In a joint webinar between Choose New Jersey, FinTech Ireland, the New Jersey City University School of Business, and others, NJ Governor Phil Murphy kicked off the event by saying that his state’s object is nothing short of being the state of innovation, where new ventures can take shape, companies can expand, and people can raise a family.
Murphy’s participation in Irish fintech collaboration was steeped in his commitment to international relations and business.
“The fintech business in particular is a big part of our economy,” Murphy said. “We’ve got proximity to New York City’s financial markets and as a result we’ve become sort of the perfect home for fintech companies. We have 145 fintech companies headquartered in New Jersey.”
The island of Ireland, by comparison, is home to nearly 250 indigenous fintech companies, according to the latest Fintech Ireland map. Recently, Irish fintech companies ranked the United States and Canada as their #1 priority region for expansion.
New Jersey is hoping to benefit from transatlantic opportunities this might present.
“There’s no better place in America than to plant your flag here in New Jersey,” Murphy said. “To those who are considering [it], it’ll be the best decision you ever make.”
The Governor also revealed that his family is descended from Donoughmore, County Cork and that he hopes to make a state trip to the republic soon.
Americans asked to name an Irish fintech company often say Stripe, the company founded by two Ireland-born brothers that is dual headquartered in San Francisco and Dublin. Recently valued at $95 billion, its financial backers include Sequoia Capital and the Irish government via the National Treasury Management Agency.
Stripe’s Irish roots may not be a one-off. Though the Republic’s entire population (4.9M) is less than that of New York City (8.7M), it is home to nearly 250 indigenous fintech companies, dozens of which offer lending and payment products, according to the latest Fintech Ireland map. And many have expansion plans in the works.
Despite the close proximity to the UK, the United States and Canada tied for the #1 priority region that homegrown Irish fintech companies said they want to expand to, according to Fintech Ireland’s industry survey. The UK came in 2nd. The majority of Irish fintech companies actually said they prioritized expansion plans for the US and Canada even over expansion in their home country.
A flight from New York to Dublin can be shorter than a flight from New York to San Francisco and Ireland’s primary language is English. 7,000 people work in fintech in Ireland, the bulk of which are based in Dublin.
deBanked evaluated the market in-person during the Fall of 2019 and determined that there are many cultural and operational similarities to the US. A follow-up piece in May 2020 captured how the industry there was faring through the Covid pandemic.
As the pandemic raged, word on the street was that fintechs were mulling a Manhattan exodus. Expensive midtown offices didn’t look great compared to Miami beaches.
But according to research by Bloomberg, there were no crowds of fleeing New Yorkers like it may have seemed. Only 2,246 people filed a permanent address change from Manhattan to Miami-Dade County, and 1,741 went to Palm Beach County.
3,987 NYC-area residents packed up shop and flew south for the Covid winter, never to return- But that’s only ~5.6% of the total 70,000 people that moved from NY state last year, according to Unicast, a real estate location analytics firm.
“The main problem with moving to Florida is that you have to live in Florida,” Jason Mudrick, a hedge fund manager, told Bloomberg.
In 2019, the US Census Bureau estimated a net 38,512 Greater New York State residents moved to the Sunshine State, suggesting that what was experienced in 2020 may have been nothing more than the routine annual migration. 2020’s Census data is not yet available so it’s difficult to say.
“We’re going to keep going with New York City if that’s all right with you,” Jerry Seinfeld wrote in an August 2020 NY Times Op-ed, “and it will sure as hell be back.”
Prosper Marketplace reported a $18.5M profit for 2020, up from a net loss of $13.7M in 2019, marking yet another online lender that successfully weathered Covid.
In 2020, Prosper originated $1.5B in loans, $1.4B of which were originated through their Whole Loan Channel.
Like Lending Club, the company has long retreated from its peer-to-peer lending roots, but still operates a platform where individual retail investors can buy notes, whereas Lending Club terminated theirs completely.
Prosper generated $100 million in revenue in 2020 and had 353 full-time employees at year-end.
Prosper is not publicly traded but is required to file regular financial statements with the SEC because it sells notes to retail investors.
