The neo-banks continue to take center stage this week. We dig into MoneyLion’s roaring $100 MM financing round and the “Netflix” banking model.
But first, in industry news, Equifax settled $700 million with state and federal authorities due to the 2017 security breach. Investors are looking past the incident. Equifax’s stock price is within earshot of an all-time high.
Stone Point – First Associates & PFSC
In financing news, Stone Point Capital invested in servicer First Associates. First Associates, led by David Johnson and the ubiquitous Larry Chivaro, will combine operations with PFSC – another Stone Point portfolio company. The combination means there is only one credible loan backup servicer for the consumer credit sector.
It’s a smart move. The two servicers are now teaming up to improve service rather than competing on price. Also, nearly all securitizations and backup servicing arrangements are linked to one of the two servicers.
The firehose of transactional data and ability to spot faltering platforms will undoubtedly create additional opportunities for Stone Point in the future, particularly during a turn in the credit cycle.
“Netflix” Model for Banking
MoneyLion’s “all-you-can-eat” membership pricing model has distinguished itself from the pack. MoneyLion provides customers access to financial advice, loans, and other banking service. Customer’s can enjoy the lion’s share of offerings all at a bundled rate $20/month.
The near-Unicorn FinTech announced a roaring $100 M funding round led by Edison Partners and Greenspring Associates, bringing PIC to ~$200M. MoneyLion is looking to invest in broker dealer, training, and stock-investing capabilities and further distance itself from potential copycats.
MoneyLion transforms the traditional origination/servicing fee model into an on-going recurring revenue “membership” model.
From a regulatory perspective, MoneyLion is also able to provide a full-suite off banking like services – without bearing the regulatory overhead of operating as a chartered bank. In contrast, several non-bank lenders are in the hunt for a charter (e.g., SoFi, Square, etc.).
MoneyLion has taken a different approach. The mane focus for MoneyLion’s is on technology and product execution. Many lenders aspire to stitch together a diversified product offering to have free range over the customer wallet; however, fulfilling that promise is easier said then done, and the news may give competitors paws.
Convergence to the Digital Bank Model?
MoneyLion isn’t alone in the “Netflix space”. There is a convergence to the digital bank model – players with distinct roots are landing on the same destination – a diversified set of consumer banking services.
Betterment, originally a roboadvisor, has launched checking and savings, despite not technically being a bank. By offering high interest rates, eliminating unnecessary fees, and providing mobile integration, these companies hope to secure the under banked, digitally savvy, millennial audiences.
Chime, a fintech focused on providing no fee checking accounts, also provides users with a debit card, spending account, saving accounts, and an app that helps users tame their finances.
Acorn, a modern version of UPromise (rounds up your purchases and invests the change), is shifting into financial literacy and education. Their $105M funding round was led by CNBC, who hopes to weave their education articles and videos into the application.
|Series||Money Raised||Valuation||Services Provided|
|MoneyLion||C||$200M||~$1B||Financial advice, loans, integration of other bank accounts|
|Chime||D||$309M||$1.5B||Debit, checking, and savings accounts with no fees|
|Acorn||E||$270M||$860M||Rounds up purchases and invests the change, financial education|
|Betterment||E||$275M||$800M||Robo-advising, savings, checking (soon), debit cards|
- Equifax to pay up to $700 million to settle state and federal investigations into 2017 security breach (Washington Post, 7/23/19) The largest data breach settlement in U.S. history includes payments to affected customers, and fines to regulators
- SoFi Appoints Aaron Webster As New Chief Risk Officer (Crowdfundinsider, 7/18/2019) Former Citigroup Chief Risk Officer hired to oversee SoFi’s risk, fraud and credit management frameworks
- Ally ends credit card experiment, pivots to point-of-sale loans (American Banker, 7/18/19) Three year credit card partnership with TD bank has ended, shells out $190M to acquire a Charlotte based point-of-sale loan company
- Could a second straight quarter of falling earnings signal a possible recession? (USA Today, 7/22/19) Back to back earning declines are sometimes followed by an economic recession
- Atom Bank raises £50m from investors including Neil Woodford (Financial Times, 7/22/19) Another UK challenger bank has entered the competition, looks to load up on spending in tech and hiring
- What Funding Circle Tells Us About Fintech Valuations (Finextra, 7/22/19) Since Funding Circle’s soaring valuation of £1.5 billion share price has fallen 72%, could be due to the fact that marginal returns for investors at later stages are relatively low
- First Associates Closes Investment Round with Stone Point Capital & Combines Operations with PFSC (First Associates, n.d.) Loan servicing group to spend the next 4-6 months combining operations with Stone Point to develop long-term growth strategy and operations
- Amazon and Realogy gang up on Zillow to entice homebuyers (Housing Wire, 7/23/19) Amazon partners up with world’s largest U.S. residential brokerage to match homebuyers with agents through program called TurnKey
- US mobile bank MoneyLion raises $100 million at ‘near unicorn’ valuation (Tech Crunch, 7/22/19) New Unicorn that can offer consumers with access to financial advice, loans, and banking has raised $100M in its’ series C.
- Fintech firm Zeta’s valuation climbs to $300M in its first external funding round (Tech Crunch, 7/23/19) Neobanking fintech Zeta also offers enterprise payment solutions
- My Quarterly Marketplace Lending Results – Q1 2019 (Lendacademy, 7/26/19) Peter Renton outlines the results from his 2019Q1 results, including a 6.09% overall return – an improvement from prior years
- Apple and Goldman Sachs Credit Card Targeting August Launch Date (Bloomberg, 7/26/19) Apple/GS collaboration card rolling out next week, aims to “bolster apple services ad push consumers to GS”
Lighter Deep Thought Fare
- The Metamorphosis (The Atlantic, August 2019) Henry Kissinger, Eric Schmidt, and Daniel Huttenlocher attempt to wrestle with the idea of AI taking over our lives, come to the conclusion that our world may be entering another Great Enlightenment Period.