Hi y’all, Cokie here.
I can’t decide if the new jacket I bought for autumn is basic. JK, today I want to talk about customizable banking.
Remember community banks? Their value prop was always “oh, you live in Middletown, Ohio? So do we.” The experience was personalized, almost intimate, based on communities of geography. (I really love community banks, btw, don’t get me started.)
Close your eyes. Recall your last bank experience. Because it is 2020, I opened my app. Chase seems to think I really want a 10% discount at Olive Garden. Your bank doesn’t know you, they don’t leverage the enormous data you entrust them with to improve your experiences. They don’t know that this bitch does not go to Olive Garden.
Now, imagine for a moment that you, like, love chess. You buy all the petit accoutrements and enter tournaments and competitions. Your hobby constitutes a significant portion of your disposable income. In comes Stalemate Bank, a bank for people who love chess. This is called a community of affinity. Stalemate Bank knows when your next tournament is and automatically pulls from your income source to save for it. It knows that you’ve been scoping out a new timer, and moves the exact price to your credit card in advance. It knows you just won a tournament and can recommend what to do with those savings. (Sidenote: can y’all tell I don’t know anything about chess yet?) Communities of affinity can be any size and based on anything. You love Blackpink, you ride a Peloton, you’re one of those people that doesn’t kill their plants, literally whatever. Or, perhaps Millennial Bank is for freelancers, and knows how to tailor its offerings to someone with that lifestyle and income stream (this is already happening).
You guys usually hear me talking about banking-as-a-service from the perspective of what flawless infrastructure can do for the 25% of Americans that are unbanked, but I wanted to discuss some of the attractive features underserved customers can anticipate in the future. Once customers of BaaS providers start scaling, we’re in for nothing short of a revolution. A totally customizable era of banking. I’m not sure what this means for the neobanks we all talk about fairly frequently these days, but I’m sure they’re thinking about better ways to customize their products for their own target markets. For the neobanks just being born, they’re already tailoring to communities of affinity (albeit, a few more high net worth offerings than i care to see).
Work smarter, not harder, baby ;).
Playlist this week is chaotic -- just went with what I’ve been listening to a lot recently. With input from Wade Arnold, Mike McCaffrey, and Frank Chaparro.
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This week’s issue is sponsored by Hummingbird, an anti-money laundering compliance startup. Hummingbird helps fintech startups and financial institutions make the AML process a lot easier, by handling things like automated SAR filings and more. The startup works with companies like Stripe, Brex, Petal, Hatch Bank, and dozens others. If you want to learn more, visit Hummingbird.co, read cofounder Joe Robinson’s guest essay for FTT, or send us a note at ian@fintechtoday.co and we’ll connect you!
FTT+ This Week
And in FTT+ this week, Julie will be diving into whether the trend of bundling which is so hot in the tech industry (Apple, Amazon etc) is even possible in finance.
The News, by Cokie Hasiotis and Parker Jay-Pachirat
Walmart partnered with Goldman Sachs to offer marketplace sellers access to capital. And I got the tea. I spoke to a source familiar with this project and here is what I learned.
This move is very much Goldman trying to pursue the Banking-as-a-Service strategy. As we know, Goldman built the technology for the Amazon deal. I had heard rumblings that this program was going to shut down, but I’m glad it didn’t. Goldman is very interested in e-commerce merchants and will probably look for distribution partners. This partnership is notable because Walmart is very much not Amazon -- they’re slow, they’re legacy. Speed to market has a lot to do with how quickly the brand can put together engineering resources. Amazon obviously has a number of engineers at their disposal, while Walmart has fewer.
This is the first time Goldman reused technology leaving this *literal expert in the subject* to wonder, is this true banking-as-a-service? Apparently the integration took between a month and a half and two months, but the technology was already built on the Goldman side. My source said, “We can stand these partnerships up in less than a month, depending on how tech-forward the partner is.”.
So -- Walmart is going to offer marketplace sellers access to capital. Sound familiar? Yeah… that’s what Square and Shopify have done too. This partnership denotes a shift in Goldman’s approach. Previously trying to acquire consumers, now they’re shifting to B2B sales.
Whatever your takeaway, we should all be paying very close attention. Goldman did this with Walmart. America’s behemoth. If this is an indication of where we’re going, expect to see VC wallets opening even more for BaaS companies aiming for the non-financial sectors.
One, a digital banking app founded by former Paypal and Capital one executives, has officially launched. Former Capital One executive Brian Hamilton and former PayPal and Intuit CEO Bill Harris (who also founded Personal Capital) founded One with an underserved market in mind: the American Middle class. "Despite the fact that 52% of Americans live in “middle-income” households, there doesn’t seem to be a banking service actually built with them in mind”, says Hamilton. According to Hamilton, One is "the first digital banking service that seamlessly combines saving, spending, sharing, and borrowing into one account—with one card. You can use it jointly with anyone in your life, and there are no fees, overdrafts, minimums or 'gotchas.'" After closing a $17 million Series A round in March, the app is now live. It’s hard for me (Parker) to see One’s competitive advantage, or how it provides more value to the average middle-class American more than your next digital banking app. Interested to see how this goes.
