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Podcast 276: Mike Cagney of Figure

The CEO and co-founder of Figure discusses the future of securitization, taking on Visa and Mastercard directly, financial inclusion, investment marketplaces and, of course, blockchain

December 4, 2020 By Peter Renton Leave a Comment

Views: 503

Mike Cagney has built a reputation as one of the smartest people in all of fintech. His capacity to raise capital is unparalleled in our space but he is also a visionary who is tackling some of the biggest fintech challenges.

Back for the third time on the Lend Academy Podcast, and his first time as the Figure CEO, Mike Cagney describes several different sectors they are attacking. He said we should think of Figure as more of a holding company with multiple divisions: lending, securitization, payments, investment marketplaces, cap table management and more. All with blockchain underpinning everything. This was the most fascinating episode I have recorded in a long time.

In this podcast you will learn:

  • How Figure has evolved since starting in lending 2018.
  • The different verticals where Figure is operating in today.
  • How they have improved Provenance to make it more attractive for third parties.
  • Why the biggest opportunity with Provenance 2.0 is with mortgage originators.
  • Why it is inevitable that most capital markets transactions will eventually run through the blockchain.
  • What Figure Pay is and why they have decided to create it.
  • Why Figure Pay will really be a solution for underbanked consumers.
  • Why the OCC license will be critical for delivering solutions for the underbanked consumer.
  • How the economics will work for Figure Pay.
  • What their investor marketplace is and the products they will offer.
  • Their plans for Hash, the token for the Provenance blockchain.
  • How Mike’s thinking about banks has evolved over the years.
  • How it has been helpful to have a head of the OCC who really gets what Figure is trying to do.
  • Mike’s vision for Figure and the Provenance blockchain.

This episode of the Lend Academy Podcast is sponsored by LendIt Fintech Digital, the new online community for financial services innovators.

Download a PDF of the transcription of Podcast 276 – Mike Cagney.

Click to Read Podcast Transcription (Full Text Version) Below

PODCAST TRANSCRIPTION SESSION NO. 276-MIKE CAGNEY

Welcome to the Lend Academy Podcast, Episode No. 276, 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 Digital, the new online community for financial services innovators. Today’s challenges are extraordinary with the upheaval affecting all areas of finance. More than ever before, we need to come together as an industry to learn from each other and make sense of this new world. Join LendIt Fintech Digital to connect and learn all year long from your peers and from the fintech experts. Sign up today at digital.lendit.com

Peter Renton: Today on the show, I am delighted to welcome back Mike Cagney, he is the CEO and Co-Founder of Figure. You know, Figure has been around for actually not that long, but as you’ll find out in this show, they’ve accomplished a huge amount and really taking on several different verticals inside fintech and really making a big splash. Now, we talk about the Provenance blockchain and how they’ve moved from really 1.0 to 2.0 and what that means for a lot of the offerings they have.

We also talk about a new initiative that I just found out about today and that is Figure Pay and that’s launching early next year and, again, somewhat revolutionary in how they are rolling out that product. We talk about the securitization space, of course, because that was really sort of the initial kind of use case for the Provenance blockchain. We talk about their bank charter because they just applied for a bank charter very recently, we talk about what the thinking is behind that. Mike also gives his perspective on the vision for what is coming up for Provenance and Figure. It was a truly fascinating interview, we hope you enjoy the show.

Welcome back to the podcast, Mike.

Mike Cagney: Thank you.

Peter: Okay. So, it’s been a while since we’ve had you on. In fact, this is the first time we’ve had you on since you started at Figure so maybe we can just get into some background and it seems like Figure continues to evolve, it’s a lot more than what you originally started out with. So, why don’t you give us a little bit of history of Figure and also of Provenance as well.

Mike: Sure. So, we started Figure back in 2018 with the idea that we could use blockchain technology to really drive some transformational change in financial services. The idea that we could just remediate a lot of intermediation in not just the lending vertical, but the asset management vertical, the banking and payments vertical and so we worked together to build a blockchain technology called Provenance.

One of the initial things we realized was that, you know, in 2018, the banks weren’t ready to run on a blockchain and, you know, a lot of interest, a lot of focus….you know, every bank had a blockchain technology team that they funded, investigate and do projects in blockchain, but no one really wanted to do production applications. So, we ended up creating Figure Lending really as a first mover to de-risk Provenance blockchain and, obviously, in that context having control and being able to manage your own destiny in that regard. And so, given that we’re building a lending business, we said, well, a vertical to a lending business, let’s do something that’s greenfield and interesting and the economics makes sense.

We chose HELOC to start with and we did a lot of innovation around HELOC origination outside of watching, right, so generating a five-minute HELOC has very little to do with blockchain and a lot to do with just better technical processes and so forth. But, effectively, our goal was to take the distributed trustless, immutable nature of blockchain, the function of a ledger registry in exchange and demonstrate whether we could or couldn’t realize savings using the technology for us, origination, financing and securitization. And what we were able to do is show that with the technology on our first securitization, which was done March of this year, soup to nuts from origination through financing, through securitization about 117 basis points of cost savings.

Another transaction, another securitization Saluda Grade did behind us on Provenance where it was about 125 basis points of cost savings. So, these are important proof points for us in the context that this is real, has a real economic impact, a real economic value and we’ve done a lot of work around lending where we use blockchain for participations, we use it for whole loan trades, but within Figure…..Figure has also evolved into several other verticals. So, for example, we have a banking and payments initiative called Figure Pay and it’s launching in Montana in January, in Missoula, Montana.

The whole focus of Figure Pay is it’s using a blockchain ledger to manage the bank accounts, the movement of money and any two entities on that blockchain who transact. So, for example, if I were to pay you and we’re both on Figure Pay, it’s using a blockchain rail not an interchange rail.

Peter: Interesting.

Mike: This is where we think there’s a huge opportunity to go after the interchange market which is…..you know, everyone hates it, it’s enormous, but that’s how you move money today. So, we think, you know, significant opportunity there, but we’re doing other things, fund services so we have a marketplace that hosts funds where our digital funds services business will do a full package of originating your fund, the documents, custody, admin, all on blockchain and we leverage this feature called Passport that does investor accreditation BSA now for raising capital.

So, I could do a 506c through DFS soup to nuts in a couple of weeks and then use the blockchain as a capital raising vehicle for the funds into that. My favorite thing we’re doing is we have a Cap Table Management Platform called Adnales. And in part it has very little to do with us wanting to go after Carta that we are obviously competing with Carta in that context, but it’s more….it acknowledged the equity for a company is now Digital Certificate on a Blockchain.

What that means is that you get all the benefits of bilateral transaction, real-time settlement, etc. and so it’s built in a way that allows a company to turn on a secondary offering, leverage our Passport for investor accreditation BSA/AML and manage their both primary and secondary market exposure in a much more efficient way. This is really how we’re thinking about the opportunity to go out through exchanges so, you know, within Provenance everything is bilateral, T-0 settlement, no counter party risk, no settlement risk, very different from the NASDAQ or the NYSE or any other stock exchange out there and the top seven exchanges….have about $120 Billion in market cap.

So, Adnales is kind of our beachhead into that opportunity set where we start off with startups in private company Cap Table Management and Private Company Secondary Offerings, but when they go public, we hope to have the capital, the resources to say why list on the NASDAQ or the NYSE, why don’t you just stay here, it’s T-0 you’ve got the market. Our hopes are that it’s going to be a successful way to go after that opportunity.

Peter: Okay. Well, man, there’s a lot to unpack there (laughs). You are in a huge number of different, interesting issues there, maybe we could just take a couple to start off with. Maybe let’s just start with the securitization, you know, I read about the first securitization you did and the second. To me, you’re taking away all these costs so, regardless of whether you….all the other advantages that are obvious when you’re doing transactions this way. I mean, why are people….maybe there are people flocking to try and do this, other originators trying to sort of put their assets on Provenance and do transactions the way you’ve done the HELOCs?

Mike: So, there’s a couple of dynamics to it. So, one is they are striving to do that and so Bob Hershey who runs our capital markets effort is working with several originators right now to begin to originate and leverage the capital market benefit of Provenance. I think one of the biggest limitations that we had was when we initially built Provenance, it was what we would describe as a permission private blockchain. You had to go through Provenance Blockchain, Inc. to access it. Provenance Blockchain, Inc. designated who the stakeholders were on that blockchain which are 12 financial institutions, including names like Franklin Templeton and Experian, all well known names.

But, we did it that way because it was the best way to put a bridge between where the banks and the hedge funds and the buy side folks were versus where blockchain was. So, one of the challenges of that is the way the fee structure was set up is it was designated by Provenance Blockchain, Inc, so you originated loans on Provenance, Provenance would come in and say, you’re saving $100, we’re going to charge you $33. And, by and large, that structure works in the sense that it provides a mechanism of economic for the blockchain, it gets distributed out to the Hash holders that’s why Hash is….you know, in Provenance is one of the most valuable blockchains in the marketplace today. But, it created a significant barrier in that we could not open source it and we couldn’t release an SDK, a Software Development Kit, to allow people to onboard themselves because if we did that, you could circumvent Provenance Blockchain Inc. and not pay any fees.

Peter: Right.

Mike: And so, there was a significant limitation on your ability as a third party to access and….you know, just as we created Figure to de-risk the blockchain, it creates a competitive dynamic whereby going to another QR originator, for example. They’re going to say, whoa, I don’t want Figure looking at my stuff and we couldn’t say, well, then just take this SDK and do it yourself. And so, what we’ve done very recently is we’ve migrated from what we would call 1.0 to 2.0 and 1.0 being permission private, 2.0 being decentralized public and we moved off of a very heavily customized version of Hyperledger onto Cosmos Tendermint as the underlying infrastructure where we have moved all these applications like marketplace that sit on top of it.

