FinTech in Focus
FinTech in Focus is available via e-mail, arriving in your inbox every Tuesday. If you would prefer to receive our weekly highlights in your inbox rather than wait for us to tweet out the post, please sign up today by selecting the “FinTech in Focus Weekly E-Newsletter”. As always, please contact Jackson Mueller with any questions.
The End of Bitcoin, or a Bump in the Road?
Bitcoin enthusiast and developer Mike Hearn penned a blog post about digital currency last week, declaring: “The fundamentals are broken and whatever happens to the price in the short term, the long-term trend should probably be downwards. I will no longer be taking part in Bitcoin development and have sold all my coins.” Just how influential is Hearn? Enough to cause bitcoin’s price to dip 15 percent after his post was released. Of course, not everyone expressed the same view, and Hearn’s recent move to R3CEV, a consortium of more than 40 global banks focused on distributed ledger technology, created speculation that this was some sort of banking conspiracy, a charge he has denied.
With Alternative Metrics and Criteria, No Need for FICO
One of the interesting headlines over the past week was the announcement by SoFi that it would remove Fair Isaac Corp., better known as FICO, scores from its application process for student loans, personal loans and mortgages. The alternative financial services provider found FICO’s model to be “flawed and outdated” and becomes the first large lender to become FICO-free. That’s not to say that FICO is not looking into alternative scoring metrics — they are — but the movement toward non-FICO credit scoring models is interesting, nonetheless.
Venture Capital Investment Soars in 2015
According to a report from the National Venture Capital Association, venture capital investment in the U.S. in 2015 totaled $58.8 billion, the second-highest total since 2000, when venture capital investment surpassed $100 billion. Financial services, consumer products and services, and healthcare saw significant increases in investment from the prior year. Nearly 60 percent of investment was concentrated in California, with New York, Massachusetts, Washington and Texas rounding out the top five. Globally, venture capitalists invested $128 billion, up 40 percent from 2014. According to the KPMG report, tech companies have taken more than 77 percent of all deal activity in the last five quarters.
Robo-Advice Model Proves Compelling
Within the past week, BBVA Compass partnered with BlackRock’s FutureAdvisor; the Bank of Montreal launched its robo-advice service SmartFolio, becoming the first of the “big five” Canadian banks to launch such a service; asset management firm Invesco acquired Jemstep; while an ex-Barclays investment manager launched Wealth Kernel to provide support to firms looking to enter the robo-advice market. Perhaps the most interesting headline to emerge was that social-media firm Snapchat is looking to get into the wealth management business. The company already moved into the financial services space through its launch of SnapCash two years ago, but is apparently looking to take a step further by providing automated financial advice to its 100 million daily users.
FinTech in America
According to a recent report from Transferwise, a survey of some 9,000 U.S. adults revealed that about half expect to use a technology provider for at least one financial service within the next five years. Not surprisingly, the 35-to-44 age group distrusts banks the most, while the boomer generation continues to remain on the side of traditional financial providers, with 34 percent of individuals aged 55 and older saying “nothing would motivate them to use technology providers.” The top factor that would prompt individuals to switch to using a technology provider is if they offered greater security than banks. A key question, however, is to what extent consumers are actually adopting the products and services created by FinTech firms. As Imran Gulamhuseinwala, head of FinTech at EY, stated in a recent conference: "The big information void we've continually come up against in this space is, is anyone actually using this stuff?”
Please contact Jackson Mueller with suggestions or recommendations for improving FinTech in Focus.