Despite the global slowdown, UK FinTech investment grows 🇬🇧; Banks might be driving the next big wave of layoffs 😔; The first market test for the creator economy 📈
You're missing out big time... Weekly Recap 🔁
👋 Hey, Linas here! Welcome back to a 🔓 weekly free edition 🔓 of my daily newsletter. Each day I focus on 3 stories that are making a difference in the financial technology space. Coupled with things worth watching & most important money movements, it’s the only newsletter you need for all things when Finance meets Tech.
If you’re not a subscriber, here’s what you missed this week:
The ‘Amazon of Latin America,’ could be the region’s Next BIG thing in FinTech💥
While most companies are slowing down, Ramp just had its fastest growth month ever 🤯
Subscription Economy sees FinTech in its future 👀 (cc Monzo Bank)
Starling Bank proves that challenger banks can be profitable too 💸
PayPal > Banks in Super App wars 📲
and more!
As for today, here are the 3 FinTech stories that were making a difference this week. It was a super exciting week!
Despite the global slowdown, UK FinTech investment grows 🇬🇧📈
New data 📊 The global investment into FinTech was flat in the first half of the year. In fact, as written yesterday, the global FinTech funding dropped by one-third in Q2 to continue a trend of declining investing this year.
But there’s one outlier here - the United Kingdom which saw a 24% year-on-year increase in FinTech investments during the same time period, according to data from Innovate Finance.
More on this 👉 Some more interesting data you should know:
Innovate Finance reports that UK FinTechs have raked in £7.6B in funding, only second to the US (£20.8B), more than the rest of Europe combined, and double the amount of Germany (£2B) and France (£1.9B). That’s solid!
The figures from data platform Beauhurst show that during the first quarter of 2022, equity investments into UK FinTech companies hit a ten-year high of £2.5B.
The number of deals during this period dropped to roughly 149, down from a record 170 in the first quarter of 2021.
Notable deals include a £730M investment secured by mobile payment provider Checkout.com in a Series D in January and a lofty £210M pooled together by automated loans company Lendable in March.
What does this mean? 🤔 In short, this shows that the UK continues to be the global FinTech hub. Here’s the takeaway:
✈️ THE TAKEAWAY
The leading FinTech Hub 📲 Despite Brexit, the current macro headwinds, and tough political times, the UK continues to be a force to be reckoned with when it comes to all things FinTech. It’s crazy when you realize that excluding the UK, the rest of Europe was in fact down by 2% this year in terms of FinTech funding compared to the same period in 2021. Furthermore, despite fewer deals being struck on aggregate and more money being invested per deal, the ecosystem development still looks very healthy. Venture activity in the UK is split evenly between early and later stages of deals (92 vs 93, respectively) with a further 73 deals announced at the seed stage and 17 growth and expansion deals. Zooming out, one can strongly say that the UK firmly continues to hold its spot as the top European FinTech Hub and one of the leading FinTech Hubs globally. Despite all the challenges, the country remains one of the best palaces in the world to start, build and scale a FinTech business.
Banks might be driving the next big wave of layoffs 😔
The news 🗞 Rumors of hiring freezes and layoffs are stirring as numerous US banks report sinking profits. Let’s see what’s happening in the ecosystem as of today.
Following the trends 🔍 After a year of dense hiring amid peaking equity valuations and abundant public offerings and mergers, some of the biggest banks in the US and globally have pivoted toward cutting costs and slimming down staffing. Here's what we can observe right now:
Some bank executives hinted that a decrease of as much as 10% in the industry workforce could unfold by the end of the year.
Large banks like JPMorgan & Wells Fargo have already begun letting go of workers in their mortgage divisions as rising interest rates cool down the housing market.
After a hot year for SPAC deals, some believe that banks’ beefed-up SPAC divisions will see cuts next.
Interest rates and inflation continue to rise and a recession looms, suppressing businesses’ appetite for mergers, IPOs, and other business deals.
Bank of America reported quarterly earnings of $0.73 per share, missing its estimate of $0.77, as well as a 32% decline in profits. JPMorgan Chase reported a 28% decline in profits, citing the need to build up reserves for bad loans and share buybacks. Wells Fargo’s profit fell 48%, with the bank earning only $0.74 per share versus the estimated $0.80. Goldman Sachs reported a 47% decrease in profit, but blew away earnings estimates, reporting $7.73 earnings per share against the estimated $6.56.
