Fintech Highlights - 10/10/2023
Rainforest is taking on the big boys of embedded finance. PayPal gets sued. Austin based Revio raises a round. Here's what we've been watching this week 👇
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Rainforest, an Atlanta-based embedded finance startup that is taking on incumbents such as Fiserv and FIS, as well as trying to take market share from other fintechs such as Stripe with its offering - has raised a round.
Accel led the company’s $8.5 million seed round, which included participation from Infinity Ventures, BoxGroup, The Fintech Fund, Tech Square Ventures, and Ardent Venture Partners.
Rainforest works with software companies to help them embed financial services and payments into their platforms. In an interview with TechCrunch, CEO and co-founder Joshua Silver respectfully disagreed with a16z general partner Angela Strange about her 2019 statement that every company would become a fintech. In his view, most software companies don’t actually want to be fintechs and deal with all the regulatory and compliance issues that go with that. They really just want to be able to accept payments and generate more revenue from being able to do so.
Founded in 2022, the startup has seen impressive growth in a short period of time, securing client commitments representing more than $500 million in processing, with much of the volume guaranteed.
Silver believes the company’s exclusive focus on software companies only gives it an edge.
“None of the modern processors were built specifically for software platforms. Most of them were built directly for merchants, and they’ve all had to retrofit their platforms even to accommodate basic payment processing and reporting functions for software companies,” he told TechCrunch.
As such, the startup is capturing volume as software platforms migrate from legacy processors such as Fiserv and FIS. As that happens, it competes against companies like Stripe (and its Connect product) to embed financial services and payments.
Nik Milanović of The Fintech Fund posted on X that he believes that one of the biggest stories of the next decade will be about Stripe, “which looks invincible from the outside, losing market share to nimble competitors.”
He added: “I think Rainforest is going to be a big part of that story.”
The BFD
PayPal has been hit with a class action lawsuit by consumers represented by law firm Hagens Berman alleging that the fintech giant’s anti-steering rules stifle competition against lower-cost payment platforms such as Stripe and Shopify.
Why this is the BFD: Specifically, according to an investigation conducted by the firm’s consumer rights attorneys, PayPal has subjected consumers to excess charges when purchasing from online merchants that accept PayPal or Venmo.
“Visa and MasterCard once imposed similar anti-steering rules on merchants accepting their cards but, after the Justice Department sued the networks for antitrust violations, they agreed in 2010 to eliminate their anti-steering rules as part of the settlement. With payments transitioning into the digital realm, PayPal has simply ripped a page right from the Visa and MasterCard [sic] playbook.”
The big picture: The case illustrates that “the tensions between merchants and the payment system providers are not over, and that litigation regarding this key cost faced by merchants is likely to continue for some time" says Patrick McGahan, a partner at Scott+Scott who focuses on antitrust litigation.
He added: “Platform companies that operate as gatekeepers in their market, such as PayPal, will continue to be the subject of antitrust litigation as a result of the significant fees they charge. PayPal’s fees are, however, driven by the costs imposed upon them by the dominant card schemes, Visa, Mastercard and American Express. So, we can expect PayPal will respond to this suit by arguing that it is as much of a price taker as the merchants themselves, and that the terms imposed upon it by the card schemes drive some of its anti-steering rules.”
