Issue #78: X Gets Licenses in Multiple U.S. States, Open Banking Payments Are On The Up And A Partnership Between Hallmark And Venmo Brings New Meaning to 'Embedded Finance'
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Issue #78: X Gets Licenses in Multiple U.S. States, Open Banking Payments Are On The Up And A Partnership Between Hallmark And Venmo Brings New Meaning to 'Embedded Finance'
👋 Hi, FR fam. I hope you’ve all had a great week!
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Alright, enough with the preliminaries. Let's dive straight into what's been making waves in fintech over the past week.
📣 The News Grab Bag
Elon Musk's X Has Licenses in Multiple U.S. States to Process Payments, Including Crypto
X (née Twitter) is making moves in the payments space, recently securing a money transmitter license in several states, including Rhode Island. This could mark the first step toward morphing X into an 'everything app' that goes beyond social media.
It’ll be interesting to see if this actually amounts to Musk launching a substantive fintech product or is just another left turn in the history of X.
Court sides with Grayscale over SEC in spot bitcoin ETF lawsuit: CNBC Crypto World
The U.S. Court of Appeals for the D.C. Circuit has ruled in favour of Grayscale in its lawsuit against the SEC over the conversion of the Grayscale Bitcoin Trust into an ETF. This decision could have implications for other companies, such as BlackRock and Fidelity, that are seeking to create bitcoin ETFs.
A spot bitcoin ETF would allow investors to gain exposure to bitcoin without actually owning the cryptocurrency. Could this be the catalyst for the next bull run? I doubt it, but it’ll likely be part of the narrative in the next crypto wave.
UK sees record month for open banking payments
UK open banking payments reached a record high in July, with 11.4 million transactions made, up 9% from the previous month. Year-to-date data for 2023 showed that total payments doubled compared to 2022.
According to the article, single domestic payments, propelled by government payments solutions and the onboarding of financial institutions and investment platforms, were the key driver of growth. The top three use cases for open banking transactions were account top-ups, credit card bill payments, and e-commerce.
Visa, Mastercard to raise credit card fees despite increased profit
In a move that could add to the accelerating interest in (and move to) A2A transactions, Visa and Mastercard are planning to increase the fees merchants pay for accepting their cards. According to the article, the decision could cost merchants an additional $502m annually. Ouch.
The fees will be split between network fees paid to Visa and Mastercard and interchange fees paid to the bank that issued the credit card. While these fees are a small part of the companies' revenues, they can have a significant impact on low-margin businesses and may lead to price increases for consumers in some markets.
M-PESA to introduce standing orders as Safaricom strengthens its mobile money product
Safaricom's M-PESA is set to introduce standing orders, making it the first mobile money platform to offer this feature — standing orders allow users to automate recurring payments or transfers, providing a convenient way to pay bills and other recurring expenses.
This feature will likely be integrated into M-PESA's bill payments, credit facilities, savings, and investment products. Safaricom has not disclosed the implementation details or when standing orders will be accessible to users.
Although this sounds like basic functionality, it is a big step forward in recurring payments in the markets that M-PESA operates in, where generally, this kind of recurring payment product doesn’t exist. I’ll be interested to see uptake when it goes live.
Goldman Warned by Fed Over FinTech Risk
The Federal Reserve has issued a warning to Goldman Sachs regarding risk and compliance oversight at its fintech unit, specifically highlighting concerns about due diligence and monitoring processes when accepting high-risk non-bank clients. As a result, the acquisition of ‘riskier’ fintech clients by a division of Goldman Sachs' transaction banking business has been halted.
This warning is no doubt a setback for Goldman Sachs' plans to expand into new businesses and emphasises the importance of robust risk management and compliance practices by sponsor banks.
Hallmark and Venmo will let people send cash with greeting cards
In an interesting twist on ‘embedded fintech’, Hallmark and Venmo have collaborated to introduce new Hallmark + Venmo Cards, which allow users to send money with Venmo in a physical greeting card securely. According to the presser, this offers a convenient and special solution for gifting, whether for birthdays, weddings, holidays, or everyday occasions.
To use the Hallmark + Venmo Cards, users choose a card, scan the Venmo QR code on the card, select a recipient, enter the amount to gift, and confirm the payment. Recipients have 180 days to redeem the Venmo gift. You can check out how the offering works in the video below.
📈 Notable Funding Announcements
Last week was a slow week in fintech financing, with only 23 funding rounds completed with companies collectively securing $156m in investment.
Ivy raises $20M to take open-banking payments international
Berlin-based startup Ivy has raised $20m in a Series A funding round to expand its open-banking payments globally. Ivy has developed an API to create a "network of networks" for open banking payments, aiming to enable cross-border transactions and provide an alternative to traditional card networks.
More specifically, the company's platform offers tools for merchants to integrate open banking payment account options at checkout, as well as features like smart routing, risk management, instant payouts, and payment links. According to the article, Ivy currently has partnerships with 5,000 banks across 50 geographies and plans to continue expanding its banking deals and merchant customer base.
It’s interesting that despite the promise of Open Banking, really, what it’s boiled down to is a way to bypass the schemes when making payments. Don’t get me wrong, this is a powerful play if a company like Ivy can execute it, but it also shows money movement > data movement.
Rent Butter, a startup that provides a tenant screening solution for workforce and affordable housing, has raised $3 million in a seed funding round led by RET Ventures.
The platform aims to help property owners assess potential residents more accurately and equitably by using alternative data such as banking reports and credit behaviour analyses. According to the company, their platform provides property owners in-depth financial and credit behaviour reports in seconds, allowing for more informed renting decisions.
I think we’re going to see more “Experian-for-X” companies gain traction as they look to leverage unique data insights (potentially driven by AI) and data sets to solve unsexy (yet large TAM) problems — like tenant screening.
🎧 Resources & Recommendations
Buy Now, Pay Later Use Declines for Third Straight Year
The latest Motley Fool Ascent survey reveals a waning American appetite for BNPL services. In 2023, 35% of respondents fessed up to using BNPL, a notable slide from 50% in 2022 and 56% in 2021. But here's the kicker: nearly half of these BNPL users — 48% to be exact —rely on these plans to make ends meet for purchases that would otherwise bust their budget. Additionally, 26% of BNPL users have had a late or missed payment.
It’s definitely an interesting time for BNPL in some markets. For comparison, it’s worth checking out this survey from earlier in the year that suggests Australians still love themselves some BNPL — especially Gen Z’ers.
In this awesome podcast interview with Dimitri Dadiomov, co-founder and CEO of Modern Treasury, he discusses the challenges of moving money across the financial system and why more companies need a money movement OS than you might expect.
It’s worth a listen for Dadiomov’s insights into PLG vs. sales-led growth motions and the importance of going slow to move fast when building financial services products that are mission critical. This is a highly recommended listen.
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