Quite a bit of market news this week on the regulatory and POS front.
First, in macro news, Fed Chair Powell noted that the Fed may lack ammo to combat the next recession. Powell indicated the Fed would use tools from the last recession (such as QE), but not move into negative rates territory.
The bond market added a healthy dose of salt to the wound. 30-year bonds were issued at the lowest rates in American history – a whopping 2% – which also happens to match the Fed’s inflation target.
The bottom line for lenders – expect rates, inflation, and long-run economic growth to stay low for a while.
Source: PeerIQ, WSJ
Varo Money Secures First FinTech FDIC Charter
Digital bank Varo Money secured FDIC approval for a national bank charter – clearing the way for the first FDIC insured FinTech. The charter enables Varo to issue loans in all 50 states and avoid the patchwork mess of state-by-state licensing.
Varo Money won some bragging rights. Other FinTechs including SoFi, Square, and LendingClub have also indicated interest in a charter. That said, some preferred to be “the first to go second” and may have avoided the whopping $100 MM in costs to secure the privilege.
Varo Money will still need to get final approval from the OCC and the Federal Reserve for their pre-opening examination and bank holding application, respectively. The FDIC, in a coordinated fashion, also rolled out materials to smooth the de novo application process for “nontraditional” firms.
Issuing Banks + Visa Enter the POS Market
Another development from Visa and the point-of-sale sector. Visa announced it is teaming up with and making a strategic investment in ChargeAfter.
This is big news! Visa-issuing banks will have the ability to act as direct lenders in ChargeAfter’s network. Visa will work with ChargeAfter to distribute a range of POS financing and credit instruments to merchants through its network of sellers, acquirers and issuing banks.
The deal creates a significant source of competition for FinTech POS providers (Affirm, Square, etc.) and Synchrony Financial.
Consider the success of Zelle – a bank-backed latecomer to the peer-to-peer app payments market. Zelle tore a hole in the growth sails of Braintree/Venmo by riding integrations and apps into customer wallets.
POS merchant acquisition is of course different from Zelle’s instant digital distribution. Signing up lenders involves hand-to-hand combat – rolling up merchants one at a time, but this is exactly what merchant-acquiring banks do day in and out.
This should make for an interesting fight.
A slew of financing news this week
HouseCanary, a real estate analytics solution provider, secures $65 MM. HouseCanary, led by CEO, Jeremy Sicklick, raised $65 million in a funding round led by Morpheus Ventures, Alpha Edison, and PSP Growth. Proceeds will be used to develop the most accurate valuations in the property sector.
Nova Credit raised $50M in Series B funding to improve immigrant access to credit. The FinTech, led by CEO Misa Esipov, translates foreign credit data into a U.S.-equivalent credit score. Kleiner Perkins led the investment and was joined by Canapi Ventures, Index Ventures, General Catalyst, Nyca Partners and Sound Ventures.
Keep an Eye Out on Payment Priority – Weakness in Auto Loans
Our chart of the week centers on rising delinquencies in the US Auto Market. Investors and lenders are always looking for the ‘canary in the coal mine’ data. Reach out to PeerIQ to learn more about our TransUnion benchmarking offering to better position your portfolio for the next downturn.
Source: PeerIQ, WSJ / The Daily Shot
PeerIQ New Hire!
Monica Zhou. Monica is currently a full stack engineer on the front-end and platform team. Formerly, Monica worked as an architect in the niche field of computational and biologically inspired design. She completed a bachelor’s in art history and neurobiology at Harvard University and pursued a master’s in architecture at the Harvard Graduate School of Design. In her free time, she likes to draw anime and sculpt.
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- Powell Suggests the Fed May Lack Ammo to Combat Next Recession (Bloomberg, 02/12/2020) Federal Reserve Chairman, Jerome Powell, acknowledged that the central bank may not have the resources to battle the next recession.
- U.S. Core Inflation Remains Subdued on Cars, Medical Goods (Bloomberg, 02/13/2020) The consumer price index rose by 0.1% in January, but inflation remains low.
- FDIC aims to smooth de novo process for nontraditional firms (American Banker, 02/11/2020) The FDIC wants to help nonbanks and agency staff understand the de novo process for non-traditional bank organizers.
- Varo Breaks New Ground With FDIC Approval For National Bank Charter (Lend Academy, 02/11/2020) Varo Money became the first digital bank to be FDIC insured.
- Avant splits into two companies, with potential IPO eyed for one (Chicago Business, 02/05/2020) Avant’s technology solutions company, Amount, is in the process of raising $50 million and has potential to go public.
- Banks, fintech startups clash over ‘the new oil’ — your data (Politico, 02/07/2020) Major lenders like Chase are threatening to limit the access of financial apps like Venmo and Betterment.
- Bank of America is about to accelerate its pace of innovation (Business Insider, 02/07/2020) Bank of America announced that it has earned a record of 418 patents in 2019, an indication that it’s going to accelerate its pace of innovation.
- Visa invests in POS financing platform (Finextra, 02/12/2020) Visa teams up with ChargeAfter to distribute a range of POS financing and credit instruments to merchants.
- Podcast 231: Anu Shultes of LendUp (Lend Academy, 01/24/2020) Anu Shultes discussed her experience so far as CEO of LendUp.
- The Slow Death Of Checking Accounts (Forbes, 02/10/2020) If mobile wallets want to own the checking account industry , they will need to be service-focused, not just transaction-focused.
- San Francisco’s Fintech HouseCanary, a Real Estate Analytics Solution Provider, Secures $65 Million in Round Led by Morpheus Ventures (Crowdfund Insider, 02/09/2020) FinTech company that provides Real Estate Analytics, raised $65 million in funding round.
- Nova Credit Raises $50M in Series B Funding to Improve Immigrant Access To Credit In The U.S. (PR Newswire, 2/12/2020) FinTech startup that translates foreign credit data into a U.S.-equivalent credit score, raised $50 million in Series B funding.
- S.F. fintech scores $100 million line of credit (Biz Journals, 02/05/2020) Zero, led by CEO, Bryce Galen, secured a $100 million revolving line of credit.
- NASA says that the viral ‘Broom Challenge’ is based on a hoax: ‘Basic physics works every day of the year’ (Business Insider, 02/11/2020) NASA started the ‘Broom Challenge’ and later revealed that it was a joke.