UBS to cut more than half of Credit Suisse workforce; How does B2B fintech pricing evolve?; Goldman in talks to offload Apple credit card, savings products to American Express;
In this edition:
1️⃣ UBS to cut more than half of Credit Suisse workforce
2️⃣ Visa acquires Brazilian fintech startup Pismo in $1B blockbuster deal
3️⃣ Embedded finance and Banking-as-a-Service (BaaS)
4️⃣ Not all good with Asian super apps
5️⃣ Crypto-asset regulatory developments
6️⃣ Goldman in talks to offload Apple credit card, savings products to American Express
7️⃣ How does B2B fintech pricing evolve?
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Fintech News
UBS to cut more than half of Credit Suisse workforce
UBS is looking to cut more than half of Credit Suisse’s workforce from next month as a result of the bank’s takeover, Bloomberg News reported on Tuesday.
Bankers, traders, support staff in Credit Suisse’s investment bank in London, New York, and in some parts of Asia are expected to bear the brunt, with almost all activities at risk, the report said.
Visa acquires Brazilian fintech startup Pismo in $1B blockbuster deal
Founded in 2016 by Juliana Motta (CPO), Ricardo Josua (CEO), Daniela Binatti (CTO), and Marcelo Parise (VP of engineering), São Paulo–based Pismo has quietly racked up a list of big-name customers, including Citi, Itaú (one of Brazil’s largest banks), Revolut, N26, Nubank and Cora. The startup processes almost 50 billion API calls and $40 billion in transaction volumes annually, and powers almost 80 million accounts and over 40 million issued cards.
Square credit card has arrived
The Square Credit Card, running on the American Express network, gives sellers a new, yet familiar tool that provides them with more spending flexibility when they need it and a rewards program that helps them reinvest back in their business. With no late fees or annual fees, the Square Credit Card features a credit limit determined by the sales a seller processes through Square, growing as their business grows, and rewards them with free card processing every time they spend.
Goldman in talks to offload Apple credit card, savings products to American Express
Apple has developed a deep relationship with Goldman Sachs through Apple Card, but apparently, it’s an unhappy marriage. According to the Wall Street Journal, Goldman Sachs is in talks with American Express about transferring its Apple partnership. This comes after Goldman revealed in January that it had lost over $1 billion on the Apple Card deal so far.
As the generative AI craze rages on, Ramp acquires customer support startup Cohere.io
Founded in 2020, New York-based Cohere.io (not to be confused with Cohere, another AI startup that recently raised capital) raised $3.1 million in a seed funding round led by Initialized Capital, later tacking on another $400,000 in funding.
The deal marks Ramp’s first acquisition since it bought Buyer, a “negotiation-as-a-service” platform that claimed to save its clients money on big-ticket purchases such as annual software contracts, in August of 2021 and second since its 2019 inception. Financial terms were not disclosed.
Brex refocuses on startups with hire of SVB veteran, ex-a16z operating partner
Today, the company told TechCrunch exclusively that it has tapped Jason Mok, a former Andreessen Horowitz (a16z) operating partner and more than 16-year veteran of Silicon Valley Bank as its new head of startups. In his new role, which he assumed in April, Mok will be helping founders navigate both today’s macroeconomic environment and the recent banking crises, as well as the promise of exciting technologies like generative AI.
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Fintech Insights
Embedded finance and Banking-as-a-Service (BaaS)
As open banking morphs into open finance and open finance becomes integrated into digital ecosystems or platforms blurring industry boundaries, we come closer to an open data economy. Then, banking gets subsumed into cross-industry digital ecosystems through Banking-as-Service (BaaS) models. Built on the foundations of open banking frameworks, BaaS has come into its own since the COVID-19 pandemic. It is the provision of complete banking processes (deposits, loans, payments) as a service from specialist cloud-based API platforms that use a licensed bank’s secure and regulated infrastructure to enable delivery of financial services at the point of customer need: embedded finance.
