Happy Sunday,

A rate hike later this month is unlikely, but there could be one more by year’s end. Economic data remains strong. ThetaRay raises $57Mn. Momnt announces $15Mn fundraise. Splitit may de-list from Australian Stock Exchange. Upgrade to begin offering auto loans. BNPL survey shows generational differences.

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To Hike or Not to Hike?

Fed Governor Waller said the central bank can “proceed carefully” with any additional rate hikes, given the significant progress on bringing down inflation. His comments indicate he is likely to support holding rates steady at the Fed’s next rate-setting meeting later this month. Not everyone agrees, however. Cleveland Fed President Mester has said the Fed may need to raise rates “a bit higher.” Former St. Louis Fed President Bullard said policymakers should continue to plan for one more rate hike by the end of year.

The interest rate discussion is taking place against a backdrop of continued strong economic figures. An unofficial estimate by the Atlanta Fed suggests GDP will grow by an annualized 5.6% in the third quarter. When the Fed publishes their updated outlook for 2023 later this month, it’s expected their growth projection for 2023 may as much as double previous estimates.

Finally, the ISM’s service gauge, which measures U.S. service sector activity, hit a six-month high in August, exceeding estimates.

Image: Bloomberg

ThetaRay Raises $57Mn For AML Tools

AI-powered anti-money-laundering tech startup ThetaRay announced it has raised a fresh $57Mn in funding. The funding round was led by Portage, with participation from JVP, OurCrowd, and other previous investors. Customers include banks, like Santander, currency firms, such as Travelex, fintechs, and corporates. In the past year, ThetaRay has posted impressive growth, with its number of customers increasing 10x and ARR increasing by 5x. The company plans to use the additional funding to continue scaling the product in those segments.

Momnt Raises Fresh $15Mn

Point-of-sale lender Momnt announced it has raised an additional $15Mn in funding. The fundraise was led by TruStage Ventures, with participation from Saluda Grade Ventures, a fund of Rockefeller Asset Management, and other existing investors. Atlanta-based Momnt, launched in 2020, initially focused on embedding lending in the home improvement sector. The company plans to use the additional funding to grow its team to continue building its technology and platform.

BNPL Splitit May Go Private

Perhaps being a public company isn’t all it’s cracked up to be? At least, that seems to be the case for BNPL firm Splitit. The Israel-based company listed on the Australian Stock Exchange, a popular venue for BNPL companies, back in 2019. But public markets haven’t been kind to fintech, in general, and BNPL specifically since then. The potential move to de-list is part of a proposed investment of up to $60Mn from Motive Partners and other investors. The investment is contingent on the company going private. Splitit also intends to “redomicile” the company from Israel to the Cayman Islands, which Splitit CEO Nandan Sheth said would simplify the firm’s tax and regulatory compliance obligations.

Spiltit is somewhat unique in the BNPL space. The service leverages users’ existing credit cards by placing an auth hold for the purchase amount. As users make payments to Splitit, it reduces the hold amount until the amount is fully repaid. If shareholders approve the de-listing, Splitit plans to use the new funding to grow partnerships with card issuers and to continue expanding globally.

Upgrade Partners With 30 Dealers to Offer Auto Loans

While many lenders are backing off of auto lending on fears over credit quality, that hasn’t discouraged Upgrade from entering the space. The company, which offers checking, savings, personal loans, and an installment-style credit card, already offers auto loan refinance. Now, it is partnering with 30 car dealerships in California and Oregon to originate new auto loans. The company has said it will underwrite applicants with credit scores as low as 580, something it credits to a wide network of 230 partner banks with varying risk appetites.

Upgrade hopes to grow distribution to 100 dealers by the end of year, and to 1,000 next year. With other lenders reducing exposure to auto loans, Upgrade may see an opportunity to quickly capture market share for its new offering.

BNPL Survey Shows Generational Differences

PYMNTS recently conducted “Tracking the Digital Payment Takeover” survey contains a wealth of data about consumer preferences and habits when it comes to buy now, pay later. One key determinant of behavior? Age. Baby boomers and seniors were significantly more likely to report using an installment payment option tied to an existing credit card, with 20% of those surveyed in that group reporting “heavy” usage of five or more times over the three month period the survey asked about. The study found Gen Z consumers were more likely to use BNPL for smaller, everyday purchases, like clothing, which accounted for a whopping 39% of BNPL usage for Gen Z shoppers. Boomers and seniors were more likely to use BNPL for less frequent, big-ticket purchases, like furniture.

Finally, and perhaps in a worrying sign, a significant number of consumers are now using BNPL to stretch payments for groceries. The survey indicated that, of the 20% who use BNPL, 56% have used it to buy groceries.


In the News:

Capital rules may have ‘poisoned the well’ for bank policy on the Hill (American Banker, 9/5/2023) With rancor over Democrats’ Basel III endgame proposals, prospects for other bank legislation passing this Congress seems to be dimming.

Discover, bracing for FDIC penalty, adds ex-agency official to its board (American Banker, 9/6/2023) The credit card issuer added Kathy Lonowski, former FDIC San Francisco regional director, to its board.

Average overdraft price hits 19-year low: Survey (American Banker, 8/31/2023) Data from the CFPB show overdraft revenue dropped to $1.6Bn in Q4’22, down by nearly half vs. 2019.

Coinbase Creates New Crypto Lending Service Geared Toward Large Investors (Coindesk, 9/5/2023) Coinbase is stepping into the gap left by the bankruptcies of BlockFi and Genesis with its new institutional lending offering.

How Visa’s rising support for stablecoins could popularize the tech (American Banker, 9/5/2023) Visa plans to use stablecoins to simplify cross-border business-to-business payments.

State Street sees opportunity in court win for spot bitcoin ETF (American Banker, 9/5/2023) Asset manager State Street is is gearing up to offer custody and administration for bitcoin ETFs, should they win regulatory approval.

Citizens Financial Group CEO Predicts Limited Consolidation in Banking Sector (PYMNTS, 9/6/2023) Citizens CEO points to high interest rates and regulatory pressures as limiting consolidation.

Lighter Fare:

‘Weird’ dinosaur prompts rethink of bird evolution (Nature, 9/6/2023) New fossil evidence helps fill in some gaps in early bird evolution.