The economy taps the brakes, but not for long. The Fed has acknowledged progress on jobs, but says it’s not time to raise rates (yet). OCC nominee faces a tough road to confirmation. KYC-as-a-Service startup Alloy raises $100Mn, while robo-advisor Betterment raises $160Mn. Consumers are using BNPL for bigger purchases. Mastercard enters the BNPL battle. Coinbase does direct deposit. Affirm’s “super app.” SPAC redemptions spike. Four credit unions team up.

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Growth in Q3 Slows, But Should Pick Back Up

New filings for unemployment rose slightly last week, to a seasonally adjusted 362,000, but remain near pandemic lows. Continuing claims dropped sharply in early September, from 11.3Mn to 5Mn, as federal pandemic-related unemployment assistance ended, meaning many workers no longer qualified for benefits.

Meanwhile, analysts are trimming estimates of Q3 GDP growth amid the summer Delta surge and supply constraints from continued supply chain and employment disruptions. Consumer confidence dropped for the third straight month, as surging cases and inflation worries dampened consumers’ mood (and spending).

Image: Deloitte Insights

Expectations are that the economy grew at a 3.6% annualized rate in Q3, a sharp revision downward from projections as high as 7.8% as recently as July. With COVID cases bottoming out and consumers sitting on a record $142 trillion in net worth, economists are expecting growth to re-accelerate after Q3. Consumer balance sheets remain strong and should continue to power a consumer spending-led recovery.

The Fed acknowledges there has been “very good progress” toward economic recovery and achieving maximum employment. While a moderation in the pace of asset purchases may soon be in the offing, Fed officials have underlined more progress needs to be made on employment before interest rates will increase.

OCC Nom Faces Tough Path to Confirmation

Biden’s pick to head the OCC, Cornell law professor Saule Omarova, faces a difficult road to confirmation, according to industry experts. Some banking industry trade groups have expressed concern based on Omarova’s academic work. In one paper, she argued that moving consumers’ deposits from commercial banks to the Federal Reserve would better meet the needs of consumers and simplify the banking system.

On the flip side, experts say, her work in the George W. Bush administration and the potential to be the first woman and first person of color confirmed as Comptroller could help her pick up votes from Republicans like Susan Collins and Lisa Murkowski. Expect a confirmation fight.

While Omarova may face a challenging road to confirmation, another Biden nominee, Rohit Chopra, was confirmed as the next director of the CFPB. The confirmation vote narrowly passed along party lines, 50-48.

Consumers Financing Bigger Purchases with BNPL

As the pandemic supercharged ecommerce, consumers have proven increasingly willing to conduct larger transactions purely online. As the use of digital shopping platforms for bigger ticket purchases has become more common, so too has consumers’ willingness to use BNPL-style products to finance those purchases. According to research from PYMNTS in collaboration with Amazon Web Services, 43% of US adults want to use BNPL for larger purchases like home improvements or medical treatment.

As BNPL options proliferate, it isn’t surprising to see upmarket options emerge. As more establishment players look to get in on the BNPL trend and credit card issuers look to defend their turf, targeting larger purchases makes sense: banks and card issuers are better equipped with capital, risk management experience, servicing, and collections to offer larger dollar amount, longer term BNPL-style financing.

Looking for the latest on fintech lending originations volume and performance, including the buy now, pay later sector? Reach out to to learn about the data and analytics we have on the sector.

SPAC Redemptions Spike

SPACs, the once-hot vehicle to take companies public, have fallen out of favor with regulators — and retail investors. A unique quirk of the structure is the ability for investors to withdraw their investment before a SPAC finalizes a merger with its takeover target. An investor may be motivated to do so if the SPAC is trading below its IPO price, typically $10, or if they lack confidence in a proposed deal. Redemptions reduce the amount of cash takeover targets get in the merger and, if enough shares are redeemed, can complicate or even scuttle a potential deal.

In a sign of waning investor interest, the average redemption rate for Q3 reached 52.4%, an order of magnitude increase from Q1’s 10% rate. While SPACs remain a viable route to the public markets, it seems investors have become more discerning about deal quality. Coupled with increased regulatory scrutiny, this suggests slower dealflow for SPACs in the coming months.

Four Credit Unions Team up on Challenger for Low Income Users

Four local credit unions have announced they’re joining forces to offer an all-digital banking cooperative for lower-income users. The cooperative, named Dora Financial, in honor of credit union pioneer Dora Maxwell, aims to promote financial inclusion for those of low and moderate income who don’t use mainstream financial services. Dora will offer an app in both English and Spanish and access to a checking account with no minimum balance requirement or monthly service fees. Dora is a great example of the potential of technology and innovative dealmaking to promote access and inclusion to financial services.

Mastercard Enters BNPL Fray with “Mastercard Installments”

Card network Mastercard is the latest to join the buy now, pay later party. Its offering, dubbed “Mastercard Installments,” won’t be available directly to end users. Rather, Mastercard is creating a platform that will enable banks and fintechs to integrate with its network to make BNPL options available at checkout.

The configuration and terms of financing available to end users will be determined by the lenders on the platform. Mastercard plans to roll out early next year in the US with partners SoFi, Synchrony, Barclays, and Marqeta.

