Is a cost of living crisis brewing? The Fed keeps tabs on 2007-like housing market. Sen. Toomey knocks CFPB on bureau medical debt decision. FTA defends BNPL. New bill proposes Treasury manage a digital dollar. ChargeAfter raises $44Mn Series B. Apple to in-source fin serv capabilities? Coinbase partners, acquires. Hancock Whitney cuts overdrafts. PayFare and Visa expand partnership.

And in exciting news closer to home, Cross River announced it has raised $620Mn at a $3Bn+ valuation to accelerate its next stage of growth. The round was led by Eldridge and Andreessen Horowitz. This new capital will accelerate Cross River’s ongoing technology-focused growth strategy, which includes four core initiatives: building out embedded payments, cards, lending and crypto solutions; investing in its people and communities; continuing to execute on plans for international expansion; and bolstering strategic partnerships.

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Brewing Cost of Living Crisis?

Economist Mohamed El-Erian warned of a “cost of living crisis” in a recent appearance on CNBC, as the rate of inflation remains elevated. As the Fed raises rates to combat rapid price increases, economic growth is almost certain to slow, possibly even entering recession territory, El-Erian warned.

Meanwhile, the Fed is closely watching the U.S. housing market for potential risks to financial stability. Some market indicators resemble the 2007 build up to the housing market crash. Home prices, first-time home buyers, and the share of purchases as non-primary residences are all at or near highs not seen since the bubble.

Toomey Knocks CFPB on Bureaus’ Medical Debt Decision

Sen. Pat Toomey (R-PA), the ranking Republican on the Senate Banking Committee, blamed the credit bureaus’ recent decision to drop as much as 70% of consumers’ medical debt on pressure from the CFPB. Toomey argued that any decision that reduces lenders’ access to consumer information could be “harmful” to the financial system. Toomey argued the result could be higher rates for all borrowers or reduction in access to credit, particularly for consumers with thinner credit files.

Financial Technology Association Defends BNPL

The Financial Technology Association, a recently formed trade association representing buy now, pay later companies, is stepping up to defend the companies in a comment letter it recently submitted to the CFPB in response to the agency’s inquiry into the sector. FTA CEO Penny Lee argues in the letter that BNPL is a valuable tool that helps consumers avoid unnecessary interest and fees. She also makes the case that BNPL is already subject to federal and state regulation, including consumer protection law.

The CFPB’s market monitoring exercise, which kicked off last December, is well underway. The ultimate outcome at this point is uncertain, but is most likely to focus on areas like affordability, fees, credit reporting, and consumer protection.

New Bill Proposes Treasury, Not Fed, Issue “Digital Dollar”

A new bill from Congressman Stephen Lynch (D-MA) would empower the U.S. Treasury, rather than the Federal Reserve, to issue a “digital dollar.” The bill, dubbed the Electronic Currency and Secure Hardware, or ECASH, Act, directs the Treasury to develop and test the software, hardware, and network necessary to operate a peer-to-peer retail dollar that resembles physical cash as closely as possible. The bill is co-sponsored by fellow Democratic representatives Chuy Garcia, Rashida Tlaib, Ayanna Pressley, and Alma Adams. The Democratic sponsors are hoping the bill’s emphasis on privacy and anonymity will help it garner some Republican support.

BNPL Network ChargeAfter Raises $44Mn Series B

ChargeAfter, a platform that enables consumers to get offers from multiple BNPL providers, has raised a $44Mn Series B. The round brings ChargeAfter’s total funding to $60Mn. The company’s backers include Visa, BBVA, Synchrony, and Citi Ventures. According to the company, it is on track to integrate and offer financing from as many as 70 lenders.

As the business model of direct BNPL providers comes under pressure, ChargeAfter’s network model has some distinct advantages. Still, the company’s revenue is presumably dependent upon volume of BNPL transactions, which could be impacted by any number of factors, including increased regulatory scrutiny and a rising interest rate environment.

Apple Said To Be Bringing More Financial Services In House

Apple was in the headlines again last week. On the heels of news that it acquired a U.K. open banking startup Credit Kudos, Bloomberg broke news that Apple is working to in-source some financial services capabilities currently provided by third parties. The initiative, dubbed “Breakout,” could see Apple build its own payment processing, credit risk, fraud assessment, and customer service functions. Development of its own financial services capabilities could support long-rumored projects, like a BNPL offering referred to as “Apple Pay Later” or a hardware subscription offering.

