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FinTechs Pursue Direct Connections to the Fed With National Trust Bank Charters

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CE 100 Index Surges 2.8% as Olo Jumps on $2B Acquisition by Thoma Bravo

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Fiserv’s Shares Fall as Clover Growth Slows and Merchant Payments Processing Revenues Dip

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Trump’s Tariff Freeze: What Could Have Happened if They Stayed in Place?

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FinTechs Pursue Direct Connections to the Fed With National Trust Bank Charters

For several FinTechs, in the move to broaden scale and scope to a nationwide level, all roads lead to the Fed.

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    As has been reported in recent days, FinTechs including Wise, Ripple and Circle have applied to the Office of the Comptroller of the Currency (OCC) for national trust bank charters.

    In doing so, should the applications be approved, the charters would allow these firms to sidestep the piecemeal approach of obtaining state-by-state licenses, and in other cases (as would be seen with Wise, which is based in the U.K.), relying on correspondent banking for cross-border money movement.

    Without a charter in hand, the FinTechs would traditionally seek 50 state-by-state money transmitter licenses, or they could seek to own a bank (as has been seen with the likes of LendingClub) or become one.

    The national trust bank charter, at a high level, sets the stage for FinTechs to operate under the scrutiny of a single regulator (the OCC), while branching out into banking services, such as settlement of transaction, with the exception of holding insured deposits or lending. Circle’s move to gain a national trust charter would enable the firm to offer those custody services.

    The OCC’s Take

    The OCC’s site lists roughly five dozen trust banks. And in a document from the Comptroller focused on national bank charters for FinTechs, the regulator notes that “the OCC views the National Bank Act as sufficiently adaptable to permit national banks—full-service or special purpose—to engage in new activities as part of the business of banking or to engage in traditional activities in new ways… with rare exceptions, all national banks, including insured and uninsured trust banks and other special purpose national banks, are required to be members of the Federal Reserve System.”

    Seeking Direct Connections

    Wise, with charter in hand, would be able to connect directly to the Federal Reserve’s payment rails to clear and settle U.S. dollar-based payments. It’s not farfetched to say the move has long been brewing: In a 2020 blog post, Wise had said that “Fed access for payments companies is smart policy,” and contended that “payment companies rely on bank partners – often competitors – to access payment rails. That ultimately results in added costs to the customer and concentrates risk in a handful of the largest banks who process most payments.”

    The direct access to the Fed would help bypass those middlemen that are a staple of the correspondent banking system, where cross-border payment fees, as estimated by the World Bank, stand at about 6.5%.

    Public commentary period is open until July 18, per the general corporate application timeline.

    And in another example of the quest for direct connections, as PYMNTS reported last week, Ripple subsidiary Standard Custody & Trust Company applied for a Federal Reserve master account as of the end of June. This account would enable Ripple to custody the reserves for its stablecoin with the Fed and issue and redeem stablecoins outside normal banking hours, per the report.

    CE 100 Index Surges 2.8% as Olo Jumps on $2B Acquisition by Thoma Bravo

    Call it a case of pre-July 4 fireworks.  The CE 100 Index gained 2.8% in a week shortened by the national holiday.  All pillars posted gains.

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      Within the Eat segment, which was 3.7% higher, Olo was a standout, jumping more than 15.5%.

      Olo Gets Acquired

      The company announced it had agreed to be acquired by Thoma Bravo, a software investment firm, in an all-cash deal valuing Olo at approximately $2 billion.  The purchase price represents a 65% premium over the end-of-April share price for Olo, which is when the financial press started reporting the company was being courted by potential suitors.

      “The transaction is expected to help accelerate Olo’s growth and strengthen its platform and offerings for the over 750 restaurant brands it serves globally. Upon completion of the transaction, Olo will become a privately held company,” the firms said in the deal announcement.

      In the Pay and be Paid segment of the CE 100 Index, which gained 4.4%, Mastercard was 4.3% higher. 

      Mastercard has expanded its startup engagement program with a focus on cybersecurity.  As PYMNTS reported, the company’s Start Path initiative now includes a “Security Solutions” program dedicated to supporting startups in the fields of cybersecurity, fraud mitigation, digital identity and payment resiliency, Mastercard said.

      Among the startups are OneID, which employs bank-based verification methods to provide a “document-free way” to verify customer credentials, and Scamnetic, which offers AI scam-detection technology to protect against things like phishing and deepfakes.

