Uncle Sean's Update - 10/8/21

Happy Friday!!! 
 
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If the month of October wasn’t spooky enough, it’s fitting that it is also Cybersecurity Awareness Month so I thought it would be prudent to kick us off with a few facts:

• Feedzai (cloud-based financial crime management platform) released their most recent Quarterly Financial Report (nicely done report by the way) this week showing a 23% increase in online fraud.
• The Department of Justice announced this week the launch of the Civil Cyber-Fraud Initiative to combat cyber threats via “the False Claims Act to pursue cybersecurity related fraud by government contractors and grant recipients.”  The goal here is to further protect the security of sensitive information and critical systems from cyber threats.
  • The DOJ also announced the creation of a National Cryptocurrency Enforcement Team (NCET) to “tackle complex investigations and prosecutions of criminal misuses of cryptocurrency, particularly crimes committed by virtual currency exchanges, mixing and tumbling services, and money laundering infrastructure actors.”
• Recall the 9/24/21 Uncle Sean Update where we talked about critical infrastructure being targeted (Ag Banks pay attention) related to Crystal Valley Cooperative ransomware attack as well as the New Cooperative ransomware attack.
• And a quick reminder that all SEC has cybersecurity disclosure requirements for cybersecurity risks and incidents in the 10Q and 10K filings as well as an 8K filing for a material incident.  Harvard Law has a good article showing recent SEC fines and enforcement actions highlighting the SEC’s increasing scrutiny on cybersecurity disclosure policies and procedures.
• I know we covered this last week, but in the spirit of Cybersecurity Awareness Month we are going to mention it again – The American Bankers Association and more than 1,500 banks across the nation launched the #BanksNeverAskThat campaign to help consumers spot phishing scams.

 
Now back to the rest of the Update:

• Monzo (UK challenger bank) withdraws U.S. banking license application with the OCC.  Not overly surprising considering multiple years of "going concern" warnings from their auditors due to mounting losses; as well as a recent nasty FCA investigation regarding compliance with Money Laundering Regulations.
  • Did you know that 97% of all community banks in the U.S. are profitable (Source - FedFis Bank database, June 2021 YTD)?  Yes, even during a global pandemic banks are expected to be responsibly profitable as to not place an undue strain on the financial system as a whole – all while supporting their local businesses and consumers.  Challenger banks looking for a charter should take that ethos to heart!

 

• Target announced this week they are adding Sezzle and Affirm as Buy Now Pay Later options for Target customers.  Payments Dive has some good insights regarding BNPL uplift and market trends – but also references the Credit Karma report that states 34% of BNPL consumers have fallen behind on one or more payments; and 72% of those who fell behind on at least one payment said they believe their credit score declined as a result.

 

• Warning – Uncle Sean goes Off The Rails with an unsolicited op-ed here, so feel free to scroll down – LOL.  The United States Postal Service (USPS) is now piloting banking services…  Gee – what could possibly go wrong (sarcasm), considering this entity is woefully insolvent (check out the USPS financials losing $3B per quarter with a $74B negative equity position), has been operating at a loss since 2007, continually asking for gov’t assistance to meet unfunded employee health and pension liabilities, and flirting with irrelevance for several decades now.  I have an idea – let’s force feed banking services on them so we have an easy avenue to publicly bail them out….  They are already “too big to fail”, so let’s make them systemic as well.  Sheesh….
  • While the USPS and the American Postal Workers Union (APWU) are upbeat and positive about the pilot program, industry backlash has been swift, vocal, and fierce including rebuttals from:
    • Consumer Bankers Association, American Bankers Association, National Association of Federally-Insured Credit Unions, and the Independent Community Bankers of America.
      • Leave it to the government to create unity by completely pissing everyone off all at once – LOL!!!!!
  • NBC News and Banking Dive have good summaries if you want to read more.

 

• AvidXchange (AP and payment automation software) sets IPO terms to raise $582M by issuing 22 million shares at $21-$23. It would have a market value of $4.2 billion, if priced in the middle. They plan to list on the Nasdaq (AVDX).  Here is the recently amended S-1 if you want to dig deeper.