Now, we have the ability to charge gas fees, very analogous to Ethereum, where you pay for processing, it allows us to open source the blockchain, publish the SDK out and that’s going to be a huge catalyst to drive adaption because we no longer have to be involved.

Peter: Right.

Mike: Up until now, Figure had to be part of your process to onboard. And so, I think the combination of that plus just people wanting to see some demonstrated economics, I think we’ve de-risked it and now with public accessibility, I expect that we’re going to get significant adoption onto it. The economics are too meaningful to avoid.

Peter: Yeah, yeah, I mean, I can understand that. So, has there been a securitization….it doesn’t sound like there has been on the 2.0 blockchain. Are you…..add another figure, HELOC deals sort of in the pipe?

Mike: Yeah. So, we do, but what we’re really interested in is we’ve got a prime jumbo first lien deal and, you know, what we’re trying to do is demonstrate the efficacy of this beyond HELOC. We’re doing some work on unsecured consumer, we’ve done some work on student loan refi, but the real one we’re targeting is mortgage and we think there’s such an opportunity for mortgage originators and such an opportunity for the GSCs and the FHA to leverage this technology. Much like we did with HELOC, we think we need to do a couple of transactions to de-risk it and demonstrate the economic benefit.

But, the dynamic here is if you think about a mortgage originator today, let’s say I’m selling to Fannie Mae, one of the fastest times from closing the loan to delivering to Fannie Mae is 21 days, usually it takes longer than that. If I’m an originator, I’m eating up my equity capital in my warehouse to aggregate those assets for 21 days. I’m taking market risk in terms of what happens to the price of those assets by the time they’re delivered through. And the agencies, when Fannie buys those loans, they’re creating a 55-day mortgage pass-throughs, the cash flow you get today, was from 55 days ago and they’re paying for the drop on that.

Blockchain solves all of that in the sense that you can deliver the asset the day you fund it because of the immutability and trustless aspects, truth aspect of blockchain…you know exactly what the loan is and because of the real-time cash flows and real-time remittance, you can actually do a one-day pass-through not a 55-day pass-through. So, we think there’s enormous opportunity here and we’re going about de-risking that by doing a prime jumbo securitization, not a conforming mortgage securitization.

Peter: Right.

Mike: But, directionally, it’s the same thing and so that’s one of the big focuses that we have for Q1, is to get that transaction done and use that as a way that kind of crowd in broader adaption from the non-bank mortgage originators and the bank mortgage originators.

Peter: Right, right. Obviously, that’s the biggest market of all so if you can get some traction there, you are well on the way. Do you foresee a time, is this your goal, you think that what…most…half the securitizations in multiple asset classes running through the Provenance blockchain?

Mike: We hope it’s Provenance, but whether it’s Provenance or something, everything is going to end up running through the blockchain as a realistic capital markets because the value……if you think about the impediments to markets today, it’s do I trust you, do I know what you’re selling me is real, do you really have a…and in that context, you’ve got equity trading, for example, there’s actually five parties involved in an equity trade and each take a  little bit of that transaction and it’s because, you know, I can’t trust you and you can’t trust me.

The whole benefit of blockchain is you know exactly what the asset is and I don’t have counter party or settlement risk and that provides a huge amount of opportunity in terms of making mortgage more efficient. So, whether it’s securitization, whether it’s whole loan trades, whether it’s equity trades, I think everything is going to end up moving to blockchain and the issue is, is it going to be Provenance, is it going to be an Ethereum derivative, will it be Bitcoin?

The challenge with Bitcoin and Ethereum is the scalability and that’s the biggest hindrance that we’ve had and, you know, there are certain aspects and benefits of Cosmos Tendermint, in terms of being over in peril instances, to deal with that, and we’ve spent a lot of time addressing the scalability of blockchain where you can pull a 10,000-loan tape off of Provenance right now and it’s just as fast as pulling it from a database. There’s no difference and that was an important aspect to us.

But, you know, one of the things I’ll build on in what you just said, we’re very focused on scale and so we’re constantly looking at situations and opportunities where we can take our technology and partner with scale to demonstrate blockchain in a bigger, more meaningful way. We actually came very close…you know, in the last four weeks, of doing a transaction with one of the very large non-bank mortgage originators where we were going to contribute our technology into that entity and build something that we felt was very differentiated where, you know, we were going to build reduced origination cost and then have this downstream potential for blockchain.

Given the nature of Figure, it is effectively a holding company across all these verticals, you know, I think what you’ll see in 2021……our pursuing certain circumstances where we can either contribute our technology on a merger basis. We’re going to do a SPAC so we’ll have that vehicle on a public company basis and look to take some of this tech and some of this de-risking that we’ve done and rather than organically build it out, merge it with scale and get there faster to prove a proof point.

Peter: Interesting, interesting. So then, you’re imagining Figure and being almost like a SaaS provider of the technology, is that where you’re moving?

Mike: Well, I see we have….Figure has a relatively large SaaS business, and that business is one of the things I’ll probably spin out.

Peter: Okay.

Mike: So, you can think of Figure as a hold-co where we have a large amount of the economic of the blockchain and each of these individual businesses….it’s really the proverbial….the parts are greater than the sum, right. You know, why do you have Cap Table Management Company in the same business that does lending, in the same business that does SaaS, these things are better off broken out. You know, as we start getting maturity with the technology, we’ll start breaking these up in 2021, you’ll start seeing that happen, you know, through M&A, through SPAC, through other types of activities in the marketplace.

Peter: Okay. I want to talk about Figure Pay which I didn’t actually know about until you just told me a few minutes ago. So, who are you trying to go up against there? Are you trying to do …is this like a merchant sort of offering, is this person-to-person, what is the market?

Mike: Sure. So, I’ll give you a little bit of history on it and then what we’re doing right now and how this ties into the OCC Charter as well that we filed at the beginning of the month. So, basically, when we built SoFi Money, what we did is we had an omnibus bank, in that case it was WSFS. It made a good source license profile and we built our own banking ledger, we built our own integration into the ATM and ACH and Wire, etc. and what WSFS was, was really the repository in the integration and the Fed-settle. And so, you know, in the context of Provenance we have this omnibus banks and these are banks that act as a bridge between blockchain and fiat.

So, for example, you were buying $50 Million of loans from me, you would push $50 Million into Silvergate, they will create a $50 Million entry in your digital wallet and you and I would face-off in a blockchain that you have the StableCoin, I have the loans and it will just register the ownership of one or the other, hence, the real-time transaction without counterparty or settlement risk. As we are looking at this, we said, look, why couldn’t we do something where we build a blockchain banking ledger, similar to what we did before, build all the off-ground interfaces into the ATM, ACH, etc., leverage one of our omnibus banks as an omnibus bank, right, integrating into Fed-settle, holding the cash, Fiat, so forth.

We can do some interesting things with this along the lines of, you know, small dollar credit, for example for thin file consumers because we get certain information, transactional history, geo location that allows us to underwrite in a way that we can make up for the fact that we don’t have a thick file. But, it has this really interesting advantage in that because it’s blockchain, it has it’s bilateral transaction capability, whether it’s a loan, whether it’s me paying a merchant or me paying another consumer where it allows us to bypass interchange.

And so, the benefit being that if you’re a merchant and I’m transacting with you on Figure Pay and we’re both on Figure Pay’s backend rails…you don’t necessarily have to be a Figure Pay customer because we private label it for other institutions so, you know, XYZ could offer this solution as well, but it’s the same backend rail. Rather than going through interchange, it’s going to go through the blockchain rail and it benefits the merchant obviously, one, the cost.

I might be a little bit off on the numbers, but I think Walmart had $6 Billion of profit last year, paid  $2 Billion in interchange expenses, so massive number. But also from a merchant standpoint, it eliminates charge back because it’s StableCoin, it’s cash and eliminates the settlement time, right, it’s instant. The whole aspect is the consumer doesn’t need to know, nor do they even care, that they’re on a blockchain ledger, right, it’s just cash and they transact the same way that they always do.

And so, we see this, initially, as a really interesting solution for underbanked consumers and we would have all the bells and whistles like payday advance, etc. that some of the other folks have out there, but we see this as an interesting solution for underbanked consumers. It’s a much better viable alternative than prepaid debit and because it’s not relying on a bank on the backend as a lot of the “US Challenger Banks” are…..you know, very few of them have banking licenses, there’s a significant economy of scale that’s there that we think we can take advantage of.

And so, the challenge we have on this is, you know, we’re looking at our business and next year, we’re going to need over 200 licenses, we already have well over 100. We have to continue add them for money transfer licenses and so forth. We have mortgage licenses, we have lending licenses, we have servicing licenses, money transmitter licenses and the challenge with having over 200 licenses is, you know, not only is it the cost, the consistency of the product, right.

What we deliver in Colorado is different from what we can deliver in California and we had optimism that the states would build some kind of reciprocity, they just haven’t done it. So, we made the decision in early November to apply for a national bank license through the OCC. It’s novel in the sense that we’re not doing FDIC insured deposits directly, we’re partnering with a bank to do that. We are taking institutional deposits toward deposit-taking, but not FDIC insured deposit-taking. We see this as a way to ….it’s sort of ironic that we built this technology, we massively lowered the cost to deliver solutions to consumers.

You can now deliver solutions into that underbanked segment in a profitable way, in a way that’s better than what they have today and then you layer in all the regulatory complexity with 200 state licenses and you start to lose the ability to do that. (Peter laughs) So, this OCC license, we think, is really critical for our ability to deliver solutions to our underbanked consumers and drive real financial inclusion which, you know, there’s been a lot of talk around financial inclusion and around fintech, but not huge amounts has been done there.

