A weekly five-point roundup of critical events in fintech, the future of finance and the next wave of banking industry transformation.
Regional Banks Have Another Crisis to Endure
What happened: A run on regional banks killed three this spring, and now the sector’s expanded exposure to commercial real estate over the past decade, some of it well hidden, represents a new risk.
Why it matters: “Over the past decade, banks also increased their exposure to commercial real estate in ways that aren’t usually counted in their tallies. They lent to financial companies that make loans to some of those same landlords, and they bought bonds backed by the same types of properties. That indirect lending—along with foreclosed properties, trading portfolios and other assets linked to commercial properties—brings banks’ total exposure to commercial real estate to $3.6 trillion, according to a Wall Street Journal analysis. That’s equivalent to about 20% of their deposits.”
What’s next: More doom looping. Increased vacancies to go with increased rates means most skylines you see from now on will be in various points of distress. (By Shane Shifflett, Wall Street Journal)
No One Wants a Binance Credit Card
What happened: Mastercard just stopped offering Binance-branded credit cards in Latin America and the Middle East, only a few months after Visa ended a similar partnership.
Why it matters: There’s two takeaways. One is that when every major American civil and criminal investigator is taking a deep look at a company, it may become toxic in the eyes of established brands. The other is that after a half-decade of hype there just appears to be little interest in crypto from traditional finance.
What’s next: The recent crypto ETF wins set up a dynamic where it might make sense to own some in your 401K but there’s still little reason to have it available for daily use. (By Ryan Browne, CNBC)
The Next Move for Many Fintech Start-Ups: Going Private
What happened: Bankers say that two recent take-privates of fintech start-ups are a sign of things to come.
Why it matters: Private equity and venture capital often have competing goals. The former wants profits and the latter wants growth. But the rise in interest rates has forced VCs to alter their goals to be more in line with private equity, which means that a lot of the VC-backed start-ups that wanted to grow at all costs are now invited targets.
What’s next: More acquisitions by established finance who see a chance to buy emerging tech instead of developing it in-house. (By Lucinda Shen, Axios)
Central Bank Digital Currencies Enter the Culture War
What happened: Ron Desantis just threatened to ban Central Bank Digital Currencies because they’re too woke. “A few years ago, CBDCs were the domain of policy wonks. Today, they are a topic of growing political importance and, among fringe groups, creeping paranoia.”
Why it matters: Digital, government-created cash as a concept looks different depending on which country you’re in. And the reasons for growing CBDC chatter are legion. But of the many hurdles to its possible adoption, its intertwinement with other existing conspiracy theories may be the highest to clear.
What’s next: It’s an election year. There are televised debates. You know where this is headed. (By Siddharth Venkataramakrishnan, The Financial Times)
Citigroup Has a Dating App
What happened: Sort of. America’s third-largest bank has been operating a lending platform known as Bridge. It connects small businesses to banks, has been online for two years, and is now so successful that Citi wants to sell part of its ownership stake.
Why it matters: Helping smaller, minority-owned banks could be good business. “Citi’s push comes at a time when many think the US industry — with about 4,500 banks — is ripe for consolidation. The swift rise in interest rates over the past year has put pressure on the profits of smaller banks. Pressure to merge with rivals or sell out to bigger competitors could mean more work for M&A advisers — including those at Citi.”
What’s next: Copycats. (By Stephen Gandel, The Financial Times)