Cross River Bank is a major financial and compliance player behind many fintechs such as Affirm, Coinbase and TransferWise, an expanding business model that is attracting new attention from venture capitalists.
KKR, which has a large financial services portfolio, made a $ 75 million equity investment in Cross River Bank, as part of a global fundraising of $ 100 million. Cross River will use the funds to expand the technology and compliance infrastructure it provides to fintech organizations.
Cross River provides banking services to To affirm, the fintech startup of PayPal co-founder Max Levchin. Affirm offers alternative financing at the point of sale and via Apple Pay. Affirm uses alternative data for credit risk, which enables it to offer installment payments and microloans. Without Cross River’s services, Affirm couldn’t extend its installment loans, which are now popular with millennials and used to shop on thousands of websites, unless they find another banking partner.
In some ways, similar to a credit union service organization and correspondent bank, Cross River is the lending and money transfer bank for organizations that do not have banking licenses and the ability to log into the Federal Reserve banking system. Besides Affirm, Cross River’s clients include market lenders such as Best Egg, Upstart, and RocketLoans, in addition to cryptocurrency exchange Coinbase and transfer provider TransferWise.
Consumers often only see the bank’s name in the fine print when they get a loan from a company like Affirm. Although the company has been a traditional banking service provider since its inception in 2008, it has received significant accolades for the services it provides to fintech startups.
The bank has found its niche as a comprehensive financial services provider to fintechs by offering its compliant banking platform that can guarantee loans, disburse funds to borrowers (or the merchant they buy from), and even provide capital. He works with partners across multiple industries including debt consolidation, point of sale, home improvement, medical, and small business. According to its website, Cross River Bank has granted $ 5 billion in loans this year through August 28.
Where Cross River does not have direct banking service capability, it will partner with other banks and financial service providers to provide it. For example, in coordination with its partners, it can provide payment transfers to offer ACH, wire transfer, debit card disbursement, money transfer, back office support and compliance framework.
According to Crunchbase, a website that tracks venture capital funding in fintech startups, Cross River Bank has raised $ 128 million in two separate rounds of funding since 2016. The first round in 2016 raised $ 28 million and was run by Battery Ventures. Andreessen Horowitz, the Silicon Valley venture capitalists with investments in Affirm, Coinbase, Lyft and Transferwise, also participated in this first round.