MonJa’s Digital Banking and Lending Monthly Roundup | November 2022

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Digital banking and lending are evolving rapidly. Recent fintech-banking partnerships and innovation in technology with the introduction of AI, ML and blockchain herald a new era in lending. Fintech’s are changing the competitive ecosystem, empowering lenders to process loans faster and smarter.  In a world full of noise, understanding how the technologies and developments may impact your financial institution’s credit decisions and credit portfolio is of critical importance, while also you can improve your finance by learning online trading, as there are resources like trade fx that help you with this. With MonJa’s Digital Banking and Lending Monthly Roundup, it’s easy to stay up to date on what’s happening in the space. Get the latest updates, analysis and commentary on digital banking and lending segment!


11/23/22 Several Credit Unions on the East Coast Plan Mergers (Credit Union Times)  

While credit unions in California and Washington claimed their consolidations had just been completed, those in Connecticut, New York, and Maryland recently announced potential mergers. The State of Connecticut Department of Banking received a merger application from the $1.1 billion Sikorsky Financial Credit Union in Stratford, Conn., and the $32 million Bridgeport City Employees Federal Credit Union. The $2.6 billion USAlliance Federal Credit Union in Rye, New York, and the $191 million Marriott Employees’ Federal Credit Union in Rockville, Maryland, announced their intention to join earlier this month. The $8.8 million Tacoma Narrows Federal Credit Union in Ruston and the $348 million Cascade Federal Credit Union in Kent, Washington, merged on November 1st, according to a statement made last week.

11/23/22 U.S. Consumers Are Still Applying for Credit Cards Despite Higher Rates (Credit Union Times)  

According to the most current credit-access study from the New York Fed, 27.1% of people applied for credit cards in October, a “strong” increase from the 26.5% rate recorded the previous year. Although it was predicted that consumers would be less likely to apply for mortgages and vehicle loans, the study also found a rise in the percentage of persons with excellent credit ratings who plan to apply for a credit card or a card with a greater credit limit. The results are consistent with a different Fed survey published last week that showed credit card debt increased over the last year by the greatest in 20 years. By quickly increasing interest rates, which increases the cost of borrowing money for both consumers and businesses, the Fed is seeking to slow down the economy and inflation. Even commercial banks are raising their conditions for business and commercial real estate loans to levels typically observed during recessions.

11/23/22 Credit union trades question FTC effort to regulate data privacy (CU Insight) 

The Federal Trade Commission seeks feedback on whether it should implement new trade regulation rules or other regulatory alternatives pertaining to how businesses gather, aggregate, use, protect, analyze, and retain consumer data, as well as share, transfer, sell, or otherwise monetize that data unfairly or deceptively. The commission observed studies demonstrating that most individuals need to comprehend the market for consumer data functioning beyond their communication devices. CUNA acknowledged that data breaches and the improper use of consumer data are issues but argued that since the financial services sector is subject to the strict data protection laws outlined in the Gramm-Leach-Bliley Act, financial institutions, including credit unions, should be exempt from any FTC regulations. A NAFCU representative, on the other hand, said that the trade commission should hold off on adopting any data privacy regulations until Congress takes action. However, Congress has been struggling for years to pass data security and privacy legislation.

11/21/22 CUNA: Recession Will Only Dent Credit Unions Next Year (Credit Union Times)

CUNA anticipates a slight recession next year that will have little impact on credit union earnings. The Fed’s sharp increase in the federal funds rate this year to combat inflation is one reason for the recession forecast. In any case, CUNA predicted that the recession would begin in the first half of the following yea. Ligia Vado, the senior economist of CUNA, cautioned credit unions to anticipate three key trends. First, users with bigger accounts are finding rates from online banks, money market mutual funds, and even Treasury bills more appealing. Second many credit unions are currently entirely loaned out and experiencing severe liquidity issues. Lastly, operating income will decrease as slower household spending decreases interchange income, and income from refinancing mortgages will remain negligible due to the high cost of mortgages while operating costs will increase due to inflation.

