Fintech News from around the globe: 4 - 10 May
The top fintech news from India, Asia, Europe and USA, that you absolutely cannot miss this week, and what it means for your business, with the Fintech Chronicler
Its been a crazy week at work. And I could say the same for the rest of Fintech Industry. So, as we wind down for the weekend, here are some of the top Fintech news, that caught my attention from around the globe. Which ones did I miss?
Don’t miss out the podcast episode on all things Account Aggregator
India
1. Large language models are everywhere. But what if one was trained on the vast ocean of financial data? Would that help improve credit underwriting, detect frauds faster while reducing false positives, and offer more personalised financial services? That is the bet with Sesame, an LLM for BFSI, from Setu by Pine Labs, that has been trained on both internal and external data.
And while I get that Pine labs, thanks to its legacy would have generated a ton of data, but what exactly is this external data that they are referring to? And did they actually get customer consent before training their LLM? Because that could be a huge roadblock for Setu in their roll out and marketing plan, especially with DPDP act, where entities that use this model could face heavy fines!
2. In an attempt to challenge the Dollar Dominance, the BRICS block has said that they re working on a common currency, which may or not be Gold backed and issued via Blockchainv. All well, if all the member states, India included, sign off on this initiative. This would be trade within the BRICS nation can then happen on this common currency. But, as you know India has been focusing on promoting Rupee based international trade, so unsure of how that would play out. But let us say this does come into existence, Will it immediately become challenger to US Dollar? I mean, has Euro emerged a Dollar challenger globally? Sure, its value against the Dollar has risen year after year, but not everyone trades in it do they?
One thing I would pay attention to is Gold price. Because every time Dollar has fumbled, Gold prices have shot up. If that happens, then maybe BRICS currency could be the reason.
3. Meanwhile, the Reserve Bank of India has been working on scaling out the Digital Rupee fo retail usage. The use case? commercial papers and certificates of deposits will be tried out in the pilots along with securities tokenisation features on the CBDC.
4. Not just that, RBI is working on exporting UPI across the globe. The latest partnership is with Ghana and their Interbank payment systems. This integration will be completed in the coming 6 months.
5. Another partnering country is Namibia for UPI, the objective behind the collaboration is to improve “accessibility, affordability, connectivity with both domestic and international payment networks, and interoperability,” as well as “enhance digital financial services and bolster real-time Person-to-Person (P2P) and Merchant payment transactions (P2M) in the African nation.”
6. Next, the RBI has tweaked some rules for custodian banks issuing Irrevocable Payment Commitments or IPCs because of the new T+1 stock settlement system. Now, the max intraday risk is 30% of the settlement amount. This takes into account a possible 20% drop in equity prices on the day after the trade, plus a bit extra just in case. Custodian banks can issue IPCs if they’ve got an agreement with clients or if the transactions are pre-funded. Paying the margin in cash or permitted securities reduces the exposure. If there’s any exposure left at the end of the day, the bank needs to maintain capital. And all of this is subject to limits under the Large Exposure Framework.
7. Coming to the capital markets, because brokerages couldn’t arrive at a consensus, the SEBI has for now shelved the idea of adding an evening sessions between 6 pm and 9 pm, in addition to the regular trading hours of 9:15 am to 3:30 pm.
8. Open, Launched in 2017, Unicorned in 2022, feels confident of achieving profitability in the next year and a half. Even though they reported a net loss of Rs 242 crore for the financial year 2022-23, CEO Achuthan is confident they won’t need immediate capital infusion. Achuthan says Open is currently helping over 40 lakh businesses manage about $40 billion annually. While there are other players in the space, like Razorpay with its RazorpayX product, Open is the market leader. They’re a horizontal player, meaning they can offer a wide range of services. One of these is payment gateway services, thanks to their PA/PG license.
As for new products, they’re working on a 30-45-day credit line product for manufacturers and their SME customers. They’re also developing a co-pilot product to help business owners and financial analysts search for information and gain insights.
