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Netflix for banking; Equifax settles; StonePoint M&A

By Vy Phan

July 28, 2019


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

Source: PeerIQ

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