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SoFi’s bank is launching soon, and Wall Street is stoked

Protocol Fintech

Hello and welcome to Protocol Fintech! This Friday: why Wall Street got stoked about SoFi, a crypto CEO’s NFT regret, and big changes coming to your favorite newsletter.

Pressing the accelerator

The pace of change in the world of money is only increasing. From crypto’s wild ride to the push to speed payments to the drumbeat of impending regulation in Washington, there’s more to cover than ever. So starting Monday, we’re taking your favorite fintech newsletter daily. Ben Pimentel and Tomio Geron will continue to anchor the newsletter, joined by our newest team member, Lindsey Choo. New sections will help you keep track of key events, earnings calls, hires and deals. Let us know what you think, and if you like what you see, tell a friend.

— Owen Thomas (email | twitter)

Banking buzz

SoFi shares rallied this week on news that the OCC has given a conditional OK to its plan to launch its own bank.

The company still has a bit of work to do, including closing its acquisition of Golden Pacific Bank, the vehicle for its banking ambitions. But there’s a reason why Wall Street’s getting excited.

Getting a charter — either by submitting to a regulatory process or buying an existing bank — is too big of a hassle for most fintech companies. Now SoFi looks to be getting to the other side of that moat. And Wall Street likes moats.

Dealing with regulators can be a pain. That’s the reason most fintechs typically work with partner banks.

  • It can be beneficial to both sides. The banks gain access to new tools and technologies, not to mention a revenue stream, while doing the hard work of compliance.
  • But fintechs can hit a point where they outgrow the arrangement, seeking more control over their products and profits. That led LendingClub to buy Radius Bank for $185 million in 2020. Last year, Square, whose parent recently renamed itself Block, got its own charter to launch Square Financial Services.
  • SoFi initially followed Square’s lead by applying for a charter, but then switched gears last year and bought Golden Pacific Bancorp for $22.3 million. CEO Anthony Noto said the move was a faster way to get to its goal.
  • The trend will “definitely accelerate,” Alex Johnson, fintech research director of Cornerstone Advisors, told Protocol. There’s so much money pouring into fintech right now — and buying a bank or acquiring a charter is “likely a good use of that capital.”

LendingClub showed why becoming a bank pays off. The fintech pioneer stunned Wall Street in 2020 when it said it was buying a bank. It surprised investors again last July by reporting the most profitable quarter in its history — largely because it has become a full-fledged bank.

  • Becoming a bank helped LendingClub cut costs while bringing additional revenue, CEO Scott Sanborn told Protocol last year. The fact that it is now subject to greater regulatory scrutiny actually inspired more confidence in customers, he said.
  • Hopes are high that SoFi will reap similar benefits with the expected launch of SoFi Bank. “It gives them easier access to capital,” which means they’d be able to offer customers better rates, IDC analyst Raymond Pucci told Protocol.
  • The downside is that regulators could slow SoFi down in expanding into other areas. In granting its conditional approval, the OCC cautioned SoFi about crypto. The agency noted that SoFi Bank “will not engage in any crypto-asset activities or services.”
  • That’s not going to be a problem, a SoFi rep told Protocol. SoFi’s crypto business operates under SoFi Invest; SoFi Bank will be a separate entity. It’s typical for financial firms to cordon off their crypto activities in this way.

Not all fintechs should try this. Becoming a bank takes a lot of work and can be very expensive. It makes sense for big, established fintechs like SoFi and LendingClub, which have some experience dealing with regulators. “It’s a scale thing,” Pucci said. “You’re adding to your toolbox so you can do more things.” Now investors expect SoFi to put that toolbox to work.

– Benjamin Pimentel (email | twitter)


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From Protocol Fintech

The Fed wants ideas on the digital dollar. The central bank released its long-awaited report on the proposal to create a CBDC — and it wants input from the public before making a decision.

Google wants in on bitcoin. The tech giant is adding crypto support to its digital Google Pay cards.

Revolut is challenging Robinhood. The U.K.-based mobile bank introduced stock trading for U.S. customers. got hacked. The crypto marketplace said a security breach affected some 400 accounts.

OpenSea bought Dharma Labs. The NFT marketplace has acquired the maker of a wallet app for buying and selling crypto.

Coinbase is teaming up with Mastercard. The crypto marketplace is working with the payments company to give customers easier access to NFTs.

Robinhood introduced its crypto wallet. Customers have been asking the online broker for a way to store their crypto, not just trade it, and a lucky thousand users will finally get access, the company said Thursday.


"We cannot bring entire fossil fuel plants back online. Particularly in light of cleaner blockchain technologies that already exist."Rep. Frank Pallone, chairman of the House Energy Committee, at a hearing on bitcoin mining.

I’d argue that PFOF is alive and well in Europe.”Edward Monrad, head of European Equity Market Structure at Optiver Europe, on the emergence of practices that resemble payment for order flow in the continent.

3 questions for Vlad Ginzburg, CEO of Blockparty

Blockparty is a digital asset marketplace. Ginzburg previously worked for eight years as an art adviser.

What fintech trend are you most excited about?

I’m most excited about the trend of decentralized finance, or, the idea of a P2P borrowing/lending market governed by smart contracts. Not only do I think the concept can offer the legacy borrowing/lending market efficiency tools, [but it can also] positively impact the availability of microloans and microfinance — something that truly has potential to democratize the availability of capital to the unbanked and underserved markets.

What fintech trend is most troubling for you?

Overly tying payments to identity. I think it is an extremely slippery slope to violating privacy concerns for individuals.

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

Waiting too long to enter NFTs for the creative industry. Winter of 2018/2019 was the moment where I knew this market was going to take off.

Need to know

Plaid is buying Cognito for identity verification. Cognito helps companies comply with know-your-customer and anti-money laundering rules.

The Russian Central Bank has proposed a ban on crypto mining. Russia became the world’s third-largest country in crypto mining after the U.S. and Kazakhstan following China’s ban on crypto mining, but now officials are concerned about the environmental, financial and social impact.

Mastercard launched a B2B payment alternative to ACH. Mastercard Track Instant Pay is a virtual card product.

Binance maintained weak checks on customers, according to Reuters. A special report found that the company acted against internal risk recommendations, based on internal documents. The company disputed the wire service’s reporting.

Making moves

Kim Milosevich has rejoined Andreessen Horowitz as CMO of crypto. She was previously at Coinbase, and before that at a16z. Her return follows the departure of a16z crypto comms staffers Rachael Horwitz and Nick Pacilio to ex-a16z crypto partner Katie Haun’s new fund.

Casey Carl, Walmart’s lead U.S. ecommerce executive, is stepping down. Tom Ward, a senior vice president, is taking his spot.

Deal flow

Autograph signed funders up for $170 million. The NFT agency, co-founded by Tom Brady, raised a series B led by Andreessen Horowitz and Kleiner Perkins. Katie Haun’s fund also participated, which highlights that things are still pretty friendly between Haun and a16z.

Habi nabbed $100 million. The Bogota-based real estate startup raised a series B led by SoftBank.

Personetics raised $85 million. The startup uses AI to analyze financial data for clients such as U.S. Bank and Santander.

Andreessen Horowitz is seeking another $4.5 billion for its crypto funds. This would more than double what the firm raised less than a year ago.

8.42 million

That’s the number of monthly users of “buy now, pay later” services in the U.S. in December, an all-time high; annual growth slowed slightly to 67%, compared to 69% in November.

Thanks for reading — see you Monday for our first daily edition!

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