Digital payments have crossed the Rubicon and are now not only an acceptable form of payment but soon expected to become the dominant form. But the problem is small businesses are still hampered in leveraging digital payments for the convenience of their customer base. The below graph indicates the share of small business owners in […]
Digital payments have crossed the Rubicon and are now not only an acceptable form of payment but soon expected to become the dominant form. But the problem is small businesses are still hampered in leveraging digital payments for the convenience of their customer base. The below graph indicates the share of small business owners in the United States who accept digital and mobile payment methods as of October 2017.
Similarly, IoT is no longer the future. Autonomous cars and voice-controlled assistants like Amazon’s Echo and Google’s Home are already in our lives. All of these technology developments represent a new challenge in how to manage and secure our digital payment and IoT devices and infrastructure.
The MagicCube Business Model
The MagicCube solution helps in securing digital transactions on different devices, with the same level of security as device hardware solutions without the complexity and cost associated with hardware deployments.
While working with VISA, founder and Chief Executive Officer Sam Shawki witnessed that companies had to use Apple Pay to access chips while securing credit cards. This required an extensive hardware set up. This led him to embark on a project to create virtual chips.
MagicCube’s patented technology provides an embedded software solution in the existing hardware set up. Now, Visa users will not have to go to Apple to get tokenized cards. Rather, they can use the hardware of MagicCube on their regular devices via cloud by just entering a pin. Now the phone can be used to access payments and there is no need for a separate external device. A lot of companies used to give these devices to merchants for free to capture payments and lending business. But now, with MagicCube, the onboarding process does not require expensive hardware. This allows for faster and cheaper penetration of the market, and merchants don’t have to interact with bulky hardware for managing transactions. Now, consumers will not require credit cards to make payments and merchants will not need any hardware device for accepting payments.
The company charges a setup fee depending on the geography, specific requirements, and volume of the client. There is a fee for active merchants on a monthly basis and a software license fee for every user.
Mobile Payments: According to research reports, digital payments will overtake cash transactions by 2023. All stakeholders in the payments ecosystem need to conform to the latest technologies as well as ensure that these payments are as secure as those executed through chip-based credit cards. The company’s MC Token Shield will offer a device-independent, hardware-grade security for mobile payments without the complications of hardware. It will also render the excessive middlemen fees associated with current digital payments redundant. The company has achieved PC-DSS Level 1 SP Certification and needs just a single API for integration with any App.
Connected Cars: Device security in connected cars is extremely important. According to research, by 2020, one in five vehicles on the road will have some form of wireless network connection. The company’s MC Vehicle Shield offers hardware-grade security to autonomous vehicles for their most critical parts. It will not only reduce the hardware bill for the car manufacturers, but any updates in security standards can be handled like a normal software update instead of having to recall the vehicles.
Pin on Glass: Only 45% of US Small Businesses accept credit cards. The point-of-sale hardware costs and the complexity attached with operating them has made it too expensive for millions of small merchants. Pin on Glass technology allows for a regular smartphone to safely accept payment card PINs, thus transforming the humble phone into a POS terminal. The tech has the power to change the entire payments paradigm. MagicCube’s MC Screen Shield works on delivering hardware-grade security and cloud monitoring services for such “PIN on Glass” payments.
Who Are MagicCube?
Founded in 2014, the Silicon Valley- and Brisbane, Australia-based MagicCube is the creator of the world’s only Software Trusted Execution Environment (sTEE) platform, a technology that enables large-scale deployment and management of IoT and mobile-secure solutions for consumers. The company has raised over $10.5 million in funding from Bold Capital, Epic Ventures, Silicon Valley Bank, and others. The company’s seed round saw participation by payments giant Visa.
Before launching the startup, Shawki was the head of Visa’s Global Remote Payments business unit. He was the driving force behind the company’s global push in mobile and remote payments. He also served as the chief innovation officer of VimpelCom, the sixth largest telecom player in the world with over 214 million customers in 18 countries.
Nancy Zayed is the cofounder and chief technical officer. She was head of engineering and operations at InnoPath, a founding member of OMA (Open Mobile Alliance), head of platform development at Cisco Systems, and also spent 10 years at Apple in various leadership roles.
