A well-established Content Marketing Specialist with a tech-savvy personality, experience in writing, and a passion for reading. Staying up to date with the latest technology and social media trends, in love with GIFs and craft chocolate.
This Week in Fintech ending 16 October 2020
This week our experts brought you the following insights based on their experience as investors, entrepreneurs & executives.
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Late last year, we heard that Google was looking to get deeper into the financial world by partnering directly with banks. In early August, Google announced its foray into the banking world with another six U.S. banks pledging to offer digital-only bank accounts through Google Pay. Google is already working with Citigroup, Stanford Credit Union, and added to its partnership roster, Bank Mobile, BBVA USA, BMO Harris, Coastal Community Bank, First Independence Bank, and SEFCU. The digital accounts will launch in 2021 in both checking and savings flavors and will be insured FDIC or NCUA. Google is looking to boost the usage of its digital payment services in North America by partnering with banking institutions. Google’s strategy is to let partnered banks and credit unions provide the underlying financial infrastructure and navigate regulation while it builds smarter interfaces and user experience. Lately, it would seem that every major tech firm has set its sights on banking. In 2019 Apple partnered with Goldman Sachs on the Apple Card, which currently has over three million customers in the U.S. In 2020, Samsung announced a competitive product to the Apple Card in the U.K, and now Google is cooking up its own option.
Editor note: the acceleration of disruption due to pandemic is making life very hard for incumbents
Tuesday Efi Pylarinou @efipm our Swiss-based Fintech Adviser, founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019 wrote Knock & iBuying in US Real Estate Fintech
The SPAC trend continues in the US and Chamath Palihapitiya is one of the leading investors with his IPOA, IPOB,… series. The latest Fintech deal was focused on a real estate disruptor in the US, OpenDoor.
With Zillow, being the blue-chip name and already public, I wanted to dig into how OpenDoor`s positioning differs. Technology with all the B2B Software as a Service offerings (Saas) makes it so challenging to create and sustain a moat.
The secret sauce of a fintech business in real estate is not evident because the US real estate market is on the one hand mature but also very fragmented. On top of that, there are several uncertainties and moving pieces of the puzzle due to the current macro-economic environment and the emerging new normal life-style trends.
Editor note: Real estate it is a big broken market, but houses need creative selling. If Fintech can coop rather than eliminate realtors, it will be huge, just by eliminating the administrivia.
Bernard Lunn, CEO of Daily Fintech and author of The Blockchain Economy wrote:Could the Sidetree decentralized identity protocol enable both privacy and personalization?
I am a bit of a privacy nut. I don’t like being tracked and I don’t like anybody else controlling my identity. Yet I know that being tracked can create personalized services that are useful to me. That is why I am a fan of decentralized identity on the blockchain. (see Part 3/Chapter 6 of The Blockchain Economy digital courseware for more on how decentralized identity on the blockchain will disrupt today’s media business).
Today we give up our privacy/identity to Big Tech/Media and that is a massive business for them. So, as a media entrepreneur in a niche domain (Fintech) I want to understand how one can make money if identity is decentralized and under user control. I think keeping advertising to contextual (avoiding all tracking technology) is part of the answer, but users want personalisation (and the networked community enabled by personalisation) and that requires access to identity.
This got me to look at the Sidetree approach to decentralized identity to see if it could be win/win ie for both users and media owners.
Editor note: bleeding edge technology alert, but all big disruption starts this way.
Wednesday Alan Scott Managing Director EMEA at 24 Exchange @Alan_SmartMoney wrote Stablecoin News for the week ending Wednesday 14 October 2020.
This weekly snapshot is the news that matters in the Stablecoin market.
Rintu Patnaik, an Insurtech expert based in India, wrote: Taking Root, the Next Insurtech IPO. Clover Chooses SPAC.
After Lemonade and other successful IPOs including Snowflake and Palantir, Root Insurance has its sights set on the primary public market. In its S-1, Root minces no words about its intent to reinvent the $266 billion US auto insurance.
Five insurtech companies established after 2015 have each raised private capital in the region of $500 million. Lemonade has gone public, Root has announced plans and there are signs of more to come.
Root Insurance which focuses on automotive, claims to be the only P&C insurance carrier with a scaled proprietary telematics solution and largest proprietary dataset of miles driven, driving behavior and claims experience.
