Issue #89: Mastercard Makes Moves In China, Wise Posts A Healthy H1 Result, And Adyen Launches A New Product In Australia
👋 Hi all, I hope you’ve had a great start to the week.
A big shout-out to our loyal subscribers and a hearty welcome to the new faces — we're ecstatic to have you here!
If you are new to Fintech Radar, this is what you can expect from each issue:
A curated round-up of the most interesting and relevant news from the world of fintech. In each issue, I focus on what caught my eye from the previous week — so don’t expect a weekly smorgasbord of press releases and partnership announcements. The aim is to serve the meaty bits in a neat, nibble-worthy package. It's all about spotlighting the head-turners and giving you the nitty-gritty without the fluff.
Also, if you enjoy this issue, please share it with a friend. I’m sure they'll appreciate it!
It’s been another busy week for fintech, so without further ado, let's delve into the major happenings from last week.
📣 The News Grab Bag
Wise pre-tax profits quadruple for H1 2023
Wise last week reported impressive financial results for H1 2023, with pre-tax profits quadrupling to £194.3m, a 280% increase compared to the previous year. The company also saw a 25% year-on-year increase in revenue, reaching £498.2m, driven by a rise in active customers (up 32% year-on-year). Wise attributed its success to onboarding more customers to its accounts and benefiting from higher interest rates.
The company expects continued income growth for FY24 and anticipates a higher adjusted EBITDA margin. Despite the challenging market conditions, Wise's shares have grown by ~25% since the beginning of the year.
🥡 Takeaway: It was an impressive H1 for Wise, but it wasn’t the only fintech that beat analyst expectations this earning season. Affirm, Block and Coinbase all had a strong Q3, exceeding the Street’s expectations. It might be too early to post “We’re so back” on Twitter, but the evidence is mounting that fintech is far from dead.
In the case of Wise, it continues to show that a consumer fintech startup can make money off more than just interchange. Posting incredibly impressive numbers, it has expanded beyond its humble beginnings as a peer-to-peer money exchange forum and evolved into a global bank.
Wise has done what every consumer fintech startup dreams of (or at least promises to investors); it’s crossed the chasm of solely being a B2C product and evolved into a B2B offering and all while expanding into a suite of adjacent products (and a platform offering too). Although many don’t ascribe the “super app” moniker to Wise, the breadth of their offering continues to expand into super-app territory. Very impressive indeed.
Adyen has launched Capital, a solution that enables funding for SMBs using Adyen for Platforms in Australia. More specifically, the product offers simplified access to funding based on historic payment data, with quick payout and repayments collected from incoming payments. The product is designed to add value to platform businesses and their SMB users by integrating financial services with embedded payment solutions.
🥡 Takeaway: The press release announcing this new product offering noted, “Research conducted in partnership with Boston Consulting Group [found] that 59% of SMBs in Australia are interested in financial services embedded within a platform. To capitalise on this opportunity, Adyen has developed a funding offering…” I’m not sure this is conclusive evidence of the need for an embedded lending platform offering, but regardless, it aligns with what we’re seeing from PSPs. One need only look at Stripe’s growing portfolio of products (currently, Stripe lists 24 products on its homepage) to confirm the growing appetite for PSPs to cross and upsell to their SME customers.
Stripe, Adyen et al. have recognised the inherent opportunity to cross-sell (uh duh), adding capital, cards, and accounts to their product suites. It’s a strategic move to grow their ecosystems and lock in customer loyalty by becoming a one-stop financial shop. In the case of Adyen’s new offering, it’ll be interesting to see how it fairs in the increasingly crowded Australian SME lending market.
AMP to work with Starling Bank’s tech to launch new digital bank for small business
AMP has announced plans to launch a new digital bank for small businesses and consumers, with a target launch date of Q1 2025. The bank will operate on a separate technology platform and will be built in partnership with Engine, the SaaS subsidiary of Starling Bank.
The new digital bank will offer transaction and savings accounts specifically tailored to the needs of sole traders and small businesses with 1-20 employees. AMP aims to invest approximately A$60m in the project and believes it will help reshape its bank portfolio and better serve Australia's growing small business market.
