Fintech
PNC Bank Launches Fintech Startup numo
September 3, 2019
Last week, PNC Bank announced its latest venture, numo, which aims to function as an internal startup, developing apps and other services to expand PNC’s operations.
The first such app is indi, a bank account for gig workers that is exclusive to mobile phones. Offering customers tax calculators, tax savings goals, and dynamics adjustments that react to how much they’ve saved, PNC is joining the list of financial institutions which are doubling down on banking apps. The numo accounts are FDIC-insured, are held at PNC, and include a Visa prepaid debit card.
Speaking on the benefits of indi, numo CEO David Passavant said, “How do you estimate your tax liability when you don’t have an employer doing it for you? We built a system with intelligence to estimate what you should set aside for taxes.”
Beyond indi, numo has two other projects in the pipeline. One of these is unknown as of yet, but the next to be launched will be a service for companies that run portfolios of retail properties.
Not the only announcement to come from PNC last week, the bank also revealed its partnership with the RippleNet blockchain network. Joining together to offer swift cross-border payments for PNC’s commercial clients, the news comes almost a year after the bank stated that it planned to partner with RippleNet in September 2018.
“The speed of doing business continues to accelerate,” explained PNC Treasury Management Executive Vice President and Head of Product Chris Ward in 2018. “And the efficiencies of RTP [real-time payments] allow our clients to not only keep pace, but stay ahead.”
Apple Card Partnership Sees Goldman Sachs Lending to Subprime Borrowers
August 25, 2019
Apple Card launched this month, and with it have come some complaints over the unforeseen damage that wallets can do as well as an official guide from Apple on how to tend to and clean your new credit card. But aside from aesthetic and hygienic concerns, the card’s release to the wider public has raised eyebrows with news of subprime borrowers being approved.
Forged from a partnership between Apple and Goldman Sachs, a bank known for dealing with corporations and the rich, the move seems out of character for the 150-year-old institution.
Rolled out initially to Apple employees as a test, rumors began to circulate of early adopters expressing surprise at being approved despite having FICO scores in the middling 600s. Then, upon Apple Card’s wider release, Ed Oswald came forward and spoke to CNBC about receiving his card, along with a credit limit of $750 and an interest rate of 23.99%, despite having a credit score of around 620.
But this is not the bank’s first foray into FICO’s less than 700. Since its launch, Goldman’s Marcus has issued $4.75 billion in personal loans, 13% of these going to borrowers with a FICO of 660 and under.
This 13% and the partnership with Apple are indicative of David Solomon’s tenure as CEO of Goldman Sachs, who has sought to expand into consumer finance following years of declining trade revenues.
And while this contrasts the bank’s history, the push for more access to credit is aligned with Apple’s values. In fact, in the 1990s, when the tech company was in talks with Capital One over a potential card partnership, Steve Jobs “had an aversion” to rejecting any customers who wanted to sign up. Such yearning for openness and ease of access has reportedly scared off other banks. According to CNBC, Citigroup was in advanced talks with Apple prior to Goldman Sachs’s confirmation, but pulled out of the deal due to concerns over the profitability of the partnership. Similarly, JPMorgan Chase, Barclays, and Synchrony all allegedly bid on the deal.
But what does such access mean? Well opening up credit to those with a less-than-proven track record increases the risk of losses due to unpaid loans. The speed with which funds are made available, the application and approval process takes two minutes, means that Apple Card could rival payday loans and alternative finance for those customers looking for more modest funding. And as well, the commodification and attention paid to the appearance of the card by Apple has led to it being viewed as the latest gadget from the company rather than a tool to use when financially necessary, as pointed out by Macworld, raising questions over how credit cards should be marketed.
On the topic of access, Ian Kar, the author of the Fintech Today newsletter said that “Apple is only making one card, so they have to target everyone … It’s not like they’re Chase with multiple cards like Sapphire Reserve to target a higher demographic and other cards for lower segments.”
This singular approach to credit joins Apple’s growing collection of services. Likely being pushed to account for the falling sales of the iPhone, Apple Card is the latest in a line of launches that includes Apple News+, Apple TV+, Apple Pay, and Apple Arcade.
