INCLUSION

Black-owned fintech makes history 

SoLo Funds, a mobile P2P lending exchange that provides access to loans of up to $1,000, became the only black-owned fintech startup to acquire a B Corp certification in the U.S. and Canada. 

History in the making 👏🏾

Inspired by their shared experience seeing family and friends struggle to make ends meet, SoLo’s founders sought to provide alternatives for cash-strapped Americans who have difficulty securing emergency funding.

As part of their B Corp evaluation, led by the nonprofit B Lab, SoLo scored 10/10 for their mission-locked impact business model. (Not easy to achieve)!

SoLo Funds also just launched SoLo Causes, which further extends SoLo’s impact by committing $$ to organizations making change for its community. 

What makes this unique

→ The $10.7 billion digital lending market is set to grow to $20.5 billion by 2026 🚀 SoLo Funds is creating a space for that market to grow in a sustainable way. 

→ While typical payday lenders have high interest and short terms loans, Solo Funds is a community-based marketplace where borrowers set their own terms and lenders earn extra income.

→ With only 4,111 companies certified by B Lab, and only 13 Black-owned companies in the U.S. & Canada, SoLo Funds joins a small group of businesses committed to ushering in innovations for a better world. 

Check out this list of 10 Black-owned fintech companies that are shaking up the industry.                                                                                     

What the founder told me

SoLo Funds co-founder Rodney Williams and I caught up over the phone earlier this week. This is just the beginning⚡

“We have full ambition and intention to become a full-service financial service company,” he said. “We will offer banking services, credit-building services, and we will partner with banks and large institutions to offer credit products that we feel are going to be attractive to our market.” 

“What’s important for us and our competitive advantage is that we intimately understand this market, we’re part of this market.” 

TL;DR: SoLo Funds is founded by Rodney and his co-founder Travis Holoway who designed a platform that is set to skyrocket not only because the digital lending market is hot, but because of who they are as diverse fintech founders. 

Diverse leadership = more profitable companies because their unique experiences allow them to better relate to an increasingly diverse client base.

SoLo Funds has more than 300,000 users and is just getting started. I’m keeping my eyes on this fintech as it has cemented a very strong foundation as a company to change the game and disrupt digital lending. 

INVESTING

No more payment for order flow, please

Public’s COO Stephen Sikes outlined new findings the digital investing app gathered to prove that quality price execution is possible without payment for order flow (PFOF) and without routing to market makers.

TL;DR: 

• Since PFOF revenue increases with trade frequency, this model incentivizes brokerages to encourage more frequent trading. For the vast majority of retail investors, that means losing money.
• There is no industry-wide standard for reporting execution quality by retail brokers, which means it’s basically impossible for investors to compare execution quality across retail brokerages. 
• Instead of PFOF, Public uses different approaches: Working with partners at Apex Clearing, Instinet, and the execution venues, Public uses smart order routing (SOR) software to locate the best price for each order available across 28 different lit exchanges and alternative trading systems (ATSs), and then routes that order to the venue that offers the best price.

Still, firms like Charles Schwab are defending PFOF revenues, arguing that investors receive better pricing through the practice. 

Why it matters

→ The debate over PFOF has been lit under new SEC Commissioner Gary Gensler. He’s made it clear that eliminating PFOF business models is on the table as it presents an inherent conflict of interest. 

→ Investing apps that use PFOF are going to scramble to find new ways of generating revenue if regulation changes (i.e. fintech co’s with this model better be already figuring out new ways of making $$). 

→ Transparency should be required from brokerage firms about how much they are paid for selling clients’ orders. 

ICYMI

Earlier this year, Public ended its participation in PFOF after the wild ride that was the Gamestop stock surge.

Since then, peers like Robinhood have been under fire for the practice by regulators.

Look, PFOF is not illegal and a lot of online brokerages use it. However, it’s pretty sleazy to market your platform as a place where users are “the new Wall Street” when your company makes more than 75% of its revenue on a model that requires you to sell customers’ trading orders to market makers. 

Remember the saying, if the product is free you are the product… but I digress.

BLOCKCHAIN

Meet MeFi: A self-custody DeFi neobank

Last night I had the absolute pleasure of speaking during a panel discussion with Min Zhang, co-founder of MeFi, a self-custody DeFi neobank for the international middle class who lack equal access to the global financial system.

I was so inspired by Min and MeFi that I just had to share this fintech with you. A part of my goal is to help build a bridge between fintech professionals, so reach out and I can make the introduction. 

Here’s what she’s building: 

• A digital product that builds a bridge between traditional finance and decentralized finance via a banking system built on the blockchain, Solana.
• Users will have the option to save and invest in the U.S. via opening U.S. bank accounts, as well as 6% to 8% savings powered by DeFi lending & future DeFi products.
• The end result is the ability to lower costs and democratize access to international banking and more attractive financial services for global users.

What makes this unique 

→ The focus is on building a neobank from the ground up via Blockchain, which has clearly accelerated capabilities fast as a maturing technology.

→ Blockchain, initially, was only handling a few transactions per second. The blockchain MeFi is using can handle 50,000 transactions per second, Min said. That’s faster than any credit card or any payment system out there. 

What’s next?

In terms of product, here’s what MeFi is serving up: 

1. MeFi blockchain wallet that supports stable coins, U.S. dollars.
2. MeFi users have the option to open a U.S. bank account through MeFi banking as a service providers or they can deposit that money invested in different products through DeFi lenders.
3. A self custody wallet to have insurance.
4. Both investment and banking products, as well as salary versus credit building programs.

Milestones: MeFi is raising a seed round, which is slated to close by year-end. Alpha product is expected to launch in Q2 2022. The initial waitlist for the user base is 10,000. 🔥

WTF ELSE? 

• Megan Thee Stallion and CashApp launch dope merch
• TikTok partners with Stripe for tips payments
• Cannabis and banking vets launch credit cards for dispensaries
• DriveWealth partners with Hisa Technologies to expand investing access
• Startup Anchor raises $15 million seed round for autonomous billing 
• Singapore is becoming a fintech capital
• Thai crypto unicorn wants to be Asia’s Coinbase
• CogniCor lets wealth managers employ AI-powered digital assistants
• Fundbox, a fintech-focused on SMBs, raises $100M