Who needs a new CEO, A$AP?

Tweet of the week 🦉🏆

The past week has been a mixed one for Klarna as it dealt with the fallout from its technical issues but was also rumoured to be raising at a $40bn valuation led by Softbank. Amongst that news was the revelation that famed rapper and producer A$AP Rocky was investing in the company and becoming its CEO for a day, June 1st. A$AP invested in the company in the name of helping people with financial literacy and payment difficulties experienced by low-income workers. A$AP joins Snoop Dogg as a brand ambassador to Klarna and their pursuit of a younger demographic and to emphasize their “anti-bank” message.

I thought this was noteworthy because celebrity fintech endorsements and influencers (finfluencers anyone?) are typically a US phenomenon and this was one of the first times I could recall a large European based fintech entering into this sort of partnership.

US fintechs like Current, Square and Step started a trend with their targeting of Gen Z customers, who typically have less options for financial services, through the use of influencers like Mr Beast, Miley Cyrus and Charli D’Amelio respectively to enhance their brand and appeal to younger consumers. Usually on social media platforms and increasingly on TikTok, these companies are benefiting from a growing trend which has seen 44% of Gen Z make a purchase decision based on recommendation from a social influencer (vs 25% for general population).

US fintechs are leading the way with innovative partnerships and marketing strategies, utilising social media influencers and celebrity partnerships, but Klarna could start the trend in the UK and Europe as the competition among fintechs increases. It wouldn’t surprise me for Monzo, Revolut, N26 or Freetrade to start similar partnerships to grow their brands. These partnerships can provide some much needed creativity and buzz around some startups who are starting to lose their mojo.

Square’s purchase of Tidal is a hint of its strategy in this domain and evidence of the large ecosystem they are trying to build. Their ambition is unrivalled across the pond unfortunately.

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Funding 💸

There were 43 deals in the fintech space across the US and Europe with total investment of $2.21bn. Some highlights are below.

🇪🇺 Sentinels raised $3.8m in an angel round for its AI transaction monitoring solution.

🇪🇺 neon has raised £5.5m from existing investors and is raising money via crowdfunding.

🇪🇺 Wefox raised a $650m Series C led by Target Global and included Partners Group, Salesforce Ventures, Seedcamp, Speedinvest, Omers Ventures and more.

🇬🇧 Ikigai raised nearly £2m in crowdfunding on CrowdCube.

🇬🇧 Bought By Many raised a $350m Series D, at a $2.35bn valuation, led by EQT and included CommerzVentures, Munich Re Ventures and Octopus Ventures.

🇬🇧 Divido raised a $30m Series B led by HSBC and ING.

🇬🇧 Lightyear raised a $1.5m pre-seed round for its commission-free trading platform by Wise co-founder Taavet Hinrikus and Teleport co-founder Sten Tamkivi.

🇬🇧 Payments company Rapyd has launched a venture arm, Rapyd Ventures and announced its first investment in Gotrade, a fractional trading platform.

🇺🇸 LoginID received a strategic investment from Visa.

🇺🇸 Truebill raised a $45m Series D led by Accel and included Bessemer, Cota Capital and Eldridge.

🇺🇸 MotoRefi raised a $45m Series B led by Goldman Sachs.

🇺🇸 Synctera raised a $33m Series A led by Fin VC and included Mastercard, Lightspeed, SciFi VC and Diagram Ventures.

🇺🇸 Pinwheel raised a $20m Series A led by Coatue and included First Round, Upfront Ventures, Gokul Rajaram, Adam Nash and Jackie Rees.

🇺🇸 Jeeves announced $131m in total funding ($31m equity + $100m debt) from investors including a16z, BlockFi Ventures, 9Yards, Clocktower, YC and more.

🇺🇸 Yieldstreet raised a $100m Series C led by Tarsadia Investments and included Soros Fund Management, Greycroft, Greenspring, Expansion VC and more.

🇺🇸 The team that created the Solana blockchain is raising $300m - $450m to take on Ethereum according to Decrypt.

🇺🇸 Capchase raised $125m in a Series A led by QED Investors and included SciFi VC, Bling Capital and Caffeinated Capital.

🇺🇸 Mirror.xyz, a crypto publishing tool, is rumoured to have raised from Union Square Ventures at a $100m valuation.

🇺🇸 The Beans raised $2m in a round led by Precursor Ventures and included One Planet VC, Oxford Angel Fund, Relay Ventures and Swing Ventures.

A quick shoutout to Finix who launched Cap Table Coalition to help startups and VCs allocate funding rounds to minority investors, helping them get on the cap table.

Challenger Banking 🚀

🇬🇧 Wise has launched in India, both opening a Mumbai office and supporting Indian customers who can make payments in 44 countries.

🇬🇧 Revolut is building a business marketplace and has signed ClearBooks, an accounting software provider.

  • 🙌🏻 FATP Take - Revolut is focusing a lot on its B2B products and expanding to create an app store will further increase the functionality of a Revolut Business account. The SMB sector is becoming increasingly popular for neobanks to target given the richer economics and stickier customers and could see the path to overall profitability for Revolut, although they are rumoured to be profitable on a monthly basis.

