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.
FinTech and the Super Bowl
About the most exciting play during Sunday’s Super Bowl, the one that got me to jump out of my seat, was Beyonce’s near-fall (and great recovery) during her performance at halftime. And, if you were smart like my wife and watched the game via cable rather than fighting the infinite loop of death to get a live stream of the game on the back patio, then you would have noticed a few FinTech-driven commercials during one of the many team/official/Roger Goodell-mandated timeouts. SoFi, Rocket Mortgage, and PayPal were featured, as well as a few other startups. Personally, I liked Shock Top’s ad the best, and I don’t even drink it. Beyond advertisements, apparently a lot of previously confident Carolina fans needed to pay up after the game, so many that Venmo’s payment service went down. Thanks Manning.
U.S. Legislative and Regulatory Developments
There was a flurry of activity over the last week concerning the FinTech space. U.S. Rep. Patrick McHenry (R-NC), the GOP deputy whip and vice chairman of the House Financial Services Committee, led a private discussion covering the regulatory challenges FinTech firms are facing at the D.C.-based startup incubator, 1776. The Federal Deposit Insurance Corp. released the winter 2015 edition of Supervisory Insights, which includes a section devoted to marketplace lending and the risks of partnering with banks, in particular. The Securities and Exchange Commission (SEC) released an updated roster of the Advisory Committee on Small and Emerging Companies, with CrowdCheck CEO Sara Hanks as co-chair of the committee alongside Stephen Graham, managing partner of Fenwick & West. The House of Representatives passed the SEC Small Business Advocate Act of 2016 by voice vote (House Report), which would create an Office of the Advocate for Small Business Capital Formation and a Small Business Capital Formation Advisory Committee at the SEC. Finally, the Federal Reserve celebrated a year since the release of its Strategies for Improving the U.S. Payment System report by publishing a progress report that details the work of the Fed’s Faster Payments Task Force, in which the Milken Institute is a participant, and the Fed’s Secure Payments Task Force. Notably, early next year, the Fed expects to publish its assessment of proposed faster payment solutions provided by the Faster Payments Task Force.
The State of Small Businesses (UK)
There are now 5.4 million small businesses operating in the UK – a record, according to new report. Keith Morgan, CEO of British Business Bank (BBB), found it "striking" that more than 50 percent of them continue to go to their main bank rather than shop around, even though awareness of alternative lenders has "improved." While bank lending continues to dominate, peer-to-peer business lending increased 75 percent last year, with the industry surpassing £2 billion ($2.9 billion) in lending overall in 2015. In fact, in the third quarter of 2015, Funding Circle found itself in third place in net lending to SMEs, behind Lloyds and RBS. Of note, just 3 percent of startups in the UK grow to more than 10 employees, compared to 5.5 percent of U.S. startups, according to the BBB report.
The State of Small Business (U.S.)
Speaking of alternative lenders, Fundera has released its quarterly State of Online Small Business Lending results, which found that loans continue to go to borrowers with credit scores ranging from 620 to 660 and with annual revenue between $100,000 and $300,000. The report also found that medium-term loans "are on the rise" and 26 percent of funded customers were between the ages of 18 and 36. That said, fewer than 2 percent of millennials reported self-employment in 2014, according to a new report by the U.S. Small Business Administration, with trends suggesting that self-employment among that generation will remain "relatively low" for decades to come. Separately, roughly one-third of U.S. startups that raised a Series A in 2015 were graduates of accelerator programs and the “proportion of Series A rounds completed each year by accelerator alums has increased YoY for the past eight years.”
The State of Georgia
The Technology Association of Georgia recently published a report on the state of Georgia's FinTech ecosystem. This is an update of the association’s 2012 report, which found that two-thirds of the 135 billion in global payment card transactions in 2011 passed through the global networks of GA-based FinTech companies. The 2016 report finds that GA’s FinTech community has grown to roughly 100 players, with more than half of the $5.3 trillion in annual U.S. card spending running through GA-based firms, most of which reside in Atlanta’s “Transaction Alley.” The challenges to GA's industry, similar to the challenges faced by FinTech firms across the country, are regulatory complexity (19 federal agencies regulate the FinTech industry, according to the report), competition from out-of-state FinTech firms, and the growing talent gap.
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