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Bulletin

Uncle Sean's Update - 9/10/21

9/10/2021

 
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Happy Friday!
 
Short weeks are always crazy busy!  Here is the Uncle Sean Update for 9/10/21:
 
Remembering 9/11 twenty years later…  I was a Senior Accountant at Chickasaw Telephone Company and was in the middle of intercompany reconciliations when the news broke that morning.  Many of us went into one of our conference rooms and watched on the TV as the terrible events unfolded.  Our world changed forever that day.  Many years later while working at Samsung, I would find myself in the middle of the World Trade Center complex of buildings each summer (for about 5 years) going through trade credit insurance renewal negotiations and presentations.  I vividly recall the construction of the 9/11 Memorial, the surreal feeling of standing next to it, and the incredibly vast mix of emotions when finally getting a chance to enter the new One World Trade Center building (fka The Freedom Tower)…
  • 9/11 Memorial & Museum
  • "I can hear you!  The rest of the world hears you!"
 
 
  • Late last Friday, the FinTech Cowboys (powered by FedFis data) posted a fantastic interview with Sunil Sachdev (SVP and GM of Community Bank Segment at Fiserv) – check it out!!!  Sunil does a great job and states “there is a path to monetizing that charter outside of M&A” – good stuff!!!
 
  • Varo Bank raised $510M in Series E round at a $2.5B valuation.  This funding came just in the nick of time as Varo’s continued losses were about to put their capital in a rather perilous position (see 8/6/21 Uncle Sean Update).  But the bigger picture is the whopping $2.5 BILLION valuation – DANG!  Herein lies the difference from traditional brick and mortar / branch model valuation versus a digital bank (here at FedFis we call them Direct Banks).  Armed with this new war chest, it will be interesting to see how Varo scales up over the next year or two.   Varo CEO, Collin Walsh, talks about the funding and Varo’s market presence on this CNBC 'Tech Check' video (under 4 minutes).
 
  • Uncle Sean geeks out a little here so feel free to scroll on down if you like – LOL…  The FDIC released the Quarterly Banking Profile report this week (I love the fact that they also break out a Community Bank section).  This report when coupled with the Federal Reserve Beige Book (summary of economic conditions by Federal Reserve District) gives a really good macroeconomic view of how things are going here in the US.  Key summary points include:
    • Bank Net income for 2Q was up by $51.9 billion from 1Q, but don’t get too excited as it was due to a $73 billion decline in provision expense.  Overall reserves remain high at $195B or 1.80% of total loans and leases (compared to $124B and 1.18% of loans and leases in 4Q2019) as Covid remains a concern.
      • Asset Quality improved – nonperforming (90 days delinquent plus nonaccrual) declined $13.2B (10.8%) from 1Q; total past due loans declined 12 bps to 1.01%; and total net charge-off rate dropped 30 bps to 0.27% - the lowest level on record.
    • 2Q Net Interest Margin of 2.5% is another record low (banks are simply not designed to operate long-term in a zero rate environment).
    • I was surprised by this on the CC side - Loan volume is up over 1Q by $33.2B driven by credit card balances (+$30.9B) and auto loans (+$18.9B).
    • The key point in The Beige Book was covered in the first sentence of the National Summary – “Economic growth downshifted slightly to a moderate pace in early July through August.”  The decline was due in large part to pandemic sensitive industries (dining, travel, tourism) “reflecting safety concerns due to the rise of the Delta variant.”
 
  • The Federal Reserve published a research paper this week intended to “serve as a resource for community banks as they embark on responsible innovation”; and an overview of “community bank partnerships with fintechs” titled Community Bank Access to Innovation through Partnerships. 
 
  • Netspend launches Earned Wage Access platform (EWA).  Uncle Sean felt that it was simply a matter of time considering their massive presence behind Prepaid General Purpose Reloadable (GPR) debit cards; and the fact that almost all payroll / pay-cards are prepaid GPR – this move to add EWA makes perfect sense.
 
  • MVB (through their BaaS subsidiary, Victor) and NYDIG partnered together to create a white label Bitcoin & banking platform for fintech companies to offer to their customers.
 
