Breaking away from its traditional banking methods, JPMorgan Chase has embraced a rather unexpected and contemporary approach by stepping into a market already under the sway of major retailers.

The news: Chase has introduced its newest endeavor, a retail media network named Chase Media Solutions. The launch comes on the heels of the bank’s integration of Figg, a card-linked marketing platform acquired in 2022. The bank has harnessed Figg’s capabilities to establish its own, two-sided commerce platform, incorporating its business clients and banking customers.

Looking deeper: Emerging as a new player with its own media platform, Chase sets itself apart by asserting its status as the only bank-initiated media platform of its kind, granting brands direct entry into its vast banking customer network.

Chase’s digital media endeavor enables advertisers and marketers to leverage the bank’s consumer transaction or spending data, enabling precise targeting of Chase’s customer base of 80 million individuals.

From both the merchants and the bank’s standpoint, a few significant points stand out:

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A victory, but in whose favor?

by SARA KHAIRI

After Visa and Mastercard’s landmark settlement over swipe fees, the sentiment ‘better late than never’ resonates strongly.

If passed, Visa and Mastercard will cut their transaction fees within the United States, a long-awaited development for merchants who stand to reap savings of up to $30 billion in interchange over the next five years. This settlement marks the culmination of a protracted legal battle initiated in 2005 by merchants, who contend that the credit card duopoly charges exorbitant payment processing fees to their detriment.

As part of the revised terms of the networks’ rules, the two largest credit card networks and their issuing banks will also enforce caps on these new lower rates until 2030 and also eliminate anti-steering provisions.

Separating fact from anticipation

While the news is still fresh and unfolding, understanding the degree to which different players —  merchants, banks, or consumers — truly benefit or stand at a disadvantage in the value chain will necessitate clarity once the dust settles.

Currently, it remains an intricate conundrum to unravel.

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After Visa and Mastercard’s landmark settlement over swipe fees, the sentiment ‘better late than never’ resonates strongly.

If passed, Visa and Mastercard will cut their transaction fees within the United States, a long-awaited development for merchants who stand to reap savings of up to $30 billion in interchange over the next five years. This settlement marks the culmination of a protracted legal battle initiated in 2005 by merchants, who contend that the credit card duopoly charges exorbitant payment processing fees to their detriment.

As part of the revised terms of the networks’ rules, the two largest credit card networks and their issuing banks will also enforce caps on these new lower rates until 2030 and also eliminate anti-steering provisions.

Separating fact from anticipation

While the news is still fresh and unfolding, understanding the degree to which different players —  merchants, banks, or consumers — truly benefit or stand at a disadvantage in the value chain will necessitate clarity once the dust settles.

Currently, it remains an intricate conundrum to unravel.

---

A victory, but in whose favor?

by SARA KHAIRI

After Visa and Mastercard’s landmark settlement over swipe fees, the sentiment ‘better late than never’ resonates strongly.

If passed, Visa and Mastercard will cut their transaction fees within the United States, a long-awaited development for merchants who stand to reap savings of up to $30 billion in interchange over the next five years. This settlement marks the culmination of a protracted legal battle initiated in 2005 by merchants, who contend that the credit card duopoly charges exorbitant payment processing fees to their detriment.

As part of the revised terms of the networks’ rules, the two largest credit card networks and their issuing banks will also enforce caps on these new lower rates until 2030 and also eliminate anti-steering provisions.

Separating fact from anticipation

While the news is still fresh and unfolding, understanding the degree to which different players —  merchants, banks, or consumers — truly benefit or stand at a disadvantage in the value chain will necessitate clarity once the dust settles.

Currently, it remains an intricate conundrum to unravel.

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Despite consumer business woes, Goldman shines in private credit.

by SARA KHAIRI

Goldman Sachs Asset Management is strategizing an expansion of its private credit portfolio, with aspirations to increase it to $300 billion within the next five years, a rise from its current $130 billion allocation.

According to Marc Nachmann, Goldman’s global head of asset and wealth management, at least one-third of the total investment sum of the $40 billion to $50 billion earmarked for alternative investments this year, will be directed to bolster private credit strategies. 

CEO David Solomon has pinned his hopes on Goldman’s asset management division since the Investor Day last year, considering it a ‘strategic alternative’ to the then deteriorating consumer business. This gradual shift came after the bank weathered eight consecutive turbulent financial quarters, largely attributed to its bumpy venture into consumer banking.

