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Mueller Jackson
Jackson Mueller
Associate Director, Center for Financial Markets
Jackson Mueller is an associate director at the Milken Institute's Center for Financial Markets. He focuses on fintech, capital formation policy and financial markets education initiatives. Prior to joining the Institute, Mueller was an assistant vice president at the Securities Industry and Financial Markets Association (SIFMA), where he focused on...
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FinTech in Focus

By: Jackson Mueller
August 16, 2016
   
   

The Olympics

I watched a lot of NBC’s coverage of the Olympics, otherwise known as “Just Swimming and Gymnastics,” this weekend due to the inferno-like temperatures raging outdoors. And as excited as I was to watch America dominate, I realized that there are competitors my age and younger whose medal count is a bit more lucrative than the MVP I was awarded in kindergarten for paying attention during soccer rather than sitting down on the field and picking dandelions. So, sulking in the corner, I turned off the TV and started writing FinTech in Focus. Game on!

Online Finance Developments

A couple of developments: First, Square Capital is reportedly marketing its lending product beyond merchants that use Square’s hardware and software. Meanwhile, the U.S. Federal Reserve will hold a conference in Washington, D.C., in December titled “Online Lending to Households and Small Businesses,” with the purpose of examining innovations in online lending and implications for borrowers, traditional lenders and financial stability.

In the U.K., draft legislation was released to amend the Individual Savings Account regulations covering debt securities offered via crowdfunding platforms. The release comes around the same time that the U.K. Financial Conduct Authority published its response to questions from British MP and chairman of the House of Commons Treasury Committee, Andrew Tyrie, regarding the opportunities and potential risks associated with the nascent sector.   

Regarding economic impact on the economy, a new report from the University of Pennsylvania has found that Kickstarter’s projects have resulted in the creation of more than 300,000 part- and full-time jobs and generated $5.3 billion in economic impact. In the U.K., a Centre for Economics and Business Research analysis of loans facilitated by Funding Circle has found that investors lending through the platform have supported roughly 40,000 jobs and boosted the U.K. economy by £2.7 billion since 2010.

The main influencing factor in a business’ decision to obtain a loan through Funding Circle

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Payments & FinTech

A report released by PWC finds that noncash transactions will grow by nearly 70 percent from 2013 to 2020, with FinTech companies posing a “serious threat” to incumbent payments firms. Of the 24 respondents from payments companies around the world, nearly 30 percent said that more than one-quarter of their operations could be lost by 2020, with 90 percent of the view that at least some part of their business is at risk from FinTech entrants. In addition, more than 60 percent of respondents view customer churn as a “serious concern” for the payments industry, and more than half of respondents are worried about ceding market share to new players.

Key highlights from the PwC Global FinTech Report 2016

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A separate study released by First Annapolis sampled more than 1,500 people between the ages of 18 and 54 who have a smart phone and a checking account or debit card and found that nearly three-quarters of respondents had made at least one mobile payment over the past 12 months, up 40 percent from May 2015. In addition, more than half of those surveyed have a mobile wallet application on their phone. While 51 percent of mobile banking users have used their mobile banking app to deposit checks, only 31 percent consider their mobile banking app to be their primary channel. And I obviously can't leave this statistic out: Adoption of mobile is strongest among millennials, with 82 percent having made a mobile payment and 27 percent having made a mobile peer-to-peer payment.

Adoption of Mobile Payments by Type

“Which of the following types of payments have you made using your mobile phone within the last 12 months?”

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Artificial Intelligence, Big Data Buying Spree

Three acquisitions over the last week covering big data and artificial intelligence: Intel shelled out $400 million for deep learning startup Nervana to acquire (and leverage) the firm’s deep learning technology. Meanwhile, Apple bought Seattle-based machine learning and artificial intelligence firm Turi in a deal reportedly worth $200 million. And Palantir acquired data visualization startup Silk for an undisclosed sum. The Netherlands-based firm had raised nearly $4 million since its inception in 2010.

Notable Moves

Two notable departures over the past week: Heather Cox, the former head of Citi FinTech, will join USAA as the first-ever chief technology and digital officer at the firm. Meanwhile, Bill Maris, the former CEO of GV, formerly known as Google Ventures, has left the venture capital arm of Alphabet Inc. Of note, according to an article by Reuters, though GV made around 320 investments since Maris founded it in 2009, only six of those startups were acquired by Google. David Krane, who has been at Google for a little less than two decades, will take over. Exactly what led Maris to step down is unclear, though Business Insider provides a breakdown of the potential reasons for his departure.

Entrepreneurship Globally

Last week, we touched on a Kauffman Foundation study covering entrepreneurship in the U.S. In this week’s edition, we turn our attention to the global picture, with recently released findings from the Global Entrepreneurship Monitor Report for 2015 focused specifically on entrepreneurial finance. This is the third report to focus on entrepreneurial finance and comes roughly a decade after the last report. It contains data from 60 countries around the world and finds that the average amount of funds needed to start a business has fallen from $54,000 in 2004 to a median* of $13,000 in 2015. Entrepreneurs have increasingly provided the majority of the upfront capital needed to start a business, with nearly three-quarters doing so in 2015. The study also takes a look at the different funding requirements between innovative and non-innovative entrepreneurs, finding that innovation levels are highest in North America and that innovative entrepreneurs need 1.5 times more funding than non-innovative entrepreneurs. Similarly, 14 percent of entrepreneurs in North America are financed through crowdfunding, compared with about 2 percent for Africa, Asia and Oceania.

Sources of finance for early-stage entrepreneurs, by region, GEM 2015

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*As stated in the report: “Although the fact that medians were used in 2015, as opposed to average amounts in the previous two reports means that a straight comparison is not possible, this does indicate a willingness among current entrepreneurs to start a business with fewer resources and the capability to do so, thanks to the influence of the internet.”


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