Wells Fargo launched a new small dollar digital financial solution called Flex Loan this week.
The new offering provides loans of $250 and $500, with a flat fee of $12 and $20, respectively.
Available in selected markets now, Flex Loan will be available nationwide by the end of the year.
Certainty, simplicity, and clarity are among the virtues of Wells Fargo’s new small dollar digital financing solution, Flex Loan. The new product is a digital, small dollar loan of either $250 or $500 with a flat fee of $12 or $20, respectively. Available only in select markets now, Flex Loans will be introduced across the U.S. by year’s end. Wells Fargo indicated that Flex Loan is part of the financial services company’s efforts to help customers meet short-term cash needs and avoid potential overdrafts.
“What makes Flex Loan different from other payment options is its certainty of approval for eligible customers, the simplicity of obtaining funds in minutes, and clarity around how much it will cost to pay for things like holiday gifts, travel, or an unexpected home or car repair expense,” Head of Personal Lending and Retail Services for Wells Fargo Abeer Bhatia said.
Eligible customers will see the Flex Loan offer in their Wells Fargo mobile banking apps. Once customers take out a Flex Loan and establish their repayment plan (four equal monthly installments), the funds are available in customers’ Wells Fargo account within seconds. Customers can then use the funds via their Wells Fargo debit cards for payments or purchases. There are no applications, late charges, or interest fees.
Flex Loan joins a trio of options announced by Wells Fargo in January that are designed to help customers better manage short-term cash needs. These options are: Early Pay Day, Extra Day Grace Period, and Clear Access Banking. Early Pay Day gives Wells Fargo customers access to eligible direct deposits up to two days in advance. Extra Day Grace Period adds an extra business day to make deposits to avoid overdraft fees. Clear Access Banking offers customers a checkless banking account with no overdraft fees.
With $1.9 trillion in assets, Wells Fargo & Company provides financial services to one in three U.S. households and more than 10% of U.S. small businesses. Wells Fargo is publicly traded on the New York Stock Exchange under the ticker WFC, and has a market capitalization of $176 billion. Charles W. Scharf has been CEO of the bank since 2019.
Financial institutions continued to invest in technology in the third quarter as mobile usership climbed and client preferences migrated further toward digital offerings. The shift to mobile banking has banks looking to tech providers — including Jack Henry’s Banno cloud-based digital banking platform, which enables online and mobile banking capabilities, and can be directly integrated […]
The fallout over the collapse of cryptocurrency exchange FTX continues. On Friday, the embattled company filed for Chapter 11 bankruptcy protection, noting that it had in excess of 100,000 creditors – before amending its filing days later to report that the number of creditors might be more than one million.
While 2022 has been a dark year for a number of cryptocurrency companies, none have suffered as FTX has. With a valuation of $32 billion and more than one million users, FTX was the third largest cryptocurrency exchange by volume last year. But all of this came crashing down earlier this month. When rival Binance learned that FTX partner Alameda Research had much of its assets in FTX’s token FTT, Binance began selling its holdings of FTT. This resulted in more selling, in what some observers have called the equivalent of a bank run, which demolished the value of FTT and created a serious liquidity crisis for FTX. An aborted plan by Binance to buy FTX gave the company few alternatives to the bankruptcy declaration it made late last week.
What’s next? The FTX crisis has reached the recrimination stage, with even the company’s performance coach weighing in. (You can read Dr. Lerner’s response to rather lurid allegations about the behavior of the company’s senior executives. Spoiler: he refers to the company’s Bahamas headquarters as a “pretty tame place”). A sizeable swathe of celebrities – from NFL star quarterback Tom Brady to supermodel Gisele Bundchen- who served as brand ambassadors for FTX are also finding themselves under scrutiny – and worse.
And speaking of scrutiny, it appears as if the FBI is in discussions with the Bahamian authorities on extraditing FTX founder Sam Bankman-Fried to the United States for questioning.
