Happy Sunday!

Fed hikes another 0.75 points, aims for 4-4.5% by EOY. White House readies FDIC board nominations. CFPB releases BNPL report, reiterates plans for new rule on credit card late fees. Financial “passport” startup Portabl raises $2.5Mn. Fraud prevention startup Sardine raises $51.5Mn. Ratio emerges from stealth. Amex ramps up tech hiring.

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Sky’s the Limit? Fed Hikes Rates Again.

As expected, the Fed raised rates by another 0.75% points at its meeting last week. Given August’s hot CPI print, some had anticipated a more aggressive, 1% point increase at the meeting. Still, Fed officials don’t seem likely to take their collective foot off the brake any time soon. New projections show the Fed is expected to lift rates to between 4-4.5% by the end of this year.

Image: Wall Street Journal

Prices for closely watched categories like used cars, gasoline, and airfare have declined in August vs. July. But rent and other shelter-related costs look likely to remain a major driver of inflation in coming months. Housing and related costs accounted for 25% of August’s overall inflation rate.

Rate hikes have continued to impact the securitization market, driving up the cost of debt. Marlette’s latest securitization (priced Sep. 12) had a weighted average cost of debt of 6.43%, up 16bps from its prior securitization (priced June 28). While overall cost of debt rose, spreads over credit enhancement tightened, indicating an increase in demand. At a 25% credit enhancement, Marlette’s latest securitization’s spread was 50bps lower than its prior issuance.

White House Looks to Fill FDIC Board Vacancies

The Biden administration began making moves to fill multiple vacancies on the FDIC’s board. Currently, there are three vacancies, including the Chairperson position. Biden will nominate Travis Hill, a former policy aide to previous FDIC Chair Jelena McWilliams, and Jonathan McKennan, senior counsel at the Federal Housing Finance Agency, to the two vacant Republican spots on the board.

Biden has yet to name a Democratic nominee for Chair. It’s expected that the administration will nominate someone for Chair, such that all three nominations would proceed through the Senate confirmation process together.

Martin Gruenberg has been serving as Chair since Trump-appointed Jelena McWilliams stepped down. It’s unknown if the administration is considering Gruenberg for a permanent role as Chair.

CFPB Releases BNPL Report, Plans to Toughen Credit Card Late Fee Caps

The CFPB’s long-awaited BNPL report was released recently. The report acknowledges some potential benefits of the product category, including its typical close-ended design and potential cost advantage vs. credit cards.

However, the report also laid out numerous areas of concern. Risks flagged in the report include lack of consistent consumer disclosures, fewer consumer purchase protections vs. cards (disputes/chargebacks), and the risks of “loan stacking.” According to the report, in general, BNPL lenders don’t currently report “split pay” plans to the credit bureaus. And consumers, particularly heavy users, may use multiple BNPL providers. The result, the CFPB fears, is that consumers may become overly indebted, causing them to fall behind on their BNPL payments or other obligations.

The report highlights areas that the CFPB is likely to focus on in any interpretative guidance or rulemaking for the fast-growing sector.

On the credit card side, the CFPB is looking to revisit a set of rules governing late fees. The rules, created by the Federal Reserve prior to the CFPB’s existence, provide “safe harbor” for late fees up to a maximum amount. That cap is adjusted under a set formula that allows it to rise with inflation. With inflation on a tear, late fees are to rise to $33 for the first late payment and $45 for subsequent late payments.

CFPB Director Chopra has indicated the agency hopes to complete a formal rulemaking process by next year. While embarking on a new rulemaking is more time consuming, it is statutorily required for significant changes to regulations and far more difficult for a subsequent CFPB director to reverse.

Financial Identity App Portabl Raises $2.5Mn

Portabl, a startup focused on identity management and verification, has raised $2.5Mn in seed financing. The round was led by Harlem Capital Partners. Portabl aims to empower users by putting them “in charge of their authentic data.” The company’s solution is designed to serve as a “digital financial passport” and, hopefully, replace legacy usernames and passwords. Portabl is targeting both traditional financial institutions as well as the hot “Web3” companies as potential customers.

