Protocol | Fintech
The people, power and politics of fintech, every Tuesday and Friday.
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Speeding up stimulus

Wells Fargo customers complained about a delay in coronavirus relief payments.​

Hello and welcome to Protocol | Fintech! This Friday: slow-moving stimulus, Mark Cuban's love for crypto and the Tipalti CEO's worries about it.

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The Big Story

Speeding the stimulus

The first batch of $1,400 economic-relief payments went out this week as a debate raged over the speed of their delivery.

Poor communication and finger-pointing marred what was, in the big picture, a remarkably swift delivery of a massive amount of economic relief in the form of 90 million individual payments.

Some digital banks and online lenders used the relief effort to show how they're able to move money faster and easier. Big banks, meanwhile, stuck to the letter of IRS instructions, which means their customers got access to payments later.

Here's the timetable. President Biden signed the American Rescue Plan Act on March 11. Confusion followed, with the IRS saying one thing and industry organizations saying another.

  • The IRS announced it started sending funds on March 12, but the agency also said payments would likely show up as pending or provisional.
  • But that's not what the IRS told banks, who said they received instructions, not cash, on that date. The instructions said the funds would settle on Wednesday, March 17.
  • JPMorgan Chase and Wells Fargo were among the big banks that faced questions on why it was taking so long for funds to reach customers. They were even accused of holding on to the money instead of disbursing immediately. (They denied this.)
  • Meanwhile, online upstarts like Credit Sesame, N26 and Chime gave customers access to the relief payments faster. How did they do this? With IRS payment instructions in hand, they advanced customers the money, figuring the Treasury was good for it.

The fallout was intense. The big banks, through the Clearing House, an industry association that processes payments, blamed the feds.

  • The IRS could have started sending funds on the same day instructions were made available but "chose not to do so," the association said.
  • The agency could also have used the "standard timing" which would have made the funds available to recipients as early as Monday, instead of Wednesday, Dave Fortney, the Clearing House's executive vice president for product development and management, told Protocol.
  • We asked the IRS for an explanation. We didn't hear back.

A marketing windfall ensued. The stimulus brouhaha gave some startups a chance to show off their flexibility.

  • This wasn't a secret. Chime, for example, had already marketed early access to stimulus payments in previous rounds. Square also noted that Cash App customers could get direct deposits up to two days faster than banks.
  • Adam Shapiro, co-founder and partner at Klaros Group, praised the upstarts for seizing the opportunity to "delight customers and tantalize potential customers." Banks "would do well to steal this playbook," he told Protocol.
The delays come at a time when people are hurting and need the money. The "confusion" and "frustration" over the way stimulus checks were sent out underscored a payments system that is clearly outdated, Modern Treasury CEO Dimitri Dadiomov told Protocol. If banks don't effectively press for changes, challengers will find ways to route around them.

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From Protocol | Fintech

SoFi co-founder Dan Macklin is back. The now-U.S. CEO of Salary Finance is leading the U.K. startup's bold expansion in the United States, which just got a boost from the $150 million debt facility through Community Investment Management.

Overheard

  • "For better and for worse, the Earth is changing at an accelerating rate." Kevin Weil, who helped create Facebook's Diem digital currency, on why he is leaving to join Planet, which operates satellites that take daily photos of Earth.
  • "We thought this was a good way to test the market. If you see it in baseball, you can see it anywhere." —Oakland A's President David Kaval, on the team's plan to sell luxury suites using Bitcoin.
  • "I can do my own banking and it's very friction-free, very straightforward and fast. That lack of friction is the game-changer." —Investor Mark Cuban on why he became a fan of crypto and DeFi.

3 Questions With ...

Tipalti CEO Chen Amit

Tipalti offers a payments and money remittance service serving small and medium-sized businesses.

What fintech trend are you most excited about?

The [customer] pains of the mid-market are really specific and acute. They are different from small businesses and they are different from enterprises. We really need something in the middle. I'm happy that we're in the center of all of that.

What fintech trend are you most worried about?

I am struggling with the crypto world. You see the volatility of the currency. One day it's up, one day it's down. There's no underlying asset behind it. I'm just staying away from it. I worry for others. It feels speculative. A few years ago, my hairdresser asked me about Bitcoin. He was buying Bitcoin. That worries me.

What was your biggest professional blunder and what did you learn from it?

The blunder was with a previous company. It was a very exciting technology, very sexy. It's really AI and machine learning. There was one customer who was just in love with what we're doing. [But] this was more of a technology looking for a problem to solve than a problem that is looking for a technology that will solve it.

Need to Know

  • Fondeadora raised another $14 million. That brings the Mexico City-based challenger bank's series A to $28 million. The round included investments from Portag3 and Google's Gradient Ventures.
  • BlueVine hired a PayPal veteran. Steve Allocca joins the small business financing startup as its first chief operating officer.
  • Nubank has 33 million customers. The Brazilian neobank released 2020 year-end numbers that show customers up 68% and revenue up 79% from last year.
  • EToro is going public via a SPAC. The trading platform said it plans to go public through a merger with SPAC Fintech Acquisition Corp V. The deal is valued at $10.4 billion.
  • Flutterwave teamed up with PayPal. The startup is working with the U.S. company to allow PayPal customers to pay merchants in Africa through its platform.
  • Visa and Mastercard pushed back planned fee hikes. The card networks are postponing a plan to increase fees for card-not-present transactions to April 2022.
  • India is considering a crypto ban. The world's largest democracy will propose a law banning the trading or holding of cryptocurrency for anyone in India.
  • SEC filed charges against a California trader. The SEC accused Andrew Fassari for using Twitter to pump and dump stocks.

Thanks for reading — see you Tuesday.

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