Bought by Many’s personalized insurance products are changing the way we manage risk

Steven Mendel is the CEO and co-founder of Bought by Many.

Why is buying insurance so hard?

There has been a lot of innovation/ change in the way in which consumers buy and interact with most retailers/ distributors in most industries, just this change has not arrived in the insurance world – so we are all forced to deal with intermediaries to buy insurance through poorly designed web offerings. So rather than saying buying insurance is hard, I prefer to say that it hasn’t moved on, in the same way that most other industries have.

Also, everyone dreads having to renew/ take out an insurance policy, not knowing who to buy from, how much cover to buy, whether they are being ripped off, etc.

How does Bought by Many change that? How does it work?

Steven Mendel, Bought by Many
Steven Mendel, Bought by Many

Consumers are used to transacting on their mobile phones, and indeed 70% of Bought by Many members join us on a mobile device – this is the medium consumers are now demanding.

We enable our members to interact with others looking for the same type of insurance to discuss this with them. We work with each group to help individuals get a better deal on their insurance.

We write a lot about the complexities around insurance decision-making and encourage our members to share their insights as well, making the whole experience much more social and less about the individual, thereby giving our members much more comfort that they are making a good decision.

What’s the genesis story — where did you and your co-founder come up with the idea?

Was there a personal reason? Both Guy and I have been frustrated with the financial services industry that takes advantage of individuals in a way that the industry doesn’t take advantage of other corporates – evidence is widespread: group life assurance is much cheaper than individual life assurance — retail share classes in unit trusts can be 3-5 times the price of institutional share classes for the same fund.

My personal example was in private medical insurance where the price for me was four times as a self-payer compared to the same offering from the same insurer when part of a corporate scheme.

How does arranging insurance buyers in groups change the dynamics of the underwriting/brokerage relationship? At what benefit to your users?

We cut the traditional face-2-face broker out of the equation – which has been costing consumers 30-35% per annum and instead use that saving to improve terms for our members.

You recently bought an insurance underwriter in the pet insurance industry. Why?

We are keen to show consumers and the industry what a great mobile-designed customer experience can be like in the insurance industry and found that the only way to achieve this was by being able to own the whole customer journey – hence the acquisition. Watch this space for the launch of this new experience soon….

What’s next for users of BBM — product enhancements/services?

So the roll out of the new customer experience for a small number of our groups is definitely next. We’ll then be expanding this to a number of other groups. We recently launched our first private medical insurance groups, which you’ll appreciate from my personal experience above, was important to me. We’ll be adding more medical insurance groups in the coming months, so if you don’t find what you are looking for now, let us know!

The Startups: Who’s shaking things up (Week ending November 7th, 2015)

fintech companies making news this week

[x_alert type=”success”]Every week, Tradestreaming highlights startups in the news, making things happen. The following is this week’s news roundup. You can get these updates delivered direct to your inbox by signing up for the Tradestreaming weekly newsletter.[/x_alert]

List of the top 10 roboadvisor CEOs (Tradestreaming)
Tradestreaming Tearsheet: Everyone’s talking @ #roboadvisors and automated investing platforms. Leading startups in the space have raised hundreds of millions of dollars in venture capital and are managing billions of dollars in AUM. But, who are the CEOs running these firms? Who are the people behind this whole industry? Here are 10 of the best.

What will be the most valuable fintech companies in 2020? (Disruptive Finance)
Tradestreaming Tearsheet: Who will be the most valuable Fintech companies of 2020? Here’s an (educated) guess. More importantly, will the largest Fintechs still be focused on niche areas or will they expand into other sectors (like the largest global financial services companies have done)?

Opening up access to new investors in litigation finance (Tradestreaming)
Tradestreaming Tearsheet: Online finance isn’t just making plain vanilla investing/lending more efficient and cheaper to the end users – it’s also opening up entirely new ways to invest and entirely new investable assets available to the average investor. Tradestreaming’s interview with Jay Greenberg of @lexshares – he’s opening up litigation finance to everyone. Can this be an asset class that eventually everyone holds in their retirement portfolios?