      Joining them is Spec, which “invisibly monitors” digital transactions to help brands spot and prevent fraud, bots and abuse, and VanishID, which helps companies protect employees by finding and removing exposed personal data publicly accessible online.  Lastly, there is Shield-IoT, which secures mass-scale IoT networks.

      Affirm last week disclosed a partnership with Xsolla, its first link to a firm that offers in-game payment services for video game companies.  Game developers will offer players a BNPL option when they buy items they can use in video games. Affirm shares gained 3.4% while BNPL peer Sezzle gathered 11%.

      Block shares increased by 6.3% in the payments segment.  PYMNTS reported at the end of last month that the company said it had prevented of approximately $2 billion in potential P2P fraud scams since 2020, aided by advanced technologies and the in-app Cash App payments warnings feature that alerts customers in real time to examine their transactions before moving ahead.

      Block Risk Lead Brian Boates told Karen Webster in an interview at the time of the announcement that “when it comes to fraud and scam detection, it’s really rooted in machine learning. We’ve built a number of models internally using all of the data points that we have historically that have gotten really, really good at detecting potentially scam payments in real time.”

      In banking, a pillar up 4.2%, PYMNTS reported that J.P. Morgan Chase reorganized its private bank and named a global head of the bank, which is a new role. David Frame, who previously served as the U.S. head of the private bank, has been appointed to the position. The reorganization of the private bank and the creation of the new role are meant to help the bank assist its wealthy customers in storing their money around the world.  J.P. Morgan’s stock was 2.5% higher.

      Elsewhere, shares of Nike jumped 22%, getting a boost from the announcement that the United States had reached a trade deal with Vietnam. 

      Tesla shares slumped 3.2%.  In its latest quarterly production report, the firm said it delivered 384,122 cars in most recent quarter, sliding 13.5% from a year ago.

       

      Fiserv’s Shares Fall as Clover Growth Slows and Merchant Payments Processing Revenues Dip

      Shares of Fiserv plummeted in intraday trading Thursday (April 24) in the wake of its first-quarter earnings report, which showed slowing growth in its Clover point-of-sale operations and a decline in payments processing activity in its Merchant Solutions segment as consumers pared their spending.

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        An earnings presentation revealed that Clover revenues were up 27%, which indicated a slowdown from 29% gains in the fourth quarter of last year. The annualized GPV, at $296 billion, slipped to 8% gains, down from 14% in the previous quarter, as measured year over year.

        In the payments processing unit of the Merchant Solutions business, adjusted revenues were down by 9% year on year to $276 million.

        Shares were down 13% in early trading Thursday.

        Looking for Accelerating Growth

        During a Thursday conference call with analysts, Fiserv President and Incoming CEO Mike Lyons said the company “had anticipated slower revenue growth to start the year and [remains] confident that growth will accelerate as the year progresses and we execute on existing contracts and key initiatives.”

        The acquisition of Payfare, finalized in March, was a catalyst to grow Fiserv’s embedded finance offerings, and a deal to acquire CCV is underpinning Clover’s expansion, he said.

        A deal announced this week to acquire Money Money in Brazil will “enhance our capital offering to merchants based on risk scoring capability and integration with the receivables registry infrastructure regulated by the central bank,” Lyons said during the call.

        Within the Financial Solutions segment, which showed organic revenue growth of 6%, banking is seeing continued investment by Fiserv in core modernization, per the presentation.

        Fiserv Chief Financial Officer Bob Hau said during the call that the results in the payments-related business came as “we saw declines in discretionary categories in Q1, including travel and hotels as well as restaurants. By contrast, growth at grocery, services and QSR establishments held up relatively well. Through the quarter, we saw a stable January, slightly lighter February in part driven by weather with a rebound in March. For April, small business payment volume is tracking in line with March levels.”

        Canadian Slowdown

        Within Clover, softer volume growth was partly the result of “a slowdown in spending in Canada particularly on travel,” he said during the call. “Canada is currently the largest international market for Clover.”

        However, looking ahead, “banks in particular added Clover hardware as part of a strategic focus to address the SMB acquiring market,” he said. “Such sales bode well for our processing and BaaS revenue going forward.”

        “Banking organic and adjusted revenue each grew 1% in the quarter,” Hau added during the call. “FinTech revenue was a positive contributor, with more revenue under contract to contribute later this year. We expect accelerated growth from experienced digital clients as we now have a more automated migration solution in place that will significantly reduce the implementation time. This is expected to help turn recent sales into revenue faster and help close new sales as the year progresses.”

