Police officers leave Silicon Valley Banks headquarters in Santa Clara, California on March 10, 2023.
Noah Berger | AFP | Getty Images
Silicon Valley Bank employees received their annual bonuses Friday just hours before regulators seized the failing bank, according to people with knowledge of the payments.
The Santa Clara, California-based bank has historically paid employee bonuses on the second Friday of March, said the people, who declined to be identified speaking about the awards. The payments were for work done in 2022 and had been in process days before the bank’s collapse, the sources said.
This year, bonus day happened to fall on SVB’s final day of independence. The institution, in the throes of a bank run triggered by panicked venture capital investors and startup founders, was seized by the Federal Deposit Insurance Corporation (FDIC) around midday Friday.
On Friday, SVB CEO Greg Becker addressed workers in a two-minute video in which he said that he no longer made decisions at the 40-year-old bank, according to the people.
The size of the payouts couldn’t be determined, but SVB bonuses range from about $12,000 for associates to $140,000 for managing directors, according to Glassdoor.com.
SVB was the highest-paying publicly traded bank in 2018, with employees getting an average of $250,683 for that year, according to Bloomberg.
After its seizure, the FDIC offered SVB employees 45 days of employment, the people said. The bank had 8,528 employees as of December.
A spokesman for the FDIC declined to comment on the bonuses.
Trading in shares of First Republic, Western Alliance, Signature and PacWest was halted on Friday following the failure of Silicon Valley Bank.
The abrupt failure of Silicon Valley Bank, which spent years carving a wide niche in the technology industry, sparked a selloff among other banks that also have exposure to the same once-fast-growing sector.
Shares of Western Alliance Bancorp, PacWest Bancorp, Signature Bank and First Republic Bank closed the day down between 16% and 38%. Trading in the four banks’ stocks was halted Friday when shares in each of the companies fell to their lowest levels since 2020.
The declines far exceeded the share-price losses of U.S. banks overall. The KBW Nasdaq Banking Index, which serves as an industry benchmark tracking large and regional banks, closed down less than 4%.
The shutdown of Silicon Valley came less than 48 hours after the banking arm of SVB Financial Group in Santa Clara, California, sold a large portfolio of securities at an after-tax loss of $1.8 billion and announced a capital-raising plan that ultimately failed to close.
The company has been steeped in deposit challenges for much of the past year due to a downturn in the venture capital investments, which led to outflows of noninterest-bearing deposits.
Silicon Valley Bank’s demise raised questions about the level of risk at other banks that hold tech-related deposits. First Republic, PacWest, Signature and Western Alliance were the only U.S. banks that had stock trading halted on Friday.
At Phoenix-based Western Alliance, about $6.5 billion, or around 11%, of the company’s total deposits, are tied to the technology industry, according to the company. Meanwhile, close to 30% of deposits are tech-related at PacWest, the Los Angeles-based parent company of Pacific Western Bank, according to Gary Tenner, an analyst at D.A. Davidson.
“Not that their exposures should be ignored, but it feels like the [stock price] reaction is overdone, especially for the second day in a row,” Tenner said Friday in an interview with American Banker.
In response to the failure of Silicon Valley, both Western Alliance and San Francisco-based First Republic sought to assure investors Friday that they remain on solid ground.
Western Alliance said in a press release that its deposits, liquidity and capital positions remain strong. The company’s total deposits have increased by $7.8 billion since the end of 2022, and they currently total $61.5 billion, Western Alliance said. At the same time, its tech-related deposits have dropped by $201 million so far this quarter, the company noted.
At First Republic, technology-related deposits represent about 4% of total deposits, and the bank maintains strong capital and liquidity positions, the company said Friday in a regulatory filing. In addition to its “strong and very-well diversified” base of deposits, the bank said it has more than $60 billion available to borrow from the Federal Reserve and the San Francisco Home Loan Bank.
The banks that watched their stock prices plummet after news of Silicon Valley’s collapse could be the same ones that benefit when the failed bank’s customers move their money elsewhere, one analyst noted.
“You have to assume that all of those Western banks that are players in California could pick up business,” Chris Marinac, an analyst at Janney Montgomery Scott, said in an interview Friday.
The nation’s largest banks, too, could benefit from an influx of deposits that were formerly held at Silicon Valley Bank, said Casey Haire, a Jefferies analyst who has covered SVB Financial since 2009. He ticked off names such as JPMorgan Chase and Bank of America.
Technology companies may choose to place their deposits with the “too big to fail crowd … out of an abundance of caution,” he said.
Like Silicon Valley Bank, where just 2.7% of deposits met the requirements for deposit insurance in the fourth quarter of 2022, some of the other banks that saw big stock price declines on Friday have relatively small shares of their deposits in accounts with less than $250,000, according to an analysis by RBC Capital Markets.
About 6% of New York-based Signature’s $88.6 billion in deposits were in accounts with less than $250,000 in the fourth quarter, RBC said. The percentage of deposits covered by insurance was 19.2% at First Republic and 23.2% at Western Alliance, according to the analysis.
Meanwhile, PacWest was around the industry midpoint, with deposits less than $250,000 accounting for 40% of its total deposits, the RBC Capital Markets analysis found.
Tenner, who covered bank failures during the financial crisis, said the shutdown of Silicon Valley Bank “feels different [than earlier failures] because of the speed from start to finish of the whole thing.”
“Back in the financial crisis, where banks were failing, there was a little more foresight because it was a credit-driven event and people had a view of who was suffering more than others,” he said. “[SVB] was effectively a 36-hour illness that went the wrong way — straight to the morgue.”
Should bank stocks like Western Alliance and PacWest decline again on Monday, it would show “there’s a great deal of fear and uncertainty in the market,” Tenner said.
