🧠 The Great Re-Aggregation of Banking

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Hey Fintech Nerds 👋,

What a week! We launched Prompted the AI newsletter, Fintech Nerdcon 2026 (in San Diego!) And we’re planning a Tokenized Live in New York at the end of March. All of that on top of a very full on week at Tempo and Utah Fintech Xchange.

The big news was the firing of PayPal CEO Alex Chriss, in what seems like an incredibly short-sighted move. Chriss had the right vision, but couldn’t create the buy-in to get them executed. Former CEO David Marcus diagnosed this whole thing perfectly. PayPal became a mixed bag of M&A that was never fully integrated. (More in Things to Know). 

Your Rant this week is about the re-aggreation of banking. With more companies than ever applying for charters, the norms of embedded finance and fintech from the past decade have completely shifted. 

Here's this week's Brainfood in summary

📣 Rant: The Great Re-Aggregation of Banking

💸 4 Fintech Companies:

1. Spend.Market - The real-time spending data prediction market 

2. Veritus - AI Agents for the Lending Industry

3. Cork - Institutional Risk Management for Tokenized Assets

4. Antidote - AI powered billing compliance for law firms

👀 Things to Know:

1. PayPal stock drops 16% after replacing CEO Alex Chriss

2. Santander acquires Webster Bank

📚 Good Read: The Adolescence of Technology

If your email client clips some of this newsletter click below to see the rest

Weekly Rant 📣

🧠 The Great Re-Aggregation of Banking

Chime, Cash App, Affirm. Billion-dollar companies built on someone else’s banking license, with lending increasingly powered by private credit funds.

Behind every neobank, there’s a partner bank. But behind a lot of the lending, there’s Blackstone, Apollo, KKR, Sixth Street, and Blue Owl. A “shadow banking” system that grew up in the gap regulators left after the 2008 financial crisis reforms.

That gap is closing. And cracks are starting to show.

The Gap

After 2008, regulators pushed risk out of banks. Capital requirements, leverage limits, stress testing. Banks pulled back on the overall amount of lending they did. The lending (and risk) didn’t vanish, it migrated. To non-bank lenders. To private credit funds. To fintechs operating under lighter regimes.

That regulatory arbitrage created room for innovation. Challenger banks, neobanks, and embedded finance—all grew in the gap between what banks could do and what consumers wanted.

Unbundling had three advantages:

1. Keep a higher multiple: Getting a charter was expensive, low-odds of success, and was considered to ruin your valuation multiple. Fintech companies traded closer to 20x revenue whereas banks traded closer to 1x price-to-book.

2. Move faster: Banks have to explain things to regulators and carry massive reporting overhead. Partner banks hid this pain from their fintech customers.

3. Lower cost distribution: Mobile-only interfaces, lower customer acquisition costs, better UX. Fintechs could reach customers banks couldn’t or wouldn’t serve.

It was a good trade. Until it wasn't.

Unbundling didn’t change the capital stack.

Fintechs still needed funding to lend. Without bank charters, they couldn’t take deposits. So they turned to private credit—warehouse facilities, forward flow agreements, asset-backed securitizations. The plumbing that lets a checkout button say “Pay in 4.”

That capital stack is now the bottleneck.

The Hidden Plumbing

Most people see the app. They don’t see the stack.

(Note: many of these banks also provide capital to lenders too)

When you take out an Affirm loan at checkout, that capital often doesn’t come from Affirm.

• Affirm has a $4 billion deal with Sixth Street, a $3 billion facility with PGIM, and over 130 funding partners. Total funding capacity: $16.8 billion, up 50% in two years.

• PayPal’s European BNPL saw KKR buying up to €65 billion of those receivables.

• Klarna locked in a €1.4 billion warehouse facility with Santander plus a $26 billion forward flow with Nelnet.

Private credit grew to $3 trillion this way. Speed and flexibility banks couldn’t match. It worked brilliantly for a decade.

Then came the cockroaches.

The Cracks

Jamie Dimon, October 2025: “When you see one cockroach, there are probably more.”

