Apple is thinking about crypto payments 👀; N26 ditches its American Dream🇺🇸; Amazon bans Visa credit cards in UK ❌ 💳

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Good morning Everyone,

And happy Saturday! This week was a blast and you definitely deserve to rest. But before you go Netflix & Chill, I invite you to take a look at the three stories that were moving the headlines this week in the financial technology world. You can uncover other stories, keep the FinTech pulse daily and get at least X5 more by becoming a subscriber. Join the community here:

And here’s a mix of 3 awesome FinTech stories from this week:

Apple is thinking about crypto payments 👀

The news 🗞 Apple CEO Tim Cook told the New York Times’ DealBook the company is considering cryptocurrency features but didn’t go into any specifics. While Cook noted that Apple has no immediate plans to enable crypto payments in Apple Pay, his comments didn’t impede the integration entirely.

Not the first time 👉 One must note that this isn’t the first time Apple has weighed crypto functionality. Back in 2019, Apple Pay vice president Jennifer Bailey expressed interest in adding cryptocurrency into the mobile wallet, saying that cryptos had long-term potential. Really? 🤔

Following the crowd 🥊 Given both the surge in crypto payment products this year -with players like PayPal and Mastercard joining the crowd - and Apple’s dominant position in tech, some financial experts view an Apple Pay crypto integration as an obvious business move for a while. Here’s why👇🏼

✈️ THE TAKEAWAY

A huge opportunity ahead. Despite Apple’s crypto plans being uncertain, integrating crypto within the Apple ecosystem could help the tech giant increase both monetization & engagement. First, an Apple Pay crypto integration could help close the gap between iPhone owners and Apple Pay users. Apple Pay has now expanded to include support for things like driver's licenses and student IDs - both attempts to increase user adoption. Yet, only about 38% of US iPhone owners use Apple Pay, according to estimates. Crypto features could hence bridge that gap. Second, a crypto-linked Apple Card product could boost Apple’s card business and payments volume. As of today, there are an estimated 6.4M Apple Card users. A crypto feature could lift Apple’s overall payments business to new highs.

N26 ditches its American Dream🇺🇸

The news 📰 N26 Co-CEO and co-founder Maximillian Tayenthal told Business Insider that the German digital bank would no longer be focussing on US expansion, instead, it would be doubling down on its presence in Europe.

The origins 👉 The neobank entered the US market in 2019 with big plans. It invested as much as $29.9M at the launch of its US operations and claims to have amassed over 500,000 customers across the region - with 250,000 still on a waitlist.

But those plans have met with muted success and face an uncertain future. Its US-based CEO left the company within a year of its introduction, and the neobank was forced to lay off 10% of its New York workforce shortly after.

Moreover, the challenger is currently seeking a relationship with a new sponsor bank to help navigate the US regulatory environment and enable its products after its partnership with Axos Bank ran its course over the summer.

Big priorities 😳 N26’s key focus now is obviously Europe. “Not as much of the management’s attention is on the United States at the moment. Ultimately what keeps me awake at night is how do we get to the European market,” Tayenthal told the Business Insider.

Also, despite hinting at a withdrawal from the US market, N26 recently scooped a Brazilian banking license, with plans to launch its services in the South American country imminently - although it remains unclear what steps the bank has taken to do so.

✈️ THE TAKEAWAY

FinTech is hard, and it’s even harder for European-based FinTechs to win in the US. Take Monzo as an example that withdrew its bid to become a licensed bank in the US last month after regulators informed it that its application was unlikely to be accepted. Or Revolut that has broadened its free offerings in hopes of attracting new US customers (the opposite of its UK strategy, which is focused on boosting fees, and driving paid subscriptions, and hence increasing the bottom line). At the core, customer acquisition costs (CAC) are high in a mature market like the US. Incumbents have managed to modernize their own digital experiences and introduce features that challengers have historically used to sweeten the pot for prospective customers, hence, making new customer acquisition troublesome. Furthermore, the neobank market is also quite saturated in the states, leaving non-domestic players drawing from a limited pool, not to mention the added cost of educating consumers on who they are and what they actually do.

