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Apple to Amex? SoFi’s New Flex? Billions for Brex? (Future of Finance | Week in Review)

A weekly five-point roundup of critical events in fintech, the future of finance and the next wave of banking industry transformation.
future of finance

A weekly five-point roundup of critical events in fintech, the future of finance and the next wave of banking industry transformation. 

A Flood of Bank Mergers Is Coming. No One Knows When.

What happened: America has more banks than any other country, roughly 4,000 at last count. Regulators and even some of those banks themselves would probably prefer there to be fewer, especially after the trio of bank failures earlier this spring. But high interest rates, paper losses and economic uncertainty are currently holding off what is assumed to be a flood of acquisitions and mergers. 

Why it matters: Bank mergers have been steadily falling since the early ‘90s, which is part of the explanation for our current, persistently-high tally. That means there are a number of large banks that aren’t quite big enough to afford the huge regulatory and IT cost that the biggest can easily cover. That’s especially bad news given that more regulation, and more expense, is likely on the way.

What’s next: The deluge, of course. It’s just timing it that matters. (By Justin Baer and Gina Herb, The Wall Street Journal)

The Only Rapidly Growing FinTech In the World Is In Brazil

What happened: Nearly half of all Brazilian adults use a product from Nubank, a company that didn’t even exist as of a decade ago. The company now has nearly 80 million customers in South and Central America and a $40 billion market cap, all with only 8,000 employees

Why it matters: The biggest fintech look-alike stateside, Chime, has one quarter of Nubank’s customer base and is shrinking, not growing. The lesson seems to be that fintech penetration in emerging markets is faster and deeper because, as Nubank’s CEO says, “the consumer pain you’re addressing is much, much bigger.”

What’s next: The question is whether Nubank can expand as quickly and successfully in other markets — and will a few U.S. and Europe-based competitors steal its strategy before it gets there. (By Jeff Kauflin, Forbes)

Brex Does About Face On Serving Start-Ups

What happened: Brex started its life as a credit card company for start-ups but last year pivoted away from serving SMBs or non-funded start-ups. Now it seems the company has pivoted back again (to be sure, the company claims it didn’t pivot the first time) after it gained a ton of new customers and deposits following the implosion of Silicon Valley Bank.

Why it matters: Brex opened nearly 4,000 accounts worth $2 billion in just one week after SVB went bust. As long as there is funding for start-ups, and the vague possibility that those founders will be the next generation’s tech stars, there will be banking and financial service firms practically falling all over themselves to gain their business.

What’s next: More hires of more people like Justin Mok, who went from SVB to a16z and now to Brex to be its new head of start-ups. Anyone with deep roots in Silicon Valley has a chance to name their price. (By Mary Ann Azevedo, TechCrunch)

SoFi, Once Proud It Wasn’t a Bank, Getting More Bank Like By the Minute

What happened: Almost everything SoFi said it was when it went public in 2021 the company is now, depending on your view, working to undermine or overcome. The pro-consumer app that told customers “don’t bank” is now, essentially, a bank. It also took a real risk by suing the Biden administration over the pause in student-loan payments, a moratorium that could have represented an extinction-level event for the company.

Why it matters: “But what will becoming a bank mean for SoFi’s status as a fintech that’s billed itself as pro-consumer? The company is suffering from something of an identity crisis, even as shares in the former anti-bank are up more than 80% this year, according to Todd Baker, a senior fellow at Columbia University’s Richard Paul Richman Center for Business, Law and Public Policy. Existing as neither ‘fish nor fowl,’ as Baker sees it, means there are few comparable firms in the market to guide traders and investors.”

What’s next: Fish or fowl might not matter if SoFi’s stock keeps doing what it’s done the past year. Going back on every promise it ever made has given the company a level of flexibility and leverage other fintechs would probably love to have. Maybe more might try to do the same. (By Paige Smith, Bloomberg)

Can American Express Succeed Where Goldman Sachs Failed?

What happened: Goldman Sachs reportedly lost $1 billion in its experiment to service Apple’s new credit card. Now Goldman is looking to offload and American Express may be the most promising suitor.

Why it matters: Amex and Apple are ideologically linked in some important ways, most notably both company’s willingness to ignore the largest portion of a market in favor of higher-end, experience-oriented customers. Should Amex succeed it may gain an important foothold amongst a target audience its talked about often on recent conference calls: Millennials.

What’s next: Possibly more scrutiny on credit card providers: if even Goldman Sachs couldn’t make money on Apple Card because it refused to charge fees, maybe others that do will get a second look by regulators or consumers. (By Pymnts)

Of course, I couldn’t envision the extent to which AI would take off when I initially urged you to buy Nvidia.