Fintech Update, 8/20 - 8/26
August 20-26, 2016
Leading Off
Forbes profiled a small Kansas bank that has become a “secret weapon” for fintech firms; Early Warning is rebranding its clearXchange payments network; blockchain consortium R3 filed for a software patent; Uber teamed up with Betterment to offer its drivers free retirement savings services; ransomware attacks are up 4x over last year; and J.P. Morgan Chase hired a new head for its cloud services division.
Policy & Regulation
Hillary Clinton discusses regulation and fintech. In a recent opinion article and conference call, the Democratic presidential nominee promised to “streamline regulation to increase access to capital for small companies.” Clinton also spoke about fintech firms, particularly online lenders, noting the role they could play in “expanding access to credit . . . in underserved communities."
Marketplace Lending & Credit
Goldman backs marketplace lender. Goldman Sachs extended a $100 million credit line to Fundation Group, “a digitally-enabled lender and credit solutions provider.” Fundation has a network of strategic partnerships with banks and other financial institutions that serve the U.S. small business market, and plans to use the facility to expand its small business lending capacity.
Banking & Securities
U.S. Bank gets into robo-advising. U.S. Bank has partnered with FutureAdvisor, BlackRock’s robo-advisory unit, to “combine technology from FutureAdvisor with a dedicated team of advisers from U.S. Bank.” The bank plans to target “upcoming investors” with its new digital investment service, which will be made available to customers in 2017.
How a small Kansas bank became a fintech “secret weapon.” Fortune profiles ex-Google engineer Suresh Ramamurthi and his wife, Suchitra Padmanabhan, a former Wall Street banker, who took over a distressed, 124-year-old bank in Weir, Kansas, and turned it into a go-to bank partner for dozens of fintech startups.
Payments
A clearXchange by any other name… Early Warning, the company behind the clearXchange payments network, which includes several of the U.S.’s largest banks, announced that it is rebranding the service “Zelle.” Early Warning plans to launch the new brand at an industry conference in October. [Eds. note: We expect that Zelle’s anti-fraud strategies will include identifying lion and avoiding cheetahs...]
Digital Currency & Blockchain
Blockchain startup files for software patent. The R3CEV blockchain consortium, backed by several multinational banks, filed its first patent on the software underlying its project Concord. R3 hopes that Concord will be “a universal platform connecting bank operations within firms and across rival firms,” improving efficiency and lowering maintenance costs for participating banks.
Big banks promote new digital currency. Several banks, including UBS, Deutsche Bank, and Santander, have joined together to promote the Utility Settlement Coin, “an asset-backed digital cash instrument implemented on distributed ledger technology.” The project was initially conceived in UBS’s blockchain lab as a “harbinger for central bank backed digital cash issuance."
Cybersecurity
Ransomware attacks are on the rise. The attacks, in which hackers seize control of a computer until the user pays a “ransom,” have grown 4x over last year to 4,000 per day, according to the Justice Department. Hackers have also begun targeting “entire networks of computers at hospitals, universities and businesses,” often demanding several hundred to several thousand dollars in ransom.
Personal Finance
Uber offers retirement planning through Betterment. Uber teamed up with the robo-advisory startup to offer free financial planning services to some of its drivers. The partnership will allow Uber drivers in select cities to open an IRA or Roth IRA for free through Betterment via the Uber app. Uber said the service is one of several efforts to help drivers save money and plan for the future.
International News
Singapore creates a new fintech lab. The Monetary Authority of Singapore (MAS) established a new lab to “provide a platform for startups, technology vendors, and financial institutions to test out new fintech tools.” The facility will be located in the MAS building, allowing the regulator to “experiment” with innovative tools alongside market participants.
China challenging for lead in fintech investment? Asian fintech companies have so far raised $9.6 billion in 2016 — more than doubling North American fintech fundraising — with over 90% going to Chinese companies. Notably, however, “the swell in . . . China was driven largely by state-backed investments into a few of the country’s largest internet and finance companies."
Fundraising & Deals
Impression Ventures grows fintech fund. The Canadian venture capital firm raised CAN 20 million to invest in early-stage Canadian fintech firms. Founder Christian Lassonde is bullish on Canada’s fintech prospects, claiming that “a disproportionate number of [fintech] companies will be founded in Canada and . . . are poised to build billion-dollar global businesses.”
D.C. data security firm completes successful Series A round. Virtru, which offers e-mail and file encryption and data protection tools, raised $29 million, led by Bessemer Venture Partners. Virtru was founded by brothers John and Will Ackerly, respectively a former White House technology advisor and a former security engineer with the National Security Agency.
Company Spotlight
J.P. Morgan Chase adds cloud computing head. The largest U.S. bank by assets hired the head of software development for IBM’s cloud unit to be its new “chief information officer for cloud services.” J.P. Morgan’s CIO noted that “the successful adoption of cloud technology is essential” for “innovation, standardization and productivity in a secure and stable environment.”
Anthemis hosts “future of fintech” event. The London-based fintech advisory firm held its fifth annual “Hacking Finance” event last week, bringing together investors, entrepreneurs, bank executives, regulators, and academics to discuss topics including Brexit, blockchain technology, and the online lending industry. Business Insider made a video summary of the event.
Commentary & Miscellaneous
Why the next step in payments should be PIN verification. Writing in TechCrunch, former U.S. patent examiner G. Nagesh Rao discusses the benefits of verifying credit card transactions with PINs rather than signatures -- and also why “ some banks and credit card companies are fighting tooth and nail against the idea.”
Have a great weekend!
The Fintech Update Team