Banking at McDonald's, Synapse Building the 'AWS of Banking', Amazon & Grab Launching Credit Cards, and Big Tech's Threat to Financial Stability

This week (10-14 June) was not only crazy hot in Vilnius🇱🇹 (with around +30Cº all week long) - FinTech space was as live and vibrant as it could be.

Without further ado, let us dive into what has happened in the financial technology space this week.

Sberbank to Open Pilot Branch in McDonald's Outlet

Customers of Russia's Sberbank will soon be able to do their banking with a side-order of Big Mac and Fries following a collaboration deal agreed between the state-owned bank and the giant US burger chain.

Under the agreement, the companies expect to partner in card acquiring and a number of other more innovative areas such as using technical systems to analyze data, developing consumer behavior analysis systems, speeding up bank card payments, developing a payroll project for employees, and the opening of a pilot branch of the bank in a McDonald's outlet.

Alexander Vedyakhin, First Deputy Chairman of Sberbank, said: 

Cooperation between Sberbank and McDonald’s will combine global opportunities and international quality standards with cutting-edge technology such as AI and big data analysis. All of this will allow us to provide innovative and highly convenient services to clients.

FinTech Platform Synapse Raises $33M to Build ‘the AWS of Banking’

Synapse, a San Francisco-based startup that operates a platform enabling banks and FinTech companies to easily develop financial services, has closed a $33 million Series B to develop new products and go after international expansion.

The investment was led by Andreessen Horowitz, with participation from existing backers Trinity Ventures and Core Innovation Capital. 

The startup was founded in 2014 by Bryan Keltner and India-born CEO Sankaet Pathak, who came to the U.S. to study but grew frustrated at the difficulty of opening a bank account without U.S. social security history. Inspired by his struggles, Synapse, which operated under the radar prior to that Series A deal, is focused on democratizing financial services.

Its approach to doing that is a platform-based one that makes it easy for banks and other financial companies to work with developers. The current system for working with financial institutions is frankly a mess; it involves myriad different standards, interfaces, code bases and other compatibility issues that cause confusion and consume time. Through developer- and bank-facing APIs, Synapse aims to make it easier for companies to connect with banks, and, in turn, for banks to automate and extend their back-end operations.

Company’s philosophy is a Lego brick approach to building services. Its modules and services include payment, deposit, lending, ID verification/KYC, card issuance and investment services.

We want to make it super easy for developers to build and scale financial products and we want to do that across the spectrum of financial products.

We don’t think Bank of America, Chase and Wells Fargo will be front and center. We want to make it really easy for internet companies to distribute financial services.

Amazon Launches New Secured Credit Card for Those with Bad or No Credit

Amazon this week unveiled a new secured credit card with Synchrony Bank, aimed at customers with bad or no credit history.

The card – called the Amazon Prime Store Card Credit Builder – requires a refundable security deposit, has no annual fee and offers Prime members 5% back on Amazon.com purchases. Consumer must make a deposit from $100 to $1,000, which determines their credit limit.

The card also features installment and special financing options on certain purchases. It's also the first of its kind, said Ted Rossman, an industry analyst at CreditCards.com.

“Secured cards have long been a good way for people to build or rebuild credit, and a lot of banks offer them," he said. "But I've never seen a retailer offering one."

In the U.S., 53 million people have no credit history and another 79 million have subprime credit, according to data analytics company FICO.

This card could bring millions of people into Amazon’s orbit.

🔥How Amazon is Disrupting the Payments Industry🔥

IMF Warns of Big Tech Threat to Financial Stability

The International Monetary Fund has warned that the arrival of Big Tech firms in financial markets could lead to systemic challenges to financial stability and efficiency. 

The specter of companies like Amazon, Apple, and Google entering the banking industry, was raised by IMF chief Christine Lagarde in an address to the G20 at a summit in Tokyo.

She warned of a significant disruption to the financial landscape by Big Tech firms, who will likely use their enormous customer bases and deep pockets to offer financial products based on Big Data and artificial intelligence.

Lagarde said the following:

These developments hold out the promise of accelerating inclusion and modernizing financial markets, but raise, in addition to privacy issues, competition and market concentration concerns, both of which could lead to vulnerabilities in the financial system.

She cites China's technology industry as a prime example of the trade-off between benefits and challenges. 

Over the last five years, technology growth in China has been extremely successful and allowed millions of new entrants to benefit from access to financial products and the creation of high-quality jobs. But it has also led to two firms controlling more than 90% of the mobile payments market. This presents a unique systemic challenge to financial stability and efficiency.

Lagarde says Asia, like the rest of the world, is facing a defining moment: "How to manage the risks of FinTech without suffocating innovation; how to keep up with rapid FinTech innovation, while making sure consumers and investors feel secure in their investments."