Achuthan emphasizes that Open doesn’t want to be a lending company. They see themselves as a SaaS-based financial automation product. They believe the buy now pay later (BNPL) model has huge potential, but they want to be an enabler for banks rather than compete with them. That’s their approach, and they’re sticking to it!
Some more news from India that you do not want to miss:
9. Fi Secures NBFC License from RBI: Expanding Financial Services Offerings
10. ICICI allows for NRI customers to use UPI
11. Phonepe is still the dominant UPI player with 49% market share
12. NPCI Onbaords Hotstar+ as a merchant on its Bharat Bill Payments Systems (BBPS)
13. Second straight quarter of profits from PolicyBazaar. Looks like the insurance bet is paying off.
15. Indian startups raised a sum total $220Million this week, with Fintech LendingKart raising $10M in Debt, 50Fin raise $550K. Feels like Fintech is no longer the flavour of the season, but at least this is a welcome relief for cashstrapped startups which were working on innovative solutions in Agritech, CleanTech and DeepTech.
16. Groww CEO and cofounder Lalit Keshre said that the unicorn completed its domicile transition back to India as of March 2024, and as per the tweet he posted, it cost them much lesser than PhonePe’s ₹8,000crores.
Asia
1. Only half the customers are satisfied with embedded lending
2. Ascend Money, Thailand’s first fintech unicorn, helps improve the lives of the unbanked across Southeast Asia by providing more accessible financial services. The company offers nano financing, personal loans, simplified digital wealth management and insurance products, as well as its popular TrueMoney payment platform, which enables over 50 million customers in six countries to access financial services such as mobile top-ups, bill payments and international remittances. And has recently partnered with ANT financials to enable their customers with cross border payments.
4. Thailand and Vietnam are the top adopters of Crypto in Asia
5. The Bank of Thailand is set to launch Cross-Border QR Payments with India
North America
1.
Neobanking startup Mercury is adding bill pay and spend management software to its services. This puts them in the ring withseasoned players like Brex and Ramp. Mercury, serving businesses since 2019, is expanding with accounting automation and advanced bill pay features. They plan to offer invoicing and employee reimbursement this summer.
Mercury has over 200,000 customers sending $4 billion in payments monthly. The new features put them against fintech companies like Navan, Airbase, Mesh Payments, and Bill.com.
Mercury and Brex both offer bank accounts, corporate cards, bill pay, and expense reimbursement. Startups make up less than 40% of Mercury’s customer base, with e-commerce companies being the second largest.
The new bill pay software allows customers to pay bills directly from their bank accounts. Mercury is also providing accounting automations, including a new NetSuite integration. This summer, they’ll offer businesses the ability to build professional invoices and set up reimbursement policies.
Access to the new workflows is free until August 1, after which they’ll offer paid plans. Mercury provides banking services through partners Choice Financial Group and Evolve Bank & Trust. They also recently expanded into personal banking, charging users an annual subscription fee of $240.
2. Neobank Dave’ credit performance improvement can all be attributed to their AI powered underwriting engine, CashAI. From Q1 2023 to Q1 2024, Dave lowered its 28-day delinquency rate from 2.60% to 1.83%, a record low. During the same period, the firm increased its originations by 32%.
CEO Jason Wilk highlighted another AI deployment by Dave: DaveGPT. Launched in January, DaveGPT autonomously answers customer inquiries, sets up direct deposits, advances account management, and solves customer issues. This has helped reduce costs, increase member satisfaction, and support member retention. https://www.pymnts.com/earnings/2024/neobank-dave-attributes-best-ever-credit-performance-to-ai-driven-underwriting-engine/
3. RobinHood the trading company that rose to fame during the GameStop Stonk saga, fears Securities and Exchange Commissions’ action against them for their crypto business. This was disclosed in a filing on Monday, where Robinhood mentioned receiving a warning from the regulator that charges could be filed upon completion of an ongoing investigation.
