Employers are still having a hard time recruiting workers and unemployment claims unexpectedly rose. But American consumers are feeling confident enough to borrow and spend. Central banks are considering how and when to begin slowing asset purchases.
Wise successfully completed its direct listing. Banking software is on trend, with Blend preparing to go public and LoanPro raising $100Mn. PayPal is taking on Square at the checkout counter.
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Americans Are Borrowing Again
The number of open jobs rose for the third straight month hitting a record 9.2Mn. Initial unemployment claims unexpectedly rose to 373,000 last week, though continuing claims dropped to 3.34Mn, as the economy continues to adjust post-pandemic.
Meanwhile, borrowing is back. American consumers are taking on debt, in some cases, at levels not seen in a decade. According to Equifax data, auto loans and leases, credit cards, and personal loans were up 39% in April vs. 2020; compared to 2019, demand for credit was up 11%.
Though not a straight line, macroeconomic indicators are generally positive. As Americans get back to work and confidence in the recovery continues to improve, we expect spending — and borrowing — to accelerate.
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Central Banks Want to Taper Without the ‘Tantrum’
Minutes from the Fed’s June meeting show officials have been caught off guard by stronger than expected price increases. Despite elevated inflation, the central bank isn’t yet ready to reduce its $120Bn monthly bond purchases. Signs point to more formal discussions around reducing asset purchases at their next meeting later this month. The Fed is seeking to provide clear guidance around asset purchases and future rate increases to avoid a repeat of the ‘taper tantrum’ that occurred in 2013, when Ben Bernanke suggested the Fed would curtail its bond purchases.
Meanwhile, other central banks, including Canada and Australia, have announced or already begun reducing asset purchases.
The Fed still views the current spike in prices as transitory and has shown a commitment to policy to guide the economy back to full employment. We expect measured guidance from the Fed on bond buying and future interest rate increases as the economy approaches that goal.
LoanPro Raises $100Mn for Growth
SaaS-based loan servicing and management platform LoanPro raised a $100Mn Series A to power its growth, continue building its platform, and expand into new loan verticals. LoanPro currently services over $15Bn in loans across a range of products, including personal, auto, business, point-of-sale, and buy now, pay later — including marketplace lender Best Egg.
Following Amount’s $99Mn raise in May, this is the latest sign of strong investor interest in the infrastructure that powers fintech-enabled lending. Congrats to the Roberts brothers and the entire LoanPro team.
Blend Prepares to Go Public
Digital lending platform Blend Labs has launched its roadshow for its IPO. Lenders like Wells Fargo and Republic Bank use the platform to originate mortgages and consumer loans. Blend also offers a consumer banking software platform that powers deposit accounts and credit cards.
The company is offering 20Mn shares of its Class A common stock at a price of $16-18. The funding round is expected to raise $360Mn at a valuation of nearly $4Bn. Blend Labs was last valued at $3.3Bn following a Series G funding round led by Tiger Global Management in January.
Goldman, Allen & Co. and Wells Fargo are the lead underwriters. The company is to trade on NYSE under the ticker “BLND”.
The California-based software company processed 1.4Mn banking transactions, up 190% from 2019. Blend Labs managed nearly $1.4T in loan volume during 2020. Blend Labs expanded its cloud-based platform with the completion of its acquisition (as of June 30) of Title365 from the Mr. Cooper Group. Blend Labs paid $422.1Mn for a 90.1% equity interest in Title365.
Title365 is a leading title insurance agency that allows financial services firms to automate title commitments and streamline communication with consumers and settlement teams. It generated $212.1Mn in revenues in 2020, up 101% from 2019. Its customers include 6 of the top 12 mortgage lenders by loan volume.
Platform companies like Blend are well-positioned to capitalize on banks’ ongoing digital transformations. By offering robust solutions that integrate with existing core banking solutions, Blend can provide a quicker route to digitizing workflows vs. building everything in-house. Congrats to the entire Blend team on the pending IPO!
Wise Goes Direct
Money transfer startup Wise (formerly TransferWise), made a strong public market debut on the London Stock Exchange via a direct listing this week. Wise’s bread and butter is international payments, though it has expanded to offer multi-currency spending accounts with a debit card.
Wise ended its first day of trading at £8.80 a share for a market valuation of about £8.75Bn, or approximately $12Bn, nearly double the expected $6-7Bn valuation. That makes Wise the biggest tech company listing in the history of the LSE — a major win for the exchange and the London fintech scene. The company did not raise new funds in the listing.
The success of the offering is a good sign for other private UK fintechs that may be considering an offering, including Monzo, Starling, and WorldRemit.
With US Zettle Launch, PayPal Gets Physical
PayPal has launched Zettle, a point-of-sale payments platform, in the US. PayPal acquired the company, formerly iZettle, in 2019 for $2.3Bn. Zettle integrates with PayPal’s invoicing service as well as third party platforms like BigCommere, Lightspeed, and Quickbooks Online. It offers increasingly popular features like contactless payments, digital wallets, and Venmo-powered QR codes.
The move helps bolster PayPal’s longtime goal of building a robust point-of-sale business. Despite the increasing prevalence of ecommerce, especially during the pandemic, the battle is on to build omni-channel solutions that help SMBs process payments, manage inventory, and handle accounting across multiple sales channels. PayPal faces staunch competition from rival Square, payments processor Stripe, and establishment players like Fiserv.
In the News:
Shake-Up at OCC: Supervision Teams Will Report to Agency’s Chief (American Banker, 07/06/2021) OCC eliminates COO position held by controversial Blake Paulson; Hsu gains control of the five supervision units that previously reported to COO.
Robinhood’s Debut Is Clouded by SEC Scrutiny of Payment for Order Flow (Wall Street Journal, 07/07/2021) Gary Gensler directed SEC to review payment for order flow in June, which accounted for 81% of Robinhood’s revenue in the first quarter.
Revolut Chasing $1Bn in Fundraising – Reports (Finextra, 07/05/2021) The challenger bank expanded its customer base and geographic presence, even as losses doubled in 2020.
Company Card Start-Up Pleo Valued at $1.7 Billion, Becoming Europe’s Latest Fintech Unicorn (CNBC, 07/06/2021) The company raised $150mm in a financing round co-led by Bain Capital Ventures and Thrive Capital.
Swedish Watchdog to Investigate Klarna for Bank Secrecy Breach (Reuters, 07/05/2021) For 30 minutes on May 27, customers were shown other users’ data, a digital mishap that Klarna blamed on human error.
A Banking App Has Been Suddenly Closing Accounts, Sometimes Not Returning Customers’ Money (ProPublica, 07/06/2021) Neobank Chime cracks down on fraudulent deposits, but there appears to be collateral damage as users complain they can’t access their cash.
Coatue Values Banking Startup Mercury at $1.6 Billion (The Information, 07/03/2021) Coatue leads Series B investment in Mercury, who provides business banking services, such as virtual debit cards and software to connect bank accounts to payment processors.
SVB Financial Group Completes Acquisition of Boston Private (PR Newswire, 07/01/2021) SVB acquires parent of Boston Private Bank, a leading provider of integrated wealth management, trust and banking services.
Cave Thought to Hold Unicorn Bones Actually Home to Neanderthal Artwork (Live Science, 07/07/2021) The artwork is a chevron design carved into the toe bone of an extinct giant deer.