Hi all, Julie here. Happy February from a blizzardy NYC. I obviously should have moved to Austin earlier, but it's too late now.

Public and Payment For Order Flow

Public, a newer brokerage that offers zero commission trading but also focuses on financial literacy, announced today that it will stop participating in the practice known as payment for order flow (PFOF). While I’m still not convinced that PFOF is a bad thing (read this piece from Matt Levine circa 2018), I admire that Public is trying to shake things up in the industry. In order to compensate for the lost revenue from this move, Public also said it will introduce an optional tipping feature.

From the release:

“To align our incentives with those of our members, we will stop participating in the practice of PFOF and instead introduce a tipping feature on trades. By doing this, we can remove this conflict of interest from our business model.

Trades will remain commission-free and tipping is entirely optional. Members of the Public.com community can freely decide if they’d like to leave a tip to help pay for the cost of executing their trades. The reality is that there is no such thing as free trades.

We have notified our clearing firm that we want to be off the “PFOF rails,” and we started the process of getting that done on Saturday, Jan. 30. With the help of our clearing firm, Apex, we will route all orders directly to exchanges (e.g. Nasdaq and the NYSE).

Direct routing to the exchanges is more expensive, and therefore we’re turning what used to be a revenue stream (PFOF) into a cost center and we’re optimistic that the difference will be offset by the optional tipping feature.”

The tipping aspect is what gives me pause. I have been fairly outspoken when it comes to tipping in fintech. I literally told the CEO of challenger bank Dave at Money 2020 that I thought his model was predatory. For background, Dave allows people to tip for cash advances. Dave also defaults the tip amount to what can be a very high interest rate depending on the amount the user is getting in his/her cash advance, and most people don’t realize the absurd APR they are paying.

However, I love the safeguards Public is putting into place. For instance, the default tip amount is $0, and the user can add or subtract the tip amount in 1 cent increments on small trades and $1 increments on larger trades. Public also won't allow users to tip more than 5% on any trade. People at Public also tell me that it has been in contact with regulators on this and haven't received pushback. I'll be very interested in seeing how this plays out and the consumer insights we garner from it.

Elon Musk Interviews Vlad Tenev

Speaking of brokerages, Elon Musk went on Clubhouse Sunday night. It was meant to be him getting interviewed by Sriram Krishnan and Aarthi Ramamurthy, but Robinhood’s CEO Vlad Tenev came out of nowhere and Elon interviewed him for a few minutes. This was way past my bedtime (I think it took place at like 2am ET?), but here is a great Twitter thread with a TLDR.

And since we're talking about Vlad, Politico is hearing that he's going to be testifying before a House committee on February 18. For those that haven't watched one of these before, I went to the one where David Marcus from Facebook talked about Libra, and these things are shit shows. Congressmen and women literally just grill these people to death. It's not a position I envy in the slightest, and I very much doubt Vlad is looking forward to it.

Metromile Gains Uber's First CEO As Backer

Metromile, the insurance company that allows drivers to pay-per-mile for auto insurance, announced that billionaire investor Ryan Graves plans to make a $50M investment in the company both personally and through his investment firm Saltwater. Graves was formerly Uber’s first CEO and SVP of global operations, and will be joining Metromile’s board. Metromile’s thesis is that people who don’t drive much should be able to pay less in auto insurance via a pay-per-mile model.

Nigerian Bank Sees Massive 2020 Growth

Nigerian digital bank Carbon hit $240M in payments processed last year, up 89% from 2019. Founded by two brothers in 2012, Carbon was initially just in the digital lending market. Today, it’s a full fledged bank account complete with a microfinance bank license (meaning users have insurance protections, among other things), so customers can perform transactions on the platform as they would with any bank.

Other growth figures were released as well. For the fiscal year 2020, the company, which has about 659,000 customers, said it processed ₦96.54 billion (~$241.35 million), up 89% compared to the same period a year ago. For its lending arm, disbursement volume was ₦25.21 billion (~$63 million), up 9.1% from FY2019. Investments made on the platform totalled ₦13.02 billion (~$32.55 million), a 365% increase from the previous year.

Even though it’s a private company, Carbon typically releases even more financial figures in an annual report in the second quarter. We’ll be sure to bring those to you too when they’re out :)

Visa Looking At Crypto

Visa CEO Alfred Kelly said his company is getting ready to handle a full range of cryptocurrency assets. "We think of digital currencies running on public blockchains as additional networks, just like RTP or ACH networks," he told analysts. From the earnings call with analysts late last week:

"In this space, we see ways that we can add differentiated value to the ecosystem. And we believe that we are uniquely positioned to help make cryptocurrencies more safe, useful, and applicable for payments through our global presence, our partnership approach, and our trusted brand.”

Kelly said Visa will work with wallets and exchanges to allow users to buy traditional crypto currencies like Bitcoin using their Visa credentials, or to cash out onto a Visa credential to make a purchase at any of the 70M merchants where Visa is accepted around the world.

Community members also have some thoughts on Public's move and PFOF:

​Jill Carlson of Slow Ventures:

​Charley Ma of Alloy (and an FTT Expert):

​Stephen Sikes, COO of Public:

As always, here are two fintech jobs we're highlighting today!

1. ​Several Opportunities, Stripe: Stripe started doing more remote work before the rest of us were forced to do remote work. While a lot of the hiring for remote employees has been focused on the US, Stripe is now starting to hire more permanently remote employees in Europe. By the looks of the website, it's largely hiring for engineering roles.
2. ​MBA Summer Associate, Common Ocean: Recently established early stage venture fund Common Ocean is looking for a summer associate to build out its investing team. Interns will have responsibilities and autonomy akin to that of a full-time associate, and will play an integral role in Common Ocean's investment process and have opportunities to interact with the entire investment team.

That's all for today. See you guys on Wednesday with more news!

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Julie VerHage is the co-founder of Fintech Today, where she focuses on editorial content and brand. Prior to joining, she was Bloomberg’s first fintech reporter, covering Robinhood from before it was a billion dollar company, breaking the news that Plaid was acquiring Quovo, and interviewing executives on Bloomberg TV and at several large conferences.

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