\nFintech startup Brex was among the bidders for SVB\u2019s early-stage and growth portfolios<\/br>
\n2023-05-15 22:08:02<\/br><\/p>\n
Welcome to\u00a0The Interchange<\/a>! If you received this in your inbox, thank you for signing up and your vote of confidence. If you\u2019re reading this as a post on our site, sign up\u00a0<\/em>here<\/em><\/a>\u00a0so you can receive it directly in the future. Every week, we\u2019ll take a look at the hottest fintech news of the previous week. This will include everything from funding rounds to trends to an analysis of a particular space to hot takes on a particular company or phenomenon. There\u2019s a lot of fintech news out there and it\u2019s our job to stay on top of it \u2014 and make sense of it \u2014 so you can stay in the know. \u2014\u00a0Mary Ann<\/a>\u00a0and\u00a0Christine<\/a><\/em><\/p>\n The FDIC finally released the various financial institutions<\/a> that bid for parts of Silicon Valley Bank\u2019s portfolio. As our fellow fintech enthusiast Alex Johnson pointed out<\/a>, there was one name that stood out on that list for being \u201cnot like the others\u201d: fintech startup Brex.<\/p>\n TechCrunch spoke with Brex co-CEO and co-founder Henrique Dubugras, who confirmed that the company did in fact put its name in the hat for SVB but only for the early-stage and growth portfolios within its business.<\/p>\n The idea actually came from a customer, he said, who thought Brex \u201ccould handle those customers better than big banks.\u201d The first week after the SVB meltdown<\/a>, the FDIC was not going to accept any bids from entities other than banks. During that time, Brex worked to step up for SVB customers in other ways<\/a>. Then the following week, the FDIC said it was open to selling it by parts \u2014 and also open to non-banks submitting bids.<\/p>\n \u201cThat\u2019s when we submitted our bids,\u201d Dubugras said.<\/p>\n While the offer didn\u2019t pan out, he doesn\u2019t regret Brex taking a shot at it. \u201cIn the end, we think it was just easier for them to sell the whole thing in one piece,\u201d he added.<\/p>\n Still, the startup continues to \u201ckeep seeing [its] deposits materially increase,\u201d as not every startup or early-stage that once banked at SVB wants to move their cash over to a big bank.<\/p>\n At one point (in early 2021), Brex was in fact thinking of becoming a bank itself, going as far as to apply for a bank charter<\/a>, before later withdrawing that application<\/a>.<\/p>\n Today, Dubugras said that\u2019s not something he thinks is in Brex\u2019s future. \u2014 Mary Ann\u00a0<\/em><\/p>\n Different demographics can have different banking needs. So it\u2019s no surprise that we have seen a flurry of financial technology startups offering banking services catered to certain populations based on factors such as age and ethnicity.<\/p>\n For example, numerous fintech startups cater to younger users \u2014 from Greenlight to Step to Current and now, Acorns. There are banks that target specific ethnicities and\/or races. Greenwood<\/a> wants to serve Black and Latinx consumers; Cheese<\/a> started out targeting Asian American consumers; numerous (TomoCredit, Welcome) are eager to serve immigrants.<\/p>\n But far less common are fintechs dedicated to serving older members of our society. Enter Charlie<\/a>, a new startup offering banking services for the 62+ community, which launched last week with $7.5 million in funding led by Better Tomorrow Ventures. The company\u2019s goal, according to co-founder and CEO Kevin Nazemi (who also co-founded now publicly traded Oscar Health), is to help retirees and soon-to-be-retirees \u201cmake the most of their limited resources.\u201d<\/p>\n My ears perked up when I got this pitch, as it\u2019s a concept that hasn\u2019t come across my inbox in all my years of covering fintech. I realized that (1) older Americans have fewer options when it comes to digital banking and (2) the COVID-19 pandemic really did lead to a lot of people who were once resistant to online banking being won over by the ease and convenience. And while trust probably remains an issue for some, I suspect a decent segment of this population would welcome more options.<\/p>\n Perhaps Jake Gibson, founding partner of Better Tomorrow Ventures, said it best. He told TechCrunch that he believes that the \u201cvast majority of founders, including in fintech, tend to build products for people that look like themselves.\u201d<\/p>\n \u201cThat\u2019s why we have so many repetitive neobanks, social investing apps, etc. Meanwhile you can probably count on one hand the number of fintech companies serving the needs of seniors, despite that being such a huge population,\u201d he added. \u2014 Mary Ann\u00a0<\/i><\/p>\n One of the fun stories I wrote this week was on Cable<\/b><\/a>, a company that provides automated assurance and risk assessment. I don\u2019t normally dabble in the financial crime sector of fintech, but what co-founders Natasha Vernier and Katie Savitz are doing is pretty interesting.