Square to buy Afterpay in $29B deal 🤯; Mixed feelings around Monzo 🤔; Blooming FinTech in LatAm🔥
Good Morning FinTech. 14/30
Good morning Everyone,
Trust you are having good Tuesday. Here are 3 FinTech stories to make it better:
Square to buy Afterpay in $29B deal 🤯
Just buy it 💸 Payments heavyweight Square plans to buy Australian Buy Now, Pay Later giant Afterpay as it looks to expand further into the booming installment loan market.
Jack Dorsey’s payments company announced the $29 billion, all-stock deal on Sunday evening. The price tag marks a roughly 30% premium to Afterpay’s last closing price.
Shared purpose 🤝 “Square and Afterpay have a shared purpose,” said Square’s CEO Dorsey in a statement. “We built our business to make the financial system more fair, accessible, and inclusive, and Afterpay has built a trusted brand aligned with those principles.”
Shares of Afterpay in Australia surged on that news, and closed nearly 19% higher on Monday.
Perspective 👀 Square has paid >$290,000 for every Afterpay merchant 🤯
Or $1812 per every Afterpay customer 👀
Pretty mind-boggling, when you think about it…
✈️ THE TAKEAWAY
Payments giant🔥 This combination will create a payments giant unlike any other. At the core, this deal is all about bringing Afterpay's merchants to the Square Seller ecosystem and converting Afterpay's existing customers to Cash App users. Australian Buy Now, Pay Later heavyweight serves more than 16 million consumers and nearly 100,000 merchants globally, including major retailers such as Amazon, ASOS.com, among others. Adding that to the thriving Square ecosystem would be a huge catalyst for future growth. With 70 million users, Cash App would also get a solid boost in total user base as well as expand its geographic coverage and effectively help to further compete with PayPal's Venmo. BNPL space is hotter than ever before. Awesome times to be in FinTech.
Mixed feelings around Monzo 🤔
The report 📖 The latest annual report from Monzo painted a somewhat mixed picture. On one hand, its losses are widening and it’s the subject of a regulatory probe. On the other hand, its revenue is strong and its deposits are growing.
Some notable numbers:
Losses increased by about 14% year over year (YoY), going from £113.8M ($145.9 million) to £129.7M ($166.3 million).
The UK’s Financial Conduct Authority (FCA) told Monzo in May that the neobank is the subject of an anti-money laundering probe. The time period under review dates back to October 2018.
On the bright side, Monzo disclosed that its revenue was up nearly 18% YoY, rising from £67M ($85.9M) to £79M ($101.3M). The neobank also revealed that deposits soared 124% YoY, climbing from £1.4B ($1.8B) to £3.1B ($3.98B).
✈️ THE TAKEAWAY
It’s not easy, even in the home market🇬🇧… The best way to understand how Monzo is performing is to look at its competitors in the home market (UK). The increase in Revolut’s YoY loss was much greater than Monzo’s—nearly 93%. Revolut also saw fast user growth, with a 45% YoY increase. Starling’s financials were by far the strongest of the trio: its losses were more than halved from the prior fiscal year, and the neobank expects that it will turn its first-ever annual profit in FY 2022. On the customer side, Starling’s accounts more than doubled, going from about 1M in November 2019 to over 2.1M in March 2021. Is there a place for Monzo? We should find this out in the next 12-24 months.
Blooming FinTech in LatAm🔥
Chile on the map🇨🇱 Chilean startup Xepelin, which has created a financial services platform for SMEs in Latin America, has secured $30M in equity and $200M in credit facilities. LatAm venture fund Kaszek Ventures led the equity portion of the financing, which also included participation from partners of DST Global and a slew of other firms and founders/angel investors.
The mission 🙌🏼 Nicolás de Camino and Sebastian Kreis founded Xepelin in mid-2019 with the mission of changing the fact that “only 5% of companies in all LatAm countries have access to recurring financial services.” Hence, Xepelin is built on a SaaS model designed to give SMEs a way to organize their financial information in real time. Embedded in its software is a way for companies to apply for short-term working capital loans “with just three clicks, and receive the capital in a matter of hours,” the company claimed.
Financials 📊 The FinTech currently has over 4,000 clients in Chile and Mexico, which currently has a growth rate “four times faster” than when Xepelin started in Chile. Over the past 22 months, it has loaned more than $400M to SMBs in the two countries. It currently has a portfolio of active loans for $120M and an asset-backed facility for more than $250M.
✈️ THE TAKEAWAY
This is yet another illustration of how huge is the FinTech market in LatAm. SMEs are the backbone of virtually every economy in the world. Given how hard it often is to secure financing (not to mention the seamless financing) to keep your operations going, and coupling that with the massive size of LatAm, it looks like Xepelin is going after a huge total addresable market. If it can deliver and maintaing customer relationships, it’s undoubtedly a unicorn in the making 🦄.
🔎 What else I’m watching
PBoC says NO to Crypto Trading 🛑 China's central bank holds that crypto trading brings financial risk to the economy, and said it will continue a crackdown on the industry.
Crypto strong 🚀 Square’s Cash App service’s bitcoin yearly revenue rose 200% to $2.72B (from $875M) while bitcoin gross profit jumped to $55M from $17M, according to the company’s Q2 shareholder letter. The company also reported an $45M impairment loss on its bitcoin holdings.
💸 Following the Money
Bitmain spin-off Matrixport gets $100M in Series C funding, with valuation Over $1B.
Spain-based fintech Ritmo has secured a EUR 13.8M seed round led by JME Ventures. The funds will be used to expand into new markets in Europe and Latin America.
NCR, an enterprise technology provider, has announced a definitive agreement to acquire LibertyX, a cryptocurrency software provider.
Kuda Bank has closed, via its London entity, a Series B of $55M — money that it plans to use to double down on new services for Nigeria, but to prepare its launch into more countries on the continent. The funding was made at a valuation of $500M, and it comes on the back of some impressive early growth for the startup.
Telecom operator Airtel Africa has secured a $200M investment for its mobile money arm from Qatar Holding, an affiliate of the Qatar Investment Authority (QIA).
👋 That’s it for today! Thank you for reading and have a productive Tuesday! And if you enjoyed this newsletter, invite your friends and colleagues to sign up:
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