3 BIG IDEAS FROM THE PODCAST
In this week’s episode of Fintech Recap, Jason Mikula and I break down a surprisingly busy stretch of fintech Liberation Day headlines.
Surprise! The IPO window is open after all: eToro priced above its range, Circle (the issuer of the USDC stablecoin) is looking to IPO, and Jason and I have been digging into Chime’s S-1. But this episode wasn’t just about the numbers. What stood out was how existential the conversations felt about where fintech, as an industry, currently stands.
And read on below for my three big ideas …
1. If Chime Walks Like a Bank, Talks Like a Bank … Then it’s a Payments Company?
Chime has very famously tried to position itself to investors as a technology company, not a bank. Chime’s long-awaited S-1 leans into this messaging strategy, but with a new twist: Chime is not a bank (and doesn’t seem to want to be one); it’s a payments company, built on high-volume debit card swipes and the small slice of interchange revenue that it generates.
But that “small slice”? It makes up 76% of Chime’s total revenue, thanks to a legal carve-out: the exemption to the Durbin Amendment for banks under $10B in assets, which allows small banks (and their fintech partners!) to collect significantly higher interchange fees on debit transactions.
This “interchange math” is Chime’s whole playbook: more users → more swipes → more interchange.
This brings us to the structural challenge: Chime currently takes 21 months to recoup the costs of acquiring each user. Chime needs that number to go down, which is why it has invested heavily in both more efficient forms of customer acquisition (this is what the newly created Chime Enterprise division is all about) and in expanding the suite of products it offers (including several short-term lending offerings), which should (in theory) drive increased revenue and member retention.
We’ll see how it turns out. As Jason and I both emphasized in this segment of the podcast, public market investors are brutally realistic, and that realism can be a shock for companies accustomed to the gentle hands of private market investors.
| 🎬 DIRECTOR’S COMMENTARY I hope this point came across clearly in the Chime segment of the podcast — I’m a big admirer of the way that Chime has built its business and product suite (their decision to steer clear of crypto in 2020/2021 is my personal favorite example). My critiques are more focused on debit interchange-heavy neobanks, as a category. That’s a tough road to walk, as Varo can attest. It can be challenging to make a subtle distinction like this clear, but hopefully I managed to thread the needle in the pod! |
2. Fintech Castles Built on Sand
Open banking just got a whole lot more open. And by open, I mean dangerously unstable.
The CFPB has formally requested that the court vacate its open banking rule (created under the authority granted by Section 1033 of Dodd-Frank).
It’s not guaranteed to happen, but if it does, it could plunge us back into a fintech dark age, one with a decidedly worse user experience, a renaissance in screen scraping (now turbocharged via generative AI), and a body blow for the financial API economy.
Much of the infrastructure of modern fintech rests on one assumption: that structured, permissioned access to financial data is here to stay. Without it, we go backward; personal finance tools, fraud mitigation, pay-by-bank, risk underwriting, all of it.
As I said to Jason in the pod, none of this is good for banks (with the possible exception of JPMorgan Chase). Even though the Bank Policy Institute’s lawsuit is the precipitating event for all this drama, I don’t think banks are going to be happy if the rule does indeed get vacated.
3. Stablecoins Are the New BaaS
Stablecoin regulation is coming. The bipartisan GENIUS Act (yes, really, that’s its name) may finally give the space clear rules. That is progress, but it’s progress that we should be appropriately cautious about.
It reminds me of banking-as-a-service (BaaS) five years ago — an infrastructure shortcut for those looking to build financial services solutions fast. BaaS created a lot of value for the ecosystem, but weak oversight and a race-to-the-bottom dynamic in compliance and industry standards also led to huge problems, which the space is still trying to recover from.
I spoke at Stablecon last week in New York. The message from me and others was loud and clear. The stablecoin market cannot have an FTX or Synapse. It would create a backlash that would make stablecoin advocates long for the Halcyon days of the Biden Administration (well, maybe not quite, but you get my point).
We’ll see if the market can self-regulate itself well enough to avoid this outcome.
WHAT I’M LISTENING TO
#1: Beyond the Bet: Understanding Sports Betting & Gambling Addiction (by Dr. Lia Nower, Moraya Seeger DeGeare, and Nick Ashburn, The HomeEc Podcast) 🎧
As I covered last week on the pod ft. Alex De Marco, gambling has become a full-blown financial crisis. This HomeEc episode goes deeper into the human cost. Dr. Lia Nower explains how a $17B industry targets kids, exploits tech, and leads to the highest suicide rate of any addiction. A must-listen before your next “friendly” wager.
#2: Michele Alt, Klaros Cofounder & OCC Veteran (by Jason Mikula, Fintech Business Weekly) 🎧
Two of the sharpest people that I know talking about bank regulation, how to acquire a bank charter, and many other nerdy topics? Yes, please!
WHERE I’LL BE
✈️ Future of Banking: Navigating Change | June 5th | Kansas City
I will have the pleasure of moderating a panel on faster payments at this event, which is being hosted by the Kansas City Federal Reserve. If you’ll be around, please say hi!
💻 Cash Flow Data: The Cure to Credit Score Overreliance | June 24th | Zoom
In this webinar, we’ll be digging into the limits of traditional risk models (and why consumer-permissioned cash flow data might be the smartest upgrade in lending). Register here.
