AMEX: ‘We’re not seeing small businesses spend more’

January 28, 2024
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amex“We’re not seeing existing small businesses spend more than they spent the year before,” said Stephen Squeri, CEO of American Express, “And that’s not an American Express phenomenon, that is an industry phenomenon.”

Squeri, who was speaking on the company’s Q4 earnings call, was answering questions about what they’re seeing with small business customers. Although spending in particular is not increasing, they still want loans and cards. “As far as card acquisition within small businesses, that still remains strong,” he said. “As far as small businesses, looking at our platform, and looking at our loans, and so forth, that remains strong. And the credit quality remains strong.”

The trend is not concerning to American Express, who explained that write-off and delinquency levels were actually lower now than they were before the pandemic, despite ticking up just a little bit higher.

First Ever Domain Name Loan by Smart Contract Was Executed on Ethereum

January 27, 2024
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EthereumHistory was made on Saturday when the first ever loan against a domain name was executed with a smart contract on the Ethereum blockchain. The significance is that the success marks the birth of a new asset class that can be leveraged to unlock capital for business owners or domain name investors in an expeditious and secure manner.

deBanked founder Sean Murray was the executor of the transaction. The process involved tokenizing a domain name ( into an NFT and then offering that NFT as collateral on an NFT loan marketplace. When a loan was executed on the platform with a smart contract, the domain name was automatically placed into an ethereum address to be held as escrow. If the borrower were to default on the loan, the smart contract would automatically release the domain name to the lender, who would now have full control of it.

The process involved two parties, the tokenizing registrar and the NFT loan marketplace. The loan, which was consummated for proof of concept, carried a 10% APY and a 7-day term. It took less than 20 minutes combined to complete the tokenization and loan execution process.

“I was guessing that this capability might still be another year away and I had not even dreamed that I would be the very first one to execute this type of loan,” said Murray. “Following this space closely probably contributed to that stroke of luck. There is still time until this is ready to be a consumer-facing product in the marketplace, but the tech already exists and transactions of this nature are already viable. It will be fascinating to watch.”

About deBanked

deBanked was launched in 2010. For questions or inquiries email and call 212-220-9084.

Small Businesses More Understanding, Looking for LOCs

December 4, 2023
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rush“The ISO channel is an important part of our business and we remain committed to it,” said Jay Shaw, Head of Sales at Enova SMB. Enova, which operates OnDeck and Headway Capital, is one of the largest small business lenders in the United States. The company has originated more than $2.2B in loans in the first three quarters of this year, a lot of which comes through “highly compliant ISOs.” The relationship works, especially in times like these when banks are reducing their exposure to small business lending.

But officially we’re not in a recession. The S&P 500 is up 20% YTD, for example, unemployment is low, and inflation has backed off from its previous peak. Shaw says that a positive sentiment among small businesses is something they’re seeing along with this, that when they actually talk to small business owners one-on-one, many of them are feeling pretty good right now.

While most observers would point out that elevated interest rates have shaken up the game, there’s actually been a silver lining to how it’s played out.

“There’s a lot more education and understanding of cost of capital,” said Shaw.

Business owners, for example, who were used to a perpetual low interest rate environment, have watched banks dramatically increase interest rates over the last year or so and it’s actually brought attention and awareness to the fact that lenders have a cost of a capital to contend with as well, that rates come from somewhere. It’s made them more understanding, according to Shaw, when they’re presented with terms now from online lenders. That understanding is compounded by a greater openness to doing it all online in the first place, which businesses are now more accustomed with after having to do so much online during the covid years. In essence it’s a strong environment to be working in right now. Still, many businesses are coming in with a certain expectation of how online lending should work especially if they worked with a bank previously.

OnDeck“More and more businesses are looking for a line of credit product,” Shaw said, which Enova offers in addition to term loans. Businesses tend to appreciate this product not only because of the control it gives them but also because “they have continuous access to capital after every payment they’ve made,” Shaw said.

According to the Intuit Small Business Index Annual Report, 22% of small businesses applied for a loan or line of credit last year. Although this didn’t distinguish term loans from lines of credit, the demand for a revolving product is evident by an even more sought after type of financing, credit cards, which 30% of small business owners applied for. MCAs, by comparison, were a distant fifth, with only 6% of businesses applying for one.

Perhaps an all important measure is not only what businesses want but how they’re using it in the end.

“A lot of [our customer’s] borrowing is growth borrowing with a significant ROI,” Shaw said.

Nice Yacht, Someone Financed It

October 26, 2023
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yachtEvery sentence sounds better ending with the word “yacht.” Enjoying crackers and cheese on a yacht. Sipping champagne aboard a luxurious yacht. Even making money financing high-end yachts, the charm remains intact. Over the past six years, East Harbor Financial has been offering a range of financing solutions under their Luxury Assets category, which includes exotic cars, aircraft, and vessels. While the company has been in business for 11 years, President Bruno Raschio’s foray into the yacht industry provides a unique perspective from an outsider turned insider.

