Varo Money Gets a Charter—Affirm Looks To Go Public
And Monzo's business is facing COVID-related concerns
Hi y’all, Cokie here.
Since I started writing the Friday issue of the newsletter, you’ve noticed a lot of complaining. Well, get comfortable. By popular demand, this week’s complaint is about a man who lives in my building and causes me near rage blackouts.
My building is equipped with a lounge that functions mainly as a co-working space. A gentleman finds himself down there everyday, with what I can only assume is the full contents of his apartment. I have named him Noah in my head. And Noah is a jackass. I write you today from that space where Noah has done the following things:
Every time I’m on a video call, he gets on a phone call himself and paces around me.
A full exercise routine, complete with foam rolling (he has two foam rollers that he leaves down here).
Helped his three small children and their two nannies to build a fort and scream, while I was very obviously on a video call. Then tried to speak to me.
Men with no self-awareness are the most egregious societal cancer.
In that vein, I have decided to give out a monthly award to people with self-awareness, called the Not A Noah award. This month’s goes to Nik Milanović for his article on building products that improve the lives of inmates. Highly suggest you go read it. Nik is very much Not A Noah.
Ian wrote part one of an essay about Shopify this week that I highly recommend. Shopify is likely best positioned to take on the non-financial brands attempts at embedding financial services in their offering (think Uber Money). Non-financial brands present the biggest opportunity for Banking-as-a-Service players and it is my opinion that many customers that are currently underserved will move from Chase Bank to, say, Walmart or Kohls, given that these brands add much more value to their daily lives.
I would be remiss if we simply sauntered past the opportunity to comment on those poor souls who made the excellent decision to attend a concert by The Chainsmokers in the Hamptons. The Chainsmokers are now under investigation for throwing it in the first place. David Solomon, DJ CEO of Goldman Sachs, opened for the artists. Wonder if this is top of funnel for their fund?
This week’s banger brought to you by 1997:
The news - By Cokie Hasiotis & Lodovico de Boni
Beyonce released her highly anticipated visual album “Black is King.” End of news. Nothing else is important.
Projections coming out of McKinsey show that by the year 2030 women will possess approximately $30 trillion worth of assets—a $20 trillion rise from the figures last reported in 2016. Analysts remain stumped as to exactly how much of that $30 trillion will be coming exclusively from Beyoncé, but general consensus appears to be “a lot.” The main reason behind this wealth transfer stems from demographic changes as the male baby boomers continue to age, but some societal shifts, such as more women taking an active role in their finances and entering the workforce, are also clear contributing factors. One notable statistic on these shifts is that since 2015 there has been a 30% rise seen in the number of married women who elect to take charge of their own investments. I’ll let you Ne-Yo tell you:
Varo Money became the first US consumer fintech firm to be granted a national bank charter, enabling the challenger to offer a full suite of FDIC-insured services. Varo previously indicated that getting a bank charter cost them $100m. The benefits are clear for Varo. For most neobanks, the cost of servicing a customer is around $100, usually because of kickback you need to pay to your partner bank. A neobank like Varo, built on uncomplicated, modular, infrastructure can lower the cost to serve from the rumored $400 per customer for incumbents to $50. Furthermore, fintechs often have fraught relationships with their bank of record, from dealing with legacy tech to asking permission to add new features, and many fintechs are continually dissatisfied with their bank partners. Varo has made a unique choice to relentlessly chase a bank charter, but pay attention, because they just gained a huge advantage.
Affirm is laying the groundwork for an IPO with Goldman Sachs that could value the company at as much as $10B. Just last April, Affirm was valued at $2.9B, later in 2019, it was valued at $5B. Point-of-sale lending has been a smash hit for Affirm and Klarna, but mostly used for non-essential purchases (i.e., my mascara, which i’m pretty sure i’ve now mentioned in every newsletter so i’ll plug). I’d be interested to see if this product can successfully move into the essentials space: groceries, over the counter medication, medical bills, etc.
UK neobank Monzo released their annual report, which shows a £113.8 million loss for the year. The continued fallout from the Covid-19 pandemic casts “significant doubt” on Monzo’s ability to continue running in this climate. The radical honesty is not unexpected from the bank, as they are well known for transparency. UK challenger banks don’t have interchange as a revenue source in the same way we do here, so banks are constantly fighting for innovative revenue streams (i.e., charging for better versions of their free product, a myriad of integrations, markups on FX, etc). With nobody traveling and UK customers unwilling to part ways with their cash on a banking product, Monzo and others are struggling to stay afloat. I’ll be wearing my significant collection of Monzo swag to bed for the next few weeks in solidarity.
As usual, Wells Fargo needs to be stopped. This time, the bank has placed a number of customers in so-called forbearance programs that were not, at any time, requested by said customers. Unfortunately for customers, even if they are paying their mortgages or loans, their credit reports will not tell the same story due to Wells Fargo’s unsavory actions. This can have negative consequences for future borrowing or refinancing down the line, as well, given that future lenders will see this as a sign of unstable employment. Senators Warren and Schatz of the Senate Banking Committee wrote a letter to Wells Fargo’s CEO, which asks questions about these practices and candidly states that the bank “appears to be incapable of self-governance.” Yikes. Defund Wells Fargo.
Challenger bank Point announced that it will launch at the end of the month following a $10.5m Series A led by Valar Ventures. Point’s consumer banking experience comes with a debit card… that, get this, earns POINTS! No foreign transaction fees or international transaction fees, it feels quite a bit like a credit card, but without the credit check. Users earn 2x on groceries and dining and 5x on subscriptions. Glad I pay for my entire family to enjoy Hulu, Netflix, and Spotify (don’t worry, Ian pays for my HBO Max). On top of that, Point Card users can also get things like trip insurance, rental insurance, and other benefits. Targeting affluent Gen Zs, Point has a bright future ahead.
ComplyAdvantage raised $50M in a growth round of funding for an AI platform and database to detect and stop financial crime. As it stands, roughly $2 trillion dollars is laundered via digital banking every year with only 1-3% of that sum ever being recuperated by the appropriate authorities. ComplyAdvantage has developed an AI platform designed to compile and track individuals involved in financial crimes via its central database of over 10 million known criminals. On the horizon for the firm is the addition of new verticals such as Insurance, where the firm hopes to utilize its existing software to detect fraud in events such as insurance claims being made immediately following an individual’s defaulting on a loan.
Tweets of the Week
elise graham kennedy 👩🏼💻 @elisegrahamWhat niche topic could you easily write a 65 page thesis on right now?
Mengxi Lu @mengxiluThe first rated securitization from Affirm, which has been in the pipeline since 2016, is about to hit the market. https://t.co/XqZZosOgx0 https://t.co/4dt5F0BLEH