Happy Sunday,

Core CPI jumps. U.S. Chamber of Commerce sues CFPB. U.K. BaaS platform raises $24Mn. Oxygen pivots to healthcare. VoPay joins with Cross River. Revolut investor cuts valuation. Chime adds “gamified” financial education. Oportun reports earnings.

Keep an eye out for our Q4 2023 Consumer Lending Review, analyzing all the key metrics and trends you need to be aware of – it will be in your inbox next week.

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Core CPI Jumps

Core CPI, which excludes volatile food and energy prices, jumped an unexpectedly high 0.4% from January to February, recently released data show. Costs of air travel, used vehicles, and clothes drove the increase. The measure increased by 3.8% year over year. Core CPI rose by an annualized 4.2% over the past three months, the quickest increase since last June. The data reinforces the Fed’s cautious approach on rates, while many have been hoping the central bank would begin cutting this year.

Image: Bloomberg

U.S. Chamber of Commerce Files Suit Over Credit Card Late Fee Rule

The U.S. Chamber of Commerce, together with several other trade groups, including the American Bankers Association, filed a suit seeking to block the CFPB’s recently finalized credit card late fee rule. The rule would close what the Bureau describes as a “loophole” allowing card issuers to charge late fees as high as $32 for the first instance and $41 for subsequent late payments. The CFPB argues that these fee amounts are not reasonable and proportional to the actual costs borne by issuers from late payers. The just-finalized rule would lower the “safe harbor” amount to just $8 for covered issuers, which the Bureau estimates would save American consumers some $10Bn in late fees each year. Issuers would be permitted to charge higher late fees, if they can demonstrate their actual costs due to late payment are higher. For its part, the Chamber of Commerce argues that capping late fees at $8 discourages responsible credit card use, is likely to impose higher costs on cardholders who do pay on time, and will limit consumer choice in card options and benefits. The suit argues that the CFPB violated the Administrative Procedures Act as the rule is “arbitrary and capricious” in its reliance on incomplete and non-public data, violated Dodd-Frank by not considering negative impacts to consumers, and that the rulemaking was issued with funds drawn in violation of the appropriations clause.

U.K. BaaS Platform Raises $24Mn

U.K. banking-as-a-service provider Griffin announced it has raised a fresh $24Mn in funding and obtained a full banking license, approximately one year after beginning the process. The full license means Griffin has received the blessing of the U.K.’s Prudential Regulatory Authority and Financial Conduct Authority to exit the “mobilization” phase and begin full banking operations. The additional $24Mn comes as an extension to the company’s Series A, which was led by NordicNinja, Breega, and MassMutual Ventures, with participation from EQT Ventures and Notion Capital. The news is a bright spot for BaaS, which at least in the U.S., has been mired in controversy lately.

Neobank Oxygen Pivots to Healthcare

Oxygen, a neobank offering consumer and business bank accounts through a partnership with Bancorp, announced it has “temporarily suspended” banking services as it pivots to a new healthcare-focused offering. The company informed customers on March 8th that it would be closing their accounts as of March 29th. Users have until that date to move funds to another account, after which any remaining funds would be returned to users via mailed paper check within 45 days. Oxygen CEO David Rafalovsky told industry publication Fintech Futures that the company is “focusing our efforts on creating a product line that integrates health with financial solutions.”

VoPay Joins With Cross River

Embedded payment platform VoPay and Cross River have teamed up to expand VoPay’s capabilities in the United States, the company announced last week. Cross River will enable VoPay to access U.S. banking and payments infrastructure and provide relevant security and compliance expertise. The partnership will enable VoPay to offer an expanded range of payments capabilities, including ACH, Same-Day ACH, RTP, and, soon, FedNow.

Revolut Investor Cuts Valuation (Again)

TriplePoint Venture Growth has marked down its stake in Revolut, company filings show. Revolut last fundraised at a valuation of $33Bn, but TriplePoint has marked down its stake twice now, first to $28Bn and now to $23Bn, an aggregate markdown of 30%. Other investors, including Molten Ventures and Schroders, have marked down their shares as well, by 54% and 46%, respectively. Part of the valuation markdown reportedly stems from Revolut’s continued difficulty obtaining a U.K. banking license, which the company initially applied for in 2021. Revolut has had a sometimes contentious relationship with its U.K. regulators, publicly decrying the “extreme bureaucracy” in the country and suggesting it might favor a public listing in the U.S. instead of the U.K. as a result.

