Fintech Archives - Lend Academy

Will N26’s Success Story in Europe Replay in the US?

N26 has now surpassed 5 million customers, but it remains to be seen whether their US business will take off

January 23, 2020 By Ryan Lichtenwald Leave a Comment

The digital banking space in Europe has been fascinating to watch. Customers seem much more engaged and willing to move to the various challenger banks that operate in the region. Reuters reports that N26 has crossed the 5 million customer mark, up from 3.5 million last summer. The incredible growth of N26 and of their peers doesn’t seem to be slowing down. N26 which was founded in February of 2013 added more customers in 2019 than in all previous years. Not only are the challenger banks attracting customers, they have also attracted massive amounts of capital. N26 has raised $683 million in total and was last valued at $3.5 billion.

Co-founder and CEO Valentin Stalf shared that growth was strongest in Germany, France and Austria and that Italy and Spain showed promise in achieving similar rates of expansion. While a breakdown of numbers by country wasn’t provided it is safe to assume that the US offering launched last year pales in comparison to their customer base across Europe.

N26’s US offering has little that is unique from the perspective of a US consumer. The N26 offering includes a cashback debit card, no hidden fees, savings ‘Spaces’ and free cash withdrawals. The most compelling feature is the access to your paycheck up to two days early which is also offered by US based companies Chime and Varo. When comparing side by side Varo’s offering is superior, currently offering 1.92% on savings with the potential to earn 2.80% by meeting certain requirements. For savers and those who don’t value the early paycheck access there are plenty of other interesting options for US consumers including SoFi, Marcus and Ally to name a few.

The digital banking space is the hottest area of fintech. It is also the most competitive with dozens of interesting offerings for US consumers. N26 has been incredibly successful at building their brand across Europe but it remains to be seen whether US consumers are going to jump on board. From my perspective they are going to have to beef up their US offering if they’re going to have a chance at the same success they have had in Europe.

Affirm: Financing Almost Everything at the Point of Sale

Consumers have more options than ever when it comes to financing their purchases at the point of sale.

January 22, 2020 By Ryan Lichtenwald Leave a Comment

Over the past decade we’ve seen consumers warming up to buying everything with multiple payments. It is a phenomenon that I believe may have first started with smartphones. It wasn’t too long ago when cell phones were advertised at their full price. Now flagship models from various manufacturers are advertised first as a monthly price though there is still an option to purchase outright. The idea of purchasing items with installment payments is an area that has grown tremendously. So far Affirm has dominated the market in the US, but there are others who provide a similar service or have decided to focus on a specific niche in point of sale finance.

This idea of being able to finance almost anything is also dangerous. Just because you can finance something, doesn’t mean you should. I err on the side of having no debt outside of mortgage payments, but used responsibly I think there is value to a subset of consumers in these types of products. In some cases, true interest-free payments are offered meaning you pay the exact same amount whether you purchase it today or purchase it in payments over a few years. The offerings range from more practical purchases to non-essentials like vacations. For example, Affirm partners with Delta so that you can pay for vacation tickets over a period of months or years.

Bloomberg just highlighted a new partnership Affirm has secured which demonstrates all too well the idea of being able to finance almost anything. NFL diehards will now be able to finance their Super Bowl tickets to cheer on their team through a partnership with StubHub. According to the report, customers can finance tickets from $99 to $17,500 for up to one year. The average ticket price on the secondary market currently sits at around $7,100. Not a football fan? Don’t worry, the partnership extends to other sports and concert tickets as well. Customers receive nearly instant credit decisions with the ability to select a three, six or twelve month term. Annual interest rates will vary from 10%-30%. It’s important to note that the deals differ depending on which retail brand Affirm is partnering with. In the case of StubHub, Affirm pays StubHub immediately for the entire ticket price and Affirm will book the interest. We’ll have more on Affirm partnerships next week.

LendIt Fintech News: The Global Fintech News Archive

The daily newsletter and news site from LendIt Fintech is the leading searchable global fintech news archive

January 21, 2020 By Peter Renton Leave a Comment

I use it every day. It could be an email I receive, an article, a tweet or a phone conversation. Someone mentions a company or a person and I immediately turn to LendIt Fintech News to do a search. I know that if is important I will find it in the LendIt Fintech News archive.

More Than a Daily Newsletter

We started covering the news daily back in 2016 and today we have published almost 10,000 short news stories. That number grows every day because each morning the LendIt Fintech content team scours the global news to bring you the ten most important stories of the day. We summarize the news story in our own words and then provide a link to the original story. It is actually more than ten articles because we write a paragraph for the top nine articles and the tenth one contains links to even more news stories. We publish it online and send our daily newsletter around the middle of the day.

