A Wise move.

Tweet of the week 🦉🏆

It’s been an exciting week for the UK fintech scene with two big stories. Firstly, Wise announced it’s direct listing on the London Stock Exchange (LSE). This is a big boost for the UK fintech ecosystem as it will allow Wise employees and early investors to cash out and put that capital to work elsewhere in the ecosystem or start their own startup. It is also a boost for the LSE which has attracted a major company to list, something it has struggled with of late but maybe the tide is starting to turn (Deliveroo and PensionBee listing recently).

Marc Rubinstein has a great write up on Wise and the company’s history from a P2P FX platform to its expansion into banking products with its borderless accounts (sign up here) and its B2B products and platform solutions like its integration with Thought Machine.

Wise has 6m customers, £421m in revenues and has been profitable for 5 years. If Wise was in the US, I would imagine with those stats it’s value would likely be much higher than it will when it lists in London.

The second story was that JP Morgan is buying UK roboadvisor Nutmeg. Nutmeg has struggled with a high CAC and low user growth although it does have £3.5bn under management and 140k customers in the UK. This makes average balances around £25,000 although likely to have long left tail. Fees range from 0.45% to 0.75% making annual revenues between £16m - £26m. Although the amount JP Morgan paid was not announced, estimates from crowdfunding investors put the amount at around £700m (or £5,000 per customer and 44x-27x revenues).

JP Morgan is set to launch its challenger bank Chase in the UK this year and its acquisition of Nutmeg will likely boost its capabilities beyond traditional banking to include wealth management. The contrasting choice of JP Morgan to buy (Nutmeg) vs build (Chase) is an interesting one.

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Funding 💸

There were 51 deals in the fintech space across the US and Europe with a total investment of $2.61bn. Some highlights are below.

🇪🇺 Upflow raised a $15m Series A led by 9Yards Capital and included N26 co-founder Max Tayenthal.

🇪🇺 Change has raised €3.7m from 50 private investors in a crowdfund round valuing it at €175m.

🇪🇺 Pennylane raised €15m from Sequoia.

🇪🇺 Finleap Connect raised €22m from SoftBank, SBI Investment and Ilavska Vuillermoz Capital.

🇬🇧 DNA Payments raised £100m from Alchemy Partners.

🇬🇧 Generation Home raised $30m in equity and $422m in debt from investors including Mithrill Capital, La Famiglia, Firstminute Capital, JamJar and others.

🇬🇧 Nutmeg is being acquired by JP Morgan.

🇬🇧 Trilo raised a £1m pre-seed round.

🇬🇧 ThinCats raised £160m strategic investment from Wafra Capital.

🇬🇧 Volt.io raised a $23.5m Series A led by EQT Ventures and included Augmentum Fintech and Fuel Ventures.

🇬🇧 10x Future technologies confirmed their $187m Series C investment co-led by BlackRock and CPP Investments with existing investors also supporting the round.

🇬🇧 Publicly listed investor Augmentum Fintech is raising £40m of capital and broadening its scope to include seed-stage fintechs.

🇺🇸 B9 raised a $1.7m pre-seed round

🇺🇸 dYdX raised a $65m Series C led by Paradigm and included Wintermute and Polychain Capital as well as others.

🇺🇸 Novo raised a $40.7m Series A led by Valar Ventures and included BoxGroup, Rainfall Ventures, Read Sea Ventures and Crosslink Capital.

🇺🇸 Goldfinch raised $11m from Andreessen Horowitz.

🇺🇸 Unit raised a $51m Series B led by Accel and included Better Tomorrow Ventures, Flourish Ventures and Aleph.

🇺🇸 Spash Financial has raised a $44.3m Series B from Citi Ventures, CMFG Ventures, DST Global, Firebolt Ventures and Northwestern Mutual.

🇺🇸 TRM Labs raised $14m in a Series A led by Bessemer and included Blockchain Capital, Initialized Capital, PayPal Ventures and Salesforce Ventures.

🇺🇸 Guideline raised $200m from Propel, Greyhound, Generation IM, General Atlantic and Felicis Ventures.

🇺🇸 PayCargo raised a $125m Series B from Insight Partners.

🇺🇸 BitWise raised $40m in a round led by Electric Capital and Elad Gil.

🇺🇸 Finley raised a ¢2.9m seed round led by Bain Capital Ventures and included YC, Twenty Two Ventures, Nine Four Ventures and Haystack.

🇺🇸 The WSJ reports that existing Stripe shareholders sold $1b in shares to Sequoia, Shopify (a partner of Stripe), Silver Lake and Capital Group as investors jumped at the opportunity to get their hands on shares of the hottest fintech’s around.

Challenger Banking 🚀

🇪🇺 Raisin has launched in the US with its first US partner bank, MapleMark Bank.

🇬🇧 New Zealand BNPL firm Laybuy is bringing its digital BNPL card to the UK.

🇬🇧 Shrap, a change card which aims to replace coins by giving users their change on a Shrap card, is conducting two pilots in a bid to keep access to cash for communities.

🇺🇸 Verizon, the US telecoms giant, is launching a payment card and app for kids.