Fraud Prevention Startup Sardine Raises $51.5Mn

Sardine, a startup developing payment fraud prevention technology, has raised a $51.5Mn Series B, the company announced. The round was led by a16z and included participation from Cross River Digital Ventures, Nyca Partners, Google Ventures, and others.

Sardine’s team says their broad experiences at fintech and crypto companies that include Coinbase, Revolut, and Zelle have given them a first-hand perspective on the fraud challenges faced in the sector.

Crypto is a major focus for Sardine. The company facilitates “instant ACH” and card transactions as an onramp for crypto transactions. It has even developed processes to support direct fiat payment for NFTs, without users first needing to convert fiat to a specific cryptocurrency in order to make the purchase.

Ratio Emerges from Stealth

Ratio, a new platform that enables SaaS companies to offer embedded BNPL products, has emerged from stealth with $11Mn in equity funding and a $400Mn debt facility. Equity investors include Streamlined Ventures, Cervin Ventures, and 8-Bit Capital, among others.

In addition to enabling SaaS businesses to offer their customers BNPL financing, Ratio is also throwing its hat in the increasingly competitive “revenue-based financing” ring.

Bucking Layoff Trend, Amex Ramps Up Tech Hiring

It seems every day brings another tech company announcing a hiring freeze or layoff. American Express is bucking that trend. Amex, which has already hired for some 3,600 technical roles this year, is hoping to add another 1,500 to its headcount by the end of year. The roles are concentrated in software engineering. About 60% of the roles will be U.S.-based, a third in India, and the remainder in Europe.

In the News:

Draft Bill Lets Nonbanks Issue Stablecoins, Bans Algorithmic Coins for Two Years (American Banker, 9/20/2022) The bipartisan bill would authorize the Fed to license nonbank stablecoin issuers.

Big Regional Banks Might Face New Rules for Dealing With a Crisis (Wall Street Journal, 9/18/2022) Regulators and the Biden admin show worries that large regional banks’ growth introduces new risk to the financial system, due to their large balance sheets.

Digital Bank Marcus, Part of Goldman Sachs, Being Queried by Federal Reserve: Report (Crowdfund Insider, 9/16/2022) Reportedly, management at Goldman has been questioned about Marcus by Fed officials, with a review that goes beyond the Fed’s regular oversight.

Capital One Released from Consent Order Related to 2019 Data Breach (American Banker, 9/16/2022) The bank recently received notice from OCC that it had achieved a level of “safety and soundness” that no longer required the extra oversight that had been imposed after its 2019 cybersecurity breach.

Adyen Selected as Fintech Platform to Introduce Cash App Pay Outside Square Ecosystem (Crowdfund Insider, 9/18/2022) Businesses working with Adyen will have the ability to integrate Cash App Pay as a payment method for their customers.

Milo’s Under-Collateralized Mortgage and Refinancing Launches Amid Winter Storm (Fintech Nexus, 9/19/2022) Milo’s new mortgage loan product requires only 40% USDC collateral.

Nasdaq Starts Crypto Custody Service for Institutional Clients (CoinDesk, 9/20/2022) The second-largest U.S. stock market operator moves into the crypto space.

Most People are Scared of their Money’: Bill Harris on his New Neobank (American Banker, 9/20/2022) Nirvana Money will offer a credit card to those who cannot get one elsewhere, but are willing to deposit their paychecks at the company.

The Four Potential Cracks in Banks’ Credit Quality (American Banker, 9/20/2022) Consumer vulnerabilities, a short-lived recovery for hotels, an office crisis and susceptible small businesses concern bankers.

How Apple’s Tap to Pay Could Hasten the Demise of the Point of Sale (American Banker, 9/20/2022) Apple now allows its handsets’ hardware to be used to accept payments without any kind of plug-in or Bluetooth card reader.

Extra Costs Biggest Reason Shoppers Ditch Online Carts (Payments Dive, 9/21/2022) The cart abandonment rate is about 74-77%, costing retailers over $100Bn in lost revenue annually.

Lighter Fare:

Can You Really Eat Crocs? An Investigation (Vice, 9/21/2022) An urban legend has held that Crocs can be survival food.