If you can’t beat ’em join ’em: Fintech and banks collaborate in online lending

banks and fintech work together

Fintech companies may be pressuring banks, but the innovators themselves may end up being the relief banks are looking for.

By offering very specialized services to customers, fintech companies are challenging banks to follow suit. Large financial institutions manage dozens of products and services, making it hard to compete with startups focused solely on a single niche. Banks have long focused on vertical integration, owning the value chain from end to end — while startups favor specialization.

“To the extent that banks faced competition it was from another bank which also owned its entire vertical stack end to end, which was operating in the same geography,” wrote Pascal Bouvier, venture partner at Santander InnoVentures, recently. “Oligarch banks ruled. Today’s bank is under threat at each layer of its stack instead, which makes for a much more complex competitive landscape.”

The bank of the future may eventually become the center of the user interface, with fintech companies gathering around the banking watering hole. A good example of this type of arrangement is the agreement TransferWise made with German online bank Number26, giving clients of the bank access to its currency services. In this set up, banks provide the front end experience as well as access to resources supplied by third parties.

Spotcap and piggyback loans

One company trying to fit into the circle around banks is Spotcap. Founded in 2014 by Toby Triebel and Jens Woloszczak, Spotcap provides lines of credit to SMBs in Spain, Australia, and the Netherlands. Incubated and backed by Rocket Internet, the Berlin-based online lender uses both technology and experience to determine an SMB’s creditworthiness; Internally-developed algorithms and smart contracts combined with a human review board determine if a SMB qualifies for a credit line.

Spotcap has only been in the Netherlands for 15 months and is still small, only underwriting $50m in the first half of 2016. Although it’s a drop in the bucket of the regional lending market, Spotcap has grown 500% year over year and has less that a 1% default rate since it started lending in the Netherlands.

What makes Spotcap different from other online lenders is its approach to incumbent financial institutions. Currently, 25% of Spotcap’s loan book is in piggyback loans with banks — where two or more lenders underwrite a loan together. For example, a SMB needs a $1 million loan, but a bank feels the maximum secured loan they can offer is $750k. The bank then contacts an unsecured lender like Spotcap, which evaluates if the SMB qualifies for the remaining $250k. If so, the bank packages the two separate loans, and the SMB pays both the bank and the unsecured lender. Banks win with piggybacked loans since they gain a new customer while staying in their lending comfort zone, and also make more money.

Banks and fintech currently collaborate on piggyback loans

On a recent trip to Holland, I met with Niels Turfboeur, Spotcap Managing Director of Benelux, which includes the Holland office. We discussed how Spotcap fits into the changing banking world, and how some would call online lending disruptive. Turfboeur disagreed, explaining that Spotcap is more of an innovator than a disruptor in banking. “Online lenders offer a slightly different product in a different way,” he said. “Banks can offer the same product if they want to, but it’s very expensive for them. Its not like we have something they can’t have. They’re very smart people with a lot of money.”

Becoming a preferred supplier to financial institutions is essential to Spotcap’s success, and Turfboeur spoke to the importance of developing working relationships with banks and institutional partners. He explained, “There will be new ways banks and fintech work together. There is a synergy between the two. It could be that they merge, or sign a contract saying we like each other, lets do tickets together.”

We ended up discussing how Spotcap fits into the new banking ecosystems — how banks and fintech companies, like Spotcap, will collaborate, and how banks may become the entry point for customers while third parties provide enhanced services.

“As a product company, what’s our added value if we become a bank? There will be specialized fintech surrounding a bank in several degrees of integration, but the bank will be in the middle as the director,” Turfboeur concluded.

Status quo for now

Unless the Armageddon or zombie apocalypse happens anytime soon, banks will likely remain the backbone of finance. Spotcap, and other innovators like it, have an opportunity to work closely with bank partners.

As banks start to move away from the vertical stack model, they may look to established relationships in determining who gets to be a part of the bank’s product suite. If fintech companies play their cards right, they may eventually see themselves in a bank’s inner circle, reaping the financial rewards of such integration.

[podcast] BBVA’s Scarlett Sieber on the building of a consumer banking ecosystem

BBVA's Scarlett Sieber on the building of a consumer banking ecosystem
BBVA's Scarlett Sieber
BBVA’s Scarlett Sieber

Spain-based BBVA is one of the most creative and aggressive global banks when it comes to investing in new financial technology. In part, that’s because they have Scarlett Sieber on the team. Her formal title is SVP of Global Business Development in the New Digital Business Unit but the reality is, in that role, she’s part business developer, ecosystem designer, and marketer.

