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BFD Expert Voices - Private Credit

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🏦 Situational awareness: Affirm and Mercury confirm they were affected by the Evolve Bank data breach. This comes just two weeks after the Federal Reserve issued a cease-and-desist order to Evolve, citing risk management issues there.

Neobank Chime acquired employee savings startup Salt Labs in a deal that could give the smaller fintech's investors up to 0.9% of Chime should they hit specific performance targets.

Why it matters: This puts Chime in position to go head to head with earned-wage access players like DailyPay, which offer such products through employers rather than directly to consumers.

State of play: Salt Labs pitches itself as an employee retention tool to employers, letting workers earn rewards for every hour worked. Its CEO, Jason Lee, was previously CEO at DailyPay.

Chime is expected to eventually offer MyPay, which is still in waitlist mode, through Salt Labs' platform.

Lee will stay on as head of Chime Enterprise, while 25-30 employees are also expected to move over.

What they're saying: "The goal for us ultimately is to is to approach employers and to offer them a suite of products which could include earned-wage access and Salt ... and use that to engage the employees in a way that we're then able to turn those employees into primary customers," says Chime COO Mark Troughton.

In other words: Chime sees the acquisition as another path to acquiring customers. 

Context: This comes after Chime reportedly sought to buy DailyPay for as much as $2 billion in 2022 but was spurned, per the Information.

Instead, Chime launched an early paycheck product known as MyPay last month, offered directly to consumers. The offering requires that users set up direct deposit — effectively making it the all-important primary bank account.

The bottom line: The deal gives the company its first enterprise-facing business.

By the numbers: Two sources with direct knowledge of the matter confirmed that the deal includes $14 million in net cash, with the potential to earn out up to 0.9% of all Chime shares over several years.

Salt Labs investors including Fin Capital already rolled some of their shares in the company, with one source confirming that the deal implied a $16 billion valuation, or $40 per share price for Chime. Fortune previously reported on some financials of the deal.

But two other sources dispute the figure, saying the valuation came in below $15 billion. But it's unclear how they reached that number.

All preferred-stock Salt investors have made back their principal and then some, per one source.

Not all Salt investors have rolled over their shares. 

The big picture: Chime was last valued at about $25 billion in 2021 and is said to be gearing up for a 2025 IPO.

Launched in 2023, Salt has raised $18 million in its lifetime from investors including Third Prime and Anthem Ventures.

The intrigue: Fortune's Wednesday report stated that the deal could be as high as $173 million — but three sources tell Axios that's not exactly accurate.

Sources with knowledge of the matter say that the 0.9% of Chime shares has no cap based on valuation — meaning the ballpark figure would be correct at a valuation of around $16 billion, but the total potential value of the deal could be higher or lower depending on Chime's valuation when the shares are earned.

Inside Chime's Salt Labs deal

Illustration of hundred dollar bills on cell phones spread out. 

Latin America-focused digital bank Nubank (NYSE: NU) is extending its AI capabilities by acquiring Hyperplane, a U.S.-based data intelligence startup for banks.

Why it's the BFD: The acquisition gives Nubank technology to provide personalized financial services to more than 100 million customers across Brazil, Mexico and Colombia.

How it works: Hyperplane developed software for banks to train models using first-party data for decision-making across risk, collections and marketing processes.

According to a TechCrunch article last year, Silicon Valley-based Hyperplane worked with "about a dozen banks in Brazil" before the acquisition.

One of those customers was an unnamed Brazilian neobank whose credit limit division increased transaction volume by 46% using its technology, per the article.

Between the lines: Over the past year, São Paolo-based Nubank has increased profitability while expanding its capabilities in its three core markets.

The fourth-largest lender in LatAm by customer count, the digital challenger recently surpassed Itau Unibanco as the most valuable financial institution in the region.

What's next: Nubank plans to use Hyperplane's tech to power its core machine-learning capabilities and build foundational models for its product and engineering teams.

Flashback: Hyperplane raised $6 million in funding last December. 

That round was led by Lachy Groom and included participation from SV Angel, Clocktower Technology Ventures, Liquid2 Ventures, Soma Capital, Latitud, Atman Capital, Crestone VC and Norte.

Nubank buys data analytics startup

Illustration of a large magnet attracting small bank buildings.

📉 How a nixed Coinbase feature killed crypto news traffic (Axios)

The largest U.S. crypto exchange removed a newsfeed feature from its app earlier this year, resulting in a significant traffic decline for Cointelegraph, Coindesk, The Block, and Blockworks. Traffic volumes dropped 30% for The Block in May.

🏦 Biggest banks can withstand severe downturn, Fed says (WSJ)

U.S. banks passed their latest annual stress test, with the Federal Reserve finding they would be able to continue lending to households and businesses in a severe recession. They would collectively lose nearly $685 billion in the Fed's imaginary worst-case scenario.

📈 Stash reaches EBITDA profitability (Stash)

CFO Steven Hodgeman says the company hit EBITDA profitability in May, with over $3.5 billion in assets under management. This comes after the company laid off 25% of its workforce in March and is said to have hired investment bankers to explore options including a potential sale.

💸 Abra settles with 25 states (CoinDesk)

The crypto investment platform and CEO William Barhydt have settled with 25 state financial regulators for operating its mobile application without the proper licenses. Under the settlement agreement, U.S. customers in the settling states will receive up to $82.1 million in crypto.

Credit score

an illustration of a pinball and pinball machine flippers that have the words "credit score" printed on them 

Go deeper into our full database with the Axios Pro Deals Tracker.

• KarmaCheck, an SF-based employee background check startup, raised $45m in Series B funding. Parameter Ventures led and was joined by PruVen Capital, Velvet Sea Ventures, GC1 Ventures and NextView Ventures. karmacheck.com

• Bling, a German family fintech app, raised a $12m Series A led by Owl Ventures. Neosfer, Peak and Angel Invest also participated. axios.link/4eHYDRi

• CereTax, an Atlanta-based sales tax solution, raised $9m led by S3 Ventures, with participation from Wild Basin Investments and Leaders Fund. axios.link/4eRv2oy

• Viio, a Danish software spend management platform, raised €3.3m led by North Ventures. axios.link/3VZ0eum

• Carlyle and KKR won the auction for a $10b student loan portfolio from Discover Financial Services (NYSE: DFS). axios.link/3VIPKy1

• Lead Edge Capital invested in IGM Technlogy, a Canadian financial software provider for state and local governments. axios.link/4cCIBWP

Deals!

• Anne de Kerckhove has joined Moneyhub as its board chair. axios.link/3xqNiEr

• Alex Daly, former CFO and CRO at Ask Inclusive Finance, joined Pozitive Payments as CFO. axios.link/4bo1tYP

• Versapay promoted Christy Johnson to chief product officer and Barrett Smith to chief payments and customer operations officer. Christina Wedge was promoted to VP of channel partners. axios.link/4cDlU4P

It's personnel

📺 @Ryan is going to watch the debate at Philly's local journo club tonight.

🤩 @Lucinda is looking forward to watching "A Quiet Place: Day One."

Thanks to George Moriarty and Rob Reinalda for today's edits.

And thanks to you for reading this edition of Fintech Deals. Please tell your fintech friends and fraud preventers about this newsletter. They can sign up here.

June 27, 2024

1 big thing: Inside Chime's Salt Labs deal