Telis Demos reported in yesterday’s Wall Street Journal that, “Startups aiming to disrupt banks have been a decent bet for venture capitalists. But what do some think might be an even better bet? Banks.
“For the first time in over a decade, a group of Silicon Valley’s top venture firms are making a sizable bet on a deposit-taking U.S. bank. Battery Ventures LP, Andreessen Horowitz, and Ribbit Capital are investing $28 million in a fundraising round for CRB Group Inc., the holding company for eight-year-old Cross River Bank, according to the firms.”
The article explained that, “In many respects, Cross River looks like many other small lenders: It is a New Jersey-chartered community bank with one branch, in Teaneck. It makes commercial loans to businesses like specialty grocery stores in and around New York City, and offers personal savings and checking accounts.
“But the little-known bank, with $543 million in assets, has quietly risen to national prominence in tech circles. Since its founding in 2008, it has partnered with some of the highest-profile financial technology, or fintech, startups offering online loans and payments, such as Affirm Inc., Stripe Inc., and TransferWise Inc. It is also linked up with tech giants MasterCard Inc. and Google parent Alphabet Inc.
“Cross River uses its position as a chartered and Federal Deposit Insurance Corp.-member bank to do things that are tougher for nonbank firms under U.S. rules. That includes originating loans in any state and moving funds over the banking system’s rails on behalf of its partners or customers.”
Mr. Demos noted that, “The Silicon Valley firms’ pivot to investing in a bank is a surprising twist in the evolution of fintech. Many investors believed that banks were ripe for disruption by tech-first upstarts, in the same way that taxi cabs and hotels were upended by Uber Technologies Inc. and Airbnb Inc.
“But startups such as LendingClub Corp., which makes online loans, and Simple, which offers smartphone banking services, have ended up partnering with banks to varying degrees to grow their businesses.”