  • If you need an easy to read and basic summary of what cryptocurrency is and where it comes from, I found this Yahoo Finance article to be very good with a ton of extra links if you want to go deeper.  My favorite line was related to blockchain as a ledger of coded transactions – “think of it as a checkbook for cryptocurrency.”
 
  • Oh Coinbase – it’s been a rough few weeks….  This week, Coinbase gets a “Wells Notice” from the SEC regarding their upcoming lending platform.  Mr. Paul Grewal, Chief Legal Office for Coinbase, published a well-written (at least in my opinion) blog detailing their frustrations – check it out here.  Some additional points:
    • Coinbase’s proposed Lend product allows up to 4% APY by lending out your USDC to verified borrowers.  This is not FDIC or SIPC insured, but Coinbase ‘guarantees’ the principal.
    • The SEC has clearly taken the position that Coinbase Lend is a security, or an investment; while Coinbase argues “…it’s not an investment contract or a note. Customers won’t be ‘investing’ in the program, but rather lending the USDC they hold on Coinbase’s platform…”  BankingDive has a good summary.
    • Coinbase CEO, Brian Armstrong, took a more aggressive (yep – that’s the nicest way I could put that) approach by going on a Twitter rant calling the SEC behavior “sketchy.”
      • I get it that he’s pissed, but it’s probably not a good idea as a publicly traded entity to call out the SEC on social media….  I’m betting his Board probably had a few things to say afterwards and behind closed doors.
 
  • The Consumer Financial Protection Bureau (CFPB) sues LendUp Loans AGAIN for continuing to deceive “tens of thousands of borrowers” and violating the standing 2016 consent order.  As part of the complaint filed on 9/8 in the United States District Court for the Northern District of California (which you can read in detail here), the CFPB is seeking an injunction, damages or restitution to consumers, disgorgement of ill-gotten gains, and the imposition of a civil money penalty.
    • I don’t think the saying, “there’s no such thing as bad publicity” applies here….  OUCH!!!
 
  • There were some interesting acquisitions this week:
    • Mastercard announced an agreement to acquire CipherTrace (blockchain analytics and crypto security start-up).
    • PayPal agreed to acquire Paidy (BNPL platform in Japan) for US$2.7B.
    • JPMorgan announced a 75% controlling interest in Volkswagen Financial Services (Volkswagen’s payments platform) to expand its digital payment capabilities and extend the platform to "the broader auto industry” as in-vehicle technology takes off.  If you have seen Apple’s CarPlay, you can imagine the possibilities of integrating payments.
 
  • Notable FinTech funding updates this week:
    • HoneyBee (employer sponsored financial literacy platform for employees) raised $105.7M in total funding that includes $5.7M equity round and $100M debt facility.
    • Zebedee (developer of bitcoin payment rail in gaming platforms) announced $11.5M in Series A funding round.
    • TrueFort (cybersecurity zero trust platform) raised $30M in Series B funding.  Valuation was not disclosed but the company did state they “experienced year-over-year bookings growth of 650% and a 260% growth in ARR.”
    • Orchard (residential real estate platform including available all-cash offerings) raised $100M in Series D with a valuation just north of $1B.
    • Lean (gig worker financial platform) raised $4.5M in Seed funding. 
    • Wisetack (business embedded finance solution) raised $45M in Series B to bring embedded BNPL financing to home services and other verticals including auto repair, elective medical, dental, veterinary, legal, and more.
    • Rocket Dollar (self-directed retirement platform) raised $8M in Series A funding.
 
 
Random Uncle Sean Stuff:
  • We had a bunch of plans for Labor Day – weed & mulch the flower beds, do some yard work, wash the cars, run some errands, etc…..  But Aunt Patty and I stayed inside (still 100 degrees here), sat on the couch and watched movies all day while eating leftovers and napping on and off.  I must confess, “doing nothing was everything I had hoped it would be” and I highly recommend it if you get a chance - LOL!!!  😊
  • And of course – here are a couple of obligatory Dad jokes for your weekend:
    • Reading can seriously damage your ignorance.
    • A wise man once said nothing…
    • And my personal favorite for the week - I recently bought a toilet brush…  Long story short, I’m going back to toilet paper…!!!!  HAHAHAHAHA!!!!!!
 
 
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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