Fintech Highlights - 3/28/2023

Hot off the Press

First Citizens BancShares has agreed to buy the commercial banking business of Silicon Valley Bank, including all of its deposits and substantially all of its loans.

Why it matters: This is a giant step toward stabilizing America's regional banking sector, after a month of tumult.

• All SVB branches will reopen today under the First Citizens banner, per a press release sent out just after 1am

What's included: First Citizens will assume $56.5 billion of deposits and $72.1 billion of loans from the Federal Deposit Insurance Corp. (FDIC), the latter of which came with a $16.5 billion discount.

• The Raleigh, North Carolina-based bank also entered into a loss-share agreement with the FDIC, of up to 50% on loan losses in excess of $5 billion.
• FDIC estimates that SVB will cost up to a $20 billion loss from its Deposit Insurance Fund (which is backed by insured banks, not taxpayers). FDIC received equity appreciation rights in First Citizens with a potential value of up to $500 million (payable in cash) and exercisable until April 14, 2023.

Investor reax: First Citizens shares climbed more than 15% in Monday's premarket trading.

Backstory: First Citizens came into the year as America's 30th largest bank and now, it is poised to absorb much of an institution that had been America's 16th largest bank.

• It's also a bit of FDIC full circle for First Citizens. Last year it bought CIT, which in 2015 bought OneWest, which in 2009 bought the assets of IndyMac from the FDIC.

The bottom line: It's remarkable that a Raleigh bank now owns Silicon Valley's namesake financial institution. For years it was impossible to get a direct flight between RDU and SFO, with many Research Triangle Park founders complaining that it hampered their ability to secure venture capital.

Pinned to the Top

UBS last week agreed to buy troubled Swiss banking rival Credit Suisse, in a $3.2 billion deal whose speed was unthinkable before Silicon Valley Bank's collapse.

Why it matters: The Swiss government literally changed the law to get the deal done, creating short-term stability for the global banking sector but long-term questions about shareholder rights.

• In any acquisition of a publicly traded company, the acquired company's stockholders have the right to vote their shares in favor or disapproval.
• Credit Suisse shares are listed in both New York and Zurich, but the Swiss government unilaterally moved to eliminate the voting rights.
• It's an unprecedented decision. Ahead of the great financial crisis, for example, Bear Stearns shareholders voted to approve its government-desired takeover by JPMorgan (even getting a better deal in the process).

What they're saying: "This feels like Russia in Zurich," says a source close to Credit Suisse.

• But, but, but: Credit Suisse shareholders do make out slightly better in this deal than do bondholders, which isn't usually the case.

The bottom line: UBS buying Credit Suisse is a shotgun wedding, insisted upon by a Western, capitalist country. The question now is if it sets a precedent for other countries to follow, and how investors would react to losing one of their most fundamental protections.

The BFD

Flagstar Bank agreed to a deal with the Federal Deposit Insurance Corporation to purchase most of Signature Bank, though the deal does not include roughly $4 billion of deposits related to the bank’s crypto business, the FDIC announced Sunday.

Signature was taken over by New York state regulators last week and was placed into a receivership with the FDIC. The bank had a significant crypto business, with clients that included Coinbase and Gemini, and ran an around-the-clock, blockchain payments network called Signet. That network was similar to a network at Silvergate, another crypto-friendly bank that collapsed this month.

The bid by Flagstar, a unit of New York Community Bancorp, did not include around $4 billion in deposits from crypto clients. Those deposits will be returned to customers directly by the FDIC. The deal also does not include Signet, an FDIC spokesperson confirmed.

M&A

Pushpay, a listed New Zealand-based church and donor management systems provider, received a sweetened NZ$1.62b takeover offer from a group that includes Sixth Street. More here →

Cover Genius, an Australian insurtech valued by VCs at over US$600m, acquired Clyde Technologies, a New York City-based embedded warranty company backed by Spark Capital, Crosslink Capital and Headline. More here →

Mastercard (NYSE: MA) acquired Baffin Bay Networks, a Swedish cybersecurity company backed by EQT Ventures. More here →

Snoop, a British money saving app, is exploring a sale after receiving a series of unsolicited takeover approaches, per Sky News. Backers include Salesforce Ventures, Paulson & Co. and NM Capital. More here →

Fintech

Parker, a provider of corporate credit cards to e-commerce businesses, raised $37m in equity funding. The company touts itself as “the first charge card for e-commerce” with raised limits that are on average 10 to 20 times higher than traditional business credit cards, like CapitalOne, American Express and Brex. More here →

Wingspan, a New York-based payroll platform for managing freelancers, raised $14m in Series A funding. The company offers an all-in-one platform linking payroll, benefits and onboarding for freelancers, so Wingspan replaces multiple categories of tools typically used by mid-market businesses. More here →

Beam, a general contractor payment platform, raised $4m in seed funding. Beam is a five-month-old startup that is aimed at helping general contractors pay subcontractors and get paid themselves. More here →

Rain, an LA-based earned-wage access company, raised $66m at a $250m valuation. The company also secured $50m in debt. Rain charges $3 per instant withdrawal and doesn't allow employees to withdraw over 50% of its gross earned wages per pay period. More here →

Caramel, an LA-based checkout platform for car sales, raised $12m in seed funding. The company is “changing the way people buy and sell cars from one another – making the entire experience safe, simple & sweet.” More here →

Guidepost Growth Equity invested in ClassWallet, a Miami-based digital wallet purchasing and reimbursement platform for public funds. More here →

