Published:
Apr 24, 2023
Author:
Cindy Grazer
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Billions of dollars moved from small lenders to banking giants following the failures of SVB and Signature Bank. Deposits across the 25 largest U.S. commercial banks climbed by $18 billion in March, while smaller banks’ deposits dropped by $212 billion. Yet despite the Fed’s steepest rate hike in decades, big banks are still paying meager yields on both checking and savings accounts, choosing not to pass on higher rates to savers.
For the average American saver, particularly in a risk-off environment, where you park cash really matters and finding the right account can mean the difference of thousands of dollars left on the table each year. The average yield on a traditional savings account is as low as 0.23%, while upstarts, digital banks and big tech companies, including Apple, are paying over 4% APY - a tried-and-true approach to lure customers in hot pursuit for their dollars.
As deposit competition over consumer dollars heats up across financial institutions, wealthy savers are taking their cash out of bank accounts and into products whose rates have more closely tracked the Fed. Consumer outflows as a result of higher deposit rates will have varying implications, but the firms whose revenues largely depend on investors leaving cash in their accounts may face the most trouble. Time will tell if some of the slower moving commercial banks will eventually pay up, but for now, many of their customers are saying “as if” to these measly rates.
Portfolio News
Flutterwave announces Kenya as gateway to East Africa - Africa’s leading payments technology company, Flutterwave, has announced that Nairobi, Kenya, will serve as its regional hub in East Africa. Flutterwave’s strategy is well aligned with that of the East Africa region, ensuring that SMEs are provided with efficient, simple and affordable technology solutions that drive their businesses to profitability across borders. Read more
The Massachusetts Department of Corrections and APDS strike landmark education partnership - The partnership provides every incarcerated individual statewide with free education from day one of their incarceration. Leveraging APDS, Massachusetts is taking an individualized and scalable approach to delivering education, rehabilitation, and workforce plans for each incarcerated individual across the state’s correctional facilities. Read more
Ethereum Shanghai upgrade spurs rotation to DeFi from centralized exchanges - The Shanghai update, also referred to at times as Shapella, enabled investors to queue up to withdraw Ether tokens they had pledged to help operate the blockchain network in return for rewards, a process called staking. So-called liquid-staking providers such as Lido, Rocket Pool and Frax Ether, which have all seen major inflows as a result, also let holders use Ether-based derivatives in a slew of DeFi trading, lending and borrowing apps. Read more
When It Pays To Shop Around
Banks are finally facing pressure to pay depositors more - Small and midsize U.S. banks lost hundreds of billions of dollars in recent weeks to their bigger peers and to money-market funds offering higher yields. That is likely to force many of them to increase the interest rates they are paying to avoid losing more customers. Read more
Apple launches savings accounts with 4.15% interest rate - The high-yield savings accounts, available in conjunction with Apple’s credit card, are one of the tech company’s latest steps into the financial-services space, which also include an option to allow customers to “buy now, pay later” on certain of its hardware products. The company partnered with Goldman Sachs to offer consumers those options, part of Apple’s effort to transform the iPhone into a digital wallet that can help keep consumers linked to the software ecosystem behind its devices. Read more
Industry News
First EU-wide crypto regulations clear final parliament vote - The approval of the EU’s Markets in Cryptoassets, or MiCA, regulation is the first time that governments have tried to supervise the upstart industry on such a scale and follows the collapse of several big players including the crypto exchange FTX. Read more
Why America will soon see a wave of bank mergers - In spite of some of the recent positive bank earnings reports, the market has already made a judgment: America’s banks are worth only about their combined book value, having traded at nearly a 40% premium at the start of the year. The likely result of their low valuations, combined with a landscape in which size matters, is a tried-and-tested response to banking crises over the past four decades: consolidation. Read more
Taylor Swift avoided $100m FTX debacle by asking one simple question - When the now-bankrupt crypto exchange FTX approached her about a $100m sponsorship deal in 2021, the pop star asked them, “Can you tell me that these are not unregistered securities?,” according to the lawyer leading a class action lawsuit against FTX promoters. That attorney also said that Swift was the only celebrity to question the exchange. Read more
Coinbase could move away from U.S. if no regulatory clarity: CEO Brian Armstrong - He said there's a lack of distinction or nuance in how regulators view the different arms of the cryptocurrency industry. Exchanges like Coinbase should be regulated like financial services companies, whereas the decentralized areas of the industry should be handled very differently because there is no central authority to regulate. Read more
Square software turns Android devices into powerful payment technology - Square this week launched Tap to Pay on Android for sellers across the U.S., Australia, Ireland, France, Spain, and the United Kingdom. The new technology lets sellers accept contactless payments directly from their phone, without the need for additional hardware. Read more
Americans go deeper into debt as they use buy now, pay later apps for groceries - US consumers are increasingly using such installment loans to pay for everyday items like groceries, highlighting the financial pain wrought by the worst inflation outbreak in four decades. Almost half of Americans have used BNPL apps, and of those, about 1 in 5 rely on such apps to buy groceries, according to a recent survey from LendingTree Inc. Read more
Biggest US banks wrote off $3.4b in bad consumer loans - The four biggest US lenders wrote off a combined $3.4b in bad consumer loans in the first three months of 2023, a 73% increase from a year earlier. That, combined with additional reserves, boosted provisions at all four institutions to levels not seen since the earliest days of the Covid-19 pandemic. Read more
Network International gets $2.56b takeover proposal - Payments provider Network International said it received a takeover proposal from a consortium of CVC Capital and Francisco Partners at a price of 387 pence per share - a premium of 27.7% to Network's last closing price. Read more
Select Financings
Bixby - Chicago based provider of credit information on private syndicated loan issuers raised $5.5m in Series A funding led by Fitch Ventures. Read more
Charm Solutions - San Francisco based lending insights company raised $3.5m in Seed funding led by BootstrapLabs. Read more
Elevate - Denver based consumer benefits administration startup raised $28m in growth funding led by Anthemis. Read more
Floodlight - UK based smart business account for e-commerce companies raised $6.4m in Seed funding led by Aleph and 83North. Read more
Fractal - New York based digital asset clearing and settlement startup raised $6m in new funding led by QCP Capital and 6th Man Ventures. Read more
Lexion - Seattle based contract management and operations workflow platform raised $20m in Series B funding led by Point72 Ventures. Read more
Mooncard - Paris based spend management startup raised €37m in Series C funding led by Orange Ventures and Portage. Read more
nZero - Nevada based carbon accounting and management platform raised $16m in Series A funding led by Fifth Wall. Read more
TaxCloud - Connecticut based sales tax compliance platform for ecommerce businesses raised $20m in growth funding led by Camber Partners. Read more
Triver - London based provider of short-term working capital to SMEs raised £7m in Seed funding led by Stride, Axeleo Capital and Motive Partners. Read more
Unchained - Austin based bitcoin storage company raised $60m in Series B funding led by Valor Equity Partners. Read more
Waave - Australia based open banking startup for account-to-account payments raised $4.7m in Seed funding led by Morten Belling and Paul Greenberg. Read more
Yonder - London based credit card rewards startup raised £12.5m in growth funding led by Northzone and RTP Global. Read more
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