Finance
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Commission-free trading app Stake secures $30M from Tiger Global to expand into Europe
Commission-free trading app Stake, which is available in the U.K., Brazil and New Zealand, has raised $30 million from Tiger Global and partners of London-based DST Global to expand into Europe.
Matt Leibowitz, founder and CEO of Stake said: “We’re really excited to get to this point but it’s just the start. We set out to change the game for retail investors and were self-funded for the first four years of our journey. We’ve proven the model and now have the chance to expand our product and bring our zero-brokerage service to more retail investors.”
Since launching in the U.K. in early 2020, Stake claims to have grown its total customer base more than six times over, with 25% month-on-month customer growth on average and hitting over 330,000 customers globally.
It was the first to offer commission-free access to the U.S. market in Australia, offering retail investors access to over 4,400 U.S. stocks & ETFs without a brokerage fee.
In the U.K. it competes with eToro, Libertex, Fineco, Plus500 and IG, among others.
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Dorothy is a startup that offers faster cash post-disaster
When disaster strikes, costs pile up quickly. Flood waters can wipe out the foundation of a home or building, just as much as wildfires can burn down the walls or the entire structure. For residents and business owners, rebuilding and rebuilding quickly is crucial: They ultimately need some place to live and offer services, and they often can’t afford to be shut out for extended periods of time.
Of course, the need for speed among consumers hits the brick wall that is the insurance industry and government’s timeline for dispersing post-disaster insurance claims and aid. It’s not uncommon for federal aid to take months or even years to arrive, and insurance companies can often take months as well to process claims, particularly after large disasters like hurricanes where thousands of claims arrive simultaneously.
Dorothy is a startup that is aiming to bridge the gap by offering, well, gap loans to users who already have existing private insurance or federal flood insurance policies. The idea is to extend cash as quickly as possible after qualification, and then Dorothy gets paid back when a claim is later processed. Much like other advance cash startups in other sectors, Dorothy takes a fee based on the size of the loan.
The company’s underwriting model assesses the likelihood that a claim will be approved given the details of a particular disaster and the user’s insurance policy.
Arianna Armelli and Claudio Angrigiani founded the company last year in the midst of the COVID-19 pandemic, naming it for the character from the “Wizard of Oz” who repeatedly said “there’s no place like home.” They met each other in graduate school at the University of Pennsylvania and explored different ways to solve the challenges of disaster finance.
Armelli, for her part, had experienced these challenges firsthand in the wake of Hurricane Sandy in 2012. She was an architect, and her office in Manhattan had to be evacuated. She returned a few days later, but over time, realized that many of her friends still couldn’t return to their homes even weeks after the hurricane had passed. She volunteered with recovery efforts, and “went house to house in the Rockaways to remove drywall from their basements,” she said.
She continued her career, spending nearly six years as an architect and urban planner, and that training drove some of her early ideas about how to improve post-disaster recovery. “I thought the answer to these problems was designing better infrastructure and long-term sustainable solutions with planning,” she said. “After six years in planning, [I] realized these were 40-year projects.”
After meeting Angrigiani, the two explored ways to make the insurance system better for end users. They began by investigating how better flood data could help insurance companies underwrite better policies and process claims faster. They realized over time though that the insurance industry was quite sclerotic, and that a third-party provider of better flood predictive data wasn’t going to have a large impact on outcomes.
As COVID bared down on the world, they then explored business interruption insurance. Using their technology for disaster prediction, they saw an opportunity to offer “a financial supplementary product for businesses,” essentially a “credit line product that is offered to commercial business owners similar to a credit card,” Armelli said. That idea eventually morphed into the company’s current product offering targeting property owners, both businesses and individuals, with the same sort of gap loan to solve immediate cash-flow problems.
Dorothy participated in the latest cohort of Urban-X and closed a pre-seed round this past February. The company has raised a $250,000 debt facility to further test out its gap loan product, and it has 25 qualified customers in its pipeline. It’s early days, but it’s an interesting new bet on how to make insurance actually useful when people face some of the toughest moments of their lives.
