Fed Holds On Rates; Ripple Gets Final Charter OK; CapitalOS Raises $21.9Mn

Fed holds rates steady. Consumer confidence ticks up. Merchants notch win on debit swipe fee fight. Ripple gets final trust charter approval. Sezzle applies for OCC charter, deposit insurance. SoFi launches tokenized deposits. Predicate announces Series A. CapitalOS raises $21.9Mn. Casap announces $56Mn Series B. Bizcap scales with new $175Mn debt facility.

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Fed Holds Rates Steady, Consumer Confidence Ticks Up

The Federal Reserve Open Market Committee voted to hold interest rates steady, between 3.75% and 4%, at its meeting last week. The vote, however, was not unanimous. Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack both dissented, voting for a 0.25% rate hike. Additional commentary from the FOMC points towards another rate hike at some point in the future, pending additional data on how inflation is faring. In a press briefing, Fed Chair Kevin Warsh pushed back on the argument that Fed rate policy is ill-suited to temper the AI building boom, which is pushing up prices. Some analysts argue that, because many of the companies powering the spending are cash-rich and believe they are in a winner-take-all environment, rates are less likely to impact their economic calculus. Warsh disagreed, saying, “Interest rates get in the cracks. Interest rates affect, directly or indirectly, almost everything.”

Meanwhile, consumer confidence rebounded somewhat in October, according to the latest data from The Conference Board. The measure rose by 7.5 points to 91.7 from an upwardly revised 84.2 in September. More worryingly, the same report showed that consumers expect prices to rise by 5.8% in the next 12 months. The share of consumers planning to purchase homes, autos, and durable goods all dropped slightly in October.

Fed’s Debit Fee Cap Can’t Include Fixed Costs, Appeals Court Says

Last week, an appeals court ruled that the Federal Reserve’s debit interchange cap, called for by the Durbin amendment to 2010’s Dodd-Frank Act, was improperly calculated. The appeals court ruling affirms a lower court’s ruling and is perceived as a win for merchants, who have long contested the costs associated with accepting card payments. The plaintiffs in the case are arguing that the Fed rule setting the cap should consider only the card issuer’s marginal cost of processing a transaction and should not include fixed costs. The Fed’s current approach includes issuer expenses related to authorization, clearing, settlement, fraud prevention, and network costs, which is not consistent with the language of the statute or Congress’ intention in passing it, the appeals court found. “No matter how much some banks and payment networks disagree with approaching the problem this way, the Federal Reserve does not get to revise Congress’s work,” the judges wrote in their opinion affirming the lower court ruling.

Ripple Gets Trust Charter Approval, Sezzle Files Charter Application

Ripple has received approval from the Office of the Comptroller of the Currency on its application to charter a national trust bank. The news comes less than a year after Ripple obtained conditional approval. Ripple, which issues the RLUSD stablecoin, intends to usethe national trust bank to scale use cases for the stablecoin, including by institutional actors. Ripple CEO Brad Garlinghouse commented on the approval, saying, “For years, we’ve said crypto and banks work better together. Final approval for Ripple National Trust Bank is what that looks like in practice. A national trust charter gives us an even stronger foundation for RLUSD and the institutional products we’re building across payments, custody and capital markets.”

Meanwhile, buy now pay later provider Sezzle is throwing its hat in the ring for a deposit-taking national bank charter. The company announced late last month that it had filed a charter application with the OCC and a corresponding deposit insurance application with the FDIC. Per Sezzle’s announcement, if approved, the bank would offer insured check and savings accounts and credit products. Sezzle chairman and CEO Charlie Youakim commented on the application, saying, “A charter would allow us to offer a broader set of banking products to people who prefer BNPL and digitally native banking products, with the same federal supervision that applies to every national bank.”

SoFi Launches Tokenized Deposits

Late last month, SoFi announced the launch of its tokenized deposit product, SOFIE, which it describes as “the first and only national bank-issued tokenized deposit for consumers.” Each SOFIE token represents $1 on deposit at SoFi Bank, meaning funds are insured up to the FDIC limit. Users holding SOFIE also earn 4.4% APY on the value of their holdings. According to SoFi’s announcement, this allows users to more easily swap SOFIE deposit tokens for SoFiUSD, the company’s stablecoin, which can then be used to trade crypto or move money via blockchain.

Predicate Raises $8Mn Series A

Predicate, a digital asset compliance startup, announced it has raised an $8Mn Series A. The round was led by Blockchain Capital. Predicate helps firms ensure compliance with laws and regulations like KYC and sanctions obligations, even when a transaction is happening outside of their ecosystem. The challenge Predicate is working to solve is how to ensure compliance when an asset has been “tokenized” and is trading or moving outside of a traditional, centralized exchange, like the Nasdaq or NYSE.

CapitalOS Announces $21.9Mn Fundraise

CapitalOS, a “money orchestration layer” for B2B platforms, announced it has raised a $21.9Mn Series A. LGVP led the round, which also saw participation from Group11, WEX Venture Capital, Night Capital, North Ventures, and others. CapitalOS enables B2B platforms to launch embedded wallets, bill pay, cards and receivables. CapitalOS CEO Nir Dremer commented on the fundraise, saying, “Vertical SaaS & AI platforms are experts in their domains, not building payments infrastructure. Our goal is to build the best financial infrastructure so any platform company can offer their end customers world class financial products.”

Casap Lands $56Mn Series B

Casap, a dispute resolution management platform, has raised a $56Mn Series B. The funding round was led by Base10 Partners, with strategic investments from Synchrony and Experian, as well as participation from existing investors that include Lightspeed Venture Partners and Emergence Capital. Casap’s AI platform uses AI agents to gather information, investigate, adjudicate, and take action on consumer disputes. The platform and its agents incorporate regulatory requirements and an institution’s own specific policies and procedures. In the year or so since its Series A, Casap says it increased its revenue by 10x. Casap cofounder and CEO Shanthi Shanmugam explained, “We started with disputes because it was one of the hardest problems in financial services. But our ambition was always bigger than disputes. We wanted to prove that AI could do more than make work more efficient.”

Bizcap Announces New $175Mn Debt Facility

Bizcap, a global SMB lender, announced it has secured a new $175Mn debt facility. The new funding will allow the Australia-founded lender to scale its operations in the U.S. and Canada, the company said in its announcement. Bizcap currently operates across eight markets and has originated more than $5Bn to over 100,000 businesses since its founding in 2019. Albert Gahfi, Bizcap CEO, commented on the new facility, saying, “This is a major milestone for Bizcap and an exciting step in our North American growth… This facility gives us the capacity to bring that approach to more businesses across the US and Canada, while continuing to invest in the technology, products and people driving our growth.”