Tag: FinTech

Best practices for regional, community banks to create modern IT infrastructures | Bank Automation News

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The banking landscape is in a state of flux. Emerging financial technology companies have built new services and offerings that place the customer experience front and center, providing a flexibility and speed that traditional banking institutions struggle to match.

Fintechs are carving into the essence of what regional and community banks have done for generations, and they’re doing so by thinking more like software vendors than financial institutions. These disruptors have none of the history, infrastructure and trust of regional and community banks. But equally, they do not have the burden of antiquated legacy technology.

 Jason Burian, vice president of product, KnowledgeLake

This powerful combination of agility and technological know-how has seen the fintech segment more than double its value in the space of four years, and there’s no sign of this growth stopping any time soon. Analysts are predicting almost 20% annual growth through 2028.

First, be bold

In the face of such success, how can regional and community banks — institutions that do not have the large IT budgets of national bank brands — hope to compete?

The answer is that community financial institutions must be bold. That means rethinking established and possibly ingrained processes and beliefs while embracing input from existing customers, partners and other business stakeholders. They must build a modern IT infrastructure that enables them to quickly develop, iterate and deploy digital banking applications that are on par with fintech offerings, or risk losing additional market share.

Resist half-measures. Embrace new technologies. Don’t be afraid to envision a new landscape. Inevitably, the landscape is changing.

Precisely what the new landscape of financial services looks like will be unique to each bank. However, there are several vital technology infrastructure elements that virtually every regional and community bank must consider as they aim to modernize and compete.

An incremental approach

First, it’s essential to recognize that fintechs don’t necessarily hold all the chips. In fact, traditional banks hold several key advantages over their fintech rivals. Chief among these is their reliability and continuation of service — qualities that customers still value highly.

This lineage is an edge that regional financial institutions should carefully maintain. Therefore, it is essential that they continue to offer their existing services throughout any digitization process. Ripping out reliable and trusted offerings and systems to pursue exciting new technologies should be avoided at all costs.

Rather than throwing out the banking baby with the legacy bathwater, any digital platform should iterate and expand upon existing capabilities. In other words, banks and credit unions should seek to add value for customers rather than slashing services in pursuit of something new.

Extensible and open platforms

Implementing a new digital banking platform, a new mobile app or even launching a new digital-only product are all initiatives with discrete start and end points. Developing an IT infrastructure is very different. It will incorporate the aforementioned individual projects and more, and it will need constant oversight and maintenance. A modern IT infrastructure is something that remains in service and must be slowly expanded upon and improved for years — perhaps more than a decade — at a time.

For this reason, any banking deployed platform must offer two things: high extensibility and open integration. Extensibility focuses on the ability to add new capabilities or functionality to any existing platform quickly and easily. Integration extends this capability by enabling connectivity to other IT platforms and systems within (or outside of) the financial institution. McKinsey describes this as a move from “closed systems to ecosystems,” a core shift in mentality from the multiple application silo approach commonly deployed in recent years.

Indeed, it’s possible for this extensibility to include partnerships with the very fintechs that traditional financial institutions are worried about. As noted, small banks hold many advantages that fintechs would love to access, such as a bank charter and recognized compliance capabilities. These can be leveraged into partnerships that allow banks to offer new services, tap new markets and expand both businesses.

Remember, extensibility and openness do not just mean that a platform is easy to modify or integrate from a purely technical standpoint. It must also be resilient in the face of new business demands and market shifts. If the past few years have taught us anything, it’s that we can never entirely prepare for tomorrow’s challenges. Therefore, from the very first planning stages, banks and credit unions need to measure how easily they can build upon a prospective platform and how much effort it will take to achieve desired outcomes.

Iterate and improve

In some industries, lagging slightly behind the curve in terms of offering a modern experience from any device is a mere annoyance that can result in a few bad online reviews. When it comes to banking, however, stalling out on upgrades and security improvements can spell impending doom for both the platform and the business.

Business-critical IT systems and platforms must accommodate rapid iteration and development to avoid creating digital monoliths that are unable to adapt and evolve. Legacy systems do not help this situation. Coded in dying languages such as COBOL (now over 60 years old), IT applications are difficult to extend, require specific programming skills and do not integrate well with other applications.

Modern banking technology platforms counter these challenges in several ways: They are developed in modern programming languages using cloud-native concepts that enable scalability, modularity, integration and overall flexibility. In addition, no-code and low-code development tools give everyday business users the ability to quickly configure just the solution they need, without the need for training or special knowledge. No-code/low-code tools extend IT platforms and expand the pool of employees who can enhance the systems beyond just highly skilled software engineers. This capability allows financial institutions to experiment and adapt faster and with greater agility — if they choose to.

For many banks and credit unions, improvement isn’t just a technology question but a question of wider business philosophy. The speed at which an institution needs to innovate is faster than ever, meaning that the IT team cannot solely be responsible for owning and enhancing the IT platform. The bank’s overall team must be able to expand existing offerings quickly, easily and with the minimum technical requirements.

Without this ability to iterate, any banking or IT platform risks becoming a severe drag on operation. That can have a costly impact on banks that need to invest significant human and financial capital into their digital transformation efforts.

It’s also trying for customers who have started to rely on new offerings and services. With brand loyalty continuing to drop off, it’s safe to assume that those customers won’t hesitate to look to other banks that provide up-to-date products and a better user experience.

Embrace change now, avoid customer attrition tomorrow

Banks are, by nature, cautious institutions. Indeed, for some customers, a reluctance to take risks can be a benefit. But this caution can sometimes manifest as resistance to change and an unwillingness to invest in new technologies and ideas.

For those banks and credit unions still using systems designed in the 1980s and 1990s, moving to a new IT infrastructure can be daunting. However, the move is arguably more important for these institutions than ever.

As more financial institutions begin to lean into digital services, the real danger lies in being left behind. Research and consulting firm Gartner estimates that banks spent $623 billion on technology in 2022 alone. If you’re not in the raft of organizations investing in new technology, you can be sure that your competitors are.

 Jason Burian is vice president of product at KnowledgeLake. He has 15 years of experience helping customers solve automation and document problems, and manages the complete product lifecycle, including research, design, requirements, execution, enablement and launch.

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May 19, 2023
Lawmakers urge SBA to delay new rules that could let fintechs into 7(a)

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“It is clear [SBA] Administrator [Isabela Casillas] Guzman (pictured) is dedicated to the notion of spurring lending to underserved communities, and people of color,” an SBA loan servicer says. “This may be a noble notion, but where do lenders making a prudent credit decision come into play?”
Stefani Reynolds/Bloomberg

Following the departure of a pivotal Small Business Administration official, lawmakers from both parties are calling on the agency to suspend implementation of controversial rules that could let fintech lenders make 7(a) loans.

Associate Administrator Patrick Kelley — who had headed SBA’s Office of Capital Access since March 2021 and has been overseeing adoption of the changes — left the SBA May 11. The leadership of the House and Senate Small Business committees wrote SBA Administrator Isabela Casillas Guzman Wednesday, urging her to “pause” the two new rules until Kelley’s successor is installed.

