This Week in Fintech (11/1)

This Week in Fintech (11/1)

Hello Fintech Friends,

Welcome to an extra spooky edition of this week in fintech…

Is fintech eating the world? It’s Money2020 week and, as happens at the end of October, the fintech community saved many of its biggest announcements for the conference spotlight. I hope you leave as exhausted from reading this as I was from writing it... I am sorry about the length but don’t blame me blame the fintechs.

Quote of the week

“Banks are to the economy what the heart is to the human body. They cycle necessary capital through the whole, and they are barely noticed until pressure, necessity, or crises.”


- Hendrith Smith, Essays on the Banking Industry

Read of the week

In Economic Incentives Don’t Always Do What We Want Them To, the New York Times delves into an interesting study of how financial incentives affect (or don’t affect) user behavior. A relevant reminder for those of us building fintech products to keep in mind the value of user-testing and smartly-designed gamification.

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In Money2020 announcements this week,

  • Venmo debuted Venmo Rewards, an automatic cash back program on its debit card with a limited time offer of 5% cash back at Target, Sephora, and Wendy’s, and 4% at Dunkin (the merchants will rotate).
  • Amazon is adding more financial services features, like utility bill payments, to Alexa’s functionality.
  • Uber unveiled a new financial services division - Uber Money - which will offer a digital wallet and upgraded debit and credit cards to users and drivers. As journalist Danny Crichton notes, one “problem with borrowing strategies is that you lose context. For unbanked/underbanked folks in the U.S., is Uber even the right platform to engage with them?”
  • Digital bank Varo crossed 1 million consumers, with plans to officially charter itself as a bank in 2020.
  • Revolut announced that Revolut Business customers in the UK can now make direct and connections to Intuit’s QuickBooks Online platform.
  • Banking platform Blend is now offering auto-loans.
  • Mastercard announced that food supply chain company Envisible is using Mastercard’s Provenance blockchain, unveiled Mastercard Healthcare Solutions, and released the fintech platform Accelerate.
  • Marqeta announced Reserve Financing to offer customers easy-to-manage access to reserve account financing through a network of third-party lenders.
  • Sunrise, owned by Lendio, announced a partnership with WePay, owned by Chase, to provide small businesses with immediate access to invoicing capabilities and the ability to set up recurring payments.
  • AccountScore and Equifax announced a new consumer credit risk index that references consumer bank data.
  • And last but not least - Petal co-founder and advisor David Ehrich announced the launch of the Alliance for Innovative Regulation.

In banking and credit card news, UK regulators are incensed about the trend of bank IT failures and tech issues. Banks themselves are in a double-bind; often times, the infrastructure hurdles they need to clear to operate are a direct result of regulation, and so it’s hard to test and implement agile new IT the way that a tech company would.

American banking regulators meanwhile are stepping up their commitment (at least on-face) to global financial innovation, with the CFTC, FDIC, OCC, and SEC joining the Global Financial Innovation Network this week. The GFIN is a consortium of 50+ multinational organizations committed to consumer-focused financial innovation.

In anticipation of Brexit, UK neobank Starling Bank has released a dual-currency debit card, that allows account-holders to make purchases in euros or pounds, alongside its Business Euro Account. The card will cost £2 per month and 0.4% per transaction. New research also shows that millennials and Gen Z consumers largely embrace ‘multi-banking’ - opening and maintaining accounts at several banks to capitalize on offers.

California retail chain Kroger, meanwhile, ended the ban on Visa cards that the company began last year as a protest against high interchange fees.

Barclays Bank, which announced last month that they would end UK customer cash withdrawals at post offices, reversed itself this week under political pressure. This could help ‘financial desert’ communities retain a much-needed way to access cash. Along those lines, free ATM provider Link has received over 100 requests for its machines a month after setting up its UK cash fund.

American Express and Nova Credit announced a partnership at the end of last week that will see the card network and issuer leveraging Nova’s foreign credit bureau tool to underwrite cards for immigrants from Australia, Canada, India, Mexico and the United Kingdom.

Keith Morgan will be retiring as CEO of the UK government-owned British Business Bank at the end of 2020. His successor has not yet been nominated.

And lastly, 1.3 million Indian credit debit cards were recently compromised and put up for sale on a dark web forum, a highlight of the increased security risks in the credit card industry.

In fintech news this week, the Chinese government announced that it will be rolling out its own digital currency, the Chinese Digital Currency or Electronic Payments system (DCEP). As Martin Chorzempa notes, “Just as China was the first to issue sovereign paper money in the 11th century, it may become the first to issue sovereign digital currency in the 21st century.” This currency - clearly announced as a competitor to Facebook’s Libra - could spur future financial innovation as fintechs in China build new applications on top of it. Elsewhere in China crypto, the CCP released a new blockchain for party members to pledge their loyalty and banned articles critical of blockchain.

