What’d I miss? News and Insights that got noticed - Week 38

Key themes this week (September 15 -21)

• Goldman Sachs Nearing Sale of GreenSky Unit
• BMO exits indirect auto lending
• IKEA and Afterpay Bring BNPL to Furniture Buying
• CFPB issues guidance on credit denials that use artificial intelligence

Report: Goldman Sachs Nearing Sale of GreenSky Unit

"...As The Wall Street Journal (WSJ) reported Tuesday (Sept. 19), the Wall Street bank is in discussions to sell GreenSky? to a group of firms that include Sixth Street, Pacific Investment Management and KKR as it moves further away from consumer lending.”

Key takeaways:

• The report, citing sources familiar with the matter, said a deal would be worth around $500 million, a sharp drop from the $2.2 billion Goldman paid for GreenSky in 2021
• The report says the sale process drew bids from a number of private equity firms and financial services firms, and that Goldman is now in exclusive talks with the Sixth Street group

LinkedIn Post

International students using fintech to receive foreign money transfers - Revolut

"...According to the company, this demographic has seen a 91% surge in growth over the past 12 months, accompanied by a 99% increase in the volume of money transferred. Since July 2021, Revolut student remittances found that the number of users aged 18 to 24 has surged by more than 290%, with the corresponding volume of money transferred increasing by over 390%.”

Key takeaways:

• The digital bank anticipates that it will see a significant increase in foreign money transfers to young people studying in Britain.?
• In a press release on the data, Akshat Mittal, head of strategy for Revolut International Payments stated that estimates suggest up to ￡50 million could be transferred to these students during September 2023 alone

LinkedIn Post

BMO exits indirect auto lending

"...BMO Financial Group exited indirect auto lending Friday as the bank looks to prioritize its resources following layoffs in recent months.? “By winding down the indirect retail auto finance business, we have the ability to focus our resources on areas where we believe our competitive positioning is strongest,” Jeff Roman, director of communications at BMO.”

Key takeaways:

• The bank joins a list of other financial institutions, including Citizens Bank and Mechanics Bank, that have exited indirect auto lending?
• The trend has caused neobank Upgrade to throw its hat in the ring

LinkedIn Post

Santander retools its structure

"...For Santander, the combined retail-commercial unit and the digital consumer bank will stand alongside divisions encompassing payments, corporate and investment banking, and wealth management and insurance.”

Key takeaways:

• Cost savings targets were not disclosed, but the restructuring will likely reduce layers of management and could result in job cuts, people familiar with the matter told Bloomberg
• The 17% ROTE target is a common one. Both Goldman Sachs and JPMorgan Chase use that figure as a benchmark. Among European banks, Deutsche Bank and BNP Paribas are aiming for a similar target (though Santander achieved 14.4% ROTE last year, compared with 12% at BNP and 10% at Deutsche, according to Bloomberg)

LinkedIn Post

IKEA and Afterpay Bring BNPL to Furniture Buying

“…The world’s largest furniture retailer announced Tuesday (Sept. 19) that Afterpay’s “Pay in 4” service was now available at its stores and website for customers in the U.S.”

Key takeaways:

• The program, which lets customers pay for products in four payments over a six-week period, is launching at a time when cost-conscious consumers continue to use deferred payment offerings like BNPL to fund purchases
• Deferred payment tools like credit card installment plans and BNPL options have gained popularity among consumers in recent years, offering a convenient way to manage spending and make large purchases more affordable.
• According to a joint PYMNTS Intelligence-AWS survey, people use deferred payment plans for three chief reasons: convenience, financial support and the ability to purchase more products. The research found that 28% of consumers had used deferred payment plans in the prior three months, including BNPL and credit card installment plans

LinkedIn Post

City National Bank hires ex-Fifth Third Bank CEO as executive board chair

"...Carmichael will report directly to RBC CEO Dave McKay. Kelly Coffey, City National’s CEO, will report to Carmichael.”

Key takeaways:

• The $96 billion-asset bank is part of RBC’s long-term growth strategy in the U.S., the Canadian bank’s “second home market”, McKay said in a statement.
• “Greg brings a client-centered and digital-first mindset, underpinned by exceptional operational expertise, that will be key to driving performance,” McKay added."

LinkedIn Post

CFPB issues guidance on credit denials that use artificial intelligence

"...The Consumer Financial Protection Bureau warned lenders of the requirement to provide specific and accurate reasons when denying credit to a consumer, reiterating the agency's skepticism of artificial intelligence and advanced algorithms in underwriting decisions.”

Key takeaways:

• On Tuesday, the CFPB issued guidance on the use of artificial intelligence in underwriting and the explanations given to consumers who are denied credit.
• ?The bureau said that creditors are relying inappropriately on a checklist of reasons provided by the CFPB in sample forms
• "Creditors must be able to specifically explain their reasons for denial. There is no special exemption for artificial intelligence," CFPB Director Rohit Chopra said in a press release

LinkedIn Post

Cisco acquiring cybersecurity company Splunk in cash deal worth $28 billion

"...Splunk's technology helps businesses monitor and analyze their data to minimize the risk of hacks and resolve technical issues faster. Cisco has long been the world's largest maker of computer networking equipment and has been bolstering its cybersecurity business to meet customer demands and fuel growth.”

Key takeaways:

• Cisco CEO Chuck Robbins emphasized the importance of artificial intelligence and using the power of AI that comes with Splunk's technology to protect networks
• The purchase price is equivalent to about 13% of Cisco's market cap, a big number for a company that has historically avoided blockbuster deals
• The deal is expected to close in the third quarter of 2024, and Cisco says it should improve gross margins in the first year and non-GAAP earnings in year two

LinkedIn Post

Versatile Credit Lands Growth Investment From PSG

"...Versatile Credit provides an omnichannel platform that lets merchants and lenders connect with and lend to consumers at the point of sale, working with merchants in sectors including furniture, elective medical services, dentistry, home improvement and car repair.”

Key takeaways:

• “Just having the old-fashioned retail private label credit card out there is not enough to win business and, more importantly, keep the business after you’ve won it,” Ed O'Donnell told PYMNTS CEO Karen Webster."
• “Merchants are leveraging financing offers to attract customers and convert shoppers at all levels of the FICO spectrum into buyers. Merchants across various industries recognize the power of promotional financing in driving interest and growth and are making it an integral part of their sales approach.”
• The credit landscape is evolving, with new credit card applications up around 25%, even as rejection rates hit 22%, their highest level in five years

LinkedIn Post

43% of Consumers Will Delay or Cancel a Purchase If Merchants Don’t Offer BNPL

"...As consumers become increasingly accustomed to convenient and flexible payment options, buy now, pay later (BNPL) as a payment method has gained significant popularity both among consumers who can spread retail purchases in several installments and merchants looking to prevent cart abandonment and sustain sales.”

Key takeaways:

• The availability of BNPL not only influences the decision to complete a purchase but also affects the choice of products. The PYMNTS Intelligence study found that if BNPL was not offered at checkout, 28% of bridge millennials would opt for a cheaper alternative
• This suggests that offering BNPL can increase the likelihood of securing the sale of higher-value products, as consumers are less likely to compromise on their desired purchase when this payment option is available

LinkedIn Post

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