Mastercard’s BNPL platform could enable a flood of banks and fintechs to more easily compete for BNPL at checkout. The increased competition is likely to result in pricing pressure on standalone BNPL providers, driving margin compression over time.

Affirm Joins “Super App” Arm Race

Affirm, best known for its buy now, pay later offerings, is throwing down the gauntlet in the battle to be users’ one-stop shop for financial services. The company has offered a high-yield savings account in partnership with Cross River Bank for some time. Now Affirm is planning features that enable customers to buy and sell cryptocurrencies directly from their savings account and a debit card for day-to-day spending.

The name of the game right now seems to be “super app.” Companies that successfully execute on this strategy will be able to boost the lifetime value of their customers by cross-selling them into multiple products, enabling them to justify spending more to acquire new ones. 

“Identity Operating System” Startup Alloy Raises $100Mn

Alloy, which offers a platform for KYC, identity verification, and fraud prevention, announced it has raised $100Mn at a $1.35Bn valuation. Lightspeed Venture Partners led the company’s Series C, with participation from existing investors.

Companies can integrate with Alloy via single API, giving them access to data from over 120 identity providers. The platform can be used during customer onboarding to verify identity and on an ongoing basis to monitor transactions. Alloy plans to add credit decisioning to its capabilities. A who’s who of fintechs use Alloy, including HMBradley, Brex, Marqeta, and Ramp.

Any tools that improve efficiency while reducing risk are a welcome addition to the banking and fintech world. Congrats to the entire Alloy team on the raise!

Betterment Raises $160Mn, Valuation Rises to $1.3Bn

Robo-advisor Betterment has announced it has raised $60Mn in equity and a $100Mn credit facility. The Series F round was led by VC firm Treasury and included participation from existing investors. Betterment now boasts $32Bn in AUM across 700,000 users.

Interest in the once red-hot robo category has cooled in recent years as established brokerages developed their own automated advice offerings. Robo advisors missed much of the uptick in retail investor interest during the pandemic, as much of consumer focus was on active trading through no-fee brokerages like Robinhood.

Coinbase to Let Users Deposit Paychecks

Crypto exchange Coinbase is starting to look more and more like a bank. Despite pulling the plug on its money market account-like “Lend” product after SEC pushback, the company is moving full speed ahead.

Last week, Coinbase announced it will roll out direct deposit. The feature will enable users to deposit some or all of their paycheck directly to the platform. Users can choose to keep deposits as USD or have them automatically converted into the cryptocurrency of their choice. The company will partner with an FDIC-insured bank on the direct deposit feature, though it hasn’t yet specified which bank.

This is the latest in a string of crypto-feature announcements from companies as varied as Square, Robinhood, Affirm, and Twitter in recent days. Now, Coinbase, a “crypto-native” company is moving the opposite direction — squarely into the realm of “traditional finance.”

In the News:

Wall Street Scans the Lots as Used Cars Prod Inflation (New York Times, 09/27/2021) Economists, analysts and traders focus on the Manheim Used Vehicle Value Index to try and gauge inflation.

Fed Leaders Eric Rosengren, Robert Kaplan to Resign Following Trading Controversy (Wall Street Journal, 09/27/2021) Leaders to step down following conflicts of interest in stock trading while setting monetary policy.

New Study: Gen Z And Millennials Use Bank Branches Because Of A Poor Digital Experience (Forbes, 09/28/2021) Half of Gen Z and Millennials surveyed who opened a checking account in the past three years had dealt with a bank branch employee during the process.

​​Upgrade Identified as Fastest Growing Card in US, Founder Renaud Laplanche Comments on Evolving Fintech Ecosystem (Crowdfund Insider, 09/29/2021) Upgrade becomes the first Fintech to be listed in the top 50 U.S. Visa/Mastercard Credit Card Issuers, growing 755% YoY.

Marcus Has Reached $100 Billion in Deposits (deBanked, 09/24/2021) The digital consumer bank may have been ahead of the curve of the fintech and banking convergence, reaching $100Bn in deposits in 5 years.

WhatsApp Payments Might Soon Earn You Cash Back (TNW News, 09/27/2021) WhatsApp is working on a cashback feature in a beta version of its Android app, to be used in India.

Early Spotify Investor Dragoneer in Talks to Back $10Bn Digital Bank N26 (Sky News, 09/27/2021) It is rumored that Dragoneer is in talks to lead a major fundraising for the German-based digital bank.

Small Banks, Credit Unions Warned to Brace for Pandemic Aftershock (American Banker, 09/28/2021) With the phaseout of government support, the industry may see increases in delinquencies and charge-offs, which could put banks and credit unions at risk of financial losses or failure.

Payfare Teams With Stride Bank on Real-Time Payments for Gig Workers (, 09/28/2021) The fintech expands its partnership to enable payment of gig workers 24/7 (even after banking hours, on weekends, bank holidays) with immediate confirmation and availability of funds.

Lighter Fare:

Amazon Astro Home Robot: How to Preorder the $1,000 Alexa Bot and Everything Else Announced (cnet, 09/29/2021) iRobot sooner than expected? Info on Amazon’s new home robot.