While many thousands of people subscribe to the daily newsletter I encourage everyone to spend some time on the LendIt Fintech News site itself. The simple search bar can unlock a world of learning for you. You can find all the news mentions of any company in fintech today.

If you are not a subscriber, you should be. To receive the free daily newsletter you can just provide your email address in the pink bar at the bottom of the home page. And then, you too will remain up to date on the latest fintech stories of the day.

Citi and Yieldstreet, the Bank Partnership No One Saw Coming

The newly announced bank partnership will give Yieldstreet investors access to private credit investments from Citi.

January 16, 2020 By Ryan Lichtenwald Leave a Comment

There have been no shortage of bank partnerships in fintech, but this might be the most unique. Last week we learned that Yieldstreet, an online platform which offers investors access to alternative investments was partnering with Citigroup to offer investors access to their private credit investments. What is most intriguing about this announcement is that a big bank is opening up investment opportunities which were traditionally funded by institutional investors and hedge funds. I spoke with Milind Mehere, the CEO and Founder of Yieldstreet to dig deeper into this partnership.

One of the challenges Yieldstreet has faced is keeping investment opportunities available for investors. They currently have 300,000 accredited investors on the platform, but for over 2 years the demand has been insatiable. Most investment offerings fill up within minutes, if not seconds, creating disappointment in investors who miss out. Mehere’s ultimate goal is to continue to create homogenous and repeatable distribution channels. In order to access good supply Yieldstreet is always looking at interesting investment opportunities and the Citi deal is the latest example of that. It will bring $2 billion of assets to investors.

Yieldstreet currently advertises investment opportunities across real estate, litigation finance, marine, commercial, art and more. You can view some of their past offerings here. The deal with Citi will bring similar assets and may include other areas such as energy and infrastructure, railroad contracts, toll booths and even cell phone towers. These deals will be slightly longer in duration, providing steady cash flow over a longer period of time on assets that tend to be uncorrelated to the stock market. Speaking of long term investing, it is worth mentioning Yieldstreet’s acquisition in December 2019 of WealthFlex which will bring these investments into retirement vehicles. This is something that will be welcome news to investors given the high yielding nature of these investments.

The way Mehere views Yieldstreet overall is for investors to have access to a broad spectrum of investments ranging up to around 12%. The mandate with Citi will focus on paper which is either in the 5-6%+ range or around 10-12%. Investors can expect the first deals to hit the platform in the next few weeks.

Yieldstreet investors can expect a similar experience when participating in the deals sourced from Citi and the investment opportunities will be marked as coming from Citi. While Yieldstreet is focused on expanding the number of offerings, they ultimately have the ability to accept or reject offerings. Mehere views their platform as a way to target investment opportunities which offer attractive returns. This means that the current asset classes aren’t necessarily the ones you will see in a year. One way for investors to achieve higher yields is due to inefficiency of capital and perceived versus actual risk. Yieldstreet wants to focus on investments which make sense, opportunities that are not overpriced and that are in areas where they have expertise.

In this way, Yieldstreet is an on demand platform with the ability to be flexible and dial up or down investments based on the current market. It’s important that Yieldstreet is careful with the offerings on the platform since all loans they put on the platform are pre-funded through a warehouse facility before investors are able to allocate. This distribution risk aligns Yieldstreet’s interests with their investor base. This warehouse facility was just renewed and increased to $250 million with Soros Fund Management. Beyond Soros, Yieldstreet works with other banks which provide leverage facilities.

When I asked Mehere about why Citi was looking to expand their base outside of hedge funds and other large investors he noted that ultimately it was a question best suited for Citi. His view though is that this group within Citi called Citi’s Spread Product Investment Technologies (Sprint) is always originating and sourcing opportunities of all kinds. He believes that Citi recognizes that the investment landscape is changing and they want to be the catalyst for this change. Challenger banks and other investment platforms have established strong trust and credibility with the end consumer and thus deals like these can be a strong channel for a big bank like Citi.

As far as what the future holds, Yieldstreet believes there is still lots of room to grow with the enormous size of the private credit market in the US. Mehere also thinks we are going to to see a transformation of behavior from investors over the next decade. Digitally native consumers are going to be increasingly interested in offerings like Yieldstreet. Currently the median age of those participating on the platform is 41. It’s going to be interesting to see where Yieldstreet goes from here as they look for further opportunities that in the past have not been available to individual investors in the US.

More on LendIt Fintech News on Yieldstreet:

Invest Like the Top 1% With Institutional Grade Investment Offerings from Yieldstreet

Podcast 99: Milind Mehere of YieldStreet

Manatt Fintech: What to Expect in 2020

Manatt, one of the leading professional services firms in fintech, looks back at 2019 and sets the stage for fintech in 2020 and beyond.

