Uncle Sean's Update - 8/9/24

Happy Friday!!!
 
Here is the Uncle Sean Update for 8/9/24:
 
Uncle Sean typically tries to emphasize happy stories and headlines, but this week I unfortunately kick off with a bit of an “off the rails” rant.  It gives me no pleasure, so please excuse my bluntness…
 

• Unit (BaaS Platform provider) sets up new embedded finance partnerships with Vantage Bank and Lincoln Savings Bank…  I confess that I do not know precisely what services are being delivered to those banks, but the Unit Blog related to Lincoln Savings Bank as well as the Blog related to Vantage Bank still sounds like the same old BaaS Middleware model (an off-core ledger and FBO structure to the IDI) with Vantage Bank describing it as an “embedded finance accelerator”…
  • In some of my research, I did find that Novel (an international business banking app) was originally under Blue Ridge Bank but transitioned to Five Star Bank per this Novel Business Deposit Account Agreement as of January 2024.  Worth noting that Unit is a third-party service provider and Program Partner to the Five Star account as noted on page 5.  The current CEO of Lincoln Savings Bank came from Five Star Bank which is where the Unit connection (pardon the pun) for LSB may have started.
    • Worth noting that Novel may have recently shut down rather abruptly as the website trynovel.com is giving a 404 error; and some pretty awful recent reviews on Trustpilot within the last 30 days or so…  Not really the best look…
  • Compliance….  Credit Jason Mikula and this Fintech Business Weekly post regarding Unit back in March questioning Unit’s “shift” to a direct type model.  I do see that Unit has recently been trying to reposition themselves as a more compliance-first based model, but a quick look at some current and past Unit customers show compliance has definitely been an issue per these public consent orders, including:
    • Blue Ridge Bank OCC Enforcement Action 2022 (I reference as the O.G Agreement that started it all) citing unsafe or unsound practices, including those relating to third-party risk management, BSA/AML, suspicious activity reporting, and information technology control and risk governance.
    • Choice Bank FDIC Consent Order 2023 citing BSA, AML, CFT, and third-party relationships
    • Piermont Bank 2024 Consent Order citing BSA, AML, CFT, and Third-Party Relationships
    • Thread Bank 2024 Consent Order citing AML/CFT – and getting very specific here as I think this is the first time the FDIC has used the actual terminology “Banking-as-a-Service” as a standalone section (separate from the traditional AML and third-party risk verbiage) in the consent order (bottom of page 6 if you download the order)…  Also reference Section 14.l (page 7) which instructs the bank to “develop and maintain an exit plan” for its FinTech relationships (something that The BaaS Association has been preaching for many years).
  • Financial Condition…  Unit raised $100M in Series C just 2 years ago in May 2022; and this follows a $51M Series B a year before that in June 2021 (bringing total equity raise to nearly $170M per this TechCrunch article).  However, in June 2024 they had to lay off 15% of their staff per their blog.
    • While I do not have direct visibility to the Unit financial statements, I can generally state that most of the time entities are not continuing to raise equity capital (dilution) if they are cash flow positive and profitable (excluding M&A strategy).  Which brings me to my next and last point:
      • Oct 2023 Joint Regulatory Guidance (FDIC, OCC, Fed Reserve) for Conducting Due Diligence on Financial Technology Companies, specifically pg 6, Financial Condition and pg 8, Legal and Regulatory Compliance.
  • Feel free to comment on my LinkedIn post (FedFis page - Uncle Sean Update) or you can email me direct at [email protected].

 
Okay, back to better things! 🤠

• Wow – what a weird week in bond and equity market reactions to relatively small pieces of economic data estimates / misses since last Friday 🤷‍♂️.  Hang on to your hat though, as we have July CPI data coming up next week on 8/14/24 😬; as well as the Jackson Hole Economic Symposium on 8/22 /24– 8/24/24.  So, what is Uncle Sean looking at these days???  Well, I’m glad you asked so I can completely geek out!!!! 🤓🤪
  • Driving the domestic macroeconomic picture recently is downward pressures (albeit somewhat slight) from the labor side include unemployment inching up and job growth slowing (covered this last week); in conjunction with the Federal Reserve Bank of New York 2Q Quarterly Report in Household Debt and Credit released this week showing consistent growth in household debt with the delinquency trajectory continuing to increase, but more of a “normalization” (2019 pre-pandemic was at 20+ yr lows).  Happy to see these FRB NY graphics going back to 2003 to reflect that performance trend. 😊  Hopefully delinquencies and jobs data begins to level off here but I am certainly watching this trend closely.
  • Also keep in mind that it is hard to look at Household Debt without looking at Household Net Worth (Z1 data) which has increased 248% over the same 21 year period of 1Q2003 – 1Q2024 (source: Federal Reserve Bank of St. Louis FRED) reminding us that all things are relative.
    • 👀 And hey – here’s some more good news in the data – As of the 8/8 reporting week, the national average for 30-yr mortgage rate fell to 6.47% (Source: Freddie Mac).  That is the lowest rate since the 5/18/23 reporting week. Recall that was the beginning of the rise to almost 8% in Oct 2023 (I know first-hand because Aunt Patty and I had to take a huge 3-2-1 rate buy down when I sold my house in Nov 2023 – ouch, LOL)…
      • Mortgage rates are typically tied to the 10 Year Treasury that went from 3.46% to 4.92% in that same May 2023 – Oct 2023 time period.  This morning, the 10Yr is trading at about 3.95%...
      • Also worth noting the 2Yr/10Yr Spread is -0.08% this morning which is ridiculously close to un-inverting (is that an actual word) and is in some of the tightest trading ranges since we inverted 25 months ago back in early July 2022 with no recession yet (yet being the operative word!).
        • Of course no one asked 😝, but here is my take -  we should probably expect to see more “mixed data results” going forward as this is likely the best scenario for the coveted soft landing.  Fingers still crossed! 🤞

 

• 💥 REDi announced an integration with Q2's Digital Banking Platform allowing community banks and credit unions to access REDi’s fraud tools (customer notification and card control) via Q2's Digital Banking Platform.  Nice work!!!!!

 

• More good news with good folks doing great things…  Check out Atomic making headlines again with some really big wins lately.  This week, Texans Credit Union (Charter 60806; Total Assets $2.2B) announced the launch of Atomic's direct deposit switching solution in partnership with Alkami Technology, Inc. (Nasdaq: ALKT) digital banking solution. 🚀

 

• Conversely in a bit of sad news, Native American focused Totem is set to close down.  Uncle Sean has no doubt that we have not heard the last of Amber Buker, J.D., and I applaud her efforts in bringing much needed attention to improving financial wellness and banking access to Native Americans nationwide. 🙏

 

• It’s no big secret that the big banks have been investigated by various regulatory bodies and government officials regarding Zelle P2P scams and customer complaints (Cash App and Venmo included in some of these probes as well)…  However, JPMorgan kicked things up a notch this week by stating they may sue the CFPB if the agency issues an enforcement action against the bank over abuse of Zelle transfers by scammers.
  • “The CFPB is fully aware we already go above and beyond what the law requires, reimbursing for all unauthorized transactions and even for certain types of scams, so they should expect to be challenged to ensure their actions stay within the bounds of the law,” a JPMorgan spokesperson told Reuters and American Banker on Friday. “If necessary, we will not hesitate to seek assistance from courts to uphold the integrity of how these services are provided.”  The CFPB declined to comment.

 

• Marqeta (Nasdaq: MQ) announced a five-year deal with Varo Bank (FDIC 59190; Total Assets $480M) to be their exclusive issuer processor in the US.

 

• NCR’s digital banking business, named NCR Voyix (NYSE: VYX) after the company spun off the digital banking (Voyix) and ATM business (Atleos) as separate companies late in 2023, sold to Veritas Capital for $2.45B in cash plus additional contingent consideration of up to $100M.  Deal is expected to close (pending regulatory approvals) by year end.

 

• Speaking of NCR (the ATM side this time)…  Chime has expanded its relationship with NCR Atleos (NYSE: NATL).  Chime currently uses ATMs within Atleos’ Allpoint Network at more than 50,000 fee-free ATM’s.  This expanded agreement, beginning in August, will begin branding Atleos ATMs at 4,000 Walgreens stores with the award-winning Chime brand across the country.

 

• BMG Money has partnered with WebBank to launch LoansAtWork, a flexible employment-based loan option for consumers irrespective of their credit scores with repayments automatically deducted from their wages.

 

• Finzly logs a big win by announcing a partnership with United Community (NASDAQ: UCBI; FDIC16889; Total Assets $27B) to provide Finzly’s FX platform enhancing United’s international banking capabilities for its commercial clients.

 

• The CFPB takes action against Credit Repair Cloud AND its CEO, Daniel A. Rosen (so much for the corporate veil) “for providing substantial assistance or support to credit repair businesses that charge illegal advance fees to consumers. The proposed order, if entered by the court, would impose a $2 million civil penalty against Rosen and a $1 million civil penalty against Credit Repair Cloud.”  Yikes!!!!

 

• Some Personnel moves this week:
  • R&T Deposit Solutions strengthens C-Suite with Michelle Barone Named Chief Revenue Officer and Joe Carroll Named Chief Operating Officer.

 

• Notable FinTech funding for the week:
  • Savvy Wealth (AI-powered wealth management platform for financial advisors) raised $15.5M in Series A extension bringing the total Series A to $26.5M.
  • Octane (financing in the powersports market including a digital dealer platform) raised $50M in Series E funding round.

 
 
Random Uncle Sean stuff:

• One of the funnier comments I read this week:  “After coasting for months, the stock market is looking as queasy as a triathlete after swimming in the Seine.” 🤢😂
• Shoutout to my friends at Longview ISD celebrating Educators, Paraprofessionals, Administrative professionals, and the entire support staff (but especially Payroll – “Whoop Whoop”, Business Office Operations, and Human Resources because Uncle Sean is biased 😊) as Longview ISD wraps up Convocation to kick off the school year!!!! ❤️👨‍🎓🙏  Go Lobo’s!!!! 🐺
• Foodie update….  I grilled Lamb Loin Chops this week for the first time ever and those tiny little t-bone looking portions were AMAZING!!!!  Super quick (about 4 minutes each side for medium rare – flip only once) and pretty affordable.  I think I paid just north of $7 for about 1.25 pounds (about 6 little t-bones).  Here is the recipe that I used:
  • Your base is 1/3 cup Avocado Oil (substitute Olive Oil if you like) with 1/2 cup Balsamic Vinegar and 1 TBSP Rosemary Garlic.
  • I also added 1 TBSP Ground Ginger, 1 TBSP Minced Garlic, 1 tsp Uncle Chris steak seasoning, 1/2 tsp ground black pepper.
    • Set aside about 4 – 6 TBSP of this marinade for basting after you flip them on the grill.  Marinate the loin chops in the fridge for about 3-4 hours before cooking.
    • After cooking, I wrapped mine up in some foil and let them rest for about 5 minutes before absolutely devouring them like a starving caveman!  Nom, nom, nom… 😊
• Yep…  You made it!  Here are the Dad / Bad Jokes for the week:
  • Uncle Sean is on the Snake Diet…  That’s where you lay around all day, eat 25% of your body weight, and hiss at anyone that comes near you! 🐍🤪
  • A lot of spouses complain that their husbands never listen to them….  I’m proud to say I’ve never heard  Aunt Patty say that… 😯😂
  • That one time I asked Mom if I was ugly and she said “I told you not to call me Mom when we are in public!” 🤣
  • You’ve heard that saying that if you love something, let it go.  If it comes back to you it is yours, if not then it never was….  Well, just FYI – that doesn’t work very well with money!

 
 
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.