BaaS offers a radically different approach to financial services — one that deconstructs the old, traditional model and places its building blocks in the hands of a wider range of stakeholders. By doing so, it accelerates the democratisation of banking and its transformation into a platform economy. The end-customer benefits from the provision of banking and financial services into a personalized end-to-end customer journey designed to address their particular unmet need, delivered at the appropriate touchpoint with real-time, intelligent and contextual experiences. At the same time, they can be reassured that the service is provisioned ultimately from a licensed, regulated entity, protecting their financial and data assets.
BaaS differs from traditional white labelled banking service provision fundamentally because it is a technical and operating model driven by a loosely coupled plug & play API platform and operating model built on configurable components.
It offers stable BaaS revenue streams to the providers: pay-as-you-go in the test phase and then standard subscription-based as the brand scales and matures its services. The provider can also benefit from data sharing deals in lieu of or in addition to revenues to gain customer insights to personalize own offerings if applicable. Self service consumption implies low cost of sale compared to traditional bilateral partnerships involving RFPs, contracts and bespoke connectivity. BaaS players offer access to a sandbox and API documentation aimed at developers, build working apps at speed often offering the first transaction in a matter of hours and scaling operations in days.
Source Temenos
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Not all good with Asian super apps
Their recent performance has disappointed (see chart). Collectively, the market capitalisation of Singapore’s Sea and Grab, South Korea’s Coupang and Kakao, Japan’s Rakuten, and the parent company of India’s Paytm has declined by around 60% since the end of 2021. None of the firms is the same; they each make money from a blend of mobile gaming, social media, e-commerce, ride-sharing and financial payments. What they have in common is an aspiration to bundle together a variety of services which complement one another on one app. They had hoped hoping to emulate Chinese companies, such as Tencent’s WeChat and Alibaba’s Alipay, which pioneered the business model.
But the newer Asian super-apps have been put under huge pressure by a rapidly changing environment. Funding, which was once cheap and plentiful, has dried up, making ambitious growth plans harder to finance. James Lloyd at Citigroup, a bank, notes that China’s super-apps started with a core of profitable and engaging businesses (e-commerce for Alipay and social media in the case of WeChat), which other services were built around. Outside China, few firms have balanced both significant scale and earnings in a similar way.
Kakao, a South Korean firm, most closely fits the bill. Unlike most Asian would-be super-apps, it has been reliably profitable. Yet its share price has declined by 8% this year. Because the company is dominant on its home turf, it is running out of room for further domestic growth. Its ride-hailing arm has a market share in South Korea of as much as 90%, by some estimates. The firm wants to raise the international share of its revenues from 10% today to 30% by 2025 — but such global expansion comes at a cost.
At other firms the funding squeeze has inspired ambitions for profitability, which inevitably comes at the expense of previous plans for rapid expansion. GoTo, an Indonesian super-app, created from the merger of Gojek, a ride-hailing company, and Tokopedia, an e-commerce firm, was expected to appoint a former banker, Patrick Walujo, as ceo at its shareholder meeting on June 30th, after we published this. Mr Walujo has stressed that his aim is to make the company profitable.
One Asian consumer-tech firm has bucked this year’s trend. The share price of Paytm, a would-be Indian super-app based around digital payments, has rallied by around 60%. The stock is still less than half of its all-time high, reached shortly after it floated in November 2021, and the firm has yet to make a profit. Nonetheless, its rising share price may reflect something companies elsewhere in Asia lack: a single, large and growing domestic market to work with. Whether that potential for scale proves enough for a more sustainable future for Paytm has yet to be seen.
Source The Economist
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Crypto-asset regulatory developments
Across the globe, crypto-assets have been regulated in myriad ways by countries, leading to a fragmented regulatory landscape.
The level and scale of regulation depends on the level of maturity of the ecosystem, the perceived potential threat to financial stability, the capacity of the regulatory bodies overseeing crypto-assets and the need to promote innovation — as well as more local considerations. The particular configuration of these variables for each country results in a complex regulatory picture, with crypto-assets banned in some countries (such as China) while in others (El Salvador and the Central African Republic) one crypto-asset, bitcoin, has been designated legal tender.
Most of these frameworks are relatively new, and due to a range of factors may not be appropriate to deal with decentralized governance and operational structures, novel operational and cybersecurity risks and legal-enforcement issues. As already highlighted in Sections 1 and 2, the nature of blockchain technology and differences in regulation and enforcement create challenges for cooperation between domestic regulators, international enforcement agencies and for the industry broadly as it absorbs an uneven compliance burden. On the other hand, these differences have exacerbated regulatory arbitrage and led to the development of regional hubs. In addition to these new frameworks, existing rules and regulations continue to apply with respect to data protection, data management, cybersecurity, sanctions compliance and securities laws.
Source World Economic Forum
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The Rise And Fall Of Goldman Sachs’ Marcus
Saying the name out loud conjures images of Ivy League-educated investment bankers in tailored suits managing money for the wealthiest of the wealthy. Or closing deals in high-rise corporate offices. Advising the wealthiest of the wealthy. Navigating the corridors of power across the world’s financial capitals — New York, London, Singapore.
So, why did Goldman Sachs — the 150-year-old investment bank — try to get into checking accounts and credit cards? And, what’s more, how did Goldman Sachs’ fail at that? Watch the video above to find out more.
Source CNBC
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How does B2B fintech pricing evolve?
- Pre-PMF companies are typically optimizing for rapid customer adoption, such that they can receive early product feedback (especially from design partners) and/or bootstrap the beginnings of a network. At this stage of company building, usage is more important than revenue, and pricing sophistication and philosophy generally reflects that. Founders are often owning pricing at this point, and prioritizing new users over value capture and velocity over repeatability (specifically with respect to deal and pricing structure). Hence, they often pick the simplest pricing method for customers to understand.
- Early PMF companies, on the other hand, care more about repeatability and revenue. This is because they’re trying to prove that they’ve established a recipe for success in their market, which in turn means they can spend more money and resources on go-to-market efforts to efficiently acquire and retain customers. As such, revenue becomes a critical input into the equation, pricing becomes more complex, and more time is spent analyzing what works and what doesn’t. These types of market insights and their corresponding pricing strategies are usually owned by the product team, an early GTM hire (e.g., the first product marketer), and/or the founders. The key responsibility of the pricing owner in this phase of company building is to ensure pricing unlocks repeatability at least as much as it unlocks value capture. Incremental nuance here can come in the form of tools such as preset discount tiers (for a usage-based model), product tiers (for a freemium offering), or pre-packaged bundles (for a modular product) to ensure that each sale doesn’t require something totally new and bespoke.
- Once your company has reached some scale, typically beyond Series C, pricing quickly becomes about maximizing value capture. It’s important to note that no one pricing model can necessarily maximize value capture on its own. This is more about what percent your company attempts to take of the perceived value generated by your product (i.e., moving from one-third toward one-half or two-thirds). As networks and initial repeatability have already been proven out (at least partially), pricing becomes one of the most essential tools in the business’ tool kit, and companies adjust their operations to reflect this. For example, we often see companies of this maturity start to introduce dedicated pricing teams and functions, which centralizes pricing intelligence and decision making with a key set of stakeholders like a deal desk or pricing council. While many other teams, like finance and business operations, will still own various components of the pricing stack, the deal desk often becomes the key hub for pricing and discounting decisions, particularly in enterprise-led software companies.
Source @Andreessen Horowitz
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Wise FY 2023 Performance Assessment
- Wise’s stock price surged c.20% to £641.40 on 28th June, fueled by its FY23 results that included surprisingly high growth. Wise stock is up more than 100% since its all-time low one year ago
- The customer base grew 34% YoY (66% of which joined through word-of-mouth), while volume grew at 37%; strong customer and volume growth across both consumer and business segments
- Transaction speed improvement via instant payment capabilities launched to and from Brazil, Singapore to Malaysia; and via new partner integrations in countries like Japan and the U.S.
- Impressive 51% YoY revenue growth powered by volume growth, margin expansion, and acceleration of interest income in a rising rate environment
Strong growth across global regions, but particularly strong in APAC and ROW
Growth propelled in part by Wise Platform (i.e., embedded partners) expansion, 60 new partners
- Adjusted EBITDA increased by ~100% YoY, and the net income margin surged by 3x as Wise Account features drove the increase in profitability from the higher interest rate environment
Source Flagship Advisory Partners