11/18/22 Analysis: U.S. banks to pounce on fintech deals as valuations plunge (Reuters)

Long considered a danger by corporations like JPMorgan Chase & Co (JPM.N), financial technology startups are gradually turning into takeover targets for traditional U.S. banks as rising interest rates and declining valuations stifle their growth. The outlook for Fintechs has diminished as interest rates rise and the United States leans toward a probable recession. Confidence was also rattled by the prominent cryptocurrency exchange FTX’s explosion last week. As consumers and companies adopt digital financial services, Fintechs have flourished. The trend was accelerated as everyone moved online by pandemic lockdowns. Also, Fintech deals may be simpler to close than bank mergers, which have been slowed down by regulatory scrutiny. Banks can purchase cutting-edge technology thanks to fintech transactions rather than developing them internally. Acquisitions can also represent defensive maneuvers into industries other than lending, including travel services.

11/16/22 Treasury calls for more fintech oversight (Banking Dive)

According to the Treasury Department’s report, increased regulation of the fintech market and bank-fintech collaborations are required to safeguard customers and promote healthy competition in the financial services sector. The report also cited that an increasing number of fintech companies provide consumers with cutting-edge services, but they also introduce new risks, citing data privacy and regulatory arbitrage as two examples. The report comes in the wake of the White House executive order from last year, which sought to increase competition in the American economy, and as the Office of the Comptroller of the Currency (OCC) has hinted that it intends to increase oversight of bank-fintech relationships.

11/15/22 Mind the gap: How lenders can open the doors for the credit invisible (Fintech Nexus News)

Consumers from all walks of life can profit significantly from being “credit visible.” Credit inclusion enables economic growth and upward mobility for millions of people. Consumers will be able to comprehend what it means to establish and improve their credit profiles and why it is crucial to be involved in the credit system, thanks to increased credit knowledge, education, and access. With inflationary pressures rising to levels that are nearly 40 years high, lenders have a great chance to increase liquidity for credit-deserving but underserved clients. It’s also critical to understand that lenders may be discouraged from pursuing this market segment by worries about how credit performance for customers with little or no credit activity will fare. When opening new products, newly serviced customers have comparable, and occasionally even better, vintage delinquencies on new originations than customers with longer credit histories. In order to empower and nurture the underserved toward becoming more active consumers, lenders must facilitate financial literacy and enable continuing involvement. 

11/11/22 FTX Files for Bankruptcy, CEO Sam Bankman-Fried Resigns (The Wall Street Journal)

In Delaware, where the U.S. unit is registered, the beleaguered cryptocurrency platform FTX filed for bankruptcy protection. It is the biggest bankruptcy involving cryptocurrencies to have ever occurred, and it was notable both for its speed and size. Sequoia Capital and Thoma Bravo, among other investors, stand to lose a lot of money as a result of the bankruptcy, which is anticipated to erase billions of dollars worth of equity value. It will wreak havoc on customers’ cryptocurrency and cash deposits. Around the world, regulators and prosecutors are looking into FTX or have frozen its assets. A number of companies involved in the cryptocurrency industry have filed for bankruptcy since the price fall of digital currencies earlier this year, including Celsius Network LLC, Voyager Digital Ltd., and Three Arrows Capital.

11/09/22 How Upgrade became a ‘marketing engine’ for deposit-hungry banks (Banking Dive)

The new high-yield savings account, which Neobank and credit card startup Upgrade announced last month, offers customers who maintain a minimum balance of $1,000 a 3.5% annual percentage yield (APY). In order to attract deposits for its new high-yield savings account, it is employing a similar strategy of sweeping money into partner institutions. In the current high-interest rate climate, deposits have increased in value for smaller institutions, and they are something they are willing to pay more for. The strategy benefits both customers and neighborhood banks. Upgrade’s high-yield savings account was the industry high when it was introduced but remained so for only a short period due to the fierce rivalry in the high-yield savings market.

11/02/22 Digital bank Chime is cutting costs across the board-including 12% of staff (TechCrunch)

Chime, a digital bank, announced that 160 employees, or 12% of its workforce, would be let go. Chris Britt, a co-founder of Chime, said the startup is well-capitalized, but the unpredictability of the financial markets contributed to these adjustments. Most recently, corporate spending startup Brex reduced 11% of personnel despite earlier this year’s being valued at $12.3 billion, citing the difficult macroeconomic situation. However, in general, the pace of tech layoffs is starting to slow down. Although November is off to a less-than-stellar start due to Chime’s layoffs and Opendoor’s recent 18% drop, the overall data offers some encouragement.

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