Protocol | Fintech
The people, power and politics of fintech, every Tuesday and Friday.
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The $33 billion question: Can Revolut be the world’s super app?

Revolut on a smartphone screen next to a lightbulb.

Hello and welcome to Protocol | Fintech! This Friday: Revolut as super app, Elon Musk on pumping crypto and fintech's record quarter.

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The Big Story

Revolut rising

Revolut, the mobile banking company, has seemingly unstoppable momentum. The U.K.-based fintech just raised a monster round, sextupling its valuation in a year's time, and unveiled a big expansion into travel booking.

In the crowded, increasingly competitive world of fintech, these are impressive moves — and a sign that the six-year-old startup is living up to its founders' and backers' huge global ambitions.

Revolut is now worth $33 billion. The challenger bank just raised another $800 million in a Series E round.

  • At $33 billion, Revolut has vaulted ahead of Brazil's Nubank in the unicorn leaderboard, according to CB Insights. That's a sixfold jump from February 2020 when the company was worth a paltry $5.5 billion after raising $500 million in a Series D round.
  • The company said it is now the most valuable U.K. fintech. It's No. 2 in Europe behind fellow fintech Klarna.
  • Revolut's Series E raise included two new high-profile investors who've become increasingly active in fintech: SoftBank Vision Fund and Tiger Global Management. It's a big win to get both megafunders in the round, since they often compete for pole position in the hottest startups.

This fintech startup wants to be known for more than just money. The company just introduced a new feature, called Stays, which lets users book hotels and other accommodations with the Revolut app.

  • Revolut is challenging established travel booking sites like Expedia and Booking.com as the world emerges from pandemic lockdowns. "We know everyone is desperate to get away whenever they can," Marsel Nikaj, Revolut's head of savings and lifestyle, said.
  • This is Revolut's first product outside of finance, but it's in line with Revolut's roots as a multi-currency payment card geared to make life easier for travelers.
  • There's a name for do-it-all apps that start with a core function like payment or messaging and add ecommerce and other features: super apps. Any serious digital finance player — WeChat, AliPay, PayPal, Paytm — wants to be a super app.
  • Revolut is on its way there, having steadily expanded with other services, such as money transfer and a crypto marketplace. The app has 15 million users and processes more than 100 million transactions a month.
  • Analyst Melody Brue of Moor Insights & Strategy said Revolut's timing with Stays is ideal. "After a year in lockdown, many people are craving simplicity and convenience and super apps certainly answer to that," she told Protocol.

Revolut wants to become the "first global financial super app." A bold plan, with stiff competitors and many hurdles to jump. Much of finance remains local and siloed by national borders — look at WeChat Pay and Alipay's slow international expansion. But with a massive funding round and a bold move into a new arena, Revolut can afford momentarily to stand tall, arms akimbo with an imaginary cape flying in the wind.

A MESSAGE FROM BROADRIDGE

To stay competitive, firms must leverage next-gen technologies. But, where do you start? Broadridge simplifies the complex to help you improve operational efficiencies, reduce risks and enhance the end-user experience. We call it The ABCDs of Innovation®.

Learn more

From Protocol | Fintech

Public co-founders react to rival Robinhood IPO disclosures. Co-CEOs Jannick Malling and Leif Abraham also got into why they junked payment for order flow.

Visa makes another fintech deal. The payments giant said it has agreed to buy cross-border payments company Currencycloud for $962 million.

Marqeta hired a software pro. Randy Kern, with a long resume at Microsoft and Salesforce (and an epic beard), is the bank-tech company's new CTO.

Overheard

  • "The industry as a whole must really be alert to the dangers of people using bitcoin and cryptocurrencies to process fraudulent payments."Anne Boden, CEO of British neobank Starling, who nevertheless said the startup was watching digital currencies closely.
  • "There is a way back, Venmo. There is a way to privacy if you want to make it happen." Gennie Gebhart, Electronic Frontier Foundation, on Venmo removing its public feed of transactions after BuzzFeed revealed President Biden's friends list on the PayPal-owned money-transfer app.
  • "If the price of bitcoin goes down, I lose money. I might pump, but I don't dump."Elon Musk, talking about his holdings in bitcoin on Wednesday.

Need to Know

  • Fintech gets even hotter. Fintech companies raised a record $30.8 billion globally in the second quarter, per CB Insights.
  • OppFi went public. The lending company merged with SPAC FG New America Acquisition Corp. and started trading Wednesday.
  • Mastercard's crypto card allows stablecoins. Paxos and Circle are working on the project, which is another sign of the growth of the stablecoin market.
  • Ant Group IPO will happen "before too long." That's according to one board member. The Chinese financial technology giant saw a planned offering delayed by regulators last year.

Making Moves

  • Serena Williams invests in Esusu. The startup helps renters boost their credit scores.
  • Capital One seeks 3,000 tech workers. A selling point for new recruits: the bank's move to Amazon's public cloud.

Deal Flow

  • FTX was valued at $18 billion. Investors in the crypto exchange now include SoftBank, Sequoia Capital and Third Point.
  • Stellar and Advent are eyeing MoneyGram. The money-transfer company has takeover interest from the cross-border payments company and the private equity firm, per Bloomberg.
  • KakaoBank looks to raise $2.2 billion. The South Korean mobile bank priced its IPO at the top of its projected range.
  • Wealth manager startup Titan valued at $450 million. Andreessen Horowitz led the round.

Data Point

153%

That's the increase in funding to South American fintech companies from the first to second quarter of this year, per CB Insights.

3 Questions With...

Dan Burstein, general counsel and chief compliance officer, Paxos

You put out a blog post saying you have 96% cash and 4% U.S. Treasuries backing your stablecoin. Why is that important?

In 2015 Paxos got our New York state trust charter from the New York Department of Financial Services. It meant that the regulators are understanding our business model and agreeing to ongoing supervision of the tokens and to supervise the reserves underlying the tokens. When a customer buys a stablecoin from us, they are giving us $1 and getting a stablecoin in return and their expectation and the most important thing in a stablecoin is that that dollar is going to be there when somebody wants to redeem the token. And so as a regulated entity, we are able to hold our tokens in cash and government-backed instruments, which is basically U.S. Treasuries. That's it.

Others like Tether and Circle have much less cash backing their stablecoins and Tether has been called a potential threat to the commercial paper market. Thoughts?

When we see that they tout their reserves as being reliable, you only have to peel back the layers a little bit to see that that's much different from what a regulated token is. A regulator is not going to allow a regulated product to be advertised as a stablecoin, but in fact to have a basket of corporate debt obligations, and other risky and illiquid assets that are underlying what they're calling a stablecoin.

Is that more of a problem for individuals to get everyday redemptions or for markets in case of some sort of crisis?

It's more the latter. Financial regulation is about safety and soundness and consumer protection as much as anything else. And it's knowing and anticipating what happens in abnormal circumstances. And so what we want to look at is the scenario where there is a run on assets and a lot of people want redemptions at the same time. We have short-term-maturity U.S. Treasuries, that we can liquidate at par on a very short notice. When you see other tokens that are backed by much less-liquid assets or are tied up for years, you're going to see the possibility of a fire sale in that adverse scenario, and the possibility of the token being at that point severely undercapitalized.

A MESSAGE FROM BROADRIDGE

To stay competitive, firms must leverage next-gen technologies. But, where do you start? Broadridge simplifies the complex to help you improve operational efficiencies, reduce risks and enhance the end-user experience. We call it The ABCDs of Innovation®.

Learn more

Thanks for reading — see you Tuesday!

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