Block takes its first steps in Japanese fintech
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A warm start to the week for you FintechFT readers from surprisingly sunny London.
News media NFTs have been on my mind lately, not least because they’re on the rise. Later this week, TIME magazine will join a vaunted company, including the New York Timeswhen that publish an NFT number with Ethereum co-founder Vitalik Buterin. (Cue joke about the FT becoming the NFT).
Like other institutions, media companies are naturally eager to innovate. But they must also ensure that these new efforts do not conflict with ethical standards – see the Associated Press’ (now cancelled) plan to sell an NFT video of ‘migrants drifting in an overcrowded boat in the Mediterranean’ .
This week’s newsletter also features Leo Lewis on Japanese fintech, my interview with the CEO of online mortgage provider Molo, and news from more tech companies preparing to dive into the amorphous world of Web3.
Block’s investment in Tokyo sparks excitement for Japanese fintech
Last week, a wave of excitement swept through the Japanese fintech world when Jack Dorsey’s financial services group Block set its sights on Tokyo for the first time.
Investment in the Kyash mobile payment application, would have Block’s only investment to date in Asia was unusual for several reasons which I will discuss below. It also raised the question of whether the Japanese venture capital and start-up scene could expand to include different models.
Block, formerly called Square, along with a platoon of major U.S. and Japanese backers, participated in a $41.2 million Series D funding round — a milestone that startups around the world often fail to achieve. reach, but which is particularly rare in Japan. After this latest round, Kyash’s total funding since the company launched in 2015 exceeds $107 million.
Kyash’s app allows consumers to make online and offline payments and remittances, as well as provide virtual prepaid debit cards. While none of this sounds particularly cutting-edge globally, it’s significant in Japan, where the fintech industry is locked in a war of attrition with money, traditional banks, and a large, conservative and elderly population.
Nevertheless, this battle has tilted more clearly in favor of fintech over the past two years. The Covid-19 pandemic has, as elsewhere, accelerated the transition to digital payments and other fintech services that would otherwise have taken longer to adopt.
It is therefore perhaps unsurprising that Japan’s banking, insurance and broader financial sector are now looking more urgently for higher quality fintech start-ups to invest in. Participants in Kyash’s four rounds of funding gave it a list of investors, including Japan Post, the country’s largest online brokerage and one of its largest trading houses, as well as branches of investment by the three Japanese “megabank” financial groups. The company is also backed by Japan’s largest venture capital group, JAFCO.
The sheer scale of this group, which has now been joined by Block, is intriguing if it means that pre-IPO Japanese fintech start-ups can now find themselves on the radars of venture capitalists in Silicon Valley and beyond. of the. Typically, Japanese companies are rushing to go public or being coaxed into initial public offerings that even brokers admit seem premature. Mother’s Market, which is run by the same JPX Group that owns the Tokyo Stock Exchange, has been a favorite destination for these listings: a record 25 start-ups listed in December 2021 alone.
But the case for companies taking this step is strong. Outside of the domestic venture capital scene, the Japanese venture capital industry is neither very large nor particularly adventurous. The relative dearth of domestic venture capital funding options beyond the second or third stage is one of the reasons why Japan has historically produced so few start-up unicorns.
Japanese start-ups look to the stock market not only as a source of funding, but also because listed status in Japan is disproportionately important for securing bank loans and attracting staff. If Kyash proves he can somehow break this pattern, the pattern effect could be transformational. (Leo Lewis)
Quick Questions and Answers
Every week, we ask founders of fast-growing fintechs to introduce themselves and explain what sets them apart in a crowded industry. Our conversation, slightly edited, appears below.
“Innovation” is probably not what comes to mind when the word mortgage is mentioned. Molo Finance, which launched in 2019 to provide fully online mortgages, is looking to change that. To date it has raised over £270m from investors including Macquarie and Patron Capital. Last week it announced the launch of an online-only 15-40 year ‘FlexLife’ mortgage product which customers can take with them when they move and which is funded by a £250million facility from the insurer Rothesay. I spoke to Francesca Carlesi, managing director of Molo, about the goals of the start-up.
What impact has fintech had on the world of mortgage loans? In the last 20 years, not much has happened in mortgage lending – it’s crazy when you look at banking and everything has been digitized, all the way. The good news is that over the last five years we have started to see innovations coming to market. For example, banks have started to realize that they need a front-end so people can put their data when requesting products, that’s a huge step up from 20 years ago years, but it’s still so far from the experience that everyone has on everything else. The main reason for this is risk aversion due to regulatory requirements, so everyone is trying to do small innovations in a small silo, but you have to develop a full front-to-back lender to eliminate a lot of inefficiencies .
How do you see further rate hikes affecting the mortgage market? What we see happening are potentially a couple of things – firstly, the wider impact is that there may be some slowdown as some customers may delay their decision as the cost of the mortgage increases. We have seen a slight shift in customer preference towards longer term fixed rate products, and at the same time many lenders are offering more innovative long term products – which is why we are so pleased to have launched FlexLife at the right time. .
What user trends do you see from your data? I think the most surprising thing for us was that a large majority of people are using mobile, which is something we didn’t expect from online mortgages. This is potentially a general change. When you ask people what their preferred touchpoint is, 30% say it’s online. More surprisingly, 50% said they seek advice on social media, which tells you how far digital adoption has come, but it is the duty of lenders to provide the right kind of support to those looking mortgage loans. We also found that young people still attached a lot of importance to home ownership; 9 out of 10 Britons say buying a home is a top priority, even in the ‘sharing economy‘. But the biggest hurdle in terms of home affordability remains affordability – home prices have risen dramatically over the past 10 years, not incomes.
Andreessen Horowitz Will Share The Bored Ape Crypto Coin Windfall Bored Apes is not only the most famous NFT collection in the world; with the launch of ApeCoin, they have been a boon for investors. One billion coins were released by a consortium led by Bored Ape creator Yuga Labs last week, although prices fell from $39 to $7 in early trading before recovering to around $15 24 hours after its launch.
Ethereum Co-Founder Questions Rival Solana’s Economics Ethereum blockchain co-founder Joseph Lubin knocked out growing competitor Solana last week. Venture capitalists are pumping money into new cryptocurrency networks; However, Ethereum remains the most widely used ledger when it comes to areas such as decentralized finance and non-fungible tokens.
Spotify plans to enter the wild world of Web3 The same week that Mark Zuckerberg confirmed that Instagram would soon start supporting NFTs, music streaming platform Spotify also hinted at its ambitions for the loosely defined world of Web3. Among NFT’s aficionado musicians is Snoop Dogg, who is building a metaverse mansion.