Happy Sunday!

Job openings dipped in August but remain elevated. The WTO is warning of a global slowdown. The U.N. wants the Fed to pause rate hikes. The Fed finalized a debit card routing rule. BNPL is bracing for what’s next. A ‘crypto bank’ startup raises $18Mn. Debt paydown startup Tally raised $80Mn. BaaS platform Railsr announced $46Mn in new debt and equity. And Afterpay rolled out longer term loans.

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WTO, U.N. Warn on Recession Risks

Job openings dipped by 10% in August to a seasonally adjusted 10.1Mn from the prior month. Openings declined the most in healthcare, retail, and other service professions. Layoffs picked up slightly and the voluntary quit rate remained elevated. Still, employers added some 315,000 in August. And ADP is showing 208,000 jobs added in September, beating estimates.

Image: Wall Street Journal

Despite the positive employment picture in the U.S., the World Trade Organization is warning of a global slowdown. The WTO pointed to rising energy costs, interest rates, and weakening household demand. The slowdown could portend a coming recession but could also bring down pricing pressures. The threat of a global slowdown led the U.N. to call on the Fed and other central banks to halt interest rate hikes.

For its part, the Fed is trying to caution that fighting inflation will take time. Fed Governor Jefferson warned reducing inflation will require a slowdown in growth, including “reduced demand” for workers.

Fed Finalizes Debit Card Routing Rule

The Fed is putting its foot down on debit card routing rules. There has long been a ban on routing exclusivity for in-person transactions. But, given technical complexity of routing “card not present” (CNP) transactions, the rule didn’t extend to them. Now, that’s set to change.

Debit card issuers have nine months to ensure their cards comply with Regulation II, which requires cards to support two unaffiliated card networks.

Unsurprisingly, issuers aren’t happy. Banking trade groups expressed “deep disappointment” with the decision, arguing it goes beyond clarifying the requirements of Dodd-Frank and will cause a significant burden to debit card issuers. At least one member of the Fed Board, Michelle Bowman, agreed with the position. She issued a statement arguing the Fed didn’t go far enough to address concerns of community banks.

Debit card issuers have until July 1, 2023, to come into compliance with the new rule.

What’s Next for BNPL?
The release of the CFPB’s market monitoring report on buy now, pay later has left industry watchers asking, what’s next? While the CFPB’s report acknowledged some positives of the “pay-in-four” style plans, it also highlighted a number of concerns, including consumer protections, ability to pay underwriting, credit data furnishing, consistent consumer disclosures, and so-called “data harvesting,” among others.

Though CFPB’s findings were derived from a non-generalizable sample of 5 BNPL providers, the market monitoring report is likely to serve as a justification for interpretive guidance or new rulemaking in the coming months. Consumer payment protections are a low-hanging fruit that could make a logical starting point. Some BNPL plans lack the consumer protections of card payments, such as chargebacks when disputes arise in a transaction between customer and merchant. The CFPB has said it is working on interpretative guidance that would extend protections, common in card transactions, to BNPL plans.

Still, the timing for BNPL providers isn’t great. Industry players have already seen valuations crushed amidst rising interest rates and a broader market downturn. As detailed in the CFPB’s report, BNPL companies have also faced eroding margin, as cost of funds and charge offs begin to increase.

One possible early victim of the increased regulatory uncertainty? Apple. The company had originally said it would roll out its BNPL service, “Apple Pay Later,” with iOS 16. But the update dropped and the option is nowhere to be seen. Instead, Apple watchers expect the service won’t actually launch until sometime in the first half of 2023.

‘Crypto Bank’ Juno Raises $18Mn Series A

Despite the crypto market rout and a broad decline in VC investing activity, some deals are still getting done. Last week, crypto banking platform Juno announced a $1 Mn Series A. The round was led by ParaFi Capital, with individual participation from well-known figures in the cryptoworld, including Surojit Chatterjee, Ryan Selkis, and Sriram Krishnan.

At its core, Juno is basically a neobank that operates on crypto instead of fiat. Its main product is the Juno card, which enables users to transact with Circle’s USDC stablecoin.

As part of the fundraise, the company is also introducing a loyalty token, dubbed Junio Coin (JCOIN). JCOIN will function akin to traditional credit card loyalty schemes.

Tally Raises $80Mn For Debt Repayment App

Automated debt repayment platform Tally announced it has raised a $80Mn Series D. The round was led by Sway Ventures with participation from Menora Mivtachim. Existing investors a16z, Kleiner Perkins, Shasta Ventures, and Cowboy Ventures also participated in the round.

Tally’s core product is focused on helping users pay off credit card debt. Its app analyzes what users owe and suggests the “fastest” way to pay it off. Tally also offers a line of credit that can be used to consolidate users’ outstanding debts.

Railsr Series C

Banking-as-a-Service company Railsr, formerly known as Rails Bank, announced it has raised $46Mn. The funds consist of a $26Mn in Series C equity and a $20Mn debt facility. The equity round was led by Anthos Capital, while the debt facility is provided by Mars Capital.

Railsr is one of numerous startups that have popped up in recent years to sit between banks and companies building financial products for end consumers. Railsr streamlines the creation of “embedded finance” products, including digital wallets, credit accounts, and rewards programs.

Afterpay Launches New Monthly Option

Buy now, pay much, much later? Afterpay, which has historically offered shorter-term, “pay-in-four” plans, is expanding its product set to include loans for larger amounts that are payable over longer terms. The new offerings will enable users to finance purchases of between $400 and $4,000 for six or 12 months. The new installment option has no late fees nor compounding interest, and features a cap on interest owed.

The move is part of a broader industry convergence, where players are seeking to offer a range of financing options from lower dollar/shorter term to higher amounts repayable over longer terms. Affirm and Klarna have also fleshed out their product sets to cover a comparable range of use cases.

In the News:

The Aftermath of Crypto Winter: How Stablecoins are Being Regulated (Fintech Nexus, 9/30/2022) An examination of global moves to regulate stablecoins.

Some Large Banks said to Reimburse Less than 50% of Consumer Fraud Claims on Zelle (American Banker, 10/3/2022) A report on fraud found large banks are reimbursing anywhere from 14-82% of fraud claims reported by consumers.

Crypto Banking Platform Juno Raises $18M in Series A Funding (CoinDesk, 10/1/2022) ParaFi Capital led the funding round into the digital banking platform.

Biden’s War On ‘Junk Fees’ Won’t Help Americans’ Overdraft Problem (Forbes, 9/30/2022) Attacking NSF and overdraft fees will not help Americans with their greater liquidity problem.

Gigable Links Up With Weavr For Instant Gig Worker Payments (Forbes, 10/4/2022) Gigable is a platform for finding and booking flexible workers in sectors like food delivery.

​​Consumers are Struggling with Credit Card Payments – is BNPL a Viable Alternative? (Tearsheet, 10/4/2022) Consumers are struggling more with making the minimum payments on their credit cards than last year.

Mastercard Pushes Deeper into Crypto with New Tool for Combating Fraud (CNBC, 10/4/2022) Mastercard launches a new product called Crypto Secure that will help banks assess the risk of crime associated with crypto merchants on its network.

Banks Send Each Other $500 Million on Day of Blockchain Launch (American Banker, 10/3/2022) Transactions conducted using a private, permissioned ledger developed by Tassat Group.

Lighter Fare:

Everything to See in the Sky This Month — From a Possible Mercury Sighting to a Meteor Shower (Travel + Leisure, 10/3/2022) Keep your eyes on the night sky this fall!