Robinhood embraces AI: acquiring Pluto signals a new era of personalized investing 💸🤖; Sony to launch crypto exchange 😮🚀; Credit card installments are overtaking BNPL among young consumers 📈💳
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👋 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 Startup Growth Toolkit: Top 5 Resources to Scale Your Business to New Heights 🚀 [unlock the secrets to startup success with these essential resources]
Top resources for building and scaling billion-dollar startups 🦄 [600+ pages of knowledge and advice to launch & scale your next unicorn in 2024]
Supercharge your B2B sales: best targeting strategies & tools for 2024 🎯 [discover how to identify lucrative verticals & leverage top lead generation tools for optimal outbound sales performance]
Revolut’s 2023 financials: a FinTech rocket with astronomical growth, but regulatory asteroids loom 🚀☄️ [breaking down the key facts & figures, uncovering the most important numbers & what’s next for Revolut + bonus deep dives into Starling Bank, Monzo and JPMorgan]
HUGE: Coinbase teams up with Stripe to revolutionize crypto payments 😳🪙 [what it’s all about & why it’s huge + bonus deep dives both in Coinbase & Stripe]
As for today, here are the 3 brilliant FinTech stories that were changing the world of financial technology as we know it. This is one of the most intense yet rewarding weeks this year so far, so make sure to check all the above stories.
Robinhood embraces AI: acquiring Pluto signals a new era of personalized investing 💸🤖
The news 🗞️ Retail trading giant Robinhood HOOD 0.00%↑ has just made a strategic move to incorporate artificial intelligence (AI) into its services with the acquisition of Pluto Capital.
This M&A marks Robinhood's first significant step towards offering AI-powered investment advice to its vast user base of over 10 million monthly active users.
Let’s take a look at this and see why it matters.
More on this 👉 Pluto Capital, founded by Jacob Sansbury, specializes in AI-driven investment research and personalized financial strategies.
This acquisition thus aims to enhance Robinhood's capabilities by leveraging AI to provide tailored investment recommendations, real-time portfolio optimization, and faster identification of market trends and opportunities. The synergies couldn’t be more obvious here 😎
On top of that, this move comes as Robinhood continues to diversify its offerings beyond its initial free stock trading model. The company has recently expanded more deeply into cryptocurrencies (bought Bitstamp), retirement products, and credit cards, among other things.
The integration of AI-powered tools is thus expected to democratize access to sophisticated financial advice, traditionally reserved for wealthier investors. Brilliant.
Zooming out, in addition to the Pluto acquisition, Robinhood is exploring other avenues for growth. The company is considering entering the advisory services market, potentially offering a unique approach that combines high-end financial advice with affordable pricing through modern technology.
The FinTech giant is also planning to launch CME-based Bitcoin and Ether futures in the U.S.
✈️ THE TAKEAWAY
What’s next? 🤔 At the core, Robinhood's acquisition of Pluto Capital represents a significant step towards a more AI-driven, personalized approach to retail investing. This move therefore has the potential to democratize access to sophisticated financial advice and may catalyze broader adoption of AI technologies across the financial services industry. However, Robinhood will need to navigate regulatory challenges, particularly given the ongoing scrutiny of its crypto operations. The company will need to ensure that its AI-powered advice complies with existing financial regulations and addresses concerns about algorithmic bias and transparency (especially in the EU). Looking ahead, we may see Robinhood further expand its AI capabilities, potentially integrating natural language processing to offer conversational interfaces for financial advice. The company might also explore partnerships with FinTech startups or academic institutions to further enhance its AI research and development (I wouldn’t be surprised if we see more AI M&As from Robinhood in 2024). Oh, and one more thing to repeat - If you were not bullish on HOOD 0.00%↑ before, maybe now it’s about time 😉
ICYMI: Robinhood Q1 2024: surging growth, profitability, and bright future ahead 🚀 [unpacking the most important facts and figures & why Robinhood makes a compelling investment case + more bonus dives into Robinhood and its biggest competitor in crypto]
Sony to launch crypto exchange 😮🚀
The news 🗞️ Japanese technology giant Sony is making a significant move into the cryptocurrency market with the launch of its new crypto exchange, S.BLOX.
This development comes after Sony's acquisition of Amber Japan, formerly known as DeCurret, in August 2023 through its subsidiary Quetta Web.
Let’s take a quick look at this.
More on this 👉 S.BLOX, previously operating under the name WhaleFin, is undergoing a major overhaul to enhance its user interface and features. The exchange aims to collaborate with various Sony Group businesses, leveraging the conglomerate's vast intellectual property portfolio across the entertainment, music, and gaming sectors.
Zooming out, we must note that this strategic move aligns with Sony's broader Web3 ambitions. The company has already invested in blockchain projects, filed patents for NFT technology, and partnered with firms like Startale Labs to develop its own blockchain network.
Sony Bank is also venturing into blockchain-based financial products, including NFT rewards and stablecoin issuance.
The launch of S.BLOX therefore represents Sony's commitment to establishing a strong presence in the crypto industry, despite recent market turbulence. By acquiring and rebranding an existing exchange, Sony is basically positioning itself to capitalize on the growing interest in digital assets and blockchain technology.
