#421
Big Banks Fight Back
Published:
Jan 22, 2022
Author:
Share:
In spite of having record years, big banks are under serious pressure, and have been since the GFC. Competitive threats are coming from every angle - from new entrants to talent to technology - and everything in between. However, if you think they are just going to roll over, you are sadly mistaken.
JPMorgan has perhaps been the most vocal about this, committing to spending an ‘astonishing’ $12b to fight back against fintech companies. The jury is still out if these investments in “data centers and cloud computing” will be any different to the ~$9b(!) they already spend every year on maintaining their aging tech stack. JPM is certainly not alone, Citi’s CFO stated in their most recent earnings call that technology will be a “very important growth line” in the bank’s expense base.
From a talent standpoint, it doesn’t seem like the work-life balance is getting much better either. Many of the most talented people who were historically drawn to lucrative careers on Wall Street have been opting to go into other fields (e.g. start-ups, technology, fintech, crypto, etc). Everyone from lowly analysts to top dealmakers are once again in high demand – and the big banks are trying to use compensation to win these people over. In 2021 alone, the top 5 banks paid out $142b, which was a 15% increase from the year prior (it’s a good year to be a Goldman partner).
Big banks are also using their ties to Washington to fight back - teaming up with powerful lobbying groups to bring attention to what they see as unfair advantages that are afforded to (fin)tech startups. One of the biggest arguments is around fintech companies benefiting from “regulatory arbitrage” - meaning they avoid many requirements that traditional banks face. Put simply, it is significantly more costly and cumbersome to be a large financial institution.
For now it seems like fintech is pulling ahead – for example, Venmo had almost 4x as many monthly average app users in 2021 as Bank of America, JPMorgan, and Wells Fargo combined. But to put it in Gen Z terms, imagine Conor McGregor (e.g. Wall Street) and Jake Paul (e.g. Chime, Affirm, Robinhood, etc) finally get in the ring together. Even though Paul is the flashy, albeit somewhat obnoxious new upstart, there is no way McGregor would go down without swinging…
Portfolio News
OpenSea confirms acquisition of Dharma, sets sights on fiat onramps - Dharma, an early entrant to DeFi, set out to create a more seamless user interface for lending and swapping tokens. While Dharma's app will be sunset, scooping up the company's UX know-how could expedite OpenSea's own efforts to simplify and expand the way in which users can purchase digital collectibles and art. As part of the deal, Dharma's co-founder Nadav Hollander, a former software engineer at Coinbase and Google, was appointed chief technology officer. Read more
Underline to bring its open access network twist to two more markets - Congrats to portfolio company Underline, a network provider that offers a fresh spin on open access fiber networks, which recently announced plans to serve Fountain, CO and Salinas, CA. The markets will be the company’s second and third after Colorado Springs (CO), its first. Read more
Graph Foundation raises $50m in round led by Tiger Global - The Graph Foundation, which operates a protocol for indexing and querying blockchain data, raised $50m in a sale of digital tokens to investors led by Tiger Global Management and will use the proceeds to buy other developers and expand in Asia and Europe. The Graph Foundation issued its own token, called The Graph, to investors including Tiger, FinTech Collective and Fenbushi Capital. Read more
Small banks set to go live with bitcoin trading - A group of community banks is poised to fulfill a high-tech goal it set last year: to let customers buy and sell bitcoin on mobile banking apps. An estimated 300 banks will go live in the first or second quarter with this service with the help of the fintech company NYDIG. The banks, the American Bankers Association and the Independent Community Bankers of America have made investments in the company as part of the effort. Read more
Coincover expands leadership team to meet exploding demand for crypto protection technology - Coincover is growing rapidly with over 120 clients spanning the entire cryptocurrency ecosystem, from the top wallet providers and exchanges to individual crypto investors across the globe. The company has expanded from approximately 12 employees to nearly 50 employees in only six months. Three new vice presidents have joined this week to help lead fast-growing divisions of the company. Read more
Identity verification platform Cognito is joining Plaid - Plaid has acquired Cognito , an identity verification and compliance (KYC, AML) platform that makes it faster, easier and safer for people to verify their identity when signing up for financial services online. Verifying someone’s identity is critical across almost all financial services, yet remains a major challenge for many companies that stitch together different solutions to get the tools and data needed. Read more
Big Banks Fight Back
|
Industry News
Block’s Cash App adopts Lightning Network for free bitcoin payments - Once live, Cash App users will be able to send bitcoin internationally to any external compatible wallet, including those for family or friends or a self-managed wallet. Users will also be able to send bitcoin to any merchant that accepts Lightning Network payments, with zero fees. Read more
SoFi rises after regulator approves U.S. bank charter - The online lending platform acquired Golden Pacific Bank as a path to getting the full-fledged banking license, the regulator said in a statement. While the entity will have a national reach and SoFi’s well-established digital lending platform, the OCC said that the new license didn’t cover crypto transactions. Read more
Coinbase NFT marketplace will enable purchases with Mastercard - The partnership will see Coinbase working with Mastercard to classify NFTs as "digital goods," which will, it claims, enable "a broader group of consumers to purchase NFTs." The crypto exchange also promised to "unlock a new way to pay using Mastercard cards." Read more
Instagram launches early test of creator subscriptions in the US - Instagram is giving creators more ways to make money with the launch of Instagram Subscriptions. The feature is now officially in early testing with a small group of U.S. creators who will be able to offer their followers paid access to exclusive Instagram Live videos and Stories. Read more
