August 8, 2022
Photo: Angela Weiss/AFP via Getty Images
Good morning, and welcome to Protocol Fintech. This Monday: Fintechs are cutting costs, the CFPB has a new report on payments and a look at the week ahead.
There are a lot of mixed signals in the economy: Companies are laying off workers and some economists are warning of a recession, yet Friday’s jobs data showed unemployment at a half-century low. Consumer confidence is falling, but spending has proven somewhat resilient.
All that uncertainty is hanging over fintech firms, whose fortunes are tied to how willing customers are to spend and borrow. Most have seen their share price fall significantly since the start of the year.
In response, industry leaders are cutting costs. Companies known for chasing scale are instead advertising to Wall Street investors how they plan to streamline and focus on core businesses.
Belt-tightening is not limited to fintech firms. With costs rising from inflation, companies across industries are eyeing cuts, a recent Gartner survey found. General uncertainty is continuing to be a drag on private investment markets for fintech as well.
The stock market has become particularly turbulent for fintech firms, which carried high valuations for much of the pandemic. The F-Prime Fintech Index is down about 75% year-to-date, compared to a 20% drop for the broader Nasdaq index. PayPal, however, closed the week with its share price up 9.5% as investors responded positively to the planned cuts.
"PayPal and SoFi probably weren’t worth what they were trading at when everyone was riding high in late 2020 and early 2021, but they are solid businesses with resilient business models," Alex Johnson, author of the Fintech Takes newsletter, told Protocol. Others, like Robinhood, saw their share value fall because of clearer issues in business fundamentals, Johnson added. Coinbase will report earnings on Tuesday, adding another data point to where the fintech market is at. There mixed signals also abound: The company is facing down a legal battle with the SEC that could fundamentally alter its business. The company also saw its shares jump 16% Thursday after announcing it would provide crypto services to BlackRock.— Ryan Deffenbaugh (email | twitter)
Chip shortage could undermine national security: The global shortage of semiconductors has impeded the production of everything from pickup trucks to PlayStations. But there are graver implications than a scarcity of consumer goods. If the U.S. does not ensure continued domestic access to leading-edge semiconductor manufacturing, experts say our national security could suffer.
On Protocol: How the fate of nine small tokens could shift regulation for the entire crypto industry.
Voyager details plan to give customers some of its cash. After getting approval from bankruptcy court, Voyager said customers can request a cash withdrawal on Aug. 11. Voyager froze withdrawals early last month before filing for bankruptcy, and the status of customers’ crypto held by the firm is still not settled.
Lawmakers are questioning diversity within crypto firms. A coalition of U.S. House lawmakers led by Financial Services Committee Chairwoman Maxine Waters have sent a survey to 20 crypto firms inquiring about their diversity, equity and inclusion efforts.Celsius cancels request to hire back ex-CFO. The bankrupt crypto lender has withdrawn its motion to bring back ex-CFO Rod Bolger at $92,000 a month.
New payment types like "buy now, pay later" and embedded finance may well make things easier for users, but "these changes also create more opportunities for companies to aggregate and monetize consumer financial data, and for large players to dominate consumers’ financial and commercial lives." So warns a new report from the Consumer Financial Protection Bureau, which lays out how the regulator plans to bring new rules to the space.Philadelphia Fed president Patrick Harker opened the bank’s annual fintech conference with, among other things, a nod toward business models working to expand credit building: "In my opinion, there is no good reason that on-time rent and utility payments should not be just as determinative in obtaining credit as on-time payments for car loans or credit cards."
The Insurtech Latam Forum is taking place all week in São Paulo. The event features 60 speakers from around the globe.
The Blockchain Futurist Conference will take place in Toronto on Tuesday and Wednesday August 9-10. Speakers include Ethereum co-founders Vitalik Buterin and Anthony Di Iorio, Ethan Buchman of Cosmos and Informal Systems and Arthur Camara of Dapper Labs.
Coinbase has its earnings call on Tuesday. According to Zacks Investment Research, the consensus EPS forecast is $-3.04, whereas it was $6.42 the same quarter last year.
Marqeta has its earnings call on Wednesday. The consensus EPS forecast for MQ is $-0.11 this quarter, according to Zacks Investment Research. It was $-0.29 the same quarter last year.Toast has its earnings call on Thursday. According to Zacks Investment Research, the consensus EPS forecast is $-0.24 this quarter. The company went public last September.
Chip shortage could undermine national security: To ensure American security, prosperity and technological leadership, industry leaders say the U.S. must encourage domestic manufacturing of chips in order to reduce our reliance on East Asia producers for crucial electronics components.
Thanks for reading — see you tomorrow!