• Subscribe
  • Contact Us
  • About LendIt Fintech News
  • Home
  • Menu Item
  • Menu Item
  • Menu Item
  • Menu Item

Lend Academy

LendIt Fintech News: Daily Coverage of Fintech & Online Lending


  • Editorial
  • Daily News
  • Podcast
  • Investor Forum
  • Events

Top 10 Fintech News Stories for the Week Ending January 16, 2021

January 16, 2021 By Peter Renton Leave a Comment

Views: 23

In was another super busy news week with some major financings. a blockbuster IPO and a merger divorce. Here are what I consider to be the top 10 most important fintech news stories of the past week.

Affirm’s IPO Takes Off Like a Rocket Ship from Lend Academy – Affirm had what can only be called a blockbuster IPO this week. It priced at $49, closed the first day (Wednesday) at $97.24 and ended the week at $117 with a valuation north of $28 billion.

Visa Abandons Planned Acquisition of Plaid After DOJ Challenge from The Wall Street Journal – The Visa and Plaid merger, first announced a year ago this week, has been canceled. Probably a good thing for Plaid as they can now explore the oh-so-hot public markets (see above) and they have added 60% more paying customers in the past year.

Checkout.com raises $450 million and reaches $15 billion valuation from Techcrunch – The most valuable fintech in Europe is Checkout.com after their monster funding round (the eight biggest rounds of the week totaled over $2 billion).

Walmart to launch fintech startup with partner Ribbit Capital from Banking Dive – While details are almost non-existent this made big news this week because, hey, it’s Walmart getting into fintech.

What banks, fintechs can learn from Simple’s rise and sudden death from American Banker – One of the very first fintechs, Simple, closed down this week with users being folded into BBVA, that purchased the company in 2014.

OCC Chief Brian Brooks Is Stepping Down Thursday from Yahoo Finance – After a busy eight months in the job, probably the most forward thinking OCC head ever, Brian Brooks, stepped down this week.

Get ready for self-driving banks from the Financial Times – As a parting gift the aforementioned Brian Brooks penned this fascinating op-ed in the FT on the future of banking (spoiler alert: he likes DeFi).

Goldman Sachs Inches Closer to Offering Marcus Checking Accounts from Bloomberg – Details are starting to emerge about Goldman Sachs’ new consumer checking account that will debut later this year with Marqeta powering some of the tech.

Analysis: Digital banks gain U.S. customers during pandemic, thanks to early deposits from Reuters – It was a good last year for digital banks like Chime, Varo and Current that collectively added millions of customers.

Anchorage Becomes First OCC-Approved National Crypto Bank from Coindesk – Crypto custodian Anchorage received preliminary approval for a national trust charter from the OCC this week, the first crypto startup to receive this designation.

Filed Under: News Roundup

Views: 23

Podcast 281: Sean De Clercq of Kickfurther

The CEO and founder of Kickfurther talks inventory financing for physical products and how they are solving an age old problem for merchandising businesses

January 15, 2021 By Peter Renton Leave a Comment

Views: 18

Those businesses that make physical products always have the same challenge. They typically have to pay for their inventory before they receive revenue from selling it. This is a balancing act that requires a financial partner and businesses have used a variety of different financing sources, both traditional and fintech. But there has never been a fintech company attacking the problem directly until now.

Our next guest on the Lend Academy Podcast is Sean De Clercq, the CEO and founder of Kickfurther. Sean saw this problem first hand when he was running a merchandising business and he decided to do something about it. He founded Kickfurther in 2014 and after some growing pains the company is really hitting its stride. I have been following them closely for several years as they won our first ever PitchIt@LendIt startup competition in 2015 (watch their winning pitch from that competition).

In this podcast you will learn:

  • How Sean got the idea for Kickfurther.
  • What Kickfurther does and how it works.
  • How the financing terms are set.
  • A detailed example of what is involved in funding a deal.
  • The kinds of risks they look at when underwriting these deals.
  • How they are pricing these deals.
  • The cancelation (default) rate they are experiencing today.
  • The kinds of people who participates on their platform as buyers.
  • How the pandemic has impacted Kickfurther.
  • The largest deal they have completed to date.
  • The scale they are at today.
  • The mix of international and U.S. manufacturers they work with.
  • The biggest challenge for their business today.
  • How they make money exactly.
  • Their big goals for 2021.

This episode of the Lend Academy Podcast is sponsored by LendIt Fintech USA, the world’s largest fintech event dedicated to lending and digital banking.

Download a PDF of the transcription of Podcast 281 – Sean De Clercq.

Click to Read Podcast Transcription (Full Text Version) Below

 PODCAST TRANSCRIPTION SESSION NO. 281-SEAN DE CLERCQ

Welcome to the Lend Academy Podcast, Episode No. 281, this is your host, Peter Renton, Founder of Lend Academy and Co-Founder of LendIt Fintech.

(music)

Today’s episode is sponsored by Lendit Fintech USA, the world’s largest fintech event dedicated to lending and digital banking. LendIt’s flagship event is happening online this year on April 27th to 29th with the possibility of an exclusive VIP in-person component. The verdict is in on LendIt’s 2020 event that was held online with many people saying it was the best virtual event they’d ever attended. LendIt is setting the bar even higher in 2021, so join the fintech community at LendIt Fintech USA where you will meet the people who matter, learn from the experts and get business done. Sign up today at lendit.com/usa

Peter Renton: Today on the show, I am delighted to welcome Sean De Clercq, he is the CEO and Founder of Kickfurther. Now, Kickfurther is a really interesting company, they’ve got a unique approach and it’s a company I’ve been following with great interest for many, many years, reason being is back in 2015, LendIt had our first ever startup competition, it’s called PitchIt @ LendIt and Kickfurther was the winner so that’s why I’ve been following them.

I’ve had a small account on kickfurther.com for many years and they provide a unique type of financing, it’s inventory financing for people who are selling physical goods, a company selling physical goods and they do this in such a way that it’s much less expensive than a lot of other types of financing. These deals are funded by typically individuals and we talk about that in some depth. We talk about how their model works, how their underwriting works, what kinds of deals they fund and really, what are their goals for the future. It really was a fascinating interview, hope you enjoy the show.

Welcome to the podcast, Sean!

Sean De Clercq: Hi, Peter, great to be here.

Peter: Great to see you and great to have you on. We’ve had a bit of a long history which we’ll get into, but before we do that, I just want to start by giving the listeners a bit of background about yourself. What did you do before Kickfurther?

Sean: So, my entire background is in supply chain management and immediately, prior to Kickfurther, I was running a merchandising company. So, you know, taking products pretty much off the shelf with manufacturers overseas, customizing them a little bit and then selling them as white label exclusives to retailers here in the US so pretty standard merchandising operation. We went from $600K of sales to a million of sales between years one and two.

Peter: Okay. So then, was that where you got the idea for Kickfurther? Tell us a little bit about the genesis of the company.

Sean: Yeah, exactly that. So, I mean, we were running the same business…..I mean, a lot of, I’m sure, your listeners will be familiar with merchandising companies. So, you’ve got these retailers and they saw, awesome, we love you product, you show them a bunch of samples and they place an order for a container load of inventory to arrive three months later. The immediate thing that you would do is then scramble to find the finance of who’s going to fund this inventory, how am I going to produce this inventory so I can collect on that PO.

It was really interesting because as we were building this business, we went out to these vendor conferences because they would have these vendor conferences, they bring all their vendors together and you go across the floor, you’d ask people like hey, how are you solving this problem, you’re on net 60 payment terms too and everybody was having the same issue. It was like, you know, I’ve got my uncle, Joe is helping finance me or I’m putting it on my credit card or this that and everybody was finding their own little solutions. But, there is no like hey, this is that way that everybody should do it, right, there is no one unified solution so it seems like a big opportunity for us.

Peter: Right, right, okay. So then, maybe you can get into it and just describe exactly what Kickfurther does and how it works.

Sean: Absolutely. So, pretty much every single business that sells physical products encounters the same issue which is you have to pay somebody, I mean, a manufacturer that make your stuff before you can ever start earning revenue when you sell it and so what we do is check further. We recognize that this is an issue for almost every single product business out there. We have a community of people who we call our buyers or our users and those people will actually buy the inventory from your supplier, we’ll aggregate all of those purchases together.

We’ll have the inventory produced and shipped to you, the business, and then as the business sells through our users’ inventory….it triggers and underlying consignment contract and they pay us back for the inventory that they’re selling as they sell through it. So, it’s zero dollars out-of-pocket for a product business, but they get the inventory that they need to sell to drive revenue and then as they sell it, they pay back the funders.

Peter: And also it seems…obviously, I’ve been on your site for many years, you set me up with an account many years ago which I still kind of pay attention and I log on pretty regularly. The terms vary right, is that the person/the company saying, you know what, I really need four months, sometimes, it’s three months, sometimes it’s six months, does the company get to dictate those kinds of terms?

