Fintech

This hyper-growth Fintech stock is a screaming buy following the announcement of its new Blockbuster partnership

Published

10 months ago

28 June, 2024

The world takes notice every time the tech giant and iPhone maker Apple does anything. CEO Tim Cook said that Apple doesn’t emphasize the importance of being the first to do something because being the best is much more important.

Knowing this, the company announced the partnership with Buy now, pay later agency To assert (NASDAQ: AFRM) to offer loans through Apple Pay caught my eye. Ironically, investors greeted Affirm’s stock with: Meh. The stock is lower now than it was before the announcement!

So, is the market asleep or is there something wrong?

What could Apple’s decision to partner with Affirm mean?

The stock market hates uncertainty, which is why many new and less proven companies can spend years battling market skepticism. Affirm is fighting this battle now; shares are down 80% from their previous high despite the company making a ton of business progress (more on that later). Why? Its core business, buy now, pay later loans, could be seen as a commodity. Apple thought so when it launched its internal Buy Now, Pay Later product Apple Pay Later in March 2023.

Apple’s decision to close the business just over a year later and outsource it to Affirm speaks volumes. Two main claims could be made. First, it claims that Apple was unhappy with the consumer experience its service provided. Providing the best user experience is Apple’s bread and butter, its source competitive advantagewhich is why the Apple ecosystem is so damn attractive.

In the same breath, one could argue that Apple’s decision to partner with Affirm is, similarly, a compliment to Affirm’s product, which features myriad loan types with varying terms and durations. After all, Apple chose Affirm over everyone else.

Second, it challenges the idea that “buy now, pay later” lending is a commodity that anyone can copy. If it were that easy, why did Apple quickly abandon ship? Sure, anyone can lend money, but not everyone can do it well. It’s another nod to Affirm’s advantage in the field.

Apple brings enormous long-term growth potential to the table

The most notable aspect of the partnership is the immense growth potential that Apple’s user base adds to Affirm’s growth story. Affirm is integrating its loans directly into the Apple Pay interface, allowing users to easily become Affirm customers without leaving their digital wallets.

And Apple’s user base is huge. According to Capital Onethere are approximately 60 million Apple Pay users in the United States, which could grow to over 75 million by 2030. Affirm is no different: the company has 17.8 million total active users. Even assuming some overlap, that’s immediate exposure to a customer base nearly four times the size of Affirm’s current size, a notable opportunity that should see Affirm acquire users once things roll out.

The story continues

Of course, not everyone will use Buy Now, Pay Later loans, but it is undoubtedly the best customer funnel a company like Affirm could dream of. Make no mistake: this is a big win for Affirm in the long term.

Why Affirm Was a Buy Even Before

That’s not to downplay the partnership with Apple, but it’s worth pointing out that Affirm has already deeply entrenched itself in the retail space. It works with over 292,000 active merchants and has partnerships with other heavyweights, including Amazon, Shop, WalmartAND Target.

Affirm went public during a frenzied market a few years ago, so it’s fair to say the stock valuation needed to cool down. Affirm has also had to deal with rising interest rates that have slowed growth for several quarters. However, note the company’s turnaround with 51% year-over-year revenue growth in its most recent quarter. Meanwhile, valuation (company value versus sales) remains relatively suppressed.

AFRM EV vs. Revenue (Forward) Chart.

Affirm is growing rapidly again, and the partnership with Apple hasn’t even started yet. Management doesn’t think it will have a material effect in the next fiscal year (the launch will take time), so investors are seeing a path to strong growth that could start in the next 18 months and last for some time.

Investors may start to feel good about the stock again as time goes on. For now, it’s hard to find a fintech stock with more upside potential in the coming years than Affirm.

Should You Invest $1,000 in Affirm Right Now?

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This Hyper-Growth Fintech Stock Is a Hot Buy After Announcing Its Blockbuster New Partnership was originally published by The Motley Fool

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Related Topics:Apple Payment via Apple To assert

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This Hyper-Growth Fintech Stock Is a Hot Buy After Announcing Its Blockbuster New Partnership

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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.

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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.”