 

• So, back in May we covered Green Dot acquiring the Tax Refund Solutions business from Republic Bank & Trust (RBT) for $165M.  Well, looks like this deal has unraveled this week as Green Dot was unable to obtain the necessary Federal Reserve approval.  Now things are getting a little ugly…  Here’s what we know thus far:
  • Aug 4 – This  Republic 8K shows that Green Dot notified Republic that the Federal Reserve was “asking for information” about the transaction and that Green Dot intended to seek the Federal Reserve’s approval of or non-objection, as applicable, to the Sale Transaction. 
    • The Warning Shot - The RBT 8K filing also states that “Receipt of approval or non-objection from the Federal Reserve is not a condition to closing set forth in the Purchase Agreement.”
  • Oct 4 – Green Dot announced termination of the transaction stating they have been “unable to obtain the Federal Reserve’s approval of or non-objection to the Sale Transaction.”  Essentially undisclosed issues with their primary regulator.
  • Oct 5 – Republic announced in an 8K that they are suing Green Dot for Breach of Contract.

 

• Finzly (modern digital payments) has been on the move lately.  Their latest announcement state Coastal Community Bank (CCB is a significant sponsor bank) has selected Finzly's Payment Galaxy payment hub to power the payment needs of CCB’s fintech partners.

 

• Circle Financial is the latest to disclose an SEC investigation requesting documents and information  regarding certain holdings, customer programs, and operations – per this Amended S-4 filed on 10/4/21, page 193 under “Legal Proceedings; SEC Matters.”
  • Circle did not disclose the scope of the investigation, but it is widely assumed that it may be related to their Circle Yield product as the SEC continues its regulatory crackdown on crypto (recall the Coinbase Lend showdown with the SEC a few weeks ago).

 

• U.S. Bank launches crypto custody service.   CNBC has a very good summary and quotes  Gunjan Kedia (U.S. Bank Vice Chair, Wealth Management and Investment Services) as saying “Our clients are getting very serious about the potential of cryptocurrency as a diversified asset class,” Kedia said in an interview. “I don’t believe there’s a single asset manager that isn’t thinking about it right now.”  To which Uncle Sean articulately responds with, “yup.” 

 

• Public (stock trading app / “neobroker”) is launching crypto trading on their app allowing users to trade and store crypto on the same app they use to manage their portfolios.  Initially featuring ten cryptos in the app [Bitcoin (BTC), Ether (ETH), Cardano (ADA), Dogecoin (DOGE), Litecoin (LTC), Bitcoin Cash (BCH), Stellar (XLM), Ethereum Classic (ETC), Dash (DASH), and Zcash (ZEC)], customers can set up a watchlist and invest with as little as $1.

 

• MoneyGram announced a partnership with Stellar blockchain to facilitate “near-real-time” money transfers using Circle’s USDC stablecoin with United Texas Bank serving as the settlement bank between Circle and MoneyGram .  Coindesk has a good writeup here.

 

• Bank of America is gaining ground by taking a page from the FinTech playbook.  BofA’s Life Plan (PFM planning feature) now has 5 million users one year after launch.  Also of note is BofA’s Advantage SafeBalance entry-level subscription based, no overdraft fee bank account that now has over 3 million accounts.

 

• Upstart (alt AI-enabled lending platform) announced the launch of Upstart Auto Retail software which is the evolution of Prodigy Software, acquired by Upstart in April 2021.  The cloud-based solution enables a superior car buying experience for both consumers and dealerships including AI-enabled financing and access to Upstart-powered auto loans.
  • Just in case you are wondering, Upstart stock price (Nasdaq: UPST) is up about 600% YTD through 10/8/21 – DANG!!!

