Quick favor: Our records indicate that you aren’t opening this email. But records can be wrong. Please click here if you’d like to remain subscribed to Fintech Takes.
{/if}
Happy Monday, Fintech Nerds!
I hope you had a fun weekend. My Bobcats won on Friday night, which set the tone for a very enjoyable couple of days.
Updated Programming Note — This is the last Fintech 3-2-1 of the year. I’ll have one last essay coming this Friday, and then I will take a couple of weeks off to enjoy the holiday break. I hope you will consider doing something similar. All work and no play …
There’s been a LOT of fintech news to close out 2024, so we have plenty to cover today.
MoneyLion is a leading digital ecosystem for consumer finance. Through this acquisition, MoneyLion extends Gen's identity solutions into offering comprehensive financial wellness through MoneyLion's full-featured personal finance platform that includes credit building and financial management services. Additionally, Gen acquires a scaled and proven B2B2C white-labeled AI recommendation platform that can be leveraged and enhanced by Gen's consumer base. MoneyLion's over 18 million customers broaden and diversify Gen's customer base, expanding the Company's top-of-funnel for full credit and identity protection.
Brigit will expand Upbound’s offerings of innovative and flexible financial solutions, positioning the combined company to create an industry-leading technology platform for the financially underserved that meets the consumer wherever they are on their financial journey. In addition, Brigit’s proprietary data and sophisticated tech stack are expected to enhance Upbound’s existing brands, including Acima and Rent-A-Center (RAC), by improving risk management and fraud prevention, enabling more customer approvals while also mitigating net losses and enhancing account management. The combined company’s data-driven insights will create a more personalized customer experience with the ability to deliver, at the right time and through the right channels, a wider range of targeted solutions for consumers. Upbound expects these enhancements to boost conversion rates, lower churn, and increase customer loyalty and engagement.
So what?
I didn’t have either of these acquirers on my 2024 fintech M&A bingo card. In fact, I had not heard of either company before these news stories broke (though I am familiar with many of the brands under their umbrellas). The fintech investment bankers who worked on these deals certainly earned their fees (FT Partners advised Brigit on the deal and Keefe, Bruyette & Woods advised MoneyLion).
Both companies were acquired for a significant premium.
MoneyLion went public via a SPAC at a valuation of $2.4 billion in 2021. The company’s stock took a sharp downward turn after going public (a common story for 2021-era SPACs) and hit a nadir of $108 million in 2023. So, an acquisition valued at roughly $1 billion is a great outcome (unless, of course, you were an early retail investor in the company).
Brigit is getting acquired for up to $460 million if all the performance incentives are hit. This represents a 3x multiple on revenue and a 20x multiple on earnings and should be a good outcome for executives and investors given that the company only raised $45 million in equity financing.
Great outcomes for the acquirees.
I’m not so sure about the acquirers.
The strategic assumption behind the MoneyLion acquisition appears to be that the company’s financial education and product recommendation platform (think discount Credit Karma) can provide Gen with a unified environment through which it can rationalize down and better cross-sell its myriad personal data and identity protection products (Norton, LifeLock, etc.)
This makes sense on paper (financial products and identity protection products are natural complements), but it may be harder to compete with the Credit Karmas and Experians of the world than Gen assumes (MoneyLion’s pivot to financial product recommendations is relatively new and its product is less mature than its competitors).
For Upbound, which owns a variety of subprime point-of-sale lending and rent-to-own services through brands like Acima and Rent-A-Center, the strategy appears to be complementing the company’s one-off lending channels (you visit Rent-A-Center when you need or want to buy something specific) with more of an always-on digital engagement channel (Brigit provides a subscription service for cash advances and credit building). Think of it in similar terms to what Affirm has done expanding from merchant partnerships to direct, always-on products like its debit card.
Again, it makes sense in theory. The trick will be building a meaningful integration between Brigit and Upbound’s other brands in a way that creates the 1+1=3 synergy that you need to justify paying a premium.
Bottom line — Upbound and Gen want to use fintech to fuse together their myriad B2C brands into more cohesive, always-on platforms.
I’ll be curious to see if it works out that way.
#2: I Don’t Understand This One
What happened?
One, the Walmart-owned fintech company, is in the process of raising more money:
Walmart is pouring more firepower into its fledgling financial venture, scoring a $2.5 billion valuation for the startup and signaling its ambition to wade deeper into financial services.
The world’s largest retailer is leading a funding round of more than $300 million alongside investment firm Ribbit Capital, according to people with knowledge of the matter.
Walmart’s latest endeavor marks a more deliberate push to expand into financial services after years of fitful efforts with a disparate set of offerings. This time, it’s established One as an independent company that sits outside Walmart, while the retailer still maintains control. And in partnering with Ribbit, Walmart picked an investor that counts fintech darlings like Coinbase Global Inc., Revolut and Robinhood Markets Inc. among its successful investments.
So what?
Wow! $300 million at a valuation of $2.5 billion! One must be doing really well! What’s their secret?!?
Ohh right, it’s owned by Walmart and has exclusive access to its hundreds of millions of customers and 1.6 million employees. Well then, yeah, these types of numbers make more sense:
One … now boasts a run-rate revenue of more than $200 million based off its November results and is processing over $15 billion in payment flow. Its products include installment loans, debit cards and payments services, as well as offering early wage access to Walmart’s … employees in the US.
The company counts more than 3 million monthly active users, and when Walmart reissues its credit card with a new banking partner next year, it will be launched by One, the people said. That would open up access to millions of customers who used that product.
Am I the only one who finds it very strange that Walmart created a separate company that it co-invested in with Ribbit rather than, you know, just revamping and investing more in the internal financial services division that it already had? Couldn’t Walmart have just acquired One and Even directly rather than through this new venture?
