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MonJa’s Digital Banking and Lending Monthly Roundup – Why Subscribe?
Digital banking and lending is evolving rapidly. Recent fintech-banking partnerships and innovation in technology with the introduction of AI, ML and blockchain herald a new era in lending. Fintech’s are changing the competitive ecosystem, empowering lenders to process loans faster and smarter. In a world full of noise, understanding how the technologies and developments may impact your financial institution’s credit decisions and credit portfolio is of critical importance. With MonJa’s Digital Banking and Lending Monthly Roundup, it’s easy to stay up to date on what’s happening in the space. Get the latest updates, analysis and commentary on digital banking and lending segment!
08/27/2020 Over 300 Lenders Provide for Aid for PPP Through Lendio (Debanked)
A recent report by Lendio about the PPP loans (worth $8 billion) rolled out by its lending platform claimed that over 300 lenders participated. In the process, the company claims, over a million jobs were saved. When it came to the funding amount, traditional banks were ahead of all others with about $3.3 billion in funding, which was about 44% of the total PPP amount on Lendio’s platform. However, non-banking lenders got the most approvals (50,264 transactions). Meanwhile, fintechs could fund about 6% of all the loans through Lendio. The company onboarded 100 new partners who needed a specialist platform to handle loan request volumes and processing. It wasn’t easy for the company either as its system wasn’t prepared for such massive volumes at such short notice. “Our systems were tested to their limits, like 1000 times more pressure than we ever saw before,” CEO & Co-founder, Brock Blake, said. “Some partners of ours got so much demand they couldn’t handle it and turned off their spigot. So we scrambled to find lenders that would take on new customers.” With this recent feat, Lendio could double the loans issued by it (since 2011) while managing to increase its facilitated amount to fourfold in just four months.
08/26/2020 Banks Relieved as Rakuten Withdraws ILC Application, CEO Says They Will Reapply (American Banker)
Rakuten withdrew its ILC application for the second time; bringing relief to many American banks. However, the relief is expected to be temporary as the Company is already planning to reapply. The main opposition consists of banks that are inherently against the idea of tech firms and retailers trying to obtain ILCs. It should be noted that the chief reason for the apprehension comes not from Rakuten itself but the opportunity that its ILC approval would provide other tech or e-com giants like Amazon. “If the FDIC approved them, we believed that they would have been willing to approve something like an industrial bank for Amazon or Apple, really any of the large tech companies,” said Chris Cole, executive vice president and senior regulatory counsel of the Independent Community Banks of America, of the company’s withdrawing its application. But it may not be that easy to convince the Congress or the FDIC for yet another moratorium, according to analysts. Rakuten, on the other hand, is in no mood to put down its banking ambitions and plans to resubmit its application soon.
08/26/2020 QuickBooks Capital Funds $683M for Cumulative Business Loans (Debanked)
QuickBooks Capital, a subsidiary of Intuit Financing, has already funded $683 million in cumulative small business loans ever since the launch of the program in 2017. This, however, (as per the recent quarterly earnings) does not include the $1.2 billion doled out by the company as PPP loans. Intuit has recorded a positive trend with a revenue of $1.8 billion (for Q4) and $7.7 billion for the fiscal year (an improvement of 13%!). The $7.1 billion purchase of CreditKarma in February would also be expected to significantly push these numbers upwards in the near future.
08/24/2020 BaaS and the Digitization of Community Banks (The Financial Brand)
BaaS or “Banking-as-a-Service” is an end-to-end banking process (for payments, deposit, and loans) as a financial service using existing licensed banks’ infrastructure (for security and regulation) with API-driven platforms. This process, most commonly utilized by fintechs, enables the delivery of banking services by a complex ecosystem of specialized financial providers. Community financial institutions like credit unions and local banks have been acting as “partner banks” behind the more popular challenger banks. Meanwhile, the “challenger bank” trend is catching on in the financial space with the likes of Goldman Sachs letting its retail banking unit, Marcus, partner with Amazon as a fully digital lender for the latter’s merchant lending platform. Such an influx of bigger players could support the non-financial companies currently operating in the BaaS space.
