WORKWEEK

3 Fintech News Stories

#1: P2P Lending … for Real Estate?

What happened?

A fintech company called Nada, which is focused on widening access to real estate wealth, raised an $8.1 million seed round. It offers two primary products:

The company offers index-like real estate investment products called “Cityfunds” that allows anyone, including non-accredited investors, to buy into a city’s home equity market with a minimum of $250 dollars

Its other target customers are homeowners who want to spend their home equity on everyday costs, which they will be able to do using Nada’s real-estate backed debit card, [John] Green [Nada Co-founder and CEO] said. The company plans to launch the card by Q1 of next year, he added.

So what?

This is an interesting model. It’s a bit like person-to-person (P2P) lending (circa 2015), but for real estate rather than unsecured personal loans.

On the one side of the market, you have retail investors looking to invest in single-family homes in specific, high-growth markets like Austin and Miami. Nada creates passive funds made up of real estate investments from these markets, which investors can buy into for a minimum of $250.

On the other side, you have homeowners that are looking to tap into their home equity. For these consumers, Nada offers an alternative to a HELOC loan. Rather than provisioning a loan with an interest rate, secured against a homeowner’s equity, Nada buys a portion of that equity upfront in exchange for a cash payment, disbursed through a debit card.

Nada sits in the middle, facilitating this indirect marketplace for retail investors and homeowners and taking a cut via a 1.5% fee charged to investors and transactional fees generated by its debit card.

Fascinating.  

#2: Better Late Than Never

What happened?

Brex will be referring its non-startup small business customers over to Oxygen:

Oxygen … announced today that they have been tapped by Brex to provide their small business customers a smooth transition as Brex has decided to focus on serving startups and scaled companies.

Existing Brex small business customers will be invited to apply to Oxygen with a special welcome offer communicated directly from Brex. 

So what?

In an interview back in June, Brex Co-CEO Pedro Franceschi admitted that Brex could have handled its decision to kick small business customers off its platform a bit better:

for the customers who are leaving, we know this is a really hard thing for them and we wish we had done things to make the migration a little easier for another financial partner, or give them a little bit more time and we’re now working on figuring out how to do both to support them throughout the migration.

Well, better late than never I guess.

#3: Trying Something New

What happened?

Cardless, a digital co-branded card platform, announced a partnership with American Express:

Cardless, a financial technology firm, today announced a new agreement with American Express. The agreement empowers some of the country’s most celebrated brands – including travel providers and retailers – to seamlessly launch digital-first cards leveraging the Cardless platform, backed by benefits, offers, and security of the American Express network. The company also received a significant investment from Amex Ventures, American Express’ strategic investment group.

So what?

I don’t think I’ve seen this before.

American Express (the bank) does a lot in the co-branded credit card space, with companies like Delta and Hilton. 

American Express (the network) occasionally allows other banks to issue credit cards on its network (U.S. Bank has a popular one, for instance).

I haven’t seen American Express partner with a third-party issuer (technically, Cardless is a third-party issuer once removed; its issuing bank partner is First Electronic Bank) to support a variety of co-branded cards, but that’s apparently what’s happening here.

Interesting strategy. And likely a smart hedge by AmEx, given that fintech companies like Cardless have been doing a great job competing for new co-branded card deals in the last few years.

2 Content Recommendations

#1: The Decline Of The Bank Starts With Small Business (By Scott Harkey, Forbes) 📚

Scott makes a simple, yet often overlooked point at the beginning of this article – consumer neobanks have never posed much of a threat to community banks and credit unions because community banks and credit unions don’t make money from consumers; they make money from businesses.

The expansion of fintech into small business (and even commercial) banking represents an existential threat to community banks and credit unions and this piece does a great job illustrating why and discussing what banks and credit unions can do about it.

#2: What Happens When A Neobank Goes Bankrupt? (by Jason Mikula, Fintech Business Weekly) 📚

This is going to be one of the defining questions for fintech and crypto in 2022. And FDIC insurance isn’t the answer. A consumer’s money may be sitting in an FDIC-insured bank account, but accessing that account requires working through the many layers of infrastructure that have been built to support banking-as-a-service. If even one of those layers hasn’t been carefully set up and rigorously tested, that consumer may not be able to get their money back out.

Jason’s latest newsletter (along with the replies to this tweet) delves into some really crucial details around this question. 

1 Question to Ponder

#1: Where will e-commerce, as a total percentage of retail sales, eventually settle out at?

This question is inspired by Shopify, which was recently forced to admit that it got its answer to this question wrong (at least in the short term) when it hired too quickly during the pandemic-driven surge in e-commerce and now has had to lay off some of its employees.

This blog post from Shopify’s CEO got me wondering – where will e-commerce eventually settle in as a percentage of the total retail sales? We’re at about 15% in the U.S. right now. Presumably, e-commerce won’t replace 100% of in-store retail, but what percentage will it get to? What’s the right balance? Any good research available on this?

If you have any thoughts on this question, hit me up on Twitter or LinkedIn.