The IMF in co-operation with the World Bank last year published a 12-point policy agenda aimed at helping member countries to harness the benefits and opportunities of rapid advances in financial technology, while at the same time managing the inherent risks. Lagarde says the results of discussions with 96-member countries on the policy paper will be published later this month.

🔥The GAFA Approach to Banking🔥

Melbourne Payments Startup Verrency Raises A$10M

Australian payments startup Verrency has closed a A$10 million Series A funding round ahead of a planned expansion to Singapore and US markets.

Verrency’s API platform provides a connection to legacy infrastructure enabling banks to upgrade their customer offerings with digital services such as auto-rounding, real-time budgeting notifications and instant loyalty rewards. The firm also boasts a third-party marketplace for banks to connect to a 30-strong ecosystem of partners including Aimia, DriveWealth, GoodWorld and RaizInvest, among others. 

Verrency counts local neobank Volt, EmiratesNBD and Colombia’s Banco Davivienda among its first clients.

David Link, Founder and CEO of Verrency said:

The customers we have signed agreements with see our technology as a long-term infrastructure play. We are an industrial-grade layer that sits over their existing technology which can open the floodgate to an array of innovative partners while protecting their legacy investments.

The latest capital raise brings total investment in the company to A$20 million and comes ahead of a forthcoming Series B drive which will be led by SenaHill Partners in the United States and SoHo Capital in Singapore.

Citi Launches Co-branded Credit Cards with Grab in Push for More Customers

Citigroup has teamed up with Singapore-based ride-hailing firm Grab to launch co-branded credit cards, as it looks to boost its Asian customer base by about 13% via partnerships with digital firms.

The new cards mark the latest step in Grab’s big push into the financial services sector, an area it has earmarked for growth. For the U.S. bank, it is in line with its strategy to offer its products within online ecosystems as consumers spend more time on smartphones. 

The Citi-Grab co-branded cards will be issued in the Philippines on Tuesday and in Thailand later this year, before being rolled out in other Southeast Asian markets. 

“Today we have about 16 million customers in Asia, and our aspiration is to increase this by about 2 million in the next few years through partnerships alone,” Gonzalo Luchetti, Citi’s Head of Consumer Banking for Asia Pacific, Europe, the Middle East and Africa, told Reuters. 

Citi launched a co-branded credit card with Indian payments firm Paytm last month and with Qantas two years ago. 

Grab, which started as a taxi-hailing app firm, has been aggressively expanding into financial services and said, earlier this year, that it was pursuing lending licenses across Southeast Asia. 

“The Citi-Grab credit card is a natural next step as we create more value for our digital first, always in GrabPay users,” Huey Tyng Ooi, Mnaging Director of GrabPay Singapore, Malaysia, and the Philippines, said in a statement. 

Grab is also exploring spinning off its financial services unit and has mandated banks to approach potential minority investors, Reuters reported last month, citing sources. 

Naspers Makes Its Biggest Takeover in Digital Payments

Naspers’ PayU agreed to buy Turkish digital payments company Iyzico for $165 million in its biggest FinTEch acquisition yet.

The deal will expand the Dutch unit’s exposure to Turkey’s e-commerce market, which is growing at more than 10% a year, the company said in a statement on Tuesday. The acquisition must still be approved by regulators and is expected to close in the next few months, it said.

PayU has invested more than $500 million in the industry since 2016 as the firm positions itself to profit from rising internet adoption and e-commerce in emerging economies. Its focus on payments, one of fastest growing areas in finance, puts the company in position to take a share of an industry that Boston Consulting Group forecasts will produce $1 trillion in new revenue through 2027.

“We are constantly looking for ways to augment the naturally high organic growth in our markets by investing in new technology, as well as market consolidation,’’ Mario Shiliashki, Head of Payments at PayU, said in a phone interview. “Being a leader in high growth markets will help us to grow faster than others.’’

Iyzico’s founders will have a small, minority stake in the new combined Turkish business, a representative for PayU said.

PayU is focused on faster growing markets such as Russia, India and African countries where online payments are in their infancy. In addition to the Iyzico acquisition, its largest to date, the company has also invested in the Indian payments sector as well the Intercontinental Exchange Inc.’s cryptocurrency venture, said Shiliashki. It’s also on the lookout for future acquisitions, he said.

Iyzico was founded in 2013 and is used by small and medium-sized companies in Turkey as well as global giants serving customers in the country, including Amazon and Nike.

Turkey is an attractive area for payments because only a fraction of the 3 million or so small- and medium-sized business in the country use digital payments and e-commerce infrastructure, said Barbaros Ozbugutu, Chief Executive Officer and Co-founder of Iyzico. High internet penetration and a young population suggest there’s large potential for growth, he said.

