Uncle Sean's Update - 7/9/21

Happy Friday!!!
 
Fintech, Banking, Data – It’s what we do!  Here is the Uncle Sean Update for 7/9/21:
 

• As part of the sweeping Executive Order on Promoting Competition in the American Economy targeting antitrust and corporate consolidations, the White House is calling on the DOJ, the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency to “update guidelines on banking mergers to provide more robust scrutiny of mergers.”  Reuters has a good summary of the banking merger emphasis here.  It will be interesting to see how the rest of the year shakes out for bank M&A.

 

• Chime gets the negative press award for the week (I bet Vlad at Robinhood sent Chime a thank you card - LOL).  It is being reported that Chime is generating a high rate of complaints with 920+ complaints with the CFPB since April 15, 2020 – many of which involve accounts being closed against customers’ will.  Hey – I get it.  Mistakes happen (see Chase customers become instant billionaires after “technical glitch”).  Statistically speaking, 900+ complaints just doesn’t seem like that big of a deal considering Chime’s 12M+ customers – although we all know that one is too many.  HOWEVER……  When you look at the BBB complaints (according to the article) – Chime BBB complaints outnumber Wells Fargo (4,439 to 3,281 respectively); and we all know WF has a stellar track record when dealing with retail customers (sorry – I just threw up in my mouth a little bit)….

 

• Compound launches Compound Treasury as a DeFi-as-a-Service (yes, that’s a thing now) function.  This is specifically targeted to enable “Neobanks, Fintech startups, and other large holders of U.S. Dollars to access the interest rates available in the USDC market of the Compound protocol” so that they can fund their own high-interest / high-yield account offerings per this press release on Medium.  I see two good things here: 1) Compound does a good job of disclosing they are not a bank and these are not bank accounts, and 2) Limiting to stablecoins takes the crypto “as a currency” volatility risk off the table.  However, I am more than just a little worried about fintech companies using this protocol to fund a high-yield consumer account (what could possibly go wrong – sarcasm).  Uncle Sean is generally not a proponent of big government or increased regulatory scrutiny, but I think regulatory attention is certainly needed in the DeFi Interest environment.  Full disclosure – I think it is very cool, but I worry that many people don’t understand the potential risks sometimes – more below:
  • The consumer DeFi Interest market already worries me as the lure of high yield (5%) interest on USD is too much to pass up for many - but the risks are real as USDC is not FDIC or SIPC insured.  Monie is the latest in a line of "high yield" consumer-facing apps like Eco.com and Linus. They're being transparent about how the return is made but not about the risks.  Once you send your USD to them, they lend it out to other crypto-counterparties that “generally speaking” need liquidity but can’t get it from a bank.
  • So if we are being fully transparent, you are actually lending money to a corporate obligor (to which you probably did not do any financial diligence on – red flag number one) that has unknown counterparties (red flag number two) that are high risk (red flag number three).  While we are all being honest, 2.5% - 8% is a pathetic return for a high-risk / non-investment grade loan (call it what it is) as an unsecured creditor to a corporate obligor with unknown counterparties….  OUCH!!!!
  • To be fair – I do see warnings and disclaimers from many firms (see SoFi warning on crypto trades as well as BlockFI disclaimer of “Digital currency is not legal tender, is not backed by the government, and BIA accounts are not subject to FDIC or SIPC protections”), but I also see blogs stating why I don’t need FDIC insurance (not to point fingers…..  but…  See Eco.com - why people don't need FDIC insurance - SMH).
  • At the very least, there should be HUGE “IN YOUR FACE” disclosures (not #2 italic font hidden somewhere) such as “not a bank, not a bank account, no FDIC or SIPC insurance, this is a high-risk investment suitable for accredited investors only, 100% of your funds are at risk of loss, etc., etc.”

 

• It was a good week for de novos – Congratulations to First Women's Bank in Illinois and Community First Fund Federal Credit Union in Pennsylvania on your new charters!!!!

 

• Immediate (EWA fintech firm) signs Automatic Payroll Systems, Inc. (APS) for Immediate’s EWA / on-demand payroll access solution.

 

• Socure (online ID verification and fraud platform) announced the introduction of the first identity verification and fraud solution built specifically for the BNPL industry.

 

• BlockFI releases their long awaited Visa Credit Card with Bitcoin Rewards with an added feature that allows you to pay your bill with stablecoin such as USDC.

 

• Circle, a Boston-based provider of payment and treasury infrastructure solutions for online businesses, agreed to go public at an implied $4.5 billion valuation via SPAC merger with Concord Acquisition Corp. (NYSE: CND).  That’s a stout valuation!!!!  You can geek out (like me) even more by checking out their Investor Deck.

 

• Blend Labs filed their S-1 this week to issue 20 million shares at $16-$18 range which would give them a $3.7 billion market value (priced in the middle).  Blend will trade on the NYSE: BLND and is expected to raise up to $400M from the IPO.

 

• Wise (fka TrasferWise) makes strong debut on London Stock Exchange reaching an approximate $11B USD Market Cap.

 

• Funding continues to run hot:
  • Mercury (neo business bank for startups) raised $100M in Series B with a valuation of $1.6B.
  • Zerion (DeFi) raised $8.2M in Series A.
  • ​Unit21 (no-code fraud prevention platform) raised $34M in Series B round.
  • LoanPro (API enabled loan management platform) raised $100M equity financing.
  • Willa (payment platform and receivable financing firm for contractors) raised $18M in Series A funding.
  • Gig Wage (commercial platform to manage contractor payments) raised $3.25M and hires Clarisa Lindenmeyer as its Chief of Staff and Chief Brand Officer.
  • Cross River is in early discussions with investors and looking to raise $200M at a $2.5B valuation.
  • Yep, I read it too – Stripe has reportedly hired Cleary Gottlieb Steen & Hamilton LLP presumably as a legal adviser on its early-stage listing preparations.  But don’t freak out too quick – the article states that an IPO would not happen this year.

 
 
Random Uncle Sean Stuff:

• 49 days until college football!!!!
• It’s been raining so much here in Texas that the catfish are starting to climb trees – LOL!!!!  But I’m not going to complain about getting rain in July!
• Dave and Tanner made a serious tactical error this week….  They left town on a road trip and Uncle Sean has the keys to the ranch - WOOHOOO!!!!

 
 
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.