Fintech Update, 4/3 - 4/9
Hi! It’s Monday, April 10th, 2023.
The Rundown
The Securities and Exchange Commission (SEC) charged the founder of financial aid fintech Frank, Charlie Javice, with fraud connected to the company’s $175M sale to JPMorgan in 2021. The SEC charges that Javice made “numerous misrepresentations” about Frank’s user numbers to attract JPM, and alleges that Javice paid a data scientist to inflate user numbers to 4.25M “to close the deal” as JPM executives pressed for customer data.
Dutch neobank Bunq announced that it “applied for a US banking license” with the intention of serving “the 5 million European expatriates and European businesses operating in the U.S.” It is unclear which regulator the firm is working with (its site mentions both the OCC and the Fed, as well as the FDIC) and why it has chosen this path, which is notoriously slow, costly, and littered with the debris of other, now-abandoned applications from European neobanks. Bunq should have the capital to see this project through if it chooses – it raised $228 million at a $1.9 billion valuation in 2021 – but we wouldn’t bet on that.
PayPal expanded its suite of options for its Advanced Checkout feature (open to small businesses) by adding support for Apple Pay, the ability for customers to save cards on a merchant site, and a new pricing structure (“IC++”) that includes interchange, network, and PayPal markup fees. PayPal hopes to reduce the 59% of merchants whose customers “frequently abandon their shopping cart when their preferred payment method is unavailable.”
Mastercard said that it will phase out first-use PVC plastics from its payment cards by 2028, in favor of more sustainable recycled or bio-sourced plastics.
The former head of talent at New York-based neobank Current is suing the company for alleged sex, race, and age discrimination.
Crypto derivatives exchange dY/dX will unwind operations in Canada after the Canadian Securities Administrators tightened restrictions on crypto trading in the country. Canadian user accounts will be disabled from executing new trades beginning April 14.
Also, there was a wave of fintech M&A this week:
Micro investing app Acorns acquired UK-based kids money management app GoHenry, giving the company access to two new markets – Europe (GoHenry operates in the UK, France, and Spain) and customers under the age of 18. Acorns, which "looked at more than 100 deals globally before landing on GoHenry,” closed the deal with an all-stock offer, though the value of the deal is undisclosed.
Navan (formerly known as Trip Actions) acquired Indian expense management provider Tripeur for an undisclosed price. The deal is Navan’s fifth acquisition of a smaller player in a new market in two years. Navan’s CEO Ariel Cohen sees “enormous potential growth from doubling down in India” estimating that the “country's travel market is worth $35 billion.”
SoFi acquired mortgage lender Wyndham Capital Mortgage in an all-cash deal for an undisclosed price. The acquisition will help strengthen SoFi’s product offerings in the mortgage space, an area where the fintech giant has been increasingly active.
Employer-based financial services and advisory platform FinFit is merging with Salary Finance US, which offers “salary-linked savings and loans for employees,” with the combined company (operating under the FinFit brand) serving “over 500,000 US employers, including Tesla, Allied Universal, and United Way.” Terms of the deal were not disclosed.
The Reading Nook
Noah Smith underscored a silver lining of the recent banking scare, claiming that a more cautious banking sector could help stabilize an overheating economy.
The FT looked at how Frank’s founder Charlie Javice cultivated high-profile connections before its sale to JPMorgan.
Selected fundings
Banking compliance startup Fourthline raised $54 million in new funding.
Zamp Finance, the company that pivoted from a crypto platform to a treasury management platform, raised $21.7 million in a seed funding round led by Sequoia India.
UK-based payment company TerraPay raised $100 million in equity and debt funding.