Chime Announces EWA Product; 7-Eleven Tests More Financial Features; Retail Sales Fall

By Cole Gottlieb

May 19, 2024

Happy Sunday,

A mixed bag on inflation metrics. Fed urges patience, reiterates policy stance. Retail sales fall as more consumers max out cards. CFPB distributes $384Mn to Think Finance victims. Klarna takes steps towards IPO. 7-Eleven tests expanded cash in/cash out capabilities. Chime announces EWA product.

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Retail Sales Stall Out as More Consumers Max Out Cards

There were some signs of inflation easing in April. The CPI rose 3.4% year over year. Core prices, which exclude more volatile food and energy expenses, rose by 3.6%, the slowest rate of increase in three years. However, the producer price index rose by more than expected, with the increase driven by services costs. Components of the PPI that the Fed watches more closely moved less significantly. Fed Chair Powell urged patience and emphasized the need to let the current restrictive policy stance work. Fed Vice Chair Jefferson reiterated that it is appropriate to keep rates elevated until there are signs inflation will return to the Fed’s 2% target. Amid the mixed news, consumers’ expectations of future inflation ticked up slightly, as did their expectations of future housing prices. Finally, U.S. retail sales are stalling out as more consumers max out their credit cards.

Image: Bloomberg

CFPB Distributes $384Mn to Think Finance Victims

Last week, the Consumer Financial Protection Bureau announced it had distributed $384Mn from its victims relief fund to victims of Think Finance, an online lender, which, the Bureau says, tricked consumers into repaying loans they did not owe. With the disbursement, the total compensation paid out by the fund since its creation now tops $1Bn. The CFPB action against Think Finance originated with a suit the Bureau filed against the lender in 2017, which argued that Think Finance’s loans were illegal under state laws, as they violated state laws on interest rate caps and lender licensing requirements.

Klarna Takes Steps Towards IPO

BNPL firm Klarna is slowly but surely taking the administrative steps necessary to prepare for a possible IPO. British broadcaster Sky News is reporting the firm secured investors’ and regulators’ approval to establish a new U.K.-based holding company. An IPO, however, is still some ways off. The firm hasn’t yet selected an investment bank to run the process, with a target date of Q1 2025 at the earliest, Sky News reports. The IPO could value the lender at as much as $20Bn.

In other Klarna news, the firm released a statement clarifying why it doesn’t report data to credit bureaus. In the post, Klarna argues that current credit scoring models “built decades ago” are not built to properly use data from pay-in-four BNPL. Klarna emphasized that 96% of its users repay on time, and that its high repayment rate demonstrates that it is not encouraging “phantom debt. However, Klarna’s users’ repayment rate to Klarna leaves out an important piece of the picture: what impact is their borrowing through Klarna having on their overall finances, including other debts they may have?

7-Eleven to Expand Automated Cash In/Cash Out Services

Convenience chain 7-Eleven is expanding its partnership with ATM solutions provider FCTI, which will see the company test additional capabilities at about 3,000 stores at Speedway gas stations. Features include a number of cash in/cash out services, such as crypto purchases and redemptions, prepaid card reloads, and online gambling redemptions. After a test period, 7-Eleven and Speedway will decide which capabilities to roll out more broadly.

Chime Announces MyPay, an EWA-Style Feature

Chime is rolling out a new EWA-like capability, dubbed MyPay, which will allow qualified Chime customers to access up to $500 of their earnings prior to payday. Unlike many other direct-to-consumer EWA products, MyPay carries no subscription fee and no tipping. Users get access to funds in two days or, for a flat $2 fee, get instant access to funds. The news comes on the heels of a recent Forbes feature that revealed some specific data points on Chime’s business, including its number of users, around 7Mn, and revenue, about $1.3Bn last year. The company is widely believed to be gearing up for an IPO.

In the News:

Kabbage Resolves PPP Fraud Claims For $120 Million (Morningstar, 5/13/2024) DOJ to receive up to $120Mn in Kabbage’s bankruptcy proceedings.

"There's A Bank Run That's Going To Happen," Synapse CEO Says In Leaked Internal Meeting (Fintech Business Weekly, 5/17/2024) Synapse’s ongoing bankruptcy case.

Judge Says Up To 20 Million Fintech "Depositors" Are At Risk From Synapse Bankruptcy (Forbes, 5/14/2024) Customers lose access to funds amid bankruptcy dispute.

'Neobank in a box' startup Fintech Farm raises $32 million (Finextra, 5/13/2024) London-based firm helps banks in emerging markets launch digital neobanks.

Mexican BNPL firm Aplazo raises $70 million (Finextra, 5/14/2024) The round was led by prolific fintech investor QED.

Gen Z loves generative AI-powered customer service chat: Affirm CEO (American Banker, 5/10/2024) Affirm’s testing of genAI-powered service bot show promising results.

Temenos ramps up AI offensive (Finextra, 5/13/2024) Temenos is leaning in to AI with its latest product release.

What Generation Z and millennials expect: Here’s how to give it to them (Fintech Nexus, 5/13/2024) Why innovation is necessary to meeting Gen Z and millennials’ shifting preferences.

Klarna Reports Internal AI Assistant Answers 2,000 Employee Questions Daily (PYMNTS, 5/14/2024) The company says more than 87% of its employees use genAI in their day-to-day work.

FIS says it is once again putting banks first (American Banker, 5/13/2024) With the spin off of WorldPay, FIS is refocusing on its banking customers.

The rising pressures on credit card issuers (American Banker, 5/14/2024) What banks are saying about the forces buffeting their businesses.

Lighter Fare:

Researchers discover "super fluffy" planet with cotton candy-like density (CBS News, 5/14/2024) The “fluffy” planet is 50% larger than Jupiter and located outside of our solar system.