<\/p>\n Why? Well, people in the U.S. reported $8.8 billion of financial fraud in 2022 to the Federal Trade Commission<\/a>. And as Vernier explained to me, much of the controls monitoring by banks and fintechs to make sure they can prevent fraud is still done manually.<\/p>\n By automating this process \u2014 which is something Vernier believes Cable is the only company doing right now \u2014 banks and fintechs can monitor all of their accounts to know, in real time, if they are compliant with regulations and if their failure controls are working as expected to combat breaches.<\/p>\n The concept is catching on: In the past year, the company increased its revenue five times, and raised $11 million in Series A capital, led by Stage 2 Capital and Jump Capital, with participation from existing investor CRV.<\/p>\n \u201cRegulators are particularly interested in effectiveness testing, but also, just the volatility in the banking industry right now, with COVID and if we are in a recession or not, there is increased financial crime,\u201d Vernier said. \u201cWe\u2019ve certainly seen, globally, an increase in fraud and other types of financial crime over the last few years. And, as real-time payments get rolled out in the U.S., we\u2019ll see more financial crime.\u201d \u2014\u00a0Christine<\/i><\/p>\n Alex Wilhem was on fire last week when it came to analyzing the fintech space. In this piece<\/a>, he looked at how both Coinbase<\/strong><\/a> and Robinhood<\/strong><\/a> reported better-than-anticipated revenue in the first quarter. He wrote: \u201cThe changing revenue mix at both Coinbase and Robinhood makes it clear that their ability to generate material amounts of revenue off cash balances (and the crypto equivalent) is changing the game in their favor. Studying public company performance is a great way to better understand what\u2019s happening in that segment of the market, so that\u2019s what we\u2019re doing today with Coinbase and Robinhood. As always, we\u2019ll relate what we\u2019ve learned back to startups.\u201d<\/p>\n Alex also leapt off how PayPal <\/strong>saw its stock drop despite the company reporting better-than-expected<\/a> revenue and profit in the first quarter. He wrote: \u201cIndeed, fintechs haven\u2019t fared well at all<\/a> even when you account for the broader dip in valuations at tech companies. It almost feels unfair. Comparing data from F Prime\u2019s fintech index<\/a> with valuation marks for SaaS and cloud companies<\/a> in terms of historical revenue multiples, it appears that fintech companies are being clobbered a little too much. So why are fintechs today worth less than they were before the recent venture boom? Why are cloud companies faring better?\u201d More here<\/a>.<\/p>\n Christine, too, was busy covering Capchase<\/strong>\u2019s move into the buy now, pay later space. In a nutshell, Capchase Pay is aimed at helping software-as-a-service companies close deals faster by giving them a way to collect the full contract value for their software while also providing their customers with flexible payment terms. Though SaaS growth didn\u2019t take as big of a hit<\/a> as previously thought, Miguel Fernandez, co-founder and CEO of Capchase, told TechCrunch \u201cthat SaaS companies did see a shift in their return on investment when sales cycles delayed as buyer\u2019s asked for more flexible financing terms.\u201d He called buy now, pay later offerings \u201cone of the last B2B payment frontiers to be done in software.\u201d More here.<\/a><\/p>\n Christine also wrote about the District of Columbia Attorney General announcing an agreement with SoLo Funds, a fintech company that enables peer-to-peer lending, to settle a lawsuit that alleged SoLo Funds engaged in predatory lending practices. As Christine wrote, SoLo denied the allegations in the Complaint and denied that it had violated any law or engaged in any deceptive or unfair practices. More here<\/a>.<\/p>\n Reports Manish Singh: \u201cAfter India and Brazil, WhatsApp is launching the ability to pay businesses within a chat in Singapore. Meta has partnered with Stripe to roll out the feature in the region. WhatsApp has built this payment feature using Stripe Connect and Stripe Checkout solutions, making in-app payments available online and offline. Customers can pay businesses using credit cards, debit cards or Singapore\u2019s PayNow<\/a> fund transfer system.\u201d More here<\/a>.<\/p>\n \u201cIn recent weeks, a number of brand-name mainstream financial institutions have been rolling out new crypto products and services in an attempt to make the space more accessible. At the end of April, Mastercard<\/a>, PayPal<\/a> and Robinhood all independently talked about the measures they\u2019re taking to do so at Consensus 2023 and how they are furthering their moves into the crypto ecosystem.\u201d More here<\/a>.