Fintech Update, 3/29 - 4/11
Hi! It’s Monday, April 12, 2021.
Hey, everyone! We’re happy to be back in your inbox after a week off. Buckle up for a two week mega-update! 🚀
Leading Off
Basically, it was two weeks of embedded fintech plays and crypto news: First, Walgreens announced it will launch a banking product; Clubhouse, Signal, and Facebook all made on-platform payments enhancements; and DoorDash and Instacart both said they’re getting into the credit card game. // Meanwhile, Goldman Sachs said it will offer crypto-backed investment vehicles; PayPal will allow users to begin paying in cryptocurrency; Visa piloted settlement using a stablecoin; and several companies, including Coinbase, banded together to launch a crypto regulation lobbying group. // In other news, Robinhood ditched its confetti celebration animation; Coinbase set a date for its direct listing; and Better, Ramp, and Plaid all completed significant new funding rounds. // All this + more below!
Heavy Hitters
Embedded fintech. It’s a thing. Last week, we got several new data points supporting the idea that “embedded fintech” – in which a company creates its own financial services stack consistent with its value proposition and customer interests to keep those customers (and their cash!) on-platform – is the hottest trend in financial services. We’ve previously written about embedded fintech in the context of banking services, but we continue to see myriad examples in payments and card services as well:
Walgreens gives itself a dose of banking: The American pharmacy chain is planning to launch a Mastercard-linked debit account product in partnership with InComm Payments that will allow cardholders to earn Walgreens rewards. Walgreens described the new product as part of its “broader initiative to launch new financial products and services . . . to its customers."
Three social platforms, three takes on payments: Demonstrating both the value and flexibility of embedded payments, Clubhouse, Signal, and Facebook all made moves to offer (or more deeply embed) payments in their services:
Clubhouse: The popular “social audio” app launched its first “monetization tool” – an in-app payments feature that will allow users to pay creators. Clubhouse said 100% of all payments will go into the pockets for creators, with senders being charged a “small card processing fee” to cover the cost of Clubhouse’s payments processor, Stripe.
Signal: The end-to-end encrypted messaging service launched a beta version of its new P2P payments tool, allowing users to send money to each other via the “privacy focused payments [cryptocurrency] network . . . MobileCoin.”
Facebook: The social networking giant rolled out a QR code feature in Facebook Pay designed to encourage in-person P2P payments across its web, Messenger, Instagram, and WhatsApp products. The new feature will allow users across platforms to pay each other by scanning a payee’s unique code and transferring the money.
DoorDash and Instacart are delivering cards: The on-demand food delivery and grocery-delivery firms will launch credit cards to help incentivize spending on their platforms. Instacart selected JPMorgan to issue a credit card that will offer rewards for repeat users (reportedly 5% cash back on Instacart purchases) while DoorDash reportedly has received offers from over 10 banks and fintechs to issue its rewards card.
The key takeaways from all of this? First, more companies – whether they’re in social media, retail, services, or some other space – are looking for new ways to keep dollars flowing through their platforms. Second, firms aren’t just looking to embed any means to capture those transaction and deposit revenues; they’re looking to create tools that match their brands and audience expectations – so Clubhouse creators get paid to create, Signal’s privacy-seekers transact with private coins, and Instacart customers get rewarded for repeat shopping. Firms are designing these products to be wins for both themselves and their customers, and we’re only scratching the surface of what’s to come.
Quick Takes
Goldman to start offering crypto investments. Goldman Sachs expects to launch “investment vehicles for bitcoin and other digital assets to clients of its private wealth management group” in Q2 2021, a target that will be overseen by the bank’s recently named global head of digital assets, Mary Rich. Rich noted that Goldman plans to build up a “full spectrum” digital asset investment over time.
PayPal launches crypto-funded payments. The online payments firm rolled out its “Checkout with Crypto” feature, allowing US customers to “instantly convert . . . Bitcoin, Ethereum, Litecoin, or Bitcoin Cash” into fiat currency at the moment of sale, which “PayPal then uses to complete the transaction.” PayPal’s crypto to USD exchanges are fee-free, while non-USD exchanges incur a foreign exchange fee.