He was talking about Tricolor Holdings, a subprime auto lender that collapsed in September. The alleged fraud was simple: Tricolor pledged the same pool of car loans to multiple lenders as collateral. Each lender thought they had security. When the music stopped, they discovered they were all holding claims on the same assets. JPMorgan took a $170 million loss. Fifth Third is suing.

Days later, First Brands filed Chapter 11 with over $10 billion in debt. Investors thought leverage was 5x. Once off-balance sheet commitments surfaced, it was closer to 20x. Now under federal investigation.

Then Blue Owl started cracking.

Blue Owl is one of the largest private credit managers in the country, with exposure to fintech consumer lending through platforms like SoFi and PayPal. In November, they blocked investor redemptions from one fund, then scrapped a planned merger after their stock dropped 7% in a day. The public fund was trading at 20% below stated net asset value. Their co-CEO called Dimon’s cockroach comment “odd fear mongering.”

Blue Owl’s stock is down 40% year to date. Most shorted among major alternative asset managers. Their co-CEO called Dimon's cockroach comment 'odd fear mongering.' The market disagreed.

Private credit isn’t collapsing. Default rates are forecast at 1.5% for 2025, down from 1.8% last year. But the sector is repricing what regulatory arbitrage is worth. 

And looking at the structural advantage banks have.

The Structural Advantage Is You

Why does your bank get away with paying you 0.47% when Marcus or Ally will offer 4%?

Because you won’t switch.

Because the idea of moving direct deposit is somehow psychologically harder than the Water Temple in Zelda: Ocarina of Time. (When in reality it's a button push these days).

Your inertia is their moat. The top 4 banks hold roughly 30% of $18.3 trillion in deposits. They don’t compete on rate because they don’t have to. You stay for the branch, the brand, and avoid the nightmarish hassle of moving direct deposits.

Fintechs without deposit access pay significantly more to fund loans. A study in the Journal of Financial Economics found that when fintechs and banks have similar funding costs, fintech borrowers pay lower rates. When fintechs have higher funding costs, that advantage disappears.

If you’re lending, the cost of capital is the cost of your inventory. Technology can’t fix a funding disadvantage.

The New Math

A few weeks ago I wrote about everyone wanting to be a bank. The valuation math that made sense in 2021 doesn’t hold anymore. Partner banks got consent orders. Synapse collapsed and took customer funds with it. The “rent don’t own” model started looking expensive and risky.

Because funding costs.

Traditional banks fund at 2-3%. Non-bank lenders fund at 5.5-7.1%. Suddenly a charter is seeming a little more worthwhile. 

SoFi got a bank charter in 2022. Their cost of funds has dropped while Affirm’s remains dependent on private credit markets. When rates were zero, that gap didn’t matter much. At 5%+ rates, it’s the difference between margin expansion and margin compression.

Now fintech has grown up. Margins matter. And companies are looking at their partner banks, thinking: I could do that myself, with better economics.

December 12, 2025: the OCC conditionally approved five digital asset firms for national trust bank charters—Circle, Ripple, Paxos, BitGo, and Fidelity Digital Assets. We’ve since seen the mighty Nubank play its hand, 121 days from application to conditional approval. 14 de novo applications were filed in 2025, nearly equal to the previous four years combined.

Mercury is getting a charter. That’s a critical market signal. A company that built its entire business on BaaS now sees better economics in owning the stack.

Where This Lands

The great unbundling produced hundreds of specialized fintechs doing one thing well. 

The great re-aggregation will produce hyperscalers—fintech UX with bank-grade funding.

Some fintechs will become banks. Others will get acquired by banks hunting for technology and talent. (Brex, I see you).

The private credit world that powered fintech’s growth isn’t going away. But it’s being stress-tested in public for the first time. Blue Owl is down 40%.  Fintech companies are getting charters. Federal investigations into the plumbing are starting. Banks are launching private credit desks.

It’s not that private credit is dead. Not by a long shot.

But now it has competition from some of its best customers.

Those fintech companies are getting charters because the math demands it.

Cost of capital is the moat. Everything else is features.

ST.

