Plaid ❤️ Banks
By Alex Johnson
#1: Plaid ❤️ Banks
Plaid now offers real-time payments for instant B2C payouts:
Transfer is our flexible platform to manage bank-linked transfers and payments. You can authorize customers securely, analyze risk, and move money – all within a single API. With Instant Payouts, our Transfer product now offers RTP in addition to ACH as a potential processing rail.
While ACH is ubiquitous for 100% of US bank accounts, RTP is compatible with between 60-70% of accounts. It really depends on how you slice it. To manage this complexity across accounts and rails, our Instant Payout solution provides intelligence on RTP eligibility. If the account is not eligible, our customers can seamlessly route the transaction to ACH (Same Day or Standard) without sacrificing the customer experience.
This is the type of thing that Visa was trying to prevent with its attempted acquisition of Plaid (dust off that volcano graphic!)
As Tom Noyes noted on Twitter, a real-time B2C payouts product focused on fintech is going to be a serious competitor to Visa Direct. This is especially true because Plaid Connect is an easy and obvious solution to the prerequisite to any B2C disbursement – consumer authentication and onboarding.
I also think that this move by Plaid signals a bigger problem for Visa.
This feature is being enabled through The Clearing House (TCH), which operates RTP, a real-time payments network that has been in market for a few years now (and that will compete with FedNow when it launches). TCH is owned by a consortium of 22 of the largest banks in the U.S.
Many of these banks hate Plaid.
Or, at least, they did.
Shortly after Visa announced that it was buying Plaid, TCH announced that it was acquiring a controlling interest in Akoya, an open banking data aggregation service built by Fidelity. This move was intended to counter the influence that Visa would have theoretically wielded over non-card payments if the acquisition of Plaid had gone through.
Obviously, that didn’t happen, and now Plaid (which has been investing heavily in fixing its relationships with big banks) is partnering with TCH to enable instant payouts.
If I’m Visa, I’m not thrilled to see Godzilla and Mothra teaming up like this.
#2: The Most Lucrative PFOF Opportunity Imaginable
Twitter is enabling users to buy and sell stocks:
Starting Thursday, a new feature will be rolled out on the Twitter app. It will allow users to view market charts on an expanded range of financial instruments and buy and sell stocks and other assets from eToro, the company told CNBC exclusively.
Currently, it’s already possible to view real-time trading data from TradingView on index funds like the S&P 500 and shares of some companies such as Tesla. That can be done using Twitter’s “cashtags” feature — you search for a ticker symbol and insert dollar sign in front of it, after which the app will show you price information from TradingView using an API (application programming interface).
With the eToro partnership, Twitter cashtags will be expanded to cover far more instruments and asset classes, an eToro spokesperson told CNBC.
You’ll also be able to click a button that says “view on eToro,” which takes you through to eToro’s site, and then buy and sell assets on its platform. EToro uses TradingView as its market data partner.
So many things here.
First, it’s interesting that Elon’s first move in transforming Twitter into a financial services super app is investing. I would have thought payments and/or banking. My best guess is that investing through a partnership with eToro was a much faster feature to enable than payments (which Twitter seems to be trying to do more of itself).
Second, Elon’s absolute disdain for the SEC continues to astonish me.
Third, I’m not sure I’d be super jazzed about this if I were eToro. Elon has quite a history of screwing over his partners/vendors. Plus, Elon’s seeming invulnerability to the SEC doesn’t apply to eToro.
That said, I can see the argument for eToro. One of the ways that the company makes money is Payment for Order Flow (PFOF) – the compensation that broker-dealers receive for directing customer orders to particular exchanges or market makers. The institutional demand for trading against Elon’s rabid base of retail traders has to be astronomically high.
#3: Eating Your Seed Corn
Capital One is exiting the floor plan financing business:
It’s been a weird few years for the car market, and things could get weirder still. As first reported by Twitter user CarDealershipGuy and now confirmed by Automotive News reports, Capital One is out of the dealer “floor plan financing” business, and while I realize this may not sound like the sexiest of topics, it could have some interesting effects on the car market.
I know this seems like an obscure bit of news, but it’s actually very important.
The auto lending industry has been in an odd spot in recent years. Thanks to pandemic disruptions to the supply chain, new cars have been hard to come by. This has led to a surge in prices for new and used cars, which has happened at the same time that consumers have been flush with cash (thanks to stimulus checks and persistent low unemployment).
This was an attractive environment for lenders, and a lot of them expanded their presence in the auto market, including Capital One.
One of the tricks to growing your auto lending business is to find ways to strengthen your relationships with dealers (which have a lot of influence over the borrower’s choice of lender). And one of the best ways to do that is by providing those dealers with floor plan financing – lines of credit (with an interest-free period) that allow dealers to buy vehicles for their lots.
By getting out of the floor plan financing business, Capital One is screwing over its dealers, which they won’t forget or easily forgive. Capital One understands the long-term implications of this decision and is doing it anyway, which suggests that they see trouble on the horizon.
This is the auto-lending equivalent of eating your seed corn. Not a great sign.
2 FINTECH CONTENT RECOMMENDATIONS
#1: New Understanding Emerging Around Uninsured Deposits (by Kiah Haslett, Bank Director) 📚
My Bank Nerd Corner podcast cohost (new episode dropped last week!) wrote a great story on her favorite question – which deposits are hot and which are not?
I found the discussion in this article about the limitations of static decay analysis (a modeling technique to predict deposit runoff) fascinating. So much of our understanding of how to manage liquidity risk is shaped by our experience operating in a low-rate environment. That experience has warped our perceptions of which deposits are stable and which aren’t, and we’ll need to unlearn a lot of the things we learned over the last 15 years.
#2: A Mind-Expanding Conversation About Human History and Happiness (by Derek Thompson, Plain English) 🎧
This one has absolutely nothing to do with fintech, but when my favorite podcast host records an episode like this, I’m going to share it. I hope you enjoy it as much as I did.
1 QUESTION TO PONDER
Instead of a fintech question, I have a Fintech Takes question for you this week.
How do you feel about the length of my Friday essays?
Recent essays, such as Pay-in-4 BNPL Was Never a Product, have been trending quite long (that one was 3,800 words). Are they too much? Do you enjoy the level of detail and research? Do you wish I’d get to the point a bit faster?
I would appreciate your feedback!