Fintech Update, 2/27 - 3/5

Mar 06, 2023

Hi! It’s Monday, March 6, 2023.

Goldman Sachs continues to put more distance between itself and its retail fintech ambitions, reportedly considering “strategic alternatives” for its consumer platforms business that could include selling GreenSky, the installment lending it acquired only two years ago for about $2.2 billion. (The business unit in question also includes Goldman’s high-profile credit card partnerships with Apple and General Motors.) Although CEO David Solomon offered few details at the bank’s recent investor day, these rumors are only the latest lines in a growing narrative that the bank is making a significant pivot away from its retail business; and regardless, none of the bank’s recent actions suggest Goldman is continuing to pursue its retail strategy with as much fervor as it once did. Within three years of announcing the Marcus brand in 2016, Goldman had acquired over $50 billion in retail deposits on the platform, but now many commentators are questioning Solomon’s strategy and what the bank should do next.

Last Wednesday, Silvergate, the crypto focused bank, announced that it was “evaluating its ability to operate as a going concern.” The announcement led to several of the larger crypto companies such as Coinbase and Galaxy Digital dropping Silvergate as their banking partner and others such as Paxos, Circle, Bitstamp, and Gemini suspending their partnerships with Silvergate. Only 2 days later, Silvergate announced that it is discontinuing its crypto payments network, the Silvergate Exchange Network, which “enabled round-the-clock transfers between investors and crypto exchanges.”

Revolut reported an annual profit in 2021, which was immediately called into question: The British challenger bank released its 2021 annual report, showing a net income of $31 million on the strength of $769 million in revenue and increases in customer numbers and gross margin. Unfortunately for the firm, the report also came with a heavy caveat from the audit firm BDO, which “was not able to independently verify three-quarters . . . of revenue reported by the fintech.” Revolut responded that the BDO findings were “remedied in 2021” and there are no additional concerns about the audited financials.

Wise rebranded with a new look and feel, and appears to be targeting the international consumer neobank market: the company has “been actively building its international account offering, which enables customers to send, spend, receive and hold money in 50+ currencies” and recently rolled out new account features like interest on deposits.

Visa and Mastercard are reportedly halting new products and services related to crypto until the market and regulatory environment improve. A Visa spokesperson said that recent developments show “we have a long way to go before crypto becomes a part of mainstream payments and financial services.”

Payments infrastructure firm Modern Treasury and Silicon Valley Bank jointly announced the launch of GlobalACH, a new service promising to “allow mutual clients to send cross-border payments more efficiently, predictably, and at a lower cost by leveraging local payment rails.”

Walmart and Citi announced a partnership to provide digital lending to Walmart’s SMB suppliers. The Bridge built by Citi lending platform will allow Walmart’s ~10k U.S. SMB suppliers to request loans of up to $10 million.

Klarna reported that its annual losses in 2022 totaled ~$1 billion, up ~34% from its losses in 2021. However, the BNPL reported an operating loss of ~$190 million in Q4, down from ~$330 million the year before in its ongoing target of returning to profitability by the summer.

Meanwhile, BNPL provider Sezzle closed 2022 turning a profit, reporting a net income in Q4 of ~$600,000.

Amazon and online mortgage lender Better.com partnered to offer Equity Unlocker, a new benefit, to Amazon employees. The program will allow Amazon employees, starting in Florida, New York, and Washington, to “use their vested equity as collateral for a down payment when trying to buy homes.” Amazonians “will have the ability to finance their homes without actually selling their shares, only needing to pledge vested equity.”

Alex Johnson wrote an interesting piece on unlocking the next wave of lending innovation.
Matt Brown of Matrix Partners wrote about the challenges fintech firms face if they index too heavily on interchange revenue – in short, customers spreading out their card spend means less interchange for each card issuer in their wallet.
TechCrunch says a16z and Sequoia invested more in fintech than any other sector in 2022.
The New Yorker wrote about the Wirecard saga: the biggest fraud in German history.

Canadian insurance and investment software developer Equisoft raised $125 million in new funding.
Pagos, the “payment intelligence” infrastructure provider, raised $34 million in Series A funding.
Data transaction enrichment API provider Spade raised $5 million in a seed funding round led by a16z.
Varo is reportedly looking to raise $50 million in a new funding round at a $1.9 billion valuation, a 25% decrease from its last fundraise in mid-2021.