        Merchant Solutions organic revenue is expected to grow between 12% and 15% for the year, tied to Clover expansion efforts. Financial Solutions organic revenue is expected to grow between 6% and 8%.

        “We continue to expect revenue growth to be weighted toward the second half of the year with some anticipated revenue already under contract and being implemented,” Hau said during the call. “Additionally, we have a number of newer products and markets that are on track to contribute.”

        In response to analyst questions on Clover, Hau said, “We certainly continue to expect growth in the latter part of the year both in terms of further VAS penetration reaching that 25% as well as overall volume growth.”

        Asked on the call about the competitive dynamics of the Global Payments-FIS deal announced this month and how that might impact the merchant landscape, outgoing CEO Frank Bisignano said, “You have Clover on the front end, and now you watch it rolling out globally. So, we then have this partnership model that’s unparalleledbut equally as important [we have] over 1,000 bank partners, and we consider that something we could continue to grow. We’re at the intersection here of merchants and FIs.”

        Payfare is going to end up being a “home run” for the company, Bisignano said during the call.

        “We have a debit network,” he added. “We have an issuing business that’s unparalleled. I love our international franchise. Yes, we leverage the ability to cross-sell through the best distribution network. I feel that market opportunity has opened up across the board, and that would include in the debit space with deals that were done.”

        Trump’s Tariff Freeze: What Could Have Happened if They Stayed in Place?

        Hate to say you read it here first, but here’s a prescient quote left on the cutting room floor from PYMNTS CEO Karen Webster’s interview with QED Investors partner Amias Gerety just two days ago: “Because this is a self-inflicted economic wound, we get an extra dollop of uncertainty. Trump could reverse all of these tomorrow.”

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          He waited until the day after tomorrow. On Wednesday (April 9) Trump announced a temporary suspension of reciprocal tariffs for most countries, reducing rates to a universal 10%. However, tariffs on Chinese imports were escalated to a staggering 125%, citing China’s “disrespect” toward global markets. This sharp increase followed China’s retaliatory tariffs earlier in the week, intensifying trade tensions between the two countries.

          The pause provided temporary relief to many industries and market, as seen in the Dow Jones surge by nearly 2,200 points. However, companies and economists remain cautious about its long-term implications. The freeze does not eliminate tariffs entirely, leaving uncertainty about future trade policies but also pulling the covers on what companies may do if the temporary freeze is lifted for an appreciable amount of time.

          Corporate Reactions: Preparing for Tariffs

          Had the tariffs remained in place, companies across various sectors were poised to pass increased costs onto consumers. Grocery chains like Morton Williams anticipated price hikes of up to 20% on imported items such as olive oil and canned tuna due to tariff impacts. Retailers like Target had already adjusted their inventory strategies earlier in the year to mitigate immediate price shocks but warned of steep increases for perishable goods like fresh produce within weeks.

          Similarly, manufacturers reliant on imported components faced significant challenges. PepsiCo noted declining snack sales due to inflationary pressures even before the tariff announcements. If sustained, higher tariffs could have exacerbated these trends, forcing companies to shrink product sizes (shrinkflation) or reduce offerings altogether.

          For smaller businesses with limited capacity to absorb costs, the effects would have been even more pronounced. Independent grocery stores and smaller manufacturers often adjust prices faster than larger corporations due to lower inventory levels. These dynamics highlight how prolonged tariffs, if they return, could disproportionately impact smaller players in the market.

          A PYMNTS report released earlier this week showed “about half of SMBs rely on immediate sales or existing cash for survival, with business credit cards — which are not a working capital solution — being the most common form of financing for those with access,” PYMNTS wrote recently. ”SMBs with access to some method of financing demonstrate greater confidence in navigating economic challenges.”

          The challenges extend to middle-market companies where — per additional PYMNTS Intelligence research — 60% of CFOs expect the tariffs to bring about additional economic uncertainty and planning challenges. The research also found that almost 70% of finance chiefs foresee supply shortages and product delays, with a similar share executing new costs to restructure their supply chains.

          Consumer Price Hikes: A Looming Burden

          Experts agree that if tariffs had stayed in place, consumers would have faced significant price increases across various sectors:

          Groceries: Yale University’s Budget Lab estimated food prices would rise by 2.8% overall, with fresh produce increasing by 4%. Lower-income households would bear the brunt of these hikes as they allocate a larger share of their income to essentials.

