Happy Sunday!

Markets calmer on hopes of slower rate hikes. But the mortgage market outlook remains gloomy. Group travel startup raises $27Mn. Cross River partners to issue cards on American Express’ network. Marqeta ramps up BaaS focus. Amazon testing accepting Venmo. Zip launches BNPL card.

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Prospect of Slower Rate Hikes Calms Markets

The Fed is poised to make another 0.75 point rate hike at its November meeting. But reports that it is debating a smaller increase at its December meeting have helped to calm bond markets.

Image: Wall Street Journal

Still, the rapid increase in rates is wreaking havoc in various markets. Mortgage rates have doubled this year, hitting nearly 7% last week. The jump in rates has brought refinance activity to a near standstill. Mortgage applications have dropped to their lowest level in 25 years. Rising rates aren’t the only headwinds for the mortgage market. The Fed is also unwinding QE by allowing mortgage-backed securities to roll off its balance sheet as they come to maturity. The result is likely to be a 49% drop in mortgage lending volume this year, according to analysis from the Mortgage Bankers Association.

Some analysts fear the rapidly slowing activity risks a collapse in the housing market. But, this isn’t 2008. Mortgage underwriting standards have been tighter and homeowners have more equity in their properties, which should help mitigate the risk of distress in the housing sector from spreading.

Group Travel Startup WeTravel Raises $27Mn

With the pandemic waning in many parts of the world, travel is back on the agenda. While “online travel agents” (OTAs) like Expedia or Travelocity have largely displaced old-school travel agents for individuals, the same isn’t true for larger group trips. Coordinating group travel can potentially involve dozens or even hundreds of vendors: multiple airlines, hotels, airport transfer services, coaches, restaurants, museums and cultural attractions, tour operators, and so on.

Processing payments from numerous individuals to numerous businesses, often across borders and currencies, turns out to be quite a complex problem. That’s what WeTravel aims to solve. The company currently provides tools to about 3,000 companies, which, in turn, support around 500,000 end customers.

The $27Mn Series B values the company at about $100Mn, according to Techcrunch. The company plans to use the funding to expand its business as travel demand continues to rebound.

Cross River Partners with Amex to Issue Cards

Cross River and American Express announced they are partnering to enable the bank to issue cards on Amex’s network. In turn, this will allow Cross River’s fintech partners to issue Amex-badged payment cards.

Adam Goller, EVP and Head of Fintech Banking at Cross River, said, “We’re thrilled to add the American Express network to our comprehensive suite of payment services. This collaboration allows us to offer our partners and their customers access to a broader payment ecosystem and expanded optionality backed by Cross River’s compliant infrastructure.”

Marqeta Ramps Up BaaS Focus With New Capabilities

Marqeta, which powers payments functionality for partners like Coinbase, Uber, and Doordash, is looking to deepen those relationships by launching new products and services. The company announced a new banking-as-a-service platform that will enable fintech companies to build products supported by Marqeta’s existing bank partnerships.

The new suite of services, officially called Marqeta for Banking, will enable Marqeta clients to offer checking accounts, including direct deposit with early pay support, ACH, Plaid integration, cash loads and fee-free ATMs, bill pay and instant funding capabilities.

Amazon Is Testing Accepting Venmo Payments

Amazon has begun allowing some users to pay using their Venmo wallet. The two companies aim to get the capability, which was originally announced a year ago, live for all users before Black Friday. The move comes amidst a wider effort by Amazon to reduce payment processing expenses. The ecommerce giant has aggressively pushed back on payment networks, most notably Visa, in multiple markets around the world. For its part, Venmo parent PayPal has been struggling to improve the service’s profitability. Like arch competitor Cash App, PayPal is moving to position Venmo as a retail payment method. It has also added crypto trading to Venmo in a bid to drive additional revenue. PayPal shares jumped as much as 7% on the news.

BNPL Provider Zip Launches Physical Card

In a bid to expand beyond ecommerce, BNPL provider Zip announced it has partnered with WebBank to launch a physical card product. The card allows Zip customers to use its pay-in-four functionality at most retailers that accept Visa, including major chains like Walmart and Home Depot.

