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Happy Monday, Fintech Takers!

For professional reasons, I have to spend more time than I’d like on Twitter. As a result, I end up overexposed to incredibly depressing news stories like this one, and I miss out on really positive news stories that would do a lot to improve my mood.

I suspect I’m not alone, so before we get into fintech, here are three delightful stories that I’m guessing will be news to you:

1. According to global energy reports released by the Energy Institute, global electricity consumption rose by 3% last year and that entire surge in demand was met 100% by renewable energy.

2. For the first time, scientists have documented a cow using tools. This behavior, exhibited by an Austrian cow named Veronika, had previously only been consistently observed in chimpanzees.

3. Scientists at Stanford Medicine have discovered a treatment that can reverse cartilage loss in aging joints and even prevent arthritis after knee injuries. By blocking a protein linked to aging, the therapy restored healthy, shock-absorbing cartilage. Upon hearing this news, the world-class orthopedic surgeons in Bozeman wept.   

- Alex

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Sponsored by Spinwheel

Nine in ten consumers say they have a clear picture of what they owe. Ask them the interest rate on their credit card, though, and they'll go quiet.

Nearly one-third want to consolidate their debt, but they have no idea where to start, a number that jumps to 52% among Gen Z (don't even get me started on the 74% of Gen Z - and 72% of Millennials - who say just thinking about debt is overwhelming, but I digress).

That gap, knowing what you owe versus knowing what to do about it, is the real opening for lenders right now.

A new research report from Spinwheel digs into why confidence and competence have split apart for so many borrowers, and what that means for anyone building credit products next.

Dig into the numbers

Tiger's Head painting by Abbott Handerson Thayer.

3 FINTECH NEWS STORIES

#1: Can we make CDs cool?

What happened?

A UK fintech startup raised some money:

UK fintech startup Stoa has raised $2.4 million in a pre-seed funding round to accelerate the growth of its cash management platform, which enables consumers and businesses to access upfront rewards on cash deposits.

The platform is now live in the UK for both consumers and businesses, allowing customers to place funds into fixed-term "Stoa Pots" and receive upfront rewards from partner brands instead of relying solely on interest payments. Deposits are held with regulated banking partners, with eligible funds protected under the Financial Services Compensation Scheme (FSCS).

So what?

The company calls its product “Stoa Pots,” but do you know what they actually are?

[I’m so excited to type this. I can’t even tell you.]

CDs!

Certificates of Deposit!

YES!!!!!

Little-known fact about me: I absolutely love CDs. I think they are one of the most honest and well-aligned B2C financial products out there. You give the bank a chunk of cash that you aren’t going to need right away and get paid interest in excess of what you could get through other deposit products. The bank gets deposits and a high degree of certainty as to how long those deposits will stick around. Plus, the structure of the product encourages consumers to consciously and strategically think about saving, which is something everyone should practice.

The problem, historically, is that the primary selling point for CDs has been the interest that they pay. As a result, CD ownership has always been very cyclical. According to the Fed's Survey of Consumer Finances, CD ownership peaked at 16.1% of U.S. households in 2007 and then slowly bled down to about 6.5% by 2022 as a decade-plus of near-zero rates made them pointless. However, once the Fed started hiking rates in 2022–23, CDs came roaring back to life.

And their appeal isn’t universal. CDs appeal primarily to people with idle lump sums who pay close attention to FOMC meetings, which is to say: older and more affluent consumers. In that same Fed survey, just 1.7% of people under 35 held a CD, versus roughly 12% of retirees. The younger, less affluent consumers who arguably have the most to gain from a nudge toward saving are (I’m guessing) more likely to own compact discs than they are certificates of deposit.

That’s a shame because CDs have a compelling value proposition that has nothing to do with interest rates.

CDs are a commitment device; a mechanism for routinely setting excess money aside, rather than spending it. This is the foundational challenge that many consumers have when it comes to saving. It’s not about maximizing yield. It’s about developing the discipline to save enough money for yield to make a meaningful difference.

The trick is figuring out how to get people to make the commitment.

