Amazon is now in the payments business too. And it could be huge 🤯; Lessons from the neobank that shouldn’t have failed💡; Crypto contagion comes in waves… Here's another one 🌊
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:
Stripe losing 40% of its valuation is the least expected thing in FinTech over the last 10 years 😳
From $1.5 billion to $0 in 4 months, or a wild story of Wyre 🤯
As for today, here are the 3 big FinTech stories that were making a huge difference this week. It was a really hot week, so definitely check out all the above stories.
Amazon is now in the payments business too. And it could be huge 🤯
The launch 🚀 Retail giant Amazon AMZN 0.00%↑ just announced it’s expanding its Buy with Prime service to U.S.-based merchants by the end of the month, TechCrunch reported.
More on this 👉 We can remember that the service, which allows 3rd-party merchants to offer Prime benefits like free shipping and returns on their own apps, was initially only available to those merchants who were already using Fulfillment by Amazon (FBA) to handle their shipping and logistics.
The service was first introduced in spring 2022, with FBA merchants and other select merchants on an invite-only basis.
The USP 🥊 With Buy with Prime, consumers get fast, free delivery, similar to Amazon.com’s Prime service, plus seamless checkout and easier returns, allowing merchants to establish their own direct relationships with customers, according to Amazon.
What’s interesting here is that since its April debut, Amazon claims the offering has increased shopper conversion by an average of 25%. That’s not bad at all 👏
✈️ THE TAKEAWAY
Payments, payments, payments 💳 Ultimately, Buy with Prime is all about ramping up Amazon’s push into the payments space. One can remember that the e-commerce giant has been innovating quite a bit in the point-of-sale (POS) space. Amazon One, which lets customers pay for services or authenticate identity with their palms, is now operating within more than 70 locations, including Whole Foods and third-party businesses. Furthermore, Amazon is reportedly exploring an initiative called Project Santos, which aims to launch a POS system designed for small businesses. On top of that, Amazon has also strengthened the payment options available on its website by adding PayPal’s Venmo and Buy Now, Pay Later (BNPL) provider Affirm. Opening up its walled garden to even more third-party partnerships could help Amazon increase sales further. Zooming out, this move effectively advances the retail giant’s push into payments by bringing it one step closer to launching a full-suite online checkout solution for small sellers. And this is a pretty huge move.
Bonus: Amazon + Venmo is a match made in heaven 🫂
Lessons from the neobank that shouldn’t have failed💡
The news 🗞 Earlier this week, I briefly covered that Germany-based neobank Ruuky has filed for bankruptcy.
There are some quick yet interesting lessons to learn so let’s take a closer look at them.
The USP 🥊 The FinTech started as Pockid in 2020 positioning itself as a neobank for teenagers, and backers such as Cavalry and Vorwerk Ventures had invested a total of around EUR 4M. The valuation for the financing round was around EUR 16M, as can be seen from the commercial register. A year after its launch, Pockid changed course and rebranded itself to Ruuky. Since then, it has increasingly focused on young adults with “social interactive banking”. In doing so, the neobank aimed to keep its customers longer, instead of focusing purely on teenage users.
What happened? 🤔 The decision to file for insolvency came after Ruuky failed to secure fresh funding from either new or existing investors. While the company has said all customer funds are secured noting that users will still be able to access the app while the firm winds down.
✈️ THE TAKEAWAY
What can we learn? 🤔 On the surface, Ruuky looked like a neobank that shouldn’t have failed - it was vertically focused (= hot FinTech trend) and aiming to serve the young people (= hot demographic). Hence, a match made in heaven 👏 On top of that, it claimed to have amassed a loyal customer base, counting 250,000 app registrations, and is the largest neobank on social media in Europe - counting more than 230,000 followers and around 2.7M likes on TikTok. So what went wrong? First, it’s clear that like most of the neobanks out there, Ruuky was very capital-insensive with no clear path to profitability. 250k registration sounds nice, but I’d guess that around 5% were probably monthly active users. And that’s basically nothing. More importantly, the whole biz model was risky from Day 1 with very questionable economics. We can remember that Berlin-based industry leader N26 had previously abandoned such a business model without success. Why? Well, because managing pocket money via an app and enabling initial debit card payments hardly pays off. This hence serves as a cautionary tale for most of the challenger banks out there. The era of free or cheap capital is over, and so are the charity startups. And you either adapt or die.
