#robinhood is on the hook for that initial transaction

[listen-to-the-inner-walrus]

re-watched the video again this morning and oh. my. god. can i stop finding this man attractive?

he is the ceo of a stock market app and the big controversy that app had - turning off the buy button during the gamestop thing - wasnt even due to the presumed reason of him being in big finances pocket, it was because his stupid stock market app is stupidly designed.

whenever folding ideas/dan olson releases a new video, i always know im gonna learn about some insane new thing that makes me question reality for at least ten minutes.

and uh, the most recent one did too, like reddit financial apes are maybe the most chronically online people i have ever heard of in my life, but somehow that was easier to process than finding out the ceo of robinhood is kinda hot.

like i do not want to find vlad tenev attractive, hes the ceo of a stock market app. also his interior design is abysmal. but hes also kinda hot.

[un-enfant-immature]

Galileo Financial raises $77 million for its fintech services that were 19 years in the making

Clay Wilkes had already been retired for six years when he launched Galileo Financial Services in 2000.

The serial entrepreneur who had been an early pioneer in telecommunications technologies (like voice over internet protocols) saw the need for better connectivity between secondary services and financial institutions 19 years ago, just as new digital services around payroll processing, transit vouchers, store cards, and other services were launching.

Now the company runs the backend integrations with financial institutions for some of the biggest names in financial technology and has just raised $77 million in financing from Accel Partners.

Not that Galileo necessarily needed the money. The company has been profitable for years since its bootstrapped beginnings and counts fintech giants like Chime Banking, Robinhood, Monzo, and Transferwise among its customers. In fact, the debit and credit card service provider will process nearly $26 billion in financing by the end of the year, according to the company.

For financial services companies that are launching these days there are a few ways to get to market quickly. One is to partner with a financial institution that will handle the money for them in accounts that are FDIC assured and the other is to become a financial provider that’s fully regulated themselves.

Most companies have opted for the second route, and when they do, they need to find a way to hook into a bank’s financial system and the payment technologies that form the backbone of transaction processing through the debit and credit cards that a huge portion fo the world relies on to buy things.

Accel partner John Locke, who is joining the Galileo board of directors, calls the company almost the flip side of the Braintree and Stripe investments that power transactions for most online merchants.

Rather than focus on the companies that are taking online orders and processing payments, Galileo deals with the consumers who are spending the money and powers the ways in which companies are trying to offer new services to get those consumers to switch from traditional banks to their upstart challengers (ironically still mostly powered by traditional banks).

“Through the API what they’re doing is creating and managing accounts, authorizing merchant transactions, monitoring fraud, initiating disputes and chargebacks, being able to configure products and a wide variety of product,” said Wilkes. “We support [direct deposit accounts] and we do credit products… all of these capabilities are capabilities that fit on our platform.”

Wilkes wouldn’t talk about the company’s valuation except to say that it’s worth “a substantial amount”.

What he will talk about is how Galileo will use the money it’s raised. The Salt Lake City-based startup is planning to greatly expand its geographical reach beyond North America. It’s “actively pursuing opportunities in Brazil and Colombia and Argentina,” according to Wilkes. In fact, the company plans to open an office in Mexico City in the coming months to service new Latin American business.

Meanwhile it already has something of a stranglehold on the market in the United Kingdom. “The top five largest fintechs in the UK are all clients today,” Wilkes said.

Unlike other companies in the market that take a fixed percentage of transactions, Galileo charges a variable amount of a few cents for every transaction that it processes to connect a startup with its banking back end.  

“We’re in a golden era of fintech innovation and Galileo has quietly built the API infrastructure layer powering the industry’s most innovative products,” said Locke in a statement. “Clay and his team have built a very impressive business with many parallels to companies like Qualtrics and Atlassian: bootstrapping first to build a quiet, profitable powerhouse and now, ready to go big globally. We’re excited to help Clay and team take Galileo to the next level.”

[ericfruits]

Bank supervision in America is unfit for the digital age

HERE COME the Germans. On May 21st Raisin, a “deposit marketplace” from Berlin, declared its intention to set up shop in America. Within a year Raisin hopes to follow its compatriot, N26, a mobile bank that is due to open there soon. Yet neither will, technically, be a bank. Remarkably, no such startup yet has a national banking charter in America, although the country is a hotbed of financial technology, spawning innovators from PayPal to Quicken Loans.