Scarlett joins us this week on the podcast. We talk a lot about how the role of banks is changing and what thought leaders are doing to stay ahead of the curve and how BBVA’s Open API initiative strives to be the AWS of banking.

We discuss the role of financial ecosystems in determining the future of consumer banking. For BBVA, she’s helped build direct channels in the US into fintech startups, venture capitalists, mentoring and sponsoring at top accelerators, universities, and technology consortia — all in an effort to work together, innovate together, and collaborate together to leverage the talents of all the players in the space.

Below are lightly edited and condensed highlights from the conversation.

The value of the financial ecosystem

The ecosystem is imperative for our strategy. Some organizations are competing by throwing money at innovation centers and interact with startups. Startups are just one piece of the larger puzzle. You have to think about other players in the space. Venture capitalists have a lot of deal flow and have unique perspectives. Accelerators see a ton of startups come through and we spend a lot of time playing a mentorship role at accelerators. Now you’re seeing fintech groups at a lot of the major universities. We also spend a lot of time with our competitors as part of BBVA’s involvement in the R3 blockchain consortium. We look to work together with all the players who are directly and indirectly in the space to provide value and find ways to work together.

Investing in fintech innovation versus partnering

We took the initiative to spin off our venture capital fund and it’s expanded to $250 million now, as well. BBVA Ventures is now called Propel. The idea there is, as a true VC, your true goal is to earn a return on your investments. Other times, it makes more sense to partner with BBVA Compass, like with our relationships with p2p payments, Dwolla and roboadvisor, FutureAdvisor.

When it comes to buying fintech companies, we don’t have an acquisition budget. We buy things that we think are necessary, strategic and relevant to what our initiatives are. Our acquisitions come from heads of departments. One of my favorite acquisitions is a San Francisco-based design shop, Spring Studio. As technology changes and consumers want a beautiful user experience, it made sense for us to buy a company that does it really well and has a great reputation.

We’re also creating startups within BBVA, so there’s a lot of opportunity for partnerships, there, too.

The last piece is our open platform, banking as a service. Shamir Karkal, CFO and cofounder of Simple, has left to become our head of our global, open API platform. In this case, we’re not directly investing in, acquiring or partnering with outside companies but we’re exposing our banking plumbing to the fintech community at large.


Photo credit: claudiolobos via Visualhunt / CC BY

The world of finance as told through outrageously funny Twitter accounts

finance can also be funny -- like these twitter accounts

In 1983, John Landis’ comedy Trading Places showed just how funny the finance industry could be. The movie, in which a commodities broker (Dan Aykroyd) and homeless man (Eddie Murphy) change places, keeps the laughs coming, thanks to a stellar cast and excellent writing. However, alongside the ensuing hilarity of this unlikely life swap, the movie is a somber critique of the devastating effects of racial prejudice and institutional corruption.

Now, in the era of social media, several enterprising individuals have taken up the gauntlet and are using Twitter to spark serious finance discussions in seriously funny ways.

This sage advice comes from one of financial humor’s (FinHum’s?) funniest Twitter accounts, Wu Tang Financial, who answered the fundamental question: what would financial commentary sound like coming from the Wu Tang Clan. The answer, of course, is that it would sound hysterical. The dissonance between the street voice the account uses and the astute financial content of the posts is what generates the account’s humor.

However, this dissonance is also what makes the account’s socio-financial critique so compelling. Wu Tang Financial complains that you

and takes on the government:

The account also dispenses practical financial advice that has had a real impact on its followers  far beyond the twittersphere, with one follower writing in to say that “Taking @Wu_Tang_Finance advice, today opened second savings, and this week adding a Roth IRA in addition to my 401(k)! #diversify”. Wu Tang Finance replied with its usual aplomb, “BLESSINGS TO YOU, YOUR FAM, AND YOUR HEIRS.”

Wu Tang Financial is one of the biggest financial humorists on twitter, boasting 95.5k followers and 21.3k likes. However, it is by no means the only Twitter account taking humorous stabs at the finance industry. Another major financial humorist on twitter is GSElevator, with 749K followers (though only 1,076 likes).