<\/p>\n Dan Primack interviewed Stripe president John Collison at Axios\u2019 BFD event<\/a> this week and discussed Stripe\u2019s annual letter<\/a>, among other things. Here are some takeaways from that interview:<\/p>\n Fast co-founder Domm Holland is back with a new venture<\/a>, Trady. After seeing his last two companies go bust, we have to say he\u2019s certainly, uh\u2026bold.<\/p>\n This tweet\u2019ll<\/a> make you think. (Courtesy of Theodora [Theo] Lau, founder of Unconventional Ventures<\/a>.)<\/p>\n More headlines<\/em><\/p>\n Onboarding and automation: What fintechs can learn from big banks<\/em><\/a><\/p>\n Plaid signs agreements to migrate traffic to financial institutions\u2019 APIs<\/em><\/a><\/p>\n Revolut\u2019s CFO leaves the digital bank after two years, citing personal reasons<\/em><\/a><\/p>\n Visa partners with Tarabut Gateway<\/em><\/a>.<\/em>\u00a0This news follows <\/em>Tarabut Gateway\u2019s $32 million raise<\/em><\/a> last week to expand Saudi open banking.<\/em><\/p>\n Twitter to add encrypted direct messages and voice and video chat<\/em><\/a><\/p>\n Shopify launches eCommerce payments tool with help from Israeli fintech Melio<\/em><\/a><\/p>\n Tema launches active luxury and reshoring ETFs<\/em><\/a><\/p>\n Paysend launches cross-border payments solution for small businesses in US<\/em><\/a><\/p>\n Affirm<\/b> reported<\/a> a quarterly loss of 69 cents per share for the quarter ended March 2023, compared to a loss of 19 cents per share a year ago. However, it said revenue was $381 million, an increase of 7.4% over the same period in 2022. Its gross merchandise volume was up 18% to $4.6 billion, and the company said it represents a 43% compounded annual growth rate on a two-year basis. In terms of transactions, Affirm reported that 88% of them were from repeat customers, while transactions per active consumer increased by 34%.<\/p>\n Robinhood<\/b> also posted mixed earnings for the first quarter<\/a>, including a net loss of 57 cents in earnings per share on net interest revenue of $208 million. That compares to a net loss of 19 cents per share on net interest revenue of $167 million for the fourth quarter of 2022. In addition, the company launched 24 Hour Market<\/a>, which it said makes \u201cRobinhood the first brokerage to enable customers to trade individual stocks at their convenience, 24 hours a day, five days a week.\u201d<\/p>\n Dave<\/b>, a neobank, reported that it narrowed its loss, posting a net loss of $14 million on revenue of $58.9 million, for the first quarter ended in March. That compared to a net loss of $32.8 million, on revenue of $42.6 million, for the same period in 2022.<\/p>\n Courtesy of Jason Mikula of Fintech Business Weekly: \u201cVaro<\/b> did reduce its overall loss by about 11% vs. Q4 2022 but, at nearly $29 million, the fledgling neobank is still a long way off from profitability \u2014 which helps to explain why the company raised an additional $50 million in equity at a substantially reduced valuation, as first reported<\/a> by Fintech Business Weekly. Still, the additional capital extends Varo\u2019s runway by less than six months, based on its current burn rate. The additional $50 million in funding was finalized in April, per management comments in the call report, and thus is not reflected in Varo\u2019s Q1 data.\u201d More here<\/a>.<\/p>\n Seen on TechCrunch<\/i><\/p>\n Salsa dips into $10M to fire up payroll features for software companies<\/i><\/a><\/p>\n The Mint, started by Better Tomorrow Ventures, wants to be the accelerator fintech needs<\/i><\/a><\/p>\n Petal raises $35M, spins off data unit \u2018to bring credit scores into the 21st century\u2019<\/i><\/a><\/p>\n Triumph raises $14M for an SDK to add real-money tournaments into games<\/i><\/a><\/p>\n 8fig gives smaller e-commerce businesses the \u2018C-suite\u2019 they\u2019ve always wanted<\/i><\/a><\/p>\n Zamp wants to give online sellers \u2018freedom from sales tax\u2019<\/i><\/a><\/p>\n And elsewhere<\/i><\/p>\n EasyKnock acquires power buyer Ribbon<\/i><\/a><\/p>\n Cross-border processor Rev acquires online payments company Netspend to reach underbanked customers<\/i><\/a><\/p>\n Join us at TechCrunch Disrupt 2023 in San Francisco this September as we explore the impact of fintech on our world today. New this year, we will have a whole day dedicated to all things fintech, featuring some of today\u2019s leading fintech figures. Save up to $800 when you buy your pass now through May 15, and save 15% on top of that with promo code INTERCHANGE. Learn more<\/a>.<\/em><\/p>\n As always, we\u2019re so grateful for your readership and support! Have a wonderful week ahead!! xoxoxo, Mary Ann and Christine<\/p>\n <\/br><\/br><\/br><\/p>\nBrex bid for SVB portfolios<\/h2>\n
Digital banking for seniors<\/h2>\n
Financial crime prevention<\/h2>\n
Weekly News<\/h2>\n
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Earnings of note<\/h2>\n
Funding and M&A<\/h2>\n
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