According to, there are currently 592,000 yachts in the United States and the global market size was valued at $8.91 billion in 2022, with expectations to expand 5.8% from 2023 to 2030. The most Raschio has ever financed on one unit was $2 million and he admits there is a lot of money to be made in this sector, but people must be willing to welcome the risk that comes with it.

“Lenders who embrace risk and identify a specialized market can consistently generate profits in a business,” said Raschio. “Nonetheless, market corrections often possess the capability to level out the gains amassed during prosperous years.”

Raschio emphasized that the industry has many brokers that do not necessarily need an in-depth knowledge on yachts. Nevertheless, the significance of understanding yachts itself is always advantageous. In the case of private lenders, like his own company, Raschio advised focusing on financing high-quality yachts that possess strong market appeal and retain their value.

With the increase in manufacturing costs, Raschio states that prices may not revert to pre-Covid rates, like when they initially joined the yacht industry. For instance, A-credit rates, which used to range from 4½ to 5% before the pandemic, have now risen to 8 to 9%. Similarly, rates for B, C, and D credit ratings, previously between 10 to 13%, have surged to 14 to 19%.”

yacht“Consider this scenario, if you were buying a million-dollar yacht before, you’d typically put down 30%, leaving you with a financing amount of $700,000,” he said. “However, in a post-Covid market, if the same yacht is selling for $1.5 million and you still put down 30%, you’d be looking at financing $1,050,000. That means you’re financing nearly $50,000 more than its pre-Covid value.”

East Harbor specializes in financing high-end yachts, brands like Sunseeker, Azimut, Ferretti, Pershing, and Princess. Transactions typically range from $600,000 to $1 million, covering yachts that fall within the 40 to 75-foot size range. Working with clients nationwide, the primary regions where the company provides financing are South Florida, which is the largest market, California’s Newport Beach, the second largest, and various areas along the east coast, the third-largest market. The company exclusively offers short-term loan options, typically lasting between 5 to 8 years, as opposed to the more common 15 to 20-year loan terms for yachts.

“We prefer to expedite our financing process since we rely on private funding,” Raschio explained. “Furthermore, this type of financing is generally costlier than traditional bank loans. Therefore, many individuals find it more sensible to present it as a short-term solution, where you secure your financing, achieve your objectives, and exit, or sell the boat.”

Upon entering the boat financing business, Raschio first’s client came to him with a million-dollar yacht with a $500,000 down payment. It seemed like a solid deal, but there was also a high likelihood that the yacht was going to need very expensive repairs. Its details like this that can change the entire dynamics of the deal and it was a teaching moment for him.

“As an example, a major repair on a used yacht that’s heavily depreciated could cost more than the entire used yacht price,” said Raschio.

With Fraud on the Rise, AI Can Fill in the Gaps

October 19, 2023
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Artificial IntelligenceIn today’s dynamic world of fraud detection, technology, and artificial intelligence (AI) are allies. The insights of industry experts, Yinglian Xie, a technology veteran with a background at Microsoft Research and CEO at DataVisor, Sandip Nayak, President at Fundation, and Andrew Davies, Global Head of Regulatory Affairs at ComplyAdvantage, discuss the transformative role of AI in fraud prevention.

When DataVisor started, it primarily offered advanced machine learning solutions, through an unsupervised approach. In other words, their programs can spot fraud without needing a loss or training labels; they can automatically identify suspicious activities. Xie explains that AI’s ability to make rapid decisions during real-time transactions depends on the amount of data available for this process. To achieve a proactive response, it must be synchronized with real-time data, as opposed to a manual or “supervised machine learning” approach.

“We need to kind of switch the traditional approach looking at fraud being very much kind of an isolated case, like a manual approach, and into something we need technology for, said Xie. “And we need to essentially be able to make decisions instantaneously as well.”

In addition to unsupervised learning algorithms, Xie explains that generative AI falls into another category of fraud detection. This method describes the data and communicates information back in human-like responses. Xie gives an example that as customers, some may not understand why a transaction was rejected and that’s where generative AI comes to rationalize the reason behind the rejection.

Echoing Xie, Nayak described solutions where traditional techniques fail, one of them being unsupervised learning algorithms. These algorithms can use techniques like anomaly detection to actually hone in on “the needle in a haystack problem.”

“Number two, the automated and advanced nature of AI can really solve the shortcomings of rules based and human based approaches in detecting fraud and can also self-calibrate itself as the nature of fraud evolves with time,” said Nayak.

Meanwhile, Andrew Davies pointed out that one of the biggest challenges faced by banks and financial institutions is “they are constantly playing catch-up.” With the accelerated pace of money movement and real-time settlement, he emphasized that fraudsters capitalize on this by being swift and innovative, continuously seeking out new vulnerabilities to exploit.

