Category Archives: Marketplace Lending/P2P, Online Lending

We’re the first neo-bank to break-even, says Starling Bank

AltFi | Daniel Lanyon | Nov 20, 2020

starling bank - We’re the first neo-bank to break-even, says Starling BankA boom in business banking has helped boost Starling Bank’s coffers.

Strong momentum in new customer accounts and increasing revenues have prompted digital bank Starling to break even, according to a trading update for the three months to 31 October.

Starling Bank, which was launched by Anne Boden five years ago, is the first ‘neo-bank’ to reach this milestone, the company said.

In October Starling hit 1.42 million retail accounts compared to 827k, an increase of 71.7 per cent. Over the same period business accounts were the standout growth area with an increase of 245 per cent, from 74,000 to 256,000. Business accounts saw a 500 per cent increase in total deposits with the average amount held by SMEs also going up.

Starling now has total customer deposits of c.£4bn.

This has all helped Starling generate a positive operating profit of £0.8m for the month of October 2020, which represents £10.1m on an annualised basis.

See: 

Neobanks Can’t Fight the COVID-19 “Flight to Quality”

Investment Crowdfunding Advocates Join to Launch New Fintech Startup GUARDD in Move to Boost Secondary Markets for Exempt Securities

In total Starling generated total operating income of £9m for the month of October 2020. This, it adds, translates to an annualised revenue run rate of c.£108m. This figure is split £5.5m of net interest income and £3.5m of gross fees and commissions income.

The figure represents a 400 per cent increase in revenue compared to 12 months ago and a c.30 per cent increase from Starling’s last trading update three months ago.

“Interest income continues to be supported by strong growth in lending volumes, particularly the extension of government-backed lending schemes,” Starling said.

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NCFA Jan 2018 resize - We’re the first neo-bank to break-even, says Starling Bank 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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Payments Startup Stripe in Talks for Funding at $70 Billion Valuation or More

Bloomberg | Katie Roof and Scott Deveau | Nov 24, 2020

stripe founders John and patrick - Payments Startup Stripe in Talks for Funding at $70 Billion Valuation or MorePrivate financial technology business Stripe Inc. is in talks to raise a new funding round valuing it higher than its last private valuation of $36 billion, according to people familiar with the matter.

The valuation being discussed could be more than $70 billion or significantly higher, at as much as $100 billion, said one of the people, who asked not be identified because the matter is private. That would make it currently the most valuable venture-backed startup in the U.S., according to CB Insights.

Stripe’s software, which competes with Square Inc. and Paypal Holdings Inc., is used by businesses to accept payments. According to its website, Stripe’s customers include Amazon.com Inc., Salesforce.com Inc., Lyft Inc. and Instacart Inc.

See: 

Lightspeed and Stripe Partner to Launch New Payments Feature

Stripe, the world’s most valuable private fintech company, is getting into lending

NCFA Sign up for our newsletter - Payments Startup Stripe in Talks for Funding at $70 Billion Valuation or More

The company has benefited during the pandemic with more shoppers turning to e-commerce. It’s gone on offense during the downturn this year, starting a card-issuing service for U.S. clients and agreeing to acquire a Nigerian startup to expand in Africa.

Brother Founders

Irish brothers John and Patrick Collison founded Stripe in 2010. The duo sold their first company for $5 million when they were teenagers and are now worth about $4.3 billion each, according to the Bloomberg Billionaires Index.

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NCFA Jan 2018 resize - Payments Startup Stripe in Talks for Funding at $70 Billion Valuation or More 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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The Dark Side of Fintech Borrowing

HBS Working Knowledge | Rachel Layne | Oct 25, 2020

borrowing - The Dark Side of Fintech BorrowingFintechs have revolutionized the banking industry, but some customers end up worse for the experience, according to research by Marco Di Maggio and colleagues.

Consumers turning to fintech lenders are more likely to spend beyond their means, sink further into debt, and ultimately default more often than people with similar credit profiles borrowing from traditional banks, according to recent research.

See: Where are the Biggest Fintech Startup Hotspots Around the World?

The findings run contrary to conventional wisdom that fintech lenders harvest deeper insight into those borrowers that banks typically reject after running a standard credit check. Fintech lenders claim to consult additional metrics like utility bills or rent payments to identify creditworthy individuals that are overlooked by traditional lenders.

 

“If you put the results into the context that most of the fintech companies claim that they use alternative data, it’s very surprising that their borrowers are more likely to default,” Di Maggio says.

In his study, Di Maggio tracked 3.79 million loans for 1.88 million borrowers using detailed national data from one of the three major credit reporting agencies over several years. This offered an in-depth look at borrowers that either used a fintech company or a bank to obtain a personal loan.

In a nutshell, fintech borrowers who initially improved their credit scores by consolidating some of their credit card debt saw a deterioration in those scores months down the line as they began to use their credit lines to consume more goods, from purchasing a car to buying everyday items, the researchers found.

See: Fintechs to play an “even more important” role coming out of lockdown, says British Business Bank

By a year after the fintech loan, more than 5 percent were likely to default. That’s a 25 percent increase in risk of default compared to similar bank borrowers.