Partnerships and Competitors
The company has entered into a partnership with Visa-funded Yellowpepper to secure token-based payments and is launching the solution in the Latin American market. The company has also partnered with ID Tech, a POS solutions provider for launching a product that will securely allow any mobile device to be converted into a POS terminal.
The young startup is competing with heavyweights like Qualcomm and Infineon, who provide security chips powering and securing payments today. But the CEO is confident that their software will soon make any hardware solutions obsolete. The company is also looking to partner with other players for launching new products and is in the process of attaining critical industrial certifications which will make the sales process much easier. The company seems to be in the pole position to change how digital payments and IoT devices will be secured in the future.
News Comments Today’s main news: Upgrade appoints Western Union exec at general counsel. Assetz Capital now claims to be second largest P2P lender in the UK. Perseus has the solution for EU cyber threats. Amartha partners with Jamkrindo in Indonesia. Today’s main analysis: How banks are investing in fintech. Today’s thought-provoking articles: LendingClub CEO Scott Sanborn interviews with […]
The top fintech trends driving the next decade. AT: “Artificial intelligence and machine learning are at our doorsteps now. One interesting prediction here is the Internet of Things connection with banking and payments. You don’t hear that very often, but I think it’s right on the money. Connected devices have a lot of practical application in financial services, but few people have realized it yet. Not only can automobiles be facilitated to make financial services more convenient, but homes and businesses, as well.”
Funding Circle’s TV ads. AT: “We could be entering into a period where traditional media advertising becomes an experiment for alternative lenders. SoFi’s Superbowl ad last year got a lot of press and seems to have been successful in getting their name known. I’d be curious to see how Funding Circle’s marketing campaign goes. But for the record, I’m underwhelmed by the content.”
Upgrade, Inc. Appoints Western Union Executive as General Counsel (Upgrade Email), Rated: AAA
Upgrade, Inc. (), the new consumer credit platform launched by LendingClub founder Renaud Laplanche earlier this year, today announced the appointment of John Dye as General Counsel. Prior to joining Upgrade, John was Executive Vice President, General Counsel and Secretary of The Western Union Company. He was also Chairman of the Board of Directors of the Western Union Foundation.
Before joining Western Union in November 2011, John was Senior Vice President, Interim General Counsel and Corporate Secretary of Freddie Mac from July 2011. From 2007 to July 2011, John served as Senior Vice President, Principal Deputy General Counsel, Corporate Affairs of Freddie Mac, where he worked on corporate transactions and managed attorneys in the areas of corporate disclosure, securities, intellectual property, contracts and human resources.
Prior to joining Freddie Mac, John spent 13 years at Citigroup Inc. in New York City, where he held senior leadership positions, and served as Senior Vice President and Senior Counsel at Salomon Smith Barney.
Upgrade also hired Louis Shansky, a partner on the securitization team at the law firm of Mayer Brown, as Deputy General Counsel.
The macroeconomic backdrop: While macro trends are generally positive—low unemployment, low interest rates, low inflation and low oil prices with an increase in consumer confidence—credit card debt levels are near all-time highs. Today, there is more than $1 trillion in outstanding credit card debt in the U.S.
Borrowers are not alone: LendingClub borrowers are not alone in seeking a lower interest rate solution: credit card debt in the U.S. is at an all-time high1 and credit cards tend to carry high interest rates. Sixty to 70% of our customers are currently taking advantage of our personal loans to pay off credit cards which helps them to get on the path to financial success.
LendingClub is enabling more new investors access to an old asset: Fifteen percent of our investor base still invests directly through the retail website, with the balance accessing the asset through other means.
Institutions want more: In Q2 2017, we had record high subscription from more than 100 institutional investors participating on the platform. Banks were 44% of our overall investor mix last quarter, attributed to LendingClub’s assets offering solid returns with a short duration.
Reaching new investors through securitization: More than 20 new investors engaged with LendingClub via the first deal, which demonstrated high demand for the asset.
Here is a glimpse at the technologies driving bank innovation today—as well as a look ahead to the technologies coming down the pipeline that will change the way banking is done over the next 10 years.
