Top Headlines in Fintech #015

“Although inflation has moved down from its peak — a welcome development — it remains too high.” - Fed Chairman Jerome Powell 

Central bankers from around the globe last week gathered in Jackson Hole, Wyoming to talk about monetary policy that will set the course for the economy. Fed Chairman Jerome Powell’s comments were among the highlights, leaving corporate leaders, the markets, and investors to read between the lines and decipher his message.

Ultimately, Powell declared that while “inflation has moved down from its peak - a welcome development - it remains too high.” Meanwhile, the economy has yet to show signs of cooling as Fed officials had hoped. As a result, the Fed is prepared to raise interest rates further “if appropriate” and to keep policy at a “restrictive level” until inflation comes closer to the central bank’s 2% target. Powell noted that policymakers should remain “agile” in their response to upcoming economic data. 

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‍Banks & Fintech 

Wall Street bank JPMorgan has introduced a contactless payment feature dubbed tap-to–pay for its U.S. merchant customers, the first of which to use it is beauty retailer Sephora. The new tool allows businesses to accept payments via an iPhone without having to depend on a physical point-of-sale unit. Tap-to-pay accepts both credit and debit cards, Apple Pay and other digital wallets, and there’s no limit on the transaction size.

Citigroup has acquired a stake in Rextie, a Peru-based forex fintech startup, the bank’s maiden fintech investment in the Latin American region. Citi will be making a cash investment to support Rextie’s growth and expansion. Rextie, which supports forex transactions via digital channel to SMBs and individuals, has completed $4.5 billion in transactions since its founding in 2016.

Takeaway: Fintech innovation continues to disrupt Latin America’s financial services industry across segments like “lending, payments, insurance, regulation, and compliance,” as outlined in a report by the International Monetary Fund (IMF). As of 2021, digital payments and digital banks were used by over 300 million and 30 million Latin Americans, respectively, led by Brazil and Mexico. Fintechs have helped to support competition and financial inclusion, paving the way for greater innovation in the years to come. 

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Brazil | Image by Unsplash

Crypto & Blockchain 

• The U.S. SEC has charged Tital Global Capital Management, a fintech investment adviser, with misleading investors about returns. As part of a settlement, the firm will pay a fine of $1 million to the securities watchdog. Titan offers individual investors access to sophisticated investment strategies via a trading app and advertised potential returns as high as 2,700% related to its cryptocurrency trading strategy. 
• Card giants Visa and Mastercard are pulling back from their respective partnerships with leading cryptocurrency trading platform Binance as regulators continue to take aim at the digital asset industry. Visa is no longer issuing co-branded cards with Binance in the European market, as of July, while Mastercard is scuttling its collaboration with the crypto exchange next month. Binance has had a target on its back amid the regulatory crackdown on the crypto industry. 
• U.S. cryptocurrency exchange Coinbase, which is in the middle of a lawsuit with the SEC, has acquired a minority stake in Circle Internet Financial, a blockchain-based fintech that is behind the stablecoin USDC. Coinbase and Circle are dissolving a former consortium that oversaw the USDC stablecoin, leaving Circle to take full ownership of it. Meanwhile, the USDC stablecoin will now support six more blockchains, bringing the total number of blockchains on which it is integrated to 15.

Takeaway: The cryptocurrency market has yet to escape the “crypto winter” that has left prices depressed since about 2022, when the bitcoin price plummeted to $18,000 after reaching an all-time high of nearly $70,000 a year prior. The crypto market goes through cycles, and market downturns generally prove which blockchain companies will have staying power, as noted by Circle chief Jeremy Allaire. Regulators have prioritized creating a legal framework in which blockchain startups can operate, which Allaire says is both constructive and positive. 