In Q4’23, Goldman distanced itself from those initiatives and redirected attention to its core business. The bank surprised analysts with an unexpected 51% surge in profits compared to the previous year during the final quarter of 2023. While the fee the FDIC assessed on GS was comparatively smaller than those of its peers, having a lesser impact on Goldman’s net income, a significant driver behind its profit increase was the growth witnessed in the asset and wealth management division.

What’s fueling Goldman’s ambition? 

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• how digital adoption is affecting physical branches
• strategies for combating digital fraud
• factors contributing to Erica’s popularity as a digital banking assistant

An increasing majority of Americans are choosing digital banking options with 71% preferring to manage their bank accounts through a mobile app or a computer. 

This trend was also pronounced among major banks such as Bank of America, JPMorgan, and Wells Fargo highlighting the growing preference for digital banking solutions, as evidenced by their financial results of the final quarter of 2023.

Bank of America currently has 57 million verified digital users, with over 35 million opting for digital alerts. The most common alerts last year included updates on account balances, available deposits, and virtual debit card usage. Throughout 2023, clients logged into their accounts a total of 12.8 billion times, with 3.3 billion logins in Q4 alone, marking a 10% YoY increase. They also interacted 673 million times with virtual financial assistant, Erica, reflecting a 28% YoY surge.

I had a conversation with Jorge Camargo, Managing Director, Mobile App, Online Banking and Erica AI at Bank of America, about:

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Looking deeper into BofA’s route to digital banking.

by SARA KHAIRI

An increasing majority of Americans are choosing digital banking options with 71% preferring to manage their bank accounts through a mobile app or a computer. 

This trend was also pronounced among major banks such as Bank of America, JPMorgan, and Wells Fargo highlighting the growing preference for digital banking solutions, as evidenced by their financial results of the final quarter of 2023.

Bank of America currently has 57 million verified digital users, with over 35 million opting for digital alerts. The most common alerts last year included updates on account balances, available deposits, and virtual debit card usage. Throughout 2023, clients logged into their accounts a total of 12.8 billion times, with 3.3 billion logins in Q4 alone, marking a 10% YoY increase. They also interacted 673 million times with virtual financial assistant, Erica, reflecting a 28% YoY surge.

I had a conversation with Jorge Camargo, Managing Director, Mobile App, Online Banking and Erica AI at Bank of America, about:

• how digital adoption is affecting physical branches
• strategies for combating digital fraud
• factors contributing to Erica’s popularity as a digital banking assistant

 

How will digital adoption affect bank branches and customer relationships, particularly for older generations who prefer in-person interactions?

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Perfecting the skill of analyzing and aligning ‘ability to pay’ with ‘verification’.

by SARA KHAIRI

Amid a backdrop of mounting consumer payment defaults, more stringent regulatory frameworks, and heightened capital requirements particularly affecting major banking institutions, underwriting has experienced a notable contraction. 

This shift has catalyzed a transition within the lending market, moving away from the traditional dominance of established financial institutions toward the emergence of non-bank entities competing for market share. 

FIs are exploring beyond conventional underwriting metrics to improve decision-making processes and risk assessment with the help of artificial intelligence [AI] and big data to catalyze overall business growth. Just over half, 65% of FIs in the US use alternative credit data for 50%-100% of new applicants, with over half of them reporting revenue increases of more than 15%.

Yet, financial institutions grapple with obstacles in navigating the technology and route for credit risk assessment and management, according to a new report by Visa. 

I engaged in a conversation with Carl Rutstein, Visa’s Global Head of Advisory Services, about…

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Robinhood suggests ‘preparing for your golden years’ starting NOW.

 

by SARA KHAIRI

Robinhood is expanding and showing a readiness to explore untapped areas within the industry.

While trading forms the bedrock of Robinhood, the investment platform has embraced the ethos of diversification. Sherwood Media, credit card business, Gold Subscriptions, high APY on deposits, traditional and Roth retirement accounts, and most recently launching services in the EU for crypto trading and the UK for brokerage are key components orchestrating the firm’s expansion through a diversification narrative.

The newest step in driving these efforts forward is the rollout of the Robinhood Retirement For Independent Workers plan. What sets the service apart is its exclusive targeting of gig workers, a group that often perceives retirement as unattainable. Roughly one-third of American workers engage in the gig economy through their primary or secondary employment, totaling an estimated 57 million individuals.

Tearsheet Take: What drove this choice? And the bigger question…

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Back to basics: Banks refocus on small businesses for growth prospects.

