Happy Sunday,
Fed Chair Powell warns more hikes are coming. Bank economists remain downbeat on credit conditions. FDIC issues more cease and desist orders over deposit insurance claims. CFPB seeks to supervise big tech. Fintechs still raising funds. Crypto grab bag. PayPal sells European BNPL portfolio. Bmtx acquires Envel.
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Despite Slowing Inflation, More Rate Hikes On The Horizon
Despite improving inflation metrics, Fed Chair Powell dashed hopes that the central bank’s rate hikes were done. Though the Fed took a beat and didn’t raise rates at its last meeting, Powell told Congress he expects rates will still need to move higher to get inflation back to its 2% target. Fed officials now expect rates to reach 5.6% by year’s end. Fed Governor Waller reiterated that policymakers shouldn’t reverse course on rates just because of an adverse impact on a small number of banks. Gov. Waller emphasized it is the job of bank management, not the Fed, to manage their institutions’ interest rate risk.
Meanwhile, surveys of bank economists show they expect lenders to remain cautious on both consumer and commercial credit in the coming six months. The ABA’s headline credit index, which measures sentiment, remains near an all-time low.
Image: Bloomberg
FDIC Issues Cease & Desist Orders for False Deposit Insurance Claims
The FDIC continues to step up enforcement actions related to potentially false or misleading deposit insurance claims. Last month, the agency sent three cease and desist orders for deposit insurance-related claims, including to a purported neobank named Money Avenue. The company, which partners with Evolve Bank & Trust via BaaS platform Synapse, according to disclosures on its site, was cited for “false and misleading statements” on its website and social media.
CFPB Seeks to Supervise Big Tech
The CFPB may be looking to expand its supervisory authority to include “Big Tech” companies like Google and Apple. The Bureau’s supervisory authority, defined by Dodd-Frank, includes banks and credit unions with over $10Bn in assets, nonbank mortgage originators and servicers, payday lenders, and private student lenders of all sizes, and “larger participants” of other consumer financial markets that are defined by Bureau rules. Examples of “larger participants” include credit bureaus like TransUnion, Equifax, and Experian.
Now, the CFPB appears to be gearing up to bring firms like Apple, Google, and PayPal under its supervisory umbrella, owing to their increasing importance in the consumer payment market. The Bureau’s spring update to its rulemaking agenda includes a new item “to define further the scope of the CFPB’s nonbank supervision program” in markets for consumer payments.
Down But Not Out: Fintechs Still Fundraising
While we’re not likely to see a return to the frenzied dealmaking of 2021 anytime soon, deals are still getting done. Per FT Partners, $4.5Bn in fintech venture deals were announced in May, and deals continue getting done this month.
Paro, which offers an AI-led marketplace delivering financing and accounting solutions to businesses, announced it had raised a $25Mn Series C. The round was led by Top Tier Capital Partners, with participation from Sierra Ventures, Madrona Venture Group, and Revolution Ventures. Paro plans to use the new funding to scale its product development and accelerate growth with existing clients.
Volt, a U.K.-based open banking startup, announced it has raised a fresh $60Mn at a $350Mn+ valuation. IVP led the Series B round, with participation from CommerzVentures, Augmentum Fintech PLC, Fuel Ventures, and EQT Ventures. The company currently integrates with some 5,000 banks across the U.K., Europe, and Brazil. Volt leverages those open banking connections to enable account-to-account payments. Part of the plan for the new funding is continued expansion, with the company eyeing further growth in LatAm and APAC regions.
Yendo, which offers a “vehicle-secured” credit card, announced it has raised a $24Mn Series A. The funding was led by FPV Ventures, with participation from Autotech Ventures and Human Capital. Yendo enables users to access up to $10,000 in revolving credit secured by the equity value of their vehicle.
Crypto Digest: Binance Gets Reprieve as TradFi Players Make Moves
Crypto world has seen a busy few weeks. Embattled crypto exchange Binance, the world’s largest by volume, has reached a deal with the SEC to continue operating in the U.S. while it battles fraud charges from the agency. The agreement requires funds belonging to customers of Binance.US to be placed in a separate digital repository accessible only to the U.S. exchange.
Meanwhile, major establishment players Citadel, Fidelity, and Schwab have teamed up to launch their own crypto exchange, EDX Markets. The venture quietly began operations in recent weeks. EDX won’t directly handle customers’ digital assets or serve individual investors. Rather, EDX is a “noncustodial” exchange, meaning clients use it to agree to and execute trades, but the assets are held and settled outside of EDX.
Establishment players are also making a run at launching a spot bitcoin ETF. Last week, Blackrock filed paperwork with the SEC to launch its iShares Bitcoin Trust. WisdomTree and Invesco followed suit, also filing requests with the SEC.
Last but not least, crypto payments firm Wyre has called it quits. The company, which was once slated to be acquired for $1.5Bn by one-click checkout startup Bolt, cited “market conditions” for its decision to wind down operations. The company will process user withdrawal requests through July 14th, after which users must engage in a separate process to recover their assets.
PayPal Sells Euro BNPL Portfolio to KKR
PayPal, a later entrant into the BNPL space that has become a major player, has reached an agreement to sell $44Bn worth of its BNPL loans to investment firm KKR. PayPal will remain responsible for all consumer-facing activities related to its European BNPL products, including underwriting, servicing, and collections. The sale frees up capital for other business priorities, including share buybacks. The company said it plans to allocate an incremental $1Bn to share repurchases after the KKR deal closes.
Bmtx Acquires Envel
BaaS platform Bmtx (formerly BankMobile) announced it has acquired the software assets of neobank Envel out of liquidation. Envel partnered with bank partner nbck and offered automation features designed to assist users with budgeting, savings, and investment decisions. Terms of the deal were not disclosed.
In the News:
Fed Launches Master Account Database (American Banker, 6/16/2023) The Federal Reserve has published a database of all entities that have or are seeking Fed master accounts.
What’s in the Bipartisan Deal on Clawbacks from Failed-Bank CEOs (American Banker, 6/16/2023) Senate Banking Committee scheduled to vote on expanding FDIC authority to clawback compensation.
Failed-Bank CEO Pay has Scrambled the Senate’s Partisanship (American Banker, 6/20/2023) A proposed bill has support of Senate Banking Committee Chair Sherrod Brown (D-OH) and ranking member Tim Scott (R-NC).
Diving into Plaid’s New Identity Verification Experience (Tearsheet, 6/20/2023) Plaid attempts to bring the “one-click” checkout experience to identity verification.
Customer’s Bank Hires 30 Signature Bankers, Acquires $631Mn Portfolio (Banking Dive, 6/16/2023) Customer’s acquired the portfolio from the FDIC at approximately 85% of book value.
SVB Customers Who Lost Their Deposits Remain on the Hook for Loans (WSJ, 6/19/2023) Clients of SVB’s Cayman Island branch had their deposits seized, but still owe on loans that were sold to First Citizens.
JPMorgan Invests in Trade Finance Fintech (Finextra, 6/21/2023) JPMC has made a strategic investment in Cleareye.ai, a trade finance automation platform.
Lighter Fare:
The World’s 50 Best Restaurants 2023 (Eaters, 6/20/2023) Only two U.S. restaurants made the list: Le Bernardin and Atomix, both in New York City.