Sean: So, the market that we’re in, you just see these businesses have such unique business models and strategies for success. You’ve got some businesses, you know, they buy a container load of inventory every two months and that’s very regular for them, they’ll do six inventory purchases a year. Some businesses do one inventory purchase a year because they’re selling sunglasses or swimsuits or what have you.

And so, what we’ve developed is this consignment model that really fits all the different types of physical products companies that are out there and because they’re all so different, we have to have that level of flexibility to meet the business owners where they are.

Peter: Right, right, okay, that makes sense. So then, maybe just take us through an example, like someone that’s done a deal on your website, they’re a repeat user, give us an example of the type of company that actually is using your service.

Sean: Sure. So, this is just top of mind because I spoke with the business owners just last week, but we have a great company called Purism. They manufacture privacy kind of no malware, no bloatware, privacy-focused laptops and mobile phones, I believe. And so they’ve been in this business for a while, they work with overseas manufacturers, they need to produce let’s say 5,000 units of their 15-inch laptops that they’re going to be selling for the next six months so their manufacturer said, alright…..you know, I’m going to make these numbers up, right, so it’s going to be $1000 per laptop so for 5,000 of them we need $5 Million to pay our factory.

They’ll come to Kickfurther, they’ll say we need $5M, you know, to make 5,000 laptops, we run them through our quality control, our quality assurance process. If everything looks good then we launch their deal on our platform and, essentially, anybody, Peter, you, me, anybody, we can go on to kickfurther.com and we can buy one laptop or two or three or, you know, 500 let’s say, depending on the timing. And when all of those 5,000 laptops have been claimed by our users, now we have enough that we can say to the factory, alright, we have all the funding we need to produce 5,000 laptops and then we can go to the factory and say, alright, here’s $5 Million, please produce 5,000 laptops and ship it to Purism.

Now, Purism gets those laptops, they belong to Kickfurther, but they have them in their warehouse to begin selling them that’s tracked through let’s say ShipBob, EasyPost or Fulfillment by Amazon, whatever warehouse service they use. We tie into that and we look at the data and then three weeks later, oh, there’s only 4,000 laptops left or two weeks later which we invoice every two weeks right now. There’s only 4,000 laptops left and we pull through ACH the thousand laptops that got sold normally at let’ say, you know, anywhere between 5 to 10% more what the original cost was that was paid. So, if we funded the laptops at $1,000, when Purism sells them they’ll pay us back let’s say $1,100 per laptop which we then distribute on a pro rata basis to the people who funded the laptops.

Peter: Right. So, are you paying the manufacturer and bypassing the retailer that’s actually coming to your site or where does the flow of funds go?

Sean: So, there’s a badge on our deal that says “supplier direct.” If that badge is lit up, it means that the funds that we are raising for the consignment opportunity are all going to be paid directly to manufacturers and to third party suppliers. So, every single dollar we raise is going to a third party that is not the business and so that’s something that…..you know, they get the inventory they need so that they can sell it, but they don’t get the cash, right. It’s not like they’re raising cash, they’re raising inventory on Kickfurther.

Peter: Just to be clear, does every company operate it that way or only some of the deals operate that way?

Sean: So, every single business that we’re doing on Kickfurther, we are funding for the physical inventory. Now, with some of the deals that are not 100% supplier direct….I’ll give you an example where we have a soap company and the soap company has 50 different suppliers and some of the suppliers, they’re only buying, you know, like a pound of saffron from, right.

And so, it makes it too complicated to pay every single one of their suppliers and it just makes the whole model too unwieldy so what we’ll do is we’ll only identify the top two or three suppliers where the large share of their cost are going. We’ll pay those cost directly to the supplier and then the business can make up the cost for the other suppliers from, you know, other cash flow that they have.

Peter: Okay, okay, got it. So, you’ve really got to have clarity….. like the consignment that you have, obviously, you’ve got all the legal documentation in place, I imagine, so the retailer is responsible for it, but the manufacturer is getting the money.

Sean: Exactly, right. So, we are very specifically only working with businesses that need funding for the purpose of inventory goods like physical inventory.

Peter: Right. So, how do you underwrite these companies because, you know, one of the things I noticed and I mentioned this in the introduction, but, you know, you guys won the very first PitchIt @ LendIt back in 2015 so that’s one of the reasons why I’ve been following you for so long. In the early days, there was certainly quite a few defaults I noticed in your platform and some of the deals that I was in, it seems like it’s gotten a lot better, but maybe you can explain how you underwrite these companies to avoid that situation.

Sean: Absolutely. So, I would say, Peter, you know, someone that’s been participating since 2015, you’ve probably seen that there’s been a change on the platform. I will admit that,  you know, in the early days I was a little bit naive and I was kind of hoping that everybody would kind of just play nice and do what they say they would do (laughs), that doesn’t always work out on the Internet the way that would hope so we learned some lessons, right.

We learned that sometimes, you know, it’s great to trust, but verify and so what we determined was look, we want to pay for inventory so we’re going to introduce a process like supplier direct payments. If the business is telling us they need to pay for inventory, great, we’ll pay your supplier directly, right, no need for you to be in the middle of that transaction. So, what we found was from the very beginning we knew this was a big problem and we knew that we had hit a nerve, right, and we’re solving it in a really interesting way.

What we had to do was tighten up who we allowed on to the platform, the quality control processes of who we allow to participate on the platform. So, what we did in 2017 is we built what I call our score card and our score card looks at products businesses across really what I would consider like what I call risk verticals, okay, so you’ve got owner credit business credit is pretty standard for everybody. I think what Kickfurther does quite uniquely is we look at production risk so how likely is it that these physical things are never successfully produced, we look at distribution risk which is how likely is it that once they’re produced they’re successfully sold through whatever channel.

And the final thing we look at is general business risk and it’s hard to really nail that one down, but I’ll give you an example. We check for our businesses who is running the quality control/quality assurance partner process for their manufacturers and what we found is that if you’re a products business and you just trust that factory is going to run their own quality control process, that almost inevitably leads to some quality control issues down the line and we know that the sophisticated business owners are paying that additional $300/$500 cost for every manufacturing run to have a third party come in and check.

So then, we can look and say, hey, who’s the third party that’s running your quality control and if they don’t have one, we know that that’s a risk factor and we have a score card that looks at 120 attributes like that across these products businesses to determine who we allow onto the platform.

Peter: And then within that, do you have like a pricing model that you put in because, you know, every one of these deals that I see has slightly different pricing. How are you basing that?

Sean: So, the profit on the platform is largely driven off of how often the business has been with us on Kickfurther. So, what you’re going to see on Kickfurther is that the pricing typically is coming down as the business participates on the platform and as they do repeat deals. Kickfurther, currently, does not set pricing, our mechanism is a past fail mechanism and we essentially let the buyers on our platform vote with their dollars.

You know, if the price is right and the deal gets funded then we feel like the market has decided that that’s a well-priced deal. Now, I won’t say that that’ll be the way it always is, but that’s been working pretty well for us and what you see is that the market really does speak quite loudly and you can tell within the first day or two whether a deal will be successfully funded on the platform.

Peter: If they’re not successfully funded, what happens then? Do you often go back and re-negotiate and say, look here, your pricing is just too low for this, I mean, what do you do?

Sean: So, we have comment boards so if our users will say, okay, hey, you look good, right, but, yeah, I only did $500. If you were offering 2% a month, I would have done $10,000, you know. So, they’ll say that straight on the comment board and we don’t even have to tell the business that that information’s presented to them so that’s nice.

Peter: Right, right, okay. So today, what kind of defaults are you seeing now, do you feel like……I mean, I know you’ve changed things dramatically over the last several years, but it seems, I mean, just from a casual observer, the defaults are way down. Do you have any stats to back that up?

Sean: Yeah. So, we don’t call them defaults, they’re consignment cancellations. So, we essentially cancel the consignment contract, our users have lost confidence in the business’ ability to sell through the inventory so they’re canceling the contract, they’re calling the inventory back. That happens on one out of 25 deals so we have a 4% cancellation rate and most of our deals are offering anywhere between 1 to 2% profit per month so, you know, it kind of works out pretty well for our users which is why the deals are getting funded, you know, they’re still getting funded in an hour.

Peter: Oh, I know, some of them even a lot quicker than that. You know, I get my emails at 3:00 pm mountain time and if I am not quick enough and I see that sometimes those deals are gone already. So, I want to talk about the other side because, I mean, I look at your website you have …..it’s all about the retailer and the business that’s trying to get funding which is, I get that. But, I know, you don’t call them investors, you call them buyers or funders, but like who is doing this, how have you built up this base of buyers? Are there certain characteristics where there’ll be certain buyers, they are friends of the company, but just tell us a little bit about that side of the equation.

Sean: Absolutely. So, the very first deal we funded way back in 2014, actually, was all friends of the company, every single buyer that participated in that deal I know and we knew that that wasn’t going to be scalable. So then, in the very early days since 2015, at Kickfurther we instituted a buyer referral program so anybody can participate on the platform, Peter, you, me, my friends, anyone, it’s open because what you’re doing is you’re purchasing physical goods just like you could on AliExpress or Alibaba.com.

