Number of the Week: $231.8 million (explanation below)
Fintech Shows Its Green Side
One of the fastest growing political issues over the last few months has been the climate impact of the gargantuan amounts of electricity required to mine Bitcoin (and to a lesser extent, other cryptocurrencies). Even as recently as the end of 2020, this concern was confined to the margins of crypto debate. That changed when Elon Musk tweeted that Tesla would no longer accept Bitcoin as payment for its cars. In May, FIN noted that a New York State Senator had introduced a bill to impose a three-year moratorium on Bitcoin mining in the state until its environmental impact can be measured.
Even China’s dramatic crackdown on Bitcoin mining can be read as a climate critique. While it’s not entirely clear why China has been shutting down Bitcoin mining since May—the country is, after all, rolling out its own central bank digital currency—it’s been argued that the sheer volume of mining in the country is at odds with the government’s promises to drastically cut back coal burning and play a climate champion role. This chart from the Cambridge Bitcoin Electricity Consumption Index starkly illustrates just how much of the world’s Bitcoin supply comes from China, as of April 2020:
And so maybe it’s a coincidence, but lately FIN is seeing a lot of fintech and crypto firms bragging about how green and sustainable their operations are. This week, the Winklevoss-owned cryptocurrency platform Gemini announced a partnership with the nonprofit Climate Vault, designed to offset the climate impact of all the Bitcoin in Gemini’s custody. Also this week Visa teamed up with a London-based startup called Novus, which has essentially created a social-impact version of rewards points:
Members can choose to use the impact points they generate in the app through everyday payments towards issues like gender inequality, world hunger and ocean pollution. They can then track their impact in real time to see just how much of a difference they are making, as well as track and offset their carbon footprint based on their card activity.
And somewhere in this mix is the revelation that El Salvador, which recently made Bitcoin legal tender, will connect Bitcoin miners to the geothermal energy generated by the country’s volcanoes.
In truth, there have long been firms in the fintech and crypto space who’ve prioritized sustainability; this month the UK-based Fintech Alliance published a white paper that profiled 20 of them. One prominent company is the Los Angeles-based Aspiration, which has several years head start against Novus and uses the tag line “Clean rich is the new filthy rich.” Aspiration was founded in 2013 by Andrei Cherny, a former speechwriter for Bill Clinton; LA being LA, the company’s backers include Leonardo DiCaprio, Robert Downey Jr.’s Footprint Coalition and Orlando Bloom. The Aspiration app tells customers what the climate impact of their spending is, on top of normal banking services.
Recently Aspiration introduced a credit card; every time a customer uses the Aspiration credit card, the company plants a tree. (Exactly how many planted trees are needed to offset an American household’s carbon footprint seems to be in contention. Aspiration suggests that 60 trees a year will suffice; other sources put the number at over 1000.; NOTE: a post-publication note from Aspiration indicated that their estimate was 60 trees a month.) Another interesting company in the green fintech space is Wombat, a UK-based Robinhood-like investing platform that pushes investors toward themed funds that include green companies and electric vehicles.
Some of the claims put forward by fintech companies are doubtlessly marketing gimmicks. Nonetheless, there is ample opportunity for fintech startups to successfully align themselves with the ESG mission. Definitive survey data may be scarce, but FIN asserts that despite thunderous proclamations from the likes of Blackrock’s Larry Fink, most Americans, at least, do not believe that the banking and financial services sector is at the cutting edge of sustainability and combating climate change. Especially as Gen Z deepens its financial and investing commitment, fintechs that can tap into that cohort’s environmental passion will be the financial leaders of the future.
First, Do No Harm
One of the fascinating things about entrepreneurs and some venture capitalists is that where most of the world sees problems, they see opportunities. And if you’re searching for problems, the American healthcare system is fertile ground indeed. There are many ways to measure how dismal the system is, but one telling method is to look at consumer dissatisfaction. According to data compiled by Satmetrix, the only industries that get a lower net promoter score (NPS of 19) than “health insurance” are those perennial bugbears “Cable & Satellite TV” and “Internet Service,” each of which scores a NPS of 1.
As with those industries, one of the problems with health insurance is a lack of genuine competition. Consider that four companies—Cigna, Anthem, Centene, and United Health—control almost three-quarters of the $2 trillion global health insurance market (about half of which is in the US). About six weeks ago, FIN profiled Waystar, which tries to rationalize the medical billing process with a cloud-based system. Several other areas of the health ecosystem are undergoing a digital transformation. Notoriously, the price that patients pay for even routine procedures like a blood test can vary enormously depending on geography. One recent entrant with strong financial backing is Sidecar Health, which promises to lower the cost that patients pay by facilitating discounts for those who pay in cash, and allowing patients to shop for the best price. The LA-based company says its average customer is 33 years old and making between $45,000 and $75,000 a year and can save 40% on medical expenses by using Sidecar.
Of course, having basic health care as a legally mandated right—as nearly every developed country in the world does—would be a better solution. That seems politically impossible for the foreseeable future, although Medicare Advantage is one of the fastest growing parts of the healthcare system and is projected to cover 34 million Americans by 2023. It’s also possible that fintech companies could make some aspects of the healthcare system worse. The publicly traded insurtech company Lemonade, for example, found itself under attack recently when it stated over Twitter that it uses artificial intelligence to monitor customers’ nonverbal cues in video statements to determine if they are committing insurance fraud. Those tweets were later deleted.
🦈Number of the Week: The UK-based neobank Revolut announced earnings this week, and while its revenue rose 57% between 2019 and 2020, its losses doubled, to $231.8 million. As Jason Mikula points out, Revolut relied heavily on “alternative performance measures” to declare that its “profits” had tripled, which may not go down well with the California and federal regulators currently evaluating its application for a bank charter.
🦈This is a new one on us: a company called XCLAIM has closed a $6.6 million seed extension round to build out a platform that allows people to buy and sell bankruptcy claims.