Fintech

Is this Fintech stock a buy on its partnership with Apple? — TradingView News

Published

7 months ago

20 June, 2024

DeFi Lending Protocol Nexo Allocates $12 Million for Ecosystem Incentives — TradingView News

Affirm holdings AFRMthe buy now pay later (BNPL) service provider, can’t seem to catch a break in 2024. With the shares down 37.8% On an annual basis, Affirm has struggled with consistency delayed rate cut expectations.

This significantly underreported performance may be the reason for the company’s recently announced partnership with tech titan Apple AAPL came as welcome news to investors last week, with AFRM shares surging higher on June 11 and hitting a 11% daily gain about the session.

But is this partnership with Apple enough to trigger a turnaround in Affirm shares? Shares have already filled the AAPL-related bullish gap, and despite Tuesday’s seemingly encouraging news that Apple was eliminating its BNPL service, Affirm said in its 8-K filing that the partnership will not “have a material impact on the come in.” or gross merchandise volume in fiscal year 2025.” Bar chart

So, what’s the benefit for investors here? Let’s dig deeper to understand.

Why does Affirm underperform?

Founded in 2012, Affirm provides a BNPL service for online and in-store purchases. They offer various consumer lending solutions, including point-of-sale loans and virtual cards. Affirm generates revenue through service fees charged to merchants and interest charged to consumers who choose to finance their purchases. It currently has a market capitalization of $9.55 billion.

In the fiscal third quarter of 2024, Affirm posted numbers that exceeded Street expectations. Net revenue for the quarter was $576.16 million, up 51.2% from a year earlier as the company’s core network revenue ($194.97 million, +31.3% on year-over-year) and interest income ($315.71 million, +77.1% year-over-year) both experienced substantial growth.

Quarterly losses narrowed to $0.43 per share from $0.69 per share a year earlier, beating the consensus estimate of a loss of $0.70 per share. Affirm’s losses have steadily narrowed over the past five quarters, even beating consensus estimates.

Key operating metrics all improved year-over-year in the third quarter, including gross merchandise value (GMV) of $6.3 billion; active customers, at 18.1 million; transactions per active customer, at 4.6 million; and active traders, at 292,300.

Additionally, Affirm reported positive cash flow from operating activities, with third-quarter net cash from operating activities of $208.15 million, reversing the outflow of $54.28 million a year ago. That said, even though the company exited the quarter with an improved cash balance of $1.62 billion, its much higher debt level of $6.41 billion is concerning.

In Q4 2024, Affirm expects GMV of $6.75-6.95 billion and revenue of $585-605 million. Analysts estimate the company’s future revenue growth at 26.59%, compared to the industry median of 5.15%.

What could push AFRM stock higher?

The BNPL business is expected to have healthy growth over the next few years, with the market expected to expand from its current size of $109 billion in 2024 to reach $171.6 billion by 2024, at a CAGR of 9, 5%.

As of the end of 2023, 82.1 million US consumers had used BNPL for their spending and borrowing needs, and that figure is expected to reach 112.7 million by 2027. During that period, volumes are expected to BNPL sales will grow from $71.9 billion to $124.8 billion, registering a CAGR of 14.8%.

As a leading player in this growing market, Affirm is well positioned to capitalize on this growth.

Another likely benefit for Affirm will be any rate cuts by the Federal Reserve. While persistently high interest rates have put pressure on growth-fueled lenders like Affirm, indications that the Fed is nearing its long-awaited policy turn should eventually remove some macro-level uncertainties that linger about stocks.

Positive strategic initiatives

In line with the rest of Apple’s artificial intelligence (AI)-powered announcements last week, Affirm has entered the AI megatrend. Affirm’s AI assistant is being developed and tested in the company’s customer support chat, where more than 60% of customers served did not require additional human assistance.

Additionally, the company remains on track to reach its $50 billion GMV goal, set last year with innovations like Purchasing Power and Adaptive Checkout aimed at improving checkout conversion and subscription capabilities based on customers’ financial preferences. consumers and reimbursement trends.

Finally, Affirm’s plans to expand internationally could drive future growth, as 60% of global e-commerce, excluding China, is outside of its core markets of the United States and Canada. Affirm’s next frontier is the UK, a huge $133 billion total addressable market. Here, their top 3 existing partners already boast a 20% penetration rate, translating into an estimated $26.6 billion potential market for Affirm once launched.

Furthermore, given the strong penetration of Affirm’s key partners across Europe, the UK may just be the beginning.

Analysts are divided on AFRM stock

Overall, analysts have a consensus rating of “Hold” for AFRM shares, with an average price target of $36.07. This indicates an upside potential of approximately 18.1% from current levels.

Of the 17 analysts covering the stock, 3 have a “Strong Buy” rating, 11 have a “Hold” rating, 1 has a “Moderate Sell” rating and 2 have a “Strong Sell” rating. Bar chart

Analysts remained firmly divided on AFRM following the Apple news, with Morgan Stanley SM arguing a “Sell” and Barclays reiterating a “Buy,” suggesting that an investment in this troubled fintech stock right now might be best left to each investor’s risk tolerance, with more volatility likely in store as Fed policy remains a short-term excess.

As of the date of publication, Pathikrit Bose did not hold (either directly or indirectly) any positions in any of the securities mentioned in this article. All information and data contained in this article are for informational purposes only. For more information, please see Barchart’s Disclosure Policy here.

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Fintech

US Agencies Request Information on Bank-Fintech Dealings

Published

6 months ago

30 July, 2024

FinCrypt Staff

Federal banking regulators have issued a statement reminding banks of the potential risks associated with third-party arrangements to provide bank deposit products and services.

The agencies support responsible innovation and banks that engage in these arrangements in a safe and fair manner and in compliance with applicable law. While these arrangements may offer benefits, supervisory experience has identified a number of safety and soundness, compliance, and consumer concerns with the management of these arrangements. The statement details potential risks and provides examples of effective risk management practices for these arrangements. Additionally, the statement reminds banks of existing legal requirements, guidance, and related resources and provides insights that the agencies have gained through their oversight. The statement does not establish new supervisory expectations.

Separately, the agencies requested additional information on a broad range of arrangements between banks and fintechs, including for deposit, payment, and lending products and services. The agencies are seeking input on the nature and implications of arrangements between banks and fintechs and effective risk management practices.

The agencies are considering whether to take additional steps to ensure that banks effectively manage the risks associated with these different types of arrangements.

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Fintech

What changes in financial regulation have impacted the development of financial technology?

Published

6 months ago

30 July, 2024

FinCrypt Staff

Exploring the complex landscape of global financial regulation, we gather insights from leading fintech leaders, including CEOs and finance experts. From the game-changing impact of PSD2 to the significant role of GDPR in data security, explore the four key regulatory changes that have reshaped fintech development, answering the question: “What changes in financial regulation have impacted fintech development?”

PSD2 revolutionizes access to financial technology
GDPR Improves Fintech Data Privacy
Regulatory Sandboxes Drive Fintech Innovation
GDPR Impacts Fintech Data Security

PSD2 revolutionizes access to financial technology

When it comes to regulatory impact on fintech development, nothing comes close to PSD2. This EU regulation has created a new level playing field for market players of all sizes, from fintech startups to established banks. It has had a ripple effect on other markets around the world, inspiring similar regulatory frameworks and driving global innovation in fintech.

The Payment Services Directive (PSD2), the EU law in force since 2018, has revolutionized the fintech industry by requiring banks to provide third-party payment providers (TPPs) with access to payment services and customer account information via open APIs. This has democratized access to financial data, fostering the development of personalized financial instruments and seamless payment solutions. Advanced security measures such as Strong Customer Authentication (SCA) have increased consumer trust, pushing both fintech companies and traditional banks to innovate and collaborate more effectively, resulting in a dynamic and consumer-friendly financial ecosystem.

The impact of PSD2 has extended beyond the EU, inspiring similar regulations around the world. Countries such as the UK, Australia and Canada have launched their own open banking initiatives, spurred by the benefits seen in the EU. PSD2 has highlighted the benefits of open banking, also prompting US financial institutions and fintech companies to explore similar initiatives voluntarily.

This has led to a global wave of fintech innovation, with financial institutions and fintech companies offering more integrated, personalized and secure services. The EU’s leadership in open banking through PSD2 has set a global standard, promoting regulatory harmonization and fostering an interconnected and innovative global financial ecosystem.

Looking ahead, the EU’s PSD3 proposals and Financial Data Access (FIDA) regulations promise to further advance open banking. PSD3 aims to refine and build on PSD2, with a focus on improving transaction security, fraud prevention, and integration between banks and TPPs. FIDA will expand data sharing beyond payment accounts to include areas such as insurance and investments, paving the way for more comprehensive financial products and services.

These developments are set to further enhance connectivity, efficiency and innovation in financial services, cementing open banking as a key component of the global financial infrastructure.

Sebastian Malczyk

General Manager, Technology and Product Consultant Fintech, Insurtech, Miquido

GDPR Improves Fintech Data Privacy

Privacy and data protection have been taken to another level by the General Data Protection Regulation (GDPR), forcing fintech companies to tighten their data management. In compliance with the GDPR, organizations must ensure that personal data is processed fairly, transparently, and securely.

This has led to increased innovation in fintech towards technologies such as encryption and anonymization for data protection. GDPR was described as a top priority in the data protection strategies of 92% of US-based companies surveyed by PwC.

Arid Islam

Financial Expert, Sterlinx Global

Regulatory Sandboxes Drive Fintech Innovation

Since the UK’s Financial Conduct Authority (FCA) pioneered sandbox regulatory frameworks in 2016 to enable fintech startups to explore new products and services, similar frameworks have been introduced in other countries.

