Kitchen worker passes food to customer
Photo: Toast

Toast built a fintech business serving restaurants. Is that enough?

Protocol Fintech

Hello and welcome to Protocol | Fintech! This Tuesday: A taste of Toast's S-1, Anchorage's boom in crypto busts, and Astra's plan to speed up ACH.

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The Big Story

It seems like every tech company wants to be a fintech company these days. Take Toast: The Boston company, which is preparing to go public this week, is best known as the way you might order dinner on a given night. But its S-1 reveals a company mostly built on financial services.

Wall Street seems happy to order fintech with a side of software. Toast raised its expected IPO price range Monday to $34 to $36, which could value it at as much as $18 billion, an indication that investors may be buying Toast's story.

  • Toast provides point-of-sale hardware, payments and marketing tools to restaurants, but generates about 78% of its revenue from financial services.
  • That added up to $644.4 million in 2020, mostly from payments, with a small amount coming from working-capital loans that Toast services for its customers through a third-party bank.
  • Toast has 48,000 restaurant locations using its platform and its gross payments volume increased 17% to $25.4 billion in 2020.
  • Sound familiar? Square's playbook was similar: Start with hardware and layer on services. And that company's now worth $115 billion.

The margins are always greener on the other side. Software companies want to be fintechs. And fintechs want to sell software, too.

  • Embedded finance is making it easier for companies large and small to add debit cards, payment options, loans, loyalty programs and other financial services. Some do it to diversify their businesses, while others just want to lock in customer loyalty. Either way, it's a growing trend.
  • Payments are the bulk of Toast's business, but the margins aren't great, and payments is hyper-competitive. Toast's average take rate for payments is 55 basis points, less than rival Lightspeed Payments, which estimated its take rate at 65 basis points.
  • But payments reduce churn. Once companies lock in a payment system, they are more likely to stick around.
  • And that's where Toast sees an opportunity to build its software business.

Payments are nice, but so are subscriptions. Wall Street likes the predictability of subscription revenue — look at those SaaS multiples.

  • Toast has been trying to grow its subscription business, which insulates its transactions revenue from economic ups and downs.
  • Toast's subscription revenue grew 62% from $62.4 million in 2020 to $101.4 million in 2020. That's compared to 21% growth in the same period for financial services and payments.
  • Toast's subscription services include things like point-of-sale software, kitchen displays, invoice management, staff scheduling and digital ordering.

Toast is showing a way to compete in payments. Toast lists rivals such as Square, Lightspeed and Clover. Even OpenTable offers payments! And the restaurant industry is, even in good, non-pandemic times, a low-margin, high-failure rate business. Despite that, Toast is succeeding by catering — sorry, we'll show ourselves out now — to the quirks of its customers' operations. Toast's lesson: Being a fintech is great. But you can't stop there.

— Tomio Geron


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From Protocol | Fintech

What do the U.S. Marshals do after a crypto bust?They call Anchorage. The startup is storing digital assets seized from criminals, and also played a role in Visa's first NFT purchase.

Coinbase canceled its crypto lending plans. The crypto marketplace has called off plans to introduce a new product called Lend after the SEC threatened to take legal action.

Why do bank transfers still take days and days? One startup, Astra, is trying to solve that problem by offering a faster way to move funds from one bank account to another using the existing ACH system.


"I really worry about the alternative data being used not just to determine who gets access to credit but how to market to people ... when they are most vulnerable." Chris Peterson, a University of Utah law professor, on the expanding use of consumer financial data in fintech.

"Fintech needs to be where the financial hubs are, and if you are not in Hong Kong then there are only a few [remaining] options."King Leung, head of fintech at InvestHK, which is promoting foreign direct investment in Hong Kong.

"WEN WALLETS???" Robinhood CEO Vlad Tenev replying to the company's Twitter update on the latest crypto news.

3 Questions With …

Eric Glyman, CEO, Ramp

What fintech trend are you most excited about?

Definitely cryptocurrency. It's a space I've been involved in since 2013. When I was working on my last company Paribus, we did a partnership with Coinbase when the company was still relatively early, and it resulted in us distributing 50 bitcoin to customers as a promotion. (Hope they held!) As the industry gets to real scale, there is a large and growing number of crypto-native businesses that have finance and accounting issues. The supporting software just isn't there yet, and there's opportunity to build solutions.

What fintech trend is most troubling for you?

Lack of alignment with customers. Many fintechs and traditional financial service providers alike monetize through interchange, brokerage fees and more, sometimes incentivizing customers to do what is good for the business, not what is best for the customer. Their business model is fundamentally misaligned with what's best for customers. Take credit cards for instance, since that's what I spend a lot of my time thinking about. Cards offer complicated rewards programs so people don't take advantage of them. The issuers also want people to spend more, because that means they make more. The biggest opportunity in fintech is to turn this upside down and build companies where business incentives are aligned with what's best for the customer.

What fintech company have you been most impressed with this past year?

I've been impressed by Recurrency, which is using AI to help companies optimize their pricing, predict sales from reorders and make intelligent upsell recommendations to customers. I think they've flown relatively under the radar, but they have a really hard-working team that's taking on a sleepy industry and is moving very fast to develop and ship products.

Need to Know

JPMorgan is set to launch a digital bank in the U.K. The Wall Street giant is introducing a digital retail bank called Chase, JPMorgan's first overseas retail bank.

Regulators are investigating Binance for possible insider trading. The U.S. Commodity Futures Trading Commission is looking into allegations of market manipulation at the crypto exchange.

Making Moves

Mircea Mihaescu is Coinfirm's new CEO. Mihaescu, who joined Coinfirm as executive chairman earlier this year, will now lead the digital currency regulation tech company.

Paul Brooking is Freetrade's new CFO. Brooking joined the British trading app from Revolut, where he served as deputy CFO.

Deal Flow

Airwallex raised $200 million. The payments technology software company's series E round was led by Lone Pine Capital.

Kernolab raised $1 million. The Lithuania-based embedded financial services company's seed round was led by Lighthouse Ventures.

Razorpay got money from Salesforce. The Bangalore-based business financial services company said the "strategic investment" from the tech giant will help "strengthen its presence in the business banking space." The size of the investment was not disclosed.

Neo Financial raised $64 million. The Canadian financial services technology company's series B round was led by Valar Ventures.

Data Point


That's the number of bitcoins owned by El Salvador after the government bought another 150, part of its push to make bitcoin legal tender in the country. Based on Monday's value, the Central American nation's bitcoin holdings are worth $30.8 million.

Thanks for reading — see you Friday!

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