Is cryptocurrency lender BlockFi now endangered due to the crisis at FTX? Media reports from The Wall Street Journal indicate that the company, launched in 2017 and headquartered in Jersey City, New Jersey, may be considering bankruptcy.
Why? According to reports, BlockFi admitted that while it did not keep the majority of its assets at FTX, the firm did have deposits on the company’s platform, as well as an undrawn line of credit from FTX “and obligations that FTX owed it.” BlockFi has suspended customer withdrawals in the wake of the FTX collapse, is limiting platform activity, and also is reportedly planning to layoff an unspecified number of workers.
BlockFi has not responded to the reporting from The Wall Street Journal at this time. A message at the company’s website reads: “BlockFi is not able to operate business as usual. We have limited platform activity, including pausing client withdrawals as allowed under our Terms. We request that clients not deposit to BlockFi Wallet or Interest Accounts at this time.”
Entrepreneur and investor Anthony Pompliano was interviewed on CNBC’s Overtime program Tuesday afternoon. Asked about the FTX situation, Pompliano made an impassioned case for the future of cryptocurrencies. Pompliano also argued that the American market-based system is the only place where this kind of innovation – and accountability – is possible.
Pompliano runs investment firm Pomp Investments. He was formerly co-founder and partner with Morgan Creek Digital Assets, and Managing Partner with Full Tilt Capital. Pompliano also was a Product Manager at Facebook where he led the growth team for Facebook Pages, and helped launch solutions including AMBER Alerts and Voter Registration. He is the author of a daily email newsletter of business, finance, and Bitcoin called “Pomp Letter.”
At a time when so many are down on cryptocurrencies, it may be reassuring to hear news that innovation platform Plug and Play is keeping the faith.
In collaboration with founding partners Visa, AllianceBlock, The INX Digital Company, IGT, and Franklin Templeton, Plug and Play has launched its new Crypto and Digital Assets program in Silicon Valley. The goal of the program is to help startups around the world that are innovating in the crypto and digital asset spaces to connect with the program’s aforementioned founding partners to help them pilot their solutions. The program has four main focus areas: stablecoin adoption, decentralized finance, crypto economics, and enterprise blockchain.
“Not only will this unique partnership offer deeper connections on the West Coast and Silicon Valley, but it will also allow us to put our leadership and expertise to work as we advise companies on the benefits of participating in the rapidly growing ecosystem of blockchain, tokenization, and cryptocurrency,” INX Chief Business Officer Douglas Borthwick said.
Companies interested in participating in the Plug and Play Crypto and Digital Assets program are being encouraged to apply.
With its decision to acquire FTX now a thing of the past, blockchain company Binance is back to focusing on its own organic growth.
The company announced at midweek that it has secured a license from the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM). This license — a Financial Services Permission (FSP) — will enable Binance to offer digital and virtual asset custody services to professional clients that meet the FSRA’s conditions for FSP.
“Obtaining this license is a pivotal step in the growth of Binance in Abu Dhabi, and a reflection of the city’s progressive stance on virtual assets,” Binance (AD) Senior Executive Officer Dominic Longman said. “We are excited to continue to strengthen our symbiotic relationship with ADGM and the city of Abu Dhabi and look forward to providing institutional investors with a secure and reliable platform for their virtual asset activities.”
ADGM’s FSRA issued its virtual asset regulatory framework in 2018. ADGM Chairman Ahmed Jasim Al Zaabi said that the framework is a core part of ADGM’s goal of supporting fintech innovation in the financial sector and “reinforcing the UAE’s status as a rapidly accelerating global crypto marketplace, with Abu Dhabi and the ADGM as the engine room powering this growth.”
Finovate has held two fintech conferences in the UAE in recent years: an inaugural event in 2018 and a second conference the following year in 2019. Read more about fintech in developing economies in our weekly Finovate Global column, published on Fridays.
