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FINTECH NEWS IN THE SPOTLIGHT
A few weeks ago, Visa announced the acquisition of Tink, the Swedish startup in Open Banking, for € 1.8bn. In the big scheme of things, there are now hundreds (at least 200 according to our ranking) of Fintech companies worth at least $1bn, so why is this acquisition important ? Read ahead.
What is Tink?
Tink is a startup in the space of API aggregators, and solves a problem of standardisation. If a Fintech startup (or a bank, a tech company, anyone really) wants to get data from Bank 1, it would need to build a specific connector for Bank 1. If it needs to connect to 100 banks, it would have to build 100 different connectors. And if 100 Fintech startups want to connect to 100 banks, 10,000 connectors would need to be created.
Companies like Tink facilitates this process by building an intermediary layer, where a company only needs to connect to Tink to get access to all these banks.
Tink was created in 2012 by Daniel Kjellen and Fredrik Hedberg in Swedden, and they started initially as a PFM (Personal Finance Management) app to help users consolidate their bank accounts – similar to Mint in the US. This was a pure B2C model. As Tink grew, they had to connect to a very large number of banks, and realised that many other organisations were facing the same issue. From 2017, they therefore focused on the B2B market and created an API platform for companies to connect directly to banks.
Tink raised money quite regularly, with the main funding rounds as follows:
- $5m in 2014,
- $10m in 2016,
- $60m in 2019 (valuation of $270m),
- $100m in January 2020 (valued at $500m),
- $100m in December 2020 (valued at $800m)
- Acquired by Visa in June 2021 ($2.2bn)
Both in terms of business and funding, Tink’s growth hugely accelerated after they shifted to their API platform strategy for B2B. Other companies in the same space are Yodlee (one of the pioneers in the space, acquired by Envestnet), Plaid (last valued at $13bn), Yolt Technology Services (owned by ING), TrueLayer (that just raised $70m).
Why is the Visa / Tink acquisition important?
This acquisition is at the intersection of many trends in financial services – all colliding at the same time:
- The growth of Open Banking from a regulatory standpoint: Tink’s growth was catalysed by PSD2 in Europe
- The business model of Platforms in financial services: 5 of the top 10 largest financial institutions are now platforms, and not banks.
- The central role of Digital Payments in the value chain of financial services: they represent now 39% of bank revenues
- The growth of Fintech startups as new entrants in financial services
Those trends are not new and have unfolded during the last few years, and there was an existential question for companies such as Visa or Mastercard 5 years ago: will Open Banking and Fintech be an enabler or a threat for the credit card companies?
In the short-term, it was clearly an enabler, since all Fintech startups and new entrants were not trying to replicate the payment rails, but on the contrary leveraged on them.
In the long-term however, what happens to credit card companies when account to account payments are made possible instantaneously and without fees? This was an important question of business model for the credit card companies, and they broadened their focus from being credit card networks to digital payment networks and even banking infrastructure.
This strategy translated in accelerated innovation initiatives, such as innovation labs, crypto currency experiments, but also external acquisitions, such as Mastercard buying Vocalink ( manages the Faster Payment network in the UK), and here Visa acquiring Tink. This is not the first attempt of Visa in the space, with the failed acquisition of Plaid a year ago – some blamed it on anti-competition laws, although seller remorse might have been a factor too.
The Visa / Tink acquisition is therefore important because:
- The former giants of financial services (banks) are being challenged by new giants (payments / tech companies) which are much more aggressive in terms of strategy and implementation
- The new payment and banking rails are being built today, and whether it’s Open Banking or Central Bank Digital Currencies, is already transforming the industry
- Open banking as trend not stopping anytime soon, which helps new entrants to get into FS
- Large companies can make successful strategic decisions in fast changing world
- B2C is easier to understand, but B2B can be better strategy for startups
- Sweden, and in general the Nordics, doing very well with Fintech (Klarna, Tink, Pleo)
The world is grappling with nearly a fourth of its population being financially excluded. That’s roughly 1.7 billion people! Morocco, Vietnam, Egypt, Philippines and Mexico top the list of the most unbanked countries in the world. Lack of funds, costly fees, general distrust is what’s urging the unbanked to steer clear of banking services. Maybe Fintechs can help?
European cryptocurrency startups scooped up €805 million as of April 2021 – more than the sector has ever raised in any one single year!
UPCOMING FINTECH EVENTS
AltFi Digital Wealth Forum 2021
Wed. 14 | Get up to speed with the accelerating winds of change in the wealth management, savings and investing sectors and get the latest insights on Robo/human advice to Open Banking.
Fintech: Payment System Integration Opportunities for E-Commerce Businesses
Sat. 17 | Grab a cup of coffee and join in for a virtual networking session with business experts as they discuss payment solutions in online retail.
Capitalising on Cryptocurrency Market Opportunities
Thu. 28 | Join an interactive roundtable with our industry panel on ways in capitalising on crypto technologies for commercial benefit.
COURSE OF THE WEEK
Dr. Oriol Caudevilla, a FinTech Advisor, Management & Strategy Consultant and Researcher – will take you through an analysis of the CBDC marketplace and highlight the golden opportunities in the marketplace through his course on Central Bank Digital Currencies.
EVENT OF THE WEEK
Rewatch this insightful webinars on central bank latest moves in the payments realm. Leading experts from the Monetary Authority of Singapore (MAS), National Bank of Cambodia, Abu Dhabi Global Market and the Central Bank of Hungary – joined in to discuss the role of regulators in new digital ecosystem payments, the emerging innovations, and digital currency initiative through CBDCs.
UNICORN OF THE WEEK
Why is it interesting?
- Denmark ! (See Tink)
- Focused on SMEs (fast growing area, but less visible)
- Fintech talents building up (Pleo founders were at Tradeshift)
QUOTE OF THE WEEK
“It’s not that much about the knowledge…but very often what’s challenging is that it’s such a different mindset”Philippe Gelis, CEO of Kantox, on the skills and mindset in Fintech startups.
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