Tag: PayPal

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Klarna CEO says “maybe” of taking public Europe’s most valuable fintech next year (but he’s not ruling out another round, either)

Yesterday, at TechCrunch Berlin, we sat down with Sebastian Siemiatkowski, the cofounder and CEO of Klarna, a 15-year-old company that’s currently the most highly valued privately held fintech in Europe, following a $460 million investment that pegged the company’s worth at $5.5 billion back in August. (Asked yesterday to confirm that the company has raised $1.2 billion altogether from investors, Siemiatkowski joked — without confirming the amount — “It sounds like you know better than I do.”)

Siemiatkowski had come to the event largely to take the wraps off a new tech hub in Berlin that will house 500 employees in product and engineering. But we were far more interested in discussing the future of the company, which is best known for providing instant credit to online shoppers at the point of checkout and is growing fast, with nearly 3,000 employees across 17 countries. Klarna has also begun competing more aggressively in the U.S.  —  as well as fending off a against a growing spate of competitors, from publicly traded AfterPay to Max Levchin’s Affirm to Sezzle. a company in Minneapolis that seemingly appeared from the blue a few years ago.

Of course, the toughest competition of all may come from Amazon and Google, which are increasingly embedding their payment systems — Amazon Pay and and Google Pay — into their own massive platforms. We talked with Siemiatkowski about how Klarna survives as they gobble up more of the retail industry. We also asked about whether Amazon might be an acquirer, or whether Klarna might be eyeing an IPO in 2020 instead. You can check out our conversation below. It has been lightly edited for length and clarity.

TC: The last time we sat down together was four years or so ago, when Klarna was best known for its checkout product. What are some of the ways in which the company has evolved since then?

SS: There’s a massive opportunity. For consumers, when they shop online today, they have so many friction points. One of them might be the ability to get free credit without all the fees and things that people associate with credit cards. But there’s also other things like, where’s my package? When will it arrive? How do I do returns? Where are the best offers? Where are the best discounts? There’s a lot of things that people still struggle with. And so what we’re trying to do is create that super-smooth shopping experience, and the more problems we solve for these customers, the better, and the happier they are, and the more they’re going to use it.

TC: Do you have any other financial products, like [longer-term] loans?

SS: We do direct type of payments like that. And then, in some countries here in Europe, we’ve already launched a plastic card, as well. So you can use this like that. And then we also do this kind of Mint.com-like financial dashboard that shows you your spending habits, and all that kind of stuff.

TC: You’re adding this hub in Berlin, but you’re already in Germany–

SS: Yes, Germany is actually our largest market. In Germany, we have about 30 million users, which, you know, takes us about 10 million ahead of that American wallet thing [PayPal], which is quite cool. So Germany is a super important for us, but right now what’s exciting is the U.S., so right now we’re adding customers at a pace that will be about six million customers on an annual basis right now. So the U.S. is really taking off.


TC: This instant credit product is still the biggest producer of revenue?

SS: Yes. If you look at those two things going on here, first is that millennials, in the U.S. and U.K.,  they don’t have credit cards they have debit cards — 70% of millennials in the U.S. only have debit cards. But they’re still looking sometimes to get a cash flow ease. What’s good about our services is doesn’t cost a consumer anything, so it’s not like the old credit cards which were really expensive for users.

It’s merchant-funded, so that allows the consumers to then sometimes be able to either ease their cash flow by paying in four installments, or try before they buy [meaning they can defer the payment for some period] and stuff like. People forget that people who have debit cards have much harder issues shopping online than people with credit cards, and that’s a big piece of what we’re solving for.

TC: Do you always break the payments into four installments? Do you customize these plans?

SS: Breaking [into] four [payments] is great and that’s one option. What we’ve seen is that consumers have different needs, so some people really like our try-before-you-buy product [where] you pay nothing at the time but then [pay] everything 30 days later when you receive the products. Sometimes, if it’s a bigger purchase, like you’re buying a sofa or something, you split it over 24 months of financing or something like that, which is kind of different. And sometimes people just want to pay for everything instantly. So we just want to make sure that people have all the options that they want.

TC: How much can users spend? What’s the upper boundary?

SS: I’m sure there is one but it’s really hard to answer because it’s very individual, on an individual basis.

TC: And to be clear, you’re buying these from merchants at a discount? Is that how it works?

SS: Basically, the merchant sets up with us, they pay us a merchant fee just like they do with PayPal or somebody else. Then we process the payments for them, and we take the full risk, and all the customer care and everything related to the transaction.

TC: I’m assuming you’re not using your [venture funding] to do this. You have a bank charter in Sweden . . .

SS: Yes, we’re a fully licensed bank and we have deposits to fund the balance sheet. So people in Germany can actually save with Klarna and get 1%, which doesn’t sound a lot, but it’s massively more than they get with any of the traditional banks in Germany.

TC: What about interest fees and late fees? How do those work?

SS: Basically, we keep them extremely low. There are sometimes if you’re late, there might be a late fee but but the whole purpose here is that it’s merchant-funded. So merchants pay for this, and the consumers get a much better product than the traditional credit card or other options.

TC: What’s the default rate?

SS: Super low. If look at overall Klarna, for all markets, it’s is less than 1%.

