Finance

US regulators need to catch up with Europe on fintech innovation 

Posted by | Adyen, Amazon, Android, Apple, Chime, Column, Consumer Financial Protection Bureau, eqt ventures, Facebook, Finance, Google, Kabbage, Libra, monzo, Open Banking, Policy, Revolut, TC, Uber, Venmo, visa | No Comments
Alastair Mitchell
Contributor

Alastair Mitchell is a partner at multi-stage VC fund EQT Ventures and the fund’s B2B sales, marketing and SaaS expert. Ali also focuses on helping US companies scale into Europe and vice versa.
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Fintech companies are fundamentally changing how the financial services ecosystem operates, giving consumers powerful tools to help with savings, budgeting, investing, insurance, electronic payments and many other offerings. This industry is growing rapidly, filling gaps where traditional banks and financial institutions have failed to meet customer needs.

Yet progress has been uneven. Notably, consumer fintech adoption in the United States lags well behind much of Europe, where forward-thinking regulation has sparked an outpouring of innovation in digital banking services — as well as the backend infrastructure onto which products are built and operated.

That might seem counterintuitive, as regulation is often blamed for stifling innovation. Instead, European regulators have focused on reducing barriers to fintech growth rather than protecting the status quo. For example, the U.K.’s Open Banking regulation requires the country’s nine big high-street banks to share customer data with authorized fintech providers.

The EU’s PSD2 (Payment Services Directive 2) obliges banks to create application programming interfaces (APIs) and related tools that let customers share data with third parties. This creates standards that level the playing field and nurture fintech innovation. And the U.K.’s Financial Conduct Authority supports new fintech entrants by running a “sandbox” for software testing that helps speed new products into service.

Regulations, if implemented effectively as demonstrated by those in Europe, will lead to a net positive to consumers. While it is inevitable that regulations will come, if fintech entrepreneurs take the action to engage early and often with regulators, it will ensure that the regulations put in place support innovation and ultimately benefit the consumer.

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Opera and the firm short-selling its stock (alleging Africa fintech abuses) weigh in

Posted by | africa, Andrew Left, Android, Asia, Citron Research, e-commerce, Finance, freeware, Google, Google Play Store, india, jumia, kenya, Lyft, Nigeria, Norway, Opay, Opera, operating systems, TC, Tesla, United States, Web browsers | No Comments

Internet services company Opera has come under a short-sell assault based on allegations of predatory lending practices by its fintech products in Africa.

Hindenburg Research issued a report claiming (among other things) that Opera’s finance products in Nigeria and Kenya have run afoul of prudent consumer practices and Google Play Store rules for lending apps.

Hindenburg — which is based in NYC and managed by financial analyst Nate Anderson — went on to suggest Opera’s U.S.-listed stock was grossly overvalued.

That’s a primer on the key info, though there are several additional shades of the who, why and where of this story to break down before getting to what Opera and Hindenburg had to say.

A good start is Opera’s ownership and scope. Founded in Norway, the company is an internet services provider, largely centered around its Opera browser.

Opera was acquired in 2016 for $600 million by a consortium of Chinese investors, led by current Opera CEO Yahui Zhou.

Two years later, Opera went public in an IPO on NASDAQ, where its shares currently trade.

Web Broswers Africa 2019 Opera

Though Opera’s web platform isn’t widely used in the U.S. — where it has less than 1% of the browser market — it has been No. 1 in Africa, and, more recently, a distant second to Chrome, according to StatCounter.

On the back of its browser popularity, Opera went on an African venture spree in 2019, introducing a suite of products and startup verticals in Nigeria and Kenya, with intent to scale more broadly across the continent.

In Nigeria these include motorcycle ride-hail service ORide and delivery app OFood.

Central to these services are Opera’s fintech apps: OPay in Nigeria and OKash and Opesa in Kenya — which offer payment and lending options.

Fintech-focused VC and startups have been at the center of a decade-long tech boom in several core economies in Africa, namely Kenya and Nigeria.

In 2019, Opera led a wave of Chinese VC in African fintech, including $170 million in two rounds to its OPay payments service in Nigeria.

Opera’s fintech products in Africa (as well as Opera’s Cashbean in India) are at the core of Hindenburg Research’s brief and short-sell position. 

The crux of the Hindenburg report is that due to the declining market share of its browser business, Opera has pivoted to products generating revenue from predatory short-term loans in Africa and India at interest rates of 365-876%, so Hindenburg claims.

The firm’s reporting goes on to claim Opera’s payment products in Nigeria and Kenya are afoul of Google rules.

“Opera’s short-term loan business appears to be…in violation of the Google Play Store’s policies on short-term and misleading lending apps…we think this entire line of business is at risk of…being severely curtailed when Google notices and ultimately takes corrective action,” the report says.

Based on this, Hindenburg suggested Opera’s stock should trade at around $2.50, around a 70% discount to Opera’s $9 share price before the report was released on January 16.

Hindenburg also disclosed the firm would short Opera.

Founder Nate Anderson confirmed to TechCrunch Hindenburg continues to hold short positions in Opera’s stock — which means the firm could benefit financially from declines in Opera’s share value. The company’s stock dropped some 18% the day the report was published.

On motivations for the brief, “Technology has catalyzed numerous positive changes in Africa, but we do not think this is one of them,” he said.

“This report identified issues relating to one company, but what we think will soon become apparent is that in the absence of effective local regulation, predatory lending is becoming pervasive across Africa and Asia…proliferated via mobile apps,” Anderson added.

While the bulk of Hindenburg’s critique was centered on Opera, Anderson also took aim at Google.