Kelley’s exit, which appeared to catch lawmakers off guard, “leaves a void in leadership at a time when such leadership will be key,” Sen. Ben Cardin, D-Maryland, Sen. Joni Ernst, D-Iowa, Rep. Roger Williams, R-Texas, and Rep. Nydia Velazquez, D-N.Y., wrote.

SBA had not responded to a request for comment at deadline Thursday.

The SBA in April finalized the rules, which overhauled lending standards and ended a 40-year cap on the number of nondepository small-business lending companies at 14. Typically, publication of a final rule by an agency signals an end to debate and the start of moves by government and private-sector players to convert what had been proposals into operational reality. That has not been the case with SBA’s rules governing nondepository SBLCs and affiliation. For the past month, lawmakers, along with advocates for banks and credit unions, have urged SBA to delay putting the rules into practice.

Those pleas grew stronger this week as Tony Wilkinson, longtime president and CEO of the National Association of Government Guaranteed Lenders, called on lawmakers to “act quickly to reverse these rule changes through a bipartisan legislative approach” in testimony Wednesday before the House Small Business Committee.

“Otherwise, SBA is inviting in the exact kind of behavior and risk that could erode the 7(a) loan program’s performance and reputation, and even harm the very borrowers they are intending to help,” Wilkinson added.

Critics of the new rules, including Wilkinson, believe they will inject more risk and ultimately a higher level of loan losses into 7(a) lending. More losses could result in the need for a subsidy from Congress. Currently, fees paid by lenders and borrowers are more than sufficient to cover 7(a)’s credit costs.

Critics have also focused on numerous reports, from SBA’s inspector general and from a House select subcommittee, that pointed to fintech lenders as the source of a significant amount of the fraud uncovered in the Paycheck Protection Program. For their part, SBA and advocates for fintechs argue that PPP bad actors have been identified and blocked from future 7(a) participation and that the nondepository lenders that are interested in SBA have technology policies and procedures in place to combat fraud.

Testifying at the same hearing on behalf of the Independent Community Bankers of America, Alice Frasier, president and CEO of the $792 million-asset Potomac Bancshares in Charles Town, West Virginia, said the rules, which she claimed were “rushed through the process without input by Congress or the industry,” would undermine SBA’s stated purpose of boosting capital access to underserved groups. Rather than calling for a legislative fix, Frazier suggested SBA should “hit the pause button” and convene a working group of current 7(a) lenders to brainstorm new ways of reaching “the smallest businesses and entrepreneurs.”

Republican lawmakers have emerged as some of the toughest critics of the rules. At a House Small Business Committee hearing last week, Kelley engaged in contentious exchanges with Rep. Blaine Luetkemeyer, R-Mo., and Rep. Tony Meuser, R-Pa. However, Democrats, too, have questioned the wisdom of the course the SBA has set. Velazquez said she was “especially concerned” by the agency’s ending the moratorium and permitting more nondepository lenders into 7(a).

“We will be doing a disservice to American small-business owners by moving forward with changes that weaken and destabilize a highly successful program that has helped millions of entrepreneurs,” Velazquez said during the hearing last week.

“I’ve heard from financial institutions again and again just how concerned they are about the implementation of these rules,” Rep. Hillary Scholten, D-Mich, said.

For Velazquez and colleagues on both sides of the aisle in the House and Senate, adding small business lending companies — many of which could be fintechs — is a particular concern because SBA has traditionally said it lacked capacity to underwrite large numbers of nondepository lenders. Indeed, that was the reason the cap was put in place in January 1982.

SBA’s ultimate aim in proposing the new rules is improving access to capital for underserved groups. Agency officials have said SBLCs are more likely than banks to make small-dollar loans of $150,000 or less, whose number has declined in recent years, Kelley testified last week. But banking advocates, including Wilkinson, have noted small-dollar loans have increased significantly in the current fiscal year.

“The numbers don’t show the market failure SBA describes,” Ami Kassar, CEO of Multifunding LLC, a Philadelphia-based loan brokerage and consulting firm, said Wednesday in testimony before the House Small Business Committee.

In addition to canceling the longstanding moratorium, the rules also did away with a number of underwriting guidelines, including a requirement for a loan authorization document detailing loan terms and conditions. The new affiliation rule pared back the number of credit criteria that lenders — including nondepository SBLCs — are required to consider from nine to three. The affiliation rule also stated that lenders could use their standards for similarly sized conventional loans in underwriting 7(a) credits. According to Wilkinson, SBA has described this policy as allowing lenders to “do what you do.”

“This is not streamlining,” Wilkinson said Wednesday. “Every principle included in the now-deleted list of underwriting criteria was put there to address a specific concern. … I believe that removing these guardrails could create a race to the bottom in terms of the conditions that individual lenders will impose on individual loans.”

In an email to American Banker, Arne Monson, president of Holtmeyer and Monson, an SBA servicing firm based in Memphis, stated that few if any of his clients support the new rules. “They think this proposal is not well thought through,” Monson wrote. “It is clear Administrator Guzman is dedicated to the notion of spurring lending to underserved communities, and people of color. This may be a noble notion, but where do lenders making a prudent credit decision come into play?”

In a statement Wednesday, the American Bankers Association warned the new rules “may negatively impact the performance of loans made under the 7(a) program, threaten the integrity of the program, and lead to increased borrower and lender fees.”

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John Reosti

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May 18, 2023
Crypto firm Ripple buys Swiss startup as SEC crackdown forces companies to consider overseas moves

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Ripple CEO Brad Garlinghouse speaks during the Milken Institute Global Conference in Beverly Hills, California, on Oct. 19, 2021.

Kyle Grillot | Bloomberg | Getty Images

Blockchain firm Ripple said Wednesday it has acquired Metaco, a Swiss firm that holds digital assets securely on behalf of clients, in a bid to expand its international footprint and broaden its range of services.

News of the deal, one of the largest acquisitions in the crypto industry in the past year or so, comes as the San Francisco-based startup continues to contest a lawsuit from the United States Securities and Exchange Commission.

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It also comes as the crypto industry as a whole is facing a host of challenges, from higher interest rates and tighter funding conditions to mass layoffs and dwindling company valuations.

“This is the largest deal we’ve seen in the last year,” Brad Garlinghouse, CEO of Ripple, told CNBC on a call Tuesday.

Ripple invested $250 million of cash off its own balance sheet to fund the acquisition, Garlinghouse said.

“At a time when others are closing their doors or facing layoffs, I think it’s a real important signal for the industry, it’s also a signal that ripple’s in a strong position — we’re going to play offense,” he added.

Ripple’s boss said the deal was a sign that it was still possible to make sizable deals even with the pressures the broader market is facing.

From crypto winter to crypto spring?

Garlinghouse said the deal would help the company increase its presence overseas at a time when the Securities and Exchange Commission is taking tough actions against major industry players — Ripple included.

The crypto titan, valued at $15 billion in its most recent private round of financing, has been faced with a great deal of regulatory uncertainty after the SEC sued the company and two of its executives accusing them of unregistered securities.

The regulator’s main assertion is that XRP, a cryptocurrency Ripple is closely associated with, is akin to a security which should have been registered with the agency before being issued and sold to investors.

Ripple, for its part, denies XRP should be treated as a security.

