Uncle Sean's Update - 2/23/24

Happy Friday!!!
 
I hope everyone was able to enjoy a little bit of downtime for President’s Day – but we seem to have to pay for days off as short weeks are ALWAYS crazy busy!!!  Here is the Uncle Sean Update for 2/23/24:
 

• 👀 Kicking off this week is the FDIC List of January Enforcement Actions and another BaaS Sponsor Bank consent order.  This time it is Lineage Bank with the Consent Order and there are some familiar patterns emerging (middleware anyone)….
  • The order stipulates “…the Bank has consented, without admitting or denying any charges of unsafe or unsound banking practices relating to its Third-Party Risk Management Program and its Financial Technology (“FinTech”) partners, to the issuance of this CONSENT ORDER (“ORDER”) by the FDIC.” (bold emphasis added by Uncle Sean).
  • This one has some meat to it as it also specifies a “BaaS Risk Assessment Report” from a qualified independent firm (page 9) as well as a written “Formal Onboarding Process” (page 10); including monthly reports to the Board regarding “the level of activity of all FinTech Partners regarding account activity by segment, such as For the Benefit Of (“FBO”) accounts and Automated Clearing House (“ACH”) activity.” 😧😬
    • Taking a look at our FinTech Analytics© database, it doesn’t take long to see that Lineage Bank uses Synapse and Synctera for middleware infrastructure (connector model) with several FinTech partnerships.  Pretty sure everyone is familiar with Synapse’s troubles in the news lately with former partner Evolve Bank & Trust.
      • Shameless plug – reach out to Bobby Button for more info on our FedFis FinTech Analytics© database. 😊
    • Foreshadowing…???  Worth noting that a few months ago, Fintech Business Weekly reported that shareholders were taking action to replace the existing Board and Company Officers of Lineage (which was successful).  It’s not much of a stretch to speculate that this probably had quite a bit to do with the FDIC ongoing investigations as public consent orders don’t just appear overnight. 😲

 

• Well, unless you were out of the country and unplugged on a serious vacay (you lucky dog), you’ve undoubtedly heard about the mega merger of Capital One (NYSE: COF) announcement to acquire Discover Financial Services (NYSE: DFS) in an all-stock transaction valued at $35.3B.  Uncle Sean isn’t going to spend too much time on this as it has been covered at length pretty much everywhere (literally)…  However 😊, here are a couple of quick and interesting points:
  • From a bank standpoint, this is a really large merger announcement and is sure to draw the ire of regulators and legislators alike:
    • The combined bank entity would be the 6th largest FI in the US in Total Domestic Deposits of $487B (just behind U.S. Bank and ahead of Truist and GS) and #6 in Total Assets of $625B (behind U.S. Bank ahead of PNC and Truist) – Source: FedFis bank call report data as of Dec 2023.
    • Per the Investor Presentation, the combined entity will be the #1 largest credit card lender in terms of CC Loans outstanding of $250B well ahead of JPM that holds $211B.  Note that in terms of purchase volume, the combined entity would come in at #3 with $824B well behind JPM at $1.16T and AMEX at $1.13T.
      • Oh – and don’t forget this little jewel from last week where the CFPB reported Large Banks Charge Higher Credit Card Interest Rates than Small Banks and Credit Unions… 😬
  • From a network perspective, Uncle Sean gives kudos for the PR spin - Discover’s payment network allows Capital One “to compete with the largest payments companies and deliver enhanced value to a franchise of over 100 million customers.”  No doubt that synergies exist and there are multiple compelling financial metrics, but my hunch is that regulatory approvals may be an uphill battle for bit…
    • Memory lane moment…  I’m reminded of the 2018 mega telecom merger where T-Mobile announced the acquisition of Sprint for $26B in order to more effectively compete with industry giants AT&T and Verizon (for the benefit of US consumers; and a huge network of broadband spectrum was involved), which ultimately was approved and completed two years later in 2020 after some material divestitures.  Many theoretical similarities here…. 🤓

 

• Truist (NYSE: TFC) announced an agreement to sell its remaining stake in Truist Insurance Holdings in an $10.1B all-cash transaction with an implied enterprise value of $15.5B for the insurance unit.

