Weekly Briefing No. 127 | Terms of Swahili & Transparency as a Service

Welcome to our 127th edition. Here’s what taxed our minds this week:

  • Terms of service agreements need to change
  • The coming empowerment of individual investors
  • Deals: VeriFone, Clean Capital, AccessFintech and Truework
  • Basic banking services rise; Fidelity’s bow to economic realities
  • Chaos engineering; Aladdin (Sane); MoviePass; Beard Taxes


Terms of Swahili.

"I say this gently: your user agreement sucks… The purpose of that user agreement is to cover Facebook’s rear end… it’s not to inform your users about their rights. Now, you know that and I know that. I’m gonna suggest to you that you go back home and rewrite it and tell your $1,200-an-hour lawyers... you want it written in English, in non-Swahili” (See here). That highlight from this week’s congressional Facebook theater comes from GOP Senator John N. Kennedy, a smart guy who clearly didn’t mean to offend those who speak the Bantu language of Swahili. Rather, it conveyed to Mark Zuckerberg that despite his efforts, he didn’t understand the meaning of Facebook’s 3,200-plus-word TOS agreement. But in fairness, Facebook’s TOS isn’t unusual. In fact, this week, we took the time to review the TOS agreements for some of our financial accounts, all of which hold sensitive data. We also looked at the TOS agreements of a few large fintechs that can afford fancy lawyers. Like Facebook’s, most of them suck. They employ esoteric language, links to other files and possess about as much charm as the disclaimers at the end of pharmaceuticals commercials. In short, they leave the reader with little understanding of what they’re getting themselves or their money into. To paraphrase a snarky quote from Voltaire, a “great” use of words is to hide what we really think and do. Hopefully, financial CEOs of all sized companies are taking note of Zuckerberg’s grilling, received in part for his company’s “great” ability to obfuscate. Because increasingly, consumers are going to scrutinize how their data is treated, and like Kennedy, they won’t take kindly to being given the runaround.

Transparency as a service.

On the related issue of trust, we wanted to highlight two fintech start-ups that came out of stealth mode this week, fitting nicely into the idea of greater shareholder empowerment thanks to technology. On Tuesday, Portland-based Bumped announced a capital raise to further develop the company’s app, which enables participating companies to provide consumers with fractional shares for purchasing a company’s products. At first, our take was that Bumped was just another twist on loyalty programs, but as we read this Geekwire article, we came to see Bumped as a way for individuals to gain ownership of companies that reflect their purchasing choices and for companies to establish a new, direct connection with customers. Also this week, SAY, a New York-based start-up led by Acorns co-founder Jeff Cruttenden, announced an $8-million Series A backed by an impressive investor group. The company looks to go beyond the velvet-roped world of the annual meeting and regulated proxies in an effort to promote new, more social communications channels between investors and companies. Jana Partners, CalSTRS, Blackrock and others have been growing bolder in using their ownership stakes to flex their muscles. We’d like to see regular folks have the opportunity to do the same, and our hope is that SAY harnesses the power of individual share ownership to make that idea a reality.

Getting the straight scoop on blockchain.

Powered by Fordham University

These days, the price of Bitcoin can leave even the toughest of investors with a queasy feeling. But underneath the turbulence, the blockchain innovations sparked by the Bitcoin protocol continue to reimagine industries ranging from healthcare to energy to financial services. However, commercialization isn’t exactly a walk in Central Park. It takes determination, grit and lots of up-to-date knowledge. That’s why our friends at Fordham University are hosting a two-day Blockchain Disruptor Conference at Lincoln Center. If you want to better understand how blockchain works and why it’s such a big deal, we invite you to go back to school on April 28th and 29th with the experts Fordham has assembled. They know that a healthy dose of toughness and moxie is needed in order to stay ahead of the curve, and as true-blue New Yorkers, they’ll provide the straight scoop you need to prosper in our rapidly changing business environment.

Readers of The FR get 50% off conference registration with the code FINREV50.

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May you live in interesting deal-making times.

