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Happy Monday, Fintech Takers!

I trust you had a refreshing weekend.

My wife and I saw The Odyssey (me for the second time, her for the first time). We saw it on a regular movie theater screen rather than IMAX, which was definitely less immersive, though also less taxing on our eardrums. FWIW, we saw it two and a half weeks after its release and the theater was packed.

- Alex

P.S. — Operating an embedded payments business at scale is incredibly challenging, but many of those challenges only become apparent once that scale is reached. I’m going to be talking about those challenges and how they can be solved for on August 19th. Join me!

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3 FINTECH NEWS STORIES

#1: Humility and Sympathy

What happened?

Increase — the BaaS middleware platform — now has a bank:

Increase now includes Increase Bank and a modern banking core with direct connections to the Federal Reserve, The Clearing House, and Visa. Increase’s technology maintains the system of record for account balances and transactions and reconciles to the Federal Reserve in real time. This gives fintechs full control over accounts and enables them to operate with their bank at the same speed and scale at which they operate their business.

So what?

To get a U.S. bank charter, you need two things: Humility and sympathetic regulators.

The prudential financial services regulators — the OCC, FDIC, NCUA, and Federal Reserve — are responsible for ensuring the safety and soundness of the U.S. financial system. Depending on the prevailing political sentiments of the moment, they may be more or less sympathetic to the desire of outsiders (investors and entrepreneurs) to acquire bank charters and compete with banks. However, at all times, they care about protecting the stability of the U.S. financial system, which can be disrupted by, among other things, an influx of excessive competition and risk taking. That is why they always want to see and hear examples from aspiring bank charter holders that they get it; that they understand the risks of growing too quickly, the inherent danger of novel activities and business models, and the self-evident importance of community banking. 

Humility and sympathy. You need both.

However, the more you have of one, the less you need of the other.

During the Biden Administration, regulators weren’t super sympathetic to tech entrepreneurs who wanted to buy community banks and repurpose their charters for use in fintech business models. You could do it, but it had to be done skillfully, subtly, and with a certain amount of performative humility.

When Jackie Reses bought Lead Bank with a group of investors in 2022, she went out of her way to speak with the local press in Kansas City and to emphasize just how important the bank’s role in the local community was. Column — the rebranded BaaS-native bank purchased by William Hockey in 2021 — ran into regulatory snafus early on due to its well-publicized growth so soon after the acquisition.

Darragh Buckley — the first employee at Stripe and founder of Increase — has been trying to follow the same playbook as Reses and Hockey, but he has experienced a few more bumps along the way. His initial attempt — a tender offer for Washington Business Bank in 2022 — was effectively blocked by the FDIC and Buckley had to settle for a small ownership stake and board seat at the bank instead.

His second attempt perfectly demonstrates the importance of both humility and regulatory sympathy.

In 2025 — the first year under the much more sympathetic Trump Administration — Buckley quietly acquired the voting shares for Twin City Bancorp (a different Washington community bank) and filed a change in bank control notice. This change in control was quickly approved by the San Francisco Fed, received a non-objection from the FDIC, and the transaction successfully closed (despite some very strange behind-the-scenes attempts by mysterious competitors to kill the deal, as reported by TechCrunch).

In his public comments about the acquisition at the time, Buckley was careful to avoid any hints of hubris, telling TechCrunch, “Twin City Bank is, and will remain, a community-focused bank,” and explaining that the bank shouldn’t get into sponsor banking because it “requires very specific capability and capacity to supervise partners safely and soundly. Only specialized banks should do it.”

This wasn’t a lie, exactly, even though everyone knew at the time that Buckley bought the bank in order to meld it together with Increase and make it a full competitor to Lead and Column. Rather, it was an act of performative humility, which Buckley appears to have learned — through trial and error — is an important ingredient in the successful acquisition of a bank charter, even in a more sympathetic regulatory climate.      

We should expect these public signals of humility to continue. Jon Jones — the former CEO of Washington Business Bank, Buckley’s first acquisition target — has been named as the President and CEO of Increase Bank, and Buckley and Increase are making it clear that Increase will continue to rely on its existing bank partners (Grasshopper Bank, First Internet Bank, and Core Bank) rather than cutting them out on day one.

#2: X Money

What happened?

Twitter has begun rolling out its financial services platform — X Money:

The service is currently available for the social media network's Premium and Premium+ subscribers in the US over the age of 18 following an invite-only beta phase.

X Money offers customers a deposit account, peer-to-peer payments and a debit card within the app. The venture has integrations with both Visa and Apple Wallet. The debit card is available digitally and as a physical, metal version that can be personalized with the individual's X handle … Although X Payments LLC is not an FDIC-insured bank, deposits are held at Cross River Bank, which is a Member of FDIC and so balances are insured.

So what?

First, a quick stylistic point. You may have noticed that I never refer to Twitter as X, even though Elon Musk rechristened the platform as X after he bought it in 2022. This is intentional on my part. Twitter is a better name for a social media platform than X is, and just because Elon Musk bought the platform (and then got cold feet and tried to back out of it) doesn’t mean I am required to call it his preferred name.