BNPL competitor Klarna offers a similar product, though its Klarna Card carries a $4.99 per month fee. Affirm has announced its own version, which operates as a decoupled debit card, though it has yet launched.

The move comes at a challenging time for the BNPL sector. Shares of publicly traded Affirm have tumbled, bringing its market cap to just $6Bn. Klarna saw its valuation drop from an astronomical $47Bn to $6.7Bn on its recent $800Mn fundraise. And there may yet be more trouble ahead. Rising rates mean increasing cost of funds for most BNPL providers. And it’s unclear how the product categories’ approach to underwriting will hold up if there’s an employment recession and consumers have to make hard choices about which bills to pay and which ones to skip.

Fintech Lenders and Payments Giants Report Earnings

We had a volatile week of earnings, with Enova, OneMain, Synchrony, Finwise, Capital One, Visa, and Discover leading the way while LendingClub, Navient, and Mastercard lagging.

Source: PeerIQ

Despite rising rates, Enova was able to grow its originations 10% from the second quarter. Enova focused on its shorter-term subprime line of credit products as well as SMB products, while pulling back a bit on their near prime installment loans. Lenders Finwise (17)%, OneMain (9)%, and LendingClub (8)% saw their originations fall from the second quarter, as rising rates impacted volumes. OneMain said it had significantly tightened its underwriting standards and LendingClub disclosed that it was holding a larger percentage of its loans on its balance sheet.

Due to the tightening of its underwriting standards, OneMain did not see its NCOs tick up from the second quarter, in fact, it saw them decline by 7bps. In contrast, Finwise (+140bps), Enova (+120bps), Capital One (+43bps), and Synchrony (+27bps) all saw NCOs tick up from the second quarter. Management notes that NCOs still remain below pre-pandemic levels, and that much of this can be attributed to credit normalizing.

Rising rates impacted Navient’s private education refi originations, which fell (38)% from the second quarter.

Payment giants Visa and Mastercard both reported new business developments for the quarter. Visa announced deals with eBay and Gopuff that will enable faster payments via Visa Direct. Additionally, Visa’s recently acquired company Tink, signed Adyen to offer a white-label pay-by-bank open banking solution.

Mastercard announced that it signed a deal with Marqueta to enable its next-gen virtual card solution, Instant Pay. Mastercard also announced that in its partnership with Chase, it will launch a new co-run program with DoorDash.

In the News:

CFPB Signals Imminent Crackdown on ‘Junk Data’ in Credit Reports (American Banker, 10/21/2022) The CFPB says it may crack down on the big three credit bureaus for “inconsistent or impossible” data on credit reports.

CFPB Announces Open Banking Rule (Fintech Nexus, 10/25/2022) Chopra announced plans for an open banking “dormant authority” rule.

Gensler: SEC Sees ‘Centralization’ in Crypto Markets (The Block, 10/24/2022) Genseler says the crypto field has significant concentration among intermediaries in the middle of the market.

Banking-as-a-Service Grows as Regulators Play Catch-Up (Banking Dive, 10/25/2022) The BaaS space is expected to reach $74.55Bn by 2030.

Banks Are Offering 4.5% CDs—Just Not to Regular Customers (Wall Street Journal, 10/24/2022) Banks are selectively raising interest rates on deposits following the Fed’s rate hikes.

Payments Giant Adyen Starts Offering Banking Services, Going Head To Head With Stripe, Square And PayPal (Forbes, 10/23/2022) Ayden will offer its banking services in the U.S. as a white label solution for other platforms.

Goldman Execs Battled Over End of Retail Banking, Report Says (PYMNTS, 10/23/2022) The decision to fold Marcus into other operations was a subject of conflict between CEO Solomon and other execs.

BNY Mellon Rolls Out New Aggregated Payment Platform (Finextra, 10/24/2022) BNY launched Vaia, giving U.S.-based institutions access to the latest digital payment options for disbursements.

Lighter Fare:

Recordings Show Some ‘Mute’ Animals Communicate Vocally: Study (France 24, 10/25/2022) Talking turtles and more??