Fintech: Canopy expands into commercial lending, part of $400B digital lending market.
Canopy's latest product, Canopy Connect, is a lending workflow builder integrated into apps like Quickbooks, Salesforce, and AWS
Hi Fintech Futurists —
You’re the best, today’s agenda below.
LENDING: Loan Servicing fintech Canopy ventures into commercial lending following its recent fundraise (link here)
LONG TAKE: The $2B of tokenized Real World Assets (RWAs) trading onchain in 2023 (link here)
PODCAST CONVERSATION: Can open banking power AI-based finance?, with Bud CEO Ed Maslaveckas (link here)
CURATED UPDATES: Payments, Lending, Digital Investing
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Digital Investment & Banking Short Takes
LENDING: Loan Servicing fintech Canopy ventures into commercial lending following its recent fundraise (link here)
Lending is the lifeblood of new growth, providing companies with capital to fund business investments, from working capital to lines of credit. It remains an attractive market for fintechs and other software as a service platforms, despite compressed valuation multiples in the sector. The fintech lending space is expected to grow from $450B in revenue in 2020 to $5T by 2030, highlighting the sizable potential of the market overall. While recent venture capital flow into the space has also slowed down, we think this frames an opportunity for growth for the right players that are able to expand into a competitive position in the current environment.
The complexity of the financial product workflow, which benefits from the application of modern technology, is a lever that fintech startups can focus on to be more effective. Canopy, a loan servicing software for unsecured loans, raised $15MM in October to expand such a value proposition, with a loan servicing API built for fintechs to offer and service lending products throughout their lifecycle.
Once a loan has been granted to a borrower, it needs to be serviced – this is the process of collecting interest, principal, and escrow payments, as well as managing the associated data. Canopy’s platform helps companies build lending products and takes care of the loan management and servicing components. As a new lending product enters the marketplace, the go-to workflow often entails several systems operating independently. The company’s latest product, Canopy Connect, is a lending workflow builder integrated into apps like Quickbooks, Salesforce, and AWS.
Canopy charges a platform fee and a variable fee on the total value of the loans on its platform. The platform will service over $1B in loans this year, with gross margins over 80%, and impressive net revenue retention is at over 175%. In contrast, many digital lending businesses have struggled to find profitability in the current part of the credit cycle, which suggests an over-reliance on the financial product part of the equation, relative to the “tech” part of the value proposition.
Given the current market conditions, the raise is promising — fintech funding dropped 49% year over year to $23B in the first half of 2023, and even reached new lows this past Q3. Similarly, public comps like SoFi or LendingClub face similar pressure. Now that rate hikes have slowed, we expect for some of these haircuts to start getting reversed by demonstrating positive operating performance.
Canopy exemplifies the broader industry move away from holistic financial technology stacks to modular composability, separating the distribution through user experience to embedded financial manufacturing. Fintech has enabled companies to leverage specialized APIs and applications that focus on providing the most value in a given niche rather than trying to offer everything at once.
To learn more about Canopy, check out our Podcast with the CEO below:
👑 Related Coverage 👑
Blueprint Deep Dive
Long Take: The $2B of tokenized Real World Assets (RWAs) trading onchain in 2023 (link here)
Today we consider the trend of tokenized Real World Assets, and put them into broader context for the industry.
We look at the evolution of institutional tokenized finance, from DLT to STOs to RWAs, and show the quantitative metrics and growth over the last year by the relevant asset classes, from stablecoins, to treasuries, to private credit. Finally, we parse the key participants in the space and compare them to the fintech digital lending generation of old.
🎙️ Podcast Conversation: Can open banking power AI-based finance?, with Bud CEO Ed Maslaveckas (link here)
In this conversation, we chat with Edward (Ed) Maslaveckas - CEO and co-founder at Bud Financial (Bud).
Bud is an API platform with thoughtful data and service capabilities, is backed by world-renowned financial institutions and gearing up to have the largest team in the UK working on Open Banking. Ed founded Bud alongside his school friend, George Dunning, in 2015. Under his leadership, Bud has grown to some 120 people, and secured more than 100m in investment. The company, which is headquartered in London, is leading the charge in making every financial decision simple by turning transactional data into rich customer insight. It counts global banks, credit bureaus and fintechs among its clients.
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Curated Updates
Here are the rest of the updates hitting our radar.
Paytech
⭐ SumUp taps €285M more in growth funding to weather the fintech storm - TechCrunch
Visa and Mastercard lower Canadian interchange fees - Finextra
UK’s FCA proposes new rules to protect access to cash - Fintech Futures
Samsung pushes mobile wallet take-up with Mastercard partnership - Finextra
Neobanks
⭐ German fintech unicorn Trade Republic is granted a full EU banking licence - Sifted
Canadian fintech Koho raises C$86m - Finextra
Lending
⭐ Liberis bags $112m in debt financing to fuel expansion in North America and Europe - Fintech Futures
Digital Investing
⭐ Scalable Capital closes on €60 million equity financing round - Finextra
BlackRock to roll out first generative AI tools to clients next month - FT
Robinhood CEO defends payment for order flow, says practice is ‘here to stay’ - CNBC
Canapi Ventures raises $750m fintech fund - Finextra
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