I’m starting a new weekly series called FinTech Roundup that will be dedicated to discussing technology startups in and around Financial Services. The series will highlight recent investments, M&A and trends across Payments, Capital Markets (Trading, Securities, etc), Banking and other related sectors such as Real Estate and Insurance. Okay, let’s get to it.
Payments is the theme for this week. There has been a ton of activity lately in the space in everything from mobile to e-commerce to prepaid so let’s take a look at a few recent investments:
First up, a European startup called Klarna. Klarna was founded in 2005 and is based in Sweden. The company recently closed an investment from Sequoia Capital and Mike Mortiz will be joining the board (his 1st European company). Klarna is reportedly one of the biggest providers in Europe of in-store credit and invoice based payment solutions for e-commerce. The company offers buyers flexible payment options — allowing payments after receiving the merchandise (up to 14 days in some cases) and small initial payment amounts. The company reminds me of alternative payments provider Bill Me Later. Online payments is a huge market and even behemoth Paypal’s market share is relatively small. Europe is also a large growing market for card payments, estimated at 1/3 of the US. Definitely one to watch.
Corduro is a stealthy mobile payments startup that Google Ventures recently invested in. It appears that Corduro is a payments platform for small businesses that want to accept credit card payments on the go. The service offers everything from e-checks and bill pay to recurring payment support to a branded payment gateway. Payment processing is a notoriously competitive space with many large incumbents (e.g. FirstData, Chase) and extreme pricing pressure so it will be interesting to see how the company’s offering differentiates. It sounds like there is an Android play here and that might be the spark behind Google’s strategic interest. Other newer competitors include Verifone’s PAYware Mobile and the high-profile Square from Twitter’s Jack Dorsey.
Last up, mobile payments provider Zong. The company spun out from its European parent earlier this year and recently raised a $15M round led by Matrix Partners. Zong let’s you pay for things (virtual goods mainly) via direct billing to your mobile phone and credit/debit card. The customer convenience factor is quite strong. No registration, bank account, or credit card is required. It’s been rumored that Zong’s payment conversion rates for merchants are up to ten times greater than traditional checkout payment methods. The company has been around a few years and has very good traction with Facebook — Zong’s platform powers mobile payments for Facebook Credits. Zong isn’t the only company with this approach. Direct competitor Boku also raised a $25M round a few months ago from Index, DAG, Benchmark and Khosla Ventures. With the incredible growth of social networking and virtual goods, this race will definitely be one worth watching.
That’s it for this week. Please send in your comments and suggestions.