Uncle Sean's Update - 8/20/21

Happy Friday!!!
 
Here is the Uncle Sean Update for 8/20/21:
 
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• A quick “off the reservation” op-ed from Uncle Sean to kick us off this week……  Recall a few weeks back where the White House issued an Executive Order to look at banking data portability for consumers…  Well, I am reading a few things this week that may or may not be related, but I found them to be conspicuously ironic when paired together (maybe it’s nothing, but maybe it’s something – you can decide)…
  • Canada appears to be slightly ahead of the U.S. in exploring the concept of “open banking” (really it’s enhanced API’s) – check out Canada's Report on Open Banking from April 2021, whereas the US (CFPB) is still “considering” availability of electronic consumer financial account data since October of 2020….
  • If you read the Canada report, one item JUMPS out at you – the term “screen scraping” is mentioned 15 times which just SCREAMS PLAID…!!!!!  If you geek out even more, the original CFPB ANPR Report - Consumer Access to Financial Records includes the term “aggregator” 37 times….  Yep – sure smells like a big pile of Plaid to me too.  LOL!!!!
  • Maybe or maybe not, inconsequently – Plaid just announced an additional funding extension (amount was not disclosed) to their previously announced $425M Series D round that includes investments from JPMorgan and Amex…..  Remember the Jamie Dimon infamous "scared shitless" earnings call in January where he specifically commented, “people who improperly use data that’s been given to them, like Plaid.”  My how the times they are a changing – LOL!!!!!

 

• Widely seen as a shot to Square, PayPal announced that they are dropping late fees for BNPL purchases globally.  The fees will be waived in the U.S., U.K., and France beginning October 1 (Germany and Australia are already free of late fees).
  • Here is the rest of the story - Square just spent $29B to acquire Afterpay (for reference – Square’s total market capitalization is about $118B).  Afterpay financials (see page 16) show that about 8.5% of their revenue comes from customer late fees.  Now I know not all revenue streams are created equal, but that probably cost ole Jack Dorsey a cool Billion dollars or so in valuation if they have to drop late fees too….  OUCH!!!!  Yep - as expected, the commoditizing of BNPL offerings has now begun.

 

• i2C announced that they are expanding their partnership with Visa so that i2C issuers can offer Visa's BNPL solution at the point of sale.  The Visa Installments API model enables issuers to offer BNPL installment plans for their cardholders under their existing credit account lines for “pre-purchase, during purchase, and post-purchase programs”. 

 

• Fiserv continues to expand and dominate in the payments world; and their latest announcement to enable businesses to pay direct to consumer Venmo and PayPal accounts via the Fiserv Carat ecosystem, is just more icing on the cake for Fiserv.

 

• Late last week, Chime announced that they raised $750M in Series G round at a lofty $25B valuation (nearly $10B higher than their latest valuation in Oct 2020 – ???) and positions Chime for an IPO in the first half of 2022. 
  • Yessir, I have read the numerous reports out there and I hate to call BS….  Well never mind – I am calling BS on some of these estimates quoting Chime customer count at 20+ million (cough, cough – yeah right), pretty much EBITDA breakeven (hell – at roughly 10% of the US “banked” population, just exactly how much more market share do you need to become profitable???), and an estimated $200M in top line revenue….  I find that valuation as well as the customer count a little hard to fathom considering Citi has about 19M deposit accounts per schedule RC-O (# of deposit accounts excluding retirement accounts with a balance less than $250K).…..  Who knew there was so much money in “free banking”???  Ahhh, but all the young cats will just tell me I’m old and I don’t understand….  I guess we will just wait for the S-1 to drop before we know the whole picture.

 

• Walgreens launched their anticipated credit card program this week (issued by Synchrony Bank) as part of their larger embedded finance platform that includes a “coming soon” Mastercard debit card issued by MetaBank and built by InComm Payments’ digital banking-as-a-service platform.
  • The myWalgreens Credit Card is a closed-loop credit card with 5% to 10% rewards that can only be used at Walgreens locations, Walgreens.com and the Walgreens mobile app (also includes a digital wallet with rewards platform), and Duane Reade stores (a Walgreens subsidiary in NYC).
  • The myWalgreens Mastercard Credit Card is an open-loop credit card that can be used anywhere Mastercard is accepted.
  • I know we covered this in the 4/2/21 Uncle Sean Update, but it’s worth repeating now that they will have a credit, debit, and mobile offering…..  If done correctly, their embedded finance / mobile banking app could become a very serious challenger bank when you consider the following stats:
    • Walgreens has about 9,200 locations (that’s about the same size as the US branch count for JPM and BOA combined….  DANG!!).
    • As of August 2020, approximately 78 percent of the U.S. population lives within five miles of a Walgreens, Duane Reade store.
    • Walgreens interacts with approximately 8 million customers in its stores and online each day.
    • According to PRB research, “the number of Americans ages 65 and older is projected to nearly double from 52 million in 2018 to 95 million by 2060, and the 65-and-older age group’s share of the total population will rise from 16 percent to 23 percent.”  Maybe this Walgreens bank works well with an aging population affixed to prescriptions…

