Fintech Update, 7/24 - 7/30

Jul 31, 2023

Hi! It’s Monday, July 31st, 2023.

The Securities and Exchange Commission (SEC) introduced a proposed rule that would treat algorithms and engagement features like push notifications, gamification, and “top mover” lists as investment advice – and would hold such features to the same fiduciary standard. The rulemaking is aimed at the use of predictive analytics by broker-dealers and investment advisors, impacting companies like Robinhood, which would be required to eliminate any conflicts of interest created by the use of such tools and algorithms. Our take? Federal regulators are still trying to get their arms around the new world of trading, as retail investors increasingly use complex tools that put them in the crosshairs of institutional investors in the wake of the Gamestop meme-stock craze and the advent of viral trading threads on sites like Reddit. Fintech platforms like Robinhood stand to profit from high frequency trading and the use of advanced transactions like margin loans, which a human advisor would be unlikely to recommend to a daytrader, creating a moral hazard for such firms. The SEC’s proposed rule represents a new effort to rebalance the playing field and ensure unsophisticated investors have some basic protections from tools that may be difficult to understand yet easily used against them.

Financial data transfer firm Plaid expanded its partnership with Cross River Bank, selecting the bank to support its new efforts in real-time money movement. Cross River’s APIs connect to “multiple payment networks, including ACH, RTP, and eventually, the new FedNow system,” all of which will help Plaid customers “send and settle funds instantly” through APIs.

Shopify launched a business credit card designed for its merchants – expanding deeper into fintech and into lending for the first time – powered by Stripe, issued on Celtic Bank, and running on Visa. The “pay in full” card is functionally a charge card, which does not permit businesses to revolve balances and instead requires them to pay off monthly statements.

AngelList is getting into private equity with its acquisition of Nova, a startup that builds investor management software for private funds. Since launching in 2010 as a fundraising channel for early-stage startups, AngelList has grown into a full-service financial management tool for startups, offering support for hiring, banking, and venture investing.

Chinese fintech giant Ant Group, which has faced intense regulatory pressure and government-mandated changes to its leadership over the past several years (following a scuttled IPO in 2020 and public fallout between the government at Ant’s founder, Jack Ma), reportedly is “planning a restructuring that will break off some operations that aren’t core parts of its China financial-related business . . . [allowing it to] revive an initial public offering in Hong Kong.”

Digital credit firm Upgrade will acquire travel-focused BNPL company Uplift for $100 million. The purchase will add roughly 3.3 million new customers to Upgrade, and at a nearly 50% discount from Uplift’s $195 million Series C valuation.

American Express debuted its Sync Commercial Partner Program, giving fintechs and software providers the ability to embed AmEx virtual cards into their existing B2B payment workflows.

Bogota-based food delivery startup Rappi is getting into the lending business, supporting restaurants in Mexico and Colombia that have been on the platform for at least three months.

Sam Altman, CEO of ChatGPT parent company OpenAI, launched his crypto startup, Worldcoin.

It’s not strictly fintech, but… Banc of California and PacWest Bancorp merged to create a new bank (keeping the PacWest name) with $36 billion in assets and 70 locations around California. To raise additional cash, the combined entity also sold $400 million in equity to Warburg Pincus and Centerbridge Partners.

What’s Elon up to? Bloomberg explores the fintech ambitions and future shape of X, as owner Elon Musk looks to “turn Twitter into a one-stop shop for financial services.”

The Consumer Financial Protection Bureau (CFPB) released a blog on the advantages of underwriting with cash flow data compared to credit score alone. While the blog post does not specifically mention fintech, firms like OnDeck, Kabbage, Square Capital, and Petal generally are credited as the innovators that brought cash flow underwriting to market. Despite this omission, we’re glad to see the CFPB taking a positive view of this innovation (for more on the benefits of cash flow underwriting, see an excellent research from FinRegLab).

Dutch digital bank Bunq raised €100M in equity funding at a valuation of €1.65B, the same valuation as its previous $228M round in 2021. The “inside round” was raised from previous backers Pollen Street Capital, Raymond Kasiman, and founder and CEO Ali Niknam.
GlossGenius, a platform for spa and salon bookings and payments, raised $28 million in Series C funding from L Catterton, Bessemer Venture Partners, and Imaginary Ventures.
High-end merchant point-of-sale firm Croissant launched with $24 million in seed funding from a suite of investors, including Portage and KKR co-founders George Roberts and Henry Kravis.