Uncle Sean's Update - 6/14/24

Happy Friday and Happy Flag Day!!!
 
Happy Father’s Day to all the Dad’s out there getting it done (Git-R-Done) on a daily basis!!!  Here is the Uncle Sean Update for 6/14/24:
 

• It’s Fed week!!!  No surprises as the FOMC held rates steady again at 5.25% - 5.5% since July 2023; and QT Taper to remain consistent at $60B per month balance sheet reduction (versus $95B prior to June) in Treasury securities rolling off as they mature.  CNBC has a good summary as always.
  • The Summary of Economic Projections shows median consensus (this is just an estimated projection based on current data) of only one rate cut for 2024, but was very close as 8 of 19 members (7 FRB Members plus the 12 Fed Reserve Bank Presidents) are forecasting two cuts.  This is significantly down from March SEP of three rate reductions.  That last mile….
  • You can check out Chairman Powell’s Press Conference Transcript (26 pages) as well as the Press Conference Video (51minutes).

 

• We also saw May CPI come in just a bit lighter at 3.3% YoY with Core at 3.4% (April was 3.4% and 3.6% respectively) with Shelter remaining very sticky.

 

• Ugh 🥴, the Synapse bankruptcy saga continues…  This week, as reported by Jason Mikula and Fintech Business Weekly, the US Trustee status report states that full reconciliation of the FBO shortfall (now estimated to be between $65M and $96M) may not be possible; and further reconciliation is “likely to result in a shortfall that predates Synapse’s bankruptcy petition” – referencing the legal dispute between Synapse and Mercury.  Also worth noting that although this remains a Chapter 11 case for now, it is likely to convert to Chapter 7 liquidation as there are no employees and no money.
  • Yep – Uncle Sean goes “off the rails” here with plenty of unsolicited commentary: 
    • #1. It appears that the Trustee (Jelena McWilliams) as well as the Bankruptcy Judge (Judge Martin Barash) do not feel that the court has authority to order release of funds to consumers as it is not considered part of the bankruptcy estate (and rightly so, thankfully)….  So where does that put us???  (IMO) I am looking for the bank regulators to eventually order the banks to release the frozen FBO funds (which they already have on the DDA accounts), but not to take part in mediation amongst other banks / fintech companies related to the shortfall to which they have stated they have no authority to do so.
      • Once that happens and there are consumer shortfalls, expect serious regulatory enforcement actions (again, IMO) citing Safety and Soundness, TPRM, and even UDAAP violations since the banks failed to protect end-user funds. 💀
        • And here they come - literally as I was writing this, the Federal Reserve Board issued a public enforcement action against Evolve Bancorp, Inc. and Evolve Bank & Trust for deficiencies in the bank’s anti-money laundering, risk management, and consumer compliance programs…
          • 👀 Here’s lookin’ at you FBO ledger reconciliation – check out page 6 (section 3.a.iii.C) regarding a written plan defining “appropriate policies, procedures, processes, and controls to ensure that ledger and sub-ledger responsibilities of the Bank and fintech partners are clearly defined, established, and maintained, including in the event of a material business disruption…”
            • Credit and Thank you goes out to Sarah Beth Felix for her excellent LI Post coverage of the enforcement action and ledger reference.
          • It’s all bad enough, but this line is a stunner (section 19 on page 18) – “Before exiting a relationship with a fintech partner, the Bank shall conduct and provide the Supervisors with an impact analysis on the Bank’s liquidity.” 😬
    • #2. Worth noting – this is not a BaaS or embedded finance problem, this is a BaaS connector / middleware platform problem (I have also heard this referred to as “indirect”).  Original participants in this space were Unit, Bond, Synapse, Solid, and Synctera with most if not all recently shifting entirely out of the connector / middleware BaaS platform model.  Warning - Here comes my bandwagon rant (it brings me no joy in saying this, but it needs to be said)…:
      • This model was NEVER considered as a viable option from The BaaS Association; and anyone who has attended The FedFis Roundup, our innovative bank conference, knows that we have been stating this as loud as we can for many, many years.
        • There are other viable solutions available such as FinXact by Fiserv, DCI sidecar or direct model, CSI direct to core ledgering, and even FIS Atelio – all regulated core processors as critical IT vendors for financial institutions.
    • Okay, moving on now to better and happier news…. Whew….

