Square CEO to depart; The power of Open Banking: exploring the next wave of use cases; Tech CEOs want to make a ‘Super App.’ Here’s why it’s so hard;
In this edition:
1️⃣ Square CEO to depart
2️⃣ Monzo debuts investments feature
3️⃣ Revolut yet to submit full US banking licence application
4️⃣ Tech CEOs Want to Make a ‘Super App.’ Here’s Why It’s So Hard
5️⃣ How BNPL works
6️⃣ Global Fintech Trends
7️⃣ The Power of Open Banking: Exploring the Next Wave of Use Cases
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News
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Square CEO to depart
Square CEO Alyssa Henry will leave the merchant payments service provider on Oct. 2, parent company Block said in a Monday filing with the Securities and Exchange Commission.
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Monzo debuts investments feature
Digital bank Monzo has launched a feature that lets users invest with as little as £1. The feature, called Investments, will allow Monzo’s customers to invest in a number of funds managed by BlackRock.
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Revolut yet to submit full US banking licence application
Revolut is yet to submit an official application for its US banking licence after taking the preliminary steps over two years ago.
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Insights
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Tech CEOs Want to Make a ‘Super App.’ Here’s Why It’s So Hard
Meta. PayPal. X. All of these companies have made attempts at building a “super app” in the U.S., following the success of WeChat in China. But they’ve struggled to combine functions like social media, messaging, payment into one place. Here’s why.
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How BNPL works
BNPL payment methods provide consumers with the option to divide purchases into installments, often with a 0% annual percentage rate (APR) and no hidden fees. The financing ranges from short-term pay in X options to longer-term financing for higher ticket items.
BNPL 1.0: “Pay in X solutions”
Consumers shop online with the merchant on the BNPL provider app or in-store.
• The “Pay in X” option is presented at checkout, offering a range of one to six months for instalment payments. The consumer then logs in or registers an account and the BNPL provider conducts soft, real-time credit checks to assess the customer’s eligibility.
• The BNPL provider pays the total purchase price upfront to the merchant deducting their fees, a few days after the transaction.
• Consumers will make monthly payments to the BNPL provider, paying a specified amount each month over the instalment period.
• If the consumer fails to pay instalments, they are subject to late fees and will be removed from the platform if they ultimately do not pay.
BNPL 2.0: Longer-term financing with interest
Consumers shop online with the merchant on the BNPL provider app or in-store, typically with a higher order value.
• The BNPL provider pre-qualifies the consumer for a specific dollar amount. The consumer then selects a payment plan, which can range from six months to multiple years.
• The BNPL provider pays the total purchase price upfront to the merchant deducting their fees, a few days after the transaction.
• Consumers will make monthly payments to the BNPL provider, which includes a small interest component. The loan is either securitised or kept on the BNPL provider’s balance sheet.
• If the consumer fails to pay instalments, they are subject to late fees and will be removed from the platform if they ultimately do not pay.
Source Deloitte
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Global Fintech Trends
• Global Fintech revenues will see five-fold growth to reach $1.5Tn+ by 2030
• APAC will become the center of gravity for Fintechs globally, along with NAMR — both ~3X of next best by revenue; APAC and NAMR with $600Bn and $520Bn revenue by 2030
• Digital Payments and Digital Lending will attain critical mass and generate 60% of global Fintech revenue
• Neo Banking, InsurTech, and Financial Infra will be exciting spaces — highest growth in revenues across segments
- Neo Banking: Differentiated opportunity — SME Services in developed economies as one-stop shop and Retail Banking in emerging economies to cater to the unbanked/underbanked population
- InsurTech: Led by B2B2X (enabling businesses serving other businesses/customers)
- Financial Infra: Led by B2B2X and B2B models, to support the growing needs of the Financial ecosystem
• Global Fintech funding peaked in 2021, followed by ‘Funding Winter’ in 2022, now showing recovery signs in 2023
- Pre-seed/Seed Fintechs hit less harshly in ‘Funding Winter’ (-3%); late stage companies hit harder (-50%)
• Global funding is evenly distributed across segments, but regional variations occur based on the maturity of the ecosystem
• Emerging geographies (APAC, LATAM and Africa) with higher share of investments in fundamental services of Digital Payments and Lending; Developed world (NAMR and Europe) with higher share of investments in WealthTech and Financial Infra
Source BCG
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The Power of Open Banking: Exploring the Next Wave of Use Cases
Most open banking use cases to date are extensions or derivatives of traditional banking services. Initiating payments is the number one application, alongside know-your-customer, financial risk management (including credit scoring), and financial advisory, for example enabling customers to manage financial activities across their different accounts.
However, open banking’s potential extends far beyond financial services. In this article, we explore how three industries — retail, travel & hospitality, and automotive — could leverage open banking data sharing to create a better customer experience, reduce costs, and build competitive advantages.
The most common and universal use case (applicable to all industries) is initiation of account-based payments, where there is transformational potential to reduce processing costs, improve cash flow lifecycles, and provide a better experience (embedded payments within the customer journey). Beyond payments, promising applications can broadly be divided into three categories, each of which represents a distinct business opportunity:
• Financial Risk Management: Companies in travel & hospitality, retail, and automotive can use transaction and account data to support more accurate credit risk assessment than is sometimes available through credit bureaus at specific points in time. Retail is the most advanced industry in terms of readiness.
• Account ownership verification: Open banking can help companies verify client account ownership, complementing existing ID/KYC verification process. One potential use case is digital IDs, already used in some countries to enable access to a range of government services.
• Loyalty and personalization: Open banking can provide unique information based on consumer buying behaviors. This can help merchants across industries create tailored marketing campaigns and personalized offers.
Source BCG
