Issue #91: Robinhood Is Opening Up Shop in The UK, Apple and Goldman Sachs Look To Be Parting Ways, And Aussie Banks Partner On Scam-Safe Accord
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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 â so donât 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.
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As always, itâs been a busy week for fintech, so without further ado, let's delve into the major happenings from last week.
đŁ The News Grab Bag
‷ Aussie banks ink anti-scam Accord, with $100m for new payee confirmation system
Australian banks have come together to launch the Scam-Safe Accord, a comprehensive set of anti-scam measures to protect customers. The Accord includes a $100m investment in confirmation of a payee system to reduce scams and ensure secure money transfers.
Banks will also introduce new and higher protections, such as biometric checks, to prevent identity fraud. Additionally, the Accord involves intelligence sharing across the sector to improve scam prevention and the recovery of stolen funds.
đ„Ą Takeaway: On the face of it, this looks like a noble initiative; I mean, anything that reduces the potency of scams is great, right? However, the Accord has a bit more to it than just introducing a payee confirmation system â which, while weâre talking about it, is functionality already available when using the Aussie faster payment rail, NPP, through PayID.
Under the âAccordâ (which is language Iâm sure their lawyers insisted on for Competition Law purposes), major banks have also agreed to a range of other initiatives, with a few that caught my eye. One such initiative is the major Aussie banks agreeing to use â⊠at least one biometric check for new individual customers opening accounts online by the end of 2024. These checks will be either detectable to a personâs behaviour or involve a check of a customerâs face or fingerprintâŠâ
Another one that caught my attention was banks agreeing to crack down on payments to âhigh-risk channelsâ. If you guessed crypto exchanges are what they are referring youâd be right. Specifically, the press release notes, ââŠexpect more banks to start limiting payments to high-risk channels such as some cryptocurrency platforms to protect customers from possible theft.â
In both cases, I get the logic, but itâll be interesting to see how the second-order effects play out (e.g. will the introduction of biometrics increase the complexity of opening bank accounts? Will banks pass this requirement on to fintech partners?) and, more specifically, whether it impacts the playing field for fintech startups.
‷ Robinhood opens in UK with low-cost US trading to woo clients
Robinhood, known for its commission-free trading platform in the US, plans to launch brokerage services in the UK, offering commission-free trading of over 6,000 US-listed stocks and ADRs.
The move is part of Robinhood's international expansion plan that seems to have sprung back to life. The company's CEO, Vlad Tenev, stated that the UK was an ideal place for Robinhood to launch its first international brokerage product. Robinhood's plans come after the FCA reminded platform chiefs that they are expected to protect customers from reckless trading and scams.
đ„Ą Takeaway: This move by Robinhood has been a few years in the making. After announcing its plans to launch in the UK in 2019, those plans were put on ice the next year as it faced challenges after its sudden burst in demand during the Gamespot saga. Now, it looks like Robinhood is ready to take the plunge abroad in its first international market.
This move aligns with what seems like renewed interest in similar offerings in the EU. For example, Monzo recently introduced an investment product, and now N26 is poised to launch a stock product for its customers in early 2024. Considering the recent positive uptick in US markets, this period could be an ideal window for launching stock-related products.
‷ Appleâs partnership with Goldman Sachs is reportedly nearing its end
Apple reportedly plans to end its partnership with Goldman Sachs as the bank withdraws from retail banking. The two companies first collaborated in 2018 to develop the Apple credit card, followed by a buy now, pay later offering and a high-yield savings account.
However, Goldman Sachs' shift from retail banking and focus on other core areas has raised speculation about the partnership's future. It is unclear how or when Apple will find a new financial partner and how this split will impact its product plans.
đ„Ą Takeaway: For anyone whoâs keeping track of the well-documented challenges Goldman Sachs is having with its consumer banking business, it might come as no surprise that they want out of their relationship with Apple. If the reports of Goldman Sachs losing $1-3b from the Apple Card are true, Iâm sure this canât come soon enough for them.
Part of the challenge that Goldman Sachs always faced was they were desperate to launch into the world of consumer banking, and who better to do it with than the biggest player in tech, Apple? As a result, the terms they negotiated werenât all that favourable, and here we are today, with Goldman Sachs likely happy to see the back of this foray into consumer lending.
The obvious question becomes, who will take the place of Goldman Sachs? The upside for any bank (or scheme? đ Amex) that partner with Apple now is that many of the challenges theyâve faced with their product are public â meaning negotiations wonât be done with a massive amount of unknowns (e.g. apparently Apple pushed GS to be ready for a 10m card launch day when eventually 3m were issued in the first year of the partnership), as they were with GS. Itâll be fascinating to see how the new partnership will impact the proposition Apple currently has in the market and, conversely, whether itâll open up any new opportunities.
‷ Dynamic Yield by Mastercard unveils Shopping Muse, the next-generation personal retail assistant
Dynamic Yield by Mastercard has unveiled Shopping Muse, an advanced generative AI tool that enhances the retail experience by providing tailored product recommendations.
The tool recreates the in-store human experience by translating conversational language into tailored product recommendations. It also uses image recognition and considers the shopper's affinity based on browsing history or past purchases. Shopping Muse combines contextual and behavioural insights to produce informed recommendations.
đ„Ą Takeaway: As Iâve discussed in previous issues of FR, the applications of GenAI to financial services have been somewhat mundane so far, suggesting that AI might serve as a sustaining rather than a disruptive innovation to the industry. In fact, this product from Mastercard is a great example of how the incumbents are adopting the tech â and still focusing on taking advantage of their data and distribution advantage vs net new offerings.
