Top Headlines in Fintech #013

"I think it's an enabling technology just as cyber was 10-to-15 years back. Will it have an impact in the space that we serve? Absolutely.” - CACI International CEO John Mengucci on Artificial Intelligence  

Inflation is finally showing signs of abating, with July’s Consumer Price Index revealing prices inched higher by 3.2% last month, less than expected. The economy is receiving mixed signals at the moment as policymakers continue to debate whether or not the latest data will cause the Federal Reserve to hold interest rates here for a while, in the 5.25%-5.50% range. 

Meanwhile, artificial intelligence (AI) continues to grab the spotlight across sectors of the economy, including fintech and cybersecurity. John Mengucci, who is at the helm of global IT firm CACI International, which provides technology to government agencies, during the company’s latest earnings call likened AI to cyber a decade ago, describing it as an “enabling technology” and saying it will “absolutely” have an impact across the public sector. 

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John Mengucci | Image by Washington Technology 

‍Takeaway: It’s a reminder of the opportunties that the fintech sector brings to bear in the public sector and the role that it can play not only in helping to shape future regulation but also future use cases so that government not only promotes fintech but also takes advantage of all that the industry has to offer its systems, employees, citizens and beyond.

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PayPal is expanding further into the digital asset space and has introduced its own stablecoin. PayPalUSD (PYUSD). The stablecoin is backed by the U.S. dollar, U.S. Treasuriers and other cash equivalents and can be redeemed 1:1 for USD. Coin holders will be able to transfer the stablecoin among PayPal and other supported wallets as well as send it peer-to-peer. 

Takeaway: New stablecoins at this stage of the game are likely to face growing competition, not only from other stablecoins such as USD Coin but also from emerging central bank digital currencies (CBDCs), like the digital dollar. In addition, the regulatory landscape for digital assets including stablecoins remains unclear, suggesting that PayPal could run into some unexpected hurdles at some point.

AI & FIntech

SoFi Technologies, a personal finance company and online bank, is making an AI push. The fintech is building conversational AI technology from Galileo Financial Technologies, dubbed Cyberbank Konecta, into its mobile app. Cyberbank’s chatbot technology creates a human-like experience for users. 

The intelligent digital assistant (IDA), as it’s known, has bolstered customer satisfaction and is building loyalty, according to SoFi’s Aaron J. Webster, chief risk officers and global head of operations. Galileo operates as a subsidiary of SoFi after the fintech acquired the company in 2020.

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Also on the AI front, Swiss-Israeli fintech Okoora is partnering with the UK’s Paysend to support the money-transfer company’s expansion into Israel. This partnership also has an AI component to it, as Paysend will be able to harness Okoora’s AI-fueled platform to deliver its payments technology to local clearinghouses to support business transactions in Israel.

In addition, fintech investor Ripplewood is reportedly planning to pour $1 billion into OpenAI, the company behind the wildly popular ChatGPT chatbot. According to reports, Ripplewood is seeking to harness the capabilities of generative AI software for its fund, giving private investors the opportunity to gain exposure to this emerging technology. 

BNPL  

Aussie buy now pay later firm Zip is shaking up its executive lineup. Larry Diamond, co-founder of Zip, is stepping down as CEO. The company has named Cynthia Scott, who has been at the helm of the company’s Australia and New Zealand businesses, as the new chief executive of Zip Group. Diamond alongside fellow-co-founder Peter Gray will now run the ANZ and U.S. divisions as the company pursues “its next stage of profitable growth,” according to a statement. 

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Image by The Market Herald

Also on the BNPL front, Klarna is making strides in the Great White North. The Swedish company has gained 640,000 active users since it entered Canada a year and a half ago. Klarna has reportedly processed over 2 million orders in the country and teamed up with companies like Airbnb to cement its position in the local market. 

Hawaii Wildfires & Tech Execs 

As the state of Hawaii continues to reel from the devastating wildfires, some tech billionaires were personally affected. Among them, investor Peter Thiel, Meta Founder Mark Zuckerberg and Amazon Founder Jeff Bezos all own part-time residences on the island of Maui. In addition, tech pioneer and Oracle founder Larry Ellison owns the majority of a county island dubbed Lanai, which appears to have been shielded from the fires. Jeff Bezos and his finance Lauren Sanchez have vowed to donate $100 million to Maui relief efforts. 

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Image by People 

Stock Spotlight

Marqeta (MQ): Oakland, Calif.-based Marqeta, a card-issuing platform, saw its stock rise approximately 25% to $6 per share last week after the company renewed its contact with payments giant Block for four more years. Marqeta CEO Simon Khalaf made the announcement during the company’s quarterly earnings call, revealing that it will remain the issuer of the Cash App debit card through mid-2027. 

However, the stock couldn’t hold onto those gains after the company also revised its profit and revenue guidance lower, causing Wall Street analysts to become concerned about some near-term challenges. Nevertheless, some see the glass half full. Berenberg Bank decided to upgrade MQ stock to a buy rating from hold and raised its price target to $8 per share. 

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Marqeta 5-Day Chart | Image by TradingView 

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Pagaya Technologies, an AI-powered data company, is benefiting from the opportunity in artificial intelligence. The company surprised Wall Street with a quarterly profit of $886,000 on an adjusted basis after experiencing a loss in the year-ago period. Pagaya skyrocketed 37% in response before retreating from its highs. 

In addition, Pagaya’s total revenue climbed 8% higher while fee revenue soared nearly 14%. Analyst firm Benchmark raised the price target on shares from $2 to $6, saying that the stock has “rebounded” from its low and that investors and is worthy of a valuation that matches the “long-term opportunity” in AI. 

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Pagaya 5-Day Stock Chart | Image by TradingView 

Weekend Reads

• “Nearly One in Four Gen Z Shoppers Won’t Buy If BNPL Not Offered” - PYMNTS published the results of a survey in which 27% of Gen Z shoppers said that they would abandon a purchase if buy now pay later options were not offered. 
• “67% of Corporate Treasurers Expect Another Interest Rate Hike” - According to a survey cited by CFO.com, more than two-thirds of corporate treasurers are bracing for another interest rate hike this year, the uncertainty from which is causing businesses to hold onto more cash reserves. 
• “Line Up Credit Now — Your Growing Business May Need It Later” - CFO.com published a report warning that a credit crunch could be on the horizon, saying that even though credit has been available through the H1 2023, loan approvals could become harder to come by before the year is over. 

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Now that the latest inflation is out, the economy will turn to some other indicators to determine how the third quarter of the year is fairing. Economic indicators such as retail sales, housing starts and industrial production will provide some insight into the strength of the consumer. 

In addition, the Fed will be releasing its minutes this week, which should give market participants a sense of whether or not policymakers intend to keep short-term interest rates where they are.

Fortunately, economic expansion is unfolding faster than economists anticipated and has muted previous calls for a recession, good news for all sectors of the economy, not least of which includes fintech.