As Klarna IPOs today, the fintech sector is closely watching for indicators of health in the market. How will the murkiness surrounding BNPL’s future be received by a broader network of public investors? And how will the company stack up against competitors like Affirm and Block (Afterpay)?
As we’ve reported, BNPL lacks a central data repository monitoring the quantity and quality of loans the way other products do (think credit cards, mortgages, and more). While BNPL is still a fairly small subsector, and most loans are relatively small, this systemic nescience renders BNPL a “phantom debt,” as Wells Fargo economists put it in 2023. Add into the mix the Trump Administration’s deregulatory zeal, i.e. reneging on the CFPB’s enforcement of BNPL under Regulation Z, and the picture becomes even more opaque.
This is coupled with consumers loading up on debt in a tough macro environment: The number of workers on payrolls will likely be revised down by a record 911,000, or 0.6%, per the government’s preliminary benchmark revision as reported today. It’s the latest indicator of serious warning signs. And while many are cheering a Fed rate cut that seems all but inevitable (and likely supersized) in September, we have the recipe for a sticky financial situation, wherein fintechs, just like regulators and households, are juggling concerns around debt, inflation, and financial uncertainty, hoping not to fumble.
Jonathan Gould is just a few weeks into his role as the Comptroller of the Currency, but the agency is already making significant moves.
Yesterday, the OCC announced “Actions to Depoliticize the Federal Banking System.” Reading the tea leaves a little suggests the OCC itself realizes these changes may hamstring banks’ ability to mitigate risk and financial crime; potential clients who otherwise would have been suspended from or outright denied banking services due to their felonious activity may find a workaround by claiming to espouse certain beliefs. “The OCC is reviewing its approaches to Bank Secrecy Act/anti-money laundering (BSA/AML) supervision to ensure they are not contributing to unlawful debanking and will make changes if needed,” the regulator writes. How prudential.
Meanwhile, the agency announced it renamed its chartering and licensing function and elevated its status, to be managed by newly appointed Senior Deputy Comptroller Stephen Lybarger.
“It further affirms the OCC’s support for the formation of de novo banks, signals its openness to considering business combinations that foster competition and better support consumers and communities, and recognizes our new remit to license payment stablecoin issuers,” Gould said.
It’s a stablecoin world, and we’re just living in it.
–The Editors