Embedded finance platform Railsr is teaming up with fraud prevention company Featurespace this week to bolster fraud prevention efforts for Railsr as a company, as well as for its clients.
Railsr will leverage Featurespace’s ARIC Risk Hub, combined with its own fraud teams, to provide its clients with a compliance tool to stay on top of regulations. The fraud tools will be available to Railsr clients with a single integration, making it easier for them to focus on growth while remaining compliant.
“As the market accelerates towards embedded finance, consumers expect a frictionless payment experience that is built into the transaction process. With Featurespace’s AI and ML capabilities, Railsr can provide an enhanced level of customer experience, making consumers’ lives simpler and safer,” said Railsr Global Head of Product for Fincrime and Operations Stuart Hartley.
The ARIC Risk Hub will enable Railsr customers to view and manage their fraud analytics, as well as offer them a single place to access Featurespace’s fraud and AML (FRAML) solutions.
“The Railsr platform is a natural fit for Featurespace,” said Featurespace Chief Commercial Officer Matt Mills. “As embedded finance increasingly becomes expected by consumers, making sure they are protected from fraud and financial crime must be expected in equal measure. Railsr have recognized this early and added a critical layer of self-learning technology to ensure their customers get only the best experience.”
Railsr anticipates the new fraud tools will be available within the next year.
Today’s news comes amid a string of high-profile partnerships for Featurespace last month, including with BBVA, Diebold Nixdorf, and Global Processing Services. Featurespace has more than 30 major bank clients including four of the five largest banks in the U.K. Among Featurespace’s customers are HSBC, TSYS, Worldpay, RBS NatWest Group, Danske Bank, ClearBank, and more.
Founded in 2005 by a university professor and his PhD student, Featurespace has raised $108 million, including its most recent investment of $37 million received in 2020.
Here is our pick of the 3 most important stablecoin stories during the week.
As FTX blows up stablecoins hang in there.
This week while FTX burned down to the ground, thankfully stablecoins managed to stay for the most part stable.
With volumes of trades at unprecedented levels as customers rushed to the exists,
USDT transactional activity jumped to a four-month-high. Tether Global Chief Technology Officer Paolo Ardoino pointed out in a Thursday tweet that over 700 million USDT were redeemed for U.S. dollars in the past 24 hours. “No issues. We keep going,” he said.
Meanwhile in CBDC land, the BIS discovers that convenience is not only good for customers but also for Central Banks. Good to know.
“More and more central banks are transitioning from thinking about central bank digital currencies (CBDCs) in conceptual terms to considering a launch. Attention has shifted from high-level monetary policy and financial stability considerations to country-specific design and policy interactions.
Large banks have a competitive advantage that the introduction of a CBDC could amplify or reduce, depending on the design choices. A highly convenient CBDC produces sufficient competitive pressure in deposit markets to raise deposit rates for any given level of IOR and increases the responsiveness of deposit rates to IOR rate changes. Increasing payment convenience also has favourable effects on market composition by levelling the playing field. Paying interest on CBDC balances increases deposit rates but is arguably a less desirable policy since this action increases the inequality of market shares and can weaken the responsiveness of deposit rates to IOR rate changes.
The conclusion is that payment convenience is a crucial aspect of CBDC design that may be more desirable than paying interest on CBDC balances.”
However, just up the road from Basel in Zurich, The Swiss National Bank does not see any overall benefit from issuing a central bank digital currency (CBDC) to be used by the general public and used in day to day transactions, governing board member Andrea Maechler said on Tuesday.
“We believe the risks outweigh the benefits,” Maechler told a financial conference held in Frankfurt, saying a retail CBDC meant central banks taking on the risks carried by the private sector and increased the risk of bank runs.
There also needed to be a balance struck between safeguarding privacy and the potential misuse of retail CBDCs in criminal activity, Maechler said.