Digital Lending (here and now) – Unsecured consumer lending is the first market where digital lending has made an impact and is by far the most mature. Today, the two leading consumer lending platforms (Lending Club and Prosper) originate roughly $2.5 billion in loans quarterly. Small business lending has quickly followed and is rapidly digitizing. ABA has endorsed the digital commercial lending solutions offered by Akouba, providing banks of all sizes the use of these platforms to enhance customer service and significantly reduce underwriting costs.
Biometrics (1-2 years) – Passwords are only secure to the extent that they are kept private and cannot be guessed by a keen observer. The problem is that these passwords often rely on observable pieces of our life like our birth date, our children’s names, or our pets (my personal favorite), which are all readily available to criminals using social media and public databases. A 2015 study by TeleSign indicated that one in five people use passwords that are over 10 years old, with 73 percent of accounts being secured by the same password. Compounding this problem is the fact that we now have so many accounts that require a password, that it is impossible to keep them straight.
Customer Data (1-3 years) – Today, customer data at banks is often unstructured—housed in systems that are inconsistent and may not talk to each other. A single customer may have multiple accounts with a bank that are all housed in different systems, with inconsistent identifiers. A number of banks, as well as core processors, are working to reconcile these systems. Some are working to build additional data warehouses that aggregate disparate customer data to create a unified view of customers.
Regtech (3-5 years) – Regulatory reporting is one area that seems ripe for digital disruption. Today, filing call reports is a quarterly activity that requires significant time. It would not be hard to imagine a software solution that was tied into a bank’s back-end systems and prepopulated all of the key reporting fields. Moreover, it would be possible for regulators to receive a steady feed of data from a bank that would give them an ongoing view into the bank and may reduce the frequency with which exams are necessary.
Artificial Intelligence (5-10 years) – One way this could help bankers is by improving fraud detection. Traditional fraud monitoring systems rely on specific non-personal rules (like geography) to detect fraudulent transactions. Machine learning could be applied to analyze the transactions of each customer, flagging transactions that are out of their normal habits.
Internet of Things (8-10 years) – For example, banks may be able to use internet-connected devices to make better loans and monitor collateral. Inventory or livestock for a small business can be monitored in real time. This would allow a bank to monitor a customer’s balance sheet on an ongoing basis, giving it the tools to make better decisions about lending or adjusting credit lines in real time.
The biggest long-term impact that IoT is likely to have is in payments. Connected devices are already able to talk to each other, but will also require the ability to make payments back and forth. Today, this may be as simple as using your smart watch to settle a bill, but could evolve to the point at which your refrigerator pays for groceries that are running low. A number of auto makers are experimenting with enabling cars to make payments.
Citizens Financial Group Inc. is the latest bank to start a robo-advisory product as part of its larger push into wealth management.
Citizens, a regional bank based in Providence, Rhode Island, is providing the technology to customers beginning Wednesday through a previously announced partnership with SigFig Wealth Management LLC, which uses algorithms to provide financial advice at lower fees than traditional human advisers.
The minimum initial investment in the Citizens offering will be $5,000, according to the firm. The annual asset-management fee is 50 basis points, or about half the typical cost of a traditionally advised account.
Last month, crowdfunding giant RealtyShares bought smaller rival Acquire Real Estate. This news was a significant in the multibillion-dollar sector, which is not even five years old. It begged the question as to whether this deal was a product of synergies between two platforms or a case of a larger player protecting its turf by taking a smaller rival off the board?
Whatever the answer, one thing is clear: We are likely looking at the start of a push toward consolidation in real estate crowdfunding. While there are hundreds of platforms now vying for a capital pool that is almost halfway to 12 figures, some clear-cut market leaders have emerged, and a movement toward economies of scale would signal continued maturation. Over the next year or so, it would not be surprising to see companies like Fundrise, CrowdStreet and Patch of Land join the market for acquisitions, especially as the space continues to establish mainstream legitimacy.
Looking at origination characteristics for the four largest MPL originators, we see origination volume continue to rise: 21% for 2Q17 over 1Q17, and up 52% over 2Q16. Loan coupons have risen from a 14.20% GWAC for the 2Q16 vintage to a 14.31% GWAC for the 2Q17 vintage, while the two year treasury has rallied approximately 50bps over the course of the year. PTI is relatively unchanged, coming in at 9.05% for 2Q17 versus 8.99% for the 2Q16 vintage.