TC: There is a competitor of yours, AfterPay, that was criticized last year because something like a quarter of its revenue was coming from late payments. What [is your revenue coming from]?

SS: Most of it is coming from merchant fees, and late fees in general are never bigger than the losses that you’re making. But I think it’s definitely an important topic, where all the companies in this industry need to be very careful about how you set up your products.

I think Klarna — maybe because we’ve been around longer than the competitor you’re referring to and because we’re five times their size in totality — maybe we have just come a little bit further in how we think about consumer value and making sure that fees are right and so forth. So those are important topics to keep an eye on. But I also think that what’s even more important is that you have this credit card industry, which in general has charged massive interest rates, a lot of late fees, and been not a very transparent and great industry. And I think, actually, the big opportunity is for people like us, and the one you refer to and others, to disrupt that industry. It’s the credit card industry that we’re going after.

TC: Sure, and I’m not going to defend the credit card industry, but did you say what your interest fees are?

SS: It depends on an individual basis, but it’s definitely lower than the average credit card fee.

TC: Meanwhile, you’re charging merchants more than credit card companies, which you can do because you’re basically increasing their customers’ purchasing power.

SS: Yes. If you look to some markets like Brazil and Turkey that’s kind of how the whole world work. So in a way,  that’s kind of the direction we’re heading in, because as a merchant, you’ll have more buying power than as a single individual consumer, so you’ll be able to negotiate better rates, and be able to offer these products at a better rate than this as a single individual [receives].

TC: Obviously you’ve heard concerns that, especially as we’re maybe heading into a recession, easy credit may be dangerous for consumers. Your technology can assess whether or not someone is a good credit risk and whether or not an attempted transaction is fraudulent, but you’re not really getting a picture of a customer’s other financial obligations or burdens. 

SS: We do thorough credit checks. It depends because it’s hard to answer these questions when you’re active in 17 markets, because they’re all different. But it’s a definite obvious for us that we need to be able to assess people’s ability to pay, as well as their intent to pay . . . We’ve been doing this for 15 years, so we really learned how to identify that and do it in a, in a thoughtful and in a good way for the consumer.

TC: A lot of competitors have sprung up in recent years. Why hasn’t there been more consolidation in the space? Is it too soon?

SS: I think it might come eventually, but I do think again that there’s a lot of focus on these companies right now . . . and the point is that like, what we’re trying to do all of us, all these companies together, is really going after the trillion-dollar credit card industry  that hasn’t served customers well, that hasn’t, you know, and has been all about hiding fees and hasn’t been transparent and whose products and services are fairly poor quality.

There’s a big opportunity to change how this whole [industry works] and that’s true for us and to some degree also true for [mobile-only banks] N26 and Monzo and all the banking disruptors. We’re all going after these big banks that haven’t really served their customers well.

TC: It’s interesting that a lot of them are taking stakes in companies like yours. Visa made a strategic investment in Klarna in 2017. Why aren’t they pulling the trigger on more acquisitions? Is it a matter of them not knowing how to integrate these new technologies into their legacy systems but wanting at the same time to keep tabs on things?

SS:  I genuinely think —  I’ve been doing this now for 15 years, which is kind of crazy; I was 23 when we started —  that the bank disruption is actually happening now and I’m one of the people who would never say that. I’m always like, ‘Oh, [something] is just a trend, it’s hype, it’s going to pass, it’s going to take longer than people expect.’ But I see it happening. Consumers are switching en masse to these new services.

So what the legacy incumbents can do is [choose] from three options: transform themselves, which demands a very courageous CEO to really change a business like that; secondly, M&A; and third, go away and die as a company. So I do think that’s what you’re going to see in the market.  In general, if you look at the whole industry, you’re going to see a lot of investments in M&A activity going on, because that’s just how you defend yourself as as an incumbent versus disruption.

TC: Have you been approached?

SS: We get approached all the time, yeah.

TC: I thought it was interesting that you announced in October that AWS is now your preferred cloud provider. I imagine that Amazon is an important partner for you.

SS: Yes.

TC: I’m wondering especially about Amazon given that Amazon and Google are now embedding payment systems into their platforms. How do and your rivals [compete against them]?

SS:  I’m [someone who] believes that sticking to core is so important and so, like, what’s happening is we’ve seen a lot of like the big tech giants trying to kind of do more and more and more and more things. And I just think that’s very hard to do over time.

The other thing we do at Klarna is try to consistently stay ahead. When we started 15 years ago, payments online was all about safety; that was the only thing people [cared about] because they felt unsafe shopping online. I think 2010 to 2020 has been about simplicity — one click. one click. one click, because Amazon really taught us that one click was important and everyone wants to do one click. The question is, what happens from 2020 to 2030? That’s what we’ve been thinking about. How do we stay ahead of the game? How do we innovate? How do we keep creating new services and improvements to consumers so that they feel that this is better than what’s out there right now.

In my opinion, that really demands you to be passionate and in love with your business. And I think it’s hard for tech giants to be that at that scale. It’s easy to recognize what’s going on right now; it’s much harder [for them] to guess what’s going to happen five years from now. That’s really demand that passion and closeness to what you’re doing.

TC: Talking about the future, I saw that you talk to the Financial Times this summer, and when they asked you about going public after all these years, you said that, “In many ways we have most of the things in place that we need. It’s more question of timing and focus.” So how is 2020 looking in terms of timing?

