Robinhood, PayPal, SoFi earnings show fintech accolades
Good morning, and welcome to Protocol Fintech. This Wednesday: good bets and bad in fintech, credit card debt on the rise and the Nomad bridge hack.
Off the chain
Tinder is doing crypto all wrong. Match Group scrapped its experiment with a cryptocurrency-like reward currency, Tinder Coins. What it needs to do instead is join forces with the crypto scammers swarming the dating app and get a piece of the action. Romance isn’t dead, it’s just insufficiently monetized.
– Owen Thomas (e-mail | twitter)
Bad games, bad games, what to do?
This earnings season reveals who made good and bad bets as a pandemic turned into a downturn, changing everyone’s assumptions about where fintech was headed.
Robinhood this week joined Shopify in admitting it got its e-commerce and e-commerce forecasts wrong, bracing for a growth bust. Then there’s PayPal: It took its lumps as e-commerce’s hypergrowth faded, but it showed a much more solid foundation for the business.
Mismeasure once, cut twice? Robinhood kicked off the week with two stunning announcements: It would cut even more jobs, and it revealed earnings a day early. The numbers were bad.
- “This is on me,” CEO Vlad Tenev said of the new round of layoffs. Robinhood hired too many people too quickly after believing that the stock trading and crypto craze of 2021 would continue. In fact, projections were so bad that cutting 9% of Robinhood’s workforce earlier this year “didn’t go far enough,” Tenev said.
- The “macro environment” worsened further, as inflation hit 40-year highs and the crypto market crashed. Robinhood saw “reduced customer trading activity and assets under custody,” Tenev said.
- That echoed what Shopify reported last week. CEO Tobi Lütke said the e-commerce company was on a hiring spree, and believed it was on track to “permanently jump forward by five or even 10 years” due to the pandemic. “It is now clear that the effort did not pay off,” Lütke wrote.
- Might as well get all the bad news out at once: Robinhood said revenue, which missed Wall Street targets, rose 6% from the previous quarter but fell 44% year over year. Robinhood also posted a bigger-than-expected loss.
Steady does. PayPal is feeling the pressure of the market downturn like most fintechs, but it is also playing on its key strength: a large network of merchants and consumers.
- PayPal’s shares have fallen over the past few months amid concerns about the slowdown’s impact on its business. Those concerns eased on Tuesday when PayPal reported that revenue growth jumped from 7% in the month of April to 12% in the month of June. PayPal’s shares rose 12% after hours on Tuesday. The company also announced a $15 billion share buyback.
- PayPal said it was doubling down on growth areas, including its digital wallet, PayPal Checkout, Venmo — which had roughly 50% revenue growth — and its Braintree back-end payment system. Gaining less weight: share trading, in-store QR code payments and international expansion.
- Yes, the market remains shaky, but CEO Dan Schulman said “turmoil in both the e-commerce and fintech sectors has created an unprecedented opportunity.”
SoFi also reported strong earnings Tuesday, buoyed by the bank’s charter, Chief Executive Anthony Noto said, and shares jumped after hours as well. Earlier this year, traders hammered fintech stocks. Now they distinguish between those who experience the same turbulence as the rest of the economy and those who managed to fly far off course. Tenev is still optimistic: “We have adapted to challenges and forced the financial industry to adapt to us,” he wrote in a message to employees. He needs to do more to get investors back on board.
—Benjamin Pimentel (e-mail | twitter) and Tomio Geron (e-mail | twitter)
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On the money
Credit card debt is increasing at the fastest rate in two decades. Credit card balances increased by $46 billion in the second quarter, a 13% year-over-year jump. Credit card companies, meanwhile, are spending aggressively to unlock new customers.
About protocol: Consumer “buy now, pay later” has been hit hard in the market downturn, but investors and entrepreneurs see the opportunity in applying the model to business financing.
Equifax provided inaccurate credit scores on millions of American consumers seeking loans. The company sent false results to people applying for car loans, home loans and credit cards to banks and non-bank lenders, large and small, from mid-March to early April.
Also about protocol: Hackers stole nearly $200 million in cryptocurrency after Nomad’s crypto bridge protocol was breached.
Solana wallets were next to being hacked. More than 8,000 wallets were tapped for solana and USDC tokens, and security experts said users’ own private keys appeared to be compromised.
Shopify invested $100 million in a strategic partnership with marketing automation firm Klaviyo. The world’s most embarrassingly named email service will be the recommended email product for the Shopify Plus merchant plan.
Crypto research firm Messari made an acquisition. Messari acquired the assets and business of Dove Metrics, which provides crypto mining data and other intelligence.
Overheard
Wants an example of what life can be like for it CFPB with a republican congress? Read the scathing letter Reps. Patrick McHenry, Tom Emmer and Blaine Luetkemeyer sent director Rohit Chopra recently. “It has come to our attention that the Consumer Financial Protection Bureau may be cooperating with states in violation of the Consumer Financial Protection Act,” wrote members of the House Financial Services Committee, taking issue with Chopra’s outreach to state officials about joint enforcement.
“Bitcoin is hardly the holy grail of cross-border payments,” authors of a new study for The European Central Bank concluded.
The Celsius Bankruptcy proceedings attract letter after letter from small savers who bought into the crypto lender’s promises of security and high returns. “Yes, I know, buyer beware, but I agree there has been far too much deception,” wrote the self-written “little retired old lady” Jeanne Savelle.
Just one question for Kristo Käärmann, CEO and co-founder of Wise
Käärmann worked as a consultant and manager at Deloitte and PwC before moving to the online money transfer company in 2011.
Which fintech trend is most disturbing to you?
The US remains behind in payments infrastructure compared to other countries, holding back fintech innovation domestically. To compete internationally, we need to be more open to changes in our payment infrastructure, thereby improving access and user experience for consumers and enabling more growth in the sector. This includes not only instant payments like FedNow, but also modernizing licenses, expanding access to payment systems and allowing consumers to share their financial data. Ultimately, this all falls within our complex regulatory framework and working together as an industry will be key to moving forward with this issue.
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Thanks for reading – see you tomorrow!
