Greetings,
Home prices hit a record. The Fed has a near-impossible task in navigating today’s economic challenges. Former Ripple advisor nominated for Fed vice chair of supervision. Fed turns to private sector in talent hunt. NovoPayment raises $19Mn Series A. Cross River teams up with Revolut. Robinhood acquires U.K. crypto firm. Coinbase launches NFT marketplace. Brex acquires Pry.
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Record Home Prices Amid Rate Hike Uncertainty
U.S. home prices hit a record $375,300 in March. Both prices and mortgage rates are rising, which caused a 2.7% drop in existing home sales from February.
Meanwhile, Atlanta Fed President Raphael Bostic expressed caution about the pace of interest rate hikes. According to Bostic, the neutral rate could be 2-2.5%, with the Fed funds rate reaching as little as 1.75% by year’s end. The view contrasts with St. Louis Fed President Bullard, who believes the rate could hit 3.5%.
It’s worth noting that the Fed has never successfully ‘fixed’ a problem like the one the economy is now facing without significantly increasing unemployment. In the past 80 years, attempting to lower inflation by four points has always caused a recession.
Barr Nominated for Vice Chair of Supervision
Third time’s a charm? Progressive lawmakers may be set to take what they can get with the Biden administration’s latest financial regulator nomination.
The administration has nominated Michael Barr, who has previously advised crypto and fintech companies, as the Fed’s top banking regulator. Barr is widely seen as a less controversial nominee who is more likely to muster the necessary votes for confirmation in an evenly divided Senate. Given the role’s decision-making power over crypto and fintech, some advocates have concerns over his work in the sector, which included a stint at LendingClub and advising stablecoin issuer Circle.
Fed Turns to Private Sector to Beef Up Talent
The Fed wants to be “at the forefront” of technological change in the monetary system. That means finding the talent to make that goal a reality. In a bid to beef up its talent bench, the Fed has been hiring from the private sector. Recent hires have included seven former employees of Circle, the issuer of the USDC stablecoin, and a former employee of Ripple.
As the nature of the financial system and even money itself evolves, it shouldn’t be surprising that the Fed needs to tap new kinds of talent to appropriately oversee and partner with private actors.
BaaS Platform NovoPayment Raises $19Mn
NovoPayment, a banking-as-a-service platform, announced it has raised a $19Mn Series A. The Miami-based company has historically focused on LatAm, with a presence in Mexico, Colombia, Peru, and Ecuador. It provides digital banking, payment infrastructure, and card solutions via its API-first platform. Now, with the new funding, the company has set its sights on continued expansion in LatAm, the Caribbean, and the U.S.
Interest in banking-as-a-service remains robust, given its potential to abstract complexity in the creation and launch of new financial products. NovoPayment’s multi-country presence could also be appealing to companies looking to launch products in multiple geographies. Cross-geographic products have been in the spotlight lately, with a number of remittance-focused initiatives from companies as varied as Meta (Facebook), Walmart, and Revolut.
Cross River Teams Up With Revolut
Cross River is teaming up with financial “superapp” Revolut to help the company build and scale its business in the U.S. The partnership will enable Revolut to offer its users personal loans via Cross River’s technology platforms, with additional credit products slated to launch in coming months.
Regarding the partnership, Adam Goller, EVP, Head of Fintech Banking at Cross River, said, “At Cross River, we’re always looking for new and innovative ways to provide access to credit. Our partnership with Revolut is instrumental in facilitating responsible financial solutions to consumers, and we’re excited to be powering Revolut’s U.S. expansion.”
Robinhood Expands to U.K. with Ziglu Acquisition
Robinhood is expanding its geographic footprint to the U.K. The no-fee brokerage has agreed to acquire Ziglu, a U.K.-based crypto trading platform. Ziglu was approved by the FCA, the U.K.’s banking regulator, to offer crypto services in 2020. Ziglu supports trading in 11 cryptocurrencies, as well as a “Boost” product that allows users to generate yield on their crypto holdings. Robinhood previously attempted to enter the U.K. market, but shelved the plans to focus on its home market.
Coinbase Launches NFT Marketplace
Six months ago, Coinbase announced its intention to launch an NFT marketplace but provided little detail. Now, the initiative has launched in beta. Coinbase’s NFT marketplace supports Ethereum-based NFTs for now, with plans to add support for additional blockchains in the future. As part of the beta launch, Coinbase is showcasing NFTs from popular collections, including Azuki, Doodles, and World of Women.
Still, in the six months since Coinbase announced its plans, the NFT space has considerably cooled. Interest has dropped markedly from the frenzied state of late 2021. Some buyers of high-priced NFTs, like one of Jack Dorsey’s first tweet, have found few takers when they’re looking to resell them.