Dan Gallagher, Robinhood’s chief legal, compliance and corporate affairs officer, expressed disappointment in a blog post, stating that the SEC has decided to issue a Wells Notice related to their U.S. crypto business. Despite years of attempts to work with the SEC for regulatory clarity, including efforts to register, the situation has come to this point.
Gallagher firmly believes that the assets listed on their platform are not securities. He is looking forward to engaging with the SEC to demonstrate the weakness of any case against Robinhood Crypto, both factually and legally.
Obviously the stocks initially slid 2%, but it has since recovered and was recently trading up by 1%.
4. Marqeta’s latest results show a surge in their transaction processing operations and potential in new markets like earned wage access. CEO Simon Khalaf highlighted that Marqeta offers a range of integrated payment options for its corporate clients. They hit a milestone by processing over $1 billion in total payment volume (TPV) in a single day.
Despite net revenues being 46% lower year over year, shares were up 6% in after-hours trading. Khalaf noted that many customers, especially FinTechs, who initially took program management in-house, returned to Marqeta due to the complexity and regulatory requirements of scaling operations.
Khalaf also sees new opportunities in the earned wage access market, a $2 billion market. He mentioned that their unit economics for earned wage access are very similar to their neo-banking economics.
CFO Mike Milotich said that TPV grew 33%, with significant outperformance in BNPL, on-demand delivery, and financial services. On-demand delivery growth remained in double digits, accelerating quarter over quarter.
South America
1. American startup Jeeves, known for its corporate expense management services, has raised $75 million for the launch of Jeeves Pay in Brazil. They’ve been in the Brazilian market for just over 18 months and are aiming for it to represent around 25% of their income in the next 12 months.
Jeeves offers lines of credit, expense control cards, and an international account to its clients, which include big names like Burger King, H&M, Kavak, Rappi, and Hotmart. They became a unicorn in 2022 after raising $180 million in a Series C round led by Tencent.
The recent $75 million line of credit from Community Investment Management (“CIM”) will be used to finance the limit released to startup customers and support the newly launched Jeeves Pay. This product offers a line of credit that customers can use and return in up to 37 days, helping with working capital.
The funds will be used for operations in Latin America, focusing on countries like Mexico and Colombia, as well as Brazil. Jeeves operates in 22 countries and sees Brazil as a key market in its strategy.
2. Chilean Fintech Fintoc raises $7M to promote account to account payments.
Europe, Australia and New Zealand
Some Crypto News
1. Visa found that out of about $2.2 trillion in total transactions in April, only $149 billion came from “organic payments activity”. This challenges the idea that stablecoins, which are tokens pegged to assets like the dollar, are set to shake up the $150 trillion payments industry. Big fintech players like PayPal and Stripe are getting into stablecoins, with Stripe’s co-founder citing “technical improvements” as a reason to be optimistic about them.
Tracking the actual value of crypto activity has always been tricky. Glassnode estimated that the record $3 trillion of total market circulation for digital tokens at the height of the 2021 bull market was really closer to $875 billion.
With stablecoins, transactions can often be double-counted depending on the platform. For instance, converting $100 of Circle Internet Financial Ltd.’s USDC to PayPal’s PYUSD on Uniswap would result in $200 of total stablecoin volume being recorded on-chain, according to Visa’s head of crypto, Cuy Sheffield.
Analysts at Bernstein predicted last year that the total value of all stablecoins in circulation could hit $2.8 trillion by 2028, an almost 18-fold increase from their combined circulation now. Visa, which handled over $12 trillion worth of transactions last year, could lose out if stablecoins become a generally accepted means of payment. Because transactions with these tokens are instant and almost costless, many in the crypto industry argue they’re perfect for disrupting the payments sector.
2. Gary Gensler, the chairman of the SEC, is accused of misleading the U.S. Congress about classifying Ethereum as an unregistered security. These revelations, stemming from internal SEC documents exposed during a lawsuit with the company Consensys, show that the agency considered ETH a security for over a year. These actions contradict the public statements of Gensler, who has declined to clarify the SEC’s position on Ethereum during a hearing, avoiding direct questions on the subject.