Fintech Update, 6/27 - 7/10
Hi! It’s Monday, July 11, 2022.
The Rundown
The Consumer Financial Protection Bureau (CFPB) issued guidance clarifying rules around personal data gathering and sharing under the Fair Credit Reporting Act (FCRA). The Bureau’s interpretive rule requires “companies that use and share credit reports and background reports [to] have a permissible purpose under the [FCRA]” and goes further to clarify that entities working with personal data “have specific obligations to protect the public’s data privacy . . . [and have] potential criminal liability for certain misconduct.” By dialing up legal protections for personal data under the FCRA and increasing penalties for violators, the CFPB is demonstrating a firmer stance on “exploitation of personal data in background screenings and credit reports,” including – and possibly motivated by – the troves of financial data held by big tech companies. In Fall 2021, CFPB Director Rohit Chopra commented that “Big Tech companies are eagerly expanding their empires to gain greater control and insight into our spending habits” in reference to the CFPB’s demand for Amazon, Apple, Meta, and Google to provide details on their use of consumer data. The CFPB lately has been increasingly active in targeting fintech and big tech, and this news may be the Bureau's latest salvo as it opens up a new front in the area of tech-driven or tech-enabled credit reporting.
The Bank of England’s policy division has recommended “enhanced regulation” with respect to crypto asset markets, noting that such assets pose an increasing risk to the financial system as they become more integrated with the wider economy. The recommendation was spurred in particular by the recent global crypto selloff, which has wiped out over $2 trillion of value over the past few months.
Swedish BNPL firm Klarna reportedly is raising new funding at a $6.5 billion valuation, down from the $15 billion valuation it was discussing only a month ago. The round is said to be valued at $650 million, mostly from existing investors, and led by Sequoia. The new valuation would be a stunning decline for a company that was valued at over $46 billion one year ago.
The Federal Trade Commission (FTC) sued Walmart for allegedly “allowing its money transfer services to be used by fraudsters” by failing to properly train employees, verify customers, and monitor transactions, allowing bad actors to steal hundreds of millions of dollars. Walmart called the suit “factually flawed and legally baseless.”
Crypto exchange FTX agreed to provide a loan to embattled crypto lender BlockFi, giving it some much-needed liquidity, in exchange for the option to buy the firm at a maximum price of $240 million. The deal is the shocking conclusion to the devaluation of BlockFi, which was valued at $3 billion in March 2020.
…meanwhile, fellow crypto broker Voyager filed for bankruptcy protection amid the massive downturn in crypto markets generally and the recent “collapse” of crypto hedge fund Three Arrows Capital specifically. (Three Arrows, which also had promised to bail out BlockFi, defaulted on a loan of 15,250 BTC and $350 million USDC.)
…and Vauld became the latest crypto lender to pause withdrawals from its platform due to “volatile market conditions.”
Australian BNPL firm Openpay halted its U.S. operations after facing significant losses amid a tumultuous tech market, rising interest rates, and broader uncertainty in the economy. Only four months ago, Openpay described the US as its primary growth market.
Revolut announced it will use Stripe to support the firm’s payment processing in the UK and Europe, with the goal of leveraging Stripe’s infrastructure to enter new global markets such as “Latin America, India and the Philippines” – faster and more seamlessly over time.
But wait, there’s more! Revolut also launched its first foray into hardware, announcing a physical point-of-sale device called the Revolut Reader, which will allow merchants to accept payments at “0.8% + £0.02 per transaction.”
In what has become a weekly story, layoffs have continued across tech: Amount, which was valued at over $1 billion last year, let go of 18% of its staff amid broad cost-cutting efforts. Meanwhile, TechCrunch has summarized the industry’s grim trend: the 4,189 fintech employees laid off in the first half of 2022 make up 11.2% of all startup employees laid off in that period.
One-click checkout startup Bolt settled the lawsuit brought by one of its biggest customers, Authentic Brands Group . . . which has now become a shareholder of Bolt. Everyone wins!(?)
Flutterwave denied fraud and money laundering claims by Kenya’s High Court, which froze the African payment startup’s bank accounts holding more than $40 million.
Noooooooooo…vi! Meta will shutter its beleaguered crypto wallet, Novi, a project that has suffered through a tumultuous year since launching as a “pilot” last October despite not supporting Diem, Meta’s in-house cryptocurrency (f.k.a. Libra, which has its own drama). So, pour one out for Novi this week – Novi, we hardly knew ye.
