FinTech Futures: Top five stories of the week – 13 January 2023
Here’s our pick of five of the top news stories from the world of finance and tech this week.
JP Morgan sues Frank founder for allegedly inflating user figures
JP Morgan sues Frank founder
US multinational JP Morgan Chase is suing the founder of start-up Frank, Charlie Javice, alleging she lied about Frank’s success, size, and the depth of its market penetration in order to “induce” the bank into purchasing the firm for $175 million in 2021.
According to the lawsuit, filed in December last year in the US District Court in Delaware, Javice allegedly claimed Frank – a student loan application fintech – had more than 4.25 million student users but had used “synthetic data” techniques to create a list of 4.265 million students who did not exist.
“In reality, Frank was nearly 4 million short of its representations,” the suit alleges.
The lawsuit alleges Javice employed “a data science professor” at New York City college to leverage customer data the firm already had to generate 4.625 million fake customer accounts, including names, e-mails and addresses, paying him $18,000.
Frank’s chief growth officer Olivier Amar is also named in the complaint. The lawsuit alleges he purchased a list of 4.5 million students from ASL Marketing, a firm that bills itself as having “the most comprehensive, accurate and responsive data of high school students, college students and young adults available anywhere” for $105,000.
Wall Street heavyweights BlackRock and Goldman Sachs cut jobs
Wall Street heavyweights Goldman Sachs and BlackRock have each embarked on a round of layoffs, with Goldman reportedly shedding more than 3,000 employees and BlackRock letting go of up to 500 employees.
While the layoffs amount to around 6.5% of the total headcount at Goldman, which employs 49,100 staff, the job cuts at the firm are the worst since the financial crisis, Reuters reports.
Most of the bank’s major departments are affected in the cost-cutting drive, with its investment banking arm and global markets division faring the worst.
The firm had embarked on a hiring spree since the pandemic, adding more than 10,000 jobs, Reuters reports, as it sought to capitalise on buoyant market conditions.
At BlackRock, the world’s largest asset manager, 500 jobs out of 19,900 are on the chopping block, according to reports from Insider and Bloomberg.
In December, BlackRock chief financial officer Gary Shedlin said the firm is “freezing most hiring and reducing expenses” at a financial conference hosted by Goldman Sachs, adding that these measures will put BlackRock in a better position next year.
Coinbase to cut 950 jobs and shut down several projects
Coinbase CEO and co-founder Brian Armstrong
Cryptocurrency exchange platform Coinbase is to cut around 950 jobs – 20% of its staff – as it looks to shore up its operational efficiency amid a wider economic downturn.
Announcing the move, CEO and co-founder Brian Armstrong says that in 2022, “the crypto market trended downwards along with the broader macroeconomy”.
As a result, the firm is cutting its operational expense by around 25% quarter on quarter, Armstrong says, which includes letting go of around 950 people.
As part of the headcount reduction, Coinbase will also be shutting down several projects that “have a lower probability of success”.
Armstrong adds that over the past decade, tech firms have been “too focused on growing headcount as a metric for success” and that, going forward, the firm will shift its focus on to boosting operational efficiency.
Nuvei to acquire Paya for $1.3bn
Canadian fintech firm Nuvei has entered a definitive agreement to buy US payments and commerce solutions provider Paya for approximately $1.3 billion in cash.
According to the terms of the agreement, Nuvei will tender an offer to acquire all of Paya’s outstanding shares at $9.75 per share in cash, subject to conditions. The transaction is expected to close by the end of Q1 2023.
With the acquisition, Nuvei expects to capitalise on domestic and global payments opportunities and diversify its business across various “high-growth and underpenetrated” markets in which Paya has a footprint.
It also aims to expand into the growing B2B payments sector – Nuvei estimates the US B2B payments middle market to have a market size of $2.3 trillion by 2026.
Jack Ma to cede control of Chinese fintech Ant Group
Jack Ma to cede control of Ant Group
Chinese billionaire and founder of Ant Group Jack Ma will be giving up control of the fintech firm, it said in a statement.
Ant Group’s shareholders have agreed to carry out a restructuring process that will see Ma give up most of his voting rights.
“The adjustment is being implemented to further enhance the stability of our corporate structure and sustainability of our long-term development,” Ant Group says, adding that it “will not result in any change to the economic interests of any shareholders of Ant Group and their beneficiaries”.
