September 15, 2022
Photo: Stefani Reynolds/AFP via Getty Images
Good morning, and welcome to Protocol Fintech. This Thursday: the CFPB lays out its “buy now, pay later” plan, Walmart preps its banking products and PayPal sees some arrivals and departures.
The advent of the Merge just reminds us how divided the crypto world is. Speculators may be happy to trade bitcoin and ether based purely on financial advantage, but there’s a world of true believers who parse the details of consensus mechanisms like Talmudic texts. There’s no convincing a bitcoin maxi like Michael Saylor that anything besides proof of work provides meaningful security. And then there’s Ethereum co-founder Vitalik Buterin concern-trolling bitcoiners about the eventual Merge-like switch from mining to transaction fees. When I sat down recently with Solana co-founder Raj Gokal, he threw gentle shade on other blockchains’ performance. I don’t think a plea for everyone to get along will mean anything, but it’s useful to remember that crypto isn’t a monolith.— Owen Thomas (email | twitter)
Diners Club got its start offering a no-interest credit line to restaurant diners who wanted to pay off their purchases over time. If that sounds a lot like “buy now, pay later,” Consumer Financial Protection Bureau director Rohit Chopra agrees. He dismissed the consumer-credit phenomenon as a “vague marketing term” applied to existing credit products. And he doesn’t think pay-later companies should be treated any differently than a credit card when it comes to applying consumer protections.
Chopra’s top concern with “buy now, pay later” is how providers use customer data. The companies say that they collect data that credit bureaus don’t so that they can underwrite customers other lenders can't.
The CFPB is also concerned consumers are getting tricked by pay-later providers. The agency listed a slew of potential consumer harms related to whether or not customers know what they’re signing up for.
It’s decision time for the CFPB. Though Chopra didn’t explicitly outline any forthcoming rules, he listed next steps he has asked CFPB staff to pursue.
The CFPB’s research into “buy now, pay later” does not stop here. New pay-later companies are getting started constantly, including new market entrants that help people purchase guns, health care and business expenses, bringing with them additional concerns. The question is whether the CFPB can write rules fast enough and effectively enough to keep the growing industry in line — or whether regulators will find themselves playing a game of cat-and-mouse with fintechs.— Veronica Irwin (email | twitter)
Software is changing payments and banks should care: At Modern Treasury, we built a platform to complement banks’ existing products to help them prepare for a future led by software. We’re here to help them future-proof their business so that they can participate in and lead in the next phase of financial services.
On Protocol: How corner stores around the world could offer a big fintech opportunity.
Walmart and Target are heading up a group of 1,600 merchants pushing for credit card fee reform. They’re backing a bill from Sens. Richard Durbin and Roger Marshall that would give merchants the right to route many credit card payments over networks other than Visa and Mastercard, which merchants say would increase competition and lower fees.
Oh, and … a Walmart-backed fintech is launching checking accounts. The venture from One, which is majority-owned by the retail giant, is poised to emerge from the shadows this month with digital bank accounts meant for Walmart's 1.6 million U.S. employees and legions of weekly shoppers.
The SEC sued Chicago Crypto Capital, alleging that it illegally sold securities. The firm reportedly sold $1.5 million in unregistered BXY tokens to investors.
Ethermine, the biggest mining pool on Ethereum, expects to shut down once the Merge is complete. The switch to proof of stake happened early Thursday, making proof-of-work mining outmoded. As much as $10 billion in mining rigs will become obsolete, Bloomberg estimates.Also on Protocol: How Gusto decided to make its first acquisition (and then another, and another).
“Bitcoin mining is the most efficient, cleanest industrial use of electricity,” MicroStrategy chairman Michael Saylor wrote in a letter on his website defending the cryptocurrency against various criticisms. He also thinks bitcoin is the only token that won’t be regulated as a security. It’s not encouraging that he doesn’t know how to spell “Howey test,” though.
John Kim will join PayPal as executive vice president and chief product officer. Kim was most recently president of Expedia Marketplace. He joins a list of new faces in the PayPal C-suite that includes CIO Archana Deskus.
PayPal CFO Blake Jorgensen is taking a leave of absence for a treatable medical condition. Gabrielle Rabinovitch will serve as acting CFO and continue to serve as vice president of capital markets, investor relations and treasurer.
Loren Padelford is chief commercial officer of Bill.com. Padelford was previously COO of Podium.
Blake Murray has stepped down from day-to-day operations at Divvy. Murray is the founder and former CEO of the company, which was purchased by Bill.com in May 2021 for $2.5 billion.
Nandita Gupta is the new chief product officer at MX. This is the latest MX hire from PayPal, where Gupta was responsible for internal payment-as-a-service platforms. PayPal's omni-payments solutions lead Jim Magats was recently named CEO. After that, former PayPal VP Wes Hummel joined as CTO.Matt Finestone has stepped down from his role as GameStop's head of blockchain. He started in the role in April 2021.
Software is changing payments and banks should care: Activities that once took place in person or over the phone—getting a loan, making a payment, investing in a security—now occur entirely within software. Covid has only accelerated this trend. To remain a part of clients' financial lives, banks need to play well with software.
Thanks for reading — see you tomorrow!
Correction: This story was updated on Sept. 15, 2022 to clarify that Gabrielle Rabinovitch will serve as acting, not interim, CFO of PayPal.