 

• Apple was busy this week as they continue their foray into financial services. 
  • At its WWDC annual feature launch, Apple announced Tap to Cash P2P feature via Apple Cash allowing iPhone users to transfer money by holding their phones together.
  • Apple also announced that Affirm will be added as an additional BNPL payment option within Apple Pay this fall.  You can check out Apple’s upcoming features here.

 

• The White House has nominated Christy Goldsmith Romero to replace Martin Gruenberg as chair of the FDIC.

 

• BIG win here…  💥Teen-banking app Greenlight gets its first big bank customer on their new B2B2C distribution strategy as U.S. Bank announces partnership with Greenlight to bring financial empowerment to families through their embedded mobile app.

 

• Live Oak Bank (FDIC 58665; Total Assets $11.4B) announced their first embedded banking partnership (utilizing Fiserv’s FinXact core 😊) with Anatomy Financial, Inc. 👏

 

• eBay is adding Venmo as a payment option at checkout.  This mobile payment option makes since when considering “over 60% of eBay volume comes from mobile devices.”
  • Worth noting that just last week, eBay announced they would no longer accept American Express payments globally due to the higher merchant processing fees. 🤔

 

• PingPong (cross-border payments) announces embedded lending solution for US businesses by partnering with Kanmon.

 

• 💪 Lumin Digital posts up a couple of headlines this week:
  • Lumin Digital announces partnership with Pinwheel to provide digital deposit switching solutions to Lumin Digital’s bank and credit union customer base.
  • Baxter Credit Union (dba BCU; Charter 68187; Total Assets $6.1B) partners with Larky nudge® for push notifications via Lumin Digital’s mobile banking solution to enhance member engagement.

 

• Bank of New York Mellon ‘drops the Mellon’ and rebrands as BNY.

 

• 👀 I typically don’t post other op-eds, but I did find this piece (credit Ken Sweet with AP News) regarding big banks transforming the local bank branch to be intriguing and thought provoking – particularly on big banks (JPM) focusing on some branches as “community centers.”

 

• Some personnel moves:
  • Nymbus appoints Nate Whaley as Chief Revenue Officer (CRO).
  • Alkami Technology names Gagan Kanjlia to the role of chief product officer (CPO).
  • MoneyGram selects Gary W. Ferrera as Chief Financial Officer (CFO).
  • Remitly hires Spyro Karetsos as Chief Compliance Officer.

 

• Notable FinTech funding for the week:
  • Pipe (modern capital platform for small businesses) raised a $100M Credit Facility with potential future expansion to $200M designed to greatly expand Pipe’s small business financing using real-time date.  Check them out at pipe.com.
  • EnFi (AI-powered complex credit analysis and risk modeling for FI’s and private lenders) raised $7.5M in Seed Funding.
    • As an old ‘credit risk superfreak’ – this platform is cool (closed beta)!  Take a look at enfi-inc.webflow.io.

 
 
Random Uncle Sean stuff:

• Not only is it Father’s Day this weekend (whoop, whoop!!!), June 14th is Flag Day!!!
  • High-five to Compliance Select (check them out at www.complianceselect.org for your community bank compliance needs – tell them Uncle Sean sent you 😊) for their post on LinkedIn with some Flag Day Fun Facts:
    • #1 “Old Glory” is one of the most famous nicknames for the American flag.
    • #2 Since the creation of the original American flag in 1776, there have been 27 versions, according to the National Flag Foundation.
    • #3 The current 50-state American flag was designed in 1958 by a teen, then-17-year-old Robert G. Heft of Lancaster, Ohio.
    • #4 According to USA.gov, the colors on our flag represent the following: red represents valor and bravery; white represents purity and innocence; and blue represents vigilance, perseverance, and justice.
    • #5 Six American flags have been planted on the moon.
• Here’s the good stuff – Dad / Bad Jokes:
  • Shoutout to all the old folks – as that’s the only way we can hear you! 🤠
  • I think we can all agree that Dr. Suess was the original gangster rapper.  No offense to Will.I.Am, but Sam-I-Am is str8 up legit - LOL!!! ✌️😎
  • Apparently, paying your taxes quarterly does NOT mean once every 25 years… 🤷‍♂️😂

 
 
Have a GREAT Father’s Day 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.