Stripe’s $1.1Bn Acquisition; CFPB Finalizes Open Banking Rule; Zip’s Series D

Fed President Logan argues a careful approach to cutting rates. The CFPB finalizes its long-awaited open banking rule. Goldman and Apple reach consent orders with the CFPB. Zip announces a $190Mn Series D. Green Dot, Zenus expand embedded finance and BaaS capabilities. Stripe acquires a stablecoin platform for $1.1Bn.

Last month, the FDIC proposed a new rule that would strengthen recordkeeping requirements for banks that offer certain kinds of custodial accounts. Read a statement from Cross River's CEO in support of the proposed rule and responsible innovation.

Slow and Steady Wins the Race

With the U.S. economy sending somewhat mixed messages, some policy makers are urging a cautious approach to rate cuts. Last week, Dallas Fed President Lorie Logan reiterated her preference for the Fed to lower rates at a careful pace, following the central bank’s initial 50bps rate cut. Logan emphasized the need to let economic indicators drive decision making, saying, “The FOMC will need to remain nimble and willing to adjust if appropriate.” Liquidity remains “more than ample,” Logan said, with the Fed’s balance sheet still well above its pre-pandemic size.

^{Image: J.P. Morgan FOMC Fed Funds Rate Forecast}

CFPB Finalizes Open Banking Rule

CFPB Director Rohit Chopra unveiled the rule during remarks he gave at last week’s Philadelphia Federal Reserve Fintech Conference. The agency had widely telegraphed that the final rule would be released this month. The CFPB has suggested the rule, called for by section 1033 of 2010’s Dodd-Frank, will lead to increased competition in the banking sector and consumers earning higher yield on their savings, paying lower interest rates on their loans, and being able to more easily “fire” financial companies that provide poor service. The final version of the rule hews fairly closely to the proposed version. The most significant differences include the addition of payment apps, like Apple Pay and Google Pay, to the scope of the rule, changes to restrictions on secondary use of consumer data, and a longer compliance timeframe for the largest covered institutions. The nation’s smallest banks, those with less than $850Mn in assets and will be exempt from the rule. Bank trade groups and large institutions like J.P. Morgan Chase were disappointed that the final rule provided no additional liability protection for banks, who are concerned about the potential for fraud or data breaches of third parties that have obtained users’ data.

Almost immediately after its announcement, the Bank Policy Institute, Kentucky Bankers Association, and Lexington, Kentucky-based Forcht Bank filed a legal challenge. The group argues that the CFPB’s rule exceeds its statutory authority and that the rule would put the banking system and consumers at risk.

Goldman, Apple Reach Consent Orders with CFPB

The CFPB has entered into separate consent orders with Goldman Sachs and its credit card partner, Apple. Rumors regarding issues with the companies’ timely handling of customer disputes and complaints have circulated for some time, with reporting suggesting that Apple’s demand that all cardholders operate on a calendar month statement cycle created headaches and strained Goldman’s capacity to respond to user inquiries in a timely manner. The CFPB’s complaint also alleges that “thousands” of consumer disputes were not correctly transmitted from Apple, who handles the customer-facing UX through its Wallet app, to Goldman. The CFPB also alleges the companies misled users about an interest-free payment option for Apple products, dubbed Apple Card Monthly Installments. The CFPB argues customers were misled into believing they would automatically enjoy this benefit when purchasing Apple products with their Apple Card, leading to thousands of customers being hit with unexpected interest charges.

Goldman will pay at least $19.8Mn in redress plus a $45Mn civil money penalty. Apple, which entered a separate consent order with the Bureau, will pay a $25Mn civil money penalty. A Goldman Sachs spokesperson described the Apple Card as “one of the most consumer-friendly credit cards that has ever been offered,” while an Apple spokesperson said the company “strongly disagrees with the CFPB’s characterization of Apple’s conduct.”

Zip Announces $190Mn Series D

Zip (no, not the BNPL provider) announced it has raised a $190Mn Series D. This Zip offers an “AI-driven” procurement orchestration platform. The round, which values Zip at $2.2Bn, was led by VC firm Bond, with participation from existing investors CRV and Y Combinator. New investors Alkeon, DST Global, and Adams Street also participated in the round. The company plans to use the funds to continue developing its “procure-to-pay” product, expanding its geographic area to include Europe, the Middle East, and Africa, and establishing an AI lab. The company says it has saved customers $4.4Bn in procurement spend to date and has tripled the number of large corporate customers it has this year.

Green Dot, Zenus Expand BaaS Capabilities

Last week, Green Dot announced the launch of “Arc by Green Dot,” the bank’s embedded finance effort. The company, which partners with large corporates that include Walmart and Apple, describes the embedded finance capabilities as combining Green Dot’s “secure banking and money processing solutions on a modern, single-source platform.” According to the company, Arc offers “direct” integration with Green Dot Bank, cloud-based and scalable tech, and end-to-end banking services and program management.

In other BaaS news, Zenus Bank, a Puerto Rico-based IFE, announced the launch of its global banking-as-a-service platform, following its integration of certain capabilities from core banking provider Tuum. Zenus intends to offer its U.S. banking infrastructure to fintechs, third-party businesses, and other banks. Zenus Chair Mushegh Tovmasyan claims the bank has “over a dozen” BaaS partnerships in its pipeline.

Stripe Acquires Stablecoin Platform Bridge

Stripe has struck a deal to acquire stablecoin infrastructure platform Bridge for about $1.1Bn, making it Stripe’s largest acquisition to date. That’s quite a premium to the $200Mn Bridge was valued at when it raised its $40Mn Series A. The move deepens Stripe’s commitment to the crypto and stablecoin space. Stripe was an earlier mover in crypto, enabling merchants to accept crypto payments, before shuttering the initiative. The company ultimately reversed course and now appears to be doubling down on crypto and stablecoins, in particular, as an alternate payment rail to its bread and butter of enabling card payment acceptance.