This is what I like about what Stoa has built. It’s a way to reframe the value of CDs for younger consumers who, A.) Don’t know what CDs are, and B.) Don’t think about their money in terms of yield. The pitch isn’t, “Give us $5,000 for 12 months and earn 4.3% in compounding monthly interest.” It’s, “Give us $5,000 for 12 months and get your annual ChatGPT Plus subscription (which you were already planning to pay for) for free.”

You’re framing a savings decision as a spending decision.

And, in theory, an added benefit of Stoa’s approach is that the merchant rewards (ChatGPT Plus, Netflix Premium, Apple gift card, etc.) can be acquired wholesale by Stoa at a discounted rate because the merchants benefit when they lock in customer sales in advance and prepaid. This arbitrage is a revenue opportunity for Stoa, but it’s also a way to break the cyclical appeal of CDs. Merchants’ CAC budgets don't evaporate when rates fall. If you can pull in funding from the merchant side, you can build a savings product that's compelling in every rate environment.

I can even imagine something like eventually ending up as a front-end financing tool, on the checkout page: Sign up for Netflix Premium, choose the annual subscription option, and fund it by setting $5,000 aside in an insured fixed-term deposit account. At the end of 12 months, Stoa gives you the option to renew the 12 month commitment and get another year of Netflix Premium, or to roll it over into a high-yield savings account.

#2: Is Klarna planning to become lend-centric?

What happened?

Klarna is trying to acquire a U.S. bank charter:

Klarna … said Monday it applied to federal and state regulators to establish a U.S. bank subsidiary.

The firm said that, if approved, Klarna Bank USA would be a Federal Deposit Insurance Corp.-backed institution chartered in Utah. The proposed bank would be led by Gary Harding, former CEO of Milestone Bank and Prime Alliance Bank, according to Klarna.

By owning a bank, fintech firms can fund loans with their own customer deposits instead of more expensive wholesale financing, directly offer checking accounts and credit cards and rely less on third-party banking partners.

So what?

It’s nice to be less dependent on third-party partners, and cutting those partners out can marginally improve your unit economics, but the main reason that any fintech lender gets a bank charter is to secure access to cheap, sticky deposits, which function as a reliable, low-cost funding source for the loans that they originate. That’s the main prize, and it’s one that most large fintech lenders (SoFi, LendingClub/Happen Bank, PayPal, Affirm, etc.) eventually go after.

However, in the case of Klarna, there are two interesting facts that diverge from the typical fintech-lender-gets-a-bank-charter story.

First, Klarna already has a bank charter in Europe, which means that it already has access to sticky, low-cost deposits. In fact, roughly 90% of the company’s funding comes from its own deposits.

Second, Klarna doesn’t really need bank deposits as a source of funding because it’s not a lender in the traditional sense. According to the company’s Q1 2026 earnings, 77% of the company’s transaction volume consisted of “pay later” loans that are short term (pay-in-4, pay-in-30, etc.) and interest-free. Another 10% was “pay in full,” which is essentially just the consumer using Klarna (either their Klarna account or the Klarna card) to make a payment. Only 12% was made up of what the company calls “Fair Financing,” which are longer-term interest-bearing loans made at the point of sale (POS). As Klarna CEO Sebastian Siemiatkowski said on the Q1 earnings call, “We are still spend-centric not lend-centric.”

Indeed.

Klarna isn’t really a lender. It’s a payments company. And payments companies — even those that routinely advance funds to their customers, as Klarna does — don’t need bank deposits for funding. Short, low-risk paper is the single easiest thing in the world to fund without a bank. You don't need sticky insured deposits to bankroll pay-in-4. Klarna just sold Nelnet up to $26 billion of its US pay-in-4 receivables in an off-balance-sheet forward-flow deal. Six-week, interest-free, merchant-fee-driven loans are boring in the best possible way: they turn over before anything can go wrong, and the capital markets will fund them cheaply all day long. Deposits buy you almost nothing there. The money is only deployed for six weeks, so the cost of that money is a rounding error in the unit economics.

So, why is a fintech lender that A.) isn’t really a lender, and B.) is already a bank, becoming a bank in the U.S.?

I think the answer is that Klarna is planning to substantially grow its POS lending business (Fair Financing) in the U.S.