Why did it do it this way? What’s the exit plan for Ribbit? Is this just an elaborate mechanism to create more financial upside for Omer Ismail and the other folks Walmart poached from Goldman Sachs?
What am I missing?
#3: Brazenly Bad At Cheating
What happened?
I know I said I wasn’t going to write about TomoCredit anymore, but Prism Data just sued them for trademark infringement, and the details of the lawsuit are AMAZING:
This case concerns the willful and persistent infringement by Tomo, a financial technology enterprise seeking to compete with Prism, of the federally registered name of Prism’s flagship product: the solution marketed under the name CashScore® (the “Mark”), which Prism coined.
In March 2024, Tomo announced a new product called the TomoScore, which appears to be an attempted copy of Prism’s CashScore® product, aimed at the same customers, to address the same business need. In connection with marketing the TomoScore, Tomo is actively usurping Prism’s rights in the Mark, including by using the Mark itself.
When Prism confronted Tomo about this infringement, Tomo refused to cease and desist and made erroneous claims regarding its rights to use the term. In support of its erroneous claims, Tomo fabricated evidence of purported use of the term prior to Prism, but Prism rapidly identified Tomo’s attempted fraud.
So what?
In case you’ve been lucky enough to not know anything about Tomo up to this point, here’s the quick backstory:
It was founded by Kristy Kim in 2019. After a few early pivots, it found traction with a charge card that didn’t require a FICO Score to obtain, and that would build your credit score by furnishing repayment data to the credit bureaus. Tomo raised a total of $39M in equity capital in 2021 and 2022 from investors like Kapor Capital, Barclays, Morgan Stanley, and Mastercard. It also raised a $100M debt facility for its card product from SVB in 2022.
In September of 2023, Tomo stopped offering its card product because (as Jason Mikula later reported) it defaulted on its debt facility agreement with SVB multiple times, including, SVB alleged, by inappropriately using the bank's collateral to pay Tomo's operational expenses and third-party vendors. SVB was forced to sue Tomo, and after winning the lawsuit, Tomo paid approximately $5 million it owed the bank.
In need of another pivot, Tomo launched a credit-building service (TomoBoost), which promised to raise customers’ credit scores without requiring them to use a credit builder product or alter their behavior in any way. As I wrote about at the time, this product was a scam that was reporting fictitious credit lines to the bureaus and was impossible for customers to cancel.
TomoBoost eventually imploded, with Jeff Kauflin at Forbes reporting a few months ago that the credit bureaus had (finally) decided to cut off Tomo from furnishing data. However, Tomo was already in the midst of yet another pivot, this time to cash flow underwriting. Its new product (TomoScore) was announced in March of 2024 and quickly ran into legal issues with Prism Data.
And that brings us back to today’s story.
The lawsuit is chockfull of incredible details and anecdotes, but my favorite is what Tomo allegedly did after Prism confronted it regarding the infringement of its trademark:
On August 28, 2024, Tomo’s counsel provided a link to a blog post that purportedly showed use of “the ‘Cashscore’ mark at least as early as 2019.” The following day, Tomo’s counsel sent a very small handful of redundant blog and social media posts, mentioning “we have evidence that traces Tomo’s use back to 2018”—despite the fact that Tomo was not even incorporated until 2019.
Upon review of the material, it became immediately clear to Prism that Tomo had been using the previous weeks to doctor its historical blog posts, on both its own website and in certain cases on its blog posts hosted through Medium as well. But Tomo did not take enough time or care to cover its tracks.
More glaringly, the original versions of the posts identified by Tomo to Prism as containing prior use of the Mark were captured by the Internet Archive’s “Wayback Machine” in 2020 and 2024, prior to Prism’s cease-and-desist letter, showing clearly that the original posts did not contain any references to “CashScore,” “Cash Score” or any other derivative of the Mark.
To quote the great Toby Ziegler, “It isn't so much that you cheat. It's how brazenly bad you are at it.”
Tomo isn’t a legitimate company. It’s a shameless and ever-morphing scam.
I don't blame you if you haven’t read this one yet. It’s long. Like 24,000 words long. But it’s very good. The most comprehensive and fairly written take on debanking that I’ve come across. Grab a few beers, find a quiet spot, and give it a read.
Simon’s annual State of Fintech report (with contributions from my fintech friend Jev). Also long. Also very much worth reading.
{ad_content_secondary}
1 QUESTION TO PONDER
What questions do you have for me? I am planning to do a mailbag sometime early in the new year, and I’d love to answer as many of your questions as possible!
If you have any thoughts on this question, reply to this email or hit me up on Twitter or LinkedIn.
HIRING EXPERTS
Through the Fintech Takes network, I meet a lot of smart and experienced fintech operators. Many of them are looking for consulting or project-based work where their very particular set of skills can be put to the best and most efficient use.
Think of them as the fintech version of Liam Neeson in Taken.
I will be featuring anonymized descriptions of these folks in this section of the newsletter. If you are interested in chatting with them, simply reply to this email and let me know!
Model Governance
How far are you behind the curve in model governance in the age of AI? Given the number of new laws going into effect in this area, chances are pretty far. So, how can you get your hands around the problem and understand where you are and what you need to do? You can go down the same tired consulting road and spend piles of money. Or you can reach out to me, and I can connect you with a great model governance expert who I know!
Thanks for the read! Let me know what you thought by replying back to this email.
— Alex
{if profile.vars.rh_reflink_11}
Share with Fintech Takes, get cool stuff!
Have friends who'd love Fintech Takes too? Click the link below to share with your friends and get awesome rewards when they subscribe!
PS: You have referred {{profile.vars.rh_totref_11}} people so far