“Google has become the primary facilitator of these predatory lending apps by virtue of Android’s dominance in these markets. Ultimately, our hope is that Google steps up and addresses the bigger issue here,” he said.

In a statement to TechCrunch a Google spokesperson said: “Our Google Play Developer Policies are designed to protect users and keep them safe, and we recently expanded our Financial Services policy to help protect people from deceptive and exploitative personal loan terms. When violations are found, we take action.”

Google did not confirm if any specific action would be taken regarding Opera’s fintech products in Africa.  

In the meantime, Opera’s apps in Nigeria and Kenya are still available on GooglePlay, according to Opera and a cursory browse of the site.

For its part, Opera issued a rebuttal to Hindenburg and offered some input to TechCrunch through a spokesperson.

In a company statement opera said, “We have carefully reviewed the report published by the short seller and the accusations it put forward, and our conclusion is very clear: the report contains unsubstantiated statements, numerous errors, and misleading conclusions regarding our business and events related to Opera.”

Opera added it had proper banking licenses in Kenyan or Nigeria. “We believe we are in compliance with all local regulations,” said a spokesperson.

TechCrunch asked Hindenburg’s Nate Anderson if the firm had contacted local regulators related to its allegations. “We reached out to the Kenyan DCI three times before publication and have not heard back,” he said.

As it pertains to Africa’s startup scene, there’ll be several things to follow surrounding the Opera, Hindenburg affair.

The first is how it may impact Opera’s business moves in Africa. The company is engaged in competition with other startups across payments, ride-hail and several other verticals in Nigeria and Kenya. Being accused of predatory lending, depending on where things go (or don’t) with the Hindenburg allegations, could put a dent in brand equity.

There’s also the open question of if/how Google and regulators in Kenya and Nigeria could respond. Contrary to some perceptions, fintech regulation isn’t non-existent in both countries; neither are regulators totally ineffective.

Kenya passed a new data-privacy law in November and Nigeria recently established guidelines for mobile-money banking licenses in the country, after a lengthy Central Bank review of best digital finance practices.

Nigerian regulators demonstrated they are no pushovers with foreign entities, when they slapped a $3.9 billion fine on MTN over a regulatory breach in 2015 and threatened to eject the South African mobile-operator from the country.

As for short-sellers in African tech, they are a relatively new thing, largely because there are so few startups that have gone on to IPO.

In 2019, Citron Research head and activist short-seller Andrew Left — notable for shorting Lyft and Tesla — took short positions in African e-commerce company Jumia, after dropping a report accusing the company of securities fraud. Jumia’s share price plummeted more than 50%, and has only recently begun to recover.

As of Wednesday, there were signs Opera may be shaking off Hindenburg’s report — at least in the market — as the company’s shares had rebounded to $7.35.

Update: This article was updated for a statement by Google post-publication. 

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Mobile payment app Lydia raises $45 million round led by Tencent

Posted by | Apps, Europe, Finance, fintech, France Newsletter, Fundings & Exits, Lydia, Mobile, Startups | No Comments

French startup Lydia is raising a $45 million Series B round (€40 million). Tencent is leading the round with existing investors CNP Assurances, XAnge and New Alpha also participating.

If you live in France, chances are you already know Lydia quite well. The company has become a ubiquitous mobile payment app, especially for people under 30 years old. Think about it as a sort of Square Cash or Venmo, but for France.

“At first, we wanted to raise less but we ended up raising more,” Lydia co-founder and CEO Cyril Chiche told me in a phone interview.

The company has managed to attract 3 million users in France. More impressive, 25% of French people between 18 and 30 years old have a Lydia account — and 5,000 people sign up every day. Lydia currently has 90 employees.

More recently, the company has expanded beyond peer-to-peer payment. First, the company wants to help you manage your money in many different ways with an important value — everything should happen in real time.

You can create multiple Lydia accounts to put some money aside or use money in that sub-account for a specific purpose. That feature alone turns the app into a versatile money management app.

For instance, you can associate a Lydia payment card with a Lydia account and a virtual card with another Lydia account — that virtual card works with Apple Pay, Google Pay, Samsung Pay and more. You can change those settings in real time.

You can share accounts with other Lydia users. And shared accounts are truly shared — everyone can top up and withdraw money from that account. You can spend directly from that account or withdraw money to another account.

You can also turn any Lydia account into a money pot account. In just a few taps, you can generate a link and share it with your friends so that they can add money using their regular payment card or a Lydia account.

More recently, the company has introduced “the market”, a marketplace of other financial products. From the Lydia app, you can borrow up to €1,000 in just a few seconds. You can also insure your phone and other mobile devices. You can get some free credit when you open a bank account, insure your home with Luko, switch to another electricity and gas provider, compare mobile phone and internet providers and more.

And that strategy is going to be key in the future. “We have an ambitious goal, which is turning Lydia into a mobile financial service app,” Chiche said.

He also pointed out that the company that has been the most successful when it comes to creating a mobile marketplace of financial products is Tencent with WeChat.

“Tencent is also the number one player in the video game industry, and there’s no industry with as much user engagement,” Chiche said. Tencent acquired Supercell, bought 40% of Epic Games, acquired Riot Games (League of Legends), invested in Ubisoft, Activision Blizzard, Discord, etc. Lydia hopes that it can learn from Tencent on the user engagement front.

Compared to many fintech startups, Lydia doesn’t want to replace banks altogether — the company says it wants to build a meta-banking app. Peer-to-peer payments represent the top of the funnel and a great user acquisition strategy thanks to networking effects.

You can then connect your Lydia account with your bank account and your debit card. This way, you can send money back and forth between your Lydia accounts and your bank account. As a user, that strategy slowly pays off over time. After a while, you end up spending money directly from your Lydia account and relying more heavily on Lydia’s native payment features, with your bank account acting as a money back end.