          Clothing: Apparel prices were expected to climb within three to six months due to higher costs for imported textiles and manufacturing inputs. Back-to-school shopping could have become notably more expensive.

          Electronics: Items like smartphones and laptops, which are heavily reliant on China-manufactured components, would likely see steep price hikes under the 125% tariff rate, which is still in place. Although it has become something of an internet meme, the exponential increases in iPhone prices if they were manufactured in the U.S. is an example.

          These increases would not only strain household budgets but also contribute to broader inflationary pressures. Economists warned that sustained tariffs could reduce GDP growth by 0.6% annually and cost the economy $80–110 billion per year. Wedbush Securities tech analyst Dan Ives said Tuesday in an interview with CBS News that Chinese tariffs could create a “category 5 price storm” for personal electronics and other gadgets. Taxing China and other nations at such rates is the equivalent of “flipping a boat upside down in the ocean with no life rafts,” he added.

          Future Tariff Policy

          The temporary freeze has reignited debates on how tariffs should be handled moving forward. Gina Bolvin of Bolvin Wealth Management emphasized that clarity in trade policy is essential for market stability. She described the pause as a “pivotal moment” but cautioned against celebrating prematurely given ongoing uncertainties. Bolvin said the timing also “couldn’t be better” given major financial institutions including Bank of New York MellonBlackRockJPMorgan Chase and Wells Fargo report earnings on Friday.

          “This pause may provide companies with a clearer backdrop for their guidance, offering some relief to a market hungry for direction,” Bolvin added.

          John Canavan from Oxford Economics noted that unilateral tariff policies create significant risks for global commerce. He advocated for negotiated agreements rather than abrupt policy shifts that destabilize markets. “There have been very mixed messages on whether there would be negotiations,” Canavan said. “Given what’s been going on with the markets, he realized the safest thing to do is negotiate and put things on pause.”

          Other developments before the tariff reversal showed how companies were prepared to deal not only with increased costs but from the uncertainty of the tariff drama.

          New tariffs on low-value packages from China could hinder the plans of Shein and Temu. As the Financial Times (FT) reported Tuesday (April 8), the White House has upped duties on those packages to 90% of their value, or a flat fee of $75 that would increase to $150. The duty goes into effect May 2, with the flat-fee hike happening after June 1. The shift follows Trump’s closing of a loophole that allowed Chinese imports under the “de minimis” threshold of $800 to arrive duty-free.

          Walmart announced it was pulling its first-quarter operating income outlook due in part to tariff-related concerns.

          “The range of outcomes for Q1 operating income growth has widened due to less favorable category mix, higher casualty claims expense and the desire to maintain flexibility to invest in price as tariffs are implemented,” the retail giant said in a news release Wednesday.

          Walmart had forecast operating income of 0.5% to 2% for the first quarter when it released fourth-quarter earnings result in February. The company is scheduled to release its full earnings May 15. Walmart said it expects first-quarter sales growth to be in line with a 3% to 4% outlook, with annual sales and operating income growth guidance unchanged, per the release, timed to coincide with the company’s Investment Community Meeting.

          Thousands of Canadian autoworkers were furloughed before the tariffs were rolled back. Now, Canada’s largest private-sector union is warning these temporary layoffs could be the beginning of larger troubles for the sector, Bloomberg reported Wednesday.

          “The industry will not be able to live under these kinds of tariffs,” Unifor President Lana Payne said, per the report. “The longer this goes on, the bigger the fallout we’re going to see. My concern is that we see temporary layoffs turn into much longer layoffs.”

          Around 6,000 Unifor members were laid off temporarily after Trump’s April 2 announcement of tariffs on most countries, the report said. The bulk of those notices went to workers at a Stellantis plant in Windsor, Ontario, which produces Chrysler and Dodge vehicles, and which shut down for two weeks as the carmaker examines the impact of the tariffs, according to the report.

          Amazon reportedly canceled orders from multiple vendors in China and other Asian countries.

          The company’s cancellations of the orders came without warning and didn’t mention tariffs, but their timing suggests they came in response to the tariffs, Bloomberg reported Wednesday, citing unnamed sources and a document it had seen.

          It’s not known how widespread Amazon’s cancellations of orders are, according to the report. The report cited one vendor who said the company canceled a $500,000 order and an eCommerce consultant who said Amazon canceled orders from “several” clients. Amazon did not immediately reply to PYMNTS’ request for comments.

          About 40% of the products sold on the company’s website are purchased by Amazon directly from vendors, while the remainder are listed on its site by third-party sellers, according to the report.