History in the making: UBS could acquire Credit Suisse 🤯🇨🇭; Meta just lost the NFT game ❌ 🖼; Wix continues pushing for unified commerce 👛
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 rise and fall of Silicon Valley Bank 🏦 [a simple breakdown of SVB’s collapse, data-driven takeaways + some thoughts for the future]
The ripple effects of Silicon Valley Bank collapse 🌊 [biggest winners & losers, lessons to learn & what’s next]
OFFICIAL: Stripe halves valuation on $6.5 billion down-round 🤯 [we're going to unpack it, and explore Stripe’s latest struggles so we could connect the dots]
Stripe’s building the payments foundation for tomorrow’s AI Economy 💳
As for today, here are the 3 FinTech stories that were literally changing the world as we know it. Both in finance and globally. It was definitely the most fascinating week in 2023 so far, so make sure to check all the above stories.
History in the making: UBS could acquire Credit Suisse 🤯🇨🇭
BREAKING news🔥 UBS UBS 0.00%↑ is in discussions to take over all or part of Credit Suisse CS 0.00%↑ according to the Financial Times.
The boards of Switzerland’s two biggest lenders are reportedly set to meet separately over this weekend to consider what would be Europe’s most significant banking combination since the financial crisis 😳
How we got here? 🤔 First, let’s do a quick refresher. Founded in 1856 to finance the expansion of Swiss railroads, Credit Suisse is Switzerland’s second-largest bank by assets, trailing only UBS. The bank’s main business is managing money and creating investment products for wealthy clients around the world.
The European lender has long been dogged by issues. Here are the most significant ones:
Twin crises linked to specialist finance group Greensill Capital and family office Archegos — which both collapsed in the space of a few weeks in 2021 — resulted in billions of dollars of losses. The collapse of Archegos alone was a $5 billion hit, which was equivalent to more than a year’s worth of profit.
According to FT, the lender was also fined for its role in the $2 billion Mozambique “tuna bonds” scandal and was the first Swiss bank to be found guilty of a corporate crime after it was discovered to have laundered money for a Bulgarian cocaine cartel run by a former professional wrestler.
More recently, the bank has been contending with customer withdrawals. In October, a social-media firestorm over the bank’s health drove outflows of rich clients, as per WSJ.
The withdrawals continued through the end of the quarter and prompted the bank to reportedly reach out personally to more than 10,000 wealthy customers to reassure them of the bank’s health.
Finally, the Silicon Valley Bank happened. Investors have thus been on high alert for signs of contagion following the rapid collapse of California-based SVB last week. That led to a selloff in shares of banks around the world, including Credit Suisse.
In an attempt to shore up confidence in the country’s banking sector, The Swiss National Bank was forced to provide an emergency $54B credit line to Credit Suisse. Yet, this failed to arrest a slide in its share price, which has fallen to record lows after its largest investor ruled out providing any more capital and its chair admitted that an exodus of wealth management clients had continued.
✈️ THE TAKEAWAY
History in the making 😳 UBS has around $1.1 trillion of total assets on its balance sheet and Credit Suisse has $575 billion. A full merger would therefore be not only one of Europe’s most significant banking combinations since the financial crisis. More importantly, it would create one of the biggest global systemically important financial institutions in Europe. Increased efficiency, market share, and stronger balance should are obviously some of the biggest benefits of this potential tie-up (or I should say a shotgun wedding? 👀). On the other hand, combining the two largest financial institutions in Switzerland (and one of the largest in Europe) would be super difficult and challenging. More importantly, a larger bank could create concentration risk, with a single entity holding a significant portion of the Swiss financial market. To put this into perspective, UBS + Credit Suisse balance sheets = 260% of Swiss GDP. That’s nuts 🥜 Zooming out, if Credit Suisse would fail somehow, it would have major implications for European and US banking, as well as for the global economy. It’s a far more international and interconnected bank than SBV. And thus its demise would suggest that even major banks aren’t safe. So whether you like it or not, this weekend is undoubtedly the most important weekend for Europe in 2023.
Bonus: The rise and fall of Silicon Valley Bank 🏦
The ripple effects of Silicon Valley Bank collapse 🌊
Meta just lost the NFT game ❌ 🖼
The news 🗞 Meta Platforms META 0.00%↑ is winding down NFTs on Instagram less than a year after launch, CoinDesk reported. The Facebook parent company will focus on other ways to support creators and businesses, tweeted Meta head of commerce and financial services Stephane Kasriel.
More on this 👉 We must remember that Meta, which owns both social media giants FB & IG, had jumped head first into digital collectibles, rolling out this functionality to 100 countries.
However, their efforts have not yet yielded any significant result, and a bear market that has dampened demand for NFTs didn’t help either.
But it’s not alone here.