It’s just one of a new crop of startups that are building new offerings in a world increasingly filled with massive disasters.
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Finary wants to create the wealth management dashboard for the next generation
Meet Finary, a new French startup that wants to change how you manage your savings, investments, mortgage, real estate assets and cryptocurrencies. The company lets you aggregate all your accounts across various banks and financial institutions so you can track your wealth comprehensively over time.
After attending Y Combinator, the startup has just closed a $2.7 million (€2.2 million) seed round led by Speedinvest, with Kima Ventures and angel investors such as Raphaël Vullierme also participating.
If you know people who have a ton of money, chances are they tend to be at least 40 or 50 years old — you don’t become rich overnight, after all. And they tend to manage their investment portfolio through a wealth management service with tailor-made services.
“There’s very little tech in wealth management. Advisors are also incentivized to sell you some financial products in particular,” co-founder and CEO Mounir Laggoune told me. In that situation, the company in charge of the financial product is generating revenue for the advisor — not the client.
At the same time, a new generation of investors is starting to accumulate a lot of wealth. And yet, they don’t have the right tools to allocate it properly. Younger people want to see information directly. They want a way to track information in real time, or near real time. And they want to be able to take some actions based on that data.
Finary wants to build that service based on those principles. It starts with an API-based aggregator. When you create a Finary account, you can connect it with all your other accounts — bank accounts, brokerage accounts, mortgage and real estate, gold, cryptocurrencies, etc.
The startup leverages various open banking APIs to be as exhaustive as possible. For instance, “you can connect a Robinhood account and a Crédit Mutuel de Bretagne account,” Laggoune said. Behind the scenes, Finary uses Plaid and Budget Insight, runs its own bitcoin and Ethereum nodes to track wallet addresses, and estimates the value of your home through public data and a proprietary algorithm.
After that, you can see how much money you have, how it is divided between your investment pools, the current value of your gold and cryptocurrency assets and more.
“Our long-term vision is that we want to build a virtual wealth manager for Europe,” Laggoune said.
That’s why Finary recently launched its premium subscription called Finary+. With a premium account, you can see how much you’re paying in fees and track your performance — more features will get added over time.
A few months after launching its platform, Finary already tracks €2 billion in assets across thousands of users. With today’s funding round, the startup will roll out its service to more countries and more financial institutions in France, Europe and the U.S. The company is also working on mobile apps.
This is an interesting take on wealth management, as Finary doesn’t try to reinvent the wheel. Legacy players want you to use a single bank for all your financial needs. But you end up paying a lot of fees and you have to use old and clunky interfaces.
Finary isn’t yet another wealth management service. It’s a holistic service that lets you use multiple banks and services while remaining on top of your assets.
Image Credits: Finary
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Amount raises $99M at a $1B+ valuation to help banks better compete with fintechs
Amount, a company that provides technology to banks and financial institutions, has raised $99 million in a Series D funding round at a valuation of just over $1 billion.
WestCap, a growth equity firm founded by ex-Airbnb and Blackstone CFO Laurence Tosi, led the round. Hanaco Ventures, Goldman Sachs, Invus Opportunities and Barclays Principal Investments also participated.
Notably, the investment comes just over five months after Amount raised $86 million in a Series C round led by Goldman Sachs Growth at a valuation of $686 million. (The original raise was $81 million, but Barclays Principal Investments invested $5 million as part of a second close of the Series C round). And that round came just three months after the Chicago-based startup quietly raised $58 million in a Series B round in March. The latest funding brings Amount’s total capital raised to $243 million since it spun off from Avant — an online lender that has raised over $600 million in equity — in January of 2020.
So, what kind of technology does Amount provide?
In simple terms, Amount’s mission is to help financial institutions “go digital in months — not years” and thus, better compete with fintech rivals. The company formed just before the pandemic hit. But as we have all seen, demand for the type of technology Amount has developed has only increased exponentially this year and last.
