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Chime is cutting 12% of its staff
Chime has laid off 12% of its staff, or about 160 employees, becoming the latest big-name fintech firm to cut jobs in this year's downturn.
A spokesperson confirmed the number of layoffs, which were first reported Wednesday by The Information. "To ensure the long-term success of the business and as we look at current market dynamics, we are focusing our organization to be fully aligned with our company priorities," the company said.
In a memo to staff reported by TechCrunch, co-founder and CEO Chris Britt said the company remained "well-capitalized" and the cuts were among moves to position the company for success "regardless of market conditions."
Chime is a leader among a group of neobanks such as Current and Varo that offer checking accounts and other banking services for people who are unbanked or underbanked. Varo conducted layoffs earlier this year, cutting about 75 jobs, which represented 10% of its staff, in July.
Chime has raised more than $2.3 billion in venture capital funding since its founding in 2013, according to Crunchbase. Its most recent round, $750 million in August 2021, came at a $25 billion valuation. It had more than 14 million customers as of May, according to research from Cornerstone Advisors.
Neobanks typically rely on collecting interchange fees on card swipes for most of their revenue — and few have reached profitability (though Britt did tell CNBC in 2020 that Chime became profitable on an EBITDA basis at the start of the pandemic).
The company was expected to go public this year but has held off as the IPO market has been largely ice-cold.
Meanwhile, venture investment into the neobanking sector has slowed significantly from the boom times of late 2020 and 2021. Banking-focused startups raised $24.7 billion from investors in 2021, according to CB Insights, compared to $7.6 billion in first nine months of 2022.
Correction: This story was updated on Nov. 2, 2022, to correct the date of Chime's latest funding round.
Why the midterms could make or break Twitter and TikTok
Hello and welcome to Protocol Policy! Today we look at how the fortunes of TikTok, Twitter, and Meta will change with the upcoming midterms cycle. Also, we have an update on all the Twitter happenings under Musk, and Microsoft will likely need to reckon with its role in China’s AI ecosystem.
Social problems
Midterms are just six days away. The battle for Congress is still very much up in the air: As of Wednesday, FiveThirtyEight models give Republicans a 51% chance to take the Senate — almost a coin flip’s chance — but an 83% chance to take the House. Of course, if the 2016 election taught us anything, it’s that we should be skeptical of election meters. But it’s typical for the party in the White House to lose the House at midterms, and Democratic leaders are reportedly preparing to lose the House, as key races seem to be tipping in Republicans’ favor.
This year’s midterms are perfectly poised to pick social media winners and losers. It wasn’t so long ago that you could treat social media companies as a political monolith: The companies fought fiercely against one another within Silicon Valley, but in D.C., their interests were generally aligned. That’s not true anymore, especially with the incredible rise of Beijing-backed TikTok and Elon Musk’s recent $44 billion acquisition of Twitter. Since the social media landscape has become more heterogeneous, so will the political fortunes of Meta, TikTok, and Twitter.
TikTok will face greater national security scrutiny if Republicans take Congress. When he was in office, former President Trump unsuccessfully tried to force TikTok into selling its U.S. operations to Oracle. A few years and Buzzfeed scoops later, the mainstream Republican party has come around to the idea that TikTok poses a national security threat.
- In September, for example, Sen. Mitt Romney said it was a huge risk to allow “an authoritarian regime to have a social media capability of the scale they have in our country.”
- And though he has no power to do anything about it, Republican FCC Commissioner Brendan Carr told Axios just this week that he didn’t see any path forward for TikTok “other than a ban.”
- TikTok’s rivals see this as a vulnerability. Meta hired a Republican consultancy to go after TikTok on national security grounds, including by planting op-eds and directly lobbying politicians, according to a Washington Post report. A staffer for the consultancy, Targeted Victory, even called for the messaging to highlight that Congress wasn’t focusing enough on the issue, according to leaked emails obtained by The Post.
- If a Republican Congress takes action against TikTok, President Biden would have a hard time going against it. To be clear, Biden would be in a lose-lose position: He could either veto an anti-TikTok bill — which would play into the narrative that he goes easy on China — or he could sign off on it and take away Americans’ bread and circus (or, more likely, corral them into a less entertaining circus).