 

• More M&A news as Manifest Financial has acquired Nerve, the fintech banking platform for creators and entrepreneurs.

 

• Gorham Savings Bank (FDIC 17748) has partnered with CorServ to implement a modern credit card issuing program offering commercial credit cards, ePayables, and virtual card features.

 

• CCBank (Capital Community Bank; FDIC 33823) has selected Lendio to power its small business lending digital channel.

 

• Revio continues to add customers (I can hardly keep up with their growth these days as they are crushing it in 2024) with a new partnership with Republic Bank of Chicago (FDIC 19333; Total Assets $2.6B) to identify customer growth opportunities by analyzing bank data using machine learning and data models.  Nice win!!!! 🚀

 

• TD Bank launches "Tap to Pay on iPhone" for their small and micro business owners to use their mobile phone as a seamless and secure point-of-sale (POS) payment acceptance without the need for POS hardware.

 

• Ncontracts announced an alliance agreement with America’s Credit Unions (recent merger between CUNA and NAFCU) for the promotion of Ncontracts’ full suite of time and cost-saving risk management solutions.

 

• Meriwest CU (Charter 68394; Total Assets $2.2B) has introduced the 'SMART Start Checking' account with parental controlled debit card for youth ages 9 – 17.  It is also paired with the Zogo financial education tool that offers online financial education modules where accountholders earn points towards gift card options.
  • Uncle Sean is a HUGE fan of financial literacy programs – especially for our youth.  Great job!!!! 😊❤️

 

• Dayforce (fka Ceridian; NYSE: DAY; TSX: DAY) selects Green Dot as BaaS partner for on-demand pay solution for Dayforce Wallet customers in the US.

 

• Some interesting material for my banker friends keeping an eye on critical infrastructure/supply chain counterparty risk (shout out to all the risk management freaks out there like me 😊) and cybersecurity…..  The White House issued an Executive Order to bolster cybersecurity of U.S. Ports to strengthen maritime cybersecurity, fortify our supply chains, and strengthen the U.S. industrial base.  The EO specifies:
  • The U.S. Coast Guard will have the express authority to report on and respond to malicious cyber activity in the Nation’s Marine Transportation System (MTS) for vessels and waterfront facilities, including:
    • Cyber risk management actions for ship-to-shore cranes manufactured by the People’s Republic of China located at U.S. Commercial Strategic Seaports.
  • Includes $20B over the next 5 years to construct new port cranes with “trusted partners.” 👀
  • Cybersecurity Dive has a really good summary that is certainly worth reading.

 
 
Random Uncle Sean stuff:

• Legit Uncle Sean story here…  So I’ve been clean for about a year now, and just like that – I run into the local dealer in front of Walmart….  Man those Girl Scout Cookies are impossible to resist!!! 😆🍪
• Chalk this one up to “if it’s on the internet, it must be true”….  Allegedly back in 1990, The Roanoke Times reported that a Domino’s Pizza delivery driver, Troy Brewer, was robbed by a pair of men armed with a snapping turtle (yes, you read that right)… "That sucker was going to bite me," Brewer said. "They put him right up to my face.  ‘Don't move or you're gonna get bit,’" Brewer said the robbers told him.  The robbers made off with Brewer’s money pouch containing about $50.  Brewer said he was still shaken a day later: "It was a big, huge, ugly turtle."
  • Yessir - only in Texas… 🤠
• Now on to everyone’s favorite part of the Update – the Dad / Bad Jokes:
  • Wow – my first week as Senior IT Manager at AT&T has been great!  Nobody can tell that I completely embellished on that resume. 😆🙃
    • Meanwhile (cough, cough), AT&T service restored after customers hit by widespread cellular outages in the U.S.... 😬
  • I don’t know about the chicken, but the turtle crossed the road to get to the Shell station… 😉🐢
  • Ahh, the litmus test of old age is when you fall down in front of a lot of people…  If they point and laugh at you, you’re still young.  If they panic and start running to you, you’re old!!!
  • And finally….
    • Teacher: Can Anyone give me examples of things that are useless?
    • Me: *raises hand*
    • Teacher: Very good.  Any other examples???  😲🤣😂

 
 
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.