The Ides of March arrive Tuesday next, and dangerous events may causeth a stir. But there’s a revolution in the air and much fintech shall occur. So be as constant as the northern star, while thou reviewest the week that was. From SoFi to insurance, BBVA to blockchain, many a thing doth caused a buzz.
SoFi: the first bulge bracket fintech firm. Calling SoFi a start-up is like saying the NBA’s Stephen Curry has potential. And news flowing from the company’s Golden State headquarters is anything but small. In recent days, we have learned that SoFi is readying to enter the REIT market and has launched an in-house hedge fund to buy the loans it originates as well as loans of competitors. That means that the company, which started humbly as a student loan refinancing platform, will now be involved in loan origination, distribution, wealth management and alternative management. It will sit on the buy side and sell side and will traffic in asset classes including student loans, parent loans (do parent loans ever get paid back?), personal loans, mortgages, asset-backed securitizations and REITs. Its stated goal is to cause mayhem for the very banks it partners with elsewhere. How will SoFi get away with that? Very simply. It’s become a mainstream financial institution courtesy of the billion dollars it recently raised from the likes of Softbank, Third Point and Wellington — and just like a bulge bracket bank, other firms won’t have a choice but to deal with SoFi. Its size also means that credit professionals at mainstream financial institutions should set a Google alert on SoFi. A billion dollars doesn’t make a heavyweight, but SoFi’s capital packs more punch per dollar than traditional competitors because it doesn’t have the legacy costs besetting others. Beware Wall Street, SoFi is coming to an asset class near you.
Care for a shot of insurance tech? If so, read CommerzVenture’s new sweeping white paper on insurance innovation, pair it with the list of the 80 hottest insurance start-ups from Let’s Talk Payments and chase it down with insights from Celent on how the Internet of Things may affect the P&C insurance segment. Our favorite nugget from the white paper: insurance tech dwarfs every other fintech sector as the largest investable opportunity, yet it has received 12 times less funding globally than banking tech. Regarding the hot list, we were happy to see that Knip, last week’s Company of Note, is featured first, but it’s unclear to us whether companies are ranked by hotness, personality or some other attribute. Still, the list is comprehensive, covering the key insurance disruptors and themes impacting the major industry subsectors. Finally, the Celent study offers a blunt assessment of IOT’s impact on P&C firms: premiums will drop faster than fixed costs.
BBVA is on a mission. In the movie The Blues Brothers, Elwood Blues repeatedly reassures his brother, “Joliet” Jake, not to worry about immediate problems since the band is on a mission from God. In reflecting on its recent purchase of Finnish challenger bank Holvi, we can’t help but think that BBVA and its peer Banco Santander also believe that they are on a sacred mission. By itself, the Holvi acquisition is a significant but not transformative deal. But in the context of the bank’s string of fintech initiatives, it’s another sign that it is firmly dedicated to transforming itself into a digital powerhouse that deserves more respect and a higher valuation. For more on BBVA’s acquisition of Holvi, see here.
Infosys takes a functional view of blockchain’s future. Yes, wider adoption is coming soon, but that’s not the point, says Infosys blockchain expert Peter Loop, who says that the technology is “going to be the internet of value transmission” within the next decade. But Loop cautions against putting too much emphasis on the technology itself. “The purpose is not that blockchain wins but that efficiencies in the process win…Pretty soon you’ll have a killer app. But, I hope none of them [Infosys clients] think it’s a blockchain app, that it’s just a solution.” Read more here.
A Ganga exchange? The pot thickens. Marijuana is becoming a serious business, but US regulation remains a bad trip. The drug is legal in 23 states, yet illegal under Federal law, which makes many forms of dope dealing chronically tenuous. However, the challenges aren’t stopping several ex-traders from trying to create an orderly trading market for this “commodity.” Amercanex and other home-grown competitors seem to be cognizant of the difficulties they face. So far, however, the upside looks high enough for them to press forward.
Chinese payments giant to raise more cash. Despite the turbulent Chinese economy, Ant Financial is still going strong as it readies to raise more money to fend off Apple Pay in its home market and possibly go public later this year. The battle for Chinese market share between this Alibaba spin-off and Apple may be a fight for the ages. See more here.
Fintech funding took a breather in Q4. According to CBInsights, Q4 2015 venture funding for fintech companies dropped by 63% from Q3 to $1.7 billion. Meanwhile, overall tech investing dropped by 29% over the same period. Our take? Great. Fintech funding was getting a bit too “easy” during the middle of last year. Nothing sustains a long-term bull market better than a wall of worry. Q4’s choppiness is a sign of some healthy caution.
The passing of a Wall Street giant. John Gutfreund's name may not ring a bell to some, but it should. Ego, benevolence and brilliance often accompany those who ascend in financial services, whether it's roboadvising or bond trading. Those characteristics and more were on full display during the colorful life of the former Salomon Brothers CEP, who died this week at 86.
Company of Note: Paribus.
This Brooklyn-based company is predicated on the little-known fact that many retailers offer price-match guarantees when another retailer drops the price of a recently purchased item. The problem is that consumers find it a huge hassle to get the money owed to them. Paribus addresses this pain point by automatically obtaining the refunds in exchange for a slice of the refunded amount. Check out the company here.
Comings and goings.
Former Thomson Reuters CEO Tom Glocer has joined credit tech firm Algomi as a strategic advisor. Also this week, ITG, a leading trading tech provider and brokerage, announced that former Jana Partners PM Kevin Lynch has joined its board.
This week’s little known facts about….St. Patrick’s Day.
St. Patrick was Welsh, not Irish, and the holiday that bears his name was invented in the US.
The most recent Ice Age, not St. Patrick, should most likely receive the credit for Ireland’s snake-free status.
St. Patrick’s blue, not green, was considered symbolic of Ireland for many centuries