Greetings,
The Fed could begin tapering asset purchases as early as November. Financial regulator appointments move closer to confirmation. Ocrolus raises $80Mn for automated document verification, while Self Financial raises $50Mn for credit building products. MoneyLion begins trading. Robinhood, Revolut, and PayPal have new features and products. Consumers falling behind on BNPL. Amazon partners on SMB loans.
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Fed Ready to Taper, Debt Showdown Looms
Despite a generally improving economy, initial unemployment claims came in at 351,000. Analysts attribute the higher-than-expected number to volatility in the week-to-week data. Housing prices cooled slightly in August, as some prospective buyers pulled back due to high prices.
Last week, the Fed signaled its readiness to begin reversing pandemic-related stimulus measures. The rate setting committee indicated it could begin reducing its $120Bn per month bond buying program as early as November. Half of the committee’s 18 members forecast raising interest rates sometime in 2022. A normalization of Fed policy may give the central bank additional options in managing inflation risk or a future economic downturn.
There is a wildcard on the economic horizon: the debt ceiling. A political standoff over the $28 trillion debt ceiling may complicate negotiations over Democrats’ spending plans and, if not resolved, threatens to cause a government shutdown and to send the US into default next month.
Chopra Moves Toward CFPB Confirmation, Omarova Gets OCC Nod
Likely leaders of top federal banking regulators are edging closer to being official.
Rohit Chopra, nominated to head the CFPB, saw his nomination move out of the Senate Banking Committee and will proceed to a floor vote as soon as next week, where it is expected to pass along party lines. Meanwhile, Cornell law professor and big bank critic Saule Omarova was named as the nominee to head the OCC last week, a potentially polarizing pick for a top regulatory role.
Ocrolus Raises $80Mn to Grow Document Automation Platform
Last week, Ocrolus announced its $80Mn Series C, valuing the company at over $500Mn. The round was led by Fin VC and included participation from Thomvest Ventures, FinTech Collective, QED Investors, Cross River Bank, among others.
Ocrolus offers an automated, “human-in-the-loop” document processing platform that can be used to classify financial documents, capture key data fields, detect fraud, and analyze cash flows. Its solution is used by innovative financial firms and lenders, including Brex, Enova, LendingClub, PayPal, Plaid, and SoFi.
The scalability of Ocrolus’ platform was demonstrated during the pandemic as lenders needed to rapidly respond to new programs, like the Paycheck Protection Program. Ocrolus worked with partners such as Cross River, Square, BlueVine, and Womply to process over 2.5 million PPP loans, playing a critical role in rolling out the program to help small businesses.
Ocrolus plans to use its new funding to more aggressively build products for the mortgage lending and banking industries and expand its US operations. Congrats to Ocrolus co-founder and CEO Sam Bobley and the entire Ocrolus team!
Learn more about Cross River Digital Ventures here, or reach out to Hillel Olivestone.
Self Financial Raises $50Mn to Improve Users’ Credit
Credit building fintech Self Financial announced it has raised a $50Mn Series E, led by Altos Ventures, with participation from Meritech Capital and Conductive Ventures.
Self’s marquee product is a credit builder account, where users’ monthly payments over the course of 1-2 years are reported to the bureaus. At the end of the term, users receive the account proceeds, less interest and fees. Those who’ve successfully completed their credit builder account can then qualify for a Self Visa card.
The company plans to use the new funds to expand its team and has longer term plans of adding additional credit and even insurance products.
Investments in startups like Self Financial are key to continuing to drive innovation in product development and credit building to better meet the needs of underserved consumers.
MoneyLion Completes SPAC, Begins Trading
Last week, MoneyLion completed its business combination with Fusion Acquisition Corp and began trading on the NYSE under the symbol “ML.” MoneyLion began as a fintech lending product but evolved over time to add bank account, debit card, credit building, and investing functionality. In the latest sign of fintech banking, lending, and crypto merging, MoneyLion added crypto features that enable its users to invest in, buy, and sell popular cryptocurrencies.
Congrats to co-founder and CEO Dee Choubey and the entire MoneyLion team on successfully completing the listing!
Robinhood Begins Testing Crypto Wallet
Robinhood has offered its users exposure to popular cryptos like Bitcoin and Ethereum since early 2018, but with a catch: users didn’t directly own and control their crypto assets, and couldn’t transfer them to or from other users.
That appears set to change, with Robinhood beginning to test crypto wallets next month ahead of a planned 2022 roll out. The wallets will allow users to transfer various cryptocurrencies in and out of their Robinhood accounts to other wallets.
The move comes as crypto makes up an increasingly large share of Robinhood’s business. Crypto transactions made up more than half of Robinhood’s transaction-based revenue last quarter, a dramatic increase from just 3% the year prior.