Interview with TransferWise’s Taavet Hinrikus and Kristo Kaarmann (Business Insider)
Tradestreaming Tearsheet: The international money transfer startup became one of London’s few ‘unicorns’ in January when Silicon Valley’s Andreessen Horowitz invested. “That makes us here think, ok, we’re probably also at a very special point in time where we’re seeing the birth of whatever number of new global financial services companies.”

Xignite Records 50 Billion Financial Data API Calls per Month (bobsguide)
Tradestreaming Tearsheet: Xignite announced that in July it served more than 50 billion API requests from its market data cloud platform, breaking all previous company records and making Xignite among the top API cloud providers in the world. As fintech enables further unbundling of data and services, Xignite and others in the space are riding the trend.

The fintech Silk Road – what we can learn from China (Jessica Ellerm)
Tradestreaming Tearsheet: “Banks often look at disruption in terms of product impact, in other words, how general FinTech (including distributed ledger technology, P2P lending, third-party payments, etc.) will disrupt. In reality, the biggest threats lie in the changing structure of global markets.”

Kickstarter surpasses $2 billion in pledges (The Verge)
Tradestreaming Tearsheet: Kickstarter announced that more than $2 billion has been pledged in total on the platform. It took the company nearly five years to hit the mark but revenue growth is ramping. Has crowdfunding become a standard way companies finance new products in our age?

Invoice2go gets $15M to compete more directly with Square and PayPal (VentureBeat)
Tradestreaming Tearsheet: Invoice2go has provided small businesses with one tool—a simple way to create an invoice and send it to clients. Now, with $15 million in new funding, the company is preparing to expand more deeply into the small business product territory. Square and PayPal should probably be paying attention.

Openfolio is building a social trading network that works

discussion with Openfolio's Hart Lamur

Hart Lambur is co-founder at Openfolio. He was most recently a government bond trader at Goldman Sachs.

What is Openfolio?

Openfolio is a platform where investors share their portfolios—not dollar amounts, but their contents and ideas—to see how their investments compare. Data derived from our network brings fresh insight and increased transparency to personal investing, helping everyone in our community make smarter, more confident investment decisions.

What’s the genesis story of Openfolio? What itch were you trying to scratch?

Hart Lambur, co-founder Openfolio
Hart Lambur, co-founder Openfolio

We were working on Wall Street when we hatched the idea for Openfolio. We noticed how the open culture of our trading desks, where people freely shared ideas and insights, helped everyone succeed. But we also quickly realized that there was no platform, or scalable solution, to replicate that powerful experience in the real world – even though so much untapped wisdom resides in everyone’s extended networks. We wondered: isn’t sharing information about investing at least as important as sharing information on Foursquare… or Tripadvisor… or Spotify?

That experience inspired the creation of Openfolio. It’s a new, open approach to investing, based on the simple idea that people will share their portfolios, in percentage terms, within their networks. Openfolio is a place where investors share insights and ideas, and watch how others put them into action. We all learn from each other’s successes (and mistakes).

Why do you think there’s a lack of transparency when it comes to investing whereas in other industries, we’re so much more likely to share our information? How has this opacity impacted the average investor?

The taboo nature of talking about money and the idea that investing is scary and risky intimidates people from sharing information with each other. There is a stigma that each of us will be laughed at as fools for sharing, when really sharing information is usually a great way to learn. The average investor is left in a cycle where it’s hard to know where to seek advice about best practices, and a large amount of the advice is anecdotal.

As a result, transparency and information is only present in small circles. There are investor communities such as Seeking Alpha, or Stocktwits, but these are largely for the engaged investor, often looking for opinions on specific stocks and bets they want to make. There is also expertise from investment advisors, but it makes sense for that expertise to be held there both for the benefit of the advisors’ business and their clients peace of mind.

