3 FINTECH NEWS STORIES
#1: Why Don’t We Have a National LISA in the U.S.?
What happened?
A UK fintech company focused on mortgage lending raised some money:
London-based fintech Tembo has raised £14m as it looks to scale its savings app and introduce new schemes in its mortgage product offering.
The Aviva-backed Southwark startup was founded during the pandemic to increase access to homeownership for first-time buyers.
It offers access to over 100 lenders, 10,000 mortgage products and 25 mortgage schemes. The fintech also recently launched a savings app for hopeful buyers to build up the cash to purchase their home with a Lifetime ISA.
So what?
One of my macro fintech theses is that incumbent financial services providers are TERRIBLE at building effective on-ramps for their products (because they already have all the profitable, prime-age customers), and one of the biggest value-adds that fintech provides is building effective, intuitive on-ramps for new and/or underserved customers.
You see this already in lending (Credit Karma, the many credit builder products in the market, etc.) and in investing (Acorns, Public, etc.), and I’m glad we’re starting to see it crop up in mortgage lending as well. There’s a lot of advanced planning and preparation needed to buy a house (both financially and otherwise), and we should build on-ramps to help first-time home buyers with that planning and preparation.
I also think the idea of a Lifetime Individual Savings Account (LISA), which Tembo and many other UK financial services providers offer, is brilliant.
For those who don’t know, LISAs were introduced in the UK in 2017. They are available to any UK consumer between the ages of 18 and 40. They allow for tax-advantaged savings of up to £4,000 per year, and the UK government will kick in an additional 25% bonus every year, up to £1,000. The accounts can earn regular interest (as savings accounts do), or the funds can be invested (as retirement accounts are). Funds can be spent (without penalty) to buy a first home in the UK or withdrawn for retirement after the account holder turns 60.
We don’t have a national equivalent to this in the U.S. (although 12 U.S. states, including my home state, offer First-time Homebuyer Savings Accounts, which are similar).
We should.
#2: The Revolut/Crypto/Neobank Vortex
What happened?
Three different companies, all co-founded by ex-Revolut employees, raised money to bring crypto-powered payments, rewards, and investing to the masses.
Deblock combines traditional current accounts with a non-custodial crypto wallet, enabling users to deposit, withdraw and spend funds across virtual and physical cards.
CEO [Jean] Meyer, [Aaron] Beck and [Adriana] Restrepo are all Revolut alumni. Meyer formerly worked as head of crypto for the UK challenger, while Beck previously served as head of core payments and banking partnerships and Restrepo as COO.
Brighty is a personal finance app that combines traditional digital banking experience with stablecoins and decentralised finance.
Brighty allows users to earn interest on their balance with free deposits and withdrawals. Physical and digital VISA cards support contactless payments through ApplePay and Google Pay.-
Businesses can open wallets in stablecoins, while crypto communities can list custom tokens, stake coins in branded accounts, and receive cashback.
The fintech also uses decentralised finance to provide daily rewards of up to 5 per cent APY on all stablecoin card balances.
Bleap provides a self-custodial wallet linked to a Mastercard debit card, letting users spend stablecoins directly in the real world without conversion fees. The app also supports multi-currency accounts with savings rates nearly 5x higher than traditional banks.
Users can add stablecoins from external wallets or purchase them with fiat. Bleap also supports fee-free crypto on- and off-ramping via external wallet connections.
Because Bleap doesn’t hold user funds, customers retain 24/7 access to their assets directly on the blockchain.
So what?
Some scattered thoughts:
- The timing of three different companies that do pretty much the same thing, all raising money simultaneously and all co-founded by ex-Revolut employees, is quite something. I’m unsure whether this makes me more bullish on Revolut or more bearish, but clearly, there’s something in the water over there.
- I guess this recent surge in enthusiasm for crypto means that founders and investors again think that mainstream B2C and B2B decentralized finance apps are a good idea. Personally, I don’t see the appeal of having a blended crypto-fiat product for payments, investment, and savings, given how volatile crypto assets still are. Who is asking for this? The article on Brighty provides a possible answer: “It’s particularly relevant to remote workers earning in crypto, particularly employees of Web3 startups.” OK then!
- Underlining that last point, it’s insane to me to create a finance app for consumers or small business owners that requires the use of a self-custody wallet, as Deblock and Bleap do. If you are trying to sell a financial operating account to an individual or business, you do not want to have to make this type of disclosure (from Deblock’s website): “Managing your crypto-assets on a non-custodial wallet means you are responsible for the security of your private keys, and any theft or sharing of them may result in the irreversible loss of your assets.”
- I wrote last week about the growing trend of crypto startups using stablecoins’ reputation for safety as a marketing tool to dress up their decidedly unsafe or illogical product constructs. Brighty utilizes this strategy. It supports stablecoins (along with BTC and ETH) and promotes how safe and reliable they are. However, Brighty also offers what it calls “stablecoin earning vaults,” which are (in their words) “a smart, simple and secure way to earn passive income.” In reality, these are high-risk DeFi lending pools, which we have seen cause significant harm to consumers and businesses in the recent past.
#3: The FDIC Gets Its Own Ledger
What happened?
The FDIC has reportedly built an internal database to help it keep track of fintech companies that partner with banks:
The system will help FDIC examiners anticipate potential vulnerabilities before they become a problem for banks, according to the people, who asked not to be named because they were not authorized to speak publicly.
Specifically, the system would make it easier to maintain consistent oversight of fintechs even if they were to switch banking partners, and complements the agency’s existing bank oversight mechanisms, the people said. The FDIC declined to comment on its internal processes.
The internal database is largely about ensuring the regulator knows which third-parties banks are working with, said one of the people.
So what?
A database for keeping track of banks’ fintech programs, including those that move from one bank to another.
Sounds like the FDIC has built itself a ledger!
As my friend Kiah Haslett would likely remind me, it’s important not to criticize the behavior you want to see more of.
I could say that it’s ridiculous that such a system did not already exist, given that we’re now a couple of decades into the modern era of BaaS and bank-fintech partnerships. I could say that it’s suboptimal for such a system to be built by one prudential regulator rather than by all four of them (yes, credit unions also partner with fintechs) cooperatively.
I could say these things, but I won’t.
Instead, I will say that this is great. If we want to avoid regulatory overreach and overreaction (which has been a hot topic in fintech circles recently), we need to give regulators the tools to get ahead of problems and address potential concerns proactively and with a lighter, more targeted touch.
This database is a small step in the right direction, and it’s a perfect precursor to the Fintech Call Report idea, which I wrote about last month.
More of this, please!
2 FINTECH CONTENT RECOMMENDATIONS
#1: Is Crypto Entering a New Golden Age—or Just a New Era of Failed Promises? (by Derek Thompson, Plain English) 🎧
Plain English rules and this episode is very good.
The guest for this episode — Austin Campbell — is more optimistic about crypto than I am, but overall, his perspective on debanking, stablecoins, and the future of the industry is very balanced and data-driven, and this conversation is definitely worth listening to.
#2: Regulators Should Conduct “Material Loss Review” Of Synapse Disaster (by Jason Mikula, Fintech Business Weekly) 📚
Jason makes an interesting case for the relevant regulators to do the fintech equivalent of a “material loss review” (which is something that happens, by law, when the FDIC insurance fund takes a loss of $50M or more) for the Synapse situation.
Obviously, that same legal requirement doesn’t apply here, but Jason argues (convincingly) that there is a moral requirement to do this type of in-depth, publicly available analysis.
Without it, we very well may never find out what happened!
1 QUESTION TO PONDER
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