Happy Sunday,

Consumers shelled out for gifts over Black Friday/Cyber Monday (and used BNPL to do it). Conventional wisdom increasingly says the rate hike cycle may be over. Consumer confidence stabilized. First Fed Bank’s FDIC consent order. Mozaic raises $20Mn for splitting creator payouts. Credit unions and merchants pilot rewards program. Apple and Goldman’s breakup. TransUnion consumer credit data.

New here? Subscribe here to get our newsletter each Sunday. For even more updates, follow us on Linkedin (PeerIQ by Cross River).

Consumers Open Their Wallets for Black Friday Deals

Most U.S. consumers long ago exhausted any “excess savings” built up during the pandemic. But you wouldn’t know it from looking at Black Friday and Cyber Monday sales numbers. Online shoppers spent nearly $10Bn on Black Friday, according to data from Adobe Analytics. Robust sales drove a 7.5% increase in revenue vs. last year. A separate gauge from Salesforce showed a 9% year-on-year increase in online sales.

How shoppers are choosing to pay for their holiday haul is also evolving. Buy now, pay later usage spiked 72% vs. the week prior to Thanksgiving, as more consumers look to stretch their budgets. Compared to last year, use of BNPL was up nearly 20%. But as use of BNPL has risen, shoppers are less likely to reach for private label credit cards. Demand for such cards has been hit by the shift from bricks and mortar to ecom, the pandemic, rising rates, and alternate financing mechanisms, like BNPL. Private label card originations in 2022 were down 37% vs. 2015, per data from the CFPB.

Fed Governors Waller and Bowman, considered to be rate hawks, signaled they are open to holding rates steady at the FOMC’s December meeting. Waller said rate policy is currently well positioned to get inflation back to the Fed’s 2% target. The shift in sentiment is reinforcing expectations that the Fed’s hiking cycle may be done.

Meanwhile, consumer confidence stabilized, rising in November for the first time in four months. The Conference Board’s index came in slightly ahead of consensus forecasts at 102.

Image: Bloomberg

First Fed Bank Latest Third-Party Risk Consent Order

First Northwest Bancorp, the parent company of First Fed Bank, disclosed in an 8-K filing that First Fed has entered into a consent order with the FDIC. The order is notable because it explicitly states it is related to First Fed’s relationship with Quin Ventures, a third-party offering a “fintech” product in partnership with the bank. The FDIC found that First Fed had engaged in unsafe and unsound banking practices; UDAAP violations; TILA violations; EFTA violations; and had made false or misleading representations about deposit insurance coverage.

As part of the consent order, before onboarding new third-party partners and/or launching new products, First Fed is required to receive written non-objection from the FDIC. As part of its request for non-objection, First Fed must include a description of how it will ensure compliance with relevant consumer protection laws.

Mozaic Raises $20Mn

Content creators often collaborate on projects. But when it comes to splitting payouts from popular platforms, it can be anything but easy. That is the problem Mozaic is tackling, including through the use of APIs and browser extensions. For instance, a song on Spotify or a video on YouTube might have three collaborators, but typically, only the creator/owner gets paid out. The creator then needs to distribute funds to the other collaborators, often resorting to consumer tools like Venmo or Cash App. Mozaic solves for this. The just-announced $20Mn Series A was led by Volition Capital.

Credit Unions Pilot Merchant Rewards Strategies

Credit unions and local merchants are exploring strategies to encourage users to use alternatives to high-interchange rewards credit cards. One experiment recently emerged from its pilot stage. Prizeout Partners CUSO, a credit union services organization, enables credit union customers to receive a bonus above the cash value of a gift card when they buy those gift cards from local and national retailers through a direct payment from their checking account. The incremental rewards are paid for entirely by the merchant. And, unlike with traditional rewards credit cards, shoppers get the reward immediately, rather than having to wait until the end of a monthly billing cycle. While the approach doesn’t currently leverage faster payment rails, like RTP or FedNow, it illustrates possible avenues of innovation that could be built on top of instant payments.

Apple Has 12-to-15 Month Plan to Break Up with Goldman

Apple has proposed a 12- to 15-month plan to break up with Goldman, the Wall Street Journal is reporting.

The move isn’t a surprise, per se, given widely reported dissatisfaction with the partnership and Goldman’s pullback from all of its consumer initiatives, including its own Marcus-branded products and GreenSky POS lending. The Apple breakup will include both the credit card, launched in 2019, as well as the savings account, launched earlier this year. There were rumors earlier this year that Goldman was in talks with American Express to take over the partnership, though sources indicated the Apple loan book’s credit profile and its loss rates could be a dealbreaker. Synchrony, the largest issuer of store cards in the U.S., is also reportedly looking into taking over the program.