4 Fintech Companies 💸

1. Spend.Market - The real-time spending data prediction market 

Spend.Market asks users to sign up by connecting their bank account with Plaid. Once they’re in they can make predictions (trades) based on the aggregated spend data in the ecosystem. The pools are resolved by the graph of data Spend collects by verifying real transactions happened. They’ll offer head to head (Starbucks vs Dunkin), Trends (EV vs Gas) and events (e.g. Black Friday). 

🧠 Either I got nerd sniped, or this is the most fascinating idea I’ve seen in a long time. Consumer spend data isn’t available on weekends but can change dramatically. This is the kind of data I can see big retailers and investors loving. 

2. Veritus - AI Agents for the Lending Industry

Veritus helps lenders deploy voice, SMS and email agents for customer interaction from origination to recovery. Users can be guided through converting at origination, get 24/7 customer service and proactively receive notifications to make collections more effective. They tout FDCPA, TCPA, FCRA, GLBA, and state-specific regulation compliance and 100% of conversations pass through a QA agent in real-time. 

🧠 This is the future of how lenders communicate. Companies like Sierra are doing very well in customer service more broadly. But talking to your customers as a lender is unreasonably difficult. So unleashing an AI that hallucinates is the obvious worry. Veritus went deep, all the regs, all the QA oversight. Smart vertical specific play. I imagine this being catnip for lenders.

3. Cork - Institutional Risk Management for Tokenized Assets

Cork helps treasurers and asset managers hedge volatility for tokenized money market funds and yield bearing stablecoins (collateral coins). It standardizes risk pricing for assets, provides hedging products for when coins de-peg, and liquidity backstops 

🧠 As corporate treasurers and major institutions come onchain, risk management should follow. How do you hedge a stablecoin that de-pegs? Or infrastructure risk? Everyone had a different answer. Standardizing that, and having products to deal with it is a sign of maturity. 

4. Antidote - AI powered billing compliance for law firms

Antidote creates individual billing standards for law firm clients from unstructured documents like previous billing data, and partner mandates. It flags entries before they go to a client to ensure a poor draft or non compliant bill never gets sent to save partners time and get law firms paid faster. 

🧠 Law firms bill by the hour, and often have custom (or legacy) software to bill that out to clients. Partners own the client relationships, so often have to fix billing errors. When they’re doing that, they’re not doing billed work.

Things to know 👀

1. PayPal stock drops 16% after replacing CEO Alex Chriss

PayPal announced it has replaced its CEO with the board saying “the pace of change and execution was not in line” with expectations, with former HP CEO Enrique Lores (current chair) taking charge. The stock has lost more than half of its value over the past year.

🧠 PayPal became a roll up of companies that never fully integrated. On paper, branded checkout, Venmo, and Braintree were a winning combination. In practice, they were silos.

🧠 TPV growth under Schulman hid a growing execution and infrastructure problem. Former CEO David Marcus wrote a postmortem that described Schulman’s approach to growing volumes at the expense of margin. Braintree had a much lower take rate than branded checkout. 

🧠 The COVID e-commerce boom hid many sins. While Adyen and Stripe were soaring, PayPal appeared to be in their class. The reality was different. 

🧠 In January 2024, CEO Alex Chriss announced they were going to “shock the world with new product launches.” In reality, they were an updated branded checkout (fastlane), monetizing Venmo, and some AI personalization features.

🧠 Execution was the issue. Branded checkout growth SLOWED from 5% in Q3 to 3% in Q4. The upgrades are described as "slow and complex" by analysts. Leading to missed revenue and profit targets.

🧠 How the mighty have fallen. PayPal processed $1.79 trillion in payments last year. With 439m customers, they’re massive. But branded checkout — the core product, the thing that made PayPal PayPal — is bleeding share. And can’t compete with SHOP Pay or Stripe Link.

🧠 Meanwhile at Block: Jack Dorsey is back. They just shipped 100+ new products in a single release cycle. Cash App profit up 16% in Q2 2025 and raised full-year profit guidance to $10.17 billion. The difference? Block actually fixed its infrastructure first. And had the backing and authority to do so.

