Hi! It’s Monday, August 28th, 2023.
The Rundown
ICYMI: The Consumer Financial Protection Bureau (CFPB) introduced a proposed rulemaking that would place new restrictions on the sale of personal data to feed digital advertising and artificial intelligence. The proposal is two-fold: first, expanding the definition of a “consumer reporting agency” (e.g., Equifax, Experian, and TransUnion) to include many data brokers; and second, both expanding the information that would constitute a credit report and adding protections around sensitive personal information. The proposed rule will be published in September. Our take: The data used by many fintech firms (cashflow data, alternative underwriting data, and more) is about to get much more regulated! Much of the data in question currently are bought and sold as easily as t-shirts; but under the new rule, sellers of consumer information would be required to do more due diligence on the data and could be required to place additional safeguards around who can buy it and for what purposes. In any case, we expect to see many more data brokers coming under the Bureau’s authority.
Following up on a story from two weeks ago, mortgage lending fintech Better (which you may remember from previous misadventures like the time the company's CEO brutally laid off 900 employees on a zoom call in 2021) formally announced its merger with SPAC company Aurora and its new status as a publicly traded company on the Nasdaq exchange (ticker: BETR). That may have been the company’s high point: share prices fell 95% on their first day of trading, dropping so quickly that trading was halted four times in BETR’s first 30 minutes on the exchange. Better operates in all 50 US states and the United Kingdom, funding over $100 billion in mortgage loans in its six years of operation. Our take: Going public when rates are at an all-time high in order to raise capital was a tough move. While Better genuinely outcompetes many of its traditional bank competitors, critical management fumbles could ultimately be the company's downfall. This is one to watch.
Digital brokerage firm Titan agreed to a cease-and-desist order from the Securities and Exchange Commission (SEC), and will pay roughly $1 million in clawbacks and fines, for making misleading statements in its crypto-related advertising between August 2021 and October 2022. According to the SEC, the charges were the first brought against a firm under the agency’s amended marketing rule of 2020, with violations that included “misleading statements on its website regarding hypothetical performance, including by advertising ‘annualized’ performance results as high as 2,700 percent for its Titan Crypto strategy.” Later in the order, the SEC also called out broader compliance failures concerning investor disclosures and disclaimers as well as internal policies and procedures.
New Jersey recently passed a law limiting the fees that merchants in the state can charge on credit card purchases, preventing them from imposing higher surcharge fees than the network charges them. The new law also requires more transparent fee disclosures prior to completing a sale. With credit card fee increases in vogue around the world over the past few years, we hope to see more initiatives coming in support of consumers.
Mastercard ended its partnership with Binance, which offered crypto-funded cards in Latin America and the Middle East. In July, Visa ended a similar relationship with the crypto exchange in Europe. Binance faces multiple charges from the SEC and CFTC, and the DoJ is considering charges of its own.
Coinbase deepened its ties with Circle by taking a stake in the stablecoin issuer. The two firms will close down the Centre Consortium, a private governance organization established to guide policy thinking around Circle’s USDC stablecoin, citing “regulatory clarity” on stablecoins.
JPMorgan’s payments arm launched a contactless payment solution for merchant clients that allows them to accept payments via iPhone.
The great fintech consolidation continues! Yahoo acquired CommonStock, a broker-agnostic social and community-based platform that drives insights for retail investors, for an undisclosed price. The acquisition “builds on Yahoo's strategy to transform Yahoo Finance into the premier, one-stop destination for retail investors.”
The Reading Nook
The Federal Trade Commission (FTC) posted a blog about the risks posed by touting artificial intelligence in ads (“FTC says ‘AI’ stands for ‘allegedly inaccurate’”), including commentary on a recent enforcement action against Automators AI, a fintech that claimed to automate storefronts. Worthwhile reading for any fintech advertising AI capabilities.
Reuters argues that PayPal’s new PYUSD stablecoin will succeed where Facebook’s Libra project failed, due to PayPal’s standing in Washington and a greater understanding of stablecoins among policymakers. What do you think?
Selected fundings
Ramp raised $300 million in a new funding round co-led by Thrive Capital and Sands Capital at a $5.8 billion post-money valuation. The round represents a 28% decrease in valuation, not too bad when looking at how fintech companies have performed in the public markets…
Crypto lender Maple Finance raised $5 million in new funding.
Thanks for this!