Harry Murphy | Sportsfile for Web Summit via Getty Images
Financial technology giant Revolut reported its first-ever annual profit in 2021, according to financial accounts released Wednesday, as subscriptions to its paid packages and overall usage of its app grew sharply.
The company reported revenues of £636.2 million ($767.1 million) for the year, three times what it made the previous year, and swung to a pre-tax profit of £59.1 million. In 2020, Revolut recorded a pre-tax loss of £205 million.
Mikko Salovaara, Revolut’s chief financial officer, told CNBC the results were the product of Revolut’s diversified business and diligent cost control.
“The worst possible scenario would be if Revolut wasn’t sustainable or if it were to require external funding,” Salovaara said. “The reality is we don’t require external funding. We continue to invest in our business providing products people can rely on.”
For 2022, Revolut gave a trading update saying it expects revenues to have grown more than 30% to £850 million. As a privately held firm, it is not required to share frequent quarterly reports.
Revolut’s announcement is a rare positive piece of news in a fintech market that has been plagued by mass layoffs and huge valuation cuts as investors reassess the space amid worsening macroeconomic conditions.
Klarna, the Swedish buy now, pay later fintech, saw its valuation plunge 85% to $6.7 billion last year. On Tuesday, the firm posted a record $1 billion loss in its 2022 fiscal year.
Asked about Revolut’s valuation Wednesday, Salovaara said he couldn’t say how much the firm was worth since it hasn’t raised cash since 2021, but he’d be “hard pressed to believe investors wouldn’t continue to be pleased with our performance.”
However, Revolut was late to producing its accounts to the U.K. company register, Companies House, in time for a Dec. 31 deadline. They were finally signed off by BDO, Revolut’s auditors, last month.
Revolut reportedly faced concerns from U.K. regulators over the robustness of its internal financial controls. In September, BDO’s audit of Revolut’s 2021 accounts was deemed “inadequate” by the Financial Reporting Council, which said that “the risk of an undetected material misstatement was unacceptably high.”
The company, which has no physical branches, offers digital banking, money transfers, and cryptocurrency and stock trading through a single app. It competes with the likes of Wise, Monzo and Starling.
Founded in 2015 by former Lehman Brothers trader Nikolay Storonsky and software developer Vlad Yatsenko, Revolut has quickly grown to become one of Europe’s largest fintech unicorns, with a valuation of $33 billion.
Revolut has been pushing hard into overseas markets, in particular the U.S., where it currently has over 500,000 clients. The firm has also opened operations in Brazil, Mexico and India. In November, Revolut announced it has 25 million users worldwide.
Closer to home, though, the company’s growth plans have been dealt some setbacks. Revolut has been pursuing a banking license in the U.K. for the past two years, in an effort to source more of its income from lending activity.
That process has been a drawn out one, and it is believed the wait is in connection with the delays to the publication of Revolut’s results. Revolut has also faced criticisms over an aggressive working culture, which has reportedly led to departures of key regulatory and compliance executives.
Revolut hopes to obtain its U.K. banking license “very soon,” Salovaara said. Pressed on when the firm would eventually secure its license, he suggested it was likely to happen before the year is out.
While Revolut’s full-year 2022 results are yet to be disclosed, one thing is clear — the firm’s crypto business deteriorated sharply. Salovaara said that in 2021, crypto accounted for roughly a third of sales, but in 2022 this dropped to between 5% to 10%.
Virtus Investment Partners’ Joe Terranova and SoFi’s Liz Young join ‘Closing Bell’ to discuss Goldman Sach shares dropping following its investor day, resilience in the trading market and competition among banks and financials.
It’s a tough time to finance a startup. Startups looking to secure capital to underwrite consumer auto loans this year face roadblocks as investors tighten their purse strings, driving up the cost of funds and stymieing the plentiful flow of capital fintechs tapped into two years ago. Fintechs looking to secure warehouse lines of credit […]
Sam Bankman-Fried, co-founder of FTX Cryptocurrency Derivatives Exchange, arrives at court in New York, US, on Thursday, Feb. 16, 2023.
Yuki Iwamura | Bloomberg | Getty Images
FTX ex-engineering head Nishad Singh pleaded guilty to criminal charges in New York on Tuesday, becoming the latest member of Sam Bankman-Fried’s former leadership team to agree to a deal.
The six charges against Singh include conspiracy to commit securities fraud, conspiracy to commit money laundering and conspiracy to violate campaign finance laws. FTX spiraled into bankruptcy in November after the crypto exchange, founded by Bankman-Fried, couldn’t meet customers’ withdrawal demands.
“Today’s guilty plea underscores once again that the crimes at FTX were vast in scope and consequence,” Manhattan U.S. Attorney Damian Williams said in a statement. “They rocked our financial markets with a multibillion dollar fraud. And they corrupted our politics with tens of millions of dollars in illegal straw campaign contributions. These crimes demand swift and certain justice and that is exactly what we are seeking in the Southern District of New York.”
The Securities and Exchange Commission, as well as the Commodity Futures Trading Commission both filed related civil complaints against Singh on Tuesday. Singh has agreed to settle with the CFTC, a court filing suggests.
Prior to Singh’s guilty plea with prosecutors, FTX co-founder Gary Wang and former Alameda Research co-CEO Caroline Ellison both pleaded guilty in December to federal charges in the Southern District of New York.
Alameda was a hedge fund and trading firm also controlled by Bankman-Fried. Prosecutors allege that customer deposits at FTX were sent to sister company Alameda, which faced billions of dollars in investment losses.
In December, Bankman-Fried was charged with eight criminal accounts, including securities fraud and money laundering. He was hit last week with four additional charges, including ones related to commodities fraud and making unlawful political contributions. He’s released on a $250 million bond while awaiting trial.
A representative for Bankman-Fried declined to comment.
Two of the charges against Singh are related to wire fraud and another is conspiracy to commit commodities fraud.
— CNBC’s David Sucherman contributed to this report.
