Fintech 🧠 Food - Jan 31st 2021 - Clubhouse does fintech, Stripe makes all the investments, Nubank is massive & Plaid deposit switching. 👀

Hey everyone 👋, thanks so much for coming back for more brainfood. A space to learn in public and hopefully process everything happening in fintech.

This week the Gamestop rant was getting so long I had to put it out separately. There’s just so much fintech goodness to unpack this week. Clubhouse does fintech, Stripe makes all the investments, Nubank is massive & Plaid deposit switching. 👀

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Wait, where’s the weekly rant? 📣

The Gamestop story was a lot to unpack, so it got its own Bonus food edition :)

This week in fintech was massive. 👇

4 Fintechs 🤑

1. Sivo - Risk scoring and debt funding for fintech (U.S.A)

• Debt financing is the unloved cousin of V.C. funding. Not as fashionable, but every bit a part of the furniture. The problem is, especially for fintech businesses, understanding the actual risk takes time and effort by banks. Banks see every customer as a snowflake and haven't productized their risk models. So is doing just that. As every company becomes a fintech, Sivo could be well placed for much faster and lower-cost funding.

2. Kevin - Square for Eastern Europe

• Square's offering for small merchants has proven wildly popular in the U.S. In Europe, there are several alternatives, but overwhelmingly the market is still dominated by incumbents. Kevin aims to change that by focussing on unloved (and, in my opinion, underpriced) but growing markets in Eastern Europe and expanding from there.

3. Spinwheel - Manage student debt as an API (U.S.A.)

• Everything is a fintech API. Student debt is a massive problem. Put the two things together, and you have a recipe for helping younger consumers via any experience. There are many payroll cards (e.g., Branch), Neobanks (e.g., Current), and non-banks now aiming to deliver younger consumers' financial services. Spinwheel has plenty of potential customers.

4. Creed - Auto Carbon offsetting & P.F.M. (U.K.)

• Become carbon neutral for as little as $1.50 a week. Offset all of your expenses and get all of the benefits of being better with your money over time. There's plenty of budgeting apps. There's plenty of apps that help you see your carbon impact. This is the first I've seen put those two together in a P.F.M. At last!

Things you should know 👀

1. Clubhouse is fintech (kinda)

• Clubhouse, the real-time podcast with an audience app taking the world by storm (one notification at a time), announced new funding at a $1bn valuation. Clubhouse will add creators' ability to get paid, set up subscriptions, tipping, and ticket sales. It will also set up a creator grant program.

• 🤔 My Analysis: Clubhouse is to podcasting, what twitch was to youtube before youtube live. Imagine if twitch had embedded finance three years ago. This makes so much sense in the lockdown, boredom, creator economy.  

• 🤔 My Analysis: If Clubhouse offers Stir-like creator tools they have a real shot at some of the major platforms like Spotify. Creators still have to do much of the leg work to build their business. Why not bring that together.

2. Stripe has been busy

• Stripe led a $102m funding round for fast.co, the one-click checkout experience taking over Twitter and the world. It also led to an investment into check to embed payroll in other vertical SaaS systems. So while Gousto and Square offer payroll for merchants generally, the vertical SaaS for yoga studios or pizza shops cannot offer the same experience. Where Argle and Finch offer payroll data via an API, Check offers headless payroll and tax management as an API.  

• 🤔 My Analysis: The one-click checkout button space is getting crowded.  Fast and Shop Pay help with conversion and growing G.M.V., but I worry about a race to the bottom with the checkout button wars. Chasing G.M.V. can create the wrong behaviors. We're in the merchant honeymoon for one-click buttons, but consumer fatigue or backlash could be coming.

• 🤔 My Analysis: Vertical SaaS embedded finance is a complex web and layer cake. It feels like there's space to roll all of this stuff up, and I'm not surprised. Stripe is looking at that given its core customer base.  Check is a logical extension of Stripe Treasury style offerings.

3. Nubank is quietly the worlds most successful Neobank

• Nubank raised $400m at a $25bn valuation (that's not far off Stripe's last major valuation). Nubank came into a market that had very little in the way of truly digital offerings, where banks competed for the affluent customer base.  