So, it’s available to everyone and we have this 10/10 referral, pretty standard where you get $10 if you bring somebody to the platform and they get $10 to try out the platform, you know, through this referral program. And since we’ve had that referral program, we have pretty much not had to spend any additional funds on recruiting the buyers for the platform, it’s been very, very  successful primarily through word-of-mouth now.

One of the experiments we’ve run in 2019 was just to identify, you know, was there a way that we could just find more people through Facebook or wherever else so we run some user ads in the early part of 2019 or 2020, but, typically, it’s just word-of-mouth referrals for the buyers.

Peter: And are these all individuals or….some companies I know, this is not like an investment vehicle because these are people….you’re buying physical goods, but do you have institutions participating as well?

Sean: So, we have a couple of guys that have set up a fund to, you know, what I would call normally super angels that really like what we’re doing and they didn’t want to have to wait at 3:00 pm everyday, to try to get into the deals. So, we have one fund that’s currently participating on the platform which is pretty much these two guys and other than that, every single other entity is an individual. Now, we do have entity on-boarding so if there was a business that wants to fund inventory for other businesses, we can allow for an LLC, there’s no strict requirement that it’s a person, let’s say.

Peter: Okay. And what about through an IRA, is that a possibility or not?

Sean: Yeah. So, we’re looking at self-directed IRAs, self-directed 401(k)s, it’s a bit of a manual process right now, but that’s something we can help facilitate and we have a few partners that are helping us with that as well.

Peter: Right, right. So, I want to talk about the pandemic because…..I’m curious, there are certain areas, obviously, of the economy that….some retailers have done phenomenally well, some have done terribly and, obviously, everything in-between. Just anecdotally, on your platform it feels like the deals have kept coming throughout 2020 now into 2021, how has the pandemic impacted Kickfurther?

Sean: You know, I say that we were very lucky with this pandemic. So, one of the things that we do at Kickfurther, we do inventory finance and so one of the things that the way the world was right before the pandemic is that a lot of people that were funding small businesses, very specifically, didn’t want to fund inventory. It was like an area that people didn’t want to go so we knew that this was a problem and we were solving it and that meant that we ended up being significantly concentrated in e-commerce businesses because with e-commerce businesses, you know, one of the main cost is your inventory. And, if you can’t find anybody to fund the inventory then, suddenly, Kickfurther became a very, very appealing option for those businesses in very little time.

So, we had probably 85/90% concentration in e-commerce prior to the pandemic hitting so when the pandemic hit and we saw that e-commerce, generally as a sector, saw a lift of anywhere between 20 to 40%, right. It actually ended up working out pretty well for a lot of the portfolio companies that we had and we saw…..you know, we’ve on-boarded some companies this year that had quadrupled sales. If you happen to be a business that was selling disinfectant and you’ve been doing that for two years….. like this literally happened where this company went from like a few million of sales to $24 Million of sales in one year selling just the same product that they’ve been selling, right. That’s the type of growth that’s hard to fund if you don’t have a platform or a partner like Kickfurther, right, so we saw that there is this product businesses that got huge lifts.

And then, you know, it was also pretty evident to us that there were product businesses like fashion did not do well in the pandemic, anything to do related to travel did really, really poorly, but what we found is that allowed those entrepreneurs to kind of just decided to sit on the inventory they had, right, and they are like, look, this year’s going to be a wash and we’ll get back to work in 2021 when our industries are going to come back around again. So, that’s kind of the way it seems to us.

Peter: So, those companies that were doing well and suddenly, they did like, you know, 5X/10X volume, were you able to handle that, like can you like…maybe you can just describe how high you can go for some of these deals.

Sean: Yeah. I mean, we broke Kickfurther’s largest deal record, we broke it three times in 2020 so it was like three months in a row. So, there’s one company, Boulder Clean, you can find them stocked all over Colorado, our biggest deal was $630K. Two months later, that was a whole thing of disinfectants, they came back for another run of disinfectant, $1.15 Million of disinfectant and that’s the biggest deal we’ve ever done on Kickfurther. So, that’s pretty significant so that’s good growth for us.

Peter: Obviously, you found enough buyers for them, but how long does a deal like that take?

Sean: So, because Boulder Clean….I mean, this was a specific deal where they had a buyer on the other end so they knew that they had, I want to say was a….Whole Foods was buying it, I’m not 100% sure, but they had a retailer that was ready to buy all of the disinfectant, they just needed to get it funded and we saw that a lot actually for businesses that were in cleaning or disinfectant, right, the demand was through the roof. So, all they needed to do was get the funding. I think the whole thing turned around in three months, it was maybe 4.5% in three months or something that they had a find a deal on the Kickfurther platform.

Peter: Right. That’s what I noticed with your platform, with your deal, sometimes in three months or six months, but it’s often this….between 1 and 2% a month which…..you know, if you’re only doing it for three months that’s fairly cheap financing. Just on that, you obviously know your customers talking to them all the time, I mean, is this their primary source of funding that they’re using to operate their business or is this just one of…they’re also talking with banks and maybe even fintech lenders to provide working capital?

Sean: So, what we very typically find is when we first join with a company, we are a supplemental funding for a whole stack of different people that have provided different funding. What we find is very quickly we take over that stack with the exception of banks which we still can’t really compete with like an SBA loan, you know, it’s really great and I appreciate the SBA support small businesses so I think that’s great.

So we provide supplemental financing above that though, but that’s typically the way it comes, they’ll say, hey, I have this opportunity, I need additional funding just for this one opportunity. And once they learn how Kickfurther works and they see how, as they continue to participate, it gets better and better and better, we, very quickly, just take over all of their funding.

Peter: Right, right, interesting, interesting. So, can you give us a sense of the scale you’re at like what sort of volume of deals you did in 2020?

Sean: Yeah. I was happy that we managed to fund just about $22 Million of deal flow in 2020, $8.5 Million of which happened in Q4, so that’s our best quarter by a huge margin. We had 120% growth from Q4 to Q4. So, right now, you can anticipate…Q1 is normally a little bit slower, we have Chinese New Year coming up, but, right now, you’re looking at anywhere between $500K to 750K of deal flow every week. It’s kind of our target and we think…you know, we should be on pace to fund about $40 Million in 2021.

Peter: Right, okay. So then, most of these…you mentioned Chinese New Year and, obviously, some of the manufacturing is likely done in China, what’s the mix? I mean, when you’re sending money, is it mainly US-based manufacturers or you’re sending it all over the world?

Sean: Yeah. So, we’re seeing roughly 70 to 75% of payments are going to overseas suppliers.

Peter: Right, right, okay, fair enough. So then, I’m curious because, you know, you’ve pretty much invented your own niche here, you’ve really…..that’s one of the reasons, I think, why you won the first pitch competition we had because it’s something that no one had ever seen before. It was pretty smart and I haven’t seen, you know, Kickfurther knock offs over the last several years, so who do you see as your competitors in this kind of financing space?

Sean: I think the way I look at it, our competitors are the people that are just providing revenue finance so we’re looking at groups like Amazon Capital, Shopify Capital, Clearbanc, BlueVine. So, those are the people that are kind of on my radar as solving a very similar or sometimes the same problem for the same market which is small and medium growing businesses, you know.

Peter: Right, right. Do you consider partnering with some of those companies?

Sean: You know, I think I would be open to it. I think we can do inventory, I believe we do inventory better than anybody and I don’t want to do any of the other stuff, right. So, that feels like it could be a partnership with some of these players that I mentioned.

Peter: Yeah, yeah. I mean, it certainly seems that way to me. So then, as you scale this business, I mean, what’s the biggest challenge for you now, are you getting the word out like is it finding more buyers for the consignment, is it finding more retailers, I mean, what’s the big challenge for your business right now?

Sean: Yeah. Our big challenge is really in awareness for product entrepreneurs to know that this is a tool and an option that’s available to them. So, you know, there’s a lot of people that want to talk to product entrepreneurs, there are a lot of people that want to put their services in front of them so, you know, kind of getting the signal through the noise and reaching that market, I would say, is what we’re working on right now.

Peter: Right, okay. And then, how do you make money exactly? Are you taking like a fee for each deal, tell us what’s the exact business model?

Sean: Yeah. So, we earn a 5% success fee if the deal is successfully funded so in that way we are 100% partnered with these businesses. We earn no revenue, no cost to try and put together a deal and to try the platform out. Only if you’re successfully funded, we earn a 5% funding success fee and that includes all merchant transaction fees. So, if you look at……you know, Kickstarter charges you a 5% success plus 5% processing fees. Kickfurther is just flat 5%.

Peter: Right, right, okay. You know, we’re recording this in mid-January 2021, brand new year, what are your goals for 2021?

Sean: Serve twice as many businesses as we did in 2020, let’s start there, right, and then keep building. We have some really exciting stuff down the pipeline. Number one thing is we want to get the word out that we have a mobile app that’s coming out to help product entrepreneurs run their product specifications and help them buy better with their manufacturer so that will be a pretty exciting new product that we put out into the market and it should hit in Q1.

