Goldman’s New Robo-Advisor; Coinbase’s $77 Bn Valuation
Greetings,
This week, we focus on Goldman Sachs’ new robo-advisor, Marcus Invest, and Coinbase’s $77 Bn Nasdaq private market valuation.
Let’s get to it.
Unemployment is on the Rise, but so are Retail Sales
Unemployment claims rose to 861,000 in the week of February 12th and continue to be above the pre-COVID pandemic peak of 695,000 since the start of the pandemic last March.
Retail sales have increased to a seasonally adjusted 5.3% in January, setting the stage for what could be the best year of economic growth in nearly four decades.
The latest round of $600 stimulus payments helped spark retail sales gain and the report shows that when fiscal aid “arrives to household balance sheets, it does get turned around fairly quickly and materializes in economic activity.”
Regulation in the Time of Biden: Regtech Growth; Crypto and Continued AML Focus
The CFPB is expected to strengthen enforcement and increase fines. Regtechs that help lenders self-regulate and stay in good standing with the Justice Department stand to benefit.
The crypto industry is also likely to face much greater scrutiny with the new administration. Janet Yellen, the new Treasury Secretary has said, “I see the promise of these new technologies, but I also see the reality: cryptocurrencies have been used to launder the profits of online drug traffickers; they’ve been a tool to finance terrorism.”
Goldman Sachs Launches New Robo-Advisor, Marcus Invest
Goldman Sachs launched an automated investment tool, Marcus Invest, with a $1,000 account minimum and a 0.35% advisory fee.
GS-Marcus is eschewing the self-directed gamified approach of RobinHood, choosing instead the robo-advisory strategy pioneered by fintechs such as Wealthfront and Betterment.
GS Head of Consumer and Wealth management division Stephanie Cohen said, “Goldman believes the best way to create wealth over time for most consumers is through diversified portfolios and that the firm didn’t design the app to drive user engagement”.
Despite entering a crowded market, Marcus’ robo-advisory offering is more accessible than other incumbents’ and threatens to displace digital wealth managers.
Minimum account balances of existing robo-advisory services from traditional wealth managers:
- $5,000 at Schwab Intelligent Portfolios
- $50,000 at Vanguard’s Personal Advisor Services
Minimum account balance thresholds are lower for existing fintechs:
- $500 at Wealthfront
- $0 at Betterment
At $1,000, Goldman is better positioned than its incumbent peers to scoop up consumers who would rather invest in a trusted established financial brand than a fintech startup.
Additional perspective on Marcus Invest from fintech advisor and commentator Jason Mikula. Some highlights:
GS’s differentiated positioning among robo-advisors as the “smartest guys in the room” should make attracting AUM easier and less costly
GS has its own ETFs via GSAM that it can offer through Marcus Invest
GS is building a multi-product, digital first bank (similar to SoFi) with cross selling opportunities
There’s Room for a Few Winners in BNPL
Although competition in the buy now, pay later space is intensifying, the space is too big and diverse to have one POS lender dominate.
POS loans vary by different loan terms and purchase amounts, which makes buy now, pay later a loosely defined product. And while BNPL payment volumes are growing rapidly, they collectively represent just a couple percentage points of the rapidly growing global e-commerce spending.
For Affirm, a small number of major deals with marketplaces such as Shopify, have the potential to power big growth. Meanwhile PayPal continues to have vast growth potential as it integrates Pay in 4 into its existing checkout button and pricing across its platform of ~30 MM merchants. Furthermore, BNPL also is just one of a growing list of features for what PayPal terms its evolving consumer “super app,” like discounts, pay-with-rewards, crypto, bill payments and more.
Apple Pay Helps “Cheat” Banks out of $250 Bn
A study found 75% of Americans are using big tech and fintech to make their payments and manage their personal finance.
Consumer adoption of tech companies like Apple, Google, Amazon, Paypal, and Credit Karma has created over $250 Bn in payments displacement for banks. Most consumers don’t link their primary credit and debit cards to their mobile payment apps, effectively “cheating” on their primary payment providers.
Coinbase Valued at $77 Bn in Nasdaq Private Market
Coinbase is trading at a remarkable $77 Bn valuation, based on the value of their shares in the Nasdaq private market. This makes the startup’s value greater than Intercontinental Exchange Inc., the owner of NYSE. This new valuation was announced just around the time that Bitcoin surpassed $51k per coin.
Here is the bull case for Coinbase’s valuation for those interested.
SeedFi Secures $65 MM in Funding and Debt
The financial health startup led by CEO Jim McGinley raised $15 MM in Series A funding and $50 MM in debt. SeedFi strives to help consumers save money while improving their credit. Since inception in 2019, SeedFi has helped consumers build over $500k in savings.
The company will use the proceeds to grow its customer base as it continues to rollout products alongside banking partners like Cross River.
In the News:
- Fed Sounds Alarm on Commercial Real Estate, Business Bankruptcy (Bloomberg, 2/19/2021) Economists believe that an increase in people working from home will impact the commercial real estate space even after the pandemic is over.
- Wells Fargo Wins Fed’s Nod for an Overhaul Plan Tied to Cap (Bloomberg, 2/17/2021) Wells Fargo has received approval from the Fed for their proposal to overhaul risk management and governance, which is the second out of four steps needed to get the sanction lifted.
- Robinhood, Citadel CEOs Grilled by Lawmakers in Wake of GameStop Saga (WSJ, 2/18/2021) Robinhood and Citadel CEOs were pressed by the House Financial Services Committee about the trading frenzy that took place in January.
- What Will The Post-COVID Banking World Look Like? (The Financial Brand, 2/15/2021) Banking functionalities may soon be integrated in lifestyle management apps.
- Venmo Expands General Availability of Credit Card (PYMNTS, 2/16/2021) Venmo has launched a credit card with a QR code that is powered by VISA in conjunction with Synchrony.
- Plaid and Atom Bank Ink Open Banking Deal for SME Lending (AltFi, 2/16/2021) Plaid and UK neobank Atom Bank have joined forces to offer SMEs loans.
- Amazon Acquires Selz, a Shopify Competitor that Helps Small Businesses Build Online Stores (CNBC, 2/26/2021) Amazon acquires Sydney-based e-commerce startup, Selz, which helps businesses launch their own online stores.
- Coinbase, Readying for Public Listing, Gets $77B Valuation From Nasdaq Private Market (Yahoo Finance, 2/17/2021) Coinbase received a $77 Bn valuation from Nasdaq, which makes its value greater than Intercontinental Exchange Inc., the owner of NYSE.
- Public.com Raises $220 Million Series D (FinLedger, 2/17/2021) Social investing app Public.com, led by CEO Jannick Malling, raised $220 MM in series D funding, which the company will use to grow its infrastructure and scale its product.
Lighter Fare:
- Just Another SPAC Files for U.S. IPO (Really, That’s the Name) (Bloomberg, 2/17/2021) Just Another Acquisition Corp. (the actual name of the firm) has carried on SPAC mania by filing with the SEC to raise $60 MM.
