Fintech Fire Alarms: August, 2021

Banking for musicians, payments + investing, and more.

Editor’s note — my apologies for the late delivery on this look back on August. September was my first post-pandemic month back out onto the conference circuit and I forgot what a grind it is (in the best way!) Related — I’ll be at MX’s Money Experience Summit next week and Empire Startups’ New York Fintech Week and Money20/20 in October. Would love to meet up with you, if you’ll be at any of these events!

As always, here are the five fintech trends, from August 2021, that caught my eye.

1. I dig music.

What happened?

  • UnitedMasters partnered with beatBread and Paperchain to offer advances and real-time payments to musicians.

  • Nerve launched the world’s first neobank for musicians.

  • Royal, a music marketplace planning to monetize royalties as NFTs, raised a $16 million seed round.

So what?

It cuts against popular imagination, but the reality is that most musicians are less like celebrities1 and more like small business owners:

Financial support remains a key selling point for artists to sign to a label rather than remain independent, as most musicians likely don’t have access to the significant capital a label would have that can help fund more music and promotional services to help push careers forward. Artists can often wait at least a month before getting royalty checks, and payment delays are currently the norm. While larger artists with significant revenue streams may not need their royalty cash right away, less established independent musicians are more likely to need access to their earnings sooner so they can fund their projects. 

And so, in the new tradition of building digital banks for every community, why not a neobank for musicians? Why not wage advances and early access to royalty earnings? why not NFTs?

2. The accessibility imperative.

What happened?

  • Nationwide is issuing braille cards for blind customers.

  • HSBC will work on cards “with features that will support people with dementia, as well as visual impairments, learning difficulties and dyslexia.”

So what?

It’s estimated that less than 2% of the 350 million active websites in the U.S. are considered accessible to people who have disabilities.

As banks embrace digital transformation in the face of disruption and as fintech companies leverage their digital capabilities to take market share away from banks, it would be nice to see all companies pay more attention to the accessibility of their digital financial products and services.

Credit to Nationwide and HSBC for their moves in this direction.

3. Competitive convergence in credit card.

What happened?

  • Banking as a service provider Synapse plans to offer its customers white-labeled credit products.

  • Revolut is set to offer a credit card product in the US as a way to differentiate itself from other neobanks.

  • Walgreens announced new health and wellness credit cards.

  • American Express’ black card is getting a facelift.

So what?

With all the excitement around BNPL, credit cards aren’t getting the attention they normally do. That’s a shame because a diverse set of companies are converging on credit cards as a key competitive battleground:

  • Neobanks are embracing credit cards as a key point of differentiation from their peers (it’s telling that Revolut, which has probably spent more time than anyone thinking about what differentiation in the U.S. neobank market requires, landed on credit cards as its strategy).

  • Traditional banks are refreshing their products (AmEx updating the design of the Black Card would seem to indicate that the aesthetic that fintech has brought to financial services is having an impact).

  • Non-bank brands have more options than ever to launch their own credit cards (Synchrony Financial is staying in the game with Walgreens’ new credit cards, but new BaaS providers like Synapse are introducing interesting new offerings focused specifically on credit).

4. Why are payments and investing becoming the same thing?

What happened?

  • You can now buy a sandwich with bitcoin, thanks to Bakkt and Quiznos.

  • NCR, one of the largest ATM operators in the US, will acquire LibertyX, a cryptocurrency software provider, to enable crypto withdrawals.

  • UnitPlus is enabling people to pay for goods with their ETF portfolios.

So what?

I guess this is the the logical conclusion of the atomization of banking — fintech companies can combine financial services functions in whatever combinations they please. I suppose I shouldn’t be surprised that two of the more engaging functions — spending and investing — are being bundled into the same product.

But, like, why? Why is this happening?

Here’s the case that UnitPlus makes:

If you think about what all these payment methods have in common, you'll notice that until money is used for payments, it hasn't been working productively for us. It sits in our current accounts and eWallets and is literally waiting for the moment to get used for transactions. Why isn't there a payment method where the money is actively working for us until we spend it? With the current real inflation rate of 1.25%, money is losing value every time we make a payment.

Interesting argument, but here’s the thing — that money sitting in our current accounts and eWallets? It’s safe. That’s why it’s there. It’s great to have some of my money “working productively”, but I’ve found it’s generally a good idea to not have it all working in case, you know, it has a bad day at work and suddenly I can’t buy that Quiznos sandwich I’ve been craving.

5. Pay-in-4 plays merchants against themselves.

What happened?

Afterpay introduced in-app ads:

Afterpay will introduce ads to its app for the first time with a new option that lets retailers buy featured placements for promotions and products through a pay-per-click model. The Australian buy now, pay later platform said the move comes after early tests showed that Afterpay Ads achieved a 20% lift in sales as compared to non-promoted listings within the app. … “It’s an ideal time for us to make this service available to brands, as they can leverage it as an added customer acquisition tool going into the busy holiday shopping season,” Zahir Khoja, general manager of Afterpay North America, told Adweek.

So what?

It’s not just Afterpay. Klarna, the other big pay-in-4 BNPL provider, has been doing affiliate marketing for a while now. Here’s David Sykes, President of Klarna North America, describing the shift:

A year to 18 months ago, most of our conversations with large partners were with the payments people. We were really bucketed into that payment mix, comparing us to PayPal or a traditional credit card. These days, we’re just as likely to speak to the marketing teams.

This is literally a case of the right hand not knowing what the left hand is doing. Merchants’ payments teams are dropping new customers into Klarna and Afterpay’s laps and Klarna and Afterpay are selling them right back to merchants’ marketing teams.

Incredible.


Alex Johnson is a Director of Fintech Research at Cornerstone Advisors, where he publishes commissioned research reports on fintech trends and advises both established and startup financial technology companies.

Twitter: @AlexH_Johnson

LinkedIn: Linkedin.com/in/alexhjohnson/

1

To quote Jeff Bebe, “it's not about money and popularity. Although, some money would be nice”.