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Thank you for reading the 10-Q newsletter. Wishing our 10-Q readers season's greetings and a happy new year -- Sara Khairi, 10-Q Editor

Last week we covered: Layoffs and shrinking bonuses — what is Goldman Sachs up to?

The implications of rapid BNPL growth — 3 questions with the VP of Global Buy Now Pay Later at PayPal, Steve Mikulcik

Buy Now, Pay Later gained ground in recent years as an alternative form of credit for online retail purchases. PayPal launched its first BNPL offering – 'Pay in 4' – in 2020, while this year it rolled out 'Pay Monthly'.

I spoke with Steve Mikulcik, VP of Global Buy Now Pay Later at PayPal, about the ramifications of such a fast-growing industry, and whether it is still serving the purpose of facilitating consumers given the current circumstances of mounting debt and soaring losses.

What are the ramifications of such a fast-growing industry that is becoming saturated?

S. Mikulcik: Certainly, there are a lot of players and I think it's good and it's bad. The players demonstrate that there is a lot of demand and a lot of opportunity to offer this product. If you believe some of the WorldPay reports, buy now pay later as a share of e-commerce is expected to double between now and 2024 – so obviously, there are competitors who want a piece of that pie.

But I think with regulation, and pressure on the macroeconomic environment due to inflation and some of the funding of startups becoming less available, there will be consolidation in the industry – and there will be fewer players left standing at the end of the day.

PayPal actually welcomes the regulation as we've already taken steps that we feel will make our product resilient to any regulation -- no consumer fees, no merchant fees, and we're very upfront.

So to answer your question, I feel like all the players are actually helping drive the demand and buzz, to which consumers are really becoming accustomed. In the long run, I do think there will be some consolidation and I feel like PayPal will be well-positioned when that happens.

Do you think VC funding will continue to flow in the BNPL sector, or is it drying up?

S. Mikulcik: I don't have any direct data to point to the fact that it did or could be drying up. But when you look at the valuations of some of the competitors, to me, it would be certainly less attractive from a VC standpoint.

In addition to the upcoming regulation, and the added cost of funds amid the macro environment, I can see how it would be less attractive for companies that don't have the scale, distribution, and platform that we have paid out. It's pretty difficult to start this product from scratch and go one by one and integrate merchant by merchant.

It's no surprise we were actually several years late to the party, but it was nice because we were able to turn it on in our wallet. And our consumers have now used this product at over 2 million merchants -- because we have that wallet and the ubiquity of the wallet.

We also have the ability for consumers to pay with their bank account other than a credit card or a debit card. Competitors or new players that don't have that wallet and that distribution will certainly face an uphill battle and a bit of an unknown regulatory environment.

How does PayPal differentiate itself from the other players and their offerings in the BNPL space?

S. Mikulcik: I feel like we're in a unique position because of our scale and how many consumers use PayPal every day to shop. We have the benefit of when consumers are shopping and using our wallet, we present the pay later options to them, so we're constantly staying relevant.

For example, we launched our Pay in 4 product in the fourth quarter of 2020. Then we further responded to our consumer and merchant demands and launched our Pay Monthly product. So we're constantly listening to our merchants and our consumers and using that as a feedback loop, while certainly keeping an eye on the competition.

But more importantly, we're listening to what our merchants are telling us and what our consumers are saying they want us to provide. We have an opportunity to interact with them every time they check out -- through a little button that says 'learn more about buy now pay later'.

Depending on the amount that they have in their cart, it offers a Pay Monthly offer or the Pay in 4, which is usually for lower transaction amounts between $30.15 and $100. The Pay Monthly, which is a monthly installment product, is from $199 up to $10,000 with terms as long as 24 months.

We're constantly evolving -- whether it's for a $30 purchase or a $5,000 purchase, we want customers to make that purchase with PayPal and have the most transparent options available.