At the bottom of the funnel, Lydia hopes that it can turn active Lydia users into paid customers with a handful of in-house and third-party financial products. In other words, Lydia doesn’t want to become a credit institution like a traditional bank, it wants to become a financial hub. Expanding the marketplace will be a big focus for the company going forward.

While Lydia is available in other European countries, Lydia is still massively used in its home market with other markets lagging behind. With today’s funding round, growth in foreign countries is going to be the second key topic.

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Fintech’s next decade will look radically different

Posted by | Amazon, Andreessen Horowitz, Android, Angela Strange, bain capital ventures, Bank, BlackRock, equifax, Facebook, Finance, financial services, financial technology, GitHub, Google, instagram, Marqeta, Matt Harris, Open Banking, payments, PayPal, Shopify, stripe, TechCrunch, Uber, Venture Capital | No Comments

The birth and growth of financial technology developed mostly over the last ten years.

So as we look ahead, what does the next decade have in store? I believe we’re starting to see early signs: in the next ten years, fintech will become portable and ubiquitous as it moves to the background and centralizes into one place where our money is managed for us.

When I started working in fintech in 2012, I had trouble tracking competitive search terms because no one knew what our sector was called. The best-known companies in the space were Paypal and Mint.

fintech search volume

Google search volume for “fintech,” 2000 – present.

Fintech has since become a household name, a shift that came with with prodigious growth in investment: from $2 billion in 2010 to over $50 billion in venture capital in 2018 (and on-pace for $30 billion+ this year).

Predictions were made along the way with mixed results — banks will go out of business, banks will catch back up. Big tech will get into consumer finance. Narrow service providers will unbundle all of consumer finance. Banks and big fintechs will gobble up startups and consolidate the sector. Startups will each become their own banks. The fintech ‘bubble’ will burst.

Who will the winners be in the future of fintech?

Here’s what did happen: fintechs were (and still are) heavily verticalized, recreating the offline branches of financial services by bringing them online and introducing efficiencies. The next decade will look very different. Early signs are beginning to emerge from overlooked areas which suggest that financial services in the next decade will:

  1. Be portable and interoperable: Like mobile phones, customers will be able to easily transition between ‘carriers’.
  2. Become more ubiquitous and accessible: Basic financial products will become a commodity and bring unbanked participants ‘online’.
  3. Move to the background: The users of financial tools won’t have to develop 1:1 relationships with the providers of those tools.
  4. Centralize into a few places and steer on ‘autopilot’.

Prediction 1: The open data layer

Thesis: Data will be openly portable and will no longer be a competitive moat for fintechs.

Personal data has never had a moment in the spotlight quite like 2019. The Cambridge Analytica scandal and the data breach that compromised 145 million Equifax accounts sparked today’s public consciousness around the importance of data security. Last month, the House of Representatives’ Fintech Task Force met to evaluate financial data standards and the Senate introduced the Consumer Online Privacy Rights Act.

A tired cliché in tech today is that “data is the new oil.” Other things being equal, one would expect banks to exploit their data-rich advantage to build the best fintech. But while it’s necessary, data alone is not a sufficient competitive moat: great tech companies must interpret, understand and build customer-centric products that leverage their data.

Why will this change in the next decade? Because the walls around siloed customer data in financial services are coming down. This is opening the playing field for upstart fintech innovators to compete with billion-dollar banks, and it’s happening today.

Much of this is thanks to a relatively obscure piece of legislation in Europe, PSD2. Think of it as GDPR for payment data. The UK became the first to implement PSD2 policy under its Open Banking regime in 2018. The policy requires all large banks to make consumer data available to any fintech which the consumer permissions. So if I keep my savings with Bank A but want to leverage them to underwrite a mortgage with Fintech B, as a consumer I can now leverage my own data to access more products.

Consortia like FDATA are radically changing attitudes towards open banking and gaining global support. In the U.S., five federal financial regulators recently came together with a rare joint statement on the benefits of alternative data, for the most part only accessible through open banking technology.

The data layer, when it becomes open and ubiquitous, will erode the competitive advantage of data-rich financial institutions. This will democratize the bottom of the fintech stack and open the competition to whoever can build the best products on top of that openly accessible data… but building the best products is still no trivial feat, which is why Prediction 2 is so important:

Prediction 2: The open protocol layer

Thesis: Basic financial services will become simple open-source protocols, lowering the barrier for any company to offer financial products to its customers.

Picture any investment, wealth management, trading, merchant banking, or lending system. Just to get to market, these systems have to rigorously test their core functionality to avoid legal and regulatory risk. Then, they have to eliminate edge cases, build a compliance infrastructure, contract with third-party vendors to provide much of the underlying functionality (think: Fintech Toolkit) and make these systems all work together.

The end result is that every financial services provider builds similar systems, replicated over and over and siloed by company. Or even worse, they build on legacy core banking providers, with monolith systems in outdated languages (hello, COBOL). These services don’t interoperate, and each bank and fintech is forced to become its own expert at building financial protocols ancillary to its core service.

But three trends point to how that is changing today:

First, the infrastructure and service layer to build is being disaggregates, thanks to platforms like Stripe, Marqeta, Apex, and Plaid. These ‘finance as a service’ providers make it easy to build out basic financial functionality. Infrastructure is currently a hot investment category and will be as long as more companies get into financial services — and as long as infra market leaders can maintain price control and avoid commoditization.

Second, industry groups like FINOS are spearheading the push for open-source financial solutions. Consider a Github repository for all the basic functionality that underlies fintech tools. Developers could continuously improve the underlying code. Software could become standardized across the industry. Solutions offered by different service providers could become more inter-operable if they shared their underlying infrastructure.

