The Week in Digital Wealth (8/17/21)

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By: Gerelyn Terzo 

Despite the chaos in the world lately, the financial markets continue to turn. Global fintechs are exploring the U.S. markets for multi-billion-dollar public listings, including more potential SPACs. Just because a company looks like a fintech doesn’t mean it is one. Demand for bitcoin and Ethereum is only growing stronger, and crypto payments have made their way to Android. Let’s dive in.

Dealer’s Choice 

Aspiration, a Los Angeles-based fintech company, is exploring going public via a SPAC deal. The “green fintech,” as it’s known, could jump onto Ahmed Fattouh’s blank check company InterPrivate III Financial Partners Inc, as reported by Bloomberg. The SPAC deal could attach a valuation of $2 billion on the fintech. The SPAC is looking to amass capital for the listing via a PIPE, or private investment in public equity, transaction. If Aspiration goes public, it could place a spotlight on green fintech. Aspiration is dedicated to fighting climate change and says it is “committed to clean money” as opposed to dirty money, which finances fossil fuel projects. 

Nubank may be a Latin American challenger bank, but it could soon be making a splash in the U.S. The neobank, which has the backing of billionaire investor Warren Buffett, is exploring a U.S. listing on the tech-heavy Nasdaq in an IPO that could value the startup at $2 billion. A couple of months ago, the once tech-averse Buffett acquired a $500 million position in Nubank, bolstering the digital payments startup’s valuation, which could rise even higher to $40 billion-plus with a U.S. listing. Nubank is targeting an IPO by year-end. 

Over in Minneapolis, U.S. Bank is acquiring Chicago and San Francisco-based fintech Bento Technologies. The terms of the deal were not disclosed, but Bento has attracted more than $18 million to its coffers in the past eight years. Bento Technologies, which also goes by Bento for Business, delivers payment and expense management tools to the small and medium-sized business community. U.S. Bank is looking to streamline its payments and banking services to simplify cash flow for its small business clients.  

Crypto Community 

Leading U.S. cryptocurrency exchange Coinbase reported its Q2 earnings, and the results suggest that demand for bitcoin and Ethereum has never been hotter. Coinbase saw its profits climb an eye-popping 4,000%-plus to $1.6 billion thanks to a volatile period for the cryptocurrency markets and frenetic trading. Revenue came in at more than $2 billion, and the number of transacting users climbed 44% higher. Trading volume in the current quarter might pale comparison to a wild Q2, but Coinbase’s stock is still up by close to 10% in August so far. 

Institutional demand for cryptocurrencies is also on the rise. Several wealth management firms have gained or bolstered their exposure to the Grayscale Bitcoin Investment Trust in recent months, according to SEC filings. These firms include: 

  • Illinois-based Clear Perspective Advisors
  • Cleveland-based Ancora Advisors
  • Boston Private Wealth
  • Cleveland-based Parkwood LLC 

 Meanwhile, BitPay has made it so U.S. users of its Mastercard can tie the card to the Google Wallet and make transactions with Google Pay, thereby enabling Android-fueled crypto payments. BitPay previously announced similar support for ApplePay while a Samsung Pay integration is in the pipeline. BitPay’s wallet app supports cryptocurrency transactions across a dozen digital assets, including bitcoin, Ethereum and XRP.

It hasn’t been a bed of roses for crypto lately, however. Lawmakers are cracking down by adding what’s been dubbed a crypto tax onto market participants, a rule that was snuck into the $1 trillion U.S. infrastructure bill. The legislation seems to target software developers and cryptocurrency miners, who would likely find it difficult to meet the onerous standards. 

In addition, there was a $600 million hack on DeFi network Poly Network, which connects various blockchains and therefore exacerbated the damage. The hacker eventually returned most of the funds but managed to bring to light a glaring vulnerability on Poly Network. All is well that ends well, and the Poly Network team has offered to reward the “white hat” hackers with a $500K bug bounty for exposing the issue.

Competitive Landscape

Fintech play SoFi Technologies reported its Q2 results, and based on the stock’s 14% decline, Wall Street was not impressed. SoFi reported stronger than expected revenue of $237 million, but its quarterly loss was wider than analysts were expecting. In addition, SoFi’s Q3 revenue outlook of $245 million -255 million fell below the Street’s consensus estimates. SoFi blamed the government’s break on student loan payments. Nonetheless, SoFi is adding more users and saw its total members rise more than 100% in the quarter to 2.6 million. 

In a payments space where competition is heating up, the big banks are flexing their muscles. JPMorgan has introduced a real-time payments feature dubbed request for pay in pilot form. The new tool gives corporate customers the ability to send payment requests to retail customers, who are then able to complete the transactions in real-time. Request for pay is considered the Zelle of corporate payment requests. The first client of the new product is reportedly a fintech firm that remains anonymous.  

You’ve heard it said, if it looks like a duck, walks like a duck and quacks like a duck, it’s probably a duck. Well, that adage doesn’t necessarily apply in fintech circles. According to a report in TechCrunch, just because a company integrates a finance-fueled model doesn’t necessarily qualify it as a fintech. The report suggests that this narrative is an oversimplification of the financial industry’s “evolution” and points instead to “what’s under the hood” — such as a “full-stack approach” — as where the innovation rubber really hits the road. In other words, just because Starbucks and Lyft offer payments services doesn’t make either company a fintech. 

People Moves 

Fintech company Acorns, which helps users to save money for retirement, has snagged Rich Sullivan, an alum of Twitter and DreamWorks, as its finance chief. Acorns is planning a public listing sometime in 2021. It plans to do so via a SPAC with white check company Pioneer Merger Corp. According to his LinkedIn profile, Sullivan started at Acorns earlier in August after a stint with Twitter that started in 2019.