BAASplosion!

As I write this, late-breaking news is the total meltdown of Tabapay's previously announced deal to acquire one of the oldest banking-as-a-service platforms, Synapse, out of a prepackaged bankruptcy deal. Over the past few days, the deal fell apart as Evolve, Synapse, Mercury, Lineage, and other players pointed fingers, shared their spreadsheets, and froze accounts.

To follow every twist and turn, my friend Jason Mikula has ongoing updates on Fintech Business Weekly.

I’m disappointed in how this has turned out for so many in the industry, and it is likely to set us back in many ways.

The worst outcome here is that consumers who took a chance on fintech startups to provide new and innovative products with something extremely critical to everyday life, their money, have failed so deeply. 

The priority of all involved must be to do right by consumers and clean up the mess later. 

New Card Season

Some weeks, I wonder what I will write about because it’s quiet on the new card front. Other weeks are like this past one, with several new card announcements. Let’s get to it:

Citi’s New Premier Strata Card

Citibank announced the relaunch of their Citi Premier Card as the new Citi Strata Premier Card. Strata–it’s a delicious cheese dish, some layers of rock, or a new card. I am not a fan of the name, but I must admit that Citi was backed into a corner. Premier, like Prestige, Platinum, Preferred,  etc., are all modifiers and don’t serve as a baseline name. The Thank You points card had very long names at some point, like Citi ThankYou Preferred, but it’s a mouthful (much like a bite of cheese strata). Like “Sapphire” for Chase, there is a need for a core brand to which you can apply modifiers. I’m just not sure Strata was the right choice.

As for the card, it’s mostly a reheating of the Citi Premier Card. As far as I can see, the major changes are adding 3 points per dollar at EV charging stations (matching gas stations) and the return of insurance packages (trip cancellation, delay, lost luggage, etc.). I have often wondered why the Citi cards get less love than Chase or American Express. It might be because their cards don't have compelling offers and the Strata is another example of this, but to each their own I suppose.  

I don’t carry a Citibank card (which is odd), but some folks are deeply invested in the brand. What I think the card-maximizing crowd is looking forward to is the next card in the lineup: a Citi Strata Prestige card that would sit at the top of the strata, so to speak, and truly compete with the American Express Platinum Card or Chase Sapphire Reserve. However, the Strata Premier does have a strong bonus of 75,000 points worth between $750 and $1500. 

PNC Cash Unlimited Visa

Regional powerhouse PNC announced the launch of its new card with a snappy name, the PNC Cash Unlimited® Visa Signature® Credit Card. The card offers unlimited 2% cashback and no annual fee. 

You can’t top Robinhood’s Gold card (there’s still time to help me try to get my hands on one of those with this referral link), but there are not a lot of simple, no-fee 2% cards. The PNC card is simple: a straight 2% on every purchase, no caps, no minimum redemption, no expiration, no foreign exchange fees, and solid 0% intro and balance APR offers for the first 12 months. What is this, 2018? Did someone forget to tell PNC that SOFR is over 5%?

Seriously, though, this is a shot across the bow of the bigger banks showing PNC is going after cards in a big way. People don’t often talk about PNC, or other regional banks and their credit card offerings. After the 2008 global financial crisis, many of these banks retreated, but it looks like they are coming back. Also, take note that this card has an $8 late fee. We will touch on this later in the newsletter.

Avianca Lifemiles Card

Cardless* has been on a roll lately, recently launching its Qatar Airways credit card suite, and this week announcing the upcoming Avianca Airlines LifeMiles card. Avianca will be Cardless’s fourth airline card, joining Qatar, TAP, and LATAM. Each of these are international carriers with limited U.S. presence, but savvy cardholders will use the transferability of global points systems like Skymiles and Avios to get the most out of these cards. When Cardless first launched, it started with a series of sports team cards, which seem to have disappeared from the market, and a one-off (so far) foray into retail led to its first American Express card with Simon Malls. The airline cards are a new trend and one that should pay off over the long term in a better way than with sports teams. 

The CFPB is Working Overtime

This year, the Consumer Financial Protection Bureau turns 12, and like any preteen, it is asserting its independence and opinions. It’s been an exciting week for CFPB news.