So in summary, the Crypto Infrastructure, of which stablecoins are a central pillar, was given one hell of a stress test this last week, while Central Bankers continue to stare at their navels about the usefulness of customer convenience.
Brightwell is launching a new cross-border payments solution called ReadyRemit.
Integrating ReadyRemit will enable Brightwell customers to help their end clients send money to 90% of the world’s population.
The new tool is leveraging partnerships with Mastercard and The Bancorp Bank.
Payments technology company Brightwellunveiled its new cross-border payments solution today. The new offering, ReadyRemit, is a cross-border-payments-as-a-service tool.
Powered via partnerships with Mastercard and The Bancorp Bank, ReadyRemit will enable Brightwell’s business and fintech clients to offer their end customers a cross-border payments solution with built-in compliance capabilities. The new tool aims to be faster than traditional money transfer tools, taking place in near-real time or on the same day the transfer was initiated.
“Our partnership with The Bancorp Bank, N.A., and Mastercard will enable customers to build a new revenue stream by offering low-to-no-code platform integrations containing everything needed to launch a global payments program in as little as 30 days,” said Brightwell Senior Vice President Hal Ramakers.
ReadyRemit will enable Brightwell’s clients to send payments to 90% of the world’s population and to more than 100 countries. Clients can make a range of payment types, including B2B, B2P, P2P, and P2B, and send the funds to 280,000 cash payout locations, including bank accounts, mobile wallets, and cash-out locations.
“Our Cross-Border Services enable fast, smart, and simple access to funds whenever and wherever you are,” said Mastercard Senior Vice President, Debit, North America Vickie Van Meir. “Our work with Brightwell supports a reliable, equitable payments experience, broadening financial access around the world.”
Brightwell offers a suite of payment products that includes a corporate expense program, global payroll service, an ATM program, fraud protection, and more. The company launched as a division of West Suburban Bank in Chicago, Illinois in 2009 under the name Prepaid Solutions. In 2011, the company split from West Suburban Bank, rebranded to Brightwell, and moved its headquarters location to Atlanta, Georgia.
Huntington Bancshares’ online engagement and acquisition mix has grown significantly through technology investments and customer experience enhancements since the bank first embarked on its digital journey five years ago. The $179 billion Huntington’s digital checking acquisition increased to 46% this year, up 228% from 14% in 2017, according to the bank’s 2022 Investor Day presentation. […]
Virtual card and spend management platform Extend announced a partnership with Bank of the West.
The collaboration will enable small and medium-sized businesses to take advantage of virtual card technology to enhance spend management.
Extend made its Finovate debut three years ago at FinovateSpring 2019, demoing its platform, app, and APIs.
Virtual card and spend management innovator Extend has teamed up with Bank of the West. The collaboration will enable Bank of the West’s small and medium-sized business clients to leverage Extend’s technology to create and control digital company cards and enhance spend management.
Bank of the West cardholders will be able to sign up for Extend in a process that does not require any technical integration. After enrolling their commercial cards, SME users can access Extend online or through a mobile device to create unique virtual cards; send virtual cards to workers, vendors, suppliers, and others directly from the application; attach purchase orders and receipts to transactions; and manage recurring expenses and subscriptions. Companies will be able to provide employees with a budget for issuing virtual cards, and virtual cards can be approved, modified, or canceled at any time.
“Bank of the West is committed to optimizing B2B payments, and our relationship with Extend offers our clients an efficient, easy-to-use solution for better spend management,” Bank of the West Managing Director Dominique Fracchia said. “Using Extend and their Bank of the West cards, businesses can create, distribute, and manage virtual cards to pay vendors, empower employees, track spending, and more.”
The offering is designed to bring the benefits of virtual cards and spend management to small and medium-sized businesses. Extend’s technology helps SMEs manage vendor payments, reconciliation, and other tedious and manual – but essential – payment tasks. In addition to saving time and boosting efficiency, Extend’s solution also helps businesses obtain real-time insights into – as well as real-time control over – company card spending.