Fed releases long-awaited study on a digital dollar but doesn’t take a position yet on creating one - Billed as “the first step in a public discussion between the Federal Reserve and stakeholders about central bank digital currencies,” the 40-page paper shies away from any conclusions about a central bank digital currency. Instead, it provides an exhaustive look at benefits such as speeding up the electronic payments system at a time when financial transactions around the world already are highly digitized. Read more
Facebook owner Meta dives into NFT digital collectibles craze - Teams at Facebook and Instagram are readying a feature that will allow users to display their NFTs on their social media profiles, as well as working on a prototype to help users create — or mint — the collectible tokens, according to several people familiar with the matter. Read more
London Stock Exchange: private stock platform would perform a public service - The London Stock Exchange says it wants a role in the funding of private companies as part of the UK’s wholesale markets review. No wonder - this is a growth market, accounting for about 7% of global investable equity assets, up from 2% two decades ago. Read more
Walmart is getting serious about the metaverse - Recent trademark applications indicate the company is looking to establish its own NFTs and cryptocurrency. The retail giant filed for several trademarks recently, suggesting plans to start selling virtual goods. There’s also mention of offering customers a digital currency, as well as the opportunity to buy and sell NFTs. Read more
Chase, Instacart and Mastercard announce partnership to launch credit card - The new Instacart Mastercard credit card will be the first Chase co-branded card offering in the on-demand grocery delivery space. The card will allow consumers to earn accelerated points on purchases across the Instacart marketplace, which today includes more than 700 beloved national, regional and local grocers and retailers. Read more
British digital banking app Revolut launches U.S. stock trading - The new offering is part of Revolut's quest to become a so-called "superapp," where consumers can manage every aspect of their finances, the company said. Read more
The calculators behind the music-catalog megadeals - The growth of streaming and other online activity means song use is on the rise, generating payments to the songwriter and other stakeholders. Investors’ deals for music are also more complex. Some are buying the right to collect a certain payment stream while not owning any piece of the underlying copyright. They are also selecting specific copyrights or royalty streams for investments. Read more
Amazon backs off threat to ban U.K.-issued Visa credit cards - Retailers and card networks have long clashed over interchange fees. Amazon, one of the world’s largest retailers, has imposed a surcharge on Visa credit-card purchases in Singapore and Australia. Amazon and other big retailers have sued Visa, Mastercard and card-issuing banks, claiming that they collude to avoid competing over interchange fees. Read more
Mastercard launches virtual card for instant B2B payments - Mastercard has unveiled a virtual card offering that uses machine learning and straight-through processing for instant payment of supplier invoices. Read more
Select Financings
Animoca Brands - Hong Kong based digital property rights company for the metaverse that utilizes NFTs and gaming raised $359m in new funding led by Liberty City Ventures. Read more
April - Israel based payments startup raised $10m in Seed funding led by Team8. Read more
Asaak - Uganda based asset financing startup raised $30m in pre-Series A funding from investors including Resolute Ventures, Social Capital, HOF Capital, Founders Factory Africa, End Poverty Make Trillions and Decentralized VC. Read more
Autograph - Santa Monica based NFT platform raised $170m in Series B funding led by a16z and Kleiner Perkins. Read more
BillEase - Philippines based BNPL startup raised $11m in Series B funding led by BurdaPrincipal Investments. Read more
BlockFills - Chicago based digital asset trading and fintech company raised $37m in Series A funding from investors including Susquehanna Private Equity Investments, Simplex Holdings, and Nexo. Read more
Burnt Finance - New York based decentralized auction protocol built on the Solana blockchain raised $8m in Series A funding led by Animoca Brands. Read more
Clari - California based revenue operations platform raised $225m in Series F funding led by Blackstone Growth. Read more
Curbio - Maryland based pay-at-closing home improvement platform raised $65m in Series B funding led by Revolution Growth. Read more
Doconomy - Sweden based provider of climate impact-focused credit cards raised $19m in growth funding led by CommerzVentures. Read more
Facet Wealth - Baltimore based provider of financial planning benefits for employees raised $100m in Series C funding led by Durable Capital Partners. Read more
Float - Ghana based provider of business cashflow solutions raised $7m in Seed funding led by Tiger Global and JAM Fund. Read more
INDmoney - India based super finance app aiming to become a “one-stop shop” for investments and expenses raised $75m in Series D funding led by Tiger Global, Steadview Capital, and Dragoneer. Read more
iTrustCapital - Los Angeles based crypto IRA provider raised $125m in Series A funding led by Left Lane Capital. Read more
Lean Technologies - Saudi Arabia based fintech company focused on accessing bank customer data raised $33m in new funding led by Sequoia Capital India. Read more
M2P Fintech - India based payments infrastructure startup raised $56m in Series C funding led by Insight Partners. Read more
Moss - Germany based spend management startup raised €75m in Series B funding led by Tiger Global. Read more
Payflow - Spain based salary advance startup raised $9.1m in Series A funding led by Seeya Ventures and Cathay Innovation. Read more
Personetics - Israel based provider of personalized advice tech for legacy banks raised $85m in new funding led by Thoma Bravo. Read more
Pinwheel - New York based payroll API raised $50m in Series B funding led by GGV Capital. Read more
Rain Financial - Bahrain based crypto brokerage raised $110m in Series B funding led by Kleiner Perkins and Paradigm. Read more
Routefusion - Austin based provider of cross-border payments software raised $10.5m in Seed funding led by Canvas Ventures. Read more
Spendesk - France based corporate spend management platform raised €100m in Series C funding led by Tiger Global. Read more
FinTech Collective Newsletter
Curated News with Context
Delivered every Monday, the weekly newsletter, produced by our team, provides a tightly edited rundown of global fintech news, along with a bit of our original analysis.