June Edition

Welcome to the June edition of our newsletter, your go-to source for insights, updates, and news from the world of lending and financial services.

This month, several major cash managers, including Vanguard and Capital Group, announce plans to close or convert some U.S. money market funds due to new SEC regulations.?Elsewhere, mortgage rates are on the decline, with the average 30-year fixed-rate mortgage dropping to 6.94%, offering some relief amid a still-tough housing market.

Is shopping around for fintech slowing progress?

On the latest 22 Minutes in Lending episode, strategic advisor to credit unions, Dr. Brandi Stankovic, gives a no-holds-barred challenge to credit union leaders to look internally first; for everything from fintech and innovation to leadership succession and their institutional strategies to achieve long-term financial sustainability.

Listen now.

Insights and strategies for mastering compliance

As regulatory scrutiny intensifies and fintech partnerships grow, LendKey's Director of Regulatory Compliance, Lauren Sartwell, provides essential insights on managing third-party oversight and maintaining robust compliance practices.

Read more.

Industry Insights

Liquidity management

Quantitative tightening continues to stymie liquidity

Despite years of liquidity tightening, apparently there's still room for contraction according to new anslysis from JP Morgan, that claims liquidity is entering a "mildly contracting phase" driven by, among several causes, the Fed's QT. Read more.

Disappointing inflation reading sees Fed stay the course

Minutes from the Fed's last meeting show a split of opinions on how to manage ongoing inflation, with some officials open to raising rates once more. As it stands, rates are anticipated to remain where they are. Read more.

FIs plan their money market exit...

Several major cash managers, including Vanguard and Capital Group, are planning to close or convert some U.S. money market funds due to new SEC regulations taking effect in October. These changes could disrupt short-dated debt markets, but increased diversity among buyers is expected to absorb the impact. Despite potential short-term volatility, experts believe the commercial paper market will remain robust, supported by high interest rates and strong demand for short-term debt instruments. Read more.

...while consumers are nudged towards them

With higher interest rates remaining, financial experts are encouraging consumers to park their cash in high-quality money market mutual funds, with some paying up to 5.25%. Read more.

Could CDFI designation ease long-term liquidity issues?

The number of Community Development Financial Institution (CDFI) certified organizations has more than doubled since 2020.?The delay allowed the CDFI Fund to develop new rules and guidelines which, now approved, offer unique opportunities for financial institutions to access grants, enhance lending capacity, and deepen community engagement. Read more.

Economy and regulation

Good news on mortgage rates but housing market still tough

Mortgage rates declined for three consecutive weeks through May, with the average 30-year fixed-rate mortgage dropping to 6.94%. Despite this, the housing market remains stagnant, with high prices and limited supply exacerbated by homeowners holding onto low pre-2022 mortgage rates. Read more.

Economists optimistic about 2H and 2025

Despite sustained elevated interest rates, economists are increasingly confident that the U.S. economy will avoid a recession in 2024, with nine out of ten predicting a soft landing according to the National Association for Business Economics. Instead of a downturn, they expect stronger growth through 2025, with forecasts for real GDP rising.?Read more.

CFPB defines BNPL lenders as credit card providers

As consumers continue to gravitate to Buy Now, Pay Later (BNPL) solutions, the Consumer Financial Protection Bureau (CFPB) has written an interpretive rule that defines BNPL lenders as credit card providers. The rule increases consumer protections by obligating BNPL lenders to provide services such as transaction disputes, refunds for canceled purchases, and billing statements. Read more.

Technology

Synapse shutdown freezes thousands of accounts, customers in limbo

After filing for Chapter 11 bankruptcy in April, the abrupt shutdown of middleware fintech Synapse froze the bank accounts of tens of thousands of U.S. businesses and consumers. With many customers unable to access their funds through May, banking regulators are evaluating the situation for further action. Read more.

Core providers next to be disrupted with cloud-native banking

With countless credit unions and community banks bemoaning legacy tech-stacks, core providers are being increasingly urged to innovate. Cloud-native banking solutions are starting to lead the way.?Read more.

Chime in hot water for delayed consumer refunds

The CFPB ordered banking services fintech, Chime, to pay a $3.25 million penalty at the start of May, after finding the organization illegally witheld consumer refunds beyond a 14-day limit. Chime was also ordered to pay at least $1.3 million "in redress to consumers it harmed". Read more.?

Consumer Insights

Retail sales stall as high costs curb consumer spending

U.S. retail sales were flat in April, following downwardly revised gains from the previous two months. The Commerce Department reported that spending was largely focused on necessities like food and gasoline, while discretionary spending decreased in several categories, indicating a softening in consumer demand, despite a still-healthy labor market. Read more.

Boon for credit union credit card programs as consumers shun big banks

Credit unions and community banks are gaining ground in the credit card market, with 24% of consumers now preferring local options over national banks, according to a PYMNTS Intelligence study in partnership with Elan Credit Card. This shift presents a significant opportunity for credit unions and community banks to capture a larger share of the market. Read more.

Items of Interest

With more than 26,000 fintech and fewer than 5,000 credit unions, is the credit union system suffering from too much of a good thing? Read more.

LendKey announces new leader to spearhead development of groundbreaking loan-trading platform, ALIRO. Read more.

ALIRO is added to the LendAPI marketplace, increasing access to innovative loan management solutions for credit unions. Read more.