October 18, 2017
If the history of FinTech teaches us something, it’s that unexpected things happen. Seemingly successful cases meet speed bumps, pivoting the history of the whole segment. Today’s picks are dedicated to that – to the ups and downs of remarkable businesses and technologies.
Square, being one of the most remarkable success stories in FinTech, is on the fast track to becoming an influential institution of the new age. After all, Silicon Valley is the Wall Street of 2017. Square will likely be a rare case of a startup that managed to build its way into niche markets, starting with payments, and now – lending.
While Square started as a payments service, its expansion into loans is a big attraction for investors. JPMorgan sees Square Capital as the most profitable value-added service in the Square empire. The client onboarding services are fully automated, and Jack Dorsey reported that 99.95% of loan applications get decided automatically by the system.
The average loan size is small at $6,000 but the portfolio loss size is respectable at 4%. The World Bank sets the acceptable microloan loss rate at 5% globally. For small businesses that rely on its payments and POS services, Square has a strong database to access the credibility of its retail business borrower which it enhances its predictive ability with machine learning and data analytics. Such technology can even extend to consumer loans in the near future.
Big news – new open-source software called Mojaloop for creating a real-time, interoperable payments platform on a national scale to reach the world’s poor with essential financial tools.
Leveraging the power of the Interledger Protocol (ILP), Mojaloop offers a way for financial providers, governments and mobile network operators to simplify and reduce the cost of developing inclusive payments platforms.
Mojaloop can be used to connect customers, merchants, banks, providers and government offices across a country’s economy – accelerating progress toward a truly inclusive economy.
The new software is a boon for the 90% of the world’s poor that don’t have bank accounts and are covered by different mobile signals.
Now, individuals in developing markets can send and receive payments on any Level One-enabled payment system and store the funds in a mobile wallet.
US digital lending FinTechs seem to always get into trouble – because of internal troubles, players are hurting themselves as well as the market one after the other. After Lending Club and Prosper, it's SoFi now.
Student online lender Social Finance said on Friday that it is withdrawing its application for a bank license in the wake of the departure of a number of senior executives, including Co-founder & former CEO Mike Cagney.
A bank charter remains an attractive option when the time is right. This decision does not change our plans to make deposit accounts available through partner banks in the near future.
Earlier this month, a source familiar with the matter told Reuters said that Cagney’s departure in September had complicated SoFi’s banking application because regulators assess whether a company has a capable CEO before allowing it to accept deposits.
SoFi is one of the most valuable private financial technology startups in the United States and was valued at over $4 billion in its last funding round.