Published:
Jun 22, 2024
Author:
Sarah Parsons Wolter
Share:
Amongst the many benefits of using a credit card - rewards, credit score building etc. - chargeback protection is one of the most important features for consumers. Once considered a last resort option, US consumers today have become more acquainted with using credit card disputes. According to the Wall Street Journal, consumers disputed 105m charges in 2023 for ~$11b in volume, up from $7.2b in 2019.
Theoretically, customers should try to make an effort to resolve disputes directly with the merchants before turning to their bank, but many are choosing to skip that step. Some go so far as to misuse the process entirely to get free items, known as “friendly fraud.” Nearly 20% of all disputes now fall into this category, and Equifax data shows that usually disputes fall in the customer’s favor. As such, merchants and card issuers end up bearing the cost of these claims, which could in turn lead to higher processing fees.
As account-to-account (A2A) payments become more prolific with companies like Plaid launching Pay-by-bank checkout options, this type of friendly fraud behavior may no longer be possible. After all, A2A payments have no chargeback protections and tend to be more merchant friendly overall. It will be up to merchants to entice consumers to use A2A, which have historically been more welcomed by B2B payments. Until then, keep an eye out for the frenemies.
Portfolio News
Plaid Effects: Connect to the future of finance - At Plaid Effects this week, the company shared new data and insights solutions designed to help customers improve onboarding, underwriting, payments, and fraud and risk mitigation. Read more
Mattilda CEO Jose Agote interviewed in Cracks Podcast - Jose Agote, CEO and Co-Founder of mattilda, was interviewed by Oso Trava and shared insights on the opportunities in Latin America's educational sector. In the interview, he recounts his career trajectory, highlighting his roles in investment banking at J.P. Morgan, private equity at Advent, and as CFO of public companies in Brazil. Read more
A new vision for “open-access” networks as operating systems for cities - Bob Thompson, CEO of Underline, shares his thoughts on why it's time to recast the "open-access" network model to a new gold standard: fully neutral, technology driven, multi-purpose "fiber-to-the-community" (FTTC). Read more
Flutterwave partners with EFCC to establish Cybercrime Research Center in Nigeria - According to a statement from the two parties, the initiative aims to intensify the fight against Internet crime, enhance the security of business transactions, and provide a sustainable lifeline to youths across the country. Read more
Friendly Fire
Reversing a credit-card charge has never been easier—or more abused - Disputes over credit-card charges, once a measure of last resort, have surged as shoppers learn how easy it is to deploy them. Last year, consumers disputed about 105m charges with credit-card issuers in the U.S., worth an estimated $11b, up from $7.2b in 2019. Read more
Card disputes projected to jump 40% as friendly fraud persists - According to the report, consumer advocates argue the trend shows people are wising up to their rights. Federal law lets card holders dispute billing errors, unauthorized/unrecognized charges and transactions for products that were defective or not delivered. And then there’s “friendly fraud.” That’s the term for when cardholders use the process to dispute legitimate charges. Read more
Industry News
Apple kills Pay Later feature ahead of Affirm integration - Pay Later’s life was extraordinarily short, having officially launched in late March 2023. Ultimately, however, the move isn’t surprising. Apple announced at last week’s WWDC 2024 that users would be able to access loans through third-party app Affirm through Apple Pay. Read more
Stripe co-founder expects another employee stock tender offer - Stripe expects to again let employees cash out some of their shares, the fintech startup's co-founder said, reiterating that the company is in no rush for an initial public offering. Fintech veterans such as Stripe, Plaid and Chime are closely watched for when and how they may go public. But unlike Plaid and Chime, which have teased that those deals may be on the horizon, Stripe has eschewed such talk. Read more
How the dash to ditch paper money created a playground for criminals - Sweden has led the way in Europe in going cashless, but fast and easy digital commerce have left consumers and the state vulnerable to fraud. Read more
Wells Fargo bet on a flashy rent credit card. It is costing the bank dearly - In 2022, Wells launched a credit card with Bilt Technologies, a fintech startup with big-name backers. The co-branded card came with a rare perk: Users can pay for rent with it without incurring fees from their landlords while also earning rewards points. More than one million accounts were activated in the first 18 months, many by young adults. But Wells is losing as much as $10m every month on the program as savvy customers flock to the card. Read more
Proposed Visa and Mastercard swipe-fees settlement is likely to be thrown out - The settlement, reached in March, would have brought an end to a battle between the card networks and the banks with merchants that have been suing them for nearly two decades. But the terms were criticized by big-merchant lawyers and trade groups that vowed to kill the deal. Read more
