June 11, 2017
The story of FinTech surrounds the predicament in which today’s banks find themselves, acutely felt by regional and community banks. Many discussions on the topic will include a lengthy back-and-forth on whether or not banks have forgotten what business they are in. I know this bends towards the philosophical but it’s an important question to ask yourself (and answer!). Why? Well, it’s the driver of what products and services you offer, how you communicate with your customers, and how you survive as a business. Two articles this week helped crystallize the point. What business do you think banks are in?
"The company issued $1 billion in loans in the past year to merchants selling on its marketplace.
With the (continued) focus in FinTech on lending, particularly small business lending, this article should light a large bonfire under banks and lending FinTechs alike. E-commerce isn’t shrinking anytime soon, lending (and the revenue made) is orthogonal to Amazon’s business model, and small business loans are an integrated perk for successful merchants selling on Amazon.
Who has better data to qualify a loan and ensure repayment? So does Amazon want to be a bank? No, not necessarily. Amazon merely understands any option that provides their customers a better shopping experience; shopping on Amazon is critical to their business. I can tell you what Amazon wasn’t thinking, Only banks offer small business loans. Let’s hope they do a good job! Oh, yeah, the revenue from interest doesn’t hurt.
What can banks uniquely offer an e-commerce merchant to win their lending business?
...Where policy has gone wrong is the insistence that a bank holding company cannot be engaged in ‘commerce’ — i.e., in non-financial services activities.
Naturally, a Walmart story to follow an Amazon story. I promise that wasn’t my intention. There are two elements to this story that are important for you to consider:
The main benefit of a Walmart bank, in this article, is that Walmart could make progress in serving un(der)banked customers. It’s easy to draw a line between Walmart improving the financial lives of customers and increased sales at Walmart. Ask yourself, how many banks are truly investing people, time, and resources in improving financial health customers and how many are just waiting for some FinTech to do it for them? I’m not sure there is an app for that. More importantly, I’m not sure it’s something you can afford to outsource.
In other news...
Last week, I highlighted an example of a company using an Initial Coin Offering (ICO) as a glimpse into the future of finance (or present, as it were). I’m sure many of you, myself included, were also wondering, Who is this startup? How does this even work? Thankfully, my colleague Elena Mesropyan did a fantastic job this week helping you understand Brave, powered by the Basic Attention Token (BAT), and it’s definitely worth the read.
See you next week!