The Cash Cow is Dead
Happy Friday, Fintech Takers!
I hope you’ve had a great week.
Today’s newsletter comes to you from Washington, D.C., where we just wrapped up our first-ever Fintech Takes Coworking Day.
I gotta tell you … I highly value work from home (and I’m never giving it up!), but there is something wonderful about working in the same room with other people, especially when those people are dyed-in-the-wool banking/fintech/policy nerds.
My thanks to everyone who joined us for coworking or the reception that followed it, especially Kiah Haslett, Alifya Valiji, Rachit Khaitan, and the wonderful folks at Canapi Ventures!
Now let’s get to today’s newsletter, which is a grab bag of a few different fintech news stories that caught my eye.
- Alex
#1: The Cash Cow is Dead Copy anchor linkCopied
What happened?
Mark Begor, CEO of Equifax, escalated the credit bureaus’ war with FICO:
Today Equifax announced that we’ve expanded our mortgage credit offerings to promote further credit scoring competition to support consumers and the mortgage industry. We are responding to FICO’s aggressive, monopoly-like price doubling by offering VantageScore 4.0 mortgage credit scores at a 50%+ reduction, charging $4.50 for the next two years. In addition, we’re also offering free VantageScore 4.0 credit scores to all Equifax mortgage, auto, card, and consumer finance customers who purchase FICO Scores in ‘26 to encourage VantageScore conversions.
So what?
As I wrote on Monday, the fragile state of cooperation that had existed for decades between FICO and the credit bureaus has been fractured.
Since the passage of the Credit Score Competition Act in 2018, it has been clear that we were eventually going to end up here. Bill Pulte pulled the pin on the grenade a bit earlier and more chaotically than market observers were anticipating, but still. This has been the endgame since 2018. FICO knew this. That’s why it started aggressively hiking the price of the FICO Score in 2018, taking it from 50 cents per pull to the $5 per-pull price that it’s at today.
When your cash cow gets a terminal diagnosis, the logical response is to dispense with the niceties and focus on extracting as much milk as you can.
The irony is that the credit bureaus benefited hugely from FICO’s aggressive price increases. The bureaus resold the (increasingly expensive) FICO Score at a 100% markup, while, at the same time, pushing the FHFA to move with urgency, citing FICO’s aggressive price hiking as evidence that the market needed more competition!
And now, in response to FICO’s decision to sell the FICO Score directly for $10 a pull (or $4.95/per pull with a $33 closing fee), Equifax is punching back. And the framing is absolutely hilarious:
We are responding to FICO’s aggressive, monopoly-like price doubling by offering VantageScore 4.0 mortgage credit scores at a 50%+ reduction, charging $4.50 for the next two years.
Allow me to translate that for you.
“FICO’s aggressive, monopoly-like price doubling” = FICO charging the same price we were already charging you, but keeping all the money for itself.
“Offering VantageScore 4.0 mortgage credit scores at a 50%+ reduction, charging $4.50 for the next two years.” = We’re now going to sell you our score for roughly what FICO was charging without our 100% markup, but don’t get used to it!
It’s likely that Experian and TransUnion will (eventually) make even more aggressive moves.
Remember, while the credit bureaus will cooperate, where necessary, to disrupt FICO, they are fiercely competitive with each other as well. And their competition tends to quickly drive down prices because their core offering (credit files + VantageScore) is highly commoditized. Lenders can and do pit them against each other to secure the best possible pricing.
It’s unclear to me if this pricing competition will ultimately benefit consumers, as Bill Pulte desires. Data resellers and lenders need to pass the cost savings along to borrowers for that to happen.
What I can say is that this will be bad for FICO.
Assuming the credit bureaus don’t create an antitrust problem for themselves (by, for example, selling their credit files for a discount to lenders that agree to buy the VantageScore), I don’t see what will stop them from continuing to drive down margins in the mortgage credit score space in their efforts to grab market share.
If that happens, it will be FICO that suffers. The FICO Score is, far and away, the biggest contributor to the company’s profitability. VantageScore, by contrast, contributes very little to the profitability of any of the credit bureaus.
