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Finovate Blog
Tracking fintech, banking & financial services innovations since 1994
It’s hard to read about David Marcus’ departure from Meta’s cryptocurrency project Diem (formerly Libra) and digital wallet Novi, and not wonder what’s next for the stablecoin.
Marcus announced over Twitter yesterday that he is leaving the company. In a tweet, he said, “Personal news: after a fulfilling seven years at Meta, I’ve made the difficult decision to step down and leave the company at the end of this year. While there’s still so much to do right on the heels of launching Novi — and I remain as passionate as ever about the need for change in our payments and financial systems — my entrepreneurial DNA has been nudging me for too many mornings in a row to continue ignoring it.”
While it’s easy to make assumptions based on Marcus’ tweet, there is still a lot we don’t know about the fate of Diem and Novi. With all of the uncertainty, let’s look at what we do know about Meta’s stablecoin project. Here are the five chapters in the life of Diem (so far).
Launches as Libra Facebook announced Libra in June of 2019. The company said that its new cryptocurrency would help users transact and transfer funds with near-zero fees via the corresponding wallet, Calibra, that would be integrated into WhatsApp, Messenger, and Facebook. In order to decentralize control from Facebook, The Libra Association was formed to govern the new cryptocurrency and wallet. The 27 founding members included Visa, Uber, and Andreessen Horowitz.
Politicians object Criticism of the project began building up and, months after launch, global privacy regulators, central bankers, and finance ministers all voiced their concerns about the new cryptocurrency and wallet. Specifically, Federal Reserve Chairman Jerome Powell aired his concerns of privacy, money laundering, consumer protection, and financial stability.
Major founding members withdraw By October of 2019, just four months after Facebook unveiled Libra, some of the top founding members pulled out of the project. PayPal, eBay, Visa, Mastercard, and Stripe announced they would no longer be part of Facebook’s cryptocurrency project.
Changes name to Diem and pivots to a stablecoin In December of last year, Facebook changed the name of its cryptocurrency from Libra to Diem. The move came after the company changed the name of its wallet from Calibra to Novi. Facebook said that the rebrand signals the project’s “growing maturity and independence.” At the same time, the company announced that Diem will be a stablecoin, which is a cryptocurrency pegged to government-issued currency.
Marcus departs, former PayPal exec Stephane Kasriel steps in The most recent chapter in Diem’s storied history is yesterday’s news on Marcus’ departure. Starting next year, former Upwork CEO and former VP of Product for Novi Stephane Kasriel will lead Meta’s cryptocurrency unit.
As for what’s next for the cryptocurrency, it doesn’t appear to be fizzling out any time soon. The project still has a handful of major industry backers and, being the child of Meta, has plenty of funding to back it up. These factors, combined with an increased interest in decentralized finance, are enough to keep Diem afloat for at least another year.
Regardless of where you stand on the Revolut/Yoppie partnership “intention versus execution” debate, it is nevertheless remarkable how fintechs and financial institutions are reaching out beyond their traditional collaboration competencies to reach new markets and promote an ever-widening array of causes.
This week’s Finovate List Series looks at three ways that banks and fintechs are helping pave the way in terms of greater financial inclusion for underrepresented groups and deeper understanding of how everyday behaviors can have a significant impact on the environment.
Gender
The first digital banking platform in the U.S. dedicated to serving the LGBT+ community, Daylight, launched earlier this month. The platform is built to help LGBT+ financial services consumers to manage their finances and save for future expenses ranging from emergency funds to gender transition surgery and related medical expenses. The company notes that with an estimated 30 million people in the United States who identify as LGBT+, the community remains significantly underserved in financial services.
“This country is at a critical turning point where we have recognized companies and services have been performatively suporting the LGBT+ community versus serving its unique needs,” Daylight co-founder and CEO Rob Curtis told Retail Banker International earlier this month. “Despite our community’s combined $1 trillion in buying power, we are still ignored – roughly 20% of LGBT+ people are unbanked or underbanked.”
Daylight will offer Visa-branded cards in the customer’s preferred name, rather than the customer’s legal name, as well as financial tools to help prioritize spending decisions and meet financial goals. The platform will also provide expert financial advice and access to a network of financial management “coaches” that specialize in responding to the unique financial needs of those in the LGBT+ community. A member of Visa’s Fintech Fast Track program – and the program’s first LGBT+-based fintech – Daylight is also supported by card issuing platform and Finovate alum Marqeta.
Daylight has announced that it will begin operations in the middle of next month, starting with an invite-only, beta period involving “a few hundred people.” The company will focus first on markets in California and New York.
Ethnicity
In the wake of the George Floyd-inspired, Black Lives Matter protests of 2020, a spotlight has been shown on the rising number of financial institutions catering to African Americans.
Among the newer entries to this cohort is Adelphi Bank, which announced earlier this month that it has filed paperwork with the FDIC to become the first black-owned, depository institution in Ohio.