CEO Adam Hughes says Amount was spun out of Avant to provide enterprise software built specifically for the banking industry. It partners with banks and financial institutions to “rapidly digitize their financial infrastructure and compete in the retail lending and buy now, pay later sectors,” Hughes told TechCrunch.
Specifically, the 400-person company has built what it describes as “battle-tested” retail banking and point-of-sale technology that it claims accelerates digital transformation for financial institutions. The goal is to give those institutions a way to offer “a secure and seamless digital customer and merchant experience” that leverages Amount’s verification and analytics capabilities.
Image Credits: Amount
HSBC, TD Bank, Regions, Banco Popular and Avant (of course) are among the 10 banks that use Amount’s technology in an effort to simplify their transition to digital financial services. Recently, Barclays US Consumer Bank became one of the first major banks to offer installment point-of-sale options, giving merchants the ability to “white label” POS payments under their own brand (using Amount’s technology).
“The pandemic dramatically accelerated banks’ interest in further digitizing the retail lending experience and offering additional buy now, pay later financing options with the rise of e-commerce,” Hughes, former president and COO at Avant, told TechCrunch. “Banks are facing significant disruption risk from fintech competitors, so an Amount partnership can deliver a world-class digital experience with significant go-to-market advantages.”
Also, he points out, consumers’ digital expectations have changed as a result of the forced digital adoption during the pandemic, with bank branches and stores closing and more banking done and more goods and services being purchased online.
Amount delivers retail banking experiences via a variety of channels and a point-of-sale financing product suite, as well as features such as fraud prevention, verification, decisioning engines and account management.
Overall, Amount clients include financial institutions collectively managing nearly $2 trillion in U.S. assets and servicing more than 50 million U.S. customers, according to the company.
Hughes declined to provide any details regarding the company’s financials, saying only that Amount “performed well” as a standalone company in 2020 and that the company is expecting “significant” year-over-year revenue growth in 2021.
Amount plans to use its new capital to further accelerate R&D by investing in its technology and products. It also will be eyeing some acquisitions.
“We see a lot of interesting technology we could layer onto our platform to unlock new asset classes, and acquisition opportunities that would allow us to bring additional features to our platform,” Hughes told TechCrunch.
Avant itself made its first acquisition earlier this year when it picked up Zero Financial, news that TechCrunch covered here.
Kevin Marcus, partner at WestCap, said his firm invested in Amount based on the belief that banks and other financial institutions have “a point-in-time opportunity to democratize access to traditional financial products by accelerating modernization efforts.”
“Amount is the market leader in powering that change,” he said. “Through its best-in-class products, Amount enables financial institutions to enhance and elevate the banking experience for their end customers and maintain a key competitive advantage in the marketplace.”
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Industrial automation startup Bright Machines hauls in $435M by going public via SPAC
Bright Machines is going public via a SPAC-led combination, it announced this morning. The transaction will see the 3-year-old company merge with SCVX, raising gross cash proceeds of $435 million in the process.
After the transaction is consummated, the startup will sport an anticipated equity valuation of $1.6 billion.
The Bright Machines news indicates that the great SPAC chill was not a deep freeze. And the transaction itself, in conjunction with the previously announced Desktop Metal blank-check deal, implies that there is space in the market for hardware startup liquidity via SPACs. Perhaps that will unlock more late-stage capital for hardware-focused upstarts.
Today we’re first looking at what Bright Machines does, and then the financial details that it shared as part of its news.
What’s Bright Machines?
Bright Machines is trying to solve a hard problem related to industrial automation by creating microfactories. This involves a complex mix of hardware, software and artificial intelligence. While robotics has been around in one form or another since the 1970s, for the most part, it has lacked real intelligence. Bright Machines wants to change that.
The company emerged in 2018 with a $179 million Series A, a hefty amount of cash for a young startup, but the company has a bold vision and such a vision takes extensive funding. What it’s trying to do is completely transform manufacturing using machine learning.
At the time of that funding, the company brought in former Autodesk co-CEO Amar Hanspal as CEO and former Autodesk founder and CEO Carl Bass to sit on the company board of directors. AutoDesk itself has been trying to transform design and manufacturing in recent years, so it was logical to bring these two experienced leaders into the fold.