Peter: Right.

Mike: And so, we see this as really a meaningful way to do that. You know, obviously, what we’re trying to do on the blockchain side is go after interchange, you know, Visa, Mastercard, market cap… the top three interchange providers, their market cap is somewhere around $750 Billion so there’s a huge opportunity there. This is the first thing that……I’ve been in financial services since the late 90’s, this is the first thing I’ve ever seen that’s a viable way to go after that interchange.

Peter: Many have tried and no one’s really got anything going there. So, like for Figure Pay, are you taking basis points from the transactions similar to an interchange and just making it a lot lower or what’s the economics?

Mike: Yeah. So, that’s right. Look, we still have a Visa debit card on Figure Pay because you can’t be reliant just on the blockchain rail because you’re going to have the chicken and egg problem. And so, it’s completely inter-operable between interchange and between Provenance and we’re just taking on Provenance transactions a much smaller cut because, you know, an interchange transaction has seven parties that are dipping into that and pulling economics out, this is bilateral, just me and you, right, and so we can take a much smaller cut to make it very economical for everyone involved.

Peter: So then, like on the merchant side, who…really you have a chicken and egg problem is, you know, are you going after some big merchants to really….you know, they can benefit as well. They don’t want to be beholden to Visa or Mastercard.

Mike: One hundred percent, so, we’re taking a barbell approach which is we’re having some conversations with very, very large merchants and then when we pilot this in Missoula, Montana in January, we’re doing it with a bunch of farmer market participants (Peter laughs) and getting them set up. So, Figure Pay will work, you know, bluetooth through NFC or work through QR code scanning and we’re setting them up.

We actually think it’s going to be a really important proof point and then go to the big merchants and say, look, this is how it worked. There’s, obviously, a lot of enthusiasm because of the local aspect of doing this, you know, around the signing up and participating. But, it’s a barbell approach and, absolutely, there are big merchants that are going to want to adopt into this because of the amount they pay on the interchange today.

Peter: Right, okay. So, I want to just talk about the investor side. I was on your website on the weekend and I signed up for Hash and I went through the accreditation process, it’s all using Plaid and very simple. I mean, I feel like there’s so many ways you can take that, but are you planning on having a platform of different assets for individual investors or what are you doing with that?

Mike: Yeah. So, that’s really what marketplace is and the idea is that as an investor, a retail investor, an institutional investor, an institution, you can go in and basically go through the marketplace and find what you want. So, for example Figure World Equity Fund is on the marketplace and you want to subscribe, you can do the whole thing without any human intervention, right, and that’s the point, is we’re trying to make it easy for people to be able to access alternative product.

One of the things that we do with Passport is that Passport moves with you so when you go from one investment to another, you don’t re-accredit it, you don’t re-establish so it makes it a much more seamless process. Literally, part of why we built this is I stopped doing private investments about a year and a half ago because I couldn’t stand filling one more accreditation (Peter laughs). You know, they’re all different, they all ask you stupid stuff, you know, they never handle my trust, right, etc. etc.

So, the intent is to have a general marketplace centralized on this whole aspect of trustless bilateral settlement where individuals can come in, they could search what they want so loan buyers can come in and search for, you know, sub-680 loans over 8% coupon in California and they can go to three different marketplaces that have that and participate in.

You could come in and say I’m looking for, you know, venture capital, early stage fintech and be able to find funds listed on the marketplace. The other interesting thing about a marketplace is because it’s built on an exchange, it allows for the secondary trading of those fund interest, right, so, you know, if you own a private equity fund and it’s five years into a ten-year life cycle, you could market that on marketplace and sell on a secondary basis.

Peter: That’s super interesting. I tell you, I’m excited to kind of explore that, but I want to move on to Hash. Hash is the token for the Provenance blockchain and you said that you were intending to do an IPO of that at some point. What are the plans for Hash now?

Mike: So, I’m glad you asked. Provenance, at one point and as I talked about earlier, it was very clear that Hash was a security and so what we wanted to do is we wanted to do a public offering of that. That meant we needed an exchange you could trade on and so we have been working with the SEC and gotten what we needed there. Now, we’re working with FINRA to get approval to operate an alternative trading system on Provenance that will allow us to run marketplace just for securities.

We were very optimistic that we’re close to getting approval for that. It’ll be the first one that’s been approved for a blockchain to trade digital assets, but what happened along the way is we said, you know what, we’re moving from 1.0 to 2.0 and, you know, somewhat analogous to Ethereum where the SEC said, it probably started off as a security, it probably is not a security now. In 2.0, with the blockchain being decentralized, open-sourced, no central control, third party contribution into it, we think 2.0 Hash is really utility token.

And so, what we anticipate is we would swap the 1.0 investors into the 2.0 utility token and that token would list on some of the popular crypto exchanges. So, relatively big transformation, but really underpinned by the evolution of the blockchain and our ability to go to a decentralized public network given that the industry has gotten comfortable with the technology and comfortable with how the process works.

Peter: Hash will underpin everything, right. It underpins Figure Pay, is that like everything gets put into….like all the transactions go through….they are transferred from Fiat currency into Hash, is that correct?

Mike: So, you can think of Figure Pay…..I mean, two things are underlying it. One is, effectively StableCoin, right, because that’s reflecting what’s in the omnibus bank account. Where Hash plays a role is, effectively, every time you’re writing or every time you’re processing on the blockchain, you’re paying gas fees and let’s see I incur $100 of gas fees. I, basically, have to buy $100 of Hash on the exchange to then distribute out to the ecosystem, right, so think of Hash as still the underlying mechanism to distribute the economics of the blockchain, but in a slightly different way that we did with 1.0.

Peter: Right, right, okay, that makes sense. So then, I’m interested to sort of hear the evolution of your thinking here, because…….I mean, obviously, when you were at SoFi, you famously did that, Superbowl ad, with anti-bank like don’t bank SoFi and, obviously, you had that sort of …..you know, there was a position that you were taking and I’m curious to see how your thinking has evolved from that time period.

Mike: Yeah. You know, it’s funny because I’ve been asked about this a lot recently and a lot of times people bring up the comment I made about banks are dinosaurs and I’m the meteor (Peter laughs) which I’ll never live down. Look, a lot of that was from a marketing context, right, it wasn’t that the function of banking was a problem, it was the way that banks delivered service into their customers that we felt we could improve on. I think SoFi has done that and continues to do that.

I think in the context of Provenance, I will say with Figure I’ve created a lending business, I’ve created a banking payments business, we’ve created a Cap Table Management company, all these things, but not because we want to compete with these traditional inline institutions. It’s actually to crowd them in to de-risk the blockchain and crowd in adaption. These businesses have to exist on their own, right, they’ve got to run positive contribution margins to be profitable and so forth.

Effectively, if you think about all the different verticals that we have, in 2021 every one of them is profitable except for one which will take us to early 2022 before we hit that, but, you know, they need to exist on their own, right, but they’re really there to show how to use it, how to access the blockchain, how to unlock value. And so, we’re in a very synergistic relationship with the banks from a partnership standpoint, we actually had some very encouraging support from the banking community related to our OCC application. Whereas, you know, the last time we did a national bank application, we did not get very positive….(both laugh).

Peter: Right, yes.

Mike: And so, I feel like what we’re doing is we’re creating value and even the institutions that you think would be concerned about disintermediation so like a custody bank, for example. We have a huge amount of activity with some of the custodians on Provenance right now, they’re looking at the technology and saying, this is coming, how do I reinvent my business to take advantage of this. So, I’m not trying to eliminate any of these folks, I’m trying to give them a better way to deliver solutions.

Peter: Right, right, okay. So, obviously, the OCC….I mean, you’ve got someone…many of the regulators would not be able to understand exactly what you do, but, I imagine, the current Head of the OCC, with his background, would probably get what you are trying to do pretty well. Is that being helpful in this process?

Mike: I think it’s been extremely helpful. I think, you know, Brian not only gets what we are trying to do, he actually sometimes thinks like two steps ahead of us in terms of the business evolution. So, I’d say, he’s very steeped in blockchain and the benefit as to the financial system so it’s been extremely helpful to have someone like Brian in that seat.

I think he’s really trying to drive situations and one of the things he likes about what we’re doing with Figure Pay is, you know, it really is really around financial inclusion in a sustainable way and I think that’s a big thing for Brian which is blockchain technology to level the playing field rather than further delineate the haves and the have nots.

Peter: Yeah, now he’s got the whole Project REACh thing he talked about….I mean, he’s very big on that. Okay, so we’re just about out of time, but before I let you go, I mean, you’ve got a lot on your plate here, you’ve got a lot of different, you know, things that could really…..each one of these could be a revolutionary company, but what’s your vision for Figure when you look down the road?

Mike: So, I think our vision is that Provenance is the preeminent blockchain for financial services. You know, I think what you’ll see with Figure is it will break apart into four, five, six different companies along the verticals that we have and, you know, as I said, each of them will be viable and hopefully a market leader in what they compete in. I think when we get to that point, it will have succeeded in what we set out to do.

Peter: Okay. Well, it’s going to be fascinating. I wish you all the best, I’m always inspired when we chat, Mike, it’s fascinating to see what you’ve accomplished in a very short amount of time. So, thanks so much for coming on the show.

Mike: Thank you for having me.

Peter: Okay, see you.

Wow. You know, as I said, I come away from my conversations with Mike inspired, but also somewhat in awe in all of the different things he’s doing and how quickly that Figure and Provenance is moving. As he says, any one of these initiatives really could be groundbreaking for fintech and he said five, six of these things that can really change the world. You know, I am really looking forward to seeing how these things play out, I mean, securitization, payments, capital markets, cap tables, all these things, I said they’re fascinating in their own right.

