In this edition:
1️⃣ Klarna launches global rollout of creator and retailer growth tools
2️⃣ Wise halts new UK and EU business customers amid capacity strains
3️⃣ Block, Jack Dorsey-led tech giant slashes a thousand more jobs
4️⃣ The superapp model
5️⃣ The development of open banking amid today’s digital payment landscape
6️⃣ Top countries for fintech in 2023
7️⃣ Banking-as-a-Service market map for card issuance
News
Klarna launches global rollout of creator and retailer growth tools
Klarna is expanding its suite of tools for retailers and creators as it continues to build on its brand beyond ‘buy now, pay later’.
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Wise halts new UK and EU business customers amid capacity strains
London-listed fintech firm Wise has been forced to freeze onboarding all new business clients across the UK and Europe due to “high demand”, City A.M. can reveal, in the latest hiccup to face the firm after it “deactivated” all US business cards last week.
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Block, Jack Dorsey-Led Tech Giant Slashes a Thousand More Jobs
The company is instituting an “absolute cap” on employees, meaning that no more than 12,000 people can be employed at Block—or Block-owned point-of-sale platform Square, payments app Cash App, buy-now-pay-later service Afterpay and music streamer Tidal—until company leaders “feel the growth of the business has meaningfully outpaced the growth of the company.
Insights
The superapp model
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In an increasingly digital world, where convenience and connectivity reign supreme, the rise of superapps has transformed the way we live, work, and play. These all-in-one platforms have become an integral part of our daily lives, offering a myriad of services and solutions at our fingertips. From ride-hailing to food delivery, financial services to e-commerce, they have revolutionized digital experiences like never before.
Imagine having the power to order your groceries, hail a ride, pay your bills, and book a doctor’s appointment all from a single app. SUPERAPPs are the embodiment of this convenience.
How do these apps manage to seamlessly integrate a myriad of services under one roof?
This magic happens through seamless integration, personalization, and constant ecosystem expansion. Behind this user-friendly facade, a robust infrastructure powers these digital powerhouses, ensuring security and efficiency.
In today’s digital landscape, the decision to embark on the SUPERAPP journey is far from arbitrary. Enterprises worldwide are increasingly recognizing the immense potential of constructing their own SUPERAPPs, and for good reason.
📌 Cost efficiency: One crucial driver is cost reduction for end customers. By consolidating multiple services within one platform, often through strategic partnerships, companies can slash customer acquisition expenses and streamline product development costs.
📌 Diverse revenue streams: SUPERAPPs enable diversification beyond core services, fostering fee-based income models that boost financial performance and enhance user engagement.
📌 Hyper-personalization: These apps also empower businesses to deliver hyper-personalized experiences. Leveraging user data insights, they can tailor products to meet customer needs effectively.
📌 Partner ecosystems: This model facilitates the creation of dynamic partner ecosystems. Onboarding new partners opens doors to growth opportunities and expanded customer reach.
Source Twimbit
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The development of open banking amid today’s digital payment landscape
Open banking refers to the ability of third-party service providers to gain secure and permissioned access to users’ account information. It allows users greater control over their banking data and enables third-party service providers to develop an array of new digital financial services. Both open banking and open finance can create an environment where traditional financial institutions are driven to improve their offerings and provide better, more innovative services to consumers and businesses. The resulting competition can lead to lower prices and increased accessibility and enable better choices for consumers. With access to more information, they can make more informed decisions, access a wider range of financial services, and benefit from new data-driven financial products and services. The concept of open data goes beyond open banking and open finance, encompassing data from other sectors, such as transit, social media, energy, telecommunications, health, and government records. The ultimate objective of open data is to provide consumers and firms with a holistic view of their data through a single platform.
In some markets, open banking regulations developed in response to the emergence of market-driven innovations around payment initiation and account information services. In other markets, regulators sought to increase competition, innovation, and security in the financial sector, considering the growing demand for consumers to have greater control over their financial data. Concerns over data privacy and security amid rapid digitalization have also played an important role in the development of open banking regulations, as consumers have increasingly demanded greater agency over their financial data and the assurance that their data will be handled securely and transparently when shared.
Previously, data was obtained exclusively through methods such as screen scraping and reverse engineering, but industry standards and regulations now encourage or mandate the use of secure APIs for data sharing. Some markets—including the European Union through the revised Payment Services Directive (PSD2) and Australia through the Consumer Data Right legislation—have mandated that banks share data and that third-party providers register with regulatory authorities. Other markets do not have mandates, but regulators have provided the industry with recommendations and guidelines, including open API standards. For example, the Canadian government has issued guidelines for financial institutions on open banking, including recommendations for data security and privacy and guidance on API development.
