Posted In:

Payments, Banking


#432
The End Of Interchange As We Know It?

Published:

Apr 09, 2022


Author:

Roxy Horrie

Posted In:

Payments, Banking

Published:

Apr 09, 2022


Author:

Roxy Horrie


Share:

As the sole facilitators of payment transactions between banks, consumers and merchants, the Visa / Mastercard payment rails have long sat in an enviable place, posting billions of dollars in annual revenue from interchange fees. With each swipe, merchants and businesses around the world have had to forfeit 3% of earned revenue to networks and intermediaries that facilitate each transaction.

The big brawl against Visa and Mastercard is no new development, though. Amazon (temporarily shutting off Visa in the UK), start-ups, ‘Zuck Bucks’, and other emergent P2P crypto payment and settlement infrastructure have all surfaced in the broader attempt to disrupt traditional payment rails. At the asset layer of DeFi, stablecoin transaction volumes between cryptographic-secured wallets represent trillions of dollars of annual on-chain payment flows, while the annual value of digital assets settled on Ethereum now surpasses that of the world’s largest payment networks. But in today’s news, the big banks are also waking up to this movement.

US banks are considering bringing Zelle - the country’s most widely-used instant, P2P money transfer service - to retail check-outs. The popularity of pay-by-bank services has taken off in other parts of the world, including AliPay and WeChat Pay in Asia, but has not reached the same scale in the US. Although Zelle posted strong growth during the pandemic, the 1.8b transactions processed pales in comparison to Visa and Mastercard’s combined 300b.

While banks have benefited from the existing arrangement with card networks by taking a cut of interchange, the move to side-step Visa and Mastercard would effectively allow banks to set their own rules and fees.

Will Visa and Mastercard be de-throned by a consortium of US banks looking to give merchants money back directly into their bank accounts? (Ironically, Visa was owned by a consortium of banks, which they all collectively let walk away and go public) Or are we simply shifting the entity and infrastructure that controls the movement of money from one monopoly to the next?

Portfolio News


B2B Payments Firm Mondu Names Klarna Veteran as New Legal Chief - Mondu offers small- to medium-sized enterprises a BNPL solution that helps “merchants and marketplaces improve conversion rates and protect themselves against default risk while alleviating the operational burden of collection and dunning.” Philipp Povel, Mondu’s co-founder and CEO, said that the role — and competence — of the chief legal officer is crucial to the company’s industry. Read more

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The End Of Interchange As We Know It?


Banks weigh using Zelle to challenge Visa, Mastercard - Banks collectively earn billions of dollars each year from fees merchants pay when shoppers use credit and debit cards. A payment option that moves funds directly between shoppers’ and merchants’ bank accounts could chip away at that. But Visa and Mastercard set the fees and take some for themselves, and sidestepping the card networks would allow banks to set rules and fees on their own. Read more

Cash App now offers 'paid in bitcoin' feature, 'lightning receive' coming soon - The "Paid in Bitcoin" option was just one of a trio of new features announced by Block, which has recently doubled down on an ambitious crypto agenda it accelerated last year. Block's new features this week also put it into more direct competition with services like Coinbase and Robinhood, which likewise offer a mix of traditional and crypto payment services. Read more

Facebook owner Meta targets finance with ‘Zuck Bucks’ and creator coins - Meta has drawn up plans to introduce virtual coins, tokens and lending services to its apps, as Facebook’s parent company pursues its finance ambitions despite the collapse of a project to launch a cryptocurrency. Read more

Industry News


Blockchain and financial markets: will computers push out brokers? - The CEO of FTX cut an unlikely figure in a grey T-shirt, khaki shorts, sneakers, and his mane of untamed curly hair as he took the stage at this year’s big derivatives-industry conference in Boca Raton. Bankman-Fried stole the show with a groundbreaking proposal to US regulators to automate risk management in financial markets - using practices developed for digital assets. Read more

Crypto-Like Digital Dollar at Least Several Years Away, Yellen Says - Treasury Secretary Janet Yellen said the design and development of a digital dollar would likely take years if the U.S. chose to create one, while outlining the various questions the Biden administration is weighing as it considers ways to make payments faster in the U.S. Read more

FTX takes stake in stock exchange IEX to strengthen crypto markets - FTX wants to continue solidifying its place in global digital asset markets, and sees IEX as a way to improve market structure for investors in a compliant and trusted manner. The size of FTX’s investment wasn’t disclosed, but an FTX spokesperson told CoinDesk it will become a “significant” shareholder of IEX. Read more

Crypto startup Wyre being acquired by payments company Bolt for $1.5b - The $1.5b price tag would make it the largest merger in the crypto sector that didn’t involve a SPAC. The deal isn't just about crypto payments either - embedded fintech has been one of the biggest investing trends of the last year, and Wyre also fits into that category. Its products allow its customers to build their own crypto wallets and NFT marketplaces. Read more

JPMorgan’s Dimon: competition between banks and fintech companies is ‘intensifying’ - Drilling down into the competitive landscape between traditional financial institutions (FIs) and digital upstarts, Dimon said that non-banks — from payments companies and fintech companies to exchanges and Big Tech — are directly competing with banks and do so while operating outside the banking regulatory system. Dimon also noted that as much as $130b was invested in FinTech last year, which has allowed them “to speed things up — and at scale.” Read more

