Blueprint: $42T BNY Mellon is live with crypto custody; Neobank NorthOne gets $67MM, goes deeper on SMBs; GoHenry's $55MM banking for children
We are seeing launches that were likely an outcome of a decision / strategy during the last market cycle
Hi Fintech Futurists —
You are the best, today’s agenda below.
CRYPTO: BNY Mellon Launches Digital Asset Custody Platform (link here)
NEOBANK: GoHenry raises $55m for global expansion (link here)
BANKING: With $67M in new capital, NorthOne is doubling down on SMBs as some fintech companies pull back (link here)
LONG TAKE: What will Goldman Sachs do with Marcus, and Why? (link here)
PODCAST: How Binance is investing $1B in the BNB ecosystem, with BNB Chain Investment Director Gwendolyn Regina (link here)
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Short Takes
CRYPTO: BNY Mellon Launches Digital Asset Custody Platform (link here)
BNY Mellon has launched their digital asset custody platform in the US, letting clients hold and transfer BTC and ETH. In 2021, the bank launched a Digital Assets Unit, and this is the continution of those developments. Notably, we are seeing a lot of launches that were likely an outcome of a decision / strategy during the last market cycle — it takes this long for execution to make its way through banks.
While BNY is not the first bank to explore crypto, this is still big important news. BNY Mellon reaches 20% of the world’s investable assets — a remarkable $42 trillion in assets under custody and $1.8 trillion in assets under management. As per a recent survey, institutional demand is there — 91% of institutional investors are interested in investing in tokens and 41% already hold crypto in their own portfolios.
The custody platform was created in collaboration with Fireblocks and Chainalysis, who also recently collaborated with Christie’s on their NFT platform. Buy-in from big banks such as BNY is essential for institutional growth, and is a powerful accelerator of the risk taking done by others. In other words, all the large brokerages, sovereign wealth funds, asset managers, and wealth managers that use BNY for custody can now play with crypto within the perceived safety net of their infrastructure.
Announcement
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The company doing the most meaningful B2C acquisitions and brokerage aggregation, and its major targets
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NEOBANK: GoHenry raises $55m for global expansion (link here)
UK-based challenger bank, GoHenry, has raised $55MM for its kid-focused banking platform. The valuation is not currently disclosed, although it is reported to be between $250-500MM, with total funding at $125MM. We also recently covered GoHenry’s expansion into France and Spain with the acquisition into Pixpay in June.
GoHenry offers two key products: (1) a prepaid debit card that can be topped up by parents and (2) in-app financial education that is linked to card activity. The app now has over 2 million customers, aged between 6-18, across the US, UK, France and Spain. User count has benefitted from the pandemic, as digital banking adoption has risen alongside online commerce. An interesting data point is that UK children earned £148MM in 2021, a 9% increase from 2020. Maybe its TikTok.
Whilst not yet profitable, the bank saw $41MM in revenue in 2021, double that of 2020, based on their pricing model of £2.99 per month. We like the efforts to promote financial education and management among the younger demographic to create sustainable money habits, though we wonder how commercial (vs. public minded) that effort should be. Other players in the challenger bank space are moving into the opportunity as well, with Revolut and Acorns releasing products for younger users — this implies that user acquisition is becoming tougher, and apps have to go younger.
BANKING: With $67M in new capital, NorthOne is doubling down on SMBs as some fintech companies pull back (link here)
NorthOne, a bank focused on small businesses, raised $67MM, bringing total fundraising to $90MM. In addition to banking services, NorthOne helps connect the data between a broad range of financial operations, such as accounting receivables, payables, lending and payroll. The bank also partnered with Bancorp Bank last year to replatform the company, and has experienced revenue and user growth of 4-5x over the recent years.
We find this interesting given that Brex recently moving away from SMBs to refocus on its venture startup niche, giving more space for a specialist like NorthOne to capture market share — for context, the majority of NorthOne’s customers have less than 10 employees. We think of Rho and Starling as other key players globally.
In industries like this, similar to the RIA space for example, they market structure looks like a number of point solutions integrated into a loose web of supporting software. The competitive playbook is to build as specialized an answer to your behavioral profile as possible, and then become present in every other piece of software that they use. The alternative to this configuration is a bundled platform, which tends to make more sense for larger organizations and the enterprise market.
Long Take: What will Goldman Sachs do with Marcus, and Why? (link here)
We reflect on the news that the Goldman Sachs consumer banking strategy, represented by Marcus, is facing headwinds — with potential $1.2B losses for the digital bank and a restructuring into wealth management.
We trace the history of the digital bank efforts and dive into the economics of the effort, comparing it to some recent numbers from N26, the german neobank. Last, we suggest a narrative shift that is responsible for this stumbling block.
Update: Apple teams up with Goldman Sachs on high-yield savings accounts and Goldman Sachs to restructure businesses, combining investment banking and trading
Podcast conversation: How Binance is investing $1B in the BNB ecosystem, with BNB Chain Investment Director Gwendolyn Regina (link here)
In this conversation, we chat with Gwendolyn Regina, Investment Director at BNB Chain.
Her main responsibilities include streamlining processes around deal sourcing, investment strategy, portfolio management and growth. As a part of her role she invests in promising projects in the web3 and MetaFi space (GameFi, SocialFi, NFTs etc.), and leads the MVB incubation program, which she set up.
Rest of the Best
Here are the rest of the updates hitting radar.
DEFI: Aave DAO favors fresh deployment of its latest version on Ethereum
DEFI: DefiLlama founder moves to NFT lending to tackle liquidity constraints
DEFI: DeFi startup Arch raises $5 million to become the 'BlackRock of web3'
INVESTING: Scotiabank Launches Canadian Algo Platform
DIGITAL WEALTH: KFH–Bahrain introduces new digital wealth management platform
INSURTECH: Munich Re acquires Apinity
ROBOADVISOR: Morgan Stanley to Consolidate Its Robo into E*Trade
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