The reports further confirm that banks’ investment deals are trailing off as the pandemic fades and the economy remains on edge.
✈️ THE TAKEAWAY
All eyes on H2 👀 Unlike the FinTech sector, which is laying off workers nearly every day, the banking industry has the funds and the time to hang on to employees at least through the summer. This leaves banks better positioned to react in H2 2022, which may see the economy finally fall into a recession or shake itself out into a recovery. Furthermore, we have to note that most big banks are remaining optimistic about loan growth as a source of revenue, but they are concerned the worsening economy might cause a dropoff in borrowing. If the credit quality continues to deteriorate in the coming months and consumer loans are likely to decrease in the current economic uncertainty, then it might be a question of WHEN not IF when it comes to big bank layoffs. Watch this space more closely from now on.
The first market test for the creator economy 📈
The debut 🔔 Digital entertainment and esports brand FaZe Clan began trading on the Nasdaq Wednesday after completing a SPAC merger in a deal valued at $725M.
More on this 👉 You might never have heard of them before, but FaZe Clan launched as a gaming YouTube channel in 2010. Today, FaZe is an esports and media company with 93 members (including Snoop Dogg). In May, Forbes ranked it the fourth-most-valuable esports company. That’s quite something!
Interesting timing ⏰ FaZe’s debut comes when public offerings and SPACs have been struggling. Given the inauspicious macro environment, many planned SPAC deals have been canceled or put on hold (probably indefinitely). We can remember that SPACs boomed mid-pandemic, accounting for ~70% of all IPOs last year. DraftKings, Virgin Galactic, and Opendoor are just a few that went public through a SPAC. Now, it seems that the oversaturated market has lost its steam and is struggling with huge losses.
That said, it’s not surprising that FaZe stock plunged 24% on its first trading day. For the perspective, it was planning to go public last year in a $1 billion deal, but that obviously didn’t age well.
Why does this matter & what does it have to do with FinTech? 🤔 Lately, I’ve been speaking and writing more and more about the creator economy that spans from cards & neobanks for gamers to influencers-led VC funds and NFT/crypto projects focused on creators/influencers, among other things.
FaZe going public is the first market test for the creator economy to show how much is it actually worth. Here’s the takeaway:
✈️ THE TAKEAWAY
Followers ≠ Investors & Investors » Followers 💸 FaZe’s public debut is a milestone for the "creator economy" brands and its first market test, most of which are obviously private. FaZe has 500M followers across socials like YouTube, Twitch, and TikTok. While this is definitely impressive, the massive following may not be enough to lure investors. More importantly, followers might not convert to investors, which are your true and most important fans. While it’s forecasting that revenue will nearly double this year to $90M, FaZe also expects a widening loss of $19M. In this difficult environment, some investors have ditched “growth stocks” in favor of companies with steady profits, hence, the prevailing sentiment is definitely not in the company’s favor. Zooming out, the FaZe Test, depending on their market performance, will be a good public reality check to realize how important and how much worth is the creator economy.
🔎 What else I’m watching
The milestone🥇 Champagne corks are popping at financial super app Revolut as it celebrates its seventh anniversary by surpassing 20M retail customers worldwide, processing over 250M transactions a month. To keep pace with climbing customer numbers, Revolut is continuing to expand its global workforce, topping 5,000 employees globally. Over the past year, Revolut has opened several offices in locations such as New York, Tokyo, Madrid, Barcelona, Paris, Mexico City, Berlin, Budapest, and Bucharest. Additionally, new offices in Mumbai and Bangalore are set to open later this year. What about the profits? 👀
The partnership 🤝 YouTube and Shopify have teamed up to enable YouTube creators to link their stores and display their products across their channels and leverage Shopify’s real-time inventory syncing. This is part of YouTube’s rollout of new shopping features. Read again about why C2C (Connect-to-Consumer) is the future of commerce 🛍
💸 Following the Money
WebBank has invested $250M in the obligations of a securitization structure sponsored by Avant that is secured by credit card receivables.
Apiture, a US-based provider of digital banking solutions, has announced the closing of a $29M fundraising round led by Live Oak Bank, with participation from other existing investors.
Crypto investment firm Valkyrie is betting on early-stage startups in Israel with a new $30M venture fund.
👋 That’s it for today! Thank you for reading and have a relaxing Sunday! And if you enjoyed this newsletter, invite your friends and colleagues to sign up: