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Bulletin

Uncle Sean's Update - 8/6/21

8/6/2021

 
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Happy Friday!!!
 
Here is the Uncle Sean Update for 8/6/21:
 
FYI – there are some new “Off the Reservation” opinion pieces in this Uncle Sean Update.  They are designed as such – opinion pieces to get you thinking and talking amongst yourselves.  Feel free to reply back to me to tell me you love it, how much you hate it, or even how much of an imbecile you think I am - LOL!!!  Uncle Sean welcomes all comments!  ENJOY!!!!!
 
  • Unless you were on a completely different planet this week, you undoubtedly heard about Square to acquire Afterpay (BNPL) for $29B in an all-stock transaction bringing a ton of customers to the Cash App platform and Square Seller ecosystem.  This marks a logical step in the race to create a “super app” (If you are a little confused as to what the heck a super app is, then congratulations – you are a normal fully functioning human being) but with notable competition in the likes of Apple and PayPal.  Check out the Investor Deck which is pretty cool and emphasizes the impact to Square Seller merchant side and Square Cash App consumer side.
    • Regarding the Square Seller ecosystem, this is huge.  Afterpay makes about 84% of their revenue by charging the merchant 4% - 6% on BNPL purchase volume.  Afterpay’s purchase volume is about $16B right now per the investor deck.  Square merchant side process volume is about $140B currently.  A lowly 10% BNPL adoption into the Square merchant platform will essentially double the Afterpay revenue.  Now THAT is ecosystem integration.  Not to mention the fact that Square just got huge international expansion overnight. 
    • For Cash App. I am much less intrigued than everyone else.  WARNING - Uncle Sean goes “off the reservation” here….
      • Let’s be honest – Cash App’s value to Square is as a bitcoin trading platform.  That’s pretty much it.  While I certainly see that integrating the Afterpay app into Cash App is cool, I don’t see it as an ecosystem play from a customer hook standpoint.  Another way to look at this – there is nothing here to make me want to move from my bank to Square.
      • Also – while I am on a rant…..  Venmo and Cash App (as a wallet P2P outside of the banking system) were cool a few years ago – kind of like mullet haircuts and bell bottom jeans (Ouch - LOL!!!).  However…..  That was true until Zelle (by Early Warning Services) hit the scene.  Your bank probably already has Zelle - it is fully FDIC insured, almost always free, and clears in essentially real-time.  Once Zelle hit the street, the gallows countdown began for Venmo and Cash App as a P2P play.    
        • Additionally - am I the only one who sees Venmo and Cash App base function of P2P wallet transfer as the preferred digital micro-money laundering platform in the U.S. (below CTR limits of course – LOL)????
      • Lastly….  $29B is a whole lotta dough and only time will tell if this pays off.  But let’s be clear – Square didn’t pay that.  This is a stock transaction which means the shareholders wrote the check. 
 
  • While Uncle Sean is “off the reservation”, let’s talk about Varo Bank.  Full disclosure – I love Varo Bank.  I love what they stand for; I love that they obtained a national charter; and I am rooting for Varo Bank to be a HUGE American success story……..  However, the takeaway here is “so you want to be a bank, huh?”  Obtaining a bank charter is a massive success for a fintech as it allows you to control your own tech stack.  The drawback is that you also have to pay for it.
    • From their beginnings in 2015, Varo is now transitioning from a single source revenue model (debit interchange sharing as a challenger fintech) to a chartered bank just last year and they are clearly making some operational / strategic changes.  A quick look in the FedFis Bank database (yep – that’s a plug) shows that they are starting to get into consumer lending based on their recent 6/30 call report (schedule RC-C), but it has been an expensive road thus far.
    • Something else caught my attention.  Check out the Memo section of schedule RC-O…. They reported 2.2M customer deposit accounts with a balance of $151M – using my higher math skills (I fully admit that I had to take my shoes off so I could count on my toes), that’s an average balance of $69 per DDA account…. It’s hard to make a living on debit interchange when your average customer bank account balance is $69.
 
  • Okay – one last “off the reservation” moment…..  I continue to read about more and more banks moving into the “early access to direct deposit” camp because of fintech pressures.  Let’s be honest – this is nothing more than ACH risk and (you can quote me here) – “RTP will kill ACH risk”…..  Period…  There – now it is out in the open which means that ACH risk will not exist anymore in about 18 to 24 months.  This is not a bank response to fintech threat, this is a banking response to technology enhancements. 
    • And I am still surprised that there wasn’t more public outrage when the big banks held the last stimulus money for ACH clearing – FOR ALMOST A WEEK when other banks and challenger banks processed immediately…..  Last time I checked, there is NO RISK in a US TREASURY ACH and as such there was no reason other than greed for the big banks to hold those funds under the premise of ACH clearing risk….  Come on man!!!!!  Ahhhh – I feel better now as I have been wanting to get that off my chest for a long time. LOL
 
Back to the Headlines:
 
  • Nymbus Labs launched their new Niche Portfolio showcasing digital banking concepts to enable “any size bank or credit union seeking to accelerate growth through new routes to market”.  Product sets include Hitched (couples finance), Blueprint (business contractor platform), Scurry (family banking), and GigMoney (money management for gig workers).  Nymbus also scored $3M in financing that I mention further down in Fintech Funding Updates below.
 
  • Synapse taps Mastercard and announces the launch of Synapse Credit Hub a full-stack white-labeled API platform that allows companies to quickly offer a “comprehensive suite of products including card issuance, credit-building tools, accounts, cashback rewards, and more.”
 
  • Synctera announced agreements with Marqeta, Mastercard, and Regent Bank (adding to Synctera’s previously announced partnerships with Coastal Community Bank and Lineage Financial Network) as partners for their upcoming launch of Synctera’s Card-as-a-Service API offering that enables fintech companies to “easily launch and manage consumer and business debit card programs”.  
 
  • In case you missed it, we had another Credit Union acquire a bank this week.  Alabama Credit Union (charter 60823; $1.3B in total assets) announced an agreement to acquire Security Federal Savings Bank (cert 31592; $39M in total assets) in an all cash deal.  A quick look into the FedFis M&A database (yep – that’s another plug) shows this is the 6th such deal this year of a CU acquiring a bank; and compares with 7 in 2020 and 16 in 2019 for those keeping score.
 
  • NCR has been busy as they announced an agreement to acquire LibertyX.  Recall where NCR recently completed the acquisition of Cardtronics in June.
 
  • UK neo bank Monzo gets another dreaded going concern clause in their annual report and faces a new money laundering probe….  No, no – Uncle Sean isn’t covering UK neo banks now, but it is worth mentioning here as Monzo US has a “coming soon” mobile app with Mastercard debit card issued by Sutton Bank.  Not sure if we will see that open or not…
 
  • Sable (neo immigrant bank) partners with Wise to provide Sable customers to transfer money internationally in a faster and more cost efficient manner.
 
  • CDC issues new Federal Eviction Ban through Oct. 3rd.
 
  • MovoCash partners with Bitpay to launch  MOVO Chain allowing real-time crypto conversion into fiat money stored on a debit card (Coastal Community Bank) to help crypto gain traction as a medium of exchange.  MovoCash also announced an agreement with ENACOMM to deploy their next-gen Interactive Voice Response (IVR) platform.
 
  • Figure announced an agreement to merge with Homebridge Financial Services.
 
  • Fintech funding updates for this week include:
    • Rapyd raised $300M in Series E funding with a $8.75B valuation
    • Prepaid2Cash (prepaid card redemption startup) raised $5.1M in Series A funding round.
    • Catch (PFM and benefits app for freelance workers) raised $12M in Series A funding.
    • Nozomi Networks (cyber security firm) raised $100 million $100M in Series D.
    • Nymbus raised a $3M financing round led by OFG Ventures, LLC, a subsidiary of OFG Bancorp [NYSE: OFG].
    • ZenLedger (cryptocurrency tax software and blockchain analytics) raised $6M in Series A.
    • Reserve Trust (domestic and cross-border payments direct on ACH and FedWire rails) has raised $30.5M in Series A funding round.
    • Octane Lending (finance platform for recreational powersports) raised $52M in Series D funding at a valuation over $900M.
    • Wildfire Systems (rewards and loyalty platform) raised $15M Series A.
    • MotoRefi (car loan refi platform) extends their Series B by $5M from Curql Fund bringing the total B round to $50M and officially becomes a credit union service organization (CUSO).
    • SentiLink (identity verification) raised $70M in Series B round.
    • ReversingLabs (cybersecurity) raised $56M in Series B funding round.
 
 
Random Uncle Sean Stuff:
  • 21 days until college football!!!
  • Here is a really surprising fact – Amazon employs 1 out of 153 American workers per their latest earnings report (based on 145.8M US nonfarm workers).  WOW!!!
  • Yes – I heard you loud and clear….  Here are a couple of Dad Jokes to kick off your weekend:
    • An elderly gentleman came into the bank lobby and asked me to check his balance, so I pushed him over!!!  (Okay – that was bad and I kind of apologize – LOL!!!!!)
    • I googled “missing medieval servant” and it came back with “page not found”…..
    • Wikiwikiwikipedia is where I go to learn about DJ’s and Rap music.
      • Admit it – you just said “wikiwikiwiki” out loud didn’t you!!!!  It’s okay – I did too!!!!! 😊
 
 
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.

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