To a Hammer …
By Alex Johnson
#1: To a Hammer …
The Director of the CFPB spoke publicly about the pernicious influence of Big Tech over in-person contactless payments:
In a more open and decentralized payments market, we would expect that there would be a plethora of players leveraging tap-to-pay functionalities. We might expect to see lots of companies and financial firms working to integrate tap-to-pay technology into their existing mobile apps, the same way we have seen so many apps integrate our mobile device’s camera or GPS capabilities.
However, we don’t find this at all. We found that Apple’s regulations forbid any third-party apps from accessing the mobile device’s NFC technology for tap-to-pay payments. All NFC-enabled payments must go through Apple Pay and card issuers must pay a fee to Apple for the privilege. As a result, many popular payment apps cannot directly use tap-to-pay. On the other hand, Google’s regulations do not currently require that these payments are routed through Google’s proprietary wallet and over time we have seen some level of tap-to-pay competition and innovation on Android devices. Google, however, has been scrutinized by international authorities in the past for allegedly placing self-preferencing conditions on device manufactures that use Android.
Before returning to lead the CFPB, Director Chopra served for a few years on the Federal Trade Commission, where he was a vocal critic of Big Tech. Since taking over the helm at the CFPB, he has made Big Tech skepticism a big part of the bureau’s focus.
To a hammer, every problem … well, you know the saying.
But in this particular case, I think the nail that the bureau is aiming for is a bit crooked.
The vast majority of non-cash payments made at physical point-of-sale terminals in the U.S. are made using debit and credit cards, which consumers use because they like them. Apple Pay and Google Pay support a wide variety of debit cards and credit cards, across a multitude of payment networks and issuers. Consumer choice isn’t being restricted here. If I want to switch to a different credit card but keep using Apple Pay, I can do that!
Consumers don’t use alternative payment apps (Director Chopra mentioned Venmo, CashApp, and PayPal in his remarks) for in-store transactions much at all today, but I don’t think that’s Apple’s fault. Indeed, if there was a huge demand for that from consumers, we would see those apps being used through Google’s NFC capabilities (which are open to developers in Android)! It’s not like Apple really cares what the underlying payment instrument is, as long as they are able to extract their 15bps tax.
(In an ironic twist, a lot of these alternative payment apps have launched their own branded debit cards and/or credit cards, and those cards are adding support for Apple Pay. PayPal is the latest example.)
I understand the hypothetical concern here – Apple and Google have a worrying amount of control that they could (and often do) choose to exercise over how third-party apps work in their operating systems. Apple could, one day, choose to enable direct bank account payments through Apple Pay for its own deposit product, but not others. That would restrict customer choice.
I just don’t see much evidence that such an issue exists today.
#2: Stripping Out the Speculation
Visa announced that it is expanding its use of stablecoins as a settlement mechanism:
Visa … announced its next step in modernizing cross-border money movement. Visa is expanding its stablecoin settlement capabilities to the high-performing Solana blockchain and is working with merchant acquirers Worldpay and Nuvei.
Through live pilots with issuers and acquirers, Visa has already moved millions of USDC between its partners over the Solana and Ethereum blockchain networks to settle fiat-denominated payments authorized over VisaNet.
I’m as skeptical of crypto as it is possible to be. However, the primary source of that skepticism is the volatility of crypto and the speculation, fraud, and nonsense that such volatility attracts.
Stablecoins are crypto stripped of speculation.
What’s left is a technology that can move money in real-time, and that is, by default, global, interoperable, and programmable.
That’s interesting. Particularly for use cases like cross-border payments, where the costs and risks to increase the speed of settlement (getting the money from the issuer to the acquirer to the merchant) are significant.
Visa is a market incumbent. They have every reason to protect the status quo when it is to their benefit to do so (watch the lobbying that is going to rain down as Durbin 2.0 heats up). When they don’t, when they embrace new technologies like stablecoins, it’s because they see their disruptive potential and are determined to get out ahead of it.
#3: White-Label POS Lending
A fintech company in the point-of-sale financing space raised some money:
Atlanta-based FinTech company Momnt has raised $15 million to grow its lending and financing platform.
Since its launch in 2020, Momnt has expanded its presence in the point-of-sale (POS) financing sector, beginning in the home improvement industry and then expanding into other verticals, the company said in a Wednesday (Sept. 6) press release.
“Momnt has been at the forefront of embedded lending innovation since its inception,” Sam Das, managing director of TruStage Ventures, which led the investment round, said in the release. “The team has proven to be a collaborative partner to its merchants and financial institutions, built on a foundation of leveraging the latest technologies to drive frictionless experiences for consumers.”
Momnt started in home improvement (competing with the likes of Greensky) and has since expanded into healthcare.
Unlike many other providers in the market, Momnt doesn’t have a consumer-facing brand. It is designed to be white labeled by merchants directly and by established merchant networks (like Roofle, a vertical software provider for roofing contractors), with the loans being originated by Momnt’s lending partners on the back end.
Today, those lending partners (Cross River Bank and Primis Bank) appear to work strictly in a mechanical capacity (originating and, in some cases, buying loans from the platform). However, I can see a world in which Momnt’s bank partners play a more active role, bringing their own small business customers in home improvement and healthcare to the table as partners and taking a more visible role in the relationship with the end consumer.
I’d imagine that TruStage Ventures, which invests in fintech on behalf of credit union LPs, is leading this round because it sees something similar.
2 FINTECH CONTENT RECOMMENDATIONS
#1: Product-Led AI (by Seth Rosenberg, Greylock Partners) 📚
One of the better VC thought pieces on generative AI that I’ve read (I swear that isn’t a backhanded compliment!)
This one is from Seth Rosenberg, Greylock’s newest partner. It argues, persuasively, that there is a lot of room for startups to directly create value using LLMs, rather than just selling gen AI picks and shovels to market incumbents.
#2: The Anti-California (by Annie Lowrey, The Atlantic) 📚
It goes against all of my instincts to share this article since, as you know, Montana is a terrible place, and you should never ever move here or even visit … but … this is just too good not to share.
This story is about how Montana recently passed the most pro-development, pro-housing set of laws in the U.S.
Fuck yeah, we did.
Real talk – Montana is incredible, and everyone is welcome here (even Californians).
1 QUESTION TO PONDER
What online communities do you participate in to keep up with what’s going on in fintech, get your questions answered, and connect with relevant folks in the industry? Do you pay for access to these communities? What platforms do these communities leverage (Slack, WhatsApp, etc,)?
I’m doing a bit of noodling on this subject and would appreciate your input.