“With Extend, Bank of the West is delivering new spend management capabilities that ensure its clients don’t wonder who paid what, when, why, or to whom,” Extend CEO and co-founder Andrew Jamison said. “This is what clients need from payments technology today – the power to run their businesses better, with the support of their preferred financial partners.”
New York-based Extend made its Finovate debut at FinovateSpring in 2019. The company demoed its virtual card distribution platform, its app – which instantly gives employees access to virtual cards – and its APIs that enable fintechs to take advantage of the technology. Founded in 2017, the company has raised $54 million in funding from investors including March Capital, Point72 Ventures, and FinTech Collective.
Bank of the West is headquartered in San Francisco, California, and has more than 600 branches and commercial banking offices in the midwest and western United States. A subsidiary of French banking group BNP Paribas, Bank of the West has more than $94 billion in assets and 1.7 million customers. Nandita Bakhshi is President and CEO.
Community banks can contend with their larger counterparts by leveraging artificial intelligence (AI)-powered chatbots to improve both customer experience and internal efficiencies. Virtual assistants save valuable time and resources by routing customers to the appropriate digital channels based on their inquiries, Murali Mahalingam, senior vice president of AI business at Eltropy, tells Bank Automation News […]
Cugini will speak on the panel “New approaches and techniques in RPA,” on Friday, March 3, at 9:05 a.m. ET at the Westin in Charlotte, N.C.
The panel will discuss methods of designing automation, and ways to build smarter and safer bots through artificial intelligence (AI) and robotic process automation (RPA) while automating verticals in banking.
Bank Automation Summit U.S. 2023 brings together U.S.-based industry experts to discuss banking automation and technology topics — from embedded finance to customer service.
Cugini joins the 2023 speaker faculty after having been a panelist at Bank Automation Summit Spring 2022 and Fall 2022 events last year, where he spoke on KeyBank’s RPA capabilities and eliminating digital platform redundancies.
Learn more about Bank Automation Summit U.S. 2023 and register.
The FTX blow up has highlighted this strategic question.
This is one WITHOUT a magic quadrant. Crypto is either a regulated asset or a disruptive technology – but it cannot be both.
If you believe that crypto is a regulated asset, the easy trade is to buy Coinbase stock (COIN). Coinbase is fully regulated in the biggest market. However,that is a possibly unwise investment as there is something not right about a centralised regulated exchange as an on & off ramp for decentralised permissionless networks.
Regulators need to hold somebody accountable and that means a centralised permissioned network. Regulators can hold Coinbase accountable, but not Bitcoin.
Decentralised permissionless networks, such as Bitcoin and Ethereum are by nature disruptive – you CANNOT regulate them even if you can regulate their on and off ramps.
Every bull market has a narrative, which bear markets then debunk. The next bull market answers that bear market debunking. Look at Bitcoin/BTC market cycles since 2009:
The 2013 bull market narrative (when very few people were paying attention) was “maybe this will actually be real” and the BTC price went to over $1,000. The bear market debunking was “well show me a real use case.”
The 2017 bull market narrative was about ICOs changing early stage fund raising (the real use case) and the BTC price went to over $19,000. The bear market narrative was that most ICOs were a failure for investors, .
The 2021 bull market narrative was about institutional money. Anarchic crypto was now wearing a suit. It was all about regulation, no more of those crazy ICOs. Crypto was just one more asset in the everything bubble.
The FTX blow narrative is all about regulation – without explaining what regulator will police a business such as FTX with over 100 entities all over the globe. Legacy exchanges have blown up, but then regulation prevented future blow ups by having a simple rule that prevents a regulated exchange from using customer assets. So this is easy if crypto exchanges submit to a single jurisdiction.
The next bull market narrative will have to show a use case that is more than one more asset for institutions. I think this will be a “first the Rest then the West” story but I do not know when the next crypto bull market will start.