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Digital-Only Payments 

Yum Brands, the parent company of fast-food brands such as Taco Bell, is exploring making the shift to 100% digital payments. Yum Brands, which also owns the Pizza Hut and KFC brands, is looking to incorporate at least one digital component to all customer transactions, whether it’s on the website, the mobile app or physical kiosks inside the restaurants. Yum Brands may build artificial intelligence into its drive-thru locations to support the shift to digital payments.  

Lower Pay for New Hires in Technology 

According to ZipRecruiter data cited by The Wall Street Journal, companies across sectors of the economy are paying new hires less money this year vs. last year. The average pay for roles in the technology industry is nearly 20% below last year’s levels after the industry went on a hiring spree following the pandemic. New hires represent less than 4% of the workforce each month, according to ZipRecruiter. Companies are no longer feeling obligated to match tech leaders like Facebook parent Meta on pay.

Image by The Wall Street Journal

Takeaway: Despite this trend for new hires, wages more broadly has been climbing higher of late, having surpassed the rate of inflation in June. However, wage growth reached a peak in the summer of 2022, since which time it has fallen by 5.7%. 

New Hire 

Walmart continues to strengthen its financial technology offering. Most recently, the e-commerce and big-box retailer has reportedly hired former PayPal executive Tim Ritz as its chief procurement officer, replacing the outgoing DK Singh. At PayPal, Ritz was responsible for spearheading procurement and real estate for the fintech and is known for cost efficiency through strong supplier relationship management, according to Walmart CFO John David Rainey. 

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Image by Talk Business & Politics

Stock Spotlight

• Affirm - Shares of buy now pay later (BNPL) stock Affirm (AFRM) got a boost, rising by approximately 30% in response to the company’s latest quarterly earnings. Investors cheered the results, which included a 25% increase in gross merchandise volume fueled by higher consumer spending in areas such as travel as well as additional revenue streams through partnerships with companies like Stripe in addition to Affirm’s new debit card.

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AFRM 5-Day Chart | Image by TradingView

• Better Home - Shares of online mortgage company Better Home, aka Better.com, received a chilly reception in the equity markets. The stock, which listed through a SPAC combination, suffered a massive sell-off, shaving off more than 90% of its value on its trading debut. Better.com, whose CEO Vishal Garg is infamous for firing hundreds of staff via a Zoom call in 2021, has suffered from weakening fundamentals since announcing its combination with Aurora Acquisition Corp.  

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Better Home Stock | Image by TradingView 

Weekend Reads

• “Fender CFO on Finding the Right Chord When Disaster Strikes” - PYMNTS.com highlights lessons learned from Fender.com CFO Matt Janopaul from a crisis, including, how to make quick decisions, tough calls, and course corrections. 

• “4 Ways Finance Leaders Can Leverage ChatGPT” - In this opinion piece, CFO.com explores four ways in which finance chiefs can harness the capabilities of the Open AI’s ChatGPT chatbot to support decision making, create greater efficiencies, and identify growth drivers.  

• “How Fintech Can Unlock The $31 Trillion Female Economy” - Forbes published an article on how the fintech industry can unlock opportunity from the lucrative “female economy,” driven by iconic entertainers such as Beyoncé and Taylor Swift.

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Image by Forbes

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Now that Jackson Hole is over, the focus shifts to upcoming economic indicators to provide a read on the economy and whether it’s heating up or cooling off. This week’s data includes Dallas Fed Manufacturing Survey, which reflects factory activity. Last month, this poll declined while the production index, which measures manufacturing conditions, held relatively steady. 

Meanwhile, a personal income and spending report on Thursday will provide yet another glimpse into the strength of the consumer. Consumers are largely credited with helping the U.S. economy to stave off a recession in 2023. The August employment report is released on Friday, Sept. 1. 

Takeaway: With a high interest rate environment seemingly set to stick around for a while, companies will have to continue to navigate the uncertainty that comes along with it. Fintech companies have not been able to escape the economic headwinds and may need to stay creative to keep profits going through various ways, such as attracting angel investors, government funds, and strategic corporate partnerships, to name a few.

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