You know, the fact that he’s wanting to go and get a banking license at this time is telling and I think it’s a very different approach than really doing it inside the banking system, inside the industry rather than trying to come out from an outsider perspective. I think that’s important. As he said, he’s getting a much better reception now than he did initially.

Anyway, before I sign off, if you enjoyed this show, please go to iTunes, Stitcher or whoever you listen to the show and please give us an honest review. I read every single one, we appreciate that you’re doing that.

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 Digital, the new online community for financial services innovators. Today’s challenges are extraordinary with the upheaval affecting all areas of finance. More than ever before, we need to come together as an industry to learn from each other and make sense of this new world. Join LendIt Fintech Digital to connect and learn all year long from your peers and from the fintech experts. Sign up today at digital.lendit.com.

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Filed Under: Lending and Fintech Podcast Tagged With: Blockchain, Figure, financial inclusion, Mike Cagney, payments, securitization

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Podcast 238: Adam Jiwan of Spring Labs

The founder and CEO of Spring Labs describes a completely new system for credit and identity data, one that is real time, secure and decentralized

March 13, 2020 By Peter Renton Leave a Comment

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The way we have stored and used credit information has not fundamentally changed in decades. The big three credit bureaus each have massive databases of personal information on everyone with a credit file. But as we have seen in recent years this is not the best and certainly not the most secure system.

Our next guest on the Lend Academy Podcast is Adam Jiwan, the CEO and founder of Spring Labs. Spring Labs is working on a completely new system for credit and identity information. This is a system that is decentralized, real time, blockchain-based and secure. They already have dozens of lenders signed up and they are looking to go into production later this year.

In this podcast you will learn:

  • The major issues with consumer financial data today.
  • How Spring Labs is trying to enable sharing of financial information directly.
  • An example of how this will work in practice.
  • How the Spring Network ensures privacy and security of financial data.
  • Some of the leading lenders who have signed on already.
  • Why they refer to themselves as an Un-Bureau.
  • How they interface with the big three credit bureaus.
  • The blockchain technology that underlies the Spring Network.
  • The different verticals they are focused on today.
  • The new products they are looking to deliver this year.
  • Where they are at on the road to implementation.
  • When they expect the trading of data to begin with their partners.
  • The number of employees they have today.
  • How Spring Labs’ business model will work.
  • How they were able to get big names like Gary Cohn on their advisory board.
  • Adam’s perspective on the future of personal credit data.

This episode of the Lend Academy Podcast is sponsored by LendIt Fintech USA 2020, the world’s largest fintech event dedicated to lending and digital banking.

Download a PDF of the transcription of Podcast 238 – Adam Jiwan.

Click to Read Podcast Transcription (Full Text Version) Below

PODCAST TRANSCRIPTION SESSION NO. 238–ADAM JIWAN

Welcome to the Lend Academy Podcast, Episode No. 238, this is your host, Peter Renton, Founder of Lend Academy and Co-Founder of the LendIt Fintech Conference.

(music)

Today’s episode is sponsored by LendIt Fintech USA, the world’s largest fintech event dedicated to lending and digital banking. It’s happening on May 13th and 14th, 2020, at the Javits Center in New York City. Lending and banking are converging and LendIt Fintech immerses you in the most important trends of the day. Meet the people who matter, learn from the experts and get business done. LendIt Fintech, z and banking connected. Go to lendit.com/usa to register.

Peter Renton: Today on the show, I am delighted to welcome Adam Jiwan, he is the Founder/CEO and Chairman of Spring Labs. Now, Spring Labs is a relatively new company that has only been around for a couple of years and they have big audacious goals. I wanted to get Adam on the show to talk about these, they’re really looking at re-tooling how personal data gets shared, how it gets stored and how companies verify information on consumers and small businesses.

We go into that in some depth, we talk about how it works, go through an example, it’s somewhat complex, but Adam’s been able to explain it in pretty simple terms so anyone can understand it. We talk about where they are in the process of getting out to production, talk about the different partners, some of them they can share publicly, and we also talk about what his vision for the future of credit data is. It was a fascinating interview, I hope you enjoy the show.

Welcome to the podcast, Adam!

Adam Jiwan: Thank you for having me.

Peter: My pleasure. So, I wanted to get started by just giving the listeners some background. You’ve had an interesting career with a variety of different companies, it looks like, so why don’t you tell us what you did, give us some of the highlights before Spring Labs.

Adam: Sure. So, for nearly 20 years, I’ve had the opportunity to develop my career at the intersection of business building and investing in financial services. Through the course of these experiences, I got to assist in the development of the real estate finance industry in Brazil, help introduce student finance in Europe as a Co-Founder and Chairman of a company called Future Finance, backed a myriad of online and innovative financial technology companies in the US, including being one of the largest seed investors of Avant, now Amount.

In all of these different experiences at either, I came to appreciate that in the digital era, data is a lifeblood of any financial institution, but I think that’s probably pretty well understood that, you know, data is the new oil, as it were. But slashing beneath the surface, really came to develop an understanding of the underlying plumbing, i.e. where is these data relating to credit identity come from, who owns it, who has the right to it, where did they get it from, who shares it, who doesn’t share it, why and why not. And, in that plumbing, my partners and I saw significant amounts of fragility and frankly, a number of things that we found to be quite broken.

Peter: Okay. So then, you found things were broken and then what were the steps involved in really founding Spring Labs? How did the idea kind of come about exactly?

Adam: Sure. So, just at the highest level, let me just share with you what Spring Labs is all about.

Peter: Okay.

Adam: We’re trying to reinvent how information is gathered, shared and monetized in the financial services industry by deploying decentralized infrastructure, and we hope that will drive much greater accuracy, much greater security, much greater consumer privacy. In doing so, frankly, we think we can actually make a dent on things like, you know, financial inclusion, and we came to this, to answer your question, because we were lenders ourselves and we were ingesting vast amounts of data to do things like identity verification, as well as credit worthiness.

And, where we were gathering these data from, we saw a system that had a number of issues and let me just run you through what these issues were. Again, we saw security being a major issue, we saw that accuracy was a major issue because the participants in this ecosystem are, generally, a pretty narrow set of retail lenders. So, a lot of the information that you might actually see on a traditional credit report, they don’t actually include things like your assets, or your income, or alternate forms of credit performance data. If you are renting, do you pay your rent on time, do you pay your utilities, or your insurance, or your subscriptions on time, so accuracy was an issue.

We saw a system that was very vulnerable to fraud, especially from the more pernicious forms of fraud like synthetic identity fraud, meaning fraudsters could not only just take data out of these databases and let’s say credit bureaus and others, but they can actually stock synthetic files into those same places which can create significant vulnerabilities for lenders such as ourselves. And then, we also saw a real misalignment of incentives, as you likely know the most valuable businesses in the world today are the business of hoarding private data about each and everyone of us and monetizing it, and it’s no different within the credit and identity world.

Centralized data aggregators are in the hoarding data business, and so when they want to sell it, for instance, to a financial institution let’s say for identity verification, they don’t provide all of the underlying data itself, they don’t provide the provenance of that data, they don’t provide linkages of where that data was seen with other pieces of data. They, basically, give you a score on the probability of thumbs up, thumbs down because they don’t want to lose on to their precious oil. So, we saw misalignment of intentions because we, as a financial institutions, or lenders who are in that business, want the most granular information possible to inform our models to actually make the best risk decisions we could for our companies.

And then finally, the way the system works today, there’s very little respect for consumer privacy. There’s a vast amount of sensitive personally identifiable information that moves around anytime anyone applies for any product because so many different verifications need to take place on a point-by-point basis. So, we saw a system that was not only fragile, but had a number of significant issues and we wondered to ourselves whether there was a technology, frankly, that could be brought to bear to deliver the elements of an ideal solution.

Peter: Right, that makes sense, and not to even mention the hacks that have happened where the exposure of all this data has gotten into nefarious hands. So, that’s another……

Adam: Absolutely, and that’s what I meant by security which was my first point was exactly that, which is, if you’re in the hoarding business, you are taking vast amounts of sensitive information, putting it into a database, that database grows ever larger and represents an incredibly juicy attack factor. The truth is, the moat around that database, no matter how wide, can be breached because once you break into the filing cabinet, you’ve got everything, right. So, we believe that there needs to be a fundamental re-thinking on security architecture, again, in order to create a much sort of safer ecosystem for both consumers, frankly, and lenders.

Peter: Okay. So, let’s dig into that, let’s dig into exactly what you’re trying to do here. Maybe you can try and explain in as simple terms as possible what Spring Labs is about.

Adam: Absolutely. So, we’re trying to transform how information is exchanged within the financial services industry with security and consumer privacy as paramount considerations. So, we are developing a network that is an information exchange, and so, what we are trying to enable is financial institutions and others that have credit-relevant, or identity-relevant information to share information with one another directly, i.e. not mediated by centralized data aggregators, or credit bureaus, or the like, i.e. just share with one another and when they do the exchange of information, they receive value.

In the current system, there is what we call a “Give to Get” model which is retail lenders today give away their hard earned credit and identity data for free to many of these centralized aggregators, like the credit bureaus, because they can’t share information directly with their competitors. So, they share it with this little man who aggregates the data together and resells it right back to those same lenders that gave it to them.

And so, it was a wonky system when we were in the lending business, we really disliked it because we lost ownership and control of our credit and identity data, and so with the Spring Labs sort of network we were trying to foster the enabling conditions, or direct sharing among institutions which means that there needs to be a flow of incentives.