David Solomon, chief executive officer of Goldman Sachs Group Inc., during an event on the sidelines on day three of the World Economic Forum (WEF) in Davos, Switzerland, on Thursday, Jan. 19, 2023.
Stefan Wermuth | Bloomberg | Getty Images
When David Solomon was chosen to succeed Lloyd Blankfein as Goldman Sachs CEO in early 2018, a spasm of fear ran through the bankers working on a modest enterprise known as Marcus.
The man who lost out to Solomon, Harvey Schwartz, was one of several original backers of the firm’s foray into consumer banking and was often seen pacing the floor in Goldman’s New York headquarters where it was being built. Would Solomon kill the nascent project?
The executives were elated when Solomon soon embraced the business.
Their relief was short-lived, however. That’s because many of the decisions Solomon made over the next four years — along with aspects of the firm’s hard-charging, ego-driven culture — ultimately led to the collapse of Goldman’s consumer ambitions, according to a dozen people with knowledge of the matter.
The idea behind Marcus — the transformation of a Wall Street powerhouse into a Main Street player that could take on giants such as Jamie Dimon’s JPMorgan Chase — captivated the financial world from the start. Within three years of its 2016 launch, Marcus — a nod to the first name of Goldman’s founder — attracted $50 billion in valuable deposits, had a growing lending business and had emerged victorious from intense competition among banks to issue a credit card to Apple’s many iPhone users.
But as Marcus morphed from a side project to a focal point for investors hungry for a growth story, the business rapidly expanded and ultimately buckled under the weight of Solomon’s ambitions. Late last year, Solomon capitulated to demands to rein in the business, splitting it apart in a reorganization, killing its inaugural loan product and shelving an expensive checking account.
The episode comes at a sensitive time for Solomon. More than four years into his tenure, the CEO faces pressure from an unlikely source — disaffected partners of his own company, whose leaks to the press in the past year accelerated the bank’s strategy pivot and revealed simmering disdain for his high-profile DJ hobby.
Goldman shares have outperformed bank stock indexes during Solomon’s tenure, helped by the strong performance of its core trading and investment banking operations. But investors aren’t rewarding Solomon with a higher multiple on his earnings, while nemesis Morgan Stanley has opened up a wider lead in recent years, with a price to tangible book value ratio roughly double that of Goldman.
That adds to the stakes for Solomon’s second-ever investor day conference Tuesday, during which the CEO will provide details on his latest plan to build durable sources of revenue growth. Investors want an explanation of what went wrong at Marcus, which was touted at Goldman’s previous investor day in 2020, and evidence that management has learned lessons from the costly episode.
“We’ve made a lot of progress, been flexible when needed, and we’re looking forward to updating our investors on that progress and the path ahead,” Goldman communications chief Tony Fratto said in a statement. “It’s clear that many innovations since our last investor day are paying off across our businesses and generating returns for shareholders.”
The architects of Marcus couldn’t have predicted its journey when the idea was birthed offsite in 2014 at the vacation home of then-Goldman president Gary Cohn. While Goldman is a leader in advising corporations, heads of state and the ultrawealthy, it didn’t have a presence in retail banking.
They gave it a distinct brand, in part to distance it from negative perceptions of Goldman after the 2008 crisis, but also because it would allow them to spin off the business as a standalone fintech player if they wanted to, according to people with knowledge of the matter.
“Like a lot of things that Goldman starts, it began not as some grand vision, but more like, ‘Here’s a way we can make some money,’” one of the people said.
Ironically, Cohn himself was against the retail push and told the bank’s board that he didn’t think it would succeed, according to people with knowledge of the matter. In that way, Cohn, who left in 2017 to join the Trump administration, was emblematic of many of the company’s old guard who believed that consumer finance simply wasn’t in Goldman’s DNA.
Once Solomon took over, in 2018, he began a series of corporate reorganizations that would influence the path of the embryonic business.
From its early days, Marcus, run by ex-Discover executive Harit Talwar and Goldman veteran Omer Ismail, had been purposefully sheltered from the rest of the company. Talwar was fond of telling reporters that Marcus had the advantages of being a nimble startup within a 150-year-old investment bank.
The first of Solomon’s reorganizations came early in his tenure, when he folded it into the firm’s investment management division. Ismail and others had argued against the move to Solomon, feeling that it would hinder the business.
Solomon’s rationale was that all of Goldman’s businesses catering to individuals should be in the same division, even if most Marcus customers had only a few thousand dollars in loans or savings, while the average private wealth client had $50 million in investments.
In the process, the Marcus leaders lost some of their ability to call their own shots on engineering, marketing and personnel matters, in part because of senior hires made by Solomon. Marcus engineering resources were pulled in different directions, including into a project to consolidate its technology stack with that of the broader firm, a step that Ismail and Talwar disagreed with.
“Marcus became a shiny object,” said one source. “At Goldman, everyone wants to leave their mark on the new shiny thing.”
Besides the deposits business, which has attracted $100 billion so far and essentially prints money for the company, the biggest consumer success has been its rollout of the Apple Card.
What is less well-known is that Goldman won the Apple account in part because it agreed to terms that other, established card issuers wouldn’t. After a veteran of the credit-card industry named Scott Young joined Goldman in 2017, he was flabbergasted at one-sided elements of the Apple deal, according to people with knowledge of the matter.
“Who the f— agreed to this?” Young exclaimed in a meeting shortly after learning of the details of the deal, according to a person present.
Some of the customer servicing aspects of the deal ultimately added to Goldman’s unexpectedly high costs for the Apple partnership, the people said. Goldman executives were eager to seal the deal with the tech giant, which happened before Solomon became CEO, they added.
Young declined to comment about the outburst.
