Happy Sunday,
Fed officials remain concerned about inflation. Maryland issues earned wage access guidance. OneBlinc lands debt facility. Better.com crosses SPAC finish line. Bluevine hopes for IPO. PayPal names new CEO. Discover chief abruptly resigns. Fitch warns on ratings downgrades. Amazon and Chase partner on installment options. Plaid teams up with Pinwheel, Atomic for payroll data. TransUnion consumer credit data.
New here? Subscribe here to get our newsletter each Sunday. For even more updates, follow us on LinkedIn (PeerIQ, a Cross River Company).
Fed Officials Remain Concerned on Inflation Pressures, Meeting Minutes Show
Minutes of the Fed’s July rate-setting meeting show that officials remain concerned about inflationary pressures and that further rate hikes may be needed. But differences of opinion are beginning to emerge. On the one hand, price increases have moderated more quickly than many expected. On the other, economic indicators, including GDP growth and employment, have remained stronger than anticipated. The Fed reiterated that it will keep policy “restrictive” until inflation comes down “sustainably” to the central bank’s 2% target.
Meanwhile, U.S. retail sales exceeded forecasts. Consumer spending in July rose by 0.7%, demonstrating consumers’ continued resilience.
Source: Bloomberg
Maryland Issues EWA Guidance
Maryland joined Nevada and Missouri in issuing guidance for increasingly popular earned wage access (EWA) providers. Maryland’s guidance clarifies that if an EWA service is offered by a user’s employer at no cost, it is not considered a loan under state law. Further, if the amount is less than an employee’s accrued wages, it would not be considered an “advance,” as the employer already legally “owes” the employee those funds. For EWA providers that are not affiliated with employers, the specific facts and circumstances will inform how those transactions are viewed. The state’s guidance lays out three factors it will consider to determine how to classify the products: who bears the economic risk, the level of contact between a third-party provider and consumer, and who benefits from any fees or “tips” paid by the consumer. Whether or not a fee or “tip” is permissible would depend on the amount and who is providing the product (the employer or a third-party provider.)
OneBlinc Scores $100Mn Credit Facility
OneBlinc, a provider of payroll-based loans to government employees, has secured a new $100Mn credit facility from ClearHaven. The announcement comes on the heels of the company’s recently announced $20Mn Series A funding, which was led by the third largest bank in LatAm, Banco Bradesco. The combined equity and debt funding will enable OneBlinc to continue expanding its lending capabilities.
Better.com is Actually Going Public
Better.com, the mortgage lending startup, is actually (finally) going public. The company had announced a plan to combine with SPAC vehicle Aurora Acquisition Corp back in May, 2021, in a deal originally worth about $6Bn and later revised up to $7.7Bn. Since then, demand for new and refi mortgages tanked as interest rates rose to 22-year highs. Not to mention multiple rounds of unfavorable press over CEO Vishal Garg’s handling of layoffs and numerous exec departures. The deal had also drawn SEC scrutiny, though the regulator ultimately decided not to pursue an enforcement action. Nonetheless, 65% of SPAC shareholders voted to approve the combination. Better.com is slated to complete the transaction and begin trading on or about August 22, 2023.
Bluevine Hopes to IPO In Next 18 to 24 Months
In other “going public” news, small-business-banking startup Bluevine is hoping to file for an IPO in the next 18 to 24 months, the company’s CEO Eyal Lifshitz told Axios. Bluevine originally focused on a tech-enabled platform for invoice factoring, before shifting to focus on providing business banking and line-of-credit products for SMBs. Citing the company’s growth trajectory, Lifshitz believes the company could become profitable in that 18-to-24 month window, which, given the current state of publicly traded fintechs, will likely be key to a successful public offering. Still, one or two years feels like an eternity these days, and there’s no telling how shifting interest rate policy, macro factors, or fintech valuations may impact Bluevine’s IPO dreams.
CEO Shuffle: PayPal Names New CEO, Discover Chief Abruptly Steps Down
Changes are afoot in the exec teams at multiple publicly traded financial firms. At PayPal, a months’ long search to replace longtime CEO Dan Schulman has reached its conclusion. The company named the nearly 20-year veteran of Intuit, Alex Chriss, as the payment firm’s new president and CEO. At Intuit, Chriss has served in numerous roles, most recently as EVP and GM of the company’s small business and self-employed group. He also oversaw Intuit’s $12Bn acquisition of email marketing platform Mailchimp.
Meanwhile, Discover’s CEO, Roger Hochschild, has abruptly stepped down, as multiple regulatory issues seem to be catching up with the bank and credit card issuer. Hochschild had served in the CEO role for the last five years. He resigned effective immediately, with Discover board member John Owen stepping in as interim CEO and president while the company searches for a permanent replacement. Hochschild will continue to serve in an advisory capacity to the company through the end of the year.
Fitch Warns of Bank Ratings Downgrades
Ratings firm Fitch issued a warning about the health of U.S. banks, as it indicated it may downgrade its ratings on dozens of banks, including JPMorgan Chase. The firm downgraded its rating for the overall banking industry to AA- in June, in a move that largely went unnoticed. But a further sector downgrade would trigger a review of the 70 banks Fitch covers, likely translating into negative ratings actions for individual firms.
Amazon and Chase Partner to Offer Installments At Checkout
Amazon and Chase have partnered to offer installment payments at checkout. The two already collaborate on a cobranded Amazon credit card and enable users to pay with Chase rewards points at checkout. Now, users who hold a Prime or Amazon cobrand card will be able to choose 6- or 12-month interest-free payments when shopping outside of Amazon at merchants that offer Amazon Pay at checkout. Transactions of $50 or more at tens of thousands of retailers will be eligible for the offering.