Average FICO has increased significantly: 703 for the 2Q16 vintage to 711 in 2Q17.
Prosper closed its second $500MM Consortium securitization, PMIT 2017-2, on which dv01 was loan data agent. Data from PMIT 2017-2 is available for accredited investors through dv01’s Securitization Explorer, and is updated monthly.
Download and read the full report (with charts) here.
Fifth Third Bancorp is borrowing inspiration from the fintech world as part of its effort to woo millennial customers and compete with megabanks for consumer deposits.
The Cincinnati bank on Tuesday is scheduled to roll out a stand-alone app designed to help its customers pay student loan debt. The app, called Momentum, lets customers link Fifth Third debit cards to student loan accounts held by more than 30 servicers. Customers can have their debit card purchases rounded up to the next dollar, or have a dollar added to every purchase; the money is applied weekly to the balances on designated loans once a minimum of $5 is contributed.
“I see Momentum as being complementary” to apps such as Acorns and Digit, she said. “This [millennial] generation is sitting on $1.3 trillion of [student loan] debt. We wanted to take a relatively simple concept and offer something to help them in their day-to-day life.”
The U.S. captured 54% of the $127 billionin global venture capital invested in 2016. This access to capital has allowed some American fintech startups to succeed despite the regulatory burdens. Yet, the U.S. underperforms in fintech venture capital compared to our share of overall venture capital. In 2016, the U.S. obtained only 33% of the $13.6 billion in worldwide fintech venture capital investment.
I am working with Arizona policymakers to introduce a sandbox in Arizona that would reduce entrepreneurs’ barriers to entry without sacrificing core consumer safeguards. This would be the first state sandbox in the United States.
Attorney General Mark Brnovich is calling for Arizona to become the first state in the country to adopt a “sandbox” like regulatory environment that would reduce fintech entrepreneurs’ barriers to entry into local markets in a new op-ed penned for American Banker magazine. Key to creating sandbox regulatory systems is ensuring core consumer safeguards are not sacrificed. Sandboxes have already been implemented in countries such as the United Kingdom, Singapore, UAE, Malaysia, and Australia.
Che Al-Barri remembers feeling like he was drowning in debt last year. He had taken out a $70,000 loan for his small cleaning company, but was struggling to repay it.
The lender, a financial technology — or fintech — company, automatically collected $331 from his bank account daily, Monday through Friday. The frequent hits depleted his income and took a toll on his business, he said.
For Al-Barri, taking a big loan seemed like a great opportunity at first. Large clients were taking months to pay him, he said, and he wanted to buy equipment and hire employees to expand. But he underestimated how much he would earn, making it very difficult to repay the loan plus the $30,000 in interest he owed.
A new Stanford study analyzing Airbnb users and data suggests measures that enhance a user’s reputation, like stars or reviews, can counteract these harmful prejudices. The results, the researchers said, indicate sites that use reputational tools create a fairer and more diverse online marketplace.
The share economy, also referred to as “collaborative consumption” and “peer-to-peer lending,” has allowed everyday citizens to turn into entrepreneurs, taking advantage of an industry that’s projected to grow to $335 billion by 2025, according to the Brookings Institution.
The researchers in this study focused on a certain type of bias called homophily, a natural tendency to develop trustful relationships with people similar to themselves, and how best to counteract it. The study is part of a broader research project analyzing trust and technology at Stanford.
Speaking at an AFL-CIO Labor Day picnic in Cincinnati, Cordray did not address one of the most—if not the most—crucial issue facing the agency—whether Cordray will resign to run for the Democratic nomination for governor in the Buckeye State.
And when questioned afterward, he declined to comment on his intentions.
The CFPB is working on its most high profile set of rules—those governing the payday lending industry. The bureau is believed to be planning to release those final rules this month.
Benzinga, a leading financial media and events company, announced Thursday that it will team up with the nation’s leading online loan marketplace LendingTree to award $10,000 to the winner of an on-site fintech demo competition at the inaugural Benzinga Fintech Summit in San Francisco September 28.
