Fintech Fortnightly – February 22, 2023 –
Fintech is a vast, multi-sector and global industry, affecting not only the banking world, but society as a whole. Our deep dives, interviews and coverage looking at the evolution of payments, finance and banking are powered by constant updates, news and commentary on deals, funding rounds and partnerships. Fintech Fortnightly captures the latest and most significant events in the fintech world.
This fortnight, reports of a dip in fintech investment may be premature, while open banking continues to grow. The UK regulator is cracking down on buy now pay later (BNPL), but interest in the sector is not dead. Regions continue experiments with digital currencies, examine the use of English law and retain interest in all things bitcoin. Meanwhile, Monzo turns its gaze back to US expansion.
UK fintech investment to fall 56% in 2022 – KPMG
The global fintech market attracted $164.1 billion across 6,006 deals in 2022 – a strong performance despite falling from the $238.9 billion peak seen in 2021. The payments space remains the strongest fintech sub-sector globally, and attracting $53.1 billion in total investment.
The sharp decline in fintech investment between H122 and H222 – from $119.2 billion to $44.9 billion – highlights the rapidly changing market conditions much more clearly.
On the other hand…
Fintech may be on the mend – Royal Park Partners
Royal Park Partners’ January 2023 report reveals that fintech showed a partial recovery last month. Some prominent findings include:
- Activity in January 2023 already surpassed Q422 in terms of number of deals and value;
- globally, 66 companies raised $2.3 billion, with slightly more late-stage activity across payments, lendtech, insurance, and crypto and blockchain;
- eighty-five M&A transactions worth a total of $5.8 billion were announced last month; and
- Europe (35) and North America (35) serve as the main playing fields for consolidation.
The report provides a detailed overview of financing transactions and valuation levels by vertical and subvertical, as well as an overall view of fintech market activity.
Royal Park Partners helps companies raise capital, as well as advising on M&As and exits, including IPOs.
In addition to…
Open Bank Payment Transactions to Exceed $330 Billion Globally by 2027 as Bill Payments and E-Commerce Integrations Drive Usage – Juniper Research
A study by Juniper Research has found that transaction values for global open banking payments will exceed $330 billion globally by 2027; up from $57 billion in 2023. The report, Open Banking: Opportunities, Competitor Leaderboard & Market Forecasts 2023-2027, predicts that the development of new use cases, such as bill payments via open banking, will drive adoption, given open banking’s ease of use versus alternatives , such as card payments.
The research estimates that efforts to educate consumers about the safety and benefits of open banking will catalyze market growth, helping to alleviate common consumer fears and misconceptions about the potential misuse of financial data accessed by third parties.
The research also predicts that the development of new use cases will be instrumental in ensuring that open banking services fulfill their potential. One of the most promising new use cases is the ability to use open bank payments to pay tax bills, as introduced in the UK. As open banking bill payments expand beyond the UK, they are expected to account for more than $59 billion globally in transaction value by 2027.
Fintech regulation: buy now pay later crackdown is time – FT Lex
BNPL is all about immediacy. It cannot be said about the effort to monitor this form of short-term credit. On Tuesday, the UK government published draft proposals aimed at improving consumer protection. They arrived more than two years after an official review called for urgent regulation of a practice that carried significant potential harm.
BNPL has tended to avoid regulations aimed at interest-bearing loans. In the UK – a market worth £5.7bn in 2021 – the watchdog had to use consumer rights legislation to force providers to redraft their terms last year. But in recent months, regulators in the US, Australia and the EU have announced plans for tougher measures.
On the other hand…
Zopa acquires the BNPL platform DivideBuy
The deal cements Zopa’s move into the $7.2bn embedded finance space and comes just two weeks after it raised £75m to spearhead a 2023 M&A.
The acquisition will increase Zopa’s revenue by at least 20% and is a major step towards their ‘BNPL 2.0’ vision for responsible and sustainable BNPL consumer lending.
Monzo Restarts US Expansion Plans – Sifted
British digital bank Monzo is doubling down on stateside expansion but has no immediate plans to pursue a banking license in the world’s largest economy, according to its chief operating officer.
“As for the US, the time is now for us – we’re investing and it’s the next big frontier,” Sujata Bhatia tells Sifted in an interview, adding that the neobank is actively recruiting a new US CEO to lead the charge.
It’s not the first time Monzo has flirted with U.S. expansion: Carol Nelson was hired as U.S. CEO in February 2021. But she resigned last year, shortly after Monzo withdrew its U.S. banking license application when it became clear regulators were unlikely to give their approval.
The CBUAE is launching a financial infrastructure transformation program to accelerate the digital transformation of the financial sector
The program encompasses nine key initiatives to enable the UAE’s competitiveness in becoming a financial and digital payments hub and a center of excellence for innovation and digital transformation.
The intention of the digital dirham is to help drive more efficient, secure and reliable cross-border payments to promote financial inclusion in the UAE.
The first of the program’s initiatives includes the launch of a number of digital payment infrastructures and services such as a domestic card system, an instant payment platform and the issuance of a central bank digital currency for cross-border and domestic use. These digital payment initiatives will drive financial inclusion, promote payment innovation, security and efficiency, and achieve a cashless society.
New research confirms: English law is key to the UK’s global leadership in digital financial markets
The legal statement on the issue and transfer of digital securities under English private law was issued by the UK Jurisdiction Taskforce of LawtechUK, an industry-led group tasked with promoting the use of English law and UK jurisdiction for technology.
Digital securities, or the issuance and transfer of equity or debt securities on blockchain and DLT systems, have grown in importance as digital transformation becomes a top priority for many institutions operating in financial markets. The opinion finds that there are clear commercial advantages to conducting digital security transactions under English law.
This follows a public consultation and research commissioned by LawtechUK, which reinforces the important role English law must play in maintaining the UK’s position as a global leader in financial services. The research, completed by finance and economics consultancy Oxera, explores the capacity of the English legal regime to facilitate the commercial use of blockchain and distributed ledger technology in the capital markets, strengthening the UK’s position as a leading jurisdiction for internationally mobile transactions.
Meanwhile…
Study reveals countries with the greatest interest in Bitcoin – cryptobetting.org
The United States ranks as the country most interested in bitcoin across the globe, with a total score of 54.95 out of 100. El Salvador is second, with bitcoin as legal tender in the country. Vietnam is the country with the greatest interest in bitcoin in Asia and is in third place globally.
Cryptocurrency betting experts cryptobetting.org combined worldwide Google Trends searches for countries searching for bitcoin, along with the number of bitcoin ATMs in each country per 100,000 people and data on crypto ownership per country. These metrics were then combined into an index to assign each country a rating out of 100 to reveal their interest in bitcoin. The ranking is as follows:
1. United States – 54.95/100
2. El Salvador – 46.19/100
3. Vietnam – 35.69/100
4. Canada – 35.49/100
5. Nigeria – 25.31/100
Switzerland is sixth on the list and is the European country with the highest interest in bitcoin, with a score of 19.14 out of 100. Rounding out the top 10 are the Philippines with 18.71, India with 17.08, Venezuela with 16.88 and Austria with 16.31 . The UK places 20th on the list with a score of 12.19.