And third, banks and investment managers, realizing the value in their own technology, are today starting to license that technology out. Examples are BlackRock’s Aladdin risk-management system or Goldman’s Alloy data modeling program. By giving away or selling these programs to clients, banks open up another revenue stream, make it easy for the financial services industry to work together (think of it as standardizing the language they all use), and open up a customer base that will provide helpful feedback, catch bugs, and request new useful product features.

As Andreessen Horowitz partner Angela Strange notes, “what that means is, there are several different infrastructure companies that will partner with banks and package up the licensing process and some regulatory work, and all the different payment-type networks that you need. So if you want to start a financial company, instead of spending two years and millions of dollars in forming tons of partnerships, you can get all of that as a service and get going.”

Fintech is developing in much the same way computers did: at first software and hardware came bundled, then hardware became below differentiated operating systems with ecosystem lock-in, then the internet broke open software with software-as-a-service. In that way, fintech in the next ten years will resemble the internet of the last twenty.

placeholder vc infographic

Infographic courtesy Placeholder VC

Prediction 3: Embedded fintech

Thesis: Fintech will become part of the basic functionality of non-finance products.

The concept of embedded fintech is that financial services, rather than being offered as a standalone product, will become part of the native user interface of other products, becoming embedded.

This prediction has gained supporters over the last few months, and it’s easy to see why. Bank partnerships and infrastructure software providers have inspired companies whose core competencies are not consumer finance to say “why not?” and dip their toes in fintech’s waters.

Apple debuted the Apple Card. Amazon offers its Amazon Pay and Amazon Cash products. Facebook unveiled its Libra project and, shortly afterward, launched Facebook Pay. As companies from Shopify to Target look to own their payment and purchase finance stacks, fintech will begin eating the world.

If these signals are indicative, financial services in the next decade will be a feature of the platforms with which consumers already have a direct relationship, rather than a product for which consumers need to develop a relationship with a new provider to gain access.

Matt Harris of Bain Capital Ventures summarizes in a recent set of essays (one, two) what it means for fintech to become embedded. His argument is that financial services will be the next layer of the ‘stack’ to build on top of internet, cloud, and mobile. We now have powerful tools that are constantly connected and immediately available to us through this stack, and embedded services like payments, transactions, and credit will allow us to unlock more value in them without managing our finances separately.

Fintech futurist Brett King puts it even more succinctly: technology companies and large consumer brands will become gatekeepers for financial products, which themselves will move to the background of the user experiences. Many of these companies have valuable data from providing sticky, high-affinity consumer products in other domains. That data can give them a proprietary advantage in cost-cutting or underwriting (eg: payment plans for new iPhones). The combination of first-order services (eg: making iPhones) with second-order embedded finance (eg: microloans) means that they can run either one as a loss-leader to subsidize the other, such as lowering the price of iPhones while increasing Apple’s take on transactions in the app store.

This is exciting for the consumers of fintech, who will no longer have to search for new ways to pay, invest, save, and spend. It will be a shift for any direct-to-consumer brands, who will be forced to compete on non-brand dimensions and could lose their customer relationships to aggregators.

Even so, legacy fintechs stand to gain from leveraging the audience of big tech companies to expand their reach and building off the contextual data of big tech platforms. Think of Uber rides hailed from within Google Maps: Uber made a calculated choice to list its supply on an aggregator in order to reach more customers right when they’re looking for directions.

Prediction 4: Bringing it all together

Thesis: Consumers will access financial services from one central hub.

In-line with the migration from front-end consumer brand to back-end financial plumbing, most financial services will centralize into hubs to be viewed all in one place.

For a consumer, the hub could be a smartphone. For a small business, within Quickbooks or Gmail or the cash register.

As companies like Facebook, Apple, and Amazon split their operating systems across platforms (think: Alexa + Amazon Prime + Amazon Credit Card), benefits will accrue to users who are fully committed to one ecosystem so that they can manage their finances through any platform — but these providers will make their platforms interoperable as well so that Alexa (e.g.) can still win over Android users.

As a fintech nerd, I love playing around with different financial products. But most people are not fintech nerds and prefer to interact with as few services as possible. Having to interface with multiple fintechs separately is ultimately value subtractive, not additive. And good products are designed around customer-centric intuition. In her piece, Google Maps for Money, Strange calls this ‘autonomous finance:’ your financial service products should know your own financial position better than you do so that they can make the best choices with your money and execute them in the background so you don’t have to.

And so now we see the rebundling of services. But are these the natural endpoints for fintech? As consumers become more accustomed to financial services as a natural feature of other products, they will probably interact more and more with services in the hubs from which they manage their lives. Tech companies have the natural advantage in designing the product UIs we love — do you enjoy spending more time on your bank’s website or your Instagram feed? Today, these hubs are smartphones and laptops. In the future, could they be others, like emails, cars, phones or search engines?

As the development of fintech mirrors the evolution of computers and the internet, becoming interoperable and embedded in everyday services, it will radically reshape where we manage our finances and how little we think about them anymore. One thing is certain: by the time I’m writing this article in 2029, fintech will look very little like it did today.

So which financial technology companies will be the ones to watch over the next decade? Building off these trends, we’ve picked five that will thrive in this changing environment.

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Robinhood lets you invest as little as 1 cent in any stock

Posted by | Apps, dividends, Finance, Mobile, payments, Robinhood, Square Cash, Startups, TC | No Comments

One share of Amazon stock costs more than $1,700, locking out less-wealthy investors. So to continue its quest to democratize stock trading, Robinhood is launching fractional share trading this week. This lets you buy 0.000001 shares, rounded to the nearest penny, or just $1 of any stock, with zero fee.