The Fintech Innovation Challenge Presented by LendingTree will award $10,000 to the company whose product best demonstrates scalable, material innovation to the Summit’s audience.
Assetz Capital, one of the largest peer-to-peer lending platforms in the UK, has announced it has received full authorization from the Financial Conduct Authority (FCA). Additionally, Assetz Capital has claimed second place in the ranking of UK’s largest P2P lenders as it reports lending in excess of £25 million per month on average to SMEs throughout the UK.
To date, Assetz Capital has lent over £316 million to businesses across the UK.
Peer-to-peer Isas failed to gain much popularity in their first year, with just 2,000 Innovative Finance Isa (IF Isas) accounts opened in the tax year 2016/2017, according to the latest statistics from HMRC.
The biggest problem is that many peer-to-peer platforms have struggled to gain approval from regulators to become IF Isa providers. There are currently around 60 firms that have received approval from financial regulators, with most of these only starting to operate within the past few months.
Across the 2,000 IF Isa accounts opened, £17 million worth was subscribed. The average subscription per account was £8,500 – about the same as the average stocks and shares Isa account subscription.
Peer-to-peer platform Abundance claims it sold the majority of IF Isas in the last tax year. It says 1,436 Abundance IF Isas were opened, representing 72% of all IF Isa products opened last year.
Overall, the amount held in Isas in 2016/17 fell to £61.5 billion, compared with £80 billion the previous tax year. This decline was largely driven by a steep fall in the amount held in Cash Isas. In 2015/16, a total of £58.7 billion was held in Cash Isas; in the latest tax year this fell by a third to £39 billion.
Samir Desai, co-founder and chief executive of Funding Circle, Britain’s largest peer-to-peer lender, says that his business, which has arranged $2.7 billion of loans to small companies, could be lending at least $100 billion within a decade.
Peter Behrens, co-founder of Ratesetter, one of Funding Circle’s main rivals, believes that his platform could double its annual loans within the next two years to £4 billion.
The A-share market, due to its profitability requirements, remains off-limits to most Chinese fintech firms, particularly peer-to-peer (P2P) lending platforms that were once regarded as an important part of the mainland’s reform of the banking system.
The increasing demand for financing has prompted a clutch of fintech firms to kick off their overseas IPO processes, most of which plan to complete fundraising in the next 12 months.
Zhong An Online Property and Casualty Insurance, China’s first online-only insurer, is seeking to raise as much as US$1.5 billion via a Hong Kong IPO.
After five years in business, Zhong An has developed a customer base of about 500 million people.
The Chinese regulators’ ban on ICO has heightened, and the financing of various tokens of the virtual currency has been put to death. In a consequence, the ICO asset value has evaporated nearly $20 billion, and more than 100,000 investors may be affected.
However, some ICO initiators still don’t want to stop. ”I don’t think the central bank’s oversight of ICO is going to be that severe,” a charger of the Digital Currency Asset Exchange said, ”and we would wait and see the specific notice of the local financial office and then decide what to do with it.” But in some communities of the ICO, we can see initiators start to announce the withdrawal of investors’ assets.
According to fintech incubator FinLeap, which is behind the venture, more than 70% of German companies were affected by cybercrime activities within the last two years, but only one out of ten SMEs holds an insurance policy that covers the resulting damages. Because Perseus offers a platform, it can connect services and offer “best-of-fit” tech solutions.
There is no specific date yet, but it also plans to add an industry-specific cyber insurance proposition to its portfolio of services.
IRISH peer-to-peer lending platform GRID Finance has ruled out the UK as part of its current expansion plans.
The business lender announced it had received €3m (£2.7m) of finance yesterday that will help to fund expansion into new markets, but chief executive Derek Butler says the UK market is already very competitive.
He said he was focusing on scaling the business in Ireland first and competing with the country’s two main banks, Allied Irish Bank and Bank of Ireland.
EU banking rules treat software as a cost rather than an investment, forcing lenders to cover expenditure on digital applications with an equal amount of capital.