“It’s really hard to imagine a better time to be launching a digital bank,” said LendingClub CEO Scott Sanborn on the company’s Q4 earnings call. “First up, we’ll be building on Radius’ multi-award winning online and mobile deposit offering to make it very easy for our customers to manage their lending, spending and savings in a holistic fashion.”
The company reported a Q4 net loss of $26.7M on $75.9M in revenue and originated $912M in loans. Their status of being a bank, however, is only just beginning. CFO Tom Casey explained the following:
In addition to lowering our funding cost of deposits, our new marketplace bank will capture significant financial benefits from being a bank and having a marketplace. [….]For every $100 million of loans we originate, we generate about $4 million through an origination and servicing fee when we sell the loans in the marketplace. The vast majority of this fee-based revenue is realized immediately and without requiring a significant amount of capital. However, it is highly dependent on origination volume.
We can now bolster this revenue stream with bank revenue generated by loans held for investment on our balance sheet. As you can see on the left side of the page, every $100 million of loans we hold on the balance sheet should generate additional marginal profitability of approximately $12 million. And when you compare that to the $4 million in the marketplace, that’s 3 times more. And this recurring revenue is not dependent on originations in any given quarter.
LendingClub experienced unique success during the pandemic, stating that loan performance exceeded their expectations.
“Coming out of the pandemic,” Sanborn said, “the strength of our underwriting has now also been cycle-tested. Losses on loans issued pre-COVID are in line with our pre-pandemic expectations, and loans issued since the pandemic are some of our best-performing loans in recent years.”
It will be a big year for fintech in Mexico, with at least 93 fintech firms in the process of obtaining a Financial Technology Institution (FTI) license.
Lawyer Rene Arce Lozano, an advisor with the international Hogan Lovells law firm, wrote about the new “fintech law”; the first of its kind in Latin America. Many firms will see an authorization in the coming year from the National Banking and Securities Commission.
“Over the last few years,” Lozano wrote, “the fintech ecosystem in Mexico has evolved to become one of the most developed in Latin America.”
Mexico, home to 441 startups- the largest fintech hub in central America- passed the law in 2018 that went into effect this past year 2020, nurturing the creation of dozens of Mexican neo banks and electronic payments firms.
The new law sets regulations for payments and open banking and has stirred up excitement for fintech enterprise in the country as a whole. But according to Financial specialist Stefan Staschen, the law isn’t the cure-all.
“The law covers only two types of fintech companies,” Stashen wrote. “It does not provide regulatory guidance for other services, such as fintechs offering balance sheet lending, big tech companies launching financial services, investment services other than crowdfunding, or central bank digital currencies.”
The new law may be a great start, but it is the first step to broader regulatory approval to the diverse financial tech world. Staschen works at the CGAP– an international advocacy group based in Washington that aims to extend financial inclusion throughout the world.
Azlo, an online business banking platform, announced it will be closing all accounts by March 31, 2021. The decision came down from the majority stakeholder BBVA, support staff dedicated to helping customers transfer out of the platform said.
“Unfortunately, it is true that our parent bank, BBVA USA, has made the decision to close Azlo and all Azlo accounts will be closed by March 31, 2021,” Alex from Azlo support said. “Please know that we regret this; helping small businesses and entrepreneurs survive and thrive has brought us nothing but joy and fulfillment, and we wish we could continue.”
Azlo has a “Business banking alternatives” blog post, featuring options like Quickbooks Cash.
Azlo provided services under BBVA USA, which was acquired in November by PNC Financial Services.
NYC Fintech Women rang the closing bell at the Nasdaq exchange with a speech by founder Michelle Tran. Photos of the members could be seen on the big Nasdaq board in Times Square.
“I’m so proud to be standing with the team as we ring the closing bell for NYC Fintech Women and all women in FinTech! I started NYC FinTech Women 3 years ago to build a community of strong female FinTech leaders and male allies to support each other in our professional advancement in FinTech,” Tran said before the event. “I absolutely LOVE hearing the stories of how this community has helped with stories of women finding new roles, getting promoted, getting more pay, and finding their own personal board.”
The organization said the bell was rung on behalf of all women in fintech and promoted an upcoming international women’s day event featuring Nasdaq and the UN on March 8th.
The 5,000 member strong organization was founded in 2017 to provide members of any gender with opportunity and connection.