May 1: Q&A of the Week with Arcus — Highlights from FTPartners' Steve McLaughlin — Things I'm Reading
Hey everyone, Ian here.
Finally, it’s May. April was such a weird month...I tweeted this, but it was like the worst 420 ever. So glad it’s over; hopefully May’s a little bit better. I’m a really extroverted person, so staying cooped up at my house is finally getting to me.
One weird side effect of this quarantine is that, since I have nothing to do, I just end up working nonstop. It’s been productive in some regards, but really not productive in others.
Over the past week or so I realized that burnout is definitely possible even when you’re working at home. I mean I can’t *not* work, but I’m going to try to spend the weekend reading, sleeping, probably watching “The Last Dance,” and generally not think too much about work. Might play around with Figma too; I also recently bought NBA 2K20 and Warzone on PS4, if you wanna play add me @Iank092345).
I’m a bit stuck on strategy stuff for Fintech Today, and usually the best solution for me is to turn my brain off and take a break. Just wanted to remind you that if you’re feeling stuck on something, a break might help you too.
Some Programming Notes: We’re raising the prices for FTT+ on June 1. If you sign up over the next month, you’ll get locked in to the $25/month rate for the first year. You also get a 15% discount if you sign up for the annual membership.
Playlist of the Week
Cokie Hasiotis (a homie of mine and a new member of FTT helping out with partnerships) and I were Facetiming about...something I can’t remember about when I saw on Twitter that there were rumors Drake was dropping an album last night. Immediately went speechless which, if you know me, is pretty rare.
Sidenote: (If you’re interested in partnerships with Fintech Today, email Cokie at firstname.lastname@example.org)
Drake blessed us with “Dark Lane Demo Tapes” last night. Lotta great tracks on it—my personal favorites include “War,” “Demons,” “D4L” (feature Future and Young Thug...wow), “From Florida With Love,” and “Time Flies.” “Pain 1993,” featuring Playboi Carti is good but Playboi Carti’s verse is...not great. Drake’s flow on a lot of these tracks are really tight and actually really impressive, particularly “War.”
Best part? This isn’t the only Drake album—the 6 God announced his 6th album this summer (maybe in June?)
Anyway, enjoy this week’s playlist. I added a bunch of other loose Drake singles from the past few years to switch it up. And before y’all start, this is one of the first Drake-only playlists I’ve made (I checked.)
FTT+ This Week
Hey, Julie here. On Sunday I'll be giving a quick PPP update, but the focus is going to be credit card marketing. A bunch of the major credit card companies reported earnings over the past two weeks, and their earnings statements and investor calls shed a lot of light onto what's going to be happening to your mailbox spam and ads on the internet. Specifically, I''m looking at how this might impact Credit Karma, both for better and worse. See you Sunday!
Q&A of the Week—Arcus CEO Edrizio De La Cruz
I’ve written a bit about Arcus (disclaimer: I’m an advisor) and the Latin America fintech market in the past, and it’s because I think there’s a ton of potential there. Existing financial services and institutions are eons behind, there’s a strong demand for digitally forward finance products, and much of the market has a high internet and smartphone penetration rate: all ingredients that add up for a strong fintech ecosystem.
Another interesting trend is that US companies are looking to expand into the market too: Galileo, the infrastructure provider now owned by SoFi, announced an expansion into Mexico and a partnership with Klar, a Mexican neobank.
Companies like Arcus have not only been there for a few years already, but have a great amount of traction too. I’ve been looking for an excuse to write about Arcus too, so send some questions over to Edrizio about Arcus and the Latin American market and what makes it unique.
For those who don’t know, can you explain Arcus a bit?
We’re building the first BaaS for Latam. We help any business launch a fintech business in LatAm. We have money transmitter licenses, so we’re taking a vertically integrated approach.
What’s the interest and opportunity for the Latin American market?
LatAm is the fastest growing fintech market in the world. The region has a population of 650M, and according to the world bank, one third of that population is expected to go from underbanked to banked by 2030. That's 200M new potential fintech consumers.
You work with large retailers (Walmart, 7-Eleven), large banks (BBVA, Santander) and major fintech startups (Rappi, Cuenca, Albo). Why’s the value of Arcus here for big companies and fintech startups expanding to Latin America?