Twitter made a political U-turn under Elon Musk, which could play in its favor. Prior to the Musk takeover, Twitter had become a top political target for Republicans, who decried the company’s decision to ban the New York Post’s Hunter Biden story just a few days before the 2020 election. Musk called the ban “obviously incredibly inappropriate” and Republicans have largely welcomed his acquisition. Though there are national security concerns with Saudi Arabia funding Musk’s acquisition, Republicans (and Democrats) have largely been happy to give the Kingdom a pass.
If Republicans take Congress, Twitter’s gain could be Meta’s loss. Republicans — and their voter base — are angry about what they perceive as Big Tech censorship. But with Twitter suddenly switching sides, Meta might take center stage as their social media punching bag. House Republicans have already indicated they want to investigate ties between the FBI and Meta, following Mark Zuckerberg’s disclosure that Facebook had been communicating with the law enforcement agency leading up to the 2020 election.
TikTok could become a useful decoy for Meta. The more Congress focuses on the national security angle, the better off Meta will be. We know Meta already recognizes this dynamic, based on its decision to go after TikTok on national security grounds. For Meta, dealing with a Republican Congress will be a lot like dealing with a bear in the woods: You don’t have to outrun the bear, just your fellow hikers.
— Hirsh Chitkara (email | twitter)In the media, culture, and metaverse
Here’s the latest on the policy fallout from Musk’s early days at Twitter:
- Musk said permanently banned accounts won’t be coming back for a few weeks, which helps him sidestep the return of Trump during the tense final days of the midterms.
- Musk also said a top safety official at the company met with civil rights leaders “about how Twitter will continue to combat hate & harassment & enforce its election integrity policies.” Conservatives were very triggered.
In Washington
Rep. Lori Trahan introduced a bipartisan bill that would criminalize websites that assist people in killing themselves.
Sen. Elizabeth Warren wants the FTC and DOJ to look into Big Tech’s automotive ambitions.
Ted Ullyot, a former general counsel to Facebook and AOL, is planning to launch a law firm with former Trump attorney general Bill Barr, according to Axios. Ullyot also ran the policy shop at Andreessen Horowitz.A MESSAGE FROM THE FINANCIAL TECHNOLOGY ASSOCIATION
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On Protocol
Microsoft could be forced to grapple with the thriving AI ecosystem it fostered in China.
Meanwhile, global, open-source collaborations have brought AI to the cusp of world-changing status, but they’re under ever-increasing pressure as the U.S. and China become increasingly nationalistic on the tech.
And questions about how to write trade controls could get in the way of the Commerce Department’s hope of using them to slow down China on quantum computing.
Tumblr will officially allow nudity again, but is still stopping short of “depictions of sexually explicit acts.” Until 2018, the site had included a mix of erotica, porn, memes, and blogging, but it pulled back amid growing worries about child abuse images on the internet, changes to Section 230, and pressure from digital intermediaries like app stores.Nope, not here either
A Twitter user suggested (seemingly jokingly) that users “all just migrate over to the same google doc.” She then actually created such a document, resulting in more than 250 pages in Comic Sans. On Tuesday, though, the user, who described herself as a Scotland-based graduate student, said “the Nazis have ruined” it and switched the document back to view mode.
A MESSAGE FROM THE FINANCIAL TECHNOLOGY ASSOCIATION
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Civil rights leaders pushed Musk on racist tweets in a private meeting
Civil rights leaders confronted Elon Musk about the uptick of tweets containing racial slurs since he took over Twitter in a virtual meeting Tuesday afternoon, and also pushed him on the need to maintain election integrity measures before the midterms and restore content moderation tools that have been frozen.
The group — which included the heads of the Anti-Defamation League, Color of Change, Free Press, the Asian American Foundation, the NAACP, and the George W. Bush Presidential Center — walked away with a few verbal commitments from Musk, which he tweeted publicly early Wednesday.
But attendees say they’re waiting to see whether Musk follows those commitments with action. “He seemed to be listening. He seemed to be earnest,” said Jessica González, co-CEO of the nonprofit Free Press. “But he’s also shown himself to be inconsistent. We will judge him by his deeds, not his words.” Twitter did not immediately respond to a request for comment.
González described the meeting as “cordial” but said she and others pushed Musk on the spread of racist tweets across the platform since last week. “Obviously that was a coordinated attempt to test the system, and the system failed,” González said.
