Issue #93: SumUp Secures The Bag, Google Pay To Add BNPL And Visa Buys Majority Stake In Prosa
👋 Hi all, I hope you’ve had a great 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’re 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!
As always, it was a busy week for fintech, so without further ado, let's delve into the major happenings from last week.
📣 The News Grab Bag
⤷ Splitit delists from ASX as Motive Partners snaps up controlling stake
After private equity firm Motive Partners acquired a controlling stake in Splitit, the white-label buy now, pay later solution provider, has voluntarily been delisted from the Australian Stock Exchange (ASX). Motive Partners will invest $50m in Splitit, with the first $25m already closed.
Shareholders also approved the company's redomicile from Israel to the Cayman Islands and could sell their stakes or carry them forward into the new private company. Splitit's CEO believes this investment will strengthen its balance sheet and accelerate its product strategy and global distribution partnerships.
🥡 Takeaway: Australia has long been the home of BNPL. At peak BNPL, the Australian Stock Exchange (ASX) was home to 15 BNPL companies. We also saw Block's monster acquisition of Afterpay for $29b — which was a seminal moment for the local fintech sector.
From a customer perspective, it continues its meteoric rise in popularity as a payment method (especially for 18-39-year-olds). Despite the consumer tailwinds, we’ve seen several players struggle (which, in some instances, might be an overly kind description — see here, here and here) as the market seems to be stratifying around a few key players. What this means for those who aren’t striving but are just surviving is that they’re presenting potentially attractive buyout opportunities for private equity and more prominent players looking to pick up more reasonably priced strategic assets. More broadly, this aligns with the pick-up in fintech M&A activity. As FT Partners reported back in October, in Q2 of this year, fintech M&A was up 33% over Q2 of 2022.
I think the dynamic of continued growth in BNPL usage and many stagnant companies — with many simply suffering from a case of ‘getting out over your skis’ — could make for attractive M&A opportunities for astute buyers.
⤷ Google Pay to Add BNPL Options Early in 2024
Google Pay is set to introduce BNPL options for online and mobile payments in the U.S. in early 2024. This move comes as the popularity of BNPL continues to grow, with spending through these payment methods expected to reach new records during the holiday season.
Google Pay has partnered with Affirm and Zip to offer their pay-in-four services on Android devices. The integration with Zip will be launched as a pilot in January, while the Affirm offering will be available in Q1 2024.
🥡 Takeaway: In other BNPL news, Google has tapped into the BNPL game. A few things jumped out at me with this piece of news. Firstly, they’ve decided to go down the partner route with two established BNPL providers. Unlike Apple, who worked directly with GS to underwrite the loans. This might be the proverbial toe being dipped into the water by Google before they move closer to the ‘metal’ and originate themselves. Still, I’d be guessing this is the configuration they go with as they look to avoid dealing with actual under-the-hood mechanics of BNPL.
The second thing I thought was interesting was Google's choice of partners. In what has become the strategy de jour for BNPL players, most are now looking to work with PSPs and larger payment platforms to expand their reach — vs what they’ve done historically, which is work with individual merchants.
In the case of Affirm, they’ve been pushing hard into the partnership space with an announcement last month that’ll be offering a BNPL option in the Amazon Business product — a B2B store enabling businesses to digitise and automate procurement with management controls and analytics — which will further expand their reach into the B2B segment. ZIP also looks to be partnering with payment aggregators. For example, they recently announced a partnership with payments orchestrator Primer.
⤷ Visa seeks majority stake in Mexico payments processor
Visa has announced that it will acquire a majority interest in Prosa, a payments processor in Mexico, to help accelerate the adoption of digital payments in the country. Prosa will continue to operate as an independent company with its own technology infrastructure, while Visa plans to expand Prosa's product offerings with new digital solutions.
The acquisition is expected to make payment transactions in Mexico more efficient and secure by leveraging Visa's network infrastructure and technological expertise. The transaction is subject to regulatory approvals and is expected to close in the second half of 2024.
🥡 Takeaway: One thing I think goes under-discussed when we talk about the credit card networks is how they always seem incredibly focused on what’s next. More so than other players in financial services, they seem to have truly internalised the Andy Grove mentality of ‘only the paranoid survive’. Whether it’s attempting to acquire Plaid to avoid being Volcano’ed or buying PSPs in growth markets (like in this instance), both Mastercard and Visa always seem to be looking at what the payments landscape holds for them and how they stay ahead.
In Visa’s case, the launching of a $100m AI fund and acquiring issuer processing and core banking platform Pismo for $1b in cash early this year continue to show they remain as paranoid as ever and, as a result, continue their reign at the top of payments hierarchy.
⤷ TD Bank Group and Plaid Forge Data-Access Agreement in North America
TD Bank Group and Plaid have entered into a data-access agreement in North America to enhance financial data connectivity for TD customers. This partnership allows TD customers to securely link and share their financial data with Plaid's network of over 8,000 apps and services.
Through APIs, TD customers can access a wide range of applications and services within Plaid's network without sharing sensitive login credentials. According to the press release, this agreement is part of TD's ongoing efforts to provide its customers with a secure and user-friendly digital experience.
🥡 Takeaway: One of the most impressive things about Plaid (and I think there are many) is how it seems to have seamlessly moved from the ‘compete’ to ‘comply’ side of the open banking landscape.
Let me explain. In most markets, we tend to see few open banking players able to cross the chasm from offering a service to help startups ‘compete’ to supporting banks ‘comply’ with their regulatory requirements. Legacy players and consultants dominate the ‘comply’ side in many regulatory-driven markets as they are inherently set up to work with lumbering, risk-averse banks.