Openfolio is designed for personal investors, who are invested in the market, but don’t want to pay 1-2% on assets for expert consultation or fully engage in active DIY investment. Openfolio is an free service that lets you engage with your investments in an informative and non intimidating way, by giving you context into what others are doing, i.e. social validation.

So, once you have more transparency on our investing behavior, what’s the next step? Can Openfolio help us make better investment decisions?

Our mission is to bring about a better understanding of investing behavior, one that complements technical expertise and avoids professional jargon. This understanding will be based on our existing intuition about how people behave. This shift creates an opportunity to bring in people that are interested in investing but may be intimidated by the topic.

This added behavioral dimension can be a really powerful teaching tool, but relies on us accurately characterizing investors based on the info they share with the community. A simple comparison of how your portfolio performed versus the average investor only scratches the surface, the best insights will come from a deeper synthesis.

For example, my portfolio holds USO, a highly volatile Oil ETF. Openfolio tells me that “People who are betting on USO trade it 2x as much as any other stock in your portfolio”. This helps me appreciate the reality of my decisions, i.e. that I own a stock that many people use for short term speculation.

The idea of Openfolio has been tried before (in various manifestations — I’m thinking Covestor, which ended up pivoting to track only professionals’ trades) — what’s different with Openfolio? Why will you guys make a business out of this where others have tried and moved into other things? Are you planning on rolling out replication technology?

The approach many other social services take is putting forth an idea that there is exists a group of high performers, who can consistently beat the market, and the way to use these services is to highlight these experts and let people emulate them. Openfolio is based on the fundamental idea that even if a minority of market beating wizards do exist, tracking and copying what they do is not the point, and is also not sustainable.

Openfolio exists to shed light on what typical investors do correctly, i.e. have a balance of stocks and funds, are sufficiently diversified, don’t trade in and out too much or get nervous when the market moves. By showing how people compare to the average based on clear metrics backed by real portfolio data from the community, we can make it easier to “get it”, i.e. this is what investing is about. It’s not about speculation, or trying to beat the market, often times it’s about deciding on a reasonable core portfolio and maybe understanding some themes (e.g. what are high dividends, diversifying into international and emerging markets), and then remembering to re-invest.

What’s next in the pipeline? Where are you taking the business?

Today, our sole focus is to create a platform that is useful for anyone that has investments, and foster a vibrant, engaged community. This is fun, exciting, and keeps us busy. Tomorrow? Actionable information and advice, backed by community driven data, which may be delivered through a subscription model or integrated into a service to help users understand and choose from different investing services. Having said that, our core product will always be a free.

Have robo-advisors peaked? A conversation with Silver Lane’s Peter Nesvold

Earlier this week, a report out of Silver Lane Advisors, an investment banking boutique that specializes in financial services M&A, caused quite a stir. The report, entitled “Have Roboadvisors Jumped the Shark“, drew parallels from the advent of Internet banking to the more recent phenomenon of automated investment advisors, or so-called, roboadvisors.

One of the author’s of the report, Peter Nesvold, is a managing director at Silver Lane. He joins Tradestreaming to discuss the report, the future of asset management, and how he thinks it all plays out.

In your study, you spend considerable time using the growth trajectory of Internet banks as a parallel case to what’s likely to play out for roboadvisors.  Why is that?

Peter Nesvold, Managing Director, Silver Land Advisors
Peter Nesvold, Managing Director, Silver Land Advisors

There’s an old saying from Mark Twain that “history doesn’t repeat, but it does rhyme”. We find that the investment thesis of today’s independent roboadvisors bears a striking resemblance to that of the original fintech disrupters — the Internet-only banks of the 1990s.

