73% of FinServ execs expect AI to take their jobs 😳; Revolut faces £10.4M lawsuit from Allianz 🥲; Monzo is exciting again: Alphabet to invest £300-500M at above £4B valuation 🤯
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 ultimate list of 140+ Family Offices in Germany, Austria, and Switzerland 🚀 [use this list to find investors who align with your company mission and goals 💸]
BREAKING: Binance. CZ to step down & Binance to pay $4.3 billion in fines 🤯 [a closer look at this craziness with the details, data + what it means for the industry & what’s next]
Strong growth & profitability: Affirm is becoming a force to be reckoned with 📈
As for today, here are the 3 wild FinTech stories that were changing the world of finance as we know it. This week was wild in the financial technology space, so make sure to check all the above stories.
73% of financial services execs expect AI to take their jobs 😳
New report 🗞️ Almost three-quarters (73%) of executives working in financial services expect to eventually be replaced by Generative AI (GAI), according to a recently released study. Yikes 👀
Let’s take a look.
More on this 👉 The introduction of generative AI (GAI) is polarizing the financial services industry, with sentiments ranging from excitement to apprehension about its potential impact.
A recent survey of 502 senior decision makers in banking and insurance produced by FintechOS revealed significant investments in GAI amidst divided opinions on its benefits and risks.
Key finding 📊 While GAI promises major productivity gains, its implementation surfaces concerns about workforce reductions. Over 70% of respondents believe GAI could eventually replace their jobs. This expectation of displacement contrasts with the predominantly positive view that GAI is more "friend" than "foe."
Nonetheless, GAI investment is charging ahead. Over half of large institutions are already using GAI, especially for customer service. Looking ahead, most research and implementation efforts target new business queries and lending automation.
But consensus breaks down on GAI's leading applications. Virtually equal proportions identify customer service, credit checks, lending, and data analytics as top contenders. Such fragmentation suggests GAI's wide-ranging potential is still taking shape.
Views also diverge on optimal ownership of GAI strategy, split between chief security and chief operations officers. This may reflect GAI’s dual nature as a security and efficiency play.
The most resounding point of agreement? GAI adoption will boost revenue. Two-thirds of respondents forecast a 10-30% increase in the next three years.
✈️ THE TAKEAWAY
Looking ahead 👀 It’s clear that GAI is set to revolutionize financial services amidst polarization on its impacts. While implementation moves forward, its complete disruption remains unclear. Legacy constraints around data and systems raise adoption barriers. Nonetheless, standing still equates to falling behind. The scale of predicted transformation demands proactive steps today. As GAI infiltrates the fabric of finance, the winners will be those who harness its capabilities early to personalize offerings and accelerate innovation. The future competitive landscape may come down to how financial institutions choose to shape GAI instead of being shaped by it.
ICYMI: Ritual raises $25M to make AI decentralized 😳 [the USP & why this is very interesting]
Generative AI will make Finance Autonomous 🤖💸 [taking a big picture view on the changes taking place now & what’s next + more deeper dives into AI & Finance]
Revolut faces £10.4 million lawsuit from Allianz 🥲
The news 🗞️ Financial technology heavyweight Revolut is being sued by insurance giant Allianz for £10.4 million over allegedly breaching the terms of a recently terminated travel insurance agreement.
Let’s take a closer look at this.
More on this 👉 In April 2022, Revolut and Allianz Worldwide Partners signed a 4-year deal to provide travel insurance to Revolut's premium and metal account holders in certain regions.
However, in May 2023 Revolut informed Allianz it would be moving its customers' travel insurance to Cowen Insurance starting in June 2023. Ups, just business 🤷♂️
According to the lawsuit filed by Allianz, Revolut did not provide the contractually obligated 6 months’ notice when deciding to terminate the deal early. Additionally, Allianz alleges Revolut stopped providing required daily reports detailing the number of eligible account holders after the termination announcement. For some reason, this isn’t too surprising…
Accurate reporting was necessary for Allianz to calculate monthly premiums owed.
The legal filings also claim Revolut breached its obligation to not make changes to the insurance product or conditions without Allianz's written consent. By shifting customers to Cowen Insurance, Revolut allegedly altered the product and terms on which it was offered.
The £10.4 million in damages sought by Allianz represents projected losses based on anticipated customer numbers and claims.
Revolut has declined to comment publicly on the lawsuit.
✈️ THE TAKEAWAY
What does this mean? 🤔 This legal dispute adds to the challenges faced by the high-profile FinTech startup as it aims to continue rapid expansion while building profitability and Super App ambitions. If Revolut fails to successfully defend against Allianz's claims, it could face a substantial financial penalty. The termination of the Allianz deal also necessitates developing replacements for important parts of Revolut's product portfolio like travel insurance. This wouldn’t be too big but it would still be a hit. Zooming out, we must note that as the company grows (and maybe becomes a bank in the UK?), properly managing third-party partnerships and contractual obligations will only gain further importance. House must be in order, especially if you want to become the leading global super app. And now it’s just too messy…
ICYMI: The bumpy road ahead for Revolut's global ambitions 🌍 [holistic view at Revolut’s strategy and moves thus far + lots of bonus reads & deep dives]
Monzo is exciting again: Alphabet to invest £300-500 million in a funding round valuing the digital bank above £4 billion 🤯
The BIG news 🗞️ Google's GOOGL 0.00%↑ parent company Alphabet is in advanced talks to acquire a stake in British digital bank Monzo through its investment arm Capital G, according to reports.
