Fintech: New acquisition to be seen for Apple

The Apple group announced the acquisition of British company Credit Kudos for 150 million dollars.

Observations from the fintech think tank Snark Tank.

fan ofApple are fond of it. Once the Apple brand makes a new acquisition, the world of technology (or the fintechaverse) goes into hyper-speculative mode, trying to figure out why Apple appointed them or that company and what it plans to do with it.

Many at Apple’s headquarters were supposed to roll on the floor laughing this week as the group announced it was buying the British company for $ 150 million. Credit Kudosdescribed by many companies as an open banking system (or open banking).

What does Credit Kudos do?

According to its website: “Credit Kudos smart products allow businesses to take advantage ofopen banking to improve affordability and risk assessment. Our predictive insights were developed by combining transaction and loan result data. Our products help lenders streamline underwriting, improve decision accuracy, and support customers after acquiring our engagement tools. “.

While Credit Kudos may describe its products as helping lenders, whose goal is often to end clients in their debt and make money on the inability of borrowers to pay immediately, rest assured, such Of almost every other fintech startup on the planet, the company’s “mission” is more altruistic. The British company has expressed its willingness “Changing the credit scoring system to provide fairer credit for all, helping customers access responsible financing they can afford, when they need it. » This is minus one, Credit Kudos!

So why would Apple want to get Credit Kudos? Just because of conventional wisdom.

What is Apple’s common wisdom in the case of getting Credit Kudos?

1) The launch of the Apple Card in the UK

Through its partnership with Goldman Sachs, Apple launched its own credit card, the Apple Card, in the United States a few years ago. If so, will Credit Kudos allow Apple to also offer this service in the UK? According to the newspaper AltFi, “Credit Kudos specializes in providing a quick alternative to traditional credit scoring byopen banking, Apple may want to bring this service in -house to support the launch of its new product in the UK. »

The opinion of the think tank Snark Tank : This seems unlikely. Apple still needs a licensed financial institution partner in the UK to offer its credit card. Just as Goldman Sachs provides credit underwriting models for Apple Cards in the United States, a UK financial institution is likely to bring its own credit models for an Apple Card offer in the UK.

2) Offer service ” Buy Now, Pay Later (BNPL, Buy Now, Pay Later)

According to Hours, Apple’s acquisition of Credit Kudos “is likely to accelerate its entry into payment technologies and products such as BNPL. » simon taylorfrom British fintech consultancy firm 11: FSsaid AltFi : “ako ‘open banking is the key to BNPL products. Instead of forcing consumers to do a full credit check to buy a $ 50 jacket, why not immediately check their financial ability and creditworthiness directly from their bank account? Credit Kudos immediately offered this possibility to Apple ”.

The opinion of the think tank Snark Tank : Simon Taylor is right, but who is overseeing this potential BNPL transaction? Apple? Impossible, will not happen. As Jason Mikulanewsletter author Fintech Business Weeklywritten on LinkedIn: “Apple Corporation is not interested in being a direct lender for several reasons. It is a capital-intensive, highly regulated business, and the image of Apple debt collectors victimizing individuals or SMBs would be appalling.”.

The Credti Kudos company also does not take the risk.

3) Allow account-to-account (A2A) payments via Apple Pay

By getting Credit Kudos, Apple can use fintech technology to integrate account-to-account payments into Apple Pay, allowing UK users to pay directly from their spending account or checking account ( called the British current account).

The opinion of the think tank Snark Tank : This may not be possible. The idea was shot by several people who responded to Jason Mikula’s post on LinkedIn, including Dmitry BarbasuraCEO of Salt Edge and member of Forbes Finance Councilstating, “At this time, Credit Kudos is a registered account information service provider, not a payment initiation provider.”

According to Geoff Whitehousehead of public relations and communications at True Layer, “Credit Kudos doesn’t have any infrastructure open banking, all connections go through a third-party provider. »

4) Get the technology or talent

The newspaper AltFi makes the following assumptions: “Another possibility, which fits with Apple’s past trends, is that the acquisition will be driven by an imaginary acquisition in both the market niche and employee talent.”.

The opinion of the think tank Snark Tank : Of course, that’s a possibility. However, Apple will love the technology and/or the talent for some reason, so posting that the company spent $ 150 million on a startup with no idea how it would use the technology and the company’s talent seems unreasonable. .

So why does Apple want Credit Kudos? The Snark Tank think tank view

Acquisitions of BNPL products follow each other at a very fast pace:

  • obstructionaka Square, is obtainedAfterPay for an amount included between 15 and 29 million dollars(the valuation was higher when the deal was announced, but Block’s share price fell by about 50% when the deal closed).
  • PayPal bought the company BNPL fee in 2021, for $ 2.7 billion.
  • Siper acquired the company Quadpaybased in New York, in 2020 almost $ 300 millionand now look to buy Squeeze.

Getting Credit Kudos will therefore be a real blessing for Apple. However, the British company is not a real competitor when it comes to BNPL products. This is why this operation is not limited to the assertion that “Apple acquires Credit Kudos to offer a BNPL service. »

Apple needs to address two strategic issues beyond the offering of BNPL services or even the launch of the Apple Card in the UK.

1) Set up a digital commerce ecosystem

Commerce platform providers such as Block, PayPal, Shopify or even Klarna are developing strong digital commerce capabilities that support a wide range of functionality in the commerce ecosystem.

Block’s acquisition of AfterPay is the only icing on the digital commerce cake the company has developed over a decade. Klarna also set up a digital commerce ecosystem.

As for the PayPal company, it highlighted its merchant value chain capabilities in its February 2021 investor presentation with a slide titled “We are building a comprehensive platform to power the global digital economy. »

2) Improve its capacity for data management/analysis

Apple is a product company. Google or Amazon are not as good at data when it comes to gathering and using data. Some would even say that if the Apple company were to position itself as a “privacy-respecting” company, it would be because it didn’t know what to do with the data it had on its customers.

Getting Credit Kudos is a small but important step toward fixing this gap in Apple’s digital commerce arsenal.

Translated article from Forbes US-Author: Ron Shevlin

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