Founded in 2015 in Switzerland, Metaco offers a range of services aimed at helping financial institutions store, trade, issue and manage digital currencies in a secure manner.

“We’ve been partnering with that segment — banks, payment providers, in our whole history,” Garlinghouse said, adding Metaco is “a good fit in terms of the strategic opportunity.”

“There’s a lot of deals people have tried to do during this crypto winter — I think this will really be a mark of a crypto spring.”

Secure custody of crypto in segregated accounts has become a heightened priority for financial institutions seeking to make a play in the industry in the wake of the collapse of FTX and numerous other notable crypto platforms.

Metaco counts several major financial firms as clients including Citi, BNP Paribas, BBVA and Societe Generale.

SEC lawsuit outcome expected in ‘months’

Crypto companies have been playing a game of poker with the U.S. SEC, making bold threats to leave the country following tough enforcement actions from the agency.

Major players are hoping the SEC and Washington takes, what crypto watchers see as bluffs, seriously and soften the hard line that regulators have taken on the industry.

Garlinghouse said last week that the firm will have spent $200 million in total defending itself against the SEC lawsuit.

The company’s legal battle with the U.S. agency is expected to draw to a close sometime later this year.

In an interview with CNBC Tuesday ahead of the news, Garlinghouse said he expects the firm will get an outcome in the legal fight in a matter of months.

“I think the most likely scenario is that we’ll hear [a decision] sometime either two to four or five months from now,” Garlinghouse said.

Gary Gensler, chair of the SEC, has made clear the regulator has no intention of backing down from its aggressive enforcement actions in the crypto space. Gensler has insisted that existing securities laws are already a good fit for crypto.

Some industry executives, however, believe the regulator’s actions are misguided. Numerous crypto industry insiders have been calling for a clear regulatory framework from the U.S. Congress to help give companies clarity over how they can operate in a way that’s legally sound.

Ripple is now Metaco’s sole shareholder, the company said. Metaco will continue to remain independent and its CEO Adrien Treccani will stay on as CEO.

“This deal will enable Metaco to leverage Ripple’s scale and market strength to reach our goals and deliver value to our clients at a faster pace,” Treccani said in a statement Wednesday.

“We look forward to continuing to serve unprecedented levels of institutional demand with the utmost excellence in delivery, as our clients have come to expect.”

WATCH: Ripple will have spent $200 million fighting SEC lawsuit, CEO says

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May 17, 2023
UN chief backs reform of Security Council, global financial system

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United Nations Secretary-General António Guterres backed the reform of the U.N. Security Council and the international financial system to align them with the “realities of today’s world.”

Both the U.N. body and the financial architecture reflect the power relations of 1945 and need to be updated, Guterres told a press conference Sunday on the margins of the G7 summit in Hiroshima, Japan, according to Reuters.

“The global financial architecture is outdated, dysfunctional and unfair,” Guterres said. “In the face of the economic shocks from the COVID-19 pandemic and the Russian invasion of Ukraine, it has failed to fulfill its core function as a global safety net.”

Guterres made the same point on Saturday, writing in a tweet that it was “time to think seriously about the reform” of the international financial architecture.

The U.N. Security Council came under fire in April when Russia assumed the rotating presidency of the 15-member body despite the fact that 141 countries condemned its aggression on Ukraine. Experts have claimed that Russia’s veto in the Security Council undermines the U.N.’s effectiveness on the international stage.

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Gregorio Sorgi

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May 17, 2023
Nubank CEO David Vélez says the Brazilian banking sector is solid despite turmoil in the U.S.

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Nubank CEO David Vélez joins ‘Closing Bell Overtime’ to talk the state of banking in Latin America and the changing fintech landscape in the region.

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May 16, 2023
FIs comparison shop for fintechs | Bank Automation News

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When Washington, D.C.-based Customers Bank made the decision to augment its third-party risk processes with the assistance of a fintech, it joined nearly 100 other community banks to shop for one via vendor platform True Digital. True Digital allows banks to connect with fintechs in various banking technology areas, essentially making it possible for financial […]

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Brian Stone

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May 12, 2023
Brex tried to buy a piece of Silicon Valley Bank in March

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Brex was one of the 20 companies that put their hat in the ring to acquire Silicon Valley Bank, or chunks of it, in March, newly-released Federal Deposit Insurance Corp. data shows.

The San Francisco-based neobank tried to buy some deposits and credit card accounts from Silicon Valley Bank when the bank was seized by the FDIC, Brex CEO Henrique Dubugras said in an interview. The deposits and card accounts were all held by early- and growth-stage startup clients.

Dubugras knew Brex’s bid was a long shot because it isn’t a bank and it wasn’t aiming to buy all of Silicon Valley Bank, but the overlap of the two companies’ focus on serving startups made the opportunity attractive to the neobank.

“We understand the community really well, and we thought we could serve it really well,” Dubugras said. “We didn’t bid for the winery or the private bank, or any of these assets that we don’t understand. We only went for the ones we thought could do a really good job and keep the ethos of SVB.”

Dubugras said that the acquisition of the early- and growth-stage portfolio would have brought customers and talent to Brex, but it would not have brought the company a bank charter.

Jonah Crane, a partner at the advisory and investment firm Klaros Group, said acquiring a portion of Silicon Valley Bank’s deposits could have been an opportunity for Brex to accelerate its growth with the company’s target customer base at a bargain price.

Raleigh, North Carolina-based First Citizens BancShares ultimately won the auction for Silicon Valley Bank, assuming $72 billion of loans and all $56.5 billion of deposits. The FDIC published all 25 bids and the 20 firms that submitted them on Wednesday, but it didn’t disclose which company submitted each bid. Although nearly half the bidders were nonbanks, including Blackstone, Apollo Global Management and Sixth Street Partners, Brex was the only neobank.

Brex declined to disclose financial details of its offer, but Dubugras said the company planned to use cash on its balance sheet to buy the deposits and card accounts. He added that Brex was never in contact with the FDIC about the bid. The company decided to submit its pitch at the recommendation of a Brex customer who was also a customer at Silicon Valley Bank, Dubugras said. Brex’s executive team put together the proposal, which was approved by its board.

Neobanks that serve startups saw a massive influx in business following Silicon Valley Bank’s failure as venture-backed businesses looked for ways to safely, quickly stash their capital. Since the bank’s collapse, Brex said it has added $2 billion of deposits. The company has also added to some products and features, including raising the amount of deposits it could protect through money sweep programs and expanding travel booking. Brex’s main strategy going forward is still focused on its expense management software.

“We’re not trying to win all the deposits,” Dubugras said. “We want to be your operating account. We want to make all your payments, run your payroll and pay your bills because our software is really good at doing that. And if you want to keep a lot of money in our treasury, too, we have a product for that. But we really excel at simpler treasury use cases where you just want a money market fund, or day-to-day operation, like bill pay, wires, checks.”

The CEO added Brex isn’t interested in acquiring a bank charter the way some fintechs that focus on online lending like SoFi and LendingClub have done in recent years.

Klaros Group’s Crane said it could make sense for Brex to try to acquire a bank charter, depending on its long-term strategy. When fintechs try to buy banks, they usually look for small, healthy community banks.

