Myra Thomas
Hi, everyone. I’m Myra Thomas and welcome to the Buzz from Bank Automation News, where we explore how automation technology is transforming the banking industry. This is our weekly wrap for what’s happening in the industry this week. And before I begin, I’d like to give a big thanks to our sponsor, Pay It Off. Thanks so much for your support. I’m pleased to be joined by associate editors Loraine Lawson and Jaspreet Kalra. It’s July 9, 2021. And here are the biggest news items from our editorial team this week. In an executive order signed, signed today and released in a press release by the Biden administration. There’s stepped up efforts to promote competition in the American economy, according to this statement. The announcement coming out of the White House is basically an announcement saying they’re going to be stepping up enforcement efforts on problems in key markets like healthcare and FinTech and technology, looking to bring further antitrust actions via the Department of Justice and the Federal Trade Commission. Also his executive order mentioned net restoring net neutrality, as well as upping protections for consumers and allowing them to take their data from one financial institution to another. Basically, the office is going to the White House is going to be establishing a competition Council which will be led by the director of the National Economic Council. Loraine, maybe you could talk a little bit about the story that you wrote and your deeper dive into the executive order that was signed.Loraine Lawson
Sure. So the executive order reads sort of like a thesis, it lays out historical reasons for why he is making each suggestion and when it came to financial services. He pointed out the Biden points out in the executive order that the United States has lost 70% of its banks that it once had over the past two decades. That’s around 10,000 bait closures. He points out the communities of color are disproportionately affected with 25% of all rural closures and majority minority census tracts. Many of these closures were the result of mergers and acquisitions, they add. The claim also states that those subject to federal view, federal agencies have not formally denied a bake merger application in more than 15 years. that’s a that’s a long time. So in the course of our lifetime IRA, maybe not just Greece, but in the course of our lifetime. We’ve seen 10,000 banks loss in the US. So the point that the the the thesis that they’re making that is that excessive consolidation raises costs for consumers, and restricts credits for small businesses, and then can harm lower income communities as a result. And it notes that branch closers can reduce the amount of small business lending by about 10% and lead to higher interest rates. So based on that, the conclusion is that it is hard for customers to switch baits, even when they have choice which they have less choice at. So to decrease that cost. They’re requiring, you’re going to require that vapes open up data and allow consumers to take their data with them their transaction data. So it’s open banking in a whole new level. Yeah,Myra Thomas
that’s got to be big news in and of itself, I would imagine the data announcement. So you know, what does that particularly mean for consumer? I wonder?Loraine Lawson
Just you had some interesting thoughts about that, based on what’s happening in UK, right? They’ve already done this there.

Jaspreet Kalra
Right, so the UK has a pretty extensive open banking regulation system, they’re in already where customer when they choose to move back accounts, it becomes the financial institutions responsibility to move that data as well. But that has not necessarily lead to a higher attrition of bank customers. So it’ll be interesting to watch what sort of benefits come out of it. But one question I do have here is, will this also, in some ways for banks to introduce new offerings or make it more lucrative in order to sort of hold their customers back make it more international? So to say,

Loraine Lawson
you know, I have to think that it’s going to be hard for banks to argue that this would this is a difficult thing for them to do. So I think it would almost have to lead to them wanting to keep their customers and acting to keep customers more. But on the other hand, it can’t be that hard to do, because they’re opening up much of that data already to third party providers via API. So to say that they can’t communicate with another bake seems like it would be disingenuous.

Myra Thomas
Yeah, it makes perfect sense. Yeah, it does. nother story that we looked at this week, we looked at stable coin issuer circle, and their look to go public via a merger with a special purpose acquisition company, concrete acquisition Corp circling that announced that the deal value would be at about 4.5 billion with circle shareholders owning 86% of the firm upon completion of the transaction, which is set to happen by year end, just read, maybe you can talk a little bit more about what stable coins actually are, and why. And I know people often confuse them with cryptocurrency, but why they’re less volatile than that.

Jaspreet Kalra
So stable coins are a type of cryptocurrency whereas cryptocurrencies are not pegged to anything in terms of say, like how stock is to a company’s production, revenue, etc. But stable coins are pegged to say the US dollar. And what a company essentially does is issues this peg form of cryptocurrency to customers in exchange for their US dollars or any other fiat currency. And they have to become like a very sort of popular entry point to the crypto landscape, say if you interact with services, like decentralized finance, a lot of that runs on the basis of stable coins. And that’s why I think circle is looking to also tap into that opportunity and build this infrastructure, which allows them to grow the ecosystem.

