Fintech Update, 7/25 - 7/31
Hi! It’s Monday, August 1, 2022.
The Rundown
Apple is the latest tech firm caught in the crosshairs of Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra, who used the company’s recent announcement of its “Apple Pay Later” BNPL service to justify exploring the “implications of Big Tech entering this space.” The CFPB has been taking an increasingly forward stance toward fintech services, invoking “dormant authority” to support its potential supervision of nonbank fintech companies, taking aim at personal data sharing under the Fair Credit Reporting Act, and ratcheting up scrutiny of companies that partner with banks to offer loans and other financial services on a white-labeled basis. Whether the CFPB is serious about investigating Apple remains to be seen, but the indications are that the bureau’s leadership is skeptical about and eager to make an example of tech companies operating in the financial services space. Fintech firms should consider themselves warned and stay tuned for more.
The House of Representatives pushed back its consideration of a far-reaching stablecoin bill until early fall, after the August congressional recess, following late tweaks to include stricter consumer protection provisions. The proposed bill would explicitly regulate the US stablecoin market for the first time and reportedly both allow banks to issue their own stablecoins and make nonbank issuers subject to Federal Reserve oversight. Nevertheless, the delay only serves to “[underscore] Washington’s struggle to create new rules for digital asset marketplaces” amid intense disagreement and lobbying from industry groups on both sides of the debate.
Guess who’s back, back again? Durbin’s back – so let’s spend. A bill introduced by Senator Dick Durbin (D-Ill.) would aim to introduce more competition into the US credit card industry by allowing merchants to process Visa and Mastercard credit cards over unaffiliated networks, changing the interchange economics for credit card purchases to encourage new challenges to Visa and Mastercard’s duopoly on card transactions. If passed, the bill effectively would extend the Durbin Amendment (the senator’s amendment to the 2010 Dodd-Frank Act that required all debit cards to run on at least two unaffiliated networks) to credit cards, although it is expected that the rule would apply only to institutions with more than $100 billion in assets.
The Securities and Exchange Commission (SEC) is investigating Coinbase over allegations that the popular crypto exchange allows customers to trade digital assets that should be registered as securities. The securities regulator has “stepped up scrutiny of the issue since Coinbase began ramping up the number of tokens on its platform.”
The Central Bank of Kenya ordered Chipper Cash and Flutterwave to halt operations and “directed all financial institutions to cease doing business with [them]” because the firms are “not licensed remittance or payment service providers in Kenya.” The news is a significant regulatory and reputational blow to two of the country’s top fintech firms, both of which are very active in digital payments and cross-border remittances.
Jack Ma reportedly plans to cede control of Ant Group following years of pressure by the Chinese government. This would be the final chapter in a strange, winding story that began when Ma made inflammatory comments about China’s regulatory apparatus on the eve of Ant’s planned mega-IPO in 2020, which was subsequently scuttled by the government and kicked off a multi-month review and restructuring of the company.
The Reserve Bank of India reportedly “wants to ban cryptocurrencies . . . raising more uncertainty about [their future] in the world’s second largest internet market.”
MX named PayPal executive Jim Magats as its new CEO.
Lemonade closed its acquisition of Metromile and laid off 20% of its staff (60 employees).
Selected fundings
Dbank, the Pakistani fintech offering transparent and friendly financial services, raised $17.6 million in a seed funding round co-led by Sequoia and Kleiner Perkins.
Balance, the payments platform for B2B merchants and marketplaces, raised $56 million in a Series B funding round led by Forerunner.
Business onboarding and risk scoring platform Kompliant raised $14 million in seed funding.