Looking at fintech over the past couple of months leaves us with two clear conclusions: the traditional financial institutions do everything they can to keep up with the fintechs and BNPL services are really strengthening their power in the financial sector. This week, we have several stories that made the headlines and focus on these two elements. We look at Discovery Bank starting the first of its kind referral program in South Africa, to create a shared-value ecosystem. We also take a look at Visa trying to facilitate the cooperation of fintechs and traditional finance institutions and CBA upping their digital game. In the BNPL environment, we take a look at Klarna that prepares to open its brand new tech hub in Madrid, and Zip expanding by acquiring the BNPL providers from Europe and the Middle East. For these and more latest news on fintech developments over the past week, take a look at our newest fintech weekly.
Discovery Bank launched a referral program which is the first of its kind in the South African banking sector. Through referring friends and family to the bank, both parties will be rewarded and a shared-value ecosystem will be created.
“Internationally, some of the most successful technology-driven businesses, such as Airbnb and Uber, have reached unprecedented scale from “digital word-of-mouth” referrals and, at Discovery, we’ve always believed that our clients should be our greatest ambassadors as they experience our products first hand. Our banking platform is designed to offer an exciting user experience and facilitates a digital network where the rewards of shared-value banking can be multiplied across our client base – which is the foundation of Friend Referral Rewards,” says Discovery Bank CEO, Hylton Kallner.
The value for the customers and low risk of defaults for the bank gives Discovery bank the advantage of a sustainable business model and solves several long-term challenges. The rewards granted to old and new customers are enabled through an AI-powered platform, Vitality Money.
“No other financial institution has adopted this referral approach and our enablement of clients to “gift” rewards to their friends and family while they also earn personal rewards in the process, talks to the fact that we have a powerful technology platform that powers our Bank, our product offerings and the value it creates for people. Making our clients ambassadors and advocates for our products reflects our belief that they are best-placed to tell the story of shared-value banking and its rewards in the most authentic way,” Kallner added.
The global payments provided, Visa, announced it will expand its Visa FinTech Partner Connect and facilitate the cooperation between traditional financial institutions and fintechs.
“Global fintech investment last year was $105 billion,” Terry Angelos, senior vice president and global head of fintech at Visa, said. “There were about 2,861 deals in venture, PE and M&A. So literally over $100 billion is going into fintech, which is more than the combined tech budgets of every bank in the U.S. As a result, a lot of innovation that is occurring in fintech is funded by venture dollars. We’re trying to bring that innovation to our clients, whether they are banks, processors or other fintechs.”
The program already launched in Europe, at the end of 2020. Now, it is available across the U.S., Asia Pacific, Latin America, and CEMEA. Since then, Visa has worked hard on identifying fintechs that can help traditional financial institutions “create digital-first experiences, without the cost and complexity of building the back-end technology in-house.”
So far, approximately 60 partners have been identified by Visa, 24 of them are based in the United States.
“So much of fintech focus and coverage is about disrupting existing banks. Everyone is trying to disrupt everyone, including fintechs like PayPal,” Angelos told TechCrunch. “Venture numbers are certainly very large. What we’re realizing is there is a significant opportunity to pair up a lot of venture-backed companies with our existing clients. It runs a little bit against us versus them approach you typically hear about.”
The banks and other financial institutions that are clients of Visa can get in touch with the fintech partners and collaborate on benefits such as reduced fees and discounts.
“The Fintech Connect program is about both helping to identify and curate interesting fintech companies and then create a favorable commercial partnership for our clients so they can engage with these Fintech Connect partners,” Angelos said.
“Our goal is that all of our clients are in a position to build better digital experiences for their consumers,” he told TechCrunch. “We would love it if every bank had the latest tools in order to onboard clients and build digital experiences.”
This week, Sift that is one of the leading Digital Trust & Safety companies has revealed it will acquire Chargeback, a company pioneering in real-time dispute management for merchants. The acquisition will allow Sift to address risk more effectively, during all stages of a transaction.
“Preventing chargeback fraud is the critical ‘last mile’ of stopping payment fraud entirely,” said Marc Olesen, President & CEO of Sift. “With the addition of Chargeback’s team, technology, and partners, our customers gain a true hub for fighting all types of fraud and abuse while creating a more seamless experience. We’re excited to continue working together as we help our customers implement their Digital Trust & Safety strategies.”
“As a longtime Sift partner, we’ve seen how effective full fraud coverage has been for joint customers using Chargeback’s integration with Sift,” said John Munro, CEO of Chargeback. “Now, as one company, we have an incredible opportunity to provide a single solution to merchants so they grow with less risk.”
The decentralized finance (DeFi) platform Yield, revealed that it will not partner will the DeFi insurance protocol Steady State, in order to fully transform the cryptocurrency protection environment. The ultimate goal is to create a new standard of insurance in DeFi.
Steady State will protect platforms and protocols against losses.