The startup’s thesis is that instead of having what are essentially “unintelligent” robots, it wants to add computer vision and a heavy dose of sensors to bring a data-driven automation approach to the factory floor.
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New Relic’s business remodel will leave new CEO with work to do
For Bill Staples, the freshly appointed CEO at New Relic, who takes over on July 1, yesterday was a good day. After more than 20 years in the industry, he was given his own company to run. It’s quite an accomplishment, but now the hard work begins.
On the positive side of the equation, New Relic is one of the market leaders in the application performance monitoring space.
Lew Cirne, New Relic’s founder and CEO, who is stepping into the executive chairman role, spent the last several years rebuilding the company’s platform and changing its revenue model, aiming for what he hopes is long-term success.
“All the work we did in re-platforming our data tier and our user interface and the migration to consumption business model, that’s not so we can be a $1 billion New Relic — it’s so we can be a multibillion-dollar New Relic. And we are willing to forgo some short-term opportunity and take some short-term pain in order to set us up for long-term success,” Cirne told TechCrunch after yesterday’s announcement.
On the positive side of the equation, New Relic is one of the market leaders in the application performance monitoring space. Gartner has the company in third place behind Dynatrace and Cisco AppDynamics, and ahead of DataDog. While the Magic Quadrant might not be gospel, it does give you a sense of the relative market positions of each company in a given space.
New Relic competes in the application performance monitoring business, or APM for short. APM enables companies to keep tabs on the health of their applications. That allows them to cut off problems before they happen, or at least figure out why something is broken more quickly. In a world where users can grow frustrated quickly, APM is an important part of the customer experience infrastructure. If your application isn’t working well, customers won’t be happy with the experience and quickly find a rival service to use.
In addition to yesterday’s CEO announcement, New Relic reported earnings. TechCrunch decided to dig into the company’s financials to see just what challenges Staples may face as he moves into the corner office. The resulting picture is one that shows a company doing hard work for a more future-aligned product map and business model, albeit one that may not generate the sort of near-term growth that gives Staples ample breathing room with public investors.
Near-term growth, long-term hopes
Making long-term bets on a company’s product and business model future can be difficult for Wall Street to swallow in the near term. But such work can garner an incredibly lucrative result; Adobe is a good example of a company that went from license sales to subscription incomes. There are others in the midst of similar transitions, and they often take growth penalties as older revenues are recycled in favor of a new top line.
So when we observe New Relic’s recent result and guidance for the rest of the year, we’re more looking for future signs of life than quick gains.
Starting with the basics, New Relic had a better-than-anticipated quarter. An analysis showed the company’s profit and adjusted profit per share both beat expectations. And the company announced $173 million in total revenue, around $6 million more than the market expected.
So, did its shares rise? Yes, but just 5%, leaving them far under their 52-week high. Why such a modest bump after so strong a report? The company’s guidance, we reckon. Per New Relic, it expects its current quarter to bring 6% to 7% growth compared to the year-ago period. And it anticipates roughly 6% growth for its current fiscal year (its fiscal 2022, which will conclude at the end of calendar Q1 2022).
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Sanlo raises $3.5M to help apps and games gain access to financial insights and capital
Having a great idea for an app or game is one thing, but scaling it to become a successful business is quite another. A new fintech startup called Sanlo aims to help. The company, which is today announcing an oversubscribed $3.5 million seed round, offers small to medium-sized game and app companies access to tools to manage their finances and capital to fuel their growth.
To be clear, Sanlo is not an investor that’s taking an equity stake in the apps and games it finances. Instead, it’s offering businesses access to technology, tools and insights that will allow them to achieve smart and scalable growth while remaining financially healthy — even if they’re a smaller company without time to sit down and structure their finances. Then, when Sanlo’s proprietary algorithms determine the business could benefit from the smart deployment of capital, it will assist by offering financing.