Canadian software-as-a-service (SaaS) provider Coveo recently launched a solution that answers business banking customers’ questions without the use of a call center. The artificial intelligence (AI)-powered Coveo Relevance Cloud for Financial Services platform uses predictive search to aggregate data sources for customers’ lending, revenue and expense forecasting inquiries, Michael Jepsen, vice president of sales […]
Technology spend at banks grew in the third quarter as mobile usership, tech partnerships and digital enhancements remained a priority for most of the larger financial institutions. The $1.6 trillion Goldman Sachs, for one, allocated $459 million for technology and communication in Q3, up 16% year over year. The $3.1 trillion Bank of America’s tech […]
Britain is taking the lead among major developed economies in moving away from cash in everyday payments, but more than two-thirds of people surveyed remain reluctant to go fully digital. That’s the conclusion of a survey by YouGov Plc for Bloomberg, which showed 57% of people in the UK rarely or never use cash in […]
As banks prioritize the move toward automation, they can take digitization one step further by looking to hyperautomation as the next logical step in their digital journeys to achieve streamlined workflows and drive faster outcomes. Extending automation The key difference between automation and hyperautomation lies in the scale of digitization, according to IBM. Automation is […]
The entire $16 billion fortune of former FTX co-founder Sam Bankman-Fried has been wiped out, one of history’s greatest-ever destructions of wealth. The downfall of his crypto empire — which filed for bankruptcy on Friday along with his resignation — means assets owned by the mogul once likened to John Pierpont Morgan have become worthless. […]
Warren Buffet, who has a way with words, said only when the tide goes out can you see who has been swimming naked. During 2022 the tide has been out in a tough bear market and FTX has been swimming naked. So I decided to dig in and try to get some perspective amid all the clickbait noise.
First, in case you need a news 101,Bankman-Fried’s FTX is a big cryptocurrency exchange on the brink of collapse amid liquidity concerns and allegations of misused funds. Bankman-Fried told investors that Alameda owes FTX about $10 billion, which FTX loaned to Alameda using customer deposits. Before making the loan, FTX had just $16 billion in assets, meaning it lent out more than half of its assets.
Headlines blare comparisons with all the big past blowups, so I started by looking at total amounts involved. I was surprised to learn that Madoff was bigger than Lehman. The big difference is that Lehman was a systemic risk, meaning all counterparties were at risk.
In all cases,the reputational loss is massive. People like Sam Bankman-Fried fooled supposedly smart investors such as Sequoia Capital. And market prices fall, in some cases close to zero such as theFTT token (which is akin to equity in FTX).
Re the skullduggery between Binance and FTX, this is a tale of two sharks and one wins. I was going to put Binance in the Cui Bono (who wins) category but decided on a new category which is Wait and See.
First Cui Amisit (who loses):
FTX shareholders such as Sam Bankman-Fried and Sequoia Capital
FTX Depositors aka traders who held crypto at FTX. $10 billion is not big compared to other big past blowups, but this is lots of people losing their life savings – ugh. But Wait and See, some money was recovered from Madoff and Mt. Gox.
Altcoin Investors. Even crypto blue chips like Bitcoin/BTC and Etherum/ETH took a hit but some crypto have been hammered and may not recover.
Next Cui Bono (who wins):
Legacy Finance. An old fashioned bank or regulated exchange looks good compared to FTX. Oh and Legacy Finance assets may be moving from bear to bull market.
Coinbase. A fully regulated cryptocurrency exchange looks good compared to FTX.
Non custodial wallets, where an exchange cannot take your assets, looks like the right technology if you think the future will be self regulated
In the Wait and See category:
Binance. Will they win as last man standing? Or will traders shun their risk as being too much like FTX?
Crypto blue chips like Bitcoin/BTC and Etherum/ETH Bitcoin. Is this end of bear market capitulation or sign of a bubble popping?
