Blueprint: $100MM for SME neobank Aspire; Optimism / Lido yield farms; NatWest buying into digital pensions for $174MM
The fintech world moves on across all fronts
Hi Fintech Futurists —
You are the best, today’s agenda below.
DEFI: Lido Finance Kicks Off Yield Farming Event on Ethereum Scaler Optimism
NEOBANK: Singapore-based neobank Aspire raises $100M from Lightspeed and Sequoia SEA
DIGITAL WEALTH: NatWest to buy workplace savings fintech Cushon for $174 mln
LONG TAKE: Why is FIS spinning out Worldpay after 4 years and a $17B writedown? (link here)
PODCAST CONVERSATION: Integrating smartphone behavioural data to manage credit risk and fraud, with Credolab CSO Michele Tucci (link here)
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Short Takes
DEFI: Lido Finance Kicks Off Yield Farming Event on Ethereum Scaler Optimism (link here)
Liquid staking protocol Lido Finance and optimistic roll-up provider Optimism are teaming up to bring liquid staking to Layer 2 venues. The new initiative is named LidoOnLayer2 and is backed by 1MM OP tokens (about $2.5MM) from Optimism to catalyze activity.
As a reminder, Lido allows users to stake any amount of ETH in return for stETH, which accrues ETH denominated interest fractionally, and is liquid. Users can thereafter rehypothecate their stETH to earn yield or as collateral in other protocols. Optimism is an L2 built on Ethereum that batches transactions before execution, thereby reducing cost and scaling throughput.
LidoOnLayer2 is incentivising liquidity providers; when users move their stETH onto Optimism, they will also be rewarded with OP tokens — stETH will become wrapped stETH (wstETH) and will be usable on Optimism. To boost liquidity provisioning Optimism also created “priority pairs” of tokens, i.e., those for which they want liquidity pools set up, such as wstETH-ETH and various stablecoin pairings. A user can setup liquidity on DeFi protocols like Aave to become eligible for the rewards.
Token incentives create demand, but they also come with risks, such as potential devaluation of Optimism’s token due to increased circulating supply without increased utility. However, if Optimism attracts enough users as a result and becomes more popular, demand may drive price up. Still if those tokens are sold off promptly, will the increased activity on the L2 be worth the trade? Perhaps this is the only equilibrium possible in Web3 competition — Optimism must fend off competition from Arbitrum and the growing number of zkEVM L2s.
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NEOBANK: Singapore-based neobank Aspire raises $100M from Lightspeed and Sequoia SEA (link here)
Neobank funding is coming back. Aspire, a Singapore-based bank geared towards SMEs, has raised a $100MM Series C from Lightspeed, Sequoia Capital, PayPal, and Tencent. Created in 2018, the neobank gives customers cross-border bank accounts, corporate cards, automated invoice processing and payable and receivable management.
The company focuses on unifying the financial operating stack to reduce complexity and time. It integrates with Zero, Quickbooks, and Accurate to help customers aggregate a single source of financial truth, as well as minimising the amount of platforms that they need to use. Over the past 12 months, the company’s annualised payments volumes have tripled to $12B, serving more than 15,000 businesses in Southeast Asia. Simplicity can be the key to success.
We found this notable given $100MM is a fairly big round, particularly given that neobank funding has been dropping as investors look for profitability. Neobank revenues typically rely on interchange fees, which require high transaction volumes at low margins. Aspire goes after SMEs, who are a more profitable segment, with higher volumes and demand for high-margin products like receivables funding and working capital.
👑Related Coverage👑
DIGITAL WEALTH: NatWest to buy workplace savings fintech Cushon for $174 mln (link here)
UK bank NatWest acquired an 85% stake in Cushon, a workplace savings and pensions fintech, for £144MM. The deal helps Natwest develop its financial wellbeing offering for commercial customers and employees. After the deal, which is expected to complete in later 2023, Cushon will continue to work with existing clients while also being distributed to NatWest commercial customers.
Cushon’s primary products include a workplace ISA and master trust pension. The latter provides an investment strategy built to minimise the CO2 emissions of investments; other products include Junior and Lifetime ISAs, and a general investment account. Cushon is targeting a growing challenge — the average UK employee is expected to outlive their savings by 10 years., and 60% of people are at risk of missing out on an adequate standard of living in retirement, despite automatic workplace pension enrollment coming into effect ten years ago.
Pensions and retirement are a great market for digital wealth and digital investing, but the distribution channels into those markets are often very challenging for startups to penetrate. Plan sponsors in the US, for example, are very sticky, and it’s difficult to launch new ones given the huge switching costs for employers. To that end, we can see why having a large traditional financial institution offering a tech enabled retirement product to its existing footprint is an easier proposition that going it alone.
Long Take: Why is FIS spinning out Worldpay after 4 years and a $17B writedown? (link here)
We look at the news that FIS is spinning out Worldpay and taking a $17B write down on the $43B acquisition price.
The failure of industry consolidation to drive shareholder value is an interesting and complex story that arises out of multiple issues. Is it a problem of Strategy? Operations? Product? Or the broader industry context changing its valuation metrics for comparable businesses? The analysis looks back at the rationales at the beginning of the acquisition, and assesses the current situation.
Podcast Conversation: Integrating smartphone behavioural data to manage credit risk and fraud, with Credolab CSO Michele Tucci (link here)
In this conversation, we chat with Michele Tucci, the Managing Director in North and Latin America and Chief Strategy Officer of CredoLab, the largest developer of bank-grade digital credit risk scorecards based on mobile device data.
An enthusiastic strategic thinker and business developer, Michele has 19 years of demonstrable track record of building and marketing online, mobile and offline payments products, consumer lending, cards, and FinTech solutions. Before joining CredoLab, he worked with Intesa Sanpaolo Bank, Capital One Bank, MasterCard, Telecom Italia Mobile and conducted business in 43 countries across the US, Asia, Australia, Europe, Russia, the Middle East, and Africa.
Rest of the Best
Here are the rest of the updates hitting radar.
NEOBANK- Neobank Vexi raises millions to offer young Mexicans lower interest rate credit cards
RISK - Sikoia raises $6 million
CREDIT - Highbeam secures $10M loan to provide credit, spend monitoring and more to e-commerce retailers
BANKING - Rhino is looking to raise more money
INSURTECH - BNP Paribas Cardif partners with Lemonade
ROBOADVISOR - The Rise Of Robo-Advisors In DeFi: A Game-Changer For Investors?
ROBOADVISOR - Saudi robo-advisor secures sharia certification
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Later this week, we will share our Short Takes on the latest Web3 and Digital Investing news, reviewing several companies. If you’d like us to look at any specific item, feel free to share your thoughts in the comments below. We will provide our best analysis in response to your requests.