Fintech disrupters are, by definition, gunning for dramatic, sweeping changes to how financial services are consumed. While it’s almost a forgotten chapter of fintech history, online banking is actually the most successful fintech innovation of the past 20 years. People often talk about how online brokers disrupted traditional brokers during the 1990s. But even today, online brokerage is only about 30% of the retail market. In contrast, an incredible 80% of U.S. households with an Internet connection bank online. The convenience factor is extraordinary. But despite this massive consumer adoption, all of the standalone, Internet-only banks failed! That’s because online banking is not a standalone business, but rather a product extension of traditional banking.

If we look at this purely as a technology, online banking in the 1990s and online/automated investment advice of today share many characteristics. Both are incredibly innovative technologies that enable users to transact whenever, wherever they want; the marginal cost of serving each incremental user is very low; yet in both online banking and online investment advice, the offering is really just a subset of the broader portfolio of services that the user is likely to need over time.

Why do you think that roboadvisors may have jumped the shark?

Two events have happened in recent quarters that suggest we’ve hit an inflection point.  First, and probably most importantly, we’ve seen mega-brands jump into the market and completely overpower the progress of the start-ups, despite these huge companies having sat back for years as idle observers.  Schwab and Vanguard — two industry behemoths — netted more assets in only 90 days from launch than the independent roboadvisors had their entire lives.  The exact same thing happened with Internet banks in the 1990s.  While players such as Bank of America were arguably slow to follow the lead of innovators such as NetBank, BofA completely leapfrogged the start-ups in only 90 days once they decided to jump in.  Now that the big boys are interested, the start-up robos will have to pour an extraordinary amount to capital into brand building and raising service levels to compete.  Forget what Twain said, this isn’t history rhyming, it’s history repeating!

Second, we’ve started to see consolidation begin.  LearnVest sold to Northwestern Mutual; FutureAdvisor combined with Blackrock; and Covestor merged with Interactive Brokers.  A small number of independent robos still have a chance to grow into big businesses; the further down the list, however, the more urgent it likely is to find a suitable partner.

How can robos avoid jumping the shark?

roboadvisors jump the sharkUsing history as a guide, the Internet banks whose DNA survived were those that affiliated with larger brands. Wingspan Bank is a good example — although the Internet-only bank was always a wholly-owned subsidiary of Bank One, it was branded and managed independently of its parent. You never saw Bank One mentioned in any of its ads. But after a little more than a year, Wingspan was folded back into the parent to become the online offering.  That made sense.

Likewise, TeleBank (once a publicly-traded Internet bank) sold to E*Trade at the peak of the market and still survives today as the brokerage division’s banking arm. In contrast, those Internet banks that did not affiliate with a bigger brand in some way all disappeared.

We believe that independent roboadvisors should consider aligning with larger, established competitors — provided those competitors are equally forward-thinking. We noted some recent examples above. Combining innovative technology with a highly credible brand seems like the best path.

If they have jumped the shark, what do you think happens going forward for the robos? For competition from within the industry (Vanguard, Schwab)? Who’s positioned well to “own this market”?

To be fair, it’s important to keep in mind that the TV series, Happy Days, survived for five more seasons after the “Jump the Shark” episode. In its truest form, a “JTS moment” doesn’t mean the end has arrived; it suggests the downward ascent has begun. There are plenty of episodes ahead for the roboadvisor trend; we just believe that the most innovative days as independents has now peaked.

In terms of who’s best-positioned to own the market: it’s a billion-dollar market that’s likely to be captured by billion-dollar brands. Early movers from the traditional brands include Vanguard, Schwab, Fidelity, Blackrock, Northerwestern Mutual, and Internactive Brokers. We anticipate someone like State Street or Invesco making a move as well, as a robo platform would be a logical distribution channel for their tremendous ETF product offerings.

Is this market saturated? Where will new competition come from and why?

The market isn’t saturated yet, because consumer adoption has been relatively slow. Even smaller, independent roboadvisors will attract assets — but the key is that they are unlikely to attract so many assets that they scale to material profitability. New competition keeps coming into the market. We probably see new entrants weekly; on paper, the business plan can look really exciting to a venture capitalist who understands technology but has limited experience in the financial services industry. But anyone jumping in today faces an unusually difficult uphill battle.

