Payments isn’t a commodity: how stablecoins are redefining the value of money transfer 💸🪙; Power struggle intensifies at Klarna ahead of the IPO 👀🔔; UK's bold move to fight FinTech fraud 😳🛡️
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 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]
JPMorgan Chase: a fortress in the financial storm 😤🏦 [unpacking the most important numbers from Q3 2024 & what they mean + lots of bonus reads & deep dives inside]
Fiserv's game-changing move: special banking charter in Georgia 😳🏦 [why it’s a game-changer & what it means for the future of PayTech & FinTech + bonus deep dives into Fiserv & co]
BlackRock’s Q3 2024: ETF titan transforms into alternatives powerhouse 😳📈 [a quick recap of BlackRock’s latest financials & what they tell us + some more bonus reads inside]
The AI Trust Gap: how banks can win over wary customers 🤖🏦 [a brief look at the latest research & key takeaways + bonus reads on AI + Finance]
Big US banks face lending income squeeze as interest rate era shifts 📉🏦 [holistic overview of the situation & what can we expect next + lots of bonus deep dives into latest financials of top banks & other finance giants]
Another one: Worldline dives into Embedded Finance as well 👀💳 [what it’s all about, why it matters & what’s next + bonus dives into HSBC & a deep dive in Worldline’s latest financials]
Monzo's valuation soars to $5.9 billion in employee share sale 🤑🦄 [what this tells us & why it matters + bonus deep dives into Monzo & co inside]
FinTech M&A of the Underserved: Pockit acquires Monese 🤝💸 [why the deal makes sense & what’s ahead in the sector + some priceless M&A resources to get your next deal done right]
As for today, here are the 3 incredible FinTech stories that were changing the world of financial technology as we know it. This was one of the wildest and interesting weeks in 2024 so far, so make sure to check all the above stories.
Payments isn’t a commodity, or how stablecoins are redefining the value of money transfer 💸🪙
Following the money 💸 I recently came across a comprehensive analysis that payments giant Adyen ran on their top 100 global customers and detailed the impact of the Adyen platform on enterprise businesses.
Apart from being a fascinating read, it’s a good reminder that payments is not a commodity. But this time it’s not about the study.
I tried to think bigger here and see what else could be done. What’s something that with relatively low effort could yield substantial results. And that’s when I realized that stablecoins is a perfect fit here.
So let’s take a quick look at this and see how stablecoins are redefining the future of money movements, how they benefit everyone, and what’s next.
More on this 👉 After reading Adyen’s 22-page report (downloads immediately after you click) several times, here’s where I think stablecoins could help payments companies like Adyen and their merchants to reduce the total cost of payments & improve operational efficiency:
Lower transaction fees: transaction fees for stablecoin payments are often cheaper than traditional funding methods, especially for cross-border transactions. This aligns with Adyen's goal of reducing interchange and scheme fees, which typically make up 85% of payment costs for their customers. Pretty nuts when you think about it…
Elimination of FX costs: stablecoins can act as a global network of networks, eliminating foreign exchange costs for cross-border transactions. Given stables are global by nature, they could therefore help payments processors’ merchants attract and serve global customers more seamlessly, potentially reducing the 59% higher fees associated with cross-border transactions mentioned in Adyen's report.
Faster settlement times: stablecoin transactions settle near-instantly, allowing customers to fund, trade, or transact within minutes. This speed could help improve PayTech’s in-person payment performance, potentially reducing queues and improving conversion rates in physical stores.
24/7/365 availability: stablecoin payments are not constrained by banking holidays or correspondent bank delays. This aligns with Adyen's goal of ensuring payments can be processed even when networks go down, as mentioned in their offline payment processing section.
Chargeback elimination: on-chain stablecoin transactions are irreversible, removing chargeback risk. This addresses a key concern in Adyen's report about reducing chargebacks and false positive declines.