Editor note: Public market investors finally get a chance to ride the Insurtech wave – at rich valuations of course because of stimulus and investment bankers doing a good job.
Christian Dreyer @x3er, our Swiss based CFA who focusses on how XBRL changes our world wrote XBRL News:SupTech, future of reporting, taxonomy guidance
Editor note: This weekly snapshot is the news that matters in the XBRL market.
Editor note: This weekly snapshot is the news that matters in the Alt Lending market.
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Alt Lending Week Ended 16th October 2020
Despite the pessimistic tone Matthew Lynn is in fact doing us all, Banks and Alt Lenders alike, a favour. In this piece he reminds us that that there has never been a recession yet which has not been accompanied at some point by a financial crash. And of course it is difficult to argue that the COVID recession is any different. You cannot regulate away an economic shock as big as this one and the impact of the sharp fall in economic activity is bound to manifest itself sooner or later. The big banks in the UK seem to be taking this pretty seriously reining in lending policies and being more selective. The Alt lenders however are behaving quite differently. Certainly their algorithm driven lending policies will steer them clear of the most obvious problem sectors but it is difficult to see how they will not undergo a certain amount of financial pain within the immediate future. I was given the unenviable task of managing a whole loan portfolio in decline. Computers are great at increasing efficiency in reaching lending decisions and processing documentation and data, even, perhaps, assisting in getting money back more quickly, but it will not help if there is a systemic collapse. To use the current situation as a means to build loan portfolios to me looks questionable as a strategy.
In January of this year the Federal Reserve published the Small Business Credit survey which looked at the business practises of online small business lenders from all over the United States. This was of course before COVID changed everything. The business showed a small number of common characteristics which include an automated online application process, proprietary algorithms to determine credit worthiness and a focus on speed and inclusivity. Succinctly the conclusion was that borrowers generally liked working with online lenders upfront but not later in the journey. This is obviously tied to the likelihood of approval which, not surprisingly, is the critical factor for a lender but it also points to the fact that credit is easier to obtain for online lenders than from traditional institutions such as banks. Satisfaction levels from borrowers working with digital lenders were significantly lower with the new boys clients citing inflexibility, high interest rates onerous repayments etc. It is much easier to dole out the cash than to get it all back together with interest and on time. Since January the whole situation has become a lot more risky. Next year’s report will be very interesting.
The UK national audit office has warned that up to £ 26 billion in Government bounce back loans are at risk either through fraud or the inability of borrowers to repay. I cannot say that I am surprised by this as it was a hurried scheme and was probably not thought through thoroughly. The loans are made either through existing banks both traditional and digital and are guaranteed by the government. The institutions that rushed in to capitalise on the government guarantee had better start looking very closely at their documentation and compliance with stipulated process. Looks like a lot of organisations might find out the hard way that a guarantee is not cash.
Howard Tolman is a well-known banker, technologist and entrepreneur in London,
We have a self imposed constraint of 3 news stories per week because we serve busy senior Fintech leaders who just want succinct and important information.
For context on Alt Lending please read the Interview with Howard Tolman about the future of Alt Lending and read articles tagged Alt Lending in our archives.
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“Digital businesses are the future”: Airwallex’s journey from café to one of Australia’s fastest growing fintech firms
The pandemic has prompted an explosion of digital and global business services. Airwallex, an online business account for SMEs, has seen this surge in digital business first-hand.
“A major shift in the way businesses operate from offline to online is something Airwallex predicted from our inception,” said Jack Zhang, CEO and Co-founder of Airwallex.
“However, 2020 has fast-tracked this transition in a way no one could have foreseen. Businesses are now racing to embrace digital transformation at an unprecedented rate. We are more certain than ever that the digital economy is going to be the centre of the world’s economic structure.”
Airwallex’s impressive growth is a testament to the digital revolution that is facing businesses.
It achieved “unicorn” status – a $1 bn valuation – last year. In Q3 2020, it experienced over a 100 per cent increase in net revenue after recruiting more than 140 staff in early 2020.
Last month, Airwallex closed their extended series D fundraising with an additional $US 40 mn after initially announcing $US 160 mn series D funding in April 2020.
To date, Airwallex has raised over $US 400 mn since it was founded in late 2015.
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