COVID's Effects on Auto Loans — Brex Raises $150m — Shopify Launches More Fintech Products

Hi everyone, Ian here. Long issue of the newsletter today, so let’s just dive right in.

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This issue is sponsored by Alloy.  Alloy’s one of the more interesting early stage fintech companies I’ve come across (PS-they’re hiring too.) Regulation makes fintech difficult to innovate in, and rules around anti-money laundering and “knowing your customer” bog down startups when they’re getting off the ground. But after you get over that hurdle and you’re growing well and getting users, you need to worry about fraud and managing risk: one of the most fundamental parts of financial services.

Alloy simplifies all that by letting customers add a number of KYC and AML related fraud services into their platform with a single, easy to use, API. The ease of integration makes Alloy the go to destination for companies looking to mitigate fraud and verify their users more quickly. Alloy’s raised $15 million, including a Series A round in September 2019 led by Bessemer Venture Partners.


FTT+ This Week

Hi all, Julie here. When you get back from Memorial Day Weekend, you’ll find an email from me about Shopify. I didn’t pay much attention to them while I was at Bloomberg, but almost no other company has come up more often in recent weeks in our FTT Slack channel than them. The pace at new product launches and partnerships has been quite impressive, and I wanted to ask some of my industry contacts for their thoughts. Feel free to ping me on Twitter if you would like to share, and have a great weekend in the meantime!

Ian’s also doing this month’s Q&A with Kaz Nejatian, the head of Shopify Financial Services. Expect a lot of questions around a dive into Kaz’s background as a YC founder and product leader at Facebook, how Shopify’s been quietly becoming a massive fintech company, and Kaz’s fintech vision for Shopify’s future.


Playlist of the Week

Very thankful we got a lot of requests for submitting a guest Spotify playlist for the weekly newsletter, so excited to take a listen and share over the next few weeks!

The first guest playlist is actually someone I begged to make one for us—Kelly Austin has impeccable taste in music and spends more time on playlists than me (which is saying something.) Best part is, all her playlists are 🔥 and have great titles—this one’s called “Phintex” lol.

Take a listen, but I highly recommend listening in order. And throw her a follow on Twitter cause she’s hilarious too.

The News: By Ian Kar and Lodovico de Boni

PayPal sees a rise in ‘silver tech’ as older generations test digital payments:

PayPal’s fastest-growing user segment for the first time ever is individuals over 50—a group whom the company has now coined as ‘silver tech’ users. The arrival of this segment as a result of the rise of e-commerce during the pandemic has allowed for PayPal’s transaction volume to return to levels seen during typical operations. It is unclear at this time whether this user spike impacted both PayPal Checkout and Venmo. Still, a breakout into the over fifty market could spell a massive win for Venmo since the app has historically struggled to reach that audience. As a joyful sidenote for the time we’re in, we also see a significant spike in “payments of goodwill.” (Like & subscribe pls) 

Plaid Launches API Exchange To Accelerate Open Banking And Digital Transformation:

Plaid has announced the launch of Plaid Exchange (PX). The current target market for the platform is generally any bank looking to ramp up its API integration and a specific focus on small to mid range banks. Stemming from its ability to update data as soon as it's available, provide digital roadmaps for clients, and access to a Gateway API to enable Plaid as an integration layer for data aggregators or fintechs—the service looks to provide value to its users by improving account connectivity via secure tokenization and improvements to data load management/scheduling. Pricing for the service is still up in the air, but it's likely going to be determined on a bank-by-bank basis. This product launch is important - community bank CEOs wish to change two things about their institutions: 1) get more customers and 2) understand and harness their data. 

Ant Financial injects $73.5 million into Myanmar's Wave Money:

As a part of Ant Financials plans announced last November to raise $1 billion for a fund specialized in investing in fintech startups in India and East Asia, the firm has announced a new $73.5 million investment into Myanmar’s Wave Money. Wave Money has seen a reliable 14% increase to active users every month since launch back in October 2018. The wave isn’t stopping either, with Myanmar’s governments plans to boost financial inclusion from 48% to 60% by 2023—with mobile fintech looking to become a significant player during this expansion. Ant Financial has been looking to expand outside China, and Wave Money seems to be one of the first horses it’s wanting to bet on.

