Archive for 2019
Square Capital Originated $528M in Loans in Q2
August 5, 2019
Square Capital facilitated 78,000 loans for $528M last quarter, according to their recent earnings report, an increase of 36% year-over-year. Thr growth is the exact percentage increase experienced by rival Shopify.
Square says that they continued to see an average loss rate of less than 4% for their core Flex Loan product.
deBanked ranked Square Capital as the 4th largest alternative small business finance company of 2018. The company loaned $1.6B last year. PayPal was #1 at more than $4B. Shopify Capital is on pace to do more than $2B this year.
Shopify Issued $93M in MCAs and Loans in Q2, Has Begun Offering Funding to Non-Shopify Payment Customers
August 4, 2019
Shopify, a publicly traded e-commerce platform, is quickly growing its merchant cash advance and loan originations through its Shopify Capital brand. The company issued $93M in Q2, up 36% year-over-year and an increase from the prior quarter of $5.2M. Shopify’s loan product is only available in Arizona, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, North Carolina, South Carolina, Utah, Washington, Wisconsin, and Wyoming.
The company also recently began offering funding to merchants who don’t use Shopify Payments but still use the Shopify platform.
On the quarterly earnings call, Shopify CFO Amy Shapero said in doing so “we still have significant visibility into their operations, we see their orders, we see the engagement with the platform. And so, we are very comfortable moving in that direction.” The move provides an opportunity to expand their eligible market by 10%, she added.
Furthermore, Shopify’s deals are performing well, the company claims. Shapero said “we’ve actually managed our loss ratio in a very, very tight range. In fact, it’s lower than the top of the range where we think we could go with this, which says the power of our algorithms are working.”
Shopify Capital has originated more than $180M in 2019 so far, indicating they may be surpass many competitors in the rankings this year. The company originated $277.1M in 2018.
Import/Export SMBs Introduced to Fintech Lending Options
August 2, 2019
Early this week TangoTrade announced its partnership with the online lender Fundation. TangoTrade, which deals primarily in payment assurances for US small business importers and exporters, will now offer alternative financing to SMBs with the help of Fundation.
The development is a reaction to the struggles faced by small businesses who engage in global trade. Sam Hayes, Co-founder and President of TangoTrade, said that “If you’re an SMB and a transaction goes south, it causes major problems for cash flow. There’s very little recourse you can have as a small business.”
Explaining that about one-third of all US imports and exports originate from small businesses (roughly 200,000 small businesses import and 300,000 export), Hayes notes that this is a large portion of the American economy that is potentially at risk. Especially when they are being left out to hang by banks whose debit and credit facilities come attached with lengthy approval wait times and complex application processes that are often too inconvenient for SMB owners.
The partnership with Fundation, which is backed by both Goldman-Sachs and SunTrust Bank, will enable TangoTrade to fund SMBs up to $1 million. As mentioned, TangoTrade also offers payment assurance for importers and exporters, which reduces payment risks by managing the entire payment process for both parties involved and offering imbursement via 130 currencies. As well as this, the option to wire funds globally is available through TangoTrade’s partnership with TempusFX.
These services have been centralized by TangoTrade, being made accessible through the business’s site, a decision that is key to the company’s vision of offering services through a platform, Hayes told deBanked. “We’ve seen innovations in cross-border payments and global sourcing, but not a whole lot in this particular area,” which is why TangoTrade is pushing to incorporate fintech in their dealings.
And this impetus has attracted attention. With a diverse set of investors ranging from Hard Yaka, which has ties to Square, Ripple, and Twitter; to Village Global, a venture capital network that is backed by Bill Gates, Jeff Bezos, and Mark Zuckerberg, TangoTrade has links to large names. Such diverse connections are mirrored in the company itself, with their team bringing together experience from MasterCard, Payoneer, NASDAQ, and Oracle.
A cabal of tech heads to be sure, Fundation CEO Sam Graziano says that this approach will “enable small businesses to access low-cost capital through an integrated user-friendly digital experience on their platform.”
Chinese Funder MYBank Using Advanced Tech to Provide Capital
August 1, 2019
MYBank, the largest non-bank funder in China, is using new technological systems to approve loan applicants. The company, which is backed by Alibaba founder, second richest person in China, and former English teacher Jack Ma, is now in its fourth year of operations and has thus far provided 2 trillion yuan ($290 billion) in funding to 16 million customers.
Having partnered with Ant Financial Services, a payment processing company which Ma is also involved in, MYBank has received access to a host of data. In order to apply for a loan, SMB owners give access to their real-time payment records, and from the analysis of these, as well as the non-bank’s own risk-management appraisal system which runs through over 3,000 variables, a judgment is made as to whether or not to fund the applicant.