Source World Bank Group
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Top countries for fintech in 2023
From the U.S. to China, countries around the world are battling it out to lead on financial technology, a heavily lucrative industry that has grown over the years taking everything from retail banking to wealth management online.
In August, CNBC, in partnership with Statista, launched a list of the world’s top fintechs.
The U.S. is home to most valuable financial technology companies in the world in 2023, according to Statista data — but China isn’t far behind with mega-payments firms like Tencent and Ant Group making the country a solid second.
The valuation data is up to date as of April 2023, with the exception of Ant Group, Stripe, Nubank, Checkout com, Revolut, Chime, Polygon, Rapyd, Ripple, Blockchain, and Plaid.
Combined, the U.S. produces the most value in terms of fintech, with eight of the top 15 highest-valued financial technology companies in the world worth a combined $1.2 trillion based stateside.
Visa and Mastercard are the two biggest fintech firms by market value, with a collective market capitalization of $800.7 billion.
China is home to the second-most highly valued fintech industry, with its financial technology giants worth a combined $338.92 billion in total market capitalization.
The U.S. has a vibrant fintech market, not least thanks to its deep-pocketed investors.
Silicon Valley is a natural home for the sector given its storied history in birthing some of the world’s largest technology companies, like Apple, Meta, Google, and Amazon, and a well-established venture capital ecosystem with major players such as Sequoia Capital and Andreessen Horowitz present.
In the U.S., some of the top global fintech companies on Statista’s list include names like Stripe, PayPal and Intuit. These are all companies with significant shares in their respective markets and hallmark products used by thousands, if not millions, of businesses both big and small.
The U.K., similarly, has a prominent fintech industry.
Buoyed by forces many — from innovation-driven regulars like the Financial Conduct Authority, to growing pools of capital, including venture and private equity, to a government that has tried to rank fintech firmly high up on its agenda — the U.K. has managed to produce significant in the fintech world, from digital banking behemoth Monzo to listed payments firm Wise.
In China, which was another standout fintech player identified by Statista, the market for digital financial services is massive.
Tencent’s WeChat Pay and Ant Group’s Alipay have cornered the market for mobile payments, providing ample competition to its fragmented, less built-up banking sector. Consumers in China tend to have a closer relationship with digital platforms like WeChat than they have with incumbent lenders.
Source CNBC / Statista
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Banking-as-a-Service Market Map for Card Issuance
Historically, cards were issued by your bank — either a national bank brand such as Amex, Bank of America, or Chase, or maybe a regional/local bank or credit union. The card issuer was straightforward. If you had a checking account and debit card from Chase, then the card issuer was Chase. Simple!
But today, cards are now delivered to you by neobanks such as Cash App, Chime, or Varo. And as is the case with all but one neobank (Varo), the checking accounts and debit cards provided by these mobile banking apps are actually provided by small regional banks. In these cases, your banking brand may be Chime, you log in to the Chime app, but the card issuer is actually The Bancorp Bank or Stride Bank — as Chime makes explicitly clear in the fine print of its website (highlighted yellow below).
The Banking-as-a-Service Model Explained
There are three parties in the Banking-as-a-Service model, which includes:
📌 The Issuing Bank, which is the member FDIC institution that issues cards on behalf of Visa or Mastercard. They open a credit account in your name and are responsible for funding approved transactions.
📌 The Issuer Processor, which provide several services to the issuing banks, including card approval authorizations and funds settlement. In the BaaS model, they are the “seller” of the the white-labeled card product to the tech companies (not to the end user).
📌 The User-Facing App, i.e., the tech company that offers a card product to its users. They effectively take the white-labeled card product, re-brand them as their own, then put these cards in the hands of their users. They acquire users and own the user relationship, and offer the re-branded card product as one of it many service offerings.
The User-Facing App acts more like a retail brand — it is the closest to the end user — reselling a white-labeled product distributed by the Issuer Processor.
Notably, the Issuing Bank and Issuer Processor are critical to the card product…there is no functioning card product without them!…but they operate largely under anonymity. They deliver a white-labeled card product to the User-Facing App, which in turn, builds its brand and relationship with the end users. Unless the end user can identify the bank by its BIN number (i.e., the first 6 digits of your Visa or Mastercard card number) or looks in detail through the cardholder agreement, the Issuing Bank remains anonymous. (similarly, you may not know that Starbucks produces the Kirkland-branded coffee from Costco)
For example, Ramp users see the Ramp-branded “wrapper” around their corporate cards and won’t typically associate these cards with the Issuing Bank (Sutton Bank) or Issuer Processor (Marqeta).
Source Jonathan Ching
Reports
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