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Rojin Nair, Advisor
June 1st, 2021
At Incyub8 Inc, Rojin is focusing on nurturing and guiding various national and international start-[...]
Category Archives: Digital, NEO and Open Banking
LendingClub Reports Strong 2nd Quarter Results, Shares Rise Dramatically
Crowdfund Insider | | Jul 28, 2021
LendingClub (NYSE:LC), a Fintech that started as a peer-to-peer lender and now operating as a digital bank, has posted strong 2nd quarter results that easily topped expectations. LendingClub finally turned the corner on profitability shredding guidance that had expected a loss. Shares moved considerably higher in after-hours trading during a crowded earnings announcement day.
At the start of 2021, LendingClub completed the acquisition of Radius Bank thus entering the red hot digital banking sector. This quarter is the first earnings round as a nationally chartered digital bank.
According to LendingClub sequential revenue increased by 93%, driven by growth in marketplace lending revenue and increased net interest income from the retained portfolio of consumer loans. Total revenue was $204.4 million, almost double the previous quarter, with net income jumping to $9.4 million – in stark contrast to the $47.1 million loss delivered in Q1.
See: Why LendingClub’s Acquisition Of Radius Bank Is A Smart Deal
The fact that LendingClub will now be able to hold deposits as a bank means a lower cost of funding for its online lending segment.
LendingClub CEO Scott Sanborn, issued the following statement:
“Our first full quarter operating a digital bank was the most profitable quarter in LendingClub’s history. This is the beginning of a dramatically enhanced earnings trajectory for the business. Our transformation is fueled by our competitive advantages, which include our 3.5 million-plus members, deep data capabilities, marketplace model as well as our more efficient operating platform. Our earnings are being bolstered by our bank, which is generating a new stream of recurring net interest income that is only beginning to contribute to our bottom-line results.”
LendingClub highlighted the following stats:
- Marketplace revenue grew 86% sequentially, primarily reflecting 105% growth in origination fees and a 132% increase in gains on loan sales as loans sold through the marketplace doubled.
- Net interest income grew 148% sequentially to $45.9 million, as the bank’s loan portfolio (excluding PPP loans) grew 27% sequentially, propelled by growth in the consumer loan portfolio of 145% to $795M.
- Deposits grew to $2.5 billion, helping fund growth in the bank’s loan portfolio.
Updates:
Shares in LendingClub have rocketed higher today jumping by over 55% (as of this moment).
The few analysts that participated in the earnings call congratulated LendingClub on its performance. Earlier today, Wedbush analyst Henry Coffey boosted his price target to $33.50 (from $25), reiterating an outperform call, after calling the results “amazing.”
See: Fintech Startups Broke Apart Financial Services. Now The Sector Is Rebundling
By becoming a nationally chartered bank, via its acquisition of Radius Bank, LendingClub is now financing its own loans, alongside a growing number of other institutions – including other banks (which now account for more than half of funding including LendingClub Bank).
Management also said there were some unanticipated benefits by becoming a bank as being regulated as a bank helped boost confidence for bank investors. There is a lot of confidence in credit quality.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Square launches small business banking
Reuters | Anna Irrera | Jul 20, 2021
July 20 (Reuters) - Square Inc (SQ.N), the company led by Twitter Inc (TWTR.N) CEO Jack Dorsey, is launching banking services for small businesses, as it continues to grow beyond payments processing.
Square Banking will offer small businesses savings and checking accounts, as well as its existing lending offering which has been renamed Square Loans, the San Francisco-based company said on Tuesday.
Square Checking will have no account minimums, overdraft fees, or recurring fees and saving accounts will offer a 0.5% annual percent yield on deposits.
See: Square buys 3,319 more Bitcoin at an average price of $51,236 for another $170 million investment
Square hopes its new checking and savings accounts, which build upon its debit card offering, will be attractive to small businesses who have struggled to gain access to more mainstream banking services, said Christina Riechers, Square Banking's head of product.
"There is no monthly fee so we see this as having high potential to get folks into more formalized business banking," Riechers said in an interview.
Deposits collected from small businesses will be lent back through Square Loans, she said.
The new services come following the launch of the company's industrial bank, Square Financial Services, which began operations in March after completing the charter approval process with the Federal Deposit Insurance Corporation (FDIC) and the Utah Department of Financial Institutions.
