Back Cross River Intelligence Archives

Petal Raises $140Mn; BNPL on Credit Reports; Dave Completes SPAC

By Cole Gottlieb

January 9, 2022


Jobless claims increase unexpectedly. Interest rates may rise by March. FDIC Chair McWilliams resigns. Credit unions and banks around the world partner to offer crypto. Petal raises $140Mn. Community banks and buy now, pay later. How will BNPL impact credit reports? Dave completes SPAC, begins trading.

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Jobless Claims Tick Up Amid Omicron; Fed May Tighten As Soon As March
Initial jobless claims unexpectedly ticked up slightly last week amid Omicron’s surge. Meanwhile, the “great resignation” continues. More than 4.5Mn voluntarily quit in November, though much of the turnover is in low-wage work. The high quit rate suggests workers have confidence in the economy and their ability to find better paid work.

The Fed’s about face continues. As “transitory” inflation has proven stubbornly persistent, discomfort with higher inflation has grown. Minutes of the Fed’s meeting last week suggest a rate increase as soon as March is possible. Faster, more aggressive shrinking of the Fed’s balance sheet is also on the table.

While a sooner and faster tightening cycle generally may put downward pressure on asset prices, it should be good news for banks. With signs that loan demand is already returning, interest rate increases should improve banks’ NIM and profitability. That said, a tightening cycle has the potential to touch off a recession, which would not be welcome news to lenders.

FDIC Chair Resigns, Creating Opportunity to Advance Democratic Priorities

In a New Year’s Eve press release, FDIC Chair Jelena McWilliams announced her resignation, effective in early February. The move comes after partisan wrangling with Democrat-appointed directors Rohit Chopra and Martin Gruenberg spilled into public view in December.

While December’s disagreement ostensibly was over potential updates to how the Bank Merger Act is implemented, you shouldn’t necessarily expect a sudden change in M&A policy, as the FDIC directly oversees relatively few large banks. Instead, with Trump-appointed McWilliams stepping down, the FDIC is likely to become more closely aligned with other Democrat-led agencies, including in policy related to the financial risk from climate change, fintech, and crypto.

NCUA OKs Crypto Partnerships as Global Interest Surges

The NCUA, which oversees the nation’s credit unions, gave its blessing for the institutions to allow their members to buy, sell, and hold digital assets. The news came in the form of a letter from NCUA Chairman Todd Harper that clarified the agency would treat credit union partnerships with digital asset service providers the same as any other third-party relationship. 

Credit unions are far from the only traditional financial institution responding to customers’ interest in crypto. Around the world banks like BBVA, the second largest in Spain, and Commonwealth Bank of Australia, Australia’s largest, are experimenting with offering digital asset services to their customers. Even in Germany, historically conservative when it comes to finance, a group of savings banks serving 50Mn customers is considering plans to offer crypto wallets.

This is but the latest sign of the collision of banking/fintech and crypto. Thanks to the composability of contemporary financial applications, traditional institutions – whether credit unions in the US or savings banks in Germany – can partner with crypto service providers like NYDIG to quickly deploy consumer-facing products and features. While the “behind the scenes'' mechanics are likely to remain in flux as regulatory environments evolve, the market is working to find solutions that meet consumer demand.

Petal Raises Fresh $140Mn, Valued at $800Mn

Credit card startup Petal announced a $140Mn haul last week, bringing its valuation near “unicorn” territory at $800Mn. The company focuses on serving customers with little or damaged credit histories. It leverages bank account transaction history to do cash flow-based underwriting, instead of relying on traditional credit scoring based on bureau data. Petal recently began offering its “CashScore” underwriting platform to other companies as a separate business unit, Prism Data.

Congrats to Petal CEO Jason Gross and the entire Petal team on the news!

How Community Banks Can Respond to BNPL

With buy now, pay later usage increasing a whopping 300-400% in 2020, there’s no sign consumer interest in the financing feature is slowing. A recent study by McKinsey indicates 60% of consumers are likely to turn to BNPL financing between mid-2021 and 2022. There are some clouds on the horizon for BNPL providers. Congress has held hearings examining the product, particularly how providers evaluate users’ ability to pay. And the CFPB recently opened an inquiry into the sector, seeking information from category leaders like Affirm, Klarna, Zip and others.

Regulatory headwinds notwithstanding, community banks can’t ignore the category. Community banks can leverage one of their key strengths: deep relationships with their customers. Community banks can use BNPL as an opportunity to emphasize their role as trusted financial partners and educate consumers on the pros and cons of the category.

