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BFD Expert Voices - Private Credit

BFD Expert Voices

A consortium of big banks is working to roll out a digital wallet to  compete with PayPal and Apple Pay, the Wall Street Journal reports.

Why it matters: With tech companies like Apple getting into financial services, banks are looking to launch more tech-friendly products for users, Ryan writes.

Details: Wells Fargo, Bank of America, JPMorgan Chase and four other banks are collaborating on the digital wallet, which would link to users’ debit and credit cards and ease online checkout at merchant websites.

The product would be managed by Early Warning Services, the bank-owned technology provider behind peer-to-peer money transfer service Zelle.

But the new digital wallet, which the banks are hoping to launch in the second half, would operate separately from Zelle.

Context: The product would compete with popular one-click checkout services like PayPal and Apple Pay, which store user credentials in a browser or mobile device and enable users to pay online merchants without entering credit or debit card information.

The launch comes as Apple, in particular, is looking to expand its financial services offerings in partnership with Goldman Sachs.

The tech giant is working on offering bank accounts and has plans to launch a BNPL product called Apple Pay Later.

Of note: Launched a little over five years ago, Zelle has 110 million users and is available to customers at over 1,700 financial institutions, EWS CEO Al Ko told Axios last September.

The intrigue: Zelle has become popular for P2P payments, but it's come under scrutiny from the Consumer Financial Protection Bureau and Sen. Elizabeth Warren (D-Mass.) over fraud perpetrated through the network.

In response, its bank owners have recently discussed creating a playbook for reimbursing consumers that fall prey to scams that lead to illegitimate transfers.

What we’re watching: Though the digital wallet would launch with debit and credit card support, banks could offer other options, such as payments made directly from user bank accounts.

1 big thing: Big banks building an Apple Pay rival

Illustration of a phone with a mobile payment icon on the screen, unzipping to show cards and money inside.

GSS, a compliance tech company focused on sanctions screening, raised $45 million in its first round of funding, Lucinda reports.

Why it's the BFD: The increased use of sanctions by the U.S. has created a pile of new compliance work for financial services companies — and an opportunity for businesses like GSS. 

How it works: Incubated out of AlixPartners in 2021, GSS operates like a collaboration platform for banks and other financial institutions.

In a cross-border transaction for example, three or four different banks might each be conducting the same sanction and compliance checks on the parties involved.

GSS would enable the banks to see what checks had already been completed by another bank, lessening the time it takes to approve a transaction, as well as the chances of human error.

This level of collaboration would also require that GSS' customers all approve some minimum set of compliance standards.

"Surely we should be doing this on a common platform available to everyone where we could share intelligence," CEO Tom Scampion says. 

Background: Investors in the round included Alix, as well as Cynosure Group and MUFG.

GSS employs about 140 people and is in its proof-of-concept phase, Scampion says, with a fuller rollout to come this year.

Sanctions screening fintech GSS raises $45 million

2. The BFD: Money for sanctions screening 

Illustration of roadwork cone with a dollar sign on it next to an army tank

Genesis demise marks the end of an era for crypto pseudo-banks (WSJ)

Many of the biggest names in crypto lending have failed in the past half-year, highlighting the shaky foundations, risky practices and lack of regulation in the sector. Now, millions of depositors who parked savings with such lenders are in limbo.

Deel ARR reaches $295 million 2022 (Twitter)

The startup's ARR grew from $57 million to $295 million in 2022, says CEO Alex Bouaziz, with EBITDA being positive since September.

‘Nightmare’: collapse of leading crypto lender traps investors (FT)

340,000 Gemini Earn customers have funds locked up after its lending partner Genesis was wrongfooted by shockwaves that cascaded through the crypto market.

Crypto banks borrow billions from home-loan banks to plug shortfalls (WSJ)

Signature Bank and Silvergate Capital are rushing to stem a flood of customer withdrawals by borrowing billions of dollars from Federal Home Loan Banks, the system originally designed to support mortgage lending in the 1930s.

Signature sets transaction minimum amid crypto pullback (Bloomberg)

Binance, the world’s largest cryptocurrency exchange, said Signature Bank would handle only user transactions of more than $100,000 as the bank decreases its exposure to digital-asset markets.

Feds seized nearly $700M from FTX founder Bankman-Fried (Reuters)

According to a Friday court filing, federal prosecutors seized assets that included Robinhood stock, as well as cash held at various banks and assets deposited at crypto exchange Binance.

3. Credit score

Illustration of a credit score meter with emoji faces showing sad, neutral, and happy emotions.

• Calimero Network, a London-based blockchain infrastructure company, raised $8.5m in seed funding led by Khosla Ventures, Lyrik Ventures and Near Foundation. GSR, FJ Labs and Warburg Serres also participated. https://axios.link/3J8YTeD

• Zenfi, a Mexico-based credit tracking and lending company, raised $8.5m. Magma Partners led and was joined by Cometa, Redwood Ventures, Polígono, and Conny & Co. https://axios.link/3WwvQEV

• Zitti, a food supply chain management platform for restaurants that includes payments infrastructure, raised $3.5m in seed funding. Oceans Ventures and Serena Ventures co-led and were joined by Crossbeam. https://axios.link/3XohO9E

• Pilon, a Singapore-based supply chain financing fintech, raised $5.2m. Wavemaker Partners led the round and was joined by Octava and Polaris Kin. https://axios.link/3JamThs

4. Deals!

• Dawn Capital has promoted Dan Chaplin to partner and co-head of fintech and digital assets. https://axios.link/3Ws7EmZ

• Nigeria named former finance minister Shamsuddeen Usman to lead Ministry of Finance Incorporated (MOFI), a state-owned asset management firm. https://axios.link/3H07rBP

• PrimaryBid, a London-based capital markets fintech, appointed Fiona Richards as COO. https://axios.link/3R6OO3N

• Barclays named John Kingman to succeed Crawford Gillies as chair of Barclays UK. https://axios.link/3XBi3hB 

5. It's personnel

6. One fun thing

Welcome back from the weekend, fintech friends.

Situational awareness: Crypto lender Genesis is headed to bankruptcy court this afternoon for its first day hearing, and we'll watch for any news.

@Lucinda is an ongoing battle to pay for Lunar New Year's dinner via Venmo.

@Ryan is still celebrating the Philadelphia Eagles' beatdown of the New York Giants on Saturday night. Bring on the 49ers. 🦅🦅🦅

Thanks to Michael Flaherty and Rob Reinalda for today's edits.

And thanks to you for reading. Please tell your fintech friends about this newsletter. They can sign up here.

January 23, 2023

1 big thing: Big banks building an Apple Pay rival