Should PayPal’s Venmo worry about Zelle’s crazy growth? 🤯; How digital brokers are trying to grow customer engagement & boost revenues 🚀; BlackRock to offer crypto trading 🤯
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Good morning Everyone,
And happy Saturday! This week was super interesting when it comes to all things FinTech. So, without further ado, let’s dive into the three stories that were moving the headlines this week in the financial technology world. You can uncover other stories, keep the FinTech pulse daily and get at least x5 more by becoming a subscriber. Join the community here:
And here’s a mix of 3 hot & fresh FinTech stories from this week:
Should PayPal’s Venmo worry about Zelle’s crazy growth? 🤯
Earnings call 📞 Both Zelle & PayPal’s Venmo finished out 2021 strong, with impressive growth in peer-to-peer (P2P) transaction volume. But that’s not what really matters.
Wait, what is Zelle? 🤔 For the start, let us remember what Zelle is.
Founded in 2017, Zelle is a United States-based digital payments network owned by Early Warning Services, a private financial services company owned by the banks Bank of America, Truist, Capital One, JPMorgan Chase, PNC Bank, U.S. Bank, and Wells Fargo.
The numbers 📊 Now, let’s take a look at the numbers:
In 2021, Zelle processed 1.8B payments, representing 49% year over year (YoY) growth, an impressive jump despite being slower growth than 2020’s 62%. Total transaction volume for the year also shot up 59%, totaling $490B.
In Q4, Venmo’s volume grew 29% YoY to reach $61B, also slower than the 36% notched in Q3. For the year, Venmo’s volume jumped 44% YoY to reach $230 billion.
✈️ THE TAKEAWAY
2022 will be an important year both for Zelle & Venmo. It’s obvious that Zelle and Venmo are both trying to push their momentum into 2022. Although the majority of Zelle’s payments are P2P, more businesses are starting to use the service. Both SME payments and the average transaction size for Zelle payments grew substantially last year. To further its growth in the segment, Zelle plans to roll out a QR code feature being piloted that lets users easily pay businesses. Looking at the other side, Venmo is also pushing further into retail payments. In November, the payments giant announced a partnership with Amazon to add Venmo as a checkout option on Amazon.com and its mobile app starting in 2022. That’s a huge win for PayPal. Zooming out, one can say that despite Venmo’s popularity, especially with younger generations, Zelle’s bank-based integration could help it become even more dominant in the P2P space. Its relationship with banks improves customers’ trust in the platform and can attract users who may otherwise be wary of P2P services. Hence, not only should Venmo watch closely what Zelle is doing, but also explore other ways how it can maintain its growth and importance beyond younger generations.
How digital brokers are trying to grow customer engagement & boost revenues 🚀
The news 🗞 After phenomenal 2021, driven by the craze in both stock (i.e. GameStop stock saga) and crypto markets, retail investment buzz has been fading away a bit. At least, for now.
Hence, feeling the squeeze from declining retail investor activity, digital brokers are branching out to keep customers engaged.
More on that 👉 Earlier this week I’ve briefly covered the UK-based investment app Lightyear. The startup has launched a new social investing feature called “profiles” in the UK & the EU. Profiles let users share personalized web pages showing their portfolio holdings, watchlists, and recent trades.
A similar move was just made by DriveWealth. Revolut’s & Stake’s share trading enabler has added crypto investing. The New Jersey-based API brokerage platform acquired Crypto-Systems so now it can offer Bitcoin and Ethereum trading to partners and retail investors.
What does this indicate? Here’s the takeaway👇🏼
✈️ THE TAKEAWAY
Doubling down on customer engagement & growth. As noted earlier, market participation by retail traders fell to around 18% at the end of January, after reaching 24% in the first quarter of 2021. A crowded marketplace with industry heavyweights like eToro, Robinhood, & Vanguard also means that it’s becoming harder to stand out. Hence, digital brokers are increasingly looking for novel ways to boost revenues and differentiate their product offerings from rivals to sustain growth and keep their customers engaged. Incorporating social elements and crypto trading are two paths that are somewhat proven already, yet it doesn’t mean they will guarantee success. Other options such as introducing DeFi elements into the mix (as done by eToro), or launching IPO investing offerings (i.e. as done by Robinhood), or doing long-term investments can also be fruitful strategies to explore. Because at the end of the day, the biggest challenge for them is if/when the growth stops. And we already saw some red flags coming from Robinhood…
BlackRock to offer crypto trading 🤯
The news 🗞 BlackRock, the world’s largest asset manager, is preparing to offer a cryptocurrency trading service to its investor clients, according to three people with knowledge of the plans.
