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Saudi Arabia’s STC Pay eyes rapid Gulf expansion

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Saudi arabian flag in Asir province, Abha, Saudi Arabia.

Eric Lafforgue/Art in All of Us | Corbis News | Getty Images

Saudi Arabia’s STC Pay plans to expand its financial services offering across the Gulf region, after achieving a billion-dollar “unicorn” valuation on the back of a deal with Western Union.

“We are very proud of becoming the first unicorn in the Kingdom and the first fintech unicorn in the Middle East,” STC Pay CEO Ahmed Alenazi told CNBC in an exclusive interview on Monday. 

STC Pay reached the valuation last week after Western Union, the world’s largest money transfer firm, acquired a 15 percent stake for $200 million – giving the burgeoning payments business a value of around $1.3 billion. STC Pay is the digital payment arm of Saudi Arabia’s STC Group, the largest telco operator in the Kingdom.

“The business opportunity is bigger than money transfers,” Alenazi said. STC Pay says it has more than 4 million active users after successfully tapping into rising smartphone and internet penetration across Saudi Arabia, where 70 percent of the population is under the age of 30 and the government is reducing dependence on cash as a way to modernize the economy. 

Western Union, which has long seen the Gulf as a lucrative market for remittances, provides money transfer services that allow STC Pay users to send money from its app to more than 200 countries around the world. 

STC Pay is now in talks with Gulf regulators to seek approval to operate in the United Arab Emirates, Kuwait and Bahrain, subject to regulatory approvals. It said other countries were also under consideration. 

“This is where we want to change the way people look at financial services,” Alenazi said. 

STC Pay seeks banking license

STC Pay was the first fintech company licensed by the Saudi Arabian Monetary Authority. It’s now negotiating with Saudi regulators to obtain a digital banking license.  

“This will allow us to do lending and other activities,” Alenazi said. “We have a lot to do in terms of products and services,” he added, indicating that a banking license would allow the business to expand into more valuable business areas.

“We don’t want to tap in with similar products and services available in the market, we want to tap in with a unique user experience,” he said. “We will work with the central bank to get it done ASAP.”


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IDFA iOS 14 change coming early spring

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A monorail train displaying Google signage moves past a billboard advertising Apple iPhone security during the 2019 Consumer Electronics Show (CES) in Las Vegas, Nevada, U.S., on Monday, Jan. 7, 2019.

Bloomberg | Bloomberg | Getty Images

The long-awaited privacy update to Apple’s iPhone and iPad operating systems that could dramatically hurt mobile advertising is coming in “early spring,” Apple told CNBC on Wednesday.

To target mobile ads and measure how effective they are, app developers and other industry players currently often use Apple’s (IDFA), or a string of letters and numbers that’s different on every Apple device. But once this update rolls out, app makers will be forced to ask permission to access a user’s IDFA through a prompt. A significant portion of users are expected to say no, reducing the effectiveness of targeted ads.

Apple first announced the change last summer, giving advertisers and app makers ample time to prepare. But it’s become a major point of contention for ad-supported companies, who could lose revenue from the change.

Facebook in particular argues that the change will hurt the availability of free content on the open web and the ability of small business to place personalized ads. On Facebook’s Q4 2020 earnings call Wednesday, CEO Mark Zuckerberg slammed the change, calling Apple one of its biggest competitors and claiming that the change “threatens the personalized ads that millions of small businesses rely on to find and reach customers.” 

The timing of Apple’s change has been the subject of intense speculation in the mobile industry. Apple CEO Tim Cook is set to speak Thursday about data privacy at the Computers, Privacy and Data Protection conference in Brussels. On Thursday, the company is also releasing new marketing materials, including an update to its website and a report on data usage to illustrate how companies track user data across websites and apps.

Apple told CNBC that the next beta version of iOS will require app developers to ask permission to access the phone’s unique identifier.

The current version of iOS is 14.4, which was released earlier this week. There currently isn’t a public beta version beyond that available to developers. Apple declined to provide additional timing details. 

As companies prepare for the change, they’re letting partners and advertisers know how they plan to approach the change. Google on Wednesday said in a post that it will no longer use any information that falls under Apple’s AppTrackingTransparency framework for its iOS apps, and doesn’t plan to show the prompt on those apps.

Nominations are open for the 2021 CNBC Disruptor 50, a list of private start-ups using breakthrough technology to become the next generation of great public companies. Submit by Friday, Feb. 12, at 3 pm EST.


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Digital bank N26 is thinking of acquiring a competitor

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The logo of German online bank N26 displayed on a smartphone.

Thomas Trutschel | Photothek via Getty Images

LONDON — German online bank N26 is considering making an acquisition for the first time, after raising heaps of cash and trimming its losses despite the coronavirus pandemic.

The $3.5 billion financial technology firm said net losses at its core European business came in at 110 million euros ($133 million) in 2020, down from 165 million euros the previous year.

N26 didn’t disclose a revenue figure for last year, but said gross revenues doubled to nearly 100 million euros in 2019, from 43.6 million euros a year earlier. Its losses also more than doubled that year, though, from 73.2 million euros in 2018.