This type of behavior is less likely among bank borrowers, suggesting that fintechs attract a different type of loan-seeker—one with a higher propensity to overspend—which is not something easily captured in their credit reports.

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NCFA Jan 2018 resize - The Dark Side of Fintech Borrowing 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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ASC Updates Raising Capital for Small Businesses Resource: Fostering Alberta’s New Economy

Alberta Securities Commission | Denise Weeres | Oct 29, 2020

ASC capital raising for small businesses resource page - ASC Updates Raising Capital for Small Businesses Resource:  Fostering Alberta’s New EconomyASC has just rolled out some new, plain language, Small Business web-content intended to help entrepreneurs and their advisors navigate the securities law requirements when raising capital through the sale of shares or other securities.  It provides some key terms, frequently asked questions, overview of common capital raising exemptions, some tips and traps.

Many factors are impacting and changing Alberta’s capital market and economy. Efforts are being taken to strengthen and to help expand and diversify the Alberta economy. There are a multitude of parties engaged in these strengthening and diversification efforts. The Alberta Securities Commission (ASC) is Alberta’s securities regulator. We are responsible for protecting investors and fostering a fair and efficient capital market.

The ASC supports these economic efforts by ensuring appropriate securities regulation that protects investors, and fosters a vibrant capital market that facilitates access to capital by Alberta businesses and investment opportunities for Alberta investors. Our goal is to find the right balance of appropriately protecting investors without unduly burdening the businesses trying to raise capital to build and grow.

See:  ASC adopts Start-up Crowdfunding Blanket Order

By engaging with market participants, ASC staff can better understand the challenges small businesses face in accessing capital.

The ASC’s various external advisory committees, including its New Economy Advisory Committee, help the ASC build connections in the community, obtain valuable insight from industry and explore how securities regulation can evolve to support economic diversification, while still providing appropriate investor protection.

Sources of Money

There are a variety of ways in which an entrepreneur may obtain the capital needed to operate their business, such as:

  • their own savings and financial resources, often referred to as ‘bootstrapping’,
  • relying on trade credit,
  • loans from banks, credit union or other financial institutions,
  • government grants or loans,
  • investments by investors, whether through shares, loans, revenue sharing arrangements or the distribution of other securities.

As Alberta's securities regulator, the ASC’s focus is on the last method, raising money through the sale of securities.

If you are trading any of the broad array of products that constitute securities or derivatives, then securities law applies to you!

Resources and Education

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NCFA Jan 2018 resize - ASC Updates Raising Capital for Small Businesses Resource:  Fostering Alberta’s New Economy 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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Fintech Fridays EP45: Mission-driven and Consumer-centric Financial Services

NCFA Canada | Oct 23, 2020

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EP45:  Mission-driven and Consumer-centric Financial Services

Guest:  KEITH TAYLOR, Executive Director, DUCA Impact Lab (LinkedIn)

Bio:  Keith Taylor is the Executive Director of The DUCA Impact Lab, an innovation hub founded by DUCA Financial Services Credit Union. The Impact Lab is a hub for leveraging emerging technology and community-based insight to build banking models that benefit all members of the community. Prior to DUCA, Keith worked as strategic advisor to a group of companies accounting for over $500 million of community investment annually. He started his career in international development working on business planning and finance for community owned businesses in the Caribbean. Since then, Keith has worked in Canada and internationally on a variety on initiatives focused on philanthropy, social enterprise, social finance and strategy. He holds an MBA from the Schulich School of Business at York University and a BA from Saint Francis Xavier University.

DUCA Impact Lab 1 - Fintech Fridays EP45:  Mission-driven and Consumer-centric Financial Services

About this episode:

Keith Taylor, Executive Director of the DUCA Impact Lab chats with Anna Niemira about consumer-centric and fair banking.  They discuss how a group of underbanked Canadian newcomers back in 1954 focused on solving a real problem in financial services.  Fast forward 65 years later, DUCA’s mission has never been stronger.  From innovative escalator-loans to digging deeper into retail financial literacy gaps, and their commitment to improving the financial well-being of its customers.  As a registered B-corporation, learn how DUCA is innovating and living up to their motto of not only being ‘the best in the world but the best FOR the world’.

Subscribe and tune in each Friday to check out the latest movers and shakers in fintech. Listen to more podcasts here:

Season 1 | Season 2 | Season 3

 


Fintech Friday Transcript of Episode 45:  DUCA Impact Lab

Intro: Welcome to fintech Friday's a weekly podcast brought to you by the National Crowdfunding and Fintech Association of Canada and partners. Covering all things fintech, blockchain, AI and alternative finance.