Walmart announced it is expanding its partnership with fintech Green Dot (program manager for the Walmart MoneyCard) and opening an accelerator focused on the intersection of retail and consumer fintech.

UK-based open banking fintech API TrueLayer inked a strategic partnership with Visa to enable the tech to work through Visa to scale open banking applications to the payment network’s clients.

Bloomberg this week took a deep-dive into fintechs Enova and Elevate Credit among others, covering how online installment loans are growing in popularity - for better or for worse - enabling increased consumer spending and driving indebtedness.

Robinhood is lowering their APY from 2.05% to 1.80% in light of recent Fed Rate cuts.

Want to pay for your coffee with a volatile cryptocurrency? You may soon be able to. Though it lost its top mobile payments app spot to Apple, Starbucks this week announced a partnership with Bakkt to accept bitcoin payments in 2020. Speaking of Apple, CEO Tim cook this week announced the Apple Card will offer 0% iPhone financing.

UK marketplace lender Funding Circle is re-working its secondary market to improve investor liquidity.

California low-income lender Aura announced a new $130 million credit facility from Varadero Capital, bringing its lending capacity to $259 million.

Building on the success of Canada’s Clearbanc - a venture debt-issuing fintech - Capital launched this week to offer debt to fast-growth businesses (ie. startups). Capital’s underwriting tech determines if businesses have the growth potential necessary to support debt and then delivers term sheets within 24 hours. This is another broadside the Silicon Valley Banks of the world, on the high end, and the Brex’s of the world, on the low end, in promoting debt as a business finance alternative to venture capital.

Paypal shares were up nearly 10% at the end of last week, as the company announced a beat on earnings, almost 300 million active Paypal users, and on-track annual revenue of $400 million for Venmo.

The new Sequin credit card launched its waitlist this week. Designed as ‘the credit card that pays back the pink tax,’ the card offers rewards on product categories like product categories like beauty, personal care, retail, feminine products, and dry cleaning, and doubles as a mirror.

SME payments firm Modulr announced that it will invest £20m in the Scottish fintech ecosystem.

And lastly, a couple charts:

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Financings

  • UK business working capital finance lender Greensill Capital announced a $655 million fundraise from Softbank’s Vision Fund.
  • Robinhood, the commission-free stock-trading app, told Axios that it added $50 million to its Series E funding from DST, bringing the round to $373 million at a $7.6 billion valuation.
  • Real estate investment platform raised a $60 million Series C to further its growth.
  • German ID verification platform IDnow announced $40 million in growth equity to support continued product expansion.
  • Residential real estate lending platform Ribbon announced $30 million in Series B equity and $300 million in debt raised to finance its continued expansion.
  • Invoice management startup Stampli raised a $25 million Series B.
  • Veterinary payment plan provider Scratchpay raised $15 million in equity and $50 million in debt to grow its lending platform.
  • Freetrade, a UK-based ‘challenger stockbroker’ (guess this is now a thing), raised $15 million in Series A funding.
  • Spanish developer of big data solutions for the financial industry Ravenpack announced a $10 million funding round.
  • Israeli-based SMB loan platform Lending Express rebranded as Become and raised a $10 million Series A.
  • Own Up, a consumer mortgage data company, raised $8.5 million in a Series A funding.
  • UK consumer consumer credit reporting startup TotallyMoney secured $5 million in debt funding.
  • UK fintech Koyo, which uses open banking tech to originate loans to thin-file consumers, raised $4.9 million in debt and equity to build its platform.
  • Penfold, the “Monzo of pension plans,” closed a £2.4m angel round to grow in the UK.
  • UK mortgage deposit and savings platform StepLadder secured a £1.5 million seed round to launch.
  • Nationwide invested in energy-switching fintech Switchd out of its £50 million Venture Fund.

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Exits and M&A

  • Brazil's Banco BMG raised $396 million in an IPO on the Brazilian stock exchange.
  • US investment data management firm Confluence acquired UK portfolio analytics company StatPro for £161 million.
  • Payments technology company BlueSnap acquired accounts receivable and invoice automation software Armatic for an undisclosed amount.

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Deeper Reads

Fintech and Financial Inclusion: How low-overhead direct banking models enable banks to profitably serve the US’ 33 million underbanked households

The ‘Underbanked’ Is The Next (Current?) Trillion-Dollar Opportunity in Fintech

Venmo vs. Cash App: A Look Inside the Most Popular Consumer Finance Products

Ping An’s $22 Billion Push to Shed Old-School Insurance Skin

“Retail banks are struggling to deliver a positive last-mile experience as customers demand more comprehensive and personalized banking”

‘Magic Internet Money’ May Be Too Volatile to Attain Gold Status

Bear wanders into Colorado man’s backyard to roll around in the snow and play with soccer ball.