The first fintech just applied to be a bank - but will it be the last? (TWIF 12/19)

Hello Fintech Friends,

Welcome to the 335 new readers who’ve joined us since last week. You’re joining 228,000+ other subscribers. Today's newsletter is brought to you by our friends at Persona, helping fintechs prepare to fight fraud.

PayPal is taking advantage of the regulatory moment by applying to become a bank with the FDIC and the Utah Department of Financial Institutions.

It would focus its bank on small-business lending (the company has provided more than $30 billion in loans since 2013).

Will more fintechs follow in PayPal's footsteps? For a company with a scaled compliance, legal, and customer service department, there is some obvious appeal – collecting net interest margin, using deposits to finance your own loans, playing the role of both sponsor and program manager...

But it is hard not to imagine that this will come with some regulatory inertia as well.

We just had PayPal CEO Alex Chriss on the podcast talking about their future strategy, including AI, stablecoins, and beyond. Our most-viewed episode of the year!

Speaking of stablecoin strategy... one day left to grab your discounted ticket to Stablecon EMEA!

Editor's Note: I asked this morning, "Will PayPal be the last fintech to apply for a bank charter?"

And as of 9:15am ET, we have our answer: No -

The Federal Reserve also published some really interesting research this week on the Silicon Valley Bank crisis and its impact on stablecoins.

As regulators determine the shape of market structure to come from the GENIUS Act, one of the big questions revolves around the seniority of stablecoin claims: are they as secure as bank deposits? What happens if a bank runs into solvency issues – should the tokenized dollars be more secure than conventional deposits? How do banks prevent quick capital flight in a stress event, when digital dollars are accessible 24/7 and transactions settle instantly?

SVB was arguably helped by the crisis primarily unfolding over the course of a weekend, which prevented panicked stakeholders from acting instantly. But Circle held much of their treasury with SVB, which caused a temporary depeg before the issuer promised to fulfill all redemptions:

Please enjoy another week of fintech and banking news below.

Have feedback for us? Let us know. Find me at @nikmilanovic, @twifintech, and @ndm

SPONSORED

🚦Is your fintech prepared for the next fraud attack?

Fraud is now an industry with well-structured criminal organizations and FaaS (fraud as a service) vendors.

That’s why leading fintechs are rethinking their risk signals: the data points that help them distinguish fraudsters from legitimate users. 

Persona’s new guide to risk signals covers the fundamentals of a signals-based fraud strategy, and then some. Learn how to use risk signals to detect deepfakes, add context to fraud investigations, and improve automation during onboarding or account recovery. Get the guide today.

Learn more

Want to sponsor a newsletter? See our sponsorship information here.

Visa announced that it will provide stablecoin settlement capabilities for U.S. banks using Circle’s USDC on the Solana blockchain. Lead and Cross River signed up as early bank pilot customers. Visa also shared that, as of November 30th, its annualized stablecoin settlement volume had topped $3.5 billion. Visa also launched a new advisory practice dedicated to helping clients navigate the stablecoin ecosystem.

JPMorgan launched a tokenized money market fund on the Ethereum blockchain as its first foray into on-chain investment assets. The bank also arranged a U.S. commercial paper issuance for Galaxy Holdings on the Solana network. "The only cash equivalent options available in crypto are stablecoins, so there’s a need for a bank deposit product for payments on public chains."

Blackstone is holding early-stage discussions with Revolut regarding a potential wealth management partnership.

The FDIC approved a proposal to establish application procedures for the GENIUS Act and approved the deposit insurance application for Erebor Bank, the first stablecoin-native bank launched this year. The OCC also announced its conditional approval of five national trust bank charter applications for Ripple, BitGo, National Association, Fidelity, and Paxos.

The DTCC picked the Canton Network to facilitate the tokenization of U.S. Treasury securities.

Nationwide received a £4 million fine for maintaining inadequate financial crime controls.

SoFi launched its own stablecoin, SoFi USD, to integrate digital assets further into its expanding on-platform financial ecosystem.

Coinbase launched... uh, absolutely everything:

Coast* launched private equity-focused expense management for PE platforms in home services and the trades.

Stable Sea* released an Enterprise API, a solution enabling businesses to embed stablecoin capabilities directly into their existing treasury and payment systems.

Brale* introduced "Instant Treasury," with Coinflow*, a tool allowing institutions to manage and mint stablecoins backed by real-time Treasury yields.

Cross River and Highnote launched a new stablecoin settlement capability as part of a Visa pilot program to streamline payment processing.

Bunq introduced cryptocurrency round-ups and an upgraded AI assistant to enhance the digital banking experience for its users.

Noah and Fincom launched virtual accounts to facilitate seamless transitions between fiat currency and stablecoins.

Stripe launched new technology that enables businesses to process payments and sell products directly through AI agents.

Klarna provided merchants with specialized tools to ensure their products are discoverable and purchasable by AI-driven search agents.

Google launched a UPI-linked payment card in India:

SPONSORED

🚦Is your fintech prepared for the next fraud attack?

Fraud is now an industry with well-structured criminal organizations and FaaS (fraud as a service) vendors.

That’s why leading fintechs are rethinking their risk signals: the data points that help them distinguish fraudsters from legitimate users. 

Persona’s new guide to risk signals covers the fundamentals of a signals-based fraud strategy, and then some. Learn how to use risk signals to detect deepfakes, add context to fraud investigations, and improve automation during onboarding or account recovery. Get the guide today.

Learn more

Want to sponsor a newsletter? See our sponsorship information here.

New jobs this week from Abode, which lets you lower your property taxes the easy way:

Securitize teased that they will be launching real tokenized equities in Q1, which can be bought and sold onchain, in real time, just like you buy and sell crypto. (Until now, natively tokenized stocks could exist onchain, but had to trade offchain.)

Crossmint is helping tokenize a nation: The Marshall Islands is launching blockchain-based UBI, giving citizens dollar-denominated tokens on their phones. More emerging Asian economies are pivoting toward stablecoins to facilitate cheaper cross-border payments and mitigate local currency volatility.

Binance also agreed to advise the Pakistani government on a $2 billion asset tokenization initiative as the nation prepared for a formal stablecoin launch.

Intuit and Circle partnered to integrate USDC stablecoins into financial workflows to accelerate global money movement for businesses.

Cleverbridge and Adyen collaborated to provide global commerce solutions that optimize subscription billing and payment processing.

Mastercard and LoanPro announced a strategic partnership to modernize the lending industry through enhanced credit card issuance and management technology.

Sardine and Helix teamed up to deliver real-time fraud monitoring and compliance tools specifically designed for sponsor banks.

Paxos selected Mesh* to enable secure and seamless cryptocurrency deposits for its platform users.

Standard Chartered and Coinbase expanded their existing partnership to provide enhanced digital asset services to institutional clients.

Mesa shuttered its credit card program that rewarded homeowners for making mortgage payments.

BaFin sanctioned German digital bank N26 and imposed stricter oversight due to lingering deficiencies in its anti-money laundering controls.

National Bank of Canada sued the co-founders of Flinks for allegedly violating non-compete agreements following their departures from the fintech firm.