 

Anna Niemira: [00:00:21] Hello and welcome to FinTech Friday's podcast, brought to you by the NCFA Canada, a leading fintech and crowdfunding association. This is Anna Niemira and I am your today's podcast host. Time Flies! We are already in the third season of our podcast. You can always refer to the past episodes by visiting ncfacanada.org, which is our website, to connect with incredible people and their stories. Thank you so much for tuning in. Let me introduce our today's guest. We have the pleasure of speaking with Keith Taylor, Executive Director at Duca Impact Lab a non-profit project, which is channeled by Duca Financial Services Credit Union. Keith, thanks so much for sitting down with me today. I'm very excited to speak with you about Duca Impact Lab and its innovation through social finance. Great to have you here.

 

Keith Taylor: [00:01:28] It's great to be here. Thanks for having me.

 

Anna Niemira: [00:01:30] Well, fantastic that we have a chance to speak once again. You presented about Duca Impact Lab at FFCON20 during summertime, and now we are going to tap into this again. So let us know a little bit about yourself. Like, what was the beginning of your fintech adventure? How did all start for you?

 

Keith Taylor: [00:01:58] As opposed to the beginning of my fintech adventure and interest in the fintech world was when we were thinking about pilots and the Impact Lab and we had a sense of what we wanted to do, but needed to create some partnerships with like-minded organizations and companies. And a key part of the partnership was, how exactly, the technology piece is going to work and help us facilitate these transactions in a way that meets the goals of the partnership. So it was really I'd say accelerated once we started launching the Impact Lab and needed to actually make our pilots work and figure out how to, what resources and partners we could draw on to meet. Those needs and fintechs have been a natural partner. They've been a crucial part of all the pilots we've done in the Impact Lab so far.

 

Anna Niemira: [00:02:57] Yes. So this is actually something interesting because Duca Credit Union's founding year was 1954, so a few decades ago. And, Duca Impact Lab is a new, over a year old project. So what was happening that the members of the organization decided to leap forward and create Impact? What was the pivotal moment when they said, OK, those financial services, the future of the financial services needs a relationship, a marriage between tradition and innovation.

 

Keith Taylor: [00:03:35] So it is really rooted in, the Impact Lab is really just an extension of the history of Duca. Duca itself was kind of an experiment in financial inclusion. We started it, like you said, in 1954. But to dig a little deeper, it was actually started by a group of people that were newcomers to Canada and didn't have access to banking services at the time. We found it very difficult to begin services and access to things like loans and accounts at banks in Canada, but they still need to bank and they created their own bank. And what was interesting about that story is like it's a good growth story over such a long period of time. I think our annualized growth rate is something like 20 percent a year for 65 years. So, you know, certainly a successful business story. But what's always intrigued me and has been a part of the Duca culture since our inception was that you know, the reason people didn't have access, was the realization that the people didn't have access to banking because they weren't able to send the right signals to banks that you could be bank customers. That growth trajectory is really impressive, considering it happened on, you know, based on the business of people who are on paper, not supposed to be very good banking customers. So we wanted to figure out, OK, well, if that was the case, then how is it materially different now and if the signals that we were using then are imperfect? Are there some better signals that we can use now? And we want to create some space to figure out how we could develop some better signals and how we could carry forward that history of providing access to people that didn't have great access to banking with better access to banking. So that's what the Impact Lab is. And it's very much rooted in where we came from. So I wouldn't say it's a new trajectory or a departure from our history. It's really like a natural evolution of where we've been and where we intend to go.

 

Anna Niemira: [00:05:54] So you mentioned about those signals. So what has been missing thus far in the traditional lending system? Because you are talking about people not really being good on paper and banks rejecting those customers. What was actually that pivotal moment that you decided, OK, we need to form, we need to create everything but there's something missing. And it seems to me, from what you're saying, that it's still missing in this traditional banking system. So what is that signal? What what is actually missing here?

 

Keith Taylor: [00:06:37] Well, I think the capacity to evaluate nuance and the importance of relationships has largely been in, phased out as we become increasingly reliant on automation, and decision-making processes are more and more centralized. I think the value of relationships and history with an institution from a credit risk perspective has started to become fuzzy. And what we're seeing, what we're seeing, is, you know, that and what our history proves is that that value is still very relevant. I would add to that, you know, there're some missing transparency pieces in mainstream banking that I think people have just come to accept. There was like, this is the terminal. It's almost like the difference between an applicant and a supplicant. OK, but it's there and it carries forward at a hangover from the banking power dynamic that you saw in the old days. And I think it's still true. You see, the partner and the impact lobbyist like to use the example of buying laundry detergent as opposed to getting a mortgage. And I'm going to steal maybe some of your thunder because I always really loved that example. And it's in, it's very, very true. It's what what is different about banking that makes you kind of leave your meeting with a banker, you know, grateful, grateful that they were actually willing to sell you their product, whereas, you know, you would never, you would never have that level of gratitude leaving  Wal-Mart with your laundry detergent and sitting here. Isn't it great that Wal-Mart sold me this laundry detergent? I'm so grateful for them. They're so lucky to be dealing with Wal-Mart.

 

Anna Niemira: [00:08:39] Yes, it's funny and it's tragic at the same time.

