Fintech Update, 9/24 - 9/30
Sept. 24-30, 2016
Leading Off
LendUp settled with the CFPB for $3.5 million over alleged UDAAP violations; Citi announced it will join the clearXchange payments network; IBM released a new study on blockchain projects and announced it will help China’s UnionPay build a new blockchain platform; SoFi plans to begin offering life insurance by end of year; the SEC announced it will host a forum on blockchain in November; and Politico published a special package of reports on fintech and regulation, entitled “The Future of Money.”
Policy & Regulation
Politico features new special on “The Future of Money.” Politico published a package of articles dedicated to financial innovation, regulation, and the future of U.S. banking and financial services. The package includes pieces on robo-advising, blockchain and exchanges, limited-purpose national bank charters, and how policymakers approach fintech regulation. According to a survey of top fintech experts and business leaders referenced in that final article, most are concerned by the lack of a clear regulatory framework governing fintech.
Marketplace Lending & Credit
LendUp settles with CFPB. The online lender, under investigation by the Consumer Financial Protection Bureau (CFPB) for alleged UDAAP violations, settled for $3.6 million -- with half going to affected customers and the other half going to the CFPB as a civil penalty. LendUp stated that the CFPB’s review focused on activities from 2012 and 2013, which have since been remedied.
Goldman takes aim at Silicon Valley-based lenders. Goldman Sachs expects its new online consumer loan platform to outcompete established startups like LendingClub and Prosper. Goldman will fund its loans through deposits, which it believes will allow for loan terms superior to those offered by the “Silicon Valley upstarts” that rely on investment funds for cash.
Payments
Citi to join clearXchange. Citigroup announced that it will become a member of the clearXchange payments network, the last of the five largest U.S. banks to join. clearXchange is the real-time money transfer system designed to help large banks compete against startup services like Venmo and Circle; it is currently developing the “Zelle” app for mobile payments.
Digital Currency & Blockchain
New blockchain partnerships abound. Banks and technology companies are increasingly working together on new blockchain initiatives. This week, IBM announced a collaboration with China’s UnionPay to develop a blockchain solution to help customers “exchange bonus points in different loyalty schemes,” while Microsoft and Bank of America partnered to develop and test “frameworks for blockchain-powered exchanges.”
IBM studies banks’ interest in blockchain. Of the 200 banks surveyed by IBM, nearly two-thirds expect to have commercial blockchain projects in place by 2019. IBM’s results also showed that banks with over 100,000 employees are “twice as likely to be ‘trailblazers’ in blockchain,” and that 56% of study participants see “regulatory constraints” as the “top barrier to success.”
1776 launches new blockchain center. The Washington, D.C.-based incubator and seed fund announced its new D.C. Blockchain Center, in partnership with the Chamber of Digital Commerce. 1776 hopes the new center will allow for public- and private-sector collaboration while serving as a resource for entrepreneurs and government agencies exploring blockchain.
Personal Finance
Green Dot creates new card for people with no credit history. The Green Dot Platinum Visa Secured Credit Card “is backed by the customer's own security deposit held at Green Dot Bank, [so] most anyone can apply and be approved for the card.” Green Dot will report customers’ payment performance to credit bureaus, (hopefully) helping them build a better credit profile.
International News
Upcoming EU rule changes boost fintech startups. The European Parliament voted last year to update its payment services laws, effective 2018, to “promote [fintech] competition with banks.” The Financial Times discusses how the new regulatory landscape could benefit consumers and retailers by opening the payments marketplace to “new technologies and more competition.
Japanese banks investing in fintech after FSA rule change. Following a recent decision by the Financial Service Agency (FSA) to allow banks to own more than 5% technology companies Japanese banks have begun increasing their stakes in fintech firms. According to the Financial Times, Japan could be “a big new source of funding for [fintech] start-ups, especially in Asia.”
Fundraising & Deals
FTV Capital raises $850 million fund for fintech investment. The San Francisco-based venture capital firm will direct the funds to fintech investments in the areas of enterprise technology and services, financial services, payments, and transaction processing.
Company Spotlight
SoFi to expand into life insurance. The San Francisco-based lender, known for pioneering student debt consolidation, plans to offer life insurance to its customers by end of year, as part of an ongoing effort to diversify and expand its offerings and revenue streams. SoFi hopes to attract new customers and leverage its quick underwriting to compete with large insurers.
Lendified approved to make loans by OSC. The Toronto-based startup is Canada’s first online lender to receive regulatory approval from the Ontario Securities Commission (OSC) to engage in marketplace lending activities. The approval will allow Lendified to work with Ontario-based institutions and accredited investors to make loans to small business borrowers.
Rakuten.com partners with Payoneer to facilitate cross-border payments. The partnership between the e-commerce platform and online payments startup will allow “global merchants to sell on Rakuten.com and receive payment in their local currency.” Rakuten.com features a global network of over 20 million customers and offers over 22 million products from around the world.
Events
SEC to host fintech forum. On November 14th, the Securities and Exchange Commission (SEC) will convene regulators, entrepreneurs, and industry leaders to assess how regulators can best address innovation in financial services.Topics will include blockchain technology, robo-advisory services, marketplace lending, and crowdfunding.
Commentary & Miscellaneous
On the regulatory response to fintech. Dr. Larry Wall, Executive Director of the Center for Financial Innovation and Stability at the Federal Reserve Board of Atlanta, writes about the regulatory challenges faced by fintech firms, exploring why sharing-economy firms like Uber and Airbnb have largely been more successful than them at working with regulators.
Have a great weekend!
The Fintech Update Team