Daily Review: The Markets Are Shrinking for 11,000 FinTech Startups Around the World

There is a limited variety of business strategies employed by technology and financial companies to remain competitive in the marketplace. And while most businesses have a hybrid model, there are often more distinguishable hallmarks of one model or another in their development. One of the ways technology companies are growing their reach is through an ecosystem model, where corporations aim to become an operating system of one’s life, deeply integrating their comprehensive suite of services with each other and feeding data into their other offerings (Alibaba Group).

Integrations into complementary fields, and even in the same field, is also a popular approach – the right partnership can make the business, extending its services to customers of another service, adding millions in the most impressive cases (JPMorgan Chase + OnDeck, Grab + Maybank, and more).

An acquisition is another way to integrate advanced technology and gain additional touch points with customers, absorb a new massive customer base, or expand consumer services, which is what Microsoft and Vodafone did this month.

Pick #1. Chinese FinTech’s Global Future Is Arriving Now

Alipay, which claims to have 500 million active users, along with its rival Tencent, controls almost all of the Chinese $16 trillion mobile payments market. The technology’s ease of use has made it ubiquitous. claims 500 million active users, and, along with its rival Tencent, controls almost all of the Chinese $16 trillion mobile payments market. The technology’s ease of use has made it ubiquitous.

Alibaba, Ant Financial’s parent company, has integrated the payments technology into other services. Alipay has a total of 450 million people using its payments and other financial services, including wealth management and insurance. It is woven into Alibaba’s online retail operation. It is linked directly with a money-market fund, Yu’E Bao, so that customers can earn a yield on the idle balances in their accounts (Yu’E Bao has grown into the largest money-market fund in the world, with $230 billion under management). It is linked to consumer and business loan products. And all of these functions feed data into a credit scoring business, Sesame Credit.

The hundreds of millions of Chinese who travel abroad every year provide a stepping stone for international expansion. Alipay has signed multiple partnerships with local payment companies in Africa.

Connections between Chinese companies and the state are very close.

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Pick #2. Tsinghua Launches Blockchain Research Center with Help of Tencent

Tsinghua University launched the Research Center for Blockchain at its FinTech Institute with financial support from Tencent among others. The new center will focus on the development of blockchain technology and industry applications.

Tencent launched its own blockchain research team in 2015, which has since been incorporated into the company’s payments infrastructure platform and financial applications group. The company is exploring the use of the technology for supply chain financing, launching the Blockchain as a Service (BaaS) open platform for the provision of third-party payment solutions.

Read more.

Pick #3. Vodafone to Acquire Liberty Global’s Operations in Germany, the Czech Republic, Hungary & Romania

Vodafone is acquiring (the transaction is subject to regulatory approval with completion anticipated around the middle of calendar 2019) Liberty Global’s operations in Germany, the Czech Republic, Hungary, and Romania for an enterprise value of €18.4 billion.

The acquisition will accelerate Vodafone’s converged communications strategy through in-market consolidation in Vodafone’s largest market, Germany; and in Vodafone’s CEE markets, the Czech Republic, Hungary, and Romania. Vodafone becomes the leading next-generation network owner in Europe, with 54 million cable/fiber homes ‘on-net’ and a total NGN reach of 110 million homes and businesses, including wholesale arrangements.

The acquisition:

  • Creates a converged national challenger to the dominant incumbent in Germany.

  • Transforms Vodafone’s fixed line and convergence strategy in key CEE markets, complementing Vodafone’s existing mobile operations in the Czech Republic, Hungary, and Romania. In these markets, the combined businesses will reach over 6.4 million homes (39% of total households) and will serve 15.8 million mobile, 1.8 million broadband, and 2.1 million TV customers.

  • Brings together leading talent in the mobile and cable sectors.

  • Estimated revenue synergies with a net present value exceeding €1.5 billion from cross-selling to the combined customer base.

  • And more.

Read more.

Pick #4. Microsoft Acquires Conversational AI Startup Semantic Machines to Help Bots Sound More Lifelike

Microsoft has acquired Semantic Machines, a Berkeley-based startup that wants to solve one of the biggest challenges in conversational AI: making chatbots sound more human and less like bots.

With the acquisition of Semantic Machines, we will establish a conversational AI center of excellence in Berkeley to push forward the boundaries of what is possible in language interfaces. – David Ku, Chief Technology Officer at Microsoft AI & Research

Today’s dialog technology is mostly orthogonal. You want a conversational system to be contextual so when you interpret a sentence; things don’t stand in isolation. – Dan Klein, Semantic Machines Co-Founder & Chief Scientist

By focusing on memory, Semantic Machines claims its AI can produce conversations that not only answer or predict questions more accurately but also flow naturally. Instead of building its own consumer products, Semantic Machines focused on enterprise customers.

Read more (+ the official announcement).

Pick #5. PayPal Expands Retail Payments with $2.2 Billion iZettle Buy

PayPal is acquiring Swedish financial technology startup iZettle for $2.2 billion in the US online payments provider’s biggest-ever acquisition. The deal will allow the Californian company to expand into the retail payment terminals business in international markets where it will compete with Square.

The Stockholm-based iZettle, which had advanced plans to go public, offers small businesses a miniature credit card reader that turns smartphones or tablets into payment registers. It is present in 12 countries in Europe & Latin America and offers other services for managing small businesses.

By joining forces with PayPal, which operates in 200 countries, iZettle will be able to accelerate its expansion, including into the United States. This year, iZettle expects to process $6 billion in payments, resulting in gross revenue of $165 million.