 

Keith Taylor: [00:08:44] Yeah. So I think that there's a lot of unpacking to do when it comes to power dynamics and transparency in banking. And it's one of the things that I think has a real impact on the experiences of people when they deal with institutions and they know it when they deal with institutions that still prioritize that relationship. I think that's something that you guys long prioritized. And it's that, in the way, that we've operated for quite some time and it's still very much part of the experience when we make business decisions and lending decisions. So I think there's an interesting culture in banking as you move through the ranks, and I'm not quite sure if I can synthesize it all in a in a soundbite. But as you move from client-facing service type roles to senior executives an interesting thing happens. You know, you move from a role that prioritizes relationships and thinks there's flexibility in decision making and that things are dealt with on a case by case basis, too, like the opposite end of the spectrum, where we do a fair banking study every year that you get in and through the impact lab. And we examine perceptions of fair banking on a number of different metrics between borrowers and lenders and the borrower side. We had a question about perceived levels of gratitude for your customer. So essentially, like how grateful should your customers be for doing business with you? And at the frontline level, that the number of people that said, oh, yeah, customer should be grateful for doing business with us was very marginal. But as you move up the ranks and especially going into the executive ranks, it actually becomes quite a significant chunk of the respondents that work in financial institutions, said that, yes, customers should be grateful. And I think there's an interesting opportunity somewhere in there for fintech, but also for smaller institutions to really reconnect with that relationship piece and to start using that as a lens for creating value for their customer base.

 

Anna Niemira: [00:11:19] Well, from what you're saying, I'm finding this fascinating because we are moving into the twenty-first century right now and we are talking about artificial intelligence and robots answering to us. And, then, you talk about creating a relationship. That's actually fascinating because it's very untypical. But yet, you find this as a foundation for your business. And this is how actually Duca started the relationship and keeps building those relationships. And, building those relationships has been fundamental to the existing and growth of Duca. And, you are taking that and you are passing this towards the future. Do you think, is it important for traditional financial institutions to open up to fintech solutions? Is it going to change the dynamics? Is this going to change their relationships with the customers, or is this just simply pertaining more to the services they can offer?

 

Keith Taylor: [00:12:33] I don't think technology and automation are necessarily at odds with the relationship driven approach. I think in the best cases, they can enhance that approach, especially when it comes to providing better data to informed advice being given by the financial institution. I think one of the things we also see in that area, banking study, is that there's a big advice problem in financial services, and it's one that fintechs are really well-positioned to help support the improvement of. So, I don't think it's necessarily the antithesis of what I would say there's starting to be an opportunity to identify fintech companies that are really taking a mindful approach to solving a problem that is worth solving as opposed to, you know, building something that can easily be gobbled up by a ban and the value proposition of each company is completely different. And the latter, you know, has an obvious audience, but the former has a chance to do something truly transformational and can fit into that sort of approach that I just described. So maybe, it is maybe, it is a bit atypical, but that's, you know, that's what we see in our business and it's what's driven the success of the credit union and its played role in the risk analysis of the impact of our pilots as well. You know, it's a crucial part of the risk that is underexplored because it's less quantifiable, but it's certainly there.

 

Anna Niemira: [00:14:35] So definitely like tapping into fintech, it seems to be beneficial for either midsize financial institutions as well as for the big banks. But at the same time, what are exactly customers' possible benefits from such partnerships? You mentioned the services. You mentioned also that there are certain applications. But, you know, it's a broad spectrum of applications when it comes to financial apps. So in particular, what are you focusing on?

 

Keith Taylor: [00:15:15] Through the Impact Lab?

 

Anna Niemira: [00:15:17] Yes, exactly, through the Impact Lab, yes.

 

Keith Taylor: [00:15:19] We run, in addition to some larger pilots, some research initiatives that we're involved in, we run special loan pilots, which are collaborations between different community organizations or social finance entities, fintechs, and ourselves. So we're focused on building models with that sort of approach that seek to address some sort of inequity in the financial system and to test, you know, to test this notion of like what would banking look like if all we were trying to do was solve a problem or create an opportunity. And framing a banking business model design process that way is a very different way of looking at it than saying, OK, what's our hurdle rate over the next three months or a month or whatever it extends, know the short-term of that type of approach with like really what ends up being a single metric that matters to a long-term view of it with a lot of different metrics that matter. So, I'll give you an example, one of the pilots we run, and I spoke about it with Stephanie Holmes from Cash-Flow, who's our fintech partner, over the summer at your conference, is the utility of cash flow based lending. And the way that it can form a type of personal lending is very much geared towards an individual's cash flow. And that is structured entirely on that individual's cash flow profile. So we created a loan pilot using that sort of a methodology and using their platform to help move individuals that have gotten themselves into trouble with high cost debt, like payday loans, or other types of high cost consolidation loans or private lenders, and provide them a way out of that with a low cost loan. It was only a prime plus two loan that was entirely adjudicated based on a cash flow profile. And what we're finding in that, in that pilot, is that the risk is a lot lower than we might have assumed. And I think that's true of both the Impact Lab pilots that we're running right now. That's what we're seeking to get out, and I think fintechs are a really crucial part of the equation. And in my earlier statement, I gravitated more towards the data functionality because that's really the value that one of the big pieces of value they've been able to bring to the table is helping us collect, dissect and utilize data in a bit of a different way than we would be otherwise.