So, if an institution is sharing information, they’re not giving it away for free, they’re recruiting value, number one. Number two, they’re dealing with very high security and secure privacy assurances. So, for instance, Personally Identifiable Information does not leave the firewall of participating institutions in our network, and from a security perspective, again, plain tech data is not sort of shared within sort of like the network and that doesn’t mean that it’s restricted, it ends to be hashed and faulted and we use the series of anonymization technology, again, to address the competitive sensitivities that have prevented this work sharing in the past. To go to your question about an example, though, I think that might be very useful.

Peter: Yeah, for sure.

Adam: So let’s say, Peter, you were applying for a product prior to sort of the Spring Network, you’re applying for a new credit at J.P. Morgan. The first thing that J.P.Morgan needs to do is verify you’re the person you’re purporting to be and they typically do that by not just doing it manually, but going to a number of vendors. So, that could be a new store, it could be a credit bureau, and, again, let’s use the simplest example where they’re just trying to verify one identity field, your phone number.

So, they typically go to a party and ask, is Peter’s phone number X, and that party because they don’t want to give the financial institution underlying data itself, typically, will say, thumbs up, thumbs down with a probability score and this could be true across a number of identities, or other factors as well. And so, the challenges with that system are several, the first is, you’re relying upon one party. That party can be compromised, meaning, someone can change literally what’s in the database that could be overwritten, i.e. think about synthetic identity fraud.

The second is…the most pernicious forms of fraud that exist today often take place by stitching together real identity factors that are for real people with a fraudulent bank account. So, if you’re just doing point-to-point on a single identity factor, you’re missing granular information, linkages among information, i.e. where was that phone number seen, with what address, with what IP address and with what bank account, you’re not getting that information and you’re not getting the provenance of that information, i.e. how, when, how did that data aggregator get that information. So, that’s the old system.

Under the Spring Network, we employ an entirely different concept which is rather than going to a data hoarder, you ping the network and let’s say 30 different institutions, many of whom might be regulated through permission, who had an experience with Peter and Peter’s phone number. And, without actually revealing your phone number because it’s hashed with an entity factor and without actually using any of your PII, those certified institutions that may have had an experience with you, within say the past six months, can come back and say, yes, what we have matches what you have, number one.

Number two, we’ve actually seen it with the following and other identity factors with the following problems, so let’s compare scenario one with scenario two. In scenario one, you’re relying upon one party for what’s true and that party can be compromised. In addition to that, you are not obtaining the underlying granular information, linkages with other identity factors, or the provenance to that information.

In the second scenario, you’re getting the benefit of multiple parties attesting to the veracity of that piece of information, you’re obtaining the granular information, the provenance of the information and the linkages of the information driving what we believe is much greater accuracy.

Similarly, in that verification case, Peter’s, PII, for instance, is never leaving and never crossing on the network. As such, it’s actually system is fundamentally more secure and it’s one that actually we should respect, Peter’s consumer privacy, which we think you have a right to.

Peter: Right.

Adam: So, that’s a very simplistic illustration of the world before the Spring Network and the world after it as we envision it.

Peter: Right. Just so I’m clear, you’re not taking any data, you’re really enabling connections between the pieces of the network, so the data, there’s no central depository because each of the 30 parties, you said, have their own….they’re pinging their own database internally. So, you’ve obviously written code that enables them to do that and so there’s no PII going back and forth.

So, basically, this seems like a far better system because…I mean, the biggest thing is, the way I look at it, there’s no central repository and everything, I imagine….all these databases are also being updated in real-time. So, your credit report, you know, it still doesn’t get updated in real-time whereas….maybe you can comment on that, is that the case?

Adam: You’re absolutely right. About a couple of things. The first is we are not a centralized repository of data because that would create another attack vector, right. Rather, we are the pipe, or the plumbing, or the infrastructure that connects all of these parties together to enable them to share information and value with one another.

So, if you think about our business model, it’s something that came to a Federal Express, right. Federal Express mediates the exchange of packages and value, but Fedex doesn’t open those packages, they don’t retain those packages and they don’t monetize those packages, right. So, effectively, the Spring Network is a set of infrastructures, or pipes among institutions that give them security and consumer privacy assurances and that enables the flow of monetary incentives.

So, finally, rather than giving away your information on credit identity for free to like Equifax where you’re finally sharing it with your competitors, you’re actually receiving value and, frankly, the anonymization technologies that we introduced are what enabled this as well because, otherwise, you wouldn’t be willing to share with your competitors.

And so, one of your comments also resonated a little bit which is, over the past several years that ……you know, at first when we were noodling on whether we could actually have this technology get adopted because as you know, there are something….you can develop technology, but if it’s never adopted, it’s sort of worthless, right, and we’re dealing with a highly regulated, compliance-minded industry.

You know, we spend a lot of time speaking with chief risk officers, chief credit officers, CEOs, CTOs, financial institution and financial technology companies and every single one of them said that this type of architecture, right, this decentralized infrastructure that employs the concept of multi-party adaptation and yet minimal disclosure, meaning no PII crosses the network, was the type of architecture that makes tremendous sense in the world. Now, the challenge that we have, having a chicken and egg problem, is can we drive sufficient adoption for this to actually become something ubiquitous.

Peter: Sure. So then, maybe just talk on that…..obviously, you have Avant on board because Spring Labs was born out of Avant, but how have you gone with the other consumer lenders?

Adam: Sure. So, last February, we announced partnerships with 15 leading financial technology companies and lenders. I think we named some of those recruited companies like SoFi, Kabbage, OnDeck, of course, Avant, GM Financial, Funding Circle and some others. Since then, we’ve added dozens of other partners, some of those partners include trillion dollar plus asset institutions and very much household names. We will be making an announcement in the coming months about, you know where we are with those partnerships and the rate of growth which we’re very, very pleased with, but, yeah, I think adoption is coming along quite well.

Peter: Okay, it makes sense to me. I mean, this is a 21st century solution to what has been really …..like we’re a little bit 20th century and the credit bureau infrastructure is pretty much unchanged, it feels like at least. I shouldn’t say that completely, but they’ve made enhancements. The core way they do things, still seems to be the same.

Let’s just maybe talk about that for a second because on your Home Page there, right in the middle of the Home page, you say Spring Labs, The Un-Bureau. So, do you view yourself as a replacement for the credit bureaus, or how do you kind of ….what’s your relationship with them?

Adam: Sure. So, you know, I think we try to be realistic about this. The credit bureaus have been around for many, many decades and they have a treasure trove, specifically, of retail credit performance data. We are an early stage company that is two years old, so the notion that we can come in and disrupt an industry that’s been around for a long period of time and that is supported by a highly regulated industry is not necessarily realistic in the first instance, okay.

That said, the reason we refer to ourselves as The Un-Bureau is that we aren’t a centralized repository of data and not therefore an attack factor. We are an information exchange that is fundamentally aligned with the interest of financial institutions because when there are sensitive data that never leave their firewall, it means they finally retained ownership and control of their data. When they share information, they’re not sharing the underlying data, they’re sharing an activation which is something a little bit sort of different and they actually get paid for it.

So, we’re flipping the system on it’s head, so we’re under in the sense that we’re not a corporate data. We believe in facilitating the safe sharing of data in a much broader universe that exists today.

In terms of adaption, in your question about we view ourselves as a replacement to the bureaus and what our relationship is with them, the truth is we are introducing products on our information exchange that’s using, we believe, meaningfully better than what the bureaus could do today and, essentially, to enhance identity verification, or income verification, or fraud prevention, right. We’re a little bit less related to credit position.

Over time, if we are able to drive sufficient adaption it’s very conceivable that we will get into, of course, credit as well because it’s a natural extension once you have the same parties around the table. In terms of where our relationship is, we see a lot of different avenues to collaborate with the bureaus themselves and, of course, there’s some statements to know where it becomes highly disruptive as well, but I think our general approach, like with most market participants, is to be collaborative and not antagonistic and we are actively working with some of the bureaus today on a number of quite innovative things.

Peter: Okay, that’s good to hear. So, we’re over halfway through this interview and we haven’t mentioned the word blockchain yet, and I think that’s interesting to me. I mean, you developed your Spring protocol, it’s a blockchain-based technology, can you just sort of just talk about….the blockchain is integral to what you’re doing, I presume, so maybe just talk about why you decided to use blockchain as opposed to some other kind of way to implement this.

Adam: Sure. So, I’m very aware that we’re a sort of blockchain, sort of nuclear winter from a perception perspective. (Peter laughs)

Peter: Right.

Adam: But, blockchain is not something that we shy away from, so I will explain that there are three sort of core components to our tech deck. There’s blockchain, there’s the series of advance cryptography, and then our client software and I’ll explain each in turn. So, blockchain, actually, in distributed ledger technology can be quite powerful in a lot of different ways at scale. At the scale that we’re considering a permission network, blockchain plays several relevant roles.

The first is permissioning, so adding sort of new notes, adding new participants. Permissioning is a place where a blockchain could be very useful. The second is creating an immutable record of the receipt and exchange of information, so think about an index. Over time, of all of the information that’s been out there on an individual, or out of business because, again, we’re doing things still beyond just consumer. And then, thirdly, it can actually serve as a ledger around value exchange as well.

So, those are the three ways of which blockchain will be utilized. At scale, there are a lot of other things that blockchain can do, but those are the ways that we use it. The second piece of the technology stack is advance cryptography. So, one of the reasons that J.P. Morgan doesn’t share information with Bank of America in market today….one is there are some regulatory prohibitions on sharing PII between institutions for certain purposes, fine, but the other also is this notion of competitive sensitivity that if Peter were applying to J.P. Morgan, J.P. Morgan wants to know if HSBC had a good experience with Peter….J.P. Morgan can’t just directly ask HSBC at the time you’re applying because HSBC will realize you’re applying for any product and try to poach you.