If expenditure on software, which amounts to roughly half of banks’ total digital investment, were treated in the EU as it is in the U.S. it could free up more than 20 billion euros ($24 billion)in capital this year alone, one banking lobbyist said.
Many European banks have been slow to invest in adapting to rapid changes in the way consumers use technology for finance, with so-called fintech firms starting to steal market share in a variety of sectors from payments to lending.
There are cases when the authorization callback from Klarna doesn’t get processed until after the user arrives at the confirmation page. The reason is that the callback and the redirect are made almost simultaneously by Klarna, so it’s a bit random which wins.
Workaround: If currentOrder is null, sleep for 500 ms and try again (GetCurrentFinalizedOrder). Repeat for 10 seconds.
CrowdExplorer, a marketplace for “Crowd-investing”, has won the special prize for “Fintech” at this year’s “Digitale Innovations” competition.
CrowdExplorer is designed to provide investors with a platform to compare access to the international Crowd Investments. CrowdExplorer has launched with the following four categories: Equity, Real Estate, Loans and P2P lending.
Online lender Spotcap has this week announced the launch of a Fintech Scholarship program, with $10,000 being awarded to an Australian student attending university in a fintech-related field. The lender launched the program with the aim of supporting local fintech talent and ensuring the longevity of financial innovation in Australia.
Spotcap is also offering one paid internship placement at its offices in Sydney alongside the program.
The Bank for International Settlements – known as the ‘central banks’ central bank’ – says the rapid adoption of financial technology or ‘fintech’ and the emergence of new business models pose an increasing challenge to incumbent banks “in almost all the scenarios considered”.
According to the venture capital analysis group CB Insights non-technology companies now invest more in technology than tech companies.
In the firm’s recent report into fintech investments by major US banks, six – Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo — have made strategic investments in 30 fintech companies since 2009.
The key sectors banks are investing in – and this is true across the globe, to differing degrees – are payments, data analytics, personal technology, distributed ledgers and/or digital currencies and peer-to-peer lending.
Peer-to-peer loans are the perfect alternative investment instrument for income-seeking investors. It enables you to offer personal loans to borrowers for an array of purposes while eliminating intermediaries such as banks, NBFCs, and unorganised lenders.
Furthermore, a good P2P lending platform can make available all the relevant information on borrowers to lenders, assisting them in assessing the credit profile of a borrower in an efficient manner. It can provide each lender with a customized dashboard with relevant informatics and data to help make an informed decision.
As per our research, lenders on our platform can earn gross returns to the tune of 18 to 24 percent p.a on an average by building a diversified borrower portfolio. These returns are not merely comparable, but often preferable to returns from other investment instruments such as mutual funds, stocks, real estate, bank deposits, and gold. Income-seeking investors who specifically want to diversify their investments get good returns at the end of the day. As a rule of thumb, at least 20 percent of total investments should be in alternative investments like art, commodity, P2P lending etc.
Peer to peer lender Amartha has formed a partnership with the largest state-owned micro credit guarantee company in Indonesia, Perum Jamkrindo. This follows a similar partnership with Bank Mandiri. Amartha is an online lender designed to connect Micro Businesses and SMEs that seek affordable working capital with investors who want to fund their business based on credit risk and expected return. This is a significant agreement for Amartha. Indonesia is the fourth most populous country in the world and support of small business is vital to the economy.
Jamkrindo is a state-owned enterprise that has been given a special mandate by the Government to guarantee credit and financing, as well as financial transactions particularly in the SME and micro segments. Jamkrindo is the largest credit guarantee company in Indonesia with total guarantee value of more than Rp 270 Trillion and 8 Million credit.
There are a few technologies in fintech that haven’t launched but are being tested around the world—these include using bitcoin as a remittance channel, using electronic health records for life insurance underwriting and a financial robo-adviser/wallet that has a holistic view of an individual’s finances.
Things are altogether different in Asia’s developing economies. First, in these countries, the infrastructure is developing. Apart from India, the concept of digital identity is only evolving in countries such as the Philippines and Indonesia. Moreover, in these countries, bureaucracy is generally a bottleneck since multiple government agencies work in silos with differing incentives.
Developing Asian countries need to prioritize different issues depending on their economies. For example, remittances are of utmost importance in the Philippines and Bangladesh.