This has reduced the “crippling effect on innovation” caused by a “one size fits all” regulatory approach, which would also require machines to be built to complete regulatory compliance before any testing. Successful applications within sandboxes give regulators the confidence to move forward and address gaps in laws, regulations, or supervisory approaches. This has led to widespread adoption of new technologies and business models and helped channel private sector dynamism, while keeping consumers protected and imposing appropriate regulatory requirements.

George Blandford

Co-founder, UK Linkology

GDPR Impacts Fintech Data Security

A big change in financial regulations that has had a real impact on fintech is the 2018 EU General Data Protection Regulation (GDPR). I have seen how GDPR has pushed us to focus more on user privacy and data security.

GDPR means we have to handle personal data much more carefully. At Leverage, we have had to step up our game to meet these new rules. We have improved our data encryption and started doing regular security audits. It was a little tricky at first, but it has made our systems much more secure.

For example, we’ve added features that give users more control over their data, like simple consent tools and clear privacy notices. These changes have helped us comply with GDPR and made our customers feel more confident in how we handle their information.

I believe that GDPR has made fintech companies, including us at Leverage, more transparent and secure. It has helped build trust with our users, showing them that we take data protection seriously.

Dr. Rhett Stubbendeck

CEO & Co-Founder, Leverage Planning

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Fintech

M2P Fintech About to Raise $80M

Published

6 months ago

30 July, 2024

FinCrypt Staff

Application Programming Interface (API) Infrastructure Platform M2P Financial Technology has reached the final round to raise $80 million, at a valuation of $900 million.

Specifically, M2P Fintech, formerly known as Yap, is closing a new funding round involving new and existing investors, according to entrackr.com. The India-based company, which last raised funding two and a half years ago, previously secured $56 million in a round led by Insight Partners, earning a post-money valuation of $650 million.

A source indicated that M2P Fintech is ready to raise $80 million in this new funding round, led by a new investor. Existing backers, including Insight Partners, are also expected to participate. The new funding is expected to go toward enhancing the company’s technology infrastructure and driving growth in domestic and international markets.

What does M2P Fintech do?

M2P Fintech’s API platform enables businesses to provide branded financial services through partnerships with fintech companies while maintaining regulatory compliance. In addition to its operations in India, the company is active in Nepal, UAE, Australia, New Zealand, Philippines, Bahrain, Egypt, and many other countries.

Another source revealed that M2P Fintech’s valuation in this funding round is expected to be between USD 880 million and USD 900 million (post-money). The company has reportedly received a term sheet and the deal is expected to be publicly announced soon. The Tiger Global-backed company has acquired six companies to date, including Goals101, Syntizen, and BSG ITSOFT, to enhance its service offerings.

According to TheKredible, Beenext is the company’s largest shareholder with over 13% ownership, while the co-founders collectively own 34% of the company. Although M2P Fintech has yet to release its FY24 financials, it has reported a significant increase in operating revenue. However, this growth has also been accompanied by a substantial increase in losses.

Source

Fintech

Scottish financial technology firm Aveni secures £11m to expand AI offering

Published

6 months ago

30 July, 2024

FinCrypt Staff

Aveni, Investment Management, AI, NLP, UK

By Gloria Methri

Today

To come
Aveni Assistance
Aveni Detection

Artificial intelligence Financial Technology Aveni has announced one of the largest Series A investments in a Scottish company this year, amounting to £11 million. The investment is led by Puma Private Equity with participation from Par Equity, Lloyds Banking Group and Nationwide.

Aveni combines AI expertise with extensive financial services experience to create large language models (LLMs) and AI products designed specifically for the financial services industry. It is trusted by some of the UK’s leading financial services firms. It has seen significant business growth over the past two years through its conformity and productivity solutions, Aveni Detect and Aveni Assist.

This investment will enable Aveni to build on the success of its existing products, further consolidate its presence in the sector and introduce advanced technologies through FinLLM, a large-scale language model specifically for financial services.

FinLLM is being developed in partnership with new investors Lloyds Banking Group and Nationwide. It is a large, industry-aligned language model that aims to set the standard for transparent, responsible and ethical adoption of generative AI in UK financial services.

Following the investment, the team developing the FinLLM will be based at the Edinburgh Futures Institute, in a state-of-the-art facility.

Joseph Twigg, CEO of Aveniexplained, “The financial services industry doesn’t need AI models that can quote Shakespeare; it needs AI models that deliver transparency, trust, and most importantly, fairness. The way to achieve this is to develop small, highly tuned language models, trained on financial services data, and reviewed by financial services experts for specific financial services use cases. Generative AI is the most significant technological evolution of our generation, and we are in the early stages of adoption. This represents a significant opportunity for Aveni and our partners. The goal with FinLLM is to set a new standard for the controlled, responsible, and ethical adoption of generative AI, outperforming all other generic models in our select financial services use cases.”