Apple to Turn iPhones into Payment Terminals; Google Goes Further into Banking; Facebook Forms a Financial Unit

August was crazy hot and really intense month in the world of FinTech. Apple has acquired Mobeewave to turn iPhones into payment terminals; Google is further going into the digital banking space; AmEx acquires Kabbage, and much more!

Without further ado, let us dive into what has happened in the new age of finance last month. Let’s connect the dots.

Apple Acquires softPOS Firm Mobeewave

With this acquisition, Apple will be able to turn iPhones to payment terminals and hence put themselves in a more direct competition with the likes of Square, iZettle, SumUp etc.

During the first week of August, Apple reportedly snapped up point-of-sale (POS) startup Mobeewave for nearly $100 million, bringing in its dozens of employees based in the startup's Montreal headquarters, according to Bloomberg.

Apple is moving into the mPOS space to capture more payments volume and keep up with Samsung.

Mobeewave develops POS solutions that enable mobile devices to accept contactless payments via an app without requiring additional hardware like dongles. For context, Samsung — one of Apple's biggest competitors — previously partnered with Mobeewave and its venture capital arm invested in the firm.

The scoop up could bolster Apple's payments business by turning iPhones into mobile POS (mPOS) devices. In October, Mobeewave helped Samsung introduce Samsung POS, an mPOS solution that lets some NFC-enabled Samsung devices accept debit and credit payments from contactless cards, Samsung Pay, Apple Pay, and Google Pay through tapping a card or device on the mPOS device.

Bringing in Mobeewave may allow iPhones and other NFC-enabled Apple devices to do the same, giving Apple the chance to facilitate payments acceptance for more merchants. Debuting its own mPOS solution would also give the company a new avenue to promote Apple Pay and Apple Card, and to drive volume for its payments business, helping its services segment find more sources for revenue growth.

Moving into mPOS solutions would help Apple keep up with Samsung and pit it against POS bellwhethers like Square.

• By bringing in Mobeewave's dongle-free mPOS solutions, Apple can ensure it doesn't fall behind Samsung and lose out on the volume mPOS solutions present. Samsung's work with Mobeewave and major payment firms like Fiserv and Visa have put it at the forefront of the development of dongle-free mPOS tech. These solutions can be attractive to merchants: They make the in-store payment process more flexible, don't require firms to spend on additional hardware — POS technology can cost hundreds of dollars and even less expensive options can be avoided if a merchant already has a Samsung device — and enable contactless payments, which are gaining popularity during the coronavirus pandemic. So, by offering dongle-free mPOS tech, Samsung has put itself in a good position to rack up volume. By acquiring Mobeewave, Apple can limit Samsung's head start as an mPOS solution provider and compete in the market as it develops.
• But if Apple moves into the mPOS space, it could face off with leading POS solution providers like Square. Apple's potential mPOS offering would provide a streamlined and possibly inexpensive alternative to the POS terminals and tools provided by firms in the space, especially if its combined with its rumored plans for Apple Pay to support QR code and barcode payments. Apple could consider building out its POS offerings to compete with more in-depth solutions in the future but the wide reach of its devices — Apple boasted 900 million active iPhones at the end of 2018 — and simplicity of mPOS solutions could help it quickly gain adoption from merchants at first.

Google is Teaming Up with 6 More Banks to Support its Digital Banking Efforts

Google is teaming up with six more banks to support its digital banking efforts. While Google and its partners should benefit from the collaboration, a successful move by Google into banking could spell disaster for US neobanks.

During the same week, something big came out - the tech giant is teaming up with six more banks to support its efforts to offer digital checking and savings accounts to US Google Pay users beginning in 2021, TechCrunch reports.

The new partners — BankMobile, BBVA USA, BMO Harris, Coastal Community Bank, First Independence Bank, and SEFCU — will join Citigroup and small lender Stanford Federal Credit Union, which Google announced as partners in November 2019. Google will craft the front-end user experiences of the digital banking services it provides, while its FDIC-backed bank partners will hold the accounts behind those services.

