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The Fintech highFIVE!

FinTech High Five (2) By Gary Dempsey, Content Leader Money20/20 Europe

Welcome to the fintech highFIVE! 🖐 Every day, I’m amazed by the sheer amount of news and innovation happening in the fintech industry. 🤯 Fintech truly has not stopped, even during these crazy times. I can’t help but notice common themes in this huge sea of news — so I’m trying something new to bring these headlines together. Bi-weekly, I’ll be hitting you with the biggest themes seen in the news — all counted down on just one hand. 👊 So gimme 5 🙏 as we celebrate 🙌 the best of fintech each week.

*We’re socially distant here. Virtual high-fives only 👏 Please don’t hit your screen.

Klarna on top, again 🏆

Klarna, the buy now pay later behemoth and upstart bank, has raised $1 billion in new funding at a valuation of $31 billion. That sees the company retain the crown as the highest-valued private fintech in Europe.

Klarna plans to use the funds to continue its expansion in the US. They are also looking to acquire companies, they recently acquired payments company Sofort for $150m and are now looking at opportunities to acquire to support their retail banking business. An acquisition could be a very attractive offer to a startup, which would gain access to Klarna’s distribution power and 90m users.

Klarna have gone from strength to strength and have seen additional boosts thanks to the pandemic. They are also rumoured to be eyeing up a direct public listing.

The global BNPL space is very active, startups are racing to help online retailers sell larger items to consumers with these options, which are growing more and more attractive to consumers. You can view a full comparison of the BNPL market leaders here, which includes their colossal earnings.

In the UK, BNPL is expected to double market share in the next 4 years as the UK’s e-commerce market, the third largest in the world is expected to grow by 37%.

With the volume of BNPL transactions tripling in 2020, FCA notes a significant risk that these agreements could cause harm to consumers, so BNPL should expect some legislation to bring it into regulation to ensure people can continue to benefit from these products with the right protections.

Tech zero task force adds a swathe of fintechs 💪🏼

The new Tech zero taskforce, setup to tackle climate change, has added Revolut, Starling, Wise, GoCardless, Moneysupermarket Group and Onfido. Led by green energy supplier Bulb, the taskforce has set itself the aim of accelerating the UK government's plan to reach net zero emissions by 2050.

The group says it plans to set "ambitious, but achievable" emission targets and to help the UK become the top destination for green investment while also helping consumers make greener choices.

This news comes with a raft of sustainability announcements, including Nordea, who have published their Sustainability Report 2020, which outlines Nordea’s 2023 and long-term sustainability targets and commitments. Octopus Ventures highlighted the startups helping banks overcome the ESG resource gap. And in the US, President Biden set out his sustainability agenda, and what it means for business.

The Ant Group saga continues 🐜

China's financial industry watchdog has announced new regulations that will deal an additional blow to Ant Group and fundamentally upset the online microlender's business model.

Banks will be required to manage risks for joint lending with internet platforms like Ant and banned from outsourcing the function. The new regulations are aimed at strengthening banks' risk management, but in reality, they are targeted at Ant's principal revenue source. Under new rules that will be enforced from next January, Ant will be required to limit its business with regional lenders in favour of the big state-owned banks Ma derided in a speech last October, before he disappeared from the public eye.

The move to clip Ant’s wings came after the size and scale of the company’s lending operation, revealed in its IPO pitch, caught regulators off guard. The regulators were surprised that Ant would have a larger market capitalisation than China’s largest state-owned banks and J.P. Morgan. Their move could be a fatal blow to Ant.

That isn’t all of the troubles with Ant, they are currently under fire from China’s central bank for not sharing consumer data.

The Kalifa review 📊

Ron Kalifa OBE has released his long awaited review of UK Fintech, outlining a comprehensive plan to support and bolster the sector’s significant presence across the globe.

Citing competition, Brexit, and Covid-19 as underlying threats to the strength of fintech in the UK, the report identifies a five-point plan of recommendations to deliver a “prize” of job growth, trade, and inclusion.

The five core recommendations of Kalifa’s strategy and delivery model are as follows:

  1. to improve its policy and regulatory approach to fintech;
  2. upskilling and retraining adults by ensuring access to education from high-quality institutions at lower costs;
  3. establish a £1 billion Fintech growth fund pulled from institutional capital to address a £2 billion fintech growth capital funding gap;
  4. strengthen the international operational support offered in the UK and targeted overseas markets;
  5. support and scale “regional specialisms” unique to the UK, especially significantly intellectual property currently being created in UK universities.

The full review can be found here.

Open, open, open… 👐

The Competition and Markets Authority is due to wind down the Open Banking Implementation Entity, handing over responsibility for running the UK's Open Banking programme to the banking and finance services industry. OBIE has played a key role in developing the standards, providing operational and technical services, and generally supporting the open banking community.

The new entity will accommodate changes outside of Open Banking and into other parts of finance and other industries, such as Open Finance and Smart Data. The Financial Conduct Authority is working on proposals to extend open banking rules to a wider range of products, under a new model billed as 'Open Finance' which would make it easier for consumers and businesses to compare price product features and switch products or providers.

While Open Banking began in the UK and Europe, other global regions are looking to implement their own version of the regulation. Open banking is rapidly gaining popularity in the Middle East in tandem with the beginning of a permanent shift towards open finance and open data and services. 5G is showing great promise in unleashing the full potential of open banking as it is about real-time, speed, and more data flow in a digital ecosystem. It can considerably accelerate the evolution to open data and services.

Open Banking platform Tarabut Gateway has raised $13 million in what it claims is the largest fintech seed round in MENA history.

🗞️ x5 big news

📰 x5 interesting articles

⚠️ x5 funding announcements

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24 May 2021