Fed Chair Testifies; Fifth Third Fined; Canoe Raises Series C

Fed Chair Powell testifies in the House and Senate. Fifth Third settles with the CFPB. Netevia announces debt facilities. Canoe raises Series C. Can GenAI save aging cores? Cross River and MassPay partner. Adobe Commerce to offer Klarna BNPL capabilities.

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Fed Chair Powell Testifies to Congress

Fed Chair Jerome Powell hit the Hill to testify in front of the Senate Banking Committee and the House Financial Services Committee last week. While Powell acknowledged progress on taming inflation, he isn’t yet confident price increases are on a sustainable path to the central bank’s long-term 2% target. Powell also gave a nod to the other half of the Fed’s mandate, promoting full employment, in saying that officials are increasingly wary of risks to the labor market. Powell addressed the Fed’s balance sheet, which ballooned due to the bank’s “quantitative easing” strategy. The Fed has reduced its holdings by about $1.7Tr but still has “a good ways to go,” Powell told Congress.

Finally, Powell told lawmakers the Fed, together with the FDIC and OCC, are close to agreeing on rules that would require large banks to hold more capital, the implementation of “Basel Endgame.” There was even a brief exchange about the Synapse/Evolve situation, with Senator Sherrod Brown (D-OH) asking the Fed chair about the situation and what the government is doing to help end users get their funds back.

Powell testified before the latest inflation stats came out on Thursday, which showed CPI declined 0.1% vs. May, making for a year-over-year inflation rate of 3%, near its lowest level in more than three years. Excluding more volatile food and energy prices, core CPI increased 0.1% vs. May and 3.3% vs. the year prior.

Fifth Third Settles Over Fake Accounts, Vehicle Repos

Regional bank Fifth Third entered into a settlement agreement with the CFPB over allegations the bank opened fake accounts in consumers’ names, forced vehicle insurance onto borrowers who already had coverage, and inappropriately repossessed borrowers’ vehicles. As part of the settlement, Fifth Third must pay compensation to a total of 35,000 consumers, including 1,000 who had their cars inappropriately repossessed. Fifth Third will also pay a $20Mn penalty as part of the settlement. The “fake accounts” element of Fifth Third’s settlement is somewhat reminiscent, if on a smaller scale, of the Wells Fargo scandal that came to light in 2016. Fifth Third, like Wells Fargo, employed bonuses tied to sales quotas, which, the CFPB argues, encouraged bad business practices.

Netevia Announces $120Mn of Debt Capital

Netevia, part of payments solutions group Net Element, announced a new deal with private investment firm WhiteHorse Capital. The funding, consisting of “various debt facilities designated to complete key acquisitions, rollout new products and execute on strategic initiatives,” totals $120Mn. Netevia offers a wide variety of capabilities, including business and personal banking, payments, and embedded finance offerings. The company claims to have processed a total of $12Bn in merchant payments since it launched in 2018.

Canoe Raises Goldman-Led Series C

Canoe Intelligence, which provides data management and analysis tools for alternative investments, announced it has raised a $36Mn Series C. The investment was led by Equity Growth and Goldman Sachs Alternatives, with existing investors F-Prime and Eight Roads participating. The company said it has “more than tripled” its valuation since its Series B last year, which valued the company at $25Mn. The company said it plans to use the fresh funding to continue developing its proprietary machine learning and AI technology while growing its market share.

Is GenAI the Answer to Aging Cores?

Generative AI has captured the world’s imagination, including in the highly regulated field of financial services. Now, consultants at firms like Accenture and McKinsey suggest the emerging tech can be used to simplify and streamline upgrades of aging core banking systems, many of which still run on the decades-old programming language COBOL. “The ability to reverse engineer 30, 40 years of legacy Cobol code into close to its original requirements,” could be one of the “most transformative” applications of GenAI to banking, Accenture’s global banking lead, Michael Abbott, told American Banker recently. Still, it’s early days. Abbott acknowledged accuracy is an issue, with 80-85% accuracy reverse engineering code and then using human engineers to bridge the gap.

Did you know Cross River has its own proprietary API-driven bank core? The Cross River Operating System, COS, connects users to a range of banking solutions across payments, lending, and cards, powered by thousands of APIs — optimal for business growth. Learn more about what COS has to offer here.

Cross River and MassPay Partner

Cross River and payment solutions provider MassPay are partnering to expand access to payment infrastructure, including ACH capabilities and instant payment rails FedNow and RTP. Industries where payments latency is particularly challenging, like gig work, independent contractors, and the restaurant and hospitality industries, are set to benefit from simplified access to acquiring and payout capabilities.

Jeff Katz, cofounder and CEO at MassPay, said of the partnership, “Combining Cross River's advanced API technology with MassPay’s global payout infrastructure, enables us to broaden our payments offering and truly deliver on the promise of global real-time payments. This collaboration helps businesses offer their clients, contractors and employees faster access to funds and a smoother payment experience. Our combined expertise ensures businesses can grow easily while providing users with the speed, reliability, and security they need today.”

Adobe Commerce to Offer Klarna’s BNPL

Adobe Commerce, formerly known as Magento, announced a partnership with BNPL provider Klarna to make Klarna’s financing options available through merchants who use Adobe’s ecommerce platform. Klarna touted the deal, saying that the partnership would enable thousands of merchants on Adobe Commerce to benefit from the offering. Still, BNPL typically carries a price tag for merchants, in the form of a higher merchant discount rate than a typical debit or credit card. The benefit, BNPL providers like Klarna argue, is that offering BNPL as part of the shopping experience improves conversion rates and boosts average order value, a key metric for retailers. At the end of the day, it’s up to merchants to do the math and understand if the increased payments costs are worth it.