VISA Looks to Speed up Cross-Border Payments with New Network Launch

Visa has launched a new network to help financial institutions process cross-border payments globally on behalf of corporate clients faster and at a lower operational cost.

The Visa B2B Connect network launch covers 30 trade corridors globally and is expected to expand to 90 markets by year-end. The network seeks to simplify international payments by enabling transactions by businesses directly from their bank to the beneficiary bank.

It provides an alternative to the correspondent banking network, where an intermediary bank will often be used by smaller banks to make a payment. This can result in slower transactions and more complexity. 

The move is part of Visa’s push to expand its reach beyond credit card payments, where it is one of the dominant players worldwide. 

“By creating a solution that facilitates direct, bank to bank transactions, we are eliminating friction associated with key industry pain points,” Kevin Phalen, SVP, Global Head of Visa Business Solutions, said in a statement. 

The new network contains elements of distributed ledger technology, the software which first emerged as the system powering cryptocurrencies. While the network is not a distributed ledger itself, some aspects of the nascent technology were used because it can help transfer more information on a payment than existing systems, Phalen said in an interview. 

Visa was initially working with blockchain startup Chain to build the new platform, but ultimately opted to use aspects of of Hyperledger Fabric, the open source distributed ledger developed by a group led by the Linux Foundation. 

Brex Raises $100M at $2.6B Valuation

Just a year after launching its corporate credit card for startups, US FinTech Brex has hit a $2.6 billion valuation off the back of a $100 million funding round led by Kleiner Perkins Digital Growth Fund.

Existing investors Y Combinator Continuity, Ribbit Capital, DST Global, Greenoaks Capital and IVP all joined the Series C-2 round, which takes Brex's total funding to $315 million.

A year ago Brex launched the first corporate card and rewards programme specifically designed for startups. The firm built its tech stack from the ground up, enabling it to do things such as determine credit limits based on real-time monitoring of clients' accounts.

The startup has already expanded its remit with the launch, in February, of a suite of products designed for ecommerce firms. With the latest funding, it plans to move into more customer segments, beginning with life science companies.

"We recognize that each business is unique and therefore tailor our product to meet their specific circumstances," says Henrique Dubugras, Co-CEO, Brex. "With this new funding, we can deliver relevant and unique financial products to an increasingly broad customer base."

Ripple Launches in Brazil

Ripple is looking to expand its footprint in Latin America, launching operations in Brazil and bringing in former American Express and Banco Bradesco executive Luiz Antonio Sacco as managing director. 

The company already has more than a dozen Brazilian financial institutions and money transfer companies on its DLT-based cross-border payments network RippleNet, including Santander, BeeTech and Banco Rendimento. 

"In January, Ripple surpassed 200 customers on RippleNet," says Eric van Miltenburg, SVP of Global Operations. "The company is experiencing rapid customer growth across all markets, and is launching in Brazil in response to high customer demand in South America."

He says the company is adding an average of two to three new financial institutions to RippleNet each week and is now focused on growing its customer base and team in Brazil, and across South America including in countries such as Chile, Peru and Argentina.

Ripple's efforts in Brazil are extending beyond the financial sector, supporting academic research into blockchain use cases at top tier Brazilian universities, including University of São Paulo and Fundação Getulio Vargas.

“We're excited to grow our ecosystem in the region and bring additional financial institutions onto RippleNet to help provide excellent, efficient cross-border payment experiences for their customers," says Sacco. “We believe that academic institutions will play a key role driving the blockchain industry forward. USP and FGV are innovative, forward-thinking institutions that are investing in blockchain research to explore new use cases and help prepare students for future jobs in this space.”

🔥All you need to know about Ripple🔥

Trustly and PayWithMyBank Agree Merger

Swedish FinTech Trustly is merging with Silicon Valley-based PayWithMyBank to create a transatlantic payment network for consumers to pay for online shopping direct from their bank accounts rather than with cards.

Together, Trustly and PayWithMyBank will enable merchants with a global footprint to accept online banking payments from European and US consumers. 

Trustly currently offers cross-border payments to and from consumer bank accounts at over 3000 banks in 29 European markets, while PayWithMyBank enables merchants to offer consumer payments by signing into online banking at the point-of-sale, bypassing the credit card networks.

Trustly holds merchant funds and is a licensed payment institution in Sweden, while PayWithMyBank does not hold any merchant funds. The merged group had revenues in excess of €100 million in the calendar year of 2018.

Financial terms of the deal were not disclosed.

