1033 Comment Letter Deadline; “Skinny” Master Accounts; Deel Raises $300MM

Fed loses access to ADP data. Fed Gov Waller floats “skinny” master accounts. Dem Senators want ILC moratorium. Open banking comment letter deadline. Deel raises $300MM. Tensec inks $60MM credit facility. Modern Treasury acquires Beam. Coinbase acquires Echo. Affirm wants late fee cap. Shift4 does another deal.

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Fed Loses Access to ADP Jobs Data

Federal Reserve officials lost access to the most up-to-date economic data, including employment-related metrics, due to the ongoing federal government shutdown. Now, the Wall Street Journal is reporting that the central bank no longer has access to data from payroll provider ADP, which the company has historically provided for free to the government as a public service. The data sharing relationship between ADP and the Fed has been public for years, but ADP ceased sharing the data shortly after a speech by Fed Governor Waller cited the ADP data in a footnote supporting Waller’s concern that the U.S. labor market is slowing.

Waller Floats “Skinny” Master Account

In other Fed-related news, at the first-ever Payments Innovation Conference, Fed Governor Waller teased the prospect of a more broadly accessible “skinny” version of Fed master accounts. Currently, institutions seeking a master account must be legally eligible and go through a review process, with the level of scrutiny tiered based on the type of institution. While there are defined criteria about who is eligible to apply for a master account, the Fed retains discretion in approving or declining applications. Though some uninsured banks and entities that are not federally supervised may be eligible, non-traditional applicants have historically struggled to be approved for access to the accounts. Waller pitched the idea of the Fed offering a type of “payments account,” which would aim to offer basic payment services to a wider array of institutions. Access to such a “skinny” version of a Fed master account could make it unnecessary for some fintechs and crypto firms to partner with banks for access to payment rails like ACH and FedWire. Waller suggested the accounts, unlike traditional master accounts, would pay no interest, be incapable of overdrafts, wouldn’t permit access to the discount window, and could face possible balance caps.

Dem Senators Want ILC Moratorium

Two Democratic Senators, Elizabeth Warren (MA) and Andy Kim (NJ), are pushing for a moratorium on granting new industrial loan company charters until Congress can “address a longstanding crack in the wall separating banking and commerce,” according to a letter the two sent to FDIC acting Director Travis Hill. The “crack” Warren and Kim are referencing is that ILCs are not considered “banks” for purposes of the Bank Holding Company Act, which means non-financial firms, like auto manufacturers, are able to own and operate them. During the Biden administration, there was a functional stop on new ILCs. While ILCs are state chartered, primarily in Utah, they still need deposit insurance to open their doors and operate, meaning the FDIC can effectively veto the creation of new ILCs. Currently, there are a number of ILC applications pending, including by General Motors, Ford, and wealth manager Edward Jones. While Democrats and some in the banking industry oppose ILCs, arguing they constitute a “loophole,” others argue that the ILC is a legal charter type and that the FDIC should decide deposit insurance applications for ILCs on their individual merits, rather than categorically declining such applications.

Open Banking Comment Letter Deadline Passes

As the deadline approached last week, industry stakeholders filed a flurry of comment letters on the CFPB’s plan to re-write its open banking rule. As a refresher, though the original 1033 open banking rule was finalized at the tail end of the Biden administration, the rule was immediately challenged in court and, when President Trump took office, the CFPB initially asked the court to vacate the rule. When the news that JPMorgan Chase intended to charge punitively high data access fees was met with widespread backlash, the CFPB, under the leadership of acting director Russ Vought, changed course and asked the court to pause the proceedings while the CFPB undertakes a new open banking rulemaking. The CFPB published an advanced notice of proposed rulemaking seeking stakeholder input on a number of topics, including what third parties should be able to access data on a consumer behalf and whether or not data providers should be able to charge fees. A comment letter from a group of trade associations that includes the Financial Technology Association and the American Fintech Council argues that any new rule should continue to prohibit providers from charging fees for data access. Still, the facts on the ground have already changed, with the leading open banking infrastructure company, Plaid, agreeing to new terms, including paying for access, with JPMorgan Chase. While it’s too early to say, it seems likely any final rule will permit data providers to charge some kind of access fee.

Deel Raises $300MM Series E

HR and payroll platform Deel announced it has raised a Series E. The monster $300MM round values the company at over $17Bn. The investment was co-led by Ribbit Capital, Andreessen Horowitz, and Coatue Management, plus participation from Green Bay Ventures, General Catalyst, and numerous others. Deel supports over 37,000 businesses, including large enterprise clients, and processes more than $22Bn in payroll annually, the company said. Deel plans to use the new funding to continue developing its platform, including by recruiting in-demand AI talent, with the goal of providing “native” payroll services in more than 100 countries by 2029.

Tensec Inks $60MM Credit Facility

Cross-border financial services startup Tensec announced it has inked a deal for a $60MM credit facility to scale what it is describing as “Stripe for global trade.” Upper90 Capital Management is providing the credit facility. Tensec, through its bank partner Stearns, provides treasury management, foreign exchange, cross-border payments, and related products and services. According to the company, the new credit facility will enable Tensec to support higher transaction volumes while growing share of wallet with existing customers. Tensec founder and CEO Helcio Nobre commented on the news, saying, “The credit partnership with Upper90 is a catalyst for Tensec's growth. It allows us to rapidly scale our customer base and transaction volumes, bringing more global trade enablers into the cross-border financial services market. Upper90's sophisticated approach to structuring growth capital makes them an ideal partner. This credit partnership allows us to bring exponentially more companies into the market as we scale from $500M to $5 billion in transaction volume.”

Modern Treasury Acquires Beam

Payments infrastructure company Modern Treasury has announced plans to acquire stablecoin startup Beam, the companies announced last week. The all-stock transaction was worth about $40MM, Fortune reported based on a source familiar with the deal. Beam, founded in 2022, provides software to enable banks and companies to send and receive stablecoins. Beam founder Dan Mottice will join Modern Treasury to lead its expansion into stablecoin-powered payments.

Coinbase Acquires Echo

Coinbase is acquiring crypto investment platform Echo for about $375MM, the companies announced last week. Echo’s blockchain-based platform enables founders to raise money from their communities through public or private token sales. Coinbase said that integrating Echo’s capabilities will help it to enable additional, direct community participation in crypto projects. A Coinbase announcement of the acquisition said, “While we’ll start with crypto token sales via Sonar, we plan to expand support to tokenized securities and real-world assets over time, leveraging Echo’s infrastructure.”

Affirm Wants Late Fee Cap

Affirm is pushing to cap late fees on buy now, pay later plans. Company founder and CEO Max Levchin told the FT last week that limiting late fees would mean firms need to focus on stronger credit risk underwriting, rather than relying on punitive late fees to make their business models work. Affirm has long eschewed charging any late fees, whether for its pay-in-four plans or longer-term installment loans. Levchin told the FT, “If buy now, pay later … was capping its ability to make money on delinquencies and defaults by regulating fees down, it would motivate the players to just get really, really good at underwriting. Everyone in the industry who uses late fees is basically just covering up for the fact that they’re not very good at underwriting.”

Shift4 Buys Worldline’s North America Business

Payment processor Shift4 is acquiring Worldline’s North America business. The transaction, once completed, would boost Shift4’s presence in North America by some 140,000 merchants. Financial terms were not disclosed. Shift4 has leaned heavily on acquisitions to grow its footprint. Commenting on this transaction, Shift4 CEO Taylor Lauber said, “This is a textbook Shift4 acquisition, delivering a massive funnel of gateway customers and payments volume to cross-sell onto our global acquiring platform.