Hi Fintech Friends,
Welcome to part three of Q1 Signals. The purpose of Signals is to get you away from the headlines in order to dig more deeply into the trendlines. (You can read part one of Q1 Signals here and part two here.)
The third installment of each quarter’s Signals drills more deeply into the product launches from the prior quarter, to unpack trends and understand where fintechs and banks are competing the most fiercely to win over customers.
In Q4 2020, we broke down 112 product launches in 6 key areas. In Q1 2021, by contrast, there were 94 new product launches, with 65 coming from fintech and 29 from financial services.
Within fintech, I found it surprising how many launches were of or by neobanks over the last quarter (18 in total); I still consider neobanks somewhat of a ‘set’ category, but they look to be innovating quickly. These were the types of products that fintech companies launched in Q1 2021:
The most interesting area for growth over the first quarter of this year (which exploded this quarter), was hybrid crypto and fintech products. The lines definitely appear to be increasingly blurred between these two product worlds (something that the rise of defi has made even more clear).
Banks are normally trailing indicators when it comes to fintech product trends. Due to higher regulator scrutiny and compliance standards, more cumbersome infrastructure, and less developer-oriented cultures, new bank products tend to signify defensive entrenchment to counter fintechs rather than net-new products. As such, the third most popular bank product category was the launch of a new credit card. Tied for fourth were buy-now-pay-later and personal financial management tools. With that said, banks were busy launching their own products in Q1 as well:
The “neobank” product category here means that a legacy bank was launching neobanking-type products to compete with fintech digital consumer banking product offerings. It was also surprising to see some banks - normally risk-averse - getting into the crypto game.
The most interesting product themes in Q1 2021 are below.
1. Embedded Payments (5 launches)
Embedded finance is not a new theme in fintech (the phrase has been coined differently for a decade, but regained prominence with mentions from Matt Harris and Angela Strange in late 2019 / early 2020). What is interesting is that all of the major tech and social platforms appear to be catching up to the theme with their embedded payment offerings, treating payments as a third rail in product development
(More recently, in Q2, Twitter added a Tip Jar similar to Clubhouse payments.)
Clubhouse payments.
2. Crypto and Fintech (8 launches)
Crypto and fintech are going through a love affair, where companies rush to enable access to currencies and leverage the back-end infrastructure of crypto in mass-market fintech product offerings. I’ve always considered fintech extremely effective at simplifying the user interface of financial products in a way that drives mass adoption and distribution, while crypto rebuilds financial rails in a way that increases speed and lowers costs (and is now beginning to enable new exotic product types…) The merger of the two is exciting.
Bitpanda launched a new hybrid crypto and fiat currency debit card to let users spend crypto and convert automatically.
Taking a page from both defi and competitors like Blockfi, Gemini launched an Earn account that lets users deposit and earn APYs on their crypto.
Commercial lender LQD Business Finance launched a crypto lending solution.
Techemynt launched a stablecoin for New Zealand’s banking system pegged to the country’s dollar.
Bottlepay launched its payments product, which will let Twitter users send each other bitcoin.
Robinhood added crypto withdrawal functionality, so that users can take custody of their holdings.
Google Finance added a dedicated crypto tab.
Fidelity announced a bitcoin ETF.
Bottlepay’s Twitter crypto payment interface.
3. Open Banking (7 launches)
Open banking saw a lot of product activity over the last quarter, from both banks and fintechs.
Bank of America rolled out its own integration with open banking provider Plaid.
European open banking platform Truelayer launched an account-to-account payment product.
Plaid launched a direct deposit switching API and its own income verification API, Plaid Income (a shot across the bow to startups like Argyle and Pinwheel).
Open banking platform Basiq added a new feature for lenders to aggregate outstanding consumer loan data.
UK startup Fintern launched consumer loans underwritten with open banking financial data.
Bopp, an account-to-account open banking payments platform, launched in the UK.
Mobile open banking platform Spot Money launched in South Africa.
Fintern’s open banking consumer loans.
4. Point of Sale (6 launches)
The battle to own the checkout continues to be a crowded one in fintech. Payment networks like Visa and Mastercard have never been under as much pressure from upstart solutions, as more and more commerce increasingly moves online. From buy-now-pay-later startups to one-click checkout providers, tech companies are trying to win checkout territory, and this is just as true for in-person point of sale payments.
Perhaps the most interesting launch of Q1, Lithuanian startup kevin. released a product that will let consumers switch from using a credit card to making a direct payment out of their bank account (which is cheaper for merchants) mid-checkout.
Square launched Square Register, a fully-integrated POS for small businesses.
Pine Labs is competing in the same space as Apple’s recently-acquired Mobeewave. The company launched AllTap, an app that turns any phone into a payment acceptance device. Eventually, to win the consumer digital wallet and payment war, big platforms have to own both sides of the transaction: the consumer and the merchant (a lesson that Square has internalized with Cash App available as a form of payment at Square Registers). The most lightweight way to win over merchants is to enable them to accept payments through their phones. Pine Labs does this with an NFC-enabled Android app.
MagicCube also launched its Brazilian SoftPOS, similar to Pine Labs.
Amazon opened a cashierless ‘just walk out’ store in London.
Mastercard unveiled its first point-of-sale acceptance technology.
Square’s new Square Register PoS solution.
5. Climate (1 launch)
Stripe officially launched Stripe Climate, which we had previously covered, in February. The product was rolled out globally, and lets online businesses redirect some of their proceeds towards four tech initiatives focused on reducing carbon footprints. Over 100 companies in Europe signed up for the launch.
