21 January 2024 | FinTech
Panacea, Leveling Up
By Alex Johnson
3 FINTECH NEWS STORIES
#1: The Next Table Stakes Feature in Banking
What happened?
Current and Varo both announced that they are adding free, in-app tax filing for their customers, which is pretty freaking cool.
Here’s Current:
At Current, nearly 50 percent of members worked at least two jobs last year, which not only can make filing taxes complicated, but also more costly. Now, through this new embedded filing integration with Column Tax, members can file their taxes for free directly in the Current app, and most can file in under 20 minutes, regardless of how many jobs they have worked. Every return is backed by Column Tax’s maximum refund and accuracy guarantees. Current members also receive their refunds on Current up to five days faster than traditional banks.
And here’s Varo:
Varo Bank … today announced the banking industry’s first free tax prep and filing service through a partnership with Column Tax. The tax service allows all Varo account holders to prepare and file comprehensive tax returns with Column Tax through their Varo Bank App.
So what?
Well, it took nearly two years, but it seems my prediction is finally starting to come true:
I believe that tax planning and filing will be the next table-stakes feature for banks and consumer-facing fintech companies. In the not-too-distant future, consumers will be able to dynamically manage their taxes throughout the year and quickly and easily file their taxes with the government, all from within their digital banking app.
My conviction on this subject rests on two main points:
- Filing your taxes is an absolutely awful experience, and the amount of money that most people pay to make it slightly less awful is the direct result of regulatory capture (this is finally starting to change, read this for more info).
- On a fundamental level, it’s insane that Americans take roughly $120 out of their pockets every time they get paid, give it to the government, and then ask for it all back in April.
These new services from Current and Varo (enabled by Column Tax) partially address point #1.
The next wave of innovation in this area is going to focus on point #2 – giving consumers more insight, throughout the year, on how much money they may be overpaying the IRS and giving them options for dynamically adjusting their withholdings or getting advances on withholdings already withheld.
#2: Panacea, Leveling Up
What happened?
Panacea Financial, a neobank and digital lender for physicians, dentists, and veterinarians, raised a $24.5 million Series B from Valar Ventures:
Panacea’s Series B financing will enable the company to expand its team of technology, financial services, and healthcare experts, introduce innovative products and services, and ultimately provide the doctor community with a more comprehensive and integrated financial platform. Since its launch in November 2020, Panacea has experienced tremendous growth and became profitable on a GAAP basis for the full year 2023. In the past year, the Company more than doubled its revenues, maintained excellent credit quality and has now provided more than $450 million in total financing to doctors and their practices. In addition, it is the preferred financial services partner for 20 national and state medical, dental and veterinary associations and organizations representing approximately 40 percent of all active doctors in the U.S.
The company also hired Ryan Gorney, a veteran bank technologist and consultant, as its new CTO:
Ryan Gorney has been named as the new chief technology officer (CTO) by Panacea Financial, a digital financial services company for medical practitioners in the US.
Focusing on implementation, compliance, and allocation, Gorney will lead Panacea’s technology strategy as its new CTO. Panacea’s pursuit of digitalization has most recently resulted in a partnership with banking technology provider Bankjoy, which it tapped last September for a full suite of digital banking solutions.
So what?
To date, Panacea’s funding has come exclusively from Primis Bank, a $3.8 billion community bank based in Virginia. Primis has also been Panacea’s partner bank, which, as I wrote about last year, has been good for Primis (Panacea drives a lot of lending volume and deposit acquisition for Primis) and a bit limiting for Panacea (during Primis’s Q2 2023 earnings call, Q2 earnings call, the bank’s CEO said that Panacea could be producing double its lending volume if not for the bank’s balance sheet constraints).
Going from that to a $24 million Series B from Valar, which has backed heavyweight B2C fintech companies like Wise, N26, and Stash, is a big step up, and it suggests that Panacea’s ambitions may have leveled up as well.
Given its success lending to and banking doctors and doctors’ practices, I wonder if Panacea is planning to extend beyond Primis, either by adding more bank partners on the backend or enabling other financial institutions to compete for healthcare practitioners in their markets using Panacea technology.
That last one might make sense, given that Panacea’s new CTO had previously worked in an executive role at KeyBank, another regional bank that is absolutely obsessed with the healthcare industry.
#3: Two Roads Diverged
What happened?
This news isn’t super recent, but it popped up on my radar screen thanks to a tweet from JC Bahr-de Stefano. Affirm is planning to add a deposit account to its product portfolio:
Buy now, pay later provider Affirm on Tuesday announced it’s launching a spending account tied to its debit card.
The account will offer savings account-type interest, ATM access and direct deposit capability, Affirm President Libor Michalek said during the San Francisco-based company’s investor forum in New York. The account “will be generally available at a later date,” a spokesperson said in an email, declining to provide a specific date.
So what?
Between this and the Affirm Card (a decoupled debit card with built-in BNPL functionality), Affirm is well on its way to becoming a full retail banking provider (though, from the sound of it, a bank charter is not on the immediate horizon).
From a customer value perspective, this makes perfect sense to me. More banking features allows for Affirm to create a more tightly integrated customer experience:
Among the key benefits noted Tuesday by Affirm CEO Max Levchin: Refunds that go to an Affirm account are there for consumers to spend again immediately.
“This is actually something I learned at my last payment network,” Levchin said, referring to his work for digital payments giant PayPal, which he co-founded. “Going from no available balance to some stored balance is a force multiplier on transactional velocity,” meaning consumers with money in their pockets tend to spend it more quickly, he said.
Levchin also indicated that this new product might enable the company to better serve lower-income, lower-credit-quality consumers (the core target market for the Cash Apps and Chimes of the world) by providing a signal (balance in the Affirm Money Account) that would be useful for credit underwriting.
More broadly, I think this news represents an interesting inflection point for the BNPL industry.
A useful way to study the evolution of BNPL is to look at the changing designs of BNPL providers’ mobile apps. They all start out with user interfaces that revolve around credit (obviously), but as the big providers have matured, some apps have become much more shopping-centric (Klarna), while others have placed a greater emphasis on banking and financial management.
With this announcement, Affirm is taking another step down that second road.
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New Ayo drop. Enough said.
#2: The New York Times’ AI Opportunity (by Ben Thompson, Stratechery) 📚
If you are curious about the New York Times copyright infringement lawsuit against OpenAI and Microsoft – why it’s happening (anyone who creates content for a living is scared to death of AI), its odds of success (not great), and what it means, big picture (AI is an opportunity for the New York Times and others who care about craftsmanship) – read this article. It’s excellent.