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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!
1/22/2021 Credit Union Mortgage Prospects Rise for 2021 (Credit Union Times)
There has been a massive increase in mortgage-led delinquencies during the pandemic-induced recession. But, analysts believe that owing to the federal relief and loan accommodations, most borrowers are in a better financial position. Also, with Biden in office and the Democratic control over all the three branches, better days can be expected. The prospects for greater relief have risen and more borrowers can be expected to stay current on their payments. “Market expectations of a larger than anticipated fiscal relief package, which is expected to further boost economic growth and lower unemployment, have driven Treasury yields higher the last two weeks,” Joel Kan, the Mortgage Bankers Association’s (MBA) assistant vice president of economic and industry forecasting, said in the MBA’s Weekly Mortgage Applications Survey.
1/19/2021 PPP Covid-19 Small-Business Aid Reopens With 60,000 Loans (The Wall Street Journal)
The SBA continues its initiative to help small businesses as it reopened the Payment Protection Program. After the historic success of the first two rounds of PPP, which was open between March-August 2020, the third round is off to a very great start. 60,000 PPP loan applications have been approved between Monday, January 11 and Sunday, January 17, by the US Small Business Administration. These applications were submitted by well-nigh 3000 lenders for over $5 billion. The loan amount is based on the size of an applicant’s payroll but the average PPP loan size is not more than $20,000 for first-time borrowers and is below $75,000 for second-time borrowers. Also, after the last two rounds being criticized for not reaching minorities, women, veterans, and underserved communities, the SBA has made sure that the groups that struggled to get access to the program are given preference. Thus, the applicants included day-care operations, mom and pop retailers, with roughly three-quarters of would-be borrowers seeking their second PPP loan. The program’s restart cannot have been at a better time as many small businesses continue to struggle with the blowback from the pandemic.
1/19/2021 Goldman’s Consumer Bank will Take Longer to Break-Even CEO Says (American Banker)
Goldman’s emerging consumer-focused fintech, Marcus is expected to take longer to reach its breakeven point. The company’s CEO and Chairman, David Solomon said that the previous target of 2021, may now be met in 2022 due to the pandemic. However, Solomon has confirmed that the company’s financial targets will not be affected by the delay in launches of other products which would have followed the breakeven of Marcus. In the first quarter, Goldman plans on introducing a wealth management product that will allow U.S. consumers to invest as little as $1,000 in index funds and exchange-traded funds. The firm also intends to launch a checking account for its customers, which will be an addition to its already-existing range of digital services, by the end of the year. Goldman has confirmed its plans of lending partnerships with organizations like Amazon, Walmart, and General Motors.
1/15/2021 How Credit Unions can Capture the Gig Economy Market? (Credit Union Times)
The gig economy that includes freelancers, Uber drivers, independent photographers, writers, and consultants, is one of the nation’s fastest-growing segments. Their population makes up more than a sixth of the US population and their income is nearly $1 trillion which is almost 5% of the US GDP. These gigantic numbers make it very important for credit unions to capture this base of consumer accounts by identifying their financial needs and filling the gaps. The one major problem that the members of the gig economy are facing is improper personal and professional financial management. In the gig economy, there often lies a tendency for people to use personal accounts for business expenses. Besides, due to the pandemic, the freelancers are experiencing reduced demand for services. At such a time, access to credit can be crucial for freelancers, and credit unions can play a huge role here. By adopting a range of digital solutions, credit unions can easily and efficiently meet the needs of non-traditional workers.
1/13/2021 Walmart’s Fintech Deal Threatens a Much Deeper Banking Incursion (The Financial Brand)
The retail giant Walmart has been looking for ways into financial services for decades and launching a fintech startup with Ribbit Capital suggests a bigger play is at hand. Walmart’s present customer and employee bases pose a huge opportunity. According to the annual report of 2020, revenue from fuel and financial services and related products, including money orders, prepaid cards, wire transfers, check to cash and bill payment totals less than 1% of annual net sales. The deal with Ribbit may reflect Walmart’s desire to get further into the actual guts of financial services, rather than being solely a distribution partner.