The rapid growth of the card, which was launched in 2019, is one reason the consumer division saw mounting financial losses. Heading into an economic downturn, Goldman had to set aside reserves for future losses, even if they don’t happen. The card ramp-up also brought regulatory scrutiny on the way it dealt with customer chargebacks, CNBC reported last year.
Beneath the smooth veneer of the bank’s fintech products, which were gaining traction at the time, there were growing tensions: disagreements with Solomon over products, acquisitions and branding, said the people, who declined to be identified speaking about internal Goldman matters.
Ismail, who was well-regarded internally and had the ability to push back against Solomon, lost some battles and held the line on others. For instance, Marcus officials had to entertain potential sponsorships with Rihanna, Reese Witherspoon and other celebrities, as well as study whether the Goldman brand should replace that of Marcus.
The CEO was said to be enamored of the rise of fast-growing digital players such as Chime and believed that Goldman needed to offer a checking account, while Marcus leaders didn’t think the bank had advantages there and should continue as a more focused player.
One of the final straws for Ismail came when Solomon, in his second reorganization, made his strategy chief, Stephanie Cohen, co-head of the consumer and wealth division in September 2020. Cohen, who is known as a tireless executive, would be even more hands-on than her predecessor, Eric Lane, and Ismail felt that he deserved the promotion.
Within months, Ismail left Goldman, sending shock waves through the consumer division and deeply angering Solomon. Ismail and Talwar declined to comment for this article.
Ismail’s exit ushered in a new, ultimately disastrous era for Marcus, a dysfunctional period that included a steep ramp-up in hiring and expenses, blown product deadlines and waves of talent departures.
Now run by two former tech executives with scant retail experience, ex-Uber executive Peeyush Nahar and Swati Bhatia, formerly of payments giant Stripe, Marcus was, ironically, also cursed by Goldman’s success on Wall Street in 2021.
The pandemic-fueled boom in public listings, mergers and other deals meant that Goldman was en route to a banner year for investment banking, its most profitable ever. Goldman should plow some of those volatile earnings into more durable consumer banking revenues, the thinking went.
“People at the firm including David Solomon were like, ‘Go, go, go!’” said a person with knowledge of the period. “We have all these excess profits, you go create recurring revenues.”
In April 2022, the bank widened testing of its checking account to employees, telling staff that it was “only the beginning of what we hope will soon become the primary checking account for tens of millions of customers.”
But as 2022 ground on, it became clear that Goldman was facing a very different environment. The Federal Reserve ended a decade-plus era of cheap money by raising interest rates, casting a pall over capital markets. Among the six biggest American banks, Goldman Sachs was most hurt by the declines, and suddenly Solomon was pushing to cut expenses at Marcus and elsewhere.
Amid leaks that Marcus was hemorrhaging money, Solomon finally decided to pull back sharply on the effort that he had once championed to investors and the media. His checking account would be repurposed for wealth management clients, which would save money on marketing costs.
Now it is Ismail, who joined a Walmart-backed fintech called One in early 2021, who will be taking on the banking world with a direct-to-consumer digital startup. His former employer Goldman would largely content itself with being a behind-the-scenes player, providing its technology and balance sheet to established brands.
For a company with as much self-regard as Goldman, it would mark a sharp comedown from the vision held by Solomon only months earlier.
“David would say, ‘We’re building the business for the next 50 years, not for today,’” said one former Goldman insider. “He should’ve listened to his own sound bite.”
Pedestrians pass a Wells Fargo bank branch in New York, U.S., on Thursday, Jan. 13, 2022.
Victor J. Blue | Bloomberg | Getty Images
Wells Fargo is unveiling a new platform to boost digital engagement with its 2.6 million wealth management clients, CNBC has learned.
The service, called LifeSync, lets users create and track progress on financial goals, ingest content tied to their plans and contact their advisors, according to Michael Liersch, head of advice and planning at the bank’s wealth division. It will be delivered through a mobile app update in late March, he said.
“These are the things that will really enhance the client-advisor experience, and they’re not available on the mobile app today,” Liersch said. “This is a really big platform enhancement for clients and advisors to collaborate around their goals and connect what clients want to accomplish with what our advisors are doing.”
Banks are jockeying to provide their customers with personalized experiences via digital channels, and this tool should enable Wells Fargo to boost satisfaction and loyalty. CEO Charlie Scharf has highlighted wealth management as one source of growth for the company, along with credit cards and investment banking, amid his efforts to overhaul the bank and appease regulators.
Wells Fargo is a major player in American wealth management, with $1.9 trillion in client assets and 12,027 financial advisors as of December.
But its client assets haven’t grown since the end of 2019, when they also stood at $1.9 trillion. Under Scharf’s streamlining efforts, Wells Fargo sold its asset management business and dropped international wealth clients in 2021.
The trajectory of the asset figure “primarily is a reflection of the volatility seen over the last few years,” according to a bank spokesperson.
With its new offering, Wells Fargo hopes to turn the tide. The bank may eventually opt to offer a financial planning tool to its broader banking population, said Liersch. That would follow the move that Bank of America made in 2019, when it unveiled a digital planning tool called Life Plan.
“We wanted to solve for that more complex experience first, and then develop the client-directed capability which is absolutely in our consideration set,” Liersch said.
ITASCA, Ill., February 15, 2023 (Newswire.com)
– Bright Side Loans, a proven online, non-prime consumer lender, announced today that it is expanding its loan origination and servicing operations via the Fintech Franchise Network (FFN), LLC, which will consist of a select group of 28 virtual consumer lending branches which will be sold as individual franchises.
Founded in 2018 by long time Consumer Credit Risk and Operations expert Greg Fasana, Bright Side Loans has successfully leveraged and applied data science, custom models, strong analytics and work-flow management across the entire application lifecycle, and now looks forward to the increased opportunities of profitably serving additional customers in the Alternative Financial Services (AFS) market.
