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Post Investment: Can Fintech Rebuild on Value, Not Hype? You might be surprised!





The pendulum seems to be swinging from the era of easy capital and rapid growth to a more sobering reality of value creation.

In this transformative period, Scott Dawson, a seasoned veteran with over two decades of experience in the payments industry and currently the head of sales and strategic partnerships at payment platform DECTA, delves into this transition, offering an understanding of the strategic opportunities emerging amid industry challenges.

In the middling science fiction novel Those Who Remain, author G. Michael Hopf said: “Hard times create strong men, strong men create good times, good times create weak men, and weak men create hard times.” This quote (which in modern terms obviously relates to all human beings) has become something of a catch-all sentiment for ‘decadence’.

The Great Depression in the 1930s is a good example of a time that this quote capture well: When economic turmoil challenged communities and individuals, making it necessary to adapt innovate, and endure severe economic hardships. As a result, a hardier society emerged, giving rise to a generation that understood the value of hard work, frugality, and community support. The Metaphor works equally well if we switch ‘men’ to ‘companies’.

In fact, it sheds some much-needed light on the trajectory of business in the 21st century. In good times investors, flush with cash, invest in thousands of weak businesses, these businesses fail and investors are forced to find more reliable sources of profit and then, again flush with cash, they return to spraying billions of dollars at any Standford drop-out with a pitch deck and a hoodie.

With fintech investment now a quarter of what it was a year ago, it seems that the good times are over and the hard times are here in earnest. Key to this has been interest rates: the very same mechanism that means that fuel and food is now more expensive than ever before also means that it is more expensive to borrow large sums of money.

Following the Great Recession of 2008, many first-world nations adopted Zero Interest Rate Policy (ZIRP) as a means of boosting investment. If companies can borrow at zero or close to zero percent interest then they should, economists say, found profitable businesses, create jobs and stimulate the economy.

Theoretically, this approach is solid except for the fact that it doesn’t always work. Japan did just this, going so far as having negative interest rates, in the 1990s ‘lost decade’ and it didn’t work. But a byproduct was massive investment funds like Softbank Vision Fund, which in turn supported many of the big names of the ZIRP-era: Doordash, Uber, WeWork, Revolut, Slack, FTX and Klarna, among others. That being said, FTX has since collapsed due to fraud, while WeWork went bankrupt and Uber posted its first profitable quarter this year – despite being founded in 2017.

However, to the strategically minded, every crisis is an opportunity.  Fintech now has the chance to get real about creating companies that really create value, that are of service to the community and solve real problems instead of jumping from one VC cash infusion to the next.

The fintech cycle beings again

Fintech investment in 2023 was a quarter of what it was in 2022, and a fifth of its peak in 2021. In the UK, one of the world’s great Fintech hubs, investment is down 57 per cent. This isn’t the same across the board: the percentage of VC funding going to fintech startups is down five per cent on 2022 and seven per cent since its high of 20 per cent in 2021. The creation of new unicorns is also down significantly: 59 companies had exits of over a billion dollars in Q2 of 2021 – in Q2 of 2023 the figure was only two. In short, VCs seemingly just aren’t that into fintech anymore.

This is in stark contrast with previous decade: PayPal, Revolut, Venmo, Stripe and Klarna became multi-billion dollar businesses almost overnight and remain so by giving people access to services that traditional financial services companies couldn’t offer – instant payments or buy-now-pay-later financing. To find these diamonds in the rough the venture capital world had to burn through hundreds of no-so-shiny diamonds, often at great cost – those 59 startups with exits in Q1 2021 aren’t likely to be household names today, if they even still exist.

Anyone who has been at a fintech conference in the last decade might have been given a business card and tote bag by a company with a clever name, stylish design, scads of VC money but with no obvious reason to exist. Such companies might not provide a new or better solution to an existing problem or have a real addressable market, and quite often no plan to become a profitable business.

This preference for growth over profit is key and is one of the defining aspects of the ZIRP era. Of course, there are example where it was been responsible for massively successful companies: Amazon dramatically cut prices of books to the point that physical bookstores were going out of business, eventually expanding its customer base so much that it cannot fail to turn a profit – it is selling so much that even the pennies it makes on a sale add up to hundreds of billions of dollars in gross profit each year.

However, its rate of growth is falling, despite a marked upturn during the pandemic, falling from an average of around 40 per cent YoY quarterly growth in the early 2010s to 30 per cent later in that decade and now a flat 20 per cent. It has now transitioned from a period of rapid growth to a profit-driven model, something that many other growth-oriented companies have failed to do.

Getting real about profit

As the faucet of cheap money shuts off, the VCs face a reckoning. The shotgun approach of spraying cash at hundreds of companies in the hope of striking gold won’t cut it anymore. The new imperative? Finding the needle in the haystack – those rare gems with genuine profit potential and genuine solutions to real problems.

It is important to say that fintech investment is still happening, albeit at a deteriorated rate. But some startups are choosing alternative paths, wary of the VC roller coaster. This could mark a welcome shift: a refocus on problem solving first, growth second. The road ahead might be bumpy, but it could be the very dose of reality the industry needs. It’s time to build for value, not just valuation.