Currently, Apple works with a number of partners, including Goldman Sachs and processor CoreCard, for its credit card, and Green Dot, for its Apple Cash product. Apple doesn’t have near-term plans to drop existing partners. When it comes to its credit card or longer-term installment loans, Apple has little choice but to work with a bank partner.

Coinbase Partners with Alviere, Acquires Owner of Mercado Bitcoin

Embedded finance platform Alviere is partnering with Coinbase Prime to make crypto capabilities available through its platform, The HIVE. Alveire will make the ability to buy, sell, and store select cryptocurrencies available to users of its platform by leveraging Coinbase Prime’s platform and its own state money transmitter licenses. 

In other Coinbase news, the crypto exchange is making a big acquisition in LatAm. Coinbase is reportedly acquiring 2TM, the Brazilian owner of popular crypto brokerage Mercado Bitcoin. The $2.2Bn acquisition would include 2TM’s other companies: Meubank, MB Digital Assets, CriptoLoja, Bitrust, Blockchain Academy, MezaPro, Wuzu, and Portal do Bitcoin.

The move signifies Coinbase’s ambitions to become a global provider of cryptocurrency services.

Hancock Whitney To Reduce Overdraft Fees

It’s been a couple weeks since we’ve seen an announcement of a bank reducing or eliminating overdraft fees! But last week, Hancock Whitney, a small Mississippi-based bank, announced plans to eliminate and reduce various overdraft and NSF fees. The bank took in about $28.6Mn in overdraft fees last year.

Hancock Whitney also announced plans to launch a new account, Assure Checking, which won’t carry any overdraft charges.

PayFare and Visa Expand U.S. Relationship

PayFare, which enables instant payouts and digital banking solutions for gig workers, is deepening its relationship with Visa. The company will begin leveraging Visa Direct for real-time disbursements. Gig- and low-wage workers are far more likely to live paycheck-to-paycheck than higher-income workers and, as a result, use short-term, small-dollar products like payday loans or bank overdrafts. PayFare and similar on-demand pay solutions provide workers real-time access to their pay, potentially lessening the need for high-cost, short-term credit.

In The News:

SEC Seeks to Broaden Definition of Dealer to Ease Liquidity Worries (CNBC, 3/28/2022) As algo and HFT firms have become a significant source of market liquidity, the SEC proposes new rules to force them to register as dealers and open their books to greater regulatory oversight.

FDIC Advances Bank Merger Proposal (American Banker, 3/25/2022) The FDIC’s RFI asks if regulators should give more consideration of financial stability risks posed by larger bank mergers, and if the CFPB should have the power to weigh in on merger applications.

CFPB’s Chopra Promises Crackdown on Repeat Offenders (American Banker, 3/29/2022) Chopra plans harsher penalties for repeat offenders, proposing measures beyond fines and restitution, such as revoking privileges like deposit insurance at the FDIC.

How Banks Can Stop Deposits Moving to Investment App Robinhood (The Financial Brand, 3/28/2022) Embedded investing could help to keep consumer’s money in the bank and credit union ecosystem.

How PayPal, GoDaddy are Transforming Tax Payments (American Banker, 3/28/2022) ACI has connected Venmo and PayPal to the IRS for income tax payments.

How Amazon, Apple, Facebook, Google are Infiltrating Financial Services (American Banker, 3/29/2022) Banking execs fear the four tech giants will move into banking, though none have yet to take the steps to obtain a banking license.

Robinhood’s Stock Pops 25% on News of Extended Trading Hours (Tech Crunch, 3/29/2022) Robinhood will extend its trading hours to 7am-8pm ET, from 9am-6pm ET.

Revolut Gears up for Brazilian Launch (Finextra, 3/29/2022) Revolut has already opened its waiting list for Brazilians interested in accessing accounts and international cards.

Lighter Fare:

Biden’s $26 Billion Proposal for NASA Paves Path for 1st Human Exploration on Mars (CNN, 3/28/2022) The budget request represents the largest request for science in NASA’s history, with the largest portion to go towards returning humans to the moon and preparing for the first human exploration of Mars.