With cryptoassets becoming an increasingly common part of investors’ portfolios, particularly the younger audience Robinhood caters to, the expanded functionality is a logical product extension. Developing a crypto wallet begins to position Robinhood as a competitor not just to traditional stock brokerages like Schwab and Etrade, but also crypto platforms like Coinbase and BlockFi.
Revolut to Launch Free Stock Trading in US
As it looks to stand out in a crowded US challenger banking market, Revolut announced last week that it has secured its broker-dealer license. The company plans to offer no-fee trading in the US, putting it squarely in competition with popular fintech apps like Square’s Cash App and Robinhood. Like other no-fee brokerages, Revolut will monetize the feature through a practice known as “payment for order flow,” where a broker sells traders’ orders to market makers for execution.
Revolut is the latest US service to add no-fee stock trading functionality, which has become an almost “table stakes” feature as many fintech apps try to diversify into one-stop shop financial “super apps.”
PayPal Launches Much Anticipated ‘Super App’
Last week, PayPal launched its expanded “super app,” in a bid to get users to manage more of their financial lives through its offerings. Features include bill pay, peer-to-peer payments, messaging, buy now/pay later, charitable giving, and cryptocurrency trading. Future feature releases will include PayPal Savings, a high-yield savings account offering 0.4% APY through bank partner Synchrony, and additional investing capabilities.
PayPal has aggressively added features in a bid to defend its core payments turf from newcomers while expanding into new services. With an extensive merchant network offering PayPal as a payment option and a large existing user base, it has some distinct advantages vs. newer entrants battling to be users’ “super app” of choice.
Signs of Stress as Consumers Report Missing BNPL Payments?
According to a recent survey data, roughly half of Americans said they’ve tried buy now, pay later financing. BNPL options are often presented as less expensive or safer than credit cards, though 34% of those using BNPL reported falling behind on one or more installment payments, according to the survey.
Still, BNPL financing continues to grow in popularity, with 63% of consumers reporting they would consider replacing credit cards with BNPL loans. The option of interest-free payments is the leading reason for using a buy now, pay later.
Image: American Banker
Looking for the latest on fintech lending originations volume and performance, including the buy now, pay later sector? Reach out to sales@peeriq.com to learn about the data and analytics we have on the sector.
Amazon Partners with Lendistry to Expand SMB Loans
Amazon has long recognized the opportunity to help its third party sellers by offering financing. Now, it’s expanding its SMB lending options with a new pilot program, Amazon Community Lending, in partnership with Lendistry. Lendistry is a minority-led CDFI focused on urban and rural small businesses in socially and economically distressed communities. The lending program will offer short-term loans up to $100,000. Program participants will also be able to access one-on-one consulting, webinars, and educational courses.
Access to capital is crucial for supporting small business growth, especially in communities that have historically had more difficulty accessing credit. Amazon and Lendistry’s partnership is a great example of a “win-win” opportunity that expands access and opportunity for small businesses.
In The News:
US Treasury Sets 99% Electronic Payments Target for 2030 (finLedger, 09/21/2021) The Treasury plans to work on a solution to have one payment system, in which multiple payment networks can tie in.
Airwallex raises $200M at a $4B valuation to double down on business banking (Techcrunch, 9/20/2021) Australian startup Airwallex, which provides business banking services and APIs, has raised a $200Mn Series E.
Banks Strike Back, but Returns Remain Strong With Fintech (Wall Street Journal, 09/18/2021) While bank/fintech partnerships have allowed them to use deposits to fund lending, fintechs like Affirm have continued to perform strongly, funding lending with a mix of the capital markets and equity.
JPMorgan Chase to Replace US Retail Core with Thought Machine’s Vault (Finextra, 09/22/2021) The contract gives JPM an opportunity to move from a legacy, siloed system to a more fluid universal platform.
JP Morgan’s Neobank Chase Goes Live (altfi, 09/21/2021) JPMorgan launches new digital banking brand in the UK, offering fee-free debit card use abroad at cash machines.
How Buy Now, Pay Later Became a $100 Billion Industry (CNBC, 09/21/2021) With BNPL accounting for 2.1% of all global e-commerce transactions in 2020, the hot fintech product has room to grow.
Coinbase Won’t Offer Lending Product Questioned by SEC (Wall Street Journal, 09/20/2021) Coinbase will not allow customers to earn interest by lending the stablecoin USD Coin, after SEC scrutiny.
Joining Chase and Wells Fargo, TD Bank Joins Akoya Financial Data Network (Tearsheet, 09/20/2021) The move gives TD bank customers the ability to securely share access to their banking data with fintech apps and data aggregators.
Amazon, Square Streamline Payments as Their Push Into Banking Ramps Up (American Banker, 09/20/2021) Amazon and Square have made big moves into the financial super app space.
Lighter Fare:
How Humans Lost Their Tails (New York Times, 09/21/2021) New study may reveal the mutation that occurred that caused humans and apes to lose their tails.