FinTech Enroute: Old Guard Interest in FinTech Ventures, Philadelphia’s Cash Crusade, and more
Big Banks & Small Shops
Big banks are now supporting small fintech companies. Goldman Sachs has extended a line of credit of up to $100 million to Credijusto, a four-year-old financial technology firm in Mexico City. Credijusto was founded to help solve small Mexican businesses’ struggles with growth through making three-year loans to small businesses, such as taco restaurants, or lightweight bicycle designers like Chop Chop Bikes who couldn’t obtain any loans from a local bank. Since more than 80% of small businesses in Mexico are unbanked and rely primarily on supplier financing instead of credit, many new lending platforms have been created in recent years to help fill the void. Credijusto has grown rapidly — lending at about $10 million in 2017 and $35 million in 2018 to about more than $125 million in 2018. This void is also seen as opportunities for big banks like Goldman Sachs that want to further entrench themselves in developing markets such as Latin America. Should we expect more untraditional moves from this big bank? Definitely.
Traditional Institutions Play Catch-Up In Consumer Finance
We’re all aware of the battle brewing between established banks and Fintech startups over who will be the ultimate financier of consumer purchases. Up until this point, the leading player in the point-of-sale financing game has been Affirm, founded by PayPal founder Max Levchin. This week, however, JPMorgan Chase has entered the point-of-sale race, launching “My Chase Plan”, a fixed-payment structure that can be used by anyone using a card issued by the US bank. This move signals a push-back from traditional institutions against the disruptors entering their industry. A key question then becomes: will traditional players like JPMorgan offer these products to users within their domain of control, or will they — much like the start-ups encroaching on their industry — begin catering to those outside of the existing credit system?
Find out more at https://www.ft.com/content/7d120c50-3ba7-11e9-b72b-2c7f526ca5d0
Dawn of the Tech IPO
It’s the moment we have all been waiting for: this week, ride-hailing disruptor Lyft finally makes its Nasdaq debut. Having filed for IPO paperwork in December, the company has been speculated to hit the market at a valuation of $23 billion, reportedly raising $2 billion in the process. The announcement rides the wave of whisperings of several tech IPOs occuring in upcoming months, including those of Slack, Uber, and Pinterest. Given that publicly-traded companies are, by default, subject to more government regulation and controllations, does this indicate a shift in the tech world towards greater a greater sense of accountability? Or is this simply a mechanism to appease private investors with a fat payday and reach a new crop of public investors? What does the comeback of IPOs mean for alternative fundraising schemes such as ICOs?
Philadelphia’s Cash Crusade
Last week, Philadelphia passed a bill banning all stores from going cashless. Come July 2019, all stores in the city must give customers the option to pay with cash. This political move marked the first piece of US legislation against cashless businesses since 1978. While many have criticized the law, claiming that “modernization is going to happen with or without Philadelphia”, many have supported the bill by fallaciously asserting that cashless societies marginalize low-income shoppers and those without access to credit lines. Will Philadelphia’s moves inspire future action against cashless institutions?
Read more at: https://www.vox.com/the-goods/2019/3/8/18256601/cashless-stores-philadelphia-law-amazon-go-sweetgreen
PayPal Finally Launches Instant Transfer
It’s the little things: PayPal broke the news this week that it will finally allow users to instantly transfer funds to bank accounts with just one tap. As a longtime alternative to credit cards and cash, Paypal has long struggled with its inability to offer its customers an Instant Transfer feature. This expansion is significant because it targets an entire pool of users who do not have debit cards, and who will now be able to withdraw the funds immediately from their bank accounts. PayPal CEO states that this is an “acknowledgement of the changing nature of the global workforce”, in which the gig economy is demanding financial institutions to allow for easy and fast access to funds.
Interested in how financial technology is fueling the gig economy? Read more at: https://techcrunch.com/2019/03/12/paypal-now-lets-us-users-instantly-transfer-funds-to-bank-accounts-in-seconds/
