Cross River IQ

Revolut Seeks $40Bn Valuation; Apple Ends BNPL; Evolve Enforcement Action

Cole Gottlieb, Research Analyst

June 24, 2024

7 min read

Consumer spending under stress. Rate cut uncertainty. Evolve hit with cease and desist enforcement action. Biden admin nominates new FDIC chair. Colorado setback in blocking high APR loans. Revolut seeks $40Bn valuation. Wells Fargo losing $10Mn a month on Bilt. Apple ends BNPL play. New insight into X’s payments plans.

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Consumers Showing Signs of Stress

U.S. consumers are showing signs of strain. Retail sales in May increased just 0.1% vs. the month prior after a downward revision, though, excluding gasoline, the metric increased by 0.3%. Recently appointed St. Louis Fed President Musalem suggested it’s more likely to be “quarters” than “months” before it is appropriate to cut rates. But Philadelphia Fed President Harker said he thinks a rate cut this year is still on the table, though he’d like to see “several” more months of improving inflation data first.


Image: Bloomberg


Evolve Hit With Cease & Desist

Evolve Bank & Trust and its bank holding company, Evolve Bancorp, were hit with an enforcement action from their primary federal regulator, the Federal Reserve Board. Evolve is one of four banks that partners with now-bankrupt banking-as-a-service platform Synapse, though the enforcement action noted it wasn’t directly related to the bankruptcy situation. The wide-reaching order imposes significant requirements on the bank, including seeking regulatory non-objection before working with new fintech partners or launching new products with existing ones. The order also flagged issues with Evolve’s BSA/AML compliance, a topic that has been a fixture in many other enforcement actions against BaaS banks. Additional requirements of the order include improving management of IT security, customer due diligence, transaction and suspicious activity monitoring, interest rate risk, and lending and credit risk.


Biden Admin Nominates New FDIC Chair

The Biden administration has nominated Christy Goldsmith Romero to replace current chair Martin Gruenberg at the FDIC. Gruenberg announced he would step down in the wake of a report detailing the agency’s “toxic” culture. Goldsmith Romero is currently a member of the Commodities Futures Trading Commission and has previously been unanimously confirmed by the Senate twice. However, in a contentious election year, her confirmation to lead the FDIC is far from assured. Sen. Sherrod Brown (D-OH), the chair of the Senate Banking Committee, has vowed fast action to progress her nomination.


Colorado Dealt Setback in Blocking High APR Loans

The state of Colorado’s efforts to block loans from out-of-state state-chartered bank lenders that exceed its interest rate caps was dealt a setback last week. A coalition of trade groups sued to block the measure, and, now, a judge has granted a preliminary injunction to block the law from going into effect. The measure was slated to go into effect on July 1, but the injunction will make it nearly impossible to enforce in most situations. The case turns on the definition of “where” a loan is made. Colorado argues loans originated by out-of-state lenders are “made in” Colorado, as the borrowers reside there. The trade groups argue loans are “made in” the state where the lender is based.


Revolut Seeks $40Bn Valuation in Tender Offer

U.K.-based neobank Revolut is seeking a valuation of more than $40Bn in a tender offer, the FT is reporting. Revolut is working with Morgan Stanley to facilitate the sale of about $500Mn of existing shares, including those held by employees. The $40Bn number would be an increase of at least 20% vs. the company’s previous highest valuation of $33Bn. Still, Revolut isn’t without its challenges. While it is a fully licensed bank in the European Union, it has struggled to gain its charter in the U.K. and, in the U.S., lost some $20Mn to fraud due to a payment processing configuration error.


Wells Fargo and Bilt’s Partnership on The Rocks

Wells Fargo is losing as much as $10Mn a month on its partnership with buzzy rent rewards startup Bilt, according to the Wall Street Journal. Bilt lets users pay their rent and earn rewards via its card without incurring a surcharge from their landlord. How the company makes the economics work has always been a bit of a mystery. Now, it turns out, Wells Fargo is footing much of the bill. Wells Fargo was banking on rosy projections of how many users would carry interest-accruing balances and sign up for the bank’s other products. Now, the bank is looking to renegotiate the contract with Bilt, which doesn’t end until 2029. For its part, Bilt isn’t happy either. The startup reportedly isn’t satisfied with how Wells has been marketing the card to its customers.


Apple Pay Ends BNPL Offering

In a surprise move, Apple has abruptly shut down its buy now, pay later offering, Apple Pay Later. The feature, fully launched less than a year ago, enabled users to borrow up to $1,000 to split over four installments. But Apple isn’t stepping away from BNPL altogether. Instead, it announced partnerships with Affirm and card issuers like Citi to offer BNPL plans via Apple Pay. The strategy will allow Apple to have a more harmonized offering across a number of countries by serving as a platform for the distribution of third-party services.


New Docs Shed Light on Musk’s X Plans

Documents X, formerly Twitter, has filed as it seeks state money transmission licenses are shedding new light on Elon Musk’s plans to turn social media site into a so-called “everything app.” According to the filings, X plans not only a Venmo-like peer-to-peer feature, but also the ability to pay business and use X to make in-store payments at bricks and mortar retailers. X, Musk says, needs other revenue sources than advertising and believes the company could become the largest financial institution in the world. The documents also show how X has struggled since Musk took over, with revenue of $1.48Bn in the first half of 2023, down nearly 40% vs. the year prior.




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