Startup Roundup: Marketplace lending up big, blockchain getting a lot of attention

fintech startups shaking things up

[alert type=white ]Every week, we write about fintech startups raising money, making partnerships, and generally disrupting finance.[/alert]

Wow, what a week.

Money 2020 has turned into a must-attend fintech event. Equity crowdfunding rules were announced on Friday –  creating utter chaos for some players and elation for others. Things are speeding up in fintech land as stock market holder ICE bought leading data provider IDC in a deal worth over $5B.

For more fintech coverage during the week, you’re going to want to connect with Tradestreaming on Facebook. Click here to do following Tradestreaming on Facebook.

OneVest Launches “1000 Angels” to Reinvent Venture Capital (Crowdfund Insider)
Tradestreaming Tearsheet: Onevest, a New York based investment crowdfunding platform focused on funding start-up entities, has announced the launching today of its new “1,000 Angels, the “world’s largest digital-first, invitation-only investor network”.

$1 Billion In Small Business Loans From PayPal (PYMNTS.COM)
Tradestreaming Tearsheet: PayPal used to be all about processing payments instead of handling funds, but if you’re not growing in this business, you’re dying. PayPal is serious about growing its SMB loan business and seems to be positioned well to continue attracting new business borrowers.

Can This Startup Restore Privacy in Payments and Turn a Profit? (American Banker)
Tradestreaming Tearsheet: Privacy.com is catching the attention of many finance professionals (including some smart fintech investors) as a creative security platform that’s building its business by protecting transaction privacy. In the Edward Snowden era, it will be interesting to see if the startup can build a business with its revenue model (taking a cut on interchange fees around a transaction).

Bizfi Originates $127M in Financing in Q3 2015 (BusinessWire)
Tradestreaming Tearsheet: Bizfi, a fintech platform that combines aggregation, funding and a participation marketplace for small businesses had a very good quarter, reporting $127M in business financing during Q3 2015.

ReadyForZero launches credit monitoring product (ReadyForZero)
Tradestreaming Tearsheet: Following CreditKarma’s success in providing credit tools, personal finance manager (PFM), ReadyForZero launches its own credit monitoring tool.

Groundfloor Announces Three New Tools to Expand Peer-to-Peer Real Estate Lending (Crowdfund Insider)
Tradestreaming Tearsheet: On Monday during the Money2020 conference, real estate lending marketplace Groundfloor introduced three new analytic tools that allow peer-to-peer real estate investors greater flexibility and analysis over security selection and portfolio management.

Digital Asset Holdings Acquires Blockchain-as-a-Service Innovator, Blockstack.io (Finovate)
Tradestreaming Tearsheet: “Miron Cuperman, Blockstack CTO, called Digital Asset “the best platform” to deliver Blockstack’s blockchain application development tools as part of a comprehensive solution for customers. Digital Asset Holdings CEO Blythe Masters praised both Blockstack’s technology as well as its talent, calling Cuperman “a renowned pioneer in the blockchain world.””

Lending Club Reports Q3 Results. Loan Originations Jump 92% Year-over-Year (Zacks)
Tradestreaming Tearsheet: Lending Club (NYSE: LC), the largest marketplace lending platform in the US, has announced Q3 results. And the origination growth is silencing some of the biggest critics of the first marketplace lender to float on public markets.

Startups raising money this week

Spreedly Raises $2.5 Million in New Funding (Finovate)
Tradestreaming Tearsheet: Spreedly helps marketplaces and platforms accept a wider range of payment types while reducing cost, complexity, and compliance burden.

Zebit Secures $10M investment; Launches Zero-Interest Credit to the Underserved (LetsTalkPayments)
Tradestreaming Tearsheet: The credit can be used to make purchases from the Zebit Market or directly from retailers that accept Zebit as a checkout option.

