The NextGen Xtensible Core Banking; Multi-rail strategy in payments; Embedded Finance Pricing Guide for Vertical SaaS Platforms;
This week in Fintech Wrap Up, we dive into Mastercard’s strong Q3 earnings, the transformative potential of Apple’s NFC opening for third-party wallets, and the rise of NextGen core banking systems.
Insights & Reports:
2️⃣ The NextGen Xtensible Core Banking
3️⃣ Embedded Finance Pricing Guide for Vertical SaaS Platforms
4️⃣ Apple in Payments: Opportunity for Third-Party Wallets
5️⃣ AI in Banking Use Case: Loan Default Prediction Prototype
6️⃣ What Does a Modern Payments Technology Stack Look Like?
7️⃣ Multi-rail strategy in payments
8️⃣ Cleo’s evolution trajectory
9️⃣ How BaaS is Redefining Traditional Banking Models
TL;DR:
Here’s what’s new in fintech, payments, and banking this week, brought to you by Fintech Wrap Up!
Mastercard’s Q3 earnings delivered strong results, with a 15% year-over-year jump in adjusted earnings per share, driven by growing cross-border volumes and switched transactions. However, operating expenses and incentives remain a challenge. On the tech side, the rise of NextGen core banking is revolutionizing how banks operate, with cloud-native and API-driven systems empowering business users to innovate without heavy reliance on developers. Speaking of innovation, embedded finance continues to shine, offering vertical SaaS platforms a golden opportunity to boost SMB retention and revenue. The key? A robust product-first approach paired with seamless payment experiences.
On the payments front, Apple’s decision to open NFC to third-party wallets could be a game-changer. Players like PayPal, Cash App, and Shopify’s Shop Pay are well-positioned to capitalize on this shift, bridging offline and online payments in exciting new ways. Meanwhile, AI is transforming banking operations, as seen in a cutting-edge loan default prediction model that’s helping lenders mitigate risk with tree-based algorithms and real-time insights.
In corporate banking, a multi-rail payment strategy is becoming essential. Banks like Bank of America are setting new benchmarks by integrating multiple payment methods into a unified customer experience. This approach not only improves efficiency but also creates valuable cross-channel insights to drive personalization and loyalty.
Let’s not overlook Cleo, the millennial-friendly personal finance app that has soared to $150M ARR by integrating AI for smarter chatbots and credit-building tools. Its success underscores the growing demand for engaging, personalized financial solutions.
Lastly, Klarna is making waves with its confidential IPO filing in the U.S. and partnerships with Google Pay, signaling an exciting new chapter for BNPL. Meanwhile, Zing is teaming up with Checkout.com to expand digital payment options for its members.
That’s a wrap! Stay tuned for more insights next week, and as always, let’s keep pushing the boundaries of fintech innovation.
Insights
Mastercard Q3 Earnings
MA reported third-quarter 2024 adjusted earnings of $3.89 per share, which surpassed the Zacks Consensus Estimate by 4.3%. The bottom line improved 15% year over year. Its shares gained 1.7% in the pre-trading session.
Net revenues of the leading technology company in the global payments industry advanced 13% year over year to $7.4 billion. The top line beat the consensus mark by 1.6%.
The quarterly results reflect benefits from increased gross dollar volume, cross-border volumes, strong demand for value-added services and growth in switched transactions. However, the upside was partly offset by escalating operating expenses and higher rebates and incentives.
MA’s Q3 Operational Performance
Gross dollar volume (representing the aggregated dollar amount of purchases made and cash disbursements obtained from Mastercard-branded cards) increased 10% on a local-currency basis to $2.5 trillion. Yet, the metric fell short of the Zacks Consensus Estimate of $2.52 trillion and our estimate of $2.51 trillion.
Cross-border volumes rose 17% on a local currency basis. Switched transactions, which indicate the number of times a company’s products have been used to facilitate transactions, improved 11% year over year to 41.1 billion. The metric outpaced the consensus mark of 40.7 billion.
Value-added services and solutions net revenues of $2.7 billion advanced 18% year over year and met our estimate. The year-over-year growth was driven by higher demand for consulting and marketing services, expansion of fraud, security, identity and authentication solutions, as well as effective pricing strategies.
The NextGen Xtensible Core Banking
The Next Generation of core banking systems needs to provide speed, low costs, and flexibility. In order to achieve this, NextGen systems streamline operations with features that go beyond mere modularity — they are cloud-native, interoperable, support continuous deployment, microservices, API & process driven, and function in real-time.
The Xtensibility Aspect: Empowering Business Users
The latest evolution in core banking systems is the move towards cloud-native architectures, orchestration, and Xtensibility — the ability to extend product logic, which allows business users to tailor their systems through business logic alone. This groundbreaking capability is the need of the hour, providing banks with unprecedented autonomy from development teams or vendors. It heralds a new era of rapid innovation, fundamentally reshaping the banking landscape.
Business users can define and modify product and operational logic, enhancing the bank’s ability to compete. This is done through a robust user interface that enables the business user to add to or override product logic based on their specific needs. The idea is to provide banks autonomy in building their intellectual property. The constraints within the platform would be such that there is a minimal risk to upgradability. The emphasis is on agility — the ability to complete major release cycles or sprints in rapid, efficient bursts.
Curated News
Klarna moves towards long-awaited US IPO with confidential filing
Payments firm Klarna began the process of going public for a second time in three years despite a sharp drop in its valuation, making it the largest Swedish company to float its shares in the U.S. since Spotify’s listing in 2018.