Myra Thomas
So basically, stable coin is a cryptocurrency, but it’s pegged, so it has a non volatile price versus Bitcoin, which is volatile. Yes. Okay. And so, you know, what’s the potential for circle after this? I mean, so, go ahead.

Jaspreet Kalra
Yeah, so the cryptocurrency space has grown exponentially over the last year and a half. And you’ve seen a lot of retail investor interest, we’ve seen a lot of institutional investor interest, both in cryptocurrencies like Bitcoin aetherium, and also in the extended decentralized finance space. And what I think circle is really trying to do is on the one hand, eat into some of that payments business, and on the other hand, eat into some of that business, which is driven by that interest to interact with services like decentralized finance. And another pitch that circle makes to its users is that instead of parking their funds in a savings account, which offers about point 1% circle has this product called circle yield, where if you park your usdc, where you get between three to 7% annual interest, so it’s a lot of factors, combining each other with each other, and circles really mean looking to make the best of that opportunity. I mean, Saku ahsay usdc, which is the stable coin circle issues is the eighth largest cryptocurrency by market cap, and there’s about $25 billion of it in circulation.

Myra Thomas
Wow. I mean, I think what circle raised like 440 million guests and one of their recent funding rounds, and that was a record if I’m not mistaken in crypto land.

Jaspreet Kalra
I have a major race.

Myra Thomas
Yeah. What does that signify? You know, as far as circle versus other players, I, you know, are there other major players in the stable coin sector? Yeah, so

Jaspreet Kalra
the other major stable coin issuer is called tether. And they’re even bigger than circulating. They’re the second largest cryptocurrency in circulation, or the third largest depending on how aetherium is doing. And but other there’s been some regulatory concerns. Recently, as I said, a lot of stable coins are backed by dollar reserves or other sort of empty money supply instruments. But tether has not had a good history of disclosing exactly what their reserves are backed by. So New York Attorney General had also opened an investigation into that, which is why it’s terrible or some of his shins come under regulatory concern. So I think circle is really pitching usdc as like a regulated alternative to it. But at the same time, commentators have raised similar doubts about what backs surco for example, in its investor deck circle says that majority of its yield product is collateralized by Bitcoin. And Bitcoin being as volatile as it is, if it decreases substantially in value, it could also have an impact on the yield circle offers on its products.

Loraine Lawson
Okay, I was just ready to move my investments out of Beanie Babies. I did have a question before I did that. So overall, they raised $711 million in funding. Why do they need to go public vs back if they can raise so much money?

Jaspreet Kalra
Well, a few reasons. I mean, I think you can only tap into so much VC funding. And on the other hand, there’s a lot of interest in the cryptocurrency space right now. So why not go public? And then I would say some of the reasons companies choose specs versus an IPO is that specs are really much faster. So one analogy that I have heard that really fits into the picture very nicely is that a spec is like Las Vegas wedding versus like a properly scheduled ready. Now Las Vegas wedding might be as good as a regular wedding. But at the same time, sometimes things can go really bad in a hurry, as we saw happened with an electric truck company last month, that some of their orders that they had put on their investment back didn’t really materialize which led to the collapse of that company. So I mean, on the one hand offers a quicker route to say public markets and marquee investors who can help you raise a lot more funding circle has committed investments of 410 million if I remember correctly from in in pipe investments. So that really helps them raise that money with accredited investors. But at the same time, if the core business model doesn’t work out, yet again, last week was reading.

Myra Thomas
Yeah. Yeah, yeah, exactly. Exactly. I mean, the benefit of the spec is that I mean, they’ve been around for years. But I guess the reason why now, more so than ever, I guess just going in traditional IPO route is because of market volatility. And like you say, the ease of doing it, because banks have been around for God knows for decades. But anyway, folks that that wraps us up for this episode of the weekly wrap. I want to thank everyone for tuning in and listening to the wrap on Myra Thomas. And thanks, everyone. Regenexx time here. Thank you so much for joining us on the bus is a look ahead for the stories we’re working on this coming week. I’m working on a cross border story looking at cross border payments and how AI is actually helping out in those transit transactions. Lorraine, what’s on the front for you? What’s coming

Loraine Lawson
up? Sorry, I’ve talked to jack Henry about what they’re going to be focusing on for their next year. They just started there. They do a fiscal year. That starts in July. So I talked to them and I talked to national Indianapolis bank bank of Indianapolis, I’m sorry about their plans for automation going forward.

Myra Thomas
Just free what’s on tap for you?

Jaspreet Kalra
So it’s earning seasons again. So I’ll be watching how banks report their earnings. The special focus on this product called robo advisors, which have been pretty popular in recent times.

Myra Thomas
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