Forbes unveils 36th annual World’s Billionaires List - The list, released this week, reveals 2,668 billionaires, including 236 newcomers—far fewer than last year’s 493. Elon Musk tops the World’s Billionaires ranking for the first time ever, with an estimated net worth of $219b. Altogether the total net worth of the world’s billionaires is $12.7t, down from last year’s $13.1t. Read more

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Britain announces plans to mint its own NFT - The U.K.’s NFT initiative is part of a broader effort by the government to “lead the way” in crypto, according to Glen. The minister announced a number of steps the U.K. will take to bring digital assets under more regulatory scrutiny as well. Read more

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Post-Brexit London races to keep its head-start in fintech - U.K. based fintech funding rose 217% to $11.6b last year — but that still puts the country behind the $46b in the U.S. Now the U.K. government is making efforts to bring more listings to the country, and to create more entrepreneurs in the space. Read more

Morningstar plans to acquire Leveraged Commentary & Data - The purchase price for LCD, which is the industry standard for leveraged loan data, news, analysis, and indexes, providing coverage across the full lifecycle of loans, is up to $650m in cash. The leveraged loan market data provider will integrate with Morningstar's PitchBook Platform, which delivers data, research, and technology covering the breadth of the private and public capital markets. Read more

Opendoor starts flipping homes in NYC suburbs as it hunts growth - The company, the largest of the so-called iBuyers, will begin buying and selling homes across Long Island, Westchester and several counties in New Jersey. There are more than 4m housing units in these areas and Opendoor will target properties between $300,000 and $950,000. Read more

Sky Mavis raises $150m round led by Binance to reimburse Ronin attack victims - Sky Mavis, the firm behind hit play-to-earn game Axie Infinity, raised the $150m round to reimburse user funds lost in the $625m Ronin attack. Venture capital firms a16z, Dialectic, Paradigm and Accel also participated. Read more

Fast shuts doors after slow growth, high burn precluded fundraising options - Fast posted a paltry six-figure revenue total in 2021, despite raising a $102m Series B led by Stripe. The company’s burn rate was said to be as high as $10m per month, or a simply massive multiple of its revenue, let alone gross profit. Read more

Select Financings


Amenitiz - Barcelona based “Shopify for hotels” raised $30m in Series A funding led by Eight Roads. Read more

Binance.US - San Francisco based US arm of crypto exchange Binance raised $200m in Seed funding led by RRE Ventures. Read more

Boba Network - San Francisco based Ethereum-scaling solution raised $45m in Series A funding led by Huobi, Crypto.com, and BitMart. Read more

Budget Insight - Paris based aggregator of banking and financial data raised $35m in new funding led by PSG Equity. Read more

CAIS - New York based alternative investment platform raised $100m in new funding led by Reverence Capital Partners. Read more

CertiK - New York based web3 and blockchain security company raised $88m in Series B funding led by Insight Partners. Read more

Coin Metrics - Boston based crypto financial intelligence startup raised $35m in Series C funding led by Acrew Capital and BNY Mellon. Read more

Composable Finance - Germany based cross chain compatibility DeFi company raised $32m in Series A funding led by GSR. Read more

Creative Juice - Texas based creator-economy banking startup raised $15m in Series A funding led by Acrew Capital. Read more

Datanomik - Uruguay based B2B open finance API startup raised $6m in Seed funding led by a16z. Read more

Ellevest - New York based wealth management platform for women raised $53m in Series B funding led by BMO and Contour Venture Partners. Read more

EnKash - India based spend management company raised $20m in Series B funding led by Ascent Capital. Read more

Fetch Rewards - Madison based shopping rewards app raised $240m in Series D funding led by Hamilton Lane. Read more

Fidel API - London based financial infrastructure startup raised $65m in Series B funding led by Bain Capital Ventures. Read more

Fractal - San Francisco based marketplace for gaming NFTs raised $35m in Seed funding led by Paradigm and Multicoin Capital. Read more

Gotrade - Singapore based app that lets international users buy fractional shares of U.S. securities raised $15.5m in Series A funding led by Velocity Capital Fintech Ventures. Read more

Kaleidoscope - Minneapolis based philanthropy fintech company focused on education raised $10m in Series A funding co-led by Rally Ventures and 3x5 Partners. Read more

Lemon.market - Berlin based embedded stock trading company raised €15 million in Seed funding led by Lakestar and Lightspeed. Read more

Lightning Labs - San Francisco based blockchain protocol startup raised $70m in Series B funding led by Valor Equity Partners. Read more

Moneybox - U.K.-based wealth management startup raised £35m in Series D funding led by Fidelity International Strategic Ventures. Read more

Near Protocol - San Francisco based blockchain development project raised $350m in new funding led by Tiger Global. Read more

Parallel Finance - San Francisco based DeFi lending and staking protocol raised $5m in new funding from investors including Section 32, Coinbase, and other strategic funds. Read more

Rattle - San Francisco based revenue orchestration SaaS raised $26m in Series A funding led by Insight Partners. Read more

Remote - San Francisco based HR startup raised $300m in Series C funding led by SoftBank Vision Fund 2. Read more

RenoFi - Philadelphia based renovation financing startup raised $14m in Series A funding led by Canaan. Read more

SamCart - Texas based eCommerce platform built for content creators raised $82m in Series B funding led by Eldridge. Read more

Starlight - New York based corporate digital asset management startup raised $5m in Seed funding led by Abstract Ventures and A*Capital. Read more

Vested Finance - San Francisco based platform for Indian investors to invest in the U.S. stock market raised $12m in Series A funding led by Ayon Capital. Read more


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