Both Raisin and N26 will rely, at least at first, on the charters and deposit insurance of local “sponsor” banks. That route is “fastest to market”, says Nicolas Kopp of N26. It is also common. Sponsors such as the Bancorp Bank, Cross River Bank and WebBank stand behind fintechs and others wanting to offer banking services. (They often supply technology, too.)

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Varo Bank, of Salt Lake City (hitherto a partner of Bancorp), is likely to be the first purely mobile bank with a national charter. Last August the Office of the Comptroller of the Currency (OCC), a supervisor, gave Varo preliminary approval, subject to its raising $104m in capital and other conditions. Varo will also need a nod from the Federal Deposit Insurance Corporation (FDIC), which it first approached in early 2017. Robinhood, an online wealth-manager, has also applied to the OCC and Square, which handles payments for small businesses (the chairman of The Economist Group, Paul Deighton, is on its board), to the FDIC.

In Australia, Britain, Hong Kong, Singapore and elsewhere, online banks and other fintechs have a fairly clear path to regulatory approval. Regulators have provided “sandboxes” in which startups can develop their products safely. In Britain, online challengers have restricted licences at first; some, such as Monzo and Starling, have gained full bank status.

The Consumer Financial Protection Bureau (CFPB) and the OCC have proposed setting up sandboxes. Arizona, Utah and Wyoming, all eager to attract startups, are building their own. But although things are starting to shift, America is still far behind. It also has no equivalent of the European Union’s payment-services directive, which allows third-party companies to make payments and aggregate data from accounts—with consumers’ permission—or the British variant, Open Banking. Both may help open up banking to digital competition. Steven Mnuchin, the treasury secretary, has proposed modernising the Community Reinvestment Act (CRA), an anti-discrimination law whose requirements are tied largely to the location of branches—hard to square with a world of digital banking—but nothing has changed yet.

America’s regulatory system is fiendishly complex, comprising “patchworks on patchworks”, says Brian Knight of the Mercatus Centre at George Mason University. As well as several federal regulators, created in response to successive crises—the OCC during the civil war, then the Federal Reserve, the FDIC, the CFPB and more—every state has its own authorities.

Overseeing digital banks is thus no one’s business and everyone’s. The OCC has tried to take the initiative—last year it invited applications for “special purpose national bank charters” aimed at fintechs—but state regulators took umbrage, though the charter does not permit deposit-taking and none has been awarded. On May 2nd a federal court ruled that New York’s Department of Financial Services could proceed with a suit against the OCC. The prospect of a legal battle, progressing at much less than internet speed, may well put off potential applicants for special charters.

Would-be banks have plenty of options, but all have pitfalls. As Varo Bank has found, the route to a conventional federal charter is slow (it went for a full OCC charter, not the limited special version). Hooking up with a sponsor buys time and convenience, but at some expense (eg, a cut of “interchange” fees from card transactions). Digital firms can buy a chartered bank, if they can find a suitable one: Moven, another fintech, has made three unsuccessful attempts, says Brett King, its founder. The biggest obstacle, he adds, was that the CRA would have obliged it to keep branches open. (Moven maintains a partnership with a bank in Kansas.) Or they can be bought themselves. Simple, a digital bank set up after the financial crisis to provide basic bank accounts, at first tied up with Bancorp, but in 2016 was acquired by BBVA, a Spanish bank already active in America.

Admittedly, new banks face similar choices in other countries. At first N26 piggybacked on the licence of Wirecard, a German financial-services firm. Raisin’s domestic sponsor was MHB Bank—which it bought this March. Nevertheless, the sheer thickness of America’s regulatory undergrowth surely hands an advantage to already-licensed banks of all sizes. Several have their own online brands.

Thus the most prominent digital entrant is arguably Goldman Sachs. Its offshoot, Marcus, has scooped $35bn in deposits, helped by a famous name and generous interest rates. Ally Financial, the biggest online-only bank, used to be General Motors’ financial arm. Meanwhile BankMobile, owned by Customers Bank, a Pennsylvanian lender with just $10bn in assets, has 2m checking-account customers; most are students, thanks to deals with their colleges. In April BankMobile launched T-Mobile MONEY, providing banking services under the telecoms network’s brand. Luvleen Sidhu, BankMobile’s president, says she is gaining 5,000 accounts a week—against just one through a typical bank branch. “Our path was easier”, says Ms Sidhu, “because we didn’t have to apply for a bank charter.”

This article appeared in the Finance and economics section of the print edition under the headline "Trouble logging in"

https://econ.st/2WA5WoL