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2020’s Biggest Fintech Stories, Part 2- Gigs, Newly Chartered Waters, Credit Skirmishes
Last week we recapped five of the most important fintech stories of the past year (don’t worry; none of them involve pandemics or the election). Let’s continue with a few more, including some late-breaking news:
Special Purpose Charters- and Not-So-Special Ones- charge forward– The trend toward non-traditional players gaining direct access to banking channels continued to gain steam. In July Varo Money became the first consumer-facing fintech to be granted a national banking charter. The State of Wyoming, aiming to become the go-to destination for blockchain companies, began issuing special purpose banking charters covering cryptocurrency (see our coverage of Kraken’s charter).
Perhaps of greatest interest, former Coinbase Chief Legal Officer Brian Brooks was named Acting Comptroller of the Currency, and quickly became an outspoken proponent of opening the financial infrastructure to more non-FIs. It’ll be interesting to follow how this campaign progresses under the Biden Administration.
The Gig Economy’s Ground Rules Get Messy– It’s been clear for some time that the “gig model” is changing how many Americans approach employment and wage earning- including shifting more workers from formal payrolls into independent contractor status. Our longstanding laws and support structures have not kept pace with this evolution.
The tension came to a head in California, where “app-based driver services” Uber, Lyft, DoorDash, etc. submitted and heavily promoted Proposition 22 on the November ballot. The measure passed by a comfortable margin (although the demographic splits and perceptions are fascinating, as our detailed analysis shows). There is plenty to come on this front- tech players have already begun carrying their message to other states- and great need for constructive debate.
One thing is clear- gig economy workers sorely need new services to manage their financial lives, providing a wonderful win/win opportunity for credit unions.
The “Buy Now Pay Later” Battleground Heats Up– I planned to let this one slide until Capital One raised the stakes last week. BNPL providers like Klarna, Affirm and PayPal are flying high, even though some studies show the number of Americans using “interest free” installment payment services growing only moderately. Adopters are using the services more frequently, however, and for higher-priced items. The surprisingly stark declining trend in outstanding credit card balances may not be a direct result of this competition, but BNPL is certainly emerging as a challenger to watch in the top-of-wallet battle.
Capital One became the first to strike back, banning BNPL charges to its cards. Once the “pay later” portion comes due, the lender needs a way to collect their funds- Capital One has determined such charges are less creditworthy than a commitment to pay made at the time of purchase. More cynically, Cap One may be looking to drive the purchase volume to their own cards in the first place- or to pitch their own BNPL offer. Watch this space.
Let’s not forget our friends Google Banking, FedNow, and the Coin Shortage– Continuing to percolate on the back burner were a pair of long-term plays. Google’s banking initiative enlisted several FI partners- including big names like Citi and a few credit unions- but has yet to launch a product or even offer a detailed peek. The ETA for the Fed’s real time payments entry is even further out, but that doesn’t stop the intrigue- especially around potential interoperability with The Clearing House’s RTP offering. Odds are good we’ll still be talking about both of these in December 2021- perhaps we’ll even have some clarity by then.
Speaking of the Fed, it convened a cross-industry task force to tackle the national coin shortage brought on by the pandemic (argh!- I almost made it without mentioning the P word). The chatter seems to have subsided, but I’m told the supply/demand imbalance persists and I’m still seeing “exact change only” signs at registers. Then there’s the Chick Fil A approach of offering a free sandwich to patrons bringing in $10 in coins (at select locations only- I can’t imagine that being an efficient drive-thru play).
With that, let’s put a wrap on 2020 and begin making 2021’s headlines.
https://www.big-fintech.com/Media/Blog/ArticleID/655/The-Crypto-Creature-from-Wyoming
https://www.big-fintech.com/Media/Blog/ArticleID/662/Who-Sets-the-Rules-for-the-Gig-Economy