Fintech Update, 11/6 - 11/12
Nov. 6-12, 2017
Leading Off
SEC Chairman Jay Clayton reaffirmed that ICOs in most cases appear to be securities offerings; a report from the Cleveland Fed said P2P loans bear similarities to “predatory loans”; a bug in a popular digital currency wallet potentially froze over $100M of Ethereum; Apple is rolling out P2P payments in its iMessage app; Revolut applied for an EU banking license; and Deutsche Bank's CEO said AI and machine learning could replace up to half of a bank’s traditional staff.
In the News
Clayton reaffirms SEC stance on ICOs. Securities and Exchange Commission Chairman Jay Clayton said that he has “yet to see an [initial coin offering] that doesn’t have a sufficient number of hallmarks of a security.” His remarks affirm the SEC’s stance on the controversial form of fundraising, following an agency finding in July.
Quarles says Fed will examine approach to fintech. The Federal Reserve’s new Vice Chairman for Supervision, Randal Quarles, said that the agency is “examining its approaches” to a variety of regulatory and supervisory activities, including those related to cybersecurity and fintech.
Cleveland Fed says P2P loans leave consumers deeper in debt. In a new research paper [full text] on online loan products, the Federal Reserve Bank of Cleveland found that P2P loans “resemble predatory loans” in terms of market served and customer impact. Notably, the findings are “in tension” with similar studies from the Chicago and Philadelphia Feds.
LendingClub to tighten credit standards. The San Francisco-based online lender said it plans to approve “a more creditworthy mix of borrowers going forward,” increasing concerns about its credit decisioning standards in conjunction with “worse-than-expected [Q3] performance” and lower-than-expected revenues for Q4.
Revolut applies for EU bank license. The London-based bank services firm applied for a banking license in Lithuania, which, if approved, would allow Revolut to operate as a bank throughout the European Union. Revolut is eyeing global expansion, with a planned U.S. launch in mid-2018, amid increasing competition from other “challenger banks” like Starling, Monzo, and N26.
Banks are growing their mobile offerings, aiming at millennials. The American Banker profiles Wells Fargo’s new Greenhouse product, “a mobile banking account that delivers personal financial management insights,” as part of a broader exploration of evolving consumer demand for mobile banking services among millennial customers.
Apple launches P2P payments in iMessage. The company did a “soft roll-out” of Apple Pay Cash, which is still in beta. The feature allows U.S. customers to send and receive money in the iMessage app, provided they run iOS 11.2 beta 2, using any debit or credit card associated with Apple Pay. Apple is “working with Green Dot to power the financial mechanics of Apple Cash.”
Vulnerability puts $100M+ of Ethereum at risk. A bug in the code of popular digital currency wallet Parity impacted hundreds of e-wallets, potentially freezing over one hundred million dollars worth of the digital currency Ethereum. The issue stems from “the fact that the Parity Wallet operates as a smart contract” and an error in the wallet’s execution logic.
Deutsche Bank CEO says AI could replace 50% of bank jobs. John Cryan, who has “already cut thousands of jobs as part of a five-year restructuring plan,” suggested that AI and machine learning tools could replace up to half of the bank’s workforce. Cryan noted that bank processes are “too manual and error-prone,” and that that new tools could reduce spending on back-end staff.
Data-sharing agreements may end tug-of-war for access to customer data. The American Banker’s Penny Crosman writes about the proliferation of private data-sharing agreements between banks and third-party partners, which may be accelerating an industry-wide movement toward acceptance of API-based third-party data-sharing and the CFPB’s data-sharing principles.
Bank Partners vs. Fintechs 2: ‘It’s Not Us, It’s You.’ Following last week’s WYSIWYG-titled “Large banks make terrible partners, fintechs say,” the AB doubles down on its fintech tit-for-tat with a snipe from from bank executives, who “counter [that] fintechs are no treat either.”
Have a great week!
The Fintech Update Team