Global accessibility: stablecoins are accessible in over 100 countries through major exchanges and FinTech apps. This could thus help payments FinTechs expand their global reach and support their merchants in entering new markets more easily.
Large and growing user base: with over 580 million crypto users globally and an annual stablecoin transfer volume of $11 trillion (already on par with Visa V 0.00%↑), integrating stablecoin payments could help companies like Adyen tap into a significant and growing market. And it’s just getting started.
Operational efficiency: some stablecoin solutions today offer automated conversion to fiat (e.g., USD, EUR, or GPB), which could integrate well with Adyen's goal of improving operational efficiency and automated reconciliation.
Reduced development costs: developer-friendly APIs and SDK solutions already today can be easily integrated into Adyen's platform, aligning with their goal of reducing development costs and freeing up valuable resources.
Compliance and security: some digital asset service providers offer built-in compliance features, including transaction monitoring and Travel Rule compliance, which could help FinTechs maintain their commitment to security and fraud prevention.
Real-world example: some brokerage platforms (i.e. tastytrade) already today allow their customers to fund their brokerage account with stablecoins. Why? Well, it opens up so many more marketplaces and they can complete transactions in seconds, anywhere in the world. It's just simpler and cheaper to get funds into a global brokerage account.
By integrating stablecoin payments, payment giants like Adyen could thus potentially offer their merchants similar benefits, helping them reduce costs, improve global reach, and enhance operational efficiency.
✈️ THE TAKEAWAY
What’s next? 🤔 All in all, one thing is clear - in a world where every second and cent counts, stablecoins are emerging as the dark horse of the payments race. Far from being just another way to move money, these digital assets are rewriting the rules of global transactions. By slashing fees, eliminating borders, and turbocharging settlement times, stablecoins are proving that when it comes to payments, innovation is the name of the game. As traditional finance and crypto worlds continue to collide, businesses are waking up to a new reality: in the high-stakes arena of global commerce, embracing stablecoins might just be the ace up their sleeve. Stripe, Revolut, Visa, PayPal PYPL 0.00%↑, and Blackrock BLK 0.00%↑ already get it. Gradually, then suddenly.
ICYMI: PayPal pioneers business payments with its proprietary stablecoin 😳🪙 [why it matters & what’s next + bonus dives into PayPal & SWIFT]
Visa unveils platform for tokenized asset management 😲⛓️ [what’s the USP here, why it’s brilliant & what it means for the future + lots of bonus deep dives inside]
SWIFT doubles down on and dives into digital assets 🤑🪙 [what’s the latest move all about, why it matters & what’s next + bonus reads on other financial giants going all into crypto]
PayPal and Adyen join forces for the first time to change the game in payments 🤝💳 [what it’s all about & why it’s huge + bonus deep dives both into Adyen & PayPal and an extra one into Shopify]
Power struggle intensifies at Klarna ahead of the IPO 👀🔔
The news 🗞️ Swedish FinTech giant Klarna is in the news again. This time, the board has decided to remove Mikael Walther, a key ally of co-founder Victor Jacobsson, FT reported.
This move underscores a deepening governance rift within the buy-now-pay-later company as it prepares for a highly anticipated initial public offering (IPO).
Let’s take a quick look at this.
More on this 👉 The decision to oust Walther from the eight-person board, pending shareholder approval, is the latest chapter in an ongoing power struggle between Jacobsson and current CEO Sebastian Siemiatkowski, who co-founded the company nearly two decades ago.
While Jacobsson stepped down from his executive role over ten years ago, he has remained a significant shareholder and a persistent challenge to Siemiatkowski's leadership.
We must remember that this boardroom shake-up follows a previous conflict earlier this year when board member Matthew Miller, representing major investor Sequoia Capital, attempted to remove Michael Moritz, a Sequoia veteran and Siemiatkowski ally, as chair. That episode resulted in Miller's replacement with another Sequoia partner.
