Vlad Tenev
Photo: David Paul Morris/Bloomberg via Getty Images

Fintech’s bad bets — and good ones

Protocol Fintech

Good morning, and welcome to Protocol Fintech. This Wednesday: good bets and bad in fintech, credit card debt on the rise and the Nomad bridge hack.

Off the chain

Tinder’s doing crypto all wrong. Match Group scrapped its experiment with a cryptocurrency-like reward currency, Tinder Coins. What it needs to do instead is team up with the crypto scammers swarming the dating app and get a piece of the action. Romance isn’t dead, it’s just insufficiently monetized.

— Owen Thomas (email | twitter)

Bad bets, bad bets, what ya gonna do?

This earnings season is exposing who made good bets and bad ones as a pandemic shifted into a downturn, upending everyone’s assumptions on where fintech was headed.

Robinhood this week joined Shopify in admitting it got its projections about ecommerce and online trading wrong, gearing up for growth that fizzled. Then there’s PayPal: It took its lumps as ecommerce’s hypergrowth faded, but it showed a much more solid foundation to its business.

Mismeasure once, cut twice? Robinhood kicked off the week with two stunning announcements: It would slash even more jobs, and unveiled its earnings a day early. The numbers were bad.

  • “This is on me,” CEO Vlad Tenev said about the new round of layoffs. Robinhood hired too many people too quickly after thinking the stock-trading and crypto crazes of 2021 were going to continue. In fact, its projections were so off that cutting 9% of Robinhood’s workforce earlier this year “did not go far enough,” Tenev said.
  • The “macro environment” deteriorated further, as inflation hit 40-year highs and the crypto market crashed. Robinhood saw “reduced customer trading activity and assets under custody,” Tenev said.
  • That echoed what Shopify reported last week. CEO Tobi Lütke said the ecommerce company went on a hiring spree, thinking it was on track to “permanently leap ahead by five or even 10 years" because of the pandemic. "It’s now clear that bet didn’t pay off," Lütke wrote.
  • Might as well get all the bad news out at once: Robinhood said revenue, which missed Wall Street targets, rose 6% from the previous quarter, but dropped 44% year-over-year. Robinhood also posted a wider-than-expected loss.

Steady does it. PayPal is feeling the pressure of the market slump like most fintechs, but it’s also playing to its key strength: a large network of merchants and consumers.

  • PayPal’s stock dropped over the past few months amid concerns about the downturn’s impact on its business. Those worries eased Tuesday as PayPal reported revenue growth jumping from 7% in the month of April to 12% in the month of June. PayPal’s shares rallied 12% after hours Tuesday. The company also announced a $15 billion share buyback.
  • PayPal said it was doubling down on areas of growth, including its digital wallet, PayPal Checkout, Venmo — which saw roughly 50% revenue growth — and its Braintree back end payments system. Getting less emphasis: stock trading, in-store QR code payments and international expansion.
  • Yes, the market is still wobbly, but CEO Dan Schulman said “turmoil in both the ecommerce and fintech sectors has created an unparalleled opportunity.”

SoFi also reported strong earnings Tuesday, buoyed by its bank charter, CEO Anthony Noto said, and its shares leapt after hours, too. Earlier this year, traders knocked fintech stocks down. Now they’re differentiating between the ones experiencing the same turbulence as the rest of the economy and the ones that managed to fly way, way off course. Tenev is still optimistic: “We have adapted to challenges and forced the financial industry to adapt to us,” he wrote in a message to employees. He’ll have to do more to get investors back on board.

— Benjamin Pimentel (email | twitter) and Tomio Geron (email | twitter)


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On the money

Credit card debt is rising at the fastest clip in two decades. Credit card balances increased by $46 billion in the second quarter, a 13% year-over-year jump. Credit card companies, meanwhile, are aggressively spending to court new customers.

On Protocol: Consumer “buy now, pay later” has been hit hard in the market downdraft, but investors and entrepreneurs see opportunity in applying the model to business financing.

Equifax provided inaccurate credit scores on millions of U.S. consumers seeking loans. The company sent erroneous scores on people applying for auto loans, mortgages and credit cards to banks and nonbank lenders big and small from mid-March through early April.

Also on Protocol: Hackers stole nearly $200 million in cryptocurrency after the Nomad crypto bridge protocol was breached.

Solana wallets were next to be hacked. More than 8,000 wallets were drained of solana and USDC tokens, with security experts saying the users’ own private keys appeared to be compromised.

Shopify made a $100 million investment in a strategic partnership with marketing automation firm Klaviyo. The world’s most awkwardly named email service will be the recommended email product for the Shopify Plus merchant plan.

Crypto research firm Messari made an acquisition. Messari bought the assets and business of Dove Metrics, which offers crypto fundraising data and other intelligence.


Want a sample of what life could be like for the CFPB with a Republican Congress? Read the scorching letter Reps. Patrick McHenry, Tom Emmer and Blaine Luetkemeyer sent Director Rohit Chopra recently. “It has come to our attention that the Consumer Financial Protection Bureau may be colluding with states contrary to the Consumer Financial Protection Act,” the members of the House Financial Services Committee wrote, taking issue with Chopra’s outreach to state officials on joint enforcement efforts.

“Bitcoin is unlikely to be the holy grail of cross-border payments,” authors of a new study for the European Central Bank concluded.

The Celsius bankruptcy case is drawing in letter after letter from small-time savers who bought into the crypto lender’s promises of safety and high yields. “Yes, I know, buyer beware but I agree that there has been way too much deception,”wrote self-described “little retired old lady” Jeanne Savelle.

Just one question with Kristo Käärmann, CEO and co-founder of Wise

Käärmann worked as a consultant and manager at Deloitte and PwC before moving to the online money transfer company in 2011.

What fintech trend is most troubling for you?

The U.S. is still behind on payments infrastructure compared to other countries, holding back fintech innovation domestically. To compete internationally, we need to be more open to changes in our payments infrastructure, thereby improving access and user experience for consumers and allowing for more growth within the sector. This includes not only instant payments like FedNow, but also modernizing licenses, expanding access to payments systems and allowing consumers to share their financial data. Ultimately, this all falls within our complex regulatory framework, and working together as an industry will be key to making headway on this issue.


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