Welcome to The Interchange! If you received this in your inbox, thank you for signing up and your vote of confidence. If you’re reading this as a post on our site, sign up here so you can receive it directly in the future. Every week, I’ll take a look at the hottest fintech news of the previous week. This will include everything from funding rounds to trends to an analysis of a particular space to hot takes on a particular company or phenomenon. There’s a lot of fintech news out there and it’s my job to stay on top of it — and make sense of it — so you can stay in the know. — Mary Ann
Greetings from Austin, Texas, where an ice storm hit last week and caused widespread damage across the city. I know, I know — Austin is known for its 100+ degree temperatures in the summertime. Who would have expected this to happen here? And not just once but twice in two years. Surely not I, when my family moved here in 2013. We’re going on Day 5 with no power, heat or internet. That’s why this newsletter is being published a day later than it would have under normal circumstances. Our neighborhood has many beautiful mature trees, including many oaks. It’s one of the things we loved most about it when deciding to live here. It’s also the same reason our neighborhood was hit SO hard by this storm. Branches from one of those trees fell on our power line, making the outage not just inconvenient but also scary. While this has been extremely stressful — my 89-year-old mother lives with us and our biggest priority has been trying to keep her warm and comfortable — there have been bright spots, like the kindness of a neighbor I’d never met before sharing a wheelchair so I could transport my mother somewhere else and a friend who offered a portable generator so that we could at least have some power for a little while. Anyway, hopefully by the time I’m writing this next week, we’ll have our actual power back. Fingers crossed.
The layoffs keep coming
There appears to be no end in sight for layoffs in the fintech space. PayPal was the latest large company to announce layoffs — with about 2,000 full-time employees, or 7% of its workforce, affected. On January 30, the payments giant publicly shared a letter that president and CEO Dan Schulman had sent to employees in which he noted the cuts would take place over the coming weeks “with some organizations impacted more than others.” Schulman added: “Over the past year, we made significant progress in strengthening and reshaping our company to address the challenging macro-economic environment…While we have made substantial progress in right-sizing our cost structure, and focused our resources on our core strategic priorities, we have more work to do. We must continue to change as our world, our customers, and our competitive landscape evolve.”
He did not provide further details, saying only the company would provide the affected “with generous packages, engage in consultation where required, and support them with their transitions.”
The company’s stock perked up on the news. After closing at $79.64 on January 30, shares closed up 7.4% at $85.52 on February 3.
It’s not the first round of layoffs for PayPal in recent times. Last spring, TechCrunch reported that PayPal had laid off dozens of employees from its San Jose headquarters around a week before the fintech confirmed that it was shuttering its San Francisco office. To better understand why it matters so much to us what publicly traded companies like PayPal do, head here.
But PayPal was not the only publicly traded fintech to lay off employees last week. The Wall Street Journal reported that SoFi Technologies was cutting around 65 jobs, or about 5% of its 1,300-person workforce. The company’s mortgage operations centers in California and Utah are reportedly impacted by the move.
Meanwhile, Silicon Hills News (operated by the very talented Laura Lorek) reported that Austin-based insurtech Decent is “shutting down all of its operations to just a core team,” which was confirmed in a blog post published by Nick Soman, the company’s founder and CEO. The company had raised $43 million in funding from investors such as Foundation Capital, QED Investors and Maverick Ventures, according to Silicon Hills. In his blog post, Soman said the company wound down its health insurance product in anticipation of signing on a partner, who recently backed out in what the founder called “a massive and unexpected setback.”
And lastly (that we know of), DriveWealth confirmed that it has reduced its headcount by 20%, the company told TC’s Natasha Mascarenhas. In a statement, DriveWealth told her that the cuts were part of “a number of strategic decisions to evolve as a global brokerage infrastructure company, with a tech-focused and product- and partner-centric organization, and increased organizational agility.” In January, DriveWealth CEO Terry Angelos announced on Twitter that he was “leaving the digital custody and clearing firm just eight months after stepping into the role,” according to InvestmentNews. The company has raised over $550 million since its 2012 inception, according to Crunchbase. It last raised in August of 2021 — a $450 million Series D funding round at a $2.85 billion valuation. Insight Partners and Accel co-led that round. Other backers include Greyhound Capital, SoftBank Vision Fund and Point72 Ventures. According to PitchBook, DriveWealth has 300 employees, although it is not clear if that was before or after the recent layoffs.
It’s apparent that even well-funded companies are not immune to the challenging macroenvironment. In fact, is it just me or does it seem like it’s the most well-funded companies that are doing the layoffs? Maybe since they had more resources and the ability to hire to begin with? Or maybe because they are more high-profile, news of their layoffs makes a bigger splash? I’m not sure, but sadly I don’t think the fintech job cuts are slowing down anytime soon. Stay tuned for a new section in upcoming newsletters that focuses on companies that are hiring, rather than laying off.