In response, González said Musk told the group Twitter is working on removing that network, details of which Twitter’s head of safety and integrity, Yoel Roth, has been sharing in recent days. But, González said, “This is an unsatisfying answer, because it’s not hard to root out the N-word.”
The group also emphasized the need for Musk himself to set the tone for users. After taking control of Twitter, Musk shared, then deleted, a fake news story about the recent attack on Paul Pelosi. Though the group didn’t specifically discuss the tweet, it did emphasize that “with great power comes great responsibility,” said Yael Eisenstat, vice president of the Anti-Defamation League.
“Regardless of what he tells us and regardless of what he says the policies are, it is clear people felt emboldened to start spewing hate speech and other really concerning content,” Eisenstat said. “He specifically said — and these are his words — that he does not want Twitter to be a hate amplifier.”
The coalition approached Musk with three key requests: that the company not restore the accounts of anyone who was previously de-platformed until it has set up a transparent process for doing so; that the company continues to prohibit election lies and denial, even after Election Day; and that Twitter includes the voices of civil rights leaders and communities that have faced hate-fueled violence on its forthcoming content moderation council.
Eisenstat said Musk verbally agreed with all of it, and afterward, he tweeted at least some of those commitments publicly. “Now it’s up to us to monitor if he stays true to his words,” Eisenstat said.
Musk’s tweets about the meeting said setting up a process for restoring suspended accounts would take “at least a few more weeks,” appearing to negate the possibility that former president Trump’s account could be restored just before the midterms.
In addition to those requests, González said the group also tried to help Musk understand the damage to free speech that comes from allowing hate and harassment on the platform. “That can have a chilling effect on speech when someone is targeted and dogpiled and harassed,” she said.
Musk also assured the group that content moderation tools that had been temporarily frozen through the transition would be accessible again by the end of the week, González said.
Despite these commitments, the civil rights coalition is not letting up on its pressure campaign, which includes calling on advertisers to pull out of Twitter if Musk reduces content moderation on the platform. IPG, which represents major advertisers including Unilever and CVS, has already reportedly recommended its clients pause Twitter advertising. The same coalition of civil rights groups previously led an advertiser boycott of Facebook after George Floyd’s murder.
Musk’s tweets about meeting with these civil rights groups prompted a swift backlash from conservative commentators. “Already he’s getting trolled about this,” González said. “Actually doing the right thing requires making unpopular decisions sometimes.”
The 'anti-bank' comes full circle
Good morning, and welcome to Protocol Fintech. This Wednesday, SoFi shows its bank-charter strength, the CFPB asks about payment-app problems, and Kraken gets social.
Off the chain
Crypto winter has not chilled the enthusiasm among once and future financial hubs to play host to digital assets businesses. Gibraltar is making a play for DeFi, and Hong Kong is considering allowing crypto trading despite Beijing’s disapprobation. Singapore wants to have it both ways, hosting crypto businesses while discouraging speculative retail trading. Malta has seen billions in crypto transactions since passing a regulatory framework for digital assets. The City of London is fretting about its market position if the FCA doesn’t hurry up its regulations. Dubai, meanwhile, seems like the place to go if you’re a crypto mogul under legal scrutiny. Crypto was meant to transcend national boundaries, but it actually seems more like an example of the late Citi chief Walter Wriston’s maxim “Money goes where it is wanted and stays where it is well treated, and that’s all she wrote.”
— Owen Thomas (email | twitter)An anti-bank’s turnabout
SoFi’s banking bet is paying early dividends. The San Francisco company revealed in its third-quarter earnings report that total customer deposits had reached $5 billion. It was only nine months ago that the fintech lender became a chartered bank able to hold deposits, through a $23 million acquisition of a small community lender called Golden Pacific Bancorp.
Its rapid growth in deposits, the company said, is a product of winning customers from large banks and has boosted its lending business.
Wall Street liked what it saw. The company’s shares climbed more than 10% immediately after earnings release Tuesday morning and closed up by 5%.
- SoFi’s quarterly loss of $0.09 per share and $419 million in revenue for the quarter were both better than analyst expectations.
- Its $5 billion in deposits marked an 86% quarterly increase. CEO Anthony Noto said on Tuesday’s earnings call that the company is winning customers from big banks.