Founded in 2013 by longtime friends Maximilian Tayenthal and Valentin Stalf, N26 has attracted 7 million users globally and is one of many app-based challenger banks that gained popularity in recent years. Its rivals include Revolut in Europe and Chime in the U.S.

The firm has raised a total of $800 million to date, from investors including Chinese tech giant Tencent and billionaires Peter Thiel and Li Ka-shing. It has also started looking at deploying its war chest of funds to buy a fintech competitor.

“We have started to look — and we are still looking — opportunistically at some interesting targets,” Tayenthal, N26’s co-CEO, told CNBC in an interview. The company has historically relied on organic growth, he added.

“It could be players that are strong in certain areas; think about trading, think about KYC (know your customer). There could be other fintechs; challenger players in our space that have a good customer base.”

Tayenthal said there were no “super concrete” plans currently in place, but that it’s held discussions and is “looking at a good number of players.”

“I’ve had conversations and we still continue to look at interesting opportunities,” he said.

The Berlin-based group raised $100 million in fresh funds from existing investors early last year, just as the coronavirus pandemic rattled the global economy.

In the summer of 2020, N26 grappled with discontent from its own workers. Disgruntled staff formed their own works councils — worker organization bodies within a company — to address concerns with management.

Pushing for profitability

So-called neobanks have come under pressure to not only clean up their work culture but also switch their focus toward making money. Experts in the fintech industry have warned the space could see some consolidation as some players stumble amid the Covid-19 crisis.

A big driver of N26’s revenues has been its premium subscription-based accounts, for which it charges between 4.90 euros to 16.90 euros for a range of additional features.

But Tayenthal said the big focus for 2021 will be a “marketplace” model, where it includes products it can’t offer itself — such as trading and credit — while taking fees from third-party providers in the N26 app.

“In 2020, we actually brought down the burn significantly,” Tayenthal said. “It is true that, at one point in time, while we are still investing into growth, expansion and building up the team, we also want to get more in the direction of profitability.”

The N26 co-founder said his company plans to hire an additional 200 employees this year. It currently employs 1,500 staff globally. The firm is also planning to expand into Brazil, having recently obtained a banking license in the country.

“The environment in Brazil is actually very favorable,” Tayenthal said. “Everyone has a bank account in the markets we’re in already; in Brazil, this is obviously not true.”

Just under a third of adults in Brazil don’t have access to a bank account, according to the World Bank. But the market has seen increased digital banking adoption over the past few years. Nubank, a well-funded neobank based in Brazil, has a total of 25 million users across Latin America.

N26 recently hired a new chief financial officer, Jan Kempe to replace Tayenthal, who was himself elevated through the ranks to a newly created co-CEO role. Kempe is a former Zalando executive who led the German e-commerce firm’s 2014 initial public offering.

The move fueled speculation that N26 may soon go public. But Tayenthal said the firm has no immediate plans, despite strong recent debuts from the likes of U.S. consumer finance start-up Affirm and digital insurer Lemonade.


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Best quarter in the history of the smartphone

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Apple reported blowout earnings on Wednesday. Even during a global pandemic, every single product line was up, leading to the company’s first quarter with over $100 billion in sales.

But Apple is still best known for the iPhone, which accounted for nearly 59% of the company’s revenue during the holiday quarter. The iPhone is booming, too: Sales were up 17% year-over-year to a whopping $65.6 billion in a single quarter. That’s a big improvement from last year’s holiday quarter, when sales were up only 7.6% from the year ago.

Apple doesn’t provide unit sales for its products anymore, but according to an estimate from research firm IDC, Apple shipped 90.1 million phones during the quarter. That’s the largest number in any single quarter since IDC started tracking smartphones, analyst Francisco Jeronimo said.

Apple’s dominant quarter is adding fuel to the so-called “super cycle” investor thesis, where must-have updates combine with the natural customer upgrade cycle to drive a spike in sales growth. Analysts saw this year’s iPhone 12 models as a good candidate for a super-cycle because they sported a new design and added 5G, which enables the devices to connect to faster wireless networks.

In a note on Wednesday, Wedbush analyst Dan Ives predicted that the current cycle “should eclipse the previous iPhone record set in FY15, an achievement for the ages in our opinion.”

Apple CEO Tim Cook also said in an interview with CNBC that the company’s iPhone results could have been better if not for store closures caused by the ongoing pandemic.

“Taking the stores out of the equation, particularly for iPhones and wearables, there’s a drag on sales,” Cook told CNBC’s Josh Lipton.  

In a conference call with analysts, Cook said that the new iPhones were not only getting current iPhone users to open up their wallets and upgrade, but also convincing people who had previously used competitor phones to get their first iPhone.

“Looking at the iPhone 12 family, we saw both switchers and upgraders increase on a year over year basis. And in fact, we saw the largest number of upgraders, that we’ve ever seen in a quarter,” Cook said.

5G remains a potential tailwind for iPhone sales through the rest of the year, Apple signaled on Wednesday. Cook said that while 5G in China was well established, leading to strong iPhone sales, 5G cellular networks in other regions aren’t as built-out yet, especially in Europe.

“I think most of that growth is probably in front of us there as well,” Cook said.


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