Issue #95: X Is Getting Into P2P Payments, Circle Files For An IPO, And Revolut Gains Interest In Its HR Tech Offering
Issue #95: X Is Getting Into P2P Payments, Circle Files For An IPO, And Revolut Gains Interest In Its HR Tech Offering
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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
‷ X Plans P2P Payments This Year
According to a blog post released by X (nĂ©e Twitter) last week, they plan to introduce peer-to-peer payments this year. The company has been busy applying for payment processing licenses and has secured approval in 13 US states. The post notes that itâs X's goal to unlock more user utility and new opportunities for commerce by launching P2P payments.
đ„Ą Takeaway: Itâs probably unsurprising that this is where Twitter is choosing to start, given Elon Muskâs background. I can also see how this might seem like a logical place to start â âwe have millions of users, even if we get a small number to send money P2PâŠâ
Beyond the very obvious âWhat is the use case?â question and the already crowded market that exists for P2P wallet offerings from Venmo, Cash App, Paypal and the umpteenth number of Neobank offerings out there, Iâd argue X has a more significant challenge here. Trust.
Who is going to trust X to custody their money? Seriously, people donât even trust the platform for their news. Somehow, I donât think many are going to hand over their hard-earned dollars to X to custody for them. Yeah, good luck with that one, Elon.
‷ Over 300 firms join waiting list for Revolutâs âsecret sauceâ HR platform
Over 300 companies have joined the waitlist for Revolut's HR platform, known as Revolut People. The platform, which was previously an in-house system, is now being licensed to third parties as a way for Revolut to diversify its revenue streams.
Revolut People offers tools for managing annual leave, payroll, performance, and recruitment. The platform has been instrumental in helping Revolut grow its workforce to over 7,500 employees and review 1.4m job applications annually.
đ„Ą Takeaway: I missed this product announcement from back in December, but it seems Revolut is getting some interest from companies, with 300 joining the waitlist. I have to admit, the level of interest in their offering has caught me by surprise.
HR software ranks among the most âstickyâ types of corporate software. Many companies are reluctant to replace their existing HR vendor, as the upheaval caused by transitioning to a new end-to-end employee management platform can be daunting. This is precisely why newcomers to this sector often adopt an incremental approach. Typically, they might begin with a feature like an employee satisfaction survey, gradually expanding into adjacent areas until they encompass the entire HR function.
This offering seems targeted at the smaller segment of the SMB market, which likely represents the core audience for Revolut's business services. The product might prove particularly appealing to business owners seeking an upgrade from managing their HR process via spreadsheets. If this is the case, it could serve as an effective strategy to further integrate users into the Revolut ecosystem.
Nonetheless, it will be intriguing to observe how this initiative performs in the market. Iâm sure other fintech startups will be watching carefully to see if Revolut can successfully establish it as a new business line.
‷ Mastercard Small Business AI is in development
Mastercard is developing Mastercard Small Business AI, an inclusive Artificial Intelligence tool that provides personalised guidance and assistance to small business owners worldwide.
The tool aims to support entrepreneurs navigating the challenges of running a small business and seeks to create mentorship at scale. It will use data from existing and new partners, including a global media coalition, to deliver relevant and inclusive content. The tool is being developed in partnership with Create Labs to ensure it is designed with diverse entrepreneurial needs in mind.
đ„Ą Takeaway: I can see how this felt like a good idea, but in reality, this is probably on the unimaginative side of the gen AI chasm.
At this nascent stage, it's likely that the incumbents will continue to experiment cautiously, primarily focusing on peripheral innovations such as this and other similar initiatives. Yep, in other words, expect more GPT bots.
‷ USDC stablecoin issuer Circle files confidentially for an IPO
Circle, the issuer of stablecoin USDC, has filed confidentially for an IPO, though details regarding the price range and number of shares have yet to be determined.
The filing comes after Circle's previous attempt to enter the public market through a SPAC merger fell through after the company more than doubled its SPAC value in February 2022. USDC has the second-largest market capitalisation on the market, worth about $25.25b, according to CoinMarketCap.
đ„Ą Takeaway: The Stripe IPO is widely regarded as a barometer for gauging market attitudes towards late-stage fintech startups (and arguably for all late-stage startups). Similarly, the Circle IPO could serve as an equivalent indicator of how bullish public markets are on the crypto sector. This IPO will be a big deal⊠if it gets away. If this plus an ETF get off in early 2024, we could be set for a mega bull run this year for crypto.
‷ BofA launches a new data-driven treasury management tool
Bank of America has launched a new data-driven treasury management tool called CashPro Insights, which is integrated into the CashPro platform. It aims to improve the decision-making capabilities of corporate and commercial clients managing their treasury, trade, and credit operations.
