FedNow may finally be live, but will it be too expensive for businesses to adopt?
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welcome to the exchange! If you want this in your inbox, sign up here. It was a week full of events in the fintech world, with FedNow launch, former fintech CEO Bolt, and the company itself, were subpoenaed by the US Securities and Exchange Commission and more. Let’s dig in here.
It’s time
Last week, the US government’s instant payment system. FedNow Servicefinally went live.
fednow is an instant payment infrastructure for transferring money that promises to be a faster payment path for financial institutions, offering immediate access to funds regardless of the day or time. As you know, this is huge because banks traditionally aren’t open 24/7 or allow you to receive money and use it the same day.
It’s also something the US has been considered “backward” about even though other countries have been running similar services for some time, including Brazil, India, the UK, and the European Union. In fact, anecdotally, we heard that in Brazil, the country’s similar system, Pix, is so common that people even use it instead of credit cards to pay street vendors. And there’s data to back that up, too.
We did it a deep dive about what the long-awaited launch of the service could mean for the US on Friday. But one thing we didn’t mention: how banks choose to price FedNow for their customers, and how that could affect how quickly it’s adopted.
By email, Adam Shapiro, partner at financial services advisory and investment firm Klaros Group, noted that the Fed charges banks about 4 cents for a FedNow payment, compared to less than half a cent for an ACH payment. However, he added, banks are free to charge customers whatever they want for these payments. As such, according to Shapiro, “business customers who are deciding what to use may be deterred if banks make FedNow significantly more expensive than ACH.”
He added: “A company may be prepared to pay 3.5 cents to get someone money faster, but they are limited to paying 25 cents. Also, how fraud is handled and where liability lies in case something goes wrong will determine adoption.”
weekly news
Christine reported on the fact that a letter written in April by a lawyer representing Screw investors said that the SEC was investigating whether federal securities laws were violated in connection with statements made when Bolt was raising money in 2021. The letter was sent to Bolt’s general counsel as part of a fact-finding mission. According to a letter referenced by The Information, WestCap Management’s Brian Reinken and Tribe Capital Management’s Arjun Sethi, investors in Bolt’s Series C and Series B rounds, respectively, demanded to see company records, alleging that former CEO Ryan Breslow was allegedly “misleading” investors while raising funds for the company. Series E Round of $355 million. You may remember that Breslow had resigned as CEO in January 2022.
Mary Ann teamed up with Rebecca Szkutak to discuss how far fintech valuations have fallen since the height of the startup boom (see chart below). Unsurprisingly, the valuations of most of the highest-value fintech companies have fallen, with three notable exceptions, all of which operate in the same space. They examined valuations based on secondary stock activity (as analyzed by aviso.co), which some argue may be a more accurate reflection of a company’s value than public valuations at the time of a fundraiser. They also spoke with some industry insiders to get a taste of what’s to come. Check it here: Fintech valuations have fallen. Where do they go from here? (TC+)
TC’s Alex Wilhelm and Anna Heim took a deep dive into the world of insurtech for TechCrunch+, noting that while some industries were able to overcome the hurdle of inflated valuations starting in 2021, this industry didn’t appear to be one of them. So much so that one report called it the “death of insurtech 1.0.” Alex and Anna discuss how global startups have fared and whether there are signs that this industry can recover. (TC+)
Reporter Dominic-Madori Davis wrote about the fallout from an acquisition involving the neobank Green woodthat serves Black and Latino customers, and the meeting place, a networking club with similar interests. As you will see, everything was going well… until it didn’t. Now there are bitter feelings and a lawsuit. Although neither party commented, Dominic-Madori details what went wrong. The debate over whether niche-focused neobanks will ultimately succeed continues as Daylight, another LGBTQ+-focused neobank, recently closed.
Prepare your palm! Reporter Sarah Pérez covered AmazonThe palm-scanning payment technology will reach all 500 Amazon-owned Whole Foods stores by the end of the year. Here’s how it works: Using a biometric payment system, customers place their palm on a reader device that identifies the individual’s unique palm signature and associates it with the customer’s payment card on file to charge them for their purchases. Don’t worry, your palm data is not shared..
