Issue #94: Visa Unveils A Web3 Loyalty Program, HSBC Launches A Forex App Called Zing, And Consumer Advocates Take Aim At The Starbucks App
Fintech Radar is back for 2024! Here's the latest fintech news from the first week of the year.
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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 — 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. FR is all about spotlighting the head-turners and giving you the nitty-gritty without the fluff.
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It’s been a busy start to 2024 for fintech, so without further ado, let's delve into the major happenings from last week.
📣 The News Grab Bag
⤷ Visa Unveils Web3 Customer Loyalty Platform
Visa has introduced a Web3 loyalty engagement platform that goes beyond traditional points-based benefits and allows firms to reward customers for their engagement and interactions.
The platform, developed in partnership with SmartMedia Technologies, attempts to bridge Web2 with Web3 and can be customised to create curated experiences and offers for consumers. Brands can provide a digital wallet where customers can apply rewards towards virtual, digital, or real-world experiences in sectors like travel and sports. According to the article, the solution aims to empower brands to reward customers for transactions and their active engagement, enabling seamless and immersive experiences.
🥡 Takeaway: Crypto markets have been ripping lately. Yes, “we are (very) back” is what most in crypto land are proclaiming. However, what might put the exclamation mark on this run-up is the heavy activity we’ve seen from incumbents like Visa.
As I’ve noted in previous issues of FR, the bear market has been a time of building for many startups and incumbents. Whether it’s JPMorgan’s JPM Coin, Mastercard, or Visa building further products around stablecoins, it’s fair to say that we’re moving beyond the monkey JPEGS as the main story in blockchain land.
⤷ HSBC Takes On Revolut, Wise With New Forex App for Non-Customers
HSBC is set to launch Zing, a forex app that aims to compete with fintechs like Revolut and Wise by offering cheap foreign exchange. The app will be available in Apple Appstore and Google Play and, interestingly, will be open to non-HSBC customers.
The bank plans to expand the service to other countries, starting with Asia, the Middle East, and EU markets. This product launch is part of HSBC’s aspiration to become the leading financial institution for internationally mobile customers and attract users who might consider doing more banking with the bank.
🥡 Takeaway: Seriously, Zing? Who comes up with these brand names for incumbents? I’m sure no one will ask to be “Zinged” that money you owe them. Putting aside the awful brand name for a second, I like this move by HSBC as it is a segment they’re well-placed to compete in.
Well before the likes of Wise and Revolut, HSBC was trying to cater to the jet setter who needed a global banking solution. Some might even remember the “World's Local Bank” tagline that they plastered all over airports, a campaign that dates back to 2001. In other words, HSBC has a long history of going after this customer set.
I also like that they seem to have pulled this product out of the HSBC mothership and have decided to launch it as a standalone offering. This will certainly test whether they can get product-market fit on a standalone basis.
Having said all this, the remittance market is incredibly crowded, and it’ll take more than a fluorescent green logo and a narrative around an incumbent taking on fintech startups to carve out a niche in the competitive market.
⤷ A New Complaint Claims Starbucks’ App Traps Customers In A Cycle Of Spending
The Washington Consumer Protection Coalition (WCPC) has filed a complaint alleging that Starbucks' mobile app and digital payment cards are designed to trap customers in a cycle of spending more than they intend.
In their complaint letter, the WCPC argues that the restrictions placed on the app, such as only being able to add money in $10 increments and not being able to split payments between cards, are unfair and deceptive. The coalition claims these practices trick customers into spending more money, resulting in nearly $900m in unspent gift card and app money for Starbucks. They have called on the Washington State Attorney General to investigate the issue.
🥡 Takeaway: This is a fascinating complaint, and I’d love to know the backstory as to why the WCPC has a bee in their bonnet about the Starbucks app. Regardless, the claims are worth a read (you can find the original letter HERE).
Dark patterns abound in fintech land — most of which companies try to masquerade as growth hacks or gamification. I doubt this particular complaint goes anywhere, but it might be a harbinger of what’s come as people get tired of battling with these annoying patterns in apps.
⤷ Bank Groups Flag Concerns With CFPB’s Open Banking Proposal
The Bank Policy Institute and The Clearing House have submitted a comment letter to the Consumer Financial Protection Bureau (CFPB), stating that the CFPB's open banking proposal does not go far enough to protect sensitive consumer financial data.
The proposed rule will require banks to share client data with third parties, like fintechs, through secure digital interfaces. However, the groups argue that the rule should apply to all third parties and data aggregators and that compensation should be allowed for data providers to enable data sharing. They also called for more robust measures against screen scraping and for liability to be defined.
🥡 Takeaway: Let the games begin! Now that the first round of comments is in from the CFPB’s s1033 consultation, we’re seeing the first signs of what is going to be a long and drawn-out process.
Having spent more hours than I care to admit writing, reading and reviewing consultation papers on the Consumer Data Right (CDR) during my time as chairperson of Fintech Australia, I can already see many of the tactics we saw deployed by major banks and lobby groups being used in the submissions to the CFPB — the battle cries of “we need more time to implement such a massive IT project”, “consumers need more protections!”, “we can’t be expected to bear the cost of this without charging” and “ban screen scraping, now!” are all there.
Having gone through this here in Australia, I can tell you this will be a long and winding road — with a strong emphasis on the word long.
⤷ Goldman Sachs Eyeing Bitcoin ETF Role Via BlackRock and Grayscale
Goldman Sachs is reportedly in talks to become an authorised participant (AP) for the bitcoin exchange-traded funds (ETFs) that BlackRock and Grayscale want to launch in the US. Being an AP plays an important role in the ETF industry, which involves creating and redeeming ETF shares to ensure they trade in line with their underlying assets.