It seems rather unlikely that Apple would retreat from its financial services ambitions at this point. The faltering Goldman relationship is a setback, but, presumably, one Apple will learn from as it evaluates and chooses a new bank partner (or partners).

TransUnion Releases October Consumer Credit Data

TransUnion just released its monthly credit snapshot for October, showing a continued rise in delinquencies.

 In October, 60+ DPDs increased across the board (MoM) for Bankcard +12bps, Unsecured Personal Loans (“UPLs”) +3bps, Mortgage +2bps and Auto +1bp. This marks the third consecutive month of DPD increases for all products.

Looking at bankcard, 90+ DPDs rose 10bps MoM, marking a fourth straight month of increases. Q4 2022 vintage DPDs continue to track higher than Q4 2021 and well above Q4 2017-2020 vintages. Average bankcard balances rose +0.3% MoM, to $6,078.

Source: TransUnion Monthly Report

Turning to originations, we got information on UPL origination volume for the July 2023 – August 2023 period (lag due to reporting time). August MoM UPL origination growth was largely positive, after a largely negative month in July.

August fintech UPL originations increased (reversing the July trend) across super prime +2.2%, prime plus +5.9%, prime +6.7%, and subprime +3.7%, but declined for near prime (6.4)%. All risk tiers remain significantly below August 2022 levels, with super prime (34.5%), prime plus (36.2)%, prime (56.8)%, near prime (64.9)%, and subprime (60.0)%.

Credit unions fared better in August than July, reporting MoM increases in August for prime plus +7.6%, prime +2.5%, and subprime +2.7%. Super prime (3.9)% and near prime (1.9)% posted MoM declines. On a YoY basis, super prime +12.5%, prime plus +8.3% were above 2022 levels, while prime (1.7)%, near prime (8.8)% and subprime (5.4)% lagged.

Finance companies reversed a July slump, reporting across the board origination growth in August with super prime +18.3%, prime plus 18.2%, prime +2.0%, near prime +0.9%, and subprime +4.1%. While super prime originations are up 5.7% and prime are up 4.5% from August 2022, near prime was flat, prime plus was (11.5)% and subprime was (7.4)% below year ago levels.

Banks reported UPL originations growth across all risk tiers (reversing the July trend) with super prime +5.8%, prime plus +5.1%, prime +1.0%, near prime +4.6%, and subprime +7.7%. Bank originations remained well above August 2022 levels, with super prime +55.2%, prime plus +9.5%, prime +5.8%, near prime +14.3%, and subprime +15.8% from a year prior.

Finance companies re-took the lead in UPL balances, reclaiming the top spot from fintechs with 27.4% of the total in October. Fintech companies just fell out of the top spot, accounting for 27.1%, while banks accounted for 25.3% and credit unions for 20.2%. Wrapping things up, average UPL balances per consumer increased +0.2% on a MoM basis, to $11,878.

In the News:

OCC Ex-Fintech Chief’s Fake Resume, DUIs Raise Fresh Questions (Fintech Business Weekly, 11/24/2023) The short-lived OCC Chief Fintech Officer faked his resume, including senior roles at Fifth Third and Huntington Bank.

Goldman CEO Says Proposed Bank Rules Could Impact Airfares, Pensions (Bloomberg, 11/28/2023) Goldman CEO David Solomon warns capital rules could have wide-reaching impacts on consumers.

CFPB fines BofA $12M for failing to collect data on mortgage applicants (American Banker, 11/28/2023) BAML fined $12Mn for HMDA violations.

Affirm’s head of product discusses its new approach to buy now, pay later (Techcrunch, 11/27/2023) Affirm’s Debit+ card gives users more flexibility in how, when they pay.

Klarna partners with Cathay Pacific (The Paypers, 11/28/2023) Cathay Pacific now offers “fly now, pay later” via Klarna partnership.

Stripe picks Everlink for host-to-host Interac debit processing services (Finextra, 11/28/2023) Stripe chooses Everlink for host-to-host debit processing.

Lendable implements variable recurring payments with TrueLayer (Finextra, 11/28/2023) Open banking platform TrueLayer announces partnership with lending platform Lendable.

Why credit card charge-offs are rising at the top credit unions (American Banker, 11/28/2023) Inflationary and economic pressures are leading to rising charge-offs at top credit unions.

Binance Begins Again With U.S. Oversight. Will It Survive? (Wall Street Journal, 11/29/2023) Binance paid a $4.3Bn fine. Now, it needs to figure out how to survive complying with U.S. oversight.

Lighter Fare:

A Decade Later, This Queens Food Festival Is as Vital as Ever (Eater New York, 11/29/2023) If you like Indonesian food, this festival is a can’t-miss.