Other weekly news
Marqeta shared with me exclusively that it has agreed to acquire two-year-old fintech infrastructure startup Power Finance for $223 million in cash, marking the first acquisition in the publicly traded company’s 13-year history. I had the opportunity to interview new CEO Simon Khalaf, who shared with me the reasoning behind the purchase. Power’s first product is a credit card issuance program, which is designed for companies, brands and banks to offer fintech experiences, such as customized credit card programs, targeted promotions and personalized rewards, embedded into existing mobile and web applications. Marqeta’s main goal with the purchase is to expand and “significantly accelerate the capabilities” offered in its credit product. More details here.
As reported by Reuters, which cited The Financial Times: “Twitter Inc is working to introduce payments on the social media platform and has begun applying for regulatory licenses. New boss Elon Musk is pushing Twitter to create new streams of revenue as it faces a drop in advertising income, following his $44-billion takeover of the company in October.”
Reports TechCrunch’s Carly Page: Ion Group, a Dublin-based software company that helps financial institutions automate their critical business processes, has been hit by a ransomware attack that forced several European and U.S. banks to revert to manual processes. More here.
Multiple news outlets reported that Thrive Capital is said to be leading a $2.5 billion to $3 billion investment in Stripe, at a $55 billion to $60 billion valuation. The New York–based firm, started by Joshua Kushner, also led the company’s $70 million Series C in 2014 when it was valued at $3.5 billion. All parties are staying quiet.
Meanwhile, Stripe competitor Checkout.com announced last week that Céline Dufétel was appointed president and COO of Checkout.com — she was formerly CFO and COO — and will remain based in New York. In her expanded role, she will oversee all operational and go-to-market teams, including finance and marketing. Nirupam Sinha will take on an expanded role as CFO. The company told me via email that with Dufétel’s new appointment, Checkout.com “is staking its claim in the U.S.”
This New York Times article does a great job of examining how buy now, pay later may be a “victim of its own success.” Writes James Ledbetter: “The industry is now facing an existential crisis, as profits remain elusive, valuations plummet, competition increases and regulators ask tough questions about the lending practices behind B.N.P.L.”
Embedded fintech remains hot. Fintech infrastructure startup Unit last week launched white-label UIs. Via email, the company told TechCrunch that it believes the UIs represent “the fastest and easiest way for companies to build an embedded banking experience, get to market, and realize new revenue streams.” One more player giving Stripe a run for its money. More here.
American Express is doubling down on SMEs. The credit card giant, as reported by Finovate, launched American Express Business Blueprint — a set of digital cash flow management tools for small businesses. According to Finovate: “The new offering evolved out of Kabbage, an alternative lending startup that the company acquired in 2020. With the launch of Business Blueprint, the Kabbage brand is now retired.”
Amex isn’t the only one focusing on SMBs. Tillful, a free business credit app built by VC-backed startup Flowcast, CEO and founder Ken So reiterated the company’s commitment to SMBs in this blog post. Last year, Brex made headlines for cutting off its SMB customers, and according to So, Divvy recently ended its credit-builder program. (Note: This has not been independently verified by TC.)
Fundings and M&A
Seen on TechCrunch
A round I really wanted to cover but just wasn’t able to get to:
Why this caught my attention: A $45 million Series B in this environment is a big deal. Plus, I covered this company in December 2020 when it raised $27 million in an “oversubscribed” Series A funding led by Andreessen Horowitz (a16z). This time around, Commerce Ventures led the financing, which also included participation from repeat backers a16z and Bain Capital Ventures, as well as Visa and Sorenson Ventures. It’s always interesting when previous backers double down on their investments, and in this case, several existing backers put money in this round.
What does it do? Moov was born when CEO and founder Wade Arnold and Bob Smith started an open source movement in 2017 to help developers learn how to build and integrate payments into their products. Arnold had founded Banno, a white label digital banking platform, which was acquired by Jack Henry in 2014 (Smith was an employee). Their goal at the time of inception, Arnold said in 2020, was “to lend a trusted hand to developers building or integrating financial products.” It has since worked to build what Arnold describes as its “full-stack approach to powering payments.”
In the past, the company has been public about “taking business from Stripe.” Still, at the time of Moov’s last raise, Arnold told me: “Stripe simplified e-commerce checkout for all by putting developers first. Moov echoes the ethos in putting developers first but we’re focused on the underpinning infrastructure of payments and banking. We would like to think that Stripe could have leveraged Moov if we existed when they started.”
Fun fact: In 2021, the startup created fintech_devcon, a flagship event for fintech developers. The third one will be held in August in my home base of Austin, Texas.
More on the embedded finance front
Liberis, an embedded finance provider for SMEs, raises additional €30M in debt financing from Silicon Valley Bank. The company says its platform applies machine learning to understand a customer’s risk profile and funding options available to them.
LevelField to acquire Burling Bank, an FDIC-insured chartered bank. With the acquisition, Houston-based LevelField Financial will become the first FDIC-insured bank to offer traditional banking and Bitcoin services.
Last week was a milestone week for me in more ways than one. I started writing for TechCrunch on February 1, 2021. Two years and nearly 700 articles later, I love my job more than ever. Also, January 30 marked the one year anniversary of the soft launch of this newsletter. It’s been an incredible experience putting this together every week, and I am honored you all still rely on me for the latest fintech news.
Until next week — when I hope to have power back!! — take good care. And thanks for hanging in there with me. Xoxo, Mary Ann