So, our technology uses advance cryptography in secret sharing technologies to address competitive sensitivity. That’s a really important part of our special sauce, frankly. And then the third is client software which is if you went to a bunch of banks and say, hey, we’ve got this nifty information exchange, it’s obfuscates competitive sensitivity, it’s secure, it’s private, but it involves blockchain in really crazy cryptography, financial institutions will do with it.

So, we needed to have client software that we do with data standardization, they would actually do the cryptographic transforms, so, again, no sensitive information will leave the firewall of a participant, or a financial institution. Similarly on the way in, they can take the cryptographic information, transform it and put it into something useful for either their decisioning or fraud models, or however the financial institution might want to use that information.

Peter: Okay, that makes sense. So then, you’ve mentioned……obviously, you’re in consumer lending, you’ve talked about small business, some of the names you mentioned earlier, I read somewhere about a real estate deal that you guys were in, so what verticals are you focused on?

Adam: Sure. So, ultimately, our technology is generalizable and global, so it can be used in a number of industries beyond financial services. So, it can be used for anonymizing the exchange of HIPAA-compliant medical records, or genomic sequencing it can be used for verifications, or authentications between humans and IOTs, you can just think about the types of use case, they can use for generalized private communication. We are not spending any of our time on any of those other verticals, even though we’ve had inbound interest because we will be boiling the ocean.

So, our entire focus is in financial services, number one, and initially, on things that relate to consumers and small business because that’s where we think we understand some of the problem sets and how to deliver real world solutions to lenders and others. And if we can prove and create proof that it creates value and it works, again, we think that there are many different ways to sort of expand the value of this network.

You know, during the course of 2020, we’re going to be launching a number of different products and those products, for instance within consumer, relate to enhance identity verification, income verification and certain fraud prevention tools like fraud registries as well as loan stacking tools.

In small business where there’s even less information sharing that takes place because there’s no real great bureau out there, ultimately, we will be, again, delivering some of these similar types of fraud and identity, business identity related sort of tool this year. The third is the property lead registry that you reference which was an RFP that we won for PACE Lenders where we think that technology can ultimately be used to create registries that over shift. So, if you think about, you know, natural uses for blockchain like obviating the need for title insurance, you know, this type of technology is one that not only could lead to that, but frankly, can also accelerate the adoption of that because it’s not that the technology can’t be used, it’s how do you change behaviors to drive adoption.

Peter: Right, okay, So then, where are you at today, do you….I mean, I presume you have pilots running, as you said, there’s a chicken and egg problem that sounds like you’ve got a few chickens running around now with all of the partners that you got signed up, so are you in production with multiple partners today? Is it still a pilot that people are running, is anyone doing their identity verification through Spring Labs and that’s it, I mean, where are you at?

Adam: Sure, it’s a great question. So, just as a piece of clarification, nothing that we’re doing is in a pilot phase and nothing that we’re doing will be a pilot. Everything is going immediately into production.

Peter: Okay.

Adam: So, we have commenced the technical integration process with some of our partners and, again, imagine for a second we’re putting technology behind firewalls of highly regulated compliance-minded institutions and, therefore, we need to be stuck to compliance, which we are. We needed to have the best in class sort of penetration testing, we needed to have some of the best and brightest minds around security architecture which, you know, I can describe the work of some our people which is pretty extraordinary.

But then we also have this, you know, understand and deal with thousands of questions, info security sort of questionnaires, we need to get on the road map for technology development as well as to, you know, be on the road map from a risk perspective with all of our partners. So, the process of getting integrated, you know, takes some period of time, we’ve commenced that process

We think by the end of the 2nd quarter, we’ll have eight to nine institutions, all household names, starting to trade data and over the course of 2020, we’re targeting something like 30 institutions to be integrated into the network. You know, the number of partnerships, of course, just continue to grow well, well beyond that.

Peter: So, what about in the alternative lending space, I mean, if I go and take out a loan at Avant today, is the Spring Labs technology in the process yet?

Adam: Not yet. So, we expect trading of data to commence towards the end of the 2nd quarter of this year and to continuous wrapping up as we add, you know, additional skills layers because the focus that we’ve been adding more recently are quite sizeable sort of institutions. So, again, we’ll make an announcement, you know, later that I think will become more obvious where the overlaps will exist. But, we view the next…call it 12 to 18 months as the rubber hitting the road on new stage revenue generation and really sort of proving that this new model for information exchanging and, importantly, will add more value for our customers.

Peter: Right, okay, fair enough. So then, maybe give us a sense of the scale you’re at like how many employees do you have, where are your offices, that sort of thing.

Adam: Sure. So, at this point, we’re roughly 55 employees, almost everyone is based in Los Angeles, in Marina del Rey. We’ve raised capital to the tune of just shy of $40 Million for our Series A from last year. And, you know, I think the majority of the team, about two thirds are engineers, or cryptographers and at this point, everyone’s heads down because, you know, we’ve developed this long standing relationship with these partners and that have been actually involved in developing the products.

So, it’s not just sort of partnership in name, they’ve been actively involved in the development process with us with the past year, or so. So now, we’re just literally trying to deploy the technology and flip the switch and continue to iterate our products because there are a whole sort of use cases beyond the range of the market this year that we think are going to add increasing value to lenders, frankly, and others over time.

Peter: So then, what’s the business model exactly? How are you guys going to make money, is it going to be like….is this a SaaS product, is this like a transaction-based revenue generation, how’s it going to work?

Adam: So, great question. When we started the business, you know, we spent a lot of time thinking about business models and, again, because of the experience that I’ve had in the past at looking and investing in many different companies, we wanted to build a very durable, compelling business model. And so, to share…. our revenue model…again, we’re just an information exchange, so let’s say, Avant is sharing information with Prosper, Marlette, Marcus, and Kabbage, in that scenario with information exchange, the sharing party receives value and we receive some portion of that value.

So, we are a toll collector on the network which means we are not charging set up fees, or monthly sort of subscriptions, or anything along those lines, our interest is, fundamentally, aligned with the volume of information that flows through our pipes. And so, we think that aligns our interest with financial institutions who want more information, and we also think it’s a good business model because it’s one that at scale requires very limited capital.

We’re not in the lending business where we have to put equity in each of the loans, and so at scale, it’s a business that also have high margin, it is a business that ought to have very strong operating leverage, it is a business that should not be cyclical, frankly, in any meaningful way, and it should be a business that doesn’t require significant amounts of capital to be raised over time. Again, maybe to reach out at some point down the road, but, again, we shouldn’t be a serial sort of capital raiser for this business. So, we think it’s a good business model, but, of course, there’s a lot of work to do to get it to scale and prove out that this vision of ours is going to work.

Peter: Yeah, that makes sense. Okay, we’re almost out of time, just a couple of more things I want to get to. You have some very high profile advisors with your company. One, Gary Cohn, who was with the Trump administration earlier and obviously a very well respected executive in financial services so maybe…how were you able to get Gary Cohn on board?

Adam: We do have an incredible Advisory Board and in most cases, these are people who have either backed businesses in the past like Nigel Morris, who co-founded Capital One, or with whom I’ve done work before. So Sheila Bair and I sat on a board together for years, Bobby Mehta, who was the CEO of TransUnion for many years, still on the board of TransUnion, he and I sat on the board for a long time. These are people who have looked at what it is we’re trying to do and believe this is the way of the future for exchanging information.

In the case of Gary, when he left the Administration, a couple of us had this thought that, you know, this is a business that we’re developing that requires not only understanding the technology and how it can be deployed in a commercial context, but also how it’s sort of can exist in a broader and evolving regulatory environment. Gary was someone, having been President of Goldman Sachs and then the Chair of the National Economic Council, a person who really couldn’t understand better the relationship between commercial activity and evolving regulation.

And so, as it turns out, we had a mutual friend, one of his former partners from Goldman had backed another business that I started, he introduced us and we had breakfast in New York and when I explained to him what we were developing, he immediately understood two very interesting use cases for the Spring protocol.

One was in effectively crowd sourcing, ultimate forms of credit performance data and other forms of data that don’t find their way into the system like the asset side of your balance sheet from asset, or investment managers, or your income, or employment, and so, if we were able to flow the incentives of our system as well as security and privacy assurances creating a more vibrant ecosystem of data sharing then all of a sudden, you can start tackling major societal level problems like thin file customers, or no file customers who are caught into the vicious cycle of not having credit, therefore people are not having traditional retail credit, therefore not having a retail performance history, therefore can’t get credit, right.

And so, he understood the power and scale of what we were doing to drive financial inclusion, and the other was he understood how technologies could actually be used to identify, you know, real problems through the cycle for regulators. So, I think, it immediately resonated with him and he has been a terrific advisor, as all of our advisors, because they’re uniquely involved, frankly, in ways that in other companies I’ve been involved with, you know, they’re much more passive even at the board level. We’ve been quite blessed to have some great people involved.

Peter: That’s awesome, that’s really, really great. So, last question then, let’s just assume you guys are wildly successful and all of your plans come to fruition and we have this real-time system, where does that leave the credit bureaus and where does that leave the individual and how they……you know, like they’re still not really owning their data. Maybe the question is, what is the future of credit data in your vision?

Adam: Sure. So, I think that’s a great question and I would answer it from two different perspectives. The first is, we would like to see the world moving away from a silo of hoarding mentality to one where you can have safe sharing, with high security and consumer privacy, and, frankly, that applies within financial services and credit, but, frankly, in the broadest sense, and that is a big thing that sort of motivates us everyday.

The second is, and this is something that we intend to add over time, but we chose not to do it because we think we get to scale faster starting with enterprises, we absolutely want to have consumers in the loop. And we want consumers to be in the loop for several reasons.