Zoom out 🔎 The removal of Walther is seen as a move that could allow Siemiatkowski to consolidate his influence ahead of the IPO, which is expected to value Klarna between $15 billion and $20 billion.
The company has been working to streamline its corporate structure in preparation for the listing, which could take place in New York as early as the first half of next year.
✈️ THE TAKEAWAY
What’s next? 🤔 At the core, the ongoing governance struggles at Klarna serve as a great reminder about the challenges faced by rapidly growing FinTech companies as they transition from startup culture to public company status. This situation thus underscores the importance of strong corporate governance and clear leadership structures in the run-up to an IPO. For Klarna specifically, the resolution of this power struggle could have significant implications for the company's strategic direction post-IPO. If Siemiatkowski successfully consolidates his influence, we may see a more unified vision for the company's future. However, the continued tension between the co-founders could potentially concern investors and impact the IPO's success. In the broader FinTech and finance space, Klarna's situation serves as a cautionary tale about the importance of managing internal relationships and power dynamics as companies scale. It also highlights the potential for conflict when founders retain significant ownership stakes but step away from day-to-day operations. Looking ahead, we can expect increased scrutiny of Klarna's governance structure and leadership team as the IPO approaches. The company may need to take additional steps to reassure potential investors about its stability and strategic alignment. This could include further board restructuring or the implementation of more robust governance policies.
ICYMI: Klarna and Adyen join forces to revolutionize in-store payments 💳🛍️ [what does it tell us & what can we expect next + bonus dive into both Klarna & Adyen]
UK's bold move to fight FinTech fraud 😳🛡️
The news 🗞️ Starting October 7, 2024, the United Kingdom has implemented groundbreaking regulations aimed at combating Authorised Push Payment (APP) fraud.
Under these new rules, payment service providers (PSPs) will be required to reimburse victims of APP fraud up to £85,000 within five days, with some exceptions. That’s a LOT!
Let’s take a quick look at this and see if this world-first regulation is set to shake up the FinTech industry.
More on this 👉 First, what is an Authorised Push Payment (APP) scam?
An authorized push payment scam, or APP scam, is where a scammer misleads you into sending your own money via bank transfer to an account they control either because they’ve pretended to be someone you intended to pay, or they tricked you into making a payment for a purpose that you didn’t intend.
The new policy has thus sparked concerns among FinTech startups and investors. Some fear that the financial burden of reimbursements could potentially bankrupt smaller companies or deter new entrants to the market.
The compliance costs and potential payouts may prove particularly challenging for startups with limited cash reserves and less refined fraud prevention processes. And this could be especially painful as some smaller FinTechs even today have 20-30% of their staff dedicated only to compliance functions.
However, the regulation is also driving innovation in the anti-fraud technology sector. FinTech companies have been scrambling to improve their fraud prevention tools and processes ahead of the deadline. This has led to increased investment in RegTech and FinCrime startups, with funding in these verticals already surpassing last year's figures.
Critics of the new rules point out that they don't address the root cause of many scams, which often originate on social media platforms. Additionally, there are concerns about the interpretation of the "standard of caution" that victims must meet to qualify for reimbursement.
Zoom out 🔎 Despite these challenges, the UK's move positions it as a testing ground for comprehensive fraud prevention regulation.
The outcomes of this policy could set new standards for fraud compensation globally and influence future regulatory approaches in other countries.
✈️ THE TAKEAWAY
What’s next? 🤔 Looking ahead, it’s clear that the implementation of these regulations will have far-reaching implications for the FinTech industry and the broader fraud prevention landscape. We can thus expect to see:
Accelerated development of AI and machine learning-based fraud detection systems, as companies seek to minimize their exposure to reimbursement claims. ICYMI: Visa is acquiring Featurespace to bolster AI-driven fraud prevention 🤖💸 [why it matters & what’s next + bonus deep dives into both Visa & Mastercard]
Increased collaboration between financial institutions, FinTechs, and regulators to share data and best practices in fraud prevention.
