Inflation Miss; Amazon Launches Subprime Card; UBER in Banking?

By Vy Phan

June 16, 2019

Greetings,

This week we dig into Amazon’s new subprime card, the Taxpayer First Act, and UBER’s latest banking offering.

US Core CPI rose by 2% YoY in May, just at the Fed’s target rate but below economists’ expectations. Consistently low inflation is boosting calls for a rate cut next week. The market is pricing in a 24% probability of a rate cut next week and a 76% probability of a rate cut in September.

Source: Bloomberg, PeerIQ

In regulatory news, the Senate passed the Taxpayer First Act which contains provisions designed to modernize the IRS, in areas such as customer service, taxpayer rights during the enforcement process, information technology, identity theft protection and electronic systems. A key provision relates to the modernization of the Income Verification Express Service (IVES) program that requires the IRS to implement a fully automated program for disclosing taxpayer information for third-party income verification. The bill sought after for years, enables lenders to access a summary of a potential borrower’s prior year tax return in real time.

Congress is considering legislation that would allow employers to contribute $5,250 per year tax-free towards employees’ student debt repayment. Student debt has ballooned to $1.6 Tn and is hampering access to credit and reducing retirement savings.

Amazon Launches Subprime Credit Card

Amazon has partnered with Synchrony bank to launch Amazon Credit Builder, a store card for consumers with poor credit history. These consumers would likely not be eligible for Amazon’s store cards, also offered by Synchrony, and would be prompted to apply for the Credit Builder program. The card is a secured credit card where borrowers need to deposit money upfront to obtain a credit line. They can then “graduate” to Synchrony’s regular store cards after demonstrating a history of payments.

We discussed last week how banks were wary of partnering with technology companies to offer lending products. Synchrony and Amazon seem to have further solidified their relationship with this product offering.
Meanwhile, is Uber getting into banking? Uber is making a push into Fintech to focus on payments, bank accounts and providing financial services for drivers and contractors. Uber already operates the Uber Cash app and has a credit card issued with Barclays.

Internet Trends Report 2019

Kleiner Perkins’ Internet Trends Report for 2019 is out. The report delves into e-commerce, education, immigration and healthcare among other topics. Despite, Kleiner Perkins activity in lending startups – LendingClub, Brex, Better – apart from a comment on Square, there were no slides in the 339 slide deck discussing digital lending trends. Maybe that is the headline? That said, the deck did wrap up with a survey of WeChat and other payments firms’ trends that are growing their lending offerings.

PeerIQ’s Consumer Credit Digest

PeerIQ’s Consumer Credit Digest allows users to track trends in each major asset class including Credit Availability, Credit Health, and Performance Analysis via an affordable monthly publication. The Digest is derived from TransUnion data.

Do reach out to learn more about our Consumer Credit Digest!

Industry Update:

Core Inflation Cools, Bolstering Case for Fed Rate Cut (Bloomberg, 6/12/19) Monthly core prices and wider annual gauge also below forecast.
Senate passes bipartisan IRS modernization bill (The Hill, 6/13/19) The bill contains provisions designed to modernize the IRS in areas of customer service, information technology, etc.
Student-Debt Relief for Employees (WSJ, 6/10/19) A proposed change to the tax code would give companies more incentive to offer assistance to their workers.
Amazon launches a credit card for the ‘underbanked’ with bad credit (CNBC, 6/13/19) Synchrony Financial and Amazon are partnering on a credit card for those who might not have good enough credit to get one otherwise.
Goldman offers incentives to keep Marcus clients away from court (American Banker, 6/13/19) Goldman Sachs Group is offering customers of its consumer finance business enticements to keep their grievances out of the courts.
UK digital bank Monzo takes first steps into U.S. market (Reuters, 6/13/19) Fast-growing British digital bank Monzo is launching in the United States through a limited rollout of its app-based checking account and connected debit card.
Uber is pivoting to fintech, something Asian startups have been doing for years (quartz.com, 6/12/19) Uber, the cash burning ride-hailing service, is reportedly making a big push into financial technology.
Brex Lands $2.6 Billion Valuation with Latest Funding Round (Bloomberg, 6/11/19) The company has raised $100 million to move beyond corporate cards for startups.
Kleiner Perkins’ Internet Trends Report (bond.com) The report delves into e-commerce, education, immigration and healthcare among other topics.
How to Make Bad Decisions and Not Get Fired (Confessions of a Fintech Junkie, 6/10/19) By making “no” easier than “yes”, Executives can and are making poor decisions without any consequences.
Makings of a Modern Risk Management System (linkedin.com, 6/6/19) Discussion on key elements, including the importance of an overarching risk management philosophy, honing a world-class underwriting system.

Lighter Fare:

Roman amphitheaters act like seismic invisibility cloaks (MIT Tech Review, 5/29/19) The discovery may explain how these buildings have survived for so long in earthquake zones.