GSElevator imagines the conversations being had in the elevators at Goldman Sachs, based on the experience of the account manager, John LeFevre, and on information submitted by his followers. Instead of the shouted advice and encouragement that Wu Tang Financial offers, GSElevator is a treasure trove of snide comments, such as the following gems:

and another:

Ultimately, both Wu Tang Financial and GSElevator are doing more than poking fun at the industry. Both have very clear, though very different agendas: Wu Tang wants to educate its followers to be more financially responsible (their tag line is #DiversifyYoBonds), while GSElevator is about “illuminating Wall Street culture in a fun and entertaining way.”

By employing humor to tackle some of the most difficult – and, let’s face it, not particularly funny – financial topics, financial humorists on Twitter are enabling people from across the industry to have meaningful conversations about finance while laughing out loud.

This is a good thing.

Christine Duhaime: Iran to take leading tech role as it rejoins the global finance community

iranian fintech

As the first anniversary of the Iran nuclear agreement approaches in July, the international business and finance community has identified an enormous market of opportunity in Iran, and believes the time is rapidly approaching that open trade with Iran will become a reality.

Christine Duhaime
Christine Duhaime

Anticipating that opening, the financial sector has hosted a series of conferences and summits analyzing the Iranian market. These include a Financial Times one-day summit entitled Exploring Opportunity and Risk in a Potential Economic Powerhouse, a May 19 get-together in London hosted by the Euromoney Iran Conference, and a two-day conference in Frankfurt produced by the Iran International Banking Forum.

Tradestreaming’s Andrew Friedman caught up with Christine Duhaime, a Canadian legal expert on anti-money laundering and terrorism financing and the Executive Director of the Digital Finance Institute, to talk about the opportunities and challenges facing Iran and the international community as Iran re-enters the global financial community.

Where are the opportunities in the financial sector for technology to step in?

Now that Iran is getting connected to the international financial system, there are all sorts of fintech opportunities that did not exist before. But Iran’s banking system is actually quite modern and the use of debit cards is very pervasive and modern. Their anti-money laundering laws are quite advanced and unique – another unknown fact – because the central bank in Iran has assumed the role of compliance for the opening of all new accounts as the account information holder. No other country does this, and it relieves the regulatory burden from bank branches to some extent and allows fintechs to create technologies at the banking sector level without the same level of regulatory burdens that fintech companies face in other countries.

Could you give a general overview of the technology sector, and the fintech market in particular, in Iran? 

There seems to be a misconception of Iran as not being tech advanced or tech savvy because of sanctions and their economic isolation from the world. But in reality, Iran is incredibly advanced in technology. There are world class technology universities in Iran and more students, including more women per capita, studying in STEM than anywhere else. There are approximately 40 students in tech per 1,000 university students in Iran and there are close to five million students per year enrolling in STEM in Iran. People thought sanctions would cripple Iran, and perhaps it did [in the short term]. But in the long run they actually united Iranians and fostered a drive to succeed, and to be so self-sufficient and achieve more than other countries with technology as a response to ensure that the world could never harm them again.

Is there a robust startup culture?

Yes, Iranians naturally are entrepreneurial and there are cultural expectations on children to be successful, if not through university education, then through business. That is driving a large part of the startup culture today. No question, Iranians are ambitious. President Rouhani started a program where they give low interest loans to over 1,650 startups a year to jumpstart the entrepreneur system in Iran. It’s the hot thing in Iran to have a startup, especially a tech start-up, and so, people are getting into startups in droves.

Is there a good way to profile mobile/internet use in Iran? Are Iranians tech savvy?

Yes, there is high internet penetration, and they are definitely tech savvy. Some areas of internet are spotty and some areas have better internet speed than others. It’s not like Canada or the US where there is high speed internet access everywhere but it’s getting better.

Is there high demand for new tools? What do users in Iran expect from their financial services providers?

Iranians are interested in everything new, modern and techie. In terms of their financial services, at the moment, they are looking for services that will allow them to bank outside of Iran as a primary concern, with the sustained ability to send money oversees to children studying overseas, and to receive funds. There’s also a huge need to be able to pay for things on the internet when it comes to foreign purchases.

How does Iran coordinate technology innovations such as online lending with the requirements of Sharia (Islamic law)? 