 

• Notable FinTech funding updates for the week include:
  • Copper (teen banking app) raised $9M in additional Seed round for a total of $13.3M ($4.3M was raised last year).  Copper is touting over 350K accounts and a trajectory of 70% growth month-over-month – HOLY COW!!!!
    • Additionally, part of the company’s mission is to incorporate financial education into its offering so that teens are not just able to spend money, but also better manage it.  Copper built in financial tips (appropriately dubbed “cheat codes”) into the app aimed at helping teens “learn the essential money lessons they’ll need throughout life” – that’s fantastic!  Uncle Sean is a HUGE proponent of financial literacy especially in our schools. 
    • A quick glimpse at the FedFis FinTech Analytics© platform (yep – that’s a plug) shows this is a Mastercard debit card issued by Evolve Bank & Trust and Synapse is the Program Manager.
  • Otto (leverages car equity for loans) raised $4.5M in Seed funding.
  • Modern Treasury (business payments platform) raised $85M in Series C funding round at a valuation in excess of $2B.
  • Playbook (tax PFM app for high earning millennials) raised $5.6M in Seed round.
  • Orca Security (cloud security platform) extends Series C to $550M (net increase of $190M) with a 50% valuation increase in only seven months to $1.8B.
  • Tekion (automotive retail cloud SaaS platform) raised $250M in Series D with a YoY valuation increase from $1B to $3.5B.

 
 
Random Uncle Sean Stuff:

• AHHHHH - It’s OU - Texas week!!!  One of the biggest college football rivalries of all time!!!!!  This will be the 117th meeting between the two storied programs – check out the history!  Texas leads the series all-time at 62-49-5.  However, OU has been better than .500 since the end of World War II (widely considered “modern day” sports) and is 15-7 since 2000 (the Rivalry record is actually 14-7 post 2000 as the teams met twice in the 2018 season, the second matchup was for the Big 12 title where Oklahoma won, 39-27).  In the 2020 Red River Shootout, the game went into a heart pounding quadruple overtime (Uncle Sean might have had a mild stroke during that game - LOL) before Oklahoma sealed the deal with a 53-45 victory when OU’s Tre Brown intercepted Texas QB Sam Ehlinger's pass in the end zone.
  • ESPN’s “College GameDay” program will host their Saturday morning college football preview show from the Texas State Fair in Dallas, Texas, the neutral site of the 117th edition of the Red River Showdown between Oklahoma and Texas.
    • Will this be the year that the Longhorn mascot, Bevo, enters the transfer portal out of shame and embarrassment from continuing to falsely claim “Texas is Back”?  LOL!!!!
      • For those keeping score - since forcing Head Coach Mack Brown to “retire” after the 2013 season (to which the Longhorns had a 8-4 regular season with 7-2 conference before suffering a defeat against 10th ranked Oregon in the Valero Alamo Bowl), Texas has not had an 8 win regular season with the lone exception of the 2018 season (9-3)….  However – New Head Coach Steve Sarkisian has the Longhorns out to a 4-1 start with a solid team, big receivers, and a respectable running game.
    • Or will this be another episode of the Sooner Schooner with a crash and burn – okay it didn’t burn, but they did crash!  Thankfully everyone was okay.
    • Oklahoma’s offense has certainly sputtered the early part of this season (eerily similar to last year), but there is no doubt in Head Coach Lincoln Riley’s ability to orchestrate a nuclear powered offense.  The Defense looks much better but seems to have shown a consistent weakness in losing the Tight End for big pass play yardage.
  • Do yourself a favor, check out these OU and TX hype videos released this week on Twitter – expand the screen to full size, turn up the volume as loud as it can go, and try not to get choked up!!!!
    • Texas - All Gas No Brake
    • Oklahoma - Legacy
    • And one quick 45 second neutral themed Red River Hype video
• And of course Uncle Sean has a few quick Dad Jokes for you:
  • Even if a bear puts on socks and shoes, he would still have bear feet…
  • Did you know that Bruce Lee had a vegetarian brother?  His name was Broco-Lee!!!
  • If Apple makes a car……   Do you think it will have ‘windows’???  Hahahahaha!!!! 

 
 
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 smayo@fedfis.com | 214-604-6961 – or you can contact FedFis Sales Team at 512-960-0911 | info@fedfis.com #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.