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
February 22, 2017

Alternative Finance

Goldman Sachs’ digital finance head, Harit Talwar, gave a brief overview of Marcus—the bank’s consumer digital lending platform—in a recent interview, describing it as combining technology with Goldman Sachs’ balance sheet to provide “more flexible and customizable products” to the consumer. Meanwhile, GS Bank USA promoted Boe Hartman to chief information officer and head of consumer and commercial banking technology. Joining the ranks of large financial institutions implementing their own SME/consumer lending platforms, NatWest has launched Esme, providing SME customers with loans of up to £150,000 over a maximum of five years. 

A few other headlines of note: Sofi is closing in on a $500 million funding round, while Funding Circle (U.K.) just surpassed £2 billion in originations to small businesses in Britain, becoming the second platform (after Zopa) to do so. This at a time when increased cybersecurity attacks are targeting alternative finance platforms. According to a report from ThreatMetrix, roughly 1 million cyberattacks targeted the online lending industry during 2016, with the number of attacks specifically aimed at alternative lending up 150 percent since 3Q 2016. “The challenge for e-lenders is that these profiles are becoming increasingly indistinguishable from authentic identities because they are created using a plethora of stolen data, making them a near blueprint of the real thing,” the report says. Lastly, the Cambridge Center for Alternative Finance launched the second Asia-Pacific benchmark survey after teaming up with 20 organizations in the region. The report will be made available in the second quarter of this year.


Hello, FinTech in Focus readers, where yours truly is currently applying bags of ice to his legs after taking the 4-year-old (aka “Gumby”) skiing, hiking, and bike riding this weekend. Feel free to send “Get well soon” cards to my office. Back to FinTech.

The Startup Life

Silicon Valley Bank released its annual report, covering 941 survey responses from startups operating in the U.S., U.K., China, and other countries. In the U.S., more than one-quarter of respondents indicated that U.S. laws and regulations had materially affected the company’s decision regarding the location of facilities or the movement of non-sales operations outside the U.S. In China, roughly 50 percent of startups said the same. In the U.K., roughly 16 percent of businesses expect business conditions to worsen—up 15 percent from 2016. Two-thirds of businesses do not expect to expand outside of Britain, while 1 in 5 businesses are considering establishing European outposts.

Payments Developments

PayPal acquired TIO Networks for $233 million in an effort to better reach underserved customers in a digital way that could lead to greater financial inclusion. The payments company is also teaming up with Singapore Management University to launch a FinTech scholarship initiative in that country. Meanwhile, Japanese-based Rakuten is expanding its in-store payment system to accept 14 digital money brands and Android Pay. Separately, Ant Financial will invest upward of $200 million in South Korea’s Kakao Pay. The Korean payment service has 14 million users. And lastly, SWIFT announced that its global payments innovation service is now live, with 12 large financial institutions using the service for cross-border payments. While blockchain is not a part of the initiative, SWIFT did launch a proof of concept last month to see if blockchain could be included under it. 

FinTech Investment

CB Insights’ annual global FinTech report finds that venture-capital-backed FinTech investment declined 13 percent in 2016, while the total number of deals fell 1 percent. Of the $12.7 billion in funding to VC-backed FinTech firms, the U.S. represented $5.5 billion (down nearly 30 percent from 2015); Asia represented $5.4 billion, with the number of deals and total investment hitting records; and VC-backed FinTech firms in Europe raised $1.1 billion, with a five-year high in deal activity. Of note, seed deal share hit a five-quarter low, while early-stage deals fell 3 percent even as funding increased.

Quarterly global FinTech VC deal share by stage (Q4 2015 to Q4 2016)

02 22 17a 

Global Developments

U.S.: The Consumer Financial Protection Bureau released a request for information regarding the use of alternative data and modeling techniques in the credit process. CFPB staff released a blog post accompanying the release, and Director Richard Cordray gave prepared remarks at an alternative data field hearing in West Virginia. Some 45 million Americans are classified as “credit invisible” or have credit histories that are limited or have been inactive for some time. Cordray said that “equal access to credit means even more if overall access to credit is expanded and not constrained by lingering uncertainty about how regulators intend to apply fair lending laws. So we have crafted this request for information to help us better understand whether and how such uncertainty may be hindering credit access for disadvantaged populations. We also want to learn more about how the consumer bureau might reduce that uncertainty while holding fast to the anti-discrimination principles that are the cornerstones of federal law.”