Top stories of the week

BANK OF AMERICA
BofA to offer free financial counseling through Operation HOPE
Bank of America and Operation HOPE partner to offer financial counseling free of cost in 180 financial centers across 17 US markets, including Baltimore, Boston, Northern Massachusetts, Brooklyn, Charlotte, Chicago, Dallas, Philadelphia, San Francisco, and Washington D.C., starting in 2023. The Operation HOPE program, also known as HOPE Inside, offers in-person financial health coaching sessions to help individuals build savings, improve FICO credit scores, and reduce debt. Bank of America plans to add more markets to the HOPE Inside program going forward. (The Paypers)

FISERV
Fiserv and Wedge partner to bolster Fiserv’s AppMarket
Fiserv and US-based smart debit card provider Wedge have forged a partnership. Through this collaboration, Wedge will offer its services to AppMarket, a product of Fiserv. This will allow the company to use Fiserv’s payment technology and offer it to financial institutions more efficiently. On the other hand, Fiserv services such as the real-time fintech ledger or the debit card issues capabilities will offer Wedge the possibility to improve its payment options and develop its customer services. (Barron's)

GOLDMAN SACHS
Goldman Sachs is deepening its banking partnership with Apple
Goldman Sachs launched an Apple credit card years ago and is currently working with Apple on savings accounts for cardholders. The bank is also handling some of the back-end services for Apple’s buy now, pay later offering. The partnership with Apple is reportedly increasing amid an ongoing race to build a super app that offers banking, payment, and investing services -- something Google and Meta haven't been successful at -- in a consumer-banking push after its consumer unit Marcus racked up a record $4 billion in losses. (WSJ)

GREEN DOT
Green Dot and Wealthfront extend partnership
Neobank and Banking-as-a-Service provider Green Dot and automated wealth management fintech Wealthfront have extended their partnership. The two companies initially partnered in 2020 to introduce Wealthfront’s cash account, and provide access to checking features like early direct deposit and bill pay provided by Green Dot. The partnership extension comes as Wealthfront recently increased the APY on its cash account from 3.3% to 3.8%, which will enable it to pass a large portion of every federal fund's rate increase to customers. (Banking Dive)

SHOPIFY
Shopify, Stripe join hands on carbon removal plan worth $11 million
Stripe and Shopify have pledged to spend $11 million in the Frontier fund to reduce the carbon footprint from the environment. Frontier was set up by global commerce and technology firms Stripe, Shopify, Meta, Alphabet, and McKinsey Sustainability, with the aim of investing $925 million in carbon removal credits between 2022 and 2030 to help accelerate deployment and cut down costs. (Reuters)

SPLITIT
SplitIt and Worldline seal North American BNPL agreement 
SplitIt, the provider of installment Buy Now Pay Later services for businesses, and payments company Worldline have inked a deal to deliver card-based BNPL payments. Through the partnership, merchants and marketplaces using Worldline’s payment system will be able to use the new solution to embed BNPL options into their checkout flow using SplitIt’s white label “installment-as-a-service” platform. Splitit will unlock existing consumer credit on payment cards, rebundling it in the form of 0% interest, installment-based repayment plans. Worldline will first integrate SplitIt into its North American processing platform. (PYMNTS)

STIFEL FINANCIAL
Stifel Financial acquires healthcare-focused investment bank Torreya Partners
Investment banking company Stifel Financial acquired Torreya Partners, a merger and acquisition and private capital advisory firm serving the life sciences sector. As a number of companies make big investments in the health sector, Stifel Financial has followed suit by tapping into Torreya's services to broaden its market. These services include Torreya's core M&A business, and advisory expertise in areas such as divestitures and joint ventures, royalty monetization, licensing agreements, and private capital raising. (Seeking Alpha)

WELLS FARGO
Wells Fargo fined $3.7 billion for 'illegal activities'
The Consumer Financial Protection Bureau ordered Wells Fargo to pay a $1.7 billion civil penalty and more than $2 billion to compensate customers with 16 million accounts. The charges are in response to customer abuses in relation to repeatedly misapplying loan payments, wrongfully foreclosing on homes, illegally repossessing vehicles, incorrectly assessing fees and interest, and charging surprise overdraft fees -- with some of the disorderly conduct occurring as recently as this year. Wells Fargo has agreed to pay the settlement amount. (CNN)

Tweet of the week

Chart of the week

At least 32 SPACs holding roughly $18 billion are looking to close up shop and return capital over the coming 2.5 weeks

What's trending

• JPMorgan inks deal for stake in fintech Viva Wallet for over $800 million (Reuters)
• JPMorgan sees real-time payments as a cross-border disruptor (PYMNTS)
• HSBC will no longer fund new oil and gas fields (Thred)