Plaid Partners with Payroll APIs Pinwheel and Atomic
Big news in the fintech data infrastructure space recently. Opening banking data aggregator Plaid has announced partnerships with payroll API providers Pinwheel and Atomic. The two payroll infrastructure companies will expand the access to real-time consumer payroll that Plaid can offer. The deal will also see Plaid refer clients to Pinwheel’s direct-deposit switch capability.
In other infrastructure-partnership news, American Express has teamed up with Pinwheel to leverage that direct-deposit switch offering for Amex’s new checking account. The partnership came as a result of an introduction facilitated by the credit card company’s venture arm, Amex Ventures, during Pinwheel’s Series B fundraise.
TransUnion Releases New Consumer Credit Data
TransUnion just dropped its monthly credit snapshot for July, offering insights into consumer debt. Average balances for Auto, Bankcard, Mortgage and UPLs rose, driven by an increased cost of living.
In July, 60+ DPDs increased (MoM) for Bankcard +13bps, Auto +3bps and Mortgage +2bps, while 60+ DPDs Unsecured Personal Loans (“UPLs”) declined by (5) bps. This compares to June, where all consumer credit product 60+ DPDs increased sequentially.
Turning to originations, we got information on UPL origination volume for the April 2023 – May 2023 period (lag due to reporting time). May UPL originations (in part helped by seasonality) returned to MoM growth, across all lender types and risk tiers reported.
May fintech UPL originations grew across risk tiers, particularly the subprime risk tier, with super prime +8.1%, prime plus +7.8%, prime +3.2%, near prime +8.6%, and subprime +23.7%. Despite the MoM growth, all risk tiers remain significantly below May 2022 levels, with super prime (31.3%), prime plus (40.3)%, prime (51.9)%, near prime (62.2)%, and subprime (66.5)%.
In contrast, credit union UPL originations are up on a YoY basis, with super prime +35.3%, prime plus +22.3%, prime +5.0%, near prime +13.8%, and subprime +3.6%, above May 2022 levels. On a MoM basis, originations were up close to 30% for the below prime risk tiers, and near 10% for the prime and above risk tiers.
Finance companies continued their trend of MoM UPL origination increases of super prime +14.0%, prime plus +14.6%, prime +12.7%, near prime +17.2%, and subprime +14.3%. While super prime originations are up 32.0% from May 2022, all other risk tiers remain below year ago figures (prime plus (6.1)%, prime (4.7)%, near prime (5.4)%, and subprime (21.0)%).
Bank reported UPL origination growth in May, reversing MoM declines in super prime and prime plus risk tiers (+9.5% and 4.6%), while re-accelerating growth for prime +4.3%, near prime +9.4%, and subprime +9.9% risk tiers. Bank originations are well above May 2022 levels, with super prime +61.3%, prime plus +22.1%, prime +20.0%, near prime +37.6%, and subprime +8.8% from a year prior.
In July, finance companies overtook fintechs for the lead in UPL balances (28.9% vs. 28.4%). Banks accounted for 22.7% of total balances and credit unions accounted for 19.9%. Average UPL balances per consumer increased modestly, +0.2% on a MoM basis, to $11,742.
Source: TransUnion
In the News:
CFPB to propose rule reining in consumer data sales (American Banker, 8/15/2023) CFPB Director Rohit Chopra announced plans to require data brokers to be covered by the Fair Credit Report Act.
Big Banks Are Supposed to Fail Without Causing Panics. Is That Even Possible? (WSJ, 8/14/2023) After the GFC, rules were supposed to ensure banks could fail without government support, but are they working?
Visa faces DOJ scrutiny for how it prices ‘token’ technology (American Banker, 8/16/2023) Visa, already under DOJ antitrust scrutiny, is facing questions about charging extra if retailers don’t use Visa’s tokenization technology.
High credit costs prompt businesses to seek BNPL loans (American Banker, 8/11/2023) As interest rates rise, BNPL financing is becoming more appealing to businesses.
Fintechs experiment with generative AI, but development is slow going (American Banker, 8/11/2023) The number of financial companies considering how to add generative AI is growing, but deployment is slow.
How ‘Pay by Bank’ could affect U.S. card volume (American Banker, 8/14/2023) With merchants dealing with inflation, lowering payment processing costs with “Pay by Bank” is increasingly appealing.
Lending Startups Seek Buyers as Rate Hikes Hobble Growth (The Information, 8/14/2023) Facing an increasingly challenging equity fundraising and consumer credit environment, some lending startups are looking for the exit.
Digital bank for US military recruits launches (Finextra, 8/15/2023) Citizens Bank of Edmond has partnered with Nymbus to launch a digital-only bank for military recruits.
Big banks lean into auto dealer loans amid rebound in car production (American Banker, 8/15/2023) With auto inventories increasing, some banks see an opportunity to grow loan volume through dealers.
UK launches £1 billion fintech fund to compete with Silicon Valley (CNBC, 8/16/2023) In its quest to be a combination of “Singapore-on-Thames” and Silicon Valley, the UK has launched a fintech fund.
Coinbase Lands Regulatory Approval to Offer Crypto Futures Trading in US (Decrypt, 8/16/2023) Crypto exchange Coinbase has secured approvals from the NFA and CFTC to offer regulated crypto futures.
Lighter Fare:
An Eater’s Guide to New York City (Eater, 8/15/2023) Need to find a spot to eat in NYC? Eater has compiled New York City’s 38 “essential” restaurants.