Sunday, June 23, 2024

The Fintech Fix 09/11/2022

Welcome to The Fintech Fix, where we cover the biggest fintech stories of the working week. Whether it’s the next groundbreaking trend in crypto, or a new partnership that’s about to change the global economic landscape, this is the place to keep up with the breaking news of the future.

Where does all the money go?

With recent slashes to workforces, plummeting losses, and exchanges on the brink of collapse, the impending economic downturn will be felt most sorely in the financial services industry. UK fintechs who attained Unicorn status, Marshmallow and Zego, are now reporting record losses, and BNPL giant Klarna is now securing a valuation one-seventh of what it was worth only a year ago. This dip has not completely brought investments to a standstill, with several fintechs this week securing funding in the tens of millions. These rounds do signify, however, a pivot in business strategy, with investments in expansion used to build more sustainable models.

Speaking of sustainability, ethical lender Plend, has secured $40 million in their seed funding round with a crop of new investors, including Leon & Soho House backers Active Partners and founders from Monzo and Starling Bank. Plend’s mission statement involves a complete rewiring of the credit system, where open banking is used to determine the creditworthiness of customers instead of historic and antiquated data points. The new funding will be used to scale up reach and lending, with the promise of more customers in the coming year.

Communications solutions provider, Worldr has also attracted a successful seed round, raising $11 million from Molten Ventures, IQ Capital and Playfair Capital. Worldr, which utilises its zero trust architecture to help organisations secure the ownership of data shared on communication and collaboration platforms, will use the funding to create a software-agnostic infrastructure that can be fully integrated into organisations’ entire interface to guarantee data sovereignty. This comes from growing regulation and compliance needs around popular messaging sites like Whatsapp, Microsoft Teams, and Outlook.

“The increase in cyberattacks, data localisation requirements, and scrutiny from regulators means that it is no longer enough to blindly trust that collaboration platforms are keeping business communications secure and compliant,” Max Buchan, CEO at Worldr, comments. “Companies rightfully want control of their data to protect themselves against operational, reputational and regulatory risk.”

In the biggest round of funding in the past week, automated underwriting service provider, Zest AI has secured over $50 in their growth funding round, co-led by Insight Partners and new investor CMFG Ventures. The company uses automation to make the underwriting process as frictionless as possible so that more loans can be approved and better economic opportunities are assured for U.S. customers. The new funding will be used to bolster AI-automated credit underwriting for all lenders, and provide access to efficient and consistent underwriting decision-making.

What ties into the recent success of fintech funding is the focus on product expansion and infrastructure building. By investing in robust, and self-sustaining technology, the industry has steadfastly reacted to the doomed strategy of over-hiring and over-confidence, cultivated from the high of last year, and has moved in a direction which prioritises digital solutions and automation. We are only at the beginning of the recession, so only time will judge the cost-effectiveness of this new direction.

The Russian Doll Effect

It seems that challengers and incumbents alike have taken the final quarter to introduce a new string of sparkly products and services to banking customers. By far the most monumental, banking giant, HSBC has launched Orion, a proprietary tokenisation platform FIs can use to issue digital bonds, through the power of distributed ledger technology. Orion will utilise assets and settlement tokens, that will sit natively and securely on the platform ledger, that will be openly exchanged when a transaction occurs – achieving digital ‘delivery versus payment. During this development, the European Investment Bank (EIB) is entertaining the possibility of issuing the market’s first-ever GBP tokenised bond using Orion, for registration and issuance under Luxembourg law.

“Digital assets are a fast-growing part of financial markets,” said John O’Neill, the Global Head of Digital Asset Strategy, Markets & Securities Services at HBSC. “Our clients are demanding solutions that can deliver the benefits of tokenisation within a trusted and secure environment. We are excited to be meeting this growing need by launching HSBC Orion, our strategic platform for tokenised assets. We plan to use HSBC Orion to facilitate further digital bond issuance and expand its usage to other products in 2023.”

Buy now pay later card company, Zilch has surpassed its user milestone of over 3 million, a mere 6 months after its 2 million user announcement. This rapid attainment of new customers shows that the company’s Ad-Subsidised-Payments-Network and direct-to-customer approach, where ad revenue is generated every time a user spends, is a winning solution in the highly competitive payments market. With over 6% of UK users already on the platform, Zilch has also expanded into the US market off the back of their $50 million Series C funding round.

Of course, no talk of product expansion in The Fintech Fix would be complete without a weekly peak of the new goings on at UK neobank Revolut, who have now introduced an instant messaging service, Revolut Chat, into its app – shooting straight into its ambition to become a global superapp. Like its eastern equivalent, WeChat, Revolut customers in the UK and EEA can now send across personal messaging as well as request funds from one another in the same space. The move represents the company’s effort to make the discussion around money less awkward for people, where a chat function will be embedded into the ‘Transfer’ section in the app, where customers can converse through end-to-end encrypted messages.

Nikolay Storonsky, CEO of Revolut, said: “We’re delighted to bring instant messaging to our customers, moving us one step closer to being a global financial superapp. We listened to our customers who said they wanted to be able to discuss and clarify payment details within the app, rather than having to swap between Revolut and different messaging apps to send or receive funds.

The release of these new financial products and services realises the priorities of an industry now centred around customer-centricity. By mirroring the guidelines and behaviours most popular in eCommerce and retail, fintechs and incumbents have realised that consumers are more susceptible to digital-first and multi-service platforms where every transaction is almost instantly reconciled and secured. The investment into developing software and architecture around these behaviours, of which the likes of Zilch and Revolut have capitalised, further indicates that the personalisation of products is where the money is, thus outlining the future of the modern payments landscape.

  1. Verituity Raises $18.8M to Accelerate Its B2B and B2C Verified Payout Platform Read more
  2. KPMG Law Partners with Shieldpay as Payments Provider Read more
  3. APIX Partners with Emirates NBD to Nurture Talent and Drive Fintech Innovation Read more
  4. Dell Technologies Names CDW its Client Sales Partner of the Year Read more
  5. Peach Announces Pipe Partnership to Power Working Capital Solutions Read more