The CFPB could be kryptonite to fintech's super apps

Protocol Fintech

Hello and welcome to Protocol | Fintech! This Friday: CFPB takes aim at super apps, Truework's CEO worries about regulation 'gray areas,' and FTX's founder on how bitcoin will keep growing.

Will the CFPB go after super apps?

The Consumer Financial Protection Bureau wants tech giants to explain how they use data they collect about transactions, a move that appears to take aim at a new trend: the rise of super apps.

These tools, whose makers say make it easier for users to manage investing, spending and saving on a single app, give tech behemoths enormous power, the CFPB warned.

Rohit Chopra, the agency's new boss, pointed to lessons from a market where super apps rule: China. "In such a market, consumers have little choice but to use these apps and little market power to shape how their data is used," he said.

Payments systems are becoming "faster, frictionless and cheaper," Chopra said. Yes, they offer huge benefits, like making it easier for consumers to send money to families and for small businesses to process transactions and raise capital.

  • But the companies are also collecting massive amounts of information that "can be monetized by companies that seek to profit from behavioral targeting, particularly around advertising and ecommerce," Chopra said.
  • The CFPB's first round of disclosure orders went to tech giants with a big presence in payments: Amazon, Apple, Facebook, Google, PayPal and Square.
  • "Big Tech companies are eagerly expanding their empires," Chopra said. And that trend would give these giants "greater control and insight into our spending habits," he warned.

There are apps that let you do everything now. That's clearly fueling the "speedy growth" of PayPal's Venmo and Square's Cash App which the CFPB said "can present risks to families."

  • Early this year, PayPal CEO Dan Schulman said the company plans to build a super app that would combine different apps "into a connected ecosystem where you can streamline and control data and information between those apps, between the act of shopping, the act of paying for that."
  • PayPal took a step toward that vision last month with a souped-up version of its app. Users can now open a savings account and gain early access to their pay. And PayPal's reported interest in Pinterest could be part of its super plan.
  • Square has expanded Cash App into new services, including bitcoin and stock investing. Its recent purchase of Afterpay, whose "buy now, pay later" features it plans to fold into Cash App, is seen as a step toward its own super app ambitions.
  • These trends worry Chopra. He pointed to what's happening in China where super apps Alipay and WeChat Pay are "deeply embedded into the lives of the Chinese public, combining messaging, ecommerce and payment functionality into super apps." He added: "In such a market, consumers have little choice but to use these apps and little market power to shape how their data is used."

This is merely a warning shot for super apps. The CFPB under Chopra is watching the race to build the perfect super app closely, and with concern. "That many Big Tech companies aspire to grow in this space only heightens these concerns," Chopra said.

— Benjamin Pimentel


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From Protocol | Fintech

Stripe is focusing on creators as a new opportunity. The payments infrastructure software company is developing products to cash in on the growing creator economy.

Facebook has unwrapped its crypto wallet. The social networking giant introduced its Novi wallet as part of a test, but the product unveiling — which came minus Diem, the much-hyped cryptocurrency Facebook has backed — only raised more questions about its strategy.


"We're starting to see the tip of the iceberg in terms of institutional cryptocurrency-related products in the United States right now, with the bitcoin futures ETF that just launched. We'd be super excited to help contribute to those over time." Sam Bankman-Fried, founder and CEO of crypto exchange FTX, which was just valued at $25 billion.

"I want Nebraska to attract people that want to be regulated." —State Sen. Mike Flood on the Nebraska Financial Innovation Act, which he sponsored and is one of several state moves to regulate crypto and digital assets.

"I still regularly trade crypto. How can authorities stop me when the industry has developed to evade centralized control?" —A Chinese investor on efforts to evade China's crypto ban.

3 questions with Ryan Sandler, the CEO of Truework

What fintech trend is most troubling for you?