This year, iPhone sales saw a drop of 12%, making up 48% of total Apple sales. While Apple services rose by 13% from 2018 to become the second largest segment of the company’s sales portfolio, being 21%.
When discussing Apple Card and its role in the bank’s ecosystem in an internal Goldman Sachs memo, Solomon, hinting at further partnerships, said “Apple Card is big, but it’s also a beginning.”
LendingPoint Places Seventeenth on Inc. 5000
August 14, 2019
Today Inc. 5000 released is 2019 list of the fastest growing private companies in America, featuring alternative finance company LendingPoint in seventeenth place after it witnessed a three-year revenue growth of 9,265%. LendingPoint offers consumer loans of up $25,000 and provides financing to merchants, service providers, and medical institutions via its LendingPoint Merchant Solutions program.
This is the Atlanta-based business’s debut on the list and it comes after LendingPoint had a strong twelve months, with it being on track to reach $100 million per month in loan originations by the end of 2019 as well as it being the year the company turned profitable. On top of these, LendingPoint also has plans to expand its operations by hiring an additional 100 people, bringing its Atlanta HQ up to nearly 300 staff members.
In a press release, LendingPoint CEO Tom Burnside claimed that “Our platform saw more originations in 2018 than in 2015, 2016 and 2017 combined [sic], and at the same time our credit performance improved allowing us to facilitate more financing for consumers online and at the point of sale.”
Such growth is attributed by Burnside to LendingPoint’s use of technology. “We started by using data and technology to provide access to credit to underserved [sic], expanded to providing financing options at the point of sale to virtually everyone, and are now working on ways to integrate financing and payments with loyalty using blockchain to protect PII and enhance customer experience.” Such technology makes use of over 10,000 alternative data points, while also using FICO as a weighted factor of their analysis, to determine an applicant’s approval.
“We spend a lot of time cross-tabularizing the data points,” said Mark Lorimer, LendingPoint’s Chief Communications and Public Affairs Officer, when asked about the company’s approach to tech. Confronted by vast amounts of data, Lorimer noted how LendingPoint makes use of its technology to determine the value of different variables, “it really is a matter of taking the data and turning it into information.”
On the subject of LendingPoint’s placement on the Inc 5000, Lorimer told deBanked that the company was “not really surprised” by the news. According to him, his colleagues had been keeping an eye on the performance of those companies who previously placed on the list and were aware of what was required to appear on it, while his CEO has a more exuberant take on it: “It has been quite a ride for the last three years, and we’ve only scratched the surface.”
Canada Fintech Week Launches in Toronto
August 12, 2019
This week sees the first ever Canada Fintech Week (CFW) in Toronto. Running from August 12th to the 15th, the four-day celebration of everything fintech in Canada features a slew of events and panels for those in the industry.
Ranging from how to incorporate blockchain technology in Holocaust asset recovery to cybersecurity, to the future of open banking, CFW appears to cover a mix of topics and issues that are at the forefront of various corners of the scene.
CFW was launched by the Digital Finance Institute (DFI), a thinktank established to provide assistance to the digital finance ecosystem of Canada, with particular attention being paid to inclusion, responsible innovation, and the supporting of women in fintech. Having held the Annual National Fintech Canada Conference for the previous four years, DFI is combining the two events into one this year, with the fifth conference taking place on Wednesday.
In the lead up to CFW, DFI has released a list of its top 50 fintech companies in Canada that features the likes of Interac, OnDeck, and Lendesk; which accompanies its previous list of the top women in Canadian fintech. FundThrough, whose Director of Innovation spoke with deBanked last month after appearing on this list, will be hosting a panel covering alternative finance on Thursday.
CFW is coming at a time when fintech in Canada appears to be on the up, with a recent report from PwC-CBInsights finding that the first six months of 2019 have seen totals funds raised by Canadian fintech firms almost doubling from $133 million in Q1-Q22018 to $251 million. As well as this, investments in seed-stage companies have risen too, with the portion of seed round investments made in the first six months of 2018 being 36% of total investments, while 2019 witnessed 49%.
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.
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.