Unlike neobanks that tend to downplay sponsor banks in favor of pushing their own brand, Google will cobrand its banking services with its partners. Here's how that will be a boon for all parties:

• Partner banks will benefit from greater visibility and Google's tech capabilities. A cobranded offering means partner banks will be able to grow their account numbers through the Google collaboration without forfeiting too much visibility among customers. Of note, this will mean less control over the client relationship, as the consumer-facing front end will be under Google's control. But that could actually be an advantage for its smaller partners, since they likely have nowhere near Google's UX-design capabilities.
• Prominent cobranding will allow Google to piggyback on its partners' perceived stability and reliability as incumbent banks. This could assuage the doubts of prospective customers who are unsure whether they are comfortable taking out bank accounts with a big tech company that is otherwise unproven in the financial space.

The firms that will take the biggest hit if Google is able to launch a successful digital banking play will be digitally native neobanks. Challenger banks' strength lies in their technological savvy, which they are leveraging to draw in customers and gain scale, although profitability remains a significant challenge.

Welcome to the Google Bank - Your Everyday Banking from Google, NOT a Bank.

However, if those neobanks end up in direct competition with a big tech company like Google — which has scale, profitability, and vast technological prowess — they will be robbed of that advantage, endangering their future prospects. Another hazard will be that as Google works to create in-demand digital banking features, it will likely look to popular neobanks' features for inspiration, releasing its own versions and reducing the competitive uniqueness of those features.

Facebook Forms a New Financial Unit

Social media giant Facebook has formed Facebook Financial (F2) in another bid to capture digital payments & commerce. 

The news came in on the 2nd week of August. David Marcus, co-creator of the company’s Libra cryptocurrency project, will head Facebook Financial, an initiative to run all payments projects, including Facebook Pay, a feature it plans to build inside all of its apps.

F2 is an obvious move as Facebook wants to allow its billions of members to easily make purchases on Instagram, WhatsApp and Messenger and spend more time on the company’s digital properties, thus enhancing advertising (which is literally their single source of revenues).

The news didn't move the investors - after the announcement, Facebook stock was down by 2%. And it’s not surprising at all, given that Facebook has been trying to tap into financial services for quite a while now (all the efforts failed thus far).

I’m not excited at all by this. You?

Revolut Losses Triple Despite Rising Revenues

Popular challenger bank saw losses triple to as high as £106.5 million in 2019, despite a sharp rise in revenues and customers.

On the same week, Revolut has released their 2019 results. Losses more than tripled to $139.4 million (2018: $43M) despite revenues climbing 180% to $212.8 (2018: $76M).

According to the UK-based unicorn, the losses piled up primarily because Revolut invested heavily in staff, international expansion into markets including the US and Singapore, as well as new products, including a stock trading offering.

Having 12 million+ customers, they lost $11.6 per customer. Which isn't too bad. For instance, its rival Monzo Bank lost as much as $37 per customer ($149M loss / 4M customers).

Grow at all cost first, think about profitability later. Right?

Robinhood Nets $200M at $11.2B Valuation

Robinhood has raised $200 million from D1 Capital Partners in a Series G funding round that values the stock trading app at $11.2 billion.

The round come on the 3rd week of August and just weeks after Robinhood topped up its Series F with an extra $320 million at an $8.6 billion valuation, fuelling speculation a public listing could be on the horizon.

The firm has added millions of funded accounts just this year and in recent weeks it has seen record revenue growth, with investors keen to take advantage of market volatility during the Covid-19 pandemic.

That's a $2.6 billion bump in valuation in about a month 🤯

Robinhood's fundraising this year thus far:

- initial $280M round at an $8.3B valuation in May 💸

- $320M addition at $8.6B valuation in July💰

- $200M at $11.2B valuation in August 💰

This clearly illustrates that Robinhood is still growing, and it's growing fast 🦄

Next step - IPO? 🤔

American Express Acquires Kabbage

American Express has struck a deal to acquire the team and technology of online small business lender Kabbage. Financial terms were not disclosed.

