The Week in Digital Wealth (10/5/21)

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By: Gerelyn Terzo 

An explosion is happening in fintech. The BNPL craze appears to be here to stay. RIAs can no longer ignore client demand for crypto, a crypto trading hamster is outperforming everybody and central bankers are forging ahead with CBDCs. 

‘Fintech Explosion’ 

UK-based fintech Monzo has thrown in the towel on becoming a U.S. bank – for now. The mobile bank has rescinded its application for a banking license in the U.S. on the heels of talks with the Office of the Comptroller of the Currency that apparently fell flat. Monzo acknowledged that it “isn’t the outcome” it wanted. Monzo has been working toward a U.S banking license since 2020 in an attempt to expand its reach and user base. The company is quoted by CNBC saying that it still has “big ambitions for Monzo U.S.” and it is considering different “routes to market.” 

Fintech veteran Adam Nash and developer Alejandro Crosa have introduced the Daffy app for charitable giving. Between them, Nash and Crosa are alums of Acorns, Wealthfront, LinkedIn, Slack and Twitter. Daffy gives users the opportunity to earmark the amount of funds they’d like to donate for charity annually and allow it to grow on a tax-free basis in “one of nine modern investment portfolios,” according to the company. More than 1.5 million U.S. charities are on the Daffy platform, which users can select straight from their mobile device.  Daffy supports payments across bank accounts, credit or debit cards, Apple Pay, stocks and cryptocurrencies. Daffy is designed to address the pain points of charitable giving.  

Fintech platform Flourish, which is owned by MassMutual and Stone Ridge Asset Management, is taking the crypto plunge. The startup has unveiled Flourish Crypto, which it describes as a “turnkey cryptocurrency investing solution built for RIAs and their clients.” Flourish Crypto was developed on the company’s existing platform, and it is being made available via Flourish Digital Assets and Paxos Trust Company. Ben Cruikshank, head of Flourish, said in a statement that “advisors are fielding questions about crypto on a daily basis.” Users will be able to gain direct access to bitcoin with “$100 minimums and unrestricted liquidity.” 

The flurry of activity in the fintech space is no coincidence. According to Jordan Fried at the Market Rebellion Trading Conference, “there’s a fintech explosion happening right now.” 

BNPL Push 

The latest company to catch BNPL fever is San Francisco-based Upgrade, a digital banking platform. The startup, which is focused on credit, plans to expand with a BNPL card that gives users the opportunity to repay debt over a four-month period with zero interest. The new product is expected to see the light of day in the coming months. Upgrade’s BNPL product is tied to a card rather than being presented as an option at checkout. The company can offer this feature due to the lower balances that are inherent with its newest card. Upgrade’s founder is Renaud Laplanche, the former CEO of P2P lender Lending Club. 

CBDCs & Crypto  

The Bank for International Settlements (BIS) has released a central bank digital currency (CBDC) report alongside seven central banks including the Fed. Policymakers expressed concern that cryptocurrencies and private sector payment mechanisms could cost central bankers their grip on money. The report also explores how far CBDCs have come and decides that these assets will “need to involve both public and private actors to ensure interoperability and coexistence with the broader payment system.” Policymakers will continue to engage with central banks about the emergence of digital currencies including those in developing nations. Separately, the Hong Kong Monetary Authority (HKMA) unveiled its own report in which policymakers reveal they are researching a “retail or general purpose CBDC.” 

While investors decide whether to go for active or passive management, a hamster is beating everyone’s strategy. BBC.com reported on a hamster named Mr. Goxx who trades cryptocurrencies and is outperforming humans. Mr. Goxx, whose portfolio was up about 20% at one point, has accounts on Twitch and Twitter where users can watch him in his cage. Trading decisions are made as Mr. Goxx runs on his “intention wheel,” which selects cryptocurrencies, while two tunnels determine whether the account will buy or sell. As Mr. Goxx sprints through a tunnel, trades are triggered automatically. 

Banking Breakdown

PNC is getting with the fintech program and has teamed up with Akoya Data Access Network to do so. PNC is integrating Akoya’s tech so that users can give fintech and data companies access to their financial data via an API network. PNC explained that users often think nothing of sharing their financial information with fintech companies, but they could be putting sensitive data at risk. By joining forces with Akoya, PNC says it is “striking the right balance between customer choice and data protection.” Customers must give their okay to share data with fintechs on the Akoya platform. 

A Twitter thread is making the rounds that debates paying off a mortgage in the current low-rate environment. The thread was started by Mike Alfred, a value investor with more than 36,000 followers on Twitter. Alfred suggests that while “paying off your mortgage used to be a badge of honor, now it’s a sign that you don’t understand how money printing and asset price inflation works.” Considering that inflation is on the rise, the value of the money being repaid is essentially slashed. Galaxy Digital CEO Mike Novogratz agreed with Alfred’s premise, saying “everyone should be borrowing 10-30 years against their house.” Kraken’s Dan Held explained that it’s “basically free money.” 

Traditional banks are increasingly responding to the rise of consumer-friendly fintech offerings.  Alabama-based Regions Bank has introduced a new type of checking account that is designed to help users reach their financial goals and does not charge overdraft fees. Regions Now Checking is a hybrid account between modern and legacy banking. Users must pay a $5 monthly fee in exchange for not having to worry about fees for overdraft or non-sufficient funds. The accounts also support check writing as well as mobile and online banking.