Happy Monday!
This time:
Online Loans Defy Fears Of Mass Delinquencies
Pandemic Speeds Up Push To Digital As Bank Branches Close
Banks Aren’t As Stupid As Enterprise AI And Fintech Entrepreneurs Think
Every Company Will Be A Fintech Company
CB Insights Report: Embedded Fintech Gaining Traction
European Fintechs Have Raised Over $3bn Since Lockdown Began, But Where’s That Money Gone?
Online Loans Defy Fears Of Mass Delinquencies.
Marketplace loans have defied sceptics in the Covid-19 pandemic, with delinquencies rising only moderately even as unemployment has spiked. According to a recent report from the data provider dv01, impaired marketplace loans — those that have fallen behind on payments or accepted payment forbearance — are 9.7 per cent of the total, up from about 6 per cent before the crisis began. That is down from a peak of 16 per cent in April, and the impairment rate has continued to decline through the early weeks of August.
Impairment rates on marketplace loans have risen less than those on cards and mortgages, which were both well under 2 per cent before the pandemic began. The dv01 data is based on 1.7m loans with a cumulative value of over $19bn, representing the great majority of the marketplace lending universe. “We’ve been struck by the improvements [in impairment rates] recently among every portion of the marketplace universe — high income, low income, high FICO [credit] score, low FICO,” said Vadim Verkhoglyad, lead analyst at dv01. “What this tells us is that they really value their online loans, even though they are not originated through a bank”.
Pandemic Speeds Up Push To Digital As Bank Branches Close.
Banks are using the coronavirus crisis as a springboard to accelerate the push from bricks-and-mortar branches to online services. Banks have long talked about reducing their high street outlets to cut costs, but progress had been slow not least because many customers are fond of branches. However, as banks were forced to close large numbers of branches throughout the lockdown, customers adapted to online banking at a rate few lenders expected. Many retail-focused banks closed around a quarter of their branches throughout the second quarter, with a handful making even more drastic cuts.
One technology trend that has accelerated this year is the uptake of end-to-end digital processing, which has set up bank systems to do away with in-person interaction entirely. A recent survey of banks by Autonomous, a research group, showed many had invested in their client onboarding and contract closing systems, especially when it came to digital identification verification. Three-quarters of banks polled said they were now able to offer mortgages or loans to small-and-medium-sized companies without personally interacting with the customer.
Banks Aren’t As Stupid As Enterprise AI And Fintech Entrepreneurs Think.
Artificial intelligence and fintech evangelists often complain that banks are too slow to adopt fintech’s bright ideas. They don’t seem to grasp where the industry is headed. Some technologists, tired of marketing their wares to banks, have instead decided to go ahead and launch their own challenger banks.
But old-school financiers aren’t dumb. Most know the “buy versus build” choice in fintech is a false choice. The right question is almost never whether to buy software or build it internally. Instead, banks have often worked to walk the difficult but smarter path right down the middle — and that’s accelerating.
Every Company Will Be a Fintech Company.
According to Angela Strange, a general partner at Andreessen Horowitz, in the not-too-distant future, every company, even those that have nothing to do with financial services, will have the opportunity to benefit from fintech for the first time.
Watch her presentation in which she delves into the infrastructure that’s enabling this transformation and, more importantly, how that’s going to fundamentally change banking as we know it.
CB Insights Report: Embedded Fintech Gaining Traction.
In its State of Fintech Q2’20 Report, market intelligence firm CB Insights, shares findings from funding data from Q2, including that the trend towards embedded fintech applications is rapidly gaining traction around the globe and across applications. Non-financial companies around the world are increasingly integrating financial products into their service offerings. This emerging trend, referred to as embedded fintech, is becoming more and more apparent, according to the report.
The concept of embedded fintech is that financial services, rather than being offered as standalone products, will become part of the native user interface of other products, becoming thus embedded. This trend has emerged over the past few years, with Apple, for example, launching the Apple Card in the US in August 2019. Amazon offers products and services in payments, lending, insurance, and more. Facebook provides payments services and has been working on its Libra stablecoin project.
European Fintechs Have Raised Over $3bn Since Lockdown Began, But Where’s That Money Gone?
Europe’s fintech startups have continued raising vast amounts of capital over the lockdown period, attracting around €2.86bn ($3.4bn) in investment between March and mid-August. It’s not yet clear how badly fintechs’ valuations have been affected in recent months, but according to PitchBook, investors in Europe seem confident that long-term macro trends (including accelerated digital adoption) will “broadly favour” the sector. Still, not all sub-sectors within fintech have attracted the same level of investor backing since Covid-19 broke out. The article breaks down the funding data by sub-sector, including payments, banking, wealthtech, lending and insurtech, to understand how each area of fintech has performed with venture capitalists in recent months.
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