The idea for Sanlo hails from co-founders Olya Caliujnaia and William Liu, who both have backgrounds in fintech and gaming.
Caliujnaia began her career in venture capital in one of the first mobile-focused funds, before moving to operator roles in gaming, stock photography and fintech at EA, Getty Images and SigFig, respectively. She later joined early-stage fintech and enterprise fund XYZ.vc as an Entrepreneur in Residence.
Liu, meanwhile, worked in gaming at EA, but later switched to fintech, working at startups like Earnest and Branch.
After reconnecting in San Francisco, the co-founders realized they could put their combined experience to work in order to help smaller businesses just starting out recognize when it’s time to scale, what areas of the business to invest in and how much capital they need to grow.
Image Credits: Sanlo’s Olya Caliujnaia and William Liu / Sanlo
Caliujnaia has seen how the app and gaming market has evolved over the years, and she realized the difficulties new developers now face.
“You have this explosion of the app economy that’s growing insanely,” she says. “That’s the exciting part of it. That creativity. That passion and that desire to build — that’s so admirable.”
Today, companies benefit from having access to better development tools, broader access to talent, consumer demand, and other forces, she notes, compared with those in the past. But on the flip side, it’s become incredibly difficult to scale a consumer app or game.
“I think a lot of that comes down to, one, that there are dynamics around the free-to-play model — how you monetize and therefore, what kind of players and users you bring on board,” Caliujnaia says. “And then the second aspect is that it’s just harder to get noticed. So, ultimately, it comes down to marketing.”
Many of the decisions that a company has to make on this front are predictable, however. That means Sanlo doesn’t have to sit down with businesses and consult with them one-on-one, the way a financial advisor working in wealth management would do with their clients.
Instead, Sanlo asks companies for certain types of data to get started. This includes product data about how well the app or game monetizes and customer acquisition and retention, for example, as well as marketing data and a subset of financial data. Its predictive algorithms then continually monitor the company’s growth trajectory to surface insights to identify where and how the business can grow.
This concept alone could have worked as a services business for mobile studios, but Sanlo takes the next step beyond advice to actually provide companies with access to capital. The amount of financing provided will vary based on the life stage of the company and risk profile, but it’s non-dilutive capital. That is, Sanlo takes no ownership stake in the companies it finances.
Image Credits: Sanlo
Caliujnaia said it made more sense to go this route rather than return to the VC world, because of potential to reach a wider group.
“There’s this long tail of developers and it’s more about enabling them, rather than producing more hits,” she says. “It’s very different mindsets, different markets that we’re going for.”
Sanlo doesn’t have a lot of direct competitors beyond perhaps, Silicon Valley Bank and other financial lenders, as well as mobile gaming publishers. But the publisher model often implies some sort of ownership, which is a significant differentiating factor. In some cases, you may see a larger gaming company extending debt financing to a smaller one. That was the case with Finnish mobile games company Metacore, which recently raised another debt round from gaming giant Supercell, for example.
Caliujnaia points out that most smaller companies don’t have that kind of access to financing. Now they could, through Sanlo.
“The idea is to have a healthier layer of companies that are able to survive for the long-term,” she says.
That means more companies that won’t have to stress about their futures, leading them to aggressively monetize their users, and later, scrambling for an exit when their financial runway comes to an end.
Sanlo is currently pilot testing its system with a small group of mobile game studios who will serve as its initial customer base, but plans to later support consumer apps, which have similar struggles with customer acquisition costs and growth.
The San Francisco-headquartered startup itself was founded in 2020 and began raising money. It has now raised a total of $3.5 million in seed funding co-led by Index Ventures and Initial Capital, with participation from LVP, Portag3 Ventures and XYZ Venture Capital. Angel investors include Kristian Segestrale (Super Evil Megacorp CEO), Gokul Rajaram and Charley Ma.
Initial Capital co-founder and partner Ken Lamb became a board director with the fundraise, while Index partner Mark Goldberg and XYZ managing partner Ross Fubini joined as board observers.
