Kontigo, Givefront, Beycome, & Cash App
Happy Wednesday, Fintech Listeners!
It’s been like a week and a half of news, and it’s only Wednesday!
Senators Dick Durbin and Roger Marshall reintroduced their proposal calling for increased competition in the credit card market after the president endorsed it.
The CFPB did yet another abrupt and bizarre about-face, this time on its funding from the Federal Reserve (Russ Vought has requested $145 Million from the Fed after arguing that it would be unlawful to do so).
And U.S. senators unveiled draft legislation that would create a regulatory framework for cryptocurrency in the U.S., amidst one of the most intense and contentious lobbying battles that I’ve seen in recent financial services history.
And, as is our custom on Wednesdays, a new Fintech Takes podcast dropped.
Never a dull moment!
- Alex
P.S. — Are you going to NY Fintech Week in April? I’m thinking of hosting an event around AI for leaders in banking. Let me know if you’d be interested in attending here!
3 BIG IDEAS FROM THE PODCAST
In this week’s episode of Not Fintech Investment Advice, Simon Taylor and I did what we do: picked a few fintech companies we found interesting … and then followed the rabbit holes wherever they led.
We started with a suddenly-infamous one: Kontigo, the “full-stack stablecoin bank” that has been the subject of much discussion in fintech and crypto circles this week.
Then came Givefront, the startup selling spend management software to nonprofits, a sector forgotten by fintech.
Then we chatted about Beycome, which is trying to apply AI to home buying and selling.
And finally, we closed with the vibe shift at Cash App, which seems to maybe have its mojo back.
Tune in for the full conversation here
And read below for my three big ideas...
#1: Building Without a NetCopy anchor linkCopied
As I couldn’t help but post recently, I like to collect quotes that epitomize different eras of fintech. (Have a quote? Hit reply to any of my emails and share it!)
And I think this one will end up epitomizing 2025: "btw, Kontigo is not a bank, Bank services are offered by the freaking blockchain."
In just a few weeks, we’ve seen that when things go wrong (and oh, they’ve gone wrong!), promises of decentralization and self-custody often don’t mean very much.
As it turns out, Kontigo accessed traditional banking rails through Checkbook, which in turn relied on JPMorgan Chase. And when stuff started to go wrong, JPMC cut them off.
Then, somehow, it got even worse.
Kontigo revealed that hackers gained “unauthorized access” to its systems, prompting the company to promise to reimburse affected users using its own $20 million war chest.
I just want to hone in on one part of that story: this is not decentralization. This is a centralized company absorbing losses.
Which raises the obvious question: what’s the point of a self‑custody neobank if your funds can still be hacked (and you’re stuck hoping the company makes you whole)?
Building with infrastructure that is, right out of the box, instant, global, and permissionless sounds great. However, in practice, it often just creates more surface area for risk. Borders still matter (sanctions, too), and risk, accountability, and restitution still have to live somewhere. Not to mention, “global by default” can quickly become risky by default when routed through markets that are difficult to bank safely (in the pursuit of growth hacking).
All of this is the reason why I am naturally suspicious of crypto/stablecoin-based neobanks, even though I understand the appeal of building on “the freaking blockchain” to developers.
🎬 DIRECTOR'S COMMENTARY
Simon and I recorded this episode last week, before our mutual friend Jason Mikula published a 5,000+ word investigative report on Kontigo, which I’m hoping y’all have read by now.
The company reacted to Jason’s reporting by threatening him and a bunch of other people who shared the reporting on Twitter, including Simon and Klarna CEO Sebastian Siemiatkowski.
Tremendous crisis communications work, fellas!
#2: Should You Cut Out the Middlemen?Copy anchor linkCopied
The real estate startup Beycome offers a rational pitch: skip the real estate agent, pay a $399 flat fee, and save an average of $13,185.
Beycome promises to bundle everything — title, insurance, appraisal (and yes, even drone tours) — as a full-stack real estate transaction platform for people who want out of bloated fees and agent gatekeeping.
But who would want to do that?
Are home buyers and sellers actually eager to cut out the middlemen and handle the transaction (with a little help from Beycome) themselves?
I can see it both ways.
On the one hand, those middlemen — real estate agents, mortgage brokers, title agents — get paid a lot of money, and research suggests that they’re not always on your side. So, why not cut them out and pocket the fees you would have paid them?
On the other hand, those middlemen take A LOT of the work associated with buying or selling a home off the shoulders of the buyers/sellers. Freeing up that time and mental and emotional stress may be worth the costs and the self-interested advice.
I think the correct answer is that there is no one correct answer. Different people will value different things.
If you value a smooth, frictionless process that imposes little to no work on you, going the middlemen route (or even the more extreme iBuying route) probably makes sense. However, if you want to be more actively involved and maintain control over the process (and save some money along the way), you may be more inclined to try a solution like Beycome.
#3: In the Right Market, Good Enough WinsCopy anchor linkCopied
There are approximately 1.9 million registered nonprofit organizations in the U.S., including charities, foundations, and other tax-exempt groups like labor unions and social clubs, with about 1.5 million being 501(c)(3) charities.
That’s a big market, and one that is in desperate need of modern financial tools.
But how do you go after that market?
The founders of Givefront wanted to bring modern financial software to nonprofits, but, as TechCrunch reported, their initial vision was too broad:
Givefront entered Y Combinator Winter 2024 with a broad vision spanning banking and accounting. The team quickly learned, however, that convincing nonprofits to replace accountants or core banking relationships required a slow and painful sales process
This makes sense.
Accountants are to nonprofits what core banking systems are to banks: mission-critical infrastructure that you won’t rip and replace unless you absolutely have to (even though it constantly annoys you). And banking relationships are nearly as sticky because nonprofits tend to work with banks that share their commitment to their mission and/or the communities they serve.
So, what you do if you’re Givefront is pivot to an adjacent, less competitive B2B finance software product category, one that can, ideally, be tuned specifically to better meet the needs of nonprofits — Corporate cards and expense management!
And the neat thing about choosing to focus on a specific (low-tech) industry and a specific product category that is dominated by a few large and highly innovative competitors (Ramp, Brex, Divvy, etc.) is that it creates a very compelling arbitrage opportunity.
To win a nonprofit’s corporate card and expense management business, you don’t need to have a product as good as Ramp’s. You don’t need a product that is a tenth as good as Ramp’s.
Your target customer has never seen Ramp. While it’s a relevant point of comparison for your product developers (thanks for the inspiration!), it’s not a relevant point of comparison for your customer's procurement process (which would be happy with anything better than the owner’s personal credit card and a handful of janky spreadsheets).
This allows you to arbitrage the difference between product quality and product quality standards, which may not feel like the most innovative strategy in the abstract, but if you’re helping underserved customers, who cares?
WHAT I'M LISTENING TO
#1: Why Don’t Uninsured Deposits Take Losses Anymore?(Bank Nerd Corner) 🎧Copy anchor linkCopied
The nerdier the topic, the more I enjoy Bank Nerd Corner.
I enjoyed this one very much.
#2: The Anti-Money Laundering Regime Is Broken. Can It Be Fixed? (Banking with Interest) 🎧Copy anchor linkCopied
A wonderfully in-depth overview of our current AML regime, why it doesn’t work, and how we might go about fixing it.
Thanks for the read! Let me know what you thought by replying back to this email.
— Alex
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