However, I am planning to refer to the financial services platform that Musk is bolting onto Twitter as X Money because that is actually a more pure reflection of his original intentions in this space.

As chronicled in the excellent book The Founders, one of Musk’s first jobs was a summer internship at Scotiabank. The internship left Musk with the ironclad conviction that banks will never innovate and got him dreaming of building something better than a bank.

My apologies for the length of this quote from the book, but it’s worth it:

What if, he [Musk] wondered, a single entity unified a person’s entire financial life? In some of his earliest investor pitches, he called this idea “the Amazon of financial services”: finance’s one-stop shop, offering not just standard-issue savings and checking accounts, but everything from mortgages to lines of credit, stock trading, loans, and even insurance. Wherever money went, Musk believed his new company should go, too. 

His vision was both eminently logical and impossibly grandiose. Musk wasn’t just pitching a new company—he was pitching half a dozen companies in one. Money’s underlying infrastructure, he felt, was long overdue for an upgrade. He’d describe both banks’ and governments’ “bunch of mainframes, ancient mainframes, running ancient code, doing batch processing with poor security, and a series of heterogeneous databases—like this herky-jerky frickin’ monstrosity.” 

Translation: 1990s-era banking infrastructure was bad. He saw its primary operators—bankers—as armies of middlemen charging big fees and offering little of merit in return. “There was a desire [among banks] to build very large buildings, for some reason,” Musk joked. “They’re very into having adjectives in front of ‘vice president.’ Senior vice president. Executive vice president. Senior Executive vice president.” 

Musk’s critique extended even to seemingly vital financial infrastructure like stock exchanges: “I said, ‘Well, why don’t we just allow people to trade with each other? So if I want to send you stock, why don’t I just send you a share of whatever?’ I don’t need to go through anything. The exchange is unnecessary.” The right code, in other words, could obsolete even the Nasdaq. 

But someone had to write that code—someone had to build, run, and own the databases that would replace high finance’s tall buildings, richly titled personnel, and the exorbitant fees funding it all. Musk believed that someone could be him.

He named the company X, based, partially, on the logic that “just as ‘X marked the spot’ on a treasure map, so X.com would mark the spot where money would be kept online.” X, as I’m sure you know, ended up becoming PayPal, which, I’m guessing, Musk believes has failed to live up to his original vision.

So now, with Twitter’s 500-600 million monthly active users as a foundation, Musk is again attempting to fulfill his vision for an “Amazon of financial services.”

The initial product set — a deposit account, debit card, and P2P payments — isn’t anything to write home about. However, the financial incentives offered around the product set are. They have a distinctly Muskian ambition to them:

• 6.00% APY on deposits.

• 3% cash back on eligible purchases on the X debit card.

• No FX fees and free ATM withdrawals with the X debit card.

Those are very generous rewards, but they come with an important caveat: X Money is only available to Twitter Premium and Premium+ subscribers. These are the two most expensive subscription tiers that Twitter offers and they cost $84/year and $395/year respectively (Twitter Basic, the least-expensive subscription tier, costs $32/year). The 6% APY is available to Premium+ subscribers. Premium subscribers earn 4% unless they qualify for the boosted 6% rate by direct depositing at least $1,000 within the past 34 days via employer payroll or X Creator Payouts.

These restrictions are sensible, although I still don’t think the math really pencils out.

6% is way too much to pay for $12,000 in annual direct deposit flow and an $84 annual fee, which are the requirements for Premium subscribers. In a letter to Elon Musk, Senator Elizabeth Warren specifically pointed out the inherent unsustainability of this 6% offer and asked him how he was planning to pay for it (and what risks that monetization strategy might entail).

The 3% cash back on debit card transactions — which appears to be available to both Premium and Premium+ subscribers and without a published spending cap (though the terms reserve the right to impose one) — is completely unsustainable, even with restrictions on certain common ineligible transactions like paying rent or buying precious metals and Cross River’s Durbin-exempt interchange (which is likely around 1.5%).

Twitter doesn’t publish estimates on the number of people who pay for a Basic, Premium, or Premium+ subscription, but my guess is that they are very small numbers and it’s those numbers that make Musk and the X Money team comfortable trying out these aggressive pricing and rewards gambits. Think of them more as early-stage experiments rather than a window into what X Money will look like when it is rolled out to Twitter’s Basic and free users.

A couple last notes on X Money:

• X Money does not currently offer any credit products, and because Cross River Bank’s 2023 FDIC consent order relating to the bank’s credit products remains in effect absent any public record of termination, Cross River would either have to get a non-objection from the FDIC to launch a credit product for X Money or X Money would need to find a different bank partner for its credit products. Something to watch.

• In the FAQs on the X Money website, it states, “everything you do on X Money is private to you by default. You can choose to share certain transactions on the X timeline, but sharing is always optional and entirely your choice.” YESSSSS!!! Screams my inner Millennial. Bring back the Venmo money social feed!!!!

