Fintech Update, 7/2 - 7/8
July 2-8, 2016
Leading Off
North Carolina enacted new legislation concerning digital currencies and money transmission; the EU made digital currencies subject to its AML Directive; American Express is creating a new online lending platform for small businesses; U.S. Bank will begin offering free P2P transfers over the clearXchange network; and Germany is trying to lure fintech businesses away from London following the Brexit vote.
Policy & Regulation
North Carolina makes a play for more digital currency business. Governor Pat McCrory signed into law the North Carolina Money Transmitter Act [full text], updating the state’s existing laws to recognize and account for virtual currencies like Bitcoin. The new law “will ensure that virtual currency miners and blockchain software providers . . . will not require a license” in North Carolina, an approach that contrasts with New York’s stricter BitLicense regime.
Payments
Walmart Pay went live. The service allows customers to check out with their smartphones in more than 4,600 Walmart stores across America. Users can access Walmart Pay through Walmart’s mobile app, which “works with any iOS or Android device, at any checkout lane, and with any credit, debit, prepaid or Walmart gift card.”
Digital Currency & Blockchain
Bitcoin gets more oversight in the EU. The EU adopted a proposal to revise existing anti-money laundering (AML) protections, impacting the treatment of digital currency initiatives within its borders. In the hope of impeding the activities of terrorists and money launderers, “virtual currency exchanges and custodian wallet providers” will now be overseen by the EU's AML Directive and required to apply certain “due-diligence controls."
Cybersecurity
Ripple tightens its security. Distributed ledger firm Ripple launched a “multisignature” security feature on its Ripple Consensus Ledger, allowing users to request cryptographic signatures from more than one party in order to validate a transaction. The company called the option a more "robust and distributed security architecture for banks," since bad actors “would have to breach multiple machines to transact on one user's behalf.”
Personal Finance
Wearable tech may pose an information security risk. Researchers in New York demonstrated how sensitive user data like PINs can be compromised by wearable technology. By analyzing data from smartwatches, the research team was able to “infer key entry sequences based on . . . hand movements” and crack users’ PINs with 80% accuracy on the first attempt.
Marketplace Lending & Credit
Online lending gets a (big) new challenger. American Express (AmEx) will roll out a new, small-business lending platform, challenging fintech firms like Square and On Deck Capital. AmEx says its new venture, Working Capital Terms, will be able to approve loans in minutes for existing AmEx small-business cardholders. “We’ve combined the convenience of the online lender with the competitive pricing of a bank,” said AmEx’s president of global commercial payments.
PayPal targets SMBs, as well. PayPal announced that its Working Capital platform, which provides loans to small- and medium-sized businesses (SMBs), will increase its funding limits. According to PayPal, Working Capital has originated more than $2 billion in loans and served more than 90,000 merchants since its inception in 2013.
Online lenders seek growth through layoffs. The Wall Street Journal discusses the online lending industry’s difficult first half of 2016, which has included the resignation of LendingClub’s CEO and flagging investor confidence industry-wide. In recent weeks, some of the largest online lenders, including LendingClub, Prosper, and Avant, have announced significant layoffs, suggesting that “they’re hunkering down for a prolonged period of difficulty.”
International News
Keep Calm and Move to Berlin? In the wake of the U.K.’s “Brexit” decision, some have touted Berlin as the city “poised to wrest [London’s] crown as Europe’s centre of fintech.” “Berlin will exploit the opportunity provided by Brexit,” said Cornelia Yzer, Berlin’s economics minister, who said her office is receiving “dozens of emails” from London-based fintech firms considering relocating to the German capital.
Fundraising & Deals
Japanese bank invests in bitcoin firm. Japan’s biggest lender, Mitsubishi UFJ Financial Group (MUFG), invested in Coinbase, a service that allows users to store and make payments with bitcoin. Most Japanese banks tend to be conservative about new technologies, but recent fintech regulations and low interest rates have pushed some to seek alternative investments as a means of offsetting the stagnating profits from traditional lending. Coinbase raised $10.5 million in the round, with the goal of expanding its Asia business.
Company Spotlight
U.S. Bank makes its P2P services free. U.S. Bank will now offer free, real-time, person-to-person (P2P) payments via the clearXchange network, the digital payments network backed by many of the U.S.’s largest banks. Fee-less P2P services have evolved from novelty to expectation for many consumers, thanks to the growing popularity of fintech startups like Venmo and Circle.
Commentary & Miscellaneous
Should banks adapt to millennials? Anthony Jabbour of FIS, the world's largest provider of banking and payments technologies, says that millennials, who already comprise one-third of U.S. banking customers, will reshape the market by “opt[ing] for convenience over a big, trusted name in banking.
Facebook is augmenting Messenger. Facebook is boosting the security of its Messenger app by rolling out end-to-end encryption, following in the footsteps of other popular messaging apps like WhatsApp and Viber. Some also see this as a step toward building e-commerce capabilities and other financial services products into the app, similar to China’s WeChat platform.
Have a great weekend!
The Fintech Update Team