#449
Just Keep Spending, Spending, Spending

Published:

Aug 06, 2022


Author:

Roxy Horrie

Published:

Aug 06, 2022


Author:

Roxy Horrie


Share:

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

Portfolio News


The next fintech movement coming to America - One of the more prominent developments the industry is experiencing is the latest invasion by Canadian fintech companies targeting the hundreds of thousands of financial advisors managing the trillions and trillions of dollars in investable assets residing in the U.S. The most recent example of this PE and VC money crossing the U.S. and Canadian borders is CapIntel, which focuses on day-to-day workflows and fund analysis for financial advisors and is opening up shop in the U.S. Read more

Qlub signs unique partnership to bring ultra-fast checkout to Saudi Arabia - FOODICS, the leading cloud-based restaurant management technology and payments platform in the MENA region, has partnered with Qlub – the leading startup for ultrafast table payments in restaurants. The seamless integration between Foodics’ point of sale system with Qlub’s instantaneous payment platform will enable all restaurants to offer the fastest table self-checkout experience for their customers. Read more

Permira announces strategic investment in Reorg - As part of the transaction, Warburg Pincus will sell its majority shareholding in Reorg to Permira, and the Reorg team will retain a significant ownership interest. Read more

Coinshift partners with crypto crowdfunder EarthFund - The partnership will see Coinshift help secure and manage the treasuries for all projects in the decentralized crowdfunding platform EarthFund's ecosystem. Coinshift CEO Tarun Gupta said the partnership reflects the company’s belief in the “transformative power of DAOs". Read more

Just Keep Spending, Spending, Spending


Household debt tops $16t for the first time, fueled by higher inflation and interest rates - Debt gains were widespread but particularly focused on mortgages and vehicle purchases. Mortgage balances rose 1.9% for the quarter, or $207b, to about $11.4t, even though the pace of originations moved lower. That annual increase marked a 9.1% gain from a year ago as home prices exploded during the pandemic era. Read more

Credit card balances jump 13%, highest leap in over 20 years, as inflation outpaces wage growth - Despite seeing real wage gains this year, Americans must contend with a higher cost of living, which is growing at the fastest annual pace in more than four decades. As inflation outpaces wage growth, credit card balances jumped in the second quarter of 2022. Americans now say they need to be making about $107,800 a year to feel financially healthy, roughly double the national average. Read more

Banks spend big to boost credit-card sign-ups, defying recession fears - Marketing expenses are up at big issuers, including American Express, Capital One and Discover Financial Services. New credit-card account openings are surging. Solicitations promoting zero-percent interest rates on purchases and balance transfers, which fell after the Federal Reserve began raising interest rates in March, are rising again. Read more

Industry News


Paystand acquires Yaydoo in B2B payments mashup - Paystand, a blockchain-enabled B2B payments firm based in the U.S., has acquired LatAm-focused accounts payable startup Yaydoo. The move illustrates the growing appetite for fintech startups to expand overseas. Combined, the two companies serve 500,000 customers and have processed more than $5b in payment volumes. Read more

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

Industry News


B9 - San Francisco based provider of payroll advances to the underbanked raised $2.6m in Seed funding led by Sky Light Invest. Read more

Ben - London based employee benefits platform raised $16m in Series A funding led by Atomico. Read more

Debt DAO - Decentralized crypto credit protocol raised a $3.5m in Seed funding led by Dragonfly Capital. Read more

Footprint - New York based KYC and identity company raised $6m in Seed funding led by Index Ventures. Read more

Galoy - California based bitcoin-native banking software startup raised $4m in Seed funding led by Hivemind Ventures. Read more

Geopagos - Argentina based payments infrastructure startup raised $35m in growth funding led by Riverwood Capital. Read more

Grasshopper - New York based SMB banking startup raised $30.4m in growth funding from investors including Patriot Financial Partners, Endeavour Capital Advisors, FJ Capital
Management, Carpenter & Company and GCP Capital Partners. Read more

Homzmart - Egypt based e-commerce platform raised $23m in growth funding led by STV. Read more

Infima - San Mateo based mortgage-backed security prepayment prediction engine raised $5m in Seed funding led by Radical Ventures. Read more

Kompliant - Idaho based ai-driven risk scoring platform raised $14m in Seed funding led by Level One Fund. Read more

Kontempo - Mexico City based BNPL startup focused on B2B raised $6.5m in new funding led by Portage. Read more

Kurtosis - Houston based provider of crypto developer tools raised $20m in Series A funding led by Coatue. Read more

Lami - Kenya based digital insurer raised $3.7m in Seed funding led by Harlem Capital. Read more

MakersHub - San Francisco based digital transaction and financing solution for manufacturing raised $4.5m in Seed funding led by TTV Capital. Read more

MarqVision - Los Angeles based NFT counterfeit detection startup raised $20m in Series A funding led by DST Global Partners. Read more

Mosey - San Francisco based payroll compliance platform raised $18m in Series A funding led by Canaan Partners. Read more

Mudafy - Mexico City based real estate broker focused on Latin America raised $10m in Series A funding led by Founders Fund. Read more

Parafin - California based SMB growth capital platform raised $60m in Series B funding led by GIC. Read more

PayIt - Kansas City based constituent engagement platform for governments raised $90m in growth funding led by Macquarie Capital Principal Finance. Read more

Raincoat - Puerto Rico based provider of white-labeled disaster insurance software raised $4.5m in Seed funding led by Anthemis. Read more

Savana - Pennsylvania based provider of customer engagement and account servicing software for banks and fintech companies raised $45m in Series A funding led by Georgian. Read more

Stackwell - Boston based digital investment platform focused on closing the racial wealth gap raised $3.5m in Seed funding led by Michael Gordon (Fenway Sports Group) and Jeremy Sclar (Kraft Group). Read more

Twid - India based rewards points-based payment solutions start-up raised $12m in Series A funding led by Rakuten Capital. Read more

ZayZoon - Calgary based earned wage access startup raised $12.5m in growth funding led by Carpe Diem Investments and Alpenglow Capital. Read more


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