#2: Yield For Me, But Not For TheeCopy anchor linkCopied
What happened?
Brian Armstrong, CEO of Coinbase, has been loudly and continuously warning that big banks are trying to take away crypto holders’ rewards:
While, at the same time, taking rewards away from his customers:
So what?
OK, a couple of thoughts on this:
- We should all be cautious of accusing others of hypocrisy. That’s a charge that has a habit of, to paraphrase my sons, bouncing off them and sticking to you.
- This Coinbase PR campaign is happening because banks have been making a (too late) push to tighten up the restrictions in the GENIUS Act that prohibit payment stablecoins from offering yield. Coinbase (and others) are currently exploiting a loophole in the law that allows distribution partners to offer yield on stablecoins, even though the issuers of the stablecoins themselves are prohibited from doing so. Coinbase has a ludicrously profitable distribution partnership with Circle, which is why it has been offering rewards (AKA yield) on USDC. Coinbase is trying to position banks’ efforts to adjust the GENIUS Act to better reflect the intent of Congress (no yield on payment stablecoins!) as a “bailout” for the banks, which is utterly absurd.
- Coinbase used to offer 4.1% interest on USDC held on its platform, with the ability to get up to 4.5% (for a capped amount) if users became members of Coinbase’s premium membership tier, Coinbase One. Now it is knocking that down to 0% for free Coinbase users and offering 4.5% on the first $10,000 of USDC (and 4.1% after that) for Basic members (at a cost of $50 per year), 4.5% on the first $30,000 of USDC (and 4.1% after that) for Preferred members ($300 per year!), or 4.5% for all USDC for Premium members ($3,000 per year!!!) This change confuses me. I thought consumers are entitled to all the yield, no strings attached? Does this count as Coinbase bailing itself out?
- It has been clear for a while that using rewards on stablecoins to acquire and retain customers would create a race to the bottom. I wonder if this change is, essentially, an admission from Coinbase that it needs to tap the brakes before it crashes itself into the ground. This seems like the most likely explanation, but the trouble for Coinbase is that there are many, many smaller crypto exchanges, platforms, and wallets that will be happy to spend their VC investors’ money to steal Coinbase’s customers. How successful they are in doing this (versus how successful Coinbase will be in retaining customers with “better products”) will be an interesting window into the price sensitivity of crypto holders.
- If crypto holders turn out to be extremely price sensitive when it comes to yield/rewards, the resulting race to the bottom may ultimately benefit banks, which can just wait out the pricing war until the next crypto winter or investor pullback. The market can remain irrational for a long time, but the banks’ business model will allow them to remain solvent longer.
#3: How is this still happening? How?!?Copy anchor linkCopied
What happened?
CNBC — a media outlet that I generally regard as rigorous and credible — published a profile of Kristy Kim, CEO of TomoCredit:
In 2011, Kristy Kim thought she was living the American dream. Fresh out of UC Berkeley and starting a career in investment banking in San Francisco, the 22-year-old was eager to find her first apartment, but her rental applications kept getting rejected.
“It was a lot of struggle... because, here is me, who studied hard, who worked hard to get a job and make money, and realizing that: ‘Oh, I don’t have a credit score in the U.S., I am credit invisible — a credit ghost,’” Kim told CNBC Make It.
Those early struggles with adapting to the U.S. financial system stuck with Kim. Today, the 38-year-old is the co-founder and CEO of TomoCredit — “tomo” short for tomorrow — a San Francisco-based fintech startup that helps people, especially those with a limited credit history, to build their credit and improve their personal finances.
So what?
I can’t … I don’t … you know, why?
Why is this still happening? Why do publications continue to write about it and Kim? Why are they seemingly incapable of basic research?
Take this sentence from the CNBC article as an example:
Last year, Kim’s company brought in more than $20 million, according to documents reviewed by CNBC Make It.
Let’s just pretend for a moment that this is true and the documents that Kim shared with CNBC are legit. If you were good at your job, you might ask some follow-up questions like:
- Is the company profitable? And if you claim that it is, how do you explain your history of not paying your vendors?
