Robinhood’s moderate IPO 😕; PayPal’s strong numbers 📈; Revolut wants to cash in on US-Mexico remittances activity🇲🇽

Good Morning FinTech. 13/30

Looking under the $HOOD…

Good morning Everyone,

And happy Monday! I hope you had some time to relax and recharge during the weekend. Here are 3 FinTech stories to make your day and week more productive:

Robinhood’s moderate IPO 😕

The $HOOD 🔔 Robinhood, the popular stock trading app, became a publicly-traded company itself on Thursday. Yet, the Wall Street investors weren’t exactly falling all over themselves to buy a share at their first opportunity.

The stock price 📉 Shares of the brokerage app closed down 8.4% on their first day of trading on the Nasdaq. Robinhood had priced shares at $38 each — the low end of its proposed range — setting an initial valuation of around $32 billion. Shares fell as much as 11% during the day before rebounding a bit. Robinhood had a market cap of around $29 billion at the closing bell — more than double its private-company valuation less than a year ago. About the same price is at the time of writing today.

Still, billions of returns 💸 Despite moderate IPO, the public market debut made multibillionaires Robinhood’s young co-founders, ​​Vlad Tenev and Baiju Bhatt, as well as minted hefty returns for its venture backers.

Tenev, Robinhood’s CEO, is worth $2.4 billion after the company sold shares to investors on Wednesday at $38 each, while Bhatt, who was co-CEO until he stepped aside last year, is reportedly worth $2.8 billion.

Index Ventures’ stake in the company is worth roughly $3.4 billion at the IPO price. Ribbit Capital alone has a stake estimated to be worth as much as $3 billion, not to mention other backers such as New Enterprise Associates, DST Global, Sequoia Capital, IVP, TSG Consumer Partners, D1 Capital Partners, among others.

✈️ THE TAKEAWAY

Could $HOOD become a meme stock itself? 🤔 It’s already clear now that Robinhood’s IPO didn’t live up to its hype. As said by Bloomberg, it was the worst first day of trading ever for a company that raised such a large pool of capital in its IPO. On the other hand, it might be worthwhile to give the company some time to see how more serious investors are thinking about the stock. On a general level, one can already notice that going public is getting tougher. And if the trend continues as the summer fades, Robinhood’s disappointing debut may be the beginning of the end of 2021’s IPO boom.

PayPal’s strong numbers 📈

Earnings 💸 PayPal has reported its 2Q2021 numbers. In Q2, the payments giant’s total payment volume (TPV) jumped 36% year over year (YoY), hitting $311 billion—up from the same period last year, when the metric grew 30% YoY.

TPV increased nearly 81% compared with Q2 2019, reflecting PayPal’s strong growth during the pandemic.

Accounts 👥 PayPal wrapped up Q2 with 403 million active accounts, netting 11.4 million new active accounts (of which 1.5 million were merchant accounts)—slower growth than Q2 2020, when the payments giant brought in a whopping 21.3 million thanks to the rise in digital payments demand.

PayPal also reported a 58% yearly increase in Venmo volume, which hit $58 billion. On the company’s earnings call, CEO Dan Schulman said that a resurgence in travel and events contributed to the firm’s strong performance.

✈️ THE TAKEAWAY

PayPal grows strong, and it will probably become even stronger… The global pandemic has obviously accelerated the growth of the payments giant. Yet, there are 4 areas that will continue this trend onwards. First, it’s buy now, pay later (BNPL) service. Since launching BNPL in August 2020, the service has processed more than $3.5B in TPV, with more than $1.5B coming in Q2 alone. The addition of new countries and more aggressive expansion will only accelerate this. Second, it’s the in-store payments. PayPal will be very aggressive on this front—and it’s already made moves in the space. The company launched Zettle, its small-business point-of-sale business, in the US in early July after introducing the solution in the UK. Third, it’s crypto. The company has already made some decent returns in this vertical, and it will continue adding new features to support the growth of cryptocurrency usage among PayPal’s customers. Finally, it’s Venmo. PayPal’s CEO shared they have big plans for Venmo which include features like high-yield savings, early access to direct deposit funds, improved bill pay functionality, and messaging capabilities. If all goes well, Venmo could become the ultimate challenger bank in the US.