See: Inside Jack Dorsey’s Next Big Bet on Bitcoin, DeFi
The industrial bank is part of efforts by Square to expand its revenue stream beyond facilitating card payments for small businesses.
The company's consumer business Cash App has been booming, with first quarter revenue excluding bitcoin investing up 139% year on year to $529 million.
While initially, only small business deposits will be brought under the Square Financial Services umbrella, over time the company will look to have the bank work across its range of products and services, a spokesman said.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Open Finance data adoption varies by country (but one thing is certain)
McKinsey & Company | By Chandana Asif, Tunde Olanrewaju, Hiro Sayama, and Ahalya Vijayasrinivasan | Jul 11, 2021
If open finance continues to accelerate, it could reshape the global financial services ecosystem, change the very idea of banking, and increase pressure on incumbents.
Banks hold a record of much of what we spend, save, and borrow—from electricity bills and mortgage payments to our weekly spend on fuel and coffee. Now, some of that customer data is being shared with third parties in a global movement known as “open financial data” (sometimes referred to as “open banking.”) Roughly half a decade in the making, it’s unlocking a wave of digital financial innovation—and likely disruption.
Brought on by a combination of government regulation and market forces, open financial data allows an expanding universe of players—both financial and non-financial—to access customer accounts and data in order to offer new products and services (all contingent on customer consent) (Exhibit 1).
See: WEF: Decentralized Finance: (DeFi) Policy-Maker Toolkit
For customers, open financial data affords greater flexibility in how their money is managed, allowing, for instance, better visibility of accounts and more convenient access to payments. (This paper focuses primarily on benefits for consumers; for more detail on benefits for all participants, including financial institutions, see our recent related report, “Financial data unbound: The value of open data for individuals and institutions.”) Still in its infancy, the movement has the potential to reshape everything from bank accounts, credit cards, payments, mortgages, small business loans, and even insurance policies.
Around the world, this trend is evolving in different ways. In the European Union, the United Kingdom, South Korea, Australia, and India, governments have mandated large banks to open up their vast troves of customer accounts to other companies, in a bid to stimulate competition (Exhibit 2). In the United States and China, it is a market-led movement, with companies establishing open-banking relationships among themselves. Singapore is using a blend of the two models.
The adoption of new digital habits and a dramatic movement toward online channels during the pandemic appears to have accelerated open banking. With so much more of their lives spent online, both consumers and small and medium-sized enterprises (SMEs) became much more open to fintech apps and other non-traditional financial products and services. They also habituated to greater levels of convenience, choice, and flexibility in their financial relationships. In just the first six months of 2020, the number of users of open banking–enabled apps or products in the UK doubled from one million to two million and grew to over three million as of February 2021. In the US, almost one in two consumers now use a fintech solution, primarily peer-to-peer payment solutions and non-bank money transfers.
See: Financial data unbound: The value of open data for individuals and institutions
We believe that if open finance continues to accelerate it could reshape the global financial services ecosystem, change the very idea of banking, and increase pressure on incumbent banks. According to the UK’s Financial Conduct Authority, a significant share of customers who are dissatisfied with their current accounts, earn uncompetitive interest rates on savings accounts, or pay higher mortgage rates do not change providers due to the hassle of switching or lack of visibility into better options. The ability for customers to better understand their full financial picture—one of open banking’s promises—could result in margin compression, as pricing and charges become more transparent. Banks may also have to contend with margin sharing, as payouts to digital platforms could play a far greater role in customer acquisition.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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UBS [Submission deadline: Aug 6]: Future of Finance Challenge 2021
UBS | Jacoline Loewe | Jul 13, 2021
![UBS future of finance challenge - UBS [Submission deadline: Aug 6]: Future of Finance Challenge 2021](https://1hvltd3evinm3tpd022grx7s-wpengine.netdna-ssl.com/wp-content/uploads/2021/07/UBS-future-of-finance-challenge.jpg "UBS [Submission deadline: Aug 6]: Future of Finance Challenge 2021")
Since 2015, the UBS Future of Finance Challenge has been open to start-ups and established, growing companies that change the way finance works and meets the client needs of the future. Take part in the 2021 competition and access benefits and prizes of over USD 400,000 worth in value, delivered in collaboration with Anthemis, Deloitte and Microsoft for Startups.
