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FINTECHFORBES ASIA FEBRUARY 20 20Instead, drive across New York’s George Washington
Bridge to Fort Lee, New Jersey. If you glance left as you
come over the traffic-clogged expanse and make your way
onto Interstate 95, you’ll see a red granite office building.
On its 14th floor, overlooking America’s busiest toll pla-
za, is the headquarters of a tiny government-insured bank
named Cross River.
Cross River is not a typical community bank. There are
no tellers here, or ATMs or safe deposit boxes. Instead there
are 175 bank staffers and traders stuffed elbow to jowl into
about 2,100 square meters, peering into hundreds of com-
puter monitors—often stacked three per desk. There are
startup touches—a kitchenette stocked with LaCroix spar-
kling water, gourmet coffee and a game room.
Cross River is on a lending tear. It is underwriting loans
at the rate of more than $1 billion a month—some $30 bil-
lion worth in just nine years. But unlike in banks of yester-
year, virtually all Cross River’s lending officers aren’t human
beings. They are apps. Cross River’s loans originate mostly
from 15 or so buzzy venture-capital-backed financial tech-
nology startups, so-called fintechs, that go by names like
Affirm, Best Egg, Upgrade, Upstart and LendingUSA. The
fintechs provide the customers; Cross River provides the li-
censes and infrastructure. It holds 10% to 20% of each loanit issues, and the massive volume of fintech
loans has propelled Cross River to $2 billion
in assets, up from $100 million a decade ago.
“We’re in the moving business, not the stor-
age business,” booms chief executive Gilles
Gade, 53, an immigrant from France, bald-
ing and wearing clear-framed glasses and a
navy Hugo Boss sweater. “We move assets.
We originate [them], we package them, and
we sell them.”
Gade is being modest about Cross River’s role in the fin-
tech revolution. State-chartered banks like his have the reg-
ulatory and compliance framework in place and the lending
licenses necessary to originate loans. Most fintechs do not
and thus rely on banks for funding. It’s the industry’s dirty
little secret. Once you get beyond the slick iPhone apps and
inflated tales of big-data mining and AI-generated lend-
ing decisions, you realize that many fintechs are nothing
more than aggressive lending outfits for little-known banks
whose deposits are insured in part by the Federal Deposit
Insurance Corp., or FDIC.
Since 2010, Silicon Valley venture firms and others have
invested some $175 billion to disrupt the financial system,
according to Accenture. This has inevitably resulted in as-
tronomical valuations for many privately held fintechs. But
just as WeWork’s prospectus laid bare the fact that the com-
pany was little more than an overpriced lessor of real es-
tate, a glance under the hood of many fintechs reveals sim-
ilar sleights of hand.
Take out a $2,000 zero-interest, 39-month installment
loan from Affirm to buy a Peloton bike this Christmas and it
is likely that Cross River is actually making the loan. Cross
River holds onto such loans for a few days, then typical-
ly transfers them to the fintech, which will sell the debt toAFRAID OF GOING PUBLIC?
THE FIVE RICHLY VALUED FINTECHS BELOW CAN THANK CROSS RIVER BANK FOR ENABLING SOME OF THEIR
IMPORTANT LINES OF BUSINESS. DESPITE THE STRONG ECONOMY, NONE HAVE DARED TO IPO.PRIVATE MARKET CROSS RIVER
NAME / CITY VALUATION RELATIONSHIP WHAT THEY DO
Affirm/San Francisco $2.9 billion, capital Lender High-interest installment loans
raised: $800 million
Coinbase/San Francisco $8.1 billion, capital Provides settlement accounts, Treasury Cryptocurrency exchange and
raised: $525 million management and transaction services a brokerage business
Stripe/San Francisco $35.3 billion, capital Provides debit platform for workers Digital payments company with software
raised: $1.3 billion in the gig economy that helps businesses conduct online transactions
Upgrade/San Francisco $562 million, capital Lender Personal loans and credit cards that
raised: $162 million convert balances into installment loans
Upstart/San Carlos, CA $750 million, capital Lender Lends money for credit card debt consolidation
raised: $165 million and to fund expenses like weddings
SOURCES: THE COMPANIES; PITCHBOOK.If you want a glimpse of
the future of banking, don’t
look to Silicon Valley or
Manhattan’s financial district.
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