Canadian Fintech: Why did Willow get acquired? 🏠
Is Shakepay becoming a bank? Flinks gets into payments. Nuvei starts issuing.
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🤝 M&A
Willow, a fractional real-estate investment platform was acquired by Guiker, a lease management service for finding tenants, processing payments, and cleaning / repairing units. Why?
Guiker’s thesis is that most renters can’t afford to buy homes, but still want to be invested in real-estate. So they’re betting on renters becoming fractional owners in other rental properties.
This reminds me a bit of the people who say “hate paying CIBC bank fees? Then just buy CIBC stock”. Yes, you get exposure to the asset class you’re a customer of. But there are many other ways of building wealth that may be better suited to your situation.
What I find more exciting about this deal are the efficiencies gained by vertically integrating investors, renters & servicing. Guiker is (sort of) building an asset light REIT competitor.
Addy is another player in this space.
OpenText is selling off AMC, a business that helps large FIs that still run mainframe computers and COBOL programs migrate to cloud computing. Rocket Software is acquiring for $3b.
🚀 Product
Flinks, an open banking platform, is launching pay-by-bank, a way for businesses to request and fulfil payment directly from a customer’s bank account.
Competitor Plaid recently launched a similar product in Canada.
Shakepay, a well funded Montreal based bitcoin exchange is releasing features that make it look more and more like a challenger bank - a visa prepaid card, e-transfer, bill-pay, direct deposit. Why?
Like most exchanges, Shakepay makes money off the spread buying and selling bitcoin. So as trading volume has sunk, the company is looking to 1) diversify revenue (ex. interchange fees on their prepaid card & interest on cash balances) and 2) become a more relevant everyday banking app.
Competitor Wealthsimple went through a similar transition. The exchange launched a slew of crypto features to ride the wave of high volume trading in 2020, and has recently returned focus to traditional banking and wealth products.
Nuvei, a large Canadian payment processor for acquirers (this means they help merchant banks accept payments) is becoming a card issuer (which means they help banks issue cards to their clients).
In cases where a processor is both the issuer and acquirer, it can increase the authorization rates of transactions (ie the payment is approved).
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📈 Stat of the week
“I’ve got some good news and some bad news” - big Canadian banks on earnings calls last week.
“Bad news is that because we were forced to set aside so much cash to cover potential bad loans, we’re less profitable than we could be, so we’re making layoffs”.
TD: 3%
CIBC: 5%
RBC: 3%
Scotia: 3%
“Good news is we’re still really profitable so we’re increasing dividends!”
RBC: 3 bps increase
TD: 6 bps increase
CIBC: 17 bps increase
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Have a great week! See ya 👋