FedNow may finally be live, but will it be too costly for businesses to adopt?


person with one hand typing on a laptop and the other working a calculator
Image Credits: Krisanapong Detraphiphat / Getty Images

Welcome to The Interchange! If you want this in your inbox, sign up here. It was an event-filled week in the fintech world, what with FedNow launching, the former CEO of fintech Bolt — and the company itself — being subpoenaed by the U.S Securities and Exchange Commission and much more. Let’s drill down here.

It’s about time

Last week, the U.S. government’s instant payment system, FedNow Service, finally went live.

FedNow is an instant payment infrastructure for transferring money that promises to be a faster payment rail for financial institutions, offering immediate access to funds no matter the day or time. As you know, this is huge because banks aren’t traditionally open 24/7 or let you receive money and use it on the same day.

It’s also something that the U.S. has been considered “behind” on in light even though other countries have been live with similar services for some time, including Brazil, India, the United Kingdom and the European Union. In fact, anecdotally, we hear that in Brazil, the country’s similar system, Pix, is so commonplace that people are even using it over credit cards to pay street vendors. And there’s data to back that up, too.

We did a deep dive on what the long-awaited launch of the service might mean for the U.S. on Friday. But one thing we didn’t touch on: how banks choose to price FedNow to their customers and how that might impact how quickly it is adopted.

Via email, Adam Shapiro, a partner at financial services advisory and investment firm Klaros Group, noted that the Fed charges banks around 4 cents for a FedNow payment, compared to less than half a cent for an ACH payment. However, he added, banks are free to charge customers what they like for these payments. As such, according to Shapiro, “business customers that are deciding which to use may be deterred if banks make FedNow significantly more expensive than ACH.”

He added: “A business may be prepared to pay 3.5 cents to get someone money faster, but draw the line at paying 25 cents. Also, how fraud is handled and where liability falls should something go wrong will shape adoption.”

Weekly News

Christine reported on the fact that a letter authored in April by a lawyer representing Bolt investors said the SEC was investigating whether federal securities laws were violated in connection with statements made when Bolt was raising money in 2021. The letter was sent to Bolt’s general counsel as part of a fact-finding mission. Per a letter referenced by The Information, Brian Reinken of WestCap Management and Arjun Sethi of Tribe Capital Management, investors in Bolt’s Series C and Series B rounds, respectively, demanded to look at the company’s records, claiming that ex-CEO Ryan Breslow allegedly “misled” investors while fundraising for the company’s $355 million Series E round. You may recall that Breslow had stepped down from his role as CEO in January of 2022.

Mary Ann teamed up with Rebecca Szkutak to look at just how far fintech valuations have fallen since the heydays of the venture boom (see graph below). Unsurprisingly, valuations for most of the highest valued fintech companies are down, with three notable exceptions — all of whom operate in the same space. They looked at valuations based on secondary share activity (as analyzed by, which some argue may be a more accurate reflection of what a company is worth than public valuations at the time of a fundraise. They also talked to a few industry experts to get a sense of what’s ahead. Check it out here:  Fintech valuations have fallen. Where do they go from here? (TC+)

TC’s Alex Wilhelm and Anna Heim did a deep dive into the world of insurtech for TechCrunch+, noting that while some industries were able to get over the hump of inflated valuations from 2021, this industry didn’t seem to be one of them. So much so that one report called it the “death of insurtech 1.0.” Alex and Anna look at how global startups fared, and if there are signs that this industry can indeed recover. (TC+)

Reporter Dominic-Madori Davis wrote about the aftermath of an acquisition involving neobank Greenwood, which caters to Black and Latino customers, and The Gathering Spot, a networking club with similar interests. As you will see, everything was going well…until it didn’t. Now there are sour feelings and a lawsuit. Though none of the parties commented, Dominic-Madori details what went wrong. The debate of whether niche-focused neobanks will ultimately prove successful continues as Daylight, another neobank focused on the LGBTQ+ community, recently shut down.

Get your palm ready! Reporter Sarah Perez covered Amazon’s palm-scanning payment technology coming to all 500 Amazon-owned Whole Foods stores by the end of the year. Here’s how it works: Utilizing a biometric payment system, the customers hover their palm above a reader device that identifies the individual’s unique palm signature and associates it with the customer’s payment card on file in order to charge them for their purchases. Don’t worry, your palm data is not shared.

