A Rough Week in Fintech Card Land

Last week saw two high-profile consumer fintech products leave the landscape: Ness and HMBradley. Fintech card issuing is a small world; I have known both founders for years (about 10 for Zach Bruhnke at HMBradley!). My heart hurts with the disappointment and loss each of them must be experiencing as they say goodbye to their products.

It’s not quite the same story for the two companies. While Ness is undergoing a full shutdown, HMBradley is pivoting to providing services to banks. You can read more about their journeys on their websites, each of which hosts a poignant and thoughtful note to their customers about the journey.

I advise and coach many CEOs and always tell them that the only thing you can be certain of when you start a company is that your plan is wrong. Everything can and will change. Outside forces will impact you in ways you couldn’t imagine. Sometimes, you will find your way around them and win; sometimes, you will take a beating and retreat.

A lot of folks who have tried to build consumer credit card products, like Ness and HMBradley, have yet to make a sustainable business from it. Unfortunately, with the launch of my Grand Reserve World Mastercard product and its subsequent exit and closure, I can count myself among them. Founders pour their entire selves into their products, often to the detriment of their health, sanity, relationships, and much more. It’s not a smart choice. It’s not easy. It’s not even that enjoyable most of the time, as we spend hours, days, weeks, and months agonizing over how to make payroll, raise the capital for our vision, and bring along slow-moving financial services partners to try innovative new products.

For every product and company that fails, someone at a legacy financial services institution is enjoying an “I told you so” moment that trying new things is bound to fail. At the same time, these innovations don’t all fail. That is what keeps the dream alive. For every Ness, there is a Bilt with massive growth. For every HMBradley, there is a Chime.

Even those of us on the startup side have our doubts about others. I worked with Chris Britt, Chime’s founder, at Green Dot. When I heard he was starting Chime (then called One Debit), I thought, “What, a Green Dot clone?” I was clearly wrong. Chris found a marketing approach and feature set that spoke to underserved users. While Chime’s current valuation is no doubt lower than its peak, there is no doubt that Chris and the team have built a wonderful and durable business that serves many customers.

There are so many examples on each side of the ledger. True entrepreneurship is defined by the risk founders take. Only one person is the founder and CEO (sorry, co-founders). That person is responsible for fundraising, payroll, benefits, and final decisions. It is nearly impossible for a founder to walk away from their business, and they put themselves at a far greater risk than the investors who spread their bets across dozens of startups in a portfolio.

We each walk into a new business knowing the chance of success is very small. Only about 1% of startups go public. Less than 50% exit and many exits do not return any capital to the founders. Yet, we still start businesses because we are crazy (narcissistic?) enough to believe we will be the exception to the rule. Somehow, we all think we’re the next Mark Zuckerberg.

The bad news keeps coming as we approach the end of the year. It’s a good time for companies to clean up shop. There will be closures, layoffs, down rounds, and fire sales. Some headlines are overblown (see Fortune’s piece that Petal is “for sale”). Some are real. Let’s all remember that all startups are for sale. If only I had a dollar for every founder who is “never going to sell” who later did.

The good news is coming. I am here to make an official prediction that fintech will turn in 2024, and we’ll start to hear more good news. Onward!

Speaking of Good News, Kasheesh!

After rebuilding their split payment card system, Kasheesh* announced their return to the market. For those not familiar, Kasheesh helps consumers stretch their credit limits by providing a new virtual card number on demand for a specific purchase that, in turn, is funded by two or more other cards. Users can stretch their ability to pay across multiple cards for a small fee, enabling transactions without ultimately requiring additional credit.

We are very proud to have helped the Kasheesh team relaunch a new financial stack supported by Mastercard, Bangor Savings Bank, and Modern Treasury, with fraud prevention from Sardine.AI.

New Cards

In this week’s new card round-up, two very different offerings:

The PNC Cash UnlimitedSM Visa Signature® Credit Card is a competitive offering from a regional bank with 2% unlimited cash back on all purchases, plus a 0% intro APR on purchases for the first 12 billing cycles and a 0% intro APR on qualifying balance transfers for the first 12 billing cycles following account opening (lots of small print applies). There isn’t a signup offer, and it appears you need to be a PNC customer, but this is a solid card.

On a different note, Dwayne Johnson is everywhere. I heard he might run for president. First, though, he has a card with late stage fintech Acorns: The Mighty Oak debit card. Acorns is built on round-up investing, which puts a few cents aside to get you savings over time. While I’m not entirely convinced by the concept, the card's unique make–it's made from TUNGSTEN–certainly caught my attention. You know I need one for my collection. Upcoming reporting on it is coming soon.

Credit-Cards-as-a-Service Market Analysis

Last week, we unveiled a preview of our report on our website, offering a sneak peek before purchasing. And now, in the spirit of giving, if you preview the report before November 25th, we'll send you a special discount code as a token of our appreciation.

Thank you for reading CardsFTW. This post is public so feel free to share it.

Happy Thanksgiving

A quick wrap-up to say, “Thank You.” I am grateful to everyone who reads each week, especially those who support my work as paid subscribers. I wish you a peaceful and fulfilling Thanksgiving. Don’t forget to optimize your card usage on Black Friday and split those big purchases with Kasheesh!

CardsFTW

CardsFTW is a weekly newsletter, released most Wednesdays, that offers insights and analysis on new products in the credit and debit card industry for both consumers and providers. CardsFTW is authored and published by Matthew Goldman and Ellen Perl of Totavi, LLC. Totavi is a boutique consulting firm specializing in fintech. We bring real operational experience that varies from the earliest days of a startup to high-growth phases and public company leadership. Visit www.totavi.com to learn more.

*Indicates a company where Totavi, LLC has a business relationship.