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Subprime Specter, Bitcoin ETF, Adyen’s Haircut (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.

Banks Are Abandoning the Car Market. Here Comes Fintech.

What happened: Car prices have never been higher. More importantly, because of interest rate hikes, monthly car payments have never been higher, either. Banks are getting nervous about credit quality but one fintech, Upgrade, has announced its plans to enter the market. 

Why it matters: Depending on who you talk to, this is either the peak of what consumers can bear when it comes to car payments, or an opportunity for lenders comfortable with subprime. The market is screaming that the limit has been reached, so any fintech that wades into these waters could be asking to eat an unprecedented volume of delinquencies.

What’s next: A lot more interest in the term “negative equity”. (By Paige Smith, Bloomberg)

SEC Loses, Bitcoin Wins, ETF Next

What happened: Grayscale won its court battle with the SEC after the agency denied approval to convert its trust to an ETF.

Why it matters: “A spot bitcoin ETF would be traded through a traditional stock exchange, although the bitcoin would be held by a brokerage, and would allow investors to gain exposure to the world’s biggest cryptocurrency without having to own the coin themselves. Many crypto bulls believe that approval of a spot bitcoin ETF will lead to more mainstream institutional adoption.”

What’s next: A short rally in coins and the stocks that serve them, followed by a wait to see if the sugar high persists. (By MacKenzie Segalos, CNBC)

The Hype Era of Fintech and Payments Is Over

What happened: Adyen is the latest fintech or payments start-up to get a brutal re-pricing when it recently got its stock price cut in half.

Why it matters: Adyen joins a half dozen other companies, some private and some public, that have had their valuations decimated recently. “These firms are hardly business failures, and they’ve developed a lot of genuinely clever tech to improve choice and simplify digital payments. But revenue expectations and valuations have been too optimistic in a sector that’s still ultimately a volume play.”

What’s next: The real possibility that valuations keep going down. (By Lionel Laurent, Bloomberg)

The Stuffiest Financial Powerhouse Led the Bitcoin Revolution

What happened: Fidelity’s initial interest in Bitcoin (it encouraged employees to mine it nearly a decade ago) set up a culture of experimentation that eventually bled it of talent when the traditional finance company started to get cold feet about digital assets.

Why it matters: It’s one of finance’s ultimate “Sliding Doors” moments. And depending on who’s talking, it either means a huge loss or a lucky break. “Some former employees said Fidelity could have been more aggressive with its crypto efforts. They were frustrated about losing custody-business clients to Coinbase, which was founded in 2012, just two years before Fidelity delved into bitcoin. Others say Fidelity’s traditional money-management business prevented it from diving into a high-risk venture without regulatory clarity.”

What’s next: Everything will come full circle when Fidelity is one of a number of institutions to get its Bitcoin ETF approved. (By Vicky Ge Huang, The Wall Street Journal)

Europe’s Neo Banks Wouldn’t Exist If They Had to Start Today

What happened: Angry regulators. Rising interest rates. Dried up funding. Shares that used to attract employees that now do the opposite. The European neo banks are in trouble.

Why it matters: In order to survive, all the neo banks that started off as differentiated from traditional banks will probably have to start offering all of the same services. 

What’s next: Growth metrics have been tossed in favor of grown-up metrics. (By Olaf Storbeck, The Financial Times)

Another Black Swan event is taking place right now. And it’s likely to have a similar effect on uranium prices.