Bonus: Starling Bank, the underrated FinTech success story 🤌 (a neobank strategy that works)
Challenger Banks 2.0, the Vertical approach 📲
Crypto contagion comes in waves… Here's another one 🌊
Another ones… 😞 Just two days ago I talked about Coinbase COIN 0.00%↑ and their second round of brutal layoffs. Now there are two other firms that joined the pack.
More on this 👉 The first one is Blockchain.com which is cutting around 110 jobs, amounting to about 28% of its workforce. The crypto brokerage previously let go of about 150 people last July, after it took a hit of $270M on a loan it had made to collapsed hedge fund Three Arrows Capital.
The second one is Crypto.com. It just said it is cutting its workforce by around 20% as the crypto industry continues to reel from the effects of the ongoing crypto winter, CoinDesk reported. The firm cited the economic headwinds from the downturn in the crypto market and the FTX implosion as the reason behind the layoffs.
According to various social media profiles, Crypto.com has around 3,500-4,500 employees. This would make the current round of layoffs impact around 700-900 employees. That’s brutal…
✈️ THE TAKEAWAY
The contagion 🌊 This and what I covered earlier this week clearly show that contagion comes in waves. When a big fish like FTX sank, it sent ripples across the crypto pond. Those ripples aren't necessarily all felt at once, because it can take a while for other big fish to get hit by the wake. The worst thing? Coinbase’s founder & CEO Brian Armstrong said there might be more contagion coming (he knows since he survived a few already). What we’re seeing right now is just another wave, the first one being FTX and everyone who was directly exposed to them. What matters here is to understand that contagion's waves could ultimately leave the overall industry stronger - or more centralized - by washing out crypto's weaker players.
Side note: CoinDesk estimates that more than 28,000 jobs have been lost in the crypto industry since last April. That’s a hell lot of jobs.
🔎 What else I’m watching
Focus - Africa 🧘♂️ Yellow Card Financial now enables customers across Africa to send and receive cryptocurrency. The company’s Yellow Pay, which was previously available only in Nigeria, uses the Yellow Card cryptocurrency exchange platform to complete customers’ transactions in USDT. “This is more than just a money transfer service — it’s a powerful tool that will unlock new opportunities for people across Africa,” Yellow Card CEO and Co-founder Chris Maurice said in the release. “By enabling instant, low-cost transactions across borders, we are helping to create a more connected and dynamic Africa.” Why? Because of this:
Visa knows that Africa is the world's next superpower. You should pay attention too💡
Africa will be the driving force for cryptocurrency adoption globally 🚀
Volcano Bonds 🌋 El Salvador has passed a new law that will pave the way for long-awaited "Volcano Bonds" to hit the market. They had been due to launch in March 2022 — but their rollout has been repeatedly delayed after BTC's value plummeted. The idea is to raise $1 billion, with half of the sum invested into Bitcoin and the other half spent on infrastructure. This would include ambitious plans to build "Bitcoin City" — a metropolis that would sit at the base of a volcano. The Central American nation's Bitcoin Office has described it as a "landmark" law, adding: "El Salvador is the epicenter of Bitcoin adoption, and thus, economic freedom, financial sovereignty, censorship resistance and unconfiscatable wealth." Let’s see how it goes as for now it’s pretty disappointing. Here’s why:
El Salvador is a case study in crypto's structural problems 🇸🇻
Bitcoin in El Salvador🇸🇻 is one of the greatest product-market fit failures ever 🤦♂️
💸 Following the Money
India-based fintech company BankSathi has raised a pre-series A round of $4M to expand in new geographic areas and invest in growing its agent network.
Canada-based FinTech company Nuvei and Paya Holdings, an American provider of integrated payment and commerce solutions have announced they reached an agreement for Nuvei to acquire the latter.
Fidelity Investments has acquired Shoobx, a provider of automated equity management operations and financing software for private companies. The financial terms of the deal were not disclosed. Shoobx will join Fidelity’s Stock Plan Services business, which provides equity compensation plan recordkeeping and administration services to nearly 700 companies with 2.5M plan participants.
👋 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: