FintechOS raises $14M help banks launch products as fast as FinTech Startups

Over the last few years, we’ve seen the rise of FinTech startups like N26 and Monzo to challenge the incumbents with new products like challenger banks. But what if the big banks wanted to compete in that game themselves? This is the aim of FintechOS a Romanian startup that actually aims to help incumbents compete in this brave new, competitive, world.

FintechOS allows banks and insurance companies to act and react faster than the new upstarts on the scene with plug and play products. 

It’s announcing today that it has secured $14 million (£10.7 million) in a Series A investment led by the Digital East Fund of Earlybird Venture Capital and OTB Ventures, with participation from existing investors Gapminder Ventures and Launchub.

The additional capital will be used to continue the growth and expansion across Europe, and to expand into South East Asia and the US.

FintechOS’s technology platform lets traditional banks and insurance companies adapt to rapidly changing customer expectations, and match the speed and flexibility of Fintech startups with personalized products and services, in weeks rather than months or years.

The banks and insurance companies can then launch multi-cloud SaaS deployments, transitioning to the cloud and on-premises deployments, working alongside the existing technology infrastructure. It now has existing partnerships with Microsoft, EY, Deloitte, Publicis Sapient and CapGemini allow deployment in multiple markets.

Started in 2017 by serial entrepreneurs Teodor Blidarus and Sergiu Negut, the company now has customers in more than 20 countries across three continents.

Teo Blidarus, CEO and Co-Founder of FintechOS, commented: “Our disruptive approach is customer, not technology-driven. We created FintechOS to transform the financial industry, empowering banks and insurance companies to act and react faster than fintech startups,
to create a smarter, slicker customer experience.”

Dan Lupu, Partner at Earlybird, said: “FintechOS is a pioneer in a booming market, with a vision to transform the way financial institutions react to market and regulatory changes. We are proud to become part of a journey that will shape the future of financial services.”

FintechOS raises $14M help banks launch products as fast as FinTech Startups

Over the last few years, we’ve seen the rise of FinTech startups like N26 and Monzo to challenge the incumbents with new products like challenger banks. But what if the big banks wanted to compete in that game themselves? This is the aim of FintechOS a Romanian startup that actually aims to help incumbents compete in this brave new, competitive, world.

FintechOS allows banks and insurance companies to act and react faster than the new upstarts on the scene with plug and play products. 

It’s announcing today that it has secured $14 million (£10.7 million) in a Series A investment led by the Digital East Fund of Earlybird Venture Capital and OTB Ventures, with participation from existing investors Gapminder Ventures and Launchub.

The additional capital will be used to continue the growth and expansion across Europe, and to expand into South East Asia and the US.

FintechOS’s technology platform lets traditional banks and insurance companies adapt to rapidly changing customer expectations, and match the speed and flexibility of Fintech startups with personalized products and services, in weeks rather than months or years.

The banks and insurance companies can then launch multi-cloud SaaS deployments, transitioning to the cloud and on-premises deployments, working alongside the existing technology infrastructure. It now has existing partnerships with Microsoft, EY, Deloitte, Publicis Sapient and CapGemini allow deployment in multiple markets.

Started in 2017 by serial entrepreneurs Teodor Blidarus and Sergiu Negut, the company now has customers in more than 20 countries across three continents.

Teo Blidarus, CEO and Co-Founder of FintechOS, commented: “Our disruptive approach is customer, not technology-driven. We created FintechOS to transform the financial industry, empowering banks and insurance companies to act and react faster than fintech startups,
to create a smarter, slicker customer experience.”

Dan Lupu, Partner at Earlybird, said: “FintechOS is a pioneer in a booming market, with a vision to transform the way financial institutions react to market and regulatory changes. We are proud to become part of a journey that will shape the future of financial services.”

A look at Latin America’s emerging fintech trends

Although the 2008 global financial crisis sparked the fintech movement, in Latin America, the rise of ecommerce was responsible for the first wave of fintech startups.

Because digital payments were key to enabling the growth of ecommerce, investors funded companies like Braspag, PagSeguro, PayU, Mercado Pago and Moip in the early 2000s to take advantage of this opportunity.

Payment is still the most relevant segment, with successful cases like Stone and PagSeguro, but after the financial crisis, we started to see the rise of financial technology in lending and neobanking, generating impressive cases like Nubank, Neon, Creditas, Credijusto and Ualá.

As the ecosystem evolves and expands, let’s take a closer look at emerging trends in Latin America that might give us a hint about where to expect its next fintech unicorns.

Financial services for the gig economy

Latin America has seen explosive growth in ride-hailing and food delivery platforms such as Uber, Didi, Rappi and iFood, creating a totally new market opportunity — many gig economy workers can’t access basic financial services such as bank accounts, personal loans and insurance. Even those who have access often struggle with financial products that that don’t suit their needs because they were designed for full-time workers.

Spotting this opportunity, Uber Money launched at Money 2020, focusing on providing drivers with financial services. As 50% of the population in Latin America is unbanked where Uber has more than 1 million drivers, the region is definitely a ripe market. Cabify is going even farther by spinning off Lana, its company that provides financial services, so it can expand its market beyond Cabify drivers to include other gig economy professionals.

Although established players in this sector have a clear advantage, they aren’t the only ones looking to explore this opportunity; Brazilian YC alumni Zippi is offering personal loans to ride-hailing drivers based on their driving earnings. As the gig economy tends to keep growing in the region, I believe we will start to see more solutions for those professionals.

Rethinking insurance

As the banking world has been shaken by fintechs, insurance companies are growing aware that high regulatory barriers won’t protect their industry from disruption.

Insurance penetration in Latin America has been historically low compared to developed markets — 3.1%, compared to 8% — but the insurance market is growing well and tends to close this gap. Adding this to bad services and complex products that insurances provide, insurtech has an immense opportunity to grow.

Because purchasing insurance is historically a complicated and painful experience, the first insurtechs in the region focused on providing a better experience by digitizing the process and using online channels to acquire customers. Those insurtechs worked together with the insurance companies and operating as online broker, but now, we’re starting to see startups providing new insurance products, as well as traditional insurances in different models.

Some are partnering with insurance companies while others are competing directly with them; Think Seg and Miituo partnered with larger players to provide a pay-as-you-go model for car insurance, while Mango Life and Kakau are offering a better purchasing experience. On the other end, Crabi and Pier are rethinking the insurance model from the ground up.

As insurtechs emerge as a potential threat, incumbents are more willing to work with startups that can improve their services to enable them to compete on better grounds, which is exactly what companies such as Bdeo, Lisa, and HelloZum are doing.

Although penetrating the insurance industry is more complicated than other financial services due to high regulatory demands and steep initial operating costs, insurtechs fueled by VC investment will without any doubt try to do it. And, if we’ve learned anything from other fintech segments, it’s that entrepreneurs will find ways to overcome initial challenges.

Brazil’s new fintech startup Cora raised $10 million on the strength of its founding team

It didn’t take much for the founders of Cora, Brazil’s newest startup to tackle some aspect of the broken financial services industry in the country, to raise their first $10 million.

Igor Senra and Leo Mendes had worked together before — founding their first online payments company, MOIP, in 2005. That company sold to WireCard in 2016 and after three years the founders were able to strike out again.

They built their initial business servicing the small and medium sized businesses that make up roughly two-thirds of the Brazilian economy and represent some trillion dollars worth of transactions. But at WireCard, they increasingly were told to approach larger customers that didn’t have the same kind of demand for their services, according to Mendes.

So they built Cora — a technology enabled lender to the small and medium-sized businesses that they knew sowell.

The round was led by Kaszek Ventures, one of Latin America’s largest and most successful investment funds, with participation from Ribbit Capital — one of the most influential early-stage fintech investment firms globally.

“We created Cora to pursue our life purpose, which is to solve the financial problems faced by small and medium businesses. These businesses produce 67% of the Brazilian GDP but are totally underserved by the traditional banks”, said Senra, the company’s chief executive, in a statement.

The company is currently operating in closed beta and plans to launch its first product, a free SME-only mobile account in the first half of 2020, according to the statement. Cora will later release a portfolio of payments, credit related products, and financial management tools that are currently being developed.

“So far, large financial institutions have mainly built products that focus either on individuals or on large corporate clients and have totally ignored small and medium sized enterprises, who are the most relevant creators of value in our economies,” said Mendes in a statement. “We want to offer a high-quality, customer-centric suite of financial products that address the specific underserved needs of our clients’ businesses.”

Credit startup Migo expands to Brazil on $20M raise and Africa growth

After growing its lending business in West Africa, emerging markets credit startup Migo is expanding to Brazil on a $20 million Series B funding round led by Valor Group Capital.

The San Mateo based company — previously branded Mines.io — provides AI driven products to large firms so those companies can extend credit to underbanked consumers in viable ways.

That generally means making lending services to low-income populations in emerging markets profitable for big corporates, where they previously were not.

Founded in 2013, Migo launched in Nigeria, where the startup now counts fintech unicorn Interswitch and Africa’s largest telecom, MTN, among its clients.

Offering its branded products through partner channels, Migo has originated over 3 million loans to over 1 million customers in Nigeria since 2017, according to company stats.

“The global social inequality challenge is driven by a lack of access to credit. If you look at the middle class in developed countries, it is largely built on access to credit,” Migo founder and CEO Ekechi Nwokah told TechCrunch.

“What we are trying to do is to make prosperity available to all by reinventing the way people access and use credit,” he explained.

Migo does this through its cloud-based, data-driven platform to help banks, companies, and telcos make credit decisions around populations they previously may have bypassed.

These entities integrate Migo’s API into their apps to offer these overlooked market segments digital accounts and lines of credit, Nwokah explained.

“Many people are trying to do this with small micro-loans. That’s the first place you understand risk, but we’re developing into point of sale solutions,” he said.

Migo’s client consumers can access their credit-lines and make payments by entering a merchant phone number on their phone (via USSD) and then clicking on “Pay with Migo”. Migo can also be set up for use with QR codes, according to Nwokah.

He believes structural factors in frontier and emerging markets make it difficult for large institutions to serve people without traditional credit profiles.

“What makes it hard for the banks is its just too expensive,” he said of establishing the infrastructure, technology, and staff to serve these market segments.

Nwokah sees similarities in unbanked and underbanked populations across the world, including Brazil and African countries such as Nigeria.

“Statistically, the number of people without credit in Nigeria is about 90 million people and its about 100 million adults that don’t have access to credit in Brazil. The countries are roughly the same size and the problem is roughly the same,” he said.

On clients in Brazil, Migo has a number of deals in the pipeline — according to Nwokah — and has signed a deal with a big-name partner in the South American country of 290 million, but could not yet disclose which one.

Migo generates revenue through interest and fees on its products. With lead investor Valor Group Capital, new investors Africinvest and Cathay Innovation joined existing backers Velocity Capital and The Rise Fund on the startup’s $20 million Series B.

Increasingly, Africa — with its large share of the world’s unbanked — and Nigeria — home to the continent’s largest economy and population — have become proving grounds for startups looking to create scalable emerging market finance solutions.

Migo could become a pioneer of sorts by shaping a fintech credit product in Africa with application in frontier, emerging, and developed markets.

“We could actually take this to the U.S. We’ve had discussions with several partners about bringing the the technology to the U.S. and Europe,” said founder Ekechi Nwokah. In the near-term, though, Migo is more likely to expand to Asia, he said.

 

Startups Weekly: Chinese investors double down on African startups

Hello and welcome back to Startups Weekly, a weekend newsletter that dives into the week’s noteworthy startups and venture capital news. Before I jump into today’s topic, let’s catch up a bit. Last week, I wrote about Airbnb’s issues. Before that, I noted Uber’s new “money” team.

Remember, you can send me tips, suggestions and feedback to [email protected] or on Twitter @KateClarkTweets. If you’re new, you can subscribe to Startups Weekly here.


China’s pivot to Africa

Three African fintech startups; OPay, PalmPay and East African trucking logistics company Lori Systems, closed large fundraises this year. On their own, the deals aren’t particularly notable, but together, they expose a new trend within the African startup ecosystem.

This year, those three companies brought in a total of $240 million in venture capital funding from 15 different Chinese investors, who’ve become increasingly active in Africa’s tech scene. TechCrunch reporter Jake Bright, who covers African tech, writes that 2019 marks “the year Chinese investors went all in on the continent’s startup scene” — particularly its fintech projects. Why?

“The continent’s 1.2 billion people represent the largest share of the world’s unbanked and underbanked population — which makes fintech Africa’s most promising digital sector,” Bright notes. “In previous years, the country’s interactions with African startups were relatively light compared to deal-making on infrastructure and commodities. Chinese actors investing heavily in African mobile consumer platforms lends to looking at new data-privacy and security issues for the continent.”

Active Chinese investors in Africa include Hillhouse Capital, Meituan-Dianping, GaoRong, Source Code Capital, SoftBank Ventures Asia, BAI, Redpoint, IDG Capital, Sequoia China, Crystal Stream Capital, GSR Ventures, Chinese mobile-phone maker Transsion and NetEase .

Here’s more of TechCrunch’s recent coverage of Africa startup activity:


VC Deals

It was a short week (Happy Thanksgiving, by the way). But here’s a quick look at the top deals of the last few days.


M&A (VR edition)

Last week, Facebook announced it was buying Beat Games, the game studio behind Beat Saber, a rhythm game that’s equal parts Fruit Ninja and Guitar Hero. Heard of the company? Maybe if you’re a gamer, but if you’re readying this newsletter because of your interest in VC, this company may not have come across your radar.

Why? It’s one of virtual reality’s biggest successes today, but it’s just an eight-person team with no funding.

“I’m really proud that we were able to build the company with this mindset of making decisions based on what is good for the game and not what is the most profitable thing,” Beat Games CEO told TechCrunch earlier this year. Read about Facebook’s acquisition here and an in-depth profile of the small team here.


Equity

If you like this newsletter, you will definitely enjoy Equity, which brings the content of this newsletter to life — in podcast form! Join myself and Equity co-host Alex Wilhelm every Friday for a quick breakdown of the week’s biggest news in venture capital and startups.

This week, we discussed Weekend Fund’s new vehicle, Cocoon’s new friend-tracking app and the unfortunate demise of a startup called Omni. You can listen here.

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

Here’s what happens when you decide to sell your startup

Are you considering selling your company as a potential exit? Now? A year from now? Five years from now? 

In more than 20 years of startup, with over a dozen acquisitions under my belt as an entrepreneur, advisor and investor, I can assure you that an acquisition is always a massive and complex transaction that you’re never 100% prepared for. In fact, the one regret I hear over and over again from my peers is that they got less than what they should have when they signed the deal.

Whether you’re a founder or just have some equity, there’s a bunch of stuff you need to know before you decide to sell your startup, stuff that you won’t actually learn until you’ve been through it.

I sat down with a friend last week who is in the position to seriously consider selling her company. It’s her first startup, so we went over a high-level outline of the process. Then I added a bunch of notes from my own experience for this post. 

How to know when it’s time to sell

There are basically four reasons to sell your company.

  1. Things are going poorly. This obviously isn’t good, and unless you’re in a position where you have to sell, I would recommend against it. Instead, I’d do everything in my power to stabilize and reconsider later.
  2. Things are going extremely well. On the other side, this is the best position to be in, but it’s also the time when the founders are least interested in selling. The deal has to be outstanding.
  3. An external factor. Something has happened outside of the company that has made selling an attractive option. For example, I wound up running two companies at the same time, and decided to get out of the small one to focus on the big one.
  4. You’ve taken it as far as you can. This is most often the primary reason why founders choose to sell their company. They see a lot of opportunity down the road, and decide that a specific acquirer can take much better advantage of that opportunity.

Usually, the decision to sell is based on a combination of these reasons.

How to make the decision to sell

There are basically three ways to get acquired.

  1. A larger company. This is someone in your space or close to it. To them, your company represents either an advance in innovation or just a bunch of new customers. This is the most popular option.
  2. Private equity. These firms usually buy out all of the existing owners and investors and may put company leadership on a profit plan to keep them around and motivated. These transactions usually happen at high levels of valuation, like approaching the billions.
  3. A new investment round. At lower levels of valuation, the same kind of transaction can take place where a new investor or group of investors buys out all of the current owners and investors.

There are two things you need to do before you decide to sell. First, consider your negotiating position from strongest to weakest. 

Ideally, you should already have at least one offer on the table, or have rejected one or more offers in the recent past. This is the strongest position, as one offer usually attracts more offers.

If you don’t have a solid offer, you should at least be investigating one or more implied offers. These hints and clues will come from partners, customers, competition, even investors and advisors with connections to other investors and PE firms. 

If you have none of these, selling the company is going to be a lot more difficult, but not impossible. In this case, acquisition is a lot like fundraising. If you don’t have any offers or leads, you need to build connections and relationships. You’re basically putting together a pitch deck and going door to door. If you’re not patient, you’ll end up giving up a lot of value on your equity.

You might also consider bringing in a fixer, an experienced person who will come in as CEO for a large chunk of equity and get your company into a better position to sell, both operationally and in terms of connections. I rarely see this work, but I have indeed seen it work. Here, you’re trading shares for the hopes of increased value of those shares. 

Finally, you might find private money that just wants to take over your company. These transactions happen at much lower valuations. Kind of a fire sale.  

The second thing you need to do before you make the decision to sell is talk to your board, your current investors, your executive team, and your advisors. Everyone has to be in line, on board, and the proper expectations need to be set and agreed upon. 

Preparing the company to be sold

There are basically three ways to calculate the sale price of your company.

  1. A service-based company is usually valued at 1x to 2x annual revenue. In cases where the company is a hybrid of product or intellectual property that may be spun off, this can creep to 3x or maybe a little more.
  2. A product company is usually valued at 2x to 10x annual revenue, depending on the market for the product, the protected unique differentiators, the higher the tech, and a number of other things, usually related to opportunity.
  3. In cases of extreme opportunity and innovation, a product company can be sold for 20x to 50x.

There are two things you’ll have to do to sell your company: Show you’re worth the sale price and prove the legitimacy of your operation.

To show your worth, if your company is taking in $10 million in revenue and your valuation comes out at 10x, or $100 million, you need to be able to show the acquirer the path to $100 million within a three- to five-year time frame. The more objectively you can show that return, the more likely you’ll get your asking price.

There are a number of ways you can do this, but spreadsheets and hockey-stick charts probably aren’t enough to open the checkbook. For example, in one case we had to actually conduct a one-month experimental project and hit certain milestones dictated by the acquirer. In another, we went through a three month period where we pushed the accelerator to the ground to show 100% month over month growth for three straight months. 

To prove your legitimacy, you’re going to have to go through due diligence. This will happen after an offer sheet has been put together and hopefully there’s a penalty clause if the buyer pulls out. 

During due diligence, you’ll have to show that the structural integrity of your company is clean. This means you’ll need to: 

  • Show a clean cap table, with all the equity in the company past, present, and future accounted for.
  • Open your books so they can audit your financials.
  • Sit your lawyers with their lawyers to sniff out liability and risk, and also make sure your intellectual property is properly protected.
  • Interview and background check your management team to uncover skeletons in anyone’s closet. And also make sure everyone important will stay on.

There will be no time between the initial interest from the acquirer and microscope time, so you’ll need to have all your ducks in a row before you put your company on the market.

Timeline

Your guess is as good as mine, so make your best guess, then double it.

The fastest I’ve ever been through an acquisition deal was four months, the longest was seven months. Again, it’s like raising a funding round, so the shape your company and the strength of your negotiating position will determine a lot of the timeline, but there will always be external factors to deal with. 

For example, one time we had the buyer just drop off the face of the earth for 45 days. At about day 30 we resigned ourselves to the fact that it wasn’t going to happen. Then it did.

Think 1–2 months to prepare and line up suitors, 2–3 months to get a solid offer in place, 1–2 months of due diligence. It is not quick, but it should not drag. Regardless of my anecdote above, both sides have an incentive to move quickly, it just takes time. 

Preparing yourself for life after startup

The last thing my friend and I talked about was what she was going to do once her startup was folded into a new company. Even from her early vantage point, in almost all outcomes, she was looking at a comfy VP position at a nice salary. She could do that. The question, of course, was for how long.

The last time my company was acquired was the first time I planned to stick around to hit the next milestone. I didn’t make it. Two years in, I hit a wall that I never recovered from, even after a few more months of soul-searching. It was a mix of internal changes, external factors, and me just being done. I felt like I was dragging a bag of bricks to work every morning. 

I’d try to stick around again. I’ve never been one to hop from startup to startup, and I’ve been immersed enough in the corporate world to know I can navigate it. But there’s a reason they usually lock the executive team in for two years. That’s about all either side can take of the other. 

The thing is, because it was the first time I planned to stay put after the acquisition, I never developed a contingency plan going into the acquisition, and I paid for it afterwards. When I did leave, it took three months just to find my feet. 

I’ve seen other folks take way longer to decompress, and I’ve seen some of them do some crazy stuff along the way, like start that folly of a company they always wanted to start and now that they had the means to start it and no one to tell them no… disaster. 

So whether your plan is to stick around or run away screaming, make sure you build in time to think about what’s next. You can do whatever you want after that time, maybe start a new project, maybe take a new position. What you do might not even be startup-related at all.

But chances are it will be. Entrepreneurs are like addicts; we don’t know when to quit.

Elavon to acquire Sage Pay, a gateway that competes with Stripe, PayPal and Adyen, for $300M

E-commerce continues to gain momentum — a trend we’ll see played out in the next two months of holiday shopping — and with that comes more consolidation. Today, Elavon, the payments company that is a subsidiary of US Bancorp, announced that it will acquire Sage Pay, one of the bigger payment processors in the UK and Ireland serving small and medium businesses.

Sage Pay’s owner Sage Group said the deal is being done for £232 million in cash (or $300 million at today’s currency rates).

Elavon is active in 10 countries and says it’s the fourth-largest merchant acquirer in Europe, competing against the likes of  Global Payments, Vantiv, FIS, Ingenico, Verifone, Stripe, Chase, MasterCard and Visa. The deal is still subject to regulatory approval (both by the Federal Reserve in the US and the Central Bank of Ireland), and if all proceeds, the deal is expected to close in Q2 of 2020.

The acquisition points to a bigger trend underway in e-commerce. The market is very fragmented, not just in terms of the companies who sell goods online but also (and perhaps especially) in terms of the companies that manage the complexities at the back end.

In keeping with that, Sage Pay has a lot of competitors in its specific area of taking and managing the payments process for online retailers and others taking transactions online or via mobile apps. They include some of the same competitors as Elavon’s: newer entrants like Stripe, Adyen, and PayPal (all of which have extensive businesses covering many countries and are each larger than Sage, valued in the billions rather than hundreds of millions of dollars), but also smaller operations like GoCardless as well as more established companies like WorldPay.

This deal is a mark of the consolidation that’s been taking place to gain better economies of scale in a market where individual transactions generally generate incremental revenues.

Sage Pay, in that context, was a relatively small player. It 2018 revenues were £41 million, but it is profitable, with an operating profit of £15 million, and Sage said it expects “to report a statutory profit on disposal of approximately £180 million on completion.”

The deal comes on the heels of Sage Group — which is publicly traded — confirming reports in September that it was looking for strategic alternatives for the payments business. Sage Group for the last couple of years has been divesting payments and banking assets to focus more on accounting, people and payroll software, which it sells through an SaaS model.

“Our vision of becoming a great SaaS company for customers and colleagues alike means we will continue to focus on serving small and medium sized customers with subscription software solutions for Accounting & Financials and People & Payroll,” said Steve Hare, Sage’s CEO, in a statement. “Payments and banking services remain an integral part of Sage’s value proposition and we will deliver them through our growing network of partnerships, including Elavon.”

Elavon, as the consolidator here, was itself acquired by US Bancorp way back in 2001 for $2.1 billion. Currently it is active in 10 countries, but in that same vein of consolidation to improve economies of scale on the technical side, and to aggregate more incremental transactions on the financial side, Elavon’s main objective is to increase its overall share of the e-commerce market in Europe. specifically by expanding with Sage Pay further into the UK and Ireland.

“We are a customer-focused company that is helping businesses succeed in a global marketplace that is changing rapidly,” said Hannah Fitzsimons, president and general manager of Elavon Merchant Services, Europe. “This acquisition brings tremendous talent and leading technology to Elavon, which can be leveraged across the European market.”

Google to offer checking accounts in partnership with banks starting next year

Google is the latest big tech company to make a move into banking and personal financial services: The company is gearing up to offer checking accounts to consumers, as first reported by the Wall Street Journal, starting as early as next year. Google is calling the projected “Cache,” and it’ll partner with banks and credit unions to offer the checking accounts, with the banks handling all financial and compliance activities related to the accounts.

Google’s Caesar Sengupta spoke to the WSJ about the new initiative, and Sengupta made clear that Google will be seeking to put its financial institution partners much more front-and-center for its customers than other tech companies have perhaps done with their financial products. Apple works with Goldman Sachs on its Apple Card credit product, for instance, but the credit card is definitely pretend primarily as an Apple product.

So why even bother getting into this game if it’s leaving a lot of the actual banking to traditional financial institutions? Well, Google obviously stands to gain a lot of valuable information and insight on customer behavior with access to their checking account, which for many is a good picture of overall day-to-day financial life. Google says it’s also intending to offer product advantages for both consumers and banks, including things like loyalty programs, on top of the basic financial services. It’s also still considering whether or not it’ll charge service fees, per Segupta – not doing so would definitely be and advantage over most existing checking accounts available.

Google already offers Google Pay, and its Google Wallet product has hosted some features beyond simple payments tracking, including the ability to send money between individuals. Meanwhile, rivals including Apple have also introducing payment products, and Apple of course recently expanded into the credit market with Apple Card. Facebook also introduced its own digital payment product earlier this week, and earlier this year announced its intent to build its own digital currency called ‘Libra’ along with partners.

The initial financial partners that Google is working with include Citigroup and Stanford Federal Credit Union, and their motivation per the WSJ piece appears to be seeking out and attracting younger and more digital-savvy customers who are increasingly looking to handle more of their lives through online tools. Per Sengupta’s comments, they’ll also benefit from Google’s ability to work with large sets of data and turn those into value-add products, but the Google exec also said the tech company doesn’t sue Google Pay data for advertising, nor does it share that data with advertisers. Still, convincing people to give Google access to this potentially sensitive area of their lives might be an uphill battle, especially given the current political and social climate around big tech.

PalmPay launches in Nigeria on $40M round led by China’s Transsion

Africa focused payment startup PalmPay has launched in Nigeria after raising a $40 million seed-round led by Chinese mobile-phone maker Transsion.

The investment came via Transsion’s Tecno subsidiary, with participation from China’s NetEase and Taiwanese wireless comms hardware firm Mediatek a Transsion spokesperson confirmed to TechCrunch.

PalmPay had piloted its mobile fintech offering in Nigeria since July, before going live today at a launch in Lagos.

The startup aims to become Africa’s largest financial services platform, according to a statement. 

As part of the investment, PalmPay enters a strategic partnership with mobile brands Tecno, Infinix, and Itel that includes pre-installation of the startup’s app on 20 million phones in 2020.

The UK headquartered venture — that was also founded with Chinese seed investment — offers a package of mobile based financial services, including no fee payment options, bill pay, rewards programs, and discounted airtime.

In Nigeria, PalmPay will offer 10% cashback on airtime purchases and bank transfer rates as low as 10 Naira ($.02).

In addition to Nigeria, PalmPay will use the $40 million seed funding to grow its financial services business in Ghana. The payments startup has plans to expand to additional countries in 2020, PalmPay CEO Greg Reeve told TechCrunch on a call.

PalmPay received its approval from the Nigerian Central Bank as a licensed mobile money operator in July. During its pilot phase, the payments venture registered 100,000 users and processed 1 million transactions, according to a company spokesperson.

With its payments focus, the startup enters Africa’s most promising digital sector, but also one that has become notably competitive and crowded  — particularly in the continent’s largest economy and most populous nation of Nigeria. 

By a number of estimates, Africa’s 1.2 billion people represent the largest share of the world’s unbanked and underbanked population.

An improving smartphone and mobile-connectivity profile for Africa (see GSMA) turns this scenario into an opportunity for mobile-based financial products.

That’s why hundreds of startups are descending on Africa’s fintech space, looking to offer scalable solutions for the continent’s financial needs. By stats offered WeeTracker, fintech now receives the bulk of VC capital and deal-flow to African startups.

Nigeria has multiple new digital-payments entrants — see Chippercash — and several firmly rooted later stage fintech players, such as Paga and recently confirmed unicorn Interswitch.

PalmPay CEO Greg Reeves believes the company can compete in Nigeria and across Africa based on several strategic advantages. A big one is the startup’s support from Transsion and partnership with Tecno.

Transsion Tecno Store Africa“On channel and access, we’re going to be pre-installed on all Tecno phones. Your’e gonna find us in the Tecno stores and outlets. So we get an immediate channel and leg up in any market we operate in,” said Reeve.

Tecno’s owner and PalmPay’s lead investor, Transsion, is the largest seller of smartphones in Africa and maintains a manufacturing facility in Ethiopia. The company raised nearly $400 million in a Shanghai IPO in September and plans to spend roughly $300 million of that on new R&D and manufacturing capabilities in Africa and globally.

In addition to Transsion’s support and network, Reeves names PalmPay’s partnership with Visa . “We signed a strategic alliance with Visa so now I can deliver Visa products on top of my wallet, link my wallet to Visa products and give access to someone who’s completely unbanked to the whole of the Visa network,” he said.

Another strategic advantage PalmPay may have as a newcomer in Africa’s fintech space is Reeve’s leadership experience. He comes to the CEO position after serving as Vodaphone’s global head of M-Pesa — one of the world’s most recognized mobile-money products. Reeve was also a GM for Millicom‘s fintech products across Africa and Latin America.

“I’ve had my fingers in mobile financial services for the last 10 years,” he said.

Reeve confirmed that PalmPay has local teams (and is hiring) in Nigeria and Ghana.

With the company’s launch and $40 million raise — which is potentially the largest seed-round for an Africa focused startup in 2019 — PalmPay’s bid to gain digital payment market share is on.

The Transsion led investment also serves as a big bold marker for China’s pivot to African tech in 2019. It follows several big moves by Chinese actors in the continent’s digital space.

These include Opera’s $50 million investment in multiple online verticals in Nigeria and a major investment by Chinese investors in trucking logistics startup Lori Systems this week.