“Banks must update their legacy technology which leaves too many weak points in the control environment,” said Davies. “Additionally, as money moves more quickly and is subject to finality, fraud detection must be done in real time.”

And as the digital landscape continues to evolve, Nayak envisions the adoption of these technologies will be beneficial to the lending industry. Embracing different strategies not only reduces fraud losses but also enhances capital efficiency, paving the way for increased profitability and security in lending, according to Nayak.

“I do expect the lending industry, especially the ones who adopt the latest technologies of fraud detection, will have a competitive advantage compared to those who don’t,” said Nayak. “And what that will do is it will help them preserve more of their capital in the current tough macro environment by helping the overall unit economics…”

Unsupervised machine learning and generative AI are strategies reshaping fraud prevention. The ability to make rapid, data-driven decisions, adapt to evolving fraud tactics, and provide human explanations behind alerts has become a cornerstone in modern fraud detection.

Prosper Originates $595.6M in Q2

August 28, 2023
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Prosper MarketplaceProsper Marketplace’s Q2 loan originations of $595.6M was down 33% from the same period last year and down more than 5% from Q1 2023. The company attributed the decline to “reduced investor demand given the current uncertain economic environment.”

Investor demand is a major driver for Prosper which sells whole loans to institutional investors and notes to retail investors. The 33% YoY decrease is even more significant considering that it actually represents a 50% drop in the raw number of loans made.

Prosper generated a $52.7M net loss in Q2 on just $31.5M in net revenue.$32M worth of expenses, however, were attributed to “Change in Fair Value of Convertible Preferred Stock Warrants.”

“There was also a $8.1 million decrease in Total Net Revenues from Change in Fair Value of Financial Instruments, Net, due primarily to higher delinquencies and charge-offs for loans held in consolidated warehouse trusts and the Credit Card portfolio underlying the Credit Card Derivative, both of which have increased in size from the prior year,” the company wrote. “Additionally, higher interest rates have led to negative fair value adjustments on Loans Held for Sale.”

Loan Applicants Might Just Give Up After Unattractive Offer

August 13, 2023
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refusing moneyA lender offering unattractive loan terms may not be driving those prospects into the arms of a competitor. Instead, they might actually be discouraging them from searching any further.

This phenomenon was raised in Upstart’s most recently quarterly earnings call when analysts began asking about APRs and acceptance rates. Upstart’s max APR is 36% and they’ve found that the higher the rate goes, the less likely the applicant will accept it.

“I mean it’s very simple,” said Upstart CFO Sanjay Datta. “It’s a pretty classic sort of supply and demand construct, where we raise our rates and not only do our approval rates go down because of the 36% APR cut off but for those who remain approved they’ll be less likely to take a loan.”

That is when Datta expanded further on what becomes of applicants who choose not to move forward.

“And typically, at least what we’ve observed in our data is that people who don’t take loans with us don’t necessarily take them from a competing source,” Datta said. “The majority of them just don’t take the loan. So it causes people’s demand to reduce.”

The Q&A did not invite further opportunity for additional insight on why that might be. Upstart’s experience as a consumer lender also may not translate into small business lending either. For example, in April 2022, a fintech lending study found that 40% of business loan seekers compared more than six options.

Loan Scammers Play With Email Dots

June 28, 2023
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online fraudDid you know if you send an email to or or, they would all go to the same place? Scammers do. In a recent bombshell report published by the SBA and OIG, $200 billion in PPP/EIDL fraud was accomplished through a number of common techniques, one of which appears to be through the manipulation of email addresses.

moving dots

Some mail servers, including Gmail’s for example, ignore the dots, a feature likely built in because periods are commonly used as concatenation operators to join two strings in programming. Reader’s Digest recently called this “The Gmail Trick That’s Been Around for 15 Years—But Few People Know About It.”

“Any combination of your e-mail address and those little dots is sent to the exact same inbox. You own all dotted versions of your address,” RD wrote.

The implications of this, however, are that scammers can potentially bypass systems that rely on e-mail addresses as a primary form of verification or identity. Both and could have separate accounts in one system even though it’s the same email address. This method is useful to scammers because they do not have to register additional gmail accounts, which could potentially trigger additional unnecessary verifications or reviews from Google for suspicious activity. Instead, they can rely on the single account.

Furthermore, the SBA report said that aliases or email forwarding or disposable email addresses are also used in fraud and are a fraud indicator.

“Using an alias technique to add an extension to an existing email address through use of a dash (-) or plus (+) that resolve to the same email (e.g., or both resolve to” was something that the SBA analyzed in its fraud investigation. “Using a disposable email service to remain anonymous by receiving emails at a temporary address that may self-destruct after a certain time elapses” is another technique that was examined.

Is your system checking for dots in gmail addresses? If they weren’t before, they should now!