Payments news highlights today include the survival of checks in a US digital world where consumers still write an average of 38 checks every year. Visa made a strategic investment in electronic payments processor Marqeta whose own clients include DoorDash, Instacart, Kabbage and Square. Watch out payments industry as Amazon has its sights set on disrupting the payments industry.
According to a report by PricewaterhouseCoopers nearly 50% of financial services companies expect to acquire a fintech startup in the next five years. In India, consumers still do more than 65 million money orders every year despite the high cost and inconvenience, illustrating an opportunity for fintech.
UK fintech startup Revolut just raised $5.3 million in a crowdfunding effort oversubscribed in 24 hours and supported by more than 40,000 of its 750,000 digital banking customers. This followed more than $60 million in new VC funds raised earlier.
Worldline and Wirecard could be the next acquisition targets in the superheated payments processing market according to a SeekingAlpha report. CB Insights says RegTech startups have raised approximately $2.3 billion across 317 deals between 2012 and 2016. Entrepreneur magazine profiles 15 VCs every RegTech startup should know.
Swedish fintech Klarna launched Wavy, a free peer-to-peer payment app and service. PayPal still dominates the payments space but Zelle and Apple Pay are becoming stronger competitors every day. Alipay partnered with Viva Payments hoping to attract some of the 150,000 Chinese tourists and business people who visit Greece every year.
Why Can’t Americans Give Up Paper Checks?
In an era of smartphones, online banking, and Venmo transfers, the U.S. still can’t seem to wean itself off paper checks. In most countries, they’ve gone the way of the fax machine and the rotary telephone. But their demise isn’t coming to America any time soon.
Americans still reach for their checkbooks more than anybody else. In 2015, they each made 38 check transactions, on average, according to data from the Bank of International Settlements, the coordinating body for the world’s central banks. Compare that with about 18 in Canada, just 8 in the U.K., and almost zero in Germany. The only country with anywhere close to American numbers is France.
There are, of course, cheaper, faster, and more efficient alternatives. Electronic transactions clear quickly—no stamp or envelope needed—and cost their users about a 10th as much as checks to process. (A 2015 survey of businesses by the Association for Financial Professionals pegged the median cost of issuing a check at $3, compared with under 30 cents for an electronic transaction.) That’s not even taking into consideration that box of replacement personal checks, which can cost a consumer more than $20. Using peer-to-peer payment apps to transfer money between checking accounts, however, doesn’t incur fees. Via bloomberg.com
Visa makes strategic investment in card processing startup Marqeta
Since 2010, Marqeta has quietly established itself as the underlying tech provider for businesses that are looking to issue virtual and physical debit and credit cards to employees, partners and customers alike. As it looks to expand internationally and sign up customers around the globe, the company has taken $25 million in strategic investment led by payments heavyweight Visa.
Unless you’re a fintech geek, you’ve probably never heard of Marqeta. But it’s one of those companies that has been behind the scenes enabling businesses to process credit and debit card payments, as well as issue their own.
By taking a developer-centric approach to card processing, Marqeta has built a tech stack that third parties can use to solve a wide range of problems. As a result, Marqeta has been able to sign up a number of companies you have heard of as customers — including companies like DoorDash, Instacart, Kabbage and Square. Via techcrunch.com
Amazon has big plans to disrupt the payments industry
As Amazon prepares to report Q2 earnings today, all eyes will be on its growth in revenue and gross merchandise value (GMV) metrics.
But it’s worth pointing out that the e-commerce powerhouse is significantly expanding its presence in digital payments. It’s not a huge part of the business now, but it’s poised for continued growth.
Here’s how Amazon has been building out a payments ecosystem:
– It introduced an easy and secure way for consumers to make online payments and merchants’ to accept them with Amazon Pay. Users can now make frictionless and secure payments on participating merchants websites by using a one-click checkout, which leverages the payment information the user has saved on his Amazon account.
