The fintech startups Apple should buy next

Apple is strengthening its fintech strategy in 2022. Will more startup acquisitions be part of the plans? If you are reading this Tim Cook, here are my recommendations.

Image source: Tim Cook/Wikimedia

It’s only been four months since Apple made headlines with its first fintech acquisition; a young British startup called Credit Kudos in a deal worth $150 million.

Credit Kudos at the time of the acquisition was entirely focused on using open banking for lending, and the deal raised eyebrows in what it suggested for Apple’s future strategy.

The acquisition, along with a series of other moves, such as the recent launch of its own BNPL service in the US, has cemented a prophecy long heralded in fintech circles about an imminent big play by tech giants in banking and other financial services.

In short, Apple could become a fintech company.

Credit Kudos’ founders Matt Schofield & Freddy Kelly.

Founded 46 years ago by Steve Jobs, Steve Wozniak and Ronald Wayne, Apple certainly has the firepower to win its heart.

According to the latest figures, reported last week, where it saw record revenue of $83 billion for the previous quarter, the company has cash or equivalent securities worth about $179 billion. That’s 50 percent more than the entire global investment from venture capital to fintech companies in 2021’s record year for funding.

Of course, Apple is already deeply involved in financial services. A quick overview of the financial products includes Apple Pay, Apple Wallet as well as the credit card, which is only available in the US at the moment.

The latest offensive against digital money includes the new BNPL product as well as an interest-bearing installment loan for purchases and its near-field communication payment system that will work directly with iPhones and allow peer-to-peer payments.

Whether the regulator, in the UK or elsewhere, will give the go-ahead for Apple – which is the world’s largest company by market capitalization – to scoop up a number of high-growth fintech startups remains to be seen, but for the avoidance of doubt let’s put that aside .

In this article, I take a look at – with many caveats aside – the fintech startups Apple might want to buy next if it feels like splashing the cash.

Apple should buy … a neobank

Will Apple be a bank? Probably not, but owning one can be very powerful.

Banks continue to provide consumer confidence, the essential ingredient for success in financial services.

It would also immediately help by giving it a banking license and open the door to faster ingratiation with financial regulators.

In addition, it will allow the company to offer a range of financial services, including of course checking accounts and using a bank’s balance sheet to increase lending.

The names that immediately spring to mind are Monzo and Starling in the UK. Both companies have a very high quality user experience that will be consistent with Apple’s own values ​​rooted in consumer-friendly design.

It’s hard to say which one will offer a better deal, given each has different levels of deposits, loans on their respective books, customer numbers and of course valuations.

Of course, both only operate mainly in the UK, which for a superlative global brand like Apple might prove less appealing. That said, Apple appears to be establishing a UK base for its fintech venture, not least with the acquisition of a British company, but also with buying up office space in the City of London, the UK’s main financial district.

Starling Bank’s founder Anne Boden.

While Monzo has bold plans in the US and Starling has also said it will expand internationally in the future, no neobanking company can claim the global reach of…Revolut.

The company, which says it has more than 20 million retail customers, is active in dozens of countries, but the UK remains Revolut’s biggest market, with 4.8 million customers with an average age of 39, but Romania (2 million customers), Ireland ( 1.9 million customers) m), Poland (1.7 m) and France (1.5 m) all follow closely behind.

While Starling has a valuation of £2.5bn at its latest funding round, Monzo at £3.7bn, Revolut is significantly more expensive at £27bn as of its last funding round twelve months ago.

Of course, none of these prices are directly comparable, and I would set aside what the founders would sell for at this stage in the companies’ funding cycle and life stage.

Apple should buy Klarna

As one of the most complex areas of finance to get right, but also the most profitable, lending is clearly on Apple’s agenda.

Apple has already used lending to help consumers buy its products at 0 percent interest for years. In the UK, this has been driven through an agreement with Barclays Bank.

Its attempt to offer interest-bearing installment loans along with a BNPL product that is store-agnostic and allows users to pay for purchases over six weeks without paying interest.

While the launch of this BNPL product may suggest an odd choice for my first fintech acquisition proposal, there is more than one good reason.

Klarna has well over 150 million customers, which means that Apple can jump right into the deep end with a large pool of committed BNPL users.

This will give it immediate traction in its fintech offensive, but also crucially help it establish itself against a rival that has spent more than a decade prioritizing building trade relationships.

Klarna’s founder Sebastian Siemiatkowski.

Although this is arguably contrary to the approach, it provides a perfect safeguard. Throwing in a strong brand and technology team and buying Klarna would make Apple’s consumer credit offensive unstoppable.

Thanks to the latest reduction, Klarna can be bought cheap. The latest valuation puts it at almost 1/10 of last year’s price. The question is will they sell?

Apple should buy Grover

Grover is a Berlin-based tech rental platform that changes ownership by letting users rent things like laptops, phones, and even headphones. It also refurbishes these which it then resells or rents out a second time.

This is based on a potentially huge global trend of people favoring renting over outright ownership. Sometimes this is environmentally motivated as it reduces waste, but can also go deeper than that.

Grover’s founders Michael Cassau and Thomas Antonioli.

Changing consumer habits of Millennials and Gen Z will set the tone for a huge change in how we shop. Currently, Apple’s fortune is axiomatically linked to annual sales of its hardware.

Services are becoming more important for Apple, but how many iPhones and iPads are still the core business. This will change. Apple’s recent success in its results was driven by sales of physical goods, but one of the areas of greatest growth was services.

The pandemic has led to a major shift in consumer spending from physical things to services, while subscriptions have become a large part of how people access goods and services.

Although Apple already has an iPhone subscription, by acquiring Grover it will achieve a similar level of technical expertise and growth in this long-term trend as with Klarna from a nimble and forward-looking startup.

Whether Apple succeeds in its financial services offensive, especially during a period of severe economic stress, remains to be seen, but if you’re reading this Tim Cook may be sent to take a look at more fintech startups.