This week, we take a look at the news and trends in the financial services industry. You need to subscribe to get this.
In the U.S., buy now, pay later has become more and more common.
There's a case in point. Affirm made its buy now, pay later technology available to U.S.TrademarkiaTrademarkiaTrademarkiaTrademarkia is aTrademarkiaTrademarkia is aTrademarkia is aTrademarkia is aTrademarkia is aTrademarkiaTrademarkia is aTrademarkia is aTrademarkia is aTrademarkia is aTrademarkia is aTrademarkia is aTrademarkia is aTrademarkia A lot of companies that were not previously able to offer their customers the option to pay in installments now can.
The deal is significant for Affirm because the company has millions of customers around the world. Each year it processes hundreds of billions of dollars for businesses of all sizes. As it makes money from interest fees, Affirm has an opportunity to make more money. Prospective and current customers can be offered more payment flexibility by the company.
Affirm, founded by Max Levchin, allows customers to pay on a bi-weekly or monthly basis once they are determined to be eligible. Affirm was conceived as an anti-credit card, according to Levchin. Despite a dramatically lower stock price, the company is still showing signs of strength.
A new partnership was announced by Sweden's Klarna. The company, which last year was valued at $45 billion but has since had its own share of struggles, is teaming up with Marqeta to launch a new card. Historically, buy now, pay later has focused on online shopping or people paying in installments at the point of sale. A growing list of issuers, acquirers and fintechs are using Visa's technology to offer BNPL options to their customers, according to the company. Last year Mastercard introduced its own offering: Mastercard installments. Craig Vosburg said at the time that people want more from their money with greater flexibility and control in how they pay and where they shop.
It's not shocking that Klarna has created its own card. It is an example of how financial services companies are trying to make their loans more accessible to more consumers. It is an example of how competitive the space is in the U.S. The Klarna Card doesn't charge interest and can be used for $3.99 a month. It is free for the first year after activation.
Over the past year, the customer base in the U.S. has grown by over 65 percent. In its recent fiscal third quarter results, Affirm stated that its number of active consumers had reached over 12 million, but did not give a breakdown of how many of those are in the US.
I am not going to attempt to predict what will happen to the market in the coming months, as the current environment presents many challenges for all kinds of fintechs. According to the Wall Street Journal, "rising delinquencies and a slowing economy" are taking some of the luster off the sector. An excerpt is available.
We are confident in our ability to deliver strong growth while driving positive credit outcomes consistent with maintaining attractive unit economics…It is our mission to improve people’s lives, and we fully intend to rise to the occasion and meet this demand — and we absolutely plan to maintain strong unit economics by only extending credit that we believe can and will be repaid. Hopefully, this gives you a pretty good sense of what one might expect from Affirm in a downturn.
Fundbox announced a partnership with Visa last week and that it has crossed over $150 million in revenue. The partnership includes the launch of the Fundbox Flex VisaDebit Card, which it says combines the power of Flex Pay with Visa's ubiquitous acceptance. The startup raised $100 million last year.
According to Colin Walsh, the CEO of Varo, getting a bank charter would allow the digital bank to grow and profitability at the same time. The fintech has struggled to build a meaningful loan book by lending to its customers and has been quickly spending the money it raised in a Series E. As a result, Varo could run out of money by the end of this year, and would become less than well capitalized before then, putting immense pressure on Varo to cut costs. What does this mean for the entire digital banking industry? It is likely that those who were considering pursuing bank charters are rethinking their decision. Brex applied for a bank charter in February of 2021. The company withdrew its bank charter and federal deposit insurance applications in order to modify and strengthen them. Maybe it avoided a bullet.
Data shows that Fintech startups are taking the downturn more hard than other sectors. Even the largest and best-known private companies are suffering from embarrassing re valuations. The data shows that public companies suffer more from valuation declines than other technology categories. New information from Fidelity's various funds shows that the investing giant has changed its mind about the worth of some startup land's highest-flying companies.
The Office of Competition and Innovation will help spur innovation in financial services by promoting competition and identifying stumbling blocks for new market entrants. Something it believes will benefit consumers is that it wants to help fintechs be in a better position to compete. The Office of Innovation focused on an application based process to confer special regulatory treatment on individual companies. The office will try to understand how bigger players can gain advantage over smaller players. Big companies can easily pitch new products to their large customer base and stymies outside players who may have more favorable products. Big tech companies are trying to join consumer finance markets and may threaten fair competition.
Policygenius, an insurtech that raised $125 million in a Series E round, has laid off 25% of its staff. A number of employees are believed to be affected by the situation. Policygenius, whose software allows consumers to find and buy different insurance products online, said at the time of its Series E that its home and auto insurance business had grown significantly. The sudden and dramatic shift in the economy forced Policygenius to adapt its strategy.
It was seen on a website.
Mondu is a B2B platform based in Berlin.
The company has a new approach to providing workers comp and payroll.
There is a new funding of over a billion dollars to scale UPI payments in India.
Credit to finance construction Subcontractors is one of the things Constrafor grabbed.
Sanlo is a startup that gives developers access to financial tools and capital.
Hitpay is a solution for small and medium-sized businesses.
A financing platform with $42 million in equity and credit is being accelerated.
Elsewhere.
Clear Street closed a $165 million Series B at a valuation of $1.7 billion.
Opn secures 40 million dollars to boost Asia growth.
Keyway is a startup that buys property from small and medium-sized business owners and then rents it back to them.
I did a little Q&A with the senior reporter of TechCrunch, who recently started covering more of the financial services industry. Don't worry, enjoy!
I want our readers to know how wonderful you are. I don't know whoNatasha Mascarenhas is.
It's your biggest fan. That's right, heh. I started reporting at my school newspaper when I was a middle school student. I went on to study journalism at Boston University and intern at publications including the Boston Globe.
I was thrown into the world of tech and startup after working for the Chronicle. I started working as a tech reporter at that location. It was my first funding round scoop and I wrote a series about loneliness.
I am a senior reporter and co- host of Equity, a weekly show about venture and startup companies. Startups Weekly is a newsletter that gets into whatever I couldn't fit into my pieces or the show. This is a vote of confidence that I should lean into my weird side more. I think it's funny.
Writing about emotions and relationships, food, friends, and then alone time to reflect on all of the above makes me very happy. I have a soft spot for Cincinnati and Central Jersey, even though I'm based in San Francisco.
You will be covering some financial services now. What attracted you to the beat, and what do you want to focus on?
When people make more, talk louder and decide to share it, I love covering the tensions that arise. I plan to focus on the promise of democratization.
I can't emphasize what draws me to stories because they feel so different. After talking to my former colleague Danny Crichton, I realized that there is such a thing as a horizontal beat. My favorite stories are about the economic empowerment of individuals.
Is there a better way to pitch you?
I would appreciate it if you could tell me about the things that don't have anything to do with your company. I cannot be a fly on the wall the same way as a founder can. The best way to get in touch with me is to send me an email at natasha.m@techcrunch.com
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