“Sanlo cracked the code to help mobile gaming and app companies reach maturity with a new level of speed, scale, and fiscal wellbeing,” said Goldberg, in a statement. “The company is building a very sophisticated fintech offering that will give those companies superpowers.”
Sanlo plans to use the funds to grow its team and product suite ahead of its public launch later this year.
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Why did Bill.com pay $2.5B for Divvy?
As expected, Bill.com is buying Divvy, the Utah-based corporate spend management startup that competes with Brex, Ramp and Airbase. The total purchase price of around $2.5 billion is substantially above the company’s roughly $1.6 billion post-money valuation that Divvy set during its $165 million, January 2021 funding round.
Divvy’s growth rate tells us that the company did not sell due to performance weakness.
Per Bill.com, the transaction includes $625 million in cash, with the rest of the consideration coming in the form of stock in Divvy’s new parent company.
Bill.com also reported its quarterly results today: Its Q1 included revenues of $59.7 million, above expectations of $54.63 million. The company’s adjusted loss per share of $0.02 also exceeded expectations, with the street expecting a sharper $0.07 per share deficit.
The better-than-anticipated results and the acquisition news combined to boost the value of Bill.com by more than 13% in after-hours trading.
Luckily for us, Bill.com released a deck that provides a number of financial metrics relating to its purchase of Divvy. This will not only allow us to better understand the value of the unicorn at exit, but also its competitors, against which we now have a set of metrics to bring to bear. So, this afternoon, let’s unpack the deal to gain a better understanding of the huge exit and the value of Divvy’s richly funded competitors.
Divvy by the numbers
The following numbers come from the Bill.com deck on the deal, which you can read here. Here are the core figures we care about:
- “~$100 million annualized revenue,” calculated using the company’s March results multiplied by 12. That puts Divvy’s March, 2021 revenues at around $8.3 million.
- “>100% revenue growth YoY,” again calculated by leaning on the company’s March results. So, we can’t be sure that its full Q1 2021 growth was over the 100% mark. Still having its most recent Q1 month generate a three-figure growth rate is good. It also lets us know that the company did no more than $4 million or so in March 2020 revenue.
- “~$4 billion annualized TPV,” or total payment volume. Again, this is a March number annualized.
This lets us price the company somewhat. Divvy sold for around 25x its current revenue rate. That’s a software-level multiple, implying that the company has either incredibly strong gross margins, or Bill.com had to pay a multiples-premium to buy the company’s future growth today. I suspect the latter more than the former, but we’ll have to scout for more data when Divvy shows up in Bill.com results after the deal closes; that data is a few quarters away.
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Shift Technology raises $220M at a $1B+ valuation to fight insurance fraud with AI
While incumbent insurance providers continue to get disrupted by startups like Lemonade, Alan, Clearcover, Pie and many others applying tech to rethink how to build a business around helping people and companies mitigate against risks with some financial security, one issue that has not disappeared is fraud. Today, a startup out of France is announcing some funding for AI technology that it has built for all insurance providers, old and new, to help them detect and prevent it.
Shift Technology, which provides a set of AI-based SaaS tools to insurance companies to scan and automatically flag fraud scenarios across a range of use cases — they include claims fraud, claims automation, underwriting, subrogation detection and financial crime detection — has raised $220 million, money that it will be using both to expand in the property and casualty insurance market, the area where it is already strong, as well as to expand into health, and to double down on growing its business in the U.S. It also provides fraud detection for the travel insurance sector.
This Series D is being led by Advent International, via Advent Tech, with participation from Avenir and others. Accel, Bessemer Venture Partners, General Catalyst and Iris Capital — who were all part of Shift’s Series C led by Bessemer in 2019 — also participated. With this round, Paris-and-Boston-based Shift Technology has now raised some $320 million and has confirmed that it is now valued at over $1 billion.
The company currently has around 100 customers across 25 different countries — with the list including Generali France and Mitsui Sumitomo, to give you an idea of where it’s pitching its business — and says that it has already analyzed nearly two billion claims, data that’s feeding its machine learning algorithms to improve how they work.