Peter: Alright. Well, it’s exciting to see you guys success, it’s really been fun to watch how things have evolved over the last several years. So, Sean, really appreciate your coming on the podcast today and best of luck.

Sean: Thanks so much, Peter, this was great and we’ll talk soon.

Peter: Yeah, okay, see you.

Sean: Bye.

Peter: You know, while Kickfurther is still in its early innings, I mean, obviously, they’re hoping to do $40 Million in financing, clearly the need is probably in the billions, maybe even tens of billions so there’s a huge runway that is out there potentially for Kickfurther. Sean and I were chatting after we stopped recording and there’s a real need to kind of institutionalize this to really get to large, large numbers and they’re looking at that.

In fact, just one thing I’ll share is John Donovan, who is well known to many people in the lending community, formerly of Lending Club, formerly MasterCard and several other fintechs that he’s worked with over the years and he’s joining Kickfurther and very bullish on the company which to me…I take that as a positive sign and clearly, I think, it’s a great opportunity for people who want to put some money to work, putting money to work on consignment.

I’m probably going to be increasing my accounts here as well and I think it’s a great opportunity for all involved. It’s a real “win-win-win” in many ways, win for the companies funding their inventory, win for the buyers. They’re not investors, but that’s kind of the type of entity that is putting money to work and I think it’s obviously a win for Kickfurther as well.

Anyway on that note, I will sign off. I very much appreciate you listening and I’ll catch you next time. Bye.

Today’s episode was sponsored by Lendit Fintech USA, the world’s largest fintech event dedicated to lending and digital banking. LendIt’s flagship event is happening online this year on April 27th to 29th with the possibility of an exclusive VIP in-person component. The verdict is in on LendIt’s 2020 event that was held online with many people saying it was the best virtual event they’d ever attended. LendIt is setting the bar even higher in 2021, so join the fintech community at LendIt Fintech USA where you will meet the people who matter, learn from the experts and get business done. Sign up today at lendit.com/usa.

You can subscribe to the Lend Academy Podcast via iTunes or Stitcher. To listen to this podcast episode there is an audio player directly below or you can download the MP3 file here.

https://traffic.libsyn.com/secure/lendacademy/Podcast-281.mp3

Podcast: Play in new window | Download | Embed

Subscribe: Apple Podcasts | Android | RSS

Filed Under: Lending and Fintech Podcast Tagged With: inventory finance, Kickfurther, PitchIt @ LendIt

Views: 18

Upgrade Launches a Rewards Checking Account

The new Upgrade account will have no fees and offer 2% cash back on everyday expenses

January 14, 2021 By Peter Renton Leave a Comment

Views: 138

Today, Upgrade announced that they have launched a unique rewards checking account. What is different about this account is that it offers 2% cash back on everyday debit card purchases. The other piece that I find really interesting is that if customers switch their bank account they will enjoy 20% lower rates on Upgrade loans.

Upgrade has moved from being a consumer lender to more of a full service neobank over the last couple of years. They added a credit card in 2019 that combined the best features of personal loans and credit cards. That card offers 1.5% cash back on all purchases based on when the monthly payment is made, not when the money is spent.

Debit cards typically have much lower rewards and often no rewards at all. Other neobanks that rely on interchange as their primary source of revenue find it cost prohibitive to offer much in the way of rewards but Upgrade is not relying on interchange as a profit center. Their core product is a lending product so they can take the interchange revenue and give it back to their customers in the form of rewards.

This is what CEO Renaud Laplanche said about the new account:

We asked our customers what would cause them to switch their primary checking account. The overwhelming answer was attractive rewards on debit card purchases. While credit cards often provide decent rewards, it has been nearly impossible for consumers to earn a broad 2% cash back on debit charges.

Here are some of the features of this new account:

  • No account fees of any kind.
  • ATM fees will be reimbursed on five withdrawals a month.
  • 2% cash back on everyday expenses, 1% on everything else.
  • Up to 20% lower interest rate on Upgrade loans.

To get the lower rate on a loan you need to maintain a balance of at least $2,500 or make a direct deposit of at least $1,000 per month. And the 2% cash back applies to purchases at convenience stores, drugstores, restaurants, bars, gas stations, utilities, phone bills and TV subscriptions.

This Rewards Checking account is now broadly available online as well as through their mobile app on the App Store and Google Play. The money is FDIC insured up to $250,000 and the actual bank account is provided by Cross River Bank.

Cross River is a well known name in fintech circles as the bank partner of choice for many lenders. CEO Gilles Gade had this to say about the new Upgrade offering:

Upgrade’s no-fee Rewards Checking account combines everything mainstream consumers expect from a modern checking account with no fees, generous rewards and access to affordable credit. Cross River is proud to enable such a consumer-friendly product.

Renaud Laplanche is one of the shrewdest operators in the business. He is positioning Upgrade to become the central banking relationship for their customer base and is providing a compelling offering to encourage them to switch. The growth in debit cards has been dramatic during the pandemic as more people are avoiding spending on credit. Upgrade is well positioned to take advantage of this trend.

Filed Under: Fintech

Views: 138

Affirm’s IPO Takes Off Like a Rocket Ship

The buy now pay later platform saw shares double in value on the first day of trading

January 13, 2021 By Todd Anderson Leave a Comment

Views: 227

Consumer lending fintech Affirm (ticker: AFRM) went public on the Nasdaq Wednesday and saw their stock take off. Shares were up almost 100 percent from an initial listing price of $49, well above the increased price range target of $41 to $44. Affirm’s shares closed the day at $97.24.

Affirm has quickly become one of the hottest fintech companies in North America as consumers began using the company as an alternative to the traditional credit card. Stay at home orders forced consumers to shop online and Affirm was well positioned to take advantage of this behavior shift.

The company was founded in 2012 by PayPal Co-Founder Max Levchin (watch his previous LendIt Fintech keynotes here and here) to offer consumers simple and straightforward credit. Affirm does not charge late fees and you can purchase many products using Affirm with no interest whatsoever. Affirm makes money with a fee paid by the merchant or through a simple interest charge paid by the consumer.

Levchin explained the vision today on Twitter: “More than eight years ago, we set out to take on credit cards and change the way we pay. We built Affirm from the ground up to align with the needs of consumers and merchants and to succeed when they succeed. We have served millions of consumers through thousands of merchant partners, including some of the biggest brands in the world, all without ever charging a single late fee or penny of deferred interest.”

Buy now pay later, or BNPL as it is often referred to as, has become a huge winner during the pandemic. Millions of people across North America live paycheck to paycheck and offering a simple credit solution over a few monthly installments has helped them to obtain a variety of goods and services.

Affirm has faced some criticism for their partnership with Peloton, which, according to their S-1 filing, accounted for 30 percent of total revenue for the three months that ended on September 30, 2020. While that is Affirm’s biggest partnership the company has a broad range of partners including the likes of Shopify and Walmart.

The successful debut is another win for fintech overall. Fintech has had a rocky history in the public markets but recent performance has indicated a potential turning point for the industry overall with Upstart having a successful IPO and SoFi in the process of completing a SPAC merger with Social Capital Hedosophia Corp V.

Filed Under: Fintech Tagged With: Affirm, buy now pay later, consumer lending, fintech IPO

Views: 227

Fintech Lenders and Banks Are Ready for PPP Round Two

Round Two of the Paycheck Protection Program got under way today with fintech lenders and banks ready to help

January 11, 2021 By Peter Renton Leave a Comment

Views: 1,418

The second (third?) round of the Paycheck Protection Program kicked off today and it was very different to when the initial program launched last April. Back then the program got off to a very rocky start. There has been no repeat of that today mainly because the SBA limited the types of lenders to community financial institutions who could submit loans today.

We covered the details of the PPP program last month and while the program is very similar to last year there are big differences with the way it is being rolled out. Instead of starting with the big banks this time the SBA decided that Community Development Financial Institutions (CDFI) and Minority Depository Institutions (MDI) would lead the way to ensure that minority-owned and underserved businesses get the first crack at applying.

Those businesses seeking their first PPP loan can apply today and then beginning Wednesday minority-owned business that are second-time borrowers can apply. It is expected by Friday that the program will open more broadly. One of the largest CDFIs is Sunrise Banks in Minnesota (they are also very active in fintech) and they have started accepting PPP applications.

To be clear, lenders of all sizes are accepting applications today. There is nothing stopping any small business that qualifies to submit an application to their lender, they just won’t be submitted to the SBA unless you are a minority-owned business applying through a CDFI or MDI.

Many of the Big Round One Lenders are Ready

Cross River Bank was third among all banks in the first round of PPP as far as number of loans made, trailing only JPMorgan Chase and Bank of America. They processed many loans directly but they also worked with dozens of partners, other banks and fintechs, where they were the lender funding the loans. I spoke with a representative there today who said they are gearing up for round two. They will be working with partners again and they have had their PPP pre-application in place for borrowers looking to work with them directly.