Credit Card Rewards Under the Microscope

First, the CFPB published a notice that it wants everyone to know it has its eyes on credit card rewards. The agency notes it received more than 1,200 complaints about rewards, which is a 70% growth over “pre-pandemic levels.” That’s an impressive way to put it, but I am not impressed. There are tens of millions of rewards cards, and you have only received 1,200 complaints about rewards? That’s pretty darn good.

What are consumers complaining about (in my own words):

1. They didn’t read the complicated details, and feel like there was a bait-and-switch
2. Points got devalued
3. It can be hard to deal with points problems, especially because of all the parties involved
4. Issuers close accounts, and they lose their points

Not that these concerns aren’t valid, but I also take them with a fair bit of skepticism. Because of the growth of blogs and subreddits working to churn cards, maximize cards, or take advantage of simpler rules, issuers have rolled out increasingly aggressive tools to limit overly aggressive use of the cards.

I don’t want to debate each point here, but I want to touch on point devaluation, which is a hot topic (and something for a future deep dive). Consumers often complain that miles or points lose value, as in that room used to be 10,000 points, and now it’s 12,000 points. While that room also used to be $100, it’s now $120 due to regular old inflation. I am oversimplifying in this short bit, but I don’t think all point value changes are unreasonable (just unpopular).

Some of the verbatims included in the detailed notice sound pretty bad, and complaints against banks that behave poorly are fair. I’d hate to see this emphasis have a chilling effect on the vibrant points market as it is today.

Credit Card Deals are on Notice

The Financial Times reports that the CFPB is raising alarms over “credit card megadeals,” such as Capital One’s acquisition of Discover. I’m on record as being in favor of this deal. Despite its size, I don’t think Discover provides meaningful competition in the space on the card front, and the increase in resources for the network could create some truly interesting competition on the network side. 

The CFPB notes that 80% of the card market is controlled by ten issuers, although the entire banking industry is subject to consolidation at the top. In general, the experience provided by top issuers is far better than that of smaller ones, and the rates are similar. Super regionals, like PNC, focusing on the market should lead to more competition, more than blocking this deal will.

Delays in the New Late Fee Rule

Finally, in CFPB news, U.S. District Judge Mark T. Pittman blocked the upcoming $8 credit card late fee limit (recently seen on that new PNC card). The Biden administration has been pushing for limits like this $8 fee to prevent Americans from paying “junk fees.” 

Is the late fee a junk fee? I would argue that it is not because it is charged based on behavior and is a penalty fee. When you open a card, you agree to pay it on time. If you don’t, you pay a fee. I think junk fees are things you can’t avoid, like when a hotel room is $100, but there is a $30 resort fee, except you’re not at a resort, just some city hotel, and the resort fee includes wifi and the crappy gym. You can’t opt out; it’s not usage-based, and the real cost of the room is $100. If you pay your credit card on time, the late fee is $0.

The CFPB has a battle on its hands here, and that $8 won’t stick.

Helicopters Are For Elites

If you were ever wondering about the buzzy Bilt Rewards card's target demographic, the latest announcement reveals its focus on wealthy Manhattanites: You can now earn two points per dollar when you buy helicopter flights from Blade. Who is buying helicopter flights from Blade?

Not only do you earn double points, but Bilt Platinum members can even get one free flight each year between Newark or JFK and Manhattan (or Monaco and Nice, but come on).

How do you get Bilt Platinum status? It's easy—charge $50,000 per year in non-rent spending or earn 200,000 points—you know, like a normal person.

Aspiration Lives On

I covered some confusing news about O.G. neobank Aspiration a few weeks back in CardsFTW #90. The company, now known as Aspiration Partners, Inc., announced at the end of April that it had spun off the Aspiration brand to a company named Mission Financial Partners, which will offer the Aspiration card. The card will continue to be issued by Coastal Community Bank. What does the future hold for this card? Time will tell, but there is an uphill battle in the challenging space.

CardsFTW

CardsFTW, released weekly on Wednesdays, offers insights and analysis on new credit and debit card industry products for consumers and providers. CardsFTW is authored and published by Matthew Goldman and the team at Totavi, a boutique consulting firm specializing in fintech product management & marketing. We bring real operational experience that varies from the earliest days of a startup to high-growth phases and public company leadership. Visit www.totavi.com to learn more.

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