Markets Expect 25 bp Cut; Sedric AI Series A; PayPal Cashback
Cole Gottlieb, Research Analyst
CPI numbers dash hopes of half-point rate cut. Sedric AI and Finally announce fundraises. Goldman takes another hit as it winds down consumer business. Klarna leans into AI narrative. PayPal woos consumers with cashback.
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Markets Expect a 25 Basis Point Rate Cut
Inflation numbers for August came in at 0.2% month over month, putting 12-month inflation at 2.5%. That marks a 0.4%-point decrease from July and the lowest inflation reading since early 2021. Core CPI, which excludes volatile food and energy prices, was up 0.3% for the month, coming in slightly above estimates, putting the year over year increase at 3.2%. Shelter costs were the primary driver of higher-than-expected inflation. While some had been hoping for a 50bps cut, markets are predicting the Fed will cut rates by 25 bps at its meeting next week.
Sedric AI Raises Series A
Sedric AI, an LLM-powered compliance platform, announced it has raised an $18.5Mn Series A. Amex Ventures joined as a new investor, with participation from existing investors The Garage and StageOne Ventures. The company’s AI-powered platform helps financial institutions to monitor and manage communications, risk, and regulatory compliance. The Tel Aviv-based company said it plans to use the new funding to develop its AI lab and expand its go-to-market team and strategy.
Finally Announces Equity & Debt Raise
Finally, an AI-powered account startup, announced it has raised a $50Mn Series B and secured a $150Mn debt facility. The new funding brings the company’s total equity raised to date to $74Mn and debt facilities to $235Mn. In addition to its core bookkeeping functionality, Finally also offers expense management, payroll, payment processing, and corporate card capabilities, putting it in overlapping markets with better-known startups like Ramp and Brex. The company declined to reveal specific financial metrics, but told TechCrunch that its revenue is up 300% since its last fundraise, in March 2022. Finally claims to have over 1,500 business customers in the United States. The company plans to use the new funding to continue developing its product offerings and to expand its marketing and sales teams.
Goldman to Take $400Mn Hit on Loan Portfolio
The pain of unwinding its consumer banking efforts isn’t over for Goldman Sachs. CEO David Solomon told investors at a conference last week that unloading its GM credit card business and another portfolio of loans would impact its Q3 revenue when it reports results in October. The bank expects an approximately $400Mn hit to results from the transactions. The loss on the GM business stems from higher charge off rates in the portfolio, resulting in Barclays, which is acquiring the program, paying less than Goldman originally hoped. The move comes as Goldman continues to wind down its consumer efforts, instead refocusing on wealth and asset management as new growth vectors.
Klarna Leans into AI Narrative
Swedish BNPL provider Klarna continues to lean into an AI narrative in advance of an anticipated IPO. The company’s CEO, Sebastian Siemiatkowski has said he expects to reduce headcount by as much as 50%, replacing employees with AI. Now, the firm says it shut down Salesforce, its CRM, and Workday, an HR platform, replacing them with a simpler tech stack created by AI. Still, there are plenty of unknowns when it comes to leveraging artificial intelligence, particularly regulatory unknowns.
PayPal Woos Consumers with Cashback
PayPal is seeking to gain share of wallet for in-person transactions and is leaning oncashback rewards to make it happen. The company is offering as much as 5% cashback when customers use its Mastercard debit card, either through its app or as a physical card. PayPal has launched a splashy new ad campaign, featuring comedian and actor Will Ferrel, to promote the offering and demonstrate that PayPal isn’t just for online transactions. The company is also seeking to educate users that Venmo can be used as a payment mechanism, not just for peer-to-peer transactions. In other PayPal news, the company has inked a partnership with Shopify. The deal will see Shopify integrate PayPal’s wallet into its payments stack. PayPal will also process a share of Shopify’s credit and debit card payments.
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