“We know that African Americans typically don’t have access to financial institutions to the degree that the majority community has,” former Fifth Third Central Ohio president and CEO Jordan Miller said to The Columbus Dispatch. “We know that our financial situations are not as strong in most cases. And so we want to make a difference in the community across Franklin County, to give those underserved a voice and financial services,” Miller, one of Adelphi Bank’s proposed incorporators, added.
The bank would be located in the King-Lincoln/Bronzeville neighborhood, and its backers stated that they plan to raise $20 million in equity capital upon earning FDIC approval to open. The institution takes its name from the city’s first black-owned bank, Adelphi Loan & Savings Company, which was launched in the early 1920s. The new bank will be part of a $25 million development called Adelphi Quarter, which will feature both housing and ground-floor businesses. The Columbus Dispatch reported that the original facade of Adelphi Loan & Savings has been incorporated into the new structure.
Sustainability
This week we reported on the partnership between Tink and ecolytiq to give banks, financial institutions, and fintechs the ability to offer environmental impact data to their customers. These kind of solutions, which include options like carbon footprint calculators, have been among the chief ways that many innovative companies have sought to bring their sustainability technology to the world of financial services.
Today we learn that micro-investing platform Wombat has added a new option to its impact investment offerings: a sustainable food ETF (exchange-traded fund) that enables investors to get exposure to dozens of companies that are involved in developing sustainable food production systems and products. These companies include new, but well-known brands such as plant-based food company Beyond Meat, oatmilk company Oatly, and farm-to-table business Tattooed Chef.
The fund, called The Future of Food, is the fifth impact investment offering on Wombat’s platform. The ETF was created via a partnership between thematic ETF issuer Rize and thematic research company Tematica Research. It will trade on the London Stock Exchange under the ticker “FOOD LN.”
“At Wombat we have found that some of our most popular thematic funds are those that offer impact investment opportunities, such as our Medical Cannabis and Green Machine ETFs,” Wombat co-founder and CEO Kane Harrison said. “We think this new sustainable food fund is a great addition to that range and it means we now offer a very competitive choice of impact investments when compared with other micro-investing platforms.”
Founded in 2019, Wombat currently has more than 190,000 users.
The modern world has witnessed three major economies. First, there was the industrial economy in which people earned money through physical activity. Then came the consumer economy in which people made money performing services. Next, the knowledge economy enabled people to earn money through leveraging intellectual capital and insight.
In these past few years, we’ve been witnessing the birth of the creator economy, a new economy fueled by social media platforms and video sharing. This new working order democratizes the ability for anyone to become a celebrity. Here’s a look at four key facts of this new economy.
Who
While many consider the creator economy to be limited to YouTubers and Instagram influencers, it actually has a wider breadth. In essence, everyone with an online presence is a creator, since we are all making content and sharing it online in some form.
A more exclusive definition of a creator is anyone who monetizes content online. This represents not just social media influencers, but also includes those who create and sell NFTs, ebooks, podcasts, digital art, etc.
Because there are such low barriers to entry in the creator economy, even kids can do it. In fact, one of the most famous YouTube creators is Ryan, an 11-year-old with 30.9 million subscribers who posts videos of himself playing with toys. Ryan is reportedly worth $32 million.
The participation of kids in the creator economy is influencing how younger generations view their future. According to a recent study, one third of kids between ages eight and 12 want to be either a YouTubber or Vlogger when they grow up.
Size
The current size of the creator economy is over $100 billion and growing. YouTube alone expects a $30 billion stream of revenue by the end of 2021. Of the 50 million people that consider themselves a creator, around two million of these are professionals making six-figure salaries.
Where’s the money?
Just like other economies, one of the ways that creators are recognized for their contributions is by getting paid. While this payment used to come from ads, branded content, or sponsorships, today’s monetization looks different. That’s because, instead of relying on third party sponsorships and brands to receive payments, creators now receive payments via subscriptions, tips, and even by payments directly from the user.
One of the latest examples of this is TikTok, which recently introduced the concept of in-app tipping. Users with more than 100,000 followers can apply to begin receiving tips from their fan base. When they receive a tip, 100% of the compensation goes to the creator; TikTok doesn’t take a commission.
Creators aren’t just getting paid in dollars. Owners and creators of non-fungible tokens (NFTs) receive payment in cryptocurrencies in exchange for their work. For more on how NFT compensation works, check out our piece 7 Things to Know about the NFT Craze.
How to leverage the opportunity?
The most important part about the creator economy for banks and fintechs is knowing how to leverage the opportunity. The future of this economy is unlike any we’ve ever seen in that payment and monetization may not rely on traditional banking infrastructure. In fact, many participants’ future revenue will be decentralized.
What we know for sure, however, is that personalization and customer experience matter and will continue to reign, even when payments are thrown off the rails. Many digital banks are already capitalizing on this opportunity. Just take a look at Nerve, a bank for musicians; Karat Financial, a bank for digital creators; and Willa, an invoicing tool for creators.
These financial services firms are different from banks in that they understand the unique challenges that come with being a creator. For example, creators experience many of the same difficulties as the self-employed, such as difficulty qualifying for a loan. They also often times have lumpy cashflow and need help with budgeting and financial planning.
