Fintech Update, 7/17 - 7/23
Hi! It’s Monday, July 24th, 2023.
The Rundown
FedNow, the Federal Reserve’s long-awaited instant payments infrastructure, went live this week. The service allows for 24x7 instant money movement via “push” transactions that consumers initiate themselves. The US’s fragmented payments infrastructure, primarily composed of ACH, wires, checks, and card payments, has lagged behind other countries with sophisticated instant payments systems like India (UPM) and Brazil (Pix). These alternative payment systems also offer “pull” transactions, which allow businesses with permission to debit accounts (the Fed currently doesn’t plan to offer this functionality, but observers expect this to change over time). The initial list of FedNow participants includes 35 banks (most significantly JPM and Wells Fargo) and 16 service providers (most of the major core providers), but it has notable big bank omissions (e.g. Citi, BofA, and Goldman) and only includes one fintech: Adyen. We expect financial institutions and fintechs to take a wait-and-see-approach to offering FedNow, as early adoption is uncertain. Some observers worry that it will destabilize the financial system, speeding up bank runs and offering a greater surface area for cyber attacks. While limited capabilities and questions about adoption at launch suggest FedNow will not immediately transform U.S payments, it's a major step forward for money movement infrastructure.
Block sued Visa and Mastercard over allegations that the two payment networks conspired to inflate their interchange fees. Block said in the suit that “the effect of these artificially inflated fees — assessed to and paid by Square — is higher retail prices paid by consumers economy-wide.”
German digital bank N26 faces additional penalties after the country’s financial regulator (BaFin) discovered continued “deficiencies” in its BSA/AML systems. N26 must continue to cap its new customers at 50,000 per month, improve its IT monitoring, quality assurance, and outsourcing controls, and allow BaFin auditors to embed at the company.
China’s central bank reported that transactions using the country’s digital yuan “hit 1.8 trillion yuan ($249.33 billion) at end-June . . . a jump from over 100 billion yuan as of August last year.” The success of China’s CBDC far outstrips that of any other country at the moment, with Chinese officials noting that adoption and features are still in their early days.
Biometric payments are coming to a Whole Foods near you… Amazon will roll out its Amazon One palm-scanning technology to all Whole Foods stores by the end of the year, allowing customers to buy their organic kale and 2 lb bags of flax with a literal wave of the hand. Amazon reported 3 million uses of Amazon One across ~200 stores so far, with “growing demand.”
FTX sued disgraced former CEO Sam Bankman-Fried for allegedly misappropriating hundreds of millions of dollars from the company, including making a $10 million gift to his father, which FTX attorneys claim is now being used to pay SBF’s criminal defense bills, and supporting plans to buy Nauru “as a potential apocalypse hideaway.” Totally normal, nothing to see here.
U.S. House Republicans introduced a new draft of the digital assets oversight bill first drafted in early June. The bill “aims to lay down a regulatory path for crypto exchanges to register with the U.S. Securities and Exchange Commission (SEC), and would enable them to trade digital securities, commodities and stablecoins all in one place.”
Crypto media company CoinDesk is nearing a deal to be sold for $125M to an investor group. CoinDesk’s parent company, Digital Currency Group (“DCG”), has been affected by the crypto downtown and has been considering a sale since January. DCG acquired CoinDesk for $500k in 2016. Not bad…
Selected fundings
Cross border B2B payment platform Thunes raised $72 million in Series C funding at a $900M+ valuation.
Karat, which provides creators with tools to manage their finances, raised $70M - $40M in a Series B funding round led by SignalFire and $30M in debt financing.
Collectly, which helps medical providers collect payments, raised $29M in a Series A funding round led by Sapphire Ventures.
Runway, which allows businesses to create, manage, and share financial models and plans, raised $27.5M in Series A funding.