3 Fintech News Stories
#1: The Revenue-Based Financing Space Grows Up
What happened?
Capchase is acquiring a company called Vartana:
Capchase acquired Vartana to accelerate the product roadmap and market expansion of its tech-powered vendor financing offerings.
The acquisition brings together Vartana’s vendor financing platform and Capchase’s vendor financing for B2B software and hardware companies, the firms said in a Tuesday (June 24) press release.
Both Capchase and Vartana have developed full-stack, API- and artificial intelligence-driven platforms that embed into sales workflows and customer relationship management (CRM) systems and automate the vendor and equipment financing process from credit approvals to configuring financing offers, according to the release.
The combined company will offer digitized vendor financing workflows that meet the growing demand from B2B buyers for financing that is integrated directly into their purchase flow, the release said. It will provide the more flexible, tech-enabled financing options sought by vendors, per the release.
So what?
It’s been interesting to watch the revenue-based financing space grow up.
In 2020, it felt like a whole wave of first-time fintech founders had discovered that it was possible to advance money to small businesses by purchasing their future cash flows at a risk-adjusted rate, and they were like, “Huh, what if we did that for SaaS startups?!?”
They called it revenue-based financing, which was funny because all the experienced small business lending folks were like, “Factoring. You invented invoice factoring.”
This skepticism was warranted. While revenue-based financing for SaaS startups was obvious and a relatively easy product to build, it was always going to be a hard path to stay on long-term. It’s just not that profitable, as a standalone business, to buy future subscription revenue from startups that likely won’t be around a year from now.
So, the fintech companies in the revenue-based financing space adapted.
Pipe (with an unintentional assist from its original founding team) made a hard pivot into embedded small business lending.
Capchase’s evolution has been more gradual, but no less significant.
It experimented with lots of different ideas (financing for large recurring bills like cloud computing or legal fees, a high-yield savings account for startups, etc.) before landing on the one that seems to have stuck: embedded financing for business buyers.
This model is often referred to as B2B BNPL, and that is a fairly accurate descriptor. Capchase enables its clients to embed real-time financing options for their customers, for both up-front payments (which can reduce the need for the buyer to get approval from the finance department or deal desk) as well as post-payment (which reduces the need for the seller to try to collect on late payments and opens up opportunities for up-sells and renewals).
This acquisition is another step in that direction, giving Capchase a big boost in the equipment financing space, more tooling around vendor procurement, and access to more enterprise companies (particularly in healthcare and construction).
#2: A Product For Every Life Stage
What happened?
Acorns made another acquisition:
Acorns … today announced the asset acquisition of Zeta, a financial planning platform that provides tools and services for couples and families. This milestone supports Acorns’ vision of being a financial wellness system for the whole family, creating compound growth at every life stage.
With this acquisition, Acorns welcomes Zeta cofounders Kevin Hopkins and Aditi Shekar to the team. They bring deep experience in the couples and family space, which is especially meaningful as Acorns accelerates its family product strategy. As an early investor in Zeta, Acorns has long believed in the startup’s mission to support shared financial journeys and improve financial outcomes for families.
So what?
Acorns has been on fire lately, when it comes to acquisitions, as the company itself notes:
This marks the fifth strategic acquisition in under two years for Acorns. In 2023, the financial wellness app purchased GoHenry, the leading money app for kids in the UK, and PixPay, Europe’s debit card for teens. Acorns acquired money management company, Chronifi, in 2024, and announced its acquisition of EarlyBird, a financial wellness app for families with kids, this spring. These moves reflect Acorns’ vision of being a financial wellness system for the whole family, creating compound growth at every life stage.
This seems like a very smart strategy to me, and it’s a fascinating contrast with Chime.
Both companies are trying to serve so-called “everyday Americans”. Both companies offer a core deposit product, which includes a debit card, free ATM access, and high-yield savings.
Acorns, obviously, has a strong collection of wealth management and investing products. Whereas Chime eschews wealth management in favor of lending, offering fee-free overdraft, earned wage access, and credit building.
I would guess that if you fast-forward a few years, the two companies’ product suites probably look much more similar. Chime will get into wealth management. Acorns will likely add at least a few lending/liquidity solutions.
The more fundamental difference between the companies seems to be in how they’re trying to grow.
Chime is trying to solve an urgent problem (income/expense mismatches) for as many consumers as possible, and in so doing, become those consumers’ primary financial services provider.
This approach necessitates a focused product strategy (everything needs to be in service to that problem), a low-friction business model (interchange fees are largely invisible to consumers), and aggressive customer acquisition (direct digital marketing, brand marketing, Chime Enterprise, etc.)
Acorns, by contrast, seems to be trying to construct a suite of products that will attract different segments of consumers at various stages of their lives and keep them (and their extended households) engaged in the Acorns ecosystem for the long term.
This approach necessitates a more diversified product strategy (acquiring different “niche” B2C fintech products built for different life stages), a more explicit opt-in business model (subscription bundles), and a product-led growth playbook for customer acquisition (Acorns doesn’t need to spend money to acquire couples if it offers the best couples banking product … they will seek it out).
