Weekly Briefing No. 175 | Card Wars, The German Fintechs Are Coming, and More

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Welcome to The FR. We’re always here for you.

In this edition:

  • Card Wars

  • German Fintechs Eye US Market

  • Is the Death of the IPO Greatly Exaggerated?

  • Regulation Coming for Cryptocurrency

  • Mexico’s Bank-Friendly President

Card Wars

The nation’s major card networks are seemingly in a fierce acquisition battle as they try to differentiate themselves from one another and from upstart fintech competitors as well. This week, Mastercard announced it has acquired Ethoca, which makes collaboration-based technology that enables card issuers, ecommerce merchants, and online businesses to increase card acceptance and recover lost revenue. This comes on the heels of its other recent acquisitions of fintech point-of-sale company Vyze and cross-border network Transfast.

Meanwhile, Visa recently acquired a cross-border payments company of its own, Earthport, in an attempt to expand its money movement network. This week, it also participated in a $250-million Series E funding round for card issuing platform Marqeta, a company with which Visa already has a partnership.

Not to be outdone, American Express has also recently acquired a spate of restaurant technology companies as it aims to add more services for its cardmembers.

What does this all mean? It’s clear that value-added services are prized more than ever before. The major card networks are not only competing against one another and other incumbent institutions, but against a whole host of fintechs as well. Consumers have a multitude of ways to make payments, both physically and digitally. It’s all about remaining “top-of-wallet” and ensuring consumers use their company’s card the most among the myriad options.

The German Fintechs Are Coming

Germany has one of the most robust and innovative fintech sectors in the world. A big reason is that the country has a regulatory landscape that seeks to work with and incubate start-ups, as opposed to stifling innovation. A number of German challenger banks and fintech firms have made waves over the past few years. And now a few have their sights set on the U.S. market.

Perhaps the star of German fintech is the digital challenger bank N26, formerly known as Number 26. It’s earned rave reviews since it debuted several years ago. Earlier this year, it made the announcement that it will shortly begin offering services to U.S.-based customers. Mambu, a German-based SaaS banking platform provider, also recently opened a second North American office, on the heels of a $30 million funding round.

Now another German fintech, Raisin, also plans to launch in the U.S., targeting consumers looking for better rates on savings accounts. Raisin was created to help Europeans shuffle their money around the continent to the highest-yielding savings account. It hopes to provide a similar service to U.S. customers, helping them chase high-yield savings accounts from state to state—accounts that many consumers are unaware of.

Given the savings crisis in America, we think such a service will catch on quickly for budget-conscious consumers.   

Is the Death of the IPO Greatly Exaggerated?

You might have heard the news over the past few weeks: The IPO is officially dead. Yes, many were quick to claim that Uber’s less-than-stellar (and that’s putting it mildly) stock debut was the final death knell of the “IPO craze.”

It was going to be the dot-com boom all over again. Get ready for Pets.com and Go.com redux. Uber’s face plant could certainly portend some future readjusting of the hype around each new tech IPO. But some also believe the boom will continue.

Indeed, The Wall Street Journal believes the IPO gravy train is still rolling strong, with investors “salivating over a huge backlog of initial public offerings” despite the lackluster starts for Uber and its rival Lyft. It points to companies such as content delivery firm Fastly, chemical-materials maker Avantor, and tech-enabled Chinese coffee chain Luckin Coffee, which all had strong market debuts recently. Perhaps it is simply the hype itself that needs to be dialed down a bit—especially over IPOs like Uber—and to come in line with reasonable expectations.

International Regulatory Standards Coming for Crypto

Cryptocurrencies are notorious for existing outside the normal regulatory oversight that governs most financial assets. Indeed, that’s a main selling point for many fans of crypto. But a group of international regulators this week outlined a plan to try and put some shackles on these shackle-less digital currencies.

The Financial Action Task Force (FATF), an intergovernmental body, is proposing a set of new rules governing the digital currencies, including that crypto providers would have to pass customer information to each other when transferring funds. This is known as the “travel rule,” and correspondent banks that process cross-border payments have long been subject to it.

While the new rules would not be legally binding, if the 36 countries that make up the FATF all enforce them, they would have some heft. Meanwhile, crypto industry representatives argued that the new rules would be difficult to enforce and encroach on user privacy. If enacted, these measures could significantly change the world of cryptocurrency.

Mexico’s Bank-Friendly President

Generally, left-wing politicians and banks are not on the same side. At least that’s the case in the United States, where the vast majority of our elected officials are unable to think independently, but simply toe the party line.

Mexico’s socialist,  nationalist president, Andrés Manuel López Obrador, is a bit different. He meets regularly with bank chiefs and has argued for less stringent regulation, suggesting banks can effectively police themselves. His ultimate goal: to get more Mexicans into the formalized banking system, believing it will help the poor and reduce Mexicans’ reliance on unregulated (and often shady) “shadow” financial services. It’s a pragmatic idea, and we hope he is successful.

Quote of the Week

“If banks cannot truly be customer intimate, they are doomed to be just dumb commodities, acting behind the scenes, like utilities.”

—JP Nicols