“Buy now pay later” was already booming at the start of 2020, but it was turbocharged by the pandemic © REUTERS

Happy new year from FintechFT!

While many firms will be hoping the new year marks the start of a calmer period after a rollercoaster 2020, beneficiaries of the tumult are trying to consolidate their gains. Here are some of the key fintech stories FT reporters will be watching as we head into 2021.

Asian regulators crack down on online lending

There has been an explosion in online lending across Asia in recent years, but 2021 could be the year the proliferation of fintechs — some of which already have soaring non-performing loan rates — may be brought to heel by regulators. 

The digital lending boom started in China with companies such as Ant Group, which used its data on small and medium-sized businesses and individuals to lend to those who did not have bank accounts. The trend expanded to China’s neighbours, including India and Indonesia, where millions of previously underbanked or unbanked people were adopting smartphones. 

But the unbridled growth has increasingly drawn regulator scrutiny. Beijing has already cracked down, and last Friday Indonesian authorities announced steps to rein in payments systems. India is unlikely to be far behind. — Mercedes Ruehl in Singapore

Ant’s rollercoaster continues

Regulators and entrepreneurs in China’s heady fintech arena have long clashed. Crypto was targeted. Peer-to-peer lenders were snuffed out. Jack Ma’s Ant Group tried to avoid the same fate by transforming itself into a platform for others’ financial offerings.

With one candid speech critiquing the Chinese state, however, Mr Ma’s buoyant 2020 turned into a nightmare. Authorities pulled Ant’s $37bn IPO at the last minute and prepared stringent new rules to restrict its business. 

“Ant knew financial services was sensitive so they tried to pivot to being a ‘techfin’ company rather than a ‘fintech’ company — they even changed their name,” said Kou Xiangtao, head of fintech think-tank ShowFin. “But regulators didn’t see it that way, [to them] they’re still in financial services.”

New rules will dent Ant’s lending business, which doles out one-tenth of Chinese consumer loans. A new “financial holding company” categorisation will bring Ant and other fintech empires like that of Tencent directly under the nose of a single regulator for the first time, indicating a tough year ahead. — Ryan McMorrow in Beijing

How far can the buy now, pay later boom go?

“Buy now pay later” was already booming at the start of 2020, but it was turbocharged when the coronavirus pandemic pushed more shoppers online than ever before. Led by Klarna in Europe, Affirm in the US and Afterpay in Australia, BNPL has brought old school point-of-sale credit products into the digital world.

Affirm will try to convince investors the trend is here to stay as it follows in the footsteps of Afterpay and smaller rival Laybuy by preparing for an initial public offering. As the sector gains more prominence, however, critics will be watching for any signs that firms are mistreating their young customers.

“The popularity of BNPL brings responsibility and scrutiny,” says Laybuy co-founder Gary Rohloff. “It is for us and the industry as a whole to demonstrate high standards of transparency.” — Nicholas Megaw in London

Will Europe’s digital banks reach sustainability?

The recent experience of Europe’s digital banks should be a warning to any over-enthusiastic BNPL evangelists about how quickly fortunes can change in fintech. After a 2019 marked by rapid growth and investor ebullience, neobanks were hit hard by the coronavirus pandemic. 

Falling revenues forced a newfound focus on cutting costs and reaching profitability. Revolut and Starling became the first major players to declare they had broken even around the end of last year, but keeping it up over the long term will be a bigger challenge, particularly if they hope to revive international expansion plans when the virus recedes. — Nicholas Megaw in London

VCs hope to gain from IPO wave

Affirm is not the only high profile US start-up heading toward IPO. Cryptocurrency exchange Coinbase and no-fee broker Robinhood are also expected to go public soon, while online lender SoFi has struck a deal to list via a blank cheque company. 

Depending on their reception, the listings could validate a generation of consumer fintech groups that blossomed in the wake of the financial crisis or throw cold water on the boom.

Venture funding for fintech companies dipped slightly in 2020, according to CB Insights data, though the number of “mega-rounds” of more than $100m hit new highs. Expect more of the same in 2021, as investors remain bullish on companies such as Stripe that underpin the rise of “embedded finance” — integrating finance into other products so practically any company becomes a potential financial services provider — Miles Kruppa in San Francisco

Quick Fire Q&A

Company name: Habito

When founded: April 2016

Where based: Aldgate East, London

CEO: Daniel Hegarty

What do you sell, and who do you sell it to: Habito is a homebuying and financing company. Our brokerage has submitted more than £5bn of mortgages for first-time buyers, remortgages, movers, and landlords.

How did you get started: By revolutionising mortgage advice. Our in-house brokers offer free, fully qualified mortgage advice via live chat, seven days a week.

Amount of money raised so far: £63m

Valuation at latest fundraising: N/A 

Major shareholders: Augmentum Fintech, Atomico, Mosaic Ventures, Ribbit Capital, Regah Ventures, SBI Group and mojo.capital

There are lots of fintechs out there — what makes you so special: Our service, designed to make mortgages easier, and our new lending products and homebuying services which truly meet homebuyer’s needs.

Further Fintech Fascination

A bumper news round-up this week, including the best features you might have missed over the holidays.

Sunlit uplands: Brexit sparked concerns about the UK’s future as a fintech hub given firms’ reliance on access to the European single market and the fact that its workers come from across the continent. The FT has the scoop on what the government’s upcoming fintech review will recommend to help the industry cope with Brexit.

TransferWise turns 10: TransferWise will celebrate the 10th anniversary of its opening this month. Executives are feeling confident as the group gears up for its second decade, but it faces rising competition as it looks for further growth. Read more in this FT interview with Kristo Käärmann and Matt Briers.

Fresh questions about working culture at Revolut: Revolut has been working hard to move on from allegations about a poor working culture and complaints about frozen accounts. Former employees at its Polish branch, however, have drawn renewed attention to both issues, complaining about a pay dispute that contributed to a backlog of compliance checks. Read the full story from the FT here. 

Mambu No. 6: A little bit of good news for Germany’s Mambu, which completed its sixth fundraising round this week at a $2bn valuation. Mambu, which develops back-end technology for banks, raised €110m in a deal led by US fund TCV. Sifted has more. 

Payments firms caught up in US-China tensions: The Trump administration fired a series of parting shots at China last week, including a move to ban transactions with apps such as Ant Group’s Alipay. As the Wall Street Journal points out, however, the ban doesn’t kick in until next month, leaving President-elect Joe Biden with a potentially tricky decision to make about whether to enforce it.

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