Even well-known names in the space, such as Coinbase and OpenSea, have struggled to gain traction with their NFT marketplaces. OpenSea, once the world's largest marketplace, has faced challenges due to the ongoing revolt over commission fees and royalties.
What does it tell us? 🤔 This one is obvious - Meta has admitted it lost the NFT game. But there’s more to that, so here’s the takeaway + the proper way of doing NFTs & one big winner out of this:
✈️ THE TAKEAWAY
Why? 🤔 We must remember that Deutsche Bank had earlier predicted that Instagram could be a game-changer in the NFT market, with the potential to attract millions of users. I have to admit - I had the same view. Yet, it now seems that Meta, which has already invested billions in the metaverse, is hesitant to continue with its NFT offerings and will shift its energy and resources elsewhere (AI? 👀). But what’s the root cause though? I think the answer lies in my take from August 2022:
Zooming out, Facebook has been struggling to expand its business beyond social networking, or just ads (as they drive the absolute majority of its revenues). They failed with crypto (Diem/Libra was shut down), Facebook Pay/Payments (including WhatsApp) is somewhat questionable while Facebook Marketplace doesn’t have a meaningful share of the e-commerce sales. Hence, this might be their best shot right now. And it would be foolish not to take it. But there’s one but. It has the brand, the user base, and the eyeballs. But what about trust? That’s something I raised back in March, and it’s still an open question from me here.
Looking ahead, this is a great reminder of what is actually the right approach to do and launch NFTs. Look no further than Reddit, which is crushing it. Also, with Meta now out, Amazon’s upcoming NFT marketplace is the most interesting thing right now. If they do it right, it could really be a game-changer.
Reread: Reddit is crushing the NFT game. Again! 🚀
Amazon's NFT initiative could be the inflection point for Web3 🚀
Wix continues pushing for unified commerce 👛
The partnership handshake 🤝 Wix WIX 0.00%↑, a leading global SaaS platform, has recently partnered with Forter, a fraud prevention and detection platform, to strengthen their merchant fraud protection.
More on this 👉 This partnership is expected to provide Wix merchants with enhanced security and protection against fraudulent transactions. Forter's AI-powered technology will analyze transactions in real time, leveraging machine learning to detect and prevent fraud attempts before they can cause harm.
In light of the increasing frequency and sophistication of fraud attempts in the fintech industry, this partnership is a positive step towards improving merchant protection and customer trust.
✈️ THE TAKEAWAY
Wix keeps delivering 👏 This partnership is a massive win for the e-commerce heavyweight. Forter’s technology can help Wix minimize merchant CNP fraud losses, which are on track to reach $6.9B in the US this year. Improving merchant fraud solutions through Forter can thus help Wix increase its value proposition and tighten merchant loyalty. Furthermore, this move also aligns with the firm’s broader push to improve merchant payment capabilities - we can remember that recently it partnered with Stripe so merchants can use Apple’s Tap to Pay on iPhone tech. Zooming out, this all integrates just brilliantly into Wix’s push to become the ultimate unified commerce platform. Watch them out more closely from now on.
🔎 What else I’m watching
ChatGPT vs. Bing 🤖 Artificial intelligence chatbots will be used as panelists for the first time as part of a conference hosted by the Gillmore Centre for Financial Technology this week. The panel event will be part of a series of workshops conducted over two days at the conference. Organizers will record each of the workshops and feed the text transcripts through OpenAI's ChatGPT and Microsoft's Bing AI to create a report of the two-day event. ChatGPT and Bing AI will also join the discussion and answer audience questions alongside human panelists. On a more serious note: Generative AI will completely transform FinTech and Banking over the next 3 years 🤖🏦
Cathie from around the Block 📈 Cathie Woods’ Ark Invest added almost $14M worth of BLOCK stock to three of its funds on Tuesday. Ark added 159,654 Block shares to its Ark Innovation ETF, 25,783 shares to Ark Next Generation Internet ETF, and 847 shares to the Ark Fintech Innovation ETF, SEC disclosures show. These purchases add to the roughly $6.4 million in BLOCK shares purchased Monday by Ark. Not surprised at all. Remember: Cash App is turning into a FinTech beast we've not seen before 😳
💸 Following the Money
Indian mobile payments company PhonePe has secured $200M in primary capital from US retail giant Walmart. The investment leaves PhonePe with a market valuation of $12 billion as it looks to break the $1 billion mark in its fundraising efforts. The company has raised $650m to date from various investors and is also in the process of moving the business from Singapore to India, a move expected to make it easier for PhonePe to enter new financial services sectors in the highly regulated Indian market. Reread: PhonePe raises $350M to turbocharge growth and become a Super App 🚀
La Famiglia raises €255M. The Berlin-based VC plans to split the fresh cash between a third seed fund of €165M and a new €90M growth fund— its first to back companies post-Series B.
Stablecoin issuer ECSA secured $3M in funding.
👋 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: