Introduction to banking-as-a-service (BaaS) for software platforms; Open Finance use cases; Understanding interchange fees and their merchant impact;
In this edition, we’ll uncover how Pay by Bank (PBB) is slashing merchant fees by up to 70%, explore Chainalysis’ 35% revenue growth in the crypto space, and dive into the growing impact of Banking-as-a-Service (BaaS) as it transforms the financial landscape with seamless integrations and new revenue streams.
Insights & Reports:
1️⃣ Mapping the fintech funding landscape across regions
2️⃣ The rise of pay by bank: How merchants can reduce costs and grow revenue
3️⃣ Chainalysis revenue, valuation & growth rate
4️⃣ Understanding interchange fees and their merchant impact
6️⃣ Introduction to banking-as-a-service (BaaS) for software platforms
7️⃣ State of the Modern Payments Stack
8️⃣ Key developments shaping the cross-border payments industry
9️⃣ Fintech Revolut Eyes Expansion in Gulf With License Application
TL;DR:
Hey everyone, welcome to this week’s edition of Fintech Wrap Up! There’s a lot to unpack, so let’s dive right in.
Did you know over $350 billion has flowed into the fintech space since 2015? However, the distribution of this funding is far from even — regions like the US and Canada lead the pack, accounting for 39% of total global funding, while others like APAC have actually seen a decline. Europe, on the other hand, continues to thrive, with fintechs not only attracting significant investment but also creating thousands of jobs and even ranking among the top banking institutions.
We’ll also talk about the growing trend of “Pay by Bank” (PBB), which offers merchants a more cost-effective alternative to card payments. With real-time payment confirmations and instant liquidity, PBB adoption is on the rise, especially in markets like the UK and US, where instant payment systems like Faster Payments and FedNow are expanding rapidly. Merchants are seeing savings up to 70% compared to traditional card fees, and with some clever incentives, PBB is becoming more attractive to consumers too.
Chainalysis continues to make waves in the crypto world, with their revenue hitting $190M in 2023, up 35% from the previous year. They’re still growing fast and expanding their product offerings — whether it’s government contracts or private sector compliance, Chainalysis is becoming a crucial player in tracking illicit blockchain activities. Plus, we’ve got a look at how interchange fees are shaping merchant costs, and the growing impact of Open Finance use cases, especially in personal finance management and account-to-account payments.
Lastly, we’ll explore the essentials of banking-as-a-service (BaaS) for software platforms, highlighting the importance of choosing providers that offer a full suite of financial services, from payments to account management. BaaS is simplifying how companies integrate financial products, making it easier to manage money, reduce complexity, and offer a seamless customer experience.
So, dive in and let’s explore how fintech is reshaping industries across the globe!
Insights & Reports
Mapping the fintech funding landscape across regions
While more than $350 billion in funding has gone into the fintech industry since 2015, VC funding is distributed unevenly across regions, and among fintech companies at different maturity stages and various fintech subsectors. These variations may result from the distinct nature and intrinsic characteristics of various fintech environments.
The fintech industry has grown rapidly in the past decade. The number of fintechs globally increased from 33,000 in 2015 to 57,000 in 2021, an average annual increase of 10%. In 2022 and 2023, the number of fintechs continued to grow but at an annual rate of just 1%; the industry ended 2023 with a record 59,000 fintechs worldwide. While all regions have experienced growth in the number of fintechs since 2015, there are marked differences in the growth levels across different regions. The US and Canada remains the region with the largest number of fintechs — 22,500, or 38% of the global total, in 2023 — followed by Europe with 21,900, or 37% of the global total.
The US and Canada alone accounted for 39% of total fintech funding from 2015 to 2023, and the region also has much higher funding per capita than other regions. Various factors could explain this, including the much larger investor base, with five of the top 10 VC firms (measured by assets under management) being from the US; the presence of a large single market without language or jurisdiction barriers, making it easy and inexpensive to expand; and the large number of mature fintech scale-ups needing funding for further expansion and acquisition.
The rise of pay by bank: How merchants can reduce costs and grow revenue
Key drivers of PBB adoption
🔹 Growth in account-based payments
The introduction of account-based payments allows PBB solutions to facilitate funds transfers directly to merchant accounts, offering an advantage in terms of cost and liquidity management. This is true for merchants that sell slow-moving goods or fast-moving goods: real-time confirmation and funds availability are real advantages for all types of merchants. Access to account-based payments is rapidly growing in the UK and the US. In the UK, the BACS and Faster Payments systems have more than 61,330 and 435 total participants as of 2022, respectively. In the US, the ACH network is ubiquitous whereas instant payment methods, such as The Clearing House’s RTP and Federal Reserve’s FedNow systems, continue to expand. While the ACH network covers all depository accounts in the US, RTP reaches 65% of all demand deposit accounts and FedNow has 700+ financial institutions participating.
🔹 Customer willingness and merchant desire
For merchants, PBB offers numerous advantages compared to other payment methods:
● Accepting a PBB payment is cheaper than card payments in the US, despite recent changes to card-based interchange. Current savings range between 20% and 70%
● PBB supports automated account reconciliation, reducing costs for merchants.
● As discussed before, using instant payments offers great liquidity management improvements, depending upon the merchant’s needs.
Curated News
Fintech Revolut Eyes Expansion in Gulf With License Application
The firm has submitted applications to the Central Bank of the United Arab Emirates to become an electronic-money institution and offer remittances in the country, according to people familiar with the matter. The goal, the people said, is to eventually apply for a full banking license, similar to the one it recently received from regulators in the UK after years of work.