Issuer processor platform Marqeta closes $25m funding round, new customers (Finextra)
Tradestreaming Tearsheet: At Money20/20 2015, Marqeta, the Open API issuer processor platform, announced a host of new marquee customers, including Affirm, DoorDash, HyperWallet and Kabbage, alongside known customers such as Facebook, Bento for Business and Perk. Marqeta also confirmed closing a $25 million Series C round.

2 major trends top investors and fintech entrepreneurs talked about at Stocktoberfest 2015

review of the 2015 stocktoberfest event with Howard Lindzon

It’s that time of year again: when scores of investors descend upon Coronado, a small town across San Diego Bay from downtown San Diego. It’s there, that for 2+ days, they’re treated to discussions by some of the smartest investors around. It’s Howard Lindzon‘s shindig and Stocktoberfest has become a must-attend event for traders, investors, and fintech entrepreneurs.

Howard’s activities as fintech angel investor (see his Social Leverage portfolio), entrepreneur (previous CEO of StockTwits, Wallstrip), and generally gregarious professional position him as an ideal connector for this event which essentially ran 2 tracks this year (or themes): the race to a $1 trillion marketcap for the largest tech firms and the social finance revolution. For startups, Stocktoberfest acts as a sort of launching pad, with a few of the firms presenting in front of a professional audience for the first time.

Marketplace lending is better

There were a few of themes coming out of Stocktoberfest that resonated with attendees (Lindzon himself wrote up his own 10 takeaways from Stocktoberfest 2015). The first was regarding the big changes facing banking.

With the growth in marketplace lending firms like Lending Club and Prosper, industry analysts think that it’s not only an inefficiency in the market that’s powering these firms, but marketplace lending is just better than traditional borrowing/lending.

According to Lindzon:

At Stocktoberfest, ApplePie Capital, PeerStreet and ProducePay received the most attention from friends in attendance. Hunger for yield matters.

Cost of information (nearly) free, but value going up

Many of the attendees to Stocktoberfest are in the investing content game themselves. They blog, podcast, and tweet about the markets. Some of these analysts, like Brian Lund, have extensive experience investing. Lund, who founded broker-dealer Ditto Trade in 2008, has been trading the markets for over 30 years and his opinion pieces are syndicated to Yahoo Finance, AOL’s DailyFinance, and About.com.

Lund observed that while the price of content is going down, the value continues to improve.

The days when you had to be an embedded analyst at a major Wall Street firm, or pay nosebleed subscription prices to get access to top shelf data and information are over.

Take, for example, Urban Carmel, who writes The Fat Pitch, was named after Pope Urban II by his papal loving parents, and sipped 18-year-old Scotch while Howard interviewed him.  His take on the market is informed, experienced, and insightful, and he gives it away for free.

Gregor Macdonald on energy. Dr. Brett Steenbarger and Chris Kimble on trading. Herb Greenberg and Eddy Elfenbein on markets.  These are just some of the great content providers who showed up at Stocktoberfest.

Just a few years ago, the Finovate series of events were pretty much the only game in town when it came to showcasing top talent and technology in the fintech space. Events like Stocktoberfest are becoming more common and provide a powerful sounding board for fintech startups to get up in front of a room full of prospective customers of their products. Now, it seems like almost every week new fintech accelerators, focused VC funds, and meetup groups are being launched.

Here’s a short video of Howard Lindzon and Jeff Macke talking about what they took away from Stocktoberfest 2015.

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Startup Roundup: Goldman Sachs, American Express placing further fintech bets

fintech companies making news this week

[x_alert type=”success”]Every week, we write about fintech startups raising money, making partnerships, and generally disrupting finance[/x_alert]

This week, finance’s who’s who soiréed at the Economist’s Buttonwood Gathering. The one question that seemed to underly all the discussions and break out sessions:

  • what about banks?
  • What’s the banking sector’s role going forward when fintech is disrupting from above, below, and laterally?