The Patriot Card aims to offer Veterans a safe, flexible, and reliable card that they can use to receive, spend, and save their government benefits. Features of the new card include a virtual card option, fee-free person-to-person transfers, card-to-card transfers, and low fees.
AMBA will donate a portion of the interchange generated by every swipe of the Patriot Card to military and Veteran support organizations and causes.
“AMBA is thrilled to offer Veterans a new, safer, and more flexible option to receive payments and manage their finances,” said AMBA President and CEO Major General (Ret.) Steven J. Lepper. “We teamed with MOCA because they share our determination to help Veterans achieve financial success. The Patriot Card will provide Veterans who prefer not to use bank or credit union accounts to manage their money an alternative that is equally safe and secure.”
Transactions made using the Patriot Card will be routed across either VISA’s network or the Armed Forces Financial Network (AFFN). AFFN serves consumers of more than 375 military banks and defense credit unions and will enable users of the Patriot Card to access more than 800,000 ATMs and 2.3 million retail locations across the globe.
“We’re honored to be able to play such a monumental role in serving Veterans worldwide,” said MOCA President Shawn Sinner. “We hope that this advancement continues to make life easier for Veterans, Military, Military Spouses, and families.”
Interesting story from The Daily Telegraph questioning the wisdom of the controversial takeover by Elon Musk of Twitter. This saga began in April this year there have been many twists and turns along the way. However, the biggest must be the seismic changes in the capital markets and the move away from the anything goes deal in the markets to a more sceptical and risk averse stance. This is not surprisingly a leveraged deal and much of the $ 44 billion needed to complete the purchase has been provided by a group of banks led by Morgan Stanley, Bank of America, and Barclays. As a trained analyst and an ex-arranger of syndicated loans for one of the said banks I can confidently say that in my day getting such a deal approved would be impossible. The difference is that these days “investment banks” don’t intend to keep the risk on their books. When I was underwriting, I had to look at how the asset would look on the books not just of my bank but a whole load of other lenders, mainly banks. The boys these days are like celebrity chefs cooking up a meal that looks great on the menu but can give you sever stomach cramp if anything goes wrong. Well in this case it has. Interest rates are rising aggressively and Twitter, which has never made much money since it went public is already highly leveraged. The interest burden is pushing it into the red as we speak. The lead management group have already conceded they might have to hold the Twitter paper longer than they expected. It could be long time indeed.
A paper written by Credit Suisse analysts argue that the Old Lady’s pronouncement on the expected peak of Sterling interest rates are underestimating the impact of the consistently tight labour market in the UK on inflation. Well they may be right but firstly who wants to listen to what Credit Suisse has to say about anything at the moment. Having said that the Bank of England’s forecasting over recent years has been less that impressive to say the least. Economists can say what they like because they always have a good story when they get everything wrong. I remember from my time in Greece having a quarterly bet with my old colleague, Oxford economics guru, George Magnus about the level of the Greek drachma three months hence. I won every time but George could always tell me why I won.
When writing about lending I am usually focussing on the lender and not the borrower but I was reading an article today about highly leveraged Grocery chain Morrisons which was putting emphasis on how it felt about its current situation. Morrisons has been hit quite hard recently by increased competition from the German discounters and its results have suffered accordingly. Morrisons was the subject of a bidding war some 13 months ago between two wall street houses sniffing a bargain. The winner was Clayton, Dubillier and Rice (CDR)the current owners. However market conditions are now completely different and in todays world it looks like they have significantly overpaid. As in all such transactions, part of this deal was financed by the company being acquired and the new owners have loaded £ 2billion of acquisition loans onto Morrisons balance sheets. This debt is apparently held by some 19 banks and the paper will nob be significantly downgraded. So what is Morrison’s view on this. Remarkably sanguine. Apparently these credits have a seven year maturity and the underlying documentation is extremely flexible. This means that there are no financial covenants in danger of breach. It is therefore the banks problem and not theirs. So lenders, the small print is pretty important when buying their party debt. The choices are binary take whatever price is available in the market or sit it out for seven years and hope for the best.