SS: Yeah, I don’t know, maybe it could happen. It was kind of funny, because I was reading an interview with Michael Moritz, who’s on our board, and he was saying that we were going to stay private forever. So, I don’t know, it’s hard for me to know that what’s true anymore. People are reporting different things about Klarna.

TC: You never do know what Michael Moritz is going to say. But if you were to go public, I assume it would be a U.S. listing.

SS: I would assume so, too.

TC: What do you make of this whole direct listing concept that your neighbor [in Stockholm, Spotify, pioneered]?

SS: I think it’s wise. I mean Michael [Moritz] is a big proponent of it. I think it makes sense. I read all the arguments, and it looks interesting.

TC: But you’re not raising money with direct listings — your existing shareholders are instead selling their shares on the open market — which sort of begs the question: will you be raising [another private round] of funding again? You raised a big round in summer.

SS: We are in a very exciting phase right now, where the U.S. and U.K. is growing so fast for us. . . And we want to continue investing. We think the potential market in in the US is just massive . . .So we’ll we’ll see what happens, but I wouldn’t rule it out, that one thing that could happen is raise even more money to be investing even more in growth and product delivery, and new products and services, as well as sales and marketing in the US,

TC: Of course, every time you raise money it impacts whether or not you’re profitable. Are you profitable now? Have you been?

SS: Klarna has been profitable every year up until this year.

TC: That giant fundraise [in summer] kind of threw you off.

SS: Yeah, exactly.

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PayPal’s exiting COO Bill Ready to join Google as its new President of Commerce

In June, PayPal announced its Chief Operating Officer Bill Ready would be departing the company at the end of this year. Now we know where he’s ending up: Google. Ready will join Google in January as the company’s new commerce chief, reporting directly to Prabhakar Raghavan, SVP, Ads, Commerce, and Payments.

Ready’s role at Google will not involve payments, which means he won’t be directly involved with PayPal’s competitor, Google Pay. Instead, as Google’s new President of Commerce, Ready will focus on leading Google’s vision, strategy, and delivery of its commerce products. However, the role will see Ready working in close partnership with both the advertising and payments operations.

Google’s prior head of ads, commerce, and payments, Sridhar Ramaswamy, left the company in 2018 after more than 15 years, which is when Raghavan stepped in. But Ready’s role is a new one, as it will focus on commerce specifically.

“Bill’s exceptional track record building great experiences for consumers and deeply strategic partnerships makes him a powerful addition to our team. I couldn’t be more excited for the future of commerce at Google,” said Raghavan, in a statement.

Added Ready, “I’ve long admired how Google has enabled access to the digital economy for everyone. Google has been making world-class commerce capabilities universally accessible to partners of all sizes, and I look forward to furthering that mission,” he said.

Ready first joined PayPal in 2013 when it acquired his startup, the payments gateway Braintree, for $800 million, then becoming CEO of Braintree and Venmo. Today, Braintree powers payments for businesses like Uber, Airbnb, Facebook, and Jet.com, while Venmo sees over $25 billion in transaction volume on a quarterly basis.

Once at PayPal, Ready moved up the ranks to become EVP and COO in 2016. In this role, he was responsible for product, technology, and engineering at PayPal, as well as the end-to-end customer experiences for PayPal’s consumer, merchant, Braintree, Venmo, Paydiant, and Xoom businesses. He was also co-chair of PayPal’s Operating Group, which focuses on delivering on revenue and profit goals for the company.

At PayPal, Ready was behind a number of the company’s biggest moves, including the introduction of its most-rapidly adopted product ever, PayPal One Touch, as well as Pay with Venmo, the redesign of the PayPal mobile app, PayPal Commerce, and the expansion of Braintree’s global reach.

PayPal announced Ready’s plans for departure this summer, saying he was planning to engage in other entrepreneurial interests outside the company.

Heading up commerce at Google will be a big task for Ready, given commerce’s close proximity to parent company Alphabet’s main source of revenue, which is advertising. In Q3 2019, Google’s ad revenue was $33.92 billion out of total revenue of $40.5 billion.

Today, many consumers visit Google first to shop for products, which allows it to charge top dollar for its ads. But over the years, Amazon has been steadily chipping away at Google’s lead as more consumers go directly to its site to hunt for products.

To address this challenge, Google has begun to transform its Shopping business.

At Google Marketing Live this year, Google unveiled a new look and feel for its shopping properties which included rebranding its Google Express app as the new Google Shopping app. The goal with the changes is to better serve the way consumers now shop online. Today, people often start “shopping” by doing things like browsing Pinterest for inspiration or seeing what influencers are posting on Instagram, for example. Instagram capitalized on this trend with the launch of Instagram Shopping in March, which allows users to checkout right in its app.

PayPal is also now moving in this direction. The company recently made its largest-ever acquisition with a $4 deal for shopping and awards platform Honey. With Honey’s integrations, PayPal will be able to target shoppers with personalized promotions and offers earlier on in their shopping journey, then direct them to PayPal’s checkout as the final step.

Google’s commerce plans are similar in that regard.

It envisions a universal cart and new ways to shop across its platform of services, including Search, Shopping, Images, and even YouTube and Gmail. This will allow Google to also capture shoppers’ attention as they engage with Google properties — like browsing images for product ideas or watching YouTube videos, for example.