There is still time for traditional banks to come up to speed in the creator economy. The key to serving this unique customer base will be to expand your existing resources for self-employed customers by offering new services such as revenue-based financing and on-demand wage access. As with most things in today’s digital banking era, the only way to properly serve this new user base will be through partnerships.
Three headlines in the cryptocurrency space this week show how seriously Big Tech, Big Fintech, and the world’s largest financial services companies are taking the rise of digital assets. And while each of the three companies listed below varies in the degree to which it is embracing our increasingly crypto-friendly future, their continued interest in the space suggests that the pace of adoption of digital assets – and the proliferation of use cases – is only likely to grow in the months and years to come.
The report is based largely on an interview that Apple CEO Tim Cook had with Aaron Ross Sorkin as part of the DealBook Online Summit sponsored by The New York Times. That said, those looking for a firm commitment from Apple in Cook’s conversation with Sorkin will be disappointed; while Cook expressed interest in cryptocurrencies from a “personal point of view … for awhile” and admitted that he believed that it was “reasonable to own (cryptocurrencies) as part of a diversified portfolio,” the idea of Apple accepting cryptocurrencies as payment for Apple products and services remains just that – an idea. Cook also expressed skepticism toward the notion of Apple investing in cryptocurrencies as part of a corporate investment strategy.
Apple’s relationship with cryptocurrencies has been cautious, to say the least. Back in 2014, Apple removed a number of Bitcoin wallets from its App Store, including one trading and storage app with 120,000 users, and another wallet app from Coinbase. More recently, there has been some softening of Apple’s stance, with Apple Pay VP Jennifer Bailey conceding the the company is “watching” the space and sees “interesting long-term potential” in digital currencies just a few years ago.
It’s worth noting that Apple’s reputation in technology is less as a first-mover and more that of a technology enhancer that often comes along and does a better job at innovations initiated by others. So the idea that Apple’s approach to embracing cryptocurrencies would be similarly slow-rolling is consistent with how the company has long operated. Nevertheless, Apple Pay’s fintech rivals – such as PayPal, Square, and Stripe – have been far more eager to pursue opportunities in crypto. Add to this the fact that Google Pay has teamed up with digital asset marketplace Bakkt in a deal that will enable users to spend Bakkt Card crypto funds directly from their Google Pay accounts. Together, it seems much more likely that a closer relationship between cryptocurrencies and Apple Pay is a question of “when” rather than “if.” As interest in digital currencies accelerate, and the solutions and services from these crypto-friendly fintechs become more widespread and even mainstream, it is hard to imagine Apple Pay remaining on the sidelines.
Revolut Takes Steps Toward Building a Cryptocurrency Exchange – The rumor that aspiring super app Revolut is looking to build a cryptocurrency exchange hinges largely on a job posting at LinkedIn. According to reports, Revolut wants to hire an individual with at least seven years experience in technology and in building order matching engines to lead a technical team to “architect and built Revolut Crypto Exchange.”
The crypto exchange would further establish Revolut as a leading player in the cryptocurrency space and potentially enable the company to diversify its services and create new cash flow, which could help Revolut establish another reliable revenue source going forward. The exchange news also follows reports that Revolut was looking into launching its own crypto token. And while Revolut has not commented on what it has referred to as a “mere rumor”, the report, first shared by Coindesk earlier this fall, does bolster the notion that Revolut is deepening its commitment to digital assets – a space the company has enjoined aggressively since introducing in-app cryptocurrency trading functionality in 2018.
In April of this year, Revolut added 11 new crypto tokens to its platform. The following month, the company launched its public beta for Bitcoin withdrawals. “I said before that 2021 would be the year of crypto and Revolut is here to deliver on that promise,” company Head of Crypto Edward Cooper announced in June when the company revealed that it would add Dogecoin to its current cryptocurrencies offerings for traders. “One of the most popular user requests over the past couple of months has been to add Dogecoin and we have answered the call!”
Revolut has more than 16 million customers around the world, and conducts more than 150 million transactions a month on its platform.
Mastercard Introduces Crypto-Linked Cards for the APAC Region – Also this week, Mastercard announced that it has secured partnerships with a trio of cryptocurrency companies – Amber, Bitkum, and Coinjar – who will issue crypto-funded Mastercard payment cards. The collaboration represents the first APAC-based cryptocurrency service providers (Amber and Bitkum are based in Thailand, Coinjar is headquartered in Australia) to join Mastercard’s Crypto Card Program, an initiative designed to enable companies to offer secure payment cards that meet regulatory requirements with regards to cryptocurrencies.
“Cryptocurrencies are many things to people – an investment, a disruptive technology, or a unique financial tool,” Mastercard EVP for Digital and Emerging Partnerships and New Payment Flows in the Asia Pacific region Rama Sridhar said. “As interest and attention surges from all quarters, their real-world applications are now emerging beyond the speculative. In collaboration with these partners that adhere to the same core principles that Mastercard does – that any digital currency must offer stability, regulatory compliance, and consumer protection – Mastercard is expanding what’s possible with cryptocurrencies to give people even greater choice and flexibility in how they pay.”
