And we’re kicking off the week with new analysis and opinions on fintech with SVB news, ESG, crypto, and more. Dive into the latest fintech insights and have a great start of the week!
What the failures of Signature, SVB and Silvergate mean for the crypto sector (CNBC)
Two of the banks that were friendliest to the crypto sector and the biggest bank for tech startups all failed in less than a week. While cryptocurrency prices rallied Sunday night after the federal government stepped in to provide a backstop for depositors in two of the banks, the events sparked instability in the stablecoin market. Silvergate Capital, a central lender to the crypto industry, said on Wednesday that it would be winding down operations and liquidating its bank. Silicon Valley Bank, a major lender to startups, collapsed on Friday after depositors withdrew more than $42 billion following the bank’s Wednesday statement that it needed to raise $2.25 billion to shore up its balance sheet. Signature, which also had a strong crypto focus but was much larger than Silvergate, was seized on Sunday evening by banking regulators. Signature and Silvergate were the two main banks for crypto companies, and nearly half of all U.S. venture-backed startups kept cash with Silicon Valley Bank, including crypto-friendly venture capital funds and some digital asset firms. Read more
Banks must shift their focus from being product-centric to customer-centric (Fintech Futures)
Incumbent banks have traditionally been product-driven organisations. Most still see the sale of products as their central role, largely because they are incentivised to do so. A bank’s mission should be to make its customers’ lives easier. Customers want a home, not a mortgage. They want their child to go to university, but they aren’t motivated by any desire to get a loan. It’s the outcome, rather than what underpins it, that they care about. Incumbent banks are now listening to the needs of customers but to deliver on those needs requires a fundamental shift in the way banks work. For example, having a single view of the customer at any one time, so they know what products they are consuming and how, is a simple step in understanding how best to provide support and deliver a more personalised approach. Read more
Silicon Valley Bank: why did it collapse and is this the start of a banking crisis? (The Guardian)
Four decades ago, Silicon Valley Bank (SVB) was born in the heart of a region known for its technological prowess and savvy decision making. The California-headquartered organisation grew to become the 16th largest bank in the US, catering for the financial needs of technology companies around the world, before a series of ill-fated investment decisions led to its collapse. What happened to SVB? As the preferred bank for the tech sector, SVB’s services were in hot demand throughout the pandemic years. Many tech companies used SVB to hold the cash they used for payroll and other business expenses, leading to an influx of deposits. The bank invested a large portion of the deposits, as banks do. But bonds have an inverse relationship with interest rates; when rates rise, bond prices fall. So when the Federal Reserve started to hike rates rapidly to combat inflation, SVB’s bond portfolio started to lose significant value. SVB didn’t have enough cash on hand, and so it started selling some of its bonds at steep losses, spooking investors and customers. It took just 48 hours between the time it disclosed that it had sold the assets and its collapse. Read more
The difference between ESG and sustainability communications is more than just a report (Fintech Futures)
The misunderstanding between the two approaches is far and wide and even my fellow communications professionals are not fully clear on the difference between the two. And I don’t blame them, as it’s such a technical topic that requires years of up-skilling and re-skilling to get right. Sustainability messages refer to the communication of information related to sustainable development practices and goals. These messages can cover a wide range of topics, such as reducing carbon emissions, promoting renewable energy, protecting biodiversity, and improving social and economic conditions for communities. On the other hand, ESG messages specifically focus on the disclosure of information related to a company’s environmental, social, and governance practices. ESG information is used to assess a company’s overall sustainability performance, including factors such as its environmental impact, labour practices, human rights record, and corporate governance structure. Read more
Starting 40 years ago, in 1983, Silicon Valley Bank rose to become the (#banking) backbone of the #startup world. It took only a few days for the entire model to collapse. Let’s take a look. SVB is (was) a bank for start-ups, offering commercial banking, investment banking, and #venturecapital services (next to a private banking and wealth management arm). As the start-up ecosystem around Silicon Valley boomed, so did SVB, which banked with nearly 50% of US venture-backed #technology and life science companies. The abundance of capital and funding over the past years meant that start-ups had more money to deposit than a need to borrow. At the end of 2022 SVB had $173.1bn in deposits and only $74.3bn in loans (12/31/22 static balance sheet view), with deposits having tripled in the last 2 years. Given that banks make money on the difference of the interest rate they pay to depositors vs the one they receive from borrowers, SVB needed to do something to close the gap. The (common) choice was to invest in (long-term) mortgage bonds and Treasuries. Read more
For startup competition, SVB’s nightmare is a win and a dare (Tech Crunch)
Sometimes, leaving stealth isn’t your own choice: It’s a force function of two of your largest competitors evaporating from the business, and the third triggering clients so much that there’s a talk of a bank run. At least that’s the case for Series CEO Brexton Pham, who has been building a full-stack enterprise platform for institutions and enterprises since March 2021. As a threat of a bank run looms at Silicon Valley Bank, days after Silvergate’s meltdown and impending shut down and Signature Bank’s ongoing step back from crypto customers, Pham has found himself in “the nuttiest week ever.” Series, which offers corporate bank accounts, is getting inundated with inbound messages, entire portfolios of VC firm — and the pace of inbound is ramping up by the hour. The CEO says their inbox is like a second application portal. And despite the idea that competitors might have a field day with the spotlight, Pham is cautious, saying that Series is only onboarding “select startups” while other startups may run the risk of being too risk tolerant with compliance to speed up onboarding processes. Read more
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