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Expressions of Interest for Director of the European Bank for Reconstruction and Development




The Minister for Finance, Michael McGrath, is inviting Expressions of Interest from suitably qualified candidates to be considered as Ireland’s Director of the London-based European Bank for Reconstruction and Development (EBRD). The remunerated position of Director is an important post with a demanding workload. A full-time residential position, it is based at Bank headquarters in London.

The Minister’s nominee is expected to be appointed by the EBRD, with the agreement of Ireland’s Constituency partner countries, for a three-year term from 1 August 2024.

Minister McGrath commented:

“This is an exciting opportunity to represent Ireland (and our Constituency partners Denmark, Lithuania and Kosovo) as a Director on the Board of the European Bank for Reconstruction and Development overseeing the policy-making and governance of the Bank. The EBRD is a unique International Financial Institution supporting projects across three continents. By investing in projects which otherwise would not be fully met by the market, the EBRD promotes entrepreneurship and fosters transition towards open and sustainable market economies. I am keen to ensure our Irish representative has the ability, education, vision, and experience to make a significant contribution to the Board and brings a range of skills and diverse perspective to the deliberations of the Board.

My nominee will need high competence in economic and financial matters. Expertise can come from notable or significant achievements in the corporate or financial sector, academia, policy-focused institutions, or public service. Importantly, they will have the highest ethical standards, a strong sense of professionalism and commitment, and dedication to serving the interests of all the shareholders and be able to make themself readily available to the Board in the fulfilment of their duties.”

Expressions of interest will be accepted up to 3pm on 27th March 2024

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Council adopts regulation on instant payments





The Council adopted today a regulation that will make instant payments fully available in euro to consumers and businesses in the EU and in EEA countries.

The new rules will improve the strategic autonomy of the European economic and financial sector as they will help reduce any excessive reliance on third-country financial institutions and infrastructures. Improving the possibilities to mobilize cash-flows will bring benefits for citizens and companies and allow for innovative added value services.

The instant payments regulation will allow people to transfer money within ten seconds at any time of the day, including outside business hours, not only within the same country but also to another EU member state. The regulation takes into consideration particularities of non-euro area entities.

Payment service providers such as banks, which provide standard credit transfers in euro, will be required to offer the service of sending and receiving instant payments in euro. The charges that apply (if any) must not be higher than the charges that apply for standard credit transfers.

The new rules will come into force after a transition period that will be faster in the euro area and longer in the non-euro area, that needs more time to adjust.

The regulation grants access for payment and e-money institutions (PIEMIs) to payment systems, by changing the settlement finality Directive (SFD). As a result, these entities will be covered by the obligation to offer the service of sending and receiving instant credit transfers, after a transitional period. The regulation includes appropriate safeguards to ensure that the access of PIEMIs to payment systems doesn’t carry additional risk to the system.

Under the new rules, instant payment providers will need to verify that the beneficiary’s IBAN and name match in order to alert the payer to possible mistakes or fraud before a transaction is made. This requirement will apply to regular transfers too.

The regulation includes a review clause with a requirement for the Commission to present a report containing an evaluation of the development of credit charges.


This initiative comes in the context of the completion of the capital markets union. The capital markets union is the EU’s initiative to create a truly single market for capital across the EU. It aims to get investment and savings flowing across all member states for the benefit of citizens, businesses, and investors.

On 26 October 2022 the Commission put forward a proposal on instant payments that amends and modernises the single euro payments area (SEPA) regulation of 2012 on standard credit transfers in euro by adding to it specific provisions for instant credit transfers in euro.

Source: European Council

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FCA highlights need for enhanced competition in wholesale data markets





The FCA has unveiled the outcomes of its in-depth study into the wholesale data market, focusing on the sectors of credit ratings data, benchmarks, and market data vendor services.

Despite deciding against major regulatory actions due to the risk of unintended consequences that could affect the data’s availability and quality—a crucial resource for global investors—the FCA has pinpointed several areas where competition could be significantly improved.

The study’s revelations indicate that the current state of competition in these markets may lead to users incurring higher costs for data than would be the case in a more competitive environment. This concern is particularly pressing given the critical role that such data plays in supporting effective investment decisions across the financial sector.

In a move to address these findings, the FCA has proposed initiatives aimed at ensuring wholesale data is distributed under fair, reasonable, and transparent conditions. This approach forms a part of the regulator’s broader strategy to ‘repeal and replace’ assimilated EU law, reinforcing the UK’s status as a premier global financial hub fostering investment, innovation, and sustainable growth.

Sheldon Mills, the FCA’s Executive Director of Consumers and Competition, emphasised the importance of quality and accessible wholesale data for the efficiency of financial markets. “The quality and availability of wholesale data is integral to well-functioning wholesale financial markets,” Mills stated. He further clarified, “Our market study found that firms can access the data they need to make effective investment decisions. We do not believe the case has been made for significant interventions. However, we will examine ways to help support wholesale data being provided on fair, reasonable and transparent terms.”

In its commitment to fostering a competitive and fair marketplace, the FCA will continue to scrutinize allegations of anti-competitive behavior across all markets, including wholesale data markets, leveraging its powers under the Competition Act to address any such issues.

Source: Fintech Global


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