Symphony, Wall Street’s Hottest Messaging App, Raises $165M at a $1.4B Valuation

Symphony, which offers secure messaging and other collaboration tools for bankers and those who work with them, announced that it has raised $165 million. With this round, Symphony’s valuation now tops $1.4 billion.

The funding comes from Standard Chartered and MUFG Innovation Partners (a division of Mitsubishi that makes FinTech investments), and also included other (unnamed) current and new investors. Symphony has now raised a very hefty $460 million, with previous backers including Google, Lakestar,  Natixis, Societe Generale, UBS, Merus Capital and BNP Paribas, along with a consortium of 14 of the world’s largest investment banks and money managers, including Bank of America, BlackRock, Citibank,  Deutsche Bank, Goldman Sachs, HSBC, and JP Morgan.

Notably, its financial backers are all strategic investors in the company: they use Symphony both for internal collaboration as well a channel to communicate with outside partners and integrate data from across their networks in a secure and compliant way.

App’s usage has been on an upward trajectory. With an expanded presence outside of its home market of the US into Europe and Asia, the company now has 425,000 users across some 400 companies using its mobile and desktop apps for messaging, voice and video conversations, and more. As a point of comparison, when the company last raised money, in 2017, it had 200,000 paying customers. 

The funding will be used to continue growing the platform’s functionality, both organically and by way of acquisitions.

N26 and Monzo Prepare for US Launches

German mobile bank N26 says it intends to enter the US market within 'the next few weeks'. UK challenger Monzo has also confirmed that it will open its first accounts to US consumers in summer 2019.

Launched in Germany and Austria in January 2015, N26 began as a current account with a Mastercard. It now operates as a fully-featured bank, serving 3.5 million customers in 24 European markets.

It's not all been plain-sailing for the startup. Just last month it was reprimanded by the German regulator BaFin over lax anti-money laundering controls and it has had to fend off accusations of unresponsive service standards following customer complaints.

N26 first signaled its intentions to open in the US in October 2017, setting up a waiting list and indicating a mid-2018 launch date, while it searched for a licensed bank partner.

Monzo, meanwhile, has opened a waitlist and will host face-to-face events in major US cities, a few hundred people at a time, over the coming months.

The UK challenger, which has amassed 2 million customers in the two years since it achieved its banking license, says it will begin the roll out with a Mastercard debit card and mobile app, enabling savers to get instant spending notifications, conduct P2P payments, split money into pots, and enjoy fee-free spending abroad.

Like N26, Monzo will partner with an FDIC-insured US bank - in Monzo's case Ohio-based Sutton Bank - at launch before applying for its own US license.

PPRO Buys Allpago

UK cross-border e-payments firm PPRO has acquired Latin American counterpart allpago. Financial terms of the deal were not disclosed.

Allpago has built itself up to become a major provider of payment and gateway services in Latin America, covering 90% of the market.

Coming off the back of recent expansion efforts in North America and Asia Pacific, the acquisition is another step in PPPRO's globalization efforts, adding a wealth of new local payment methods (LPMs).

The combined business will have more than 200 staffers, with allpago CEO Philipp Bock becoming a PPRO shareholder.

Facebook Gets Big Backers for GlobalCoin Project

Facebook has reportedly landed VISA, Mastercard, PayPal and Uber as founder members of its forthcoming stablecoin ecosystem.

Facebook has been rapidly moving forward with its crypto plans, reportedly hoping to launch its 'GlobalCoin' by Q1 of 2020. The social media giant has been tapping up major financial services players for funding to support the development of the project and fend off wild swings in volatility.

According to the Wall Street Journal, the two card schemes along with PayPal and Uber have each invested $10 million into a foundation that will govern the coin. Other backers are said to include Stripe, travel-reservation site Booking.com and Argentina-based e-commerce site MercadoLibre.

In return for their support, each firm will get a node on the network - on the face of it to ensure that no-one organization has complete control over the currency - but also with a useful sideline of opening up unfettered access to user's transactional data.

Facebook reportedly plans to release a white paper introducing the coin and detailing how it will work before the month ends.

On the public policy front, Facebook has recruited a senior British corporate affairs specialist to front up its dealings with regulatory authorities as it pushes deeper into financial services. Ed Bowles, Standard Chartered’s European Head of Corporate and Public Affairs, will join Facebook in September as its London-based director of public policy.

🔥The Facebook Coin🔥

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P.S. You might enjoy my earlier pieces as well:

👉 Following Dirty Money

👉 The Biggest Deals in FinTech History are Taking Place NOW

👉 IOTA is Climbing Back

👉 Month in Blockchain & Crypto | April 2019

👉 Month in FinTech | April 2019

👉 Lithuania's 10 Years Challenge - from Developing Country to European FinTech Hub

👉 Bitcoin is NOT a Currency, and Never Will Be

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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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