Amazon bans Visa credit cards in UK ❌ 💳

Breaking🔥 Starting 19 January 2022, retail giant Amazon has announced it will stop accepting Visa credit cards issued in the United Kingdom, citing high transaction fees.

The context 👉 Brexit has obviously influenced the online payment market, with Visa no longer being controlled by the EU authorities to keep its fees within a limit.

As a result, throughout 2021, Visa has thus imposed higher charges on its credit card payments, determining US retailer Amazon to drop from their long-time partnership. Visa’s fees have gone up from 0.2% - 0.3% to 1.15% for every Amazon purchase via a credit card. That’s a lot… 😬

More context 👉 Fees to accept online credit cards tend to be higher in part because they carry a larger risk of fraud - bringing on higher costs for e-commerce merchants like Amazon.

✈️ THE TAKEAWAY

Applying pressure. The UK is a major card market for Visa, and being cut off by one of the largest retailers in the world could severely impact its payments volume. Last year alone, as many as 2.8B payments were made using a credit card in the UK, which represents ~8% of the overall payments volume for the card network giant. Knowing that Amazon is obviously trying to pressure the card giant to bring down fees, even if it means potentially losing some inconvenienced customers in a key market. Amazon is expected to reach $50.82B in UK e-commerce sales this year, so it’s definitely serious with this move. Visa, your call.

🔎 What else I’m watching

• Open Banking is huge 🙌🏼 A new Juniper Research study has discovered that the value of global payment transactions facilitated by Open Banking will exceed USD 116 billion in 2026, from just under USD 4 billion in 2021. This growth rate of over 2,800% over the next five years will be driven by increasing user awareness of Open Banking features, supported by greater deployment within Europe, as vendors build on PSD2 (Second Payment Services Directive) APIs to deliver expanding services. The research identified Open Banking-facilitated payments, where payments are made directly from bank accounts, as a growing threat to the dominance of cards within e-commerce. While card payments are well established, leveraging permissioned access to bank accounts can reduce fraud risks due to strict KYC (Know Your Customer) rules. The research recommends payment providers partner with Open Banking API providers to reduce risks of disintermediation.

• Uber move 👉 Delivery mobile application Rappi has planned to get regulatory approval to operate as a digital bank in Colombia in the first quarter of 2022, according to texasnewstoday.com. If approved, the company plans to expand its services as a financial institution through Rappi Pay, a joint venture with the bank Davidienda, which already offers credit cards and electronic accounts. Rappi already offers several financial services in Colombia, Mexico, Brazil, Peru, and Chile. These depend on national regulations, but Rappi does not yet provide full banking services.

• Direct-to-artists payments 💳 Music streaming service Tidal has launched a new membership tier that will send payments to artists in two ways. With a new fan-centered royalties model included in Tidal’s HiFi Plus membership tier, royalties attributed to that tier’s subscribers will be paid to artists based on the subscribers’ streaming activity, rather than from a pool as is standard in the industry, to the reports. In addition, with new direct-to-artist payments, up to 10% of each HiFi Plus subscriber’s monthly membership fee will go to the artist whose music they streamed the most during that calendar month.

💸 Following the Money

• Float, a corporate card and spend management platform, has raised $30M in a Series A funding round, FinTech Futures reported. The company’s total funding is now $34M. Float’s business involves putting out Visa-issued cards, which can integrate with a company’s bank account to let employees use virtual as well as physical corporate cards, along with a spend management platform. The idea is to solve a pain point for small Canadian businesses by eliminating the need for personal guarantees from company leaders, according to the report.

• Verity, a UAE-based fintech startup building a family banking and financial literacy app for the Mena region, has opened a waitlist having closed an $800,000 pre-seed funding round, with backing from regional VCs and angel investors. The Verity app, which is set to launch in the UAE before the end of the year, enables kids and teens to build core money management skills such as how to earn, save, give, and spend responsibly in a safe and secure environment.

• Crypto exchange Gemini Trust is raising $400M in a new funding round which would bring its valuation to $7B. The round has not yet been finalized and could change.

👋 That’s it for today! Thank you for reading and have a productive weekend! And if you enjoyed this newsletter, invite your friends and colleagues to sign up:

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