Avg Card Rates Hit 21.5%; Mercury Lands $100Mn Warehouse Line; Logik.io’s Series B

A blockbuster September jobs report. FOMC minutes reveal disagreement about half-point cut. Average credit card rates hit 21.5%. Fiserv lands Georgia specialty acquirer charter. Mercury announces $100Mn warehouse line. Logik.io scores $25Mn Series B. Grasshopper acquires Auto Club Group. LendingClub and Pagaya acquire assets from Tally. Plaid leans into pay-by-bank.

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A “Blowout” Jobs Report

The minutes of the most recent FOMC meeting dropped last week, and it sounds like the meeting was more contentious than usual. While all participants supported lowering the Fed’s key interest rate, there was disagreement about a 25bp cut vs. the larger 50bp cut that ultimately came to pass. According to the meeting minutes, “some participants” indicated they would have “preferred” a smaller cut, with “a few others” indicating they would’ve supported that decision.

Still, what’s done is done. But those hoping for another 0.50% cut at the Fed’s next meeting should check those expectations, particularly in light of what some analysts are calling a “blowout” jobs report. Non-farm payrolls jumped by 254,000 in September, which well surpassed the consensus estimate of 150,000. The unexpectedly strong jobs report brought the unemployment rate down by 0.1%-point month-over-month to 4.1%.

Lower interest rates aren’t providing borrowers any relief on their credit card balances, though. Despite the recent cut to the Fed funds rate, the average credit card interest rate is near its highest level, at 21.5%, according to Fed data going back to 1994. Some issuers appear to be hiking rates in advance of the CFPB’s $8 late fee cap taking effect. The CFPB has estimated the cap would reduce the $14Bn issuers collect in late fees each year by some $10Bn.

Fiserv Lands Georgia Specialty Bank Charter

Core banking provider and payment processor Fiserv has become just the second firm ever to secure approval for a specialty state-issued bank charter in Georgia. The Merchant Acquirer Limited Purpose Bank Charter was created in 2012, but it has received little interest, as there is no guarantee that the card networks will grant membership to entities holding this type of charter. The only other firm to obtain one, startup Finaro (acquired by Shift4), was rebuffed when it sought principal membership in the card networks. Presumably Fiserv, given its scale and maturity as a business, conferred with the card networks prior to seeking the Georgia charter. If Fiserv is granted principal membership in Visa and Mastercard, it will be able to act as a merchant acquirer without relying on a third-party bank partner. The charter would also enable Fiserv to act as a merchant acquiring bank sponsor for smaller bank clients, who may not have the capacity to obtain network membership on their own. Fiserv has made clear it does not intend to become a “traditional” financial institution.

In other Fiserv news, the company is partnering with Canadian open banking and instant payments startup Zūm Rails. The deal will bring Zūm Rails’ capabilities to Fiserv’s U.S. customers, the companies said. On the flip side, Zūm Rails will leverage Fiserv’s embedded finance capabilities to “facilitate accounts payable and receivable transactions, merchant onboarding, reporting, reconciliation and fraud management without relying on a bank or other third-party provider,” the company said in a press release last week.

Mercury Secures $100Mn Warehouse Line

Business banking startup Mercury announced last week it secured a $100Mn warehouse facility to support the fintech’s credit card program, branded as IO. The program, which Patriot Bank sponsors, was launched in 2022. Natixis Corporate and Investment Banking is providing the warehouse line. Of the news, Mercury’s VP of finance, Dan Kang, said, “We will continue to invest in our IO card programme, including product development, hiring, and building new features.” Mercury, despite challenges that include two of its key bank partners getting hit with enforcement actions, has maintained a steady cadence of shipping new products and features, including its recently announced employee expense reimbursement capability.

Logik.io Announces Series B

Logik.io, a startup building a software platform to simplify configure, price, quote processes, announced it has raised a $25Mn Series B. Existing investors ServiceNow Ventures, Salesforce Ventures, Emergence Capital, and High Alpha and new investor Permanent Capital participated in the round. “Configure, price, quote,” or CPQ, is a process by which sales reps customize proposed features and pricing for potential customers, which, historically, could be a manual and time-consuming process. Logik.io’s platform helps to automate and streamline this work, enabling sales reps to spend more time selling. The company plans to use the additional funding to support “new projects,” continue developing features and capabilities, and to expand its partnerships. Of the news, Logik.io cofounder and CEO Christopher Shutts said, “With continual enhancements to our platform and capabilities, a growing number of customers across industries and geographies, our enviably high NPS scores, new strategic partnerships, and expansion of our global teams — all combined with our ambitious growth plans — we are using this investment in our company to boldly push the boundaries of what CPQ can and should be."

Grasshopper Acquires Auto Club Group

Grasshopper Bank has reached an agreement to acquire Auto Club Trust, the federally chartered savings bank subsidiary of The Auto Club Group (ACG) and Insurance Association, the companies announced last week. For context, the Auto Club Group (ACG) and Insurance Association is the second largest AAA Club in North America. As part of the cash-and-stock deal, Grasshopper will need to raise an additional $35Mn in equity, and ACG will take a 4.9% ownership stake in the bank. Boards of both companies have signed off on the deal, which is anticipated to close in the first half of next year, subject to typical closing conditions. The acquisition of ACG will boost Grasshopper’s total assets by approximately 50%, to around $1.4Bn.

LendingClub and Pagaya Partner to Acquire Defunct Tally’s Assets

LendingClub and Pagaya partnered to acquire some of the assets of defunct credit card debt management and consolidation platform Tally, the companies announced last week. Tally offered both loans to allow users to consolidate outstanding debt and tools to intelligently manage and optimize their repayments. LendingClub plans to use the acquired IP to continue building out innovative tools to enable its users to better manage their debt. Pagaya plans to white-label the tech in order to embed it into its B2B offerings. On the news, LendingClub CEO Scott Sanborn said, “Tally’s credit card management platform – along with a few select former Tally employees who have joined our team – will bolster those efforts and accelerate our strategy to empower and engage our members with full visibility into their credit card debt.”

Plaid Leaning into Pay-By-Bank

Plaid has rolled out a capability to help facilitate “pay-by-bank,” or account-to-account payments, for merchants’ recurring payments. The feature, dubbed “Pay by Bank for Bill Pay,” is designed to provide both consumers and merchants a simpler way to automate recurring charges, like for monthly bills or subscription payments, without relying on more expensive to process card payments. Users who have previously interacted with Plaid and have their information stored may be able to set up the recurring payments with a single click, significantly streamlining their checkout experience.

In other Plaid news, the open banking company announced that neobank MoneyLion will leverage its new capability that allows users to see if they pre-qualify for certain loans or credit products. The Plaid feature, dubbed Layer, allows users to opt-in to sharing cashflow data with a potential lender with minimal friction. The lender, in turn, can use this data to better assess what products a user may qualify for.

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