Brex Acquires Pry
Corporate spend management startup Brex has acquired Pry, a software platform with tools for budgeting, accounting, bookkeeping, and forecasting. The tooling is designed to help companies project cash flow, track budgets, and do scenario planning. News of the acquisition comes on the heels of Brex’s launch of its Empower platform, which it describes as designed to enable “a culture of trust and financial discipline.”
Second Week of Earnings Coverage Shows Consumer Loan Growth
This week in earnings, Citizens (+6.9%), Synchrony (+6.2%), and Bank of America (+3.4%) surged on earnings beats. Amex ((2.8)%) beat earnings expectations, but slumped amidst a broader market selloff, where the S&P and Dow were each down over (2.5)%.
Source: PeerIQ
Bank of America saw a 1% increase in its average consumer loans from the fourth quarter, and, excluding the impact of PPP, would have posted a 2% increase YoY. CEO Brian Moynihan noted that, “This [consumer loan growth] is despite typical seasonality and despite the continued suppressed credit card balance.”
Bank of America executives reported a strong recovery in card spend for travel, entertainment, and restaurant. The bank reported an increase in its new tech initiative budget to $3.6Mn for the year. While this represents a modest increase from the previous year’s budget, the number is dwarfed by fellow bank JPMorgan’s planned ~$12Bn tech spend for the year.
Citizens reported that retail loans grew 10.6% YoY and 3.5% QoQ on strong mortgage, home equity and auto loans. This is in contrast to many large banks we covered last week, which faced immense headwinds in the mortgage and home equity segments due to rising interest rates.
Citizens built on the trend of reducing overdrafts by announcing Citizens EverValue Checking, a new overdraft-free checking account. Additionally, the bank announced the planned 2Q22 launch of Citizens Paid Early, allowing customers to receive direct deposits up to two days early. Inflation and the tight labor market has pushed companies to offer workers benefits like earned/early wage access to attract and retain talent.
Synchrony also reported an increase in loan receivables, up 5.6% YoY and 1.2% QoQ, “thanks to some moderation in payment rate”. Synchrony expanded its CareCredit network through a partnership with Mercyhealth to expand patient financing options. Further, the company partnered with PayPal to launch a new credit card that is fully integrated with the PayPal app.
Amex capped off the week, reporting average loans of $86.8Bn, representing a 23% increase YoY and 5% increase from the previous quarter.
Amex CEO Stephen Squeri outlined the company’s fintech strategy, stating, “we’re accelerating our focus on fintechs to drive more innovation, including our new partnership with i2c, which will enable fintechs to more seamlessly and quickly issue new products on the American Express network.”
As a reminder, Amex announced its partnership with i2c in the beginning of April, with the goal of the partnership to increase the speed for fintechs to launch cards on the Amex network, powered by i2c. The partnership creates a plug-and-play onboarding platform that gives fintechs access to features such as Amex Offers, protection and fraud mitigation offerings, ticket pre-sales, and pre-certified partners, such as bank issuing BIN sponsors.
In the News:
Credit Unions Continue to Buy Banks Despite Bank Lobby, Regulator Pushback (American Banker, 4/19/2022) Bank lobbies say credit unions buying bans results in a loss of revenue to taxpayers.
Why the OCC is Creating Fintech Supervision Specialists (American Banker, 4/17/2022) The OCC wants more control over bank and fintech partnerships, and to promote consistent treatment across its multiple regions of national bans.
US Senator Falsely Claims Chime And Digital Banks ‘Make Users Vulnerable To Losing Their Money’ (Forbes, 4/18/2022) Chime is FDIC insured up to the standard $250k maximum.
BNPL Regulation is Urgently Needed. But Not All Providers are the Same. (American Banker, 4/18/2022) BNPL providers vary in how they operate, with lots of differences in if they obtain banking licenses, require credit checks, or partner with chartered banks/credit unions.
Gemini Crypto Rewards Credit Card Now Available in the US (Crowdfund Insider, 4/16/2022) Gemini has amassed over 500k sign-ups since launching its waitlist.
Ally Says the Auto-Lending Party Isn’t Over Just Yet (American Banker, 4/14/2022) CFO LaClair estimates that 4-5Mn consumers are sitting on the sidelines because they can’t find a vehicle to buy.
How Splitit’s New CEO Plans to Make BNPL More Bank-Friendly (American Banker, 4/18/2022) Splitit accesses unused consumer credit to fund BNPL by turning credit into smaller installment payments without interest.
Why Google and Global Payments Zeroed in on Small Business (American Banker, 4/19/2022) The partnership has been adapting Google’s public API interfaces for Global Payments’ 3.5Mn merchants across 60 countries.
Lighter Fare:
NASA Beamed a Doctor to The ISS in a World-First ‘Holoportation’ Achievement (Science Alert, 4/19/2022) Beam me up, Scotty!