Fintech Update, 5/9 - 5/15
Hi! It’s Monday, May 16, 2022.
The Rundown
Popular cryptocurrency Luna dropped nearly 100% overnight on Thursday amid an investor panic that permeated crypto markets, prompting the stabecoin’s creators to temporarily halt transactions on its blockchain. The background on this whole saga is worth a read (as with many topics, we’re particularly fond of Bloomberg’s Matt Levine and his particular brand of snarky clarity), but the tl;dr version is this: Luna is tied to algorithmic stablecoin TerraUSD, which was supposedly pegged 1:1 to the Dollar but was shown to be decidedly not that when it fell to 32 cents last week, along the way precipitating a crisis of confidence in the whole system. Not great! Tether, the world’s biggest stablecoin – which actually is backed by some real assets (cool!) – which currently is fighting legal battles over allegedly misrepresenting just how much real-asset backing they have (oh.) – also temporarily lost its peg last week. Algorithmic stablecoins are not necessarily meant to be backed 1:1 by real assets, instead relying on a complex system of minting and burning tokens to maintain price stability, but the Terra-Luna example calls into question the viability of the approach and demonstrates the growing interconnectedness and fragility of the overall crypto ecosystem. Our take? A house of cards eventually gets blown over, and although this won’t be a death blow to algorithmic stablecoins, we think investor interest will re-focus on higher quality tokens like USDC and DAI, more reputable coins that regularly publish audit reports on their reserves and demonstrate more interest in behaving like long-term market participants than gimmicky get-rich-quick schemes.
Digital consumer banking firm Current announced a new API platform that will allow customers to make new, fast connections to “other fintech apps for things like payments, financial planning and investing.” Current also announced a new partnership with Plaid, allowing “Current users . . . to connect their Current bank account to any of the 6,000 fintechs in Plaid’s network” via its Plaid Exchange product. Current also signaled that it may be interested in banking-as-a-service in the future, noting that it “hopes to use [its API] platform to offer embedded banking to other fintechs” – though no concrete plans are in the works.
Stock trading app Robinhood said it will offer a “revamped” brokerage cash sweep program to “eligible” customers, sweeping uninvested cash into FDIC-insured savings accounts generating interest on the cash at 1% APY.
Fintech investment giant Tiger Global reportedly has lost $17 billion so far in 2022 amid a broader tech industry slump, wiping out “around two-thirds of the gains the hedge fund has seen since its 2001”—losses that would rank among “history’s biggest dollar declines for a hedge fund.”
Payments firm Checkout.com will acquire French identity verification startup Ubble for an undisclosed amount. Checkout.com reportedly was searching for an identity verification partner in order to avoid outsourcing KYC checks to a third-party.
A number of top fintech execs decided to take their talents to startups:
Visa’s global head of fintech and crypto, Terry Angelos, left the playments giant to become CEO of DriveWealth, a startup that provides “behind-the-scenes infrastructure” to allow fintech apps like Cash App and Revolut to support fractional stock-trading.
David Marcus, former head of Meta’s ill-fated (and oft-renamed) Novi/Diem crypto project, launched a new venture, Lightspark, which will be based on the Lightning Network protocol.
Scott Young, Marcus’ Chief Commercial Officer informally known as the “deal guy” for his work securing the co-branding credit card deals with Apple, GM, and Amazon, has left to join early-stage lending startup iCreditWorks.
Google Chrome will offer the users the ability to use virtual card numbers when making online payments starting this summer. Google is working with Capital One as its launch partner for issuance, and all major networks will be supported when the product launches.
UK-based open finance provider Yapily acquired finAPI, the German fintech that offers an API to enable multi banking and digital account management services for banks, savings banks to offer their customers, for an undisclosed price.
Instagram announced that it is beginning to start testing NFTs with select creators this week.
Selected fundings
Crypto investigation and compliance services provider Chainalysis raised $170 million in Series G funding at an $8.6 billion valuation.
Payment infrastructure provider Paddle raised $200 million in a Series D funding round led by KKR at a valuation of $1.4 billion.
Egyptian digital payments enabler Paymob raised $50 million in a Series B funding round co-led by PayPal Ventures.
Altro, the Jay-Z-backed fintech that helps consumers build credit with everyday payments and subscriptions, raised $18 million in Series A funding.
Sao-Paolo based payments and digital banking platform Dock raised $110 million in growth funding at a valuation of over $1.5 billion.
Tifin, the personalization tool that matches investors to the advice and investments necessary to meet their wealth goals, raised $109 million in Series D funding at a valuation of $842 million.
UK-based open banking payments platform Token.io raised $40 million in new funding.