Ant also provides MYBank with other tech, such as facial recognition software to detect fraud, and aids them with their implementation of cloud-computing and big data. But as well as these methods is another system unique to China: social credit. Currently in its pilot stages, this national reputation system is set to rival traditional credit score systems. It works by increasing or decreasing a citizen’s rating based off whether they perform a good or bad action. Yell at someone unnecessarily on your commute? Your social credit scores lowers. Help an old woman cross the street? It’ll go up.
When discussing how the system could be implemented, MYBank President Jin Xiaolong gave the example of a small business owner who, upon forgetting to return a borrowed umbrella, finds it harder to get a loan. As well as this, Bloomberg reported in 2018 that a very poor social credit score could lead citizens to being barred from staying at luxury hotels, buying high-end real estate, and enrolling their children in elite schools. The flip side of this is that those with impeccable ratings will receive discounts when commuting, relaxed scrutiny when seeking financial aid, and priority when applying to schools.
Made possible by data-tracking tech, social credit scores appear to be almost revolutionary for the alternative finance industry. Partnered with the other technological tools available to MYBank, the company could experience previously unseen heights of successful loans. Or rather it does already, with default rates at approximately 1%.
Accessible via a few taps on a smartphone, MYBank’s application process takes 3 minutes and due to automation, customers are often instantly approved with funds being made available straight away. One customer described this shift in supply as “unimaginable” and praised how easy it now was to find capital as soon as he needed it.
MYbank also revealed Tuesday that it intended to raise $871 million at a valuation of approximately $3.5 billion.
Clearbanc Raises $300M in a Series B
July 31, 2019
Toronto-based Clearbanc, a company founded on the idea of providing business owners with capital to purchase facebook and instagram ads in exchange for a percentage of their future sales, has raised $300M in a Series B. $50M of it is an equity investment led by Highland Capital. The other $250M will go into a fund that Clearbanc uses to fund small businesses, according to Fortune.
Clearbanc’s payment methodology is reminiscent of merchant cash advances and their factor rates range between 6% and 12.5%. Funding amounts range from $10,000 to $10M and the company is reportedly on track to fund $1 billion to small businesses.
Clearbanc President and co-founder Michele Romanow is a serial entrepreneur that is also a celebrity investor on the TV show series Dragon’s Den. She attributes the idea for Clearbanc to her experience on the show in which entrepreneurs were inappropriately seeking venture capital when it was really a specific type of working capital they needed, funds to advertise on facebook or instagram, for example.
The company was founded in 2015 in Toronto.
Maria Vullo Joins Emigrant Bank
July 31, 2019
Maria Vullo, who served as the Superintendent of New York’s Department of Financial Services (NYDFS) from 2016 to February 2019, has been elected to Emigrant Bank’s Board of Directors. As well as this, Vullo will be joining Emigrant’s holding company, New York Private Bank & Trust (NYPB&T).
The move comes five months after the end of Vullo’s tenure at NYDFS, a role which she was nominated for by Governor Andrew Cuomo. In the period proceeding this, Vullo took up the role of Regulator in Residence at Fintech Innovation Lab’s Partnership Fund for New York City. Here she offered mentorship to enterprise technology companies.
Having been a partner at the international law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP prior to her time with NYDFS, Vullo is versed in civil, regulatory, and criminal issues, as well as securities, banking, insurance, real estate and other financial subjects.
Her tenure as NYDFS Superintendent was noted for its regulations on cybersecurity, transaction monitoring and life insurance. However it was not without hiccups and conflict, as one hearing on online lending saw her display both a distaste for alternative finance and a seeming misunderstanding of how interest rates within the industry are calculated. And upon the Office of the Comptroller of the Currency’s (OCC) proposal to establish a fintech charter that would grant bank-like powers to non-banks, Vullo opposed the rule in a letter, instead favoring state regulation over federal, claiming that such a charter could risk a financial crisis as well as endanger New York state’s sovereignty.
“Her depth of experience in financial services regulation and operations will greatly enhance our ability to provide innovative services to a range of customers in the markets we serve,” said Howard P. Milstein, Chairman, President, and CEO of NYPB&T, “She will be a great addition to our Board.”
Ken Rees, CEO of Elevate, Resigns
July 30, 2019
Ken Rees, the CEO of consumer lending company Elevate, resigned on Monday. The announcement coincided with the release of the company’s Q2 financials in which Rees described the business as performing “extremely well.”
Thus far, in 2019, we have already delivered over $19 million in net income or $0.43 per fully diluted share. We are reaffirming our full year guidance for $25 million to $30 million in net income. This will be more than double the net income we delivered in 2018. Elevate’s bottomline performance was driven by excellent credit quality and very low rates of fraud across all of our products. Additionally, our customer acquisition costs have remained better than target levels. In short, the business is performing extremely well.
