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The fintech consumer is changing

Protocol Fintech

Good morning, and welcome to Protocol Fintech. This Monday: the new fintech consumer, layoffs at Stripe and the FDIC’s crypto crackdown.

Off the chain

Venmo was something PayPal picked up almost by accident when the larger company bought Braintree in 2013 in an effort to better compete with Stripe. Braintree itself had bought Venmo a year prior as part of a nascent plan to build a consumer wallet. Rather than fold Venmo into PayPal, its parent has let it grow. And it’s done that: Venmo grew 50% in the second quarter to nearly 90 million accounts. Not bad for a free gift with purchase.

— Owen Thomas (email | twitter)

The fintech consumer is changing

As the debate rages on over whether we are in an economic slowdown, recession or “vibecession,” one thing has been pretty clear: "Across the board, consumers are feeling worse off than they were last year," said Charlotte Principato, financial services analyst at Morning Consult.

And that sentiment affects the financial products people are interested in using, as detailed in Morning Consult’s recent “State of Consumer Banking & Payments” report, based on monthly surveys of more than 2,000 consumers.

People are more likely to say they’re concerned about running out of money, or not attaining the lifestyle they want because of money.

  • The financial well-being score for American consumers — a reflection of their perceived financial security, among other factors — showed declines across all income brackets comparing June 2022 to June 2021.
  • About 53% of U.S. adults said they have money left over each month as of this June, compared to 61% at the same point last year.
  • Roughly 13% fewer adults are now saying they are making progress toward financial goals of saving for education and donating to charity.

Investing is getting cut out. Especially by young adults. The number of Millennials who say they have at least one savings product fell from 70% in July 2021 to 57% this June; just 49% of Gen Z adults have at least one investment product, compared to 60% last year.

  • "We are comparing this to what was still the height of the retail investing boom," Principato said. "But it seems we are on a reversing trajectory to the pre-pandemic world, when people did not have the time or money to invest."
  • That's a big part of what's cutting into Robinhood's revenues. "Customers are seeing this high inflation, along with high interest rates, bear markets [in] stocks and a crypto winter," CEO Vlad Tenev told analysts earlier this month. "And this all adds up to less money to spend and therefore, less to save and invest."
  • It is also adding up to a less diverse base of investors. "The demographic makeup of individual investors — already disproportionately older and wealthier than the general population — is even older and wealthier than it was in July 2021," Principato wrote in the report.
  • Perhaps surprisingly, the number of U.S. adults who said they hold crypto held steady from January to June at about 15%. That’s despite a crash in values.

Younger consumers are still buying now, paying later. Just under 40% of Gen Z adults and 30% of Millennials surveyed by Morning Consult used “buy now, pay later” to make at least one purchase in the past month as of June.

  • "I think consumers that have gotten in the habit of using it over the past year will continue to do so in the coming months, especially as we reach the holiday season," Principato said. Morning Consult began surveying “buy now, pay later” use last July and found reported monthly usage peaked in December at about 25% of the U.S. adult population.
  • There is an age gap: Fewer than 10% of Baby Boomer shoppers reported using a pay-later service in June.
  • Credit card use is holding steady compared to last summer, Morning Consult found, while fewer households report holding auto and home-equity loans.

People are staying the course with their bank. The number of people who told Morning Consult they were interested in adding a new banking provider dropped by 39% in June compared to last year. "People are focused on not rocking the boat anymore than it already is being rocked for them," Principato said. That could be bad news for neobanks already struggling to find profits.

— Ryan Deffenbaugh (email | twitter)

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On the money

The CFPB says Block is slowing down its Cash App investigation. The Consumer Financial Protection Bureau asked a federal judge to force Block to hand over documents it requested last year about Cash App’s handling of complaints and disputes. Block said it was “disappointed” by the agency’s move.

Stripe laid off between 45 to 55 employees at TaxJar, according to TechCrunch. Stripe acquired the tax-compliance startup last year.

The U.S. bankruptcy trustee for Celsius Network is seeking the appointment of an examiner. “There is no real understanding among customers, parties in interest, and the public as to the type or actual value of crypto held by the Debtors or where it is held,” the trustee said in a court filing.

Mortgage lenders are in trouble. More of the mortgage market is controlled by nonbank lenders, including fintechs, and many of them are struggling to stay afloat as originations slow.

The FDIC’s crypto crackdown

The FDIC said Friday that FTX and other crypto firms published misleading statements about deposit insurance. The agency sent a cease-and-desist in response to tweets by FTX.US president Brett Harrison that the FDIC said contained misrepresentations about deposit insurance. Shortly after the announcement, Harrison tweeted that he had deleted the post and "didn’t mean to mislead anyone, and we didn’t suggest that FTX US itself, or that crypto/non-fiat assets, benefit from FDIC insurance."

The FDIC sent similar letters to the websites Cryptonews.com, Cryptosec.info, SmartAsset.com and FDICcrypto.com alleging the sites made misleading statements about crypto products having deposit insurance. The letters are part of a crackdown the FDIC promised after it sent a cease-and-desist letter about FDIC insurance claims to Voyager.

— Ryan Deffenbaugh (email | twitter)

Coming up

FinVolution Group is expected to report earnings today. Analysts don’t have an estimate for EPS, but it was $0.34 for the same quarter last year.

The Mobile Payment Conference is happening today through Wednesday in Atlanta. The conference is focused on education and networking for people who work in mobile payments and digital technology.

Intuit will report earnings Tuesday. The consensus EPS forecast, according to Zacks Investment Research, is $0.03 for the quarter. It was $1.28 for the same quarter last year.

Fintech DevCon takes place this Tuesday through Thursday in Denver. Speakers include fintech adviser Lou Anne Alexander, TrueML’s Laura Marino, and Mike Bifulco of Stripe.

The LatAm Fintech Summit takes place Wednesday and Thursday in Mexico City. The 14th annual event examines Latin American fintech, as financial inclusion and education for the region’s young, underbanked, growing populations become big drivers for the industry.

Affirm will report earnings Thursday. The consensus EPS forecast, according to Zacks Investment Research, is $-0.45. It was $-0.48 for the same quarter last year.

The Fintech Growth Summit is this Thursday and Friday in Miami. The “intimate” event spans topics from fraud and risk management to NFT use cases.

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Thanks for reading — see you tomorrow!

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