Customer Bank was another major player in the PPP. Their home page right now is all about the PPP describing three offerings: for new PPP borrowers, repeat borrowers and a new white label program. This latter program is new as they realized other banks needed help in offering PPP loans to their customers. They have already signed multiple banks on to this program including one of the largest banks that will be sending Customers Bank their overflow customers. There is very little integration needed to be part of this program, it consists primarily of just a link as Customers Bank handles the entire process.

Kabbage was the largest non-bank lender in the initial PPP program, originating around 300,000 loans. Since that time Kabbage has been acquired by American Express and they are yet to make new loans since the acquisition. An outgrowth of that acquisition was K Servicing created to service all existing Kabbage loans. Small business owners who took out a PPP loan with Kabbage will be able to apply for a second loan through K Servicing.

Lendio was another major player in the first round of PPP. CEO Brock Blake had a very high profile appearing regularly on TV and his Twitter feed became one of the best sources of information. Lendio is not a lender but they work with dozens of lenders and they have been taking preliminary PPP applications for a couple of weeks now. They will be hiring hundreds of workers to help process the flood of application for new PPP loans.

Biz2Credit offers both a white label lending solution, through Biz2x, as well as lending directly to small businesses. They can offer banks their Biz2X Accelerate SBA platform with full white label capabilities or they can help banks and non-banks earn referrals fees by offering a full outsourcing solution. According to their website they have over 350 banks already signed up.

There are dozens more fintechs and banks that will be working extremely hard over the coming weeks to ensure that small businesses get access to the funding they need to survive. The PPP is such a critical program and now that we have had nine months of experience the rollout should be much more smooth. Fintech lenders and banks are ready. Bring it on.

Filed Under: Fintech Tagged With: Paycheck Protection Program, PPP, small business lending

Views: 1,418

Top 10 Fintech News Stories for the Week Ending January 9, 2021

January 9, 2021 By Peter Renton Leave a Comment

Views: 690

In was obviously a crazy week here but it was also a very busy week for fintech news. Here are what I consider to be the top 10 most important fintech news stories of the past week.

SoFi to Go Public via a SPAC That Values the Company at $8.65 Billion from Lend Academy – SoFi has the most diversified offerings in all of fintech and they announced this week that they would bypass an IPO and go public via a SPAC with the deal closing by the end of Q1.

Lender Affirm Seeks to Raise Almost $935 Million in IPO from Bloomberg – Affirm is getting set for its IPO that is rumored to be happening on Tuesday next week where it will raise close to $1 billion and if it hits the upper end of its pricing range will be valued at $11 billion.

BBVA says that it is shutting down banking app Simple, will transfer users to BBVA USA from TechCrunch – This week marked the end of an era for one of the world’s first digital banks as Simple, acquired by BBVA in 2014 for $117 million, was shut down.

Paycheck Protection Program application start date: What to know about the new small-business loans from Fast Company – The SBA released the rules for the next round of PPP this week and applications will begin on Monday.

Green Dot launches Go2bank, its in-house challenger bank from Tearsheet – Another digital bank enters the fray as Green Dot, known for its banking as a service business, launches Go2bank targeting those people living paycheck to paycheck.

How decentralized finance could reshape banking from American Banker – This is the best article I have read on how banks can take advantage of the DeFi trend. Worth reading every word (good job Penny Crosman).

Banking software start-up Mambu raises $135 million at a $2.1 billion valuation from CNBC – As digital banking adoption ramps up around the world the beneficiaries of this trend are the bank software providers and Mambu is one of the leaders here.

N26 scoops Brazilian banking licence to take on Nubank from AltFi – N26 has received a license from the Brazilian Central Bank and will now be taking on the world leader in digital banking, Nubank.

What banks can earn, and learn, from underbanked customers from FinLedger – There are more banking options than ever before for underserved consumers and fintech is leading the way.

New York leads states’ push to overturn OCC’s ‘rent-a-bank’ rule from American Banker – A coalition of states sued the OCC this week of attempting to facilitate predatory lending by working around state usury laws.

Filed Under: News Roundup

Views: 690

Podcast 280: Thea Mason of PenFed Credit Union

The Head of Consumer Deposits, Digital Payments, and Student Lending at PenFed Credit Union talks digital transformation and what is means for credit unions

January 8, 2021 By Peter Renton Leave a Comment

Views: 123

In 2020 for banks and credit union all roads led to digital. The pandemic caused something of a stress test on digital offerings for financial institutions of all sizes. Pretty much everyone saw digital adoption far exceed expectations in several categories. Today, we are going to look at what it meant for one of the country’s largest credit unions.

My next guest on the Lend Academy Podcast is Thea Mason of PenFed Credit Union. She has quite a portfolio of responsibilities there, she is the Head of Consumer Deposits, Digital Payments, and Student Lending. We talk about each vertical and their approach to innovation in general.

In this episode you will learn:

  • The mission of PenFed and the different niches they operate in.
  • When they started offering membership to anyone.
  • The impact of the pandemic and how they pivoted quickly.
  • What digital transformation means for PenFed.
  • How they are partnering with fintechs today.
  • Their philosophy around building versus partnering.
  • The support they have provided their borrowers.
  • How their entire loan portfolio has performed.
  • What they done to combat fraud.
  • The biggest challenge for the credit union space right now.
  • How they decide which digital experiences are most important.
  • How Thea stays up to date on technology.
  • How much Thea keeps up to date on the digital banking offerings.
  • What they are looking at as far as payments innovation.
  • Their goals for 2021.

This episode of the Lend Academy Podcast is sponsored by LendIt Fintech USA, the world’s largest fintech event dedicated to lending and digital banking.

Download a PDF of the transcription of Podcast 280 – Thea Mason.

Click to Read Podcast Transcription (Full Text Version) Below

PODCAST TRANSCRIPTION SESSION NO. 280-THEA MASON

Welcome to the Lend Academy Podcast, Episode No. 280, this is your host, Peter Renton, Founder of Lend Academy and Co-Founder of LendIt Fintech.

(music)

Today’s episode is sponsored by LendIt Fintech USA, the world’s largest fintech event dedicated to lending and digital banking. LendIt’s flagship event is happening online this year on April 27th to 29th with the possibility of an exclusive VIP in-person component. The verdict is in on LendIt’s 2020 event that was held online with many people saying it was the best virtual event they’d ever attended. LendIt is setting the bar even higher in 2021 so join the fintech community at LendIt Fintech USA where you will meet the people who matter, learn from the experts and get business done. Sign up today at lendit.com/usa

Peter Renton: Happy New Year everybody and welcome to the first podcast of 2021. We have a number of fantastic guests planned this year and first off the rank is Thea Mason, she is the Head of Consumer Deposits, Digital Payments and Student Lending at PenFed Credit Union. Now, I wanted to get Thea on the show because I think some of the things that PenFed are doing are really interesting, they’re one of the largest credit unions int he country now, but they’ve got a pretty small branch footprint very much focused on digital initiatives, digitally serving their membership base.

So, we talk about that in some depth, we talk about the different verticals that Thea is responsible for, we talk about partnering with fintechs and what they’re looking for there. We also talk about the pandemic and some of the changes they’ve implemented there and the increase in fraud and how they’re combating that and we talk about what’s going to be coming down the pipe this year. It was a fascinating interview, we hope you enjoy the show.

Welcome to the podcast, Thea!

Thea Mason: Thank you, Peter, great to be here.

Peter: Okay, my pleasure. Let’s just get this started. You’ve had an interesting career working in the traditional banking sector as well as credit unions so why don’t you just give us some of the highlights of your career to date.

Thea: Okay. Well, I got my start in banking at Capital One and I worked with some of the lending businesses there like the auto finance business at Capital One and then I moved over to work with the….running Strategy and Marketing with the original group at Capital One that stood up the direct bank which was, at that time only the second Direct Bank in the US following ING Direct which was the first.

 

I’ve done other types of roles in financial services and now, most recently, I’ve been at PenFed Credit Union for almost five years now and I head up the deposits business for PenFed as well student loan refi business and lastly, I recently took on managing what I call digital payments which is our ACH, wires and bill pay team.

Peter: Okay, interesting. So, maybe just tell us a little bit about PenFed. I mean, it stands for Pentagon Federal Credit Union, I believe so what’s its mission and how are you sort of serving your members?

Thea: Sure. Well, basically, I would say PenFed’s mission is to empower the members of our community to achieve their financial well-being. So, that’s really where the heart of PenFed is and we’re really focused on our membership because like a credit union, as all credit unions, we are owned by our members, we don’t have shareholders.

So, that’s kind of the orientation of PenFed and we are in many, many different consumer lending spaces. We have a mortgage business, home equity, auto finance, credit card and personal lending business as well as a deposits business where we offer savings, checking and CD accounts.

Peter: I was reading that PenFed is really open to anybody today, right, you don’t have to have a military background or anything, tell us a little bit about that, who’s your target audience, I guess.