Challenges
What are key challenges for the finance industry? We have identified four challenges that are key to how finance meets the client needs of the future
![UBS 2021 fintech challenges available - UBS [Submission deadline: Aug 6]: Future of Finance Challenge 2021](https://1hvltd3evinm3tpd022grx7s-wpengine.netdna-ssl.com/wp-content/uploads/2021/07/UBS-2021-fintech-challenges-available.jpg "UBS [Submission deadline: Aug 6]: Future of Finance Challenge 2021")
Who is eligible to enter?
We’re looking for start-ups and growing companies, with an annual turnover lower than USD 150m. You should have received less than USD 150m in total investments:
Participants should have developed:
- A working prototype of a product, service or application grounded on innovative / disruptive technology applied to banking / finance
Proposed technology solutions should:
- Be focused directly on banking and financial services, or
- Have a demonstrable impact in another sector but with a potential connection or application within the banking and financial industry.
Some other restrictions apply – see the Official Rules for full details.
See: 65% of Global banking executives see branch-based models dead in 5 years
What is in it for you
One winner per challenge will be selected and each winner will win a cash prize of USD 10,000.
In addition, over 120 hours of dedicated coaching and mentoring from experienced technology and business leaders will be offered to competition finalists. Some finalists may also be considered to participate in a «proof-of-concept» or pilot program with UBS after the competition or enter our UBS Next investment pipeline.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Banking the Underbanked
Scott Galloway | Jul 9, 2021
My north star(s) for philosophy, management, and politics are Star Wars, The Sopranos, and Game of Thrones, respectively. The Iron Bank (GoT) is a metaphor for today’s financial institutions, if present-day banks didn’t need bailouts or to invent fake accounts to juice compensation. Regardless, it was well known throughout Braavos that The Iron Bank will have its due. If you failed to repay, they’d fund your enemies. So today’s Iron Bankers are the venture capitalists funding (any) incumbents’ enemies. If this makes VCs sound interesting/cool, don’t trust your instincts.
See: Getting tangible about intangibles: The future of growth and productivity?
Lately, I’ve spent a decent amount of time on the phone with my bank in an attempt to get a home equity line, as I want to load up on Dogecoin. (Note: kidding.) (Note: mostly.) If Opendoor and Zillow can use algorithms and Google Maps to get an offer on my house in 24 hours, why does it take my bank — which underwrote the original mortgage — so much longer?
Let’s start with this: Twenty-five percent of U.S. households are either unbanked or underbanked. Half of the nation’s unbanked households say they don’t have enough money to meet the minimum balance requirements. Thirty-four percent say bank fees are too high. And, if you’re trying to get a mortgage, you’d better hope the house isn’t cheap.
Inequity is a breeding ground for disruption, leaving underserved markets for insurgents to seize and launch an attack on incumbents from below. We have good reason to believe that’s happening in banking.
Insurgents
A herd of unicorns is at the stable door, looking to trample Wells Fargo and Chase. Fintech is responsible for roughly one in five (17%) of the world’s unicorns, more than any other sector. In addition, there are already several megalodons worth more than financial institutions that have spent generations building (mis)trust.
How did this happen? The fintechs are zeroing in on everything big banks aren’t.
Example #1: Innovation. Over the past five years, PayPal has issued 26x more patents than Goldman Sachs.
Example #2: Cost-cutting. “Neobanks” offer the basic services of a bank, with one less expensive and cumbersome feature: the branch. A traditional bank branch needs $50 million in deposits to generate an adequate return. Yet nearly half (48%) of branches in the U.S. are below that threshold. Neobanks don’t have that problem, and there are now at least 177 of them. Founders frame these offerings as more progressive, less corporate. Dave, a new banking app, offers a Founding Story on its website (illustrated with cartoon bears) about three friends “fed up” with their banking experience, often incurring $38 overdraft fees. Fed up no longer: Dave provides free overdraft protection and has 10 million customers.
See: Economist Spotlight: Imagining a world without banks
Example #3: Less inequity. NYU Professor of Finance Sabrina Howell’s research found fintech lenders gave 18% of PPP loans to Black-owned businesses, while small to medium-sized banks provided just 2%. Among all loans to Black-owned firms, Professor Howell found 54% were from fintech startups. Racial discrimination is the most likely explanation, as lenders faced zero credit risk.
