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I hope your Januarys have been suitably exciting. This week, Imani looks into JPMorgan’s efforts to broaden its reach in Europe with a stake in Greek fintech Viva Wallet, I speak to payment platform Form3, and Meta’s digital currency project Diem (once known as Libra) looks to wind down after three years of regulatory angst.
JPMorgan goes Greek
JPMorgan is seeking to expand its European presence by picking up a stake in a Greek fintech that it hopes will give it a foothold into the commercial payments space.
Last week, the US banking group scooped up a 48 per cent stake in Viva Wallet, which specialises in cloud-based payment solutions for merchants. The financial terms of the deal were not disclosed but it was announced shortly after news of a $1bn funding round for London-based rival Checkout.com, which valued that business at $40bn.
Commercial payments focused fintechs in Europe have captured the attention of investors seeking to tap into what is still a very fragmented market. Unlike the US industry — which has a very large, uniform and mature payments market dominated by card payments — European payment schemes can differ greatly between different countries. European nations have varying levels of credit card penetration and disparate regulatory regimes.
However, companies like Viva Wallet, which operates in 23 European countries locally through a combination of local branches and online services, have built platforms which can accommodate country-specific requirements and customer preferences. That technology could make it easier for megabanks like JPMorgan to compete in the market it previously stayed away from due to complexity.
“Once the transaction is closed, the two of us together [JPMorgan and Viva Wallet] will be able to compete across the spectrum of clients, from the very large to the very small,” JPMorgan Global head of wholesale payments Takis Georgakopoulos said in an interview.
His division currently helps facilitate payments for a number of large ecommerce marketplace clients in the US, but has not been able to offer similar services across Europe for regulatory reasons. Though payments is the starting point, the bank hopes to eventually expand into other services like working capital management and lending for smaller businesses.
“In our experience, for the profitability of a small business relationship, 50 per cent comes from payments and 50 per cent can come from all the other things that small businesses need,” Georgakopoulos said.
The acquisition marks the second move by the US lender to increase its international presence. Last year, the company launched its first overseas consumer bank in the UK through a digital-only offering. Goldman Sachs’ Marcus opened its online savings account in 2021 as well.
“In the future, we will be able to offer clients a western world value proposition rather than a US only value proposition,” Georgakopoulos. (Imani Moise)
Every week we ask the founders of fast-growing fintechs to introduce themselves and explain what makes them stand out in a crowded industry. Our conversation, lightly edited, appears below.
I recently spoke to Michael Mueller, chief executive of cloud-native payment platform Form3, which raised $160m in its Series C funding round in September led by new investor Goldman Sachs. Existing investors include major banks and payment players such as Lloyds Banking Group, Barclays, Mastercard and Nationwide, with a total fundraise of $217m. Mueller has previously worked at institutions including Deutsche Bank, Royal Bank of Scotland (now NatWest) and Barclays before founding Form3 in 2016.
Who are your primary customers and what do you offer them? We work with banks (both challengers and increasingly tier one banks transitioning to cloud native technology), regulated financial institutions, service providers — anyone who moves money for other people with the technology that process payments in the background. We don’t provide front-end capabilities, so no mobile applications or web applications. Instead, we pick up a payment as soon as it has been initiated by the end user, take it through workflows, and hand it over to the clearing and settlement system. We’re focused on bank-to-bank payments including Automated Clearing House, a digital network for processing transactions, and cross border flows.
What is the impact of banks shifting to platform-based payment technologies like Form3? One trend we’ve benefited from is the growth in platform-based technologies that banks use to build and deliver better customer outcomes. I think it’s happening in different parts of the banking ecosystem, where they are moving away from proprietary technology. We work in what you might call the plumbing of the bank, which has always been more collaborative — so that’s why we’ve managed to convince quite a few banks to move their payment processing to platform-based technology. They can then focus their attention on end customer outcomes, which is a lot more interesting.
What are the macro-trends you see in the payment space over the next year? Across the globe, payments are moving into real time processing. In the UK, most of what you do is through Faster Payments [a system first introduced in 2008 which reduced payments times from days to hours] and that’s an acknowledged standard. But that’s not the situation in other countries. Customers will obviously require their banks to process payments in real time in the same way that they require their communication providers, WhatsApp and others to process their messages in real time.
I would say that one of the key characteristics of payments, in particular bank-based payments, is that they grow at a massive pace. If you look at your own account statement today and compare that to your account five or 10 years ago, there’s just a lot more activity because people are moving away from cash, and there are a lot more small dollar payments around. So a lot of our customers need to upgrade the infrastructure, also, because they need a lot more capacity for processing payments. And that’s where cloud native technology comes in, and effectively provides unlimited processing capability.
Facebook’s digital dollar Diem disappears The Zuck buck looks dead, James Fontanella-Khan, Hannah Murphy and Miles Kruppa report, as it prepares for an asset sale. An unfortunate end, but perhaps not a surprising one — regulators’ wariness of allowing the big blue social network to run its own currency had only grown with every new scandal.
Investors bet on crypto custody providers Eva Szalay reports on the $8bn valuation secured by Fireblocks, which helps securely hold crypto assets. The $550m funding round reflects broader inflows of capital into the blockchain industry, even amid wider volatility in both bitcoin and alt-coins.
Genesis starts offering JPG-backed loans In one of the weirder stories of the week, Eva reports on the news Gemini, part of Barry Silbert’s titanic Digital Currency Group, is now accepting non-fungible tokens as collateral for loans and derivatives deals. But fear not, for Genesis is only going to accept “blue-chip” NFTs.
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