Lafferty News recommends that holidaying executives from the European north head home shortly or else they'll find that everything has been sold. Today comes news that Worldline is to acquire First Data's subsidiaries in Lithuania, Latvia and Estonia for € 73 million. First Data Baltics provides financial processing services to the main Baltic banks along with some banks in the broader Nordic region. The deal is expected to go through in the third quarter. It follows a spate of takeovers and buyouts. In fact, it's only a week since Worldline acquired Stockholm-based Digital River World Payments. Meanwhile, Permira took a stake in Stockholm-based Klarna, not to mention Ingenico's acquisition of Swedish company Bambora. " In one transaction, we gain a leading position in the fast-developing countries of Latvia, Lithuania and Estonia, we reinforce our group capabilities in the north of Europe and will establish new relationships with numerous prestigious Baltic and Nordic banks," said Giles Grapinet, general manager of Worldline. Estonia in particular will offer an interesting backdrop for a digital payments company. It considers itself the world's most digital society, with the motto: "We have built a digital society and so can you."
Slap the word digital in front of anything to do with finance and money will come flooding in. At least that's the story that young bankers are telling Bloomberg: "From Hong Kong and Beijing to London, accomplished financiers are abandoning lucrative careers to plunge into the murky world of ICOs, a way to amass quick money by selling digital tokens to investors sans banks or regulators. Cut out of the action, a growing cohort of banking professionals are instead applying their talents toward buying or hawking cryptocurrency." What could go wrong? This particular story on Bloomberg follows wide-eyed banker Richard Liu, who claims to have ditched a multi-million dollar salary to join the ICO world. "Liu, the ex-China Renaissance executive, compares the ICO market to the first internet boom and bust, when startups from Webvan to Pets.com imploded and investors' money went up in smoke. Yet it's in part the opportunity to carve out a niche away from monolithic banking bureaucracy that's lured him to this space. 'You want to be on a rocket ship,' Liu said. 'If you join early, then every day you're making history'."
Huy Nguyen Trieu, CEO of The Disruptive Group, believes that hyperscalability is what separates internet finance from traditional finance, and to this end, he looks at the scale at which the big and successful online finance businesses have grown in recent years. With $50bn of investments gone into fintech, he thinks we're now about to see the 'Googles of finance'. "Finance companies that can achieve hyperscalability have the potential to redesign tomorrow's finance," he writes over on LinkedIn, "but does it mean that the future is bleak for the traditional banks and insurers ? Not necessarily, because nothing prevents existing players from building hyperscalable businesses too." He gives the example of ICBC in China, "now the largest bank in the world thanks to 250m clients using its mobile service."
Yesterday we noted the incursion of Western card schemes into China, but Chinese businesses aren't planning on handing Alipay and Tencent the future on a plate. Jianming Lin at Samoyed Financial believes that there's room for premium development in the credit card business, now that there's enough data to make good lending decisions. "Lin's firm uses data taken from the consumers' phone records and online behavior, with consumers' authorization," writes Forbes. "The data is then used to build a credit risk model. To guard against fraud, Lin checks for differences between online and offline information, comparing information the user enters about his/her ID card with that in the public security office." Unlike banks, Samoyed doesn't require a face-to-face meeting with the applicant, lowering costs. "Lin's firm received a stamp of approval from a state-owned firm, CITIC Capital, when it led an over 100 million RMB ($14 million USD) series B round investment in Samoyed Financial this past January. Lin attributes this to the strength of his team, which hails mainly from the traditional banking sector, as well as to his firm's edge in pricing low for prime consumers." Being an online business, there's an opportunity to scale...
Speaking of scale, will Facebook ramp up its European databank? Or, as eMarketer asks Thirion de Briel of secure identity business HID Global: "Will the PSD2 allow Facebook to enter the digital banking space?" The answer is a resounding yes. "Facebook might be going after a PISP license, and I wouldn't be surprised if it seeks an AISP license, too," says Mr de Briel. "The most interesting thing for Facebook will be to get access to consumers' banking data, which is what PISPs will get with consumer approval. The value for Silicon Valley players right now is not in the number of users that they have but in the amount of data they have on them. Getting access to banking data in Europe and the UK is a gold mine for big guys like Facebook."
Lafferty News noted that consumer-friendly digital-first banks such as Monzo tend to talk to their customers in a helpful, off-the-cuff manner, doling out advice about how to deal with your money once you start into full-time employment. A popular suggestion is to stop blowing all that newfound income on expensive tubs of hot coffee [FT Lex paywall],and the message seems to be getting through. In the UK, Costa Coffee is near-ubiquitous, providing stiff competition to Starbucks, but now it appears to be suffering thanks to those financial do-gooders, with Costa sales dropping in the first quarter, and potentially putting the brakes on global expansion.
Subscribe to the Lafferty Daily BriefingSIGN UP
© 1981-2018 Lafferty Group
Toll-free: +44(0) 800 772 3849
T: +44 (0) 203 633 1630
1-6 Yarmouth Place