The whole of Iran’s financial services sector, including lending whether online or not, has to comply with Sharia law. But that hasn’t and doesn’t impede innovation. It’s innovation-neutral.

Does the introduction of technology aid things for the industry, or complicate matters? 

It definitely helps many industries – one area where I think Iran will beat us all shortly is artificial intelligence, and specifically, artificial intelligence in banking and finance. AI is going to wipe out hundreds of thousands of bank employees, mostly tellers and compliance personnel in a few years, both globally and Iran. I have no doubt that Iran will lead in this area by virtue of the sheer size of its population, their ambition, drive and the numbers of students who are studying STEM. No country will be able to compete.

The Iranian rial has tanked in recent years. What impact on fintech investments do you envision as a result?

I think investors look at Iran as an inexpensive place to invest and when you look at the incredibly low salaries for MBAs, lawyers, or other well-educated Iranians who studied at the best schools in North America or the EU, it’s incredibly advantageous for an investor. It means the costs of the investment goes way further and they can obtain incredibly bright, well-educated young employees engaged in a startup.

Is there local money to invest in technology, or will the sector be heavily dependent on foreign money? 

It’s a bit of both — there is local financing and also a huge dependence on foreign investment, with the expectation that more investment will come to Iran. Part of the reason we did the first FinTech Conference, as Canadians in Iran in 2015, was to help to light the flame of fintech in Iran with foreign interest. Hopefully it had an impact.

Photo credit: Paul Keller via Visualhunt.com / CC BY

Finance as fashion symbol: 5 examples of design creeping into finance

design has made its way into finance

Finance used to get a free pass when it came to style. Banks, brokerages, and asset managers worth hundreds of billions of dollars issued client statements looking like spreadsheets with logos slapped on. Design seemed to be something other industries focused on, not finance.

But the industry seems to be getting the gospel and buying into the fact that customers expect more design from their financial products and services. Apple took commodity products like the computer and mp3 player and turned them into consumer devices with an aesthetic that wasn’t shared by competitive products at the time.

Now, everyone is upping their game and finance is no different. We’re beginning to see beautiful, fashionable financial products, tools, and apps.

Here’s a list (with a few gag gifts mixed in) of some of the design innovations creeping into the financial world.

Credit cards with personality

card.com stylish credit cards

When you’re out with a client or on a date, you don’t want to whip out a lame credit card. That’s so…plebeian. You need something distinctive, something that says, “hey, I’ve thought about how I look when I pay my bills.” Companies like Card.com have licensed images and plenty of fashionable options to match your style.

Beautiful payment platforms

fashionable payment platforms: Stripe


Remember when ecommerce was fun but checking out was the pits? Stripe has not only done an amazing job simplifying the payment process, but it looks great, too. Gone are the days of checkout and invoice tools that look like glorified spreadsheets. We’re in an era where design matters in finance — payment tools, finance apps, credit cards, and customer statements issued by banks. It all matters.

The annual report gets a face lift

making annual reports beautiful

Especially for publicly traded companies, the annual report traditionally represented a boring, old regulatory filing. Sure, some firms put a nice cover on and maybe some glossy pages at the beginning of the report, but for the most part, there wasn’t really anything fashionable there. Consumer brands issued nicer looking reports, but the internet provides new ways not only to communicate with shareholders, but also to do it beautifully. Take leading early stage fintech investor Google Ventures, for example. The company issues a yearly report (here’s a recent one) that is part educational, part interactive, and part marketing. You can browse through it quickly or drill down on particulars — like sectors the firm has invested in or on specific companies in their portfolio. Expect to see more communication tools that will enhance investor communication to emerge in the future.

A gift that keeps on giving

give the gift of stock

As most of finance has been digitized, something’s been lost along the way. I mean, who doesn’t have a single physical share laying around of an old blue chip stock that you got for your bar mitzva from a family friend who was stock broker? Anyway, there’s also something magical to those old certificates and a company called GiveaShare make it easy to gift a stock to a friend or family member. There are other services that make it easy to gift stock but this one comes with a framed plaque the proud recipient can hang on a wall. Like golf? Hang up Callaway. Like tech? Mount a share of Apple in your study.

