Below is news related to the fintech industry this week.
AmEx debuts checking account for small businesses.
Small business is a vital component of the U.S economy. More than half of U.S private-sector workforce jobs are provided by small businesses. Fintech companies have emerged to meet the demands of small businesses and are challenging the traditional banks.
Let's take a look at banking needs for small businesses. At a high level, they would need the following features,
1.Basic checking or savings account.
Business owners would need a way to manage their cash flow and store all their money in a simple bank account.
2. Quick and easy loan process.
Business owners would need hassle-free access to more working capital through loans that the owners can obtain by leveraging the excellent credit history of the business.
3.Invoice management (both inbound and outbound).
Paying the last day before the penalty and collecting money at the earliest sounds like a simple way to have more working capital to run a business - but invoice management is complicated. Small businesses would need invoice management automation.
Payroll services are a very critical component when small business owners are employing people to run their business. In such cases, business owners would need help in payroll processing services.
At first glance, the above needs for small businesses sound normal. However, traditional banks do not provide all such services, and if they do, they charge a lot. Fintech companies using technology at the center of their innovation are providing all the above services. They also use technology to reach economies of scale and provide low-cost services.
For example, Fintech digital banks don't need a vast amount of real estate and employees to operate many branches as traditional banks do. All these savings are passed on to consumers.
Let's review the AmEx announcement made earlier this week.Per CNBC reporting, AmEx is said to be using Kabbage acquisition to offer a new checking service called Kabbage Checking, a no-fee digital account that pays 1.1% on up to $100k in balances.
Kabbage is a decade-old company that is known for its automated lending platform. Last year during Covid lockdown, Kabbage faced some hardships as small business owners, primary customers of Kabbage, faced tough times. Eventually, Kabbage was acquired late last year by AmEx(American Express).
Even Square, a fintech company founded by Twitter CEO Jack Dorsey, has expressed interest in providing a small business checking account.
Overall emergence of Fintech will positively help small business owners.
Stripe launches a new identity verification tool.
Stripe launched "Stripe identity" earlier this week. The new identity verification platform is said to verify identities in over 30 countries easily. The platform will help internet businesses securely verify identities. Based on the press release from the Stripe, the high-level process is as outlined below. Individuals whose identity needs to be verified upload their government ID and take a live selfie. The Stripe machine learning algorithm will match the ID and selfie. Businesses can also ask for additional information from end users that stripe can verify with third-party systems.
"Businesses have been asking us for an easy and fast way to verify identities online. Stripe Identity offers them just that". "Now, any internet business—from a five-person startup to a multinational enterprise—can begin securely verifying the identities of their users in a matter of minutes, not weeks or months."- Rob Daly, Head of Engineering for Stripe Identity.
Visa, MasterCard Face Antitrust Suit by Square users
Bloomberg Law earlier this week reported that small business owners had filed a class-action antitrust lawsuit against Visa and MasterCard. The suit alleges that Visa and MasterCard working together with banks, were improperly hiking transaction fees("interchange" fees) on purchases made using the Square devices.
Credit card companies charge "interchange" fees per transaction, and these fees are passed on to the merchants. So the allegation is that the "interchange" fees were set higher for Square devices.
Law Enforcement friendly tech regulation.
Times had an interesting article this week on advancement in technology leading to an arms race between the good and the bad guys.
The U.S law enforcement agencies were able to recover the ransom payments for the colonial pipeline attack ( review our post on ransomware). Digital currencies promise decentralized and anonymous transactions. How could one trace and recover such a transaction?
D.O.J press release may hold the answers,
"by reviewing the Bitcoin public ledger, law enforcement was able to track multiple transfers of bitcoin and identify that approximately 63.7 bitcoins, representing the proceeds of the victim's ransom payment, had been transferred to a specific address, for which the FBI has the "private key," or the rough equivalent of a password needed to access assets accessible from the specific Bitcoin address. This bitcoin represents proceeds traceable to a computer intrusion and property involved in money laundering and may be seized pursuant to criminal and civil forfeiture statutes. "
In a nutshell, the law enforcement agencies were able to track down the cryptocurrency transactions landing up to one digital wallet. Tracing cryptocurrency is the easy part as this is the promise of cryptocurrency. All transactions will be held in a digital ledger, unlike cash transactions. Once agencies identified the digital wallet, the press release stated that the agencies had the required credentials to access the wallet and retrieve the fund.
So it would be interesting to see how will the regulation change over the coming years when it comes to cryptography (for example, end-end messaging and digital currencies )
Fintech New Venture and IPO
- Volk, U.K based bank account payment provider ,raises £17m in Series A funding.
- Finley,San Francisco based debt capital funding and management platform,raised $3m in seed funding.
- 10X future technologies,a UK based banking platform,raised $187m in Series C funding.
- Novo,a New York based digital banking platform for SME,raised $40.7m in Series A funding.
- Nate, a New York based universal shopping app,raised $38m in Series a Funding.
- Bitwise,a San Francisco based crypto asset manager,raised $70m in Series B funding.
- Hello Alice,California based small business platform , raised $21m in Series B funding.
- Unit,a San Francisco based embedded financial services provider,raised $51m in Series B funding.
At Unit, our mission is to help companies launch new banking products that unlock value and expand financial access for all” . “We designed Unit to be the simple, powerful infrastructure to power the new generation of fintech builders. Quality infrastructure expands the financial ecosystem — launching new companies, and growing revenues at existing ones. The new round will help us expand our platform into additional financial products, SDKs, and integrations, further making Unit the easiest way for companies to launch new banking products. - CEO and cofounder Itai Damti
- FamPay,a India based payments tool for Gen Z,raised $38m in Series A funding.
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