 

Anna Niemira: [00:18:31] When it comes to Canadians, and I'm sorry to say that, we are one of the most indebted nations. So definitely, when it comes to this variety of loans, with some of them being very high interest, why this is actually happening? Do we have too easy access to money here, or perhaps not enough of financial education, or do we consume too much that we are spending too much? What is actually happening when you are dealing with retail clients and you are consolidating their debts? What is the biggest problem here and why we are borrowing so much?

 

Keith Taylor: [00:19:20] Well, I think it's a complicated answer, I keep coming back to one of the findings from our fair banking study that was really interesting to me. And I think it's been mirrored in the results of other studies is that there's a two part problem, really. There's a big gap between consumers self-assessment of their financial literacy and evidence of that financial literacy. So, for example, I forget the actual numbers now, but most of the respondents, it was somewhere in the neighborhood of 80 percent of people, thought that they were very, very good at managing their own personal finances. But half of those people never established and don't have a budget. You know, a similar proportion don't have any goals. So, the evidence that you are good at managing your own money is not really there, despite this self-perception that you know, you're excellent at it. The second part is, where financial institutions need to reflect on their role in that equation and that it's not just the availability of debt. It's the quality of advice that they're getting in that same study we saw almost half the borrowers say that the advice I get at my financial institutions is very helpful. And you combine that with the fact that most lenders don't think that, almost half of the lenders surveyed don't think, that their borrowers understand what they're buying. That's a recipe for a bit of a mess.

 

Anna Niemira: [00:21:04] Ok.

 

Keith Taylor: [00:21:07] So I don't know that answers your question, really, but I think what we need is a better assessment of our own abilities and in a better framework for giving advice through either tax or financial institutions, or both.

 

Anna Niemira: [00:21:27] Right. So we can say that we are lacking financial education, that Canadians are lacking financial education and, you know, being positive by nature they overestimate what they are capable of doing, and earning, and paying. And, I think that is actually the biggest problem, that we are lacking a reality in our financial situations.

 

Keith Taylor: [00:21:53] And it speaks to the value. If you can come up with a model, you know, of addressing financial literacy for a bunch of people that don't think they need financial literacy addressed is a really big opportunity.

 

Anna Niemira: [00:22:06] And, at the same time, that pertains also to advisors, to financial advisors, as you mentioned, who are working at the bank. That sometimes it's just for them about knowing their products, but not really seeing if those products are suitable for their customers. So, the perception of the bank needs to be a little bit changed, or the mentality of the bank. It's not just about selling the products, but also selling the products which are suitable for the customers. And that actually makes a big difference. What are the differences between lenders' and borrowers' perceptions of lending risk factors? You mentioned that you're looking, for example at Duca, at the cash flow; whereas, banks are looking from a different perspective. At the same time, borrowers also looking at themselves from a different perspective. If you were to mention one or two crucial points what each side would need to look at when evaluating the person for the loan.

 

Keith Taylor: [00:23:27] I think credit scores are still really important in our studies. They insistently come out on the lender side as the highest weighted aspects. And I think the more we learn about using that as a basis for lending, the more we realize we need other indicators. And it particularly becomes relevant, I think. And I think one of the most interesting transparency issues, in the kind of borrower-lender world, or the lending world, is the way things are priced. I think you have situations where credit scores are overly weighted in applications, but then you also have lots of situations where similar types of credit profiles are getting different deals. So, the importance of negotiation is one of those things that I think lenders appreciate that borrowers may not be based on what we're hearing. There are about half the lenders that responded, suggested, that they don't get questions on pricing a lot, or at least, just half the time, which means half the people aren't really asking. They're kind of taking what they're given. And what they're given is primarily based on a credit score and with a few other things peppered in there. That is a difference that's worth unpacking. And the importance of negotiation, especially on the borrower side, is an underappreciated difference because I think lenders are expecting a certain amount of it and they're not always getting it.

 

Anna Niemira: [00:25:17] Thank you. Thank you so much. That's actually very helpful because we can at least know what we need to focus on making sure that certain points are completed before we are applying for anything. As you mentioned, education is the key to successful banking and successful lending as well and it makes it easier for both sides. What is the current project you are running at Duca? Is it escalator loan? What is it?