At a product level, banks can offer competitive solutions that leverage consumers’ existing credit lines. For example, Visa Installment Solutions and Mastercard partner SplitIt can help banks provide BNPL-type features to existing customers.

Will BNPL in Credit Reports Help or Hurt Consumers’ Scores?

As usage of BNPL and regulatory scrutiny of the category has increased, so has pressure for BNPL providers to report tradeline data to the bureaus. It looks like this will come to pass, sooner than later. Equifax has already announced it will enable reporting on the popular “split pay” (pay-in-4) product. And recent reports make clear Experian and TransUnion plan to follow suit.

What remains less clear is exactly how this additional tradeline data will impact users’ credit scores. Equifax analysis showed reporting on-time payments for BNPL trades could boost users’ FICO scores by an average of 13 points. The score boost rises to 21 points for consumers with “young” files (less than 24 months of data).

But consumer advocates have pointed out the converse will also be true. Consumers with late or missed payments will see scores drop.

Image: American Banker

Still, reporting BNPL tradelines to bureaus should give other potential creditors a fuller and more accurate picture of consumers’ financial situation and ability to pay. This will enable better underwriting decisions, helping to protect consumers from taking on an unsustainable debt load.

Looking for the latest on fintech and BNPL lending originations volume and performance? Reach out to to learn about the data and analytics we have on the sector.

Neobank Dave Completes SPAC Combination, Begins Trading on NASDAQ

The once-hot SPAC category has cooled noticeably lately. A number of high-flying fintechs and insurtechs that went public via SPACs in 2021 have seen their share prices drop since trading began. SoFi, Payoneer and MoneyLion are all trading over (30)% lower than their public market debuts.

Source: PeerIQ

But, so far, so good for neobank Dave. The company completed its merger with a Victory Park sponsored SPAC to begin trading on the NASDAQ last Thursday. Dave ended its first trading day up about 4% at $8.53, though still below the SPAC’s $10 offering price.

Congrats to co-founder and CEO Jason Wilk and the entire Dave team on going public!

In The News:

Senate Banking Panel to Hold Powell, Brainard Hearings Next Week (American Banker, 1/4/2022) Powell will appear for his nomination to a second term and Brainard will appear for her elevation to Vice Chair.

Fintech-Focused Ribbit Capital Raises $1.15B in Seventh Fund, According to SEC Filing (Tech Crunch, 1/3/2022) Ribbit has seen success in prior investments such as Coinbase, Nubank, Affirm, and Robinhood.

Crypto, Build Back Better, M&A: A Banker's Guide to Congress in 2022 (American Banker, 1/3/2022) With the midterm elections ahead, Dems may try to seize the opportunity to craft new laws regulating the financial sector.

10 Bank and Fintech Executives to Watch in 2022 (American Banker, 1/2/2022) Crypto emerged as the major theme to watch in 2022.

A Booming Startup Market Prompts an Investment Rush for Ever-Younger Companies (Wall Street Journal, 1/2/2022) The median valuation and P/S ratios of “young” companies has ballooned over the past couple of years.

Wall Street Will Find Ways to Satisfy Crypto Envy (Reuters, 1/2/2022) Regulatory permission for U.S. banks to offer custody and trading of crypto assets would open the floodgates for crypto.

China’s Tencent Takes Stake in UK Challenger Bank Monzo (PYMNTS, 1/2/2022) Monzo has seen its valuation bounce back from an early pandemic hit, to $4.5Bn.

The Seven 2021 Fintech Trends that Will Shape 2022 (Lendit Fintech, 1/3/2022) Lendit predicts that trends such as BNPL, overdraft, embedded finance, CBDCs, and Web3 will shape 2022.

Visa, Mastercard Enlist Fintechs to Reach Latin America's Unbanked (American Banker, 1/4/2022) One-third of people in LatAm are estimated to use digital-only bank accounts or mobile wallets.

Tap-to-Pay App Developers Work to Maintain Security Without POS Readers (American Banker, 1/3/2022) Contactless payments will likely be driven by projects such as Visa’s Tap to Phone and Mastercard’s Tap on Phone.

Super Apps Or Smart Wallets? (Forbes, 1/4/2022) To provide customers with all they need in one spot, or to allow seamless interaction between apps via digital identification?

Lighter Fare:

Exploding Meteor 'Booms' Over Pennsylvania on New Year's Day (, 1/4/2022) Don’t look up - a meteor with the energy of 30 tons of TNT exploded above Pittsburgh to ring in the New Year.