Morning in Orange County, marine layer still hanging around. Notes open.
TL;DR
- Inflation 2.9% YoY; jobs benchmark revised downward ~911k; Fed path uncertain. Card charge-offs ~4.15%; delinquencies ~2.98%.
- Capital is moving again: Klarna IPO (~$1.37B raise, ~$15B val), Rainforest B ($29M), Mazlo ($4.6M), OnePay adds MVNO via Gigs, Pipe × Uber Eats working capital.
- Policy tape: court blocks attempt to remove Fed Gov. Lisa Cook (for now); Evolve under probe; usury and routing keep surfacing.
- Read-through for healthcare fintech: price for spread volatility, lean into debit mix and instant settlement where it pays, and keep routing + sponsor diligence front and center.
Macro
Inflation ticked up to 2.9% while employment was revised downward. The Fed is balancing higher-than-hoped inflation against softer jobs. Small silver lining: credit card charge-offs and delinquencies eased.
I’m planning for spread volatility and an uncertain rate path instead of assuming a straight-line cut cycle.
Deals I’m Watching
- Klarna IPO: ~$1.37B raised; valuation near ~$15B. Public market appetite for payments models is selective but open.
- Rainforest ($29M B): payments-as-a-service for vertical SaaS-platform-first motion keeps winning.
- Mazlo ($4.6M): nonprofit finance-niche vertical finance continues.
- OnePay × Gigs: MVNO add-on; bundling communications with finance can add stickiness (distribution + ARPU).
- Pipe × Uber Eats: embedded working capital where operators already live.
Policy / Regulatory Watch
- Fed governance: a federal judge temporarily blocked removal of Gov. Lisa Cook. Near-term FOMC continuity matters for rate-path expectations; the medium-term story is still inflation vs employment.
- Bank program risk: continued scrutiny of sponsor bank programs (e.g., Evolve probe) keeps third-party oversight and model risk on the exam sheet. If you run vertical programs, expect deeper evidence on monitoring, complaints, and dispute handling.
- Market plumbing: debit routing obligations and dual-network enablement keep surfacing; distribution pushes for Zelle/Paze expand reach of incumbent rails; usury debates flare in SMB credit.
Builder Notes (mapping to healthcare fintech)
- Vertical payments and platform economics
Focus beats breadth. See Unit Economics and Deposits → Credit. - Sponsor bank diligence > demo slickness
Durbin status and ops muscle define margins and reliability. Background: Durbin Advantage. - Rails choice isn’t a feature list; it’s settlement behavior
Instant rails change operations, not just marketing. Notes: RTP/FedNow Rails. - Compliance is a moat, not a banner
Credit lines, BNPL, wage access-regulatory muscle makes or breaks them. Our view: KYC/KYB and Compliance Costs.
Thoughtful Analysis: Q3 read-through for dental/healthcare
- Pricing power and deposit beta
At 2.9% inflation with an uncertain rate path, assume stickier spreads and higher deposit beta for sophisticated practices. For vertical banking, that means pricing cards and working capital for volatility, not a smooth normalization. Debit economics matter more when credit re-prices. - Debit mix and routing discipline
Practices skew to debit for co-pays and recurring payments. Durbin-exempt routing and MCC hygiene (8021) remain first-order variables. Validate dual-network enablement at the BIN, not in the sales deck. - Instant settlement where it actually pays
ACH + 835 remittance fidelity still wins for reconciliation; use RTP/FedNow for high-value timing moments (payroll, supplier crunches) where finality offsets cost. Run file-level tests; measure disputes, not press releases. - Public markets’ message to payments
Klarna’s rebound signals appetite for scaled unit economics over growth slogans. For vertical SaaS, “payments-as-a-feature” now competes with dedicated payments infra designed for platforms (Rainforest). Pick lanes: PM-native distribution + platform economics vs merchant-direct breadth. - Program risk and sponsor expectations
With sponsor scrutiny elevated, be exam-ready: show ERA/EFT-to-bank tie-outs, Reg E flow-charts, and model validations. Push controls to the edge (MCC gating, tokenization, velocity) and reconcile daily (BTR/IMAD/OMAD).
Healthcare fintech, dental, AI peers—if you want the model behind these notes, ping me. Newport or LA coffee works.