- It helps to offer more money. SoFi this week will raise the top annual percentage yield on its savings accounts from 2.5% to 3%, compared to a 0.16% national average at all banks, according to Bankrate.
- “The vast, vast majority of what we’re seeing is coming from the largest banks in the United States, and we’re winning deposit share from them,” Noto said. He added that big banks were losing deposits to “fintech companies like SoFi” but also money-market funds.
Some perspective: JPMorgan Chase and the like may not be feeling the loss as much as SoFi feels the gain. The largest U.S. consumer banks measure their deposits by the trillion.
- The deposits mean an awful lot to SoFi, though. That’s because the banking charter allows SoFi to use the deposits to fund its loans, providing a cheaper, more stable alternative (especially as interest rates rise) to the investor funding that most nonbank fintech lenders rely on.
- “By using our deposits to fund loans, we benefit from a lower cost of funding for loans, and that’s more profit per loan,” Noto said. SoFi originated about $3.5 billion in loans from July through September, up 2% from the same period last year, and reported a 43% increase in revenue from loans, at $301 million.
- LendingClub, which last year added its own banking charter, warned of weakness for so-called marketplace lending in earnings last week and said it was holding more of its loans. It has also reached about $5 billion in deposits over its first year as a chartered bank.
- Upstart, which is not a bank and relies on marketplace funding for its loans, on Tuesday laid off 140 hourly employees, blaming “the challenging economy and reduction in the volume of loans on our platform.”
A bank charter was not SoFi’s only bet. It also reported growth for its Galileo unit, which provides software and payments technology. A Wedbush report Tuesday said SoFi’s one-stop shop approach gives it “a significant competitive advantage over neobank competitors.” But as the company digs its share price out from a roughly 60% year-to-date fall, it’s notable how much a company whose advertising once had it labeled an “anti-bank” is being boosted by banking basics.
— Ryan Deffenbaugh (email | twitter)A MESSAGE FROM THE FINANCIAL TECHNOLOGY ASSOCIATION
Have you reserved your spot at the FTA Fintech Summit: Shaping the Future of Fintech? There's no better time than now to confirm your seat at the table as we talk fintech, policy, and Washington.
RSVP here today to join us on November 16.
On the money
The CFPB is again looking for your thoughts on Big Tech and payments. Director Rohit Chopra tweeted that the agency is reopening a public comment period for “Big Tech and P2P payment platforms.” The agency is looking for input “on companies’ ‘acceptable use policies’ and their use of fines and penalties,” he added.
On Protocol: How Marqeta CEO Jason Gardner decided it was time to step down.
Shopify made an acquisition. The company did not disclose the price paid for Remix, a startup developing an open-source web framework.
MoneyGram is adding crypto features. The MoneyGram app will soon allow nearly all U.S. customers to buy, sell, and hold bitcoin, ether, and litecoin.
Galaxy Digital could cut jobs. The crypto financial services firm founded by billionaire Michael Novogratz is exploring eliminating as much as 20% of its workforce, Bloomberg reports.Social currency
Kraken is joining the crypto social networking craze. With Twitter now controlled by Elon Musk and backed by Binance, and Jack Dorsey working on a new social network, Cryptowatch, a Kraken subsidiary, on Tuesday launched Cryptowatch Social, a new social media service geared to crypto users and enthusiasts.
Cryptowatch founder Artur Sapek said the new social network’s goal is to become “the discussion center of the crypto world.”
“We are building the ultimate all-in-one crypto mobile app where traders can watch markets, manage their portfolio, and learn from each other,” he said in a statement.
Cryptowatch allows crypto holders to check prices, make trades on multiple exchanges, and analyze market trends. The social network would add “social features,” including “live idea feeds and chart sharing,” the company said. Cryptowatch also streams Crypto Fight Night live from Dubai, which will also be available to the social network users.
Read the full story on Protocol.com.
— Benjamin Pimentel (email | twitter)A MESSAGE FROM THE FINANCIAL TECHNOLOGY ASSOCIATION
Join founders, industry leaders, regulators, and policy experts at the #FTAFintech Summit. Access exclusive discussions on the power of financial technology to drive competition and break down barriers to financial services. Learn about the need for modernized policies and regulations.
RSVP today to join the conversation.
