FedNow may finally be here, but will it be too costly for businesses to adopt?

Photo credit: Krisanapong Detraphiphat / Getty Images

Welcome to The Interchange! If you want this in your inbox, sign up here. It’s been a busy week in the fintech world, with the launch of FedNow, the subpoena of the former CEO of fintech Bolt – and the company itself – by the U.S. Securities and Exchange Commission, and more. Let’s drill down here.

It’s time

Last week, the US government’s instant payments system, FedNow Service, finally went live.

FedNow is an instant payment infrastructure for money transfer that aims to be a faster payment gateway for financial institutions, providing instant access to funds, any day, any time. As you know, this is huge, because traditionally banks are not open 24 hours a day and do not allow you to receive money and use it on the same day.

It’s also something the US is considered “lagging behind,” although other countries have been offering similar services for some time, including Brazil, India, the United Kingdom, and the European Union. In fact, we hear anecdotally that in Brazil, the country’s similar system, Pix, is so widespread that people even use it instead of credit cards to pay street vendors. And there is data to back that up.

We delved deeply into what the long-awaited launch of the service could mean for the US on Friday. However, one thing we haven’t addressed is how banks are pricing FedNow to their customers and what impact that might have on rapid adoption.

By email to Adam Shapiro, partner at a financial services advisory and investment firm Klaros group, noted that the Fed charges banks about 4 cents for a FedNow payment, compared to less than half a cent for an ACH payment. However, he added that banks are free to charge their customers any fees for these payments. Therefore, according to Shapiro, “business customers who decide to use it may be put off if banks make FedNow significantly more expensive than ACH.”

He added: “A company might be willing to pay 3.5 cents to get someone money faster, but the limit is 25 cents. How fraud is handled and where the liability lies if something goes wrong will also affect adoption.”

Weekly News

Christine reported that a letter written in April was represented by a lawyer bolt Investors said the SEC is investigating whether federal securities laws were violated in connection with statements made by Bolt when Bolt raised funds in 2021. The letter was sent to Bolt’s General Counsel as part of a fact-finding mission. According to a letter referenced by The Information, WestCap Management’s Brian Reinken and Tribe Capital Management’s Arjun Sethi demanded investors in Bolt’s Series C and Series B rounds, respectively, look at the company’s filings and claimed that ex-CEO Ryan Breslow allegedly “misled” investors while raising funds for the company’s $355 million Series E round. You may recall that Breslow stepped down from his role as CEO in January 2022.

Mary Ann teamed up with Rebecca Szkutak to examine how much fintech valuations have fallen since the heyday of the venture boom (see chart below). Unsurprisingly, the valuations of most of the top-rated fintech companies are down, with three notable exceptions — all of which operate in the same space. They examined valuations based on secondary stock activity (as analyzed by Notice.co), which some say is a more accurate representation of the company’s value than public valuations at the time of a fundraiser. They also spoke to some industry experts to get a sense of what’s ahead. Watch it here: Fintech valuations have fallen. Where do you go from here? (TC+)

TC’s Alex Wilhelm and Anna Heim delved deep into the world of insurtech for TechCrunch+, noting that while some industries have been able to weather the inflated valuations of 2021, this industry didn’t seem to be one of them. So much so that one report spoke of the “death of Insurtech 1.0”. Alex and Anna take a look at how global startups have fared and if there are any signs the industry may actually be making a recovery. (TC+)

Reporter Dominic-Madori Davis wrote about the consequences of taking over the neobank greenwoodaimed at Black and Hispanic customers, and The meeting point, a networking club with similar interests. As you will see, everything was going well… until it failed. Now there are bitter feelings and a lawsuit. Although neither party has commented, Dominic-Madori explains in detail what went wrong. The debate over whether niche-focused neobanks will ultimately prove successful continues as Daylight, another LGBTQ+-focused neobank, recently shut down.

Get your palm ready! Reporter Sarah Perez reported AmazonBy the end of the year, Amazon’s palm-scanning payment technology will be available in all 500 Amazon-owned Whole Foods stores. Here’s how it works: Using a biometric payment system, customers wave their palm over a reader that recognizes the person’s unique palm signature and links it to the customer’s payment card on file to bill them for their purchases. Don’t worry, your Palm data will not be shared.

