This was a big week for PeerIQ, as we announced we joined the Cross River family.

In regular programming, employees are feeling confident enough to quit, markets react to the Fed’s shifting signals, Morgan Stanley makes its first blockchain investment, BNPL companies seek to differentiate, and Visa tries to buy an open banking startup (again).  

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PeerIQ joins the Cross River family

Cross River has been a client and a close partner of PeerIQ for years. We are thrilled to join forces and our clients can expect new and expanded capabilities that reflect the combined value of Cross River and PeerIQ.

PeerIQ will continue to operate as an independent business and our current products and services remain supported by the existing PeerIQ team, including your beloved Sunday newsletter 🙂

Behind the scenes, we doubled down on product – more on that to be announced soon – and on our team, including a number of senior hires. Fabrizio Tiso joined us as General Manager, Benton Lee as COO and Zvika Badalov as VP Engineering. 

Fabrizio spent over a decade in fintech as venture-backed founder in the consumer lending space, commercial leader at a D.E. Shaw’s fintech spin-off, and previously with the Boston Consulting Group. 

Benton spent over 15 years in investment banking and private equity leading investments in business services and consumer industries and guiding strategy, organization management, and operations as a Board member of middle market companies. 

Zvika, a fintech entrepreneur and founder, spent over 10 years in engineering leadership focused on financial services, solving engineering challenges for commercial and residential banking, wealth management, and consumer finance products.

More Workers Saying “I Quit” to Look for Better Pay, Benefits

Initial claims for unemployment benefits were higher than expected, though they dropped slightly week over week, from a revised 418,000 to 411,000. While the unemployment rate remains elevated, workers seem confident in their ability to find new, better jobs. Nearly four million people, 2.7% of the employed workforce, voluntarily quit their jobs in April. 

The higher quit rate coupled with employers’ difficulty in filling roles is a strong sign that workers have gained leverage in the tightening employment market. As pandemic disruptions dissipate and supplementary unemployment benefits are phased out, we expect a lessening of this pressure.

Markets React to Fed’s Changing Tone on Inflation

While the Fed maintains its position that inflationary forces are transitory and will dissipate as supply-side disruptions resolve, last week’s signs that interest rates could rise sooner than later are having an impact in the market. Dallas and Atlanta Fed Presidents see interest rates rising next year.

The spread between 5- and 30-year Treasuries, which reflects the balance of interest rate and inflation expectations, narrowed to the smallest gap since last August. Commodity prices and equities slipped on the Fed’s change of tone.

The Fed’s careful recalibration on interest rates shows that it is taking the risk of inflation seriously. Unlike the “taper tantrum” set off when the Fed began to unwind QE after the Global Financial Crisis, the market seems to be taking these cautious signals in stride so far.

Credit Card Tech Startup Deserve Raises $50Mn at $500Mn+ Valuation

Deserve, which offers digital-first credit cards under its own brand as well as offering “Credit Card-as-a-Service” APIs for others to build on, announced it has raised $50Mn from Mastercard and Ally Financial’s investment arm, with participation from existing investors. Deserve’s credit card tech stack enables instant card provisioning into mobile wallets like Apple Pay and Google Pay. Plans for future products include offering buy now, pay later financing and installment loans.

This is the latest sign of traction for fintechs focused on modernizing financial infrastructure to enable innovative financial products. Our congratulations to co-founder/CEO Kalpesh Kapadia and the entire Deserve team.

Morgan Stanley Makes First Blockchain Investment

Morgan Stanley co-led the $48Mn Series B investment in blockchain company Securitize. Securitize enables private companies to raise capital by issuing tokenized securities on its blockchain platform. In addition to its core offering, Securitize is developing a marketplace for the trading of digital asset securities and has an asset management arm, Securitize Capital, which offers crypto yield funds.

The opportunities in crypto-related technology go far beyond speculative assets like Bitcoin. We’re bullish on the payments and lending use-cases around stablecoins specifically. 