As a part of the Google Shopping revamp, the dedicated Shopping homepage was updated to allow consumers to filter products by brands they love, features they want, as well as read product reviews and videos. Shoppers could add items to a universal cart where purchases were backed by a Google guarantee, as well as receive customer service and make easy returns, as before with Google Express.

Google’s travel business also falls under commerce, and similarly received new attention this year with updates designed to simplify the experience of trip planning on google.com/travel, and more features around tracking flight price drops and predictions. 

On the advertising side, Google’s highly visual Showcase Shopping ads were expanded outside of Google Shopping. And Shopping Actions — customers’ ability to shop directly from Google surfaces, like Google Assistant — are making their way to new services, like YouTube.

Google is also ramping up its ability to serve smaller and local businesses with features aimed at driving in-store pickup traffic to brick-and-mortar stores.

Critical to making Google’s new Shopping platform successful is being able to forge retail partnerships — as, unlike Amazon, Google itself is not really in the business of selling directly to consumers, outside of its own hardware devices.

Ready’s experience will prove valuable here, too. At PayPal, he was able to build strategic partnerships with a number of unlikely players — including Visa, Mastercard, Apple, Walmart, Samsung, and even Google.

What Ready’s strategy and vision will more precisely entail for Google will have to wait until after he’s on board, however.

“I’m thrilled to welcome Bill to Google as we continue our work to create more helpful commerce experiences and build a thriving ecosystem for partners of all sizes,” said Sundar Pichai, CEO of Google and Alphabet.

Image Credits: Getty Images — Bloomberg/Contributor; Ready: Google

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Essential tools for today’s digital nomad

Dave Williams Contributor
A serial entrepreneur in the digital marketing, advertising, and ad tech industries, Dave Williams founded and sold 360i, IgnitionOne, BLiNQ Media, and other ventures and is now the CEO and Co-founder of NOMADX, with his base in Lisbon, Portugal.

The world isn’t ready for the digital nomad movement.

If projections are to be believed, the growing trend in how people choose to live and work is fast outpacing the service and policy enhancements needed to keep up with a borderless workforce bound only by its need for a reliable Wi-Fi connection. But that’s not slowing down the nomads.

The Economist theorizes that there could be as many as one billion remote workers by 2035. Such a movement has implications for entities ranging from banks and insurance companies to national governments — but few organizations are in the habit of looking 15 years down the road and altering course appropriately. But even short-term, the numbers deserve our attention: about 59 million people are considering joining the digital nomad movement in the next two to three years.

Put another way: in the next 24 to 36 months, roughly the population of Italy plans to sever traditional workplace ties so they can go mobile. How are our global services and infrastructures going to accommodate these individuals?

Having spent more than six years as a digital nomad myself, I can tell you that there’s a steep learning curve to this lifestyle. While it’s one that I’ve found well worth the effort, tapping into the networks and services needed to sustain my professional and personal networks hasn’t always been easy. Looking back to when I first gave into my wanderlust, after starting my career in the late ‘90s dot-com era as a serial entrepreneur in the U.S. digital marketing and ad tech industries, I can’t help but muse that I wish I knew then what I know now.

So for all of those aspiring or early stage nomads out there, in hopes that your own transitions to the nomadic lifestyle might be easier than my own, I’m here to tell you what I know now. While we can expect to see a great deal of change over the next couple decades, as the world economy races to catch up to the digital nomad movement, these are the essential considerations — and your best options — when it comes to the core elements needed to sustain yourself in your nomadic ramblings today.

Accommodations

Let’s start with the basics: where to live.

It’s almost impossible for digital nomads to find suitable accommodations at fair prices within major U.S. metropolitan areas that foster the standard of living they’re seeking. That’s one of the main reasons why so many nomads are ending up in Asian countries and other economical international destinations. In addition to being lower-cost, these destinations offer desirable alternatives to city environments where the standard 9-5 is required to afford everything the city has to offer.

When it comes to finding a place to live, whether for a few days or many months, there are a lot of options. The one that makes the most sense has a lot to do with your individual situation and preferences. Most important is having a place to stay with strong Wi-Fi. Consider:

Airbnb: Given its popularity for vacation rentals, a lot of new nomads initially turn here. While it allows for a more “at home” feel in a rental (because it is someone’s home), it can quickly become cost-prohibitive. Airbnb is great for short-term rentals, but comparatively expensive for anything more than a couple weeks.

Booking and Agoda: Similar to Airbnb, but these sites are more professional in that they’re mostly used by professionally-run apartments, hotels and resorts. All are great for those who are looking for more services with their accommodations. But they don’t always have the home-like feel that many nomads crave, and like Airbnb, they can get expensive fast.

Facebook Groups: A number of Facebook Groups for digital nomads have emerged recently. These groups can be handy because they let guests and hosts connect directly and come to mutually agreeable arrangements. However, these groups aren’t a rental platform. Guests don’t have access to reviews or an easy way to issue payments confidently. So while accommodations can be a bit more affordable when organized through groups, it’s hard to know what you’re going to get.

Hostels: As any rambling college student can attest, hostels are an affordable, social way to see the world. But living at a hostel offers little privacy and near-constant disruption, often of the drunken partying variety. It’s not a terribly viable route for nomadic couples or anyone looking for living space that can also double as an office. 

