Avenue of the Allies: Brazil, Belgium (1918) by Frederick Childe Hassam.

3 Fintech News Stories

#1: Nubank’s New Move 

What happened?

Nubank is creating a mobile virtual network operator (MVNO) so that it can (presumably) offer mobile service to its customers:

Nubank wants to venture beyond banking services and is preparing to launch its own cell phone company. Anatel approved an accreditation contract signed between the financial institution and Claro, giving the green light for the creation of a new virtual mobile operator (MVNO).

So what?     

MVNOs are wireless communications services providers that do not own the wireless network infrastructure over which they provide services. Instead, an MVNO enters into a business agreement with a mobile network operator to obtain bulk access to network services at wholesale rates, then sets retail prices independently. Some MVNOs operate a skinny model, in which they are just resellers for the underlying network operator, relying on all of their existing operational and sales infrastructure. Others will operate a thicker (and higher margin) model in which they use their own customer service, billing support systems, marketing, and sales personnel. Examples of MVNOs in the U.S. include Cricket Wireless (AT&T), Visible (Verizon), and Metro (T-Mobile).

In Brazil, the number of companies licensed to operate as MVNOs or as aggregators of MVNOs has grown significantly in recent years, increasing from 24 in 2019 to 132 in 2021. However, despite the growth in the number of players, the amount of mobile lines linked to MVNOs still represents only 1% of the total mobile lines in the country.

Claro, the company that Nubank is partnering with to become an MVNO, is the second-largest mobile provider in Brazil. Claro has done very little work with MVNOs to date, but its closest competitor in the market (TIM) has made MVNOs a centerpiece of its growth strategy, which may be motivating Claro to get more aggressive.

From the Nubank perspective, this seems incredibly smart. Based on the current market share of MVNOs in Brazil, I would guess that there’s a huge opportunity to undercut existing providers with a lower-cost bundled solution. Nubank’s financial services market share (nearly 50% of Brazil’s adult population) gives it a great platform to cross-sell off of. I’d also guess that this will become a driver of Nubank’s international growth, as Claro also operates in Colombia and Mexico.   

#2: Uber and the Power of Platforms in Payments

What happened?

Uber has partnered with Forage to enable EBT payments for Uber Eats:

Forage, the San Francisco-based payments company, today announced a partnership with Uber Eats to enable payment processing of SNAP EBT, when the delivery platform launches the product in late 2024.

Additionally, Uber is currently testing out pay-by-bank (powered by Stripe) in its ridesharing app:

So what?     

I think these two bits of news really illustrate the power of platforms in the modernization of payments.

Uber is one of the original case studies that embedded finance nerds cite when discussing the potential of embedded payments – add a card on file, remove payments as an explicit step in the user’s workflow, and create a more magical experience for everyone.

The thing is, once you succeed in establishing that embedded payments beachhead, it becomes a jumping-off point for all kinds of other initiatives.

There’s literally not a single one of the 1,000+ grocery stores that are integrated into Uber Eats that wouldn’t want to be able to accept SNAP EBT payments for home delivery. It’s both the right thing to do and good business. However, very few of those stores would have the time and resources to independently integrate with Forage. With Uber in the middle, it becomes easier.

Similarly, there’s a robust debate happening right now on the prospects of pay-by-bank in the U.S. I’m still undecided on how well providers like Stripe, Plaid, and Trustly will do in displacing card payments, but I would guess that most of the success that we will see in pay-by-bank (at least in the short term) will happen in places where the payments are embedded.

#3: Ohh Canada

What happened?

Canada released its 2024 budget, which included some updates on the country’s long and winding road to open banking:

In the budget, the government committed to introducing some of the necessary legislation this spring and the remaining elements in the fall, and designated the Financial Consumer Agency of Canada to oversee it, but did not specify a target implementation date.

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“We would have liked to see a formal launch date for the open banking framework,” said EQ Bank chief executive Andrew Moor in a statement.

He said the bank would have also liked to see a higher level of investment in the system to ensure its success.

The federal government committed $1 million in this fiscal year to help the FCAC get started, and earmarked $4.1 million over three years for the Finance Department to complete the necessary policy and oversight work.

The government was similarly vague on when other promised regulatory changes would be enabled:

The government committed to capping non-sufficient funds fees at $10, down from the $45 to $50 range the big banks generally charge. It also plans to bring in additional protection measures, such as alerts when a consumer might be charged, prohibiting multiple NSF fees on the same transaction and not allowing charges on overdraws under $10. 

The budget said the government would release draft regulation on the measure in the coming months, but no target date for when the new rules might be in place.

While the government launches new initiatives, advocates are still waiting for it to implement ones already in the works, including reducing the maximum allowed interest rate from 48 per cent to 35 per cent on an annual percentage rate. Draft regulations were published in December, but it’s not clear when the rate will be lowered.

There is little reason to be optimistic that these initiatives will be finalized in a timely manner if Canada’s experiences trying to launch real-time payments are any guide:

The launch of Canada’s oft-delayed Real-Time Rail (RTR) payments system will now not happen until at least 2026, with new tech partners IBM and CGI brought in to the process.

Following the completion of a second review, the RTR programme will resume with “renewed momentum,” says Payments Canada.

So what?

We’re committed to doing it. We will be introducing legislation later this year to begin the process of developing a framework for implementing it. The program will resume with renewed momentum.

This sounds like the type of stuff I tell my kids when they ask me for something that I don’t want to tell them no over (it’s always a fight), but that I really don’t want to do.

Canada was originally slated to launch a real-time payments system in 2019. Now, Payments Canada is bringing in new partners to restart the program with “renewed momentum.” The initial implementation of open banking in Canada was projected to happen at the beginning of 2023. Now, the Canadian government will supposedly introduce legislation this spring and fall to establish a framework for open banking.

My fintech friends in Canada get mad whenever I say this, but come on! This is embarrassing!

I know you are making progress. The government has now released a list of principles that will guide the development of your open banking framework, and an actual budget has been allocated to the FCAC to start doing the work. And while you don’t have the real-time clearing and settlement component of your real-time rail (RTR) built yet, the real-time exchange messaging component, provided by Interac, was finished in June 2023.

But still, my goodness, this is taking a long time.

At this point, I’d honestly respect the Canadian government more if they just came out and said, “Look, we never have financial crises, ever. You’re welcome. Just get off our back about the fintech stuff. It’s coming. Be patient.”

2 Fintech Content Recommendations

#1: Money Isn’t Everything (By Mary Wisniewski, Cornerstone Advisors)

Mary is the single most delightful human working in fintech (and that’s a high bar), so I have zero hesitation in recommending her new podcast (which has one of the greatest names ever) – Money Isn’t Everything. Listen to episode 1 and subscribe. Trust me.  

#2: 2030 and Beyond: An Unconventional Look at the Future of Fintech (by Team8)

This is the best report on the future of fintech that I’ve seen from a VC firm, full stop. Not a surprise if you know the folks over at Team8. Give this one a read.

1 Question to Ponder

Will Paze (EWS’s newest offering) succeed? If yes, what does success for Paze (and EWS’s bank owners) look like?

Have thoughts on this question? Let me know!

Alex Johnson
Alex Johnson
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