JPMorgan Chase, Jane Street and Cantor Fitzgerald are among the other finance giants that have already taken on the AP job for some of the dozen or so firms seeking the Securities and Exchange Commission's permission to offer bitcoin ETFs in the US.
🥡 Takeaway: As noted above, the bear market of 2021/2022 has been a time to build for many. One thing that might not be as obvious to the casual crypto observer is that it’s signalled a shift in the regulatory strategy for many players in the crypto land.
More specifically, it feels like we’re moving from a posture of “ask for clarity from regulators” to “force clarity” through litigation. Outside of the major stories last year of SPF and CZ going to the big house (and I’d argue, more importantly), we’ve seen several important matters being taken to court for clarity. In the context of the Bitcoin ETF, it was Greyscale’s win over the SEC that paved the way for it, and Ripple’s winning streak against the SEC — even if it didn’t provide the clarity many hoped for — showed that going to court and not settling is sometimes the best path.
The poster child of this might end up being Coinbase, which is headed into an epic showdown with the SEC. The case is an excellent example of the ‘forcing clarity’ stance, and it’s a matter that might end up updating case law on how security is defined for the purposes of US securities law.
Previously, the position might have been to bend the knee to the SEC, but this seems to be changing, and this year, I think we’ll see more look to follow Coinbase’s lead if a regulator comes knocking.
💸 Notable Funding Announcements
Last week was an unsurprisingly quieter week for fintech financing, with 13 funding rounds completed and companies collectively securing $96m in investment.
⤷ Revfin Raises $14M in Series B Funding to Boost its EV Loan Services
Indian digital lending startup Revfin has raised $14m in a Series B funding round led by Omidyar Network. The round also saw participation from the Asian Development Bank, Companion Capital Limited, and existing investors Green Frontiers Capital and LC Nueva.
The company plans to use the funding to advance its commitment to fortify the electric vehicle ecosystem and provide financing for electric vehicles, including charging stations and batteries. Founded in 2018, Revfin is a digital lending platform that aims to finance 2m electric vehicles in the next five years.
🥡 Takeaway: Verticalised lending is nothing new. What’s interesting about Revfin is the niche they’re focused on and the market they operate in.
In the growing Indian market, Revfin offers digital loans to individuals in Tier 2 and 3 towns with no credit history using alternative lending signals. More specifically, they focus on financing commercial electric vehicles for drivers involved in passenger transportation, e-commerce, and cargo deliveries, with all vehicles equipped with telematics for improved productivity and security.
On the face, this seems like a fairly standard lease financing model for those looking to finance the purchase of a productive asset. However, it’s a financial product sorely missing in the subcontinent and many parts of Asia, especially outside of tier 1 cities.
The focus on EV-based vehicles (and conversions to electric systems) is an interesting angle that feels ahead of the curve for the subcontinent. Having said this, given how quickly the world is going electric, this might be just the right time for a product offering like this.
⤷ Bumper has closed a $48 million Series B funding round
Bumper, a fintech startup that enables flexible payments for car repairs, has completed a $48m Series B funding round. The funding round was led by Autotech Ventures and included investment from Shell Ventures, JLR’s InMotion Ventures, Porsche Ventures, and Revo Capital.
Bumper, which counts major car companies like Volvo, Ford, Nissan, VW, JLR, and Porsche as clients, plans to use the funding to expand its reach and become the dominant payment platform for European car dealers. The company offers digital and physical payment options and, according to their announcement of the round, has experienced significant growth in recent years, with Gross Merchandise Value (GMV) growing 100% year over year.
🥡 Takeaway: Is there a vertical safe from BNPL? Seemingly not. Despite all the shade being thrown at BNPL, verticalised B2B offerings still seem to be able to raise money in one of the tightest fintech funding markets in recent memory.
In Bumper’s case, their focus on offering a pay-in-installation product for the car repair segment is an excellent example of how niche we’re getting in the world of BNPL. It also speaks to how ubiquitous BNPL is becoming — whether it’s a pizza or a new radiator for your car, there’s a BNPL offering available.
It’ll be interesting to see over the coming years whether the market will be segmented into many verticalised players or the likes of Afterpay, Klarna, and Affirm bully their way into these segments using their brand access to cheap(er) capital. My guess is we’ll see a few of these more niche offerings get gobbled up by the bigger players.
🎧 Resources & Recommendations
⤷ Business Breakdowns — Live Oak: The Small Business Bank
On this episode of Business Breakdowns, Matt Reustle chats with Stephen Vafier, Founder of Storri Labs Capital Partners, and they delve into the evolution of Live Oak Bank. Unlike traditional banking institutions like JP Morgan or Goldman Sachs, which have over a century of history, Live Oak Bank was chartered just before the financial crisis.
The episode explores Live Oak's unique approach to banking, highlighting its focus on specific industries and the SBA loan program, as well as how they’ve taken a tech-focused approach from inception. If you’ve ever wanted to know Live Oak's story (and trust me, it’s worth hearing about), this is a pod you’ll want to listen to.
Fun fact: nCino, the NASDAQ-listed cloud banking software provider, was a spinout from Live Oak.
⤷ Fintech Predictions for the Not-So-Distant Future, with Frank Rotman
On this episode of Fintech Takes Podcast, Frank Rotman from QED Investors shares his 10-year predictions for the fintech landscape. More specifically, he discusses the impact of rapidly progressing AI capabilities on the stock market, the need for financial institutions to restructure their costs, and what stablecoins might mean for the settlement process. As always, Frank Rotman brings the heat and this is well worth a listen.
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