Block to refocus Cash App; stablecoin pay expands

July 24, 2024 10:16 AM

Amid a flurry of product deployments in the United Arab Emirates, Visa makes a data-driven push for more banks to get involved. Goldman Sachs preps an IPO for a cross-border payment firm and other updates. Here's what's happening in the world of payments.

Andrew Harrer/Bloomberg

Block dumps Cash in the U.K.

Block's peer-to-peer Cash App will no longer operate in the U.K. as of September 15, ending six years of service.

Block attributed the move to a broader strategy that emphasizes growth in its home market of the U.S. over global expansion.

In the P2P market, Block faces pressure from U.S.-based firms PayPal, PayPal's Venmo and the bank-supported Zelle, along with local services in Europe and other regions. The move isn't expected to impact Block's other functions in the U.K. or Europe. Block referred questions to the company's media statement.

While Block's core business is enabling payments and extending credit for small businesses, Cash App in recent years has become a connective tissue for Block, supporting the merchant and consumer sides of the payment company. Cash also serves as a funding source for products such as Block's crypto trading and is marketed within Afterpay, Block's buy now/pay later unit.

Since retaking the CEO job at Block in 2023, Jack Dorsey has been cutting costs, a strategy that includes choosing parts of the business to discontinue or deemphasize while enhancing products with a greater earning potential.

While Block scales back its global ambitions, it is doubling down on the U.S. The company is adding financial tools to Cash in the U.S. in an effort to make Cash operate more like a bank, with Block focusing on U.S. consumers earning up to $150,000 in yearly income. It's also positioning Cash as a merchant banker for its small businesses, with Dorsey recently telling analysts Block, which retains its original Square brand for its merchant services group, will make Cash the primary account for its business clients.

Like most payment technology companies, Block struggled in 2022 and 2023 due to the impacts of a correction that followed rapid growth during the pandemic. Block reported improvements in profitability during its most recent earnings report, largely due to cost-cutting and downsizing. The company reports second-quarter earnings on August 1. —John Adams

Klarna combines pay-by-bank, point-of-sale payments

Swedish payment company Klarna is combining its pay-by-bank service, called Sofortüberweisung, or Sofort, into Klarna's core payments product.

The integration is designed to improve security by requiring Klarna's two-factor authentication for Sofort-powered transfers. Klarna also wants to make it easier to access account-to-account payments at the point of sale. A2A payments are an older product that has gained traction in recent years as a way to avoid credit card fees.

Klarna positions itself as an alternative to credit cards, particularly for its well-known buy now/pay later business.

Klarna acquired Sofort, a German-based company, in 2014, to boost its account-transfer capabilities and to access open banking, or the ability to use a single account to access multiple financial services, often from a third party. Klarna is rolling out the Sofert integration slowly, with the U.K. being the initial market, and Germany added this week. —John Adams

Visa outlines opportunity in the UAE

Like Mastercard, Visa is aggressively pursuing the payments market in the United Arab Emirates, where there's a consumer and merchant population that is rapidly embracing digital commerce and a supportive regulatory environment.

Ninety-five percent of small- to medium-size businesses say digital payments are superior to other methods, and more than 70% believe investing in automated payments is vital for their business, Visa reported in a survey of local UAE merchants.

"SMEs are the backbone of economies worldwide, playing a critical role in driving growth, innovation, and employment. In a rapidly changing environment, it's imperative for issuing banks to deeply understand their needs and develop targeted solutions that propel the SME sector forward," Salima Gutieva, vice president and country manager for the UAE for Visa, said in a release.

Visa's strategy was partly about making the case for issuing banks to offer payments and other financial services in the UAE. Mastercard has also made several moves in the UAE, including a partnership with the Rochester Institute of Technology to train local technology talent.

Bank of America and dozens of other banks have pursued consumers and businesses in the UAE and other parts of the Middle East in recent years, fueling competition in the market. —John Adams

Warburg Pincus bets on Brazilian real-time payments firm

Brazil has become a global leader in real-time payments, making one of the firms behind the country's network popular among investors.