 

Keith Taylor: [00:25:57] It's a yeah, it's a mix of projects. The Escalator Loan is one project and that's the pilot loan program I mentioned that we're running with CacheFlo and it's called CacheFlo, the Credit Canada Debt Solutions, which is a national non-profit that counselor, Equifax is involved, and Duca and Duca Impact Lab are involved so that that pilot is meant to be a consolidation loan option for individuals that wouldn't qualify for consolidation loans through the usual channels without being, you know, huge premiums to do so. It's structured on its adjudicative based on the cash flow profile and structured in a bit of a unique way, it's a prime plus two loans and for borrowers that meet the terms and payment obligations of the loan as they've agreed. They actually get the plus two back in a cash payment. So there's kind of an incentive both to repay the loan, but also a cushion to help them avoid to start funding a savings account and start to avoid getting into trouble with particularly payday loans. We've seen a lot of payday loan patrons in that in that pilot and it's something that I think there's a lot of, it's just amazing to see what people are paying for that type of financing, and the circumstances they get themselves into. I think it's also amazing to see how many people have multiple payday loans outstanding at once, which is technically against the rules but seems to happen anyway and there's a lot we're learning there. I think the other pilot we're running is a working capital pilot for underbanked entrepreneurs and social enterprises that are being done with our Partners Fund through and we're targeting businesses and individuals that would never we are outside of the usual criteria of funding through his usual channel and testing, you know, the risk and impact of providing this type of short term financing for businesses to help manage cash flow crunches by giving them a vehicle for selling their receivables.

 

Anna Niemira: [00:28:41] Those ones are actually fantastic projects. And what I can see, we were talking about education, but I can see, that through your projects, you are actually educating people because you are focusing on this cash flow management as well, and you are trying to do everything to help people to improve their credit score, to consolidate the debt giving, as you mentioned, prime plus two, which is really affordable for many people. That can really set them up in life as well and they can start looking at life from a different perspective as well.

 

Keith Taylor: [00:29:19] Yeah, we're taking the approach of solving the problem first and then thinking about how to scale as the second. I don't know if that's the right way to do it, but that's how we're doing it and it's been successful.

 

Anna Niemira: [00:29:35] Now, you're looking at, as I can see, that this is a long-term approach. This doesn't look like a short-term approach that, OK, let's make money as much as possible, but rather what we can do to help people, to help Canadians. And if we help Canadians, they are going to be better off, and then they are going to be our better clients. Through that, our business will excel, our business will scale and will grow. You're looking to do all through action, to build yourself through tangible actions and seeing the problems and looking for solutions.

 

Keith Taylor: [00:30:13] You said that a lot better than I did.

 

Anna Niemira: [00:30:17] Yeah.

 

Keith Taylor: [00:30:18] You can see that's exactly what we're trying to do. We'are trying to create a venue for ourselves and for like-minded partners to explore what's possible. If you take that sort of let's do it.

 

Anna Niemira: [00:30:30] I think one of your mottos at Duca is: be the best in the world but also be the best for the world.

 

Keith Taylor: [00:30:38] That's a B-Corp motto. We are also a B-Corp, and that's one of their lines. Duca's mission is to help people do more, be more, and achieve more money in their lives.

 

Anna Niemira: [00:30:50] Right.

 

Keith Taylor: [00:30:51] It's very, very much linked to the mission of the Impact Lab as well and why Doca decided to create such an environment.

 

Anna Niemira: [00:31:02] Right. But those two actually are going very well together. When you think people and by that you actually good for the world as well and Duca is the first ever credit union to receive global recognition, which is Duca's designation as a B-Corp certified organization, as you mentioned, and because of that, I'm sure that there's many fintech companies which would like to connect with you and collaborate. How they can do it? How the fintech community can connect and collaborate with Duca Impact Lab?

 

Keith Taylor: [00:31:39] I was going to ask, you can either send me a note on the Impact Lab site, there's a connect with us feature there that just come straight to me or you can find me on Linkedin and send me a note there, and if that fails, it's ktaylor@duca.com.

 

Anna Niemira: [00:32:00] For everyone who's listening, they can actually connect with Keith directly and make sure that they're giving actually a very good proposal as well because it definitely needs to be solution-oriented. It's all about fulfilling the mission.

 

Keith Taylor: [00:32:16] Yes, absolutely.

 

Anna Niemira: [00:32:18] If you were actually to give also one advice to the fintech community what would it be? We mentioned that, yes, they have to be solution oriented, but is it anything specific that you are focusing on when you are reviewing fintech companies for collaborating with you?

 

Keith Taylor: [00:32:43] Really, I think what separates the ones that we want to collaborate with from the ones we don't is the ones we collaborate with are trying to solve a problem we're solving. And they're trying to build something, you know, not necessarily build it to an exit, but build something that's a contributor to the ecosystem. They're trying to, they're taking that problem-solving first approach that the one we just went through and those are the partners that we find the most interesting, and those partnerships are the ones that work out the best. I know there are multiple ways or multiple drivers of evolving your fintech business, but, you know, if that sounds like the company that you run, then it'll be interesting to chat.

 

Anna Niemira: [00:33:43] We are coming to the end of our conversation. I would love to ask you more questions, but maybe at the same time, in the end, is it a story or some profound case or the situation or eureka moment that you said, either pertaining to you or your colleagues, that you encountered at Impact Lab and then you said, OK, this is it, this is how we do it. This is our vision and mission for the future when you actually either collaborated with someone or you came across something, that you had this very unique moment, either personal or from the business perspective.