For example, robo-advisers are a great way to enable the burgeoning middle class to put their savings into equities with a view toward investing and long-term retirement preparation; Thailand has none of those at the moment. There are international brokerages such as interactive brokers that enable robo-advisers to operate in other parts of the world and are licensed in Thailand. However, there are no traditional Thai banks/ brokerages that provide these new services to their consumers. Elsewhere in Asia, Indonesia is a great example of where the regulators have worked with new businesses to create regulations around peer-to-peer (P2P) lending.
Private equity fund manager Senturia Capital has reportedly announced a partnership with peer-to-peer financing platform Funding Societies to expand alternative financing access and capital solutions for Malaysian businesses.
Mitsubishi UFJ Financial Group Inc. will launch a financial technologies unit Oct. 1 in collaboration with 32 regional banks nationwide.
MUFG will put up ¥3 billion in capital to start Japan Digital Design Inc., which is expected to develop new services including those for cashless settlements using smartphones at small shops. It will also promote the automation of operations through artificial intelligence.
News Comments Today’s main news: Walmart getting closer to a deal with Afffirm. AutoFi raises $10M. Zopa reports diminishing losses, rising revenues for 2016. Landbay closes 2.4M GBP round on Seedrs. USAmeriBank goes live on Finastra. Today’s main analysis: After shallow sell-off, corporate credit spreads stabilize. Today’s thought-provoking articles: A call for more considered critiques of P2P lending. What’s behind […]
Walmart, Affirm getting closer to closing the deal. AT: “The news broke yesterday that Walmart is discussing the possibility of using Affirm to offer financing on point-of-sale purchases. If this happens, and it looks like it will, the floodgates will open to POS financing.”
The future of Simple. AT: “It’s refreshing to see a company admit it has strayed from its original path and is now going to repent.”
SuperMoney’s auto loan offer engine. AT: “Interesting that interest rate is the least negotiated factor among auto buyers when purchasing a car when it is where they spend the most on their purchase. I see the auto lending sector heating up in the next couple of years thanks to services like SuperMoney.”
Smart solutions for smart cities. AT: “This is the first time I’ve seen the connection made between the Internet of Things and marketplace lending. While JD Supra doesn’t spell it out, there are all sorts of solutions that can facilitate more a connected financial services sector with everyday living. They include apps for connected cars that allow you to apply for a loan from your bank or preferred lender at the push of a button. And you can just as well have one in your home, too–on the wall, on your TV, by voice command.”
Why are retailers so enamored with Affirm? Giving customers the option to take out an installment loan to finance a purchase gives customers more choices, making it more likely that they actually will make the purchase. Millenials and other younger demographioc consumers are often loathe to carry mountains of personal debt that way previous generations have.
However, it also has to do with the inflexible and sometimes excessive terms of store credit cards, which generally charge higher interest rates than the lowest portion of Affirm’s rate range. Still interest revenue and late fees from store cred cards contribute a significant amount of money to retailers’ bottom lines, making it difficult for them to commit to giving their customers more financing choices.
Overall though, retailers, banks and credit card companies are all starting to understand that at a time of massive change in how and where people shop, they need to make it easier for shoppers to close the deal. Mastercard may recognize this as well as Walmart does. The card network aligned with Verifone late last year to begin offering instant installment financing at the point of sale.
Affirm may be a relatively new company, but the service it offers isn’t particularly innovative: It’s taking the concept of layaway, a type of no-interest payment plan that became popular during the Great Depression that lets you pay for things in fixed installments and take them home once you’ve paid for it in full, and twisting it for millennials. Unlike layaway, Affirm delivers your purchases instantly — but the cost of instant gratification is interest rates as high as 30 percent. The service is basically a cross between credit cards and layaway, combining the worst aspects of both.
Once your Affirm loan is approved, you can choose to pay it off in 3, 6, or 12 months, and interest rates range from 10 to 30 percent. The average customer takes out a $750 loan with a 21-percent interest rate and pays it back in nine months. Compared to credit cards, which have an average APR of 17 percent, and personal loans that typically have interest rates ranging from 5 to 36 percent, Affirm isn’t a particularly good deal.