3 Fintech News Stories
#1: Turning a Drizzle Into a Downpour
What happened?
Rain, an earned wage access provider, raised a Series B:
Rain, a startup offering an employer-integrated earned wage access (EWA) app coupled with financial-wellness features like overdraft alerts and spending trends, has raised $75 million in an all-equity Series B round.
So what?
$75M is a decent amount in this environment, so it’s safe to assume that investors were impressed with the progress Rain has made since its $66M Series A raise in 2023.
On the one hand, I can see the appeal.
Rain is an employer-integrated EWA provider, meaning it distributes its product exclusively through employers (Rain targets mid-market and enterprise companies with over 300 employees). It does not market its product directly to consumers.
Going with the employer-integrated model was a good decision. It is superior to the consumer-facing EWA model. It’s more cost-effective when it comes to customer acquisition. It has better data (payroll and time & attendance), which leads to better underwriting and fewer losses. And it’s less likely to draw the ire of regulators (the Biden-era CFPB made a late charge on EWA last year, though the Trump Administration may prove friendlier to the industry).
On the other hand, I think Rain (like most EWA providers) has a challenging road ahead.
As far as I can tell, the primary way that Rain makes money today is through a small transactional fee (typically $3-$4) when employees opt to receive their advances instantly, rather than waiting the standard 2-3 days for an ACH to clear.
While common in the EWA space, this business model is, on its own, pretty flimsy.
Rain obviously knows this and is hard at work finding ways to expand its services and generate more revenue. It announced a debit card (issued through Marqeta) last year, giving employees a fee-free method of accessing their advances early (and generating interchange revenue for Rain). This is a good, if unoriginal, idea, but the challenge with a debit card like this is getting it from occasional use (when I need an advance on my pay) to habitual use (this is my primary debit card). This challenge is magnified now that Chime, which already has a ton of primary debit card customers, has gotten into EWA.
So, Rain is going further. Here’s TechCrunch:
In Q3, the startup plans to launch an EWA-secured credit card with a dynamic credit limit based on the verified earned wages it has from the employer payroll systems.
The startup is also working on a product to be rolled out later this year that makes it easier for employees to use their Health Saving Account (HSA) by letting them spend on any card and get reimbursed. Furthermore, it will bring saving accounts later this year with features including auto-save and rewards.
OK! Now we’re talking!
The savings account would bring Rain a bit closer to parity with Chime, which has made a big push to give employers an integrated suite of financial products and services. The credit card would be a big step beyond what I’ve seen any other EWA provider offer (and would further boost interchange revenue for Rain). The HSA refunds on any card also seems like a great idea (and is an obvious benefit to offer through employers). It sounds similar, in concept, to what Bilt introduced with Walgreens last year.
#2: Pax Americana
What happened?
Pax, a fintech startup based in San Francisco, raised a $4.5M seed round:
The round was led by Initialized Capital, alongside Sancus, Basis Set, Soma Capital, General Catalyst, Transpose, ZVC1, and Flexport angels.
Led by CEO Penny Chen, Pax provides AI-powered duty drawback solutions. By partnering with brokers and tech providers, they streamline drawback processes for seamless collaboration. The proprietary AI-powered refund maximization algorithm serves companies of all sizes, helping them identify the maximum recoverable duties, ensuring they reclaim every dollar and accelerate payments.
So what?
The timing for Pax is incredible.
The Trump Administration’s tariffs-are-on-but-wait-not-really-but-seriously-they-are-kinda-maybe-we’ll-see approach to global trade has been bad for pretty much everyone in the world. Pax would seem to be one of the rare exceptions.
Pax is applying AI to automate the duty drawback process.
What are duty drawbacks?
Well, generally speaking, when a company pays duties, taxes, or fees on imported goods that are then exported, used in manufacturing exported products, or destroyed, they are eligible for a refund on those duties/taxes/fees. This includes tariffs.
As folks have been explaining non-stop over the last few weeks, almost no company in the U.S. manufactures its products entirely within the U.S. from materials wholly produced within the U.S. Instead, it’s common for products (and their components) to cross borders, often multiple times, before they are finalized.
That means that basically every company in the U.S. needs to worry about tariffs, but because the administration won’t stick to a consistent strategy on tariffs, no company has certainty on what their costs will look like tomorrow or a month from now or a year from now.
In the face of all that uncertainty, I can imagine that companies will try to grasp onto anything that gives them at least a little bit of control.
This should benefit every company in the business of helping importers with duty drawbacks (e.g., Comstock & Holt, Alliance Drawback Services, etc.), but Pax’s model of zero upfront costs and a low success fee (thanks to its use of AI and automation) should help it stand out.
#3: A Sign of Coming Trouble?
What happened?
The Federal Reserve Bank of Kansas City released some interesting data:
Credit card delinquencies rose steadily for subprime borrowers from March 2022, when monetary policy tightening began, to November 2024. As of January 2025, however, the subprime delinquency rate has fallen for two consecutive months. This fall coincided with declines in both subprime credit card purchases as well as the annual percentage rate (APR) for subprime credit cards. Together, these declines suggest subprime borrowers had lower demand for credit card financing in recent months.
So what?
Subprime credit card delinquencies have decreased?
That’s not a headline I was expecting to read in 2025.
What’s going on here?
You might be tempted to explain it by looking at the interest rates on those credit cards, which, as the Kansas City Fed reported, have been decreasing. The Federal Reserve’s rate cuts in late 2024 likely lowered funding costs for banks, enabling them to reduce subprime APRs. Cheaper credit reduces monthly payments, making it easier for borrowers to stay current, thus lowering delinquencies.
That’s a sound theory … except that the Kansas City Fed also found that the growth rate in subprime credit card purchase activity declined in 2024 and actually turned negative in 2025.
So, it’s not just that the cost of borrowing decreased for subprime credit card customers. Their use of those credit cards decreased as well.
What could be causing that?
Well, here is where we leave the realm of fact and enter the murky lands of educated guesswork, so take the following two statements with some grains of salt:
- Subprime consumers have migrated away from credit cards and are, instead, using forms of financing that have more predictable fees and do not allow users to get into revolving debt (e.g., EWA, BNPL, etc.)
- Subprime consumers are exercising more caution, financially, in the face of growing economic uncertainty.
I’m not sure if either of these theories is correct, but I will say that I have a hunch that there is something to theory #2.
By virtue of living so close to the cliff (financially speaking), subprime consumers often have a very accurate intuitive sense of when the economy is about to get worse. Much better, quite frankly, than higher-income prime and super-prime consumers.
This trend is worth watching closely.
2 Fintech Content Recommendations
#1: It’s still Day 1 for Nubank (by Jevgenijs Kazanins, Popular Fintech) 📚
My favorite writer on public fintech companies writes about perhaps the most interesting public fintech company out there.
Yep, there was no way I wasn’t recommending this one.
#2: AI 2027 (by Daniel Kokotajlo, Scott Alexander, Thomas Larsen, Eli Lifland, and Romeo Dean) 📚
This is a bit outside my normal lane for content recommendations, but it felt like I should deviate given the all-consuming importance of AI on fintech (and everything else).
A very interesting and well-thought-out overview of how AI is likely to progress over the next couple of years.
1 Question to Ponder
If you were going to make a list of 10-12 companies that most embody the emergence of fintech, as an industry, over the last 30 years, which companies would you pick? And why?
