Brex’s Break, Binance’s Burden, Brazil’s Bounty (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. 

When Banks Retreat, Private Credit Pounces

What happened: “Private credit firms are raising billions of dollars to grab a share of the $5.2 trillion market that includes US consumer debt, seizing on a growth opportunity while the industry’s traditional lenders are in disarray.” 

Why it matters: If loans can’t be packaged into bonds and sold, lending dries up. By assuming the role of traditional banks, private lenders are keeping direct lending going, though not out of the goodness of their hearts but because they see a potential for greater returns.

What’s next: Continued whispers that private credit firms can’t properly assess the diverse loan packages they’re buying, while those same firms continue to buy. (By Carmen Arroyo, Bloomberg)

Euro Fintech Consolidation Is Coming

What happened: U.K. fintech Monzo is finally profitable, and now come rumors that it’s interested in an acquisition or two. That and a handful of small to midsize purchases over the past year point to an increased level of potential M&A activity.

Why it matters: Rapid growth and sky-high valuations defined the past decade. Now with higher interest rates and a tougher business environment, the start-ups that might once have held out until unicorn status are more open to purchase and consolidation. In other words, reality has set in.

What’s next: Less ambition. Whereas five years ago funding might’ve been available to any broad, consumer-based fintech that wanted it, newer start-ups are trying to get profitable faster by focusing on a specific niche. (By Jonathan Keane, The Next Web)

Is Binance Too Big to Fail?

What happened: “U.S. Department of Justice officials are considering fraud charges against crypto exchange Binance, but are concerned about the cost to consumers, according to people familiar with the matter.”

Why it matters: It’s odd for the DOJ to be weighing the consequences when the SEC and CFTC have already sued Binance. Even odder given that the SEC’s lawsuit all but says Binance’s alleged activities were illegal, paving the way for criminal action by the DOJ.

What’s next: If the U.S. government are worried Binance’s U.S. customers won’t be sufficiently warned ahead of an indictment, this leak, and the previous lawsuits, should put those worries to rest. (By Reed Albergotti, Semafor)

SVB Failure Nearly Doubled Brex’s Business

What happened: “Startups and other tech companies fled Silicon Valley Bank during its final days, and many put their money in too-big-to-fail institutions… Some also opted to store at least some of their money at Brex, a payments company better known for issuing corporate credit cards. Brex now oversees close to $7 billion in customer money, up from $4 billion.”

Why it matters: Worry about FDIC insurance in the wake of bank collapses may be less necessary if the alternative isn’t traditional banks but clearinghouses like Brex, whose strategy of fanning out money into many separate accounts takes care of the $250,000 insured max.

What’s next: Possibly an increasing interest in startups becoming bank-like, rather than actual banks. (By Angel Au-Yeung, The Wall Street Journal)

Amazon Tries to Reverse Struggles In Its Ancestral Home

What happened: Amazon rolled out its first-ever credit card offering, two actually, in Brazil, a pivotal country where it hasn’t been able to replicate its retail advantage.

Why it matters: “The move from Amazon comes as the U.S. giant seeks to compete with Mercado Libre, dubbed the ‘Amazon of Latin America’. While the U.S. retailer boasts an undisputed market lead in America, it has encountered strong competition from its Buenos Aires-based rival south of the border. The Argentinian firm has grown a strong fintech muscle, too, which boasts over 45 million active customers in the region. While the card is a new addition for Amazon in Brazil, it’s not a new concept within the broader market.”

What’s next: Maybe the beginnings of buy-now, pay-later in the States? If it works in Brazil, it could come here sooner rather than later. (By David Feliba, Fintech Nexus)