July 28, 2022
Image: iStock/Getty Images Plus; Protocol
Oh hi there, and welcome to Protocol Fintech. This Thursday: Shopify gives ecommerce the jitters, Durbin plots a credit card sequel and Lloyds is also shopping for fintechs.
“Buy the dip” hits differently when it comes from Chipotle’s Twitter account. The chain restaurant — make that blockchain restaurant — is giving away $200,000 in free crypto. A $BRTO token seems inevitable now. Stablecoin? More like tablecoin, am I right, folks? I’m here all week, tip your quesadilla artist.— Owen Thomas (email | twitter)
There were few companies in the world better positioned for the pandemic than Shopify. Small businesses whose storefronts were shuttered turned to the company with haste to find shoppers online.
But that left Shopify's leadership with a tricky calculation: Was the surge in ecommerce demand a wave to ride out or a sign of a long-term change in how people shop? The company bet that shopping had changed for good and, as its leaders now admit, got it wrong.
"In short, we overshot our prediction," president Harley Finkelstein said Wednesday on the company's second-quarter earnings call. Shopify reported a net loss of $1.2 billion, compared to a $876 million profit in the second quarter of 2021. The company is projecting losses for the second half of the year as well.
Shopify is "recalibrating" its spending. That recalibration seems especially focused on head count.
But Shopify's bets were not limited to hiring. Most notably, the firm paid $2.1 billion this year to acquire Deliverr, an order-fulfillment technology company.
That final point has implications for any fintech with exposure to consumer spending. Consumer confidence is still falling, even if it’s still well above the depths of the Great Recession. And Wall Street investors are already turning against "buy now, pay later” firms and fintech lenders, which were better positioned when interest rates were at rock bottom and consumers wanted to spend. Plenty of public fintechs will have to show their cards as they report second-quarter earnings in the coming weeks. Shopify's executives might not be alone in questioning their bets.
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.
FTX.US opens stock trading. As expected, the crypto exchange has added the option to trade stocks. Outside the U.S., FTX already offers tokenized stocks.
Bitcoin rises after rate hike. While bitcoin’s utility as a hedge against inflation remains cloudy, bitcoin was up about 8% Wednesday, as the Fed raised its benchmark interest rate by three-quarters of a percentage point.
Cathie Wood offloads Coinbase. The investor’s closely watched ARK Invest asset management firm sold more than 1 million shares of Coinbase Tuesday, following a report the company was under SEC investigation. Wood reportedly scooped up about $50 million worth of Shopify shares following its price dip on Tuesday.
Another fintech shopper emerges. The CEO of Lloyds Banking Group said the firm could buy more financial technology companies to bolster its digital offerings. The CEO of Capital One said last week that the company was considering fintech acquisitions as well.
Web3, IRL. Solana is opening a store in Manhattan’s Hudson Yards that includes an NFT gallery wall.LendingClub shares rose on earnings. The company reported $330 million in revenue, up 61% year-over-year, and a $46.8 million profit, excluding an income tax benefit.
Sens. Dick Durbin and Roger Marshall will propose a bill as early as this week targeting credit card fees, The Wall Street Journal reports. The proposed legislation would be similar to the 2011 Durbin amendment, which capped fees debit card processing companies could charge.
According to the sources that spoke to the Journal, the bill would permit merchants to transact through different networks beyond Visa and Mastercard, a duopoly that controls most of the credit card market. Currently, when a customer uses one of the two companies’ cards, the payment must be processed through the corresponding branded network, which critics say allows the companies to charge high fees without much competition.
In a Senate Judiciary Committee hearing in May, credit card executives said the industry faces increased competition from digital wallets, "buy now, pay later" providers and cryptocurrency. “Regulatory interventions focused exclusively on card networks would shift consumer spending away from networks like Visa, and toward more expensive payment methods with more risk, less reliability and fewer protections and security,” Bill Sheedy, senior adviser to Visa CEO Al Kelly, said at the time.
Read the full story on Protocol.com.— Veronica Irwin (email | twitter)
CFTC Commissioner Goldsmith Romero hired Joseph Cisewski as her chief of staff and senior counsel.Cisweski most recently served as general counsel for Pantera Capital.
Will Ruben has joined Uniswap as its vice president of product. Ruben was formerly senior director of product management at Coinbase.
LendingClub has named Drew LaBenne as chief financial officer. LaBenne, previously CFO of Bakkt, will take over the role in September for the retiring Tom Casey.
The Crypto Council for Innovation named two new executives. Linda Jeng has joined as a chief global regulatory officer and general counsel. Jeng is a former senior aide to the Federal Reserve Board. Brett Quick has joined the crypto council as head of government affairs for North America. Quick's Capitol Hill experience includes time as a staff director of the Senate Banking Committee’s national security subcommittee.
U.K.-based banking app and card provider Curve has hired Eyal Galina as chief product officer. The company has been working to build a foothold in the U.S.Eugene Wong is now chief financial officer for Hometap, a fintech home-equity access provider. Wong was previously VP of strategy and finance at Forward Financing.
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!