Stock charts as art

Stock charts as art
from Sarah Meyohas

If trading is indeed an art form, it probably deserves some wall-space in your living room. That’s exactly what Sarah Meyohas thought when she painted a series of paintings she calls Stock Performance. The one above? It’s the chart of the New York Stock Exchange (before it was acquired by ICE). In this case, the artist is intrigued that the chart represents both a individual stock and the exchange it’s traded on.

“This line is a self-reflexive existence,” the artist wrote on her website. “It is the stock market subject to its own critical analysis. As the price fluctuates, the stock exchange is valued through the very means of that which is being valued. It is creating its own image, attaining its own concept in self-revelation.”

Bonus: Drink like a (Wall Street) boss

bull and bear whiskey glases

Once you’ve closed the deal, don’t celebrate with just a another whiskey glass! You want something that both feels good in your hand and looks good with your colleagues. These Bull and Bear Whiskey Glasses are sold by a company called Bull Market Gifts where they have, as you can imagine, lots of gifts for the financial pro. My favorite is a replica of a ticker tape machine.

Bonus: Money hits the bank, light up that Cohiba with your…calculator?

calculator lighter

I’m not sure this is a real thing and if it’s not, it should be. Maybe. This vintage 80s Casio calculator fits inside a real, working lighter. So, when you’re done crunching the numbers and the money hits the bank, you don’t have to scramble to find a way to light up your stogie. Just hit C and click.

[podcast] The top 10 fintech stories of 2015

top stories about financial technology in 2015

2015 was in many ways a watershed year for fintech.

According to Pitchbook, it looks like 2015 will finish with close to $8 billion worth of venture capital invested in financial technology startups. To put that into perspective, there was $4.7 billion worth of fintech investments in 2014. It looks like there will be close to $10 billion of M&A done in 2015, as well.

Based on our coverage, here’s what we believe to be the top 10 most important fintech stories of 2015.

Listen to the FULL episode



Photo credit: mathaios via VisualHunt / CC BY

Getting good advice (finally) for your 401k — with Chris Costello

retirement investing with Income&

Why is it so hard to know what to do with your 401k? Why is it hard to understand what you’re invested in and get advice on how to improve it?

Chris Costello, co founder of Blooom, joins Zack Miller on the Tradestreaming Podcast to discuss retirement planning and investing and how his firm is addressing the problem with an easy-to-use, affordable investing tool.

Listen to the FULL episode

About Chris

Chris Costello of BlooomA co-founder at Blooom, Chris has been working with clients and building portfolio allocations for almost two decades. He also co-founded and runs another investment advisory firm managing over $500 million for clients.

Resources mentioned in this podcast

Even more resources


Investing lessons from the lemonade stand

fintech VC, QED Investors' Caribou Honig

Teaching people about investing generally comes in two flavors: plain-vanilla, simple prosaic stuff or text-book-heavy chocolate which is either too complicated or too boring to digest.

Simple books tend to lack the rigor or pragmatism that investors face. Investing is hard and a general investing overview is typically insufficient to help investors facing tough decisions: like selling into a fiscal cliff or avoiding home or Internet bubbles.

On the other hand, definition- and formula-driven books also lack a real-life approach to investing. Instead, books like these are good for classroom settings or MBA-on-the-job training.

Sneaking in the complicated stuff while engaging the reader

James Berman’s new book, Lessons from the Lemonade Stand, uses a common metaphor to a book by James Bermanteach the basics of investing: the lemonade stand (Joel Greenblatt used a similar one in The Little Book that Beats the Market.

By abstracting out the “hard” stuff about investing and focusing on the most simple of businesses, Berman (a finance prof at NYU and an investment advisor) is able to gradually introduce more complicated concepts without overwhelming the reader with jargon.

Really, Lessons from the Lemonade Stand encompasses much of an introductory finance curriculum in book form that reads, well, more like a book of fiction than one on investing.

Interesting excerpts

The difference between traders and investors:

The difference between investors and traders is almost religious in fervor. Ironically, both have the same goal: to make money. But each approaches that task in a different way. At first glance, investors hold stocks for the long term while traders buy and sell stocks on a short-term basis. But the distinction is more philosophical. INvestors view stocks for what they are: pieces of paper that grant ownership in a company. Traders view stocks as gambling chips” things to be bought low and sold high regardless of what they actually represent.


