Fintech Update, 6/19 - 6/25

Jun 26, 2023

Hi! It’s Monday, June 26th, 2023.

We’ll be off next week in celebration of U.S. Independence Day! 🇺🇸🇺🇸🇺🇸

Enjoy the fireworks 🎆, hot dogs 🌭, and short work week. 🥳 We’ll be back in your inbox before you know it on July 10. - Team TFU

Robinhood acquired income-based rewards credit card X1 for $95 million. This is Robinhood’s first foray into the credit card market, signaling both a new revenue stream and the company’s continuing ambition to broaden out of its traditional brokerage product and into a more complete set of banking offerings.

According to new documents released by the New York Attorney General, stablecoin issuer Tether’s reserves at one time included commercial notes from Chinese companies, confirming a 2021 report from Bloomberg and refuting Tether’s claims to the contrary. Our take? Tether’s stablecoin may no longer be backed by Chinese paper, but the NYAG’s release is just more evidence that Tether’s claim to be backed 1:1 by US Dollars is, to use a technical term, a bunch of malarkey. As we covered in May, only about 76% of Tether’s reserves were backed by US Treasuries then, and the so-called “stable” coin has lost its peg several times since last year (as recently as two weeks ago!).

The Consumer Financial Protection Bureau’s (CFPB) Office of Servicemember Affairs released its annual report on the challenges servicemembers face with consumer financial services [full text]. While the vast majority of the over 66,000 complaints assessed by the report relate to traditional sources of dissatisfaction (such as credit reporting, debt collection, and credit cards generally), the report highlights that “servicemembers submitted more than 1,100 payment app complaints, one of the fastest-growing complaint types submitted to the CFPB.” In addition to recommending that digital payment app providers like PayPal, Zelle, Venmo, and CashApp bolster their security to prevent fraud, the CFPB’s report also highlights the need for improved responsiveness in the event of fraud and fraud loss policies tailored to the unique needs of military families. Our take– Zooming out, we see the same principles outlined in the CFPB’s report applying to all consumers, servicemembers or not. The CFPB and other regulators have been putting fintech firms under closer scrutiny, and servicemembers are a highly visible class of consumer on whose behalf the Bureau can outline principles that will apply to all. Fintech firms, especially in the payments space, should take notice.

Speaking before the House Financial Services Committee about digital assets, Federal Reserve Chair Jerome Powell noted that the Fed “[sees] payment stablecoins as a form of money, and . . . it would be appropriate to have quite a robust federal role” in the regulation of such assets.

Goldman Sachs is expected to take a significant write-down on GreenSky, the fintech lender it acquired in 2021 and is now trying to sell as part of the bank’s shift away from consumer business. Bidders reportedly are offering roughly $300 million to $500 million for the lending platform, which Goldman purchased for $2.24 billion.

Alphabet launched “Anti Money Laundering AI,” a new artificial intelligence tool inside Google Cloud that “uses machine learning to help clients in the financial sector comply with [AML] regulations” like transaction monitoring and suspicious activity reporting. The API-based tool is already being used by HSBC, Brazil’s Banco Bradesco, and Danish digital bank Lunar.

Plaid launched Beacon, a collaborative network of financial institutions and fintech companies that, through their mutual use of Plaid, can report instances of fraud to each other.

Dutch payments firm Adyen announced a global partnership with Shopify, supporting the latter’s “expansion into the enterprise segment through diversified commerce solutions.”

EDX Markets, a new institutional crypto exchange backed by Citadel, Fidelity, and Charles Schwab, launched last Tuesday. Unlike Coinbase or Binance, which have drawn criticism for requiring users to custody their crypto assets with the exchange, EDX has taken a noncustodial approach: trades on EDX will be matched and negotiated on the exchange, but customer assets will be held with third parties.

African payments firm Flutterwave signed a “five-year technological agreement” with Microsoft, committing to use the tech giant’s Azure platform to “[power] payments infrastructure across the African continent and beyond.”

Our friends Jenny Johnston and Nik Milanovic at This Week in Fintech wrote an excellent white paper on the future of money movement!

The New York Times published a fascinating piece about the hazards of being a crypto lawyer, including what can go wrong when you’re paid in a company’s coins or you brag about interactions with regulators. (Pro tip, probably don’t do either of these.)

British open banking startup Volt raised $60M in a Series B funding round led by IVP.
Yendo, which offers a car-secured credit card, raised $24M in Series A funding led by FPV Ventures.
Heard Technologies, an accounting tool provider for therapists, raised $15 million in a Series A extension round led by Headline.
Debt collection software provider Aktos raised $4.4 million in a seed funding round co-led by 8VC and Crew Capital.