Mastercard’s APAC announcement comes on the heels of news that the company will enable the banks and merchants on its payment network to integrate cryptocurrency offerings into their products. The new arrangement comes courtesy of a partnership with Bakkt and will empower bitcoin wallet providers as well as issuers of credit and debit cards that offer rewards in crypto and enable digital assets to be spent. Also benefitting from Mastercard’s plan are those companies that offer loyalty programs that allow points from travel or hotel stays to be converted in to cryptocurrencies.
“Mastercard is committed to offering a wide range of payment solutions that deliver more choice, value, and impact every day,” Mastercard EVP for Digital Partnerships Sherri Haymond said. “Together with Bakkt and grounded by our principled approach to innovation, we’ll not only empower our partners to offer a dynamic mix of digital assets options, but also deliver differentiated and relevant consumer experiences.”
The concept of Central Bank Digital Currencies (CBDCs) is already familiar to most in the banking and fintech industry. However, the idea that the U.S. will have a functioning CBDC of its own in the near future still seems far-fetched.
PwC’s CBDC global index ranks the U.S. 18th in the globe when it comes to the maturity of its retail CBDC project. This places the U.S. significantly behind countries including the Ukraine, Uruguay, and Turkey, which all rank among the top 10.
So when the U.S. rarely ranks below the top 10 in any global comparison, what’s holding it back when it comes to CBDCs? There are three major reasons, as outlined below.
Slow
The U.S. is a big ship to turn, partially because the country’s legislative process is slow. This is true especially when compared to other countries, such as China, which have more authoritarian control over citizens.
This lack of agility can be seen in other federal initiatives, such as FedNow, the U.S. central bank’s instant payment service. Initially announced in 2019, the service will begin a phased launch of real time payments in 2023 and aims to be fully operational by 2024. As American Banker noted, FedNow should instead be called FedLate. By the time the central bank rolls out instant payments, many other private industry players will have already stepped in. In fact, some already have. Ripple, The Clearing House, and Orum are already offering real-time payment solutions.
And the U.S.’s progress is slow not only when it comes to implementing a CBDC, but even in simply making the decision to implement one. Earlier this fall, the Federal Reserve announced plans to “soon” release its research on a CBDC. While this is an important first step, the report won’t even take a stance on whether or not the U.S. should issue a CBDC.
Fragmented
This is a big one. The U.S. government is siloed; there is no central authority of who would have direct oversight or responsibility for the issuance or regulation of a CBDC.
Government branches that would want a say in the matter include not only the Federal Reserve, but also the Office of the Comptroller of the Currency, the Securities and Exchange Commission, the Federal Trade Commission, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the Financial Stability Oversight Council, the Federal Financial Institutions Examination Council, the Office of Financial Research, and state and regional authorities.
This list doesn’t even include private commercial banks, which will be crucial to the rollout of a CBDC.
This large number of stakeholders is highlighted when contrasted with India, Kenya, and Brazil, which all have central digital payment systems that are overseen by their respective central banks.
Untrusted
Simply stated, many U.S. citizens don’t trust their government. This distrust is potentially the consequence of free speech mixed with 21st century communication technologies and sharing platforms such as Facebook and YouTube, which help spread misinformation and skepticism. If you’ve ever met someone who thinks that the Earth is flat, you know what I mean.
U.S. citizens’ reactions to a recently proposed measure, the IRS reporting mandate, illustrate that the distrust of the government isn’t just for conspiracy theorists. The IRS reporting mandate was part of President Biden’s Build Back Better bill, a bill that would have required financial institutions to report inflows and outflows totaling more than $600 from bank accounts to the IRS.
The purpose of the bill was to catch tax fraud; it would generate an estimated $463 billion in revenue over 10 years. However, many citizens on both sides of the political divide viewed the additional governmental surveillance as overreach. “While the intent of this proposal is to ensure all taxpayers meet their obligations—a goal we strongly share—the data that would be turned over to the IRS is overly broad and raises significant privacy concerns,” Democratic representatives wrote to Speaker Pelosi. “We have little information about how the IRS plans to protect or use this massive trove of data. Americans expect their bank or credit union to safeguard their financial information.”
If the U.S. government issued its own digital currency, many would switch to cash or alternative currencies. It is evident that U.S. citizens don’t want to offer data on financial habits to their government. Additionally, many would likely not appreciate that the government would be able to dictate how they spend a government-issued currency. Indeed, one of the most appealing aspects for governments of a CBDC is that they can control how and when certain funds, such as stimulus checks for example, are spent.
The last shall be first and the first last
Ultimately, the headline of this piece may be a bit dramatic. The U.S. may not necessarily be the last to establish its own CBDC. However, it is already lagging behind many developed countries and doesn’t appear to be making much progress.
“The reason you could say the U.S. is behind in the digital currency race is I don’t think the U.S. is aware there is a race,” Yaya Fanusie, an Adjunct Senior Fellow at the Center for a New American Security, and a former CIA analyst, said in an interview with TIME. “A lot of policymakers are looking at it and concerned…but even with that I just don’t think there’s this sense of urgency because the risk from China is not an immediate threat.”
