• Fasanara Capital

U.S. Economy, Apple Card in Twitter and Fintech News from Asia



Happy Tuesday!


In This Post:


  • Asia braces for 'tech winter' after SoftBank losses

  • Capital flowing into fintech is driving funding deals for European tech companies

  • How much longer can the debt-burdened consumer hold up the U.S. economy?

  • Financial Innovation and Borrowers: Evidence from Peer-to-Peer Lending

  • China to Transform Remaining P2P Platforms

  • Shifting Logistics To The Centre Of Trade Finance

  • How fintech is revolutionising with blockchain technology

  • Goldman faces probe after entrepreneur slams Apple Card algorithm in tweets.




Asia braces for 'tech winter' after SoftBank losses



SoftBank Group's $9 billion loss on Vision Fund investments is rippling across Asia's technology scene, with startups scrambling to change their business plans amid a new "tech winter" that can no longer count on endless capital from Masayoshi Son. From Indonesia to India, technology companies that recently pursued a visionary strategy of growth-at-all-costs are now pulling in their belts and making "profitability" the new mantra, according to interviews with executives and employees at SoftBank-backed companies across Asia. The tech chill, which could have repercussions on valuations not only across Asia but globally too, began in earnest late this summer as WeWork's planned share flotation began to wobble and then fell.

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Capital flowing into fintech is driving funding deals for European tech companies


According to a recent report compiled by Stripe and Tech.eu, a surge in €100m+ (£86m+) funding deals for European tech companies over the past 12 months has been driven by an increase in capital flowing into the European fintech industry. The report notes the surge has been driven by funding deals for the likes of Monzo, Transferwise in the UK and N26 in Germany and that there have been nearly five times more late-stage funding rounds for European fintech companies between quarter one and quarter three in 2019 compared to all 2018.


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How much longer can the debt-burdened consumer hold up the U.S. economy?


In the Trump era, two seemingly contradictory narratives have dominated the portrayal of U.S. consumers: the tale of the indefatigable American consumer on the one hand and the inequality-crippled majority on the other. Both narratives are true. Through August, retail sales had increased for six straight months, the longest stretch since 2017. Yet, consumer debt has surged to nearly $14 trillion or roughly 19% of GDP, surpassing the total of 17.5% prior to the Global Financial Crisis. As recessionary threats mount, cracks are becoming apparent in consumer fortunes and confidence.


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Financial Innovation and Borrowers: Evidence from Peer-to-Peer Lending




The impact of FinTech lenders on bank credit is ambiguous. Banks can reduce credit if borrowing from FinTech lenders increases default risk. Alternatively, banks can provide more credit if such borrowing signals creditworthiness. The author examines these possibilities in the context of a large peer-to-peer lender. She finds that banks increase credit for consumers who obtain peer-to-peer loans, especially consumers with inferior credit histories. Most borrowers use peer-to-peer loans to refinance expensive bank debt. Marginally funded borrowers consume these loans, but their bank credit increases nonetheless. These results are consistent with information spillovers from peer-to-peer lending to banking.

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China to Transform Remaining P2P Platforms



The Chinese government is making rapid inroads towards reducing peer-to-peer lending risk by shutting down the P2P platforms that are found to be running Ponzi schemes and other fraudulent operations. Many provinces, including Shanghai, have issued a complete ban against all future P2P lending. Whilst most P2P platforms will be shut down, those with fintech expertise and shareholder support will be converted into small lenders. A select few with strong capital bases and are fully compliant will be converted into consumer lenders.

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Shifting Logistics To The Centre Of Trade Finance



The Asian Development Bank‘s estimation of a $1.5 trillion gap in available trade finance is both concerning (particularly to small and medium-sized businesses struggling to access financing to expand across borders), as well as enticing to technology innovators seeking ways to fill a portion of that demand. Though FinTech service providers continue to roll out new products to broaden access to trade finance, there often remains one constant across their strategies: lenders are the focal point of trade finance processes. However, in the world of trade finance, where so many participants join in, there is opportunity for other players to step into the middle of the trade finance web.  That’s the concept that led ConsolFreight to introduce a new trade finance business model, one in which freight forwarders, not banks, stand at the centre. Banks are not experts in international trade, whereas freight forwarders are in an ideal position to understand whether a business — even if it’s a small company — is able to fulfill its end of an international trade agreement.


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How fintech is revolutionising with blockchain technology




Fintech is disrupting the financial industry and the blockchain development companies in this sector have a major advantage going forward. According to PWC’s study of financial services and fintech, about 77 percent of the financial services industry is planning to adopt blockchain by 2020. This is complemented by an estimate of the blockchain market growth of up to $7 million by 2022. The blockchain sector in fintech has been intended to provide banking with a more seamless and effective experience, from cost reductions to uncheck unconditional bureaucracies in the traditional banking sector. While blockchain promises to correct inefficiencies in most banks’ back-office set-ups notably in procedures like clearing and settlement, the most tangible effect this technology will probably have is to reduce fraud and cyber-attack in the financial world, significantly.


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Goldman faces probe after entrepreneur slams Apple Card algorithm in tweets



A probe into Goldman Sachs’s credit card practices has been initiated after tweets from a tech entrepreneur alleged gender discrimination in the new Apple card algorithms that are used to determine credit limits. In a series of Twitter posts starting on Thursday, a tech entrepreneur railed against the Apple Card for giving him 20 times the credit limit that his wife got. The tech entrepreneur did not disclose any specific income-related information for himself or his wife but said they filed joint tax returns and that his wife had a better credit score.  New York’s Department of Financial Services confirmed that an investigation was being conducted.


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