PayPal has been expanding aggressively through acquisitions and partnerships with large banks and technology firms like Bank of America, JPMorgan Chase & Co, Apple, and Facebook.

Read more.

Pick #7. Grab & Maybank Ink Strategic Partnership to Accelerate Cashless Adoption in Malaysia

Grab, the leading on-demand transportation & FinTech platform in Southeast Asia, announced a strategic partnership with Maybank, South East Asia’s fourth-largest bank by assets to drive the acceptance and usage of Grab’s new cashless payment method, the GrabPay mobile wallet.

The announcement comes as Grab, which received its e-money license from Bank Negara Malaysia in December 2017, is set to launch its GrabPay mobile wallet in beta in the coming weeks.

With the partnership & support of Maybank, Grab consumers will be able to use GrabPay mobile wallet at GrabPay merchants and use their mobile wallet at Maybank’s key merchants thereby making GrabPay accepted at a wider network of merchants. Similarly, Maybank customers will also eventually have the option of paying via Maybank QRPay at GrabPay merchants.

Through the partnership, consumers will soon also be able to top-up cash to their mobile wallet via Maybank2U, Maybank’s internet banking portal. Maybank customers who use GrabPay as a payment method for rides and other services on Grab will receive exclusive benefits and rewards. Through the same Grab app, consumers will be able to also access other important everyday services such as ordering and paying for food and drinks, paying for items purchased at shops or making money transfers to friends.

In addition, through the GrabPay ecosystem, micro-entrepreneurs (which include driver-partners and merchants) can also go cashless and gain additional income.

Read more.

Pick #8. Square Stumbles into the Banking Business

Square customers are treating the payment company’s Cash app more like a bank account than the company intended, and Square plans to capitalize on it.

Since early 2016, Square Cash app downloads have averaged 128% YoY growth each month versus Venmo’s 74% growth. The company had 7 million active customers on its money transfer app in December 2017 alone.

Square signaled its plans to break into banking last year, filing for an FDIC license to be an industrial loan company in Utah. The license would allow it to perform some of the same services as banks, including issuing loans without having to rely on a bank to originate them, and without having to get licenses in each state.

Read more.

Pick #9. Bank of America Delivers First Widely Available AI-Driven Virtual Financial Assistant

Bank of America is rolling out the first widely available AI-driven virtual assistant Erica to its 25 million mobile clients – a development that reflects the bank’s continued investment in digital capabilities as part of its high-tech, high-touch client experience, including the Digital Mortgage Experience™, mobile car shopping tool, Merrill Edge® Guided Investing, and Business Advantage.

The bank recently surpassed 25 million mobile banking clients and began rolling out Erica broadly across the country. The rollout will continue through June.

Currently, clients can ask Erica to:

  • Search for past transactions, such as checks written or shopping activity, across any one of their accounts.

  • Increase awareness about their credit scores and connect them to information that will help them learn about money management through Better Money Habits®.

  • Navigate the app and access key information, such as routing numbers or the closest ATM or financial center.

  • Schedule face-to-face meetings with more than 25,000 specialists in our financial centers.

  • View bills and schedule payments.

  • Lock and unlock debit cards.

  • Transfer money between accounts or send money to friends and family with Zelle®.

Erica is designed to learn from clients’ behaviors over time, helping them accomplish simple to complex tasks within the mobile banking app with easy-to-follow prompts. Clients can interact with Erica any way they choose, including texting, talking or tapping options on their screen.

In the coming months, Erica will be able to tackle more complex tasks, such as:

  • Sending proactive notifications to clients about upcoming bills and payments.

  • Displaying key client spending and budgeting information and advice on ways to save.

  • Identifying ways for clients to save more.

  • Managing credit and debit cards to help notify clients of card changes.

  • Showing upcoming subscription charges and monitoring transaction history and changes.

During the first quarter of 2018, mobile banking clients logged into their accounts 1.4 billion times, made 140 million bill payments, and deposited 33 million checks via mobile.

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Pick #10. Wirecard Launches Internet of Things (IoT) Retail Showcase with Biometric Facial Recognition

Wirecard is launching its new IoT shelf. The showcase combines IoT technologies with biometric facial recognition, thereby granting insights into a seamless purchase and payment experience supported purely by biometric data.

In order to make a purchase and place products into their shopping bag, shoppers simply need to position themselves in front of the shelf, identify themselves via the biometric facial recognition system and choose their products – and the shelf will automatically detect which products have been selected. The changes to the virtual shopping bag as well as the payment process are shown in real time on the screen above the IoT shelf.

Read more.

Pick #11. PayPal CFO Sees Opportunity in Consumers Who Have Mobile Devices, but Not Bank Accounts

There’s something like two billion people across the world that don’t have things that you and I take for granted – a checking account, a banking account, a home mortgage, traditional financial services. The unique aspect about those two billion people is that 70% of them, or some 1.4 billion, have a mobile device. – John Rainey, CFO at PayPal

If you’re going to be a global payments player, you’ve got to have a footprint in India, Rainey said, noting that in India’s population of some 1.2 billion people, there are roughly 400 million mobile phones.

We have a vision of democratizing financial services for those that are underserved today, the CFO said. With a mobile device, we can put all of the power of a bank branch in the palm of their hand and allow them to join the world of e-commerce and shop online.

PayPal has been building out its digital wallet.

Read more.