Fintech Update, 10/19 - 10/25
Hi! It’s Monday October 26, 2020.
Leading Off
PayPal joined the crypto movement, allowing its 346 million users to buy, sell, and hold cryptocurrencies. Federal Reserve Chairman Jerome Powell discussed the possibility of an American central bank digital currency (CBDC) but made no commitments. The International Monetary Fund published a paper warning of the risks of CBDCs. JPMorgan launched a peer-to-merchant product that directly competes with Square and PayPal. // In other news, Ripple is considering relocating to the U.K. amid frustrations with the U.S. regulatory environment; Chinese authorities are cracking down on the use of Tether and other competitors to its forthcoming digital yuan; and Monzo rolled out (another) premium account. // All this + more below!
Heavy Hitters
PayPal makes friends with crypto. The global payments firm partnered with cryptocurrency brokerage Paxos to allow PayPal users to buy, sell, and hold bitcoin and other digital currencies in PayPal wallets. In addition, customers will be able to use their crypto assets to shop online, with PayPal doing instant conversions into sovereign currencies at the point of sale wherever PayPal is accepted. The new functionality is the latest and perhaps most significant sign that digital tokens are becoming a more mainstream retail option, as PayPal’s adoption will enable over 346 million people globally to transact in digital assets. The move also increases the number of large players in the space, with PayPal going toe-to-toe with other providers like Square’s Cash App (perhaps PayPal noticed Square’s Q2 earnings, where the firm’s 167% YOY growth was largely driven by $875 million in Bitcoin revenue?).
Powell discusses digital Dollar, makes no commitments. Only days after China launched live tests of its digital yuan, Federal Reserve Chairman Jerome Powell spoke about the possibility of an American central bank digital currency (CBDC), stating that he is “open” to the idea but that no decision is in sight. Powell acknowledged that a U.S. CBDC could drive a number of benefits for consumers and businesses, including faster and cheaper transactions and a means of reaching underserved populations, but highlighted potential cyberattacks, fraud, and other illicit activity as concerns to resolve “before making such a decision.” “I [think] it's more important for the United States to get it right than it is to be first,” Powell said. Meanwhile, the Bahamas rolled out its digital “Sand Dollar” nationwide, becoming the second country in the world with a live CBDC, following China.
Meanwhile, the IMF sounds the alarm on CBDCs. In a new paper [full text], the International Monetary Fund (IMF) said the adoption of CBDCs could result in foreign currencies displacing domestic ones in national economies, while also potentially boosting illicit capital flows without proper safeguards. The report also considered the adverse effects of ‘global stable coins’ like Libra, and focuses on the potential macro-financial implications of such products. The possibility of this “currency substitution” can erode authorities’ control over domestic liquidity, reducing the stability of money demand and potentially weakening the impact of monetary policy. The IMF identified “conceptually clear” benefits of digital currencies for cross-border transactions but noted they are currently hard to quantify given the significant unknowns associated with adoption.
Quick Takes
JPMorgan rolls out peer-to-merchant payment product. The financial services behemoth launched a new service called QuickAccept, which lets businesses take card payments within minutes, either through a contactless card reader or a mobile app, and see sales hit their business accounts on the same day without charging a fee. The new service positions JPM as a direct competitor to Square and PayPal.
CFPB issues ANPR on access to consumer financial data. The Consumer Financial Protection Bureau (CFPB) issued an advance notice of proposed rulemaking (ANPR) regarding the “regulations to implement Section 1033 of the Dodd-Frank Act,” which relates to consumers’ rights to their financial data and impacts the ability of fintech firms to access users’ bank and other financial information.
China cracks down on use of Tether amid digital yuan roll out. The People’s Bank of China (PBoC) and other authorities shut down online gambling sites and arrested 77 individuals that were using the Tether stablecoin. Authorities allege the 77 arrested suspects helped launder ¥120 million using Tether. Separately, the PBoC proposed a law banning all yuan-pegged stablecoins other than its digital yuan.
Ripple weighs move to U.K. over regulatory concerns. The payments firm behind the XRP token is “considering relocating its headquarters [to London from San Francisco] due to frustration with the U.S. regulatory environment.” CEO Brad Garlinghouse said that British regulators do not consider XRP a security, while disputes with the SEC have left XRP’s legal status in the U.S. “shrouded in uncertainty.”
Visa makes strategic investment in GPS. . . The global payments giant is investing an undisclosed amount in Global Processing Services, a payments processor that works with fintechs Starling and Revolut, among others. The deal continues Visa’s recent high-profile investments in fintechs like Plaid.
. . . and adds i2c to its Fintech Fast Track program. As an “enablement partner,” the digital payments and bank technology firm can now more easily integrate with Visa’s numerous programs. The integration promises to remove complexities for i2c as it can now operate from a single global platform
Monzo launches premium account. The London-based challenger bank rolled out a new premium service offering perks including a metal card, travel and phone insurance, up to £600 of fee-free international withdrawals, and 1.5% interest on deposits up to £2,000. The service costs £15 per month.
Acorns partners with ZipRecuriter. The financial planning and money management app now connects users to ZipRecruiter job boards directly in the Acorns app. The new service “had been on the company’s road map, but was accelerated by . . . the pandemic.”
Stampli launches new payments product. Invoice management software startup Stampli launched Stampli Direct Pay, an extension of its platform that will enable companies to pay invoices from inside the Stampli platform via ACH or check from their own bank accounts.
Pop Flies
B2B accounts receivable solution provider Billtrust announced that they will go public via a SPAC.
Insurtech Root is targeting a valuation of over $6 billion in its pending IPO.
Ant Group received approval from Chinese regulators to list its shares in Hong Kong.
Fundings!
San Francisco-based product protection startup Extend announced a second funding round of $40 million.
Mexican challenger bank Klar raised $15 million in new funding.
Lili, the challenger bank made for freelancers, raised $15 million in Series A funding.
Credit underwriting software provider Zest AI raised $15 million in a funding round led by Insight Partners.
Cap table startup Pulley raised $10 million in Series A funding led by Stripe.
Mine, the Israeli startup that scans users’ inboxes to help them understand who has access to their personal data, raised $9.5 million in Series A funding.
Cashierless checkout tech provider Tiliter raised $7.5 million in Series A funding.
Compliance automation software provider Secureframe raised $4.5 million in seed funding.