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1. The launch of Uber Money cements Big Tech’s leap into banking
Last week Uber announced it had created a mobile wallet for its drivers. This will allow Uber’s 4m operators worldwide to get paid for their rides immediately. They can then use their designated debit card to make payments and the accounts will also give them access to Uber’s free overdrafts.
It’s unlikely to stop there. Uber Money could expand into offering sizeable loans to drivers (it already offers micro-loans in some countries). Later it’s said it envisages providing its customers with card services so they can earn Uber rewards as they spend. That basically means Uber is on its way to becoming a challenger bank…
So what does this mean?
Firstly, it points to Big Tech’s coordinated move into financial services. We’ve already had Facebook announce it is building its own cryptocurrency. Then we’ve seen Apple partner with Goldman Sachs to offer its own native credit card — and Amazon already offers loans to distributors on its platform.
Who can blame them; the blatant gap in banking is what birthed the fintech industry. Indeed, it speaks volumes that Apple’s credit card slogan is ‘Created by Apple, not a bank’. The public now seem to trust tech companies more than they trust financial institutions with their money.
But the other question is what this means for European startups. This is a clear move into the territory of some of the ‘gig economy’ fintech startups such as Zego, Portify and Tapoly, which help independent workers get better access to loans and insurance. So are they going to be challenged or complemented by Big Tech moving into this space.
One player at least thinks it will be positive. Paris-based startup Mansa is set to launch later this year, offering large loans to freelance drivers and writers (who typically get refused loans by banks). These loans can only be secured if their employers partner with Mansa. Its cofounder Ali Rami believes Uber Money will now encourage more partnerships.
“It’s even better for us because [Uber’s competitors] will make a bigger promotion to their drivers to compete,” he told Sifted. Backed by President Macron’s former advisor, Mansa targets those who do not have fixed monthly salaries and therefore do not fit the credit-rating model of traditional banks.
Another question is whether Uber Money will give its parent company an edge in the competitive European taxi-app market, helping them beat the likes of Bolt and MyTaxi. Uber Money is setting the groundwork for a new payments system. In time having an ‘in-house’ banking platform could see it cut out the financial middlemen and reduce costs.
But good or bad, this could well be positive for Uber employees. Uber’s drivers have long been pitted as an exploited class of under-protected workers who shoulder the set-backs of the gig economy. There’s some truth in that, which a tailored financial service could help to rectify.
Zihao Xu, analyst at Octopus Ventures, told Sifted: “This highlights how fintech can open the door to ‘unbanked’ or ‘under-banked’ sectors of the economy and is a useful tool when streamlining these clunky cash payment methods in order to improve the working life of a driver relying on a volatile income… It will be fascinating to see if they can replicate the model of some of the large players in the Asian markets.”
Saying that, there’s also a darker side to mixing tech and banking. What happens if Uber — a loss-making company, now a slave to the public market — collapses? What happens if a driver defaults on an Uber loan — do they lose their job too? Will the tech algorithms be able to detect dependencies or preferences and then capitalise on that?
It’s an interesting hybrid and one that fintechs — and banks — will no doubt be watching closely.
2. Funding in October overview
As autumn creeps into winter fintech venture capital funds seem to be feeling the chill.
Rough estimates show that fintechs in Europe raked in around €233m in October (excluding Softbank’s standalone investment of $655m into London’s Greensill, a working capital provider). That’s not bad, but it’s down from around $420m in September and marks a slow start to Q4.
For clarity, this data is taken from Dealroom and encapsulates banking and payments, insuretech, and proptech.
Still, the UK again dominated in October in terms of number of deals, which included large raises by Starling Bank and Tide. Innovate Finance estimated that fintech firms in the UK alone brought in $2.91bn in funding in the first quarter of 2019.
October # of fintech deals by country. Source: Dealoom.co
October’s funding dip is something of an anomaly over the last nine months. Fintech funding in 2019 has been Europe’s biggest year on record thanks to a strong Q1.
A previous version of this article mentioned Bolt and Taxify as two seperate companies. In fact, they are the same company. Taxify changed its name to Bolt earlier this year.