Hey fintech friends,

Who needs to watch the Met Gala when we can follow one of the biggest trends that emerged this past tax season?

That's right: The IRS completed its Direct File pilot for the 2023 tax year, so free direct tax filing could be fully released as soon as early 2025. Meanwhile, major US neobanks have announced that they've embedded free tax filing this season, which begs the question: Will US taxpayers need a direct filing option in 2025?

Before we dive into that, another trend emerging in the fintech fundraising world...

Convertible notes

So far this year SoFi has issued $750 million in convertible notes; Flexport $260 million, and Coinbase a whopping $1.1 billion in convertible debt.

Why is convertible debt so appealing to large fintechs right now?

With interest rates at a 23-year high in the US, fintech funding has dipped to its lowest levels since early 2017. Companies looking to raise funding in this environment are left with a couple options:

1. Raise equity investment albeit with smaller checks, at a lower valuation, or on deal terms that might be less favorable than they would've been in the ZIRP days.
2. Borrow from lenders, assuming the company has an established credit record and the appetite to finance debt costs at today's APRs.

Nobody's excited about these choices, so some larger fintechs are opting for a third option: Convertible debt.