🥡 Takeaway: Yes, this is another piece of fintech news from Down Under, and it caught my eye for a few reasons. To start with, this is a bizarre move from AMP. Business banking for micro-SMEs? To say this is a brave move from the embattled AMP is an understatement. For my international reader, if you’re interested, here is a short article on AMP’s recent(ish) history explaining some of their self-inflicted challenges. While for my Aussie readers, I’m sure you’re scratching your head wondering why AMP is going after this highly challenging and generally unprofitable segment.
From a fintech perspective, it’s interesting to see a large Australian FI use Starling’s platform offering to power a new product. In many ways, it’s an acknowledgement that the platforms being built by startups are competitive with incumbent offerings. Having said this, it’s also fascinating that they’ve turned to the UK for a solution vs using any number of Aussie fintech offerings that are localised for the Australian market (e.g. Shaype or Constantinople). Now I suppose we wait for 2025 to see the product launch…
Corporate card startup Ramp integrates with Microsoft Teams and 365 Copilot
Ramp last week announced an integration with Microsoft Copilot and new features aimed at making finance teams more efficient and expenses easier for businesses. With the integration, companies can access Ramp's AI assistant directly from their Microsoft 365 workspace, allowing them to perform tasks such as issuing new cards, setting policy controls, and receiving real-time alerts on employee transactions.
Ramp has also introduced AI-powered expense automation, including flagging out-of-policy transactions and generating receipts for transactions under $75. These innovations aim to streamline processes and enable better working methods across back-end operations.
🥡 Takeaway: As noted last week, AI has slowly been creeping into fintech. Even though we’ve seen pretty much every sector jump on the generative AI bandwagon, fintechs have been, I think, reasonably restrained in their adoption of the tech into their products. I have no doubt there’s a range of “what the?” press releases to come, but overall, we’ve seen thoughtful implementations from the industry.
In many ways, this is an excellent example from Ramp of implementing a neat feature using generative AI and combining it with a deeper integration into the revived MS ecosystem — very clever.
Mastercard joint venture approved for China card processing
Mastercard has received approval from Chinese government authorities to offer bankcard clearing in China through its joint venture with NetsUnion Clearing. This approval allows Mastercard to issue cards tied to China's currency, the yuan, and, according to the article, should provide a seamless payment experience for Mastercard cardholders in China.
The joint venture has already established infrastructure and rules to meet local regulatory requirements. Mastercard's expansion into the Chinese market aims to benefit Chinese consumers and businesses while also connecting China's commerce and cross-border payments to the international economic ecosystem.
🥡 Takeaway: The ability to clear payments is a significant step forward for Mastercard in the $37.15 trillion Chinese payments market — and has been three years in the making. Partnering with NetUnion means they are now more directly able to settle transactions, which in turn means a reduced reliance on local partners to do this on their behalf.
In the long run, this should also translate into better margins in China for Mastercard. With an important structural element solved, it’ll be interesting to see how Mastercard deal with the local competition and establish its brand with local issuers and processors — which I think will be the real battleground for them in China.
Notable Funding Announcements
Last week was a big one for fintech financing, with 49 funding rounds completed and companies collectively securing $1.8b in investment.
Pineapple secures a record $22 million in Series B funding round: A milestone for African insurtech
South African insurtech Pineapple announced a $22m raise last week as part of their Series A funding round. The round was led by new investors Futuregrowth, Talent10 and MIC, and existing investors Old Mutual ESD, Lireas Holdings, ASISA ESD Fund and E4E Africa.
The funding round is the largest ever raised by an African insurtech company. According to the article, Pineapple's technology allows the company to offer insurance at 20% of the cost of traditional providers, which has helped extend insurance services to a new customer demographic. Pineapple's offering has attracted tens of thousands of customers, nearly 50% of whom are first-time insurance buyers.
