November 3, 2017

Fintech lender risk isn’t too different from banks
TransUnion released a new study this week analyzing tens of millions of loans over the last few years to understand the impact of fintech lenders. In 2016, fintech lenders made up 30% of the personal loan market, but are less risky than some would expect. While a common narrative is that fintech lenders are gaining share by serving the subprime market, the majority (59%) of their loan volume is prime and near prime, with only about 10% in subprime, and the remaining 30% in prime plus and super prime. Also, fintech customers aren’t just Millennials. In fact, fintech lenders have a lower proportion of 18-29 year olds compared to banks and credit unions. And while fintech delinquencies are higher slightly higher in the prime sector and modestly higher in the near prime compared to banks, this is offset by 5-10% higher interest rates.

European digital bank startups coming to the US in 2018
Both N26 and Revolut have announced plans to enter the US market in 2018. N26 has already hired some staff in New York who are working on tweaking the product to meet the needs of US consumers. The company has its own banking license in Europe, but will look to partner with a bank in the US to provide the US-based deposit account and debit card. Revolut also has a small team working in New York, and though its app is more focused on international transactions, 5,000 people have already signed up during the pre-launch phase. Digital banks have been much more prolific in Europe than in the US, so 2018 will be their chance to see if they can transfer that success to a new market, or if US-based digital banks will start to shine.

SoFi drops plans for OCC charter
Back in June, I covered SoFi’s application for an industrial loan charter in Utah. However, due to the turmoil in executive ranks this year, including the departure of CEO Mike Cagney, CFO Nino Fanlo, CTO June Ou, Chief Revenue Officer Michael Tannenbaum, and co-founder Dan Macklin, the firm has pulled the charter application. None of these positions have been permanently filled yet, so the company will focus instead of stabilizing the leadership team. This withdrawing of the application came after company adviser and former SEC chairman Arthur Levitt publicly stated that it would be nearly impossible for the OCC to approve its application after the departure of Cagney.

TransferWise continues international growth with $280MM funding
Despite already achieving profitability earlier this year, international money transfer service TransferWise raised an additional $280MM to fund expansion into Latin America and Asia. TransferWise states that they handle $1 billion in volume each month and have over 2 million customers. Earlier this year, Santander had circulated an internal presentation showing that it charges customers 6x more than Transferwise for the same transaction, and that TransferWise already had 8% market share of the UK international money transfer market. Despite a valuation of $1.5 billion, an IPO still looks to be about three to four years away.