January 15, 2020 By admin Leave a Comment

[Editor’s note: This is a guest post from Brian Korn, Neil Faden, Benjamin Brickner and June Kim of Manatt, Phelps & Phillips, LLP]

Taking a break after eight brisk years of regulatory and litigious turbulence, the world of fintech and marketplace lending in 2019 was notable for being more business as usual, or what some might call a “ho hum” year of upward growth.

Despite the moderation, 2019 saw growth in nearly all aspects of the fintech ecosystem, including:

Capital flowing to originators, especially payments and AI, but fewer start-ups emerging (big equity bets in Figure Technologies, Goldman Sachs’ investments in Even Financial and Climb Credit)
Retail access to bespoke debt investments and funds growing sharply, with lightning-fast subscription periods (YieldStreet, Cadence, PeerStreet, CrowdStreet, Sharestates, CNote, Fundrise)
Growth of securitization with greater rate and spread stability (15+ unique rated fintech issuers and many issuing $1 billion annually in nearly quarterly ABS transactions)
Established banks swallowing smaller fintech fish and digesting their tech or high-profile banks partnering with fintech (American Express, KeyBank, Goldman Sachs, Barclays, Silicon Valley Bank, Santander)
Credit and warehouse lenders opening the market for upstream origination capital (UpLift, SoFi, Idea Financial, Upgrade, Platinum Autos, CircleUp)
About the only facets of fintech that saw a cooling off were interest in blockchain and cryptocurrency, and the federal regulatory environment.¹

Here are a few key industry trends we observed in 2019 and areas worth watching as we enter 2020: [Read more…]

Visa to Buy Plaid in $5.3 Billion Deal

This groundbreaking deal values Plaid at double the valuation of their last round.

January 14, 2020 By Ryan Lichtenwald 1 Comment

Fintech companies continue to attract interest from traditional financial institutions and now we have a significant acquisition to start off 2020. Yesterday, we learned that Visa is planning to buy Plaid for $5.3 billion. Plaid is unique in the fintech market today, providing the rails for connections between financial institutions. Many consumers in the US have leveraged their service, but they wouldn’t know it because it all happens behind the scenes. Because Plaid has been successful in making these connections possible, they are the defacto choice for many financial institutions. As of now it seems like this large niche that Plaid has carved out is a winner take all proposition.

Chief Executive of Visa Al Kelly noted on an investor call that the acquisition will help Visa expand access to other fintech firms and also accelerate their movement outside of cards. While Plaid has already become a successful fintech company on their own, the credibility of the Visa name is likely to help them reach even more customers. Plaid last raised a round in 2018 at a $2.65 billion valuation. It may sound like a lot to pay for a company, but Visa’s market cap currently stands at around $420 billion. Interestingly, both Visa and Mastercard had participated in a $250 million round. Other investors in previous rounds included Andreessen Horowitz, Kleiner Perkins, Index Ventures, Norwest Venture Partners, Coatue Management, Goldman Sachs, NEA, American Express, Citigroup and Spark Capital.

Writing on the Plaid blog yesterday, CEO Zach Perret said that Visa was the one to approach them and he also explains how the acquisition will work:

We were very impressed by the Visa team from the minute they approached us. They share our vision for the future of financial services and have deep respect for the developer community we support. They want us to operate as an independent business unit so we can keep doing what we do best. We’ll be able to lean on their brand, resources, and international footprint if doing so can benefit our customers, our partners, and the markets we serve.

This deal is welcome news for the fintech community and it is going to be fascinating to watch where Visa takes Plaid from here. And what does this mean for broader fintech? Will this be the year that traditional finance makes fintech acquisitions a priority? The answers will be forthcoming as we see how the rest of 2020 shapes up.

Early Bird Pricing for LendIt Fintech USA 2020 Ends Tomorrow

Register by end of day Friday to save $1,000 on your ticket to LendIt Fintech USA 2020 in New York

January 9, 2020 By Peter Renton Leave a Comment

LendIt Fintech is excited to be back in New York City for our marquis event, LendIt Fintech USA 2020, after spending the last two years in San Francisco. We will be back at the Javits Center again on May 13-14 where you can attend the world’s largest event dedicated to lending and digital banking.

Our keynote roster is shaping up to be the best we have ever had. Earlier this week we announced the Chief Strategy Officer for Goldman Sachs, Stephanie Cohen, who will be speaking about Goldman’s approach to innovation and how they are working with the fintech ecosystem today. We also have confirmed Jelena McWilliams, the head of FDIC, Craig Boundy, the CEO of Experian North America, Angela Strange, General Partner at Andreessen Horowitz and Rishi Khosla, the CEO and Co-Founder of OakNorth, the leading UK challenger bank. We also have a couple more big names that we will be announcing very shortly.