- If your goal is to make “people, especially immigrants, feel empowered,” as you claim, why do you have an F rating from the Better Business Bureau? Why are customers unable to cancel your service or unsubscribe from your marketing?
- How can you claim to be a credible expert on the subject of credit building when the U.S. credit bureaus have publicly disavowed you and cut your company off from being able to furnish repayment data?
How is it possible for a publication like CNBC to publish a glowing profile of Kristy Kim without doing this very basic level of due diligence?
Shit, just ask Google if TomoCredit is a scam! I did, and here’s what Google’s AI came back with:
Based on numerous consumer complaints and reports, TomoCredit is highly questionable and shows many signs of a scam.
I hope that this ridiculous CNBC article won’t cause too many more consumers to wind up trapped in Tomo scam hell, but, sadly, I know that at least a few more will. And that absolutely sucks.
MORE QUESTIONS TO PONDER TOGETHER
Big news for the endlessly curious (yes, you): I’m collecting your fintech questions on a rolling basis.
What’s keeping you up at night? What great mysteries in financial services beg to be unraveled? Think of it this way, if a stranger is a friend you just haven't met yet, your question is a Fintech Takes conversation waiting to happen.
One that could headline a Friday newsletter or be answered in an upcoming Fintech Office Hours event.
Drop your question here, whenever inspiration strikes!
MONEY20/20 SPOTLIGHT
It’s officially Money 20/20 season, which means I’ll be highlighting a handful of sessions, meetups, and happenings in every newsletter.
💰 Deepfakes, Real Risk: Fighting Fraud in an Age of Synthetic Identity | 10/26 | 3:00pm–3:30pm PT
I’m thrilled to be moderating this discussion at Money20/20, featuring the head of fraud at Varo and the co-founders and CEOs of SentiLink and Oscilar.
☕ Nova Credit Coffee + Conversation | 10/27 | 8:15am–10:30am PT
Start the AM with lending leaders unpacking the real-world journey of cash flow analytics (where to begin, how to apply it, and what it takes to make it work). Breakfast, networking, and discussion included! RSVP here.
🍸 MX Happy Hour Panel: Data into Action | 10/27 | 3:30pm–6pm PT
Small panel conversation featuring Jane Barratt (Chief Advocacy Officer, MX) and yours truly (among others!), followed by drinks and hors d’oeuvres at The Grand Lux Cafe, Venetian. RSVP here.
🍸 Fundbox After Hours | 10/27 | 7:30pm–9:30pm PT
Come for the conversation on the future of embedded finance and small business lending. Stay for the one-on-one conversations (over drinks and appetizers, of course!)
🥯 Astrada Breakfast Discussion | 10/28 | 8–10am PT
Join Salman Syed (CEO of Astrada) and yours truly for a lively AM conversation on data, AI and open banking. Who will win as the battle lines are redrawn? Bring your hunger and curiosity to Bouchon at The Venetian. RSVP here.
WHERE ELSE I’LL BE
💻 What’s the Best Way to Protect Consumers (and Lenders)? | 11/6 | Zoom
Chris Guild (Director of Lending Solutions, TruStage) and Taylor Nelms (VP of Research and Insights, Financial Health Network) will unpack the state of consumer financial health, how lenders are bracing for a turn in the credit cycle, and why payment protection insurance is becoming a critical tool for both portfolio risk and customer reassurance.
Seats are limited; register here!
FINTECH TAKES: BUILDERS SUMMIT
As you may know, Fintech Takes is hosting our first-ever in-person event on November 12th and 13th in the mountains outside Bozeman, Montana.
The Fintech Takes: Builders Summit is the industry event that I’ve always wanted, but have never quite been able to find. We are bringing together experienced founders and operators from banking and fintech — the folks who are actually building products in our industry — and giving them the content and networking opportunities they need to find (and understand) the next big problem they are going to tackle.
If that sounds like something you’d be interested in participating in, apply to attend or hit reply to this email to get more information on sponsorship opportunities. We still have room, but it is going fast!
Thanks for the read! Let me know what you thought by replying back to this email.
— Alex