Howard Tolman is a well known London based Banker, entrepreneur and technology specialist.
Financial inclusion has been a rising hot topic in the past few years. Providing underserved populations with the tools they need to manage their finances and build their wealth has been a top goal across many banks and fintechs, especially those focused on credit and underwriting.
I recently had the opportunity to speak with Gregory Wright, Executive Vice President and Chief Product Officer at Experian. Wright was a keynote speaker at this year’s FinovateFall event in New York. He offered key takeaways from his keynote, discussed opportunities for banks when it comes to financial inclusion, and talked about how they can prepare and plan to scale their operations.
Key takeaways from his keynote
I talked about innovation in three parts. The first part was about innovation with purpose. I think being mission-driven and wanting to have an impact in the world helps drive not only what you want to do as a business, it helps drive growth and [has an] impact on consumers and who you serve in the communities you live in. And that also can drive employee engagement; they love to work on something that actually has meaning beyond just making money.
The second part is innovation through scale. So, think about platforms. Think about global scale, how we leverage platforms and data, and cloud computing, and modern APIs so that you can innovate faster, get products to the market faster, and really have an impact not only for your business, but for your clients.
And in the third part, we talked about innovation with analytics. We live in this new world where cloud computing, advanced APIs, and modern APIs pull data from multiple data sources. [They are] able to do that in real time with advanced analytics and automating model deployment. We can bring together things that we’ve never been able to bring together before. That enables us to do analytics and credit scoring in ways we’ve never been able to do before.
On how banks and fintechs can leverage data and technology to drive financial inclusion
So, let’s just talk for a minute about conventional credit scoring. Today, the conventional credit scores can score about 81% of the U.S. population. That’s one-fifth that are not being scored or that are credit invisible. With ExperianLift, we can score between 93% to 96% of the U.S. population. That is a step change in performance. And that’s because we use more data, better analytics, bringing it all together in a big data platform and making it live instantly for consumers. So lenders, banks, fintechs– they need to be doing that every day to score more people, drive financial inclusion, and have better business outcomes.
How do we represent consumers in their time of need? There are one-to-two million credit reports pulled every day. These are the most important financial moments in consumers’ lives. We can help represent that. And I know fintechs want to create a consumer experience that is delightful, seamless, digital, easy. And with analytics and big data platforms, they can make that happen. We can help partner with fintechs to use things like Experian Lift, or, even better, Experian Boost, where we’re allowing consumers to come in, connect their bank account, add data to their credit report in real time based on the bills they pay, and improve their credit score before they even apply for something. We’ve worked with a lot of fintechs to figure out how we not only allow consumers to contribute to their credit report and get a better outcome, but also we can help them with better analytics and scores to score more consumers and get to a better outcome. This is not only good for consumers, because they get to a better financial outcome, it’s good for them. They’re scoring more people, getting to “yes” more often, and helping build their business.
What should companies implement now to prepare for future growth?
It comes down to what they’re trying to do and how they want to grow. I really advocate for innovating with purpose. [They should think] about how they want that consumer experience to feel and what that consumer journey is. How do they make it more digital, more seamless? How do they get to “yes” more often?
And again, we’ve talked about the platform capabilities from Experian that can help them. We’ve talked about how we can go from analytics and model development all the way to production through the Ascend platform. Things that normally take nine-to-twelve months to get a new score into market, into production, through compliance, and through their IT queue suddenly, we can do that in one platform from the analytics to deployment in real time. That’s something that any lender, any bank should be doing because it’s going to help get to “yes” faster, deploy better models in real time, pull data sources from not just the credit bureau but from anywhere. That means you can drive better customer outcomes, get to “yes” more often, not add more risk, and eventually build great businesses.