“Brex is offering banking services to customers as a nonbank, and they found some relatively creative structures to do that,” Crane said. “But ultimately, they’re not going to be able to be the core operational account or core banking relationship with their customers without a banking license. I think it’s just too hard to run a core treasury and payments function for sizable commercial businesses as a nonbank.”

Dubugras said that Brex is still open to other potential acquisitions but is prioritizing internal investments. He added that distressed Silicon Valley Bank was a “very unique” situation because of its customer base’s overlap with Brex’s. There aren’t many banks that have similar portfolios, except First Republic Bank, which was also based in San Francisco and served similar startup clients but failed Monday following a steep drop in deposit, he said. JPMorgan Chase bought all of First Republic’s deposits and “substantially all” of its $229.1 billion of assets. Dubugras said Brex didn’t have a chance to look at submitting a bid for First Republic.

Bloomberg News and Reuters reported at the time that the FDIC had asked banks to place bids the day prior, including PNC Financial Services Group, U.S. Bancorp, Bank of America and Citizens Financial Group. JPMorgan Chairman and CEO Jamie Dimon said his company had 800 people working to assess First Republic’s books.

“Our government invited us and others to step up, and we did,” Dimon said in a news release at the time. “Our financial strength, capabilities and business model allowed us to develop a bid to execute the transaction in a way to minimize costs to the Deposit Insurance Fund.”

Crane said finding nonbanks able to take assets out of failed, or even healthy, banks could help the banking industry shore up capital positions. He added that he thinks if more banks fail, it will be easier for a nonbank to get in on the purchase action.

“Even if the vast majority of banks are reasonably healthy, they’re all looking at the balance sheet, and they’re all looking at the economic environment, and they’re all getting a little risk-averse right now,” Crane said. “It makes sense that you would want to attract capital from outside the banking system to provide part of the solution here. … JPMorgan can’t buy everybody.”

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Catherine Leffert

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May 12, 2023
Goldman Sachs created an A.I.-powered social media startup for corporate use

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Goldman Sachs, known more for its Wall Street bankers than its technology, has just spun out the first startup from its internal incubator.

The company, a networking platform for employees called Louisa, was funded and owned by the New York-based investment bank until a few weeks ago, when it became independent, according to founder-CEO Rohan Doctor.

Now Doctor is hustling to grow his client base beyond the confines of Goldman, whose employees have used Louisa for the past two and a half years. The software automatically creates user profiles from an employer’s databases and pulls in newsfeeds to proactively connect people who might benefit from knowing each other, he said.

“Think of Louisa as an A.I.-powered LinkedIn on steroids,” Doctor, 42, said this week in an interview. “We have smart profiles and a smart network, and Louisa reads millions of articles a week from 250 providers and begins connecting people” based on possible deals gleaned from news, he said.

Under CEO David Solomon, Goldman has sought to speed up its digital makeover by hiring Google and Amazon executives and asking employees to pitch leaders on startup ideas. Louisa was part of the inaugural class of Goldman’s incubator program, which encourages employees with startup ideas to develop them in-house.

‘Dumb luck’

Doctor, a 17-year Goldman veteran who had stints in Hong Kong and London as head of bank solutions, got the idea for Louisa after landing a massive deal in 2018.

The elation of securing the transaction, a complex risk transfer between a bank and an insurer worth tens of millions of dollars, was followed by nagging questions: How did Doctor pull it off, and was it repeatable?

“The real answer was serendipity, happenstance,” he said. “It was dumb luck that me and another guy got thirsty at the same time, go to a [bar] in London and start exchanging information.”

Rohan Doctor, CEO and founder of Louisa

Source: Goldman Sachs

There has to be a better way, thought Doctor. Professional services firms like Goldman rely on the expertise and contacts of their employees, but there’s a limit to how many colleagues anyone can know.

“This is costing companies billions of dollars in terms of missed opportunities, disconnected colleagues and fractured client experiences,” he said.

So he moved to New York from Hong Kong and began hiring programmers for his nascent effort.

The company’s name originally referred to Louisa Goldman Sachs, the youngest daughter of Marcus Goldman and wife of Samuel Sachs. But, seeing as how Doctor has to cater to competitors of Goldman, the startup’s name now refers more generally to a “renowned warrior,” he said.

Client #1

Louisa has more than 20,000 monthly active users, according to Goldman, which declined to say how much it spent launching the company.

Doctor has begun signing up clients besides Goldman, including a commercial bank and a venture capital fund with nearly $100 billion in assets, he said. They will focus initially on a small subset of five or six professional services clients before broadening their efforts, he said.

He believes two factors make his startup especially timely.

The arrival of generative A.I. technology like OpenAI’s ChatGPT has created excitement in an otherwise subdued environment for technology firms, he said.

“What OpenAI has done is just phenomenal,” he said. “We can use it to sort of map out what’s in people’s minds and how they want to describe themselves in seconds.”

Further, remote and hybrid work has disrupted the way employees interact, creating the need for a networking platform like Louisa, Doctor said.

“The way it used to be done if you had a question, you’d lean back on a crowded trading floor and ask around,” he said. “Hybrid is here to stay, even at places that don’t want it, and asking around no longer works.”

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May 12, 2023
Revolut’s CFO leaves the digital bank after two years, citing personal reasons

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The Revolut logo displayed on a smartphone.

Igor Golovniov | SOPA Images | LightRocket via Getty Images

LONDON — Revolut’s Chief Financial Officer Mikko Salovaara is leaving the digital bank after two years, citing personal reasons.

“I am grateful for the opportunity to serve as Group CFO at Revolut and remain confident in the firm’s future success,” Salovaara said in a statement sent to CNBC via WhatsApp.

Revolut’s CEO Nik Storonsky said: “I thank Mikko for his contribution and wish him well on his next steps.”

A company spokesperson told CNBC Salovaara resigned and has not been fired. He said it would be inappropriate to divulge the personal reasons that have led to his departure.

The spokesperson said Salovaara’s decision was unrelated to concerns flagged by auditor BDO about the company’s financial accounts.

In March, BDO said that it was unable to independently verify three quarters of the £636 million of revenue reported by the company in its delayed 2021 accounts.

This is a breaking news story, please check back later for more

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May 11, 2023
Fintech CEO Chris Britt of Chime on reasons Americans don’t trust banks

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The disruption of traditional bricks-and-mortar banks by fintech companies was already occurring when the pandemic sent startups offering banking services faster, cheaper, and more digitally accessible into overdrive.

A rush of venture capital followed, with fintech companies raising more than $130 billion in 2021 alone, creating more than 100 new unicorns, or companies with at least $1 billion in valuation.

However, as the field of fintechs got more crowded and the economy has entered a more recessionary environment, funding has dried up and several fintechs have taken valuation cuts. The fintech reckoning is going well beyond private companies, as public markets have not been kind to former Disrupters Dave and SoFi, both trading well off their IPO prices. Legacy banks have seen their efforts to disruptor these disruptors fall short of expectations – for example, Goldman Sachs recently pulled back on its fintech ambitions.

Making that banking picture even fuzzier is the recent collapse of Silicon Valley Bank and the wave of concerns that followed.