🇬🇧 A switch to Prepaid Financial Services, a new administrator for funds from the UK Home Office to asylum seekers, has left thousands without access to money due to card delays and incorrect deliveries.

🇺🇸 US fintech Ally is leading the charge to remove overdraft fees. If all banks follow suit, as brokerage firms did when Robinhood introduced zero fee trading, they could lose something like $30bn per year which is their estimated 2020 overdraft revenue. These fees increasingly fall on financially vulnerable households.

Digital Assets ₿

🇪🇺 Sweden’s central bank is partnering with TietoEvry and Handelsbanken for its CBDC pilot.

🇬🇧 Standard Chartered is launching an institutional crypto brokerage and exchange for Europe in partnership with HK exchange OSL.

🇺🇸 Cathie Wood’s Ark Invest holds 4m shares in Coinbase worth nearly $1bn.

🇺🇸 Google has relaxed its strict crypto ad policy to allow exchanges and wallets targeting the US to advertise if they meet registration requirements and comply with Google Ad Policy. Ads for ICOs, defi trading protocols or promoting trading of cryptocurrencies are still prohibited.

🌍 Dogecoin finally listed on Coinbase and soared +25% as a result.

🌍 The ECB is warning countries that a failure to launch digital versions of their currency may face threats to the financial system and monetary autonomy due to reliance on payment service providers i.e. US tech giants.

🌍 Credit scoring is coming to DeFi thanks to ARCx Sapphire v3 which will issue its DeFi Passport which incentivises reputation building and creates an on-chain identity.

Fintech Infrastructure 🚧

🇪🇺 The EU is pushing forward plans for a bloc-wide digital wallet for people to access public and private sector services to protect them online. The app will store passwords and log in details for government services but could also be used to pay bills and store personal documents. Target is September 2022 for launch.

  • 🙌🏻 FATP Take - This could be a hugely disruptive move to create a digital identity, likely spurred on by the need for digital vaccination records. With identity and trust at the core of most financial products, this wallet could form the foundations for fintechs to build on top of and could merge with the European Payments Initiative which is aiming to cut US firms out of EU payments. It will also provide greater data privacy and control, something the EU is focused on. It sounds too good to be true, we’ll have to wait and see if it ever makes it into production.

🇪🇺 Enfuce is partnering with Visa to provide fintechs their own payment cards within eight weeks.

Payments 💰

🇪🇺 Data from Russia and its national payment network Mir shows its possible to disrupt Visa and Mastercard but requires heavy government regulation.

🇬🇧 Worldpay estimates only 7% of in-store purchases will be made with cash by 2024.

🇺🇸 Coinbase is linking its Visa debit card with digital wallets Apple Pay and Google Pay as it also invites customers off the waitlist.

🇺🇸 Sezzle signed a 3-year deal to provide BNPL services to Target in-store and online.

🇺🇸 eBay has now removed PayPal as a payment option for sellers, amongst other changes, although still available for buyers

  • 🙌🏻 FATP Take - eBay sellers will be paid directly into their bank accounts, cutting out PayPal’s 2.9% take which it is now taking itself. Previously eBay charged 10% and PayPal 2.9%. Now eBay is charging 12.8%, a whopping saving of 0.1%. In worse news for sellers it will now take them two working days to receive funds whereas PayPal was the same day. Great move eBay …

Regulatory Corner 🔎

🇬🇧 The FCA has extended the registration deadline for crypto businesses to March 2022.

🇺🇸 The OCC is looking to create an “overall strategy” for digital assets and broadly reviewing past guidance as it seeks to provide more clarity for the industry going forwards.

🇺🇸 An Appeals Court reversed a previous court victory for state regulators who challenged the OCC’s ability to offer the fintech’s charter but it may be a temporary victory for the OCC.

Crypto 101 🏫

Hash Rate - hash rate is a measure of the processing power of the bitcoin network and is a key security metric. You can think of hashing power as computing power and the higher the hashing power, the greater the security of the network and its resistance to attacks. As part of the mining process, miners try to produce a hash (remember from last time an output of a fixed length of random numbers and characters) that is lower than a predetermined target hash and so the hash rate describes how many of these hashes are being produced at one time. The current hash rate of the bitcoin network is 171 million EH/s, which is 171 quintillion hashes every second.

Smart Contracts - a bunch of code that is stored on the blockchain and is run when preset conditions are met. Think of them like programs on the blockchain that can be triggered by certain events automatically. You can also think of them like a vending machine which gives you a certain output given the right inputs. The Ethereum blockchain is a blockchain heavily used to store and execute smart contracts and although possible to build smart contracts on the bitcoin blockchain, it’s not typically used for that functionality. Ethereum was created with smart contracts in mind and are used to exchange money, property or other things of value without using a middleman. An example could be a life insurance smart contract with policy terms incorporated into the contract through which a payment is released to the beneficiaries once a death certificate is provided as the input.

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