Happy New Year,

Welcome to 2024 – hopefully you enjoyed some time off over the holidays (we did!) and are ready for the new year.

FOMC meeting minutes suggest rate hikes are done. Job listings continue to normalize. Bank trade groups push CFPB to take stronger stance on user data in open banking rule. Former Anthemis investors launch new fintech VC. HSBC’s Zing looks to compete with Wise, Revolut. Regions’ check fraud problem. Google’s Wallet ambitions include identity credentials.

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A Soft Landing is Far from Certain, but is Looking More Likely

Meeting minutes from the FOMC’s most recent meeting released last week tried to thread the needle by acknowledging restrictive rate policy may be necessary for some time, while allowing for the possibility the Fed will start cutting rates sometime this year. Fed officials noted “clear progress” on bringing the rate of inflation closer to the Fed’s 2% target. Markets indicate investors now expect the Fed to begin cutting rates as soon as its second policy-setting meeting, scheduled for March. Some Fed officials have commented they now view a “soft landing” as more likely, though far from a certainty.

Meanwhile, open job listings continue to normalize but remain above pre-pandemic levels. Job postings in December were down about 15% from a year prior, but are still about a quarter higher than early 2020. Despite a decline in job postings, ADP data showed private payrolls increased 164,000 in December, the most in four months, as companies ramped up hiring.

Image: Bloomberg

Bank Trade Groups’ Feedback on CFPB Open Banking Proposal

Bank trade groups argue the CFPB’s long-awaited open banking rules do not go far enough to protect consumers, recently filed comment letters indicate. The Clearing House Association and the Bank Policy Institute’s letters said the proposed rules do not do enough to require data recipients to protect sensitive customer information. The organizations’ letter argued that the CFPB should impose direct requirements on third-parties that aggregate or store customer data and that they should be subject to supervision for compliance with such rules. The American Fintech Council raised a different set of concerns, including about limitations in how third parties can use shared banking data. The CFPB is aiming to finalize the open banking rules by the end of 2024.

Former Anthemis Investors Soft Launch New Fintech VC

Two former Anthemis Group employees “soft launched” a new fintech-focused venture fund dubbed Foxe Capital. Ruth Foxe Blader, formerly a partner at Anthemis, and Kyle Perez, an investment associate at the firm, are joined by Sophie Winwood, formerly of WVC:E, an organization focused on promoting inclusion and empowerment in the VC space. Blader led investments in over 50 fintechs over the years, including in Branch, Elevate, Lemonade, and Amplify. Foxe Capital will advise and continue investing on behalf of Anthemis. Blader projects the new firm will transition from writing checks from Anthemis’ funds to raising its own capital sometime later this year.

HSBC Aims to Compete with Fintechs with Zing Launch

HSBC is set to compete directly with fintechs like Wise and Revolut with the launch of its international payment app Zing. Zing aims to serve those who are not existing customers of the bank. The offering will initially launch in the U.K., with plans to expand into Europe later this year. HSBC is explicitly positioning the offering as a way to “attack” the worldwide payments market, and views Zing as a possible entry point to win over customers to a wider set of HSBC offerings. Still, establishment banks, in the U.K. and elsewhere, have historically struggled to rollout fintech-like offerings. Whether or not HSBC can buck that trend, only time will tell.

Regions “Early Pay” Feature Caused Fraud Spike

In 2022, in response to criticism about its overdraft and NSF fees and competition from fintechs, Regions began offering Early Pay, which enables users to access funds up to two days before their normally scheduled pay date. The bank has twice settled with the CFPB in consent orders related to its overdraft practices.

The new feature, however, has had an unintended side effect: increased fraud. As part of the rollout of the Early Pay feature, Regions updated its funds availability policy, specifying that electronic direct deposits would be available “no later than” the day they were received. That change has contributed to some $135Mn in check fraud the bank has seen between April and September of last year. The bank apparently was targeted with two distinct check fraud schemes, one using counterfeit checks, and the other using stolen checks. Since identifying the schemes, the bank has hired new staff and rolled out additional tech aimed at identifying and mitigating the risks.

Google’s Wallet Ambitions Go Beyond Payments

Google is increasingly making capabilities beyond payments a key part of its Google Wallet strategy. While arch-rival Apple is increasingly owning a large chunk of offering and operating pieces of its Apple Wallet and financial services strategy, like Apple Card and Apple Pay Later, Google has pursued more of a platform-and-partnership strategy.

When it comes to enabling identity credentials, like state IDs and driver’s licenses, both companies are largely dependent on playing nice with the primary issuers of such credentials in the United States: state DMVs. Progress there has been slow, with just four states – Colorado, Arizona, Maryland, and George – offering mobile-enabled driver’s licenses that can be stored in Google Wallet. A handful of additional states are planning rollouts in the coming months. But the number of touchpoints accepting such credentials may be even more limited for the foreseeable future.

In the News:

U.S. Auto Sales Bounced Back in 2023 (Wall Street Journal, 1/3/2023) Pent-up demand and better availability helped power a rebound in auto sales last year.

Trinity Capital provides USD 30 mln growth capital to Cart.com (The Paypers, 12/22/2023) Cart.com, which provides unified logistics and commerce tools, scored $30Mn from Trinity.

Buy Now, Pay Later to Surge in 2024 as Consumers Demand ‘Micro-Credit’ (PYMNTS, 1/2/2024) As consumers look to manage cashflow, more are expected to turn to BNPL in 2024.

Millennials Are Card Rewards Programs’ Most Loyal Customers (PYMNTS, 12/29/2023) Millennials, more than boomers, are loyal to specific brands and merchants.

Creditspring research reveals BNPL used to afford Christmas (Finextra, 12/27/2023) More shoppers turned to BNPL over the holidays as they struggled with rising costs.

Will a ‘soft landing’ fuel 1990s-like boom for banks? (American Banker, 1/2/2024) A much-hoped for soft landing might be a boon for bank stocks.

Lighter Fare:

5 space milestones in 2023 that are ‘rewriting textbooks’ (PBS, 1/3/2024) Last year was a great year for space exploration achievements.