Our take on fintech headlines. Plaid's announcement about going beyond North America leaves us scratching our head; and Maersk's success is a huge endorsement of enterprise blockchain.
Plaid goes international
U.S. payments fintech Plaid, valued at $2.7 billion, opened its first business outside of North America, in the U.K. Its founders say this is just the start of a fuller international rollout. Although the company didn’t say where else is on their list, CEO and co-founder Zach Perret cited China’s growth as a long-term goal to tap.
That’s going to be a very long-term goal indeed. Does Plaid actually bring something to the table in China?
The company connects fintechs in the U.S. such as Acorns, Coinbase, Robinhood and Venmo to bank accounts via APIs. Plaid wants to do the same elsewhere. Last year it opened in Canada (American Banker) and now it's entering the U.K., where digital banks have been operating for many years. Open banking is also enshrined in European Union laws, while Britian doesn’t have a major home-grown competitor to Plaid, unlike the U.S. (Mint, Yodlee) or some European countries (Bankin’ in France).
Plaid is riding the trend of open banking and sharing customer data with third parties. Asia is still just getting started on these. Singapore has pushed open APIs and is the most developed, although it does not have challenger banks – the sort of natural, large-scale fintechs that could bring Plaid a large user base.
Australia and Hong Kong are now phasing in open banking legislation, with fintechs such as Gini trying to fill that API-connector role. Both do now have mobile banks in the works.
But Asia has not been easy for Western fintechs. It’s not the kind of place where a company can readily bring a plug’n’play solution to local financial services.
Look at Revolut: this European success story has been talking about launching in Singapore since late 2018 or maybe 2017 (Revolut's Twitter feed), and received a remittance license in November; but it has yet to go live. No doubt its debut is imminent; its experience will be an interesting test of leading Western fintechs finding a market in the region.
But it’s notable that Plaid’s biggest American fintech customers don’t operate here (Acorns has a business in Australia that so far has failed to expand into Southeast Asia). And these guys want to win Chinese clients? By, what, selling to a non-existent Chinese fintech wave looking for third-party API providers to connect to Western banks?
Maersk makes friends
The backbone of world trade is shipping; some 80% of goods crossing borders, comprising $16 trillion worth per annum, do so by sea. Last year, the world’s leading shipping company, Maersk, teamed up with IBM to launch a blockchain project to remove many inefficiencies and risks from the process. But things had gone quiet. Blockchain automates workflows at the industry level, and the project, called TradeLens, seemed to go aground (Coindesk). Other shippers didn’t want to get sucked into an ecosystem dominated by their biggest rival.
But TradeLens now looks like a success (TechCrunch). Two more cargo shipping companies have joined. Along with about 100 other supply-chain operators – port authorities, freight forwarders, cargo owners, and so on – the participants now account for about half of the world’s shipping volumes.
With so many players now taking a node on the distributed ledger, built by Hyperledger Fabric, it now seems likely that the rest of the industry will have to follow.
The benefits are many, which is why competitors distrustful of Maersk finally decided TradeLens was worth joining. The status quo works – goods got delivered – but is potted with many inefficiencies that are expensive to paper over. (And they are literally "papered over", by a multitude of documents, many still transmitted by fax.) You can read a summary from Maersk's head of global digitalization here (Ledger Insights).
The context for banking is the same except what is being shipped is value rather than physical cargo. From trade finance to post-trade reconciliation to payments, there are many DLT projects in banking. Leaders and holdouts alike should take a look at how Maersk finally won over the doubters. This is a big win for enterprise blockchain.