Citi sees AI impacting more than half of all finance jobs - According to a new report by Citi, a little more than half — 54% — of jobs in the banking sector have a higher potential for automation, while another 12% could be augmented by AI. The report also noted that a move to a “bot-powered world” also raises issues dealing with compliance, security, regulation and ethics. Read more
Sainsbury’s is latest retailer to ditch banking in NatWest deal - For years, retail giants have sought to offer financial services to their customers in the hope of winning more of their main grocery businesses. But more recently retailers including Walmart and Tesco have retrenched from offering those services as they sought to boost profitability and faced various challenges, including the logistics of offering highly regulated products and the difficulty of competing with more established rivals. Read more
MercadoLibre's fintech arm sees credit-card reader boom in Mexico - In the past year, the adoption of Mercado Pago's slim mobile credit-card readers has more than doubled in Mexico. Five years ago, approximately 1m credit-card readers used by merchants were provided by traditional banks and 1m from third parties such as Mercado Pago and Clip. Now, the number of bank-provided credit-card readers has stagnated while third parties have rolled out more than 4m. Read more
Revolut seeks more than $40b valuation in employee share sale - UK fintech Revolut is targeting a valuation exceeding $40b in a share sale that would cement its status as Europe’s most valuable start-up, according to three people with knowledge of the plans. The SoftBank-backed company is working with Morgan Stanley to sell about $500m worth of existing shares, including those held by employees, the people said. Read more
How Apple is winning the financial services game - The iPhone has become a platform for thousands of financial services companies, including buy now, pay later providers. The one guaranteed winner is Apple, which has ensured it takes no risk itself. An iPhone doesn't just act as a metaphorical wallet, it's also the store where the money is spent. That means Apple can just collect fees on every transaction, rather than finance them. Read more
Documents show how Musk’s X plans to become the next Venmo - A major plank of Elon Musk’s plan for expanding X into an “everything app” has been grafting a payments network onto its main social networking service. Those plans include a Venmo-like payments feature that will let users store money on their X accounts, pay other users or businesses, and even buy goods and services in physical stores. Read more
Select Financings
After Hour - San Francisco based social trading app raised $4.5m in Seed funding led by Founders Fund. Read more
Amplify Life Insurance - San Francisco based insurtech platform raised $20m in Series B funding led by Crosslink Capital. Read more
Auxilius - New York based clinical trial financial management platform raised $10m in Series A funding led by SignalFire. Read more
Cadana - New York based emerging markets payroll services provider raised $7m in Seed funding led by Costanoa Ventures. Read more
Celcoin - Brazil based BaaS company raised $125m in growth funding led by Summit Partners. Read more
Chexy - Canada based rent payments and rewards company raised $3m in Seed funding led by Venrex. Read more
CleverCards - Dublin based digital payments startup raised €8m in new funding led by Pluxee. Read more
Clip - Mexico based payments and commerce enablement platform raised $100m in Series D funding led by Morgan Stanley Tactical Value. Read more
Constructor - San Francisco based product discovery and search platform for enterprise e-commerce raised $25m in Series B funding led by Sapphire Ventures. Read more
Danelfin - Spain based stock selection and portfolio management startup raised €2m in pre-Seed funding led by Nauta Capital. Read more
Daydream - San Francisco based e-commerce AI platform raised $50m in Seed funding led by Forerunner Ventures. Read more
Finbourne - London based investment data management startup raised £55m in Series B funding led by Highland Europe. Read more
Gynger - New York based financing platform for technology purchases raised $20m in Series A funding led by PayPal Ventures. Read more
Hero - France based banking services platform for small businesses raised €11m in new funding led by Valar Ventures. Read more
Layer3 - Distributed token distribution protocol raised $15m in Series A funding led by ParaFi. Read more
Nuffle Labs - Distributed entity spun out of the Near Foundation raised $13m in new funding led by Electric Capital. Read more
Prosperr.io - India based SaaS platform raised $1.5m in pre-Seed funding led by Gokul Rajaram. Read more
Ramify - France based wealth management platform raised €11m in Series A funding led by 13books Capital. Read more
Renzo - Decentralized ethereum restaking protocol raised $17m in new funding led by Galaxy Ventures. Read more
Travel Wallet - South Korea based company offering a prepaid card for travelers raised $10m in new funding led by Lightspeed. 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.