The Week in Digital Wealth (6/22/21)


By: Gerelyn Terzo 

Fintechs are increasingly coming into their own, with investment banks hunting ways to rub shoulders with the digital crowd. In the past week, JPMorgan made a splash with a fintech investment while the IPO pipeline is filling in the U.S., as well as globally. PayPal is upping the ante for merchants as it boasts its prowess in the competitive payments landscape, while central bank digital currencies are all the rage. Let’s dive in. 

Big Bank Makes a Big Splash

JPMorgan is taking the adage, ‘if you can’t beat them, join them,’ to heart. The Wall Street bank is making a fintech push with its planned acquisition of challenger bank Nutmeg Saving and Investment Ltd., a UK-based digital wealth manager. The deal will give JPMorgan a footprint in the UK’s retail banking arena, where Nutmeg reportedly boasts approximately 140,000 users across $5 billion in assets. 

Terms of the deal were not disclosed, but according to reports, the price tag could be as high as $1 billion. JPMorgan, which is in a separate initiative introducing a digital bank in the U.K. under the Chase brand, will go head to head with the likes of Starling, Monzo and Revolut. 

Speaking of Revolut, the London-based startup suffered a widening of its operating losses, which doubled last year to $280 million amid a sharp rise in administrative costs. One bright spot at Revolut is the cryptocurrency segment, where the fintech continues to invest.  Crypto trading generated GBP 38.7 million in revenues as new clients flocked to the Revolut platform. The number of retail customers soared 45% last year to 14.5 million users, while its commercial clients grew twofold to more than 500K. 

IPO Pipeline 

Digital payments platform Wise, which was formerly known as TransferWise, plans to go public in London via a direct listing. Wise co-founder and CEO Kristo Kaarmann touted the direct listing as a cheaper and more transparent way for the company to make its public market debut. As a result of the deal, Wise shares already held by investors can be traded on the LSE. It will be interesting to see whether Wise sets off a trend of tech plays choosing this approach to going public in the U.K. Kaarmann tweeted about his journey to pursuing a public listing and what he hopes it will achieve for customers and stakeholders. 

Source: Twitter 

Meanwhile, financial services company Ant Group could be attempting ‘take two’ for a public listing. Jack Ma’s company is reportedly exploring listing its shares by year-end, albeit at a lower valuation than when it attempted a listing last year. The company is facing a 60% decline in its valuation to $120 billion after revenues have taken a hit. When Ant attempted a dual listing in Hong Kong and Shanghai last November, it boasted a valuation of $320 billion. The Chinese government thwarted those plans and blocked the deal, and Ant Group has since promised to become more regulated. 

Amazon Payment Services, which is the company’s Middle Eastern and North African payments arm, has introduced its maiden fintech lab in Dubai. The Amazon Fintech Lab made its debut in the DIFC Innovation Hub in the UAE. The lab is designed to support local entrepreneurs and developers as well as provide education on the global digital payments space. Participants will engage in networking activities and have access to mentors, in addition to a host of other cool perks. Amazon is looking to turn ideas into disruptive realities in the fintech arena. 

Also on the payments front, PayPal is bolstering U.S. merchant fees to better reflect the value that its products and services bring to bear, the company said. The higher fees represent the rising influence that PayPal has in the competitive payments landscape, particularly since the pandemic. According to the company, PayPal boasts a customer conversion rate for merchants of 60% vs. customers who use other platforms. They say consumers are almost three times more likely to hit the buy button when they have the option to use PayPal. The changes in the fee model will take effect on Aug. 2. 

In addition, Los Angeles-based Emburse has introduced Emburse Pay – B2B Payments, a payables solution that will be available for its Chrome River Invoice customers. The company says the new product lets companies do the following: 

  • Save time
  • Lower costs
  • Bolster efficiency 
  • Improve the user experience 

It will allow payments teams to track and confirm the invoice approval and payments process from soup to nuts in an automated way on one streamlined system. 

Digital Currency Race

Central bank digital currencies (CBDCs) have been a major part of the cryptocurrency narrative in 2021, and that trend is only gaining more steam. China has been out front with its digital yuan, which has been in the pilot phase. 

Now thousands of ATMs in Beijing will allow locals to withdraw the digital yuan, convert it to cash, or the other way around. Some 3,000 ATMs are strategically located across the city including at major shopping centers. Two Chinese banks — Industrial and Commercial Bank of China and the Agricultural Bank of China — are reportedly behind the initiative, which catapults China even further ahead in the CBDC race. 

In Africa, meanwhile, Nigeria is exploring the possible launch of its own CBDC. The West African nation plans to follow in China’s footprints and launch a CBDC pilot program possibly by year-end. Nigeria has been a hotbed for cryptocurrency transactions, specifically bitcoin, amid the uncertainty brought about in the economy due to the pandemic. The Nigerian government has cracked down on cryptocurrency transitions for banks, and this latest initiative appears to be another attempt by the Nigerian government to keep tabs on the trend toward crypto. 

The U.S., meanwhile, is facing a fork in the road for its possible pursuit of a CBDC. On the heels of Congressional hearings earlier this month, House members appear more eager to go down the CBDC path while the Senate continues to hem and haw on this front. In the meantime, other jurisdictions continue to embrace digital currency innovation, leaving their U.S. counterparts in the dust.