Medical procedures often involve a complicated web of bills and payments that can stretch for months or even years later. I (Christine) personally had a collections agency chase after me for a $50 urine test (I was 21 years old and didn’t know better), so I can imagine what it’s like for someone owing thousands of dollars in medical fees. This week I wrote about Collectly, a company that developed proprietary interfaces that integrate with electronic health records and practice management software to make patient billing operations easier.  By making it easier to pay, the company touts that medical company customers were, on average, able to increase patient collections for medical group partners by 75%, reducing the “days sales outstanding” to 12 days from between 60 and 90 days. Though Collectly’s customers are the medical offices, I’d like to think that the digitizing of medical bills is something that can help patients, too. Who wouldn’t want a one-click way to access and pay all the bills associated with a procedure?

CB Insights released its Q2 State of Fintech Report last week, and unsurprisingly, global funding in the space was down — plunging by nearly half to $7.8 billion, its lowest level since 2017. But at least one region didn’t have a bad quarter. Can you guess which one it was? Meanwhile, payments — which has historically been the darling of the fintech space — didn’t have a great three months. Read more here.

Visa and Mastercard were hit with an antitrust suit by fintech company Block. In a suit filed July 14 in the U.S. District Court for the Eastern District of New York, Block alleges the two credit card giants “conspired to vastly overcharge the Square payment platform, causing higher retail prices paid by consumers,” by inflating interchange fees as a way to maintain market share, according to a Bloomberg report.

Tech giant Apple in late March finally launched its Apple Pay Later service, which allows users to split the cost of an Apple Pay purchase into four equal payments over six weeks without interest or late fees. The move put Apple in direct competition with the likes of Affirm, PayPal and Klarna. How’s it going so far? Well, according to J.D. Power, pretty darn good. A recent report found that about a fifth of BNPL (buy now, pay later) customers said they used Apple Pay Later in its first three months. Additionally, the report also revealed that Apple has “a potentially more stable, sustainable user base than competitors do. And beyond that, data suggest it may be attracting first time BNPL users that might not otherwise consider BNPL as an option.” This all led J.D. Power to conclude: “There are no guarantees, but Apple Pay Later has got a lot going for it — [this] is a nice thing to have in general, and especially when Apple itself is diving further into financial services.”

Image Credits: Miranda Halpern / TechCrunch

Other headlines

Daffy for Work is a type of ‘charitable 401(k)’ that could unlock billions for US charities

Sundae set out to build a kinder way to buy run-down homes (TechCrunch reported on the company’s 2021 raise here.)

Toast axes 99-cent fee

Vest and Sproutfi team up to boost investments in the US

Nuvei and Plaid team to expand pay-by-bank 

Airwallex joins Brex in expanding international presence

Fundings and M&A

Seen on TechCrunch

Thunes pockets $72M at a $900M+ valuation to expand its cross-border, B2B payment platform

Karat, a startup building financial tools for content creators, raises $70M

Cognaize raises $18M to build a better LLM for the finance sector, one that keeps humans in the loop

Runway lands $27.5M to streamline financial planning for businesses

Addition leads $6M seed round in Egyptian fintech Flash 

Seen elsewhere

Anduin, which empowers investor relationships in private markets, announces $15M Series B

Nav Acquires Tillful to Accelerate Data Platform Development 

Do you Mynd? Invesco Real Estate invests $20M more in SFR platform. (Read TechCrunch’s previous coverage of Mynd.)

Portrait Analytics raises $7M for launch of AI research platform

KASO raises $10.5M in seed funding, launched a fintech vertical offering payments and extended credit terms to restaurants

Payment collection platform Colleen AI raises $3.5 million in series seed funding

Join us at TechCrunch Disrupt 2023 in San Francisco this September as we explore the impact of fintech on our world today. New this year, we will have a whole day dedicated to all things fintech, featuring some of today’s leading fintech figures. Save up to $600 when you buy your pass now through August 11, and save 15% on top of that with promo code INTERCHANGE. Learn more.

Image Credits: Bryce Durbin

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