The high demand in LatAm has spurred a tidal wave of fintech solutions. Unlike the US, LatAm does not have modern API solutions for basic financial products like bill pay, money movement, card issuing. In addition, each country has its own set of providers. There is no single pan regional platform. This puts us in a favorable market position to become the default platform to launch fintech products, by developing API services in all these countries and serving as a single platform for companies. The vision is to help out clients integrate into a single partner and expand into a number of different countries.
Arcus is fully regulated in Mexico. Can you go through some of the differences between regulation in Mexico vs the US, and some details on the process of getting regulated in Mexico
It’s quite similar in some aspects: In both the US & LatAm, an MTL [Money Transmitter License] allows you to touch and move consumer funds from point A to point B. A bank charter is required to hold deposits for those consumer funds. Both regions require AML/KYC policies and certain reserves requirements to assure solvency. In both regions this is a multi year, multi-million dollar effort. However, unlike the US, some countries in Latam have passed the fintech law, which enables tech companies to have MTL and bank-capabilities, with lower constraints and requirements. Most of our clients don't want to go through this process, so they much rather rely on us.
FTT+ Q&A: Steve McLaughlin, FTPartners
On Tuesday, we published our hour long interview with Steve McLaughlin, founder and CEO of FTPartners. It was an absolute blast—we had a wide-ranging conversation about his experience building FTPartners and the fintech ecosystem as a whole. We also had a virtual event with the head of product from Better.com and the cofounders of Alloy and Rho Banking, which went great. We’ll be publishing select highlights from those talks over the next few weeks.
FTT Convos—Q&A’s and Virtual Events—are available in full for FTT+ members. We’re raising rates in June, so sign up now to get locked in at $25/month for the next year.
We whipped up some highlights of our interview for free subscribers. Watch below!
Things We’re Reading
Some of my VC friends posted some really great articles this week. Here’s what I’ve been reading:
Really enjoyed this piece by Lightspeed’s Natalie Luu on her thoughts on the B2B fintech space. She broke it down into 3 areas: Payments Infrastructure and Embedded Financial Services, Better Financial Data Platforms for KYC and AML, and Automating Financial Operations.
The KYC and AML space is one that particularly interests me—I just spoke to Alloy’s Tommy Nichols about it yesterday. There are so many issues that seem archaic and antiquated that need to be addressed, like how companies handle non-US citizens through onboarding. I also wonder how the industry shapes out over time. Companies that bring a modern approach to operations around KYC and AML also have an interesting opportunity of becoming the industry standard—if there are clear advantages, then the products are actually appealing to fintech startups and institutions alike.
My good friend Allen Miller at Oak FT penned a great piece on hybrid business models (something that I had the privilege of reading beforehand.) I’m a big believer in having multiple streams of revenue, and turning things like payments into a revenue driver for companies like Shopify (note: both pieces mentioned Shopify...so hot right now damn.) Allen also mentions Stripe, which seems to be an ideal blend between SaaS and services. The transparent business model for payments was a great hook for Stripe in the early days, and after they established that, Stripe was able to stitch on different value-add services, like Radar for fraud and chargeback protection, to add more revenue while adding value for clients too.
Tweets of the Week
Great thread by Jon Coffey on the business models for companies like Stash vs roboadvisors like Betterment (definitely should be following him on Twitter if you don’t btw.)
Lots of earnings reports coming out right now. Mengxi and Jai have been highlighting some interesting details on Twitter
Speaking of investment trends, seems like Robinhood’s still crushing it.
Lot of talk about this Bill Gurley thread, particularly the bit about programmable payments. It’s worth a read. I have a lot of thoughts on why this hasn’t happened in the US yet...it’s not because of a lack of trying, but I think the blame lies with institutions and a lack of government intervention focused on leveling the playing field.
I’m fascinated by how companies have been shipping product during COVID—Jeff Morris highlighted some points by Silicon Valley’s newest darling, Tobi Lutke.
A great, concise, overview of some key concepts in business writing by David Perell (who’s a must follow if you’re looking to improve your writing skills.)