🥡 Takeaway: I know, I know, this is another insurtech funding announcement. In recent weeks, I’ve been on the insurtech bandwagon when it comes to funding announcements, in part because I think it’s been one of the more ‘oversold’ segments of fintech over the last 12 months and also because after having spent some time in the industry recently, I am more bullish than ever about the startups taking on incumbents.
In the case of Pineapple, it’s building a brand in one of the largest insurance markets on the continent. As we’ve seen in other markets globally, creating a d2c insurance offering is challenging, but there is room in the SA market for a new upstart offering a different proposition.
Puzzle secures $30m for revolutionary AI-powered accounting platform
Puzzle, an AI-powered accounting platform, announced they’d secured $30m in funding from investors such as S32, XYZ Capital, and General Catalyst.
The platform integrates with modern fintech tools like Stripe, Gusto, Rippling, Mercury, Brex, Ramp, and Pulley to provide finance teams with accurate, up-to-date intelligence to drive decisions. Puzzle has experienced rapid growth and, as the article notes, aims to become the essential financial infrastructure for modern companies. This funding brings Puzzle's total raised capital to $50m.
🥡 Takeaway: Accounting software has gone through several paradigm shifts — from paper to spreadsheet to desktop software, then to the cloud, and now we might be hitting the next inflection point for the industry.
The move from boxed software to the cloud for the sector was a massive shift, and along with it came an ecosystem of new digital solutions that were meant to make the drudgery of accounting more manageable for accountants and business owners. The ability to capture receipts, reimburse employee expenses, issue invoices and have them paid all online was a step forward. It also meant that the average SME was now dealing with more data and reconciliations than ever. In some respects, it’s only become more cumbersome for accountants and business owners to manage it all.
This is partly why I think we’re seeing a new breed of accounting solutions taking on the Xeros, Intuits and MYOBs by being integration first and AI-enabled. Beyond this, we’ve also seen an increase in the number of businesses born internet native from day one — which has implications for the types of information that SME owners need to have surfaced and reported.
I’m bullish on this segment of new startups that are building accounting solutions for the URL economy, and I’m sure with a sprinkle of AI, many will find a very receptive market for their offering.
🎧 Resources & Recommendations
The Future of Fintech Report From SVB [Report]
Last week, SVB dropped a report on the state of the fintech sector. It’s a comprehensive look at how the industry is navigating the challenging climate — like adapting to rising interest rates and a shift in the investment landscape.
The report sheds light on the new growth cycle in blockchain and how AI is stepping up in the battle against fraud. Plus, it touches on the increasing regulatory attention fintechs are facing. It’s a great mix of deep insights and forward-looking trends. Overall, a great read.
Competing in a Crowd of Incumbents with Mercury's Immad Akhund [Video]
This is the first episode of A16Z’s new fintech-focused show, First Sixteen. In it, Semma Amble chats with Imad Akhund, the co-founder and CEO of Mercury. In this conversation, they discuss how to compete in a crowded market of incumbents when launching a new fintech product.
Akhund also talks about the importance of understanding the bar set by existing players and how to be 10x better than them. He also emphasises the need for a minimum delightful product (MDP) in fintech, which should be more robust than a typical MVP. Additionally, they touch on how Akhund targeted Mercury's initial customers and the importance of talking to potential customers before launching. Well worth a watch!
This podcast with David Haber, a General Partner at A16Z (yes, it’s an A16Z kind of week for content), he discusses the outlook for fintech, drawing on his experience as an operator, entrepreneur, and investor.
He also shares his current investing theses and highlights the importance of "leading with software" based on his learnings from Bond Street, a small business lending platform he founded and later sold to Goldman Sachs. Haber also discusses how his time at Goldman Sachs and venture capital role at Spark Capital influenced his investment criteria and founding team preferences.
❤️ Show Some Love For FR
📧 Feel free to reach out if you want to connect — I'm @alantsen on Twitter.
Ps. If you like what I'm doing with FR, please share it on your social disinformation network of choice. I'd also appreciate it if you forwarded this newsletter to a friend who might enjoy it.
🙏 What did you think of this week's issue of FR?
I love it! ◌ I Like It ◌ Not Bad ◌ I Don’t Like It ◌ It’s Awful