Happy Sunday,
Disinflation fueling share buybacks. Walmart can end CapOne partnership early. Visa and Mastercard reach $30Bn settlement. Apple’s antitrust headache. JPMC sues TU. Trade groups seek to block Colorado law. EWA provider ZayZoon extends Series B. Robinhood launches credit card. Western Union offering eSIMs.
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Firms, Not Consumers, Capturing Upside from Slowing Inflation
Inflation is slowing, but it isn’t necessarily helping consumers. Firms are reporting expanding gross margins as the pace of price increases slows down, suggesting that merchants, rather than consumers, are capturing the benefit. The average gross margin for consumer staples in the Russell 3000 increased from 31% to 34%, Bloomberg reports. The improvement in margins is boosting company profits – and share buybacks, a favorite villain of some in Washington.
Image: Bloomberg
Walmart Can Breakup with Capital One, Judge Rules
Walmart can end its co-brand card partnership with Capital One early, a federal judge ruled last week. Walmart sought to end the exclusive arrangement owing to Capital One’s “repeated customer service failures,” and the judge in the matter agreed. The card behemoth disagreed with the outcome and said it was evaluating its rights to appeal the decision. The judge gave both companies until April 19th to advise how to resolve their claims and counterclaims. Some have speculated Walmart is seeking to exit its Capital One deal in order to begin issuing cards through its neobank joint venture, ONE.
Visa and Mastercard Reach Blockbuster $30Bn Settlement
In a settlement nearly 20 years in the making, card networks Visa and Mastercard have agreed to lower so-called “swipe fees” in an agreement that could save merchants as much as $30Bn over the next five years. Visa and Mastercard agreed to reduce interchange fees, the largest portion of the cost of accepting card payments, by at least 0.04% for at least three years. For a period of at least five years, the average system-wide fee must be at least 0.07% lower than the current average. While merchants stand to benefit, some aspects of the order might not be so great for consumers. The projected $30Bn savings comes primarily from reduced interchange revenue to issuers. Issuing banks are likely to reduce benefits and rewards, increase fees and interest rates, or both to compensate for the lost revenue. The settlement also will allow merchants to refuse to accept certain cards and to discount/surcharge by card type, which, if merchants take advantage of, is likely to yield a confusing experience for shoppers at the point of sale.
DOJ, States File Antitrust Case Against Apple
It’s been a busy week, legally speaking. The U.S. Department of Justice and 16 state attorneys general sued Apple in a wide-ranging antitrust suit, including constraints Apple puts on payments-related functionality of its devices. The most significant claim is that Apple uses its power over app distribution via its App Store to make it more difficult for consumers to switch to other devices. In the financial services space specifically, Apple functionally limits the usefulness of third-party wallets by blocking access to iPhones’ near-field communications (NFC) functionality, which is used for tap-to-pay transactions. In the U.S., Apple collects a fee for all credit and debit card transactions conducted via Apple Pay, while simultaneously offering its own credit card via a partnership with Goldman Sachs. Apple is expected to vigorously defend itself from the suit.
JPMorgan Chase Sues TransUnion Over Trade Secret Dispute
In a situation that has received surprisingly little attention, JPMorgan Chase is suing TransUnion, alleging the bureau misappropriated the bank’s trade secret data (anonymized credit card data.) The matter stems from a TU subsidiary, Argus Information & Advisory Services, which came to be owned by TransUnion through its acquisition of Argus’ parent company, Verisk, in April 2022. Argus contracted with the Federal Reserve Board, the Philadelphia Fed, and the OCC as a data aggregator. JPMC alleges that Argus improperly used data collected in its work for those agencies to create and sell benchmarking services to other banks. Earlier this month, Argus agreed to pay $37Mn to settle an investigation by the DOJ and other federal authorities accusing it of the same thing.
Trade Groups Seek to Block Colorado Lending Law
Industry trades groups, including the American Fintech Council, the American Financial Services Association, and the National Association of Industrial Bankers filed suit seeking to block a Colorado law that would attempt to prohibit state-chartered out-of-state banks from lending to borrowers in Colorado at rates exceeding the state’s usury cap. Colorado has joined Rhode Island, Minnesota, and Washington, D.C., in similar efforts to block out-of-state high-APR lenders. The trade groups argue blocking out-of-state lenders will reduce consumers’ access to credit to Colorado consumers.
ZayZoon Extends Series B
Earned wage access startup ZayZoon announced it has extended its Series B with an additional $15Mn of capital. The new funding comes six months after its prior raise and brings the Series B total to just shy of $50Mn. The round was led by Viola Fintech with participation from Intuit Ventures and existing investors. ZayZoon focuses on enabling small- and medium-sized businesses to offer EWA to their employees. According to the firm, it has grown the number of businesses it serves by 8x in the past two years.
Robinhood Launches Gold Card
No-fee brokerage Robinhood is gradually fleshing out its product stack. The company announced its Robinhood Gold credit card. The card is the product of Robinhood’s acquisition of startup X1, which it bought for some $95Mn last year. The card is currently only available to users who pay $5 per month for Robinhood Gold, which offers other features, including a 5% APY on uninvested cash in users’ brokerage accounts. The Robinhood card offers 3% cashback on all categories and 5% back when booking through Robinhood’s travel portal (who knew Robinhood had a travel portal?) As some industry analysts have already pointed out, at 3% cashback, the unit economics of the offering are likely to be challenging, particularly depending on credit risk and charge off rates. The card will carry APRs from 20.24% to 29.99%. Coastal Community is the issuing partner for Robinhood’s Gold card.
Western Union Offering eSIMs in Digital Wallets
Old-school remittance firm Western Union is teaming up with eSIM Go to equip WU digital wallet customers with mobile service connectivity in more than 150 countries. According to the news release, digital wallet customers in Poland, Germany, Italy, and Romania will be able to access the offering within their banking app and transact in their local language and currency. Western Union isn’t the only financial firm to start offering mobile connectivity alongside remittance and forex services – Revolut recently started offering eSIMs as part of its app as well.
In the News:
Large firms seeking mergers face long odds under proposed FDIC policy (American Banker, 3/22/2024) An updated policy statement means large banks looking to merge may have a tough time.
US investment management platform FundGuard bags $100m Series C funding (Fintech Futures, 3/26/2024) The round was led by Key1 Capital, with new investors Euclidean Capital and Hamilton Lane.
US fintech Coast secures $92m in mix of equity and debt capital to fuel product development (Fintech Futures, 3/25/2024) Fleet operator-focused fintech Coast raises fresh funds.
Is Chime Ready For An IPO? It Has More Primary Customers Than Chase (Forbes, 3/24/2024) According to Cornerstone’s Ron Shevlin, Chime has 38Mn users.
Shared Payments Models Rewrite Economics of Commercial Cards (PYMNTS, 3/26/2024) B2B payment models are changing, and so are their economics.
Lighter Fare:
These photos are works of art—and the artists are bugs (NatGeo, 3/25/2024) Insect as artists, with the help of photographer Xavi Bou.