The wise lemonade stand investors spends some time learning the ins and outs of taxes. Unfortunately, the tax code is outlandish in its complexity. But it’s yours. And if you want to hold onto your gains, you better know the basics.

Price vs. Value:

In the real world, just as in Lemonville, everything has both a price and a value. Understanding the difference is the key to success. A stock’s price and value are often far apart.

Continue reading “Investing lessons from the lemonade stand”

How transparent is financial social media really?

financial social media

Over the past few years, investors have been treated to an unprecedented level of transparency thanks to Twitter/Facebook/blogging.

With millions of people tradestreaming (the collective publishing of investing advice 24/7) out onto social networks, all an investor needs to do is just plug in and begin learning from investors much more experienced and talented than he.

Moving beyond just listening to the stream, many investors are replicating hedge fund returns by following top investors’ quarterly regulatory filings on sites like market folly and using research tools the likes of AlphaClone (affiliate link because it’s awesome).

Here’s an example of how I’ve built my own DIY all-star hedge fund.

Professional advisors and the social media pushback

But this post on Quora (if you’re interested, follow the Tradestreaming board on Quora) got me thinking about how transparent investors — particularly, investment advisors —  really are online.

In fact, in talking with many portfolio managers about the merits of joining a marketplace for portfolio managers like Covestor, one of the biggest pushbacks I’ve heard has been the need to be completely transparent. It’s one reason why truly valuable actively managed strategies may not make their way to ETF format: investors can track (almost) every move.

As the Quora post describes, many investment advisors feel that their stock picks are their special sauce and wouldn’t do anything to jeopardize losing their edge.

There’s little advantage in it for them, because for most the exclusive nature is their bread and butter

Freemium: emphasis on the -mium

When they approach publishing online, these investors actually reveal very little of what they’re really doing with their portfolios. They throw a bone to investors here and there, but typically it’s just a throwaway investment idea, not something they’d stake their livelihoods on.

If these investment types are really using a freemium model to attract new clients, they’re definitely emphasizing the –mium part, not the free.

The downside risk of being wrong outweighs opportunity of being right

Of course, like financial newsletters, there’s a downside to being completely transparent — the risk of being wrong. Investors want to believe good managers (and newsletters) are infallible. All their picks go up. Returns are always outsized.

Just take look at Jim Jubak — he’s publishing away, airing his laundry for the world to see. He gets some right and some wrong. The point is no stock picker is going to be infallible.

Advisors have good months and bad ones — that’s part of the game and inevitable. It’s how well advisors limit their downside on the bad months that determines how good overall performance is going to be. Investors don’t like to think about how hard investing is (geez, May 2012 was impossible).

As Barron’s Steve Sears said in my recent interview with him:

Investors want a pharmaceutical solution to investing, a magic performance pill they pop to succeed.

But of course, for most of us, we understand that it’s not always the outcome of the investment advice. Rather, it’s the thought process, the intellectual back-and-forth to hone a thesis about what the world will look like in the future.

That’s hard but it’s also a conversation worth having. That’s why I’m betting on the tradestream as the future of investing.

 photo courtesy of Fayster

Investing on the edge: Weekly update on tech, social media and investing (May 22, 2012)

Subscribers (free) to my newsletter received the following this week. It’s my best-shot at providing an overview on

  • important research and new investment strategies
  • new technologies, apps, and platforms for investors
  • insights into the behavior of investors
  • changes in the investment business

Investment Products

How fund firms are luring advisors to use their products (Financial Planning)
Posted: May 17, 2012

This article describes the tactics fund firms are using (“value-added programs”) to encourage the usage and sale of their products for/to clients.

Vanguard lapping index fund competition (InvestmentNews)
Posted: May 15, 2012

Vanguard has seen over $65 billion in inflows, 4X the money its largest competitor (PIMCO) has seen.

AlphaClone signs partnership to license hedge fund replication index (AlphaClone)
Posted: May 15, 2012

AlphaClone, a platform that empowers creative hedge fund replication strategies, has taken a step that puts it one step closer to launching a fund based on its data.

Navigating the ETF Galaxy (Systematic Relative Strength)
Posted: May 15, 2012

This article by the folks at Dorsey Wright examines the state-of-the-art in ETF land and where the market is pointing for future growth.

Continue reading “Investing on the edge: Weekly update on tech, social media and investing (May 22, 2012)”