Welcome to The Interchange, a take on this week’s fintech news and trends. To get this in your inbox, subscribe here.
We’ve all been keeping up with the recent drama of Stripe vs. Plaid. Rather than rehash all that here, I’ll point you to some of our recent articles on the topic and just summarize: The two fintech startups have recently grown (much) more competitive.
If things weren’t turbulent enough, another startup has very publicly emerged as a formidable competitor to Stripe: Finix.
Now, Finix is not coming out of nowhere. The SaaS startup — which started out in early 2020 by selling its payments tech to other businesses — raised a $35 million Series B led by Sequoia. In an unusual twist, Sequoia just 1 month later walked away from the deal in which it reportedly wrote the self-described payments infrastructure company a $21 million check. As TC’s Connie Loizos reported at the time, Finix told employees that soon after issuing its check, Sequoia concluded that Finix competes too directly with Stripe, the payments company that represented one of Sequoia’s biggest private holdings and that in turn counted Sequoia as one of its biggest outside investors.
Fast-forward to last week. Finix announced that it was becoming a payments facilitator, in addition to enabling other companies to facilitate payments. This move puts it in direct competition with Stripe, something that CEO and co-founder Richie Serna is not shy about admitting.
In an interview this past week, Serna elaborated by noting that Finix indeed started out to build software that gave any software company a way to become their own payment facilitator.
“We were building technology that would take a three-year in-house build by dozens of engineers, with tens of millions of dollars of technical R&D and investment, and taking that down to a number of months by getting developer-friendly APIs to start monetizing their payments,” he said. “That was our biggest core offering. What we’ve done now is become the payments facilitator ourselves, so that we can not only provide the payments, but also all the back office requirements and compliance certifications, so that our customers can get up and running in a matter of days, rather than months.”
He says the move gives Finix the ability to work with companies and software platforms who have $0 in processing volume all the way up to companies with billions of dollars in processing volume.
“This allows these customers to get a better product experience and faster speed to market, and allows us to take on those non-technical aspects of rolling out and monetizing, and getting payments,” Serna added.
You see, historically, companies needed to hit a certain volume threshold before Finix could work with them. But now, according to Serna, they can start working with them in their earliest states.
“Customers can start working with us from day one, use finance APIs, and when they're ready to take on more of that ownership and more of that responsibility around risk, underwriting and compliance operations, they can graduate and become their own payment facilitator,” he said, “since we're still using the exact same APIs.”
Finix has also entered what the executive described as the “card present,” or in-person, payments space. This means that it is able to provide software for many types of businesses to accept credit card payments.
“If you think about a software provider for restaurants, they're going to need a different set of devices than the device provider for gyms, or food trucks,” Serna said. “And so that's something that we uniquely offer and bring to the market.”
So, in case you haven’t figured it out, Stripe did have reason to be concerned because Finix indeed is directly competing with it. So how are they different?
According to Serna, the answer lies in the fact that Finix has built “an open system and open architecture that is modular and configurable.” Stripe, on the other hand, he said, “continues to double down on that vendor lock in so it can continue to close their system and architecture.”
“We think about it very similar to iOS,” Serna told TechCrunch. “We think about ourselves much more like Android…And I think we're just going to continue to see those characteristics magnified as we continue to build our products and build our companies.”
With just over 150 employees, Finix is powering over 12,000 merchants in the U.S. with its APIs today. It has raised about $100 million in funding from investors such as American Express Ventures, Bain Capital Ventures, Homebrew, Inspired Capital, Lightspeed Venture Partners and Visa.
Meanwhile, in a recent Forbes article, Stripe co-founder John Collison told Alex Konrad, reportedly with a shrug: “We will compete with a bunch of companies, and we’ll partner with a bunch. Everyone just needs to be a grownup and well-behaved about it.” In that same article, sources told Alex that Stripe saw gross revenue of about $12 billion in 2021, up 60% year-over-year. It also reportedly posted net revenue of about $2.5 billion.
Speaking of Stripe, Ingrid Lunden reported on May 24 that the company debuted its App Marketplace, a new offering where Stripe will provide access to both third-party apps and scripts created by app publishers, users and Stripe itself, that incorporate those apps with Stripe. It potentially represents its biggest leap yet away from payments.
Swedish payment giant Klarna reportedly cut 10% of its workforce, or 700 jobs, this past week. The move came just after the Wall Street Journal reported that the company was going to cut its valuation in order to raise fresh capital.
One-click checkout startup Bolt is believed to have laid off as many as 240 employees across go-to-market, sales and recruiting roles. Earlier reports had cited that 100 workers would be impacted, but as details emerged, it appeared to be more. In mid-February, founder Ryan Breslow made headlines after announcing on Twitter that Bolt was offering every employee the chance to borrow money from the company to exercise their stock options. Now, it’s unclear what happens to the people who were laid off and borrowed money from the company. The company told Bloomberg that the number of affected workers that took out loans is in "the single digits."
But not all fintechs are laying off. Fidel API says it “is rapidly growing” after its $65 million Series B announcement and is hiring for more than 60 roles across its engineering, sales and customer-experience teams. The fintech says it has doubled in size over the past 6 months and intends to double again before year’s end.
Peggy Mangot has left her role as operating partner at PayPal Ventures to serve as the new head of fintech partnerships for JPMorgan Chase Commercial Banking. At PayPal Ventures, Mangot helped lead investments globally across fintech, commerce, infrastructure and crypto.
Both large and small companies are retaining their crypto optimism despite the recent market correction in the developing technology space. Mass adoption of blockchain technology and digital assets is going to happen sooner rather than later, according to Mastercard’s VP of new product development and innovation, Harold Bossé. Read more here.
Fundings and M&A
Seen on TechCrunch
That’s it for this week! If you’re reading from the U.S., hope you enjoy the rest of your long weekend, and for everyone else, have a great day and week ahead. And to borrow from my brilliant friend and colleague, Natasha Mascarenhas, you can support me by forwarding this newsletter to a friend or following me on Twitter.