Fintech

Revolut’s prospects in Asia-Pacific are still uncertain

Published

10 months ago

4 July, 2024

Revolut's prospects in Asia-Pacific are still uncertain

Revolut app logo. Revolut is a digital banking alternative that includes a prepaid debit card, … [+] currency exchange and peer-to-peer payments.

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Revolut’s PR machine has long sought to portray the company as a rising player in the Asia-Pacific (APAC) region. These efforts date back nearly six years. Revolut entered Singapore and Japan in late 2018 and Australia in early 2019. In recent years, it has invested heavily in India. The UK’s finetech unicorn has spoken of Enter China in 2021but these efforts do not seem to have borne fruit.

Having finally made a profitA reinvigorated Revolut is likely to double its APAC expansion. The company reported a pre-tax profit of £438 million, compared to a loss of £25.4 million a year earlier. Revenue nearly doubled to £1.8 billion. “Our customer base is expanding at an impressive pace and our diversified business model continues to fuel exceptional financial performance,” Revolut co-founder and CEO Nik Storonsky said in a statement.

However, success is far from assured.

Growth in Singapore

Judging by some of the publicly available figures, Revolut’s business in Singapore is growing at a healthy pace. According to figures cited by Fintech News SingaporeYear-on-year, users grew 77% in 2023, while customer e-wallet balances increased 52%. Overall card payments increased 83%, from 7.07 million in 2022 to 12.95 million in 2023. Physical Revolut card transactions increased more than 93%, while virtual card payments increased 64%. “Our 2023 results prove that we are truly becoming an everyday app for Singaporeans,” said Matt Baxby, CEO of Revolut APAC, in a statement.

When considering Revolut’s business prospects in Singapore, it’s worth keeping in mind that stringent capitalization requirements have led the company to avoid applying for a digital banking license in Singapore. Since it doesn’t operate a bank in the city-state, it can’t directly offer deposit and lending products. It remains to be seen whether alternative solutions will pay off.

For example, at the end of May, Revolut launched Flexible accounts in the city-state, which invests customer deposits in USD-denominated money market funds (MMFs) managed by global asset manager Fidelity International. Revolut calls it a “high-yield savings product” due to an APY of 5.21%.

Additionally, in mid-June, Revolut said users can now hold up to S$20,000 in their e-wallets at any one time, up from S$5,000 previously. Annual spending limits have also been increased from S$30,000 to S$100,000. “With the limit increase, we expect in-app payment volumes to increase at least two to three times,” said Revolut Singapore’s managing director. Raymond Ng he told The Straits Times.

Slow progress in India

While Revolut has been keen to highlight its growth in Singapore, it has been less forthcoming in discussing its business in India. The subcontinent is a challenging market for Revolut, where the British company has sought to carve out a niche in payments before moving into trading, investing and lending.

Three years on from its foray, Revolut has little to show, even though the Reserve Bank of India granted the British fintech in-principle permission to issue prepaid instruments (PPI), including prepaid cards and wallets. We know it took this long partly because of data localization requirements. At the time, Revolut India CEO Paroma Chatterjee noted that there were 175,000 people on the waiting list for these products. We wonder how many of them will become profitable customers.

Revolut commits to investing 45 million dollars in India in 2022, and it will be interesting to see how far that money goes, and whether the company is willing to up its game going forward. With Google Pay and Walmart-backed PhonePe dominating domestic payments, it’s unclear how regulators will perceive a foreign fintech with ambitious plans for the cross-border market.

Opportunities in Australia and New Zealand

Australia and New Zealand offer Revolut the best opportunity in the Asia-Pacific region. They are very similar to its home market of the UK, and the UK fintech unicorn could eventually get banking licenses in both countries. Revolut already has a lending license in Australia. It just needs an Authorized Depository Institution (ADI) license to be a fully-fledged bank.

In February, The Australian reported that Revolut is planning to launch credit cards in Australia and increase unsecured lending. The company sees growing demand from cash-strapped families who are borrowing to cover higher expenses related to the rising cost of living. Baxby told the paper that Revolut has doubled local customer sign-ups in 2023 to 500,000 and sees an opportunity in unsecured debt as the country’s big four banks focus more on mortgages than consumer credit.

Revolut began offering personal loans in Australia as part of a pilot last year. It also plans to launch a credit card pilot in 2024 or 2025.

Future perspectives

To some extent, Revolut’s ADI offering may hinge on whether it eventually receives a UK banking license. This process has dragged on for about three years so far. In November 2023, Revolut appointed a new UK CEO. While the company denied that the move was related to its banking license application, we wonder if that’s entirely accurate. In the meantime, Storonsky said The CNBC earlier this week, “I hope we’ll get it sooner or later [the UK banking license].”

If Revolut gets approval for a UK banking license, it would signal the legitimacy of the company’s banking aspirations to other regulators. Approving Revolut’s ADI would then become a safer bet. However, if the UK banking license doesn’t come through, things could get complicated for Revolut in Australia.

Given the different fintech segments that Revolut is exploring in Singapore and India, the UK banking license is less directly relevant to its business in those two countries. We expect the UK fintech unicorn to continue to gradually expand in the city-state, while India may prove difficult for Revolut to penetrate.

In India, Revolut must demonstrate that it can meet the needs of a large and diverse emerging market. The jury is still out on whether Revolut can create a compelling value proposition for Indian customers, given the plethora of competition and regulatory hurdles it faces there.

Based on its actual business performance (not its account numbers), we think Revolut has ultimately been a bit too ambitious in its APAC expansion. The company has its work cut out for it to prove the skeptics wrong.

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Fintech

US Agencies Request Information on Bank-Fintech Dealings

Published

9 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

9 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

9 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

9 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.”