Hotels: On the flip side, hotels are great for couples. But for nomads spending weeks or even months abroad, they’re expensive and can be isolating for people looking to truly immerse themselves in new local cultures. Hotels are best reserved for short-term expeditions.

VIP hostels (e.g., Selina): This new breed of the hostel experience offers a great combination of co-working and social connections that help nomads connect with like-minded people. They provide some level of privacy, but these accommodations — like others — become expensive in the long term if you want your own bedroom.

Co-living spaces: As with co-working spaces, there’s a growing movement in which digital nomads come together to share the cost of living accommodations, which range from multi-bedroom apartments to large-scale co-living buildings complete with kitchens, shared and private bathrooms, working and community spaces. These environments are great for making connections while having access to privacy when needed, but branded co-living spaces will still cost more than a local midterm apartment.

Midterm rental platforms: For nomads looking to stay in one place for a month or more and truly soak in the culture, midterm rental platforms represent a more-affordable alternative to platforms like Airbnb. These platforms (full disclosure: I now operate one of them, by the name of NomadX) offer affordable month-to-month options with fast Wi-Fi in everyday neighborhoods, which enables you to connect more deeply with the local community without an overly long commitment. That said, this category is still quite new, so midterm rental inventory might be limited or nonexistent in the market you’re considering.

Couchsurfing: Finally, I’d be remiss not to mention Couchsurfing, a social network for travelers and nomads that makes it possible to connect directly with locals and even crash on their sofas for free. That said, Couchsurfing is only designed for short-term stays, it’s not very professional and it’s quickly evolving into more of a dating/hook-up platform than anything else.

Also, a quick note on Wi-Fi: No matter where you stay, you’ll need to ensure you can always be connected in order to stay on top of work. While you can check with your current mobile provider on international roaming plans, the coverage might be limited and ultimately become expensive. You might instead want to consider buying a local SIM card in every country and using it with your smartphone. That way, you can use your phone as a hotspot and get internet on your laptop. In a pinch, though, it’s good to have a backup mobile hotspot option. (For example, I travel with a Skyroam Solis.)

Insurance

We digital nomads are risk takers by nature, but that doesn’t mean we don’t want or appreciate a safety net. After all, having an accident isn’t a choice. Unfortunately, if nomads can’t get coverage for a fair price, many opt to forego insurance altogether and end up resorting to crowdfunding if they end up in a bad situation. I’ve had several friends get into accidents in foreign countries, and they couldn’t get proper medical treatment until they’d crowdfunded the needed resources. This is a worst-case scenario, and it’s one that I hope becomes a thing of the past as more borderless options for insurance emerge.

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Daily Crunch: PayPal acquires Honey

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 9am Pacific, you can subscribe here.

1. PayPal to acquire shopping and rewards platform Honey for $4B

Currently, Honey’s 17 million monthly active users take advantage of its suite of money-saving tools to track prices, get alerts, make lists, browse offers and participate in a rewards program called Honey Gold.

The acquisition, which is PayPal’s largest to date, will give the payments giant a foothold earlier in the customer’s shopping journey. Instead of only competing on the checkout page against credit cards or Apple Pay, for example, PayPal will leap ahead to become a part of the deal discovery process, as well.

2. Alphabet’s Loon signs deal with Telefonica to provide internet to remote parts of the Amazon

Loon is Alphabet’s high-altitude balloon company that is using its stratospheric technology to provide internet connectivity on Earth. This is Loon’s third commercial contract, including one with Telkom Kenya which is also awaiting final regulatory sign-off, and an arrangement with Canadian company Telecast to develop a coordination system for a future planned low-Earth orbit satellite constellation.

3. Apple expands and updates its ‘Everyone Can Code’ program

The company says it has redesigned the “Everyone Can Code” curriculum with a focus on introducing coding to more elementary and middle school students, while also adding more resources for teachers, a new student guide and refreshed Swift Coding Club materials.

4. G Suite users get more AI writing help, Google Assistant calendar integration and more

Unlike other grammar tools, Google’s version utilizes a neural network approach to detect potential grammar issues in your text — similar to the techniques used for building effective machine translation models. The company is also bringing to Docs the same autocorrect feature it already uses in Gmail.

5. Announcing TechCrunch Early Stage, a new event series all about founders

Our TC Early Stage events will be smaller (and more affordable) than Disrupt, with a focus on giving early-stage founders the information they need to be successful. The first will be in San Francisco on April 28, followed by one in Paris on October 28 and another in New York City (date TBA, but hey, we’re coming back to NYC!).

6. Sonos acquires voice assistant startup Snips, potentially to build out on-device voice control

Snips, which had been developing dedicated smart device assistants that can operate locally (instead of relying on consistently round-tripping voice data to the cloud) could help Sonos set up a voice control option for its customers that has better privacy and is focused more narrowly on music control.

7. Reimagine inside sales to ramp up B2B customer acquisition

User-first products are driving rapid company growth in an era where individuals discover, adopt and share software they like throughout their organizations. This is great if you’re a Slack, Shopify or Dropbox — but what if your company doesn’t fit that profile? (Extra Crunch membership required.)

