Hi y’all, Cokie here.
This year has been amazing for Banking-as-a-Service players. Infrastructure providers have built beautiful MVPs with ambitious roadmaps, banks have gotten rather smug with their “we’re not like other banks” rhetoric. Frankly, it’s been a historic year for fintech and a grand entrance for Fintech 2.0.
Let’s first recap what these players are solving for:
25% of Americans are unbanked. Does that statistic sound familiar? Good, that means you read this newsletter every week. Well done!
Banks are slow to deliver valuable products. It takes 18 months to spin up a high yield savings account that’s a subpar offering to what fintechs created in a tenth of the time.
Banks are vertically integrated, which means they do everything all by themselves. Banks are extremely good at risk management, but not so good at onboarding and KYC. Infrastructure providers “horizontalize” banking by working with as-a-service vendors, like Alloy, who deliver onboarding and KYC much more smoothly. Infrastructure providers use as-a-service vendors for every part of the stack, making them extremely efficient and uniquely qualified to deliver better products.
I think we can all agree that this is dope for financial services. But will it last?
The model of the infrastructure provider currently inherently relies on banks' ineptitude. But banks aren’t incapable of delivering the same services. Like, look at Goldman. Everyone else is capable of catching up. That doesn’t mean they will -- in fact, I expect to see quite a lot of compression and M&A in the community banking space over the next three years.
However, some banks will get this right, they’ll pivot and build so that any brand can sit on top of them to deliver financial services. And they’ll have a simple competitive advantage: they’re cheaper. Banks charge less than infrastructure providers for the fintechs and brands that integrate with them. Infrastructure providers and banks will use their economies as their battleground -- another business model entirely dependent on interchange.
My relatively informed prediction is: the infrastructure providers we see today will evolve massively and look like entirely different companies in six (6) years. And if they need help, they know where to find me.
Until literally a month ago, I was unable to work with music playing. Last week, a great tune completely solved my writer's block. So I share with you, low stress productivity, tunes to vibe to while you work. As always, it’s collaborative so please add bangers.
Unrelated but worth noting, Paris Hilton released a new song yesterday and i’d be remiss if we didn’t acknowledge its glory.
FTT+ This Week
On Sunday, Julie is going to be diving into something you’d think a bunch of engineers would be better at: customer service. This is something our sector has been TERRIBLE at! It consumes a ton of time and money, but it can make a huge difference when it comes to customer loyalty and being able to cross-sell. I’m looking forward to seeing what Julie has to say on what we’ve done wrong and how we can improve.
Ian also wanted me to tell everyone that we’re going to start off-the-record Q&A’s with industry CEO’s (the first one’s someone in the mortgage space 👀) for premium subscribers. Stay tuned on that this Sunday too.
If you want Julie’s column, sign up for FTT Lite ($10/month)
We also have over 100 sign ups for our beta community product for FTT+ members—we’re going to be experimenting around a more accessible community forum for members this quarter. If you’re interested in FTT+, sign up here:
The News by Parker Jay-Pachirat and Cokie Hasiotis
Stripe will acquire Paystack, accelerating online commerce across Africa. E-comm is expanding quickly in Africa, growing at a rate 75% faster than the rest of the world, at 21% YoY. To increase Africa’s online GDP, Stripe has agreed to acquire Paystack, a Lagos tech company making it easy for organizations of all sizes to collect online and offline payments around the world. Stripe and Paystack have already established a relationship - in 2018, Stripe led Paystack’s Series A and has provided ongoing guidance as the company has scaled rapidly. For now, Paystack will continue to operate independently. Over time, Paystack’s capabilities will be embedded in Stripe’s Global Payments and Treasury Network, a programmable platform for global money movement which currently spans 42 countries. This is a huge step forward for the many incredible African fintechs that don’t necessarily get the Silicon Valley hype that many others are afforded (looking at you, Ejara).
Chase jumps on the bandwagon of family banking, releasing a new checking account- Chase First Banking- designed for parents and children. Parents and children can manage allowances, complete and check-off chores, monitor spending, and save toward a goal. Each child gets their debit card, used only based on the spending limits their parents have set. From their Chase Mobile app, Earn lets them see what chores they have been assigned, check them off, and see when their allowance has been paid. Children can also use the app to see how much is in their account and where they’re allowed to make purchases.
TV founder Ryan Glover and Killer Mike launched digital banking platform Greenwood on Thursday. Greenwood is named after the former Greenwood district of Tusla, a prosperous early 20th-century community known as ‘Black Wall Street’. Greenwood was destroyed by a mob of White Americans during the 1921 Tulsa race massacre. Glover says his interest in the startup sparked after the murder of George Floyd- Greenwood is specifically focused on providing specialized support to Black and Latinx businesses and communities. Though the bank doesn’t open until January, the waitlist has racked up tens of thousands of users already. Glover has been working on Greenwood since early 2019, and the team raised over $3m in seed funding in June.
Bloomberg reports Robinhood estimates about 2k customer accounts were hacked in recent hacking spree, indicating that the hacking was more widespread than was previously reported. Robinhood initially disclosed to Bloomberg last week that a “limited number” of customers had been affected. This week, Robinhood sent push notifications to users, encouraging them to enable two-factor authentication on their accounts. One Robinhood user, whose account was hacked, said: “I feel like my money could be put somewhere else, somewhere that has a human person that I can talk to. It’s kind of ridiculous that an investment app that’s handling people’s livelihoods, people’s money, has the audacity to make people wait several weeks to hear back anything.”
Google Ventures hires its first black female investor, Terri Burns. Having previously worked at Venmo and Twitter, Burns will be the firm’s youngest ever partner at age 26. While her current investments are focused in the consumer space, Burns will also invest in areas like fintech and the future of work. In a blog post announcing her promotion, Dave Munichiello wrote, “Her investments display her interest in companies that are built by and for Gen Z, particularly as this generation comes of age in a remarkably uncertain time”.
Fundraising News
Argyle, the Plaid of payroll and employment data, raised a $20M Series A led by Bain Capital, bringing total capital raised to date to $23M. There are over 7.8M businesses in the US alone that generated employment records in 2019, and Argyle downloaded 10M Employment Records in the last month alone. Argyle is integrated into over half of the Fortune 500 employers (i.e., Walmart, Target, HomeDepot, FedEx). Oh, and by the way, they raised exclusively with Notion pages, no deck. So hot right now.
(Editor’s note: FTT Publisher Ian Kar invested in Argyle.)
Insurtech startup Cover Genius raised $15m from King River Capital and Leap Capital. Sydney-based Cover Genius was founded in 2014 by Angus McDonald and Chris Bayley, and provides insurance to customers of internet-age businesses like mobility, retail, travel property, and gig economy businesses. The fintech will use the round to continue expanding their product suite and partner network globally.