During the same week, the newest FinTech M&A happened: as anticipated American Express has acquired Kabbage, Inc for an undisclosed amount (though it was rumoured to be around $850M) 💸

It's an obvious move for AmEx which aims to expand its product offering for small businesses.

AmEx already is a leader in SME cards business having 40% of the market in the US. This deal will only strengthen their positions.

As for Kabbage, well it was struggling lately, and COVID-19 hasn't made their life easier - they had to stop lending and shift towards PPP loans.

It's interesting to note that back in 2017 SoftBank Group has invested $250M into Kabbage at $1.2 billion valuation, bringing the small business lender into the unicorn club 🦄

It remains to be seen whether their investment has paid off...

AfterPay Nets €50M to Expand Across Europe

Australian buy now, pay later outfit AfterPay is expanding into the European market through the acquisition of Pagantis and PMT Technology from NBQ Corporate.

Already available in the UK under the ClearPay brand, the buy out of Pagantis and PMT Technology will give AfterPay a head start on entry to e-commerce markets across Spain, France, and Italy. The news came on the last week of the month.

The acquisition comes three months after Chinese tech giant Tencent spent A$390 million to buy a 5% stake in the Australian FinTech.

Under the latest deal, NBQ will receive a minimum €50 million, with €5 million in cash payable at completion of the acquisition and a deferred consideration of a minimum of €45M, payable three years after completion of the agreement.

Deferred consideration can exceed €45M, provided the equity value of Pagantis exceeds €45m after three years.

It will be very intersting to see their head-to-head against Klarna, one of the leading buy now/pay later providers in Europe.

JPMorgan Chase to Enter UK Digital Banking Space

JPM is reportedly on track to open a digital-only UK bank, after it ended a similar effort in the US.

The US-based bank is reportedly targeting early next year to roll out the Chase-branded neobank, per AltFi, announced on the same week, after it was rumored in February amid a crop of UK-based hires.

One must note that this will be Chase's second attempt at a digital-only offshoot after shuttering its Finn app in the US last year.

Stiff competitive landscape in UK will definitely present its own challenges. Chase will be joining Goldman Sachs, which launched its own digital-only offshoot, Marcus in the UK in 2018 — it now counts 500,000 customers who have deposited more than £21 billion ($27.4 billion) in savings, per AltFi.

Meanwhile, the neobank landscape is crowded with prominent neobanks that offer cutting-edge digital features, including Monzo, Starling, and Revolut, which each count millions of users. What’s even more important is that some UK incumbents' offshoots have failed to dent the market: earlier this year, RBS shuttered its standalone digital-only bank, Bó, citing pandemic fallout.

For me, this doesn’t look exciting at all and might be just a waste of time and money. But hey, I might be wrong…

Continue reading on other top stories and get the Month in FinTech to your inbox early every month by subscribing to Connecting the Dots Newsletter.

Month in Brief

Apple Acquires softPOS Firm Mobeewave.

Google is teaming up with six more banks to support its digital banking efforts.

Social media giant Facebook has formed Facebook Financial (F2) in another bid to capture digital payments & commerce. 

Robinhood has raised $200 million from D1 Capital Partners in a Series G funding round that values the stock trading app at $11.2 billion.

American Express has struck a deal to acquire the team and technology of online small business lender Kabbage.

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About: I am a business developer, sales professional, FinTech strategist, as well as Cryptocurrency and Blockchain enthusiast. I'm highly passionate about Financial Technology and Digital Innovation, and strongly believe that it will change the world for the better. Apart from my daily job at a global payments startup where I'm leading company's expansion into Europe , I'm an active member of FinTech community and a TechFin evangelist.

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