In 2015, Nick Molnar was living with his parents in Sydney, Australia, and selling jewelry via computer from his childhood bedroom. Selling everything from $ 250 Seiko watches to $ 10,000 engagement rings, the 25-year-old had gotten so good at online marketing that he became Australia’s top selling jewelry store on eBay, shipping thousands of packages a day.
That same year, he teamed up with Anthony Eisen, a former investment banker who was 19 years his senior and lived across the street from his home. They co-founded Afterpay, an online service that allows consumers in the US, UK, Australia, New Zealand and Canada to pay for small items like shoes and shirts in four interest-free installments in six weeks. “I was a Millennial who grew up in the 2008 crisis and witnessed this great shift from credit to debt,” Molnar, now 30, says today. Either without credit cards or fearful of piling up high-interest debt on their credit cards, Molnar’s generation was ready to embrace this new way of buying and getting products right away, paying a little later.
The new fintech billionaires: Nick Molnar, co-founder of Afterpay
Nick Molnar, co-founder of Afterpay (Photo source: Twitter)
Five years later, Molnar and Eisen, who each own about 7% of the company, became billionaires during a pandemic. After not doing very well at the beginning of the year, the shares of Afterpay, which went public in 2016, grew almost tenfold, thanks to an increase in business related to e-commerce sales. In the second quarter, it reached $ 3.8 billion in transactions, an increase of 127% over the same period last year.
Molnar and Eisen aren’t the only ones who have seen their fortunes take off in recent months. According to Forbes analysis, at least five fintech entrepreneurs, including two Australians, have been included in the billionaire rankings thanks to the pandemic. The others are Chris Britt, founder of the digital bank Chime, and Vlad Tenev and Baiju Bhatt, the co-CEOs of the “free” app for trading Robinhood shares. Many other company founders like Klarna and Marqeta have also achieved excellent results and are suddenly approaching billionaire status.
As in other industries, the Covid recession has created both winners and losers in the fintech world. For example, LendingClub, which offers personal loans to high-risk consumers, has laid off 30% of its staff; the On Deck small business loan company was sold at a settlement price.
But for a sizable group of consumer and payment fintechs, the virus has produced massive growth, just as it did for e-commerce giant Amazon and home-based platforms like Zoom. Slack and DocuSign.
Consumer adoption of fintech was already strong before the pandemic, especially in the 20 to 40 age group, “says Victoria Treyger, general partner who leads fintech investments at Felicis Ventures. “The pandemic has become a growth spur, fueling rapid growth in adoption across all age groups, including 40-60 years.”
Several developments caused by Covid are helping specific categories of fintech players. For example, consumers’ shift to higher spending and online delivery services is a boon for some businesses that handle payments. Marqeta, a specialized payments platform whose clients include Instacart, DoorDash and Postmates, has entered into negotiations to go public with a valuation of $ 8 billion, four times more than it was valued in March 2019. That would give CEO Jason Gardner , which owns 10% of Marqeta, a share worth 800 million dollars.
Meanwhile, the more than $ 2 trillion CARES Act passed by Congress in March, with its $ 1,200 in citizen incentives, late payment of student loans and (now overdue) unemployment supplements of $ 600 a week, it has helped many Americans to support themselves financially – and some digital banks like Suona to thrive.
In the second quarter of 2020, amidst Covid lockdowns and fears, consumers cut their spending on travel, restaurants and luxury items they usually put on their credit cards, but continued to spend on necessities and smaller items. , the kind of thing that is easier to pay for with debit cards. During the quarter, Visa credit card transaction volumes fell 24% from the previous year, while debit card transactions increased 10%, according to research firm MoffettNathanson. And debit cards are the most popular spending vehicle offered by fintech neobanks like SoFi, Dave, and MoneyLion.
San Francisco-based digital bank Chime, in particular, used state incentive payments to its advantage. In mid-April, about a week before the government’s $ 1,200 incentive began flowing into Americans’ checking accounts, the company advanced customers that money, totaling over $ 1.5 billion. “After the advance of the incentives, we had the day with the largest number of new registrations in the history of the company,” reports ceo Britt.
The pandemic has decreased total consumer spending and the unemployment rate remains positioned at 8.4%, two factors affecting Chime’s middle-income customer base. However, according to the user, “the average spend per customer has increased compared to last year,” says Britt. “Part of the reason for this is the government programs on incentive payments and unemployment.”
New fintech billionaires: Chris Bitt
Chris Bitt, CEO and co-founder of Chime
Today, Chime’s annual revenue is $ 600 million, according to a source close to the company. At its stunning new $ 14.5 billion valuation announced alongside a $ 485 million fundraiser in mid-September, venture capitalists are valuing the company 24 times its revenue. Some investors ask whether Chime should be credited with such a high value when Green Dot, a publicly traded fintech company that offers pre-paid checking accounts and debit cards for low-income clients, is worth twice the revenue. “We really do look like a payment processing company,” replies Britt. This is because virtually all of Chime’s revenue comes from transactions – the commissions paid by merchants when Chime users swipe their debit cards. The company doesn’t make interest on its new card, though Britt says he doesn’t rule out lending in the future.
Now Britt himself has joined the “billionaire club”. Forbes estimates its stake in Chime to be at least 10%, meaning its holdings are worth more than $ 1.3 billion (Forbes applies a 10% discount to all private company holdings). And he’s planning an IPO. “Over the next 12 months, we have a number of initiatives to complete to make us even more ready for the IPO,” he says.