And this is why I believe now is a good time for me to step down as CEO. I am very proud of our financial accomplishments since our launch in 2014, but I am even proud of the leadership team here at Elevate. They are all seasoned and dedicated professionals that have been instrumental in the rapid growth of the company and in generating solid profitability over the past two years.
Rees also stepped down as chairman of the board of directors but will a remain a director of the company.
Chief Operating Officer Jason Harvison has been named interim CEO. Harvison joined the quarterly earnings call and said, “First, I couldn’t be more excited about Elevate’s future and believe the company is very well positioned to capitalize on the strategic initiatives put in place over the past year. Secondly, I firmly believe that Elevate is uniquely well-positioned in the market with strong credit quality, improving margins and a measured approach to growth. We are on track for steady profitability in 2019 and beyond.”
A permanent CEO is expected to replace Harvison in his capacity as interim CEO as soon as one is selected.
Elevate had a net income of $5.8M in Q2, up 87% year-over-year.
Spotlight on deBanked CONNECT Toronto
July 30, 2019
As the heat of the Toronto sun split the stones outside, the crowd inside the Omni King Edward’s seventeenth-floor Crystal Ballroom mingled and munched as part of deBanked’s most recent CONNECT event.
The first of its kind to be held in Toronto, the CONNECT series are half-day events that take place in both San Diego and Miami as well. Despite not being as established as the latter two, Toronto proved just as eventful, with a variety of speakers and topics broached, as well as a host of attendees from differing backgrounds making an appearance. It was par for the course for an inaugural deBanked show with the attendance figures being reminiscent of deBanked’s first ever event in the USA, a market that’s 10x the size.
The day was kicked off by entrepreneur, a dragon on the Canadian Dragons’ Den series, and co-founder of Clearbanc, Michele Romanow, whose anecdotes detailed the adventures that accompany the beginning of a startup. Regaling the audience with the story of Evandale Caviar, Romanow began with telling the room of a post-college venture that saw her working tooth and nail to secure a fishing license, studying YouTube fish gutting tutorials that were exclusively in Russian, and getting her hands dirty with the other co-founders when the time came to put their time spent online to use.
But it wasn’t all blood and glory for Romanow, as the tale shifted from one of youthful expansion to one of reflection and acceptance of the unknown. Speaking on the effect of tech giants in various fields, Romanow explained that “we have no idea of how these industries will shape out.” The likes of Uber and AirBnb never planned change the world, just to change a product and thus solve a problem, and their meteoric rises are unpredictable as a result. Iteration, rather than innovation, is what drives a company forward according to Romanow.
And this sentiment was brought further along with the following panel, which featured Vlad Sherbatov of Smarter Loans, Paul Pitcher of SharpShooter Funding, and SEO expert Paul Teitelman, speaking on the trials and novelties of the sales and marketing scene. Offering wisdom on various aspects of the field, the three men covered the need to go beyond the traditional forms of advertising, instead looking outward towards unorthodox methods of marketing; the hardships that come with the grind of a sales job; and the role that SEO can play when raising public awareness of your company; respectively.
“It’s a matter of spreading the word,” one conference goer noted when asked about the sales panel afterwards. “Businesses have to know who we are, and we’re working on that.”
Similarly, Martin Fingerhut and Adam Atlas discussed the existing legal topics of note to Canadian alternative financing companies, as well as those incoming rulings that may be worth knowing about. Covering both the English-speaking provinces and Quebec, the duo gave a comprehensive crash course on the legal landscape of the industry, highlighting laws unique to the regions. Aaron Iannello of Top Funding considered the talk to be particularly engaging, commending it for relaying information that might otherwise be unknown to American companies.
Following this, Kevin Clark, President of Lendified, took to the stage to talk about the importance of the Canadian Lenders Association (CLA). Saying that in the absence of a regulatory body, the CLA seeks to offer guidance to those companies who are looking for it. Clark asserted that “it’s a good thing for our industry to have oversight from a regularly body,” and that he looks forward to the day when one is established.
And before wrapping up the speakers for the day, Clark was joined by IOU Financial’s President, Robert Gloer, to discuss contemporary risk management. Covering everything from the next recession to the emergence of AI, the pair, which accumulatively have been in the industry for decades, offered knowledge learnt from years of experience in both the pre- and post-crash eras.
And the prophesizing of what will be the next big episode to shake the industry continued beyond the day’s scheduled agenda as many attendees continued on well into the evening at smaller networking functions offsite.
As the sun started to touchdown on the tips of Toronto’s skyscrapers, the salvo of excited conversation briefly harmonized to produce a singular axiom, that there was an abundance of opportunity in Canada.