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PayPal to acquire shopping and rewards platform Honey for $4B

PayPal announced today it has agreed to acquire Honey Science Corporation, the makers of a deal-finding browser add-on and mobile application, for $4 billion, mostly cash. The acquisition, which is PayPal’s largest to date, will give the payments giant a foothold earlier in the customer’s shopping journey. Instead of only competing on the checkout page against credit cards or Apple Pay, for example, PayPal will leap ahead to become a part of the deal discovery process, as well.

Currently, Honey’s 17 million monthly active users take advantage of its suite of money-saving tools to track prices, get alerts, make lists, browse offers and participate in an Ebates-like rewards program called Honey Gold. Its users tend to be younger, millennial shoppers, both male and female.

PayPal aims to add Honey’s technology to its own product line, expanding its reach to PayPal’s 300 million users.

“What’s exciting is that we can take the functionality Honey now offers — which is product discovery, price tracking, offers and loyalty — and build that into the PayPal and Venmo experiences,” explains PayPal SVP of Global Consumer Products and Technology, and former Xoom CEO, John Kunze. “When Honey says they’re putting money in the pockets of their customers — that’s perfectly in line with what we want to do. We want to make digital commerce and financial services more affordable, easier to use, more fun and more accessible to people around the world,” he says.

In addition, PayPal’s network of 24 million merchant partners will gain the ability to offer targeted and more personalized promotions to consumers as a means of acquiring new business and driving increased sales. PayPal Credit may also be integrated into Honey to help finance larger purchases.

Honey has flown under the radar to some extent since its founding in 2012.

Originally only a web browser extension, Honey tracks sales and retailers’ promo codes, as a rival to RetailMeNot and others. What makes the extension so useful is that it automatically tries all the eligible promo codes for you during checkout then selects the one that provided the most savings and applies it on your behalf. This helps shoppers feel more comfortable with their purchases and reduces shopping cart abandonment.

The company also rolled out features to inform shoppers of an item’s price history, including the historical pricing of any product on Amazon’s marketplace. In 2017, Honey launched DropList, which would track and alert users to lower prices, as well as tools for finding travel deals.

As more consumers shifted their shopping to e-commerce merchants, Honey’s user base also rapidly grew.

Its browser extension now works across approximately 30,000 merchant websites, including fashion, technology, travel and even pizza delivery. Last year, Honey publicly shared that its 10 million members had saved over $800 million using its tools. As of today, Honey’s 17 million members have saved more than $2 billion to date.

 

“Honey is amongst the most transformative acquisitions in PayPal’s history. It provides a broad portfolio of services to simplify the consumer shopping experience, while at the same time making it more affordable and rewarding,” said Dan Schulman, president and CEO of PayPal, in a statement.

“The combination of Honey’s complementary consumer products with our platform will significantly enhance our ability to drive engagement and play a more meaningful role in the daily lives of our consumers. As a partner of choice for our merchants, this is another way that we can help them build and strengthen their customer relationships, provide personalized offers, and drive incremental sales. The combination of Honey and PayPal adds another significant and meaningful dimension to our two-sided platform,” Schulman added.

The acquisition also gives PayPal a way to fight back against the increased competition from Apple, Google, Facebook and other tech companies that have entered the payments market in recent years. On Apple’s Q4 2019 earnings call, for example, CEO Tim Cook noted that Apple Pay has now exceeded PayPal transaction volume with 3 billion transactions in the quarter. Meanwhile, analysts are predicting Facebook Pay has the potential to unseat both Apple Pay and PayPal alike.

Then there are PayPal’s original rivals — the world’s biggest card networks like Visa, Mastercard, American Express and Discover. These companies are also fighting to remain relevant online, with a new PayPal competitor of their own to simplify online checkout.

With Honey, PayPal immediately shifts the battle away from the checkout page itself to instead compete against all the places people go to discover, browse, get inspired and deal-hunt — whether that’s directly on retailers’ sites or through newer platforms, like Pinterest or Instagram Shopping.

As a result of the acquisition, Honey co-founders George Ruan and Ryan Hudson will join PayPal where they’ll work on product integrations and scaling the technology to a much larger user base. Also joining is Honey’s predominantly L.A.-based team of 350 employees.

The Honey team and headquarters will remain in L.A., where they’ve just signed a lease on a new office space with expansion goals in mind.

“Combining PayPal’s assets and reach with our technology, we can build powerful new online shopping experiences for consumers and merchants,” said Hudson. “We’ll have the ability to help millions of retailers efficiently reach consumers with offers that deliver more and more value to Honey members.”

To date, Honey had raised $49 million from investors, including Ludlow Ventures, Zuma Partners, Mucker Capital, SXE Ventures, BAM Ventures, Plug and Play, Wonder Ventures, Cendana Capital, Anthos Capital and others, according to Crunchbase.

Honey was already profitable on a net income basis in 2018, PayPal notes. The acquisition is expected to close in the first quarter of 2020, subject to regulatory approval. It’s expected to be accretive to PayPal’s non-GAAP earnings per share in 2021.

PayPal will hold a conference call at 2 PM PST today to discuss the transaction further.

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Elavon to acquire Sage Pay, a gateway that competes with Stripe, PayPal and Adyen, for $300M

E-commerce continues to gain momentum — a trend we’ll see played out in the next two months of holiday shopping — and with that comes more consolidation. Today, Elavon, the payments company that is a subsidiary of US Bancorp, announced that it will acquire Sage Pay, one of the bigger payment processors in the UK and Ireland serving small and medium businesses.