And as TIME described, this disconnect may cause the U.S. to cede control of previously established global financial power. “With private companies pushing deeper into the digital currency space, rival countries seeking to seize leadership, and a public that is moving further away from physical currency,” the author wrote, “the U.S. is facing a world in which it may not control or even lead the world’s payment systems.”
The Buy Now Pay Later (BNPL) revolution shows no signs of abating any time soon. A combination of newcomers, Buy Now Pay Later pioneers, and even credit card companies like Visa and Mastercard are figuring out new ways to integrate themselves into the biggest consumer commerce phenomenon since shopping by smartphone.
According to CNBC, which bases its analysis on data from FIS Worldpay, the Buy Now Pay Later market has an estimated value of $60 billion globally as of 2019 – though there are even higher estimates. Excluding China, this sum represents 2.6% of all e-commerce. And while BNPL represents less than 2% of sales in North America, the overall BNPL market, CNBC believes, could reach $166 billion by 2023.
Here is just a smattering of this week’s headlines from the Buy Now Pay Later beat that only underscores the velocity of the flight from credit cards and traditional consumer financing.
Stripe teams up with Klarna as BNPL competition from Square, PayPal intensifies
Klarna, a company with a long pedigree in providing consumers with alternative payment options, announced this week that it was partnering with ecommerce innovator and payments platform Stripe. The deal will enable Stripe customers in 20 countries to offer Klarna as a payment option to their customers. As part of the partnership, Klarna will use Stripe to accept payments from consumers in both the U.S. and Canada.
“Over the past years, Klarna and Stripe redefined the e-commerce experience for millions of consumers and global retailers,” Klarna Chief Technology Officer Koen Köppen said. “Together with Stripe, we will be a true growth partner for retailers of all sizes, allowing them to maximize their entrepreneurial success through our joint services. By offering convenience, flexibility, and control to even more shoppers, we create a win-win situation for both retailers and consumers alike.”
The partnership is widely seen as a way for Stripe to compete with payments rivals PayPal and Square, which have deepened their commitment to BNPL in recent months. Square agreed to acquire Australia’s Afterpay for $29 million in August. A month later, PayPalannounced its $2.7 billion acquisition of Japanese Buy Now Pay Later company Paidy.
Affirm partners with American Airlines to ease cost of holiday travel
In a move well-timed to take advantage of end-of-year travel trends, American Airlines has announced a partnership with Buy Now Pay Later innovator Affirm. The collaboration will enable eligible travelers to pay for the costs of airfare over time on an installment basis, providing them with “flexibility, transparency, and control,” according to Affirm Chief Commercial Officer Silvija Martincevic. Using Affirm, travelers can pay for flights costing at least $50 with monthly installments without having to pay late fees or worry about hidden charges.
“While consumers are as eager as ever to get away,” Martincevic said, “they remain conscious of fitting travel into their budget.” Martincevic cited a survey conducted by the company that indicated that 74% of Americans queried said they would spend more on holiday travel this year “than ever before,” but that 60% were worried that they would not be able to “afford to travel as they would like to.”
The offering is currently available only to select customers, but will be expanded to include more U.S. consumers in the weeks to come. The collaboration marks the first time that American Airlines has integrated BNPL options into its website.
Marqeta and Amount announce collaboration to help banks offer BNPL
The partnership announced this week between card issuing platform Marqeta and bank technology provider Amount will make it easier for financial institutions to get into the Buy Now Pay Later business. Marqeta and Amount have forged a virtual card and loan origination partnership that will enable banks to go to market with their own BNPL/virtual card offering in months. This will help them boost revenues, grow market share, and promote loyalty.
Echoing the challenge that banks and other financial institutions face from Big Tech and fintech alike, Amount CEO Adam Hughes pointed to the partnership with Marqeta as a way for banks to close the consumer expectations gap between themselves and more tech-savvy, tech-native enterprises entering the financial services space. “Banks must compete or continue to lose market share to digital challengers who offer a more flexible way for their customers to pay,” Hughes said.
Part of what makes the Marqeta/Amount partnership interesting is how it takes advantage of research that suggests that a significant number of consumers who have used BNPL would prefer it if the service came from their bank or credit card provider. Amount’s modular approach to BNPL is configurable, easy to deploy, and integrates readily with banks’ legacy platforms, giving FIs the ability to introduce BNPL offerings over a variety of different channels and payment methods.
Berlin-based Billie banks $100 million in funding
The latest reminder of the international growth of Buy Now Pay Later comes from the $100 million investment secured by Berlin, Germany-based, B2B Buy Now Pay Later startup, Billie. The Series C round was led by U.K.-based Dawn Capital and featured participation from Tencent and, interestingly enough, Klarna. In fact, Klarna’s investment comes in the wake of a strategic partnership with Billie in which the two companies will integrate their service to better leverage their core competencies, with Billie serving business customers and Klarna handling retail consumers.
