Fintech Update, 5/10 - 5/16
Hi! It’s Monday, May 17, 2021.
Leading Off
Many of the largest banks in the U.S. are launching an alternative to credit scores to expand credit to individuals lacking a credit score but exhibiting financially responsible habits; Marqeta and NerdWallet filed to go public; and Google Pay partnered with Wise and Western Union to enable cross-border money movement // In other news, Tether released much-anticipated information on its reserve holdings (spoiler, only 2.9% are backed by cash); Stripe acquired Bouncer to boost card fraud detection, and Brex launched crypto rewards. // Plus, Diem (Libra) relocated to the US and partnered with Silvergate Bank to issue its stablecoin // All this + more below!
Heavy Hitters
U.S. banks to issue credit cards for users with no credit scores. Many of the largest U.S. banks are launching an initiative to share data on consumer deposit accounts to expand credit to individuals with no credit scores but financially responsible habits. Historically, underwriting methods and models have been entirely based on credit reports and scores, meaning that individuals without credit scores (53 million adults in the U.S. today) have been unable to secure credit via financing from banks and were forced to turn to alternatives (e.g. payday loans). The pilot grew out of Project REACh, launched last summer by the OCC, which looks to remove barriers for minorities and underserved people to fully and fairly participate in the nation’s economy. In theory, building out a mechanism to lend to those without credit scores makes commercial sense as it provides access to a previously untapped base of potential loanees and addresses an issue of social importance (assuming it does not overstate or inaccurately characterize a user’s creditworthiness, of course). However, banks have always had the opportunity to lend to this population (although it is unquestionably easier to access such data now than ever before). We see the move as a response to the rise of BNPLs that are providing this user base access to credit. Currently, many of them don’t actually pull credit reports on users during the application process (e.g., Klarna and AfterPay).
Quick Takes
Two more fintech IPOs on the way… Pay-tech fim Marqeta filed to go public at a valuation of $16-17 billion, after doubling its revenue to $290 million in 2020. The valuation would be ~4x increase over its valuation of $4.3 billion when it last raised venture capital funding last year. Meanwhile, NerdWallet also confidentially submitted IPO paperwork, reportedly targeting a $5 billion valuation.
Google Pay adds international transfers. The tech giant launched partnerships with cross-border money movement firms Wise (formerly TransferWise) and Western Union, allowing users of the US Google Pay app to send cash to users in India and Singapore – with plans to expand to all the countries served by Wise and Western Union by the end of 2021.
You should be somewhat less than 100% confident in Tether… Facing scrutiny from New York state regulators over its previous claim that its USDT stablecoins are backed 1:1 by US Dollars, Tether magnanimously (and for no other reason!) released a one-page PDF (behold the comprehensiveness!) of its reserve holdings, demonstrating the “unrivaled transparency” for which it has become so well known. The big reveal? Only 2.9% of USDTs in circulation are backed by USD.
Amex launches BNPL for air travel. The card giant is now letting customers use its “Plan It” feature, which sets up installment plans for any purchase above $100, for any flights booked on Amex’s travel site. The move is the latest example of a major card company offering BNPL.
Stripe bolsters card fraud detection with acquisition. The payments giant acquired Bouncer, a platform that detects fraud in card-based online transactions, with plans to integrate it with Stripe’s in-house solution, Radar. The purchase price was undisclosed.
PayPal acquires Happy Returns. PayPal announced its plans to acquire the retail returns solution, which helps customers return purchases made online or in-store. If this business seems familiar, you may recognize it from other recent acquisitions like Affirm’s recent purchase of Returnly...
Brex launches crypto rewards. The corporate card provider partnered with TravelBank to launch a crypto rewards program for its business clients. The program will allow the firm’s business customers (Airbnb, Carta, Classpass and Y Combinator) to redeem points earned on purchases for bitcoin and ether.
Diem (aka Zombie Libra aka Zuck Bucks) relocated to the U.S. from Switzerland and announced a partnership with Silvergate Bank, which will become “the exclusive issuer of the Diem USD stablecoin.” We’re a long, long way from this.
The IRS is looking into cryptocurrency investors. The Internal Revenue Service is conducting an “ongoing, extensive” investigation into holders of cryptocurrencies, serving ‘John Doe’ summons to exchanges requiring them to turn over account holder’s names and identifying info.
Block.one is investing $10B into new crypto exchange. The Peter Thiel-backed blockchain firm is putting $10 billion into a new subsidiary, Bullish Global, which will launch a “blockchain-based crypto exchange” later in the year. Bullish’s capital includes “$100 million [cash], 164,000 BTC, and 20 million EOS tokens, which power Block.one tokens.”
Pop Flies
US Bank and Plaid established a new relationship to give “US Bank customers an API-based, credential-less open finance experience that lets them share their account data.”
Digital business banking platform Rho unveiled the Rho Card, a bank-issued corporate card that “enables firms to control cash back, credit terms, spend control and policies all on their own terms.”
Fundings!
Lending
Divibank, the Latin American financing platform that offers businesses access to growth capital, raised $3.6 million in a seed funding round led by BTV.
Banking
Lili, provider of financial services and tools for freelancers, raised $55 million in Series B funding.
Crypto
Blockchain based data-sharing platform Spring Labs raised $30 million in a Series B funding round led by TransUnion.
Corporate
Invoice management platform Stampli raised $50 million in a Series C funding round led by Insight Partners.
Infrastructure
Pomelo, the Latin American fintech building payments infrastructure, raised $9 million in seed funding.
BaaS provider Treasury Prime raised $20 million in a Series B funding round led by QED.