Then there is the Robinhood phenomenon. The boredom of being stuck at home, wild swings in the stock market and the provision of government incentives have turned some Millennials and Gen Zs into traders and options traders. Robinhood’s latest fundraising round in September brought the company to a valuation of $ 11.7 billion and its co-founders a net worth on the card of $ 1 billion each. But considering Morgan Stanley’s $ 13 billion acquisition of E-Trade in February and Schwab’s previous purchase of TD Ameritrade for $ 26 billion, some think Robinhood could get a $ 20 billion valuation. dollars if it went public or acquired.
If there is a fintech segment that was the real winner of the pandemic, it is the one in which Afterpay operates: installment financing for online purchases. It benefits both from consumers switching to online shopping and from their reluctance, in these uncertain economic times, to take on new credit card debt.
Sebastian Siemiatkowski, CEO of Klarna
While Afterpay’s Nick Molnar and Anthony Eisen achieved billionaire status in July, their competitors aren’t far behind. Take Klarna, which was founded in Stockholm in 2005 and entered the US market in 2016. Two of the three founders, Sebastian Siemiatkowski and Niklas Adalberth, met while working at a Burger King in Sweden. They pioneered the buy now, pay later model, calling it “try before you buy” and letting people own the products for 30 days before making their first payment. (It’s much more attractive than the old-fashioned layaway, the once popular store system for Christmas gifts and large appliance purchases, where shoppers had to make all installment payments before getting an item.)
Klarna charges resellers 3% to 4% of each transaction, slightly less than 4-5% of Afterpay’s fees, to offer their service. A key difference that separates the two companies: Klarna is becoming a full-fledged financial services company. It became a licensed bank in Sweden in 2017 and offers long-term financing of up to 24 months, with interest charges, for high-priced items such as laptops sold through a small number of retailers. Siemiatkowski has already turned Klarna into a digital bank in Europe with a debit card for everyday purchases. It will probably do the same soon in the United States.
La pandemia ha catapultato l’attività di Klarna su una traiettoria di ascesa. Entro la fine del primo semestre del 2020, la sua base di clienti negli Stati Uniti ha raggiunto i nove milioni, in aumento del 550% rispetto allo stesso periodo dell’anno precedente. A livello globale, 55.000 utenti scaricano l’app Klarna ogni giorno, più del doppio rispetto allo scorso anno. Klarna è ora disponibile in 19 paesi, ha 90 milioni di utenti e prevede di realizzare entrate per oltre 1 miliardo di dollari quest’anno. Quando ha raccolto un nuovo round di finanziamento la scorsa settimana, la sua valutazione è quasi raddoppiata rispetto a un anno fa, raggiungendo i $ 10,7 miliardi.
Il cofondatore Victor Jacobsson ha una partecipazione del 10%, mentre Siemiatkowski ha l’8% nella società non ancora quotata. (Niklas Adalberth ha trattenuto solo lo 0,4% dopo aver venduto alcune azioni per finanziare la sua organizzazione filantropica e aver investito in startup. Né lui né Jacobsson sono ancora coinvolti in Klarna.)
Non sorprende che, poiché le fintech stanno acquisendo più clienti e attenzione, si trovino anche ad affrontare ulteriori controlli da parte delle autorità di regolamentazione. A marzo, Afterpay ha accettato di sborsare oltre $ 1 milione, inclusi $ 905.000 in rimborsi ai consumatori, dopo che il Department of Business Oversight (DBO) della California ha concluso che le commissioni per le dilazioni imputate a Afterpay indicavano che gestiva un’attività di prestito senza licenza. “Afterpay rifiuta l’idea che la società abbia operato illegalmente”, ha detto la società australiana in una nota. “Sebbene Afterpay non ritenga che tale accordo richieda una licenza dal DBO, Afterpay ha accettato di condurre le sue operazioni sotto la licenza DBO come parte di questo accordo.” Un portavoce ha aggiunto che Afterpay “ha richiesto e ha ottenuto licenze [in altri stati] dove necessario”. Nel 2017, Klarna è stata multata di $ 15.000 nel New Hampshire per aver operato senza una licenza utile alla concessione di prestiti. Oggi Klarna ha tali licenze in ogni Stato degli Stati Uniti.
Un altro vincitore del fintech nel settore dei pagamenti rateali è Affirm. Con sede nella Silicon Valley, è una creatura dell’imprenditore seriale Max Levchin, fondatore di PayPal, che a sua volta è entrato nel business dei pagamenti rateali solo il mese scorso. Tra novembre 2019 e luglio 2020, Affirm ha quasi raddoppiato i suoi utenti statunitensi arrivando a 5,6 milioni. La scorsa settimana ha raccolto 500 milioni di dollari portando la valutazione della società a oltre 5 miliardi di dollari, rispetto ai 2,9 miliardi di dollari dello scorso anno. Sebbene la quota di Levchin non sia stata rivelata, probabilmente vale centinaia di milioni.
Affirm also enjoyed a special Covid exploit with expensive home fitness equipment. Since 2015, it has fueled funding for Peloton, whose sales have soared as affluent young consumers, lacking the motivation of group exercise classes, flocked to purchase the $ 2,000 exercise bikes with their streaming workout classes. Affirm now also funds purchases of Mirror, the $ 1,495 home fitness device purchased by Lululemon this summer.
Of course, the sustainability of current valuations of fintech companies hinges on consumer spending staying high and consumers maintaining some of the online shopping habits they have developed over the past six months. With an agreement between Congress and the White House for a new incentive package that seems unlikely and the future course of Covid-19 still unknown, there are no guarantees. But for now, these fintechs are flying high.