A shift in focus towards consumer education and awareness programs to help prevent APP fraud at its source.
Pressure on social media platforms and other online services to take more responsibility for preventing the spread of fraudulent schemes.
And obviously, potential consolidation in the FinTech sector, as smaller companies may struggle to meet the new regulatory requirements and larger firms look to acquire innovative fraud prevention technologies.
Looking at the big picture, the success or failure of this regulation in the UK will likely influence similar initiatives in other countries. If effective in reducing fraud while maintaining a vibrant fintech ecosystem, we may see this model adopted more widely. However, if it proves too burdensome for startups or ineffective in curbing fraud, regulators may need to reconsider their approach. Will probably be a painful yet interesting watch 🍿
ICYMI: Starling Bank’s £29 million fine 🤯🏦 [what it’s all about, what it means for the future of FinTech & challenger banks + bonus deep dive into Starling’s latest financials]
🔎 What else I’m watching
Coinbase to Delist Certain Stablecoins in the EEA 📉 Cryptocurrency exchange Coinbase COIN 0.00%↑ has announced plans to delist some stablecoins in the European Economic Area (EEA) as the sector prepares for stricter regulation under the EU's Markets in Crypto-Assets (MiCA) guidelines. MiCA, introduced in early 2023, will be fully enforced starting in December 2024 and requires stablecoin issuers to comply with stringent standards around transparency, liquidity, and consumer protection. Coinbase informed its users via email that it will restrict services for EEA users related to stablecoins that do not comply with MiCA by December 30, 2024. In November, the platform will offer EEA customers the option to transition to stablecoins issued by authorized providers, including Circle’s USDC and EURC, which are tied to the USD and EUR, respectively. ICYMI: Coinbase’s solid Q2 earnings might get derailed by regulatory headwinds & market volatility 👀📊 [breaking down the key numbers, what they mean, & whether Coinbase is worth your time and money in 2024 + lots of bonus dives inside]
Revolut Adds American Express for Businesses 💳 Revolut is now offering UK business merchants the ability to accept American Express AXP 0.00%↑ cards, initially for e-commerce through Revolut Gateway, Payment Links, and Tap to Pay on iPhone. In-person payments will be available later this year. This addition brings the total payment methods offered by Revolut Business to seven. The move aims to attract higher-spending customers and expand the American Express network in the UK. Both Revolut and American Express executives highlight the benefits of offering multiple payment methods to enhance customer experience and loyalty. ICYMI:
Mastercard Launches Real-Time Payments in South Africa 💸 Mastercard MA 0.00%↑ has introduced real-time card payments in South Africa, making it the first market globally to benefit from this innovation. This move enables acquiring banks to process transactions instantly, providing merchants with faster payouts and improving cash flow management. The initiative aligns with the South African Reserve Bank's Vision 2025, which aims to modernize payment systems and support financial inclusion. Mastercard has partnered with ACI Worldwide to facilitate the adoption of real-time processing standards, enhancing liquidity and faster access to funds for businesses and consumers. This development addresses the challenges of delayed settlements and inefficient cash flow, particularly for SMEs, and supports the growth of South Africa's digital economy. ICYMI: Mastercard's $2.65 billion bet on Cybersecurity: acquiring Recorded Future 💸🛡️ [why snapping Recorded Future for $2.65B is a great move & what it tells us about the future + bonus dives in both Visa & Mastercard]
💸 Following the Money
Zepz, formerly known as WorldRemit, has secured $267M from both new and existing investors to support its expansion in some African markets.
KOHO has secured $190M in equity and debt to accelerate its development process and continue to pursue a banking license.
Vienna-based Fynk, AI contract management software, raised $3.5M in seed funding. 3VC and 10x Founders led the round.
👋 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:
YES! My favourite Sunday read is finally out - highly recommended.
Have been suspisious of crypto assets for years in light of their anti Central Bank stance.Am still on the fence but more hopeful as systems of integration into traditional Banking.