Sage Pay’s owner Sage Group said the deal is being done for £232 million in cash (or $300 million at today’s currency rates).

Elavon is active in 10 countries and says it’s the fourth-largest merchant acquirer in Europe, competing against the likes of  Global Payments, Vantiv, FIS, Ingenico, Verifone, Stripe, Chase, MasterCard and Visa. The deal is still subject to regulatory approval (both by the Federal Reserve in the US and the Central Bank of Ireland), and if all proceeds, the deal is expected to close in Q2 of 2020.

The acquisition points to a bigger trend underway in e-commerce. The market is very fragmented, not just in terms of the companies who sell goods online but also (and perhaps especially) in terms of the companies that manage the complexities at the back end.

In keeping with that, Sage Pay has a lot of competitors in its specific area of taking and managing the payments process for online retailers and others taking transactions online or via mobile apps. They include some of the same competitors as Elavon’s: newer entrants like Stripe, Adyen, and PayPal (all of which have extensive businesses covering many countries and are each larger than Sage, valued in the billions rather than hundreds of millions of dollars), but also smaller operations like GoCardless as well as more established companies like WorldPay.

This deal is a mark of the consolidation that’s been taking place to gain better economies of scale in a market where individual transactions generally generate incremental revenues.

Sage Pay, in that context, was a relatively small player. It 2018 revenues were £41 million, but it is profitable, with an operating profit of £15 million, and Sage said it expects “to report a statutory profit on disposal of approximately £180 million on completion.”

The deal comes on the heels of Sage Group — which is publicly traded — confirming reports in September that it was looking for strategic alternatives for the payments business. Sage Group for the last couple of years has been divesting payments and banking assets to focus more on accounting, people and payroll software, which it sells through an SaaS model.

“Our vision of becoming a great SaaS company for customers and colleagues alike means we will continue to focus on serving small and medium sized customers with subscription software solutions for Accounting & Financials and People & Payroll,” said Steve Hare, Sage’s CEO, in a statement. “Payments and banking services remain an integral part of Sage’s value proposition and we will deliver them through our growing network of partnerships, including Elavon.”

Elavon, as the consolidator here, was itself acquired by US Bancorp way back in 2001 for $2.1 billion. Currently it is active in 10 countries, but in that same vein of consolidation to improve economies of scale on the technical side, and to aggregate more incremental transactions on the financial side, Elavon’s main objective is to increase its overall share of the e-commerce market in Europe. specifically by expanding with Sage Pay further into the UK and Ireland.

“We are a customer-focused company that is helping businesses succeed in a global marketplace that is changing rapidly,” said Hannah Fitzsimons, president and general manager of Elavon Merchant Services, Europe. “This acquisition brings tremendous talent and leading technology to Elavon, which can be leveraged across the European market.”

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Google to offer checking accounts in partnership with banks starting next year

Google is the latest big tech company to make a move into banking and personal financial services: The company is gearing up to offer checking accounts to consumers, as first reported by the Wall Street Journal, starting as early as next year. Google is calling the projected “Cache,” and it’ll partner with banks and credit unions to offer the checking accounts, with the banks handling all financial and compliance activities related to the accounts.

Google’s Caesar Sengupta spoke to the WSJ about the new initiative, and Sengupta made clear that Google will be seeking to put its financial institution partners much more front-and-center for its customers than other tech companies have perhaps done with their financial products. Apple works with Goldman Sachs on its Apple Card credit product, for instance, but the credit card is definitely pretend primarily as an Apple product.

So why even bother getting into this game if it’s leaving a lot of the actual banking to traditional financial institutions? Well, Google obviously stands to gain a lot of valuable information and insight on customer behavior with access to their checking account, which for many is a good picture of overall day-to-day financial life. Google says it’s also intending to offer product advantages for both consumers and banks, including things like loyalty programs, on top of the basic financial services. It’s also still considering whether or not it’ll charge service fees, per Segupta – not doing so would definitely be and advantage over most existing checking accounts available.

Google already offers Google Pay, and its Google Wallet product has hosted some features beyond simple payments tracking, including the ability to send money between individuals. Meanwhile, rivals including Apple have also introducing payment products, and Apple of course recently expanded into the credit market with Apple Card. Facebook also introduced its own digital payment product earlier this week, and earlier this year announced its intent to build its own digital currency called ‘Libra’ along with partners.

The initial financial partners that Google is working with include Citigroup and Stanford Federal Credit Union, and their motivation per the WSJ piece appears to be seeking out and attracting younger and more digital-savvy customers who are increasingly looking to handle more of their lives through online tools. Per Sengupta’s comments, they’ll also benefit from Google’s ability to work with large sets of data and turn those into value-add products, but the Google exec also said the tech company doesn’t sue Google Pay data for advertising, nor does it share that data with advertisers. Still, convincing people to give Google access to this potentially sensitive area of their lives might be an uphill battle, especially given the current political and social climate around big tech.

