You Want P2P Payments? I’ll Give You P2P Payments!

3 Fintech News Stories

#1: You Want P2P Payments? I’ll Give You P2P Payments! 

What happened?

Varo’s product roadmap is apparently just a piece of paper that says, “P2P Payments” in big letters:

Varo Bank customers can now send funds to anyone with a U.S. bank account, the company announced Thursday, part of a new feature called “Varo to Anyone.”

The feature allows Varo account holders to instantly transfer funds at no cost to anyone with a U.S. debit card, the company said.

The feature is the third iteration of Varo’s peer-to-peer payments offerings. “Varo to Varo” allows the bank’s customers to send funds to other Varo account holders. Varo customers also have access to Zelle, the bank-owned P2P payments network that allows for money transfers to other bank account holders with Zelle access. 

So what?

Why? Why is this happening?

Apparently, it’s because, despite the existence of the first two iterations of its P2P payments capability, Varo customers are still using other tools to send and receive money:

But despite having access to the aforementioned payment methods, many Varo customers still use third-party payment apps to send money, Walsh said.

“Almost 3 million transactions a month … were going through peer-to-peer rails like Cash App, Venmo and PayPal,” he said.

Walsh said he hopes Varo’s latest P2P feature will displace some of the payments volume going through third-party rails, bringing more transaction activity into Varo’s ecosystem.  

Right, yep, ok, but none of these P2P payments capabilities drive revenue. You’re giving them all away for free, sometimes at great cost (hi Zelle!). So why do you care so much about capturing that Cash App/Venmo/PayPal volume?

Maybe marketing?

The new feature comes as Varo looks to regain its footing following a difficult 2022, where it laid off 10% of its staff and made cuts to its advertising budget.

Walsh hopes Varo to Anyone … will work as a marketing tool for the bank, filling in the bank’s gap in advertising activity following the budget cuts.

“We’re seeing really nice pickup and adoption on this, both in terms of money being sent, but also recipients clicking through and applying for Varo accounts as well,” he said. “We’ve been very pleased with the early results.”

This would make sense for a proprietary P2P payments capability like “Varo to Varo” where the recipient has to download the Varo app to accept the payment. That’s how Cash App achieved such low customer acquisition costs in the early days.

But that’s not how this new Varo to Anyone feature works! It’s built on the card networks (Visa Direct and Mastercard Send, I’m guessing). The recipient doesn’t have to do anything except have a debit card. This is just a tool that makes it easier for Varo customers to move money out of the Varo ecosystem.

Why?!?

#2: Embedded Payments for Qualified Medical Expenses

What happened?

A fintech company focused on the Health Savings Account (HSA)/Flexible Spending Account (FSA) space launched:

Medication might be easier than exercise or eating right, but TrueMed wants to change your thinking on that.

Calley Means and Justin Mares started the payment integration company last year to make it easy for consumers to pay for healthy food, exercise and supplements using their tax-free health savings accounts or flexible spending account dollars. And with regulatory compliance.  

So what?

There’s roughly $140 billion sitting in tax-advantaged healthcare accounts. There are two problems with this pot of money, according to the founders of TrueMed – much of it goes unspent, and much of the spending that does happen goes towards the treatment of illnesses rather than the prevention of illnesses.

TrueMed wants to unlock HSA/FSA dollars for spending on health (nutrition, exercise, sleep, etc.) 

The challenge is that while these expenses can be considered qualified medical expenses for HSA/FSA spending, you need a doctor’s note in order to confirm that they are medically necessary. And the work it takes to get a doctor’s note, via an in-person visit or virtual appointment, is significant enough that it discourages these smaller dollar, less urgent HSA/FSA purchases.

TrueMed’s solution is intriguing. They are embedding their service within existing e-commerce channels (like Shopify) for merchants that sell health-focused products and making it quick and easy for consumers to add their HSA/FSA accounts as payment options. Then, in the flow of the transaction, TrueMed leverages asynchronous direct-to-consumer telehealth capabilities (essentially the ability to automate patient intake, diagnosing, prescribing, and charting for certain use cases, which became technically and legally viable during the pandemic) to get that doctor’s note and unlock the ability to use those HSA/FSA dollars: 

“You’re basically doing a healthcare intake, similar to a credit intake, and are able to pay right into payment flow with your HSA/FSA funds,” Means said. “That’s the key that we’re doing. We’re adding a telehealth component into the payment flow for leading health and wellness brands and widening HSA/FSA to items it doesn’t usually cover.” 

This is interesting! It’s basically the healthcare equivalent of what POS lenders and BNPL providers did with credit decisioning. 

By compressing the decisioning process (or intaking, as they call it in healthcare) down to something that can fit within the e-commerce purchase flow, they can unlock incremental spending.       

#3: If 10% of My Followers Like This Post, I’ll Lower the Federal Funds Rate

What happened?

I love this so so much:

The Federal Reserve Board on Monday launched its Instagram and Threads accounts with the aim of increasing the accessibility and availability of Board news and educational content.

The first post on Instagram will include a brief welcome video from Chair Jerome H. Powell. Instagram posts generally will include photos, videos, frequently asked questions and answers, economic education content and more.

So what?

Many thoughts:

• The inclusion of Threads is great. We all moved on a long time ago, but here comes the Fed!
• TikTok is conspicuous in its absence. I guess the Fed didn’t want to wade into the whole China/TikTok/data security morass. Do any federal government agencies or departments have TikTok accounts?
• The Fed is apparently already on LinkedIn, which is amazing. They need to hire Alex Cohen to up their game in that channel.
• My pitch for the Fed’s Instagram strategy (which would work for YouTube as well) would be to have Jay Powell film these mini travelogues in each U.S. city that he visits where he investigates the local economic situation and then just gets irrationally angry when he finds out that his rate increases haven’t cooled things off as much as he hoped.

2 Fintech Content Recommendations

#1: A brief guide to building your first lending product (by Rohit Mittal)

Rohit knows his stuff, having built lending businesses directly and having built a lending-as-a-service platform.

This is a great foundational piece for those who are starting their journey building a lending product.

#2: Reimagining the Future of Finance (by BCG & QED Investors)

If you’re looking for a good ‘state of fintech’ report, look no further. This one covers a lot of ground, across 41 pages and has some excellent charts and graphs.

1 Question to Ponder

What does the banking-as-a-service (BaaS) space look like 5 years from now?