 

Keith Taylor: [00:34:30] I think. I mean, for me, those moments are when we realize when we kind of had that Aha link to the history of Duca and recognize the need to kind of carry that on as we evolve, was one. I think the second was, you know, once we started to analyze the data that we had was that a lot of our existing members were in situations that could benefit from the loan and debt solutions that we were coming up with within the Impact Lab. So you could start to see a real tangible need for it and our membership base now that was really clearly linked to the history and why we became a thing in the beginning and I think those two pieces were really powerful. And, I'm looking forward to continuing to evolve what we're doing and to set out new partnerships, and solve problems.

 

Anna Niemira: [00:35:37] Yes. So you had this feel good moment.

 

Keith Taylor: [00:35:41] Yeah, exactly, but it was almost like it was "feel good", but it was a validation too. We kind of had this hypothesis of what we wanted to do and we started to look, OK well, who could benefit from this in our own membership base expecting to not find that many, but there were a lot of them and just, you know, got us excited in a way and in that it really demonstrates the need for what we're doing and how many people could benefit from it.

 

Anna Niemira: [00:36:13] I'm truly looking forward to seeing what will be happening in the future and how you are going to evolve, because so far what you do, I think, it's absolutely fantastic. Keith, thank you so much for being with me and sharing all this information and everything that you've said about Duca's future, but also what you are doing for the community and how you're trying to help retail and institutional clients as well, how you are working with fintech companies and trying to improve our financial systems, step by step, case by case.

 

Keith Taylor: [00:36:51] Thank you. Appreciate that. And thanks for having me.

 

Anna Niemira: [00:36:53] Thank you so much. Ladies and gentlemen, that's a wrap. On behalf of the FinTech Fridays podcast, we would like to thank Keith Taylor for joining us on this show and you for tuning in. Please feel free to share your thoughts with us. We always welcome your feedback. And listen and learn! Once again, I'm inviting you to visit NCFA website to check out some of the fantastic past episodes. We look forward to seeing you next Friday for another episode of FinTech Fridays. Have a great weekend. Thank you so much.

Outro : you've been listening to Fintech Fridays brought to you by NCFA and partners. Tune in weekly for the latest fintech Friday podcast by subscribing to this channel. The National crowdfunding and Fintech Association of Canada is a non-profit actively engaged with social and investment fintech sectors around the globe and provide education research industry stewardship services and networking opportunities to thousands of members and subscribers. For more information please visit ncfacanada.org. Oh yeah.

 

End of Podcast

 

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NCFA Jan 2018 resize - Fintech Fridays EP45:  Mission-driven and Consumer-centric Financial Services 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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How Fintech is Changing the Mortgage Industry

Guest Post | Sep 8, 2020

Fintech innovation - How Fintech is Changing the Mortgage IndustryWhen it comes to changing the way we utilise financial services, fintech is beginning to significantly impact the mortgage industry. With new companies continuously redeveloping approaches to home buying, future homeowners are being provided with convenience, quality, and personalisation.

Using Tech to Address the Downsides of Buying a Home

As of right now, the housing sector continues to depend principally on the traditional mortgage market – for prospective homeowners, this is a complex and bloated process with significant room for growth.

Where in particular is there room for improvement? There are a number of answers, according to various fintech firms worldwide. Tic:Toc home loans is such an example, with the start-up aiming to offer 22-minute home loan applications through the use of digital technology that processes an application automatically, in real time.

For another point of difference, REALas is a digital platform that has highlighted the need for predictable and accurate property pricing. Their claim involves a proprietary algorithm that accurately speculates sale prices, with predictions averaging within 5.4% of the actual price.

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With a different approach to the industry, Effi utilises AI in offering what they claim to be “the smartest mortgage broker platform ever built”. This focus on integrated efficiency, effectiveness and customisation aims to move the industry beyond traditional CRMs and lead management tools, automating and streamlining the mortgage broker job process.

A final example, Lucas, provides an innovative approach to addressing the problem consumers face when raising a deposit for a mortgage. Lucas has redefined the concept of the mortgage, facilitating home ownership through renting. The company purchases properties from real estate funds, before making them available to pre-vetted tenants who will initially contribute as little as five percent towards the property purchase price.

 

The Impact of Fintech Businesses Transforming Consumer Experiences

Given the extremely high value of property markets in any given country, online only fintech businesses are threatening a significant impact on banks and credit unions that have traditionally dominated the mortgage market.

Not only does fintech hold a remarkable percentage of refinanced loans (in the US, fintechs originate more refinanced loans than a combination of their 5 largest banks), but US market share of traditional lenders decreased by 22% from 2007 to 2014. Lower mortgage closing times, higher innovation and flexibility, and more targeted offerings are aspects and goals that traditional lenders will need to work towards in order to remain competitive, and many are doing so.

 

Big Bank Fintech Investment

It is clear that not only start-ups that are showing interest in fintech within the mortgage industry - when it comes to Canada, there is significant disruption within the financial services and mortgage sectors. Despite ranking a low 23 out of 27 countries in the market adoption of fintech, Canada is ahead of the US, France, and Japan. In particular, the Bank of Nova Scotia has developed ‘eHOME’, a tool that digitises the entire mortgage process in real time, allowing the elimination of contact with financial advisors and mortgage specialists.