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Google to offer checking accounts in partnership with banks starting next year

Google is the latest big tech company to make a move into banking and personal financial services: The company is gearing up to offer checking accounts to consumers, as first reported by the Wall Street Journal, starting as early as next year. Google is calling the projected “Cache,” and it’ll partner with banks and credit unions to offer the checking accounts, with the banks handling all financial and compliance activities related to the accounts.

Google’s Caesar Sengupta spoke to the WSJ about the new initiative, and Sengupta made clear that Google will be seeking to put its financial institution partners much more front-and-center for its customers than other tech companies have perhaps done with their financial products. Apple works with Goldman Sachs on its Apple Card credit product, for instance, but the credit card is definitely pretend primarily as an Apple product.

So why even bother getting into this game if it’s leaving a lot of the actual banking to traditional financial institutions? Well, Google obviously stands to gain a lot of valuable information and insight on customer behavior with access to their checking account, which for many is a good picture of overall day-to-day financial life. Google says it’s also intending to offer product advantages for both consumers and banks, including things like loyalty programs, on top of the basic financial services. It’s also still considering whether or not it’ll charge service fees, per Segupta – not doing so would definitely be and advantage over most existing checking accounts available.

Google already offers Google Pay, and its Google Wallet product has hosted some features beyond simple payments tracking, including the ability to send money between individuals. Meanwhile, rivals including Apple have also introducing payment products, and Apple of course recently expanded into the credit market with Apple Card. Facebook also introduced its own digital payment product earlier this week, and earlier this year announced its intent to build its own digital currency called ‘Libra’ along with partners.

The initial financial partners that Google is working with include Citigroup and Stanford Federal Credit Union, and their motivation per the WSJ piece appears to be seeking out and attracting younger and more digital-savvy customers who are increasingly looking to handle more of their lives through online tools. Per Sengupta’s comments, they’ll also benefit from Google’s ability to work with large sets of data and turn those into value-add products, but the Google exec also said the tech company doesn’t sue Google Pay data for advertising, nor does it share that data with advertisers. Still, convincing people to give Google access to this potentially sensitive area of their lives might be an uphill battle, especially given the current political and social climate around big tech.

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PayPal reports solid third-quarter results, with total payment volume growing 25%

PayPal reported third-quarter results today that were slightly ahead of analysts’ expectations, driven by an increase in total payment volume.

The company’s quarterly revenue grew 19% year-over-year to $4.38 billion. Its GAAP net income was 39 cents per share, or $462 million, a 7% year-over-year increase. On a non-GAAP basis, net income was 61 cents a share, a 5% increase.

These figures included a negative impact from strategic investments in MercadoLibre and Uber; without that, GAAP net income would have increased 48% to 54 cents per share, and non-GAAP net income would have rose 31% to 76 cents per share.

During the third quarter, PayPal added 9.8 million active accounts, increasing the total number by 16% to 295 million. Total payment volume (TPV) increased 25% to $179 billion. Venmo processed more than $27 billion in TPV during the quarter, an increase of 64%.

For its full-year results, PayPal said it expects earnings per share ranging from $3.06 to $3.08 per share, on revenue of $17.7 billion to $17.76 billion.

In September, PayPal announced it will acquire a 70% equity interest in GoPay (Guofubao). The deal is expected to close during the fourth quarter and will make PayPal the first foreign payments company licensed to provide online payment services in China, an important potential driver of future growth.

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Luge Capital raises $85M to invest in Canadian fintech startups

There are 831 financial technology startups headquartered in or operating in Canada, according to data collected by Fintech Growth Syndicate, yet only a handful of venture capital funds specializing in the region and sector.

Luge Capital, a fintech and AI-focused venture capital fund headquartered in Montreal and Toronto, is looking to close that gap. The firm has raised $85 million for its debut fund and plans to make seed investments as small as $150,000 and as large as $2 million.

The relatively new outfit, founded in 2018, is led by David Nault, a former vice president at iNovia Capital, and Karim Gillani, who previously led corporate development for Xoom, the PayPal -acquired remittances startup.

Luge Capital is backed by iA Financial Group, BDC Capital, Caisse de dépôt et placement du Québec, Desjardins Group, La Capitale, Sun Life Financial and Fonds de solidarité FTQ. In a somewhat unusual series of events, some of the limited partners approached Nault and Gillani and said if they raised a fund, they would bankroll them. And so the pair left their jobs to raise a debut vehicle to support fintech companies in Canada’s growing tech scene.

Luge Capital will deploy capital to startups across North America, but will focus on Canadian tech.

“We’ve seen growth in terms of absolute numbers of fintech companies,” Gillani tells TechCrunch. “We think it’s because there’s new access to capital. Companies can now find themselves getting funded and there’s a bigger appetite for larger companies to partner with these startups.”

Luge Capital has to date made five investments, three of which they were able to disclose. Gillani says they’ve provided checks to Flinks, which helps businesses connect apps and users’ bank accounts; Owl, a provider of a service that supports financial institutions with customer onboarding, fraud detection and more; and insurance technology company Finaeo.

According to PitchBook, nearly $3 billion has been invested in Canadian startups, a record year for the country.

“We are going to see more growth in venture in Canada,” says Gillani. “I think we are going to see founders in Canada having more of a global mindset such that they look at Canada as an initial market for them, with a focus to expand geographically soon after they’ve been able to prove the model in Canada. And I think because of that dynamic, we are going to see more and more outside capital to finance these founders.”