June 16, 2017

SoFi takes a step closer to launching a bank
SoFi has applied for an industrial loan charter in Utah under the name SoFi Bank. SoFi’s application specifies that it will not operate branches or deposit-taking ATMs, and will only offer a credit card and an FDIC deposit account. If approved, it would be the first industrial loan charter granted in around 10 years. SoFi will invest about $4MM for initial opex, plus $166MMM to capitalize the bank, which shouldn’t be a problem given that it raised $500MM a few months ago.

Zopa raises more funds… to also become a bank
Zopa, the UK peer-to-peer lender and one of the first online lenders in the world, raised another $41MM to help fund an expansion into more banking products. Zopa, with a twelve year history, is rare in the fintech world as a company that has lasted for a long time and can still raise money. However, twelve years without an exit also does not bode well for the exit opportunities for these online lenders. The move towards banking may be an attempt to help offset the slowdown in online lending. Zopa plans to apply for a full banking license later this year for a digital/mobile bank and also offer credit cards and investment products.

Wells Fargo upcoming innovations
There were a few interesting ideas coming from Wells Fargo’s Investor Day last month. To facilitate shifting from a product-view to a customer-view, Wells will underwrite total credit exposure to a consumer, and the consumer will be able to choose how to allocate it among products – credit card, unsecured term loan, etc. Other new technology to be rolled out includes a chatbot (surprise!), Zelle, improved digital payment cards, and APIs.

China may step up oversight of payments
A few weeks ago I mentioned that the rapid scaling of Chinese fintech companies, especially around payments, was included in Mary Meeker’s report. However, as these payments happen more and more outside of the traditional Chinese banks, the banks and central bank are losing the payment data associated with it, not to mention the fees. The current narrative is that traditional banks would be more concerned about using the data for cross-sell, while the central bank wants to data for understanding capital transfers. As China continues to lead in terms of scaling fintech solutions, it will be interesting to see what the break point is before the government feels it must have control over how it runs.