Fintech Update 11/12 - 11/18
Nov. 12-18, 2016
Leading Off
The SEC hosted a fintech forum featuring industry leaders and regulators; the CFPB issued an RFI seeking information on the use and security of consumers’ financial records; state regulators voiced concerns about the OCC possibly granting national bank charters to fintech firms; former LendingClub CEO Renauld Laplanche is starting a new firm to compete with his old one; online loan-backed bonds are going bad faster than expected; and new funding for fintech firms declined 17% in Q3 compared to Q2.
Policy & Regulation
SEC hosts fintech forum. The Securities and Exchange Commission (SEC) hosted a forum on fintech innovation at its Washington, D.C., headquarters. The forum included remarks from Commissioners Mary Jo White [full text] and Michael Pirowar [full text], as well as panel discussions on developments in robo-advisory services, trading and settlement, capital formation, and investor protections. The webcast archive of the event can be found here.
CFPB seeks information on consumer data-sharing. The Consumer Financial Protection Bureau (CFPB) released a request for information (RFI) regarding the use and security of consumers’ financial records, “and to what extent consumers have control over [them].” According to the Wall Street Journal, the RFI reflects CFPB concerns “that traditional banks have erected improper hurdles to [consumer] data-sharing,” impeding the ability of fintech firms to grow and innovate.
State regulators oppose OCC charter for fintech firms. In a letter [full text] commenting on the Office of the Comptroller of the Currency’s (OCC) proposed rule on receivership, the Conference of State Bank Supervisors said that approving national bank charter applications for fintech firms would be an “unprecedented, overreaching use” of the agency’s authority.
Marketplace Lending & Credit
LendingClub founder launches new venture. Renaud Laplanche, who was forced out of LendingClub in May after the company’s board discovered his “personal investments in an outside fund that was buying LendingClub loans,” launched Credify, an online lender similar to the company he left behind.
Concern grows over online loan defaults. More bad news for online lenders already struggling to attract and maintain investor interest: A set of loan-backed bonds “is going bad faster than lenders and bond underwriters had expected.” Avant already must “repay three of its . . . notes” after breaching “trigger” levels, while subprime lender CircleBack may breach those levels soon.
Banking & Markets
A data revolution in hedge funds. The New York Times’ Dealbook explores the growing adoption of computer-driven, quantitative strategies in the world’s largest hedge funds. To combat “dismal returns and investor criticism over high fees,” hedge funds are increasingly replacing big-name investors with “teams of [Ph.D.s]” to develop trading algorithms.
Nasdaq uses AI to detect illegal behavior. The American Banker’s Penny Crosman discusses the use of artificial intelligence (AI) by the Nasdaq exchange to “help it detect market abuse.” The exchange sees 14 million trades per day, an impossible number to review for humans alone. AI provides “the best detection mechanism possible," said Nasdaq’s head of risk and surveillance.
Personal Finance
Wells Fargo partners with SigFig. The U.S. banking giant will team up with the robo-advisory startup to launch a digital advice pilot program in the first half of 2017. The program initially will be available only through Wells’ community bank unit, though management eventually hopes to make it available to all its brokers and clients.
International News
MAS launches fintech match-funding program. The Monetary Authority of Singapore (MAS) will begin providing “match-funding” to fintech firms conducting to “promising” proof-of- concept trials in Singapore. MAS will “fund 50% of the costs, up to a maximum of S$200,000 per project,” for fintech ideas that have the potential to benefit “the financial system at large."
EC establishes fintech task force. The European Commission [EC] announced the creation of the Financial Technology Task Force, which aims to “shape the [EC’s] response to the effects of digital innovations in the banking sector.” The new body will bring together financial regulatory services and “experts in competition and consumer protection policy.”
Sweden considers a national digital currency. The Central Bank of Sweden is investigating whether to adopt a national digital currency. Sweden is one of the world’s top users of credit cards per capita, and the quantity of notes and coins in circulation in the country has declined 40% since 2009.
Fundraising & Deals
Funding for fintech firms tumbles. According to a new report from KPMG and CB Insights, funding for fintech startups fell 17% to $2.9 billion in the third quarter. Companies in North America were particularly impacted, as “funding for venture capital-backed fintech companies in the region [fell] 68 percent compared to [Q3 2015].”
Company Spotlight
Prosper gets new CEO. The online lender announced that current CEO Aaron Vermut will leave the company at the end of November, to be replaced by David Kimball, currently Prosper’s CFO.
Events
DC Blockchain Center to host public event on 11/30. The Chamber of Digital Commerce and incubator 1776 will host a discussion on smart-contract and blockchain technology on Wednesday, 11/30 at 1776’s offices in Washington, D.C. The event will begin at 5:30.
Commentary & Miscellaneous
Is there a global hub for fintech? The New York Times’ Dealbook discusses, noting that “traditional centers” like London, New York, and San Francisco are still competing for firms, talent, and money with “less-established capitals like Berlin, Singapore, and Sydney.”
Does the U.S. need a regulatory sandbox? American Banker contributor Brian Knight thinks so. Knight argues that a sandbox approach to fintech regulation is necessary for continued innovation in American financial services and cites the British Financial Conduct Authority’s sandbox as an example of the model’s successful implementation.
What to watch for as fintech matures. A McKinsey report highlights “seven critical changes” to brace for as the fintech sector matures: expanding scope, increasing diversity, improving collaboration, impending consolidation, normalizing valuations, shifting regulations, and emerging ecosystems.
NOTE: We’ll be on hiatus next week for Thanksgiving, but will return the following week. As always, thank you for reading and your positive feedback. Happy Thanksgiving!
Have a great weekend!
The Fintech Update Team