Warburg Pincus has invested $100 million in Matera, a Brazil-based technology company that supports Pix, Brazil's national instant settlement rail.

Pix is the second largest real-time payment system in the world after India's United Payments Interface, and Matera plans to use the investment to enter the North American market.

Matera's products include core banking, real-time payment processing and contactless payments. Its clients include more than 200 banks and credit unions in Brazil and elsewhere. One of its early goals in North America will be to sell a payment product for merchants to use mobile phones to accept payments via a QR code. —John Adams

Rabobank partners with bank tech firm to go 100% digital

Netherlands-based Rabobank has hired Canadian technology company Zafin, which sells an integrated platform and capabilities to bolster the bank's mandate to become fully automated for internal and external products and operations.

Zafin will replace existing Rabobank technology that powers payments, product development, pricing and billing. The bank is attempting to enable real-time analysis of banking and payments while consolidating disparate processes across divisions.

Another goal is to reduce the bank's physical footprint as more customers choose digital channels. As part of its ongoing digitization, Rabobank was an early adopter of robotic process automation, which enables staff to use artificial intelligence to choose parts of their jobs to delegate to a bot. —John Adams

Goldman Sachs to lead IPO for Santander-backed payments startup

London-based cross-border payments firm Ebury has appointed Goldman Sachs to lead a listing on the London Stock Exchange, signaling the growing popularity of firms that can support international transactions.

The initial public offering will be about $3 billion, according to The Financial Times, which added that the listing is scheduled for the first quarter of 2025. Ebury's backers include Santander.

More banks are upgrading technology and expanding services to reach a growing number of businesses that are selling across borders. HSBC, for example, is combining real-time processing, new forms of artificial intelligence and its work on digital currencies to expand the bank's international payments business. —John Adams

Australian fintech and Mastercard take stablecoin payments global

Sydney-based fintech Stables, which supports stablecoin payments, is expanding an existing relationship with Mastercard to go beyond Australia.

Stables offers a stablecoin wallet that can be used to make contactless Apple Pay and Google Pay payments at mainstream retailers that may not be set up to support cryptocurrency. The fintech is launching its wallet and a virtual Mastercard in Europe following a 2023 debut in Australia. —John Adams

Temenos cuts guidance as Hindenburg report weighs on sales

Temenos cut its guidance for the year after reporting second-quarter revenue that fell short of analyst expectations.

The Swiss provider of banking software had sales of $248.4 million and slashed its target for recurring revenue for 2024. The results are a fresh blow for the company, after short seller Hindenburg Research alleged "accounting irregularities" at the firm in February.The company said in a statement Tuesday that some deals that were delayed because of the Hindenburg accusations have finally been signed in the second quarter. Still, the months lost to reject the allegations continue to weigh on revenue, prompting the cut in guidance.

This quarter is the first since Chief Executive Officer Jean-Pierre Brulard was appointed in April.

"There are areas we need to improve on and invest in, and these will be our focus and commitment to our clients," Brulard said in a statement.

The company says it will give an update on its strategic and financial plan at its capital markets day on Nov. 12, including a review of its midterm targets. It is exploring options for its Multifonds business, according to a Reuters report earlier this month. —Paula Doenecke, Bloomberg News

Hong Kong bank pursues global stablecoin role

ZA Bank has launched reserve banking services for stablecoin issuers, attempting to attract clients in digital assets, cryptocurrency payments and blockchain in and outside of Hong Kong. The digital-only bank recently launched a sandbox, or technology testing venue, for stablecoin issuers. The initial users include stablecoin issuer RD Innotech, with a pipeline of about a dozen other issuers.

"By providing a secure and reliable banking infrastructure with greater security for users, we aim to build greater trust and confidence in the stablecoin market," said Ronald Iu, CEO of ZA Bank, in a release.

The bank's move comes as stablecoin issuers try to expand use beyond early adopters and investors in an attempt to support payments and other financial services. PayPal, for example, is assembling a roster of partners including blockchain company BVNK to scale PayPal's own stablecoin. —John Adams