Fintech Update, 8/27 - 9/2
Aug. 27 - Sept. 2, 2016
Leading Off
The SEC partners with Amazon and Alphabet to store its CAT database using their cloud services; TransferWise works to limit reliance on third-party bank partners by acquiring a variety of U.S. state licenses; Singapore plans to streamline its payments laws to limit the regulatory burden faced by payments-related fintech firms; Apple begins showcasing mobile apps that allow iPhone users to transfer funds via Siri voice commands; and NYCA Partners’ David Sica discusses the firm’s desire to invest in entrepreneurs willing to work with banks and regulators.
Marketplace Lending & Credit
McKinsey highlights the benefits of digitized bank credit risk processes. In a new report [full text], the global consultancy argues that digital transformation in credit risk management would bring greater transparency to banks’ risk profiles. According to the report, digitalization would also lessen regulatory pressures, help banks meet investor expectations, and make banks more competitive with fintech firms.
Banking & Securities
Goldman Sachs to launch new online lending platform. Continuing to shift its post-financial crisis strategy to broaden its consumer services, Goldman announced that it will launch Marcus, an online lending platform offering personal loans to retail clients, this fall. Aiming to provide “more basic banking businesses,” Marcus will offer loans up to $20,000 and “[target] borrowers with existing credit-card debt and [consolidate] it at lower rates.”
How Wall Street banks are embracing fintech to stay competitive. CNBC features a recap of the major recent steps Wall Street banks have taken to “defend themselves against the growing threat of fintech,” including launching online lending services and forming consortiums to advance payments platforms and blockchain infrastructure initiatives.
Payments
TransferWise wants to limit its reliance on bank partners. The London-based global money transmission service has long touted itself as a bank alternative, despite relying on third-party bank partners to conduct many of its operations. However, the firm recently announced plans to access the U.K.’s real-time payment system without a bank intermediary, and has also acquired MSB licenses from 37 U.S. states in the past year.
Money transfer services integrate Siri. Apple has begun showcasing mobile apps from fintech firms Square and Monzo that will allow iPhone users to transfer funds via voice commands using Apple’s Siri personal assistant. The initiatives place Monzo and Square at the “forefront” of building Siri-enabled apps that can “send a secure payment without ever opening an app.”
Digital Currency & Blockchain
Visa to experiment with blockchain for interbank payments. Visa’s London-based innovation lab announced a new blockchain trial program that will focus on interbank payments. Visa’s “Europe Collab” unit partnered with Toronto-based BTL Group to “explore how . . . interbank settlement system[s] can leverage blockchain and smart contracts to streamline domestic and cross-border payments between banks.”
Cybersecurity & Cloud Storage
SWIFT discloses more hacks. In a letter to clients, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) said that it experienced a string of new attacks in recent months, following the Bangladesh Bank hack in the spring. The financial messaging system warned its member banks to “quickly upgrade their software and security protocols,” noting that “the threat is persistent, adaptive and sophisticated — and it is here to stay.”
Tech giants work with SEC on CAT database. Amazon and Alphabet are working with the Securities and Exchange Commission (SEC) to store the Consolidated Audit Trail (CAT) database, its “massive repository” of stock and options trading data, via their cloud services. Some brokers and banks are hesitant about the plan, however, fearing “everything from data breaches to technology firms making one of their biggest inroads yet into the financial world.”
International News
The UAE wants to go cashless. The United Arab Emirates government signed a memorandum of understanding (MoU) with 16 of the country’s largest banks to develop a proprietary mobile wallet platform. The UAE announced its mWallet initiative in 2014, and the UAE Banks Federation hailed the MoU as “an important milestone” toward its goal of a “cashless” future.
The U.K. steps up scrutiny of MSBs. The U.K.’s tax authority, HM Revenue & Customs (HMRC), outlined new plans [full text] to tighten oversight of businesses using money service businesses (MSBs) to “escape tax liabilities.” The HMRC aims to “identify where more significant amounts of money, which may have been earned in the hidden economy, have been transacted through an MSB." The greater scrutiny could impact internet-based MSBs, like TransferWise, some of which facilitate the transmission of billions of dollars per year.
Singapore reforms its payment laws to support fintech innovation. The Monetary Authority of Singapore (MAS) announced it will work to streamline its regulatory framework governing “payment systems, stored value facilities and remittance businesses,” limiting the need to “obtain multiple licenses for [related] services, such as digital wallets, acquiring, [and] operating payment platforms.”
Company Spotlight
SVB hires new chief risk officer. Silicon Valley Bank (SVB) hired Laura Izurieta, most recently the chief risk officer for retail and direct bank operations at Capital One. She will lead SVB's risk management, corporate compliance, and regulatory relations functions, and will be a member of the bank’s executive management team.
J.P. Morgan launches digital car-buying service. The new offering, known as Chase Auto Direct, helps customers shop for cars and secure financing on their computers or mobile devices, saving time spent on negotiation at the car dealership. The service is offered through a partnership with TrueCar, a digital car-buying startup, and represents the “latest instance of a bank teaming up with a financial-technology firm rather than facing off against them.”
Commentary & Miscellaneous
How NYCA Partners connects D.C., Wall Street, and Silicon Valley. In an interview with American Banker, David Sica, a principal at fintech-focused venture capital firm NYCA Partners, shares why his firm targets startups that are willing to collaborate with regulators and banks.
Have a great Labor Day weekend!
The Fintech Update Team