Fintech Update, 12/7 - 12/13
Hi! It’s Monday December 14, 2020.
Leading Off
Crypto services firms Paxos and BitPay applied to the OCC for national trust bank charters. More details have emerged on causes and concerns underlying Ant Group’s scuttled IPO. // In other news… Capital One has barred customers from using its cards to make buy-now-pay-later transactions; Stripe is significantly expanding its hiring throughout Asia; Revolut quietly broke even in November; and BaaS platform Unit publicly announced that it is live and has raised $18.6M. // Plus… SoFi is exploring options to go public, Affirm postponed its IPO, and Tink raised $103M in new funding. // All this + more below!
Heavy Hitters
Two crypto firms file for trust bank charters. Cryptocurrency services firms Paxos and BitPay filed applications with the Office of the Comptroller of the Currency (OCC) to obtain national bank trust charters. Both firms focus on using crypto to modernize financial market infrastructures and enabling online merchants to accept digital currencies as easily as they accept payments via credit card, debit card, or PayPal (Paxos was recently selected by PayPal to power their cryptocurrency service). Getting a national trust charter would help both crypto firms serve their customers across the country more efficiently and would provide additional flexibility to operate across U.S. state lines. Comptroller Brian Brooks teased forthcoming crypto regulations last week and crypto firms may see the next several months as a prime opportunity to gain regulatory legitimacy before the Biden administration makes new appointments. As we wrote about in our Big Idea on Brooks’ tenure at the OCC, keep an eye out for more charter applications!
Ant Group’s unprecedented loan origination may have doomed its IPO. The Chinese fintech giant originated loans to half a billion people in the course of a year, which accounted for nearly 20% of China’s short-term debt, drawing immense regulatory interest that culminated in its cancelled IPO. Concerningly from a regulatory perspective, Ant’s partnership model means the company holds little credit risk while rural lenders – who rely on the app to source loans – have outsized exposure. Relatedly, country’s top banking regulator questioned the power of the large fintechs like Ant, hinting at “timely and targeted measures to prevent new systemic risks”.
Quick Takes
Circle revamps platform amid USDC growth. The crypto platform overhauled its network by adding Digital Dollar Accounts, which enable businesses to store value in crypto while maintaining compatibility with legacy payments infrastructure. The change, which advances mainstream trading of USDC, comes as the stablecoin surpasses three billion in circulation, a growth of nearly 500% in 2020.
Capital One bans use on BNPL transactions. The third-largest U.S. credit card issuer said it will bar customers from using its cards to “clear buy-now-pay-later (BNPL) debt” over concerns that such transactions “can be risky for customers and the banks that serve them,” according to a Capital One spokeswoman. The decision is one of the first institutional pushbacks on the fast-growing BNPL segment.
Whatsapp adds shopping carts. The Facebook-owned messaging app added a new carts feature that invites its ~2B users to shop. Carts allow users to buy multiple items from a business and helps merchants better track sales. The new feature comes as Whatsapp builds out the commerce experience on its app, having already unveiled QR codes and a dedicated shopping button.
Stripe expanding in Asia. The digital payments firm reportedly is making a significant hiring push throughout Southeast Asia, Japan, China and India, growing its team in the region “by 40% to more than 200 people this year.” Stripe’s regional head for APAC noted that the firm is “working to adapt to each country’s laws and preferred payment methods.”
More banks get into crypto custody. Two European banks – the Swiss subsidiary of Spanish giant BBVA and Standard Chartered – are preparing to launch new trading and custody services for cryptocurrencies. The banks are making the moves “in response to growing demand from investors who are already working with digital currencies [via] fintechs and other startups.”
Revolut breaks even. Revolut’s CEO and co-founder Nik Storonsky stated that the digital bank broke even in November, citing major increases in revenue and gross margins and diversification or revenue as the driving factors that fueled the fintechs rebound from the early days of the pandemic.
Unit announces $18.6M funding, publicly launches. The banking-as-a-service platform, which allows tech firms to easily integrate banking services into their products via API, announced that it has raised $18.6 million in combined angel and Series A funding and is now operational.
Pop Flies
Robinhood moved ahead with its IPO plans, selecting Goldman Sachs to lead preparations for the anticipated listing.
SoFi has held discussions with several SPACs to explore a deal to go public.
The Economist explored how central bank digital currencies might disintermediate the financial system.
Affirm postponed its initial public offering, potentially due to concerns with DoorDash’s and Airbnb’s extreme first-day pops this past week.
Fundings!
NeuroID, the startup that uses behavioral data to detect and isolate fraud in real time, raised $7 million in Series A funding.
Dubai-based BNPL provider tabby raised $23 million in Series A funding.
AI/ML powered financial assistant Cleo raised $44 million in Series B funding.
Synctera launched out of stealth mode and raised $12.4 million in seed funding to build a platform that facilitates fintech and community bank partnerships.
Swedish open banking platform provider Tink raised $103 million in new funding.
Mexican challenger bank Albo raised $45 million in new funding.
Payroll and HR API provider Finch launched and raised $3.5 million in seed funding.