• Also in the FAQs, it is made clear that you must have a Twitter account in good standing to access X Money and users are warned that if their Twitter account is “suspended for violating Child Safety or Violent and Hateful Entities policies, you will lose Money access and your funds will be mailed to you via check.” That is very interesting to me because it’s the first time, from what I can tell, that access to an FDIC-insured banking product has been conditioned on a social media platform’s content moderation policies. Given that A.) Twitter maintains full and unilateral control over setting and enforcing its content moderation policies, B.) Elon Musk maintains full and unilateral control over Twitter, and C.) Elon Musk has very strong opinions about politics, free speech, and which groups should be considered “hate groups,” the odds that X Money will generate some interesting new accusations of debanking in the future seem to be higher than zero.  

#3: Robinhood’s New Winner

What happened?

Event contracts have proven to be an incredibly profitable product for Robinhood, as demonstrated by the company’s Q2 earnings:

“The business is firing on all cylinders,” said Shiv Verma, Chief Financial Officer of Robinhood. “We delivered record revenues and drove new highs across equity, option, and event contract volumes, as we continue to win market share.

Prediction Markets reached a new milestone with the launch of Rothera in June, a CFTC-licensed exchange and clearinghouse independently managed through Robinhood’s joint venture with Susquehanna International Group, with over 3.5 billion contracts traded to date.

Event Contracts Traded increased over 10x year-over-year to a record 13.6 billion.

So what?

Urrrgghhhhh.

Alright, whatever. I’m going to try to explain these numbers and then I’m going to go and take a shower.

First, some context.

Robinhood launched event contracts in the fourth quarter of 2024, and then expanded the offering through a partnership with Kalshi in 2025. Robinhood took the order and the commission, and Kalshi ran the actual exchange and took an exchange fee on top. That arrangement is still mostly intact.

However, in January of 2026, Robinhood acquired MIAXdx, which already held CFTC licenses as both an exchange and a clearinghouse, folded it into a joint venture with Susquehanna International Group, and launched it in June under the name Rothera. Over 3.5 billion contracts have been traded on it already.

The Q2 numbers tell us why Robinhood went to the trouble of partnering with SIG to launch Rothera.

In Q2, event contracts brought in $156 million on 13.6 billion contracts traded, up more than 10x year-over-year, and out-earned crypto and equities. However, it’s the take rate, not the raw revenue, that tells the real story.

On equities, Robinhood earned $129 million on $956 billion of notional volume in Q2, or 13 cents per $1,000 traded. On crypto, $100 million on $40 billion, or $2.50 per $1,000. Prediction markets you have to bracket, because Robinhood reports contracts rather than dollars. The floor is easy: Robinhood's own definition says each contract trades in penny increments up to $1, so 13.6 billion contracts cannot represent more than $13.6 billion of cash, which puts the absolute minimum at $11.47 per $1,000. A more realistic figure (which Sheel Mohnot highlights in this tweet) is roughly double that: A 50-cent average contract price, which would equate to $23 per $1,000.

So even at the theoretical floor, prediction markets monetize a dollar of customer money 85x better than stock trading does. Realistically it's more like 170x, and about 9x better than crypto.

This is, to put it mildly, alarming. Robinhood has built (but barely yet capitalized on) the infrastructure (Rothera) to offer its customers trading on an asset class that offers the average investor a negative expected value and that generates somewhere between 9x and 170x the take rate of the company’s other flagship investment products. That infrastructure, as Robinhood itself notes in its risk factors, could be “immediately” turned off by regulatory enforcement actions, litigation, or changes in federal or state law.

Given these facts, it seems likely to me that Robinhood is going to do everything it can to drive as much volume as it can, as quickly as it can, to this new asset class, before anything changes.

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2 READING RECOMMENDATIONS

#1: What Should Stripe Keep, Rebuild or Reinvent If It Bought PayPal? (by Jas Shah, Fintech Under the Hood) 📚

I enjoyed this one from Jas.

A theoretical (though unlikely) Stripe acquisition of PayPal presents lots of fun what ifs.

#2: A Narrow View of Reserve Banking (by Kiah Haslett, Fintech Takes Banking) 📚

It’s very weird that financial services policymakers seem to be moving the U.S. steadily closer towards a narrow banking system without ever really acknowledging it or discussing the virtues and vices of such a system, in comparison to fractional reserve banking.

I guess it’s up to the Bank Policy Institute — a famously neutral market observer — to play that role instead!

*Bonus: The Primary Banking Agent (by me, with Chime) 📚

I've been stuck on a deceptively simple question: who will you bank with, now that an AI agent might pick where your money goes? My new article bets that whoever earns the trust to hold both the account and the agent wins the next decade. Read it here!

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1 QUESTION FROM FINITY

There are a TON of interesting questions being asked in Finity (our digital community for fintech and banking nerds). I’ll share one question, sourced from the community, each week. However, if you’d like to join the conversation, please apply to join!

Will we see any other BaaS middleware platforms get a bank charter in the next two years?

If you have any thoughts on this question, reply to this email or DM me in Finity!

(In Finity ... Infinity ... get it? ... OK, sorry, I'll show myself out!)

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

— Alex