The Chime model is probably a better fit if your goal is to scale up quickly.
However, I’m deeply intrigued by the idea of assembling a collection of niche fintech products into a single “pipeline” that can capture and nurture households for decades.
#3: Fiserv’s Stablecoin Won’t Help Community Banks
What happened?
Fiserv is planning to launch a stablecoin to (ostensibly) help community banks keep pace with bigger banks and fintech companies:
Financial-technology giant Fiserv plans to launch a stablecoin and platform that could be used by its clients, which include roughly 3,000 regional and community banks, executives told The Wall Street Journal. The platform is expected to be compatible with other stablecoins and allow for easy connection with the other 10,000 financial institutions and millions of merchant locations that Fiserv works with.
So what?
Crypto and stablecoin advocates are very excited about this news (“probably nothing,” many of them tweeted), but I gotta be honest — I don’t understand it.
At least not the way that the Wall Street Journal is reporting it.
Let’s start with who is behind this, because we can bet that Fiserv isn’t issuing a stablecoin on its own. The WSJ reports:
Fiserv will partner with the blockchain platform Solana and stablecoin companies Circle Internet Group and Paxos on the venture, which should be launched by the end of the year. It plans to announce a separate partnership with PayPal, which has its own stablecoin.
Huh?
Circle and Paxos are direct competitors. How is Fiserv going to be working with both of them to issue a single stablecoin?
And doesn’t interoperability kinda defeat the purpose of a stablecoin?
Take PayPal, which works with Paxos to issue its stablecoin, as an example. My assumption is that PayPal is attempting to utilize PYUSD to establish a closed-loop ecosystem, built upon a native currency that is global and real-time by default.
If that’s true, what is the benefit to PayPal in making its stablecoin interoperable with a stablecoin that is being offered by banks? I get why Paxos would want to enable that, but why would PayPal?
And what, exactly, are Fiserv’s 3,000 regional and community bank customers going to get out of this stablecoin initiative? The WSJ believes it has the answer:
A broad shift to crypto would put at risk the deposits that regional and community banks are especially reliant on to make loans. If customers were to pull deposits out of accounts and put them into stablecoins, that would leave the banks less room to lend, a critical source of revenue.
But then it undercuts the internal logic of its own story a few paragraphs later (emphasis mine):
FIUSD and the stablecoin platform will have built-in fraud, risk-management and settlement controls, Fiserv said, and large banks will handle custody of the stablecoin.
LARGE BANKS WILL HANDLE THE CUSTODY OF A STABLECOIN THAT IS SUPPOSEDLY BEING ISSUED TO HELP STOP DEPOSITS FROM MIGRATING OUT OF COMMUNITY BANKS? ARE YOU KIDDING ME?!?
This story is just the best.
Here are a couple of additional fun tidbits:
The stablecoin will be called FIUSD, but banks could work with Fiserv to create their own branded coins.
Fiserv said it would allow its bank clients to implement its stablecoin technology at no additional cost. But it will demand transaction fees and part of the yield earned through reserve investments such as Treasurys.
I’m trying to summarize the sales pitch here, but, I just, I can’t stop laughing … long enough … to type it …
We’re launching a stablecoin. We won’t charge you to implement it (unless you haven’t migrated to Finxact yet), but you will need to pay us transactionally and we also get some of the yield that it generates and no, you don’t get to custody the funds backing the stablecoin so it won’t help solve your deposit flight problem at all but the good news is that you don’t have to call it FIUSD if you don’t want to!
There’s a version of this initiative that could eventually make sense for community banks. Fiserv mentioned in its press release that it is exploring tokenized deposits, which could help keep funds at community banks rather than driving them to the big bank partners of Circle and Paxos.
However, at this moment, this initiative seems more geared to generate positive press and investor sentiment for Fiserv than it does to help community banks.
2 Reading Recommendations
#1: FinCEN, Banking Regulators Clarify CIP Rule’s TIN Collection Requirements (by Jason Mikula) 📚
Lots of good stuff in Jason’s latest newsletter (as usual), but the big news is that he finally wrote about stablecoins! A very good rundown of what’s been happening in the stablecoin space, with a healthy dose of skepticism.
Welcome to the club, Jason!
#2: Stablecoins are a Platform pt3 – New Financial Products (by Simon Taylor, Fintech Brainfood) 📚
Simon has been writing a TON about stablecoins lately, but I thought this piece (part 3 in a series) was especially interesting.
I have a similar belief in the potential of stablecoins to be a major competitor to BaaS, and Simon does an excellent job laying out that theory.
1 Question From The Fintech Takes Network
There are a TON of interesting questions being asked in the Fintech Takes Network. I’ll share one question, sourced from the Network, each week. However, if you’d like to join the conversation, please apply to join the Fintech Takes Network.
What’s the argument for tokenized deposits vs. stablecoins? I understand why banks prefer the former to the latter, but I’m unclear on why businesses and consumers might prefer one to the other.
If you have any thoughts on this question, reply to this email or DM me in the Fintech Takes Network!