“BNPL for B2B is still in its infancy phase,” Klarna CEO and co-founder Sebastian Siemiatkowski explained, “even though the demand has never been higher. We are here to solve problems and by being able to offer this service to our merchant partners together with Billie, we are doing just that.”
The Series C round gives Billie a valuation of $640 million, and is believed to be the largest B2B Buy Now Pay Later funding round to-date. Co-founder and co-CEO of Billie, Dr. Matthias Knecht noted that those companies buying from larger businesses and individual retailers are increasingly embracing a “digital-first” approach that includes not just “modern user interfaces, high limits for shopping carts, as well as real-time decisions for B2B” but options like BNPL, as well. “There is nearly no provider of a BNPL product (for these companies) like what Klarna offers for B2C,” Knecht said. “We aim to close this gap.”
Visa expands BNPL offerings in Canada via partnership with Moneris
International card company and financial services provider Visa has been making inroads of its own into the Buy Now Pay Later market. This week, the company made headlines in the Canadian fintech news space via a new collaboration with unified commerce company Moneris.
“We’re happy to be working with a trusted brand like Visa Canada on providing a buy now pay later option to Canadians,” Moneris Chief Product and Partnership Officer Patrick Diab said. “Bringing flexible payment methods like buy now pay later to our merchants helps them offer their customers more options when it comes time to pay.”
Courtesy of the new collaboration, merchants partnered with Moneris will be able to leverage Visa’s BNPL solution – Visa Installments – to give eligible Canadian credit cardholders access to installment payments on qualifying purchases. Cardholders can use the existing credit on their cards to pay for purchases in smaller, equal payments over a defined time period, with no additional, new service sign ups or requirement to apply for a new line of credit.
Moneris is set to begin offering Visa Installments to its customers by the spring of 2022.
Insurtech has already taken off across the globe. What’s more, the fintech subsector is finally beginning to heat up in the U.S. as consumers become increasingly comfortable with digital financial services.
According to CB Insights, fintechs in the insurtech subsector raised $7.4 billion in the first half of this year alone. This figure already surpasses the amount insurtechs raised in all of 2020 by more than $300 million.
The number of new insurtechs driving competition in the space is also growing, so we thought we’d look at some of the newly launched insurtechs in the U.S. this year. Here are 11 of the newest insurtech startups in the U.S.:
Non-fungible tokens, better known as NFTs, have been making their way into mainstream culture this year. From “breeding” digital kitties to collecting NBA trading cards, the possibilities of buying and selling digital media are endless.
If you’re NFT-curious, one of the best ways to discover more is to create or purchase your very own NFT. If you already have a crypto wallet, it is fairly simple. Create your own by uploading a photo to OpenSea or check out the OpenSea marketplace to browse media. It only took me around five minutes to create my first NFT:
As a quick-fire way to help you sort the ins and outs of NFT trading, here’s a quick list of seven things you need to know about the NFT craze.
1. NFTs are not just for fintech nerds
The fact that NFTs leverage the Ethereum blockchain doesn’t scare off creators nor buyers. Multiple marketplaces, including the aforementioned OpenSea, Binance, and Rarible make it very simple to upload, buy, and sell NFTs. As Time reports, teenagers as young as 15 are already making millions of dollars by creating, buying, and selling NFTs.
2. NFTs are good for creators
Instead of sacrificing commissions to art houses, publishing companies, and other middlemen, creators can keep the majority of the purchase price for their work. OpenSea, for example, charges only a 2.5% fee. Additionally, some NFTs enable the artist to receive a royalty payment each time the NFT is sold or changes hands.
3. NFTs benefit buyers
The value of buying and owning NFTs is a bit less clear than the value for creators. Aside from exercising bragging rights, NFT owners can use the NFT as a speculative tool by buying and selling NFTs, or they could use their purchase as a way to more directly follow and support artists.
4. Anyone can create an NFT
As long as a user has a crypto wallet and is able to upload media, they can create their own NFT. My NFT is proof of this– while I am certainly not an artist (I failed art in the fifth grade), I was able to upload a photo I already had to quickly create my own.
5. NFTs are one-of-a-kind
As the name suggests, NFTs are non-fungible, meaning they cannot be exchanged with assets of the same type. In other words, unlike currency which can generally be exchanged one-for-one (I can pay you a dollar for your dollar), each NFT is completely unique.
6. Yes, NFTs can be copied or downloaded
Because NFTs are digital media, they can easily be reproduced. Anyone can take a screenshot of an original NFT or download a copy of a video. The value, however, is in owning the original NFT. As an example, there are many copies of Van Gogh’s Starry Night, but none are as valuable as the original.
7. NFTs can potentially bridge the digital/ physical divide
While NFTs are restricted to digital assets, it is possible to use NFTs as a type of verification method for the purchase of an original, physical item. For example, Nike has patented a way for sneaker collectors to track ownership and verify the authenticity of sneakers.
On the final day of FinovateFall a few weeks ago, I had the opportunity to talk with James Wallis, Vice President of RippleX, Central Bank Engagements, and CBDCs, on the topic of blockchain technology, cryptocurrencies, and the potential traction both are gaining within mainstream finance.
