 TOP STORIES YOU MISSED | Featured Stories | | |  | WELLS FARGO MULLS JOB CUTS, PULLS BACK ON LENDING Wells Fargo is taking action to reduce operational costs and lending risk as the coronavirus crisis wears on — and ahead of what some analysts estimate could be the bank’s first quarterly loss in over a decade, per Bloomberg. The bank is preparing to cut tens of thousands of jobs starting this year, and it’s tightening requirements for the refinancing of certain mortgages. These moves could help Wells Fargo weather pandemic fallout, but to meaningfully grow beyond that, it needs to shuck its federally mandated asset cap. Even if the current economic situation were to suddenly improve, Wells Fargo wouldn’t be able to go on a lending spree because its growth is constrained by the asset cap placed on it as a result of its 2016 fake accounts scandal. But if the bank can go above and beyond to help consumers and businesses now while the coronavirus crisis is in full swing, it could start to shift regulators’ opinions about whether it has remedied its past shortcomings. And there are signs that Wells Fargo understands this, as it is taking the fees it has received from the Paycheck Protection Program and using them to establish a $400 million “Open for Business” fund to support small businesses, according to Bloomberg. |
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| | |  | SOFI APPLIES FOR BANK CHARTER US-based alt lender SoFi has filed an application with the Office of the Comptroller of the Currency (OCC) for a national bank charter, Business Insider reports. In a companywide email, SoFi identified three benefits of obtaining a charter, including operating under unified regulations rather than managing 50 sets of state regulations, more flexibility with the products it could offer, and more competitive pricing on interest rates for loans, checking, and savings accounts. SoFi joins a growing list of other US fintechs, neobanks, and payments firms that are pursuing independent banking licenses. In February, Varo became the first neobank to receive FDIC approval to use federal deposit insurance. And in March, Square received conditional approval from the FDIC for its planned SMB-focused bank. These preliminary approvals could indicate an increased regulatory willingness to accommodate more digital startups in the banking space — meaning increased competition as well. SoFi entering the neobank space with an independent bank charter could give it an operational advantage, however, as it would be able to lend money and accept deposits without relying on a sponsor bank: US regulations require nonbanks to choose between pursuing their own license or partnering with an incumbent bank, which takes a cut of the profits. |
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|  | RAILSBANK GETS FIRST US BaaS PARTNERSHIP Railsbank, a UK-based Banking-as-a-Service (BaaS) provider, is partnering with US neobank Unifimoney to provide its white-label banking services, AltFi reports. Through the partnership, Unifimoney will use Railbank's APIs to access its Credit-Card-as-a-Service (CCaaS) offering, through which the neobank will launch a credit card later this year. Credit card services will be valuable for securing fintech partnerships, but Railsbank should also continue building out its suite of BaaS solutions. Centering CCaaS at the heart of its BaaS offerings allows Railsbank to fill a key need for many fintechs: Credit cards are a space which Railsbank CEO Nigel Verdon describes as having been "immune from disruption" by fintechs due to the high costs and complexity associated with launching a credit card. Railsbank's CCaaS offering can help them overcome those hurdles and iterate on credit card offerings. This should give Railsbank a strong value proposition as it enters additional markets including Australia and Southeast Asia, for which it plans to use its $10 million in Series A funding raised in September 2019. But given the crowdedness of the US BaaS market in particular — with mature players like Green Dot also offering credit card services — Railsbank should also explore other BaaS niches to develop into as it establishes more partnerships. |
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