There are a few reasons I think this is the case.

First, POS lending is Klarna’s fastest-growing business segment. Klarna originated $4.1 billion in longer-term, interest-bearing loans in Q1, which represented a growth rate of 138% year-over-year. Also, as I wrote about recently, Klarna just ended its partnership with Pagaya, which had been underwriting and funding a significant (and higher-risk) portion of Klarna’s POS loans in the U.S. This decision (which led to a lawsuit from Pagaya) signals a desire by Klarna to own more of the business end-to-end.  

Second, I’m guessing that the U.S. (being the consumer credit capital of the known universe) is a priority growth market for Klarna’s Fair Financing product. If true, it will need funding sourced from the U.S. Strictly speaking, this isn’t a requirement. Klarna can and does fund U.S. loans using European deposits. However, European regulators’ tolerance for that cross-Atlantic funding model likely has its limits. Additionally, there are FX risks that need to be hedged when you are collecting deposits in euros and kronor and originating loans in dollars. Hedging that risk costs money which eats into margins.

Third, and most importantly, if we accept the premise that Klarna wants to aggressively grow its Fair Financing business in the U.S., U.S. bank deposits are, far and away, the best source of funding given the risks inherent to longer-term, interest-bearing consumer loans. When you hold a loan for two years instead of six weeks, the spread between your APR and your cost of funds is the business, not an afterthought. You take on real, slow-developing credit risk. You don't find out you mispriced a 36-month loan until you're deep inside it. And you take on duration and interest rate risk as well. If you fund a book of fixed-rate, multi-year consumer loans with wholesale money that reprices, a 2022-style rate shock can invert your economics long before those loans mature. This isn’t theoretical. Affirm — a BNPL competitor to Klarna with a portfolio that is mostly made up of longer-term, interest-bearing loans — got hit with this exact problem in 2022 and saw its stock price fall by more than 90% in the aftermath.

Stable, insured, slow-to-flee deposits are the best possible defense against that problem. They don't reprice in a panic, and they don't evaporate when the ABS market seizes up. Which means a bank charter is worth the cost and annoyance to get it only if Klarna intends to grow the longer-term, interest-bearing part of its book.

And that, of course, will be risky. The U.S. bank charter is being sold as a safety story — cheaper, steadier funding — but it only pays off if Klarna leans harder into its least safe product. Deposits solve the funding leg of long-duration lending. They do nothing for the credit leg. And cheap funding is an accelerant: nothing tempts a lender into growing an unproven portfolio faster than a cheap, abundant pile of money to grow it with, especially a portfolio underwritten by a model that hasn't been tested through a real downturn and that (as alleged by Pagaya) may not even be entirely Klarna's to begin with.

#3: Is making your model less discriminatory now false advertising?

What happened?

The FTC is giving the industry a few weeks to comment on a proposed policy statement regarding UDAP and artificial intelligence models:

As they have marketed their remarkable breakthroughs to the public, AI companies have spent years representing explicitly and implicitly that their systems aim to produce the best output—output that faithfully and accurately achieves users' stated objectives and the built-in objectives that users expect in the AI system—that is possible within their technological and resource constraints. Because of these representations and the inherent nature of the products and services in question, consumers have a reasonable expectation that AI systems aim to give truthful and accurate outputs. Consumers have no basis to believe that AI systems aim to produce outputs that are distorted by undisclosed ideological objectives.

Nonetheless, an AI company might be tempted to alter or steer the output of its systems contrary to consumers' reasonable expectations for various reasons, including attempted compliance with a State law, such as Colorado's recently revised Artificial Intelligence Act. But steering an AI system in this manner may deceive consumers in violation of section 5 of the FTC Act.

So what?

My basic theory of the executive branch of the federal government is that coordination is time-consuming and annoying and something that humans, as a general rule, try to avoid. So, when you see a high-level of sustained coordination across many different federal government agencies in a specific policy area, you know that area is a high priority.

In the current administration, I’m not sure who is driving the bus on disparate impact (though I’m guessing Russ Vought is prominently involved). However, based on my theory, it’s easy to conclude that it’s among this administration’s highest priorities.