The challenge (or I suppose, opportunity) that Shift is tackling, however, is much bigger. The Coalition Against Insurance Fraud, a nonprofit in the U.S., estimates that at least $80 billion of fraudulent claims are made annually in the U.S. alone, but the figure is likely significantly higher. One problem has, ironically, been the move to more virtualized processes, which open the door to malicious actors exploiting loopholes in claims filing and fudging information. Another is the fact that insurance has grown as a market, but so too has the amount of people who are in financial straights, leading to more desperate and illegal acts to gain an edge.
Shift is also not alone in tackling this issue: the market for insurance fraud detection technology globally was estimated to be worth $2.5 billion in 2019 and projected to be worth as much as $8 billion by 2024.
In addition to others in claims management tech such as Brightcore and Guidewire, many of the wave of insurtech startups are building in their own in-house AI-based fraud protection, and it’s very likely that we’ll see a rise of other fraud protection services, built out of adjacent areas like fintech to guard against financial crime, making their way to insurance. As many a fintech entrepreneur has said to me in the past, the mechanics of how the two verticals work and the compliance issues both face are very closely aligned.
“The entire Shift team has worked tirelessly to build this company and provide insurers with the technology solutions they need to empower employees to best be there for their policyholders. We are thrilled to partner with Advent International, given their considerable sector expertise and global reach and are taking another giant step forward with this latest investment,” stated Jeremy Jawish, CEO and co-founder, Shift Technology, in a statement. “We have only just scratched the surface of what is possible when AI-based decision automation and optimization is applied to the critical processes that drive the insurance policy lifecycle.”
For its backers, one key point with Shift is that it’s helping older providers bring on more tools and services that can help them improve their margins as well as better compete against the technology built by newer players.
“Since its founding in 2014, Shift has made a name for itself in the complex world of insurance,” said Thomas Weisman, an Advent director, in a statement. “Shift’s advanced suite of SaaS products is helping insurers to reshape manual and often time-consuming claims processes in a safer and more automated way. We are proud to be part of this exciting company’s next wave of growth.”
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Chime has agreed to stop using the word ‘bank’ after a California regulator pushed back
Chime can apparently call itself the “fastest-growing fintech in the U.S.,” but it has agreed to stop referring to itself as a “bank,” per a new report out of American Banker.
Evidently, the eight-year-old, San Francisco-based outfit was the target of an investigation by the California Department of Financial Protection and Innovation after Chime used “chimebank” in its website address, as well as used “bank” and “banking” elsewhere in its advertisements, according to the agency in a settlement agreement.
As noted by AB, Chime made the decision to settle ahead of a deadline imposed by the regulatory body.
The development shouldn’t surprise anyone familiar with banking laws. No outfit can represent itself as a bank or credit union unless it’s licensed to engage in the business of banking. The commission that pushed back on the startup issues such licenses and regulates state-chartered banks in the state of California through the Department of Financial Protection and Innovation and said in the settlement that “at all relevant times herein, Chime was not licensed to operate as a bank in California or in any other jurisdiction, nor was it exempt from such licensure.”
Chime has at times attempted to draw a distinction between itself and a bank. When the company raised its most recent round of funding — a $485 million Series F round last September that valued the business at $14.5 billion — CEO Chris Britt told CNBC: “We’re more like a consumer software company than a bank . . . It’s more a transaction-based, processing-based business model that is highly predictable, highly recurring and highly profitable.”
Still, Chime, like many newer fintech companies, has seemingly embraced the term “neobank” and “challenger bank,” and perhaps it’s no wonder. It’s certainly easier to convey to consumers what it is selling, which is banking services that include — in this case — debit cards, spending accounts and savings accounts, all offered through users’ mobile phones.
Given the settlement, expect to see more startups like Chime make clearer that in most cases, they do not have a bank charter and instead are being provided services by banks that do. In Chime’s case, for example, it now makes more plain on its website that it is a “financial technology company” and “not a bank” and that its services are being provided by the The Bancorp Bank and Stride Bank, which are both FDIC members.
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