“We have long been of the view that the DeFi insurance market is lacking,” Tim Frost, the CEO of Yield says. “Our search for an adequate protocol for our own platform led us to take an interest in Steady State, which we believe has the potential to transform the cryptocurrency protection landscape.
“As we have commented before, the one major factor holding back mainstream adoption of cryptocurrency is its risk profile. While no investment is risk-free (even, or especially cash in some regions) a high number of hacks and exploits has been discouraging for new users that might be convinced to enter the market if their assets were adequately insured.”
The risk-based approach of Steady State mimics the processes and methods of the traditional insurance markets. However, as it utilizes DeFi, Steady State will be able to create a 360-degree ecosystem.
Jonathan Libby, the founder of Steady State, comments: “Steady State is what every member of the DeFi community has been waiting for: an insurance product that understands and can accurately price the risks faced by platforms and their users. It shouldn’t be down to individuals to cover their assets in arbitrary pools – we need a system that looks a lot more like traditional finance to help reach everyone that stands to benefit from the new economy emerging on the blockchain.
“We have been working closely with YIELD App from our earliest stages and will continue to do so over the coming weeks and months to develop and deliver a product we believe will break new ground in DeFi and cryptocurrency more widely.”
Commonwealth Bank of Australia will be the first of Australia’s Big Four banks to allow customers to see benefits from the Open Banking rules in its banking app. The announcement is the first of a series of updates we can expect from CBA, after their $50 million investment in disruptive business platforms including Little Birdie and Amber.
CEO Matt Comyn says: “The shift to digital banking is accelerating and we are investing to remain at the forefront of innovation. We aim to be the most trusted partner at the centre of our customers’ financial lives by saving them money, giving them more control over their finances, and by making banking simpler and easier.”
So far, CBA has a 23% stake in an online shopping startup Little Birdie and a 25% share in Amber, a subscription-based platform that provides customers with wholesale electricity prices.
“Little Birdie will bring customers the best shopping deals from across the internet and will help to connect our 7.5m digitally active customers with our 700k business customers,” says Comyn. “Combined with our 50:50 partnership with Klarna in Australia and StepPay, CBA’s recently announced buy now, pay later card, we have a highly differentiated platform to help business customers grow and retail customers save money. Deals and offers, integrated with CBA’s goal savings products, will help customers save for a special purchase in a completely different way.”
At the same time, Amber’s technology will be utilized into CBA’s home lending offer.
“There will be increasing benefits to consumers as the consumer data right is extended to energy and other sectors,” says Comyn. “The CDR pilot launched today will soon be available to all CBA customers, allowing them to see their account balances from other eligible financial institutions directly in the CommBank app. We will continue to invest behind the consumer data right to bring benefits to our customers.”
More news on banks and financial institutions trying to keep up with fintechs:
One of the leading Buy Now Pay Later (BNPL) services, Klarna, announced it will open a new tech hub in Madrid. The new base will be employing 500 employees. The newest hub joins the other bases of Klarna, based in Stockholm, Milan, and Berlin.
Klarna is opening its new base a year after the company entered the Spanish market. Currently, it partners with more than 160 global and domestic brands in Spain.
“We need the best engineers to deliver a seamless product experience for our customers,” CEO of Klarna, Sebastian Siemiatkowski, says. “That’s why we’re coming to Madrid, one of Europe’s emerging tech centers. Together with our tech hubs in Stockholm, Berlin and Milan, we are creating a powerhouse of technology expertise that will support Klarna’s growth.”
Siemiatkowski says that Klarna will be focusing on recruitment for its new hub, focusing on the product development roles such as engineers, product managers, designers and experts in data science and analytics.
For more news on BNPL:
The BNPL firm Zip decided to expand their services to Europe and the Middle East, by acquiring the European, Czech-based BNPL provided Twisto and the startup based in UAE – Spotli.
Since its launch in 2013, Twisto has gained a 1.6 million customer base across the Czech Republic and Poland. However, since the company holds the license of a European Payment Institution, the payment services can be done across all member states.
Twisto founder and CEO Michal Smida comments: “There is a massive opportunity in Europe as BNPL follows the global trend with a shift away from the unfriendly world of credit cards. With Twisto’s existing operations in Central Europe, we are uniquely positioned to tackle the $1.1 trillion European e-commerce market.”
After acquiring Twisto back in January, Zip is acquiring the remaining shares of the newly founded Spotli. Founded just in 2020, Spotli has shown unusual early traction, with more than 650 merchants integrated into the platform.
Zip co-founder and CEO Larry Diamond says: “We have been working with Spotii since our initial investment in December 2020 to broaden our understanding of the BNPL opportunity in the region and have a number of exciting global merchants we are looking forward to activating in the coming months. We also believe there is a large untapped opportunity to bring BNPL to emerging markets where cash on delivery remains a significant merchant challenge, and where the digitization of retail accelerates.”