Fintech Update, 1/25 - 1/31
Hi! It’s Monday February 1, 2021.
Leading Off
Amid the massive, coordinated, Reddit-fueled price increase of GameStop, Robinhood appears to be paying dearly in the court of public opinion for its decision to suspend trading of GME on its app. // In other news, Plaid introduced its beta product that will allow users to modify the destination of their paychecks; Coinbase announced that it will go public via direct listing; and Ant announced its planned restructuring in response to mounting pressure from the central bank. All the while, investors (including Stripe) continued to pour investment cash into fintech. // All this + more below!
Heavy Hitters
Robinhood rep ruined after GameStop stock shock spurs swap stop. In a special crossover episode that gave fintech a starring role in a mainstream news story, the massively popular digital brokerage was pilloried by fans and foes alike after suspending trading on its platform of GameStop, the maligned video game retailer whose stock experienced a meteoric, Reddit-fueled rise during the week. (If any of that is confusing, it’s okay, you’re not alone. Basically, members of the “r/wallstreetbets” Reddit forum banded together to push GameStop’s share price to over $400 from $17 in order to destroy the positions of hedge funds that held short positions on the stock. They were very successful, causing several such funds to lose millions.) Robinhood claimed that it halted trading to ensure it could meet its “many financial requirements, including SEC net capital obligations and clearinghouse deposits,” which were jeopardized by exceptionally high volume driven by GameStop trading. This is supported by news that Robinhood secured an emergency, $1 billion line of credit from its existing investors to cover any shortfalls. Nevertheless, skeptics argue that Robinhood suspended trading because of its connections to Wall Street institutional investors, some of which are Robinhood backers. This narrative flies in the face of Robinhood’s mission to “democratize” financial services, and has done significant short-term damage to Robinhood’s brand and reputation. To be sure, Robinhood has faced reputational challenges before, but never one that speaks so directly to the heart of the firm’s mission. We’ll be staying tuned to see how the episode plays out.
Quick Takes
Plaid launches Deposit Switch. Plaid introduced its Plaid Deposit Switch beta product, which lets users set up or modify the destination of their paychecks by connecting to the payroll or employer account and creating instant funding.
India prepares to ban cryptocurrencies (except its own). The Indian government is planning to introduce a bill during the current parliamentary session that would “ban private cryptocurrencies such as bitcoin” and “provide a framework for the creation of an official digital currency” that would be issued by the country’s central bank.
Coinbase will go public via direct listing. Coinbase announced that it has opted out of the traditional IPO process and plans to go public via a direct listing.
Ant plans restructuring in response to central bank pressure. The fintech giant is planning to become a financial holding company, overseen by the Chinese Central Bank, as it looks to fall in line with financial regulations. The designation will subject the company, which is controlled by Jack Ma, to more stringent capital requirements and reverses its longtime effort to shed its image as a financial services provider.
JPMorgan launches UK digital bank, hires 400 staff. The global financial institution is launching a digital bank that will operate under the Chase brand, its first retail operation in the UK. Formerly known as “Project Dynamo”, Chase staff assigned to the bank kept their work under wraps for two years.
N26 to make hiring push. The German digital bank reportedly plans to hire 200 new staff, having added two million customers in 2020 and increasing its UK and US users to seven million, combined. N26 reported that its monthly transaction volumes have reached an “all-time high” of $5.5 billion.
Pop Flies
Flywire is reportedly working with Goldman Sachs and JP Morgan to begin planning for an IPO later this year which could value the company at $3 billion.
Visa and cross-border payments giant TransferWise announced a “global partnership” that will provide it and its partners with access to Visa’s cloud processing network, Visa Cloud Connect.
British challenger bank Starling is in “advance negotiations” to land a £200 million fundriaising round led by US-based Fidelity Investments.
Personal finance app Charlie is relaunching with a mobile app that will gamify the process of saving money and getting out of debt.
Fundings!
Brazilian neobank Nubankraised a $400 million Series G, giving it a $25 billion valuation.
Automation-driven financial services firm Albert raised $100 million, led by General Atlantic with participation from CapitalG, Portag3, and QED.
Melio, the fintech that helps SMBs digitally manage B2B payments and receivables, raised $110 million at a $1.3 billion valuation in its latest financing round.
European BNPL firms Alma 🇫🇷 and Scalapay 🇮🇹 raised $59.4 million and $48 million, respectively.
Digital lending platform Roostfiy raised $32 million in Series C funding.
Online checkout company Fast raised $102 million in a Series B funding round led by Stripe.
Stilt, the fintech that offers financial services for immigrants, visa holders, and the underserved, raised a $100 million debt facility.
Financial back-office services provider Pilot raised $60 million in Series C funding.
London-based open banking payments platform Token raised $15 million in Series B funding.
Payroll software provider Check raised $35 million in a Series B funding round led by Stripe.
Yotta Savings, which offers a prize-linked savings account, raised $13 million in Series A funding.
Rental deposit insurtech Rhino raised $95 million in new funding.