But Chris Britt, CEO of Chime, which ranked No. 15 on the 2023 CNBC Disruptor 50 list, says even with much of the banking system on edge, he still sees a strong market need for fintechs.

“It’s very difficult for [the big banks] structurally to compete for the segment that we aim to serve, which is sort of mainstream middle and more lower income consumers,” Britt said on CNBC’s “Squawk on the Street” on Tuesday. “Big banks do a pretty good job with high income, high FICO score folks who have big deposits and are credit worthy, but for most Americans, the 65% that live paycheck to paycheck, the only way that big banks can make the math work on serving them is by being very punitive on fees.”

More coverage of the 2023 CNBC Disruptor 50

Addressing the part of the population that has been disillusioned by traditional banking was part of the impetus for Britt and Ryan King to found Chime in 2010. This year marks the fourth time Chime has been featured on the CNBC Disruptor 50 list.

“The trust levels that mainstream Americans have in banks is extremely low, and that was part of the opportunity that we pursued,” Britt said.

Those trust levels waned in recent weeks with the collapse of Signature Bank and Silicon Valley Bank, followed by the eventual government seizure and sale of First Republic Bank. Nearly half of the adults polled in a recent Gallup survey said they were “very worried” (19%) or “moderately worried” (29%) about the safety of the money they had in a bank or other financial institution.

Britt said that although Chime has a relationship with SVB, it “hasn’t seen much of a change as a result of the SVB situation” from members, as “99.9% of our consumer deposits are FDIC insured because they’re well below the $250,000 threshold.”

Chime’s focus on having a primary account relationship with members as opposed to other fintechs that may focus on one-off or peer-to-peer transactions has helped the company’s business be “very resilient.”

“Most of our members use Chime for non-discretionary spend; they’re going out and shopping at Target or Amazon or Subway, and they’re using it for their everyday purchases,” Britt said. The majority of Chime’s revenue comes from network partners like Visa when members use their cards at the point of sale.

Chime, which was valued at $1.5 billion in 2019, reached a valuation of $25 billion in 2021. The company became profitable on an EBITDA basis during the pandemic, Britt told CNBC in September 2020.

However, the company has not been immune from the current challenges. In November, Chime laid off 12% of its workforce, or about 160 people, in a move that Britt said would help the company thrive “regardless of market conditions.”

Still, Chime is still open to a future IPO, Britt told CNBC’s Julia Boorstin, something that the company has long been rumored for well ahead of the current frozen IPO market for new offerings from venture-backed startups.

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May 9, 2023
50. SoLo Funds

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Founders: Travis Holoway (CEO), Rodney Williams
Launched: 2015
Headquarters: Los Angeles
Funding: $24 million
Valuation: $150 million
Key technologies: Decentralized finance (DeFi)
Industry: Fintech
Previous appearances on Disruptor 50 List: 0

The banking system leaves out a lot of people — cutting them off from access to capital, whether it’s for a new car, a house, or to start a business. Travis Holoway and Rodney Williams saw the negative impact this had on their friends and family who needed access to short-term loans but had to go without. The experiences spurred them to start SoLo Funds, a community finance platform where members borrow and lend to make a return or a social impact.

“We remembered being kids when our parents had bills due on Friday but didn’t get paid until Monday, so the lights would be shut off when we didn’t pay on time. That kind of experience is sadly very common for many Americans, so we wanted to create a solution that gave people a chance,” Williams said in an August 2022 interview.

SoLo is among the fintech firms trying to make the financial system more equitable so that more people want to be a part of it. It works by acting as a peer-to-peer lending platform. Would-be borrowers create a loan request and are matched with an investor, who can be an individual. The two parties agree on repayment terms though SoLo puts some guidelines around this.

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Since its founding in 2018, the company has gained more than a million users, issued $150 million in loans and run $280 million in transaction volume. The majority, or 82%, of its members are from underserved zip codes. At a time when the number of Black-owned banks has declined sharply, SoLo is looking to fill the void. The company says it is the largest Black-founded and led fintech or neobank.

The company’s mission has garnered support from prominent or celebrity investors such as Kesha Cash, the founder of Impact America, which is the largest fund run by a Black woman, and Serena Williams, who runs Serena Ventures.

But its growth has not come without controversy in the highly regulated industry of financial services. Critics and state regulators have come after SoLo for a model in which consumers were asked to pay tips for the loans they received. Most notably, Connecticut regulators issued a temporary cease and desist order last year, alleging that 100% of the loans to Connecticut residents originated on the platform from June 2018 to August 2021 required some form of a tip being paid — and that resulted in actual interest rates on loans pitched as 0% APR to range from 43% to over 4280% — and that it lacked proper licenses in the state.

SoLo co-founder Williams told American Banker, in response to questions about legal issues, that the company is “working through that process.”

It’s staffing up for the fight, too. In February, the company made several executive hires with experience in bank compliance and government regulation: Collin Schwartz, who worked for multiple global banks, as general counsel; Kyle George, who worked in the Nevada Attorney General and Governor’s offices, to head government & regulatory affairs; and Manny Alvarez, former official at buy now, pay later company Affirm, and former banking commissioner for the state of California.

At the time of those hires, Williams stated, “Too many policymakers don’t understand the challenges and opportunities faced by everyday Americans affected by their decisions, which is a major problem we are working to change.”

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May 9, 2023
Coinbase CEO says SEC is on ‘lone crusade,’ dials back on suggestion exchange may relocate

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Brian Armstrong, co-founder and chief executive officer of Coinbase Inc., speaks during the Singapore Fintech Festival, in Singapore, Nov. 4, 2022.

Bryan van der Beek | Bloomberg | Getty Images

The CEO of cryptocurrency exchange Coinbase, Brian Armstrong, doubled down on his criticisms of the U.S. Securities and Exchange Commission chief Gary Gensler Monday, but added the exchange would not leave the U.S. despite the regulatory uncertainty the company is facing in the country.

Coinbase has been under intense regulatory scrutiny in the U.S. lately following a grim year for the crypto industry which saw major companies like FTX and Terra fail, prices plunge, and investors lose billions of dollars in the process.

The SEC earlier this year served Coinbase with a Wells Notice, a letter that the regulator sends to a company or firm at the conclusion of an SEC investigation that states the SEC is planning to bring an enforcement action against them.

At the heart of the regulator’s dispute with Coinbase, and a host of other crypto companies, is the allegation that it is selling unregistered securities to investors. Coinbase disputes this.

“The SEC is a bit of an outlier here,” Armstrong told CNBC’s Dan Murphy in an interview in Dubai Monday. “There’s kind of a lone crusade, if you will, with Gary Gensler, the chair there, and he has taken a more anti-crypto view for some reason.”

“I don’t think he’s necessarily trying to regulate the industry as much as maybe curtail it. But he’s created some lawsuits, and I think it’s quite unhelpful for the industry in the U.S. writ large, but it also is an opportunity for Coinbase to go get that clarity from the courts that we feel will really benefit the crypto industry and also the U.S. more broadly.”

The SEC was not immediately available for comment when contacted by CNBC.

Armstrong also rowed back on a suggestion he made last month that the company may be forced to move its headquarters overseas.