More to this 👉 The New York-based company, which manages over $10 trillion in assets for institutions, plans to enter the cryptocurrency space with “client support trading and then with their own credit facility,” one of the people said. In other words, clients would be able to borrow from BlackRock by pledging crypto assets as collateral.
Aladdin 🪔 One of the people said BlackRock will allow its clients – which include public pension schemes, endowments, and sovereign wealth funds – to trade cryptocurrency through Aladdin (short for “Asset, Liability, Debt and Derivative Investment Network”), the asset manager’s integrated investment management platform. The timetable for unveiling the service is unclear.
✈️ THE TAKEAWAY
Institutions are coming 🏦 First and foremost, it must be noted that BlackRock has already sent some positive signals to the market regarding crypto, including trading CME bitcoin futures, as per a filing with the U.S. Securities and Exchange Commission. The company also has plans to launch the iShares Blockchain and Tech ETF, an exchange-traded fund tracking an index composed of companies involved in crypto technologies in the U.S. and abroad. Furthermore, BlackRock also owns 16.3% of MicroStrategy, whose CEO, Michael Saylor is one of the most active Bitcoin maximalists while MicroStrategy is one of the biggest publicly-traded Bitcoin treasuries. Looking at the bigger picture, it’s clear that institutions are coming, and they are coming for digital assets. Wall Street banks and large financial institutions are edging into crypto, with the likes of Goldman Sachs, Morgan Stanley, and Citi carefully choosing strategies. This is a positive and huge move to further legitimize the space and make it even more mainstream.
🔎 What else I’m watching
Metaworse 😬 Metaverse-related tokens took a hit in the past two days as Meta, formerly known as Facebook, reported a $10B loss on its augmented and virtual reality division in an earnings release earlier this week. Tokens of blockchain-based games Axie Infinity, The Sandbox, and Gala all took double-digit hits. Meanwhile, the play-to-earn poker platform from Decentral Games is seeing moderate success with 6,000 unique players each day, comprising more than 30% of Decentraland's daily users, according to the latest figures. In the past three months, the poker game has generated more than $7.5M in revenue through its various income streams.
No crypto ban from Russia🇷🇺? Russia has unveiled plans to regulate cryptocurrencies — reducing the risk of an outright ban. Estimates suggest more than 12 million crypto wallets have now been opened in the country. Officials fear a lack of regulation means law enforcement "will not be able to respond effectively to offenses and crimes committed through their use." The government also admitted that "a complete ban on the segment of transactions related to its circulation was not possible."
Solid numbers from Adyen 📈 Dutch payments group Adyen saw a 70% growth in transactions last year, according to a report from the Financial Times. The numbers were reportedly boosted by the pandemic-spurred digital shift. Adyen acts as a middleman of sorts, working between other payment companies and merchants, including Uber, LinkedIn, Spotify, and Microsoft. The full-year net revenue was up 46% and had hit €1 billion in 2021. Meanwhile, the sales transactions volume processed was up 70% last year. Solid, very solid! 👏
💸 Following the Money
Business-to-business (B2B) payments and financing platform Tribal closed a $60M Series B fundraising round, bringing its total investment to $140M.
Bpifrance and Eurazeo were among the investors which led the €130M funding round for French revenue-based financing startup Silvr. According to the company, it's helped companies grow by 64% within two months after receiving financing.
US-based Bitcoin payments processor OpenNode has raised $20M in new funding led by Kingsway, bringing its valuation to $220M. The Series A funding round also saw additional investment from Twitter, Fidelity Investments affiliated Avon Ventures, and Bitcoin supporter Tim Draper. OpenNode operates a secure Bitcoin processing infrastructure for businesses that allows for payments and payouts, invoicing, conversion and settlements.
👋 That’s it for today! Thank you for reading and have a productive weekend! And if you enjoyed this newsletter, invite your friends and colleagues to sign up:
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