The ability to buy by millionth of a share lets Robinhood undercut Square Cash’s recently announced fractional share trading, which sets a $1 minimum for investment. Robinhood users can sign up here for early access to fractional share trading. “One of our core values is participation is power,” says Robinhood co-CEO Vlad Tenev. “Everything we do is rooted in this. We believe that fractional shares have the potential to open up investing for even more people.”

Fractional share trading ensures no one need be turned away, and Robinhood can keep growing its user base of 10 million with its war chest of $910 million in funding. As incumbent brokerages like Charles Schwab and E*Trade move to copy Robinhood’s free stock trading, the startup has to stay ahead in inclusive financial tools. In this case, though, it’s trying to keep up, since Schwab, Square, Stash and SoFi all launched fractional shares this year. Betterment has actually offered this since 2010.

Robinhood has a bunch of other new features aimed at diversifying its offering for the not-yet-rich. Today its Cash Management feature it announced in October is rolling out to its first users on the 800,000-person wait list, offering them 1.8% APY interest on cash in their Robinhood balance plus a Mastercard debit card for spending money or pulling it out of a wide network of ATMs. The feature is effectively a scaled-back relaunch of the botched debut of 3% APY Robinhood Checking a year ago, which was scuttled because the startup failed to secure the proper insurance it now has for Cash Management.

Additionally, Robinhood is launching two more widely requested features early next year. Dividend Reinvestment Plan (DRIP) will automatically reinvest into stocks or ETF cash dividends Robinhood users receive. Recurring Investments will let users schedule daily, weekly, bi-weekly or monthly investments into stocks. With all this, and Crypto trading, Robinhood is evolving into a full financial services suite that will be much harder for competitors to copy.

Robinhood Debit Card

How Robinhood fractional shares work

“We believe that if you want to invest, it shouldn’t matter how much money you have. With fractional shares, we’re opening up a whole universe of stocks and funds, including Amazon, Apple, Disney, Berkshire Hathaway, and thousands of others,” Robinhood product manager Abhishek Fatehpuria tells me.

Users will be able to place real-time fractional share orders in dollar amounts as low as $1 or share amounts as low as 0.000001 shares rounded to the penny during market hours. Stocks worth over $1 per share with a market capitalization above $25 million are eligible, with 4,000 different stocks and ETFs available for commission-free, real-time fractional trading.

“We believe that participation is power. Since day one, we’ve focused on breaking down barriers like trade commissions and account minimums to help people participate in the financial system,” says Fatehpuria. “We have a unique user base — half our customers tell us they’re first-time investors, and the median age of a Robinhood customer is 30. This means we have a unique opportunity to expand access to the markets for this new generation.”

Robinhood is racing to corner the freemium investment tool market before other startups and finance giants can catch up. It opened a waitlist for its U.K. launch next year, which will be its first international market. But in just the past month, Alpaca raised $6 million for an API that lets anyone build a stock brokerage app, and Atom Finance raised $12.5 million for its free investment research tool that could compete with Robinhood’s in-app feature. Meanwhile, Robinhood suffered an embarrassing bug, letting users borrow more money than allowed.

The move fast and break things mentality triggers new dangers when introduced to finance. Robinhood must resist the urge to rush as it spreads itself across more products in pursuit of a more level investment playing field.

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Atom Finance’s free Bloomberg Terminal rival raises $12M

Posted by | Apps, Atom Finance, bloomberg terminal, Finance, funding, Fundings & Exits, General Catalyst, Mobile, Recent Funding, Robinhood, Sentieo, Startups, stock market, stock trading, TC, Yahoo-Finance | No Comments

If you want to win on Wall Street, Yahoo Finance is insufficient but Bloomberg Terminal costs a whopping $24,000 per year. That’s why Atom Finance built a free tool designed to democratize access to professional investor research. If Robinhood made it cost $0 to trade stocks, Atom Finance makes it cost $0 to know which to buy.

Today Atom launches its mobile app with access to its financial modeling, portfolio tracking, news analysis, benchmarking and discussion tools. It’s the consumerization of finance, similar to what we’ve seen in enterprise SaaS. “Investment research tools are too important to the financial well-being of consumers to lack the same cycles of product innovation and accessibility that we have experienced in other verticals,” CEO Eric Shoykhet tells me.

In its first press interview, Atom Finance today revealed to TechCrunch that it has raised a $10.6 million Series A led by General Catalyst to build on its quiet $1.9 million seed round. The cash will help the startup eventually monetize by launching premium tiers with even more hardcore research tools.

Atom Finance already has 100,000 users and $400 million in assets it’s helping steer since soft-launching in June. “Atom fundamentally changes the game for how financial news media and reporting is consumed. I could not live without it,” says The Twenty Minute VC podcast founder and Atom investor Harry Stebbings.

Individual investors are already at a disadvantage compared to big firms equipped with artificial intelligence, the priciest research and legions of traders glued to the markets. Yet it’s becoming increasingly clear that investing is critical to long-term financial mobility, especially in an age of rampant student debt and automation threatening employment.

“Our mission is two-fold,” Shoykhet says. “To modernize investment research tools through an intuitive platform that’s easily accessible across all devices, while democratizing access to institutional-quality investing tools that were once only available to Wall Street professionals.”

Leveling the trading floor

Shoykhet saw the gap between amateur and expert research platforms firsthand as an investor at Blackstone and Governors Lane. Yet even the supposedly best-in-class software was lacking the usability we’ve come to expect from consumer mobile apps. Atom Finance claims that “for example, Bloomberg hasn’t made a significant change to its central product offering since 1982.”

The Atom Finance team

So a year ago, Shoykhet founded Atom Finance in Brooklyn to fill the void. Its web, iOS and Android apps offer five products that combine to guide users’ investing decisions without drowning them in complexity:

  • Sandbox – Instant financial modeling with pre-populated consensus projections that automatically update and are recalculated over time
  • Portfolio – Track your linked investment accounts to monitor overarching stats, real-time profit and loss statements and diversification
  • X-Ray – A financial research search engine for compiling news, SEC filings, transcripts and analysis
  • Compare – Benchmarking tables for comparing companies and sectors
  • Collaborate – Discussion boards and group chat for sharing insights with fellow investors

“Our Sandbox feature allows users to create simple financial models directly within our platform, without having to export data to a spreadsheet,” Shoykhet says. “This saves our users time and prevents them from having to manually refresh the inputs to their model when there is new information.”

Shoykhet positions Atom Finance in the middle of the market, saying, “Existing solutions are either too rudimentary for rigorous analysis (Yahoo Finance, Google Finance) or too expensive for individual investors (Bloomberg, CapIQ, Factset).”

With both its free and forthcoming paid tiers, Atom hopes to undercut Sentieo, a more AI-focused financial research platform that charges $500 to $1,000 per month and raised $19 million a year ago. Cheaper tools like BamSEC and WallMine are often limited to just pulling in earnings transcripts and filings. Robinhood has its own in-app research tools, which could make it a looming competitor or a potential acquirer for Atom Finance.

Shoykhet admits his startup will face stiff competition from well-entrenched tools like Bloomberg. “Incumbent solutions have significant brand equity with our target market, and especially with professional investors. We will have to continue iterating and deliver an unmatched user experience to gain the trust/loyalty of these users,” he says. Additionally, Atom Finance’s access to users’ sensitive data means flawless privacy, security, and accuracy will be essential.

The $12.5 million from General Catalyst, Greenoaks, Global Founders Capital, Untitled Investments, Day One Ventures and a slew of angels gives Atom runway to rev up its freemium model. Robinhood has found great success converting unpaid users to its subscription tier where they can borrow money to trade. By similarly starting out free, Atom’s eight-person team hailing from SoFi, Silver Lake, Blackstone and Citi could build a giant funnel to feed its premium tiers.

Fintech can feel dry and ruthlessly capitalistic at times. But Shoykhet insists he’s in it to equip a new generation with methods of wealth creation. “I think we’ve gone long enough without seeing real innovation in this space. We can’t be complacent with something so important. It’s crucial that we democratize access to these tools and educate consumers . . . to improve their investment well-being.”

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Xiaomi launches app to offer credit to millennials in India

Posted by | Android, Apps, Asia, Finance, india, miui, mobile phones, Xiaomi, Zestmoney | No Comments

Xiaomi, the top smartphone vendor in India, today joined a growing wave of fintech startups in the nation that are offering credit to aspirational young professionals and millennials.

The Chinese electronics giant said today it is launching Mi Credit, its curated marketplace for digital lending, which offers users credit between Rs 5,000 ($70) and Rs 100,000 ($1,400) at “low” interest rates.

Xiaomi said it has partnered with a number of startups, such as Bangalore-based ZestMoney, CreditVidya, Money View, Aditya Birla Finance Limited and EarlySalary, to determine who should get credit and then finance it.

Users are required to let the Mi Credit app access their texts and call logs to look for transactional information and some other details to assess whether they are credit-worthy. This whole process takes just a few minutes and eligible users can walk out with some credit, said Manu Jain, vice president of Xiaomi, at a conference in New Delhi.

He added that having multiple partners for the crediting platform ensures that the likeliness of a user securing a loan is high. Once a user has secured credit from the app, they can avail more credit in the future with a single click, the company said.

For startups that have partnered with Xiaomi, the big draw is access to a large user base, an executive with one of the partner startups told TechCrunch.

Xiaomi, which has been the top smartphone vendor in India for nine consecutive quarters, has an install base in the tens of millions in the country. The company has shipped more than 100 million smartphones in the country, it recently revealed.

Xiaomi said the Mi Credit app will be pre-installed on all Xiaomi smartphones running the Android -based MIUI operating system. The app is also available from the Google Play Store for non-Xiaomi Android smartphone users. (It’s not available for iPhone users.)

A wave of fintech firms have emerged in recent years in India to help millions of users secure credit and other financial services for the first time in their lives. The penetration of credit cards remains very low in the country (roughly three in 100 people in India have a credit card). This has meant that very few people in the nation have a traditional credit score.

This void has created an immense opportunity for startups to explore a range of other data points to determine who should get a loan. In emerging markets such as India, where the laws are lax, nobody appears to be alarmed with the idea of a company gleaning a lot of sensitive details.

As of today, Mi Credit is available to users in 1,500 ZIP codes, or 10 states in India. The company said it plans to extend the credit service to all of India by March of next year.

Partner startups involved declined to comment on the financial arrangement they have with Xiaomi. The aforementioned unnamed executive said the agreement would vary with partners and the kind of product they are bringing to the table.

Xiaomi said it has deeply integrated its partners’ offerings into the app. As a result, users are able to see details such as disbursement of loans, lower interest and credit score in real time.

The company began testing the app with some users in India last month. During the trial, it disbursed loans of over 280 million Indian rupees ($3.9 million).

For Xiaomi, the new offering would help it make its services ecosystem more engaging to consumers. The company, which recently posted one of its slowest-growing quarterly reports, has been attempting to cut its reliance on hardware products and make more money off its internet services and through ads.

One of the services it is increasingly focusing on is Mi Finance. In a quarterly earnings call earlier this year, the company said, “we are also making it a point of focus to diversify our advertising customer base. We are achieving this diversification through expanding into more vertical industries, such as e-commerce, gaming, finance, education, and small and medium-sized enterprises.”

In March this year, Xiaomi launched Mi Pay, a UPI-powered payments app that is part of its Mi Finance ecosystem, in India. The app has already amassed over 20 million registered users in the country, company executives said today.

Hong Feng, co-founder and senior vice president of Xiaomi, said the company understands the consumption behavior of its 300 million users.

“It is one of the strengths we aim to leverage to build a stronger Mi Finance business globally. We see a huge opportunity for consumer lending in India with estimations reaching up to $1 trillion dollars in digital lending by 2023, as per a report from BCG. This makes us believe that our Mi Finance business, based on solutions such as Mi Pay and Mi Credit, can truly revolutionize the Indian fintech industry,” he said.

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Revolut supports direct debits in the UK

Posted by | Apps, challenger bank, Europe, Finance, fintech, Mobile, Revolut, Startups | No Comments

Fintech startup Revolut is adding a key feature for users who want to replace their traditional bank account altogether. You can now pay with GBP direct debits. Revolut already added EUR direct debits last year.

While most people use cards to pay for goods and services in the U.K., some businesses require you to pay with direct debit. It can be a utility bill, a gym membership or a phone contract for instance.

Compared to card transactions, direct debits pull money directly from your account and transfer it to the recipient’s account. It doesn’t go through Mastercard or Visa. Some businesses love direct debits because it’s usually cheaper than card processing fees. Direct debits also don’t have an expiry date, unlike cards.

Customers from the European Economic Area can now share their GBP account details for direct debits in the U.K. Direct debits are protected against some fraud and payment errors by the U.K. Direct Debit Guarantee.

Revolut has partnered with Modulr for this feature as it uses Modulr’s API. Business customers will also be able to take advantage of direct debits. You can now pay suppliers with your account details, which could be convenient for large sums of money for instance.

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Fabric’s new app helps parents with the hard stuff, including wills, life insurance & shared finances

Posted by | Apps, children, fabric, family, Finance, financial planning, kids, life insurance, Mobile, parents, Startups, wills | No Comments

A new app called Fabric aims to make it simpler for parents to plan for their family’s long-term financial well-being. The goal is to offer parents a one-stop-shop that includes the ability to ability for term life insurance from their phone, create a free will in about five minutes, and collaborate with a spouse or partner to organize key financial accounts or other important documents. In addition, parents are able to coordinate with beneficiaries, children’s guardians, attorneys, financial advisors, and others right from the app.

Fabric was originally founded in 2015 by Adam Erlebacher, previously the COO at online bank Simple, and Steven Surgnier, previously the Director of Data at Simple. The company last year raised a $10 million Series A led by Bessemer Venture Partners, after having sold life insurance coverage to thousands of families.

Since launch, Fabric has expanded beyond life insurance to offer other services, like easy will creation and the addition of tools that help families organize their financial and legal information in one place. The idea, the company explained at the time, was to offer today’s busy parents a better alternative to meetings with agents to discuss complicated life insurance products. Instead, the company offers a simple, 10-minute life insurance application and the option to connect with a licensed team if they need additional help, as well as a similarly simplified will creation workflow.

As with the founders’ earlier company, Simple, which offered a better front-end to banking while actual bank accounts were held elsewhere, Fabric’s life insurance policies are issued by “A” rated insurer, Vantis Life, not Fabric itself.

However, until now, Fabric’s suite of services were only available on the web. They’re now offered in an app for added convenience. The app is initially available on iOS with an Android version in the works.

“Money can be especially stressful when you’re trying to build a family and a career,” said Fabric co-founder and CEO Adam Erlebacher. “In one survey by Everyday Health, 52% of respondents said financial issues regularly stress them out, and people between the ages of 38 to 53 were the most stressed out financially. Parents want to have more control over their families’ long-term financial well-being and today’s dusty old products and tools are failing them,” he added.

Using the Fabric app, parents can take advantage of any of its offerings, including the option to apply for life insurance from the phone and get immediate approval. The app also makes it possible to share the policy information with beneficiaries, so it doesn’t get lost.

Another feature lets you create your will for free, and share that information with key people as well, including the witnesses you need to coordinate with in order to finalize the will, for example. And a spouse can choose to mirror your will, which speeds up the process of creating a second one with the same set of choices.

Fabric also helps to address an issue that often only comes up after it’s too late or in other emergency situations — organizing both parents’ finances in a single place. Many working adults today have not just a bank account, but also have investment accounts, 401Ks, IRAs, and credit cards, or a combination of those. But their partner may not know where to find this information or where the accounts are held.

The app, which we put through its paces (but didn’t purchase life insurance through), is very easy to use. It starts off with a short quiz to get a handle on your financial picture. It then delivers you to a personalized homescreen with a checklist of suggestions of what to do next. Naturally, this includes the life insurance application, as this is where Fabric’s revenue lies. And if you’re lacking a will and have other fiances to organize, these are featured, too.

The online forms are easy to fill out, despite the smartphone’s reduced screen space compared with a web browser, and Fabric has taken the time to get the small touches right — like when you enter a phone number, the numeric keypad appears, for example, or the integration of address lookup so you can just tap on the match and have the rest autofill. It also saves your work in progress, so you can finish later in case you get interrupted — as parents often do. And it explains terms, like “executor,” so you know what sort of rights you’re assigning.

Given its focus, Fabric protects user information with bank-grade security, including 256-bit encryption, two-factor authentication, automatic lockouts, biometrics, and other adaptive security features.

Fabric isn’t alone in helping parents and others financially plan wills and more from their iPhone. Other apps exist in this space, including will planning apps from Tomorrow, LegalZoom, Qwill, and others. Plus many insurers offer a mobile experience. Fabric is unique because it puts wills, insurance, and other tools into a single destination, without complicating the user interface.

Fabric’s app is a free download on the App Store. 

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Facebook shares rise on strong Q3, users up 2% to 2.45B

Posted by | Advertising Tech, Apps, Earnings, Facebook, Facebook ads, Facebook Earnings Q3 2019, Facebook Political ads, Finance, Mark Zuckerberg, Mobile, Social, TC | No Comments

Despite ongoing public relations crises, Facebook kept growing in Q3 2019, demonstrating that media backlash does not necessarily equate to poor business performance.

Facebook reached 2.45 billion monthly users, up 1.65%, from 2.41 billion in Q2 2019 when it grew 1.6%, and it now has 1.62 billion daily active users, up 2% from 1.587 billion last quarter when it grew 1.6%. Facebook scored $17.652 billion of revenue, up 29% year-over-year, with $2.12 in earnings per share.

Facebook Q3 2019 DAU

Facebook’s earnings beat expectations compared to Refinitiv’s consensus estimates of $17.37 billion in revenue and $1.91 earnings per share. Facebook’s quarter was mixed compared to Bloomberg’s consensus estimate of $2.28 EPS. Facebook earned $6 billion in profit after only racking up $2.6 billion last quarter due to its SEC settlement.

Facebook shares rose 5.18% in after-hours trading, to $198.01 after earnings were announced, following a day where it closed down 0.56% at $188.25.

Notably, Facebook gained 2 million users in each of its core U.S. & Canada and Europe markets that drive its business, after quarters of shrinkage, no growth or weak growth there in the past two years. Average revenue per user grew healthily across all markets, boding well for Facebook’s ability to monetize the developing world where the bulk of user growth currently comes from.

Facebook says 2.2 billion users access Facebook, Instagram, WhatsApp or Messenger every day, and 2.8 billion use one of this family of apps each month. That’s up from 2.1 billion and 2.7 billion last quarter. Facebook has managed to stay sticky even as it faces increased competition from a revived Snapchat, and more recently TikTok. However, those rivals might more heavily weigh on Instagram, for which Facebook doesn’t routinely disclose user stats.

Facebook ARPU Q3 2019

Zuckerberg defends political ads policy

Facebook’s earnings announcement was somewhat overshadowed by Twitter CEO Jack Dorsey announcing it would ban all political ads — something TechCrunch previously recommended social networks do. That move flies in the face of Facebook CEO Mark Zuckerberg’s staunch support for allowing politicians to spread misinformation without fact-checks via Facebook ads. This should put additional pressure on Facebook to rethink its policy.

Zuckerberg doubled-down on the policy, saying “I believe that the better approach is to work to increase transparency. Ads on Facebook are already more transparent than anywhere else,” he said. Attempting to dispel that the policy is driven by greed, he noted Facebook expects political ads to make up “less than 0.5% of our revenue next year.” Because people will disagree and the issue will keep coming up, Zuckerberg admitted it’s going to be “a very tough year.”

Facebook also announced that lead independent board member Susan D. Desmond-Hellmann has resigned to focus on health issues.

Earnings call highlights

Facebook expects revenue deceleration to be pronounced in Q4. But CFO David Wehner provided some hope, saying “we would expect our revenue growth deceleration in 2020 versus the Q4 rate to be much less pronounced.” That led Facebook’s share price to spike from around $191 to around $198.

However, Facebook will maintain its aggressive hiring to moderate content. While the company has touted how artificial intelligence would increasingly help, Zuckerberg said that hiring would continue because “There’s just so much content. We do need a lot of people.”

Zuckerberg Libra 1

Regarding Libra’s regulatory pushback, Zuckerberg explained that Facebook was already diversified in commerce if that doesn’t work out, citing WhatsApp Payments, Facebook Marketplace and Instagram shopping.

On anti-trust concerns, Zuckerberg reminded analysts that Instagram’s success wasn’t assured when Facebook acquired it, and it has survived a lot of competition thanks to Facebook’s contributions. In a new talking point we’re likely to hear more of, Zuckerberg noted that other competitors had used their success in one vertical to push others, saying “Apple and Google built cameras and private photo sharing and photo management directly into their operating systems.”

Scandals continue, but so does growth

Overall, it was another rough quarter for Facebook’s public perception as it dealt with outages and struggled to get buy-in from regulators for its Libra cryptocurrency project. Former co-founder Chris Hughes (who I’ll be leading a talk with at SXSW) campaigned for the social network to be broken up — a position echoed by Elizabeth Warren and other presidential candidates.

The company did spin up some new revenue sources, including taking a 30% cut of fan patronage subscriptions to content creators. It’s also trying to sell video subscriptions for publishers, and it upped the price of its Workplace collaboration suite. But gains were likely offset as the company continued to rapidly hire to address abusive content on its platform, which saw headcount grow 28% year-over-year, to 43,000. There are still problems with how it treats content moderators, and Facebook has had to repeatedly remove coordinated misinformation campaigns from abroad. Appearing concerned about its waning brand, Facebook moved to add “from Facebook” to the names of Instagram and WhatsApp.

It escaped with just a $5 billion fine as part of its FTC settlement that some consider a slap on the wrist, especially since it won’t have to significantly alter its business model. But the company will have to continue to invest and divert product resources to meet its new privacy, security and transparency requirements. These could slow its response to a growing threat: Chinese tech giant ByteDance’s TikTok.

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