Q2 was full of records, although not all were the celebratory type. US credit card balances grew at the highest rate in more than 20 years, while inflation outpaced wage growth to reach a four-decade high. Despite headlines of credit card trends countering fears of recession, a bit more nuance may be helpful to gain a full understanding of these implications on the current environment.
Credit card companies are leaning into growth from several angles. In addition to receiving a natural boost from inflation that generally results in higher fee revenue from increased consumer spending, companies are doubling down on this trend through marketing and advertising, extra rewards, and card mailers. Their efforts are paying off – issuers including Amex, CapitalOne, and Discover all report soaring levels of new account openings.
But what does all of this mean for the consumer? During COVID in 2020 unemployment spiked, but individuals in quarantine put their stimulus checks to work to pay down debt. Now, with a backdrop of low unemployment and low credit card delinquencies, card companies remain resolute in their belief that consumers will continue to be in good financial shape.
In this sense, consumers are aligned with card companies – they are ready to get out of their houses and start shopping. The second quarter saw record spending in the US. With rising costs of living that outpace real wage gains, companies’ assumptions that consumers are making adjustments to deal with inflation and maintain strong liquidity may come under strain. In the near term, though, the consensus seems to be to just keep spending!
Just Keep Spending, Spending, Spending
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Canada's TD Bank eyes further U.S. expansion with $1.3b Cowen purchase - The deal marks TD's second acquisition bid in the United States this year and Canada's second-largest lender by market value has made no secret of its ambitions to expand in the world's biggest economy. TD will fund the acquisition from the $1.9b proceeds from the sale of shares of Charles Schwab , announced on Monday. Read more
Equifax says consumer credit scores changed in computer error - A server “coding issue” led to the inaccurate scores, the consumer credit-reporting firm said this week. The scores covered consumers applying for auto loans, mortgages and credit cards to banks and non-bank lenders including JPMorgan Chase, Wells Fargo and Ally Financial. Read more
Global Payments to buy EVO Payments - Global Payments agreed to buy Atlanta-based payments company EVO Payments in a deal that gives EVO an enterprise value of $4b. EVO provides payment technology and services and operates in more than 50 markets and 150 currencies, according to its website. The much larger Global Payments primarily provides technology and point-of-sale services to merchants and has a market value of around $34b. Read more
Senate plan would put Bitcoin, Ether under commodity regulator’s watch - Senate Agriculture Committee Chairwoman Debbie Stabenow (D., Mich.) and top-ranking Republican John Boozman of Arkansas, are planning to introduce a bill Wednesday that would empower the Commodity Futures Trading Commission to regulate spot markets for digital commodities, a newly created asset class. Currently the CFTC has authority to police derivatives, such as futures and swaps, rather than underlying commodities. Read more
CEOs ditch kinder approach as economy shows signs of chilling - As the outlook worsens, corporate chiefs are bringing back blunt demands, performance reviews and the swag police. The WSJ explores. Read more
Solana wallets ‘drained’ in blow to crypto network - Hackers have targeted the Solana ecosystem, draining crypto funds from thousands of “hot” wallets connected to the internet. It seems hackers have been able to steal both Solana’s own cryptocurrency (SOL) and some compatible with the Solana blockchain, like the stablecoin USD Coin (USDC). Read more
Australia Stock Exchange’s Blockchain Project Hits Another Snag - The Australian Stock Exchange’s plan to replace its main trading applications with a blockchain-based system has hit another snag identifying that more development is required than previously anticipated to meet ASX’s scalability and resilience requirements for the application. Read more
Almost half of mortgaged homes in US now considered equity-rich - Home ownership has reached a milestone in the US. Nearly half of mortgaged properties were considered equity-rich in the second quarter -- meaning owners had at least 50% in home equity. Read more
What the $1.3b Mega Millions Jackpot reveals about the economy - Two things tend to boost lottery-ticket sales: massive jackpots and economic downturns. Last week, the US had both with the Commerce Department saying GDP fell at an annual rate of 0.9% in the second quarter and the Mega Millions lottery had its second-largest drawing ever of $1.3b. Read more
Goldman Sachs credit-card business investigated by consumer watchdog - Goldman said in a securities filing that the CFPB is looking into several areas, including how the bank handles customer refunds and resolves billing disputes. The regulator is also looking into Goldman’s advertisements and how it reports consumer information to credit bureaus. Read more
Warren Buffett-backed Nubank hits 1m crypto users in less than a month - Brazilian challenger bank Nubank has announced hitting one million cryptocurrency users in the country barely a month after launching the service. Nubank’s CEO and co-founder David Vélez confirmed the milestone noting they expected to hit the target in a year considering the ongoing crypto winter. Read more
BlackRock teams up with Coinbase in crypto market expansion - Top BlackRock clients will be able to use its Aladdin investment-management system to oversee their exposure to Bitcoin along with other portfolio assets such as stocks and bonds, and to facilitate financing and trading on Coinbase’s exchange, according to a statement Thursday. The focus of the partnership with Coinbase, the biggest US crypto-trading platform, “will initially be on Bitcoin,” BlackRock said. Read more
a16z now wants to manage the money of the entrepreneurs it backs - Andreessen Horowitz’s recent hire of former Jordan Park Group Chief Investment Officer Michel Del Buono suggests the venture capital firm is getting into startup founder wealth management. Read more
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