FDIC Warns on Fintech Apps; LoanPro/Visa DPS Integration; eBay Drops Amex

By Cole Gottlieb

June 9, 2024

Happy Sunday,

The job market tightens somewhat. FDIC warns consumers on fintech apps. Senate hearing on Zelle scams. Synapse end users still can’t access funds. LoanPro announces Visa DPS integration. LoanSnap faces legal problems. eBay to drop Amex as payment option.

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Job Market Tightens

In what is being interpreted as positive news in the inflation fight, job openings declined in April to the lowest level since 2021. Available positions dropped to 8.06Mn, with a broad-based decline in job openings across sectors of the economy. A separate data set from ADP showed that private payrolls rose by 152,000 in May, which was less than expected, adding another data point to suggest the labor market is cooling.

Image: Bloomberg

FDIC Warns Consumer on Fintech Apps

The FDIC’s consumer newsletter last week warned about the risks of using third-party fintech apps. The FDIC’s communication clarifies that whether or not users’ funds held by non-bank apps are insured depends. So-called “pass through” insurance is dependent on accounts being properly titled and accurate record keeping at each involved organization. And, as the collapse of banking-as-a-service firm Synapse illustrates, FDIC insurance only protects against the failure of an insured depository institution. It offers no protection against the failure of a non-bank fintech company, whether a consumer-facing app or a technology provider like Synapse. The FDIC notes that, “As a result, you may want to be particularly careful about where you place your funds, especially money that you rely on to meet your regular day-to-day living expenses.”

Senate Hearing on Zelle Scams

Peer-to-peer payment service Zelle is in the spotlight again. A hearing in the Senate Committee on Homeland Security and Governmental affairs took aim at how Zelle, owned by Early Warning Services, and banks that offer it handle fraud and scams on the platform. EWS argues that less than 0.1% of transactions on Zelle are reported as fraud or scams, making it one of the safest ways for consumers to make payments. But consumer advocacy groups argue the measure likely underestimates the impact. Because consumers are often tricked into authorizing payments, the protections of the Electronic Funds Transfer Act do not apply. EWS points out that, beginning last June, its network rules require participating institutions to reimburse consumers who are victims of certain “imposter” scams, going beyond current legal and regulatory requirements.

Synapse End Users Still Can’t Access Funds

End users of fintech apps built on Synapse have been unable to access their money for nearly a month. Adam Moelis, CEO and cofounder of Yotta, one of the impacted fintechs, told CNBC that, “We never imagined a scenario like this could play out and that no regulator would step in and help.” Yet as a statement the Federal Reserve Board, which oversees Evolve Bank & Trust, made to the U.S. Trustee in the bankruptcy makes clear, the Fed doesn’t see itself as having a role here, nor does the FDIC. There are approximately 85,000 Yotta users who cannot access a total of around $112Mn. While Moelis has expressed the company is doing everything it can to resolve the situation, Yotta has deleted many of its accounts on social media and hasn’t been responding to customer service inquiries, according to complaints on social media and statements impacted users have made to the bankruptcy court.

LoanPro Announces Visa DPS Integration

LoanPro, a loan management system and credit platform, announced it has integrated directly with Visa DPS, one of the largest issuer processors of Visa debit transactions. The integration will enable LoanPro customers, which include names like SoFi, Cross River, M1, Best Egg, and numerous others, to easily launch, manage, and service “next-generation” credit card programs. One unique capability the integration will unlock: transaction-level credit. Lenders will be able to tailor terms, including credit limits, interest rates, and grace period, based on the details of a transaction, including amount, location, merchant type, and more.

Mortgage Startup LoanSnap Facing Legal Problems

Mortgage lending startup LoanSnap is facing a plethora of legal problems that seem to stem from not paying its bills, despite raising around $100Mn in equity funding from names that include LinkedIn founder Reid Hoffman, Richard Branson’s Virgin Group, and the Chainsmokers’ Mantis Ventures. LoanSnap has been sued by seven creditors who, collectively, argue the company owes them more than $2Mn. The company has also been fined by state and federal agencies and has failed to make payroll consistently. LoanSnap has even been evicted from the office space it uses as its headquarters in Southern California.

eBay to Drop Amex as Payment Option

eBay will cease accepting American Express as a form of payment beginning in August. eBay cited the high fees and that its own research indicated its customers are willing to use alternate forms of payment to continue using eBay’s marketplace. An eBay spokesperson told PYMNTS, “At a time when payment processing costs should be declining because of technological advancements, investments in fraud capabilities and customer protections by merchants like eBay, credit card transaction fees continue to rise unabated because of a lack of meaningful competition.”

In the News:

Regulators are laying the groundwork to rein in private credit (American Banker, 6/4/2024) Bank regulators are stepping up scrutiny of private credit.

Fintech firm Nium cuts valuation by 30% in new funding round, eyes 2025 IPO (CNBC, 6/5/2024) The 30% haircut isn’t bad, considering how much the funding climate has changed since Nium’s last round.

Does Numisma open or close the door for more novel banking charters? (American Banker, 6/2/2024) Numisma is the first uninsured institution to be granted master account access since the Fed updates its process

$9.2 billion fintech Navan appoints ex-NYSE exec as CFO ahead of anticipated IPO (CNBC, 6/3/2024) Navan, formerly TripActions, looks to be gearing up to go public.

Bunq, the $1.8 billion European neobank, hopes to secure license for UK expansion this year (CNBC, 6/3/2024) Dutch neobank bunq plans UK expansion.

Where's the stolen card? Generative AI can find it, says Mastercard. (American Banker, 6/3/2024) The payment network is using AI to better detect stolen cards.

California digital bank reaches $1 billion deposit mark in six months (American Banker, 6/3/2024) The digital-only savings product has scooped up deposits by offering high rates.

The SBA is unveiling new credit lines of up to $5 million to fund small businesses (CNBC, 6/4/2024) The Small Business Administration will rollout a new LOC product.

Live Oak Bank Launches First Embedded Banking Partnership (PYMNTS, 6/3/2024) Live Oak, powered by in-house tech and Finxact, launches its first embedded partnership.

Plaid launches a new product to take cash flow underwriting mainstream (Fintech Nexus, 6/4/2024) Plaid officially announces its Consumer Report product.

Equals Money and Zūm Rails make BaaS plays (Finextra, 6/5/2024) Equals Money launches BaaS product to help businesses offer digital payments.

UK neobank Monzo reports first full (pre-tax) profit, prepares for EU expansion with Dublin hub (Techcrunch, 6/3/2024) Monzo reports pre-tax profit, plots European expansion.

Lighter Fare:

Were Egyptians Really the First to Domesticate Cats? Try Cave Men (Atlas Obscura, 5/24/2024) Domesticated cats have been around for at least 8,000 years, new discoveries indicate.