Fintech Update, 5/1 - 5/7
Hi! It’s Monday, May 8th, 2023.
Hi! It’s Monday, May 8th, 2023.
The Rundown
The same day it facilitated the sale of First Republic to JPMorgan Chase, the FDIC also published a report recommending Congress increase the amount of deposit coverage available for business accounts. The FDIC’s report [full text] called out two fundamental changes that have increased the sector’s exposure to bank runs since deposit insurance was first introduced in 1933: First, the percentage of deposited dollars exceeding the FDIC’s $250,000 cap has increased substantially – reaching nearly 47% as of 2021. Second, changes in technology – specifically, innovations that have increased the “speed with which information is disseminated” (e.g., Twitter) – have accelerated the rate at which depositors can panic and demand to withdraw their funds. In a statement, FDIC chairman Martin Gruenberg noted that of the three options the agency’s report considered in response to the growing concern about deposit insurance, it settled on “Targeted Coverage [i.e., higher coverage for business accounts] as having the greatest potential for meeting the fundamental objectives of deposit insurance relative to its costs.”
Payments giant Stripe announced two major partnerships: One with Microsoft to embed payments into its Teams product using Stripe Connect for payment acceptance, identity verification, and user onboarding; and one expanding its partnership with Uber by allowing users to connect bank accounts directly in the Uber app via Stripe Link. In addition to its BMW and Amazon partnerships, both announced earlier this year, these latest announcements demonstrate Stripe’s increasing efforts to make a splash in enterprise sales amid increasing competition from providers like Adyen.
Digital bank Greenwood, which was founded to improve financial access and opportunities for Black and Latino individuals and small businesses, acquired Kinly, a fintech focused on improving financial outcomes for Black Americans. Greenwood will incorporate Kinly’s roughly 300,000 users into its community of over one million users. Terms of the deal were not disclosed, but Kinly reportedly had been struggling recently, including laying off 30% off its workforce in September and encountering difficulty raising new funding.
Senate Banking Committee chair Sherrod Brown urged the FDIC to investigate Tellus, a fintech company that offers high yield savings accounts funded by residential real estate lending. Senator Brown takes issue with this model (if borrowers default, the deposits used to fund those loans are at risk) and is concerned that the company is suggesting their savings accounts are safe and secure, despite not being FDIC insured.
Payments infrastructure startup Finix became a payments processor, taking another major step in its journey to compete with Stripe across all payments dimensions. The company first started as an API provider before debuting as a payments facilitator last May, and its new processing capabilities now allow it to plug in to the major U.S. card networks. Finix touts its ground-up approach and focus on scalability as an advantage over Stripe, which has focused on speed-to-launch.
So what does Apple’s massive distribution advantage, which we wrote about two weeks ago, look like in practice? Look no further than the early returns on its new savings account, which reportedly “brought in as much as $990 million in deposits over its first four days.”
Revolut expanded into Latin America, launching in Brazil. As part of the launch, the company will offer a global account product, which will offer “locals foreign exchange and remittance capabilities in 27 currencies,” and crypto investments.
The Reading Nook
The Economist looked at MercadoLibre’s success as e-commerce companies struggle. Launching MercadoPago, a payments system accessible beyond the core e-commerce platform, certainly helped: it processed $100B worth of payments in 2022.
Memecoins are alive and well: Pepecoin (PEPE) surges to $1B in market cap.
Selected fundings
Nigerian payments company Nomba raised $30 million in a “pre-Series B investment” round led by Base 10 Partners.
Latin American payments company Liquido announced that it raised $26 million in funding across two rounds, both led by Index Ventures, and emerged from stealth.
French neobank for climate-conscious users Green-Got raised $5.5 million in a new funding round.
Bend, a fintech company that translates transaction data into programmable CO2e emissions data, raised $2.5 million in a seed funding round.