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Klarna - from smooth payments to smooth shopping

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Also: 🌳 Is ESG-investing possible? 🤖 Scammed by AI? 🔎 The ultimate guide to search UX? 🚴‍♂️ The
 

This week in fintech

September 14 · Issue #27 · View online
A weekly summary of the latest news in our world of finance, design, and technology.

Also: 🌳 Is ESG-investing possible? 🤖 Scammed by AI? 🔎 The ultimate guide to search UX? 🚴‍♂️ The economics of Tour de France

🌊 Klarna - from smooth payments to smooth shopping
Klarna became Europe’s highest valued Fintech last year after closing a $460m funding round at a $5.5bn valuation. Revolut and Checkout.com have since passed them, but now Klarna is ready to claim the top position again as they are eying a raise at $500m at a $10bn valuation. (That is a $4.5bn incrase in a year 🤯). 
During the Covid-19 online shopping boom, Klarna has added more than 35 000 new retailers (200 new every day) and an average of 1m transactions are processed through the platform daily. Despite this, Klarna is reporting losses seven times higher than in the first half of 2019. This is mostly because of their expansion into the United States, where they at the moment are getting a strong foothold with over 1.2 million monthly active app users in US alone. 
As a result of changing user demand from shopping in-store to online Klarna is now updating their app-strategy to covering the entire shopping journey, from “inspiration and discovery” through to the transaction - all in one place. Customers will now have access to wish lists, price drop notifications, and deals directly in Klarnas app. They are also piloting the first􏰊 global buy now, pay later shopper loyalty program, called Vibe.
As a countermove to Klarna moving into the US, PayPal joins the “buy now, pay later” race with a new installment program called “Pay in 4”.. With this program customers can pay for purchases, interest-free, over four separate payments. More or less the same product as one of Klarnas pay later solutions.
🌳 Is ESG-investing possible?
Behind ESG (Environmental, social, and governance)-investing lies the idea that shareholders’ economic interests and the social good harmonize over the long run. Some people argue that this type of investing should be viewed suspiciously by anyone seeking real change. The central premise behind ESG investing is that divesting from certain companies, like fossil fuels, creates economic pressure for change. Last month Storebrand, for example, divested from ExxonMobil because of this. But the counterpoint of ESG-investing is that more people investing in ESG-friendly companies will drive the prices of these companies up - thereby meaning lower returns for the ESG investors.
But the main problem with ESG-investing might be that ESG-data is hard to come by. Some of the data is even illegal in some countries: The collection of racial diversity information is, for example, not legal in many countries in Europe – mainly because of the Holocaust. Other data, like gender pay gaps, companies like Alphabet and Facebook, don’t want to disclose because the data is rather unflattering.
There is, however, a lot of data on diversity being good for companies and your wallet. Last year, PwC, together with Care and Storebrand, analyzed Nordic listed companies and found a connection between the proportion of women in management and financial results in the companies. Companies with a high proportion of women on boards and top management even had lower volatility and fewer years with negative results. ESG is a field with a lot of data about how good it can be, but currently with a lot of data missing to make it feasible.
As a sidenote a recent Goldman Sachs analysis found that female-managed US funds outperform all-male rivals. Ironically enough, only 14% of fund managers are women even though fund management companies have become increasingly vocal advocates for greater diversity at public companies.
🦾 Scammed by AI?
Research shows growing concern about deepfake fraud in banking. According to a report published last month, fake audio and video content now rank among one the top of ways artificial intelligence can be used for crime. However, the most problematic area might be the use of AI to personalize phishing attempts – with names or references that only friends or family would know. This could increase the risk of phishing attempts from the 60% it is today to closer to 100%. The Guardian even published an article written entirely by an AI, proving that GPT-3, OpenAIs powerful new language generator, is close to fooling everyone.
🔎 User Experience find of the week
Like it or not, search is an integral part of any app or web user experience these days. But there are many more intricacies of searching than putting a magnifyer over a search bar and being done with the job. Here is a great 15 min read about the ultimate guide to search UX.
🚴‍♂️ The economics of Tour de France
We’re now in the middle of Tour de France 2020. The Tour de France is a historical and global phenomenon. Each year, fans from more than 180 countries turn in to watch the race. But despite this popularity, the economics of the sport are primarily buried in secrecy. 
How does the Tour de France, an event that is free to the public, actually make money? How do money and the sponsorship-model affect how professional cycling teams work and how the riders choose to compete? This weeks long-read is about the economics of Tour de France.
🙏 Don’t keep it a secret!
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Marius Hauken, partner Stacc X
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