In part, I think the answer lies in the fact that GenAI use cases in financial services arenât as apparent as in other fields, like software development. For the most part, the free-form creativity that products like ChatGPT show us isnât directly relevant to the sector. The opposite is generally the case â give me the numbers! That might all change when we move from large language models to ones that can actually handle numbers, but until then, expect a steady stream of âshopping assistantsâ to come from the incumbents.
‷ Stripe launches Climate Orders, enabling businesses to pre-order carbon removal tons
Stripe has launched a new product called Climate Orders, which allows businesses to pre-order a specific number of carbon removal tons from Frontier's portfolio. This can be done through the Stripe Dashboard or by integrating the API into their own climate offerings.
Climate Orders is part of the Stripe Climate product offering, which now includes two ways companies can purchase Frontier-vetted carbon removal. Businesses can purchase carbon removal tons through the Stripe Dashboard in just a few clicks or use the API to integrate permanent carbon removal into their climate offering. The product is already being used by several businesses, including Watershed, Patch, and Terraset.
đ„Ą Takeaway: Last week, I briefly touched on the growing fintech x climate segment, and this week, Stripe launched this. Coincidence? I think not.
In all seriousness, itâs interesting to see Stripe continue to invest in this space. You might recall that in 2020, they launched an option for customers to make carbon removal purchases at checkout. This new offering takes this up a notch. It pushes the process to the earliest stages of the development process for carbon removal projects, allowing those interested to support initiatives at inception. As youâd expect, Stripe is doing it all with an excellent UX/UI and customer delight youâd expect from them đ
đž Notable Funding Announcements
Last week was a solid one for fintech financing, with 42 funding rounds completed and companies collectively securing $696m in investment.
‷ As pet owners turn to mobile insurance apps, Lassie raises $25M Series B led by Balderton
Pet health app and insurance provider Lassie has raised âŹ23m in Series B funding led by Balderton Capital, bringing its total funding to âŹ36.5 million. The app has grown significantly due to increased pet ownership during the pandemic, with pet owners turning to mobile apps to maintain their pet's health.
The funding will be used to expand Lassie's team and products, including in-app sales of health products for pets, and to expand into new markets beyond Germany and Sweden. The app offers online courses and information on preventative health for pets, with owners who complete the courses receiving rewards such as lower premiums and loyalty points.
đ„Ą Takeaway: Itâs wild to me that the global market for pet insurance is worth north of $4.5b (and is expected to reach $16.8b by 2030). At the same time, itâs probably unsurprising, given the rise in pet ownership during COVID-19 and the rising cost of pet care (up 11% during 2022 -2023), that weâre seeing demand rise for insurance in the space.
As a result, youâd be right if you guessed a fair few are competing in the pet insurance segment to wrangle these dollars from pet owners. ManyPets, Waggle, PetPlan, Figo, ManyPets, Trupanion, Dalma, Lassie and ManyPets are just a few players vying for the pet owner insurance dollar. One of the more fascinating trends that startups like Lassie (also, what a banger of a name for pet insurance startups!) are doing that seems to be working for them is being focused on prevention â most use an app to offer education and to trigger reminders about checkups etc.
As far as segments go in insurtech, this is one I think weâll continue to see raise dollars as demand for modern insurance offerings grows.
‷ CapitalOS Raises $39M in Funding to Empower Platforms with Embedded Spend Management
CapitalOS, a company that provides embedded spend management infrastructure for B2B platforms serving small businesses, has raised $39m in funding. The round was led by Group 11 and included participation from other investors and industry leaders.
The investment will help CapitalOS expand its mission to make spend management accessible to small businesses through B2B platforms. By leveraging CapitalOS' infrastructure, platforms can easily add spend management as a feature and offload tasks such as risk management and compliance. This allows platforms to differentiate themselves, increase user retention, and generate new revenue streams.
đ„Ą Takeaway: Embed all the things â from cards and accounts to insurance; if there is a financial service to embed, a startup exists that does it. In the case of CapitalOS, they provide embedded spend management. As they note in their fundraising announcement:
B2B platforms â such as Toast for restaurants, HoneyBook for creative professionals and Workiz for field service technicians â are increasingly acting as the operating system for their customers. These platforms are uniquely positioned to provide their customers with spend management, leveraging their effective distribution and in-depth proprietary financial data. That said, they often lack the resources and specialization to develop an in-house solution. Leveraging CapitalOSâ embedded spend management infrastructure, platforms can quickly and easily add spend management as a feature.
The thing that I find most interesting is that instead of providing a point solution in the spend management workflow (e.g. cards), theyâre going after the whole thing. The full-stack approach is a fascinating one as it means theyâre upstream of many others playing in this segment â itâll be interesting to see if this strategy ends up being the winning one.
đ§ Resources & Recommendations
‷ Visa Follow-Up and Todayâs Payments Ecosystem (with Gaurav Ahuja [Podcast]
In this sequel to their epic podcast on the history of Visa, the Acquired team have Gaurav Ahuja â co-founder of Imprint and Thrive General Partner â on to share insights on the modern payments ecosystem and Visa's current position.
In this wide-ranging discussion, they go into further detail about the dynamics of interchange fees, the role of payment networks, the ever-fascinating rewards ecosystem and what disruption might look like for the Visa and card schemes more generally. If their in-depth Visa episode captured your interest, this follow-up is essential listening.
‷ Welding Yourself to Early Customers with Marqeta's Jason Gardner [Video]
In the latest episode of âMy First 16â, Jason Gardner, the founder and executive chairman of Marqeta, discusses the company's founding story and its evolution through different business models.
He tells how Marqeta morphed from a card that could hold multiple Groupon coupons, to providing infrastructure for Facebook's gift card project. Gardner also discusses how they eventually found PFM as a debit card issuing API, targeting the burgeoning food delivery industry. It's well worth watching if you havenât heard the Marqeta story before.
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