In the face of the upcoming enhancements to s1033, the long tail of US banks will suddenly need to weigh up how they approach complying with their regulatory requirements. It seems Plaid is positioned to be the default choice for these players as they look to become compliant.
⤷ ABN Amro acquires European neobroker BUX
Last week, ABN Amro announced they intend to acquire European neobroker BUX, a platform that enables users to invest in fractional shares, ETFs, and cryptocurrencies.
According to their press release regarding the acquisition, it will strengthen ABN Amro's presence in the retail investment space and create a unique combination of innovative user-friendliness and financial strength, stability, and expertise. The acquisition does not include BUX's cryptocurrency activities, and the transaction is subject to regulatory approval and is expected to be finalised in 2024.
🥡 Takeaway: The neobroker segment is at an interesting crossroads. After a wild run through the turbulent and up-and-to-the-right 2021 market, many have seen a flatlining of their businesses. Players like Robinhood have even started diversifying into other (more boring) offerings like IRAs, which is in stark contrast to their Gamestop mania days.
Despite a challenging 18 months, we’re seeing some green shoots as markets rebound and fintech startups begin to reinvest in their stock product offerings (like Monzo, Revolut and N26). I’m interested to see how the players who make it through dip rejig their product in the next market uptick. Personally, I hope we see more thoughtful products that do more than turn people’s phones into options fuelled slot machines 🤞
💸 Notable Funding Announcements
Last week was slower for fintech financing, with 55 funding rounds completed and companies collectively securing $740m in investment.
⤷ Citi Provides Investment and Technology to Colombian FinTech Supra
Citi has led a strategic investment round in Colombian fintech company Supra, which specialises in cross-border payments and treasury solutions for SMBs involved in import and export activities. With the new capital, Supra plans to expand its payment aggregator role in partnership with Foreign Exchange Market Intermediaries and licensed Payment Service Providers.
Citi's cross-border payments and foreign exchange technology will support Supra's expansion in Colombia, where the B2B cross-border payments market totalled about $134b in 2022. Citi's strategic investments arm led the investment round, with Far Out Ventures and H20 Capital also participating.
🥡 Takeaway: In my opinion, the B2B cross-border payments segment is seriously under discussed. It’s a well-known fact that the B2B payments market is magnitudes of orders larger than the B2C payments market. But what, I think, is under-discussed is how fast the segment is growing (see graph below) and yet how few great options exist across the stack in most markets.
In a time when, from day 1, most SMBs are selling online and looking to be global, cross-border money movement and treasury management are still managed arcanely. The more prominent players see the opportunity and are actively trying to solidify their position in the market through acquisitions. For example, AmEx acquired Nipendo earlier this year to elevate its B2B payment capabilities, and OFX recently gobbled up Payrton to build out its SMB offering further.
The complexity combined with the diversity of challenges across the SMB sector means there are many opportunities for players in the segment to emerge. It’s one of the few where the vertical fintech opportunities are truly vast for startups.
⤷ SumUp goes for growth with €285 million raise
London fintech SumUp has raised €285m in growth financing to expand its global footprint and enhance its financial products and services for its four million small business customers.
The funding round was led by Sixth Street Growth and included Bain Capital Tech Opportunities, Fin Capital, and Liquidity Capital participation. According to the article, this funding comes after a successful year for SumUp, with positive EBITDA since Q4 2022 and revenue growth of over 30% YoY. The company plans to use the funding to pursue growth opportunities and develop new products to support small businesses.
🥡 Takeaway: What caught my attention with this announcement was the size of the round. In some ways, this feels like a ‘we’re so back’ moment for fintech. Having said this, with raises like this, I’m always curious about the structure placed around the funding round. A ratchet? I’d be guessing yes.
Based on the funding announcement, it seems like the company is headed in the right direction, with a positive EBITDA since Q4 2022 and a healthy growth rate. Having said this, these numbers need to be tempered with the fact that just in October, Groupon sold its stake in the company at a $4b valuation — a sizable discount to their ~$8b valuation.
This aligns with the valuation haircuts we’re seeing in the market for most late-stage fintech companies. However, what will be interesting for this class of late-stage fintech startups is where all these funding rounds lead. As many have asked, when will the window reopen for these unicorns to hit the public markets? And more importantly, how will public markets value these companies?
🎧 Resources & Recommendations
⤷ How Unit Operates with Precision feat. Itai Damti (Co-founder and CEO of Unit)
In this episode of The Peel, Turn Novak chats with Itai Damti, CEO of Unit. On the podcast, they discuss what Itai sees as the first and second waves of fintech innovation and, more specifically, how the second wave brings financial services inside other software. They also discuss how Unit raised $170m by focusing on product and expanding the market size, Itai’s framework for leveraging his investors and his strategy for prioritising as a founder.
⤷ Launching a New Category with Modern Treasury's Dimitri Dadiomov
I’ve featured a few episodes of “My First 16” from A16Z, as this is another great one from the A16Z team!
In this chat with Dimitri Dadiomov, co-founder and CEO of Modern Treasury, he discusses the challenges of launching a new category in the fintech industry. He explains how Modern Treasury was founded to address pain points in the payments infrastructure, and how they built their MVP based on customer feedback.
Dadiomov also talks about the importance of trust when outsourcing financial processes and how they initially targeted smaller companies who were more willing to take a risk on a startup. As always this is well worth watching for founders looking to learn how others have been able to acquire their first handful of customers.
❤️ 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