Monday Fintech News - November 28th, 2022
When regulators get involved, a look into the African fintech ecosystem and BNPL drama
Happy Monday everyone, a lot has happened last week, here is a short debrief on that last fintech action! 🔥🔥🔥
The fintech ecosystem is moving fast, with changes across every sub-sector (payments, markets, retail, etc.) every day. To help you navigate them I decided to launch the Fintech Weekly Briefing, a newsletter including the top news of the week and M&A updates.
Top 3 news
Regulators are taking on personal trading companies, and not only for crypto
The recent turmoil in the crypto world has pushed regulators to focus more time on the question, the Bank of England has called for more regulation in the crypto industry, to protect investors and financial stability, and to foster innovation. At the same time, the FCA (UK’s financial authority) has also warned retail trading app against gamification, after observing behaviours similar to gambling among users of these apps.
What it means: The pandemic has led to more savings in a low interest rates environment. With more time on their hands, individuals searched for alternative savings solutions, such as trading platforms and cryptocurrency investing. The companies provided these services were then benefiting from limited regulations, and clearly, high enough interest from VCs to skip the due diligence process (Sequoia Capital apologised to investors for the $150M loss in FTX). As these companies have grown, the impact of their failure could reach beyond their industry, which has led regulators to get involved. The silver-lining of FTX’s story has been to show that the crypto-industry is not presenting a systemic risk, as its failure, despite leading to other crypto companies failing (like the lender BlockFi) has barely impacted traditional markets.
Sources: Finextra, Financial Times, CryptoNews, DBRS, Financial TimesIvory Coast’s super-app Djamo raises $14M from Enza Capital, Partech Africa and Oikocredit, with plans to expand across francophone Africa
Djamo is a “provider of financial applications to allow customers to use their cards with zero fees in a wide range of services” founded in 2019. While traditional banks in the region focus on affluent customers, the demand for financial services from lower income populations was initially filed by telcos and mobile money wallets, representing over 60% of the population today. Djamo has worked to offer a better, cheaper alternative to users, with its initial product, a Visa-powered debit card that lets users make online purchases on online retailers’ website. The company has now expanded its offer with virtual accounts for peer-to-peer transactions, a product to receive salaries and an autosaving product that offers guidance into customers’ financial goals.What it means: While investing in Subsaharan African start-ups has a huge potential for returns, historically, investors have shied away from it, due to major challenges in terms of governance, exits, and for some regions, politic instability. However, since 2017, VC investment value has grown significantly: from $300M in 2017 to $1.4bn in 2019, and reaching $3.5bn just in H1 2022, making it the highest growing continent for VC investments in 2022. The limited exit options remains a challenge (partly due to a nascent public market, taking off IPO as a potential exit), but the improvement of infrastructure and a growing middle class is presenting a range of opportunities in near-untaped markets, with the financial services sector leading the way with 144 deals in H1 2022.
Sources: Crunchbase, TechCrunch, Fintech Global, Brookings, AVCA, AVCA H1 2022 VC activity reportBlack Friday and Cyber Monday are the time to shine for Buy-Now-Pay-Later (BNPL) companies
Despite inflation reducing purchasing power and the World Cup, which was expected to impact sales negatively on that day, Black Friday went beyond expectations, breaking $9 billion in online sales in the US for the first time, surpassing last year’s record by 2.3%. Globally, e-commerce reached an estimated $40bn in sales. Supporting this growth, BNPL has come as an alternative to credit, cheap and easy to access, allowing consumers to keep spending in challenging times. BNPL companies were seen as “at-risk” in times of recession, as most of them are not profitable and heavily reliant on VC funding (which has fallen in 2022), but e-retailers have increased use of these solutions in order to grow sales despite the economic environment, transforming that risk into an opportunity.
What it means: While BNPL has existed for a long time, it has taken off in 2020 during the pandemic, as it offered cheap credit in times of crisis. More recently, high inflation and fear of recession have led to a growing demand for credit among consumers, BNPL companies have seized this opportunity thanks to an efficient use of embedded finance (seamlessly integrating their solution into the user journey).
While the solution is facing challenges from regulation and traditional credit providers (study from StepChange and Barclays claims 876,000 Britons were at risk of falling into debt due to BNPL), the market for it is growing fast, and BNPL payments are expected to account for nearly 25% of all global e-commerce transactions by 2026, up from just 9% in 2021, especially reaching Gen Z and millennials (respectively 44% and 37% of these populations are expected to make a BNPL payment in 2022). Klarna is going even further, as it is launching an in-app price comparison tool in three European markets, as it plan to turn into "a single shopping destination" for consumers.
Sources: TechCrunch, Adobe Analytics, Salesforce, Fortune, Juniper Research, eMarketer, GlobalPayments, Wired, The Fintech Times, Fintech Magazine,
M&A and fundraising news
Atom Bank raises £30m from BBVA, Toscafund, and Infinity Investment Partners and pushes back IPO plans to 2024
BVNK, a UK-based payments platform for global businesses, acquires fellow paytech System Pay Services, as part of their global expansion plans
Atoa Payments, UK-based startup using open banking to offer merchants an alternative to debit card payments, raised a $2.2M pre-seed funding round
Denmark-based Female Invest (a subscription-based edtech built to “close the financial gender gap” and “engage more women in the world of investing”) buys trading platform Gaia as its first acquisitions
BeZero Carbon, a global rating agency for the Voluntary Carbon Market, raised a €51.6m Series B
WeGift (removing friction from the payouts process, so businesses can instantly transfer value to build commercial relationships) raised a €29.6m Series B round
Sources: Fintech Futures, BlackFin Tech, Fintech Futures