WORKWEEK

#1: Debt Management, for Whom? 

What happened?

A fintech company focused on debt management raised a Series A:

Clerkie, a startup providing debt repayment and optimization tech to lenders, has raised $33 million in Series A funding from Left Lane Capital, the company tells Axios exclusively.

As more people fall behind on bills due to rising interest rates, Clerkie technology helps borrowers get out of debt and helps lenders reduce delinquencies.

Clerkie sells tech that banks use to manage their loan losses by identifying borrowers potentially facing delinquency before they default.

It looks at data points like spending velocity and abnormal spending behaviors and, based on a borrower’s budget or income, determines whether or not there is a risk of delinquency.

If it finds borrowers are at risk, Clerkie proactively enrolls them in hardship assistance programs, which offer personalized options to reduce their debt burden and avoid the more traditional collections process.

So what?

Hmm, interesting. A few thoughts:

• Clerkie appears to be focused on early-stage collections (helping borrowers who are just starting to fall behind on their payments) rather than later-stage collections or recovery (more serious delinquencies and write-offs). This is an area that lenders typically don’t care about when times are good, but do invest in more during adverse credit conditions. Good timing for Clerkie.
• I wonder which types of lenders Clerkie wants to sell its technology to. Its value proposition (AI to identify borrowers who are about to go bad) likely won’t resonate with the really big banks (they think their AI is better than anyone else’s). However, smaller banks do more commercial lending than consumer, and collections in commercial lending is more about relationship management than it is about technology. CMFG Ventures was one of the other investors in this latest round for Clerkie, so maybe credit unions?
• It’s not uncommon for companies in the debt management space to attack the market from several different angles simultaneously. Clerkie appears to be doing that. In addition to offering technology and analytics to lenders, it also is trying to sell its services through employers, and it has a consumer-facing app, which helps individuals manage their loans in one place and access short-term liquidity when needed. $33 million for a Series A seemed a touch high to me, but maybe this explains it – running three different businesses simultaneously is expensive.    

#2: Waste Management Fintech

What happened?

A new fintech company raised a seed extension: 

CurbWaste, a SaaS software and payments provider to the waste management industry, has raised a $4 million seed extension from TTV Capital, the company tells Axios exclusively.

New York-based CurbWaste provides an all-in-one SaaS platform for managing waste and recycling operations, including CRM, task management, route logistics, fleet tracking, and data reporting.

Crucially, it also integrates online ordering, invoicing, payments and asset management and plans to expand its fintech suite with revenue-based financing in the near future.

So what?

One of the core reasons that B2B embedded finance is exciting actually has nothing to do with fintech.

The number of industries that are, only now, being digitized is mindblowing. It’s easy to assume that the internet has permeated every corner of the economy, but that isn’t true. Every week you have folks building software to streamline tasks that have never been properly digitized. Like waste management:

He [founder Mike Marmo] started building the technology behind CurbWaste to help manage his own operations more efficiently before productizing the platform and making it available to other waste management companies.

“Post-Covid, we were fully digital,” Marmo says. “We had mobile apps, we had a cloud-based experience… and at that point, I started to feel market pull. My friends and my peers started asking, ‘Can we use your software?'”  

Embedded finance isn’t just about cannibalizing existing financial services revenue streams. It’s also about capturing net-new revenue streams that have been created by the digitization of analog industries. 

#3: Worst Headline Ever

What happened?

The Financial Times published an article about deposit outflows at large regional U.S. banks:

Big US financial groups Charles Schwab, State Street and M&T suffered almost $60bn in combined bank deposit outflows in the first quarter as customers continued to move their money in search of higher returns.

The deposit flight has been turbocharged by the collapse last month of Silicon Valley Bank and two other US lenders, with cash moving out of bank accounts at a pace not seen since the aftermath of the 2008 financial crisis.

In a fresh sign of the threat to traditional banks, Apple and Goldman Sachs on Monday announced the launch of a new savings account in the US that will pay a market-leading 4.15 per cent a year.

So what?

The title of this Financial Times article is, “Depositors pull nearly $60bn from three US banks as Apple raises pressure”.

Worst. Headline. Ever.

Let’s clear up a couple of things:

• The Apple savings account isn’t offering a market-leading interest rate, and it was literally just launched, so obviously, there’s no way that it has anything to do with accelerated outflows at Schwab, State Street, and M&T.
• The deposits that are moving are largely uninsured deposits that are fleeing to safety in the wake of SVB. These are going to the largest U.S. banks (because they are seen as too big to fail) and to alternative products such as money market funds or Treasury bills (which are not subject to the same liquidity concerns as bank deposit accounts). This movement isn’t motivated by a desire for higher yields.
• It’s unclear how depositors’ desire for higher rates is influencing these accelerated outflows, but my guess is that it is a relatively small part of the overall picture (especially for fully-insured depositors), and it likely conforms to what banks’ models have been predicting for a while.    

We’ll get a better understanding of the deposit landscape over the next couple of weeks, as analysts pour over all the earnings results. In the meantime, Financial Times – please resist the temptation to write words that don’t make sense. 

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2 FINTECH CONTENT RECOMMENDATIONS

#1: Lessons From Ancient Rome: How Banks Can Learn to Love Start-Ups (by Matt Harris, Bain Capital Ventures) 📚

I recently had the opportunity to interview Matt for an upcoming podcast (which I can’t wait for y’all to listen to) and was absolutely blown away by the depth of his perspective on fintech (I shouldn’t have been surprised, given his extensive history in the space).

Anyway, in the meantime, you should read this. It provides a clear window into the strategic thinking driving banks’ interest in acquiring, investing in, partnering with, and buying from fintech companies.  

#2: The Myth of the Broke Millennial (by Jean M. Twenge, The Atlantic) 📚 

Narrative violation!

According to the U.S. Census Bureau, Millennials aren’t, in fact, broke. They’re actually doing really well financially! In 2021 dollars, Millennials are making more money than Gen X’ers and Boomers at the same age. The news is especially good for Millennial women, who are outearning their Boomer counterparts (when they were the same age) by a significant margin.

The financial services implications of this are both obvious and important. Adjust your mental models accordingly.

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1 QUESTION TO PONDER

Which geographic region is going to produce the next great fintech case study?

It’s a bit of a tradition in fintech to pluck case studies out of different geographic regions and hold them up as examples of larger trends that will soon be sweeping the globe. China and super apps. The UK and open banking. Kenya and mobile payments.

Where is the next case study going to come from? And what larger trend will it exemplify?