Thea: Oh, yeah, absolutely. So, PenFed has….you’re absolutely right, we were originally called Pentagon Federal Credit Union and our core membership for many, many years was the military or retired military in the US. Several years ago, we merged with another credit union and they had what’s called an open charter and as part of that merger, we ended up taking over that open charter which really enables us to offer membership to anybody.

We do not have to be part of like a select group of people where most credit unions are really built around like one or two types of organizations or groups that you have to be a part of in order to join a credit union. We are really open to anybody who wants to become a member and I think we are still continuing our focus on military and former military, but now are really able to open up to a broader group of members.

Peter: Right, right, okay. So then, we’re recording this just before Christmas, it’s going to be out in the new year, but I’d love to kind of ….as we’re winding down the year, just get a bit of a sense of how this year has been for PenFed and for the credit union space, in general.

Thea: Well, you know, I think we really have been impacted much the way many financial services institutions are when the pandemic hit. I think, credit unions….one of them were impacted similar to banks. We all had to make a lot of pivot very quickly to make sure that we were providing our members access to services that are very, very important financial services as best we could. So, we really were very fortunate because we already have a pretty solid infrastructure for self-service and we have an online banking capability as well as mobile banking and that really helped us support our membership when, you know, they couldn’t move about freely and go visit our branches.

One of the unique things about PenFed is that we are a nationwide organization so we do have a little over 50 branches spread across the country. As a national organization, it’s relatively a thin branch network so we’ve always been at the forefront of having that technical capability for our members to access us through self-service and we also have a number of call centers throughout the country where members can call-in and get financial support as well. You know, we were very fortunate that we were able to really pivot those employees to move from the service centers they worked in and continue to maintain the security that really is essential in financial services by having them work from home.

Peter: Right, right, interesting, interesting. So then, you mentioned a few of the different categories that you’re responsible for, it’s interesting when you go to your website I see you’re leading off with online savings in bright red on your home page here.

Thea: I think that’s just today (laughs). I literally think that just happened today.

Peter: (laughs) Well, it’s there in bright red talking about 0.6 annual percentage yield, digital access. So, of the different areas, what’s the main focus? Are deposits like a really strong focus for you right now, given this bright red box on your home page?

Thea: You know, that box…switches product all the time (laughs) so I wouldn’t say there’s one product that PenFed focuses on. We really are focused on meeting all our members’ financial services needs so luck of the draw for me, I run the deposits business, every once in a while. The products that I manage get featured on the website for a few days and then it will disappear.

And, you know, come next week it will be credit cards, a lot of wonderful credit card offers, very generous cash back cards. We have very competitive rates really across all our lending products, auto finance, personal lending as well as student loan refinancing so in addition to our very meaningfully-sized mortgage business and home equity business. So, we all, as product owners, hope to have our products featured periodically on the home page to attract more interest.

Peter: Yeah, yeah. I also saw when I was doing some research for this interview, you’ve got sort of like a PenFed personal loan product, was featured as best product for loans up to $20,000 so that’s interesting. Is that part of your portfolio as well, the personal loans?

Thea: Unfortunately, not, I don’t have that, but, you know, we’ve got a couple of people like myself that are kind of product leaders and there’s another individual that runs a particular product set.

Peter: Right. So, maybe we can just talk about…I want to talk about the products that you’re responsible for. I mean, what are some of the things…..you know, it sounds like PenFed is well-positioned better than most credit unions to really take advantage of the fact that people were working from home, people were doing lots of, you know, business online, as far as banking goes. So, did you like…..were there certain projects this year that you fast tracked or what digital initiatives did you kind of roll out this year that maybe you might not have if but for the fact we are in a pandemic?

Thea: That’s a great question. So, Peter, at PenFed, as I said, we’ve always had a strong digital presence, but we are working very hard to continue to develop and evolve that presence so that we can provide more services and better services to our members through self-service, whether it’s on their phones or on their laptop or on their tablet. So, and there’s projects, you know, sort of behind the scenes as well as things that are very obvious to our members.

We have, actually, a multi-year initiative going now that we kicked off in the middle of this year where we are looking to transform our whole user interface, you know, behind the log-in for members so that we can upgrade it, make it much more mobile friendly and still there’s been kind of project little by little moving in that direction this year. The bulk of those things will really start to pick up next year as we continue on digital transformation.

Peter: Okay, that makes sense. So then, I want to talk about partnering with fintechs. I know that PenFed is, obviously, a pretty sizeable organization, how are you partnering with fintechs today and maybe can you give us an example or two, that would be really helpful.

Thea: Oh, yeah. So, we’ve got a whole bunch of different kinds of things we’re doing with fintechs. One thing that we’re doing is like in the personal loan space, also in the student loans refi space, we work with fintechs who are, you know, effectively marketing their specific product in the marketplace and then they function as a kind of….providing us leads…to our website so that’s one relationship. We have a whole bunch of other relationships that are more backend-oriented, for example, we’re trying to create a smoother process for our members and for new members to join PenFed and apply for our products.

As you know, there are lots of processes that banks have to go through to verify identity. If you’re applying for a lending product, maybe you…particularly, if it’s a refinancing, we need to gather information about the loans that you currently have so that we know what your pay-off balances are and so there’s a number of fintechs in that space who have solutions on identity verification or helping us connect to the members’ institutions to get that financial information we need.

We’re working with fintechs…there’s new rules that are recently put in place by NACHA, the National Association of Clearing House for electronic payments, where you have to verify a user’s third party account before you could take money out of that account. We’re working with a fintech right now so that we can enable our members to instantly verify those accounts as opposed to….traditionally, what we’ve done is use kind of a micro service approach. We’ve got a lot of different opportunities and we’re always looking for fintechs who have solutions that are state-of-the-art so that we can implement them as opposed to building our own technology/

Peter: So, what is your approach then, I mean, what’s the philosophy around building your own versus taking on technology and partner with a fintech?

Thea: Well, to be honest, we’re actually working at transforming…..you know, I talked a lot about our digital interfaces, but part of that is also transforming the way our entire tech set is set up so that it can be much more API-enabled. So, we have an all-course system, I think we’re…..no plans to talk that out, but building kind of that middle layer between our forces and fintech solutions is a big part of our transformation and what we’re working on is to be in a place where we can easily connect with fintech technology so that we don’t have to build it ourselves.

You know, PenFed is the second largest federal credit union in the country, but that’s still …so while we’re very large, we’re a credit union and when you compare us to say the top ten banks, we’re relatively small. We don’t have the technology resources and teams to build these solutions, we are very eager to partner with fintechs that are working on solutions to help us better serve our members and really see that as an opportunity that we want to continue to grow and foster.

Peter: Okay, okay, that’s really interesting. So then, can we just talk about the student loan refi business for a second because that’s been in the news a lot lately as far as student loans with people being allowed to postpone payments. How is that loan book going, I mean, firstly, maybe I’d love to hear about your experience with some of your borrowers who are struggling, what are you doing as far as forbearance there and how has that product performed for you guys this year?

Thea: So, the business is 100% focused on refinancing our members’ student loans, not originating student loans while people are in school. So, we have….it’s a relatively smaller asset class for PenFed, but we have provided those borrowers essentially the same support we are providing all of our borrowers which is an opportunity, if they are struggling financially, to ask for a skip pay on their product and continue to ask for skip pay multiple times, if needed, if they are struggling.

In general, I would say, because PenFed has been largely a fairly conservative organization when it comes to lending, we have weathered the storm pretty well on that front when you think about our whole portfolio and, you know, again, because we’re really very focused on members” service, it’s a really core value of ours to work with our borrowers particularly during something like the pandemic who are struggling, to see if we can see them through this difficult period of time and then they can start repaying their loan once they’re back up on their feet.

Peter: Right, that makes sense, that makes sense. So then, one thing I’ve always been curious about is we’ve seen this…we’ve had many people on the show this year and in the various sessions we’ve had at LendIt talking about fraud and there’s been an increase in fraud attempts this year as the fraudsters try to take advantage of everyone being online as well.  I’m just wondering if credit unions are a little bit different to a regular bank because you’re really a membership organization, but has there been an increase in fraud attempts this year at PenFed?

Thea: You know, I think we have seen an increase in fraud attempts across the institution like the rest of the industry have. One of the things that I think all of us are feeling good about is over the last three years, three to four years, as we’ve moved the organization and evolved our technology, we did add a number of solutions, third party solutions, to help us manage those fraud attempts and be far more sophisticated about detecting them so I think that we’re feeling very good about the fact that we have put in some of those solutions prior to this pandemic.

I do think the whole industry has seen an increase in fraud attempts and I think it’s one of the challenges that all financial institutions face. What we found is we put a series of solutions in place and the fraudsters are always kind of one step ahead. Once they realize their regular pattern can be detected, they’re working hard to come up with new ways to, you know, perpetrate, infiltrate our system one way or another, But, I think the good fortune is while we’ve seen an increase in attempts, we’ve been effective at detecting those and have minimized the impact to our members and to PenFed as an institution.