“Coinbase is not going to relocate overseas,” Armstrong said. “We’re always going to have a U.S. presence … But the U.S. is a little bit behind right now.”

“I would say we’re seeing more thoughtful approaches, for instance, in the EU [European Union], they’ve actually already passed comprehensive crypto legislation, the U.K. has been incredibly welcoming, and for us there, and that’s been a hub where we’ve decided to serve the U.K. market.”

At a fintech conference in London in April, Armstrong said that Coinbase may consider relocating outside the U.S. if the current regulatory headwinds persist. He said the U.S. “has the potential to be an important market in crypto” but right now is not delivering regulatory clarity.

If this goes on, he said, then Coinbase would consider options of investing more abroad, including relocating from the U.S. to elsewhere.

Still, Armstrong said Monday that Coinbase was looking to increase its international investments, stating it is “very interested” in the United Arab Emirates as a country to do more investment in. Dubai has been a notably favorable regulator when it comes to crypto, courting business from the likes of Binance and Kraken.

Noting that it was his first visit to the UAE, Armstrong said: “I’m here to learn and listen and meet with the relevant regulators both in Abu Dhabi and here in Dubai and decide if this is a good place for us to serve a large region of the world.”

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May 8, 2023
Cloud Revolutionizes HealthTech & FinTech | Entrepreneur

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Opinions expressed by Entrepreneur contributors are their own.

During the first phase of the pandemic, many companies were forced to drastically rethink the way they worked. Rapid digital transformation became necessary to survive financially, support evolving consumer needs, and help keep workers connected.

Overcoming the model of office and lab work with cloud computing

Cloud computing systems have allowed enterprises, schools, and government organizations to overcome pandemic-induced challenges and meaningfully accelerate innovation and agility toward the market.

Related: The Rapid Growth Of Fintech: A Revolution In The Payments Industry

The cloud-computing industry is expected to grow to nearly $500 billion in 2022 — from $243 billion in 2019. Amazon’s Web Services alone is growing 33% per year. This accounted for 75% of the company’s operating income last year.

Rather than returning to the way things once were, business leaders must continue disrupting industry stagnation with emerging technology. Here’s how the cloud is revolutionizing health tech and fintech industries.

Cloud-based services are ripe for disruption

Business leaders in healthcare and dental services have historically faced issues with “on-premise” storage — in-house systems that can limit scalability and storage.

Related: What is Cloud Computing? Here’s Everything You Need to Know.

As diagnostic systems become more sophisticated, on-premise servers and aging infrastructure severely limit the ability of providers to implement new tools and leverage the data they already have.

The limitations also create patient-side challenges. These challenges include difficulty accessing health records, scheduling online appointments, and connecting different healthcare providers for multi-system health needs.

While these issues have existed for years, pandemic-induced healthcare overwhelms exacerbated problems, making it even more difficult for many patients to access necessary care.

Upgrading EHR to better Cloud systems

Solving these problems means upgrading to better systems that can work more quickly, save costs, and evolve with consumers’ and patients’ needs. In a recent case study, MIT Sloan examined how Intermountain Medical Center in Utah modernized its aging in-house EHR system to address common challenges.

Intermountain substantially improved patient outcomes by upgrading the technology powering its 22 hospitals and 185 clinics while saving millions in procurement and internal IT costs. The MIT analysis confirms what we know to be true: Streamlining patient management with cloud-based systems can reduce attrition rates, recapture lost revenue, and build stronger, lasting relationships with patients.

How does updated EHR work for the dental industry?

In the dental industry alone, the average practice loses 20% of its patients, one of the highest attrition rates in healthcare, reported by tab32. Even a minor 3% reduction in attrition could result in $72,000 of additional production per year. Cloud-based services streamline communications, replace archaic booking systems and help patients remember appointments. When outmoded systems are replaced, it prevents long wait times that are already helping dental providers see tangible improvements in their retention rates.

Finance and the cloud

In the financial sector, banks scaling through cloud-based technologies are doing better at tracking fraud activity, expediting loan applications, and responding to flurries of customer activity based on market fluctuations. Cloud-based tools also allow banks to implement new mobile banking features, detect money laundering patterns, and automate analyses of underwriting decisions with AI.

Related: 7 Reasons Why Your Business Should Run On Cloud Accounting Software

Unfortunately, many banks lag behind in cloud adoption, relying on internal servers with inherent limitations. Currently, only 12% of North American bank tasks are handled in the cloud. Ninety percent of U.S. banks have digital transformation initiatives in place but haven’t converted to them. While titans like Wells Fargo and Capital One are either currently using cloud technologies or in the middle of migrating over — Bank of America built its own cloud. The updated and improved cloud-based technology has saved Bank of America billions of dollars.

Highly regulated systems are slow to adapt

Organizations in highly regulated industries are often slow-moving sectors and are historically hesitant to move data out of on-premise servers and data centers.

The pandemic revealed just how impactful such a move can be. Migration to cloud-based software allows for better service for constituents. The benefits of cloud reveal a reduction in costs and IT issues and high flexibility to respond to unexpected challenges.

Updating and retiring legacy systems also provides the foundation needed to support long-term growth and scalability. Cloud-based solutions are set to alter how these previously stagnant industries addressed their long-standing challenges at a fundamental level.

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April 28, 2023
Crypto can’t just ‘burn out’, says top global regulator

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This article is part of the Politicization of Central Banking special report.

AMSTERDAM — Global regulators can’t afford to just let crypto “burn out,” according to Klaas Knot — the man overseeing international efforts to bring the sector to heel.

The crypto industry has absorbed some crushing blows over the last year, including the collapse of the FTX exchange in November.

That has led to calls in some quarters for regulators to sit back and let the crypto crater deepen, rather than applying regulation that might legitimize the speculative assets.

“That’s a little bit overdone,” Knot, chair of the Financial Stability Board, told POLITICO in an interview at the end of April. “This whole ‘let it burn out’ strategy, I don’t believe in it.”

Indeed, expectations that crypto would die from its wounds have proved premature: the collapse of a string of U.S. regional banks has revived true believers’ faith that digital currencies will outlive mainstream finance. Bitcoin has risen nearly 50 percent since Silicon Valley Bank went under, while the stablecoin Tether’s market cap — a rough proxy for global exposure to crypto — is back where it was before the first of the big crypto scandals last year.

The FSB, an international standard-setting body, is working on a global regulatory framework for crypto assets and stablecoins, with final recommendations due out in July.

Under the proposals, which are not yet finalized, crypto would become subject to tougher supervision, along with firm rules on information exchange, disclosures, governance and risk management — like other financial markets.

Knot, who also heads the Dutch central bank, said that reflects the reality that the crypto market exists, and that ordinary people are investing their money in it — despite regular warnings from officials about its riskiness, and the constant drumbeat of scams.

“We live in a free world. If investors and consumers opt to invest in these crypto assets, then it behooves us to come forward with an appropriate regulatory response,” he said.

It’s also because some of crypto’s blowups, including FTX, have replayed bad behavior from the world of traditional finance that securities regulation aims to prevent — including the basics, like dipping into customers’ funds.

Knot highlighted enduring “serious issues” with the sector, such as conflicts of interests at crypto conglomerates and the need to keep leverage out of the system.