Wallis offers an unqualified “yes!” in response to the question of whether or not digital assets and the technology that makes them possible are gaining in popularity with financial institutions. Pressed for examples that support his conviction, Wallis had more than a few examples to share with our attendees. Below, we excerpted a few highlights from his remarks on where to look and what to watch for as the financial sector begins to shift from crypto-curious toward a potentially more enduring embrace of the technology.
Trade Finance
“Traction is being gained. It has been steadily growing over the past four or five years. A few examples, or proof points, particularly in the blockchain space: there are a number of trade finance initiatives around the world, different consortiums are live and running, facilitating trade finance with different blockchain platforms.”
“With RippleNet we have a global network for cross-border payments, which is blockchain based, and we use a native crypto, XRP, to facilitate cross-border payments in what we call ‘on-demand liquidity’.”
Tokenization
“We’re seeing lots of different assets being tokenized, whether that’s NFTs, or securities, whether it’s currencies … That, I think, is a big trend. I think the World Economic Forum has predicted that something like 10% of the world’s GDP will be tokenized by 2027. I think that equates to around $24 trillion of goods and assets being tokenized.”
Central Bank Digital Currencies (CBDCs)
“It’s a very busy environment right now. I think there’s a clear distinction between research and proof of concept versus building out real systems. Among the ones that are furthest ahead in building out real systems, China is probably the biggest one of scale. They are still in pilot mode; they are not fully operational. But they have had a number of pilots in different cities around China, and also are looking now to do some pilots cross border, as well. On the other end of the scale in terms of size, you have the Bahamas with their sand dollar, which is up and running.”
“Others that have done a lot of great research and are fairly well along but have not really pulled the trigger to go live yet are in Sweden with their digital e-krona and then, of course, Singapore with the Monetary Authority there. They have had a number of different projects over the last several years.”
Commercial bank interest rising
“I’ve seen personally a big uptick (in interest) in the last three or four months from commercial banks, household name banks wanting to understand more about what their role will be or could be in a CBDC. You know, when commercial banks start paying attention to something its because they’re either feeling there’s an opportunity to make more money or they feel there’s a threat against them.”
“A lot of early work was really wholesale: bank to bank transfers through central bank accounts. And that’s a valid use case. There’s been a trend in the last 12 months more towards retail, people looking at digital cash or other use cases around retail. Most of those, so far, have been domestic. In the Bahamas it’s really allowing people to send digital money to each other across the different islands there. But we are seeing an increase in interest, as is the Bank of International Settlements, in cross-border CBDCs: so how do you transact, say, with a digital U.S. dollar to a digital Euro to a digital yuan? I think use cases will just keep coming and coming, to be honest.”
At FinovateFall last week, Citizens Bank of Edmonds CEO Jill Castilla described how she is leading her bank through the pandemic. In her 16-minute address, she described how her bank navigated the decision making process and leveraged fintech relationships to help their small business customers survive COVID lockdown.
Citizens Bank of Edmonds was founded in 1901, has $400 million in assets, and 55 employees. The bank aims to serve everybody and has a goal to be the best at everything. And while that sounds like a lofty goal, the bank has proven that it is up to the task by implementing unique solutions that come alongside customers to meet their needs.
So what does it take to be such a successful bank in both the eyes of competitors and customers? Here are three takeaways from Castilla’s keynote that are worth considering.
Communication is foundational
By today’s standards, Castilla is very liberal about offering up her contact information. During the pandemic, she was quick to share her cell phone number; she even tweeted it out multiple times! Providing this open line of communication to both staff and customers was key to ensure that nobody fell through the cracks. Castilla even concluded her keynote by sharing her phone number, saying, “You’re welcome to text me any time.”
But it doesn’t end there. When the pandemic hit, Castilla made sure to contact all of Citizens Bank of Edmonds’ business customers to determine their main areas of stress. And when the bank had to close its lobby, it sent employees to meet customers at the curb to schedule time slots to serve its customers and maintain the personal touch.
Look forward
Castilla watched Frozen II during lockdown and the quote, “All one can do is the next right thing” caught on. In trying to make decisions for the bank, Castilla and her team would consider “the next right thing.” In other words, they would think about what the best decision would be for the future, and not for the present moment.
Castilla offered the example of using the mantra to determine if Citizens Bank of Edmonds should host its annual block party at a time when COVID was just getting started. Thinking about the next right thing made it easy for the bank to call off the party.
And while a block party may seem trivial, consider this mantra implemented for a larger, more strategic decision making. Questions such as, “should we make an investment in AI technology?” or, “should we partner with this up-and-coming fintech?” are a bit easier to answer when filtered through the lens of the next right thing.
Focus on the needs of clients
This takeaway ties back into the first two points, because if financial institutions maintain a foundation of communication while focusing on the next right thing, they will ultimately be doing what is best for their clients.
“Doing the right thing will help you find your people,” Castilla said during her keynote, “And talking about what’s important to you out on social media and the digital space will help you connect with people.” She also noted that both banks and fintechs are trying to do what is best during this challenging time, adding, “Collectively and individually, while working together and on our own, we’re going to change the world for [consumers and small businesses], we’re going to provide greater access to credit, we’re going to have a better understanding of what their financials are, (and) we’re going to help them run more successful businesses.”