Peter: Right, right. And then, would you say…when you look at sort of the credit union space, in general, it’s different to the traditional banking space in many ways, but what do you feel like is the challenge for the credit union space because, obviously, you’re a bit different because you’re the second largest credit union, federal credit union, so a lot of credit unions are small, what do you feel like is the biggest challenge for the credit union space right now?

Thea: Well, I think one challenge in the whole space is there are a lot of much smaller credit unions that were very branch-centric and didn’t have the technology that they really need to support their members in a more remote way. So, I think there has been a number of smaller credit unions that have been challenged by that as their members are visiting branches less frequently.

We ourselves, depending on the location is, you know, all our branches are open, but some have reduced hours, many are pushing as many services as possible to kind of put through the drive-through, again, to make sure everybody stays safe. So, I think that’s really been a big  challenge for the smaller credit unions and then I think one of their challenges going forward is going to be, you know, keeping up with consumer expectations, keeping up with their members’ expectations on the kind of digital experiences, our members are continually setting a higher bar for us and I’m sure that’s happening across the credit union space.

Peter: Yeah. I think that’s one of the stories that hasn’t really been talked about enough this year is the consumer expectations. You know, it feels like to me that they’ve changed….I think people very much want a digital experience and obviously PenFed has been able to provide that even before the pandemic, but it seems like now that there’s mobile that is really becoming bigger and you’ve got a broader cross section.

I know friends of mine who are explaining to their parents how to deposit a check with a mobile phone and you’ve got a whole new segment of the population suddenly has digital expectations as well. I mean, when you’re designing digital products, what sort of population are you trying to focus on or how do you….I guess my real question is this, there’s new people that have come on to digital this year, what are you doing specifically for those kinds of people?

Thea: Yeah, no, absolutely. I think all demographics has become more digital this year when it comes to their financial services and banking, in particular, and we ourselves are seeing higher usage of our digital platforms from our membership as I’m sure other institutions are as well. So, I think there’s a couple of things, as people get more comfortable using…you know, we’ve always had mobile deposits, we’ve had it for a very long time, we have the basics that consumers are looking for, but there are new experiences out there that members are also looking for or going to start looking for.

So we try to focus on what are those going to be and which ones do we think our members will be most interested in and how we do we set ourselves up fast so that we could support those experiences as they come about. So, a lot of what I do and my peers and my team does is try to become a more sophisticated and educated about the tools out there that are evolving, what’s happening in the tech space around financial services so that we can do the groundwork that we need to do and be ready to implement those services when our members are starting to ask for them.

Peter: Right, right, that makes sense. So then, how do you go about educating yourself because, I imagine….obviously, there’s a huge…..I mean, everything to know about what’s going on today is virtually impossible and there’s just so much happening. I see it and try to keep up as much as I can, but it’s a fire hose of new things that are being released and developed today, how do you try and stay up-to-date with what’s needed, what could be useful for PenFed?

Thea: Well, you know, I think of myself, my team, my peers, we try to have a lot of different accounts at different places to see what our competitors are introducing to their users, that’s one way a, of course, there’s….we used to go to conferences where….and there’s many excellent conferences in financial services where there’s many, many fintechs as well as other innovative companies coming to the table talking about new services and capabilities they have.

We already have relationships with a number of third party providers, particularly on the technology front, they’re always talking to us about what they’re looking to introduce and then, of course, there’s a lot, as you’re well aware, there’s a lot of press out there that are covering the innovation in the space and we really work hard to stay on top of that as well. And I think we try to be pretty proactive about reaching out to organizations that are building new technology, whether it’s fintech firms or more established technology providers in the financial services space.

We try to take the initiative and be proactive about learning about their solutions and then talking internally with our own technology team to talk about, you know, what are the challenges, what the hurdles might be if we wanted to implement some of those solutions.

Peter: Right, right. How much do you pay attention to the digital challenger banks that are out there, Chime and SoFi and MoneyLion, Dave, those sort of companies, how much do you …really looking at them as kind of inspiration?

Thea: You know, I think quite a bit, to be honest. You know, SoFi, as you’re well aware, is a very, very significant participant in the student lending space so we do spend a lot of time trying to understand what they’re doing and the innovation they bring to the table. Chime is an innovator in the banking space and has really made a number of activities when it comes to opening an account and getting started with your account, really simple and easy for users.

We do look at those players in the space and see what they are doing and see what we can leverage and apply to PenFed to make PenFed…..you know, we want PenFed to be a great institution for our members, we want it to be user-friendly, we want our members to be able to access state of the art technology so we consider that a big part of what we do.

Peter: Right, right, okay, okay. So, we’re running out of time, but a couple of things I want to get to before we close. We haven’t talked about payments at all yet and I’d love to kind of get your perspective on what’s new, what are you doing there that is new and interesting.

Thea: Yeah. So, what we’re doing now is we’re doing a deep dive into sort of P2P trying to understand the market there, whether bringing our members a solution like Zelle makes sense for PenFed, what roles some of the other P2P solutions like Venmo is playing and how active our members are in a new single kind of solution so we’re spending a good deal of time. I don’t have an answer yet what our strategy is going to be for, you know, person-to-person payments.

We’re also trying to understand the landscape of the future so that we can make sure PenFed is really well positioned for our members in the future. The Clearing House has come out with the RTP payment infrastructure, the Fed is in the process of developing a real-time payment infrastructure as well that they anticipate will come out in the next two years.

What we’re trying to understand is what will it take for PenFed to be able to support those new technologies so that our members can be supported by them and so we’re spending a lot of time learning about them and understanding how they’re evolving and getting a sense of when they’ll start impacting the broader retail consumer population.

Peter: Right, right, okay. So, last question then. Again, this is the first episode for 2021 so I want to ask you what are your goals for this year, what are you focused on?

Thea: Well, okay, I would say number one, one goal on the payment space is setting our strategy in person-to-person payments and how we want to approach that and beginning to execute on our chosen strategy, Number two is really pushing hard for this initiative that we have to re-platform a lot of our self-service activities into a new technology platform that will be a lot more user-friendly. You know, as a product owner, we spend a huge amount of time working with our technology team and partners helping to decide what that user experience should be so that it really meets our members’ expectations.

And then, I think the third area that’s become a big priority for us is we actually are looking to invest in our value propositions in the checking space. We want to introduce at least one, if not more than one, new value proposition in checking that we think will be more attractive to our membership base and really be able to provide that checking service to our members and expand the number of members we have with checking products at PenFed.

Peter: Right, right, okay. Well, that sounds like an admirable slate of products, slate of achievements for 2021 so I wish you all the best, Thea. Thank you very much for coming on the show.

Thea: Oh, well, thank you for having me, Peter, appreciate it,

Peter: Okay, see you.

You know, it’s really interesting to hear Thea about their approach to partnering with fintechs and how they’re really open to doing that and really looking for fintechs who provide really the best-in-breed technology and user experience. I think, sometimes, credit unions….you don’t hear them as much of a focus for many of these Banking-as-a-Service/Lending-as-a-Service type companies.

I was just looking on their website and PenFed has $25 Billion in assets and that is a very sizable organization and to have someone like that actively courting the fintech community is I think a call-to-action for many of us here. We should be putting, I think, a little bit more effort into really working more with credit unions than we do. I know there are fintech companies that are specifically working with credit unions, but I think there could be a lot more effort put in here.

Anyway on that note, I will sign off. I very much appreciate you listening and I’ll catch you next time. Bye.

Today’s episode was sponsored by Lendit Fintech USA, the world’s largest fintech event dedicated to lending and digital banking. LendIt’s flagship event is happening online this year on April 27th to 29th with the possibility of an exclusive VIP in-person component. The verdict is in on LendIt’s 2020 event that was held online with many people saying it was the best virtual event they’d ever attended. LendIt is setting the bar even higher in 2021 so join the fintech community at LendIt Fintech USA where you will meet the people who matter, learn from the experts and get business done. Sign up today at lendit.com/usa.

You can subscribe to the Lend Academy Podcast via iTunes or Stitcher. To listen to this podcast episode there is an audio player directly below or you can download the MP3 file here.

https://traffic.libsyn.com/secure/lendacademy/Podcast-280.mp3

Podcast: Play in new window | Download | Embed

Subscribe: Apple Podcasts | Android | RSS

Filed Under: Lending and Fintech Podcast Tagged With: credit unions, digital banking, PenFed

Views: 123

SoFi to Go Public via a SPAC That Values the Company at $8.65 Billion

The deal will provide up to $2.4 billion in cash for SoFi and is expected to close by the end of Q1

January 7, 2021 By Peter Renton 1 Comment

Views: 1,168

Big news from SoFi today. While we know that the company has been considering going public for some time, we learned today that they will do so, not via an IPO, but through a Special Purpose Acquisition Company (SPAC) deal. The publicly traded SPAC, Social Capital Hedosophia Holdings Corp. V (NYSE:IPOE) has agreed to merge with SoFi in a deal that values the fintech at $8.65 billion. The deal will provide up to $2.4 billion in cash proceeds and is expected to close in the first quarter.

