“The more tightening that people feel motivated to do, the more uncertainty around these lags and the greater risk to more extreme economic outlooks.” - PIMCO CIO Daniel Ivascyn
With central banks globally eyeing further interest rate hikes before the year is over, some economists warn that the other shoe has yet to drop. Among them, PIMCO CIO Daniel Ivascyn predicts that the global economy is headed for a “hard landing.” He believes the markets are assuming too much about central bank monetary policy and that there may be greater risks and uncertainty than is currently being reflected in the markets.
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Meanwhile, with the U.S. preparing to celebrate the 4th of July holiday, this is likely to be quiet week in the markets. One thing that market observers are looking out for are the latest FOMC minutes for any more hints from the Fed on what policymakers have up their sleeve for the second half of 2023.
Fintech M&A is back, and the industry has Visa to thank for it. The card giant made a splash with its acquisition of Pismo, a Brazilian payments infrastructure company. After months of a rumored deal, Visa beat rival Mastercard to the punch, snapping up the Latin American startup and making a statement about the opportunities in the region.
Pismo has an impressive track record, seeing its number of customer accounts rise from 10 million three years ago to 80 million at last check. The Brazilian fintech also boasts approximately $40 billion in transaction volume each year.
London-based Zepz, a fintech unicorn, also has M&A in its sights. The money transfer company is reportedly eyeing an expansion through acquisition despite slashing its workforce by more than 25% in recent weeks. Zepz, which is behind the WorldRemit and Sendwave brands, is targeting a full-year profit and boasts a valuation of approximately $5 billion.
Jack Dorsey’s Square (aka Block) is making a banking push. The company has introduced a new credit card and cash flow products for U.S. merchants to streamline cash flow management. The move comes on the heels of $1 billion in Square debit card spending by customers in the first five months of the year. Square’s banking expansion also includes more loan options and early deposit features.
The Square Credit Card, which remains in beta format and harnesses the American Express network, offers a credit limit commensurate with the merchant’s sales on Square’s platform. In this competitive market landscape, the card has zero late fees or annual fees.
Separately, Square’s Cash App suffered a technical glitch in which customers were double charged for their purchases. The app’s Cash Card was affected, and phone-based customer service was unavailable, making matters worse. The Cash App Twitter account tweeted that affected customers would be notified and any duplicate charges would be refunded.
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Meanwhile, there appears to be trouble in paradise for the Goldman Sachs and Apple partnership. The two companies recently introduced a high-yield savings product with an APY of 4.15%. However, reports suggest that the Wall Street bank is now running for the exits, with other major financial players including American Express in line to take its spot.
Salt Lake City, Utah is looking to become the next hub for the fintech industry. Most recently, a fintech education center, dubbed the Stena Center for Financial Technology, made its debut at the Universitu of Utah.
Students have the opportunity to take courses and learn from fintech companies that visit the center. In early 2024, the curriculum will be expanded to include venture capital, office space and mentorship by fintech execs, offering support to students and recent graduates to launch fintech startups. Among the fintech companies that already have a footprint in Salt Lake City include Brex, Plaid and SoFi.
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India-based payments startup Innoviti Technologies may pursue a fresh funding round at a valuation of $350 million, according to a Bloomberg report. The company is eyeing $25 million in funding, while early investors might also sell some of their equity. Innoviti plans to direct the capital toward expanding into additional customer segments and introducing more lending-based products. Discussions around the funding round remain in the early innings.
Payments giant PayPal is launching a tap-to-pay feature on Android for U.S. merchant customers on Venmo. Businesses will be able to accept payments directly on an Android mobile device without the need for having or paying for any additinal hardware.
Solo Funds, a U.S.-based community-based lending platform that caters to the unbanked, is expanding its footprint into Nigeria, its maiden international market. The company, which has amassed more than 1 million users so far, chose Africa for its its budding fintech landscape coupled with a rising middle class. In addition to Africa, Solo Funds is eyeing other international markets for expansion over the next year to 18 months.
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Shares of money-transfer company Wise have been on a tear, rising by a double-digit percentage in recent days on soaring profits. The company earnings before taxes came in at $186.5 million in the latest period, nearly tripling from year-ago results, thanks to interest-related income.
In addition, Wise’s customer base has grown by more than one-third while volumes increased by nearly 40%. The rising interest rate environment has served as a catalyst for the fintech company.
Wise Chart by TradingView
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A slew of economic indicators are due out this week that will reveal the strength of the U.S. labor market, including non-farm employment numbers and the Challenger jobs report. The results will provide the missing piece to the interest rate puzzle as noted by Fed Chairman Powell.
With the week shortened by the U.S. holiday, trading is likely to be light. But the tone of the June Fed meeting minutes, which will be revealed mid-week, should provide a glimpse into what is likely to come for the markets and fintech for the second half of the year.
