This week: Alpha FX, Barclays, Currensea, Curve, Finablr, Lloyds, MoneyGram, Ripple, Standard Chartered, Travelex, Yolt
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New data, new insights on cross-border payments. Every week.

Welcome back and a Happy New Year to all our readers.

We're going to hit the ground running and get straight to Open Banking. In our eyes, it is very much an indicator of some of the broader trends in the sector, particularly around data, customer access and user experience. 

The holiday season also passed with a $200m mega-raise for the blockchain player Ripple, raising its valuation to $10bn. Does such a valuation make sense? Corporate-focused Alpha FX just reported on a strong 2019 and some enviable per customer revenues.

And finally, we look at the impact of the major hack and ransom demand at Travelex and its knock-on effects.  

What Open Banking tells us about the future

Open Banking (the ability to connect directly to a customer's bank account) has taken time to get going.

Before 2016, it was hardly talked about. With PSD2 and other similar regulations entering into force, Open Banking now appears to be a predictor of where finance and payments are heading as it democratises access to customers and their data. This has spawned some interesting developments in the international payments space.
Some takeaways:
  • Financial services are becoming more accessible. New apps and products increase financial literacy and provide the opportunity to recommend products.
  • Data, previously the right of just the customers' bank, is now freely available (with the customer's permission). This shifting of data rights provides opportunities for non-bank institutions and other companies to build new products based on this insight.
  • A need for cross-border payments can now be easily identified for customers who allow access to their data. An alternative option (usually cheaper and faster) can be offered, taking the cross-border business away from the banking incumbents.
  • Fewer and fewer payments will have to be initiated directly from banks. This is good news for payment companies, less so for the banks. Some forward thinking banks such as Barclays and Lloyds already offer account aggregation services to pull funds from competitor accounts.
2019 was very much a year of transition from competition between banks and fintechs to partnerships. Open Banking knocks down one more barrier and means a fintech no longer needs to setup a formal relationship with a bank to partner with them. This will massively speed up product development and means the rate of change in this decade is likely to come even faster than before.
Which challengers and incumbents could Open Banking impact?

Is Ripple worth $10bn?

Late last year, whilst most people were out buying last minute Christmas presents, Ripple raised a cool $200m, increasing the company's valuation to $10bn. Whilst Ripple is not the XRP digital currency, it does own close to 60% of all XRP. 

Ripple is working to replace SWIFT and to speed up cross-border payments to reduce the liquidity demands of cross-border payments businesses. But is it really worth $10bn?

There are three sources of value in Ripple: 

Holding in XRP
The first and key element is Ripple's 57% holding in the crypto currency XRP, for a total value today of approximately $12bn, the majority of which is currently placed in escrow.

How you view the future value of XRP plays a large part in how you value Ripple. Yesterday's price of 0.21 XRP:USD is broadly in line with the average price for 2017. 2018 saw the crypto bubble pull the XRP price up to 0.67 to the dollar. In 2019, the average price was back down to 0.31. 

Underlying operating business
Ripple has two key products, RippleNet (a messaging service that doesn't use XRP) and On-demand liquidity (ODL) - its solution that uses XRP as a middle currency in cross-border transactions. MoneyGram, in which Ripple has invested $50m, is the largest known user of XRP. The USD/MXN corridor is Ripple's most developed corridor. Latest reported estimates show that the crypto exchange Bitso, also backed by Ripple, is processing approximately 2.5% of the total USD to Mexico flow.

Ripple has made a number of investments either directly (MoneyGram, Bitso) or via its developer initiative Xpring. While only the amount of $50m invested in MoneyGram was made public, these investments are currently a rounding error in Ripple's valuation and are mostly aimed at onboarding customers to help drive remittance flows via XRP.

Overall, the big unknown is how much of XRP's value is reliant on the success of Ripple's products and its investments. Right now, it's too early to tell.

Stay up to date on the biggest trends in the industry

Alpha FX gaining scale in corporate space

Alpha, the mid-market focused UK based FX provider provided another strong trading update yesterday giving clarity on its 2019 performance.

The quality of customers appears to also be on the rise as seen by its average revenue by customer growing to c.£54,000/customer for 2019. Not bad for a sector driven by customers typically worth only three or four figures.

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Cyber terrorism is real and Travelex, owned by Finablr, has been hit full on. Not only has Travelex had to take their site down but a malicious group called Sodinokibi claims to hold their customer's data although Travelex disputes this. As of publication, the issue was still not resolved and a seven figure ransom demanded. 

What impact?
Although a Travelex press release from Tuesday stated that the company does "not currently anticipate any material financial impact for the Finablr Group", shareholders weren't so kind knocking 18% of the share price yesterday to a historic low.

The effects are now spreading too. A number of UK high street banks are now reporting they cannot service their travel money businesses as they have not received the bank notes they need from Travelex.

Additionally, there is a question whether Travelex would have needed to report this as a data breach. The hackers claim they have personal data, Travelex's statement says nothing has been exfiltrated. GDPR fines can be substantial and material if the data did get out.

We all hope that Travelex can get back to normal as soon as possible. Episodes like this hurt everyone from the customers all the way through the sector.

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On our radar this week:
Curated by FXC Intelligence's Team
Grab seeks Singapore banking license
The ride-sharing company plans to create a massive digital ecosystem.
Standard Chartered launches tracker
The bank allows real-time tracking of cross-border payments.
Business Times 
MoneyGram's Christmas present
Strong growth from its digital and mobile business over the holidays.
Yahoo Finance
Starling Bank eyes IPO
The digital bank plans to IPO in 2022 and aims to breakeven this year.

Missed the last few weeks of 2019?

The 5 trends shaping cross-border payments in 2020 (here)
Canadian cross-border payments partnerships (here)
Will TransferWise reach zero-cost transfers? (here)
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Wishing everyone much success for a great 2020.

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