Medical procedures often involve a complicated web of bills and payments that can drag on for months or even years. I (Christine) personally got hounded by a collection agency for a $50 urine test (I was 21 and didn’t know any better), so I can imagine what it’s like for someone who owes thousands of dollars in medical fees. This week I wrote about Collectly, a company that has developed proprietary interfaces that integrate with electronic health records and practice management software to simplify patient billing. The company states that by simplifying payment, medical company customers have, on average, been able to increase patient revenue for medical group partners by 75%, reducing “days of pending sales” from 60-90 days to 12 days. Although TogetherSince the customers are doctors’ offices, I believe that digitizing medical bills can also help patients. Who doesn’t want to access and pay all the bills related to an intervention with just one click?

CB Insights released its Q2 State of Fintech Report last week, and unsurprisingly, global funding in this space fell — by nearly half to $7.8 billion, its lowest since 2017. But at least one region didn’t have a bad quarter. Can you guess which one it was? Meanwhile, payments — historically the darling of the fintech industry — hasn’t had a good three months. Read more here.

Visas And MasterCard were affected by an antitrust lawsuit by a fintech company block. In a lawsuit filed July 14 in the U.S. District Court for the Eastern District of New York, Block alleges that the two credit card giants “co-ordinated to significantly overcharge the Square payments platform, resulting in higher retail prices for consumers” by raising interchange fees to retain market share, according to a report by Bloomberg.

tech giant Apple Finally, in late March, the Apple Pay Later service launched, allowing users to split the cost of an Apple Pay purchase into four equal payments over a six-week period with no interest or late fees. The move put Apple in direct competition with companies like Affirm, PayPal, and Klarna. How is it going so far? Well, damn good according to JD Power. A recent report found that about a fifth of BNPL (Buy Now, Pay Later) customers said they used Apple Pay Later in the first three months. In addition, the report also revealed that Apple “has a potentially more stable and sustainable user base than the competition.” What’s more, the data suggests it could attract BNPL first-time adopters who might not otherwise consider BNPL as an option.” All of this led JD Power to conclude, “There are no guarantees, but Apple Pay Later has a lot to offer – [this] is a nice thing in general, especially as Apple itself continues to delve into financial services.”

Photo credit: Miranda Halpern / TechCrunch

Other headlines

Daffy for Work is a kind of “charitable 401(k)” that could free up billions for US charities

Sundae set out to create a friendlier way to buy run-down homes (TechCrunch reported on the company’s 2021 raise here.)

Toast axes 99 cent fee

Vest and Sproutfi team up to boost investment in the US

Nuvei and Plaid are working together to expand bank payments

Airwallex joins Brex in expanding its international footprint

Financing and M&A

Seen on TechCrunch

Thunes is pocketing $72 million at a valuation of over $900 million to expand its B2B cross-border payments platform

Karat, a startup developing financial tools for content creators, raises $70 million

Cognaize raises $18M to build a better LLM for the financial sector that keeps people connected

Runway raises $27.5 million to improve corporate financial planning

Addition leads $6M seed round in Egyptian fintech flash

seen elsewhere

Anduin, which strengthens investor relations in private markets, announces $15 million Series B

Nav Acquires Tilful to Accelerate Data Platform Development

Mynd? Invesco Real Estate invests an additional US$20 million in the SFR platform. (Read TechCrunch’s previous coverage of Mynd.)

Portrait Analytics raises $7 million to launch AI research platform

KASO raises $10.5 million in seed capital, launches fintech vertical offering for payments, and extends restaurant credit terms

Collection platform Colleen AI is raising $3.5 million in seed funding for the series

Join us at TechCrunch Disrupt 2023 in San Francisco this September and explore the impact of fintech on our world today. New this year, we will devote a full day to Fintech, featuring some of today’s leading Fintech figures. Save up to $600 when you buy your pass now through August 11th, plus save 15% with promo code INTERCHANGE. Learn more.

Photo credit: Bryce Durbin