1/13/2021 Affirm’s IPO Takes Off Like a Rocket Ship (Lendit Fintech News)
The Nasdaq was witness to one of the many successes of fintech IPOs in recent times. Affirm, a consumer lending fintech firm saw its initial listing of $49 which was quite the increase from the price range target of $41 to $44. The shares closed at $97.24. The organization which was founded in 2012 by PayPal co-founder Max Levchin, is a simple and consumer-friendly credit solution. With the lockdown and stay-at-home orders in place, millions of North Americans sought refuge under Affirm’s easy credit policies. These policies include no single late fee or penny of deferred interest. The organization earns from either charging a fee from the merchant or through a simple interest charge paid by the customer. The ‘Buy Now Pay Later’ purchase model is yet another example of changing customer behavior.
1/12/2021 Visa Abandons Planned Acquisition of Plaid After DOJ Challenge (The Wall Street Journal)
Visa’s initial plans of acquiring the emerging start-up, Plaid, was challenged by the Department of Justice by filing an antitrust lawsuit against the payments industry giant. The DOJ felt that even though Plaid is an emerging company and will still take some time to establish its customer base, it still stands as a serious competitor to Visa. It implies that by buying Plaid, Visa would be limiting the competitors in its market, leading to increased monopolization in the payments industry. This move ultimately led Visa to abandon its plans to merge with Plaid. Visa had planned on fighting the government for winning this deal but later came on a mutual agreement with Plaid to end the partnership as of now.
- 1/11/2021 Banks are shuttering branches left and right. Here’s why. (finLedger)
Banks are the most impacted by shifts in consumer habits over the past 10 months because of the Covid-19 pandemic. Banks continue to shutter down physical retail locations all through. More than 4,400 branches were closed across the US since 2017, bringing the total number of branches closed to over 13,000. Truist (resulting from the merger of BB&T and SunTrust) has taken into consideration a lot of factors while finalizing the branches to be closed. They have kept in mind the customer’s preferences and behaviors while going from physical branches to digital banks. The main driving force behind the closure of bank branches is considered to be digital and mobile banking. However, bank closures seem to be affecting different areas differently. Most of the consumer base for banks are from cities or urban areas, whereas the branches are being shut down almost entirely in rural areas
1/7/2021 SoFi to Go Public via a SPAC That Values the Company at $8.65 Billion (Lendit Fintech News)
While SoFi has been planning on going public for a long time, they’re planning on doing it not via an IPO but through a Special Purpose Acquisition Company (SPAC) deal. The SPAC deal values the fintech at $8.65 billion. SoFi plans on leveraging the financial services productivity loop where building trust with one product leads consumers to use multiple products. We shouldn’t underestimate the importance of SoFi’s acquisition of Galileo last year because this gave them a very successful technology services business that was profitable at the same time. It will become a publicly-traded company once the deal with SPAC is finalized. This deal is considered to be the blockbuster fintech deal of the year.
- 1/5/2021 What Banks can Earn and Learn from Underbanked Customers? (finLedger)
When thinking of the underbanked population, many people link that with developing countries with not-so-developed financial systems. But, what would surprise most people is that around two-thirds of the US population prefers alternative financial services like money orders, payday loans, and check cashing services. To make sure that banks don’t miss out on a huge market segment, they can learn the following four things from the underbanked population to fill the gap. First, low credit scores are not an anomaly. Even though fraud flags help mitigate the risk based on low-credit customers, they also drive a wedge between the underbanked and the banks. Second, fintech startups fill the gaps that banks leave. Banks need to consider that millions of people in the US have fluctuating income, high debt, low credit, or are living on government assistance, fintech startups provide these people reasonable financial services and scoop up the revenue. Third, banks need to step-up and mitigate risk. Banks possess enough data about customer needs to compete with fintech companies, they just need to make full use of it. And lastly, banks need to follow in fintech’s footsteps. Fair access to financial services can have a huge impact on customer loyalty in the long run.
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