This week, Francisco Partners, along with British Columbia Investment Management, said that it was acquiring ubiquitous but struggling point-of-sale card company VeriFone in a $3.4-billion transaction. Increased competition from the likes of Square, the migration to chip-card technology and the approaching transition to contactless payments looks to have figured into VeriFone’s decision to sell. Also this week, Clean Capital and CarVal inked a $250-million deal that allows for the acquisition of up to $1 billion in clean energy assets (debt included), and JP Morgan backed trading technology portal AccessFintech. Finally, San Francisco-based Truework raised $2.9 million in an ambitious bid to challenge Equifax’s dominance in its employment verification business known as “The Work Number.”

Basic banking heats up.

Early in the week, The Wall Street Journal reported that PayPal has been offering some of its customers basic banking features (e.g., a debit card, FDIC insurance for balances, check depositing via photo). The article, which quoted Bill Ready of PayPal, pointed out that BofA has stepped back from its free checking account popular with lower-income customers, and indicated that the new features would provide an alternative for customers who often rely on check-cashing centers. Also this week, MoneyLion announced that it would be adding checking and savings account services as part of its membership program. As some large banks pare back their free/low-cost banking services, we suspect that other fintech companies will step in to fill the void — especially for lower-income consumers.  Now, if only the OCC could get its act together on the fintech charter...

Fidelity’s Achilles heel.

In an example of how tech-driven disruption can ultimately force incumbents to adapt to skinnier margins, Fidelity revealed that it was joining the pack of advisors who have moved to a fee-based charging structure. Although this is a logical move, Fidelity’s position remains problematic, according to our friend SWS’s Phillp Kessler. “Fidelity has scale, of course, but it doesn’t have the nimble front end of some of the robos, nor the easy spread on cash income that peers such as Schwab or TD rely on,” he said.


Have you come across an interesting white paper, article, podcast or video that you want to share in The FR? If so, please contact Gregg Schoenberg here.

Chaos engineering on the rise: Why would anyone want to create confusion and failure when it comes to databases? According to Gremlin’s Tammy Butow (ex-Digital Ocean, Dropbox and NAB), you see failure all the time when you’re dealing with data at massive scale. That’s why injecting failure constantly and on purpose is vital to ensuring that remediation processes are in good shape.

Talking your own book via white papers: When an insurance company commissions a report on whether there’s an opportunity for more insurance, you don’t even have to read it to know the top-level answer. That said, Lloyd’s new report on the potential for insurance to manage the inherent risks of the sharing economy is a solid, worthwhile read.

The Honest Guide to AI for Risk: “The world is rough and grimy. While we can do some amazing things with AI in a sanitized, safe lab with clean data and a perfect scenario, the real world is another thing entirely.” That’s a quote from Basis Technology CEO Carl Hoffman in a comprehensive and entertaining new report on AI (registration).

Aladdin (Sane): This past Thursday marked the 45th anniversary of Aladdin Sane, David Bowie’s sixth studio album. In honor of this weird and wonderful work, we are happy to feature a recent article in the wonderfully quirky British publication New Statesman on Blackrock’s Aladdin (See below). Blackrock’s risk and technology management system continues to grow impressively, with the article claiming that it touches nearly ten percent of the world’s financial assets. If true, that’s insane.

MoviePass’s CEO on its Moviefone acquisition: In our opinion, MoviePass is one of the most financially innovative things to happen to the movie business in a long time. And by movie business, we mean actually going to the movies (still the best way). In the great piece below, CEO Mitch Lowe explains why his company opened its wallet to enhance Moviefone’s proposition by buying the company best known for the cheery 1990s-era saying, “Hello and welcome to Moviefone.”

Is the SALT cap getting you blue this tax season?: If so, you can at least take solace in the fact that you don’t live in 18th-century Russia. As our friend Nick Lichtenberg pointed out, Peter the Great imposed a bizarre tax on facial hair in 1698 upon returning home from a European jaunt. The tax, which was especially controversial with members of the pro-facial hair clergy, remained in place for 47 years after Peter died. Our takeaway: even highly unfair taxes are hard to get rid of once they are on the books, but at least whiskers aren’t taxable in America (yet).


“If you get up early, work late, and pay your taxes, you will get ahead — if you strike oil. “

~ J. Paul Getty