Welcome back to The Interchange! If you want this in your inbox, sign up here. We’re back after a short hiatus, with plenty of fintech news, including Robinhood’s latest addition, Plaid’s latest product, and a ChatGPT powered AI tool that aims to help you save money on bills.
When Robinhood announced on June 22 that it was acquiring credit card startup X1 for $95 million, it caused quite a stir in the fintech world.
Why would Robinhood want to buy a credit card startup? Did it get a good deal considering X1 only raised $62 million over its lifetime? Did the investors get a good deal or just a return on their investment? Why X1 in particular over the many other credit card startups out there?
Let’s talk about that last point first.
Speaking to X1 back in December at the time of its latest fundraiser, Founder and CEO Deepak Rao told us that the company was launching a new trading platform that would allow its cardholders to purchase shares by using earned reward points. In fact, he listed Robinhood as a company he hoped to compete with, telling businessroundups.org, “Using credit card points to buy stocks instead of cash or their savings, we think this is a safe way for many consumers to get started. invest. There is no real downside as their investment is technically free.”
Could that be what drew Robinhood to X1?
We talked about that opportunity on this week’s Equity podcast, with co-host Alex Wilhelm noting that you’d have to earn a lot of rewards before you can buy a lot of stock. He also pointed out that Robinhood might have some money to burn, as well as the company stating it was looking for something new as a way to “broaden [its] product offering” and “deepening” the relationship with existing customers.
If you’ve been following Robinhood’s performance over the past year, the desire to diversify its business probably comes as no surprise. We noted that not only has Robinhood’s crypto trading slowed, but the company has also seen significant user churn. So an X1 acquisition brings Robinhood into the credit card space And an additional income stream.
Still, one observer noted that while X1’s premise of offering credit based on income rather than credit score was innovative, it hasn’t really delivered on anything since its inception in 2020 — except the new stock function – that stands out in the market.
Fintech analyst Alex Johnson shared a similar sentiment, tweet: “The alignment of the brand is strong. Both companies have a certain undeserved machismo about them. Other than that, though, I don’t get this for Robinhood. X1 doesn’t have many customers (was it ever fully launched?) and none of its features are revolutionary.”
It’s true that X1 may not have had many customers, especially when compared to a giant like Robinhood, but the company claimed to be on a growth trajectory, with Rao telling us last December that the company saw $3 million a month in revenue last October, giving it annual sales of $36 million.
However, not everyone is behind the deal. Sheel Mohnot of Better Tomorrow Ventures tweeted that while X1 may not have many customers, Robinhood does. He added: “[T]I think this is a good asset, cheaper for cross-selling than for new customers.”
— Mary Ann and Christine
Fintech startup Plaid started out as a company that connects consumer bank accounts to financial applications, but has since gradually expanded its offerings to provide more of a full-stack onboarding experience. And on June 22, Plaid announced even more new product releases that took the company in a whole new direction while helping to diversify its revenue streams. At the top is Beacon, which it describes as a “collaborative anti-fraud network that enables financial institutions and fintech companies to share critical fraud information via API in Plaid.” More here.
Navan (formerly TripActions) offers both a corporate card and a subscription to its software. In a twist, the company announced on June 12 the launch of a new product called Navan Connect, which it describes as a proprietary card-link technology that gives businesses a way to offer automated expense management and reconciliation without having to contact their business card provider. modify. . For the initial launch, Navan is partnering with Mastercard and Visa, with plans to announce additional network links in the near future. More here.
Start up spend management Brex was named to Time’s 100 Most Influential Companies list. As it made the recognition, Time wrote: “Co-CEO Henrique Dubugras says you should think of Brex as a ‘spending platform’. The company launched its business charge card for startups five years ago and has since grown into a fintech conqueror. Valued at $12.3 billion by 2022, it has made 10 acquisitions and after the collapse of Silicon Valley Bank, it received $2 billion in deposits and opened 4,000 new accounts. Last year, Brex launched Empower, software that links Brex cards and accounts to a custom expense management service. The company serves startups and helps new businesses get off the ground, as well as corporate clients including DoorDash, Indeed, Coinbase, SeatGeek and Lemonade.”
Brubank, an Argentina-based digital bank founded by former Citibank executive Juan Bruchou, shared with businessroundups.org that it has gained nearly 3 million customers since launching in 2019, making Brubank “the largest Spanish-language digital bank in Latin America, with a 50 % activity rate,” the company said. It has also maintained profitability over the past 12 months.
At least two companies are poised for a credit card launch this summer: Snowfall, one of three startups that pitched at TC Early Stage Boston in April, will launch a credit card in July that is tailored to users in the US and India to make it easier for them to transfer cash across borders. The company said users in the US are eligible for limits of up to $30,000, and the card reduces the need to have separate bank accounts in the US and India. Moreover, the process is instant and free. In the meantime, Step, the financial platform tailored to teens, their families and young adults, opened a waiting list for its newest card, Step Black Card. Cardholders are eligible for benefits including earning 5% on savings of up to $1 million and up to 8x the points on purchases. Read businessroundups.org coverage of Step here and here.
Financing and Mergers and Acquisitions
Seen on businessroundups.org
Volt, an open banking fintech for payments and more, raises $60M at a $350M valuation
Heard Technologies is raising another $15 million to develop accounting tools for therapists
Nasdaq acquires financial services software company Adenza from Thoma Bravo for $10.5 billion
With Equifax in sight, TransUnion invests $24 million in income verification platform Truework
Finfra allows Indonesian companies to add embedded finance to their platform
Join us at businessroundups.org Disrupt 2023 in San Francisco this September as we explore the impact of fintech on our world today. New this year, we will be dedicating a full day to all things fintech with some of today’s leading fintech figures. Save up to $600 when you buy your pass now through August 11, and save 15% on top of that with promo code INTERCHANGE. Learn more.