Overseas, big banks such as Westpac in Australia are making significant investments. Both in the form of big commitments such as backing venture capital firm Reinventure, and in small features like their flexible mortgage calculator (click here to check it out), Westpac is making a point of demonstrating the feasibility of fintech services within the banking and mortgage industries.

US banks are also getting involved, with 24 equity deals to fintech’s in 2019. Some mortgage start-ups that have been backed by US banks include Built, Rabbet, and Trussle.

 

The Future of the Mortgage Industry

The commitment to innovation and fintech by a range of companies across the mortgage industry highlights the increasing role that technology is having in reshaping financial markets.

The various service offerings that are becoming available within the property market are continuing to shape business models, push new customer experiences, and scale companies more rapidly. Ultimately, the mortgage industry is in the process of exciting change – being a previously underdeveloped area within the financial sector, there is still much to look forward to when it comes to fintech and property.

 


NCFA Jan 2018 resize - How Fintech is Changing the Mortgage Industry 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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Intro to yield farming and the latest developments in DeFi

Coinbase Blog | Justin Mart | Jul 24, 2020

DeFi yield farming - Intro to yield farming and the latest developments in DeFiDeFi and the Yield Farming Phenomenon

DeFi protocols exploded in all metrics over the last month, passing $3B in Total Value Locked (TVL), triggered by the launch of the Compound governance token ($COMP) and subsequent “yield farming.”

What is Yield Farming?

Most crypto protocols are designed to be decentralized. For base-level networks (like Bitcoin and Ethereum), this is achieved through Proof of Work, where anyone can be a miner and earn some BTC or ETH in exchange for helping secure the network. In so doing, control of the network is more or less democratic (one CPU one vote).

But how do projects built on Ethereum achieve decentralization? One path is to hand over governance in the form of tokens to the users of a protocol, effectively turning users into stakeholders. This is precisely what Compound (an autonomous borrow/lend protocol) pioneered. They are releasing $COMP tokens, which provides governance rights over the Compound protocol, to the users of the network, distributed pro-rata according to how much they use the protocol.

Sounds good, right? Two observations:

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  • $COMP governance tokens hold value. Compound is the leading DeFi borrow/lend protocol, and governance rights over this network are powerful.
  • Distributing $COMP pro-rata to users of the protocol is free yield. It’s an added bonus just for using Compound.

When $COMP was released, the token quickly appreciated in value owing to Compound’s leading position in the DeFi ecosystem. The community quickly realized that adding assets to Compound and/or borrowing against them resulted in significant interest rates due to the additional $COMP being distributed (topping 100% APY at some points).

Ergo, the practice of using a protocol to earn native platform tokens is known as “yield farming.”

What Happened with Compound

Yield farming drove a flood of capital into Compound — in a single week in mid-June nearly half a billion dollars was added to Compound, driving total value locked (TVL) from $100M to over $1.7 B at the peak. $COMP similarly opened trading around $80 and exploded to over $300.

COMP total value locked - Intro to yield farming and the latest developments in DeFi

However, not all metrics are as honest as they appear. With Compound, it’s possible to recursively invest your capital, multiplying your yield. It goes like this:

  1. Add 100 USDC as collateral to Compound (earning interest + $COMP)
  2. Borrow 70 DAI against your 100 USDC collateral (paying interest but earning $COMP)
  3. Trade 70 DAI for 70 USDC (bonus: on a DEX)
  4. Repeat Step 1

DeFi composability adds another dimension, where it’s also possible to stack your yield across different protocols. For example, you could lock DAI in Compound, and deposit your compound-DAI tokens into Balancer for additional yield farming.

Popular DeFi tracker defipulse.com does some cleaning on reported TVL to account for these effects. As of July 23, 2020 they report Compound’s TVL at $550M.

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Yield Farming is Not Without Risk

In efficient markets, increased yield is reflective of increased risk. While DeFi is a largely inefficient market today, outsized DeFi yields are still indicative of additional risk:

  • Smart Contract risk: Smart contracts are prone to exploits, with several examples just this year (bZx, Curve, lendf.me). The surge in DeFi has led to millions in value being slammed into nascent protocols, increasing the incentive for attackers to find exploits.
  • System design risk: Many protocols are nascent and the incentives can be gamed. (E.g., Balancer, where FTX was able to capture >50% of the yield due to a simple flaw)
  • Liquidation risk: Collateral is subject to volatility, and debt positions are at risk of becoming undercollateralized in market swings. Liquidation mechanisms may not be efficient, and could be subject to further loss.
  • Bubble risk: The price dynamics of the underlying network tokens (like $COMP) are reflexive because expected future value follows usage, and usage is incentivized by expected future value.

In general, DeFi protocols with significant capital are honeypots for exploits. In just one week, the Balancer protocol was gamed by an exchange, changed its protocol rules, got hacked, and saw the token price go up 3x! In some ways DeFi is still the wild west — be careful out there.

Continue to the full article --> here

 


NCFA Jan 2018 resize - Intro to yield farming and the latest developments in DeFi 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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