One thing that will always be challenging is the delta between how fast the private sector moves versus the public sector. The troubling trend we're seeing right now is startups in the fintech space being forced to operate in a gray area as the government figures out policy over the course of many years. That gray area, which can be especially large in modern financial services, introduces unnecessary risks for financial services companies as well as consumers. The handful of contradictions between various state and federal laws means a perfect path forward rarely exists.

Financial services require smart regulations to protect consumers while startups need to move fast to stay ahead of incumbents and competitors. It's a natural paradox, but I'm encouraged by the spike in recent activity in D.C. around issues like Dodd-Frank 1033 and data portability. Well-informed regulation can generate lasting benefits. It is the speed that is the issue.

What's been your biggest professional blunder, and how did it help you?

When I was a senior in college, I took a stab at starting my first company, called DareDvl. The idea was a "kickstarter for challenges," where a user would dare another user to do something, crowdfunding money to be donated to a cause of their choice.

DareDvl simply did not have product-market fit and I could have spared some time and money with a more disciplined approach. The concept was not a frequent or sticky enough application, not differentiated enough from other charity and crowdfunding sites and, even if it was successful, the total addressable market was fairly small — though as a college student, it seemed much bigger!

I learned one of the hardest truths about starting a company: Even if an idea sounds good in theory, and you personally want it to exist, that doesn't make it a good idea. Founders need to build things that people truly want or need, on a regular basis, and (hopefully) are willing to pay for. Consumer behavior can be fleeting and trends always come and go. You need to dig deeper to find something that is truly worth your time.

What problem would you like to see a fintech company solve?

Crypto and NFTs are clearly here to stay, and the need for financial institutions to verify alternative assets will only increase over time. Some lenders are already taking into account crypto as they assess the worthiness of a borrower, but it is often done haphazardly with sharing of PDFs and screenshots that leave room for fraud and abuse. I'm excited about the ways fintech companies can better assess someone's "crypto net worth" when issuing credit.

Need to know

AmEx and Goldman inked a B2B payments partnership. AmEx's virtual cards will be offered through a Goldman corporate banking service.

Bank of America is grappling with California's unemployment fraud epidemic. The bank issues debit cards for the state's unemployment program.

Binance.US blamed a flash crash on a trading algorithm. The exchange saw bitcoin's price briefly drop to $8,200 — an 88% plunge.

Plaid made a big move into payments. The fintech powerhouse unveiled a new product that enables direct payments from bank accounts.

SEC's GameStop report is out. The regulator said the trading frenzy in January "tested the capacity of our markets."

Making moves

JPMorgan's C.S. Venkatakrishnan saw a $6.3 billion loss coming. A risk officer dismissed his warning as "garbage." He's now a front runner to become Barclays' new CEO.

Aditya Rane is joining Andreessen Horowitz. The former Renegade Insurance exec joins a16z to focus on fintech in India.

Priya Sanger is moving from Patreon to Chime. The legal expert, a former Wells Fargo and Google executive, will continue to work on payments and product issues in her new role as associate general counsel at the neobank. Sanger recently spoke with Protocol's Owen Thomas about the challenges and opportunities in global payments.

Deal flow

Embed raised $60 million for investing infrastructure ahead of its launch. The startup is led by Michael Giles, who previously ran Square's Cash App Investing.

Candy Digital grabbed $100 million in a series A. The sports NFT startup was valued at $1.5 billion by Insight Partners and SoftBank Vision Fund 2.

Mojito raised $20 million. The startup, which lets people sell NFTs from websites, powers Sotheby's Metaverse.


It's that adaptability that keeps clients loyal to Apex, and helps them grow in the highly competitive and turbulent world of democratized finance. As of June 2021, 11 million of Apex's customers were aged 18-40 — but as others start to see the potential in this new and growing space, they're starting to jump in.

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Data point

$1 million: That's the bounty offered by short-seller Hindenburg Research for information on Tether, the stablecoin issuer whose reserves have come under intense scrutiny.

Thanks for reading — see you Tuesday!

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