✈️ THE TAKEAWAY
What’s next? 🤔 Sony's entry into the crypto exchange market could indeed be huge. As a major global brand with extensive resources and a diverse range of products and services, Sony has the potential to bridge the gap between traditional entertainment and the crypto world. More importantly, this move may accelerate the adoption of cryptocurrencies and blockchain technology among mainstream consumers. Looking ahead, Sony's vast user base across its various platforms could provide a ready market for crypto services, potentially leading to increased integration of digital assets in the gaming, music, and film industries. Big one.
Credit card installments are overtaking BNPL among young consumers 📈💳
Following the trends 📈 Buy Now, Pay Later (BNPL) firms are facing unexpected competition from an established source - surprise surprise - credit card companies.
Recent studies indicate that Gen Z and Millennial consumers, once the core demographic for BNPL services are increasingly favoring card-linked installment plans over traditional BNPL options.
Let’s take a look at this.
More on this 👉 A PYMNTS study revealed that 42.7% of Gen Z respondents preferred card-linked plans for everyday purchases, compared to only 28.1% choosing BNPL.
Millennials showed a more even split, with 34.6% favoring BNPL and 33.3% opting for card-linked solutions.
This shift is particularly notable given that these younger generations were previously considered BNPL's strongest supporters.
Several factors contribute to this changing landscape. Card-linked plans are being used for larger purchases, with an average transaction amount of $2,095 compared to $926 for BNPL plans.
Additionally, major credit card issuers like American Express AXP 0.00%↑, Chase JPM 0.00%↑, and Citi C 0.00%↑ are receiving higher satisfaction ratings for their installment offerings than BNPL firms such as Sezzle, Afterpay, and Affirm AFRM 0.00%↑.
Interestingly, BNPL remains an important financial tool for certain demographics. Consumers with children and those living paycheck to paycheck who struggle with bills are more likely to use BNPL services.
This suggests that BNPL still plays a crucial role in providing access to credit for those who may have difficulty obtaining traditional financing.
✈️ THE TAKEAWAY
What’s next? 🤔 At the core, this shift signals a maturing market where consumers have more choices for flexible payments. To remain competitive and maintain their market position, BNPL firms will need to innovate and develop more robust incentive structures without compromising their profitability goals – a delicate balance to strike. One potential avenue is subscription-based models, like Klarna's program which has already attracted over 100,000 members. These programs could offer unique benefits that set them apart from credit card offerings. Looking at the big picture, the next phase of competition in this space will likely focus on user experience, integration with other financial services, and the ability to offer unique benefits that go beyond simple installment plans.
ICYMI: Deal of the year: Affirm partners with Apple Pay to expand BNPL reach 👏😎 [why it’s a deal of the year, what it means for both giants + a bonus deep dive into Affirm and why it’s about time to be very bullish on them]
🔎 What else I’m watching
US Marshals Service Selects Coinbase for Custody & Trading of Digital Assets 🏛️💻 The US Marshals Service, part of the Department of Justice, has awarded a $32.5 million contract to Coinbase Prime for custody and advanced trading of its digital assets. Coinbase COIN 0.00%↑ was chosen after a competitive due diligence process due to its strong track record and ability to securely provide institutional-grade crypto services. The contract aims to manage and dispose of large quantities of popular cryptocurrency assets in a professional and lawful manner, consistent with DOJ and USMS policy. This partnership with Coinbase comes amid ongoing legal disputes between the crypto exchange and the Securities and Exchange Commission over platform registration and regulatory practices. ICYMI: HUGE: Coinbase teams up with Stripe to revolutionize crypto payments 😳🪙 [what it’s all about & why it’s huge + bonus deep dives both in Coinbase & Stripe]
Wise Alerts Customers to Potential Impact of Evolve Bank Hack 💻🔒 Money transfer FinTech Wise has warned that some of its customers may have been affected by the recent hack on Evolve Bank & Trust. Wise worked with Evolve between 2020 and 2023 to provide USD account details, which means the bank had access to customers' personal information, such as names, addresses, dates of birth, contact details, SSNs or EINs for US customers, or other identity document number for non-US customers. Wise is actively investigating the matter and will email all customers who may be impacted. Other FinTechs, including Affirm AFRM 0.00%↑ , EarnIn, Marqeta, Melio, and Mercury, are also investigating potential effects on their customers due to the Evolve Bank hack. ICYMI: Wise's price-led growth strategy is all that matters 📉💸 [why their price-led growth strategy is all that matters + a bonus deep dive into Wise & why their current stock price could be an early gift for us]
💸 Following the Money
India-based crypto exchange CoinDCX has acquired UAE-based virtual asset trading platform BitOasis after previously investing in it.
BlackRock BLK 0.00%↑ is to acquire private market data firm Preqin for £2.55B in an all-cash deal expected to close before year-end.
China's Ant Group has acquired Dutch payments firm MultiSafepay as it expands further into Western markets.
👋 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:
Thanks for a great read as always. Thoroughly enjoyed it!