Category: stripe

Who will the winners be in the future of fintech?

So what happens when fintech ‘brings it all together’? In a world where people access their financial services through one universal hub, which companies are the best-positioned to win? When open data and protocols become the norm, what business models are set to capitalize on the resulting rush of innovation, and which will become the key back-end and front-end products underpinning finance in the 2020s?

It’s hard to make forward-looking predictions that weather a decade well when talking about the fortunes of individual companies. Still, even if these companies run into operating headwinds, the rationale for their success will be a theme we see play out over the next ten years.

Here are five companies positioned to win the 2020s in fintech:

1. Plaid

In 2014, I met Zach Perret and Carl Tremblay when they reached out to pitch Funding Circle on using Plaid to underwrite small and medium businesses with banking data. At the time, I couldn’t understand how a bank account API was a valuable business.

Plaid’s Series C round in 2018 came with a valuation of $2.65 billion, which caught a lot of people in fintech off-guard. The company, which had been modestly building financial services APIs since 2012, recently crossed the threshold of 10 billion transactions processed since inception.

For those unfamiliar with Plaid’s business model, it operates as the data exchange and API layer that ties financial products together. If you’ve ever paid someone on Venmo or opened a Coinbase account, chances are you linked your bank account through Plaid. It’s possible in 2020 to build a range of powerful financial products because fintechs can pull in robust data through aggregator services like Plaid, so a bet on the fintech industry is, in a sense, a derivative bet on Plaid.

Those 10 billion transactions, meanwhile, have helped Plaid understand the people on its’ clients fintech platforms. This gives it the data to build more value-added services on top of its transactions conduit, such as identity verification, underwriting, brokerage, digital wallets… the company has also grown at a breakneck pace, announcing recent expansions into the UK, France, Spain, and Ireland.

As banks, entrepreneurs, and everyone in-between build more tailored financial products on top of open data, those products will operate on top of secure, high-fidelity aggregators like Plaid.

The biggest unknown for aggregators like Plaid is whether any county debuts a universal, open-source financial services API that puts pricing pressure on a private version. However, this looks like a vanishingly remote possibility given high consumer standards for data security and Plaid’s value-added services.

2. Stripe

Predicting Stripe’s success is the equivalent of ‘buying high,’ but it is hard to argue against Stripe’s pole position over the next fintech decade. Stripe is a global payments processor that creates infrastructure for online financial transactions. What that means is: Stripe enables anyone to accept and make payments online. The payment protocol is so efficient that it’s won over the purchase processing business of companies like Target, Shopify, Salesforce, Lyft, and Oxfam.

Processing the world’s payments is a lucrative business, and one that benefits from the joint tailwinds of the growth of ecommerce and the growth of card networks like Visa and Mastercard. As long as more companies look to accept payment for services in some digital form, whether online or by phone, Stripe is well-positioned to be the intermediary.

The company’s success has allowed Stripe to branch into other services like Stripe Capital to lend directly to ecommerce companies based off their cashflow, or the Stripe Atlas turnkey tool for forming a new business entirely. Similar to Plaid, Stripe has a data network effects business, which means that as it collects more data by virtue of its transaction-processing business, it can leverage this core competency to launch more products associated with that data.

The biggest unknown for Stripe’s prospects is whether open-source payment processing technology gets developed in a way that puts price pressure on Stripe’s margins. Proponents of crypto as a medium of exchange predict that decentralized currencies could have such low costs that vendors are incentivized to switch to them to save on the fees of payment networks. However, in such an event Stripe could easily be a mercenary, and convert its processing business into a free product that underpins many other more lucrative services layered on-top (similar to the free trading transition brought about by Robinhood).

Sleek raises $5M to help companies incorporate and operate in Singapore and Hong Kong

Sleek, a startup that is making it easier for other startups and companies to incorporate and operate in Singapore and Hong Kong, said today it has extended its seed financing round to raise $5 million.

The extended seed round for the two-year-old startup was led by private investors Pierre Lorinet and Fabio Blom, and MI8, an Asia-focused European backed private investment company.

Sleek also counts a number of high profile individuals including Martin Crawford, former Group CEO of corporate services giant Vistra, Olivier Gerhardt, founder of Wavecell, Eric Barbier, founder of TransferTo, and Olivier Legrand, MD Asia at Linkedin among its investors.

Sleek, founded by French entrepreneurs Julien Labruyere and Adrien Barthel, today helps more than 2,000 startups and companies in Singapore and Hong Kong, an additional market it extended to in mid-2019. Some of its clients include Yours Cosmetics (funded by Sequoia), Aspire Financials (which raised $30 million recently), Ematic Solutions, Devialet, and oil and gas giant Total.

As we wrote about them in June this year, Sleek not only helps startups and companies incorporate themselves in Singapore (and now, Hong Kong), but also takes care of their accounting, taxes, regulatory compliance and other administrative work.

Sleek founders Julien Labruyere (right) and Adrien Barthel (left)

Singapore and Hong Kong have emerged as epicenters for startups and tech worldwide. “Hong Kong is a historical Asian financial hub, with six times more operating companies than in Singapore and an amazing business ecosystem,” said Barthel, adding that despite the current situation in Hong Kong, the business is growing in the market.

Both Singapore and Hong Kong today offer a range of benefits including government-backed startup programs to attract businesses, but setting up shops there still require a lot of paperwork.

The traditional way of dealing with accounting and incorporation is a cumbersome task, and the last thing founders want to deal with, Barthel explained to TechCrunch in an interview. Plus, there’s no transparency in what the actual cost of doing these tasks would be, he said.

Sleek offers a subscription business, where it charges a fixed amount — about $600 — to its customers each year. Starting second year, it waives some of its fee, said Barthel. “We also offer a simple dashboard for our clients to quickly check the progress we have made on any front,” he added.

To make the deal even better, Sleek offers vouchers with subscription to AWS, Stripe, Google Cloud — that they are likely going to use in their businesses anyway — worth thousands of dollars. The startup also connects its partner entrepreneurs with financial institutions to help them access working capital.

Barthel said before signing up a client, Sleek does its own due diligence. “Singapore, for instance, has stringent on KYC (know your customer) processes. Among other things, we use a number of APIs that are tied with all the major global databases to ensure that our potential clients are not doing notorious business,” he said.

Sleek, which today employs 85 people, will use the fresh capital to expand its tech team, build new features for clients, and increase its operational capacity.