By Gary Dempsey, Content Leader Money20/20 Europe
In this week's Fintech HighFIVE, we'll be looking at the SPAC frenzy, socially responsible neo-banking in the US, the regulation of cryptocurrencies in Africa, and some exciting technology announcements.
Over the last few weeks, there has been lots of buzz about SPACs! SPACs are not new, they’ve been around for a while, but they have been sprouting up quite a bit recently.
They are special purpose acquisition companies which are “blank cheque” shell corporations designed to take companies public without going through the traditional initial public offering (IPO) process, removing all of the pain points like going on a roadshow, getting investors interested and worrying about valuation uncertainty. With a SPAC, the IPO work is done, you just need to negotiate with the SPAC that will acquire you.
The SPAC frenzy is now coming for fintechs. OppFi is to go public through a merger with FG New America Acquisition, which could lead to a valuation of $800m.
Mobile banking platform MoneyLion is joining the Spac frenzy, inking a deal with blank-cheque firm Fusion Acquisition Corp to go public in a $2.9 billion deal.
Europe is looking to Amsterdam as a launchpad for SPACs as the Amsterdam stock exchange has an early lead in developing expertise, thanks to its volume for European equities. Brexit moved some of London’s share and derivatives trading to Amsterdam, and the top brass behind SPACs are drawn to the Dutch capital because of its flexibility and global reputation.
There is speculation that SPACs may outpace traditional IPOs this year, but Marqeta, the Open API carde issuing and processing platform, announced they are pursuing a traditional IPO this year.
Neo banking in the US seems to be following a bit of a trend, by focusing on diverse communities to differentiate themselves from larger corporate incumbents targeting the general population.
Varo Bank, the first consumer fintech to be granted a banking charter in the US has raised $63m in a funding round led by NBA star Russell Westbrook. Russell, who is passionate about making lasting social change and helping the bank reach underserved portions of the American population, particularly communities of colour, will work with Varo to create a social impact programme.
Coincidentally, I recently had the pleasure of speaking with Billie Simmons, Co-founder of LGBT-focused neo bank Daylight, who told me Daylight has been overwhelmed with positive reaction to their banking services, which is currently in the first phase of rollout since their launch in December. Daylight offers access to LGBT+ financial coaches to their members, and has inclusive features, such as allowing transgender people to use their preferred name on cards, rather than their given name.
Across the pond in the UK, Monzo is calling on the government to block gambling access. Monzo currently has a gambling block on their accounts which can be removed at the customer’s request, and they have teamed up with TrueLayer to extend the block to Open Banking-enabled payments.
Regulators in Africa’s big economies are scrambling to get on top of a spike in cryptocurrency trade. Just two years ago, many countries on the continent didn’t even have a stance on the subject. But now, regulators are stepping up thanks to the surges in cryptocurrency trading on the continent with Nigeria and South Africa, two of the largest economies leading the way.
Nigeria recently became the #2 bitcoin market, down to a number of reasons including everyone’s favourite COVID-19, as well as cross border payments, especially in Nigeria, with the slumping local Naira currency leading to unfavourable exchange rates.
I recently spoke to John Oke, Founder and CEO of Wallets.Africa, which helps Africans and African owned business send and receive money as well as trade crypto currencies, who said that due to the volatility of the Nigerian currency, it was leading consumers to using Bitcoin, which they could use to trade in US dollars.
By setting out requirements for cryptocurrency startups to operate, the belief is regulation will ultimately make it easier for interested customers to identify credible and licensed exchanges, as well as ensuring confidence and protection of the consumer.
The European Central bank is exploring the idea of imposing a €3,000 limit on consumer CBDC accounts to discourage users from transferring all their cash from commercial banks to the central bank. This raises the alarm bells around the thorny issue of disintermediation for commercial banks as it could lead to the loss of consumer deposits as they switch their cash holdings to a CBDC account.
The ECB have explained that they have no intention of competing with banks and that the measures were to dissuade them from using the CBDC with the central bank, they will only offer safe money, not financial services, and that the measures were only to discourage large holdings of digital euro. They are also taking measures to support banks that do lose deposits.
In Sweden, the Riksbank has extended its e-krona pilot project by another year but says it has still not decided whether it will eventually issue the digital currency.
With cash usage dwindling in Sweden, the Riksbank started a project in the spring of 2017 to examine the scope for the creation of a central bank digital currency (CBDC) that could ensure that the general public will still have access to a state-guaranteed means of payment.
Two really interesting bets on future tech to share:
UBS is predicting that biometric cards could capture a huge share of the market in the next 5 years, increasing use of fingerprint sensor cards will drive $5 billion in revenue by 2026.
Japanese credit card scheme JCB is collaborating with Singapore's Keychain to develop a secure infrastructure for processing credit-based micropayments between IoT devices. The initiative will exploit Keychain's distributed ledger infrastructure to reduce operational risks related to data security by providing each IoT device with a unique, blockchain-based, self-sovereign identity associated with customer identity.