FINTECH ARTICLES OF THE WEEK 05/22/16
No surprise that much of this week’s FinTech news drew this or that lesson from the difficulties at peer-to-peer lender LendingClub. The market is abuzz with possibilities of lower FinTech investment, closer regulatory scrutiny, and either the need for greater partnerships with banks or a sense that perhaps the banking industry is OK on its own after all. Take a look at the links and see what you think:
Alternative lending and the LendingClub drama
In the aftermath of LendingClub’s recent fall from grace, Bank Innovation breaks down the business, including its distribution channels, the funds it managed, and the overall loan process. Peer-to-peer lenders have become a valuable source of credit for individuals and small businesses overlooked by banks, and there’s “value in LendingClub, even as it stumbles,” writes Steven Davidoff Solomon for The New York Times. Yet alternative lenders, “can’t replace your neighborhood bank branches,” as banks take steps to use technology to speed up their processes, partner with FinTech competitors, and go after millennials, James Langford argues in a piece for The Street. And the online lending industry is feeling the pinch, as “Avant lays off nearly 60 as it scraps new product launches,” reports Steve Daniels in Crain’s Chicago Business.
Google is right to ban short-term loan ads, but I won’t stop offering short-term loans. Here’s why.
Sasha Orloff, CEO of short-term lending company LendUp, makes the case for why her company is not to be lumped in with all the other payday loan companies criticized for their predatory lending practices. Though Google recently banned payday loan ads, it invested in LendUp earlier this year.
Moody’s: FinTech to drive transformation rather than disruption for banks
In a new report, Moody’s Investor Service said it foresees traditional banks taking advantage of new technologies and improving the customer experience to keep a competitive edge. “Banks will certainly need to transform to appeal to (the Millennial) generation and counter FinTechs’ rise, but many incumbents have made significant steps towards implementing their own digital strategies and they have some time before the full transformation is complete,” said Moody’s Senior Vice President Robard Williams.
Who utilizes customer data better: Banks or FinTechs?
There’s no single winner between banks and FinTech firms. FinTech firms have more agility, but banks have greater scale. Both of them, according to Devie Mohan in a post for BankNxt, can benefit from the large pools of consumer data that are now available to provide customers with services they don’t even know they want yet. Traditional banks have already begun partnering with FinTech firms to gather consumer social media and biometric data points, while some FinTech startups have applied consumer data to go after underbanked customers abroad.