Cardless Raises $30Mn; FOMC Nov Minutes; Visa Fee Hikes

Fed likely to continue cutting rates at a measured pace. Core PCE remains elevated. Cardless raises $30Mn in fresh financing. Capitolis announced $20Mn funding round. Ally eyes exit from credit card business. Klarna announces Q3 profit as it angles for IPO. Visa plans to raise some merchant and issuer fees.

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Core PCE Remains Elevated

The Fed is confident that the U.S. labor market remains strong and that inflation is slowly but surely easing, according to the minutes of November’s FOMC meeting released last week. The minutes suggest that the Fed will continue cutting interest rates, though at a measured pace. However, the Fed’s work on inflation isn’t done. Core personal consumption expenditures, the Fed’s preferred inflation gauge, picked up in October. In October, core PCE was up 2.8% year over year and 0.3% month over month. Part of the jump was caused by a jump in stock prices, which drove a corresponding increase in portfolio management fees.

Cardless Announces $30Mn Funding Round

Credit card and loyalty infrastructure startup Cardless has announced it raised a fresh $30Mn in funding. The round was led by Activant Capital and included participation from Amex Ventures, Mischief, Thayer Ventures, and Industry Ventures, among others. Cardless enables its clients to more easily launch co-branded credit card and loyalty products and features, and the company claims to be the only platform to support issuing on Visa, Mastercard, and American Express. According to Cardless’ announcement, the company’s annual recurring revenue has increased fivefold over the past year and its end user numbers have doubled in the last six months. Cardless has recently expanded into the business and ecommerce market, including a partnership with Chinese retail giant Alibaba. The company plans to use the new funding to continue driving product development and expansion in retail, ecommerce, and small-business segments.

Capitolis Raises $20Mn

Capitolis, a startup that describes itself as “unlocking capital constraints” to enable greater access to more diversified capital, announced that it has raised $20Mn in new financing. The investment round was led by Citi with participation from UBS, State Street, Morgan Stanley, a16z, Sequoia, Index Ventures, and others. On the news, Capitolis cofounder and CEO Gil Mandelzis said, “Capitolis has been partnering closely with the industry to make the financial markets safer and stronger within a well-regulated system, and we have seen tremendous growth because of this. Our partnership with the world’s leading banks over the last few years has been terrific and we are excited to expand these relationships as well as add more of the world’s foremost financial institutions as both investors and board members.”

Ally Mulls Selling Credit Card Biz

Ally Financial is reportedly considering the sale of its credit card business, Fair Square Financial, which it acquired for some $750Mn in 2021, Bloomberg reports. Ally’s card business has north of $2Bn in outstanding loans. The move, should it come to pass, would accelerate Ally’s move away from unsecured consumer lending. Earlier this year, the bank sold its point-of-sale financing business, Ally Lending, and its $2.2Bn loan portfolio to Synchrony. And, back in 2019, wound down a cash back consumer credit card it had offered in partnership with TD Bank. Ally, which was originally known as GMAC and was spun off from General Motors in 2006, has historically focused on auto lending.

Klarna Turns Approximately $20Mn in Q3 Profit

Klarna’s effort to position itself for a potential IPO seems to be bearing fruit. The company posted net income of SEK 216Mn (approximately USD $20Mn) in Q3, a 57% increase year over year, it reported last week. Klarna has previously posted profits, prior to embarking on an aggressive product and geographic expansion and facing intense competition from other BNPL providers, particularly when the category was exploding in popularity early in the COVID-19 pandemic. Of the news, Klarna cofounder and CEO Sebastian Siemiatkowski said, “We're back in familiar territory: profit and growth, just like the old days. With our exciting new collaborations with Worldpay, Apple Pay, Google Pay and Adyen, we're closer than ever to making Klarna available at every checkout. We're gearing up for a strong holiday season, and our AI-powered products will help consumers save time, money and reduce financial worry.” The company also announced last week that it plans to hire as many as 100 software engineers for a new tech hub in Warsaw, Poland, which has become a popular location for sourcing technical talent.

Visa Expects to Raise Some Fees

Visa expects to raise some fees it charges merchants and issuers, based on information referenced in last week’s Senate hearing on the card networks. Visa expects its “misuse fee,” assessed when a transaction is authorized but not settled in a given timeframe, to rise by 66% from $0.09 per instance to $0.15. The base transaction fee paid by financial institutions will increase from $0.0018 to $0.0025. Visa will also begin determining its digital commerce service fee based on authorized transactions, rather than cleared and settled transactions. Last week’s Senate hearing took place against the backdrop of a last-ditch effort to advance the Credit Card Competition Act before the end of Congress’ session. The proposed CCCA would require institutions with more than $100Bn in assets to support two networks, one of which could not be Visa or Mastercard, on credit cards that they issue.