Hello Fintech Friends,

In my fintech career, I’m fortunate to have met with the CFPB, the OCC, the FDIC, the FTC, and the SF and NY Federal Reserve Banks, mostly in the context of cashflow underwriting and consumer credit access.

Something universal about the regulators I met with was that they were thoughtful, well-informed, level-headed, and curious to learn.

They wanted to understand how to facilitate the delivery of better, more customer-aligned financial products, without forfeiting their responsibilities to consumer protection (or safety and soundness, oversight and examination, etc.) They understood that banking, like many industries, was improved through competition and innovation, and that those improvements ultimately benefited the end-users.

But they were also clear-eyed about the emergence of bad actors, regulatory arbitrage, controls failures, poor policies and procedures, and fraud in a nascent ecosystem like fintech.

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This week, compliance, internal controls, security and data storage practices, and customer fund management are back in the spotlight thanks to the ongoing meltdown of BaaS provider Synapse and the related hack of its banking partner Evolve, both of which have been well-covered by Jason at Fintech Business Weekly.

These two failures have breathed new life into the 'never fintech' crowd, who've called from the sidelines for years for fintech to be banned. Strangely, Equifax's 147 million customer data breach and the continual cycle of bank data breaches didn't lead the same crowd to cry breathlessly for the end of credit-scoring or the end of banking.

But the 'never fintech' crowd are not founders, they are not investors, and – fortunately – they are not regulators.

Regulators have a variety of tools at their disposal. Two of the most frequent ones you'll hear about are (1) rulemaking and (2) enforcement. Rulemaking concerns the development of guidelines for how financial products can be built and offered (such as the current open banking rulemaking process at the CFPB). Enforecement concerns the punishment of bad actors for failures or willful breaches of those rules.

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The question at-hand for the prudential regulators has always been how to rulemake in a way that counterbalances innovation and safety. I expect the Evolve and Synapse news to lead to enforcement actions both parties. I wouldn't be surprised if their controls failures also lead to expanded rulemaking about commingling of customer funds and data tokenization in storage and transmission.

I don't expect these two failures – as significant as they are – to lead to a 'regulatory ban' on fintech.

Bad practices need to be exposed, rules need to be refreshed, and consumers need to be protected from predatory and poorly-managed financial services providers in the digital age. But fintech has as much nuance as any other industry: just as there are bad actors in banking, so there are bad actors in fintech, and an all-or-nothing approach to rulemaking and enforcement doesn’t recognize nuance.

The 'never fintech' crowd must be incredibly cynical to look at examples like Nubank or Mpesa or Stripe and not see the millions and millions of people made better-off by well-run fintech companies.

I’m hopeful that we’ll continue to punish bad actors in fintech while rulemaking in a way that allows the good ones to flourish. When innovation and safety are well-balanced, it's the financial consumers who win in the long-run.

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Please enjoy another week of fintech and banking news below. (👍👎 Have feedback for us? Let us know!)

💼 Fintech Job of the Week

UK banking-as-a-service provider Griffin, which was recently covered in our deep dive into BaaS across the pond, is hiring a Sales Manager.

Sales Manager

London or Remote within the UK

Share your job with 2,000+ fintech people in our Slack #hiring-and-jobs channel.

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💬 Quote of the Week

🏦 Financial Services & Banking

🚀 Product Launches

The Federal Reserve launched its ScamClassifier model to help payments companies improve scam reporting, detection and mitigation.

📰 Other News

A federal judge is likely to strike down the proposed settlement reached between merchants and Visa and Mastercard to settle how the two networks restrict competition and price swipe fees for their cards. Trade groups representing large retailers claimed that the settlement was favorable to small businesses but did not address larger merchants' concerns.

Visa partnered with Amazon to enable installment payments for Canadian consumers.

Mastercard partnered with fintech Argyle* this week to expand its open-banking Verification of Income and Employment solution to include credentialed payroll.

Investment manager VanEck filed to list the first spot Solana ETF in the US.

Swift released results from a European survey of small businesses showing that they broadly support faster payments regulation and expect it to bring them cost savings.

Evolve, an Arkansas-based bank that is a regular partner to fintech companies, confirmed that it was the victim of a cybersecurity breach that stole customers' unprotected personal information. The bank was recently hit with an enforcement action related to failures in its 2023 safety and soundness examination. LockBit, the ransomware group that hacked the bank's systems, originally claimed that it had breached the Federal Reserve to access customer data.

Historically, Know Your Business (KYB) has been a manual, disjointed, and complex endeavor — think manually collecting info, endless back-and-forths with customers, and piecing together multiple solutions. But it doesn’t have to be. Check out this guide from Persona to learn how to streamline your KYB-KYC process and better meet ever-changing regulations, combat fraud, and build trust. Download the guide here.

💻 Fintech

🚀 Product Launches

TrueBiz*, the developer of a merchant-monitoring solution for business vendors and partners, launched Always-On Monitoring, which empowers risk and compliance managers with real-time risk insights across a merchant’s website rather than reviewing merchants just once a month.

Charlie, a banking platform for seniors and elder consumers, launched SpeedBump, a combination of pauses, alerts, and real-time education introduced at the moments customers are most vulnerable to fraud.

Mosaic Smart Data partnered with Euroclear to launch Smart Markets, an AI-powered tool for parsing unstructured fixed income data to generate trading insights.

CFO-tooling provider insightsoftware launched an automated ESG reporting solution.

Motive, which builds financial solutions for the trucking industry, launched Missed Savings, a feature designed to help Motive Card customers reduce fuel costs by 5%.

SymphonyAI launched insights and analysis from predictive and generative AI capabilities to global financial markets.

MuchBetter launched a contactless payment ring in Italy.

Rayls launched a blockchain system for financial institutions to connect permissioned and permissionless ecosystems.

Solix launched an enterprise document management solution for accounting and finance teams.

📰 Other News

Stripe and Coinbase announced a partnership. Stripe will add support for Base in its crypto product suite to offer users faster and cheaper money transfers, and Coinbase will add Stripe’s fiat-to-crypto onramp into Coinbase Wallet to allow users to buy crypto instantly with credit cards and Apple Pay.

Brazilian payments platform PagBrasil is planning to bring the country's real-time payments system to international consumers with its upcoming Pix Roaming and International Pix solutions.

Walnut*, a payment and claims processing platform for healthcare providers, rebranded to Arrow* and emerged from stealth.

🤝 Partnership Corner

Cotribute, a platform that helps credit unions grow deposits, loans and memberships, partnered with APCU and Center Parc Credit Union to launch a digital account opening solution for small businesses.

Financial account servicing provider Peach partnered with embedded working capital provider Pipe.

👎 The Bad News

Lottery-based savings app Yotta claimed that nearly $109 million in customer deposits have been lost as a result of BaaS provider Synapse's collapse.

Venture fund Point72 laid off their fintech team in a pivot to AI investing.

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