“My vision for Bright Side Loans has always been to serve customers’ financial needs with the latest data-driven analytics and bespoke fintech tools that we have refined over our careers,” said Greg.
In regards to Fintech Franchise Network, Greg shares, “With Bright Side Loans now set, we have truly got the band back together as our launch team consists of proven executives and senior operators from several of the largest consumer lending companies, starting with FFN CEO and Capital Raiser, Glenn Hafner. We couldn’t ask for a better marriage of state of the art technology and tools, and broad and deep consumer finance experience from which to confidently advance to our next chapter.”
With nearly 65% of the American workers living “paycheck to paycheck” (CNBC.com Personal Finance, Dec. 15, 2022) expanding Bright Side Loan’s lending capabilities will be key to serving these non-prime customers. As the business expands via Fintech Franchise Network, Bright Side Loans will continue to serve as our customer-facing brand name and identity.
For investment opportunities, and general corporate inquiries, please contact Glenn Hafner at (630) 777- 4005 or GHafner@FintechFranchiseNetwork.com.
LAS VEGAS, February 15, 2023 (Newswire.com)
– Passport Technology (“Passport”), a global leader in innovative payment technology and customer engagement for the gaming industry, today announced the selection of Passport’s Lush™ loyalty and rewards platform, and Mira™ player enrollment kiosks, at Lake of the Torches Resort Casino (“Lake of the Torches”).
Passport’s Lush loyalty platform introduces new opportunities for casino operators to increase player enrollment, engagement, and point redemption through customizable games, promotions, and dynamic offers.
“Our team is thrilled to have chosen Lush as our solution for casino marketing and loyalty kiosks,” said Bill Guelcher, CEO of Lake of the Torches Resort Casino. “Passport’s Lush platform has the tools we were looking for to drive brand awareness and reward our players through custom games, promotions, drawings, and gifting. We are looking forward to bringing this innovative technology to our guests’ experience at Lake of the Torches.”
As the industry’s first HTML5, cloud-based loyalty and rewards platform, operators can customize an unlimited number of branding, gamification, virtual drawings, multipliers, and patron-specific promotions through Lush’s secure web application. Lake of the Torches guests will benefit from self-service features like player club enrollment, card reprints, dynamic games, and offers through the Lush kiosk. With configurable gifting options and the industry’s first Earn and Shop™ redemption portal, guests will have the opportunity to redeem points instantly for e-gift cards, physical cards, real merchandise or their own inventory.
“Lake of the Torches is a savvy operator with a high standard for player development and customer engagement,” said Diallo Gordon, Chief Product and Marketing Officer for Passport Technology. “Lake of the Torches has a tremendous product; amazing floor mix, beautiful resort on the shore of Pokegama Lake, entertainment, food and beverage, and a flurry of new and exciting promotions. We can’t wait to spoil them with outstanding service and unique features specific to the Lush platform that drive player acquisition and retention.”
“Passport is excited to bring Lush and its bevy of casino products to the Wisconsin market. This business was won on Passport’s great product and service and we look forward to a long partnership with Lake of the Torches,” stated Jason King, Chief Revenue Officer for Passport Technology. “Passport will look to move aggressively across the Midwest with not only Lush, but our amazing lineup of cage automation, redemption, cash access, floor efficiency and cashless technologies.”
About Passport
Passport is a leading developer of technology-based solutions and services for the highly regulated payments, gaming, and financial services markets. The company’s product portfolio includes redemption kiosks, quasi-cash, check warranty, ATM, digital payments, cash and cashless integrations, casino automation, regulatory compliance solutions, bank-sponsored transaction processing, server and web-based analytics, agnostic application management systems, and interactive content and loyalty services. Through its privileged gaming licenses and payment sponsorships, Passport has securely and responsibly settled over $45 billion in funds to casino floors across the globe.
Goldman Sachs has dropped plans to develop a Goldman-branded credit card for retail customers, another casualty of the firm’s strategic pivot, CNBC has learned.
Not long ago, CEO David Solomon told analysts that the bank was developing its own card, which would’ve made use of the platform Goldman created for its Apple Card partnership.
It was part of an ambitious vision Solomon had for serving everyday Americans by stretching beyond the core competencies of the 154-year old investment bank. A Goldman card would’ve been part of a suite of products, including a digital checking account, to help enhance the profit margins and loyalty of its retail efforts, according to people with knowledge of the matter.
That vision unraveled after Solomon bowed to pressure to stem losses from its consumer businesses as storm clouds gathered on the U.S. economy last year. In October, the bank split its retail operations in a corporate overhaul and later said it was shuttering its Marcus personal loans business and shelving plans to widely offer a checking account.
When it scaled back plans to become the primary bank for the masses, the rationale for a Goldman card evaporated, said one of the people, who declined to be identified speaking about a former employer.
Executives had believed consumers would covet a card from Goldman Sachs. After all, Apple had insisted that Goldman Sachs was etched on the back of its titanium cards, not the Marcus brand that Goldman unveiled in 2016, according to a person with knowledge of the matter.
It would allow the bank to be more choosy with who it approved as customers and wouldn’t require sharing revenue with a partner, as it does with Apple.
But launching its own card would be even more expensive than partnering with an outside brand, as Goldman would’ve footed the cost of acquiring customers and enticing them with rewards. Card giants including JPMorgan Chase and Citigroup have a combination of co-brand products with airlines and retailers and their own direct cards.
The concept of a Goldman card first surfaced in Oct. 2021 when an analyst asked Solomon about his consumer product roadmap. One idea was to use the card technology created to service Apple Card customers for its own card, he said.
“We have our own credit card platform that I think is really differentiated, and we’re onboarding both other partnerships, but also have the opportunity for a proprietary card that’s in development,” Solomon said.
Although the idea of a card offered with a suite of banking products was mentioned as recently as last summer by Goldman executive Stephanie Cohen, little had been done to actually develop it, according to people with knowledge of the situation.
