ONLINE BANKING: European Fintechs backed by Goldman, Paypal and Nordea get $200 Million

Open banking is happening, but it feels different than expected. The story is not the gradual digitization of incumbents through Application Programming Interfaces that liberate data and modernize incumbents. Incumbents -- other than a select few giants (e.g., JPM, Goldman, BAML, BBVA, Santander, DBS) -- are primarily performing Fintech Kabuki to look good for public equity investors. And even more, their financial performance is driven too much by exposure to capital, interest rates, regulation and compliance, physical retail costs and other risk-averse incentives, that tech-first approaches do not matter. The ice cube is melting slowly, like the media industry in early 2000s. This is how you get to absurdist PR poetry: in advertising their merger of equals, creating a $300 billion deposit bank, BB&T and SunTrust proclaim: "Two Legacies, One Future". Yes, the future of Planned Obsolescence.

Instead -- open banking looks like this. London-based Bud has raised a $20 million round from Goldman, HSBC, Investec and Sabadell to sit on top of legacy, obsolescent systems and pull data out of them into modern architecture. The firm has 80 fintech partners, and can connect third party developers into products like credit cards and insurance, as well as categorize the data exhaust coming from these sources using machine learning (but who couldn't at this point). Or take Tink, raising EUR 56 million in new funding from Insight Ventures and the Nordic banks, similarly going after the PSD2 as a service opportunity. Yet another example is Raisin, which just got $114 million for interest-rate shopping across the continent. The company has placed $11 billion across 62 partner banks; 62 banks that offered the most interest to customers, and therefore made the least money. This technology intermediator is accumulating the long tail of capital as product, while owning the customer directly.

So yes, these are all little bits. But such is the nature of erosion, until the rock-face breaks off into the ocean with a final splash. We note the investors in these entities are from the financial industry, so that creates a hedge. But we can also imagine Amazon, with a net promoter score 3x better than the national banks, snapping one of these apps as the industry yawns. Bud and Tink are cloud services, which could sit in AWS for finance. Raisin is a comparison shopping engine, at home in Prime. Neither make financial products, instead relying on the industry to get hollow in the middle and provide capital through the long tail. And capital is fungible -- for example, if a legitimate crypto-first bank comes along, offering 1% returns backed by insurance on a stablecoin, why shouldn't these open banking players connect to the decentralized ones? 

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Source: Forbes (Bud), Finn.ai (Amazon), TechCrunch (RaisinTink), Company Websites