The first is we wanted to have transparency and much better transparency than they have today with the existing system. The second is we want them to have better user experience, especially around contestability. Again, have you ever tried to contest the bureaus these days is a complete nightmare.

The third is, in many cases, we actually want consumers to have some amount of control and actual ownership over their data. The reason why I say some, rather than all, is I think there’s often this notion that consumers should own everything, the truth is they should own their identity. And so, they should be compensated, in fact, when some of their information ultimately is used. Again, we think our network can actually accomplish that over time. Perhaps that shouldn’t be the case for credit performance data because you shouldn’t be able to delete, you know, the time you actually forgot to pay.

Peter: (laughs) Right.

Adam: It’s note a universal thing, but the general idea is we want to see the world moving away from these data hoarding silos to safe sharing and we want to see a world where consumers are in the loop with privacy and some degree of control in dramatically better user experience and transparency.

Peter: Well, that is a wonderful vision and I hope we are able to get there this decade. (Adam laughs) It would be great for so many of us. Anyway, we’ll have to leave it there, Adam, I really appreciate your coming on the show today.

Adam: My pleasure, Peter, we really appreciate your inviting us.

Peter: Okay, see you.

Adam: Alright, thanks.

Peter: You know, I think even the credit bureaus would acknowledge that the future of credit and personal identifying information….it’s not stored in a centralized database. I think the way we have it set up today is, if not broken, it’s certainly in need for improvement. What Spring Labs has got is, I think, a pretty compelling case for one of the visions that could actually come to fruition when it comes to how all this information is stored and how access to it works. I think we have a long way to go before they get there.

Adam acknowledges that as well, they are not ready for prime time yet, but I think they’re getting there, whether it’s Spring Labs, or somebody else, I really feel like we are going to have a decentralized system. I think it’s going to happen this decade.

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. It’s happening on May 13th and 14th, 2020, at the Javits Center in New York City. Lending and banking are converging and LendIt Fintech immerses you in the most important trends of the day. Meet the people who matter, learn from the experts and get business done. LendIt Fintech, lending and banking connected. Go to lendit.com/usa to register.

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Filed Under: Lending and Fintech Podcast Tagged With: Blockchain, Credit Bureau, credit data, identity, Spring Labs

Views: 509

Spring Labs is Building the Future of Anti-Fraud and Identity Verification

A new blockchain-based anti-fraud system is being built in cooperation with major online lenders

January 21, 2019 By Peter Renton 1 Comment

Views: 726

Last week fintech startup Spring Labs announced they are developing the Spring Protocol, a blockchain based anti-fraud and ID verification system, with 16 consumer and small business lenders as launch partners. The 16 partners include SoFi, OnDeck Capital, Avant, GreenSky, Funding Circle, BlueVine, Fundation, Upgrade, Fundbox, and Better Mortgage. There are six other lenders who were not named in the release.

I have been following the development of Spring Labs with great interest since they announced their initial funding in March of last year. Most of the management team came out of Avant so they were familiar to me and I have spoken to them several times since their launch, most recently, just a few days ago. What they are looking to achieve, I think, is groundbreaking and sorely needed in the online lending space.

Much has been written about the Equifax breach and it is clear that keeping credit and identity data in a centralized database is not the best solution and probably not sustainable long term. Spring Labs provides a real alternative, one that takes advantage of blockchain technology. They have built a peer to peer network that allows any member company to query information that may be held at another member company.

It is easiest to understand with the use of an example. Let’s say someone applies for a loan at Avant. In order to do identity verification on this borrower Avant sends a request to the Spring Protocol to see if any member company can verify the address and phone number of this person. A one way encrypted hash of this information is sent to the protocol as an API request to determine if any other network participants can verify the information for this borrower. It just so happens that Upgrade has made a loan to the borrower nine months ago so the protocol sends a request back that the information has been verified. Avant has no idea who verified the information only that this borrower is within the network and their identity has been verified. There is no central store of this information, instead, the validation of the request is provided via the protocol without unencrypted or personally-identifying data leaving Upgrade’s servers.

[Read more…]

Filed Under: Future Trends Tagged With: Blockchain, Credit Bureau, fraud, identity, Spring Labs

Views: 726

New Report Covers Early Progress on Open Banking

A new report by LendIt Fintech looks at the current state of open banking and some early lessons learned.

October 17, 2018 By Todd Anderson Leave a Comment

Views: 201

Open Banking has been one of the most talked about topics in fintech over the past couple of years. In a new LendIt Fintech report we wanted to explore where open banking stands today and what the key issues are for banks, fintechs and service providers.

The report covers seven key areas of open banking: drivers and benefits of open banking initiatives, regulatory frameworks around the globe, financial functions targeted by open APIs, leading open banking players and their initiatives, collaboration strategies, risks and challenges and defining the path to success.

[Read more…]

Filed Under: Peer to Peer Lending Tagged With: AI, APIs, Blockchain, credit risk, data analytics, identity, lending innovation, Open Banking

Views: 201

Five Things That Excite Me About Fintech Today

There is more change happening in fintech today than ever before but here are five themes that are particularly exciting

July 10, 2018 By Peter Renton Leave a Comment

Views: 1,719

When I started LendIt with my fellow co-founders back in 2013 I was most excited about how online lending could disrupt the banking system. I felt that we were at the beginning of a paradigm shift in banking and that the online lenders would soon rule the world. While it hasn’t turned out exactly like that I am actually more excited today about where finance is heading than ever before.

Today, there are many things that excite me about fintech, here are five themes that I find particularly exciting.

1. Advances in Data Analytics

I have said before that data science is becoming the most important skill in fintech. There is more data generated today than at any time in human history and we need new ways of analyzing this data. Advances in artificial intelligence and machine learning have meant we can now make sense of this vast amount of data.

There are so many benefits to finance of these advances but the most important one I think is what it means to the underserved consumers around the globe. Advanced data analytics combined with the increased use of mobile phones in the developing world means for the first time everyone has the potential to be connected to the financial system. This is going to have huge ramifications globally over the next decade.

2. Blockchain and Distributed Ledger Technology

[Read more…]

Filed Under: Future Trends Tagged With: Amazon, Blockchain, China, data analytics, digital banking, distributed ledger

Views: 1,719

Global Debt Registry Launches Loan Ledger with Help of IBM Blockchain

The new platform will allow for greater transparency into the online lending ABS market and already includes lending platforms such as Avant

June 27, 2018 By Ryan Lichtenwald Leave a Comment

Views: 332

We often hear about all of the applications of blockchain technology in financial services, but there are very few solutions which have reached a point where they are ready for prime time. Today we learned that Global Debt Registry was leveraging IBM Blockchain for their new decentralized ledger. Loan data serving the ABS market will now be available on the cloud-based IBM Blockchain Platform.

The ABS market relies on a variety of service providers throughout the supply chain which leads to inefficiencies in the process. Putting this information on the blockchain also allows for greater transparency for issuers, auditors and of course, investors.

What’s interesting about this announcement is the new GDR decentralized registry has already registered over 700,000 loans across multiple credit facilities. It’s no surprise that the focus has been on the digital or online lending market. Specifically, the press release noted that investment banks are currently leveraging the platform to manage their positions in Avant among others.

Kevin Friedrich, VP Finance & Treasury from Avant provided the below statement in the press release:

Avant is committed to serving its capital partners with innovative technical solutions to maximize transparency and ease of collateral management, as further demonstrated through our use of GDR’s blockchain based registry.

Conclusion

If we look back at the early days of p2p lending, access to loan level data was one of the aspects that made the next generation of lenders revolutionary. Leveraging blockchain technology is the next iteration of this, offering transparency to investors in a more seamless way. Given the benefits to numerous stakeholders and efficiency gains it is also one that could scale quickly.

Filed Under: Peer to Peer Lending Tagged With: ABS, Avant, Blockchain, Global Debt Registry, IBM

Views: 332

Chris Larsen: From Marketplace Lending Pioneer to Creating the New Internet of Value

The co-founder and former CEO of Prosper is now trying to solve a massive multi trillion dollar challenge: enabling instant global payments

May 1, 2018 By Peter Renton Leave a Comment

Views: 196

Back in 2010 in my first month at Lend Academy one of the first people I reached out to was Chris Larsen, then CEO of Prosper. I was writing a story on some changes at Prosper back then and Chris was gracious enough to respond to this new and unknown blogger. Over the next couple of years I met Chris in person several times and got to know him reasonably well as I continued to cover Prosper and marketplace lending more broadly.

I was very disappointed when in 2012 Chris announced he was stepping down as CEO of Prosper. He was the founding CEO and at the time I wondered what could be more important than helping to drive Prosper forward. But Chris had an itch to start a new company, one that was based on this emerging blockchain technology.

Of course, this move proved to be prescient and his new company, which eventually became known at Ripple, has the potential to completely rewrite the rules of global commerce. In 2013 they introduced the XRP token as the vehicle to help them achieve this goal. XRP (as of this writing) is the third most valuable token with market cap of $32 billion. This is down considerably from its high in January when its market cap reached around $150 billion and briefly made Chris Larsen one of the wealthiest people in the world.

Chris had never spoken at LendIt before given that his time at Prosper was over before we launched our event. But he agreed to speak on our keynote stage last month and it was standing room only for this fintech pioneer. You can watch the video below or go to this link. It has become the most downloaded session out of all the keynote videos. [Read more…]

Filed Under: Peer to Peer Lending Tagged With: Blockchain, Chris Larsen, Prosper, ripple

Views: 196

What will the financial services industry look like in five years?

Bo Brustkern, the CEO of LendIt Fintech and Co-Founder of NSR Invest shares his thoughts on the future of financial services.

