Happy Sunday,

Consumers are faced with hard choices as inflation bites. Gas prices down = consumer confidence up. 10-year Treasuries hit 4%. Banks push back on “Durbin 2.0.” Nexo acquires a stake in a bank, is sued by state regulators. Banc of California acquires Deepstack.

New here? Subscribe here to get our newsletter each Sunday.

At Least Gas Prices Are Falling…

There’s no doubt consumers are shifting their spending habits as inflation continues to bite. New research from PYMNTS showed 60% of Americans living paycheck to paycheck. A quarter reported struggling to pay their bills each month. As pressures on household budgets mount, some are turning to credit to fill the gap, just as interest rates are increasing.

Still, there’s some good news for consumers. Gasoline prices have been steadily dropping, helping to reduce the pain at the pump. Falling gas prices have helped improve consumer confidence. The measure rose for the second month in a row, to 108 from 103.6 the prior month.

10-year U.S. Treasuries broke the 4% mark, as GBP’s abrupt drop roiled bond markets on both sides of the Atlantic. Treasuries retreated a bit as the Bank of England stepped in to buy longer-dated U.K. government debt. Still, yields have been climbing at their fastest pace in four decades.

Image: Wall Street Journal

Banks Push Back on “Durbin 2.0”

A bill that potentially would shrink interchange fees is not a hit with bankers.

The bipartisan bill, officially known as the Gooden-Welch bill, would require large banks to enable card transactions to be processed on at least two unaffiliated networks. One would have to be a smaller network (eg, not Visa or Mastercard). The measure would only directly apply to banks with over $100Bn in assets.

The bill’s sponsors argue that it will encourage competition in the payment processing space. Such competition, they say, will result in lower swipe fees and thus save consumers money.

Opponents of the bill don’t see it that way. No fewer than eight trade groups representing banks and credit unions have come out in opposition to the bill. The industry groups argue the bill would favor “big box retailers over consumers.” The groups argue that the legislation would hurt consumers by reducing the number of card issuers competing for their business. The trade groups also point to fraud, which card issuers typically bear liability for. A reduction in interchange income, they say, would mean banks and credit unions investing less money in fraud prevention and management systems.

While battlelines are drawn, experts generally think the bill has little chance of passing in the current Congress.

JPMorgan’s Payments “Insurance Policy”

JPMorgan Chase makes billions from processing card-related payments. That makes it all the more surprising that the bank is pursuing the development of a “pay-by-bank” offering, also known as “account-to-account” payments. Such payment methods bypass the traditional card networks to move money directly from a consumer’s bank account to a business’ account.

Image: FT

Chase already plays in this space in some ways. Consumers already use Zelle for some low frequency, high-value transactions like paying rent. But Zelle operator Early Warning Systems, which is owned by the country’s largest banks, has been reluctant to roll out Zelle as a retail payment method. This is, presumably, owing to the potential to disrupt banks’ lucrative card revenues.

Some experts are skeptical of the likelihood of pay-by-bank catching on in the U.S. Shifting consumer payment habits is an uphill battle, particularly given American consumers’ love of points- and rewards-heavy credit card programs. Previous merchant attempts to implement pay-by-bank, notably a 2012 effort by chains like Walmart and Target, have failed to gain meaningful traction.

Still, given Chase’s history of being caught off guard by the success of payment platforms like Square, the bank is looking to cover its bases on pay-by-bank.

Nexo Sued by State AGs, Acquires Stake in Summit National Bank

You win some, you lose some.

Crypto platform Nexo scored a win with its acquisition of a minority stake in Summit National Bank. Note that, contrary to some chatter on crypto Twitter, Nexo did not “buy” or “become” a bank. Rather, it bought a minority stake in the bank. Still, the deal helped pave the way for Nexo to partner with the bank. Nexo will leverage the partnership to offer its customers accounts with Summit National, as well as working to enhance its lending and card products.

In the “loss” column? Nexo is being sued by eight state securities regulators: New York, California, Kentucky, Maryland, Oklahoma, South Carolina, Washington and Vermont. Allegations include failing to register with state authorities and lying to investors about its registration status. The suits also seek to force Nexo to give up revenue from its “Earn Interest Product” and provide restitution to customers who used it.

Several of the states also filed cease and desist orders against Nexo regarding the “Earn Interest Product,” arguing they constitute unqualified or unregistered securities. Other companies offering such “crypto lending” products have faced similar actions from state regulators.

Banc of California Acquires Deepstack

The Banc of California is looking to make a push into payment processing. It acquired Deepstack, a payment processor, for $24Mn in a cash-and-stock deal. The bank plans to use the new capability to market payment processing services to fintechs, ecommerce sites, marketplaces, and integrated software vendors. Acquiring the payments business will allow Banc of California to capture a larger share of revenue per transaction.

In the News:

Powell: Stablecoin Regulation Belongs to the Fed (American Banker, 9/27/2022) Fed Chair Powell said stablecoins are a type of private money and need to be regulated as such.

Banks Point to Law Enforcement for Solutions in Combating P2P Fraud (American Banker, 9/26/2022) Banks say the government needs to commit the resources and time to combat fraudsters and scammers.

Fintech Lending Boosts Credit Access for US Small Businesses (Finextra, 9/26/2022) Researchers conclude that fintech lending platforms lent to more small businesses in ZIP codes with higher unemployment rates and higher business bankruptcy filings.

PayPal Defends BNPL Position (Payments Dive, 9/22/2022) A PayPal VP maintains that the company is just as popular with young shoppers as its rivals are.

Klarna Seeks to Shed More Workers (Payments Dive, 9/22/2022) Klarna is supposedly offering under 100 employees buyouts.

Amazon and Affirm Bring BNPL Payments to Canada (Finextra, 9/26/2022) The product will be available to customers in Canada within the next month.

Podcast: When Will Big Banks Pay More for Deposits? (American Banker, 9/26/2022) Large banks may be slow to raise their rates, given they do not really need more deposits.

Upstart Says it’s Improving AI Models After Report Finds Race Approval Disparities (American Banker, 9/26/2022) Law firm that monitors fair-lending compliance found lower loan approval rates for Black applicants.

How a ‘Payday Loan’ Alternative Made a Small Bank a Star On CNBC (The Financial Brand, 9/27/2022) OneUnited Bank created a small-dollar loan option for Covid-impacted customers.

JPMorgan’s DoorDash Card Deal Can Build Momentum for Co-Brand Card Business (Insider Intelligence, 9/28/2022) The companies will launch a co-brand credit card on Mastercard’s network.

Bankrupt Crypto Lender Voyager to Sell Assets to Sam Bankman-Fried’s FTX for $1.4 Billion (CNBC, 9/27/2022) FTX buys assets in bankruptcy auction, Voyager hints of possible transition of its customers to FTX U.S.

Lighter Fare:

New ‘Baby’ Island Appears in Pacific Ocean After Volcano Eruption (New York Post, 9/26/2022) The Earth’s newest land mass has formed.