Crypto-exposed firms launch policy lobbying group. Several financial services companies, including crypto exchange Coinbase, investment firm Fidelity, and payments firm Square, helped launch the Crypto Council for Innovation, an organization “aimed at giving companies with cryptocurrency exposure a say in how the asset class is regulated.”
Banks to test FedNow real time payments system. Five northern California banks and three credit unions will start testing the Federal Reserve’s FedNow program, allowing for near-real time clearing and settlement, available any time of the year. The program will be fully implemented by 2023.
Visa pilots stablecoin settlement. The global payments network is using the USD stablecoin to settle transactions over Ethereum, as part of a pilot program with crypto platform Crypto.com and digital asset bank Anchorage. Visa plans to offer the service to more partners this year.
Robinhood cans the confetti... The stock-trading app removed its confetti celebration animation, following arguments that it gamified stock trading and helped encourage risky behavior, especially among amateur investors.
...and gets sued by Ice Cube. The actor said ‘hell naw’ to Robinhood’s use of his image in a March newsletter, stating in his complaint that the firm is “the antithesis of everything that Ice Cube stands for.” Lawyers for both sides now will work to determine whether Robinhood adequately checked itself before it wrecked itself.
Coinbase has an eventful couple of weeks. The crypto exchange chose April 14 as the date for its direct listing and reported that their Q1 revenues were $1.8 billion, a jump of 9x year over year.
Finally, a PSA. At TFU, we generally see fintech as a positive force in the world; but we should also remember that the same tools democratizing financial services can also help unscrupulous actors cheat people faster and on a wider scale than ever before. Consider this story in Quartz about a university scholarship scam that robbed aspiring students in Africa of their cash and dreams of a higher education.
Pop Flies
BNPL provider Afterpay launched a contactless virtual card to step up its move into in-store payments.
Anil Dash, the inventor of non-fungible tokens (NFTs) explained to The Atlantic how techno-opportunism has distorted the purpose of NFTs away from his original intention of protecting artists.
Better late than never: Tether says its stablecoin is now fully backed by reserves.
The London Stock Exchange is investigating the cause of a 5-hour-long outage at its Refinitiv market data unit, which left 400,000 users unable to “access prices for currencies and other assets” on Thursday.
Visa expanded its global money movement platform, Visa Direct, offering “Direct Payouts” APIs designed to facilitate sending money between networks and intermediaries, both domestically and across borders.
Fidelity, Square, and Coinbase formed a crypto lobbying group that aims to shape the way bitcoin and other cryptocurrencies are regulated.
Acorns acquired Pillar, a fintech that is using AI to help manage student loan debt, in its second acquisition of the year so far.
Fundings!
Lending
Japanese BNPL provider Paidy raised $120 million in Series D funding.
Mortgage startup Better raised $500 million from SoftBank at a $6 billion valuation.
Credit card management and bill payments platform CRED raised $215 million in a Series D funding round at a $2.2 billion valuation.
Healthcare BNPL provider Walnut raised $3.6 million in seed funding.
Brazilian tech-enabled SMB lender Cora raised a $26.7 million Series A funding round led by Ribbit Capital.
Banking
Ethical banking app Spiral raised $14 million in new funding.
UK challenger bank Atom Bank raised £40 million in new funding at half the price from its 2019 equity raise.
Payments
Egyptian digital payments provider Paymob raised $18.5 million in Series A funding.
Crypto
Technology and investment solution for Bitcoin provider NYDIG raised $100 million of new growth capital.
Corporate
Corporate card and expense management technology provider Ramp raised two massive new funding rounds in the same week! The first was a $65 million investment by D1 Capital at a $1.1 billion valuation and the second was a $50 million investment by Stripe at a $1.6 billion valuation.
HighRadius, provider of AI powered treasury management software, raised $300 million in a Series C funding round led by D1 Capital and Tiger Global at a $3.1 billion valuation.
Infrastructure
Capital markets technology provider Capitolis raised $90 million in a Series C funding round led by a16z.
Plaid raised $425 million in a Series D funding round led by Altimeter at a $13.4 billion valuation as it continues its post-Visa glow up.
British Plaid competitor TrueLayer raised $70 million in new funding to expand its services internationally.
Orum, the infrastructure provider that aims to make money move faster, raised $21 million in a Series A funding round led by Bain Capital Ventures.