April 3, 2018 By Bo Brustkern 3 Comments

Views: 82

[Editor’s note: Bo Brustkern is Co-Founder and CEO of LendIt Fintech and Co-Founder of Lend Core, which operates NSR Invest and Lending Robot. He is a serial entrepreneur with a passion for building companies and he has spent the past six years focused on the fintech space.]

Attempting to predict the future is a fool’s errand particularly in the fintech arena, where change can be surprising, lightning quick and brutal. But I’ll play the fool and give it a go. This article briefly touches on many of the themes being explored at our LendIt Fintech USA 2018 conference, which is now just days away:

Audits Will Go the Way of the Dodo Bird

Stop me if you’ve heard this one before. No, seriously: the blockchain is for real. The protocol of trust is here to stay, and it’s going to disrupt everything. Just know, it is going to have a massive impact on the future of financial services. Here are some examples:

At our p2p robo-advisor, Lending Robot, we publish a record of all transactions executed by our Series Fund to the Ethereum blockchain. An immutable record of all transactions, making future audits far less complex and expensive. While the blockchain has not rendered audits unnecessary yet, I believe we’ll see it happen within the next five years.

Smart Contracts Are In, Long, Paper-Intensive Financial Processes Are Out

As I write this, Lending Robot is raising a private round of growth capital. The closing process, called “papering” for very obvious reasons, is just as onerous and Microsoft Word-oriented as I remember it back in the early 2000s when I was a young VC. Where are Ethereum-based smart contracts when we need them? Indeed, I believe we’ll see smart contracts proliferate broadly in the next five years.

Cross-Border Payments Become Seamless and Inexpensive

Our conference business, LendIt Fintech, is a multi-currency enterprise regularly dealing in USD, CNY, GBP and EUR, just for starters. Cross-border payments are costly and time-consuming. For good reason; cross-border transfers have the compounding challenges of anti-money laundering laws, know-your-client regulations, exchange rates and stacked bank fees. Again, I believe that the protocol of trust (blockchain) coupled with a universal, fungible currency (crypto) will disrupt cross-border payments in the next five years.

Say Goodbye to Expensive Transaction Fees

Several recent announcements from well-known crypto companies claimed to allow businesses to set up alt-coin enabled checkout systems. After several months of trial and failure, our conference business finally broke through with a success… BitPay to the rescue. I’m delighted to say that LendIt Fintech accepts Bitcoin as a payment method. And here’s the pleasant surprise: processing fees for crypto payments are materially lower than credit card processing fees. Compare roughly 3% (old skool) with 1% today. Imagine a future with sub-1% transaction fees… I believe it’s going to happen, and soon.

“Investing for Everyone” Takes Hold

Some of the most exciting innovations are occurring in wealth management. While Betterment and Wealthfront may have taken early headlines and a few billion AUM, it’s not robo-ETFs that I’m excited about. That stuff is… well, let’s say comparatively easy… and most of the innovation over the past decade is not impacting the non-accredited investor, which accounts for about 92% of us. What’s more exciting are the new Regulation A+ funds that are beginning to proliferate. Noteworthy are Fundrise, which offers real estate investments to retail investors, Street Shares, which specializes in small business lending, and SeedInvest, which is democratizing venture capital. Imagine a future where investment products proliferate not just for the already-rich, but for aspiring intelligent investors across the economic spectrum. This reality is already on the way.

Fintech is Everywhere

Fintechs are enhancing the customer experience along four axes: choice, price, convenience, and predictability. They are meeting the needs of educated, aware, demanding consumers and they are attacking traditional financial institutions at every angle. They are everywhere: personal loans, business credit, insurance, investing, wealth management, mortgage lending, student loans, financial education, visualization and interface, credit scoring, credit management and achievement, merchant services, payments, payroll, benefits. Did I get everything? I’m sure not.

Enabling this is the amelioration of regulatory requirements by governments across the globe. While Estonia is famous for its digital citizenship, called e-residency, the UK’s Financial Conduct Authority is arguably the most innovative regulatory body when it comes to promoting financial services innovation. Since 2016 the FCA has been building and promoting its regulatory sandbox built for UK fintechs to launch and test their products under proportionate regulation, which is essentially a scaled-down compliance requirement that scales up once it’s clear that a concept is commercially viable.

Not only has the UK government created a hospitable environment for fintechs at home, but it has begun exporting the blueprint for its regulatory sandbox to other nations. The idea is that fintechs that meet common regulatory standards will be able to offer their products around the world without burdensome regulatory requirements at home or abroad. It’s quite possible that we’ll see multiple governments around the world set up regulatory frameworks that scale in proportion to innovation, allowing fintechs access to a broadly compatible, cross-border regulatory system.

Summary: The Engine is Roaring & the Runway is Long

We are right now experiencing the confluence of massive change. Sovereign identity, deep learning, decentralized networks, trustless systems, and scalable regulations are conspiring to fundamentally change financial services. Indeed, the fabric of our economies is being rewoven right under our feet. I am delighted to participate in this time of massive change because I am optimistic about what will result: increased speed, safety, security, convenience, and privacy. Governments competing for innovators, and consumers benefiting across the board.

Do you agree? What do you think will be the lynchpin of change in financial services? Tell me in the comments section below.

Filed Under: Guest Post Tagged With: Blockchain, Bo Brustkern, financial services, future

Views: 82

What is Blockchain and Why Should the Real Estate Industry Care?

In this guest post Tobias Briegel explores the intersection of blockchain technology and real estate.

February 6, 2018 By admin Leave a Comment

Views: 128

[Editor’s note: This is a guest post from Tobias Briegel, a cryptocurrency and blockchain enthusiast and National Account Manager at Chetu Inc. As an experienced leader and communicator, Tobias offers commentary on the changing tides within the finance industry, offering predictions on how emerging technologies will rattle the pre-existing system.]

Blockchain, the decentralized ledger behind the cryptocurrency curtain, is a force to reckon with, offering a compelling alternative to traditional exchanges of all kinds. Rather than compiling transaction records in a central hub, blockchain technology fragments this information and keeps records across an immense network of hard drives and servers—keeping a transaction as public record, but keeping the exchange anonymous.

In its infancy, blockchain represented an anti-establishment movement, putting a microscope to the deficiencies of centralized banking systems and building bridges where those gaps exist. Blockchain operates with a less is more ideology, keeping risk low by reducing the parties involved and increasing transparency.

Transactions are encrypted and verified in one of two ways: Proof of Work (PoW) or Proof of Stake (PoS). Crypto miners verify transactions through a series of sophisticated computations before the transactions are added to the public ledger. The miners are then compensated with fractional ownership of recently mined cryptocurrency.

Blockchain and Smart Contracts Save Real Estate

In 1996, over a decade before Bitcoin came to market, digital currency pioneer and computer scientist extraordinaire, Nick Szabo, introduced a contractual protocol that was entirely self-executing. We call this protocol a “smart contract,” an encrypted and trackable agreement between consenting parties.

Since the dawn of organized property exchanges, real estate brokers and legal entities have existed in pairs. Sometimes they coexist productively, but more often than not, the cross-industry dialogue is a pain point. We need legal representatives to outline the terms and ensure these terms are met by all parties—land registry, mortgage providers, surveyors, the buyer, the seller, an agent. With a high-value exchange dependent on the compliance of such an immense web of people, the process frequently encounters long-term setbacks and unexpected tribulations.

Smart contracts eliminate the number of hands involved by cutting out extraneous third parties. Who remains? The buyer, the seller, and the agent. The conditions are established and then coded into blockchain technologies. Met conditions (dollar amount or date of execution) trigger a reaction automatically, and the contract self-executes.

The process remains relatively similar to traditional contracts: property selections through blockchain MLS, negotiation of letter of intent, smart contract pre-lease, smart contract lease agreement, automated payments and cash flow, plus real-time statuses. However, this all happens without any legal involvement. [Read more…]

Filed Under: Peer to Peer Lending Tagged With: Blockchain, real estate

Views: 128

My Thoughts on Bitcoin and Sharing my Cryptocurrency Portfolio

Bitcoin is the financial phenomenon of the year, here are my thoughts as well as a breakdown of my holdings

December 14, 2017 By Peter Renton 18 Comments

Views: 193

Every quarter we get together with three other families for a dinner party. While all professionals no one is in the finance space except for me. But at our last gathering this past Sunday night the conversation turned to bitcoin. In the last month or two bitcoin has made the jump from esoteric financial instrument into a dinner party discussion subject.

We first covered bitcoin in a two part series on marketplace lending with bitcoin three years ago. It provides a good primer to what bitcoin is, the definition of a blockchain and how it works for lending.

Back in late 2014 bitcoin was nothing more than a curiousity – you could barely even call it part of finance – it was a strange hobby that a few tech people were engaged in. Today, bitcoin is making an appearance regularly on the front page of the Wall Street Journal as its meteoric rise has captured the imagination of the general public.

Depending on the day (or the hour) bitcoin has a market cap of around $300 billion which is close to the value of Bank of America, one of the top 10 largest companies in the United States. According to Coinbase, the largest bitcoin exchange in the world, the price of bitcoin is up over 2,000% in the last 12 months and that is why everybody is talking about.

We have read articles about someone buying two pizzas for 10,000 bitcoins back in 2010 (around $170 million in today’s value) or another person throwing away 7,500 bitcoins. There are now bitcoin billionaires and many other stories of people who have become insanely rich because they got into bitcoin early. This is what captures the imagination of the public. If only we had invested just a few hundred dollars back in 2011 or 2012.

The Rise of Cryptocurrencies

[Read more…]

Filed Under: Peer to Peer Lending Tagged With: Bitcoin, Blockchain, ethereum, litecoin, portfolios, ripple

Views: 193

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