Weekly Briefing #4 — Relax M&A bankers, you aren’t going to be Uberized just yet.
Relax M&A bankers, you aren’t going to be Uberized just yet. This Bloomberg article tore through bankers’ inboxes on Thursday. And while we think Axial is an interesting platform to connect “small” buyers and sellers of businesses, it’s not Tinder, which is geared towards, how shall we say it, short-term transactions. Tinder, in fact, is all about not doing due diligence and not thinking about long-term compatibility. The day that eHarmony announces a business broking platform is the day M&A bankers should be worried.
Unicorn fetishization is very 2015. Hopefully, next year, there will be more substantive things to grab headlines than the extremely small minority of companies that garnered silly valuations this past year. Several fintech companies are well represented in the endless stream of clickbait articles and blog posts that have either glorified or tisk-tisked the unicorn cohorts, but we don’t think you can understand what’s going in financial innovation by looking through the prism of the finaccorns. This piece speaks in general terms about why the marking down of unicorns is good for entrepreneurs and we think it’s doubly true for those involved in the fintech sector.
AI is going to devour lots and lots of jobs. The latest research from McKinsey, Four fundamentals of workplace automation, indicates that 45% of the activities that individuals are paid to perform, worth about $2 trillion, can be automated. These are not just low positions on the totem pole. McKinsey indicates that high-paying occupations including managers, senior executives and CEOs also perform a significant amount of work that can be turned over to software. While the study wasn’t industry specific, we suspect that a healthy chunk of that $2 trillion worth of savings is projected to come from the financial services industry. McKinsey does try to put a positive spin on things by suggesting that automating repetitive functions will enable workers to spend more time undertaking fulfilling tasks: “Financial advisors, for example, might spend less time analyzing clients’ financial situations, and more time understanding their needs and explaining creative options.” Nice try, McKinsey.
J.P. Morgan and OnDeck Capital agree to start dating and celebrate the holidays together. News hit this week that JPM and OnDeck would engage in a strategic tie-up that would fuse the Chase brand and client reach with OnDeck’s online small business lending capabilities. There was no shortage of press coverage on this deal, but our favorite piece was from FT’s Alphaville. The cheeky blog post pointed out that OnDeck’s underwriting was now central to JPM’s relationships with small business customers and, by the way, the online lending industry has spent most of its existence within “very benign credit conditions.” Point taken, FT. Our guess, though, is that after seeing Goldman Sachs and The Blackstone Group jump into the online lending space, JPM felt it needed its own toehold into the coolest thing that’s happened to lending in decades. If everything goes well, we wouldn’t be surprised to see J.P. Morgan buy OnDeck next year, assuming it can navigate the regulatory obstacles of owning an online lender.
Goldman is placing multiple bets on digital currencies. The 146 year-old technology firm that used to be an investment bank announced this past week that it filed a patent application called “Cryptographic Currency For Securities Settlement.” The digital currency will have the catchy name of SETL coin. Here’s how it will work: traders will use their SETL wallets, which will house crypto-versions of securities such as IBM or Google, to transfer ownership to another party on the SETL ledger. Each trade will be subject to authentication and verification, but the settlement promises to be nearly instantaneous. In addition to SETL coins, the wallet will also permit use of other cyptocurrencies such as Bitcoin and Litecoin, making the exchange a digital Ellis Island for cyptocurrencies. The article points out that this patent was filed prior to Goldman’s decision to join the R3 CEV consortium, which is building a common blockchain standard for participating firms. Recently, Goldman’s fingerprints were also on the $50 million financing for Bitcoin start-up, Circle, which is seeking to create a hybrid digital platform that enables users to move in and out of both digital and fiat currencies. So to sum up, when it comes to digital currencies, Goldman’s chips are everywhere on the roulette table.
Company of Note: FeeX.
Started by Waze co-founder, Uri Levine, FeeX bills itself as the Robin Hood of fees. Inspired by Levin’s personal experience in discovering and fighting against an annual $250 charge levied against his retirement account, FeeX is seeking to bring light to the hidden costs that eat away at IRAs and 401ks. Read an article about the company here.
Three Random Data Points: December 5th throughout history.
- In 1776, Phi Beta Kappa, the first U.S. fraternity, is established at the College of William & Mary.
- In 1848, President Polk confirmed a major gold discovery in California, igniting the first of many gold rushes that have occurred throughout the state’s history.
- In 1985, the Dow Jones Industrial Average closed above 1,500 for the first time.
Originally published at www.thefinancialrevolutionist.com on December 5, 2015.
