Uncle Sean's Update - 4/22/22

Happy Friday!!!
 
Happy Earth Day!!!  Here is the Uncle Sean Update for 4/22/22:
 

• For the headline spot this week, Uncle Sean gives you the punchline first – this is what a De Facto OCC FINTECH CHARTER looks like…  Now that I have your attention - Column, N.A. (FDIC #58224) effectively emerged from stealth this week as the new “developer infrastructure bank.  The only nationally chartered bank built to enable developers and builders to create new financial products.”  Basically a fintech bank - WOW!!!!  How did we get here?  Well, I’m glad you asked… 😊
  • Uncle Sean and the FedFis Team recently came across Column, NA as we were updating our 1Q2022 FinTech Analytics© Report (nice plug, right) when we saw that the Point Debit Card had changed sponsor issuers from LendingClub Bank (fka Radius) to Column, NA.  Needless to say I was excited to see a new sponsor bank emerge – but there is even more to the story:
    • Last year (3/8/21), investors acquired Northern California National Bank for about $50M (a smaller $330M nationally chartered bank).
    • What was not disclosed (until recently) was that the "investors" were William Hockey (former President, CTO, and co-founder of Plaid) and his wife, Annie Hockey.
      • The “change in control” merger was completed on 7/14/21 and FFIEC shows that Northern California National Bank changed their name to Column NA on 8/16/21.
      • From a brand perspective is where things separate.  
        • Northern California National Bank (“powered by Column N.A.”) retains their website and brand as the traditional bank operations.  The separate Column website is where the new fintech BaaS layer resides and lists Plaid (among others) as their customers.  If you spend 2 seconds on the Column website, there is no doubt this is a fintech infrastructure bank.  Hell, even the website structure and font look eerily similar between Plaid and Column.  It’s pretty cool; and you can check out their blog  "Announcing Column" which is really cool too!
        • While the bank operations still utilize FIS-BancPac (source: FedFis) for core processing, Column (on the fintech side) has “built its own core purposefully to expose primitives like ACH directly to developers.”
    • Even better, this is not the first example.  Brian Barnes (founder and CEO of the fintech M1 Finance) acquired First National Bank of Buhl which was one of the smallest nationally chartered banks by asset size ($34M total assets) via change in control merger; and readily admitting that M1 was not ready to become a bank holding company.
  • Don’t take any of this the wrong way - I support and applaud the innovative approach by both Mr. Barnes and Mr. Hockey; and I LOVE seeing the “middleware” BaaS structure brought back to the actual bank (a model that Cross River Bank and many others have also excelled at).  I am also SUPER happy that we did not lose a charter in the M&A examples above!!!
    • To expand a little bit more, to me this is the 3rd Gen iteration of a fintech charter; and the evolution has clearly been a product of a tedious and restrictive U.S. De Novo process:
      • 1st gen was the standard de novo application by a fintech – i.e. Varo (expensive, lengthy, very restrictive business plan, and not granted for most applicants)
      • 2nd gen was “buy the bank” – i.e. SoFi acquisition of Golden Pacific Bank (very small nationally chartered bank).  Jiko really spearheaded this movement.
      • And now we have 3rd gen – a much easier “change in control” individual / investor acquisition of small nationally chartered banks.
    • Last point – remember when everyone was suing each other over the legality of a National Fintech Charter by the OCC???  Well, Uncle Sean is patiently waiting for the good folks at the CSBS, ABA, and ICBA to freak out when they realize that this is what the new de facto OCC FinTech Charter looks like….  It’s evolution due to a restrictive de novo process.

 

• Fifth Third Bank raises minimum hourly wage to $20 per hour beginning July 4.
  • At first glance, this looks like a great benefit for many of the hourly workers.  However, the contrarian in me can’t help but focus on the fact that higher costs often spur innovation and adoption to newer technologies (in this case the potential for accelerated digital transformation, AI, and RPA).
    • i.e. - not much of a coincidence to me that the same quarter where a barrel of oil hit $130 that Tesla releases record earnings – LOL!!!  Now I know there is a lot more to the Tesla story, but you get the general idea of increasing costs spurring alternate innovation.

 

• OCC issues a Consent Order against Anchorage Digital Bank for BSA/AML program violations.  Not great press for Anchorage (although I suspect they will cure the consent order successfully and quickly); but it does show consistent treatment from the OCC towards digital asset banks (i.e. crypto custody, trading, staking, etc.) as BSA/AML is still a big concern in the digital asset arena.
  • As Mike Fernandez recently pointed out in a LinkedIn post under a separate topic (but applicable here as well), “…make sure your compliance department is just as strong as your development department or all your efforts will be for nothing.”  Yep!

 

• The CFPB is no longer just showing teeth, they are biting hard – especially towards repeat offenders!  The CFPB and NY Attorney General sue MoneyGram as a “repeat offender.”
  • “MoneyGram spent years failing its customers and failing to follow the law, ignoring customer complaints and government warnings in the process,” said CFPB Director Rohit Chopra. “MoneyGram’s long pattern of misconduct must be halted.”  OUCH!!!

 

• Notable FinTech funding for the week:
  • NovoPayment (global BaaS platform) raised $19M in Series A funding with an emphasis on expansion in the U.S. market.
  • SEON (online fraud prevention) raised $94M Series B funding round to continue to expand global operations “In 2021, the company more than tripled its annual recurring revenue, grew its headcount by 4X, and opened new offices in Austin, and Jakarta.”
  • Flipside Crypto (blockchain analytics) raised $50M in new funding at a $350M valuation.
  • BlockApps (blockchain developer) raised $41M in new funding.
  • FundGuard (AI platform that assists asset managers and fund administrators to manage and service funds, ETF’s, and insurance) raised $40M in Series B.
  • ThreatLocker (cybersecurity) raised $100M in Series C .
  • Spruce (decentralized identity) raised $34M in Series A.
  • Oyster (red-hot distributed workforce platform market) raised $150M in Series C funding at a $1B valuation following their launch in 2020.
  • Convoy (digital freight network) raised $260M in Capital including $160M Series E plus $100M in venture-debt.
  • And of course we can’t pass up a 4/20 highlight – Treez (cloud-based retail and supply chain platform for the cannabis market) raised $51M in Series C funding at a $260M valuation.

 
 
Random Uncle Sean Stuff:

• Happy 96th Birthday to Queen Elizabeth II; and having taken the throne at age 25, now celebrates an impressive 70 years of leadership service (platinum jubilee)!!!  The all-out shindig for her birthday and platinum jubilee celebration will actually occur in June when it’s a bit warmer.  BBC has a great compilation of the Queen's life in pictures; and check out the Barbie Signature Queen Elizabeth II Platinum Jubilee Doll by Mattel that instantly sold out. 
  • Do you think she bought one for herself – you know I would have!!!  I can see it now…  An Uncle Sean doll (err Action Figure) holding a big ole catfish!  LOL
• Happy Earth Day!!!  In an era where we as a global society finally seem to pay more attention to ESG, conservation, pollution, and environmental restoration – it’s important to recognize the O.G. since 1970 - Earthday.org.
• And here they come….  Dad Jokes – it’s how eye roll…
  • Why do hens lay eggs?  Well, they would break if they just dropped them.  Duh!!!
  • In honor of Earth Day (and in my best Obi Wan Kenobi voice), may the Forrest be with you!
  • Do you know why you can’t hear dinosaurs pee?  Because they are extinct…. 😊

 
 
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.