🧠 To be fair, Chriss inherited a mess. Too many acquisitions not integrated, and a checkout experience that competitors had lapped. He diagnosed it correctly. Fastlane is a good product, and Venmo monetization is finally moving. The partnerships with Adyen, Amazon, Shopify were smart. The infrastructure work needed more time, or more founder-mode decision making, and it seems this board didn’t have the appetite for that.

🧠 Without Chris, you have to wonder if an HP exec is the right call. Or a cost-cutting signal and a return to the kind of short-term financialization that builds up more problems over time. 

🧠 What if Elon bought PayPal? He’s combining SpaceX and XAI. PayPal was originally x.com. Its current market cap is cheaper than Twitter was when he bought it. Looking at the Block experience and the recent woes of Fiserv, I think it should be pretty obvious by now that finding leaders who can grind through operational complexity and giving them time is the only way out of this death spiral. 

2. Santander acquires Webster Bank

Webster Bank just sold to Santander for $12.2 billion. This acquisition makes Santander a top-ten retail and commercial bank in the U.S. by assets and a top-five deposit franchise across key states in the U.S. Northeast. Santander believes it can remove around $800m of cost from the combined entities and they will create a combined U.S. balance sheet of $327 billion in assets, $185 billion in loans and $172 billion in deposits.

🧠They were the best-performing regional bank in America. Why sell?

• 45% efficiency ratio. 

• 18% return on tangible equity. 

• Clean credit. 

• Strong deposit franchise.

• No distress. No activist pressure. Stock at an all-time high.

They sold anyway.

🧠 The best time to sell is when your stock is highest and you don’t see a path to further growth. Webster 2x tangible book value. 9% premium to their all-time high. I think Webster's board looked at what it would take to win in the next decade and realized the next battle is very different to the last.

🧠 Banks need to become wildly more efficient and tech-forward, something not all regionals can do alone. Santander is targeting a sub-40% efficiency ratio for the combined entity. Webster was running at 45-47%. Elite for a regional. Most run 55-65%. But sub-40% is digital bank territory. Santander has the ambition and long-term funding approach to get there.

🧠 Americans might not know Santander well. In the US they're mostly known for auto loans. Globally? A completely different story.

• Largest bank in Europe by market cap. 

• Just overtook UBS. 

• 180 million customers worldwide.

• €14.1 billion profit in 2025.

• 62 million customers in Brazil alone. 

🧠 Ana Botín has made the US central to Santander's strategy while every other European bank retreated. This consistency and multi-year focus is almost unique among peers (with the notable exception of JPMC).

🧠 The largest banks outspend regionals 10-to-1 on technology. And tech just became much harder. Tokenization. AI. Infrastructure modernization. These are required to get to digital bank and below cost/income ratios. But they’re hard to implement at-scale, globally and in a compliant way. 

🧠 This is the perfect setup for M&A. With 181 bank deals in 2025 and merger approvals at a 35-year high. Fifth Third + Comerica closed in under 4 months. If you're running at 55% efficiency and your plan is "wait for conditions to improve," you're not being realistic about where this industry is headed.

Good Reads 📚

1. The Adolescence of Technology

Founder and CEO of Anthropic Dario Amodei questions if humanity as a species has the maturity to possess a technology as powerful as AI. Our governments disagree, our decision making is slow and there are real potential issues like bio-security, humans using AI badly, or AI already demonstrating a desire to jailbreak itself during experiments. This essay covers everything from labor market disruption, misuse for seizing power, destruction, autonomy or external effects like rapid biology changes. Our test then is to make sure we develop AI responsibly.

🧠 The first stop to managing risks is naming them. When you can imagine what could go wrong, you can test for it, build defenses to prevent it and try and make the most of it for society.

🧠 Dario is called a doomer, but this reads like a realist. He accepts that AI progress is now generally understood, and the economic forces driving it are so powerful it is near impossible to slow down. So the best path is to lead from the front with responsibility. And honestly. I kinda dig that Anthropic is in that spot. 

Tweets of the week 🕊

That's all, folks. 👋

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(4) A team of researchers has not rigorously fact-checked this. Please don't take it as gospel—strong opinions weakly held

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