• 🤔 My Analysis: Part of why Nubank is doing so well is that the Brazilian market was so unbelievably broken for the mass market.  Inflation is high, customer service was shocking, and lending APY rates had been staggeringly high.  

• 🤔 My Analysis: Nubank's execution has also been exceptional. Most Neobanks either build a great brand or build a lending business. Nubank has done both. Combine this with a low C.A.C., a 100% digital experience, and a market where interest rates allow for profitable lending if you can build the right models and you have a recipe for success.  

4. Plaid does direct deposit switching

• Plaid Deposit Switch makes it faster / easier for users to change the destination of their paychecks. It works by connecting to the payroll or employer account and creating instant funding. It won't work with every employer or payroll service but is still in beta.

• 🤔 My Analysis: The dirty secret of Neobanks has been they're usually a second account. One-click to switch where your paycheck goes makes a ton of sense.  We may look back on this product as the beginning of the end of it being hard to switch banks.If Plaid can make it easy to change auto-pay and recurring payments, it would be something.

Good Reads 📚

1. Fintech & the creator economy (a16z)

• Fintech is now purpose-built for creator communites. Stir builds financial tools especially for creators (like revenue splits for collaborations). a16z compares Neo banks to commodity products (get paid early, cash advances, savings).

• Brands like Step, Yotta, and Current are appealing to Gen Z.  Gen Z's aspirations is less Rolex, and more F.I.R.E. Creators aren't there to help you do marketing. Creators and their audience are a part of the product.  

• 🤔 My Analysis: My co-founder Jason Bates (fmr Monzo CCO) always talks about the difference between commodity products & digital services.   Going deeper into the niche problem space of creators and their audience is how you add more value. Differentiation is not about what % APY you have; it's about how many adjacent problems you can solve.  

2. Walmarts fintech Teardown (Jason Mikula) 

• Walmart partnered with A-list V.C. firm Ribbit to create a fintech. Walmart has had many attempts, including a loan charter and Walmart Money card with Green Dot.  

• The Moneycard appears to be a Walmart logo on a Greendot product. AMEX Bluebird, a prepaid debit card aimed at low-income segments. Partnerships with Capital One (with 5% in-store cashback).  

• All of these partnerships seem to have failed to deliver a significant benefit for Walmart to date beyond historic "cobrand" and affinity style products. With a lot of false starts, maybe Ribbit will help this product cut through?

• 🤔 My Analysis: Compare this with the aspirational brand of Step.  The Walmart brand doesn't scream premium. Walmarts previous efforts come across like a card for poor people.  It will be interesting to see if Ribbit can help Walmart go in another direction. 

• 🤔 My Analysis: Ribbit is an incredible V.C., but handling the complexities of large corporate decision making is an art that I'm not sure most V.C.s are ready for. (I know this cool challenger consultancy who could help, though ;).

3. The value chain of the open Metaverse (PackyM)

• The Metaverse is the Ready Player One world made real, where all games and media exist in an open and connected way, like how the internet moved from networks to the internet, but with media.  Packy talks about how Web3 and decentralized finance bring an economy to this virtual world.  

• If Web 1.0 was homepages and email, web 2.0 is social and platforms, web 3.0 is a world without platforms extracting value. Non Fungible Tokens (N.F.T.s), create a way to have digital scarcity on the internet. 

• 🤔 My Analysis: Digital scarcity matters. Historically if I sent you a word document, now you had a copy, and I had a copy. But if I send you a Bitcoin, you now have that Bitcoin, and I no longer do. This means you can have limited edition digital content, art, or even 20 second N.B.A. moments that only you and ten other people can have at one time.  Interoperable digital worlds need interoperable economies.

• 🤔 My Analysis: The Metaverse and the Defi world are incredibly early, confusing, and hard to use for most people. But the same smart money that bet on web 2.0 15 years ago is betting on web 3.0 now.

Tweets of the week 🕊

That’s all folks 👋