– The e-commerce giant further built out this capability by allowing consumers to make convenient payments in-store via Amazon Pay Places. This new feature is allowing users to order ahead and pay for goods in-store via the Amazon app.
Consumers then have the opportunity to add cash to their Amazon accounts and the ability to earn rewards, essentially giving these users a banking account. Via businessinsider.com
FreeCharge’s acquisition is proof that the Axis of Indian banking is changing
In the next five years, almost 50% of the world’s financial services are planning to acquire fintech startups, according to a report by PricewaterhouseCoopers LLP. Collaborations, too, are expected to increase, with eight out of 10 companies waiting to partner with these new players, the report added.
Some 67% of senior Indian financial sector executives believe their business is at risk following the rise of fintech firms, and 95% of them were willing to explore partnership with them, a separate report by PwC released this April revealed.
And it has already begun. On July 27, Axis Bank, the country’s third-largest private sector lender, acquired FreeCharge, a payments application and mobile-wallet company, for Rs385 crore ($60 million). This is the first such deal in the sector, potentially setting off more such transactions in the future, believe experts. Via qz.com
Money order: 4 key reasons why India is still stuck with costly and slow payment modes like money order
The money order system of the Department of Post, better known as India Post, is an interesting case study of access versus cost in payment systems. Customers have paid fees to the extent of five-ten times those for a remittance of the same amount made through the banking system. Surprisingly, the system is continuing without any debate or discussion on pricing. As many as 65 million transactions were effected during 2016-17, which means customers have endured high cost of remittance with no questions asked.
The reason is simple. Bank-based remittance system has yet to get universal. India Post, with its 1,50,000-plus service outlets, has provided the money order service silently and with simplicity for more than 150 years. In the good old days, the service used to be entirely manual. The money order form, filled in by the customer at the originating post office, used to be physically sent to the destination post office and cash delivered at the doorstep the beneficiary. In recent years, the department has upgraded its service and introduced three forms of digital money orders: electronic money order (eMO), instant money order (iMO) and mobile money order (mMO). Via economictimes.indiatimes.com
Revolut’s $5.3 million crowdfunding campaign is oversubscribed
Fintech startup Revolut just raised a ton of money. But grabbing $66 million from respected VC firms wasn’t enough (£50 million). For the second time, Revolut asked its user base to invest in the startup.
Revolut was looking for $5.3 million on Seedrs (£4 million), but 40,000 customers said that they were interested in the investment opportunity. If Revolut took all the money, it would represent $22.3 million (£17 million). But the company will limit its equity crowdfunding campaign to its initial goal.
The $5.3 million target was reached in less than 24 hours, which is quite impressive as equity crowdfunding ins’t as popular as other investment products. Revolut even says that there has never been an equity crowdfunding campaign with so many pre-registered investors.
For context, there are now 750,000 Revolut users. Revolut is a digital wallet that lets you receive, exchange and send money in dozens of currencies. When you sign up, you can create virtual cards and receive a good old plastic MasterCard. You can top up your account using another card or a bank transfer. Via techcrunch.com
These 2 Payment Processors Could Be Next In Line For Acquisition
The payments processing space is seeing a wave of M&A activity now. Two companies that would make for an attractive acquisition from a US buyer are Worldline and Wirecard.
The payments processing space is on fire right now. Private equity firms Blackstone (NYSE:BX) and CVC just made a $3.8 billion bid for UK-based payments processing company Paysafe Group Plc (OTC:PASZY).
Other notable recent transactions include the just-announced Ingenico Group – GCS (ING.PA) acquisition of Swedish payments group Bambora for €1.5 billion ($1.7 billion) and private equity group Pernira’s acquisition of at least 10% of another Swedish payments processor company, this one a start-up called Klarna, for around $250 million. Via seekingalpha.com
15 ‘RegTech’ Investors Every Fintech Startup Needs to Know
According to statistics from CB Insights, RegTech startups have raised approximately $2.3 billion across 317 deals between 2012 and 2016. As an area that continues to grow, propelled by interest in and demand for FinTech solutions, more investors are turning their attention to regtech startups, including those in cannabis, vendor risk management, information security/cybersecurity, healthcare, background checks, compliance management and government/legislation.
