Uncle Sean's Update - 9/9/22

Happy Friday!!!
 
Hmmm - for a short week, it sure felt like there was a lot of policy and regulatory speeches…  Here is the Uncle Sean Update for 9/9/22:
 
Let’s get the reg stuff out of the way first -

• Acting Comptroller of the OCC Michael Hsu gave a speech at the TCH + BPI Annual Conference titled “Safeguarding Trust in Banking: An Update” – with a segment emphasizing “Developing a more sophisticated understanding of bank-fintech arrangements.”
  • Specifically stating, “bank-fintech partnerships have been growing at exponential rates and have gotten more complicated.  Banks and tech firms, in an effort to provide a ‘seamless’ customer experience, are teaming up in ways that make it more difficult for customers, regulators, and the industry to distinguish between where the bank stops and where the tech firm starts.”  Also noting that this is likely to “accelerate and expand until there is a severe problem or even a crisis.”
    • Keeping in mind that this comes one week after the written OCC agreement with Blue Ridge Bank related to third-party fintech partnerships.
  • The BHB BaaS Association responded by issuing a statement, “Acting Comptroller Hsu’s comments at the TCH+BPI Annual Conference shine light on issues which have concerned the members of the Banking as a Service Association for some time.  We believe that BaaS relationships can carry mutual benefit for financial technology companies and financial institutions alike.  However, the only winning scenario for partnership is one in which the end-user is served in a safe, sound and compliant manner” also encouraging collaboration towards clear and consistent regulatory guidelines.

 

• Regarding inflation and monetary policy, the Fed continues its hawkish tone.  Federal Reserve Chair Jerome Powell reiterated this week in a Q&A presented by the Cato Institute that he is “strongly committed” to fighting inflation and will continue “until the job is done.”  And again highlighting, “the longer inflation remains well above target, the greater the risk the public does begin to see higher inflation as the norm, and that has the capacity to raise the costs of getting inflation down” longer term.  Worth noting that this was Chairman Powell’s last scheduled public event before the FOMC meeting on Sep 20-21.
  • Fed Vice Chair Lael Brainard echoed similar resolve during a speech at TCH and BPI 2022 Annual Conference stating, “we are in this for as long as it takes to get inflation down.  So far, we have expeditiously raised the policy rate to the peak of the previous cycle, and the policy rate will need to rise further.”

 

• SEC Chairman Gary Gensler continues to continues to forcefully reiterate the case for SEC’s broad authority over crypto stating the “vast majority” of the nearly 10,000 tokens in the crypto market meet the definition of a security and are therefore subject to securities laws. 

 

• Fed Vice Chair of Supervision Michael Barr gave his first policy speech this week pushing for action on stablecoins, climate change preparations and both the safety and fairness of the finance industry.  You can find the full speech here.

 

• And just in case you missed it, the OCC released their five year Strategic Plan for 2023 - 2027 with a focus on:
  • The ability to be agile and learn quickly
  • Highly credible and consistently trusted
  • Leading on bank supervision as the banking system evolves

 
Now on to the rest of the update -

• Zelle® adoption continues to explode with 2Q 2022 results showcasing:
  • 1,700 banks and CU’s including 100+ MDIs offering Zelle in their apps
  • 2Q 2022 payments totaled $155 billion with 554 million transactions.  YoY $ amount increased by 29% with # of transactions increasing by 27%.
    • Highlighting an increase of 87% quarter-over-quarter for business disbursement transactions to nearly 8 million employees, contractors, and small business customers.
  • 5 year milestone includes 5 billion transactions totaling $1.5 trillion in value have moved across the network since 2017.

 

• WOW - Apple Pay has now moved into the #2 spot edging out Mastercard by processing more than $6 trillion in annual transaction volume behind only Visa at the top spot globally.

 

• DailyPay (on-demand wage platform) announced the launch of Friday a Visa prepaid GPR debit card and mobile app allowing for “no-fee instant on-demand pay transfers” to the debit card.  Users can track the card balance and transaction history on the mobile app, along with the available amount of on-demand earned pay they could draw upon.  More details about Friday by DailyPay:
  • Existing bank account is not required, no minimum balance, no maintenance fees.
  • Currently, the no-fee, instant on-demand pay requires employer participation in DailyPay, and election to deposit early transfers and set direct deposit to the Friday Card.
  • Allows for multiple funding options including:
    • Direct deposit, transfer of available on-demand pay balance, other linked bank account, and cash loading via 90,000+ Green Dot retail locations across the country.

 

• The FDIC released the Second Quarter 2022 Quarterly Banking Profile.  Key takeaway is “generally positive results this quarter, amid continued economic uncertainty.  Loan growth strengthened, net interest income grew, and most asset quality measures improved.  Further, the industry remains well-capitalized and highly liquid.”  More specifics:
  • Net Income declined $6B compared to 2Q 2021 due to increase in provision expense of $21.9B.
  • NIM expanded to 2.80% - YAY!!!!
  • Loan growth is wide and consistent – DOUBLE YAY!!!
  • Credit quality remains in check, but some growth in early past due (30-89) is showing up in consumer loans (also note increase in provision mentioned above).
  • Deposits declined for the first time since 2018 (but still way above pre-pandemic levels).
  • # of problem banks remain unchanged at 40.

 

• Ramp (corporate card and expense management platform) reportedly to launch cross-border B2B payments in the next 60 days per this Payments Dive article.

 

• UBS announced the mutual termination of Wealthfront merger agreement ($1.4B cash acquisition price) and instead has invested $69.7M via a convertible note at approximately the same total valuation.

 

• Bond (BaaS middleware / connector) launched white label commercial charge card solution enabling “B2B SaaS platform providers to launch their own commercial charge cards without writing a single line of code.”

 

• Notable FinTech funding for the week:
  • Bitwarden (open source password manager) announced $100M in capital in an undisclosed round referencing a growth investment.
  • Mesh Payments (corporate spend automation platform) raised $60M in new financing.
  • Chargezoom (B2B invoicing integrated payments) raised $10M in Series A.
  • Boopos (M&A alternative lending platform based on revenue financing model) raised $58M in capital consisting of $8M in Series A plus $50M in debt financing.
  • Stack (crypto education and trading app for teens and their parents) raised $2.7M in new funding and launched this week with over 6,000 users on the waitlist.

 
 
Random Uncle Sean Stuff:

• Remembering Queen Elizabeth II who passed away peacefully at her summer residence, Balmoral Castle in Scotland, this week at the age of 96 after 70 years of service to the United Kingdom.  This collage from Town & Country has 108 photos of Queen Elizabeth life in pictures.  NPR also has a great collection of pictures as well.
  • This statistic really jumped out at me – when Queen Elizabeth first took the throne at the age of 25, the UK prime minister was Winston Churchill who was born in 1874.  At the time of her death, the current prime minister is Liz Truss who was born 101 years later in 1975.
  • Maybe the best reflection I read was a simple LinkedIn post from Agility Bank, “Our deepest sympathy goes to the #RoyalFamily and citizens of the #UnitedKingdom in the loss of Her Majesty Queen Elizabeth II.  Her actions over a 70-year reign speak louder than any words.  Her quiet leadership, her dignity, and her steadfast service to her people will always be remembered by those of the countries she watched over and by those of us who admired her from afar.  You will be missed, Your Majesty, by everyone.”

 
 
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.