Fintech Update, 12/11 - 12/17
Hi! It’s Monday, December 18th, 2023.
Hi all – We’ll be off for the next two weeks, but we’ll be back in January to continue bringing you the latest in the world of fintech. We wish you all a very happy, healthy holiday season and a Happy New Year ahead! Thanks for your continued readership and support of the Fintech Update. Best – Joe, JC, Kieran, Anna & Abby
The Rundown
The times, they are a interchangin’... The UK’s Payment Systems Regulator (PSR) proposed a new cap on debit card interchange fees in an attempt to curb increasingly high charges from the Visa and Mastercard networks for transactions between the UK and EU in the years following Brexit [full announcement]. According to the Financial Times, following Brexit, Visa and Mastercard “boosted debit card interchange rates between the UK and [Europe] for online transactions to 1.15 per cent from 0.2 per cent, and credit card fees to 1.5 per cent from 0.3 per cent. In making its recommendation to return interchange rates to pre-Brexit levels, the PSR reflected that fee hikes imposed on merchants have led to British businesses paying an extra £150-£200 million annually (TFU note: some or all of which are then typically passed along to the consumer). Despite the 5-6x increase in such fees, “businesses have little choice but to pay the increased costs [because] Mastercard and Visa cards account for 9 out of 10 online transactions at UK businesses using [European]-issued cards.” Elsewhere in the world, the Canadian government finalized a deal with Visa and Mastercard to “lower credit card interchange fees for small businesses . . . and non-profits with less than $300,000 in Visa sales and less than $175,000 in Mastercard sales,” with the goal of achieving a “weighted average interchange rate of 0.95%.” We’ve covered the changing dynamics in interchange policies before (see, e.g., here and here) – and here’s a good primer from our friend Samir at Interspace on the importance of interchange and the Durbin Amendment to fintech business models – and we’re watching these developments closely to see whether these new government interventions will affect the size of the interchange pie on which many fintechs rely for part of their revenue.
Google Pay announced that it is running a pilot program with Affirm and Zip to display “multiple BNPL options at select . . . merchants in the United States that offer Google Pay at online checkout.” When users click the Google Pay button, they’ll “see a promotional banner alerting them to the option of using BNPL via Affirm or Zip.” Our take? This feels like a win for both Affirm and Zip (as well as BNPL more broadly!), giving them massively increased distribution without direct integration. As the use of BNPL continues to increase, particularly around the holiday season, users are clamoring for more options and payment flexibility across merchants – and these two providers just scored big wins without having to spin up their own product or marketing efforts. It’s also interesting to note the difference in approach to BNPL between Google and Apple – i.e., partnering (with multiple partners!) vs. building a proprietary solution within the Apple ecosystem. We’ll be interested to watch how these different approaches play out over time!
Speaking of, Affirm partnered with Blackhawk Network, one of the largest distributors of prepaid gift cards for retailers, to let shoppers purchase digital gift cards via installment payments. The BNPL giants announced that shoppers can buy gift cards from Nordstrom, REI and Bath & Body Works with Affirm.
S&P Global’s new stablecoin industry ratings graded Tether poorly and concluded that it may be "constrained" in its ability to maintain its U.S. dollar peg. The world’s largest stablecoin received the new classification’s second lowest grade, 4 out of 5, with the S&P citing “a lack of information on entities that are custodians, counterparties, or bank account providers of USDT's reserves.”
The Securities and Exchange Commission (SEC) denied a July petition from Coinbase to “propose and adopt rules to govern the regulation of securities that are offered and traded via digitally native methods.” In its response letter, the SEC noted that it disagrees with Coinbase’s stance that the existing regulatory framework for securities is “unworkable” for crypto. The decision is a major blow for Coinbase, which has engaged in a multi-month legal spat with the regulator. Here’s a recap of the events leading up to that decision:
July 2022: Coinbase filed that petition with the SEC
March 2023: The SEC issued a Wells Notice to Coinbase, informing the crypto exchange of its intent to sue (for… something – they didn’t say what)
April 2023: Coinbase sues the SEC, forcing the regulator to respond to its July 2022 petition
June 2023: The SEC sues Coinbase for operating as an unregistered national securities exchange, implying that all digital assets on its platform except for Bitcoin qualified as a security
What’s our take? The ruling represents a further expansion of the SEC’s oversight of digital assets through a sequence of recent lawsuits. The SEC likely won’t change its tune unless Congress steps in to establish a written regulatory framework for crypto such as the bill approved over the summer by the House Financial Services Committee to expand CFTC oversight and clarify SEC jurisdiction of crypto.
PayPal and SAP announced an expanded integration to simplify digital payments for SAP’s business customers, leveraging the PayPal Braintree platform.
Last week’s wave of fintech layoffs continued as one-click checkout company Bolt confirmed it laid off 29% of its staff.
Selected fundings
London-based PoS and payments startup for SMEs SumUp raised €285 million in new funding.
Kapital, which offers tools to SMBs to give them visibility of their finances, raised $40 million in equity funding and $125 million in debt funding in a Series B funding round led by Tribe Capital.
Comun, which offers digital banking services for Latinos in the US, raised $4.5 million in a new funding round led by Costanoa Ventures.
SupportPay, “the leading platform for divorced, single, step, co-parents, and caregivers to easily manage and exchange shared expenses,” raised $3.1 million in seed funding.