Hi Fintech Friends,

As the saying goes, only two things are certain in life: death and fintech news events. Here’s your weekly digest of the latter.

In addition, a few people have asked me if they could forward this newsletter. Please do! No confidential information enclosed. Similarly, if you'd like to be left off, please just let me know.

Quote of the week

“The financial revolution now underway is that technology is bridging that "information asymmetry", i.e. decent people like Avtar Singh are better able to show the world that they are indeed creditworthy. This is enabling them to better serve the ‘invisible prime’ borrowers such as Avtar or in other words, the people who are new to credit, have little credit history, or are temporarily going through hard times and are highly likely to repay their debts. In doing so, fintech lenders cater to people who don’t qualify for the best loan deals but also do not deserve the worst.”
Bhupinder Singh, Money Control

In banking and credit card news, a trend that we’ve been following for a while is the negative network effect of bank branch closures. New research from Deutsche Bank shows: “the more branches that banks close, the sharper the fall in footprint at remaining outlets, as consumers turn to online services in frustration at the time spent traveling to a brick and mortar locations.”

In a related note: the British ATM network Link has set up a £1 million fund for communities to crowdsource their own free ATM installation.

In a notable story for the traditional finance system, Charles Schwab is ending commissions on stock trading, making trades free for all customers. TD Ameritrade quickly responded to match the offer. The pricing move is an obvious competitive response to Robinhood and other zero-commission brokerages, which have gained market share and put pressure on traditional brokerages. As Matt Levine points out, the main way in which brokerages generate revenue is through net interest income (ie: the interest they earn on investments made with cash that customers park in trading accounts). Only 7% of net revenue came from Schwab’s commissions. See Patrick McKenzie’s great description of how discount brokerages make money for more detail.

Over the last decade, the largest American banks have seen their share of mortgage loans fall by 30% to online lenders.

Credit networks Visa and Mastercard are beginning to publicly reconsider their involvement in the Facebook Libra network, after regulatory backlash against the proposed currency.

Mastercard this week also rolled out Threat Scan, an analytics tool to help banks identify fraud vulnerabilities in their authorization systems.

HSBC has launched a trade finance API that lets other financial institutions see the status of their bank guarantees in real-time from their own platforms.

Finally, lending company Self has launched a secured credit card that is accessible without a credit check. The card builds on installment loan records, and requires a cash deposit, to gauge customer eligibility.

In fintech news, Brex this week announced a new business banking feature: Brex Cash. The business cash management account will integrate with the Brex credit card and allow business customers to send and receive payments with no fees.

PayPal has become the first foreign firm to get an online payments license in China after buying a 70% stake in Guofubao Information Technology Co, known as GoPay. This a bet that the license will allow Paypal to become the first non-Chinese digital payments service in China, following the rapid growth and success of platforms like WeChat and Alipay.

A developing story is speculation that the wave of fast-growing neobanks are struggling to become profitable. This Monzo profitability analysis takes a similar tone to prior articles about Chime’s ability to expand into lending and whether neobanks can become more than just debit cards and deposit-holders. Now that they have users, can they build on that success towards profitability? Meanwhile Revolut’s losses have doubled in the last year. This hasn’t slowed Revolut down however, as they recently inked a global expansion deal with Visa that sees them looking to grow the company by 3,500 employees globally.

All the same, Dutch digital bank Bunq is set to enter the UK mobile banking fray, expanding its presence from 30 European countries.

Why is nobody talking about the rise of payday loan apps?

Not having a banking charter isn’t stopping fintechs from teaming up with small-town banks. Many fintechs, when growing their banking products, face a “build, buy, partner” decision with respect to traditional banks. Good partnerships provide a competitive advantage to both fintechs (expansion) and banks (enhanced product offering).

“We'll tell you when the ATM tricked you.” Transferwise rolls out a new feature to bring transparency to foreign exchange fees.

Fintech analyst Daniel Sinclair raises a valid question: why isn’t anyone talking about the proliferation of payday lending apps in the midst of the fintech boom?

UK consumer fintech Curve has hired former head of Samsung Pay Europe, Nathalie Oestmann as COO.

And fintech data aggregators are pushing back against the (mistaken) notion that they have a fraud problem.

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Financings

There is a question - what counts as fintech? Fintech continues to eat into other product areas, and we’re moving toward the world of “embedded finance”. Are benefits payments companies fintech? Data sources used by investing platforms? We try to take a broad lens in our coverage here.

• Venture financing continues to pour into finance and payments infrastructure platforms, with UK-based Rapyd raising a $100 million Series C for its ‘fintech as a service’ API. The growth in funding for infrastructure players is a ‘category’ bet on fintech writ large, ie. a bet that companies like Stripe and Marqeta will continue to grow as online finance and commerce brands do, regardless of the winers. Tellingly, Stripe is an early Rapyd investor.
• Banking SaaS platform nCino closed an $80 million venture round to continue helping banks modernize their operating systems.
• Dave raised a $50 million Series B for its digital financial management tool, on the back of 4 million users and an 800k-person waitlist.
• Finnish mobile benefits payment service ePassi raised a €41.5 million round to enable expansion.
• San Francisco financial health startup Digit raised a $27.5 million Series C round.
• Spanish neobank startup Bnext closed a $25 million round to allow it to continue building a banking product as it moves past 300,000 customers and launches in Latin America.
• Indain SMB business transaction-tracking app Khatabook raised a $25 million Series A to expand beyond its 2.9 million active businesses and 5 million registered users.
• Distributed spend management software provider Teampay raised a $12 million Series A.
• Atom Finance, an investment research platform based in New York, raised a $10.6 million Series A.
• Rental industry credit bureau startup Naborly raised $7.5 million in seed funding.
• Australian expense management startup Divipay raised a $2.3 million seed funding round led by ANZ to build a better budget platform.
• Australian open banking platform Basiq closed a Series A funding round - terms were not disclosed.

M&A

• Financial analytics platform Dealogic completed an acquisition of Selerity, a financial workflows automation software. Terms of the acquisition were not disclosed.
• Banking software company Temenos entered an agreement to purchase digital banking SaaS competitor Kony for an enterprise value of $559 million and an earnout of $21 million.

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Deeper Reads

I Worked at Capital One for Five Years. This Is How We Justified Piling Debt on Poor Customers.

Africa is a promising terrain for digital banking. But traditional lenders need to be careful to get it right.

The Seven-Year Auto Loan: America’s Middle Class Can’t Afford Its Cars

Fintech for the aging: Technology holds the potential to help solve systemic issues in our wealth management system and allow people to age with fewer financial worries.

Does Libra Threaten Monetary Sovereignty?