CashPro Insights is part of the CashPro Data Intelligence product suite, which includes CashPro Forecasting and CashPro Search tools.
One of its initial features is the Security Insight, which evaluates and recommends improvements to user security controls. Bank of America plans to extend CashPro Insights to other banking services in the future.
đ„Ą Takeaway: Corporate treasury function is becoming more complex. In many organisations, Treasurers are transitioning from traditional cash custodians to strategic roles focusing on enterprise liquidity management. And, you guessed it, thereâs a software solution for that. Correction, lots of them. In fact, corporate spending on software solutions for cash and liquidity management is estimated at $3.5b annually.
When it comes to treasury management, corporations tend to lean on banks more than third-party providers (but thatâs changing, especially at the lower end of the market), making BofAâs enhanced treasury management offerings a clever strategic move.
Keep an eye on this space. The competition between banks and fintech startups for control of the treasury function is definitely heating up.
đž Notable Funding Announcements
Last week was again slower for fintech financing, with 55 funding rounds completed and companies collectively securing $433m in investment.
‷ YC-backed African fintech Cleva, founded by Stripe and AWS alums, raises $1.5M pre-seed
Nigerian fintech Cleva has raised $1.5m in pre-seed funding to create a banking platform for African individuals and businesses to receive international payments by opening USD accounts. The round was led by 1984 Ventures, and other participants included The Raba Partnership, Byld Ventures, FirstCheck Africa, and several angel investors.
Cleva, founded by two Stripe and AWS alums, aims to help Africans navigate hyperinflation challenges and estimates the market for facilitating payments for remote workers and freelancers in Africa to be an $18b opportunity. Cleva has initially launched its services to Nigerians, allowing users to open USD accounts, but plans to target Africans in the diaspora.
đ„Ą Takeaway: The demand for USD-denominated accounts in African consumer fintech is incredibly high. In countries like Nigeria, where inflation reached a staggering 32% last December, the desire for these accounts is nearly universal. This trend isn't confined to Nigeria; it's a continent-wide phenomenon.
Cleva is navigating a competitive but demand-rich market for these services. With no shortage of demand from customers looking for stability amidst rampant inflation, the market is bustling. Watching how Cleva and others manoeuvre in this increasingly competitive space is worth keeping an eye on.
‷ UK insurtech Hyperexponential raises $73M and eyes US expansion
London-based insurtech startup Hyperexponential has raised $73m in a Series B equity round led by Battery Ventures, with participation from Highland Europe and Andreessen Horowitz.
The company provides "decision intelligence" for pricing in the property-casualty insurance industry, helping insurers and reinsurers make better-informed decisions using predictive data. Hyperexponential plans to use the funding to expand into the US market and open a New York office, doubling its headcount to over 200. According to the article, the company has seen significant growth and profitability and counts insurance giant Aviva among its clients.
đ„Ą Takeaway: At its core, the insurance is a data business. More specifically, itâs about taking vast amounts of data regarding risk and analysing it to determine how to price that risk a customer is looking to insure. Then, monitor that risk and increase or decrease (usually increase) the price in future periods of said risk.
Ironically, as the ability to collect and store more esoteric data has increased (hereâs an example), many carriers have struggled to ingest and take advantage of this â it turns out that wrangling insights from this data into pricing decisions is hard.
The challenge most startups face when trying to sell into an insurer is that underwriting is an incredibly tightly (and usually fairly manual â think Excel and C+) managed function. This is a land where new tech rarely makes it into prod. Having said this, armed with $73m, Hyperexponential definitely now has the cash to try and make a dent in this challenging segment.
đ§ Resources & Recommendations
‷ The Economics of Consumer Fintech Businesses with Matthew Newcomb, CFO of Chime
In this episode of the Allocate podcast, Chime's CFO, Matthew Newcomb, discusses the economics of consumer fintech businesses with host CJ Gustafson. He also touches on monetisation for neobanks, bank partnerships, competitive moats, and fundraising for fintech companies. Additionally, he shares insights on the qualities that make a great CFO. Well worth a listen!
‷ The Bank Sponsorâs POV with Coastalâs Chris Rigoni Fintech Layer Cake
In this episode of Fintech Layer Cake, Chris Rigoni from Coastal Community Bank discusses the evolving landscape of Banking-as-a-Service (BaaS) and embedded finance from a partner bank perspective.
He explores the complexities and future potential of fintech partnerships, focusing on how these collaborations impact customer experience and bank operations. Rigoni also highlights the challenges and opportunities in the fintech space, specifically for community banks that are embracing technological advancements and innovative partnerships. Definitely one worth adding to your podcast playlist.
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