Another (new) neobank in the UK🇬🇧; DeFi is vulnerable to hacking 🕵️♂️; Another crypto bank (sort of) 👀
Good Morning FinTech. 20/30
Good morning Everyone,
And happy Wednesday! I trust your week has been going great thus far. Here are 3 FinTech stories to make the most of today:
Another (new) neobank in the UK🇬🇧
The raise 💸 UK-based FinTech challenger Kroo has raised GBP 17.7M in its Series A funding round, according to AltFi. Not too shabby… The round was led by Rudy Karsan, an entrepreneur who sold HR platform Kenexa to IBM in 2012 and runs founder of Karlani Capital.
Neobank in the making 🏦 Launched in February 2019, the firm is initially offering a prepaid debit card (like many other, now well-known names - Revolut, Monzo, N26, etc.). The new funding is said to support its mobilization phase, ahead of its launch in early 2022. It is also looking to grow its team as it works towards securing a full banking license. Who doesn’t want to be a bank these days, right? 🤔
The USP 🥊 Kroo will seek to differentiate itself from the UK giants of digital banking by building a bank more focused on ‘social features’, prompting groups to act together on financial matters. It is currently offering one such deal, in a manner similar to Bunq, that when a customer successfully refers a friend Kroo plants 20 trees with the aim of creating a forest of 1 million trees. And then what? 😬
✈️ THE TAKEAWAY
A socially responsible bank? 🤔 While it indeed sounds a bit different than the rest, it’s a questionable strategy at the first glance. It’s obvious that we lack social responsibility in most of the industry, but can it be a key USP for a neobank? Especially considering their struggles to be sustainable businesses. On the other hand, Kroo is said to be pursuing a more traditional route to revenue growth via growing lending volumes. This is by far the most important component to maintaining a healthy bottom line. If it can find a synergy between the two (social responsibilities + lending), I’m bullish on them.
DeFi is vulnerable to hacking 🕵️♂️
More money - more problems 🤷♂️ Decentralized finance aka DeFi, that refers to blockchain-based protocols that facilitate money lending, interest, asset swaps, and other financial transactions without using an intermediary, is enjoying a period of massive growth, with nearly $80 billion in assets locked into protocols. But when there’s more money, more problems emerge…
New data 📊 According to a new report from blockchain forensics firm CipherTrace, DeFi-related hacks and fraud have cost protocols and their users $474 million through the first seven months of the year. While overall cryptocurrency fraud and crime has dropped considerably—CipherTrace pegged the number at $4.5 billion in 2019 and $1.9 billion in DeFi hacks have done 270% more damage than all of last year.
The trend 📈 Most of the attacks on DeFi protocols use flash loans. Flash loans are a way for someone to borrow a lot of money, use that borrowed capital to take advantage of an arbitrage opportunity, then pay back the loan—all in one transaction.
✈️ THE TAKEAWAY
It takes time… DeFi is still a very very young space, both in terms of user adoption and overall infrastructure. That said, it’s not surprising that it is being exploited by the wrongdoer. On the other hand, given the potential upside and innovative power at its disposal, it’s only a matter of time when security will improve and DeFi becomes business as usual.
Another crypto bank (sort of) 👀
IPO & a Bank 🏦 On the verge of going public, USD Coin (USDC) creator Circle is seeking status as a national digital currency bank, which would operate under the oversight, rules, and guidance of the Federal Reserve, U.S. Treasury, Office of the Comptroller of the Currency (OCC) and the FDIC.
Wait, but why? 🤔 As a full-reserve national commercial bank, Circle will not lend out its customers’ deposits, rather all customer deposits will be backed by USDC and will be able to be withdrawn at any time.
USDC is a digital stablecoin pegged to the US Dollar and runs on several crypto blockchains, including Ethereum and Stellar and there is now more than $27.5B of it in circulation.
✈️ THE TAKEAWAY
A few pivots 🚀 Circle is one of the few FinTechs that have changed their course since inception. The app started off its life as a peer-to-peer payment network before shifting to a payment provider and is now one of the more prominent crypto trading platforms in the US (it has acquired crypto exchange Poloniex in 2018). It’s clear that Circle believes in the future of crypto and digital dollar (especially USDC) and obviously wants to be at the core of it all. If they get the approval and execute on it, it might be a very interesting building block for a more efficient, safer, and more resilient financial system. I’d watch them closely.
🔎 What else I’m watching
FinTech isn’t for everyone… Gaming company Razer has announced it will be shutting down its e-wallet services Razer Pay and Razer Card in both Malaysia and Singapore, with effect from 1 October. According to its website, the last date for users to top up their wallet was on 6 August and users will still be able to use the wallet to purchase games, entertainment, food and mobile top-ups until 31 August. Users will have until 30 September to withdraw their funds via the in-app withdrawal function.
Payments, payments everywhere 🙌🏼 US-based WordPress e-commerce plugin WooCommerce has expanded its payment services across four new countries in Europe: Spain, Italy, France, and Germany. Businesses in Spain, Italy, France, and Germany will now have access to WooCommerce's solution, which allows users to manage payments directly from their store's dashboard. The company has also added multi-currency support, which lets customers shop in any of the 135 currencies WooCommerce supports. Previously, merchants were required to use a plugin to add further currencies.
CBDC in Jamaica🇯🇲 Bank of Jamaica (BOJ) has minted Jamaica’s first batch of central bank digital currency (CBDC). The full amount will be issued to “deposit-taking institutions and authorized payment service providers” during the pilot program, which is expected to end in December.
AMC + Bitcoin 🍿 AMC Entertainment is getting on the bitcoin bandwagon and will accept the cryptocurrency for the online payment of movie theater tickets and concession snacks, AMC CEO and Chairman Adam Aron said in an earnings call, per Deadline and other media.
Another profitable neobank 🎉 During the last quarter to June, Atom Bank said it turned its first monthly operating profit in the Durham-based lender’s eight-year history and will be regularly profitable on that basis soon. The milestone came after Atom Bank surpassed £3B in mortgage lending at the end of June, and grew deposits by 16 per cent to £2.5B.
Lost funds 💸 Cross-chain protocol Poly Network has been hacked for $611M in the largest DeFi hack to date. The assets stolen were $273M of Ethereum tokens, $253M in tokens on Binance Smart Chain, and $85M in USDC on the Polygon network.
Venmo crypto cashback 😎 Venmo, the mobile payments outfit owned by PayPal, has launched a new crypto cashback tool. The company will allow Venmo credit card users to automatically purchase cryptocurrency using cashback rewards earned through credit card purchases, according to an announcement.
💸 Following the Money
Pluggy, a fintech accelerated by the LIFT LAB of the Central Bank, has received a contribution of more than BRL 3M in a Pre-Seed round, according to startupi.com.br.
Card issuing platform Lithic Secures $60M in Series C funding round.
Brokerage app company Robinhood announced that it acquired the investment communications firm Say Technologies for a $140M all-cash deal, according to a Tuesday release.
👋 That’s it for today! Thank you for reading and have a productive Wednesday! And if you enjoyed this newsletter, invite your friends and colleagues to sign up:
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