 

• This is cool – Nerve (right here in Austin, TX) appears to be the World's First Neobank Created for Musicians and is launching next month.  Equally as impressive is the fact that Piermont Bank is the sponsor bank (they have only been around since 2019).  Congratulations and nice work to all parties involved!

 

• And the Credit Union trend of acquiring Banks continues at a blistering pace with two more deals announced this week.  For those keeping score, this is the 10th CU acquisition of a bank this year, 5 of which have been in August – source: FedFis M&A Database (see what I did there – LOL).
  • Fairwinds Credit Union (charter #68417; total assets $3.8B) announced an agreement to acquire Citizens Bank of Florida (cert #16442; total assets $492M).
  • Scott Credit Union (charter # 66370; total assets $1.5B) announced an agreement to  acquire Tempo Bank (cert #30615; total assets $93M) in an all-cash transaction for $14.125M.

 

• Brex announced an agreement to acquire Weav for $50M.

 

• Paysafe (NYSE: PSFE) expands even more in Latin America by acquiring SafteyPay in an all-cash transaction totaling USD $441M.

 

• Aspiration (the OG of ESG before ESG was even a thing) is set to become a publicly traded company after merger with SPAC InterPrivate III Financial Partners, Inc.  Valuation is a huge $2.3B for a company with a $100M top-line revenue run rate (boasting 7X growth over the last year) and 5 million members per the very well done Investor Deck.

 

• Other notable FinTech funding (excluding Plaid and Chime mentioned above) updates for the week:
  • DriveWealth (brokerage-as-a-service with fractional trading) raised a hefty $450M in Series D at a $2.85B valuation.
  • Branch (EWA employer payments platform) raised $48M Series B plus $500M credit facility.  Valuation was not disclosed, but they did note 300% growth year over year.
  • Blumira (cybersecurity automated threat detection and response) raised $10.3M in Series A funding round.
  • One (FinTech Neo Bank) raised $40M in Series B  $40M in Series B funding round.
  • Sightline Payments (payments platform for online gaming and sports betting) announced $244M funding round at a $1B valuation touting 1.5 million accounts.
    • This is particularly interesting as I recently read where the NFL is possibly going to allow limited sportsbook betting ads this year during broadcasts.  Hmmm…. 
  • Certik (blockchain cybersecurity) raised $24M extension of their previous $37M Series B.
  • Candor (loan engineering system and mortgage decisioning platform) raised $12.5M in Series A funding.
  • Jaris (credit-as-a-service full stack embedded lending solution – wow that was a mouthful!) raised $31M in Series B financing.
  • MobileCoin (digital payments ecosystem) raised $66M in Series B funding.
  • PayEngine (white-label payments facilitation platform) raised $1.6M in Seed funding.

 
 
Random Uncle Sean Stuff:

• 7 days until college football – SEVEN DAYS!!!  I know it’s dubbed “week 0” and the rest of the season starts a week later – but it’s a start!!!!!!
• If you find yourself rambling around the Texas Hill Country, do yourself a favor and stop by the Wimberley Cafe in Wimberley, TX.  Aunt Patty and I went there Sunday morning and had blueberry pancakes and an omelet with hashbrowns – everything was amazing!  Don’t forget to try their salsa – it has a smokey chipotle and cilantro flavor that was fantastic (and is great on that omelet)!
• And a couple of obligatory Dad Jokes to get you through your day:
  • If chocolate milk comes from brown cows, do deviled eggs come from evil chickens???
  • Lesser known fact – Mozart did not like chickens at all because they kept saying Bach-Bach-Bach!
  • It’s inappropriate to make a Dad Joke if you are not a father….  That would be a faux pa…..  😊

 
 
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.