08/18/2020 The Reason Behind Amex’s Buying of Kabbage (American Banker)
Amex is buying all of Kabbage (for a rumored $850 million) except the loan portfolio which means that it will acquire the latter’s technology and people. Observers assess that the bank could utilize the competitive edge of Kabbage’s software and talent to deliver a greater variety of services to SBEs. Kabbage’s tech gathers vital data about SBE borrowers enabling an unmatched business performance view. This enhances user experience, letting automated loan decisions be taken within ten minutes. Kabbage’s technology is expected to provide American Express with a crucial edge over its lending competitors which essentially requires the ability to make instant decisions (which is a specialty of Kabbage’s software.)
08/13/2020 FinTechs’ Declaration of Victory In PPP Loans (Forbes)
While bigger banks may have, initially, been viewed as the chief source to obtain liquidity for businesses, the tide soon turned towards the Fintechs. It was obvious given the glitches faced by the big banks when it came to serving small customers. On the other hand, fintechs had already been prioritizing smaller businesses as their target market long before the pandemic knocked on our doors. When assigned to work with PPP loans, fintechs could easily manage the areas that were problematic for the bigger banks. Now with the completion of the PPP program, fintechs are calling it a victory as they were able to help small businesses through the COVID-19 economic struggle and rightfully so. The latest report by SBA PPP Report supports the idea as well. Kabbage had about 300,000 applications representing over $7 billion in loans, making it the second-largest PPP lender based (based on application volume.) Unquestionably, fintechs like Kabbage proved to be a lifesaver for SBEs across the U.S.
08/10/2020 Community Bank Somerset Teams Up With Fintechs For Gig-Economy Workers (American Banker)
As the gig-economy is catching up while the mainstream economy is still under the impact of the pandemic, more and more challenger banks are offering help for gig workers. The executives at Somerset Trust Co. had already sensed the trend of gig-economy workers back in 2019. Somerset wanted to help its prospective customers with independent or side-gig income. It came up with a partnership with RoamHR (a financial platform for the self-employed) to adapt freelancer-friendly features with its existing accounts. This type of partnership provides one method for traditional banks to adapt to gig-economy workers. Initially, the partnership was seen as a way to attract new customers. However, many of Somerset’s existing customers turned out to be a mix of W-2 and 1099 income holders. With the ongoing economic upheavals, it is obvious that more workers would go for contract gigs.
08/03/2020 Reason Why Banks Want To Be Google Checking Account Partners (American Bankers)
More and more banks are growing interested in being partners with Google for checking accounts. The reason is varied; enhanced customer experience being one reason and scope of innovation being another. Google’s current partners are a diverse group that includes big global firms like BBVA, BMO Financial Group, and Citigroup, two community banks, an online bank (for college students), and two credit unions. The Company announced a new group of partners recently, Citi and Stanford Federal Credit Union. Many of the new partners said the tech and marketing opportunities with Google offers are “too great to pass up.” While promising in nature, partnerships like these would obviously raise valid data privacy concerns; especially when it comes to questions like—how much bank account data will Google have access to.
07/31/2020 Brock Blake on PPP Loan Waiver (Forbes)
While the PPP provided critical help to businesses across the U.S., its waiver could less helpful than thought. PPP was aimed to help businesses keep the salaries coming for the employees. But to forgive these loans altogether may not be the best idea, according to Lendio CEO Brock Blake. An automatic waiver of PPP loans would mean that businesses would not have to do any paperwork whatsoever to prove where if all the funds were used for the intended purpose. In his view, relief funding must be accounted for to encourage accountability and reduce fraud. Despite the stance, Blake seemed in favor of forgiving the loans on sole proprietors and the self-employed since the loan payment is essentially far more difficult for them.
07/31/2020 Varo Money Secures National Bank Charter (American Banker)
Varo Money finally managed to secure a national bank charter after three years. As its banking journey begins, Varo will have to move the customer accounts into its core system after buying them from its partner bank (The Bancorp Bank). Varo will now be able to offer credit products like credit cards, mortgages, and short-term loans. Varo Money, which launched five years ago with the help of its partner bank, specializes in “no-fee” checking account with “no-fee” overdrafts of up to $50 and a debit card. During the COVID-19 crisis, Varo’s pro-customer approach was commendable. It was able to adapt and refurbish its app to recognize U.S. Treasury checks. Additionally, it chose not to place any hold times on these checks. It enhanced its service operations to accommodate more customers. No wonder its customer base has grown 200% since March 2020. With its status upgraded to a bank, Varo would be able to do more and offer more complex credit services such as home financing.
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