Masttro, a leading wealth tech company serving family offices, financial advisors and large institutions managing the wealth of ultra-high-net worth (UHNW) families, secured $43 million growth equity investment. More here →

Natech, a Greek fintech, has grabbed €10M in convertible bond to expand. Natech is a leading Core Banking System provider to small & midsize financial institutions, providing an end-to-end, real-time, and competitive offering specially structured and designed to target underserved financial institutions and benefit from the gradual shift to BaaS. More here →

Apexx Global, a payments orchestration startup, raised $25M. The firm will use the new funding to expand its presence in North America, enhance its capabilities and add more payment methods to the payments orchestration and buy now, pay later (BNPL) aggregation that it already offers to merchants around the world. More here →

Chile-based recurring payments company Toku has raised $7.15M. More here →

Credable, a Tanzanian digital banking infrastructure startup, raised $2.5m in seed funding. Last May, Credable launched officially with two products: a 30-day term loan product in partnership with Vodacom M-Pesa in Tanzania and a short-term lending product for Diamond Trust Bank in Kenya. Since then, the fintech has enabled over six products for various businesses, from banks and mobile network operators to e-commerce platforms and fintech players across three markets: Tanzania, Kenya and Uganda. More here →

Two, a Norwegian B2B payments startup, raised €18m in Series A funding. Thecompany offers mcompanies the ability to sell more and get paid upfront without the credit risk via “instant trade credit to client’s B2B customers at the checkout using Two's Buy Now Pay Later solutions.” More here →

Monite, a German embedded B2B payments platform, raised $5m in seed funding. The startup offers an API, allowing invoicing and supplier management to be embedded into existing payments interfaces. This, the startup claims, allows companies to establish new revenue channels by increasing SaaS pricing bundles and charging processing fees for payments on their platform. More here →

Kredivo, a provider of credit to underbanked consumers in Indonesia and Vietnam, raised $270m in Series D funding. Formerly known as FinAccel, Kredivo is the parent company of Kredivo and Krom Bank Indonesia, its new neobank. The company’s products include online and offline buy now, pay later, personal loans, credit cards and banking services through Krom. More here →

ID Finance, a Spanish financial wellness app, raised €30m in convertible funding led by Kingsway Capital. ID Finance uses advanced analytics and machine learning algorithms to provide access to competitive financial services via its financial wellness app Plazo. More here →

Crypto

CrossX, a crypto trading venue, raised $6.35m in seed funding. Co-founded by traditional finance veterans Brandon Mulvihill and Anthony Mazzarese — who both spearheaded the FX prime brokerage business at Jefferies — the firm boasts that CrossX is "one of the fastest crypto trading engines in the world" with a sub-20 microsecond matching engine latency and throughput of millions of messages per second. More here →

Gryfyn, a custodial wallet joint venture between Animoca Brands and Hex Trust, raised $7.5m from Liberty City Ventures, Leadblock Partners, Mind Fund and GameFi Ventures. More here →

Insuretech

Sure Launches Ecommerce Insurance Solution - Insurance technology provider Sure has launched Retrace, a solution for online merchants to provide customers with embedded one-click insurance and protection at the point of sale. More here →

Fairmatic, an SF-based commercial auto insurance startup, raised $46m. The company aims to apply AI to reduce risk in the car insurance industry. More here →

From the Stash

Credit Suisse also played an active role in startup fundings - When it came to startup funding, Credit Suisse was no Silicon Valley Bank. That said, the troubled Swiss banking behemoth, which was just acquired by rival UBS, was no slouch in the venture investment and debt arena either. More here →

SVB crash opens door for treasury management innovation - The collapse of Silicon Valley Bank presents an innovation opportunity for fintechs in treasury management as more bank clients look to multibank strategies to ensure security in their capital. For example, as companies look to diversify their balance sheets for risk management purposes, they’ll need a snapshot of all of their accounts in one place. More here →

Some companies that provide banking services to startups stepped up following the Silicon Valley Bank collapse to offer their services and help companies maintain cash flow - like Rho, that saw a surge in new customers, and Mercury, which moved quickly over the weekend to launch a new product called Mercury Vault. More here →

Adyen, providing end-to-end payment capabilities, said it further advanced its digital authentication solution, combining security and seamless checkout experiences for it customers. In testing, Adyen was able to authenticate the consumer on behalf of the issuer, while they remained on the merchant checkout page, helping merchants get a conversion uplift of up to 7%. More here →

1 big thing: Navigating SVB's new era - Startups breathed a sigh of relief Sunday night when the Federal Reserve announced it would backstop Silicon Valley Bank deposits. Yet amid anxiety about the banking sector and the future of venture capital funding, this past week has been surprisingly busy. More here →

Discover democratizes tech with open-source developer platform - Discover Financial Services is democratizing its technology by allowing engineers and outside developers to share their knowledge in a newly launched platform. The platform, Discover Technology Experience, allows developers to share ideas and work on technologies such as robotic process automation (RPA). More here →

4K accounts opened with Brex since SVB collapse - Customers have opened 4,000 accounts with finance and technology company Brex since the collapse of Silicon Valley Bank on March 10 as fintechs look to banking providers that understand startups and innovation. More here →

By The Numbers: BNPL fraud attempts jump 211% YoY -mCyberattacks are on the rise, with attempted payment fraud in the buy now, pay later segment seeing a 211% year-over-year increase, attempted payment fraud in fintechs was up 13% in 2022, and payment fraud losses are anticipated to grow 17% YoY to $48 billion by the end of this year. More here →

Reports

What is open banking? Speed and convenience are accelerating open banking adoption around the world. But what exactly is it?

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