The Securities and Exchange Commission recently signed an information-sharing agreement with the North American Securities Administrators Association “to ensure that the new [crowdfunding] exemptions are serving their intended purpose of facilitating access to capital for small businesses.” Speaking of the SEC, its Advisory Committee on Small and Emerging Companies just wrapped up a meeting last week that included two presentations by Goodwin Procter and EY on why more companies are staying private. 

At the state level, Ohio is considering an intrastate crowdfunding bill that, if enacted, will add the state to the list of more than 30 that have implemented crowdfunding rules.

Canada: C.D. Howe, a nonprofit think tank, has released a report on blockchain technology that, apart from discussing its potential, also provides three recommendations to policymakers. They are: Design a principle-based regulatory regime, ensure that the technology actually leads to cost efficiencies for the end-user, and determine areas where government involvement is advisable. The Bank of Canada has published a staff working paper titled “Canadian Bank Notes and Dominion Notes: Lessons for Digital Currencies.” According to the paper, “privately issued digital currencies will not be perfectly safe without government intervention, government-issued digital currency will not drive out existing private digital currencies, and government intervention will be required for privately issued and government-issued digital currencies to be a uniform currency.”

Pakistan: The World Bank has committed $130 million in support of financial inclusion efforts through improvements to the digital payments ecosystem in the country.

Singapore: The Monetary Authority of Singapore published a consultation paper proposing to simplify the regulatory regime applicable to managers of venture capital funds. According to the paper, MAS “intends to simplify the authorization process for VC managers by removing the existing admission criteria on minimum base capital, track record and experience of directors and representatives, and the need to submit information on compliance and audit arrangements as part of the application process.” 

India: Are digital payments slowing in the country? Recent data from the Reserve Bank of India show that digital payments in January were 10.2 percent lower in volume and 7 percent lower in value than in December. Even so, MasterCard, Visa and RuPay have come together to launch a QR-code-based payment solution, BharatQR, which went live Monday. On the lending front, the Digital Lenders Association of India and PwC released a report covering the FinTech-related provisions in India’s 2017 budget. Meanwhile, the State Bank of India is taking the initiative to develop blockchain technology to stamp out fraud and reduce the amount of bad loans on bank balance sheets. IBM, Microsoft, 10 commercial banks, and others are working with SBI on the effort.

Indonesia: After previously banning balance sheet lending for FinTech firms, the country’s financial services regulator is preparing to allow such lenders to operate in the country, subject to a loan cap to ensure that such firms gear their services to those not served by the current financial system. Meanwhile, Experian has partnered with Lenddo to support financial inclusion efforts in Indonesia and Vietnam.

China: The value of mobile payments in the country is roughly 50 times greater than in the U.S., with third-party payments totaling $5.5 trillion in 2016, compared with $112 billion in the States. Separately, Beijing’s Bureau of Financial Work has reportedly found that 90 percent of the country’s peer-to-peer lending platforms will fail this year as regulations are rolled out, leaving roughly 500 platforms operating—out of the current 4,856.

Australia: The Australian Securities and Investments Commission (ASIC) held a roundtable on February 8 focused on RegTech. ASIC’s Mark Adams was interviewed about the event, what came out of it, and why ASIC is interested in RegTech.

Kenya: At least 150,000 merchants in the country will be able to accept in-store payments using MasterCard’s Masterpass QR platform this year. MasterCard has partnered with Kenya’s government to launch the Huduma Card, the country’s first multipurpose social payment card that allows Kenyans to pay for various government services. And speaking of payments, Kenya’s banks have teamed up to launch a payments application to rival M-Pesa called PesaLink. The product “will for the first time enable customers to make payments between banks in real time, around the clock, without having to go through intermediaries.”

China and U.K. FinTech

A report by the British government and EY examines the opportunities between U.K. and Chinese FinTech sectors. According to the report, “there are several opportunities for cross-border expansion and investment opportunities between China and the U.K.” It takes a deep dive into the FinTech sectors in both countries and finds market opportunities exist for the U.K. given its knowledge of and work on blockchain, RegTech, and foreign exchange, which, as the report acknowledges, are still relatively nascent in China. Meanwhile, the British FinTech sector provides Chinese investors with ample opportunities to invest. The document also offers a quick review of how to access each country’s market.