🇺🇸 Novus has partnered with Visa and Railsbank to offer users rewards for sustainable purchasing.

Digital Assets ₿

🇪🇺 Swiss bank Sygnum is launching custody and trading services for DeFi tokens

🇪🇺 BBVA has opened bitcoin trading to its Swiss private banking clients after six months of testing.

🇺🇸 Uniswap is the first decentralised exchange (DEX) to pass $300bn in trading volume, up from $1bn a year ago.

🇺🇸 Greyscale is eyeing 13 more investment products, including ones tied to Solana and Polygon.

🌍 Hedge funds may invest $312bn into crypto assets by 2026 according to a survey, representing a 10% allocation.

🌍 The World Bank denied El Salvador’s request to help it implement bitcoin as legal tender given its “environmental and transparency shortcomings.” Hopefully some other agencies or crypto experts will help.

🌍 Easy come easy go for Iron Finance and its TITAN token, which had peak TVL at $3bn and the price to TITAN rose to $64 but crashed to almost 0 in less than 24hrs in a bank run. The Defiant has the scoop on what happened and Frances Coppola had a great write up. There were also issues with algorithmic stablecoin Malt resulted in some LPs earning 500,000% APR.

🌍 Sichuan, a Chinese crypto mining center, has told the state power grid to cut its hydroelectricity supply to 26 mining farms. This sent bitcoins hash rate plummeting.

🌍 Stablecoin Tether saw more volume that PayPal and Zelle in Q1 2021.

Traditional Banking 🏦

🇪🇺 BaaS platform SolarisBank has migrated its customer base from a third party core to its own inhouse alternative.

🇺🇸 American Express is launching checking accounts and lines of credit for SMEs as it looks to build upon its acquisition of Kabbage.

🇺🇸 CapitalOne added early direct deposits, copying challenger banks like Chime.

  • 🙌🏻 FATP Take - Whilst fintechs like Chime are solving customers problems one at a time, building out its functionality, banks will keep copying it, eroding their value propositions. Whilst copying features in the social media space has proven to be a good strategy for Facebook, will the case be the same for incumbent banks?

Fintech Infrastructure 🚧

🇪🇺 Societe Generale is partnering with Temenos to revitalise its account management and payment systems in Europe and Asia.

🇬🇧 The UK and the Nordics came out ahead in Mastercard’s Open banking Readiness Index, with digital infrastructure, high number of bank APIs, progressive regulators and consumer readiness the highest across Europe.

🇺🇸 Google lost another exec in a short space of time from its Cloud financial services business as Global Head Anil Saboo is leaving after three years to become VP at Bakkt. Derek White left last week to become CEO of Galileo.

🇺🇸 Stripe announced its first partnership for Stripe Treasury, farming financial management company Ambrook.

🇺🇸 Modern Treasury launched Ledgers, a solution to track products that store and move value.

Payments 💰

🇬🇧 Checkout.com acquired Estonian software development firm Icefire.

🇺🇸 Visa and Mastercard both make separate partnerships in the biometric payments space. Visa with Abu Dhabi Islamic Bank and Mastercard with UK’s FinGo. Visa also kicked off its Tap to Phone POS offering this past week in the US.

🇺🇸 Former PayPal exec’s Jim Nguyen and Nas Kavian have launched Six Clovers, a decentralised global payments network aiming to replace Swift and build on the Algorand blockchain.

Crypto 101 🏫

Proof of work (PoW) - a consensus mechanism powering and securing the Bitcoin blockchain.

We have previously talked about mining at a high level, that it is the activity through which groups or individuals validate transactions and add blocks to the blockchain. Mining can be done in two ways, one of which is Proof-of-Work and the other is Proof-of-stake (next week’s topic). Proof of work is sort of self-explanatory, in that to validate transactions and create the next block, you have to work for it. For bitcoin this means solving complex cryptographic problems and coming up with a winning solution i.e. working for it. Proof of work is difficult, costly and time consuming to carry out and in the bitcoin concept, it involves a lot of trial and error to complete before a new block can be added.

For a block to be added, its hash must be less than the current target. The target is a large, 256-bit number. For a block to be validated and added to the blockchain, the hash of its block header must be less than the target. The lower the target, the more difficult it is to mine a block (more on this further down) because the odds of finding a hash that is lower than the target is smaller. The target adjusts every 2016 to make sure that the average time taken to mine block is every 10 minutes.

A block’s header, also a 256-bit number, is a summary of the contents of the block which includes a hash of the previous block header, hashes of the transactions in the block, a timestamp, the current target, and the nonce. The block header is hashed and if it is below the target, it is accepted. If it isn’t, you incrementally increase the nonce field, in trial and error style, to get a new hash to compare to the target. This repeats until you get a hash of the block header that is lower than the target value. The difficult and repetitive nature of this process is the proof that you have done the work.

PoW solves the double spend problem that decentralised ledgers like Bitcoin are prone to. If I send my 1 BTC to User A, if there is nothing stopping me from sending the same 1 BTC to User B, then I have spent the money twice. Traditional finance has measures in place so you can’t spend more than you have and Proof-of-work is the crypto process which stops it,

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