Chime Adds Gamified Financial Ed

Leading neobank Chime is partnering with Zogo to offer its users “gamified” financial education. The financial education platform offers lessons and quizzes that users can complete in order to earn rewards. Chime isn’t the first to offer such features. Kids’ banking startup Greenlight, regional bank Truist, and bank consortium Early Warning Services have all begun leveraging gamified experiences to encourage their users to learn about personal finance. Game-like structures have been found to promote engagement and have a positive effect on user outcomes and retention.

Oportun Reports Earnings

Source: Yahoo Finance

Oportun reported earnings this week, with $437.2Mn in aggregate originations representing a (28)% decline YoY and (9)% decline QoQ. The decrease in originations was primarily due to credit-tightening actions, which were originally enacted in July 2022. However, there have been subsequent rounds of further credit tightening actions taken, including in the fourth quarter. CFO Jonathan Coblentz reported on the results of the tightening, revealing that, “The percentage of underwritten loans with Vantage scores of 660 or greater increased to 51% during Q4 23, up from 33% for Q2 22 prior to the start of our tightening actions.”

Oportun’s annualized NCO rate dropped to 12.3% (in line with guidance), from 12.8% a year prior, but rose from 11.8% in the third quarter. A large portion of the charge-offs could be attributed to originations made before its July 2022 credit tightening efforts (the “back book”). In fact, these loans, despite making up just 21% of owned principal balance outstanding, accounted for 53% of 4Q23 gross charge-offs. CEO Raul Vazquez explained, “Loss rates are approximately 400 basis points lower for our front book of loans in comparison to our back book loans.” As these loans run off, it is likely we see a decline in charge-offs.

Additionally, Oportun has seen significantly better credit performance from users of its app, with CEO Raul Vazquex saying, “We now know that borrowing members who use our app have exhibited approximately 45% lower, 30 plus day delinquencies 3 months post disbursement than those who have not yet signed up to use the app.”

While portfolio yield is nearing Oportun’s 36% APR cap, its expansion into secured personal loans may represent an avenue for growth. Oportun plans to expand the product to ~40 states by the end of 2025. Notably, Upstart is following a similar path, and is planning to allow borrowers to provide collateral in support of their personal loan applications.

In the News:

Lenders score win as IRS sidelines plan to restrict tax data (American Banker, 3/12/2024) The IRS has suspended a policy change that would have blocked access to applicants’ income data.

Walmart Bought a Finance App and Reduced Fraud Protections. Guess What Happened Next? (ProPublica, 3/11/2024) Since ONE’s acquisition by Walmart, fraud complaints have increase substantially.

How To Be(come) A Great Partner Bank In The BaaS Space (Forbes, 3/11/2024) The BaaS banking space isn’t dead, it’s changing. What banks need to know to succeed.

Western Alliance’s survival saga (American Banker, 3/10/2024) How Western Alliance successfully navigated last spring’s banking crisis.

How Klarna’s IPO prep got tangled up in a boardroom drama (American Banker, 3/7/2024) How Klarna got caught up in Sequoia’s drama.

Mastercard, Dwolla using open banking to pursue separate markets (American Banker, 3/8/2024) Mastercard and Dwolla are both developing open banking tools to facilitate account opening.

After Contactless, The Next Big Thing In Retail Payments Is A2A (Forbes, 3/8/2024) Will 2024 be the year of account-to-account payments?

Flagstar paid $1 million bitcoin ransom in 2021, case filings show (American Banker, 3/12/2024) New filings reveal the bank paid a $1Mn ransom to hackers that had accessed sensitive customer data.

How the Wirecard story unravelled: an interview with Dan McCrum who broke the truth (The Finanser, 3/13/2024) Chris Skinner interviews Dan McCrum about breaking the Wirecard story.

Stripe reveals it passed $1 trillion in total payment volume in 2023 (CNBC, 3/13/2024) The payment behemoths annual letter reveals the state of its business, including strong cashflow.

The tech partnership helping credit unions finance Teslas (American Banker, 3/12/2024) California-based CUSO Origence is helping match credit unions with Tesla buyers.

Goldman aims to grow its private credit portfolio to $300B: report (BankingDive, 3/12/2024) Goldman is looking to lean into private credit as it looks to bulk up asset and wealth management.

Lighter Fare:

2024 Solar Eclipse: The 13 Best Cities to See the Phenomenon (Architectural Digest, 3/8/2024) The best places to take in next month’s solar eclipse.