Buy Now, Pay Later Players Seek to Diversify in Competitive Market

There’s no doubt that the BNPL space remains hot, with plenty of recent fundraising activity and product launches in the sector. As competition for customers and merchants escalates, BNPL providers are testing new features in an effort to differentiate and continue growing market share.

Klarna recently added single-use virtual cards, which allow consumers to use the service at merchants that don’t directly offer Klarna as a payment option. Sezzle recently launched Sezzle Up, an optional feature to report users’ payment histories to the credit bureaus, allowing users to build their credit history.

With balance sheets bulging from recent fundraising hauls, the buy now, pay later race may be entering the ‘war of attrition’ phase.. Competition will likely unfold along two key fronts, merchants and consumers, with network effects reinforcing early movers’ advantages.

On the merchant front, we expect the fierce rivalry to sign up top merchants and platforms, on an exclusive basis when possible, to intensify. On the consumer side, we expect more announcements of functionalities like BNPL shopping apps, virtual cards, and credit reporting that give consumers more reasons to stick with a single, preferred BNPL provider. 

Visa Buys EU Open Banking Platform Tink

Just months after a DOJ antitrust suit sunk its attempted acquisition of bank data aggregator Plaid, Visa has announced its intent to buy European open banking platform Tink. The open banking ecosystem in the EU is considerably different than in the US, owing to clearer regulations, like PSD2, which require banks to offer APIs for securely sharing customer data and initiating payments.

The move comes as Visa looks to diversify beyond traditional credit and debit card payments. The payment network has been an active investor and participant in emerging fintech, including through its Visa Fintech Partner Connect program and by offering stablecoin-linked settlement functionality.

While Visa no doubt would prefer to acquire a bank data platform that came with good coverage in the United States, Tink has integrations with 3,400 EU banks and provides a strong technology foundation to expand coverage of other geographies. This move reinforces the value of bank account transaction data, which has moved from “nice to have” to “must have” for many financial services providers.

In the News:

OCC, States Declare Cease-Fire in Fintech Charter Case. Will it Hold? (American Banker, 06/18/2021) 90-day stay issued as Figure Technologies’ specialized charter application hangs in the balance.

IPO Alternative Loses Early Luster at Key Time For New Deals (Bloomberg, 06/22/2021) Direct listings have been overshadowed by the boom in SPACs.

Revolut Said to Eye Fundraising at Over $20 Billion Valuation (Bloomberg, 06/21/2021) The digital banking services provided is rumored to be looking for funding at an over $20Bn valuation, a large markup from its 2020 round where it was valued at $5.5Bn.

FT Partners Advises Mollie on its Financing (FT Partners, 06/22/2021) Blackstone leads financing round of $800MM at a $6.5Bn valuation.

Goldman Sachs Ramps Up Bitcoin Trading in New Partnership With Mike Novogratz’s Galaxy Digital (CNBC, 06/18/2021) Goldman begins trading bitcoin futures, becomes first major U.S. bank to begin trading cryptocurrency.

PayPal Overhauls U.S. Rates as Payments Rivalry Heats Up (Reuters, 06/18/2021) PayPal lifts merchant costs for its branded payments products while cutting costs for its processing of Visa and Mastercard transactions.

Goldman Opens UK Transaction Bank to Offset Trading Volatility (Financial Times, 06/21/2021) Goldman continues to grow its UK footprint with launch of transaction bank, diversifying from its volatile trading and advisory business.

NXTsoft and Upstart Partner to Streamline Delivery of AI-Based Lending Platform to Banks and Credit Unions (06/23/2021) Partnership to use NXTsoft’s API abilities to efficiently implement Upstart’s AI lending platform in the U.S.

Lighter Fare

Scientists Identify 29 Planets Where Aliens Could Observe Earth (The Guardian, 06/23/2021) Are we alone in the universe? Scientists estimate that 29 habitable planets can see Earth transit and intercept human broadcasts.