Uncle Sean's Update - 10/25/24

Happy Friday!!!
 
WOW this week was jam packed with high profile market research headlines – so let’s jump right in!!!  Here is the Uncle Sean Update for 10/25/24:
 

• Hey – remember last week when Uncle Sean asked if we will start to see banks explore fintech acquisitions for instant deposit and noninterest income growth???  Well, that didn’t take long (LOL) as First Carolina Bank (FDIC 35530; total assets $3B) announced an agreement to acquire BM Technologies for $67M.  This is a really cool story as First Carolina bank is one of the Sponsor Banks for BMTX.
  • As the World Turns 😊…. (pardon me while I completely geek out – LOL)…
    • Recall many moons ago where BankMobile was a direct digital bank division of Customers Bank (FDIC 34444), but was spun off and sold making Customers Bank an immediate Sponsor Bank to BMTX.  Years later, BMTX had attempted to get its own bank charter buy acquiring First Sound Bank (FDIC 57799), but that deal was ultimately terminated; and First Sound bank was acquired by Harborstone Credit Union earlier this year.
    • Seeking to diversify from Customers Bank, BMTX announced First Carolina Bank as their new sponsor bank for the BankMobile Vibe accounts. 
    • Now the Sponsor Bank has acquired the fintech…  “Upon completion of the transaction, BM Technologies will become a wholly owned subsidiary of First Carolina Bank….  will continue operating under the BM Technologies name…”  Basically – BM Technologies will return to being a Direct Digital Bank, but this time as a division of First Carolina Bank.
      • That was a cool trip down BaaS Memory Lane – LOL!!!! 🤓

 

• 👀 And another CU acquisition of a bank…  This week Y-12 FCU (Charter 6775; total assets $2B) to acquire First State Bank of the Southeast Inc (FDIC 2710; total assets $415M).
  • Keeping score – the record of announced CU acquisitions of a bank is now at 19 so far for 2024 compared to 11 in 2023, 16 in 2022, 13 in 2021, 7 in 2020, and 16 in 2019 (source: FedFis).

 

• Bank failure (fraud)…  Late last Friday, The First National Bank of Lindsay, Lindsay, OK (FDIC 4134; total assets $108M; total deposits $97.5M) was closed today by the OCC.  The OCC acted after identifying false and deceptive bank records and other information suggesting fraud that revealed depletion of the bank’s capital. The OCC also found that the bank was in an unsafe or unsound condition to transact business and that the bank’s assets were less than its obligations to its creditors and others.
  • The FDIC resolution includes a purchase and assumption agreement with First Bank & Trust Co. Duncan, Okla., to assume the insured deposits of The First National Bank of Lindsay for a 6.67 percent premium. It will also purchase approximately $20 million of the failed bank’s assets.
    • The FDIC will make 50 percent of uninsured funds available to those depositors on Monday, October 21, 2024. This amount could increase as the FDIC sells the assets of the failed bank. Approximately $7.1 million of the deposits exceeded FDIC insurance limits; this amount is likely to change once the FDIC obtains additional information from customers. 
  • The FDIC preliminarily estimates that the failure will cost its Deposit Insurance Fund (DIF) about $43 million.  That’s quite a bit for a $108M bank with $98M in deposits - OUCH!!! 😲  It will be interesting to see what additional information comes out of this soon…

 

• And here we go – 1033 is now final!!!  The CFPB published the much anticipated final rule (affectionately known as the 1033 Open Banking rule).  The 594 page document (HOLY MOLY) offers plenty of reading time… ☹️  Looks like first compliance dates are set to begin in April 2026 and subsequent years following through 2030 depending on the criteria set forth in § 1033.121(c) – found on page 83 for depository institutions (you’re welcome 😊).
  • Banking Dive has a good summary reminding us that banks and credit unions with less than $850M in total assets are exempt, but non-depository entities of any size must comply.
    • Maybe a contrarian viewpoint, but here is some Uncle Sean “Food for Thought” - It will be interesting to see if at some point in the future banks and credit unions under the $850M compliance threshold voluntarily begin to participate in order to remain competitive; and/or does this exacerbate the acquisitions of those smaller banks by larger FI’s that offer open banking… 🤔
  • Not so fast???  Almost immediately, the Bank Policy Institute, the Kentucky Bankers Association, and Forcht Bank filed a joint lawsuit claiming the CFPB is overstepping its authority and asserting the rule would put consumers and the banking system at risk.

 

• Speaking of open banking….  Prism Data announced the launch of CashScore® v4, “a new and more powerful version of its market-leading cash flow underwriting score that helps financial institutions and fintechs more accurately assess creditworthiness” by analyzing consumers' open banking data.
  • Keep in mind that most recently, Nova Credit announced a partnership with SoFi, Plaid announced a partnership with MoneyLion, and Prism Data recently announced it's working with Equifax to make Prism cash flow underwriting solutions and the CashScore broadly available to lenders.  And don’t forget that Mastercard debuted Mastercard Connect Plus to “give consumers control of where, how and with whom their financial data is shared.”
    • Yessir – things are moving quickly in this space…. 🚀

 

• This is great!!!  Fiserv (through the Finxact platform to be precise) delivers embedded finance to DoorDash as part of the DoorDash Crimson Program with the Visa Debit card issued by Fiserv community bank client, Starion Bank (FDIC 33758; total assets $1.9B).  Very nice!!!! 💪

 