Save $1,000 to LendIt Fintech USA 2020 by Registering Now

Early bird pricing of $1,995 ends at midnight on January 10th (that’s tomorrow as I am writing this), that is $1,000 off the full price of a ticket. Also, as always Lend Academy readers can receive an additional 15% discount (off the already discounted price) by using the code LENDACADEMYVIP at checkout. You know you want to go so why don’t you go ahead and register now.

Below is a video with some highlights from our event last year in San Francisco. We look forward to seeing you at LendIt Fintech USA 2020 in New York in May.

Goldman Sachs to Give Investors More Transparency on Lending Operations

The bank hopes that additional information about their business will change how investors value their stock

January 7, 2020 By Ryan Lichtenwald Leave a Comment

The Wall Street Journal reports that Goldman Sachs is planning to share more information about their different business units. The new financial disclosures will finally give investors insight into both their lending practices and their trading business, areas where the bank has previously shared very little.

Currently, shares of competing banks like JPMorgan Chase and Bank of America are valued much higher. and the Goldman Sachs CEO believes their stock is significantly undervalued. The hope is that the increased transparency will help their stock which currently trades at levels around their 2007 stock price. From the WSJ:

Mr. Solomon and his deputies, including finance chief Stephen Scherr, are betting that more openness will help in the meantime. For all of Goldman’s changes since the financial crisis—building a consumer bank, reining in freewheeling traders, lowering its funding costs—investors still view the firm as more prone to market swings than rivals and less willing to explain its results.

The build out of their consumer bank and their Marcus brand has been one of the biggest strategic changes for the firm. Marcus is now one of the leading digital banks in the US and they have also recently moved aggressively into the UK with plans to expand elsewhere in Europe.

One of the big changes is breaking out their investing and lending segment which previously included various loans and bets that the bank had made. Loans to companies will now be reported as well as loans to hedge funds, but it remains to be seen whether we will learn more about their personal loan business. Investors will also be able to see revenue from wealth management which is noteworthy given the bank has recently opened up to serving a younger demographic who aren’t necessarily wealthy.

Why a National Interest Rate Cap is a Bad Idea

Legislators want to introduce a national rate cap of 36% but there are better ways to solve the problem they are trying to address

December 17, 2019 By Peter Renton 2 Comments

Last month five legislators introduced the Veterans and Consumers Fair Credit Act, a bipartisan piece of legislation that proposes an ill-advised solution to a difficult problem. It seeks to put an interest rate cap on all loans nationally in the name of consumer protection. Unfortunately, it will likely have the opposite impact on the consumers it seeks to protect.

No one likes predatory loans where consumers can sink into a debt spiral that often ends up in financial ruin. While this bill seeks to focus on payday and car-title loans, two loan products that are universally disliked, it will also impact many installment lenders. These are the companies who sit between the low interest marketplace lenders and the payday loan industry, offering loans with APRs of 36% to 100%, many of whom provide critical financial support for struggling consumers.

The fact is that an interest rate caps is a very blunt instrument to use on a nuanced problem. There are some who believe that any interest rate above 20% or 25% is unacceptable and certainly 36% is out of the question to many. But what is the solution for people who simply don’t qualify for a loan at a lower percentage rate? According to the legislation proposed these people would just be out of luck. This will lead to more bankruptcies and more lives disrupted.

This is not just my opinion. This recent op-ed in The Hill by Consumers’ Research cited a study conducted in 2014 on the historical evidence of the impact of rate caps at the state level and they concluded that “state interest rate ceilings restricted credit availability…for higher-risk borrowers.” So, the legislation that is supposed to help higher risk borrowers in effect will price them out of the system and leave them with no good options.

Sometimes I think critics of high interest loans suffer from a kind of magical thinking. That if we simply legislate away a product the demand will go away. Clearly that is not going to happen, in fact demand will likely increase for a product that would now be banned. [Read more…]

All LendIt Fintech Europe 2019 Sessions Now Available Online

LendIt Rewind now has audio of all Europe 2019 sessions on Apple Podcasts and Stitcher

December 10, 2019 By Todd Anderson Leave a Comment

Rishi Khosla, CEO of OakNorth, in the opening keynote session

If you attended LendIt Fintech Europe 2019 in London this past September you probably missed out on many sessions you really wanted to attend. I know that was the case for me. Not to worry you can now listen to or watch any of the sessions from this groundbreaking event.

While we have had videos of all the keynote sessions available online for a couple of months now, we recently completed uploading all the track sessions as well. These are audio files that you can listen to on Apple Podcasts and Stitcher (just search for LendIt Rewind or the title of your favorite session).

In addition, recorded sessions can be found on the LendIt Fintech Europe 2019 website. You can also view photos from the event. All available slide presentations can also be found on the LendIt Blog.

If you are interested in joining us as a speaker for LendIt Fintech Europe 2020 please sign up to speak today.