Backing Mesh to Connect Our Financial World
"Our country has always benefited when markets were more decentralized, when they're not dominated by a handful of incumbents... I want a financial market where consumers can switch products more seamlessly, and where financial companies have to constantly compete to keep them… Our goal is to accelerate the shift toward open banking and ultimately give more leverage to consumers to find the products best for them.”
-- Rohit Chopra, Director of the Consumer Financial Protection Bureau (“CFPB”) - link
THE NEW PARADIGM OF OPEN BANKING
The financial services market has been talking about “Open Banking” for the better part of the last decade. Open Banking—a concept and philosophy that consumers should own and be able to share their financial data to access innovative financial services—despite all its benefits, has felt more idealistic than reality. However, the CFPB’s new rule proposal in October was a watershed moment and one that is poised to “jumpstart competition and accelerate [the] shift to Open Banking.”
These rule changes are great for consumers of financial products in the United States, which has lagged other geographies across the world in terms of Open Banking adoption. They are likely to establish consumer protections around data, supercharge competition by reducing data moats held by incumbents, and reduce fees. They transfer control away from banks toward consumers who will have “more power to walk away from bad service and choose financial institutions that offer the best products and prices.”
Open Banking and the crypto community share many of the same principles—decentralization, customer empowerment, transparency, etc. Given this philosophical overlap, the crypto industry has been fertile grounds for entrepreneurial activity accelerating this shift.
REDESIGNING THE FINANCIAL USER EXPERIENCE
The average consumer has multiple financial accounts, creating fragmentation across many bank accounts, brokerage / retirement accounts, fintech/neobank applications, digital wallets, crypto exchanges, etc. Despite the innovation we’ve seen across fintech over the last decade, our financial lives are disintegrated and don’t offer connectivity across these services—something Open Banking and crypto are destined to help solve.
Imagine a world where your financial life is unified: where you can use funds sitting in your Robinhood account to fund a trade on Coinbase; where cash sitting idle in your Venmo wallet can be used to purchase goods on Amazon; where an enterprise or small business can use its assets cross-platform in the same manner.
This world would require a network that facilitates communication and secure & compliant asset transfers between isolated financial platforms. Moreover, it would require a magical user experience that allows users to “pull” assets seamlessly from one account to another.
THE MODERN “MESH” NETWORK
Our portfolio company, Mesh, enables this future world. Mesh is a financial ecosystem that enables users to seamlessly move assets (crypto, equities, etc.) between their disparate financial accounts and wallets, without ever leaving their native fintech application—think “Plaid but with the read, write, and transfer capabilities.” Mesh has more than 300 platform integrations across crypto and TradFi with a vision to build a seamlessly connected financial ecosystem that prioritizes openness, accessibility, and user-friendliness for both businesses and consumers.
Mesh establishes secure, scalable, and compliant API integrations with brokerages, financial institutions, crypto exchanges, and wallets, in order to build an open, connected, and secure financial ecosystem. Mesh’s infrastructure provides a magical product experience for users who want to move assets across a wide range of applications.
This integration engine is Mesh’s secret sauce and something the Mesh team was uniquely positioned to build. With deep experience across financial software, security, and compliance, Mesh was founded by Bam Azizi and a group of technologists from NoPassword (acquired by LastPass). The integrations and identity services built during their time at NoPassword are currently still used by major financial institutions.
Mesh’s value proposition for users is simple and it fulfills the promise of Open Banking by giving users more control. Mesh also provides a compelling proposition for fintech platforms, who are eager to improve conversion of funds onto their application in a compliant manner (see Travel Rules). The value propositions are strong and have led to impressive pull in the market across a number of use cases including:
Embedded Crypto Deposits: Enables companies to keep users in their app as they deposit crypto.
Crypto Payments: Enables users to make payments directly from their existing accounts on all major exchanges and wallets.
Seamless On-Ramping: Enables users to buy crypto using balances and payment methods in the KYC’d exchange accounts they already have.
THE FUTURE OF FINANCE
Today, Mesh announced their latest investment from PayPal Ventures. The investment will be made almost entirely in PayPal USD (PYUSD), PayPal’s U.S. dollar denominated stablecoin, and will be transferred on-chain using the Mesh API. This is a big moment for the company and one Galaxy is excited to be a part of.
Similar to how the internet has been moving from ”read” to “write” to “own”, our financial lives are undergoing the same paradigm shift. We are entering a new era where TradFi and crypto products are converging via Mesh, enabling users to write and own our assets with more autonomy and ease.
From neobanks and self-custody crypto wallets, to exchanges, DeFi, personal finance and investing, Mesh’s use cases hit every corner of finance. We can’t wait to see what the future looks like in a world where our assets are unified through Mesh.
*Mesh is a portfolio company of Galaxy’s Venture arm.