3 Fintech News Stories
#1: Chase Unfriends Social Media Platforms
What happened?
JPMorgan Chase is going to be restricting Zelle transactions that originate from social media platforms:
Chase Bank is going to make it harder to use Zelle for transactions stemming from social media. In an update to its policy on Zelle, Chase says it may “decline or block” payments related to purchases from social media marketplaces or messaging apps
The company also says it may request more information when you add a payment recipient to Zelle, including the purpose of your payment, how you contact this person, and “other details we deem appropriate to assess whether your payment has elevated fraud or scam risk, or is an illegal, ineligible or improper payment.”
So what?
Honestly, this is great, and I expect all of the other banks that own Early Warning Services (which operates Zelle) to follow suit.
According to Chase, 50% of scams reported in the second half of last year originated from social media (I’ve heard this percentage is even higher for other banks). It absolutely makes sense to restrict payments that originate from those channels, especially when the ostensible purpose of the transactions is commerce (where delays or inconveniences are unlikely to cause dire problems for the consumer). And if those social media platforms find that frustrating, they are free to develop their own payment systems (and dispute-handling processes) to fill in the gap.
My question is: How much work is Chase (and EWS) doing behind the scenes with Meta and the other big social media platforms to share insights on scams and tailor these interventions to only the most suspicious transactions? It would be in the interest of Meta and the other platforms to do so, and, indeed, they have been doing exactly this already in the UK.
It would not surprise me if there has been some behind-the-scenes work on this issue happening in the U.S. as well.
Now the question is if Cash App and Venmo will join the party.
#2: Betting on Financial Safety
What happened?
Synovus teamed up with Carefull to offer a range of financial safety benefits to its customers:
Synovus Bank announced this week it would be collaborating with Carefull, which provides consumer-oriented fraud prevention products, including for elders. The initiative gives Synovus customers across the southeast new protections against falling for fraud and scams or making money mistakes.
Carefull is a financial safety platform designed to protect aging adults, their families and financial institutions from elder fraud, scams and money mistakes. The company maintains an AI model for account monitoring, identity protection products and similar offerings. Carefull sells both directly to consumers and to banks looking to offer Carefull services to their customers.
So what?
As I have written about many times in this newsletter, in the age of interstate banking and the internet, banks no longer have a default right to win in their target markets.
And the impact of this change isn’t evenly distributed across the industry.
The biggest banks will (mostly) continue to win, buoyed by their combination of scale and systemic importance. And (some) small banks will continue to win because they will always be able to outcompete their bigger peers in serving niche customer segments.
It’s the regional and super-regional banks in the middle of the market that will struggle the most, as long as they continue to try to play big banks’ game (mass market consumer and commercial banking) at a sub-big bank scale.
To win, they need to think differently about their products and competitive differentiation.
Synovus is a $60 billion regional bank based in the southeast, and judging by the homepage of its website, it’s trying to carve out a right to win around financial safety:
The partnership with Carefull allows Synovus to enhance its existing product bundles (aimed at mass affluent and HNW consumer segments) with different levels of access to Carefull’s suite of financial safety services, including credit monitoring, dark web monitoring, bank account monitoring, secure digital vaulting, and read-only access and alerts for customers’ trusted contacts.
Given the escalating threat of scams and the increased attention that older (and often wealthier) consumers are getting from scammers, betting on financial safety as a core competitive differentiator seems like a sound strategy.
#3: All-in-One Embedded Finance
What happened?
Modern Treasury, a payments operations platform, partnered with Brico, a fintech infrastructure startup focused on regulatory compliance:
Today, we’re excited to announce our partnership with Brico, to help accelerate the shift to the Instant Economy. Brico’s AI-powered platform helps companies quickly and cost-effectively secure the necessary licenses to launch and scale embedded payments. Meanwhile, Modern Treasury’s payment operations platform provides businesses with the infrastructure to move and reconcile money automatically. Together, we make it easier for companies to enter the payments space, reducing complexity and accelerating time to market.
So what?
Modern Treasury was founded in 2018, and in the seven years since, it feels like a lot has happened in the market to position the company for success.
Embedded finance became one the most popular theses in fintech (with embedded payments being the tip of the spear). Adoption of faster payments infrastructure accelerated. And, of course, Synapse collapsed in spectacular fashion, which made boring core competencies like ledgering and reconciliation suddenly sexy.
And now there’s this partnership with Brico, which might not seem like a big deal, but (from my vantage point) represents an important inflection point across all of these trends.
Modern Treasury wants to encourage and enable more companies to launch embedded payments experiences for their customers, preferably experiences that require instant money movement. One of the longest poles in the tent, for any company considering embedded payments is licensing, specifically the acquisition of state money transmitter licenses (MTLs), which are generally required if you want to transfer, send, or exchange money on behalf of others.
Brico streamlines the acquisition, maintenance, and renewal of state financial licenses (including MTLs). Thus, through this partnership, Modern Treasury can help its customers more quickly, conveniently, and inexpensively launch compliant embedded payments experiences.
It’s essentially the embedded payments equivalent to Stripe Atlas for business incorporation.
Smart stuff.
2 Fintech Content Recommendations
#1: PayPal Wants to be Everywhere (by Jevgenijs Kazanins, Popular Fintech) 📚
Jev has been writing some great analysis on PayPal recently (also check out his article “PayPal’s Fresh Bid for Relevance”), and the main takeaway is that PayPal is trying to do too much.
#2: Fast & Furious: FDIC, CFPB Reverse Course In Numerous Cases (by Jason Mikula, Fintech Business Weekly) 📚
An excellent overview of the recent decisions made by the CFPB and the FDIC to stop pursuing lots of active litigation against banks and fintech companies (though not all … sorry, MoneyLion!)
I will confess to being disappointed that Jason didn’t include more quotes from or references to the Fast & Furious movies in his article, however.
1 Question to Ponder
Does anyone know how Figure’s new YLDS stablecoin makes money? It offers yield and is a registered security with the SEC, so I assume it’s investing in something besides T-Bills to pay for the yield. Does anyone know what it is investing in?
I am increasingly seeing stablecoin issuers talk about yield, but it’s unclear to me where that yield is supposed to come from.
If you have any thoughts on this question, hit me up on Twitter or LinkedIn.