In April of last year, President Trump signed Executive Order 14281, which has the stated goal to "eliminate the use of disparate-impact liability in all contexts to the maximum degree possible." Disparate impact — which I wrote about, in depth, a couple of months ago — is the idea that a facially neutral policy can be unlawful discrimination if it produces skewed outcomes, no intent required. It is the foundational doctrine of modern civil rights enforcement in employment, housing, and lending. President Trump's EO declared it illegitimate and ordered the government — specifically the DOJ, EEOC, HUD, CFPB, and FTC — to rip it out everywhere it lives.   

And boy oh boy have they been working on it.

DOJ issued a rule in December 2025 eliminating disparate impact under Title VI, the provision governing recipients of federal funds. DOJ also “settled” a fair lending investigation into a PayPal program that involved no loans (ARRRGGHHHHH!) The CFPB pulled disparate impact out of Reg B in April of this year, gutting the fair-lending framework that governed ECOA for decades. HUD has proposed rescinding the Fair Housing Act's disparate-impact rule. The EEOC is deprioritizing disparate impact theory under Title VII.

And now the FTC is taking its turn at the plate.

What’s weird about this proposed policy statement from the FTC (Besides the fact that it’s a proposed policy statement? Like, what even is that?) is that it’s regulatory, not deregulatory. Everything else that the Trump Administration has done on disparate impact has been an act of subtraction. Deprioritize a case. Rescind a rule. Ask a court to lift a consent decree. The FTC statement is an act of addition. It is imposing new regulatory requirements on the market.

Specifically, under the theory proposed by this policy statement, if a company tunes an AI model to reduce a discriminatory outcome because a state law (like this one in Colorado) tells you to, you have "suppressed accuracy," and unless you loudly disclose that model design decision to every user, you've deceived them and are liable under the FTC’s UDAP authority. The theory rests on the assumption that an AI model’s "accuracy" is a fixed, objective baseline, and that any equity-motivated adjustment is a deviation from truth — AKA a lie.

This is, to be blunt, idiotic. AI models aren’t truth machines. They’re trade-off machines. They’re designed to understand the relationships between different variables and to help companies make decisions that optimize the trade-offs caused by those relationships. In financial services, those trade-offs are things like approval rate vs. risk and price vs. acceptance rate.

The theory of disparate impact, when it is applied in a fair lending context, looks for deviations between the expected impact of a model’s decisions on protected classes (specific groups of consumers protected under civil rights law) and its actual impact. If the actual impact is significantly worse for a protected class, lenders are required to explain the business necessity for the model’s design and to search for less discriminatory alternatives that can produce the same business results.

If the FTC’s proposed policy statement is finalized and (more importantly) operationalized in the FTC’s enforcement work, this pursuit of less discriminatory alternatives that can achieve the same business objectives will, unless prominently disclosed, be considered deceptive. Even if it’s being done to comply with state civil rights laws.

You don’t have to think disparate impact is perfect (and I certainly don’t) to find this idea alarming.

2 READING RECOMMENDATIONS

#1:  All Accounted For (by Kiah Haslett, Fintech Takes Banking) 📚

If you’re curious about what a fed master account is and why it’s the source of so much drama in banking, fintech, crypto, and policy circles, Kiah has you covered!

#2:  Trump-Linked Fintech Tied To "No KYC" Crypto Cards Marketed for Iran Sanctions Evasion, Sources Say (by Jason Mikula, Fintech Business Weekly) 📚

Some great and very well-sourced reporting from Mr. Mikula on a company that appears to sit at the very center of his own personal Venn Diagram!

1 QUESTION FROM THE FINTECH TAKES NETWORK

There are a TON of interesting questions being asked in the Fintech Takes Network. I’ll share one question, sourced from the Network, each week. However, if you’d like to join the conversation, please apply to join the Fintech Takes Network. 

Who would be a good guest for a deep-dive 2-3 hour podcast interview?

I used a longer format for my interview with Max Levchin at Affirm and I thought it worked wonderfully. Who would you most want me to replicate that format with?

If you have any thoughts on this question, reply to this email or DM me in the Fintech Takes Network!

Thanks for the read! Let me know what you thought by replying back to this email.

— Alex