Example #4: Serving the underserved. Unequal access to banking is a global botheration. Almost a third of the world’s adults, 1.7 billion, are unbanked. In Argentina, Colombia, Nigeria, and other countries, more than 50% of adults are unbanked.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Financial data unbound: The value of open data for individuals and institutions
McKinsey Global Institute | Jun 24, 2021
Economies that embrace data sharing for finance could see GDP gains of between 1 and 5 percent by 2030, with benefits flowing to consumers and financial institutions.
As countries around the world look to ensure rapid recovery once the COVID-19 crisis abates, improved financial services are emerging as a key element to boost growth, raise economic efficiency, and lift productivity. Robust digital financial infrastructure proved its worth during the crisis, helping governments cushion people and businesses from the economic shock of the pandemic. The next frontier is to create an open-data ecosystem for finance.
Already, technological, regulatory, and competitive forces are moving markets toward easier and safer financial data sharing. Open-data initiatives are springing up globally, including the United Kingdom’s Open Banking Implementation Entity, the European Union’s second payment services directive, Australia’s new consumer protection laws, Brazil’s drafting of open data guidelines, and Nigeria’s new Open Technology Foundation (Open Banking Nigeria). In the United States, the Consumer Financial Protection Bureau aims to facilitate a consumer-authorized data-sharing market, while the Financial Data Exchange consortium attempts to promote common, interoperable standards for secure access to financial data. Yet, even as many countries put in place stronger digital financial infrastructure and data-sharing mechanisms, COVID-19 has exposed limitations and gaps in their reach, a theme we explored in earlier research.
See: What is open banking and why hasn’t it come to Canada yet?
This discussion paper from the McKinsey Global Institute (download full text in 36-page PDF) looks at the potential value that could be created—and the key issues that will need to be addressed—by the adoption of open data for finance. We focus on four regions: the European Union, India, the United Kingdom, and the United States.
By open data, we mean the ability to share financial data through a digital ecosystem in a manner that requires limited effort or manipulation. Advantages include more accurate credit risk evaluation and risk-based pricing, improved workforce allocation, better product delivery and customer service, and stronger fraud protection.
Our research identifies seven broad mechanisms through which open financial data can create economic value. Three directly benefit individual and MSME customers: increased access to financial services, greater user convenience, and improved product options. The other four mechanisms directly benefit financial institutions: increased operational efficiency, better fraud protection, improved workforce allocation, and reduced friction in data intermediation.
Our analysis suggests that the boost to the economy from broad adoption of open-data ecosystems could range from about 1 to 1.5 percent of GDP in 2030 in the European Union, the United Kingdom, and the United States, to as much as 4 to 5 percent in India. All market participants benefit, be they institutions or consumers—either individuals or micro-, small-, and medium-sized enterprises (MSMEs)—albeit to varying degrees.
See: Privacy Reform: Back to the Drawing Board For C-11?
Capturing the full value requires both a level of data standardization and a breadth of data sharing that are not yet current in many economies. Indeed, our research suggests that more than half the potential value remains inaccessible, particularly the value that financial institutions could gain directly through greater efficiency and reduced fraud costs. The use of open data raises questions about user consent, data protection, and cybersecurity. But if these issues are addressed, the innovation such ecosystems could enable would be a spur to economic recovery and broader-based prosperity.
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Download the 32 page PDF discussion paper --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Financial Health Network Report: Financial Data – The Consumer Perspective
Financial Health Network | Jun 24, 2021
While technology-driven financial products, services, and institutions have the potential to benefit consumers, they can also pose new risks due to the increased availability of financial data. To better understand the consumer perspective on the use of financial data, the Financial Health Network fielded a nationally representative survey.
See: EY Global FinTech Adoption Index finds over half (64%) of global consumers use FinTech
The findings in this report describe consumer understanding of practices in the financial data ecosystem, and consumer preferences on how they would like personal data to be treated. These findings can serve as a guide to both industry stakeholders and policymakers as they seek to build trust and ensure that both practice and policy serve consumers.
Data Portability:
62% of consumers think their bank should be required to share data about them if they direct it to.
Data Privacy:
Approximately 90% of consumers favor an opt-in standard for banks, tech companies, and fintech apps to share data about them.
Data Minimization:
87% of consumers favor data minimization, but only 41% think it is taking place in the market today.
Consumers’ views on data portability, data minimization, and opt-in standards do not vary with political party affiliation.
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Download the 23 page PDF report --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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