• Green Dot Bank (FDIC 22653; total assets $4.6B) has launched Arc by Green Dot representing a comprehensive set of embedded finance / banking-as-a-service (BaaS) capabilities with direct integration to Green Dot Bank.
  • I like it and it sure feels like the industry is headed in this direction as we continue to bring BaaS back to the bank (I love that line) – especially after the middleware meltdown era we have just experienced (TPRM anyone?).  Makes sense when you think about it – especially considering “payments subsidiaries” have been around for a while now (Kotapay, Transfund, Central Payments, etc.).  Is this the next logical step?  I guess time will tell, but there are many examples already in operation:
    • Victor Technologies by MVB, BancFi by Piermont, Avenu by Mainstreet Bank, Maast by Synovus, Bend by FNBO, Newline by Fifth Third, and more…
      • 👉 Want more information (here comes the plug 😊)???  Contact our very own Bobby Button for strategic market intelligence here at FedFis. 🤠

 

• And another example of BaaS and payment subsidiaries…  Kotapay, a division of First International Bank & Trust, announced the launch of Kavinu, a direct-to-bank BaaS platform “designed to eliminates the instability of middleware-reliant BaaS models.”  You know Uncle Sean likes that!!! 😊

 

• Initially covered back in April, Santander has now officially launched Openbank, their direct digital bank, in the US.  Openbank is currently Europe’s largest 100% digital bank by deposits; and will operate in the US as a division of Santander Bank, N.A. (FDIC 29950) which is a $100B bank.  Check them out at Openbank – which is currently sporting a high-yield savings account at 5.25% APY (in select markets only) with many more services set to launch in 2025! 💥

 

• Stripe coughs up a smooth $1.1B (cha-ching) to acquire Bridge, a stablecoin platform.  Per this CNBC article, “Investors familiar with Bridge’s financials said annual revenue is in the range of $10 million to $15 million. At the low end of the range, that’s a multiple of 110 times revenue, and at the high end, it’s a revenue multiple of over 70.”   WHOA!!!💰🤑

 

• LoanPro announced the launch of Smart Verify for rapid identity verification and ongoing monitoring for business and consumer accounts.
  • “LoanPro customers can streamline and simplify their processes for account-disrupting events, such as bankruptcies, deaths, or lawsuits. Without these data tools, a lender trying to comply with the Servicemembers Civil Relief Act (SCRA) or Military Lending Act (MLA) would need to either request documentation from their customer or manually search for proof of their enlistment and active-duty status. LoanPro’s SCRA/MLA Verify streamlines this process into a one-click action, offering instant verification that benefits both the borrower and lender.”

 

• ZSuite Technologies teams up with COCC to offer ZSuite’s innovative escrow solutions to bank and credit union clients of COCC.

 

• Atomic announced a new partnership with M1 Finance to provide Atomic’s Direct Deposit Switching (DDS) integration within M1’s Invest and Earn products.

 

• Socure (in the red-hot digital identity verification space) is set to acquire Effectiv, a real-time risk decisioning platform, for $136M.

 

• North Bay Credit Union (Charter 63373; total assets $119M) leans in as a BaaS Sponsor FI by partnering with Braid payments and treasury management platform.

 

• Evolve Bank & Trust (mired in the Synapse middleware bankruptcy disaster 💩) stated that it is preparing to return funds held at Evolve to Synapse Brokerage end users.  Per the article, Evolve will launch an online resource center (https://reconciliationbyevolve.com/).  End users with a balance at Evolve will be asked to select a payment method election on November 4, 2024, and payments will begin shortly thereafter. 
  • Certainly worth noting that many end user funds have been frozen since early May (about 6 months)…

 

• Oof… 😧 The CFPB has ordered  Apple and Goldman Sachs to pay $89M for mishandling customer disputes of Apple Credit Card transactions; AND has banned Goldman Sachs from launching new credit cards unless it can provide an adequate plan to comply with the law.

 

• Notable FinTech funding for the week:
  • Obligo (flexible security deposit solution between renters and property managers using open banking protocol) raised $35M in new funding.
  • Zip (global enterprise procure to pay platform) raised $190M in Series D at a $2.2B valuation – WOW!!!
  • Interface.ai (customer automation platform for banks and other financial institutions) raised $30M in capital consisting of $20M in equity round plus $10M in debt financing.
  • Finix (payment processor) raised $75M in Series C funding round.
  • DailyPay (EWA) picked up an additional $100M commitment to its secured credit facility capacity from Citi.

 
 
Random Uncle Sean stuff:

• ⚾ The World Series is set with the Yankees vs. Dodgers. Game 1 will be Friday in L.A on Fox.  Whew - that is about the toughest travel schedule you can get!  This is the 12th time these two iconic teams have met in the championship series.  ESPN has a great summary of this rivalry history dating back to 1941 (remember the Brooklyn Dodgers?).
• You made it!!!!  Here are the Dad / Bad Jokes:
  • Definition of the week….  “Avoidable” – what a matador attempts to do. 🐂🤠
  • PSA – laxatives and sleeping pills should not be taken together! 😬
  • I asked our Head of IT, “how do you make a motherboard?”  He said, “I just start telling her about my job.” 🤓😆
  • Of all the things that taste like chicken, it’s weird that eggs aren’t one of them… 🤔🤷‍♂️
  • Pretty sure we are called grown-ups because we groan every time we get up!  😂🤣

 
 
Have a GREAT weekend and please stay safe!!!
 
Uncle Sean
 
 
Sometimes known as Sean Mayo – contact me directly for scope and pricing of custom reports / analysis projects at [email protected] | 214-604-6961 – or you can contact FedFis Sales Team at 512-960-0911 | [email protected] #FedFisHasTheData FedFis
 
FedFis, LLC disclaimer – The views and opinions of Uncle Sean are of his own and may not necessarily represent the views, endorsements, and/or opinions of FedFis, LLC – we all know he’s a little bit different; but that’s why we love him.