Fintech Research
Revolut still wants to go big
Observing Revolut CEO Nikolay Storonsky comment on how the UK fintech unicorn erred in its growth-first business strategy, one could almost imagine he was having a change of heart – that perhaps Revolut should be more modest and disciplined in its expansion efforts. Storonsky recently told Bloomberg, “For a long time, I wanted to be as less regulated as possible, it was the completely wrong decision.” He said that Revolut had focused too much on brisk growth. Yet he then went on to seemingly contradict himself. He said that Revolut sought to double in size from its current 50 million daily active customers to 100 million in 100 countries, with US$100 billion in annual revenue – a fiftyfold increase over the US$2.2 billion it earned in 2023.
What Klarna filing for an IPO says about BNPL
We remember when Swedish payments firm Klarna was valued at US$46 billion back in June 2021. Unsurprisingly, leading the charge in funding the company was SoftBank, which has a tendency to make losing bets on tech startups. At the time, investors were ecstatic about buy now, pay later (BNPL), which we have long seen as old wine in a new bottle. There is nothing particularly innovative about installment payments, and it was not long before banks and tech giants like PayPal moved into the space. Since there is little differentiation between different providers of BNPL services, it was no surprise that Klarna’s valuation plummeted, finally bottoming out at US$6.5 billion. Analysts have recently turned more bullish on the company though and it is valued at US$14.6 billion ahead of an expected IPO in New York next year.
Nubank sees profit surge in Q3
Brazil’s Nubank had a strong third quarter in which its adjusted net profit reached US$592 million, beating the US$559 million expected by the London Stock Exchange Group. The Brazilian online lender’s annualized non-adjusted return on equity, a measure of profitability, reached a record 30%. According to Reuters, the profitability increase can be attributed to more active customers and higher average revenue per active customer. During the September quarter, Nubank reached 100 million customers in Brazil, a number that represents 57% of the adult population in the country.
The end may be near for Investree
On October 22, Indonesia’s Financial Services Authority (OJK) revoked the business license of peer-to-peer lender Investree and ordered it to shut down all operations. The OJK’s decision deals a potentially lethal blow to the troubled P2P lender, which has been unable to recover from severe fraud allegations against its founder and former CEO, as well as legal challenges from lenders. While the OJK’s action was technically triggered by Investree’s inability to meet a minimum equity requirement of 7.5 billion rupiah, the biggest underlying issue is the alleged criminal behavior by former CEO Adrian Gunadi, who is believed to be outside of Indonesia right now.
Investments pick up in the Pakistan fintech market
With one of the world’s largest unbanked populations, Pakistan is one of Asia’s last major nascent fintech markets. Yet in 2023 and through the first half of 2024, it was mired in a funding slump – not unusual given the broader global trend, but problematic for a country that truly needs more digital banking services to boost financial inclusion. In the 2023 fiscal year, fintech funding in Pakistan fell 80% to just US$20 million while the number of deals decreased 44% to just eight. However, 2024 could turn out to be a better year for funding given rising investor interest.
The UAE is an increasingly important fintech hub
On Oct. 1, Ripple announced it had received in-principle license approval from the Dubai Financial Services Authority (DFSA), an important step in the process of gaining a full license in the city. When it gains full approval, Ripple will be able to provide cross-border payment services in the Dubai International Financial Center (DIFC), a special economic zone. The focus of Ripple on being licensed in Dubai is the latest example of the United Arab Emirates’ (UAE) growing importance as a fintech hub.
Does Nubank have an NPL problem?
Brazil’s Nubank is unique among digital banks globally because it is both unusually large in terms of customers and profitable. Other profitable online lenders, such as Korea’s Kakao Bank – which has about 22 million customers – much smaller. Even Revolut is less than half as large as Nubank. However, there is some concern that Nubank’s lending practices are problematic given its rising non-performing loan (NPL) ratio.
Is Revolut doing enough to combat fraud?
UK fintech unicorn Revolut thinks big. Despite not holding a banking license in its home market until very recently, it has sought to depict itself as a global disruptor of the financial services sector. Long before it turned a profit, Revolut had set up offices across the world. Nothing has been able to slow Revolut down significantly, but the speed at which the company moves also has drawbacks. Its compliance regime has been lacking in the past, and it is now facing a growing problem with scams.
Is fintech funding in Asia picking up again?
Fintech funding in Asia has been tepid due to a confluence of factors, notably high interest rates, uncertainty about the global economy – and especially that of the United States – and general investor disenchantment with growth-first business models. That said, there are signs that the drop-off in funding that began in 2022 may have finally bottomed out. A new report by DealStreetAsia suggests that a modest recovery may be underway in Southeast Asia.
Nubank is both big and profitable
Brazil’s Nubank is continuing to prove the naysayers wrong. In the second quarter, the massive digital lender nearly doubled its net income from a year earlier to US$487 million. Revenue reached a record US$2.8 billion. It now has 104.5 million customers, including about 60% of Brazil’s adult population. The bank is also Latin America’s most valuable publicly-traded financial institution with a market capitalization of nearly $66 billion.
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Grab loses US$53 million in Q2
Grab lost US$53 million in the second quarter in the latest sign that its super app business model continues to face serious challenges. To be sure, Grab’s fintech business performed well, but because of the way the Singaporean firm has constructed its business, there is no separating that unit from its ride-hailing and food-delivery arms.
APAC fintech funding falls to US$3.7 billion in H1 2024
Fintech funding in the Asia-Pacific (APAC) region is continuing a steady deceleration. A new report by KPMG shows that fintech investment in APAC decreased 21.7% year-on-year in the first half of the year to US$3.7 billion from US$4.6 billion during the same period in 2023. While the total number of deals in APAC rose to 438 from 406, not one of the 10 largest deals globally occurred in the region.
Is Revolut worth US$45 billion?
In its nine years of operation, UK fintech unicorn Revolut has always had outsize ambitions, depicting itself as a game-changing disruptor in the financial services sector. In some respects, the company has been successful. It is one of the most valuable startups in Europe and swung to a pre-tax profit of US$554 million in 2023. Its ability to reach profitability in less than a decade compares favorably with other prominent fintechs and platform companies leaning heavily into digital financial services. However, it is questionable whether Revolut is worth the US$45 billion valuation it is reportedly seeking.
GoTo lost US$174 million in H1 2024
In the first half of 2024 Indonesian super app GoTo lost US$174 million. While such a figure would barely have raised eyebrows back when interest rates were low and VC funding flowed freely, these days investors are more discerning – especially since GoTo is a public company listed on the Indonesian Stock Exchange (IDX). Like its counterpart Grab, GoTo has found it challenging to adjust to being a public company after being able to shrug off massive losses for years in private markets.