Dear Readers, This is our final Fintech Update of 2018, but we will be back at it in the New Year! Thanks to all of you for your continued interest and positive feedback. All our best to you and your families for a happy and relaxing holiday season. See you in January! Best, the Fintech Update Team
The CFPB proposed new rules that would establish a “product sandbox” and certain safe harbors for fintech innovators; U.K. challenger bank Revolut received a license to operate as a bank throughout the EU; Robinhood faced scrutiny over, and quickly walked back, its plan to offer SIPC-insured checking and savings accounts; German startup Bitwala established the country’s first “crypto bank”; Facebook could be facing over $1B in fines from regulators for recent data breaches; and Plaid raised $250M in new funding, giving it a valuation of $2.7B.
In the News
CFPB proposes limiting liability for fintech innovators. The Consumer Financial Protection Bureau (CFPB) drafted “a sweeping proposal” to establish a “product sandbox” and safe harbors from certain supervisory and enforcement actions. The proposal expands the CFPB’s “no-action letter” policy and has already received “sharp criticism from congressional Democrats and consumer advocates.”
CFTC seeks guidance on Ethereum. The U.S. Commodity Futures Trading Commission (CFTC) will publish a Request for Information seeking public comment on the Ethereum blockchain and questions related to its “technology, opportunities, risks, [and] mechanics.” Responses also will support its LabCFTC fintech hub with understanding Ethereum-related use-cases and regulatory considerations.
Revolut gets banking license. The London-based digital financial services firm was granted a Lithuanian banking license, allowing it to begin operating as a bank throughout Europe, thanks to the EU’s regulatory passporting rules. Revolut plans to begin offering bank products early 2019, initially focusing on small markets before expanding them to larger ones like the U.K., France, and Germany.
Robinhood backtracks on savings and checking accounts. The no-fees investment firm faced scrutiny after announcing new savings and checkings accounts insured by the Securities Investor Protection Corp (SIPC) up to $250,000. Robinhood now plans to “re-vamp” its program, after the head of the SIPC said the firm had not contacted his office or the [SEC] before announcing the launch.
Bitwala opens German crypto bank. The German startup launched the country’s first ‘crypto bank’ that integrates cryptocurrency and fiat accounts. The accounts are operated by startup solarisBank, which has a German banking license, and are regulated by the German financial services regulator and central bank. Bitwala currently has 40,000 pre-registered customers.
Facebook data breach fines could top $1B. Facebook could be facing a multi-billion dollar fine after the Irish Data Protection Commission announced that it is launching an investigation into the company over failure to protect user privacy. The investigation follow several breaches, including Facebook’s latest disclosure that a bug exposed the photos of millions of Facebook users.
Barclays enables spend blockers. The British bank launched a feature allowing debit card customers to prohibit payments to specific categories of retailers, including gambling services and premium rate phone lines. Similar spend blockers are already provided by challenger banks Starling and Monzo; and Barclays is the first incumbent to follow suit.
Plaid raises $250M at $2.7B valuation. The firm, which claims to now connect 25% of all Americans with bank accounts through its API, announced a $250 million Series C funding round led by venture capitalist Mary Meekers. The funding was a significant increase over its Series B round, which was $44 million and valued the firm at $225 million. Plaid’s new investment values the firm at $2.7 billion.
TransferGo completes $17.5M funding round. The British digital remittance transfer company closed a $17.5 million Series B funding round led by Silicon Valley’s Vostok Emerging Finance and Hard Yaka. Launched in 2012, TransferGo promises a 30-minute turnaround time for bank account transfers across Europe, and has grown its customer base to 833,000 users.
Good Money raises $30M. The digital bank, in which every customer owns some amount of equity and has incentives to refer friends and set up direct deposits, raised $30 million in Series A funding led by Galaxy Digital. Good Money plans to be fully functional in 2019 and says it will offer free ATMs throughout the U.S., no overdraft fees, low loan rates and a 2% FDIC savings rate.
How exchanges are experimenting with blockchain. The Economist examines the ways in which global financial exchanges are exploring the application of blockchain technology to support trading and settlement. The article notes that although blockchain was developed as a medium of exchange without a central authority, exchanges throughout the U.S., Europe, and Asia are interested in its uses.
WSJ explores the aftermath of the bitcoin bubble. The Wall Street Journal, referencing the “bubble criteria” defined by Harvard lecturer Vikram Mansharamani, considers the rapid rise and fall of the price of Bitcoin, now that “there is no more denying that we have witnessed the popping of a classic bubble.”