Fintechs were supposed to transform banking by making it dead simple for users to open savings accounts or pay their bills. But a series of recent high-profile setbacks with both fintechs and the traditional banking sector is setting off alarm bells.
This month’s series of bank collapses has shined a spotlight on the health of small banks, typically a behind-the-scenes partner of fintechs. And a report on Thursday from short seller Hindenburg Research alleged rampant payment fraud and inflated user numbers at Cash App, the payment and banking app owned by Jack Dorsey’s Square. It’s all adding up to a big wakeup call about the realities of how fintechs work.
Among the small banks that could be in the spotlight going forward are Cross River Bank, backed by Battery Ventures and Andreessen Horowitz, which also works with Affirm and Coinbase.