“These are structural vulnerabilities that will not go away,” he added.

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Hannah Brenton

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April 28, 2023
‘Utterly irresponsible’: SVB failure was caused by a banking — not tech — crisis, top VC says

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LONDON — The collapse of Silicon Valley Bank was the result of a crisis in banking rather than technology, according to a top venture capitalist.

Anne Glover, CEO and co-founder of Amadeus Capital, said Friday that the SVB crisis was caused by “utterly irresponsible” practices by Silicon Valley Bank and its management — namely, taking short-term deposits from VCs and investing them in long-maturity debt.

“It is a banking one-on-one failure, unbelievably irresponsible frankly by the senior management of SVB in California,” said Glover, speaking at a tech investor showcase in east London. A spokesperson for SVB wasn’t immediately available for comment when contacted by CNBC.

SVB was shut down and taken over by the U.S. government after a slew of startups and venture capitalists withdrew their money en masse amid fears over its financial health.

The firm had earlier tried to raise $2.25 billion of capital to plug a $1.8 billion hole in its balance sheet caused by the sale of $21 billion worth of bonds at a loss. The bank was a crucial pillar of the tech industry, offering financing for firms often turned away by the traditional banks.

“They took cash deposits from VCs and hedge funds and put them into first-year mortgage bonds that fell in value when the interest rates went up,” Glover added.

“They didn’t hedge the interest rate. This is really basic banking, it’s nothing to do with the tech community. The tech community was impacted.”

Across the Atlantic, SVB’s U.K. arm was sold to British bank HSBC for £1, in a government and Bank of England-facilitated deal that protected £6.7 billion ($8.3 billion) in deposits.

Glover, who serves on the Bank of England’s board as a non-executive director, said the central bank “did a phenomenal job in delivering a resolution that was satisfactory to the U.K., much better than the U.S. did.”

Banks more broadly have been under immense strain due to a rise in interest rates, which has made debt more expensive. While on the one hand it is now more profitable for banks to lend, they are also holding government bonds on their balance sheet. When interest rates rise, those assets become less valuable.

Credit Suisse is the most notable failure in the sector to date. The Swiss banking giant was rescued by rival lender UBS in a cut-price deal coordinated by the Swiss government.

Glover, a prolific tech investor, joined Amadeus after previously running Apax Ventures. She co-founded Amadeus in 1997 with Hermann Hauser, who was instrumental in the development of the first Arm processor.

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April 21, 2023
SumUp Announces New Global ESG Initiatives to Support Sustainability Efforts
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With new environmental and societal activities, SumUp steps up its efforts to support positive change in the planet
BOULDER, Colo., April 19, 2023 (Newswire.com)
–
Global financial technology company SumUp continues its industry-leading sustainability agenda, today announcing a range of initiatives addressing societal and environmental issues.

The SumUp ESG framework is based on: Environment, Education and Entrepreneurship. Within the Environment pillar, SumUp has pledged to donate 1% of net revenue generated by its Solo card readers to NGOs within the “1% for the Planet” movement.

Today’s announcement is a continuation of that work as SumUp looks to contribute to all aspects of ESG, looking at environmental and societal matters. SumUp is proud to announce several initiatives:
- In partnership with River Cleanup, removing 100,000kg of plastic from the Citarum River in Indonesia, the most polluted river in the world. In addition to the initial removal, SumUp will also conduct campaigns to raise environmental awareness among local communities
- With Wilderness International, protecting 100,000m² of forest in Peru for generations to come, preserving valuable habitats and biodiversity and offsetting 6,000 tons of CO₂
- Through StoveTeam International, SumUp will be supporting 1,000 families in Central America with safe, fuel-efficient cookstoves. These stoves reduce the risk of lung diseases and save 12 tons of CO₂ per stove
SumUp is also offering three-month Java Full Stack courses to over 120 students across Chile, Brazil, and Colombia, providing tech education to women and girls, non-white, LGBTQ+, and other underprivileged people. Over 80% of last year’s graduates have found employment post-course. In addition, SumUp works with Dharma Life to provide a technology platform that supports education for children from rural India.

Commenting, SumUp Global Head of Diversity & Inclusion and ESG Felizitas Lichtenberg, said:

“As a world-leading technology company, we’re committed to having a positive impact on the world and empowering people. And with our ESG initiatives, we want to create value throughout society and for the planet. We believe that investing in critical global issues and addressing them at source, like education for unemployed and minoritized groups, or protecting our planet, is not only the right thing to do but also a responsibility of everyone and will shape our shared future. We are committed to driving this agenda further to accelerate change and help create a sustainable future.”

About SumUp

SumUp is a global financial technology company driven by the mission of empowering small businesses all over the world. Founded in 2012, SumUp is the financial partner for more than 4 million entrepreneurs in over 35 markets worldwide.

In the United States, SumUp offers an ecosystem of affordable, easy-to-use financial products, such as point-of-sale and loyalty solutions, card readers, invoicing, and a business account that allows customers to manage their money and receive payouts the next day.

For more information, please visit https://www.sumup.com/en-us/.

Source: SumUp
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April 19, 2023
CRED launches P2P UPI payments on its app
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Fintech major CRED has launched peer-to-peer UPI payments on its app, allowing CRED members to transact with CRED members or non-members by searching their contact list and adding phone numbers, or UPI ids.

The service will be limited to CRED members. To become a CRED member, one needs to have 750 or above credit score. “While UPI has created a revolution in digital payments with a focus on utility, CRED seeks to move beyond being transactional- creating an elevated UPI experience for members. This experience hinges on making payments instant, secure, and rewarding,” the company said in a statement.

The new payment experience has been introduced after the launch of Scan & Pay in October 2022. As scan and pay gain traction, CRED expects the number of merchants to grow. Now with the launch of P2P UPI payments, CRED members will have multiple payment options including offline payments (UPI P2P, Scan & Pay, Tap to Pay), online merchant payments (CRED Pay, CRED flash) and bill payments.

Key features

Other key features of CRED’s UPI P2P Experience are payment reminders for recurring transactions, option to create a custom VPA and mask personal details like mobile numbers from their UPI id. CRED recorded a net loss of ₹1279 crore in FY22 even though its revenue jumped by almost 340 per cent from ₹95 crore in FY21 to ₹422 crore in FY22.

The company’s losses have more than doubled from ₹524 crore in FY21. In an earlier conversation with businessline, CEO Kunal Shah attributed the losses to the company’s focus on building a community of members and building the brand. CRED said it has grown to a base of 11.2 million members in FY22 as compared to 7.5 million in FY21.

The four-year-old start-up rewards customers for paying credit card bills and has built multiple user cases for its customers including cash, mint, pay, credit card bill payment, max, rewards, store and travel.
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Published on April 17, 2023
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April 17, 2023
Arrest made in stabbing death of Cash App founder Bob Lee, men reportedly knew each other

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In a press conference on Thursday afternoon, San Francisco District Attorney Brooke Jenkins confirmed that an arrest has been made in the April 4 fatal stabbing of Cash App founder Bob Lee. Officials named Nima Momeni — a tech entrepreneur in the Bay Area — as the suspect.

