This week, we focus on the formation of the American Fintech Council, SoFi’s acquisition of Golden Pacific Bank, and highlights from LendingClub and Greensky’s earnings.
Let’s get to it.
Stimulus Checks to Add to Record U.S. Households’ Net Worth
Unemployment claims fell by 42,000, which brought the total number of claims to 712,000 for the week of March 6.
President Biden’s $1.9 Tn stimulus package will send $1,400 checks to many Americans and allocate billions of dollars in funding for vaccine distribution and development.
U.S. households’ net worth rose to a record $130.2 Tn in Q4, as soaring prices for stocks, real estate, and other assets erased pandemic-related losses.
MLA and OLPI Merge to Form the American Fintech Council (“AFC”)
The Marketplace Lending Association and the Online Lending Policy Institute have joined forces to form the American Fintech Council (“AFC”). The AFC will focus on promoting policies that advance responsible innovation and inclusivity within the financial services industry.
“Together we will create a more expansive fintech association of companies that foster responsible innovation and growth while encouraging sound public policy”, said Richard Neiman, Head of Regulatory and Public Policy at LendingClub.
Membership requires lenders to support a 36% APR cap on the cost of loans, adherence to the Small Business Borrower’s Bill of Rights, and transparency with products and fees.
SoFi Acquires Golden Pacific Bank
SoFi has announced that it will acquire Sacramento-based community bank Golden Pacific for $22.3 MM. Although SoFi had already applied for a national bank charter with the OCC, this acquisition accelerates SoFi’s route to a bank charter because change of control applications are faster than de novo applications at the OCC.
Golden Pacific will expand SoFi’s book of assets by $150 MM and its community bank business will continue to operate as a division of SoFi Bank.
Lend Academy’s Peter Renton writes that this could be the start of a new trend as more and more fintechs see the benefits of a national charter. Last year, LendingClub acquired Radius Bank, a former community bank that transformed into a digital bank in 2012, and Jiko acquired Mid-Central Federal Savings Bank, which is based in Minnesota.
Earnings highlights – LendingClub and GreenSky
LendingClub LC (Market cap $1.41 Bn, P/E N/A, P/S 1.86x)
- Loan originations at $912 MM in Q4 20 (Up 56% vs Q3 20, but down 70% vs Q4 19)
- LC Bank (previously Radius Bank) made up 15-25 % of originations, while the traditional marketplace product made up about 75-85% of originations
- Access to stable, low-cost deposits through Radius Bank, reduced funding volatility and lowered borrowing costs
- CEO Scott Sanborn said – “The pandemic has demonstrated that our borrowers prioritize LendingClub loans above many of their debt obligations, even credit cards”
- Plan to grow originations by 45% and revenue by 55% in 2021
GreenSky GSKY (Market cap $1.29 Bn, P/E 54.35x, P/S 1.79)
- Loan Servicing portfolio up 4.4% YoY
- GSKY reported $9.5 Bn for the quarter (2% higher than $9.3 Bn in Q4 19)
- 2020 annual transaction volume of $5.5 Bn was down 8.3% vs $6 Bn in 2019. This is the first time that transaction volume has decreased in five years
- Delinquencies are the lowest that they have been in four years, at 0.99%
Publicly traded fintech market data as of March 12, 2021 shown below.
BlockFi Secures $350 MM in Series D
BlockFi, led by CEO Zac Prince, raised $350 MM in Series D funding, which values the crypto lender at $3 Bn. BlockFi offers crypto market investors a retail and institutional suite of products through their bank-like platform. Users of the mobile app can earn 6% yield on their bitcoin holdings and 8.6% on stablecoins.
Bain Capital Ventures, partners of DST Global, Pomp Investments, and Tiger Global co-led the Series D funding round. Other investors include Valar Ventures, Breyer Capital, Susquehanna Government Products, Jump Capital, and Paradigm.
The new funding will help BlockFi grow its product suite, expand into new global markets, conduct strategic acquisitions, and double headcount by the end of the year.
NFTs – New Opportunity for Finech?
NFTs or Non Fungible Tokens, which started as an internet hobby among a few tech and finance nerds has now catapulted to the mainstream, with Twitter CEO Jack Dorsey listing his first ever tweet as an NFT.
The question for fintech is – what financing and trading opportunities are created by this new asset class?
In the News:
- U.S. Jobless Claims Hit Lowest Since November With More Vaccines (Bloomberg, 3/11/2021) Unemployment claims dropped by 42,000 for the week of March 6, bringing the total to 712,000.
- How the CFPB can Better Regulate Data Sharing (American Banker, 3/10/2021) How the CFPB can address the challenges that consumers face when accessing digital financial tools.
- Who’s Who among Biden’s financial regulators (so far) (American Banker, 3/10/2021) A summary of President Biden’s financial regulators.
- JPMorgan Shutting Down Digital Wallet a Year After Discontinuing App (Bloomberg, 3/9/2021) JPMorgan has decided to discontinue its digital wallet offerings, after a year of discontinuing the Chase Pay app.
- Walmart’s Fintech Ambition: A Super App, Not The ‘Bank Of Walmart’ (Forbes, 3/8/2021) Walmart’s aspiration is to become a digital ecosystem that offers innovative and affordable financial solutions to its consumers.
- How Fintech is Evolving in 2021 (Forbes, 3/10/2021) Post-pandemic fintech trends that are unfolding in 2021.
- Community Banks with the Largest Portfolios of Home Equity Loans (American Banker, 3/8/2021) A table view of all of the community banks with the largest portfolios of HELOCs.
- JPMorgan Hires New Head of Fintech and Innovation for Wholesale Payments (Reuters, 3/9/2021) JPMorgan has selected former HSBC executive Jeremy Baskin to head the bank’s fintech and innovation for wholesale payments sector.
- Silicon Valley Fintech Brex Launches Instant Payouts Feature, Now Available for Sellers on Shopify and Amazon (Crowdfund Insider, 3/9/2021) San Francisco-based fintech unicorn Brex has announced the launch of its instant payouts feature, which gives sellers on Amazon and Shopify instant access to their revenue.
- MoneyLion CEO: SPAC Route Offers Fintechs ‘Degrees Of Freedom’ (PYMNTS, 3/8/2021) MoneyLion CEO Dee Choubey said that going public via SPAC was the perfect choice to accelerate MoneyLion’s growth.
- Coatue leads $75 Million Series D for M1 Finance (FinLedger, 3/9/2021) Wealthtech startup M1 Finance, led by CEO Brian Barnes has secured $75 MM in Series D funding, which the company will use to nearly double its headcount by the end of the year.
- Scientists Received a Radio Signal From the Furthest Reaches of Space Yet (Vice, 3/8/2021) Astronomers discovered a quasar signal that traveled over 13 Bn light years across the universe.