The bank’s ambitions in consumer finance outstripped its ability to execute on them, Solomon acknowledged last month. It didn’t help that its existing card products caught the attention of regulators including the Consumer Financial Protection Bureau.
“The idea of a consumer-facing proprietary Goldman Sachs credit card was discussed but never became a meaningful part of our strategy,” said a spokesman for the New York-based bank.
A challenger bank for Latino immigrants has closed its seed round.
Comun in New York announced Tuesday that it has raised $4.5 million in seed funding led by Costanoa Ventures with participation from South Park Commons and FJ Labs. Its digital banking app became available to consumers in September.
The company was co-founded by two immigrants to the United States from Mexico. Spanish is the default language for the app — which is linked to a no-fee checking account and a debit card — but users can switch to English. Applicants do not need a Social Security number to sign up for an account; instead, they can use an individual taxpayer identification number (ITIN), a foreign passport or another form of official foreign identification and must supply proof of address.
“We built Comun to make it easier to thrive as an immigrant family in the U.S.,” said Andres Santos, co-founder and CEO of Comun. “My co-founder [Abiel Gutierrez] and I both experienced how challenging it can be to navigate the banking system as immigrants.”
Comun’s website defines the adjective “comun” as belonging to, or affecting, the whole of a community. Piermont Bank in New York, which has $448.9 million of assets, provides the underlying banking services for Comun.
Santos and Gutierrez will use the funding to expand Comun’s offerings and add more educational content, especially related to financial literacy. Comun makes money via interchange fees.
The number of neobanks that are bilingual or Spanish-first has ebbed and flowed in recent years. Dora, a challenger bank developed by the Rye, New York-based credit union USAlliance Financial and three other credit unions, offer bilingual services. It launched in September 2021. Viva First in Lubbock, Texas, bills itself as a Latino-first banking app. Welcome Tech, which builds products and services for immigrant communities in the United States, has a digital banking service called PODERcard that, like Viva First, is bilingual. The website for Crediverso, a financial technology company for Latinos, says that it is launching a banking app for Latino families. But the website for Tend, a neobank that launched in both Mexico and the U.S. in 2021, is no longer operational.
Other neobanks, such as Majority, target immigrants more broadly. Of the U.S.-based neobanks reviewed, Comun appears to be the only one whose website defaults to Spanish.
Traditional financial institutions and other financial services companies have made their own overtures to Spanish-speaking people. For example, Community First Credit Union in Santa Rosa, California, trained its conversational bot to communicate in Spanish as well as English. In September, Square announced that its entire product line would be available in Spanish as well as English.
Opinions expressed by Entrepreneur contributors are their own.
Internet fraud is a menace in our various financial institutes, and many fintech companies have been victims of this fraud game. Detection of these attacks comes in two ways: through inconsistent traditional methods or using ever-growing artificial intelligence mechanisms.
Traditional methods, such as the rule-based method, are still widely used by most fintech companies in contrast to AI. At the same time, some are adjusting to leverage machine learning and artificial intelligence, improving ways to detect fraud. Hence, bringing us to the question below.
How have AI and machine learning improved fraud detection in the fintech industry? What specific applications does this technology touch, and what mechanisms complement it? We have compiled key areas where its application has become highly beneficial.
Fishing out identity thieves before they penetrate a server
Identity theft is common, but with the rise of AI, its effect on the fintech industry has been reduced drastically. Users are bound to become more susceptible to fraud in this area when activities like creating accounts, submitting applications or filing tax returns become more computerized. Digitized data is easier to access, giving identity thieves more possibilities to penetrate the server. For instance, identity thieves can create accounts in someone else’s name, get access to that person’s benefits or even steal their tax returns using the stolen identification information. In curbing these anomalies, AI is to the rescue. AI-driven identity theft detection systems such as pattern recognition are pretty good at reducing the danger of such scams and spotting them early on. Depending on the circumstance, the models may be able to identify suspicious transactions, behaviors or information in the supplied documents that do not fit the customer’s usual patterns of behavior, therefore averting a possible danger.
Quick detection of credit card fraud through identification of unusual transactions
Customers may secure their credit card and account information in various ways, such as by utilizing virtual private networks or virtual cards or checking the website certifications. However, with fraud tactics becoming more sophisticated, organizations handling credit card transactions and transfers must scan them to avoid any risks. AI methods such as data mining have been provided with a sizable dataset that includes both kinds of transactions (i.e., card transactions and transfers) to be trained to spot fraudulent behavior. By analyzing it, the model can spot fraud red flags. Are there possible ways the illegal transaction can be flagged and detected on time? Yes, for instance, a rapid spike in the customer account’s weekly or monthly transaction values or a purchase made in a store that doesn’t ship to the country where the account holder resides. All these can be swiftly detected with the help of AI, and fraud can be mitigated on time to avoid running losses.
Detection of money laundering amidst account activities
Fintech companies and banks use deep learning AI algorithms such as neural networks to uncover undiscovered connections between criminal conduct and account activity. Money laundering is difficult to identify with traditional approaches since the signs are frequently quite subtle. Still, since the emergence of artificial intelligence, every action is carefully considered because such practice typically involves large sums of money and is carried out by organized criminal organizations or entities that appear to be genuine.
Despite a thorough mechanism put in place, individuals are undoubtedly susceptible to errors. It gets challenging to spot money laundering-related acts among cover-up activities because they leave no room for suspicion, but AI has been at the forefront of detecting such. For instance, a wrong transfer of funds might be the key to revealing a set of illegal activities. In addition, there are situations when several transactions on an individual’s account come together but don’t appear legitimate when scrutinized. These patterns could be quickly identified by AI systems put in place, and fraudulent activity could be prevented on time.