Brex Brings On $150M in new cash in case of an ‘extended recession’:

Brex, the startup firm built around providing lines of credit to its peers in the category, has just received $150M in a Series C extension from its group of existing investors—such as Lone Pine Capital and DST Global. Brex announced that the funding was not necessary for it to stay afloat through the recession, but instead intends to go on the offensive and develop a competitive edge for when the economy stabilizes. Concerns have been raised with regard to the firm’s cut backs on credit limits for clients as well as their total elimination of expenditures on travel and restaurants, but co-founder Henrique Dubugras remains unphased and notes that the firm has been consistently rolling back its credit limits since its founding. Part of the new cash injection is bookmarked for new hires, backing up the co-founder’s optimistic outlook.

Shopify Announces Some New Fintech Products:

Shopify’s been on a tear recently when it comes to fintech product rollouts (FYI—our FTT Q&A this month is with Shopify’s head of financial services Kaz Najatian, which will be going out next Tuesday.) This week, Shopify announced two fintech related products—an installment loan program for consumers and a business banking product for merchants. TechCrunch wrote that Shopify was partnering with companies to power those products, but it’s still unknown who the company’s partnering with. Regardless, it’s a big step toward adding more value for people on the Shopify platform by creating financial services experiences that improve the lives of merchants and customers alike. Shopify also has Shop Pay, a checkout button; Shopify Capital, a lending product to help merchants grow faster; and a retail POS system that was refreshed recently.

Report of the Week—COVID and its Effects on Credit Inquiries

I recently came across a special report from the CFPB studying the effects COVID has has had on credit inquiries across the US. The argument to study credit inquiries was interesting—the CFPB argues that delinquencies is actually a lagging indicator, because of how far into the credit cycle a customer has to be in order to actually be delinquent on their loans. It makes sense, and also makes sense that the top of the funnel—signing up for new products—can give good insights around consumer sentiment.

I want to focus on one aspect of the report—the effect COVID’s been having on the auto lending industry.

Of course, inquiries are down across the board. But the auto lending sector seems hurt the most—from week 2, inquires down 13%, where other sectors were in the single digits. By week 4, inquires were down 52%, siginifanctly lower than other areas like credit cards and mortgages. I wonder if that’s because of the shelter-in-place order’s that have been implemented across the US. People aren’t going anywhere, and travel has been hit the hardest from those orders. It seems like the auto lending market is also feeling an impact.

The geographical breakdown also backs up this theory. As you can see from the above chart, the biggest percentage change in auto loan inquiries comes from states that have been the hardest hit from COVID—particularly New York, New Jersey, California, Michigan, and Nevada.

Tweets of the Week

Great thread on installment loans with lots of data.

Jai with another great thread—this time on Shopify

Absolutely *loved* this thread. Even people who aren’t in tech know about Brex cause of their billboards. Brex’s marketing has always been extremely fascinating to me—and controversial for a lot in the fintech industry—and this breakdown is well worth your time.

𝚃𝚛𝚞𝚗𝚐 𝙿𝚑𝚊𝚗 @onetrunna
0/ ⚡️Brex’s Out-Of-Home (OOH) Playbook⚡️ @brexHQ Head of OOH Media (Kasper Koczab) and Director of Brand (Kira Klaas) told
Trends.co how the $2.6B fintech startup effectively uses billboards, transit shelters and other OOH assets. (A thread 👇)

Funding News Of The Week

Spruce, a proptech company focused on digitizing the paperwork around real estate transactions, raised $29 million in a Series B round earlier this week. The round was led by Alex Niehenke at Scale Venture Partners, with Zigg Capital and Bessemer participating.