M&A
PNC Financial Services (NYSE: PNC) acquired a loan portfolio from Signature Bridge Bank, per an agreement with the FDIC. It includes $9b of funded loans, as part of $16.6b in total commitments. More here ->
Ripple canceled its agreement to acquire Fortress Trust, a Las Vegas-based crypto infrastructure company. More here ->
Fintech
Revio, an Austin-based maker of software for community banks, raised $2.5m in Series A funding. Revio combines millions of data points and industry expertise to deliver targeted recovery strategies, optimized by channel, with embedded payment options. More here ->
Dallas-based Take Command, an individual healthcare benefits platform for small and mid-market employers, has received a $25 million equity investment. Founded in 2014, Take Command aims to "disrupt group health insurance" with "individual market plans that can be personalized to each employee." More here ->
Stampli, a Mountain View, Calif.-based accounts payable automation startup, raised $61m in Series D funding. Stampli's AI-powered Accounts Payable automation solution brings all AP-related communication, documentation, & workflows into one place. More here ->
Kafene, a New York-based point-of-sale financing platform, raised $12.6m in Series B extension funding. The company enables customers to "enjoy financial flexibility with affordable lease-to-own options for furniture, appliances, electronics, tires and wheels, and more." More here ->
Cardata, a provider of mileage reimbursement software, raised $100m. Cardata’s reimbursement solutions reduce liability, lightens admin burden and generates significant annual cost savings. More here ->
Flex has secured $20M equity and $100M debt fundraise to build a "one-stop-shop financial hub for SMBs." Construction companies were the initial focus of Flex, but soon realized just how prevalent financial management issues were for SMBs in all verticals – and just how few financial institutions and fintechs fairly and effectively serve these customers. More here ->
Clearco, a Toronto-based revenue-based financing provider, raised $60m in Series D funding in a combination of equity and debt-equity swap at a valuation below $1b. Clearbanc claims to make equity-free investments in businesses within 48 hours based on information provided on the two metrics ad spend and unit economics and calls this ‘The 20-Min Term Sheet’. More here ->
Stitch, a South African fintech API startup, raised $25m in Series A extension funding. Ribbit Capital led, and was joined by insiders PayPal Ventures, CRE Ventures and The Raba Partnership. https://axios.link/3ZC0U9v More here ->
Mintago, the UK based financial wellbeing app, secured $4.75m of funding. Mintago is an FCA regulated company that helps businesses save on their workplace pension NI costs and improves thefinancial wellbeing of their employees. More here ->
Creednz, an Israeli payments fraud startup, raised $7m. Creednz is a new B2B fraud prevention technology aimed at servicing the modern CFO and proactively protecting corporations from fraudulent transactions. More here ->
Qobra, a French sales compensation startup, raised $10.5m in Series A funding. The French startup offers an online solution for managing variable compensation for salespeople. More here ->
Investtech
Allocate, a San Francisco, CA-based platform that provides investors with a streamlined way to invest and manage private investments, raised $10M in strategic capital. More here ->
Frec, a San Francisco-based automated investing startup, raised $26.4m in seed and Series A funding. The company aims to make sophisticated investment strategies more accessible through its suite of automated, self-service products. More here ->
Cobre, a Colombian corporate treasury platform, raised $13m. More here ->
Insuretech
Insurtech homeowners insurer Openly said has raised $100 million in Series D funding. Launched in 2019, Openly said it now serves 30,000 independent agents across 21 states in the U.S. More here ->
Reserv, a Weston, Conn.-based digital claims admin startup, raised $20m in Series A funding. The company describes itself as a digital-native third-party administrator (TPA)that seeks to overhaul P&C claims processing. More here ->
Atlanta-based Safely has successfully secured $8 million in funding. Founded in 2013, Safely provides guest screening and insurance for individual homeowners and professional property managers. More here ->
From the Stash
Major shakeup at Truist’s tech innovation operation - Truist Financial is overhauling its digital innovation operations. Bank Automation News has learned that a key bank C-level innovation officer left Truist last week, and the bank shut its Foundry unit, which led the FI’s skunkworks ventures. More here ->
Ally Financial starts job cuts with less than 5% of staff affected - Ally Financial Inc. started cutting jobs on Monday, initiating a workforce reduction that will affect less than 5% of the company’s overall headcount. The Detroit-based firm said the job cuts will occur across divisions and aren’t isolated to a single line of business, spokesperson Peter Gilchrist told Bloomberg News in an email. More here ->
Clearcover Announces Expansion of Embedded Strategy Via Goosehead Insurance - Clearcover has announced the expansion of its embedded insurance strategy through a bind-API integration with Goosehead Insurance, Inc., a rapidly growing, independent personal lines insurance agency. More here ->
Fintech funding: Citi Ventures pivots investment strategy - Citi Ventures, the venture capital arm of $1.7 trillion Citigroup, is changing its investment strategy amid turbulent macro-economic conditions. The first half of 2023 saw a 50% decline in global fintech funding as investors pulled back in response to inflation, high-interest rates and geopolitical instability. More here ->
Reports / Webinars
Why Should Retailers Care About Embedded Financial Services?
E-commerce is booming across the globe! Finding new revenue streams is vital. And this is where embedded finance comes into play. In this episode of 11:FS Explores, David Barton-Grimley breaks down the arsenal of tools embedded finance gives retailers to boost revenues. More here ->
Empathy in Action: Perfect Pairing of Technology & Human Touch in Claims Handling Join experts from Mass Mutual, Insurance Evolution Partners and EIS as they discuss the perfect pairing of technology and human touch is essential for providing excellent claims handling. Thursday, October 12th, 11 AM EST and 4 PM BST. More here ->
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