Early detection of fraudulent loan and mortgage applications
In recent times, most fintech companies and banks heavily rely on fraud detection AI technologies to assess loan and mortgage applications by fraudsters. It is a crucial component of their risk assessment and aids the analysts in their day-to-day job. With machine language, they can extract pertinent data from the applications and analyze them using a model developed through a dataset that includes both legitimate applications and those flagged as fraudulent. The essence of AI in this area is to detect trends that can likely lead to fraud so that alarms can be swiftly raised, whether accurate or not. It allows the analyst in charge to scrutinize further, which could either lead to acquittal or fraud prevention. It also helps fintech companies to predict the chance of a customer committing fraud as it can help forecast trends by examining consumer behavior data.
Banks and fintech companies still occasionally believe that rule-based methods are safer and more straightforward. Traditional rule-based methods and AI tend to support one another but will likely change sooner. This is due to the complexity of rule-based systems having their bounds and the fact that fraud efforts are getting more sophisticated and dynamic than in the past. The rule-based method is a losing struggle since it necessitates the creation of new rules each time new patterns appear. Instead of constantly being one step behind, fintech companies can actively foresee fraud using AI and machine learning techniques to safeguard their financial integrity.
David Solomon, Chairman & CEO of Goldman Sachs, speaking on Squawk Box at the WEF in Davos, Switzerland on Jan. 23rd, 2023.
Adam Galica | CNBC
Goldman Sachs CEO David Solomon said Tuesday that the odds the U.S. economy can avoid a deep recession this year seem to have improved.
While Solomon cautioned that uncertainty is high, in particular because of inflation and growing tensions between China and the U.S., business leaders seemed to be more optimistic than last year, he told investors at a Credit Suisse conference in Miami.
“I think it’s going to be, you know, a twisty, turn-y kind of road to navigate through this and get to the other side, but I think the chance of a softer landing feels better now than it felt six to nine months ago,” Solomon said.
Markets have rallied this year as inflation moderated and job growth remains strong, feeding investors’ hope that the economy can stick the elusive soft landing with, at worst, a shallow recession. As a result, capital markets activity has improved from a difficult 2022 that saw a steep drop in IPOs and debt and equity issuance.
“Clearly the market has a sense that we’re putting inflation in the rearview mirror,” Solomon said.
The CEO spoke before the release of Labor Department data showing that the consumer price index rose 0.5% in January, which translated to an annual gain of 6.4%.
Although Solomon said inflation was still a deterrent to growth and corporate investment, he cited improving sentiment among other CEOs as the basis of his measured optimism. New York-based Goldman is one of the world’s top advisors when it comes to mergers and tapping capital markets.
“Consensus has shifted to be a little bit more dovish in the CEO community, that we can navigate through this in the United States with a softer economic landing,” he said.
The American consumer has been “much more resilient than people expected” so far, he added.
During the wide-ranging interview conducted by Credit Suisse analyst Susan Roth Katzke, Solomon said that Goldman has a “much tighter hiring plan” this year after laying off about 3,200 workers last month.
While Solomon said he’s open to making acquisitions, especially in the asset and wealth management sector, the bar is very high to making a deal.
The CEO is scheduled to address investors again on Feb. 28 at the bank’s second-ever investor day. The last one was in early 2020.
We’ve seen a rise of innovation in financial services over the past few decades, which has brought us to the current boom of the embedded fintech market. Embedded fintech is the integration of financial services with non-financial business infrastructures, without the need to redirect customers to traditional financial institutions. The technology can be applied to everything from payment cards to insurance to create greater efficiencies for businesses.
Bobby Tzekin, co-founder and CEO, Wisetack
The market for embedded finance is growing rapidly to the tune of $22 billion in total revenue. The vast majority of B2B software companies are now offering some form of embedded finance solution, signaling this next wave of fintech is here to stay and adoption will happen faster.
Embedded fintech as core strategy
Embedded fintech has quickly become a core business strategy. According to Bain and Company, the total revenue of the embedded fintech market will double by 2026. Embedded finance is predicted to account for 10% of all payment transactions within the next three years, taking a significant market share away from traditional payment methods. This begs the question: What’s next for a space that’s already shown such significant growth?
Embedded lending, such as popular buy now, pay later (BNPL) services used by businesses, is showing significant growth in the embedded fintech space and gaining rapid adoption. Embedded lending enables businesses to offer customers loans directly, forgoing the need for touchpoints with high-cost financial institutions.
This is not just a moment in time; it’s the way forward because of its simplicity and efficiency. Merchants simply access embedded lending products directly from the software systems they use to run their businesses, which creates a sticky business model that scales quickly. With flexible APIs enabling seamless integrations, embedded lending can now send the future of fintech into spaces that have historically not had great access to modern financial products.
The future of embedded lending
BNPL has reached near ubiquity in e-commerce, setting the groundwork for the embedded lending model to thrive in other spaces.
We will see the adoption of embedded lending by in-person service providers — think home service companies, veterinary offices and auto repair shops. In-person services have been overlooked by leading embedded lending fintechs for years, creating a whitespace.
E-commerce is no longer the mainstay of embedded lending, in large part because in-person service providers are increasingly adopting software to drive their sales experience. The tides are turning as the in-person service businesses are seeing an opportunity to grow their customer base and boost revenues quicker by offering their customers flexible loan payments embedded during the sales process.
It is impossible to predict when you will need an emergency root canal or when your car will need a costly repair, which can leave consumers in a tough spot financially. However, now, in-person service companies can embed technology directly into their operating systems that offer flexible loan options with just a few clicks, giving consumers better customer service and much needed support.
The dollar value for such transactions averages $4,000 each — exponentially more than the BNPL transactions on the e-commerce side averaging $104 each.
With larger transaction sizes, embedded lending is a win for B2B companies, SMBs and consumers. It’s rapidly becoming the golden goose of fintech and is revolutionizing the way businesses can drive revenues and customer growth.
