Fintech Update, 11/23 - 12/6
Hi! It’s Monday December 7, 2020.
We hope all of our U.S. readers had a wonderful and relaxing Thanksgiving! We’re glad to be back in your inbox after a week off :)
Leading Off
Stripe announced that it is teaming up with Goldman Sachs and Citibank to offer embedded banking services (and launched the next phase of Stripe Capital). // In other news, Credit Karma sold its tax preparation services to Square, Affirm acquired a leading Canadian BNPL provider, Libra rebranded as Diem, Oportun applied for a national bank charter, and investors continued to POUR funding into the fintech space. All this + more below!
Heavy Hitters
It’s Stripe’s world; we’re all just living in it. The payments firm made significant waves in the burgeoning Banking-as-a-Service (BaaS) sector, announcing Stripe Treasury in partnership with Goldman Sachs and Citi. The Stripe Treasury platform will allow clients to quickly embed financial products into their tech stacks via APIs, allowing them to offer white-labelled checking accounts, debit cards, and other business services through underlying bank partners – without having to integrate directly with those partners. The launch is a validation of the growing BaaS model and gives Stripe a beachhead in a new, potentially lucrative niche of the fintech marketplace. Not stopping there, Stripe also announced the expansion of Stripe Capital, launched in 2019, which allows online platforms to offer financing to their own business customers, enabling them to provide merchants quick infusions of cash without developing their own lending infrastructure.
Coming up: What’s the Big Idea with BaaS, anyway? Stripe’s announcement is only the most notable in a string of recent news in the Banking-as-a-Service (BaaS) space, which has left the sector feeling particularly frothy. Concurrent to Stripe’s move, banking API platform Modern Treasury launched its new self-serve Instant Bank Partners program, built to allow companies to “apply online for a corporate bank account with payments capabilities and start building immediately.” Meanwhile, open source banking platform Moov raised $27 million in a Series A funding round, only four months after raising $5.5 million in seed funding; Weavr, another embedded banking startup, raised $4 million in seed funding; and oh yeah, Stripe (who?) is rumored to be raising additional funding at a valuation over $70 billion. Add to all of this the continued presence of market-leading bank API layers like Synapse and Galileo (recently acquired by SoFi), plus buzzy new entrants like Unit and Bond, and you’ve got a market niche primed for competitive battles over market share and funding. Stay tuned for our next Big Idea breaking down the recent developments and key players in BaaS, coming to your inbox just in time for the holidays.
Quick Takes
Brooks teases forthcoming crypto regulations. Comptroller of the Currency Brian Brooks said the OCC expects to release new rules governing bitcoin and other cryptocurrencies, noting that the regulator’s goal is to provide “clarity” and is “very focused on not killing this.” Brooks also argued that “the new regulations would help accelerate adoption of crypto by major financial players.”
Libra rebrands as Diem, solves all its problems. Hoping to distance the cryptocurrency project from the Facebook-related regulatory carping that has plagued it since launching in June 2019, Libra has seized the Diem and plans to launch a dollar-pegged stablecoin under its new moniker in early 2021, pending approval from FINMA. The Diem team expects the strategy to succeed, since financial regulators notoriously care more about organizations’ names than their business models or operational risks.
Oportun applies for national bank charter. The Community Development Financial Institution, which focuses on lending to low-to-moderate-income individuals, applied to the Office of the Comptroller of the Currency to become a national bank. CEO Raul Vazquez noted that a national charter will “provide the security of dealing with a federally regulated and supervised bank to our customers.”
Square buys Credit Karma’s tax prep service for $50M. Credit Karma sold its tax preparations services to Square for $50 million in an all-cash deal, after the Department of Justice required that it sells the services as a condition to gain approval for its $7.1 billion acquisition by Intuit. Square plans to integrate the tax preparation services into Cash App adding to its already impressive list of financial tools.
Affirm acquires PayBright. Shortly after filing their S-1, Affirm announced that it has entered into a definitive agreement to acquire PayBright, a leading Canadian BNPL provider, for a total cash and equity consideration of ~CAD $340 million.
Revolut rolls out digital payments tools. The British challenger bank launched new API tools allowing firms to “install plug-in checkout software or . . . custom features to take card payments over the internet,” putting them into competition with payments giants like Stripe and Adyen. The new tools are part of Revolut’s broader push into business services, which has grown to 500,000 clients since 2017.
Circle takes USDC global. The cryptocurrency firm behind the dollar-pegged USDC stablecoin signed an agreement with Visa to allow Circle’s “business account holders to spend their USDC at more than 60 million merchants worldwide accepting Visa.” Meanwhile, the US government okayed Circle and foreign exchange firm Airtm to disburse aid in the form of USDC to Venezuelan healthcare workers, bypassing financial controls imposed by the Maduro regime.
Amex partners with PayPal and Venmo to split payments. The global card giant teamed up with the digital payments firm and its P2P subsidiary to allow cardholders “to send money to any PayPal or Venmo customer directly from the American Express App” via the Amex Split & Send service.
Female founders are losing out on fintech fundraising. According to Crunchbase, fintech firms with women-only founding teams received just 0.9% of the record $16.9 billion raised in the first three quarters of 2020, despite representing 3.8% of the firms receiving funding. While female founders trail male counterparts in venture funding across all sectors, Crunchbase found the gap particularly stark in fintech.
Pop Flies
Digital lender LendUp launched its own challenger bank, Ahead Financials, to provide banking and financial health services targeted at “emerging middle class” individuals.
Crypto lender BlockFi announced that it plans to launch a bitcoin rewards credit card early next year.
Marqeta reportedly is targeting a $10 billion valuation for its planned 2021 IPO.
Finicity launched Finicity Pay, a platform enabling “payments, account creation, and fraud mitigation.”
Jack Henry partnered with Plaid to enable Plaid Exchange for financial institutions on its digital platform.
Quadpay launched a new browser extension for Chrome that enables users to pay installments in one-click everywhere they shop.
Digit, the fintech focused on money management and savings, added automated investing to its app.
Cash App launched… a… clothing line.
Fundings!
Challenger bank Current raised $131 million Series C funding led by Tiger Global Management.
Insurtech company Hippo raised a $350 million investment from Japan's Mitsui Sumitomo.
E-commerce fraud detection platform Forter raised $125 million in Series E funding, led by Bessemer Venture Partners.
Challenger bank Monzo raised £60 million in new funding.
Online lender Amount raised $81 million in a Series C funding round led by Goldman Sachs.
Teen banking fintech Step raised $50 million in Series B funding.
HMBradley, the fintech that rewards users by offering higher annual percentage rates as customers save more, raised $18.25 million in Series A funding.
Productify, the fintech company creating a platform to enable non-bank companies to develop and launch fintech applications, raised $2.35 million in seed funding.