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Digital Currencies Finally on the Mainstream Path

Two recent announcements by PayPal and Coinbase have helped to accelerate the wide scale adoption timeline for the crypto markets.

November 3, 2020 By Todd Anderson Leave a Comment

One of the biggest questions the crypto and blockchain communities have yet to answer is when would these technologies reach mainstream usage. That is beginning to be answered with the recent news of PayPal’s new service enabling users to buy, hold and sell cryptocurrency.

Coinbase then announced a debit card that lets you spend any asset in your Coinbase portfolio and earn rewards for each purchase. You don’t need to be an engineer to use either product and it is a giant step in the right direction for the space.

There has also been a big trend by central banks across the globe to begin development on central bank digital currencies. According to the Bank of International Settlements ten percent of central banks have said they will develop a digital currency within the next three years.

China has taken the early lead in this race and has already been conducting tests worth more than $300mn. The EU has committed to building a CBDC by 2025 and the U.S. has even said they are examining the issue, though they have yet to commit to a timeline.

For years, the industry has talked about the transformative nature of using these technologies to democratize access to financial services and make markets more efficient. One of the biggest impediments to that vision has been the complicated nature of the tech and making it easily accessible to the general public.

To be clear only about 15 percent of Americans own cryptocurrency as of late 2019. That number is up from about 8 percent in 2018, which shows the knowledge base is growing but wide scale adoption is not apparent yet.

PayPal is helping to breakdown the complicated barriers allowing crypto holders to use their PayPal wallets. “The shift to digital forms of currencies is inevitable, bringing with it clear advantages in terms of financial inclusion and access; efficiency, speed and resilience of the payments system; and the ability for governments to disburse funds to citizens quickly,” said Dan Schulman, president and CEO of PayPal, in a press release announcing the news.

As of this writing bitcoin is now above $13,500, and even surpassed $14,000 briefly, highs not seen since early 2018. Traders clearly believe the PayPal news has the potential to be a game changer with the payments firm having more than 345 million users and 26 million merchants globally. The price has also been impacted by the news that Square invested $50 million in bitcoin just last month.

CBDC’s will help tamp down the volatility and governmental unrest across the globe can also help to move more people towards crypto as a safe haven. There has always been a lot of potential with the crypto and blockchain community. For the first time a clear path to scale seems attainable.

Bernardo Martinez Steps Down as Managing Director Funding Circle US

Martinez served as managing director of Funding Circle US for more than two years and is now returning to PayPal.

May 7, 2020 By Ryan Lichtenwald Leave a Comment

We have recently learned that Bernardo Martinez is stepping down from his role as US Managing Director of Funding Circle. Bernardo started leading Funding Circle US in March 2018 when industry pioneer Sam Hodges stepped down. Before his role at Funding Circle, Bernardo was head of PayPal Working Capital.

Interestingly, Martinez is returning to PayPal in a new global role after his two year stint at Funding Circle. Vipul Chhabra is stepping in to fill the role as interim managing director. Chhabra is Funding Circle’s Global Head of Data and Analytics and has been working in financial services for two decades spanning roles at Capital One and Citigroup.

Martinez provided the following statement as part of the news:

I’m extremely proud of my work with Funding Circle US over the past two years. Our goal has always been to support American small businesses—the backbone of the economy—and I can truly say that Funding Circle US is at the forefront of aiding small businesses, even in a historic crisis. While my time with Funding Circle US is coming to a close, I’m confident that the company and it’s leadership will continue to innovate and deliver for small business owners.

Interim managing director Vipul Chhabra had this to say:

Having launched our Paycheck Protection Program lending, this is a historic period for Funding Circle. I’m committed to our mission of supporting and funding American small businesses, which is as important today as it’s ever been.

Conclusion

Funding Circle is among the fintech lending leaders serving small businesses in the US. The company recently was approved by the SBA to issue loans under the Paycheck Protection Program. We continue to follow the work Funding Circle is doing closely and wish Martinez the best of luck in his new role at PayPal.

All of the Fintechs Involved in PPP Loans

We share all of the fintech lenders who are currently involved in the Paycheck Protection Program

April 16, 2020 By Ryan Lichtenwald 7 Comments

It has been an interesting to say the least as we have watched everything play out with the Paycheck Protection Program loan process. Fintechs were eager to help small businesses with the $349 billion initially allocated to small businesses but initially there wasn’t clarity on when it might be possible. For many who wanted to be among the first to apply, going through a bank was the only option as LendIt Fintech experienced firsthand. As we stand today there are now many fintechs, both lenders and banks involved in the process although the initial $349 billion allocated to the PPP has run out, according to Senator Rubio this morning. It is expected that Congress will appropriate additional funds soon.

Approvals started with small business lenders like Kabbage, made possible through an unnamed bank partner. Then this week we saw lenders get approved on a standalone basis. Other fintechs have taken an entirely different route. StreetShares had originally planned to offer SBA loans but then opted to instead partner with Fiserv. They are providing to them a secure portal for bankers to review and prepare documents while also providing application processing and eligibility checks.

If you’re looking for a full list of PPP lenders, Gusto has created this helpful Google sheet which continues to be updated with the status of each lender.

We will continue to update the list below as more fintechs get approved.

Approved Fintech PPP Lenders

PayPal
Quickbooks
Square
OnDeck
Funding Circle
Kabbage
Bluevine
Credibly
Fundbox

Fintechs Working with Partner Banks for PPP Loans

Fundera
Lendio
Brex
Nav
SmartBiz
Biz2Credit

Fintech banks processing applications

Cross River Bank
Celtic Bank
Radius Bank
Sunrise Banks

It is difficult to overstate the importance of the PPP for the health of American small business. For many, it will have come too late but for millions of small businesses this money will allow them to stay in business and keep paying their employees. Congress needs to set aside its differences and provide more money for this program immediately. There is still a huge number of small businesses that need this money.

The Ten Biggest News Stories of the Decade in Marketplace Lending

We take a look back at the news stories that shaped marketplace lending in the 2010s

December 30, 2019 By Peter Renton 1 Comment

I started writing about marketplace lending back in 2010, so I have spent almost the entire decade immersed in this space. While we have expanded our coverage on Lend Academy today beyond marketplace lending this remains a major focus.

We have certainly come a long way in the past ten years and the industry is almost unrecognizable from where it was in 2010. Back then there were just two notable companies in the space, LendingClub and Prosper, originating just a few million dollars a month in loans. No one could have predicted that by the end of the decade marketplace lending would have led to a resurgence in personal loans and changed expectations for customer experience across all lending verticals.

As I look back at the past decade here are, in my opinion, the top ten most important news stories in chronological order.

Prosper Recapitalizes and Brings in a New Management Team
(January 2013)

At the time this was a huge story. The number two marketplace lender had been struggling for some time and was in serious danger of running out of money. This new funding round was small by today’s standards at $20 million but it ensured that Prosper would remain a going concern. The deal was architected by, the now fintech legend, Ron Suber as he brought in a new management team and a new board to guide Prosper on to their future growth path. It helped set the industry up for success over the next several years.

LendingClub Becomes First Marketplace Lender to go Public
(December 2014)

This was a momentous day for marketplace lending as market leader LendingClub became the industry’s first company to go public. The IPO was a huge success by any measure. By the end of the first day of trading LendingClub was valued at $8.46 billion and they had raised $870 million in cash. Of course, at the time we had no idea what would happen to the stock but there was a sense a real optimism that this company was going to change the world.

Second Circuit Rules on The Madden Decision
(August 2015)

The biggest legal issue the industry dealt with this decade was the ramifications of the Madden v Midland decision. We have been following this case since the Second Circuit ruling in 2015 and it has had far reaching consequences for the industry. It has led to a reduction in lending activity in Second Circuit states (NY, CT and VT) but the bigger concern was that this kind of ruling would spread nationally. That has not happened and there have been multiple regulatory fixes proposed plus the OCC and FDIC have weighed in as well. But as of this writing nothing concrete has changed since the 2015 decision.

SoFi Raises $1 Billion Led by SoftBank
(September 2015) [Read more…]

PayPal Crosses $10 Billion In Small Business Loans

PayPal continues to grow their small business lending operation and is originating $1 billion per month

May 29, 2019 By Ryan Lichtenwald 1 Comment

PayPal is a company whose name is much more synonymous with payments than lending. However, that might be changing as the company announced that they had crossed $10 billion in lending.

The originations were spread out across 225,000 small businesses around the globe. While their US lending business may be familiar to many, they also operate in the UK, Australia, Germany and also Mexico through a partnership with another online lending platform.

It took the company five years to reach the $10 billion milestone and almost two years to pass the $1 billion mark. Now they are hitting some impressive quarterly milestones, originating $1 billion per quarter, so their next $10 billion is surely to happen even quicker.

Their success is in part due to the wide range of loan amounts, from $1,000 to $500,000. So where does PayPal stand when it comes to their competition? deBanked recently highlighted the leading small business originators which showed that PayPal is solidly the leader when it comes to originations in the US. OnDeck which is second to PayPal reported originations of $636 million in Q1 2019. According to data provided by Funding Circle on their website, which includes their lending globally, they have originated $9.5 billion in loans.

Image credit: deBanked.com

Beyond just looking at origination numbers, it’s important to take note of the value that all of these small business lenders are providing to small businesses both in the US and abroad. When you look at the fact that on average a loan from the U.S. Small Business Administration takes 90 days to complete and that traditional banks have ignored this segment for years, it’s clear that there is room for many winners in the small business lending market. Looking forward it’s going to be interesting to see how all of these lenders evolve to provide much needed capital to small businesses across the globe.

The New Breed of Small Business Lenders: Amazon, Paypal and Square

We explore the small business lenders of tomorrow who have significant advantages in customer acquisition and data.

July 25, 2017 By Ryan Lichtenwald 1 Comment

If asked where to get a small business loan most people would state their local banks or even some of the bigger traditional banks. Those aware of the online lending space may mention the likes of Kabbage, OnDeck, Funding Circle or maybe even some of the new online initiatives of big banks like Wells Fargo’s FastFlex product. However there is another, often overlooked segment of small business lenders and they are names you have heard of: Amazon, Paypal and Square.

Until recently I hadn’t paid much attention to these companies. Amazon in particular flies under the radar and little is known about their lending business. Recently it came out that they are doing a considerable amount of lending to small businesses. Amazon lent $1 billion in the last year and has lent $3 billion to more than 20,000 small businesses since launching their lending product in 2011.

Most alternative small business lenders aim to innovate on pricing, speed, transparency or underwriting. Many also claim the use of data for underwriting purposes as a main differentiator. I’d argue that Amazon has more of an advantage when it comes to data since most other lenders rely on third parties or the small business to provide access to their data. Since Amazon is a marketplace for sellers they have an incredible amount of data on the cash flow of businesses that operate on the platform. They also have a significant pool of borrowers, resulting in virtually no customer acquisition costs.

The best way to understand how Amazon lends money to small businesses is hearing about it directly from a borrower. The podcast called Marketplace recently interviewed an Amazon seller and it was fascinating to hear how it works. [Read more…]