Stripe partners with Salesforce, powering their first cloud-payment system. In response to spending in e-commerce having jumped 71% since last year, Salesforce has decided to partner with Stripe to streamline its payment processes. This new partnership allows Salesforce’s customers to set up payment processing platforms using Stripe’s technology. Adam Blitzer, VP and GM of digital at Salesforce, says of the partnership, "Our partnership with Stripe will enable our customers to deliver just that, boosting conversion rates with a fast and easy checkout experience powered by our out-of-the-box payment solution on the leading commerce platform, Salesforce Commerce Cloud." The partnership is strategic for both parties and aligns with Stripe’s track record of providing enterprise payment services to industry leaders.
On Monday, Neo launched a new international multi-currency SME bank account, allowing users to trade in over 80 currencies. The new account enables CFOs and finance teams to streamline processes and manage cash flow, payments, and currency transfers all in one place. “From the very first day, we wanted Neo to be cross-border. One of the biggest problems our clients face is that, even when you have a large company, as soon as you cross the border you can encounter issues”, says Neo CEO and founder, Laurent Descout. Neo increased its customer base three-fold during the pandemic, an increase Descout attributes to the inability of traditional banks to operate remotely: “Demand for our multi-currency account has increased massively because clients are coming to us simply because they can’t speak to anyone in the banks. Bankers aren’t in their offices, they’ve been struggling to work remotely and they just haven’t been performing at the capacity they need to”, he says.
Two of Shopify’s support staff stole customer data from at least 100 merchants. According to Shopify’s memo, “Our investigation determined that two rogue members of our support team were engaged in a scheme to obtain customer transactional records of certain merchants”. Shopify asserts that the incident was not the result of a technical vulnerability in their platform but rather a targeted scheme. In one merchant’s case, more than 1.3 million customer records were taken, and over 4,900 were accessed. Shopify notes that customer records contain basic contact information like email, name, and address, as well as order details. Since the investigation, Shopify has referred the matter to the FBI.
Fundraising news
French startup Kard raises another $3.5m, bringing the total amount they’ve raised in their seed round to $7m. Last year, they raised a similar amount- $3.4m- from Kima Ventures and a few other angels. This round was led by Founders Future, alongside the participation of angels like Laurence Krieger, Michael Vaughan, Jon Oringer, and Iris Mittenaere. If you’re not familiar, Kard was founded in 2018 as a challenger bank specifically for teenagers, designed to be a teenager’s first bank account. This past year, 50K teenagers signed up for Kard’s free services. As of Wednesday, Kard is switching to paid subscriptions for new users at €4.99 per month. The price comes with newly-added parental controls, allowing parents (through their own Kard app) to manage allowances, block cards, and transfer money to their child’s account. Kard faces competition from PixPay, Xaalys, and Vybe, but also traditional banks gearing services towards teenagers, like Revolut Junior and Lydia. It’ll be interesting to see the effect of Kard’s new pricing strategy on their growth, particularly in relation to their competitors.
Petal raises $55m series C round, led by Valar Ventures. The credit card startup was established to help people build credit- not debt- by providing people the opportunity to qualify for a Visa, even if they’ve never used credit before. Rather than relying solely on credit scores, Petal has built proprietary technology that analyzes banking history, measuring credit-worthiness on one’s income, spending, and savings- also known as ‘cash scoring’- which enables Petal to make credit accessible on term’s tailored to an individual's financial needs. “We’re pleased to once again invest in Petal...they have created a better and more modern credit experience, and a game-changing technology platform that’s well-matched to these times. We’re happy to support them as they scale,” said James Fitzgerald, a founding partner of Valar Ventures.
Following a $215M series C, kids-debit card app Greenlight reaches a valuation of $1.2B. The round, led by Canapi Ventures and TTV capital, gives Greenlight approximately $297m total funds since the company was founded in 2014. The app includes parent-managed, fee-free debit cards for up to five children, and is $5 a month. This fourth quarter, Greenlight will begin the roll-out of an investment tool, adding more value to the app. Greenlight is one of a few noteworthy startups operating in the space of financial education and children- Meemo launched a social finance app in July with a $10m seed investment, and recent Y Combinator grads CapWay and Mozper are also focused on children-parent and millennial fintechs.
Robinhood continues to raise, increasing their series G round to $600 million, putting Robinhood at a valuation fo $11.7 billion. A spokesperson told Reuters: "We've raised an additional $460 million in subsequent closings to our Series G to support our core product and customer experience and new offerings like cash management and recurring investments". This most recent injection comes from investors like Andreessen Horowitz, Sequoia Capital, DST Global, and Ribbit Capital. Though Robinhood continues to raise, they recently canceled their highly anticipated UK launch.