Even though super apps aren’t common in the U.S. or Europe, most everyone in fintech across the globe is familiar with them. Super apps serve as a one-stop shop that allow users to access multiple services from a single place.
In Asia, the hot spot for super apps, users are able to use super apps for everything from ordering groceries to hailing a cab to managing their finances. Apps including WeChat, AliPay, Paytm, and Grab are commonplace across Asia. In fact, WeChat has more than 1.2 billion monthly active users; 78% of people in China between the ages of 16 and 64 are using WeChat.
It is the “super” nature of these apps that makes them so successful; they are a platform and do not just fulfill a single purpose. With a combination of in-house technologies and third party integrations, the apps serve a range of consumer needs. Many super apps began with only a single purpose, accumulated a large number of users, and then began adding new capabilities.
What does it take to become a super app? Starting with a massive user base helps, and providing a range of tools for everyday tasks and activities will help keep those users coming back. Below are 10 common capabilities of successful super apps.
Social
As the popularity of WeChat has proven, social tools are sticky. Building communication, collaboration, and sharing capabilities into an app not only builds a user base, but also creates a community around a brand.
Ecommerce
Shopping is taking place increasingly online, which means that ecommerce purchases are becoming a large part of consumers’ everyday lives.
Food delivery
Everybody needs to eat. And between online grocery orders and takeout meal deliveries, super apps can help users meet this need.
Transportation services
Just as important as having food and online purchases delivered is having the means of getting from one location to another. Included in this category are ride hailing services, car sharing services, and bike or scooter sharing services.
Personal finance
Another one of life’s essentials is managing finances. From budgeting for daily expenses to planning for retirement, banking and finance tools are key components of a super app.
Travel services
Offering travel services, such as travel insurance, concierge services, and rental car discounts, is commonplace for many financial services companies. Super apps offer more robust capabilities, however, such as flight comparison and booking tools, train schedules and ticketing services, and hotel booking capabilities.
Billpay
Paying bills is a regular occurrence for most people, so including utility billpay and a mobile top-up feature will give users yet another reason to log into a super app on a regular basis.
Health services
The healthcare industry is fragmented. So providing health services, such as appointment booking, tele-health calls, records management, general health information, and ask-a-nurse services in a single place provides a lot of value for end users.
Insurance
Similar to the health industry, insurance comes with a lot of moving pieces. Offering a digital lock box with insurance cards, contact information, coverage options, and payment history is a valuable tool that can help keep users organized.
Government and public services
Rounding out the list of life’s necessities in the digital realm are government and public services. Super apps can host social security cards and information, public transportation payment options, and library card information.
From partnership to acquisition, the Buy Now Pay Later revolution shows few signs, if any, of abating any time soon.
Apple, one of the Big Tech companies that has been aggressive in its expansion into fintech and financial services, recently announced that it is teaming up with BNPL company Affirm Holdings to offer new, interest-free financing options for qualifying Apple customers in Canada. The new program enables consumers to finance iPhone purchases over a 24-month period and iPad and Mac purchases over a 12-month period, both with 0% APR.
The new initiative comes a month after Apple announced that it was teaming up with Goldman Sachs to help introduce its own Buy Now Pay Later service – ostensibly to rival companies like the aforementioned Affirm. The offering will reportedly be called Apple Pay Later.
And filed in the “if you can’t beat ’em, buy ’em” folder is the news from London, U.K.-based Buy Now Pay Later company Zilch. The firm agreed this week to acquire San Francisco, California-based debt funding platform Neptune Financial as part of setting up shop in the U.S. “We’ve been exploring growth options in the U.S. for some time and following the additional funding,” Zilch founder and CEO Philip Belamant said. “Now was the perfect time to take another meaningful step towards our U.S. launch.”
Zilch’s acquisition news comes less than a month after the company secured $110 million as part of an extension of its Series B round. One of the first Buy Now Pay Later firms in the U.K. (founded in 2018), Zilch enables consumers to pay for purchases using their virtual Zilch card by splitting their transaction into four, interest-free payments over a six week period. The company has raised more than $200 million and boasts 150,000 new sign-ups a month for its BNPL services.
One of the more interesting pivots in the BNPL space of late was an internal one as Canada’s Scotiabank announced that it will convert its credit card repayments into BNPL plans. The new arrangement will give cardholders the ability to pay off their debt balances in fixed installments over three-, six-, or 12-month periods.
“Our customers told us that they’re looking for more options to help them manage their finances,” Scotiabank SVP for Credit Cards and Lending Brett Mooney explained. “This new credit card feature offers our customers more flexibility in how they pay for purchases, in addition to the convenience, rewards and lifestyle benefits that our credit cards already provide.”
The new service is called Scotia SelectPay and can be accessed via the Scotia mobile banking app as well as online. Purchases of more than $100 are eligible for the new financing option, which requires no additional credit check or application.
