A weekly wrap-up from Silicon Valley on what’s making the news in fintech, banking, and disruptive trends
Hacker Group Draws Bull’s Eye on ‘Every Major Banking System’
What it is: The hacktivist group Anonymous, which brought down the Greek central bank’s website through a distributed denial of service attack on Tuesday, claims it will be targeting financial organizations around the globe over the next 30 days. In a video about the attack, the group claims it will target PayPal, MasterCard, Visa, Nasdaq, the Bank for International Settlements, all central banks, the IMF, London Stock Exchange “and every major banking system.”
Why it is important: The group says it wants to punish the financial system for a broad range of actions, including high fees and interest rates, foreclosures and bailouts. “Banks have been getting away with legally stealing [from] and ripping of [sic] citizens for far too long,” Anonymous says in the video.
A Wave of Regulation is Coming for Fintech
What it is: If 2015 was the year where financial technology startup funding hit its peak, 2016 might be the year that regulators scared investors away. Regulatory oversight of fintech startups is tightening, according to a report from PwC, and it is a growing concern for industry CEOs. PwC noted that 86 percent of financial services CEOs are worried about the impact of being too heavily regulated, and notes that the chorus of voices in Washington talking about fintech concerns is growing.
Why it is important: “The twin pillars of financial services regulation in the U.S. are safety and soundness and consumer protection,” said Haskell Garfinkel, fintech co-lead with PwC. “Regulators are trying to balance these mandates with the flood of innovation occurring on the periphery of the regulated industry.” It comes as investor interest in fintech companies looks to have stagnated. After hitting an all-time high last year, the first quarter of investing in the space shows a 41 percent decline compared to the first quarter of 2015, the PwC report noted.
Why Shares of Fintech Lenders OnDeck and Lending Club Are Getting Crushed
What it is: The problem is that the fintech lenders are having more difficulty finding buyers for their loans. And investors seem to be nervous this is not just an OnDeck problem. Other fintech lenders have been struggling with what to do about the fact that buyers for their loans—hedge funds and other investors—appear to be drying up.
Why it is important: As long as the market and regulators treat OnDeck and its rivals as tech companies none of this might be a problem. But regulators have started to hint that they are going to take a closer look at fintech companies and whether they should be regulated like banks. If regulators decide they should be, then OnDeck and others will have to meet the same capital rules that banks do, which will put a ceiling on how much they can lend, if they can’t find genuine third-party investors willing to take a good deal of that risk off of their hands.
Fintech Doesn’t Just Disrupt Banks, It Makes Them Platforms
What it is: It’s easy to move your money between banks. What’s annoying is moving your apps. There’s been a recent explosion of fintech products in spaces like stock trading, wealth management, payments, loans, remittance and insurance. It’s been fueled by a massive uptick in venture investment in private fintech companies, which hit $19 billion in 2015 according to CB Insights. That’s up 58 percent from 2014 and over 1,000 percent since 2010.
Why it is important: What many of these startups have in common is that they all rely on connecting to your existing bank to fund your accounts with them or receive money. Rather than shun the startups, the incumbents have built bridges to let you hook fintech products into your bank accounts. The result is that while banking is changing rapidly, you might be more reluctant to change which bank you use, according to several fintech founders and VCs
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