3 Fintech News Stories
#1: Offering Something Different
What happened?
Footprint, a fintech infrastructure provider, raised a Series A:
Footprint, a company that unifies KYC (Know Your Customer), security and authentication to automate consumer onboarding and reduce identity fraud, today announced a $13 million Series A led by QED Investors.
The funding will be used to double down on the Footprint product, providing the highest fidelity verification for people today and ways to utilize identities within Footprint tomorrow.
So what?
Footprint is a bit unusual compared to many other providers that work in KYC, fraud management, and digital identity.
Instead of focusing on back-end workflow orchestration – bringing different data providers together and executing decisioning rules set by the client – Footprint provides a much more comprehensive and prescriptive service. That service is embedded directly within the client’s front-end digital interfaces, allowing Footprint to directly control the various onboarding flows for different customers and products, including (where necessary) step-up verification checks.
This identity verification and KYC service is complemented by a data vaulting service, which allows Footprint to capture and store all customers’ personally identifiable information (PII). By doing so, Footprint can directly authenticate returning customers with minimal additional friction.
That last part – frictionless authentication of existing customers – is especially appealing to large enterprises, which struggle to deliver a unified customer experience across various product silos (if you’ve ever opened up multiple accounts at a large national bank, you understand what I’m talking about). It also, long term, may allow Footprint to build an identity authentication network that spans across companies, which is the big prize that everyone in the digital identity space is aiming at.
#2: One Love
What happened?
Walmart has officially divorced its co-brand credit card partner, Capital One:
Capital One Financial Group will no longer be the exclusive issuer of Walmart Inc. credit cards after the retailer succeeded in a lawsuit regarding the relationship earlier this year.
The partnership had been in place since 2018, when Capital One became the sole issuer of the retail giant’s private label and co-branded credit cards. Walmart sued in 2023, alleging the bank failed to deliver replacement cards in a timely manner and to promptly update transaction and payment information to accounts.
At the time, a Capital One spokesperson said the lawsuit “is an attempt to renegotiate the economic terms of the partnership it agreed to just a few years ago, or end the deal early.”
A federal judge ruled in Walmart’s favor in March.
So what?
A couple of notes on this news.
First, this is not the first time that Walmart has had a bad breakup with a credit card issuer. In 2018, they sued their last partner (Synchrony Financial) in order to get out of that partnership.
Given that, I’m sure Capital One knew what it was getting into.
Second, it appears that Capital One is getting the house in the divorce:
Capital One will remain on as owner and servicer of the credit-card portfolio of approximately $8.58 billion of loans, according to a filing. The card company originated and underwrote about 40% of the card balances, and the McLean, Virginia-based firm plans on converting eligible customers into its own banded cards.
And third, it seems likely that One (Walmart’s fintech business unit) will play a more active role in whatever future credit card plans the retailer may pursue:
The more aggressive route by Walmart would be to take on banks by becoming a one-stop financial services provider. It could do that with the help of an outside fintech firm, but analysts think it’s more likely that it will look internally through its majority-owned fintech, called One. One runs a debit card, is testing out buy now/pay later options, and, with the addition of a credit card, could be closer to becoming the financial super-app Walmart has long sought.
It’ll be interesting to see if Walmart does decide to launch a new credit card through One.
A big challenge with classic co-brand credit card partnerships is that the issuing bank partner often pushes the non-bank brand to market the card as widely as possible. In fact, after Walmart’s lawsuit against Capital One, the bank fired back by accusing the retailer of not marketing the card as aggressively as it should have.
Here’s the thing, though—it’s not necessarily in Walmart’s interest to offer credit cards to all of its customers.
Credit cards work great for consumers who can use them primarily in a transactional capacity. Revolving a balance, on the other hand, is a very financially unhealthy choice.
Capital One’s business model depends on customers making that unhealthy choice much of the time. Walmart’s business model does not, and, in fact, it is arguably antithetical to Walmart’s brand promise (to help customers save money).
I wouldn’t be at all surprised if Walmart’s next foray into credit cards focuses on a more narrowly targeted product for transactors and a combination of debit, EWA, and BNPL for everyone else.
#3: Comparison is the Thief of Joy
What happened?
Frich, a personal financial management (PFM) app for Gen Zers, raised a $2.8 million seed round:
“We realized that Gen Z has no clue what to do with money and we’re all pretending on social media that we have our lives together, when in reality, we don’t,” [Katrin] Kaurov [Co-founder of Frich] told TechCrunch in an interview. “Are they actually overdrafting or are they actually living those lavish lives? We just felt there was a really strong disconnect between what’s being shown online, and what the banks and financial institutions are offering with Gen Z actually wants.”
Users of Frich — which stands for “Effing Rich” — have the ability to ask questions anonymously on the app to get a better understanding of how others their age are doing financially without feeling competitive. They can also anonymously share financial data to see how they compare with peers. For example, a college freshman can see what others with similar backgrounds spend on entertainment, investing and rent. Questions users could ask include, for example, How much are people my age investing? Do my classmates have allowances?
So what?
My favorite consumer survey that I ever did was one in which we asked people, “What is crucial to the future of your financial success?”
We didn’t give them a drop-down list of options to choose from. The question was open-ended. We wanted people to answer it outside the context of the banking products and services that they already used.
One of the most popular answers we received was “developing a healthier relationship between money and happiness”.
When asked to elaborate on that, many respondents told us that they deal with a great deal of anxiety due to their feelings that they aren’t on track financially. In fact, a full two-thirds of respondents said that they either weren’t on track financially or weren’t sure if they were or not.
When asked what was causing this lack of confidence, many folks pointed to social media. 58% of respondents said that they had felt disappointed with themselves or embarrassed when they saw someone else’s financial status or lifestyle.
Here’s an illustrative quote from one respondent:
We have this image that other people see [on social media] and think, “Okay, she’s got it together. He’s got it together.” In reality, I only traveled because I had some SkyMiles. I paid for dinner because someone gave me 20 bucks to put gas in my car, so I could use my card for dinner instead of for gas. No one knows some of those behind-the-scenes things.
This is the core problem that Frich is trying to solve. They’re basically trying to create the anti-social network for money, in which consumers anonymously share what’s really happening with their finances, in an effort to give all users more context on how they’re actually doing, relative to their peers.
As a PFM wedge product, I really like this. My only quibble would be the Gen Z-specific framing. Gen Z might be the right generation to start with, but this is a product that all generations need.
2 Fintech Content Recommendations
#1: How the Capital One/Discover deal could boost competition (by Sheila Bair) 📚
We have a simple rule around here: When Sheila Bair (former Chair of the FDIC and author of a kickass series of children’s books) speaks, we listen.
#2: They Were Used to Five-Star Service at First Republic. Now They’re Just Regular Customers. (by Alexander Saeedy, Wall Street Journal) 📚
An interesting overview of the bumpy transition that First Republic Bank customers have had in moving over to JPMorgan Chase.
In particular, I appreciate the headline of this piece. It does a good job of putting the transition problems, which rich people on Twitter have been complaining about nonstop, in the proper context.
Guys – this is what banking is like for most people most of the time!
1 Question to Ponder
What are the best resources (books, academic papers, podcasts, etc.) to learn about the history of the mortgage industry in the U.S. (and how it compares to its peers in other countries)?