 

by SARA KHAIRI

 25% increase in median revenue over the past 18 months and are optimistic for the future. However, this doesn’t discount the fact that they still confront their fair share of challenges.

I had a discussion with Shruti Patel, the Chief Product Officer for the Business Banking Segment at U.S. Bank, regarding:

• the latest trends in the SMB sector 
• whether conditions have improved 
• ways in which financial institutions can strengthen their support for SMBs

Before joining U.S. Bank, Patel served as the Director of Partnerships at Shopify, where she focused on building partnerships and engaging with software development.

What challenges are SMB owners facing today – have things turned for the better stepping into 2024? 

Shruti Patel: Last year, U.S. Bank conducted a nationwide survey of small business owners to study the complexities they are facing today. The small business owners identified their top stressors as obtaining enough funding to support their business (80%), supply chain issues (78%), needing to upskill their workforce (74%), staffing shortages (77%), and competitors in the marketplace (79%).

Small business owners wear a lot of hats to face these challenges and ensure their business runs smoothly. As a result, one of the greatest problems SMB owners face today is lack of time. Although 88% of small business owners said they feel personally fulfilled by their work, 83% felt stressed by their workload and lack of time to do everything they need. 

I believe digital solutions can play a huge role in addressing this dynamic. 82% of small business owners say that investing in digital solutions would reduce stress in their day-to-day life and 42% say digital solutions free up time, allowing them to focus on more strategic responsibilities. There is a need for financial institutions and other providers to help small business owners find innovative solutions through digital tools that can save them time and energy.

How are SMBs finding ways to keep moving forward?

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Jack of all trades (pun intended), master in some.

by SARA KHAIRI

While Gen AI has been the primary focus of discussions quite recently, attention has also shifted to bitcoin after the SEC approved US-listed ETFs. This development has sparked renewed interest and conversation surrounding cryptocurrency within the broader conversation.

Crypto advocates are optimistic that the advent of bitcoin ETFs will likely propel a surge in demand for the asset class and attract a diverse array of investors who had previously been hesitant due to lingering concerns about custody practices and the safety of crypto exchanges.

While this might hold water for novice crypto investors, it doesn’t quite ring true for Robinhood traders who still opt to trade in spot bitcoin rather than bitcoin ETFs. Despite the online brokerage offering all the 11 spot Bitcoin ETFs since January 11, the first day of trading, only 5% of overall trading in crypto has come through the ETF, with 95% still executed via spot trading, according to Jason Warnick, CFO Robinhood. However, this trend could become clearer once the next Q1 2024 results are in.

While trading forms the bedrock of the business, the investment platform has embraced the ethos of diversification.

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Wins and areas for improvement went hand in hand.

 

by SARA KHAIRI

 

As PayPal charts its course, it rides a roller coaster of experiences, new product feature rollouts, layoffs, and earnings fluctuations.

Last week, the payments firm reported its earnings for the final quarter of 2023 with a solid 9% increase in Q4 revenue, reaching $8.0 billion, while FY 2023 revenue climbed 8% to $29.8 billion. The company encountered obstacles, too, such as a 2% decline in active accounts and a 1% decrease in transaction margin dollars to $13.7 billion over the course of the full year.

A couple of weeks before reporting its financial results, PayPal unveiled upgrades to its services, including AI-driven personalizations and checkout experiences for merchants and consumers – something it has been working on for a while. 

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“2024 will be a transitional year,” CEO Anthony J. Noto said.

 

by SARA KHAIRI

SoFi reported its fourth quarter 2023 results this week. Net income came in at $47.9 million, while revenue grew 34% from the prior-year quarter to a record $594.25 million. Breaking through a significant milestone, SoFi turned a profit in the final quarter of 2023, which has been awaited for quite some time.

Why wasn’t it profitable earlier?

Despite SoFi’s delivery of strong quarterly earnings in the past year, analysts continued to harbor concerns regarding the company’s future path and its prospects for profitability since its second-quarter financial results of 2023.

As of July 2023, SoFi Bank offered an APY of up to 4.40%, which has since increased to 4.60%, without any account fees. Additionally, customers qualifying for direct deposits could enjoy a bonus of as much as $250, which has now increased to $300. During the same period, the federal funds rate experienced a shift, touching 5.00% in the early part of the second quarter of 2023, and has since stabilized within the 5.25% to 5.50% range.

While SoFi successfully attracted customers throughout the quarters with enticing high-yield offerings and perks, the backend costs associated with these deposit relationships have been eroding the company’s profit margin.

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