Fintech Update, 3/13 - 3/19
Hi! It’s Monday, March 20, 2023.
The Rundown
First, in the ‘fallout from Silicon Valley Bank’ section…
Global banking giant HSBC purchased SVB U.K., Silicon Valley Bank’s British subsidiary, for £1. The deal excludes the assets and liabilities of SVB’s holding company, but will “protect the deposits of SVB U.K. clients” in a deal brokered by the Bank of England and U.K. Treasury. HSBC’s Group CEO Noel Quinn said the acquisition “strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life-science sectors, in the U.K. and internationally.” Separately, SVB’s parent company filed for Chapter 11 bankruptcy protection.
Meanwhile, two other banks found themselves at the center of attention as focus shifts from SVB to other banks that could be vulnerable to a growing crisis of confidence. In the US, First Republic is considering a partial sale to counteract significant deposit outflows, only days after JPMorgan, Citi, and nine other global banks placed $30 billion with the bank to prop up its lending operations and instill confidence among the rest of the industry. First Republic shares have declined over 80% in the past 10 trading days, as fallout from the collapse of SVB continues to spook investors. Over in Europe, UBS agreed to buy Credit Suisse for over $3 billion in an effort by Swiss regulators to backstop the beleaguered bank. The news came only days after Credit Suisse took an emergency credit line of over $50 billion from the Swiss Central Bank to shore up its liquidity. Though the bank is no stranger to scandal and poor performance, concerns over Credit Suisse’s health have mounted in the days following SVB’s failure – last week, deposit outflows reached as much as $10 billion per day.
And, in other news…
The Consumer Financial Protection Bureau (CFPB) issued a request for information on “data brokers,” “an umbrella term to describe firms that collect, aggregate, sell, resell, license, or otherwise share consumers’ personal information with other parties. The CFPB is looking to better understand the “scope and breadth of data brokers’ business practices and the impact of those practices on the marketplace and peoples’ daily lives,” especially in relation to credit reporting and the requirements and intentions of the Fair Credit Reporting Act. [Full text]
In one of the most watched funding rounds of the year, Stripe raised over $6.5 billion in new funding (their Series I round!) at a $50 billion valuation. While the amount raised was more than many expected for the company, it is nevertheless a down round that values Stripe at $50 billion post-money – nearly 50% less than its $95 billion valuation from its previous funding round in March 2021. As previously reported, Stripe raised the case to “provide liquidity to current and former employees and address tax obligations related to equity awards.”
Banking service provider for startups Mercury launched a new product, Vault, that enables customers to access FDIC insurance for up to $3 million in deposits (updated to $5 million shortly after the initial announcement).
Nigerian mobile bank for emerging markets FairMoney acquired PayForce, Nigerian provider of merchant payment services for small businesses, in “a cash-and-stock deal in the range of $15 million to $20 million.”
Despite the panic that has rattled the banking sector, the European Central Bank raised rates by half a percentage point on Thursday in an attempt to reduce inflation.
Digital asset custodian Anchorage Digital Bank laid off 75 employees, roughly 20% of its headcount.
The Reading Nook
Aaron Klein of the Brookings Institution published an op-ed on the SVB collapse outlining “four red flags of the bank’s conduct that should have sent the alarm bells ringing.” It’s far the the only such piece, but we appreciated Klein’s clear approach and the regulatory context he offers as a former drafter of the Dodd-Frank Act.
Selected fundings
Longest round ever? After announcing $350 million in new funding from General Atlantic, followed by another $100 million from Ribbit, Tiger, and TVS Capital, Indian mobile payments app PhonePe has now raised another $200 million from Walmart – all as part of the same round. The company says it “plans to raise up to $1 billion as part of the ongoing round” at a $12 billion pre-money valuation.
Commercial auto insurance company Fairmatic raised $46 million in a new funding round led by Battery Ventures.
Charge card provider for e-commerce businesses Parker raised $157 million in equity and debt funding.
Tilia, the payment platform used by games, virtual world publishers, mobile applications, and NFT providers, secured a strategic investment from JP Morgan and Dunamu.
Payments orchestration platform APEXX Global raised $25 million in Series B funding.