🧠Fintech Brain Food - July 26 2020

This week, Ant Financial, A2A payments are everything, and don't forget about crypto! Sharing is caring, so tell your friends about brain food 🙏

Happy Sunday fintech nerds 👋

Fintech feels like it's having it’s second major moment for me. The first was 2009 / 2010 when Stripe and Square burst onto the scene and the speculation around Google Wallet was huge. We’re about to see big things.

This week, 4 fintech's you should pay attention to, the best reads, and some other things you should check out. Sharing is caring, so tell your friends about brain food 🙏

Weekly 4 Fintech's you should pay attention to 🤑

1.💸 Vyne - Account to account e-commerce payments. Like if fast.com and plaid had a baby.

  • Merchants find card acceptance expensive (especially in the USA), but cards come with in built rules around refunds, fraud and identity

  • Plaid and Finicity mean merchants could accept payments easier, but it's still complex for them vs stipe.com and cards. But what happens if it's stripe.com levels of simple to accept payments without a card but directly from your bank? Sounds strange? It's happened in India where UPI is more popular than credit or debit cards. (Ps. this is a great read on the "The Indian Internet" and Jio).

  • Vyne is a brand of payment acceptance that allows you setup the link to your bank, then whenver you see the "Vyne" button on a website, you validate and blam. Money moves, transaction done.

  • The assumption is you have less fraud too because the user has to pick up their phone to validate the transaction (vs say storing the card information on the website)

2. 💹 Public - Social driven investing. Robinhood but where you can follow people as well as stocks.

  • I've heard several people tip Public to be bigger than Robinhood this week, as it faces into it's own regulatory scrutiny after some really quite horrible press and events.

  • Crucially, they don't sell day trading or exotic asset classes. There's also a focus on "purpose driven investment".

  • As banks stare at horrible loan losses in the next 12 months, they'll look to "robo" and "free" investing. They should look at public as their #1 case study for how to position responsible investing.

3. 📷 Stir - Describe themselves as building tools for creators that empower them to run great businesses.

  • Tools for creators is 🔥. This isn't - strictly fintech, and their website is pretty vague BUT, go with me here...

  • It's also not a fintech but: Shopfiy isn't a finance company but they do finance. They've wrapped themselves around small businesses in everything from creating your e-commerce page, to logistics, to accepting payments, to financing your supply chain. They're an "ecosystem" for small businesses, bringing everything together (yes I hate that word too, but it's true).

  • In the same way Stir has the opportunity to be THE ecosystem for creators, and their Cap table reads like a who's who of creator tech. Investors include, CEO of Patreon, CEO of Cameo, oh and the Head of Podcasts at SPOTIFY.

  • This means they have the opportunity to monetise via offering finance products. Give value to creators with all of the tools to run and manage their business. Monetize via fintech.

4.🏥 Catch - Self employed challenger bank USA. "Benefits for people without benefits"

  • Catch focusses on 1099 / self employed in the USA, helping them with retirement and healthcare etc. It "holds back" tax every month to avoid the costly calculations.

  • This is a sector that seems under-served in the USA, massively. The recco came to me from Mario (AKA the generalist), after we had a chat about how CoconutTide and Starling all seem to be doing well in the UK with this community.

  • Strikes me that the opportunity for THE challenger self employed bank in the USA is still wide open (interestingly, Compass has Azlo, but aside from that there aren't many noteable examples). Self employed are happy to pay a small fee for the help.

  • When 11:FS kicked off Mettle with Natwest, the key insight from customer research was that the self employed don't want to be accountants. If you can bake in invoicing, as well as basic cashflow monitoring you solve the biggest pain these businesses have, and you can build out from there. Also if you're loving the SMB sector in the USA, do check this report out (yes it's a plug, but it's also a f*cking brilliant report, don't @ me)

Great Reads 📚

1. Ant Financial readies for IPO - Net Interest Substack ✍

  • Ant Financial is massive. $560Bn assets under management in a market that's growth is nearly 50% YoY.

  • 310 loans are genius. 3 minutes to apply, 1 second approval, 0 human interaction. Built on the data they see about users through day to day payment activity.

  • Their cross sell is exceptional. 80% of users have more than one finance product, 40% use all five. Show that to anyone who works in a big bank and watch them squirm.

  • 🤔My analysis: This is why bankers are scared of big tech. But the story in the west is nuanced. Regulation is a moat for bankers (still, just), and consumers are used to cards. But things like open banking (A2A payments) and bank as a service providers will be game changers. Bankers don't have to fear this though. Big tech is facing anti trust and growth ceilings. Goldman have got this figured out with their Marcus / Apple Card partnership...

2. Shopify Partners with Affirm for POS Lending - Barrons ✍

  • Affirm allows customers to pay for items without a credit card. In this deal, Shopify merchants get paid up front, but the customer gets to "buy now, pay later" in installments every 2 weeks (with no late fees!)

  • Merchants who offer Affirm’s installment payment service as an option often see volumes rise 80% to 100%. (My note: so, double your sales by offering installments, seems like a sweet deal).

  • Merchants pay a fee for the service, but not a big one. For many merchants, the fees involved are no higher than those they would pay for credit-card processing, and in some cases are less. 

  • 🤔My analysis: Someone is taking on a chunk of (data driven) risk The article says cryptically "Specific economics of the arrangement with Shopify are still being worked out". Shopify has form here, for example they credit merchants immediately when a customer buys an item (even the money hasn't reached Shopify yet, Shopify pays their merchant).

  • 🤔My analysis: Affirm have industry leading stats when it comes to loan repayments, their loan losses are much smaller than traditional competitors. So on one hand this speaks to the huge potential of data driven lending. On the other I can't help but feel like POS lending and installments are riskier than they look. Sort of like a Juul pod, Gen Z seems to love them, and I buy the science as to why they're better than cigarettes (credit cards), but something isn't quite right. Who knows though, this appears good for merchants 🤷‍♂️. I'm a massive fan of Shopify and Affirm, so much to learn from both companies.

Things you should know 👀

1.Visa & Mastercard both made significant moves in "Cryptocurrency" this week

  • Visa - Advancing our approach to digital currencies. "We believe that digital currencies have the potential to extend the value of digital payments to a greater number of people and places." This would be unheard of just 2 years ago. Pay attention. Visa are.

  • Mastercard - Granted Wirex principal membership. This is slightly nerdy but historically crypto companies had a BIN sponsor (someone who is a principle member who sponsors you, and lets you issue cards but using their allocation of card numbers from the card scheme).

  • 🤔My analysis: Visa and Mastercard are both taking digital currency a lot more seriously than your bank probably is.

2. Crypto JUST. GOT. INTERESTING. (Again)

  • Defi is so hot right now 🔥. It took 160 days to get to $100m locked in Defi, 495 days to $500m, $1bn 263 days, $2bn 146 days, $3bn 20 days, $bn, 4 days. Spot a trend? (tweet from Spencernoon)

  • You really really should check out RollRally & Foundation. The creativity in the creator currency space is off the charts.

  • "The India Stack" is already a case study in how to build a 21st century finance infrastructure (albeit there are some concerns around privacy)

  • OCEN builds on this to create a network of lenders, and mediates all lending as a centralised platform. How this will work is TBD, but it follows the hugely successful roll out of Aadhaar and UPI which have been transformational. If you work in policy, and you don't quite fancy the Chinese model of big tech and government oversight, India is showing a different path forward for the 21st century.

That's all folks 🧠

I had a finance joke but I couldn't afford to tell it (meme)...

Until next week 👋