Fintech Update, 11/20 - 12/3

Hi! It’s Monday, December 4th, 2023. 

The Rundown

• According to several news outlets, Apple made an attempt to exit the partnership it has with Goldman Sachs covering their entire consumer partnership, including the Apple Card and Savings account. It is worth noting that no statement from Apple regarding the future of the Apple Card has been made. That said, according to the WSJ, “the tech giant recently sent a proposal to Goldman to exit from the contract in the next roughly 12 to 15 months.” Earlier this year, Goldman communicated to Apple that it was looking to offload the partnership - which surprised no one given that, as of January, Goldman had lost over $1 billion due to loan-loss provisions largely tied to the Apple Card. Our take: many of the responses we saw seemed to imply that the program was a failure and that if a team up between these two titans didn’t work out, then maybe the fintech opportunity isn’t as big as we all think. We disagree and feel as though it says something different - partnerships, especially of this magnitude are incredibly difficult to get right, and that it was really never a good deal for Goldman at all and comes with a broader consolidation of their consumer book. Goldman was a relative newcomer to consumer financial products and maybe they strayed a bit too far from what they are good at. We will be very curious to see who steps in to take Goldman’s role - the product, and underlying economics for the partner who steps in, will likely change as a result but we will be tracking this closely to see how it unfolds!  

• It was a no good, very bad week for crypto (par for the course, really). CEO Brian Armstrong of Coinbase, claims the industry is “kind of turn[ing] the page” by purging “bad actors”-- but we’re not so convinced.

  • Changpeng Zhao, the founder of Binance, pleaded guilty to violations of money laundering, agreeing to pay a $50 million fine and step down from his role as CEO. Binance also pleaded guilty and “agreed to pay $4.3 billion in fines and restitution to the government.”

  • Speaking of Binance, soccer star Cristiano Ronaldo faces a $1 billion class-action lawsuit due to his commercial relationship with the crypto exchange. A District Court in Florida alleged that Ronaldo "promoted, assisted in, and/or actively participated in the offer and sale of unregistered securities in coordination with Binance."  Sound familiar? Yeah, it is. Tom Brady, Larry David, and other superstar celebs faced lawsuits for endorsing FTX. 

  • The SEC  sued crypto exchange Kraken for operating an unregistered securities exchange. The headline is giving us déjà vu – last February, Kraken paid a $30 million fine to the SEC in a lawsuit tied to its (now defunct) staking-as-a-service program. This time around, the SEC claims that the exchange’s “business practices, deficient internal controls, and poor record-keeping practices present a range of risks for its customers.” It also alleges that Kraken has illegally commingled customer funds with its own. In response, Kraken called the SEC’s view “incorrect as a matter of law, false as a matter of fact, and disastrous as a matter of policy." Yikes.

  • Deputy Treasury Secretary Wally Adeyemo suggested that stablecoin issuers like Tether may come under further regulatory scrutiny. At a recent Blockchain Association event, Deputy Treasury Secretary Wally Adeyemo warned that “dollar-backed stablecoin providers outside the United States” (cough cough, Tether) could come under further regulatory fire.

  • SoFi announced that it’s shuttering its crypto services. 

• It was another busy few weeks for fintech M&A, showing that it continues to be a buyer’s market in which larger, acquisitive companies can pick up great tech and talent to build out their product offerings, solidify their positions in the market, or expand to new geographies.

  • Alternative investment platform Yieldstreet announced that it has agreed to acquire real estate investment platform Cadre for an undisclosed price. From a pure product perspective, this seems to be a good fit as it seemingly supports a vision to create the largest digital alternative asset manager in the industry. Cadre had raised over $133 million in debt and venture funding and was once valued at $800 million, but according to a report from The Information earlier this year, this acquisition could value the company at around just $100 million - which, if true, means Yieldstreet picked up a fairly discounted asset, at least relative to past valuations. According to TC, “Yieldstreet confirmed that all Cadre employees would be staying on but did not specify how many.”

  • Stock trading app Webull acquired Mexican investment platform Flink for an undisclosed price. Flink gives Mexican consumers a means to invest in fractional shares of U.S.-listed companies. This acquisition gives Webull a presence in Mexico, meaning that it “now operates in nine markets, including the U.S., Hong Kong, Singapore, Indonesia, Australia, South Africa, Japan, and the U.K.”

  • Irish payments company NomuPay acquired Manchester-based company Total Processing, which “builds payment processing solutions for functions like recurring payments, risk management, PCI (data security) compliance and payment integrations,” for $35 million.

• Buy now, pay later provider Klarna received regulatory approval in the UK to offer credit cards and term loans. Klarna was approved by the Financial Credit Authority under the Consumer Credit Act, which does not cover their core business of BPNL, which remains unregulated.

• Its first foray into international markets, Robinhood announced that it is launching operations in the UK. The retail trading app will be rolled out first for those who join the waitlist, and then gradually to the rest of the UK market by early next year. Robinhood has been teasing the news since Q3, after rival Public.com announced its own UK expansion in July.

The Reading Nook

• The American Banker asked whether the OCC hired a “con artist” as its first head of fintech. Prashant Bhardjwan lied extensively in his application, an embarrassing oversight for the bank regulator. Congress is expected to grill the agency in a hearing on Tuesday.

Selected fundings

• Vendor management & procurement startup Candex announced a $45 million Series B round led by Goldman Sachs.

• Freelancer accounting platform Indy secured $44 million in a funding round.

• Embedded spend management infrastructure provider CapitalOS raised $39 million across equity and debt financing. 

• Swedish pet health app and insurance provider Lassie raised €23 million in Series B funding.

• UAE-based revenue-based financing provider Flow48 raised $25 million in a pre-Series A funding round.