Sat. Oct 16th, 2021


This article is a version in place of our #fintechFT newsletter. Sign in here to send the newsletter directly to your inbox every Monday

Good afternoon from New York City. I’m Imani Moise, US bank correspondent for the FT, and I’m delighted to be the new editor of this newsletter after taking over for my colleague Nick Megaw, who has moved on to a new approach to understanding the awkward US capital markets. – Congratulations, Nick!

FintechFT will continue to be the leading destination for a true worldview on the digital trends that are shaking the financial industry. Our team of experts spread across innovation hubs in Europe, Asia and the US will bring you insight from the ground up, and I’ll provide a question and answer with one fintech entrepreneur you should know, followed by a summary of some of the most interesting themes in the industry since the last publication. One household note: this newsletter will appear every other week as we search for a new co-editor in London to ensure the commentary maintains its global lead.

This week’s newsletter is an example of what we do best. From the US, I caught up with Colin Walsh, CEO of neo-bank Varo, who had just completed a redundant round of financing. There is also news from my colleagues in Beijing about the latest collapse of the fintech giant Ant Group. Furthermore, you see a sober analysis of the starting market in the UK.

Do you have any other thoughts on how this newsletter can be improved? Email me at any time imani.moise@ft.com with ‘fintechFT’ in the subject line.


Investors reward banking ability over technology

If you are a challenger bank that wants to attract the attention of investors in an increasingly busy market, try to become more like a traditional bank. That was the strategy for the neo-bank Varo in America, the first all-digital nationally chartered bank, which last week announced a $ 510 million round of financing that raised its valuation to $ 2.5 billion.

Behind the scenes, insane negotiations led to the company raising an extra $ 100 million in the 48 hours before the announcement.

“I had to keep going back to my advice, like, ‘Oh, I think more money is coming,'” Colin Walsh, chief executive, told FintechFT. “Finally I had to say, ‘Enough.’ We no longer have to take money. ‘”

Talks with investors have changed dramatically since Varo won the first national charter for a fintech consumer business in July last year.

By maintaining its own charter, Varo was able to eliminate intermediaries and reduce its variable costs by 50 percent, as the business had to pay longer fees each time a customer wiped a card or withdrew money from their account. It also reduced Varo’s capital costs by giving the company direct access to deposits it could use to make loans.

Most neo-banks still use the surety bank model, which offers the advantage that it is not necessary to spend money to comply with heavy regulations. But Walsh said the costs associated with a chartered bank, such as keeping up with the fight against money laundering and the demands of your customers, are small relative to the savings.

By having a bank charter, the business can also offer more products and earn more revenue per customer. Since July 2020, Varo has doubled its customer base to 4 million and tripled its revenue.

‘Now I can show [investors]in numbers, and you can actually see the cost going down, ”Walsh said.

The charter helped the company form a group of sophisticated crossover investors, including Lone Pine Capital, Declaration Partners, Eldridge, Marshall Wace and Berkshire Partners, which specializes in preparing private companies with high growth and potential to to enter public markets. .

Although the compliance costs associated with a banking charter are traditionally the most important factor preventing traditional banks from profitably addressing niche markets and lower-income customers, Varo’s lack of overhead costs can give them an advantage.

“The economy works on a large scale,” Walsh said.

Fintech fascination

More stories from the industry that caught our attention this week

Alipay is likely to be broken up even further Authorities in Beijing have indicated that they want the super-app owned by Jack Ma’s Ant Group to create separate programs for the company’s profitable lending business. The forced separation would be only the latest restructuring for Ant Group, which in the cross hair of Chinese regulators who want to suppress its influence on the Chinese economy.

Fintech appears in the top 100 UK entrepreneurs of FT The industry accounted for just under a quarter of the whole light. Retail has the second largest performance with 20 businesses and only four technology entrepreneurs made the list. Meanwhile, my colleagues were investigating why the UK was unable to grow new businesses into large power companies at the same rate as other global superpowers.

Cryptocurrency regulation moves from theory to practice In Latin America, El Salvador’s experiment The use of bitcoin as a legal tender has so far been tumultuous. The price of Bitcoin fell by 10 percent on the first day of launch and a sell in the country’s bonds. In the US, the SEC has placed the crypto industry on notice with a threat to sue Coinbase, and in the UK Charles Randell, chairman of the Financial Conduct Authority, said the FT is urgently needed to protect investors from fraudulent crypto schemes.

QuickFire Questions and Answers

Every week we ask a fast-growing fintech to introduce themselves and explain what makes them stand out in an overcrowded industry.

This week’s questions and questions were inspired by my 14-year-old cousin, which is based on the fact that over the past four days she has spent a hefty $ 700 on her parent’s credit card. If you’re a parent, your eyes have probably just grown big, but the reality is that it’s easier than ever for minors to spend money unsupervised because of online shopping and in-app purchases. I spoke to Taylor Burton, co-founder of Till Financial, who aims to keep parents back in control of their wallets while teaching their children the value of money. The mission is personal to Burton — in the past two years he has welcomed two daughters into the world, in addition to launching Till Financial with co-founders Tom Pincince and Brian Chemel.

How did you get started? I started with the advertising technology at an early stage, and eventually I got a closed offer at PayPal, where we worked with trading partners and consumers to get deals in their PayPal wallets. [Later,] I was a leader in strategy and revenue at Drizzly, where I help scale it from 10,000 to 2 million users. I have two daughters under two. I want to change the trajectory of their lives, and financially is a great way to start. I come from the Midwest where we do not talk about drugs, sex or money, and I think the dynamics need to change.

What do you sell, and to whom do you sell it? Until products in the US are checked and debited to children under the age of 18 without a bank account. We want to be a young person’s first banking experience, and we’ve built specifically to support them during the life phase. For the past 50 years, teaching children about financial literacy has actually been very focused on saving. But the reality is that at 18 or 21, [kids] do not enter a savings economy – they enter a spending economy. If they have never made one of the right zero-sum decisions, they will be unprepared, which is why we focus on spending and spending.

So, how do you make money? Currency exchange, merchant costs and original fees at partner banks as children age out of account.

How much money have you raised so far? $ 5.2 million at an unknown valuation.

Who are the major shareholders? Elysian Park, Magnify Ventures, Afore Capital, Luge Capital and Alpine Meridian Ventures

What makes you so special and why can current financial companies not do what you do? We respect the child as a financial actor. We are not trying to go to grants. We’re really interested in the $ 3 million that affects children. Parents have this mental block on how mature children actually are, and what we are really trying to do is change the dynamics of our interaction and interaction with them, because the second time a cell phone hits the child’s hand, the economy comes quickly in, and I think parents are unprepared. [Big banks] just do not respect this customer as a real consumer, and they do not think there is value in accounts with a balance of less than $ 3,000.

* This story has been modified since the first publication to correct the number of children under the age of 18 to 50m without a bank account.

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