Welcome to The Interchange, an overview of this week’s fintech news and trends. To receive this in your inbox, subscribe here.
We’ve all been following the recent Stripe vs. Plaid drama. Rather than rehash all of that here, I’ll point you to some of our recent articles on the subject and simply summarize: Both fintech startups have recently become (much) more competitive.
If things weren’t turbulent enough, another startup has very publicly established itself as a formidable competitor to Stripe: Finix.
Now, Finix does not come out of nowhere. The SaaS startup – which got its start in early 2020 by selling its payments technology to other companies – raised a $35 million Series B led by Sequoia. In an unusual twist, Sequoia just 1 month later walked away from the deal in which it would have written the self-proclaimed payment infrastructure company a check for $21 million. As TC’s Connie Loizos reported at the time, Finix told employees that shortly after issuing its check, Sequoia concluded that Finix was competing too directly with Stripe, the payment company that represented the one of Sequoia’s largest private holdings and which, in turn, counted Sequoia as one of its largest outside investors.
Fast forward to last week. Finix has announced that it is becoming a payments facilitator, in addition to allowing other companies to facilitate payments. The move puts it in direct competition with Stripe, which CEO and co-founder Richie Serna is. not hesitate to admit.
In an interview last week, Serna expanded on noting that Finix has indeed started building software that has given any software company a way to become its own payment facilitator.
“We were in the process of developing a technology that would require a three-year in-house build by dozens of engineers, with tens of millions of dollars of technical R&D and investment, and reducing that to a number of months in getting developer-friendly APIs. monetizing their payments,” he said. “It was our most important basic offer. What we’ve done now is become the payments facilitator ourselves, so that we can not only provide the payments, but also all the back office requirements and compliance certifications, so that our customers can be up and running in days, not months.
He says the move gives Finix the ability to work with companies and software platforms that have processing volume from $0 all the way up to companies with billions of dollars in processing volume.
“This enables these customers to get a better product experience and faster time to market, and allows us to support the non-technical aspects of deployment and monetization, and to obtain payments,” added Serna.
You see, historically companies had to reach a certain volume threshold before Finix could work with them. But now, according to Serna, they can start working with them in their first states.
“Clients can start working with us on day one, using the financial APIs, and when they’re ready to take on more of that ownership and responsibility for risk, underwriting, and compliance operations, they can get graduate and become their own payment facilitator,” he said, “since we still use the exact same APIs.”
Finix has also entered what the executive described as the “card-present” or in-person payment space. This means that it is able to provide software that allows many types of businesses to accept credit card payments.
“If you’re thinking about a restaurant software vendor, they’re going to need a different set of devices than the gym or food truck device vendor,” Serna said. “And so it’s something that we offer and bring to market in a unique way.”
So, in case you haven’t figured it out, Stripe had reason to be concerned because Finix is indeed in direct competition with it. So how are they different?
According to Serna, the answer lies in the fact that Finix has built “an open system and an open architecture that is modular and configurable”. Stripe, on the other hand, he said, “continues to double down on this vendor’s lockdown so they can continue to shut down their system and architecture.”
“We think about it very similarly to iOS,” Serna told TechCrunch. “We think of ourselves a lot more like Android… And I think we’re just going to continue to see those features amplified as we continue to develop our products and grow our businesses.”
With just over 150 employees, Finix now powers over 12,000 merchants in the United States with its APIs. It has raised approximately $100 million in funding from investors including American Express Ventures, Bain Capital Ventures, Homebrew, Inspired Capital, Lightspeed Venture Partners and Visa.
Meanwhile, in a recent Forbes article, Stripe co-founder John Collison told Alex Konrad, seemingly with a shrug, “We’re going to compete with a bunch of companies, and we’ll partner with a bunch. Everyone just needs to be an adult and behave themselves about it. In that same post, sources told Alex that Stripe saw gross revenue of around $12 billion in 2021, up 60% year-over-year. It also reportedly recorded net revenues of around $2.5 billion.
Speaking of Stripe, Ingrid Lunden reported on May 24 that the company launched its App Marketplace, a new offering where Stripe will provide access to both third-party apps and scripts created by app publishers, users, and Stripe itself, which integrate those apps with Stripe. This represents potentially its biggest leap yet away from payouts.
Swedish payment giant Klarna reportedly cut 10% of its workforce, or 700 jobs, last week. The move came just after the Wall Street Journal announced that the company would cut its valuation in order to raise new capital.
Starting Bolt One-Click Payment reportedly laid off up to 240 employees in marketing, sales and recruiting roles. Earlier reports had said 100 workers would be affected, but as details emerged it seemed to be more. In mid-February, founder Ryan Breslow made headlines after announcing on Twitter that Bolt was offering every employee the ability to borrow money from the company to exercise their stock options. Now, it’s unclear what happens to the people who were laid off and borrowed money from the company. The company told Bloomberg that the number of affected workers who took out loans is “in single digits.”
But not all fintechs lay off. Fidel API says he’s “growing rapidly” after his $65 million Series B announcement and recruits for more than 60 positions in its engineering, sales and customer experience teams. The fintech claims to have doubled in size in the last 6 months and intends to double again before the end of the year.
Peggy Mangot quit her role as an operating partner at PayPal Ventures to serve as the new head of fintech partnerships for JPMorgan Chase Commercial Banking. At PayPal Ventures, Mangot helped lead investments globally in fintech, commerce, infrastructure and crypto.
Large and small companies maintain their crypto-optimism despite the recent market correction in the developing tech space. According to Mastercard’s Vice President of New Product Development and Innovation, Harold Bossé, the mass adoption of blockchain technology and digital assets will happen sooner rather than later. Learn more here.
Financing and M&A
Seen on TechCrunch
Paddle acquires ProfitWell for $200 million to bring analytics and retention tools to its SaaS payment platform
Founder alleges YC-backed fintech startup ‘copy and paste’ his business
Revenue-Based Funding Platform Bloom Secures $377M Series A Led by Credo and Fortress
Viola Credit closes $700m fund to provide asset-based lending to fintech startups
Roofstock founder closes $90 million fund to support early-stage proptech startups
Zip lines up $43 million at a $1.2 billion valuation for its growing ‘supply concierge’
Nowports Streamlines LatAm Shipping to Deliver $1.1 Billion Valuation
Indian fintech Jar eyes $50m investment
It’s all for this week ! If you’re reading from the United States, I hope you enjoy the rest of your long weekend, and for everyone else, have a great day and week ahead. And to borrow from my brilliant friend and colleague, Natasha Mascarenhas, you can support me by forwarding this newsletter to a friend or follow me on twitter.