Thanks for reading — see you tomorrow!
The intersection of tech and diplomacy: Global collaboration on emerging technologies
Emerging technologies are transforming governments, businesses, and citizens into a truly digital society. Critical infrastructure, financial systems, and communication methods are migrating to an increasingly decentralized internet. New tech innovations like Web3, blockchain, and AI have massive potential to strengthen democracies and global economic security while decreasing the digital divide.
However, these innovations come with significant risks. In his book, “The Power of Crisis,” political scientist Ian Bremmer underscores disruptive technology as one of three looming global crises for which we are largely unprepared. Increased exposure to cyberthreats, complexities around critical resources and supply chains, and environmental concerns complicate technology’s adoption worldwide. U.S. Secretary of State Antony Blinken points to tech challenges like these as some of the critical areas vital to the modernization of American diplomacy.
The solution to these challenges is strategic tech diplomacy — a rapidly growing form of statecraft which engages non-state actors in the international arena to discuss the future of technology and foreign policy in the digital space. It begins with governments working with business, civil society, and institutions, and equipping global leaders with the knowledge and understanding of how to effectively engage across borders and sectors on the global stage.
The 11th Annual Meridian Global Leadership Summit: Preparing for Tech Transformation in a Digitalized World explored the intersection of diplomacy and emerging technology through ways the public and private sectors can foster policies to promote innovation, build resilient cyber systems, and ensure trust and transparency. Over 50% of the foreign diplomats, business leaders, U.S. government officials, and issue-area visionaries polled at the summit consider tech diplomacy most effective when there is technological and diplomatic cooperation among nations, international organizations, and tech companies.
Eugênio Vargas Garcia, Deputy Consul General and Tech Diplomat, Consulate-General of Brazil in San Francisco speakers at the 2022 Meridian Summit.
We are seeing this collaboration take shape already.
Public-private partnerships are on the rise to connect and engage international leaders with emerging technologies. Jennifer Bachus, principal deputy assistant secretary at the U.S. Department of State, spoke at the summit about how the new U.S. Bureau of Cyberspace and Digital Policy is playing a lead role in enabling an environment where private industry and venture capital can catalyze to increase connectivity. She also announced the launch of the Global Emerging Leaders in International Cyberspace Security program, in partnership with Meridian. Starting next year, the program will bring leaders from likeminded foreign partners and governments to the U.S. to equip them with the knowledge and connections to be effective advocates of the U.N. General Assembly-affirmed framework of responsible state behavior in cyberspace.
Multilateral platforms like the U.N. and the Climate Change Conference continue to serve as the ultimate platform for public-private partnerships, like the Global Digital Compact or Open-ended Working Cyber Group. Tech diplomacy is also being incorporated in corporate social responsibility initiatives like Microsoft’s Airband Initiative, a public-private effort to increase meaningful connectivity worldwide for underserved communities.
While tech can be a transformational tool for change, there must be a balance to ensure we are not only depending on multilateral institutions to implement policy and standards, as authoritative regimes can easily dismiss those initiatives as Dame Karen Pierce, ambassador of the United Kingdom to the U.S., shared at the summit. Instead, we must have a holistic diplomatic approach that ensures tech diplomacy and collaboration can be spread through various platforms.
Another area of consensus at the summit was the need to greater leverage technologies to build an inclusive environment and economy for all. Collaboration across sectors is needed to overcome the global tech and cyber talent shortage, including the industry’s notorious gender gap. Camille Stewart Gloster, the White House deputy national cyber director for technology and ecosystem security, detailed how the U.S. government is developing a multifaceted national strategy to increase diversity in the cyber workforce. Meridian honored Confidence Staveley, founder and executive director of CyberSafe Foundation, with the Meridian’s Global Citizen Award for dedicating her career to increasing female participation in cybersecurity to pull families out of poverty across Africa. She calls these real-life examples of how global priorities can mean local impact.
Technology policy will be a central and defining feature of U.S. foreign policy for years to come. But tech diplomacy will not be shaped solely by heads of state or diplomats. A full-scale collaborative effort by leaders from across sectors, institutions, and societies will be the real driver behind an open, secure, and reliable digitalized world for all. The era of tech diplomacy is here, and the room for growth at the cross-section of tech and diplomacy is exponential.