August 9, 2022
Illustration: Christopher T. Fong/Protocol
Good morning, and welcome to Protocol Fintech. This Tuesday: BNPL credit reporting, Galaxy Digital reports a big loss and Tornado Cash is sanctioned by the Treasury Department.
Most “buy now, pay later” products can only hurt a user’s credit score — if they have any effect at all. But major BNPL companies, consumer advocates and credit bureaus all say they’re trying to change that.
It all started when the CFPB launched an inquiry into BNPL credit reporting in December. Part of that inquiry looked at BNPL’s impact on users’ credit scores. The CFPB now wants the three major credit bureaus — Experian, Equifax and TransUnion — to work together with BNPL companies to find a way to incorporate BNPL data into credit reports in a way that rewards responsible use.
But BNPL companies are hesitant to trust credit bureaus with user data. FICO Score 8 — still the most commonly used credit scoring algorithm — best responds to revolving lines of credit, while BNPL services are treated as something more akin to an installment loan. If the services reported BNPL user data to credit bureaus, it could hurt many users' credit scores.
BNPL companies want a tailor-made solution and aren’t accepting any of the possible fixes that have been proposed. BNPL is neither a revolving line of credit nor an installment loan, and BNPL companies argue they shouldn’t be treated like either.
That leaves BNPL companies, credit bureaus and the CFPB at a stalemate. They all agree BNPL products have potential as a credit-building tool, but both BNPL companies and credit bureaus want to be the arbiter of BNPL consumers’ data. It may take a nudge from the CFPB to force one side to give in first.email | twitter)
They created Digital People. Now they've made celebrities available as Digital Twins: Soul Machines co-founder and CEO Greg Cross and his co-founder Mark Sagar, Ph.D., FRSNZ are leading their Auckland and San Francisco-based teams to create AI-enabled Digital People to populate the internet, at first, and soon the metaverse.
Galaxy Digital stock gets a boost despite a big loss. The crypto conglomerate posted a second-quarter loss of about $555 million, widening from a loss of $183 million a year earlier.
AI lender Upstart’s stock slides after offering lower-than-expected revenue guidance. CEO Dave Girouard said some investors for the company's loans "have paused or reduced originations due to fear about the future of the economy.” The company warned of its struggles in preliminary earnings last month.
Wall Street is shifting which types of debt it will bet on. Some investors are spurning low-rated bonds backed by pools of consumer loans, preferring safer slices of debt that offer more protection when missed payments mount.
California fines BNPL provider for operating without a license. The company, Four, joins Quadpay, Sezzle, Afterpay and Klarna in reaching a settlement with the state.
Another crypto lender has frozen withdrawals. Hodlnaut, which operates in Asia, said it is “halting withdrawals, token swaps and deposits with immediate effect” due to “recent market conditions.”Crypto.com is expanding in South Korea. The Singapore-based exchange said it has acquired two startups in South Korea and secured registration in the country as a virtual asset service provider.
North Korean hackers used Tornado Cash, a mixer platform for cryptocurrencies, to launder funds, according to the U.S. Treasury Department, which imposed sanctions on the USDC and ETH wallet addresses associated with the protocol Monday.
Cryptocurrency mixers exist to make transactions more private. The protocols “mix” funds used for a transaction with large amounts of other funds, essentially scrambling the ledger.
The Treasury Department said that Tornado Cash did not utilize controls on the protocol to prevent money laundering. The department said the platform had been used to launder more than $7 billion in cryptocurrency in the last three years, though private sector analysis cited by The Wall Street Journal says that number may be inflated.
“Mixers are basically an automated money-laundering service,” a senior official told The Journal.
Read the full story on Protocol.com.— Veronica Irwin (email | twitter)
PayIt, a Kansas City-based payments platform for government services, raised $90 million. The round, which was labeled as a “growth” round and comes after the company’s Series B, was funded by Macquarie Capital Principal Finance.
Parisian crypto hardware wallet company Ledger will be raising another $100 million, Bloomberg reports. The company raised $380 million in its last round in 2021.
Brazilian financial management app NG.CASH raised $10 million in a seed round co-led by a16z and monashees. The app is targeted toward Gen Z users.
Financial SaaS company Savana raised $45 million in a Series A funding round led by Georgian. The Pennsylvania-based company sells primarily to banks and other fintechs.
Mexican B2B BNPL Kontempo raised $6.5 million in equity in a seed round led by Portage. The company offers 0% APR installment loans to business customers.Blockchain-based B2B payments company Paystand acquired Yaydoo. The merger is one of the biggest tech mergers to take place in Latin America.
They created Digital People. Now they've made celebrities available as Digital Twins: Soul Machines is at the cutting edge of AGI research with its unique Digital Brain, based on the latest neuroscience and developmental psychology research.
Thanks for reading — see you tomorrow!