Octopus Capital
This UK venture capital firm invests in all types of technology-backed startups. Recently, it made the move into RegTech by leading the investors in backing the US-based open banking platform Token, which raised $15.7 million in a Series A funding round in April. The startup’s open banking platform helps banks to meet the compliance requirements of the upcoming European Payment Services Directive (PSD2). Via entrepreneur.com
Klarna launches a peer-to-peer payment app called Wavy
Fintech startup Klarna grew thanks to its e-commerce payment service, but now the startup is diversifying a bit. The Swedish company is launching Wavy, a free peer-to-peer payment app and service.
After Cookies imploded, Klarna approached the team behind the German app so that they could join another fintech company. It turns out that this team has worked on another peer-to-peer payment app. And the fact that Klarna is backing this project makes it interesting as it’s a highly competitive space.
There are quite a few peer-to-peer payment apps out there, such as Venmo and Square Cash in the U.S., Lydia in France and Ireland, Circle, etc. Other fintech products also let you send money instantly for free, such as Revolut and N26. Finally, big players are also adding peer-to-peer payment features as part of their existing products, such as Apple with Apple Pay in iOS 11, or Facebook with Messenger in the U.S.
Wavy is trying a different approach because people are tired of downloading new apps, signing up and saving their credit card information everywhere — with Wavy, only one side of the transaction has to sign up. It works in 31 European countries already. Via techcrunch.com
Zelle And Apple Pay Rising, But PayPal Dominates Money Transfers
PayPal is in control when it comes to money transfers and payments among Americans, but other competitors are making their way up, according to a recent survey.
For the survey, Morning Consult polled nearly 2,000 Americans from July 20-24. Overall, 27 percent of respondents said they used PayPal a few times a year, while 15 percent said they used it once a month.
PayPal is more popular with Baby Boomers (65 and older), with 32 percent saying they use the service a few times a year, compared to millennials at 21 percent. Among those aged 30 to 44, 27 percent said they used PayPal a few times a year. Twenty-five percent of people aged 45-54 reported using PayPal, while 30 percent of people aged 55-64 said they used the service.
While PayPal has the lowest usage among millennials, its platform Venmo is bringing in young people. About 1 in 10 millennials (11 percent) said they used Venmo several times a day, the survey found. There is still room for more young people to join Venmo, since 58 percent reported not having an account with the app or said they did not use the service. Venmo is especially struggling with older people. For example, among those aged 30 to 44, 80 percent of Americans in that age group said they did not use the platform.
Zelle has the ability to get more traffic because it’s linked to financial institutions, which means people can make payments using their bank apps instead of downloading a separate app like Venmo. However, since Zelle is linked to financial institutions, the service is limited to the banks that offer it. As of now, there are only nine banks that use Zelle, but there are more financial institutions that have signed on to use the service, including Citi and TD Bank. Via ibtimes.com
Alipay Lands In Greece Via Viva Payments
Viva Payments, a global, cloud-based mobile payments factory that provides secure online payment services to consumers, professionals and businesses of any size, announced news on Thursday (July 27) that it formed a strategic partnership with leading Chinese mobile and online payment platform Alipay. Alipay is the digital payment arm of Alibaba, the Chinese e-commerce giant.
“Our partnership with Alipay is of particular significance to Viva Payments, as it signals our universally directed corporate mentality. Payments via Alipay are now a reality in Greece, and we expect this novelty to vastly expand the potential of local businesses, making their service more attractive to a very significant market segment. This year only, Greece is expecting more than 150,000 visitors from China, and according to predictions, this number will keep growing. It is necessary, therefore, when dealing with this important touristic audience, to be able to facilitate their consumer habits. The continuous evolution of our services through cutting-edge technology and strategic partnerships is key to our international development,” stated Viva Payments’ Chief Marketing Officer Panos Tsakos. Via pymnts.com
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