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Data: Yahoo Finance; Chart: Axios Visuals

Shares of money transfer firm Wise jumped nearly 20% today after the company reported its pre-tax profit had spiked on higher interest income, Ryan writes.

Why it matters: Higher interest rates aren't always bad for fintechs, especially those that benefit from holding customer deposits.

By the numbers: London-based Wise's pre-tax profit tripled to £146.5 million for the fiscal year ending in March from £43.9 million in the 12 months prior.

Revenue grew 51%, to £846.1 million, and income rose 73%, to £964.2 million, for the year.

In addition, the company reported it now has 10 million customers, a rise of 34% year over year.

Between the lines: The company attributed the rise in profits to increased adoption of its Wise Account and higher customer balances which, combined with the higher interest rate environment, led to a boost in interest income.

After introducing an interest-earning product in the third quarter, cash balances grew more than 50%, to £10.7 billion, for the year, split almost evenly between business and personal accounts.

Interest income grew accordingly from £3.9 million in 2022 to £140.2 million in 2023.

Wise says 36% of personal users and 55% of businesses use its accounts for more than just sending money internationally.

Yes, but: The rise in interest income came at the expense of slowing transaction volumes, particularly in the back half of the fiscal year.

CFO Matt Briers wrote in the company's annual update that personal volume per customer was unchanged year over year, but it was "higher in the first half of the year, as we saw more customers transacting with larger payments to take advantage of the strength in the USD." 

"[I]t is only natural that we may also see an uneven growth rate through FY2024, partly given the nature of the YoY comparisons we will see each quarter," Briers wrote.

1 big thing: Wise profit jumps on interest income

Socure, an identity verification company last valued at $4.5 billion, acquired Berbix, another company in the space, for $70 million in cash and stock, Lucinda reports.

Why it's the BFD: The deal comes as U.S. regulators grow more aggressive about holding businesses responsible for fraud in this era of digital money — driving up demand for regulation technology.

Context: In the spring, five Democratic senators wrote to agencies including the Federal Reserve and OCC, asking them to take a deeper look at Zelle. The peer-to-peer payments system, along with its competitors, has come under fire for the volume of fraud on its platform.

Last year, the Consumer Financial Protection Bureau was reportedly weighing guidance that would push greater liability onto banks in cases where consumers authorized a payment — but later found out it was fraudulent.

Details: Berbix boasts the ability to verify IDs, barcodes and selfies almost instantly.

Incline Village, Nevada-based Socure offers such a product, but it uses a third party.

"This is much more about product performance capabilities [and] leapfrogging our roadmap for the next 18 months to 24 months," says Socure CEO Johnny Ayers.

Berbix co-founder Eric Levine will be brought on as SVP and head of document verification solutions. About 20 of the 35 employees at Berbix will also join Socure.

Background: Ayers did not disclose Berbix's exact valuation at its last round, confirming only that it was around $20 million.

Mayfield led its last known round of financing, with participation from Initialized Capital, Y Combinator and Fika Ventures.

The bigger picture: Though Socure had its start with fintechs and later moved on to banks, it aims to reach beyond financial services.

Current customers include Poshmark, Chime and SoFi, but Socure says 25 of its top 75 customers are outside fintech.

Berbix, meanwhile, brings in customers like crypto payment startup MoonPay, cannabis company Caliva, and scooter rental firm Spin.

Editor's note: This story has been corrected to note current customers include SoFi, not Soft.

2. The BFD: Socure acquires Berbix

Illustration of piggy bank wearing a robber’s mask

FTX management details new allegations on misuse of customer funds (Axios)

A new report goes into detail explaining how entities like FTX Digital Markets and North Dimension Inc., were set up for no other reason than to receive customer deposits on behalf of FTX and distract banking partners, Axios' Brady Dale writes.

Robinhood lays off about 7% of full-time employees (WSJ)

Roughly 150 jobs are being cut, according to an internal company message seen by The Wall Street Journal. It is Robinhood’s third round of layoffs in just over a year as the company adjusts to a slowdown in customer trading activity.

Banks raised alarms over FTX commingling as early as 2020 (Reuters)

Some banks began rejecting wires to or from Alameda in 2020, with one questioning whether the hedge fund's account was being used to settle trades on FTX, per the crypto exchange's current management. An Alameda employee said all wires on the account were being used to settle trades with Alameda.

Salt Lake City ups ante in bid to become fintech hub (WSJ)

The University of Utah launched a multimillion-dollar fintech-education center in Salt Lake City. It will also serve as an office for startups and as an incubator of ideas.

3. Credit score

Illustration of a Scrabble board with letter tiles spelling "credit."

• Cart.com, an Austin, Texas-based provider of e-commerce enablement solutions, raised $60m in Series C funding at a $1.2b valuation from B. Riley Venture Capital, Kingfisher Investment Advisors, Snowflake Ventures, Prosperity7 Ventures and Legacy Knight. www.cart.com

• Flatpay, a Danish point-of-sale tech startup, raised €15 million in Series A funding from investors that include Seed Capital. https://axios.link/3piJelA

• Resistant AI, a Prague-based provider of fintech anti-fraud tools, raised $11m in Series A extension funding from Notion Capital. https://axios.link/44czwA4

• Fennech, a London-based business finance automation startup, raised £2m in seed funding from Lloyds Banking Group. https://axios.link/3CMEFD9

• AdvisorCheck, an Englewood Cliffs, New Jersey-based data transparency platform for investors vetting financial advisors, has raised $1.8m from undisclosed investors. www.advisorcheck.com

• Hut 8 (TSE: HUT), a Toronto-based crypto miner, secured a $50m credit facility from Coinbase Credit. https://axios.link/46qWrcM

• Ramp, a corporate finance automation startup valued by VCs at $8.1b, acquired Cohere.io, a New York-based customer support startup that raised $3m from firms like Initialized Capital and YC. https://axios.link/46hPHhj

4. Deals!

• Goldman Sachs will cut about 125 managing director jobs amid a deals slump, per Bloomberg. https://axios.link/3NMDDNJ

• Jacqueline White, a former Temenos exec, is joining Redwood City, California-based digital banking firm i2c Inc. as president. https://axios.link/3NMZpAY

• CEO Jeff Parker, finance director Stephen Gregson and managing director Danny Howe have all recently left London-based international payments firm WorldFirst, per The London Evening Standard. The company was acquired by Ant Group in 2019, and Ant Financial staff are reportedly being tapped to replace the departing execs. https://axios.link/3NQOzdk

5. It's personnel

Situational awareness: Private equity-backed deals have an average value of $65.9 million this year, the smallest for the comparable period since the global financial crisis, according to Refinitiv.

Thanks to George Moriarty 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.

June 27, 2023

1 big thing: Wise profit jumps on interest income