Banking

Why Gravity Payments isn’t pursuing a bank charter — yet

Like some other fintech upstarts, Gravity Payments may one day pursue a bank charter, but for now its main focus is helping small-business clients pull out of the pandemic downturn, said Dan Price, the firm’s outspoken founder and CEO.

Price started Gravity Payments at the age of 19 with his brother Lucas in 2004. The Seattle company set out to give small merchants a better price for processing card payments and now has roughly 20,000 clients.

While consumers stayed home last year to curb the spread of COVID-19, Gravity and the small businesses it serves struggled. Revenues were reportedly down at the company by as much as 55%, and employees elected to take pay cuts to avoid layoffs. (Price is perhaps best known for his commitment to paying a $70,000 minimum salary at his company in the name of addressing income inequality.)

“Pretty much every industry right now … monopolies and oligopolies are basically eliminating competition as the way to achieve returns,” said Gravity Payments CEO Dan Price.

With the economy set to recover, Gravity now is striking partnerships with software companies that can help its clients reach customers who are shopping again.

As it has been focused on regaining its footing, other fintech names like Square, LendingClub, Brex and SoFi have made moves to obtain banking charters, either through direct applications with regulators or an acquisition of an existing bank. Last year, Varo Money became the first fintech to get a banking charter approved by federal regulators.

Adding traditional banking services and pursuing a charter may be necessary down the line, Price said in a brief interview. But he also questioned whether the venture capital backers he has long avoided are rushing these companies into charters for the sake of big returns when they exit their investments.

What follows is the interview, which has been edited for length and clarity.

While all these other fintechs are trying to get a bank charter, what are your plans?

DAN PRICE: It’s definitely something we’re keeping an eye on and may need to do at some point.

What are some of the things keeping you from moving it to the front burner?

We only have 200 employees. We’re resource constrained. We would need people at the company to really make that a focus and a priority, and so it’s really just a matter of bringing in the right [ones] into the organization.

What are some of the issues that don’t get talked about enough when a fintech jumps to get a bank charter? Is that being pursued too aggressively?

I don’t have an answer to that off the top of my head other than to say, there is a lot of money that is being thrown out there, and that money wants crazy returns. It wants VC-type returns.

The broader theme is there are so many of these fintechs that are basically raising a ton of money, and it’s no secret why.

Pretty much every industry right now…monopolies and oligopolies are basically eliminating competition as the way to achieve returns. A lot of these companies are throwing massive amounts of money in a lot of different directions and then seeing what sticks in the hopes they won’t actually compete with each other but instead eliminate choice from the small businesses that use them.

But do we need to get a bank charter? Do we need to start doing more traditional, more full-service banking-type services? That is definitely something that we have to consider and keep an eye on.

Is there any timeline for that?

No.

What are your plans in the near term instead? Where would you rather spend those resources?

We had a bit of a tough time as many did during the pandemic. We’re enjoying a chance to really try and be as connected as possible to our clients and do anything that they need. That’s sending us in a lot more directions as opposed to fewer directions right now.

We’re very focused on providing software to our client base that will help them compete with the big companies. The reason we’re so focused on that is that these huge companies are at all-time highs in terms of their valuations and their ability to go out and get money to compete against small businesses. And at a time when small businesses are being squeezed, these huge companies are really making a killing, and that’s bad for all of us.

Our solution for that is to partner with software companies to bring the right software to our small-business clients that would still allow them to compete while still allowing them not to sell out to some giant corporation. We’re adding several software partners every week.



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