Revolut wants to cash in on US-Mexico remittances activity🇲🇽

Remittances 💸 UK FinTech giant Revolut is establishing a payment corridor for the US and Mexico to facilitate the easy movement of funds between the two countries.

The opportunity 👀 The Super App in the making is aiming to enter a cross-border payments market between the two countries that saw a 31.0% surge in May and hit a monthly record of $4.52 billion, according to research from BBVA. The company’s prospective customer base includes migrants from Mexico who are residing in the US and sending payments back to their families. 

The economics 📊 For its new feature, the neobank charges a percentage-based transaction fee of 0.30%, which is set within a fixed range: Users will pay at least $0.30 but no more than $6.00 per transaction. Revolut says that it’s competitive with fees assessed by other companies, pointing to charges that can reach11%. 

Customers will not be hit with FX fees if they stay within their free allowance limit, and their transactions will use the interbank exchange rate, the neobank noted. However, recipients may still have to pay fees to their beneficiary banks. 

✈️ THE TAKEAWAY

Building brand awareness. Revolut hasn’t made a big marketing push since its US launch in March 2020, hence, this move could be a bit more than “a quiet launch.” Remittances and LatAm are a strong and huge opportunity, especially for the challengers like Revolut aiming to be less reliant on their home market (UK). On the other hand, we must remember that there’s Nubank which has equal (if not bigger) ambitions, local market knowledge, and the first-mover advantage. This year will be super interesting!

🔎 What else I’m watching

• Strong MC numbers 📊 Second-quarter earnings results for Mastercard, like Visa before it and the big banks too, show a rebound in consumer spending and a snapback in cross-border activity as international travel is in its early innings of recovery. The payments giant reported consolidated net revenues of $4.5B, which on a currency-neutral basis were up 31%. Currency neutral earning came in at $1.95 a share, gaining 37% year on year. Cross-border payments volume was up 58% (makes you put Visa’s acquisition of Currencycloud into perspective… 👀).

• Zelle going mainstream 👀 The Zelle® Network processed $120b on 436M transactions in the second quarter, the company announced. Year-over-year sent payment values were up by 68% and payment transactions were boosted by 58%.

• Google + Marqeta = more FinServ 📲 Card-issuing company Marqeta announced in a press release that its platform will fuel the new virtual Google Pay balance card. The new virtual Google Pay balance card enables users to spend their Google Pay balance through a virtual card tokenized into a mobile wallet, which can be used at participating merchants. In the past, Google Pay balance users could use their balance for person-to-person payments, purchases on eligible Google-owned properties such as the Play Store or YouTube, or they could transfer balances to their bank account. With the new virtual card, Google Pay users can make purchases directly from their Google Pay balance.

• CBI for digital euro 💶 Central Bank of Ireland Governor Gabriel Makhlouf said that although the eurozone has yet to decide on a central bank digital currency, the development is "very likely" to happen. "In my view, it's not a question of if but rather how and when," the governor wrote in a bank blog post on Thursday.

• ARK + $HOOD 🏦 Cathie Wood’s ARK Investment Management snapped up shares of Robinhood Markets, the parent company of a popular stock and crypto trading platform, hours after they made their debut on the Nasdaq exchange. The New York-based investment manager's ARK fund bought 1.3M Robinhood shares. The fund typically invests in tech stocks. Did you buy it? 🤔

• PayPal to expand crypto coverage🇬🇧 Global payments platform PayPal has announced it is looking towards the UK as the next market in which to expand its crypto trading services.

• Monzo in trouble 😬 The FCA has launched a formal investigation into Monzo’s anti-money laundering practices, which could carry both civil and criminal liability, says AltFi.

• Binance derivatives go 🌪 Crypto exchange Binance announced Friday that it will no longer offer crypto futures and options trading to users in three European countries: Germany, Italy, and the Netherlands. With immediate effect, new users from these countries will no longer be able to open accounts with Binance to trade crypto derivatives.

💸 Following the Money

• Landis, a US startup that uses technology and data science to help renters reach homeownership, has closed $165M in debt and Series A equity financing.

• Conversational AI chatbot developer Kasisto has closed a $15.5M Series C funding round co-led by new investors Naples Technology Vendors and NCR Corporation.

👋 That’s it for today! Thank you for reading and have a productive week ahead! And if you enjoyed this newsletter, invite your friends and colleagues to sign up:

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