Authorities also said that Momeni knew the victim, though they would not comment on the motive. They also indicated that the investigation was ongoing.

Momeni will be arraigned on Friday, and prosecutors said that they would be filing a motion to detain him without bail.

Police made the arrest earlier on Thursday in Emeryville, California, a suburb 15 minutes outside San Francisco. Jail records say that the 38-year-old Momeni was booked on suspicion of murder at 9:19 a.m.

News of the arrest was first reported by Mission Local, a local San Francisco news publication.

In the press conference, Jenkins criticized early comments on the murder from pundits and celebrities that used the murder to paint San Francisco as a crime-ridden and violent city.

San Francisco police officers found Lee, 43, with stab wounds at 2:35 a.m. in a deserted part of downtown San Francisco. He was taken to a hospital with life-threatening injuries and later died, police said at the time.

Lee had been working as chief product officer for the cryptocurrency company MobileCoin. He previously served as chief technology officer of Square (now known as Block), a financial technology company co-founded by former Twitter chief Jack Dorsey. Lee went on to create Cash App, a money transfer service.

He was also an investor in Elon Musk‘s SpaceX venture as well as other tech firms, such as the social audio app Clubhouse, according to his LinkedIn profile.

He was widely praised by former colleagues, including MobileCoin CEO Joshua Goldbard, who said in a Twitter thread that Lee was a “brilliant” visionary with a “kaleidoscopic” mind.

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April 13, 2023
Ether is rallying ahead of major upgrade that will let holders more easily access their tokens

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Ether has spiked this week to a nine-month high, ahead of a major network upgrade that some crypto enthusiasts say will make the digital currency a more profitable long-term investment.

The world’s second-biggest cryptocurrency is up about 6% over the past three days, surpassing $1,900, while bitcoin is roughly flat over that stretch.

Beginning next Wednesday, an upgrade to the blockchain, dubbed “Shapella,” will allow owners of ether to withdraw their assets. Up to this point, investors would have to use centralized exchanges like Coinbase or decentralized finance (DeFi) protocols like Lido, to essentially exchange their locked-up ether for a token of equivalent value.

The recent rally has followed a similar pattern to past bouts of enthusiasm surrounding network upgrades. In September, ethereum ran up ahead of a historic transition to a more energy-efficient way of securing the network, called proof-of-stake.

Ethereum previously had a vast network of miners all over the planet running highly specialized computers that crunched math equations in order to validate transactions. After the so-called “Merge” upgrade in September, ethereum migrated to a proof-of-stake system, swapping out miners for validators. Instead of running large banks of computers, validators leverage their existing cache of ether as a means to verify transactions and mint new tokens.

“Ether itself becomes a productive asset,” said Danny Ryan, a researcher at the Ethereum Foundation, regarding the September upgrade. “It’s not something you might just speculate on, but it’s something that can earn returns.”

In the post-merge era, ether has taken on some characteristics of a traditional financial asset, paying interest to holders.

“It’s probably the lowest-risk return inside of the ethereum ecosystem,” said Ryan, adding that yield in other corners of DeFi involve smart contracts and other types of counter-party risk.

So far this year, ether has underperformed bitcoin, but recent gains have helped to close the gap. Ether is up nearly 59% this year, versus bitcoin’s gain of 70% in 2023.

Currently, over 18 million ether tokens worth about $32.5 billion are staked, meaning that 15% of ether’s total supply are considered locked assets.

While the coming upgrade will unlock much of that value, giving holders more control over their assets, there’s some concern that the release of so many tokens will have a flooding effect of sorts on the market. Even with capped withdrawals, some $2.4 billion worth of ether could hit the open market, K33 Research said in a note on Tuesday.

“A plunge is likely to happen shortly after the completion of the upgrade, as a huge amount of ETH will be unlocked, and many people will also be selling their ETH,” said Ilya Volkov, who runs a blockchain-based fintech platform. Volkov said he’s bullish over the long term.

The ratio between the open interest of ether put and call options reached its highest level since May on Tuesday, according to data presented by crypto data analytics and news firm The Block. That could signal a buildup of bearish bets leading up to the network upgrade.

According to research from Bernstein, of the 18 million ether tokens locked on the blockchain, almost 70% are staked through protocols like Lido, creating a measure of liquidity for investors.

“Liquidity for 70% of staked ETH is not new, they could do it anyways,” Bernstein wrote. The firm described the remaining 30% of holders as “original believers,” who are unlikely exit their positions at this price.

Having the ability to deposit and withdraw tokens might encourage more investors to stake ether, and some analysts said they expect a significant influx of capital onto the network once it proves that money that’s been staked can be taken out with relative ease.

WATCH: Bitcoin climbs as investors shrug off regulatory concerns

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April 5, 2023
Frank founder Charlie Javice charged in fraudulent acquisition

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Federal prosecutors have charged Charlie Javice with fraudulently misrepresenting the value of the college financial aid technology startup she founded by inflating the company’s customer base ahead of a $175 million sale to JPMorgan Chase.

The Securities and Exchange Commission accused Javice on Tuesday of knowingly concealing the number of customers that her New York-based company, Frank, had secured as JPMorgan prepared to acquire the fintech in an attempt to expand in the student financial services industry.

Javice wrongfully received approximately $9.7 million as a result of the transaction as well as “millions more indirectly,” according to a complaint filed by the SEC in the U.S. District Court for the Southern District of New York.

The Department of Justice and the Federal Deposit Insurance Corporation also filed criminal charges against Javice after her arrest last night in New Jersey, accusing the Frank founder of making more than $45 million from the fraudulently negotiated deal, according to a separate statement released on Tuesday.

A lawyer for Javice declined to comment and said in an email that the Frank founder denied the government’s allegations.

The fintech founder allegedly exaggerated the amount of Frank’s 300,000 student loan customers in the months leading up to JPMorgan’s acquisition of the company in September 2021, according to the SEC’s complaint.

Gurbir S. Grewal, director of the SEC’s Division of Enforcement, said in a statement that Javice “lied about Frank’s success” to induce JPMorgan into making a deal.

“Even nonpublic, early-stage companies must be truthful in their representations,” Grewal said.

After launching Frank in 2017 as an online service helping potential and current college students apply for federally disbursed financial aid, the regulator alleged, Javice promoted on the fintech’s website and in deal negotiations throughout 2021 that the company had attracted 4.25 million customers.

After JPMorgan agreed to purchase the fintech, the SEC accused Javice and a high-ranking Frank executive of working together to pay $105,000 and $75,000 to third-party data providers to augment an enlarged list of the company’s customers.

In a lawsuit filed in December, JPMorgan named former Frank chief growth and acquisition officer Olivier Amar as a co-defendant alongside Javice.

A lawyer for Amar did not respond to a request for comment. A spokesperson for JPMorgan declined to comment.

The case raises questions about how banks should conduct due diligence on potential startup acquisitions as lenders increasingly seek to purchase fintechs that have developed lucrative technology or penetrated a market that’s difficult to enter.

During JPMorgan’s fourth-quarter earnings call in January, CEO Jamie Dimon described the acquisition as “a huge mistake.”

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Jordan Stutts

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April 4, 2023