Medical procedures often involve a complicated web of bills and payments that can stretch for months or even years afterward. I (Christine) personally had a collection agency come after me for a $50 urine test (I was 21 and didn’t know anything) so I can imagine what it’s like for someone who owes thousands of dollars in medical fees. This week I wrote about Collectly, a company that developed proprietary interfaces that integrate with electronic health records and practice management software to facilitate patient billing operations. By facilitating payment, the company claims that medical company customers were able, on average, to increase patient charges for medical group partners by 75%, reducing “days of sales pending” to 12 days from 60 to 90 days. Although collectivelyThe clients of are medical offices, I would like to think that the digitization of medical bills is something that can also help patients. Who would not want to access and pay all the invoices associated with a procedure with a single click?
CB Perspectives threw his State of Fintech Q2 Report Last week, and unsurprisingly, global funding in the space declined, falling nearly in half to $7.8 billion, its lowest level since 2017. But at least one region didn’t have a bad quarter. Can you guess which one it was? Meanwhile, payments, which have historically been the darling of the fintech space “I didn’t have a good three months. Read more here.
Visa and MasterCard were hit with an antitrust lawsuit by a fintech company Block. In a lawsuit filed July 14 in the US District Court for the Eastern District of New York, Block alleges that the two credit card giants “conspired to grossly overburden Square’s payment platform, resulting in higher retail prices paid by consumers” by inflating interchange fees as a way to maintain market share. according to a Bloomberg report.
tech giant Apple at the end of March finally released its Apple Pay Later service, which allows users to split the cost of an Apple Pay purchase into four equal payments over six weeks without interest or late fees. The move put Apple in direct competition with Affirm, PayPal and Klarna. How are you doing so far? Well, according to JD Power, pretty good. a recent report found that about a fifth of BNPL (buy now, pay later) customers said they used Apple Pay Later in their first three months. Furthermore, the report also revealed that Apple has “a sustainable and potentially more stable user base than the competition. And beyond that, the data suggests it may be attracting first-time BNPL users who might not otherwise consider BNPL as an option.” All of this led JD Power to conclude: “There are no guarantees, but Apple Pay Later has a lot going for it – (this) is a nice to have in general, and especially as Apple is getting more immersed in financial services.”
Image Credits: Miranda Halpern/TechCrunch
other headlines
Daffy for Work is a type of ‘charitable 401(k)’ that could unlock billions for US charities.
Sundae set out to build a kinder way to buy run-down homes (TechCrunch reported on the company’s 2021 rise here.)
Vest and Sproutfi team up to drive investment in the US.
The Nuvei and Plaid team to expand payment by bank
Airwallex joins Brex in expanding its international presence
Financing and M&A
Spotted on TechCrunch
Karat, a startup that creates financial tools for content creators, raises $70 million
Cognaize raises $18M to build a better LLM for the financial sector, one that keeps humans informed
Runway lands $27.5 million to streamline financial planning for businesses
Addition leads a $6 million seed round into Egyptian fintech Flash
seen elsewhere
Anduin, which powers investor relations in private markets, announces $15 million Series B
Nav acquires Tillful to accelerate development of data platforms
Do you mind? Invesco Real Estate invests $20M more in the SFR platform. (Read TechCrunch’s previous coverage of Mynd.)
Portrait Analytics raises $7M for AI research platform launch
KASO raises $10.5 million in seed fundinglaunched a fintech vertical offering payments and extended credit terms to restaurants
Payment collection platform Colleen AI raises $3.5 million in serial seed funding
Join us at TechCrunch Disrupt 2023 in San Francisco this September as we explore the impact of fintech on our world today. New this year, we’ll have a full day dedicated to all things fintech, featuring some of today’s leading fintech figures. Save up to $600 when you purchase your pass now through August 11, plus save 15% on top with promo code INTERCHANGE. Learn more.
Image Credits: Bryce Durbin
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