The deal could see Monzo valued at over £4 billion in a funding round of between £300-500 million. Huge.
Let’s take a closer look at this, see why it’s important and what’s next for Monzo.
Plus, lots of bonus reads and deep dives.
More on this 👉 We can remember that Monzo was founded in 2015 and has rapidly grown to become one of the UK's largest digital banks with over 8.5 million customers.
ICYMI: Monzo is on track to be the most downloaded UK banking app in 2024 🇬🇧🚀
This potential investment from Alphabet comes as Monzo appears to be awakening after a period of relative calm. The bank made waves with early innovations but entered a lull as new CEO TS Anil settled in. Now Monzo seems to have strapped a rocket to its brand with new offerings in savings, cashback, and investments, among other things.
ICYMI: The foray into wealth is finally here: Monzo launches investments 💸 [a deeper dive unpacking this pivotal move for Monzo + more bonus reads]
It is even reportedly profitable on a monthly basis.
ICYMI: Monzo hits monthly profitability for the first time ever 🥳
The money 💸 The potential investment from Alphabet's Capital G fund, which has $4 billion in assets deployed across 55 companies, would cement Monzo's status as the most highly valued digital bank in the UK. More importantly, it would also provide a significant boost to the country's FinTech sector.
P.S. Alphabet just sold its stake at Robinhood, so it’s clear where they see more value:
Why did Google cut its remaining stake in Robinhood? 🤔
Also, Monzo’s forecast to turn a profit this year would be a major milestone for a standalone digital bank. Yet, we must note that the new funding round is seen as opportunistic, providing capital to accelerate Monzo's growth rather than out of necessity. Maybe it’s for their US expansion?
ICYMI: Monzo’s second attempt to conquer US: here’s why the British neobank is more likely to fail than succeed 🇺🇸🏦 [a deep dive with lots of bonus reads]
The deal would follow Monzo's last funding round in late 2021 which valued the company at around $4.5 billion. However, some existing investors are keen to invest more money in Monzo at the new higher valuation of over £4 billion.
✈️ THE TAKEAWAY
Looking ahead 👀 First and foremost, if the deal goes through, it would provide validation of Monzo's recovery after a difficult period during the pandemic. The investment from Alphabet would also give Monzo the financial firepower to pursue ambitious growth plans in the UK and overseas markets, cementing its position as a leading digital bank (apart from the US, of course…). On top of that, this potential deal also signals continued strong investor interest in digital banking and FinTech as consumers increasingly embrace digital financial services. Looking ahead, an initial public offering (IPO) is probably the next likely step for Monzo, with the new investment round positioned as the final round before a potential stock market listing. We must also remember that the company recently restructured to support international expansion ahead of a planned IPO in the coming years. But everything is not rainbows and unicorns. While the stage seems set for Monzo to make 2024 a breakout year, the neobank must carefully navigate all the obstacles:
Monzo's younger customer base has been disproportionately affected by the ongoing cost of living crisis.
The bank must also steer through public market volatility, carefully evaluating all the IPO hopes.
Viral disinformation on platforms like TikTok has also threatened Monzo's reputation.
Other than that, Monzo is finally exciting again! And I’m bullish as well.
🔎 What else I’m watching
Klarna gets approved in the UK 🇬🇧 Swedish FinTech giant Klarna has gained UK approval to keep offering term loans and card products ahead of a temporary Brexit deal expiring. Klarna Bank previously relied on the Temporary Permissions Regime to serve UK customers. The authorization covers Klarna's credit offerings but not its core buy now, pay later business which remains unregulated. Klarna argues that BNPL should be regulated to protect consumers while retaining access to affordable credit. Head of Klarna Financial Services UK Abby Vickers says FCA approval provides regulatory certainty beyond the TPR expiry and ahead of expected BNPL rules. Though not yet regulating BNPL, the UK has now fully authorized Klarna to continue serving British consumers with other financial products. IPO soon? ICYMI: Klarna's remarkable comeback: how the FinTech giant went from valuation collapse to potential 2024 IPO 📈 [latest numbers, how we got here, and what’s next + a look at how leveraging AI Klarna is building the Google of Shopping]
SEC sues Kraken 👀 The SEC has filed a lawsuit against crypto trading platform Kraken, accusing it of illegally operating as an unregistered securities exchange, broker, dealer, and clearing agency. This follows similar charges against Binance and Coinbase. The SEC alleges Kraken intertwines traditional exchange functions without proper registration, depriving investors of protections like inspection and recordkeeping requirements. Further, the SEC says Kraken commingles customer funds and assets with its own, creating significant loss risk. SEC Enforcement Director Gurbir Grewal says Kraken prioritized profits over compliance, resulting in conflicts of interest and jeopardizing investor money. Kraken disagrees with the complaint, stands by its position that it doesn't list securities, and plans to vigorously defend itself. Crypto is having a tough time. ICYMI: BREAKING: Binance. CZ to step down & Binance to pay $4.3 billion in fines 🤯 [a closer look at this craziness with the details, data + what it means for the industry & what’s next]
💸 Following the Money
The Bitcoin-focused Ordinals startup Taproot Wizards raised $7.5M in seed funding.
Barclays is reportedly considering the acquisition of Tesco’s banking operations.
UK-based SME payments fintech Crezco has raised $12M in a Series A funding round and entered into a partnership with Xero.
👋 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: