Text reading Fintech Fortnightly over an abstract image of a digital net.

Every fortnight, The Banker showcases interesting insights from the world of fintech that caught our eye. Liz Lumley reports.

Fintech is a wide-ranging, multi-sector and global industry, growth of which influences 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 fuelled 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 fall in fintech investment may be premature, while open banking continues to grow. The UK regulator cracks 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 returns its gaze to US expansion. 

UK fintech investment falls 56% in 2022 – KPMG

The global fintech market attracted $164.1bn across 6006 deals in 2022 – a strong showing despite falling from the high of $238.9bn seen in 2021. The payments space remains the strongest fintech subsector globally, attracting $53.1bn in total investment.

The sharp drop-off in fintech investment between H122 and H222 – from $119.2bn to $44.9bn – highlights the rapidly shifting market conditions much more clearly. 

However…

Fintech may be on the road to recovery – Royal Park Partners 

Royal Park Partners’ January 2023 report reveals that fintech showed a partial recovery last month. Some standout findings include:

  • January 2023 activity already surpassed Q422 in terms of deal count and value;
  • globally, 66 companies raised $2.3bn, with slightly more activity in the late stage spread across payments, lendtech, insurance, and crypto and blockchain;
  • eighty-five M&A transactions for a total $5.8bn of value were disclosed last month; and 
  • Europe (35) and North America (35) act as the main playing fields for consolidation. 

The report offers a detailed breakdown of financing transactions and valuation levels by vertical and subvertical, as well as a general outlook on fintech market activity. 

Royal Park Partners helps businesses raise capital, as well as advising on M&As and exits, including IPOs.

As well as…

Open banking payments transactions to surpass $330bn globally by 2027, as bill payments and ecommerce integrations drive adoption – Juniper Research 

A study from Juniper Research has found that global open banking payments transaction values will exceed $330bn globally by 2027; up from $57bn 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 simplicity of use versus alternatives, such as card payments. 

The research anticipates that efforts to educate consumers about the security and benefits of open banking will catalyse market growth, helping alleviate common consumer fears and misconceptions regarding the potential misuse of financial data to which third parties are granted access.

The research also predicts the development of new use cases will be instrumental in ensuring that open banking fulfils its potential. One of the most promising new use cases is the ability to use open banking payments to pay tax bills, as introduced in the UK. As bill payments using open banking expand outside of the UK, they are expected to account for more than $59bn globally in transaction values by 2027.

Fintech regulation: crackdown on buy now, pay later is about time – FT Lex

BNPL is about immediacy. That cannot be said of efforts to police 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 escape 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.

However…

Zopa acquires BNPL platform DivideBuy

The deal cements Zopa’s move into the $7.2tn embedded finance space, and comes only two weeks after it raised £75m to spearhead a 2023 M&A push.

The acquisition will increase Zopa’s revenue by at least 20% and is a big step towards its ‘BNPL 2.0’ vision for responsible and sustainable BNPL consumer lending.

Monzo restarts US expansion plans – Sifted 

UK digital bank Monzo is doubling down on stateside expansion but has no immediate plans for pursuing a banking licence in the world’s biggest economy, according to its chief operations officer. 

“In terms of 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 hiring for a new US CEO to lead the charge. 

It’s not the first time that Monzo has flirted with US expansion: Carol Nelson was hired as US CEO in February 2021. But she stepped down last year, shortly after Monzo withdrew its banking licence application in the US when it became clear regulators were unlikely to give their approval.  

CBUAE launches a Financial Infrastructure Transformation Programme to accelerate the digital transformation of the financial services sector

The programme comprises nine key initiatives to enable the UAE’s competitiveness in becoming a financial and digital payment hub and a centre 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 programme’s initiatives includes the launch of a series of digital payment infrastructures and services such as a card domestic scheme, an instant payments platform, and the issuance of a central bank digital currency for cross-border and domestic uses. These digital payment initiatives will drive financial inclusion, promote payment innovation, security and efficiency, and achieve a cashless society.

New research confirms: English law key to UK’s global leadership in digital financial markets

The Legal Statement on the Issuance 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 issue and transfer of equity or debt securities on blockchain and DLT systems, have grown in importance as digital transformation becomes the top priority for many institutions operating in the financial markets. The statement finds that there are clear commercial benefits for conducting digital security transactions under English law.

This follows a public consultation and research commissioned by LawtechUK, which reinforces the important role that English law has to play in maintaining the UK’s position as a global leader in financial services. The research, completed by the 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 capital markets, reinforcing the UK’s position as a leading jurisdiction for internationally mobile transactions.

Meanwhile…

Study reveals countries with the highest interest in Bitcoin – cryptobetting.org

The US ranks as the country most interested in bitcoin across the globe, with a total score of 54.95 out of 100. El Salvador ranks second, with bitcoin being a legal tender in the country. Vietnam is the country with the highest interest in bitcoin in Asia and places third globally. 

Cryptocurrency betting experts cryptobetting.org combined Google Trends searches across the globe for countries searching for bitcoin, alongside 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 allocate each country a rating out of 100 to reveal their interest in bitcoin. The ranking is as follows: 

1. US – 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 places sixth on the list and is the European country with the highest interest in bitcoin, with a score of 19.14 out of a 100. Rounding out the top 10 is 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. 

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