Well known Silicon Valley venture capitalist, Chamath Palihapitiya, the founder of Social Capital, is the architect of this deal. Here is what he said in an interview on CNBC earlier today where he gave his rational:

What I did was systematically try to future out what was broken in banking, and try to figure out which company was the best representative of the solution people wanted. SoFi was the top of the list when I looked across all the companies.

So, from his perspective SoFi is best positioned to take advantage of the trends shaping banking today. CEO Anthony Noto said at LendIt Fintech USA last year that he wants SoFi  to be a top 10 financial institution in the coming years and that was one of the driving forces behind their 20-year deal for the naming rights to SoFi Stadium. They have probably the broadest product set of any fintech company today so no doubt that was part of the appeal to Palihapitiya.

You should check out SoFi’s official investor presentation which details not just their financials but also shows how they view financial services and SoFi’s role in it. They talk about leveraging the financial services productivity loop where building trust with one product leads consumers to using multiple products. As of December 7, 2020, SoFi had 1.7 million members of which 398,000 were multi-product members. They plan to grow those numbers 75% and 95% respectively in 2021.

Now, adjusted EBITDA was negative in 2019 and 2020 but they are projecting that to shift to a small profit in 2021. Revenue was estimated to be $621 million in 2020, with the vast majority still coming from their lending operation. In fact, the lending operation still funds the rest of their activities with the other financial services offerings having a negative $133 million contribution margin in 2020. That is not supposed to turn positive until 2023.

One should not underestimate the importance of SoFi’s acquisition of Galileo last year because this gave SoFi a successful technology services business that is profitable. If you look at the numbers in the official filing, SoFi’s technology platform (which I presume is primarily Galileo) generated $53 million in contribution margin in 2020 on revenue of $103 million. That is a good business.

Here is the official statement from CEO Anthony Noto on this deal:

SoFi is on a mission to help people achieve financial independence to realize their ambitions. Our ecosystem of products, rewards, and membership benefits all work together to help our members get their money right. With the secular acceleration in digital-first financial services offerings, SoFi is the only company providing a comprehensive solution all in one app. The new investments and our partnership with Social Capital Hedosophia signify the confidence in our strategy, the momentum in our business, as well as the significant growth opportunity ahead of us. We look forward to helping more people get their money right in the years to come.

SoFi will become a publicly traded company when the deal closes. We should point out that SoFi received preliminary approval from the OCC for a national bank charter in October. According to the press release $150 million of the transaction proceeds will be used to clean up the SoFi cap table that will be more conducive to obtaining the bank charter.

This is the first blockbuster fintech deal of the year. Beating them to the punch, though, will be Affirm, which is getting set to go public on Nasdaq in an IPO as soon as January 13. So, while last year was the year for fintech M&A this year is quickly shaping up to be the year that fintech hits the public markets in a big way. It is going to be an interesting ride.

Filed Under: Fintech Tagged With: public company, SoFi, SPAC

Views: 1,168

Get Your Tickets to LendIt Fintech USA 2021

LendIt Fintech USA will take place on April 27-29 as a virtual event, discounted launch pricing ends Friday

January 6, 2021 By Peter Renton Leave a Comment

Views: 73

LendIt Fintech USA is back with its regular spring calendar slot – it will be held virtually on April 27-29. Our 2020 event set the bar high for virtual events as we focused our efforts to bring all the best parts of an in-person event to the virtual world.

But don’t take my word for it. Here is what Jon Thurston at TAB Bank had to say:

You all did an amazing job, you turned a tough situation into an opportunity and it was a truly excellent event! There were many aspects of the virtual event that I preferred to the in-person format. Thank you all for your efforts to put on the best show in the industry.

Now we turn our attention to the 2021 event. Your favorite elements will return including big name keynotes, insightful panel discussions, Women in Fintech program, the PitchIt@LendIt startup competition and one-on-one networking with Brella.

What’s New at LendIt Fintech USA 2021

We will be launching several new initiatives with our 2021 event:

  1. Industry Roundtables – these will be intimate discussions, curated by the LendIt Fintech team, focused on a niche topic. The idea is for these sessions to have limited attendance, be interactive and allow a deeper dive into topics than a typical panel discussion.
  2. Halftime Show – The LendIt Fintech content leaders will hold a lunchtime discussion focused on the morning keynotes. We will breaking down what was said and will share key lessons learned.
  3. Postgame Show – This is all about meeting with your peers to discuss the highlights from the day’s content. This open-ended session will provide the opportunity for any attendee to have your voice heard.
  4. New Content Themes – While we create new agenda topics every year, this year we will have an entire track dedicated to the coming green fintech wave. We will also be looking ahead to see what finance will look like in 5-10 years. And we will be spotlighting regtech initiatives that are moving the ball forward.

There is the Possibility of an In-Person Component

While LendIt Fintech USA 2021 will be a virtual event we are planning for the possibility of a limited in-person component. The event will be broadcast live from the Javits Center in New York City and if the stars align we hope to have an intimate VIP in-person event there. Of course, we will be following advice of city and state public health officials and will only consider such a move if it can be done safely. We will likely not know whether this will be possible until late March. But you can join the waiting list if you are interested.

Launch Pricing Ends on Friday

Our special launch pricing of $395 ends this Friday. Such a low price will likely never be repeated again. As always, as a Lend Academy reader you can save an additional 15% off the already discounted price. When you register just enter the code LENDACADEMYVIP at checkout.

I look forward to seeing you when the industry gathers for the 9th annual LendIt Fintech USA event in April.

Filed Under: Fintech Tagged With: LendIt Fintech USA, virtual event

Views: 73

LendingClub Bank Acquisition Approved by OCC as Investor Platform Closes Down

LendingClub is on their way to establishing their digital bank with OCC approval of the Radius Bank acquisition as we all learn on the same day the individual investor platform shuts down

January 4, 2021 By Peter Renton 2 Comments

Views: 433

The last day of the year is normally pretty quiet as far as news goes but LendingClub had two major developments on December 31, 2020.

First, as announced in October, the retail investor platform for LendingClub closed down. The last day to invest in new notes was December 27 and the retail platform officially closed on December 31. It was a sad day for me as I have been investing since 2009 and this marked my initial foray into fintech. The reason for the shutdown is because of the acquisition of Radius Bank. Which brings me to my second piece of news from December 31.

We learned that the OCC approved LendingClub’s acquisition of Radius Bank on December 31, although the seven page approval was officially dated December 30. The news sent LendingClub’s stock soaring 26% on the last trading day of the year (it did lose some of that ground in trading today). Needless to say, this is a big deal. It means the leading bank regulator has given the green light for the merger, an essential step for the acquisition to complete. Now, LendingClub still needs to get approval from the Federal Reserve to become a bank holding company but if and when that happens LendingClub Bank, National Association will be the new name for Radius Bank. So, it was a good end of the year for LendingClub.

Now, as for LendingClub individual investors we are starting to see a cash build up in our accounts. We have not heard anything yet on the Founder Savings account that was promised when they announced the shutdown. This will be a high yield savings account that can sweep the cash from the LendingClub account on a weekly basis. I reached out to LendingClub today for more information on this and they said there is no update yet.

I still remain optimistic that LendingClub will eventually offer range of good investor options but as each day goes by now with no news on any new products they risk losing whatever investor goodwill they have generated over the years.

Filed Under: Fintech Tagged With: digital bank, individual investor, lendingclub, OCC, Radius Bank

Views: 433

Next Page »

Investor Intelligence

Peter Renton's Returns

Investor Forum

Lending Club Review

Prosper Review

Investor Resources

Most Popular Editorials

The Pure Marketplace Lending Model is Dead, the Hybrid Takes its Place

The 2018 Lending Club and Prosper Tax Guide

My Returns at Lending Club and Prosper

Map of Available States for Lending Club and Prosper Investors

Banks and Marketplace Lending Platforms: Ideal Partners?

Subscribe to the Podcast

Subscribe to the Lend Academy Podcast on iTunes
Subscribe to the Lend Academy Podcast
List of Podcast Episodes

Archives

Follow @LendAcademy Follow @LendIt

ABOUT LENDIT FINTECH NEWS

LendIt Fintech News, Powered by Lend Academy, has been bringing you all the news and information about fintech and online lending since 2010 when it was founded by Peter Renton. We not only have the industry’s most active news site, but also the largest investor forum and the first and most popular podcast.

We are a team of fintech enthusiasts who have been covering the industry for many years. With a deep knowledge of online lending, digital banking, blockchain, artificial intelligence and more our team covers the daily news and writes in-depth editorials.

Recent Editorials

  • Top 10 Fintech News Stories for the Week Ending January 16, 2021
  • Podcast 281: Sean De Clercq of Kickfurther
  • Upgrade Launches a Rewards Checking Account
  • Affirm’s IPO Takes Off Like a Rocket Ship
  • Fintech Lenders and Banks Are Ready for PPP Round Two

Copyright © 2021 · Metro Pro Theme on Genesis Framework · WordPress · Log in