Bobby Tzekin is co-founder and CEO of Wisetack, the leading pay over time platform for in-person services.
FTX’s top bankruptcy, legal, and financial advisors have billed the company more than $19.6 million in fees for work done in 2022, according to Tuesday bankruptcy court filings. More than $10 million of that was for work done in Nov. 2022, as Sam Bankman-Fried’s crypto empire entered bankruptcy protection in Delaware.
The firms will initially only be paid a little over $15.5 million, or 80% of the value of their work, under a court-ordered interim compensation plan.
The law firms that billed FTX are Sullivan & Cromwell, Landis Rath & Cobb, and Quinn Emanuel Urquhart & Sullivan. Professional advisor Alvarez & Marsal and financial advisor AlixPartners also billed the company.
Some of the work that the firms billed for involved meetings with other companies that also were billing FTX for their time, or involved corresponding with former and current executives, including Caroline Ellison, the former CEO of Bankman-Fried’s hedge fund, Alameda Research.
Landis Rath & Cobb and Sullivan & Cromwell, FTX’s primary legal firms, billed the company a combined $10.7 million for over 8,400 hours of work. Landis Rath & Cobb billed $1.16 million for work done between Nov. 11 and Nov. 30.
Sullivan & Cromwell, a target for both lawmakers and Bankman-Fried over their pre-petition work with FTX, sought over $9.5 million in compensation for over 6,500 billable hours, in the period between Nov. 12 and Nov. 30. Over a third of those billable hours, totaling over $4.8 million, were for the work of partners, who typically charge the highest hourly rate.
Sullivan & Cromwell assigned over two dozen partners to FTX’s case, according to the filings. Jim Bromley, a partner at Sullivan & Cromwell and a lead attorney on the case, billed over 178 hours for the weeks between Nov. 12 and Nov. 30.
Alvarez & Marsal, an advisory firm, billed $1.9 million for over 2,300 hours of work on “business operations,” meeting with lawyers, FTX executives, analyzing FTX’s holdings using blockchain explorers, and reviewing “cybersecurity scenarios.” Those operations included multiple hours in November corresponding with and calling Ellison, 5.3 hours in a single day imaging iPad files and other electronic devices, and a first-day hearing conference call that lasted 2.5 hours.
Quinn Emanuel, which billed over $1.5 million for work done between November and December, assigned over a dozen lawyers to the case, nine of whom were partners. One of those partners, Sascha Rand, billed over $13,000 for a single day’s work in November, corresponding and reviewing first-day issues. Another Quinn lawyer filed for over $17,000 on a “non-working travel” day trip beginning Nov. 21, returning on Nov. 22.
AlixPartners, a financial consulting firm, billed $1.1 million for work done over the course of a little more than a month, from Nov. 28 to Dec. 31.
FTX’s advisors aren’t entitled to their full fees yet. Under an interim compensation order, professional advisors are paid 80% of their filed fees, provided that no objection is filed. Full compensation for legal and advisor fees will not occur until a final fee application is filed, whenever FTX’s bankruptcy saga concludes.
That doesn’t mean that advisors won’t get their due, however. A 2019 Federal Reserve study said professional and consulting fees in Lehman Brothers’ bankruptcy were over $2.56 billion.
Lawyers for Sullivan & Cromwell did $40,000 worth of work just to appear in FTX’s first bankruptcy hearing on Nov. 22, based on court filings of hours billed and hourly rates.
More than half of smartphone users in the U.S. are sending money via some sort of peer-to-peer payment service to send money to friends, family and businesses.
Stocks of payment services like PayPal, which owns Venmo, and Block, which owns Cash App, boomed in 2020 as more people began sending money digitally.
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Zelle, which launched in 2017, stands out from the pack in a few ways. It’s owned and operated by Early Warning Services, LLC, which is co-owned by seven of the big banks and it’s not publicly traded. The platform serves the banks beyond generating an independent revenue stream.
“Zelle is not really a revenue-generating enterprise on a stand-alone basis,” said Mike Cashman, a partner at Bain & Co. “You should think of this really as a little bit of an accommodation, but also as an engagement tool versus a revenue-generating machine.”
“If you’re already transacting with your bank and you trust your bank, then the fact that your bank offers Zelle as a means of payment is attractive to you,” said Terri Bradford, a payment specialist at the Federal Reserve Bank of Kansas City.
One limitation of PayPal, Venmo and Cash App is that users must all be using the same service. Zelle, on the other hand, appeals to users because anyone with a bank account at one of the seven participating firms can make payments.
“For banks, it’s a no-brainer to try to compete in that space,” said Jaime Toplin, senior analyst at Insider Intelligence. “Customers use their mobile-banking apps all the time, and no one wants to cede the opportunity from a space that people are already really active in to third-party competitors.”
Watch the video above to learn more about why the banks created Zelle and where the service may be headed.
Competition among peer-to-peer payment apps like Venmo, PayPal, Cash App and Zelle have been heating up for the past 10 years. The big banks tried to compete in the space when PayPal first came on the scene 25 years ago, but their business models failed. Now, Zelle, a seven-bank platform, is outpacing its rivals in average transaction value. But a rise in reported fraud activity recently got the attention of Congress, with allegations that the banks aren’t supporting those affected customers.
Deutsche Bank’s Blue Water Fintech Lab has unveiled its first commercial product, a robotic process automation platform for corporate treasury clients that focuses on multi-bank data processing and reconciliation. The RPA tool connects via API to enterprise resource planning or treasury management systems and can configure different messaging standards including payment and accounting formats, according […]
In the space of just five years, a little-known company on the outskirts of London has grown into a payments-industry powerhouse, processing more than 1 billion euros ($1 billion) in transactions every month. Backed by licenses from regulators in the UK and Lithuania, Transactive Systems Ltd. touted itself as “one of the fastest-growing fintech companies […]