The Startups: Who’s shaking things up

Inside Monese, the mobile banking app for migrants (Tradestreaming)
The app lets people sign up with just a picture of a passport and a selfie in as little as 3 minutes.

LendKey Enhances Lending-as-a-Service for Local Banks & Credit Unions (Finovate)
Tradestreaming Tearsheet: Even in this newsletter there’s lots of talk about the competition hitting banks. New platforms like LendKey don’t disintermediate them as lenders; instead, they help them create digital offerings and compete. It will be interesting to see how many banks adopt platforms like LendKey or instead partner with the larger online lenders.

Indiegogo Launches Generosity To Compete In Personal Crowdfunding (About.com)
Tradestreaming Tearsheet: After GoFundMe’s (crowdfunding platform for personal campaigns like paying medical bills or tuition) success and raising massive amounts of capital, Indiegogo wants more of the market and relaunches (and rebrands) its own offering, Generosity.

Digital currency is poised to reinvent how startups are funded, led by Chroma Fund (TechRepublic)
Chroma Fund is a crowdfunding site powered by the blockchain, the same underlying technology that powers Bitcoin. Learn how it’s preparing to disrupt startup investing.

From start-up to incumbent: the innovation cycle (The Finanser)
Tradestreaming Tearsheet: Interesting framework to think about growth in the fintech industry and how that maturation unfurls for startups on their way to becoming larger, incumbent players. Useful for startup founders and those investing/partnering with fintech startups.

RushCard Breakdown Affects Thousands of Prepaid Debit Card Users (NYT)
The troubles, lasting much of the past week, illustrate the potential perils for those without access to the banking system.

Co-Founder of Capital One, Nigel Morris, Joins Zopa Board (Crowdfund Insider)
Morris, currently the Managing Partner at QED Investors, is the co-founder of Capital One. QED has invested in well known Fintech companies, including, Credit Karma, Avant Credit, GreenSky and SoFi.

OnDeck Adds New Small Business Lending Options (Finovate)
“The expanded product suite includes broader loan terms, increasing the maximum loan amount from $250,000 to $500,000 and granting borrowers up to 36 months to repay (from 24 months). Lines of credit will be available up to $100,000 (from $20,000) for a monthly fee of $20 and no “draw fees.” And repeat customers will be eligible for annual rates as low as 5.99%, as well as loyalty pricing benefits.”

Early Read on Square’s S-1 Filing (First Annapolis)
Good initial read of the payment firm’s IPO filing – what questions it answers and which ones remain unanswered.

Startups raising money this week

Goldman Sachs leads investment in cloud-based POS startup Financeit (Finextra)
FinanceIt enables businesses to offer payment plans to their customers and Goldman Sachs wants a piece of the online lending fintech firm.

American Express Invests In Bitcoin Venture, Abra, Which Announces U.S., Philippines Launch (Forbes)
Bitcoin startup Abra will soon launch in the US and Philippines, and is rolling out a merchant services API. It also received investment from American Express and Ratan Tata.

Citrus Payments Raises $25M (Let’s Talk Payments)
PE firm Ascent Capital and early investor Sequoia are investing $25M in Citrus’s C round. Citrus “makes digital payments and online checkout processes simpler, faster, safer and easier for an 800 million strong electronically connected user base”.

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The Economist takes honest look at fintech

future of banking

The Economist, on the eve of its Buttonwood Gathering in NYC, takes an open look at fintech, stripping away the hype to discuss the longterm prospects of fintech and how startups will continue to interact with the incumbents in the industry (namely, banks)

How Silicon Valley Will Bring Down the Banks

[x_pullquote type=”right”]If you look ahead 5-10 years the things that put banks under most pressure today, notably, regulation, will be the things that ultimately protect them[/x_pullquote]In this edition of the Economist’s Money Talks, banking editor, Stan Pignal talks to American finance editor, Tom Easton and the duo spend a lot of time analyzing the banking system: its current strengths and weaknesses and what it may look like 5-10 years out.

It’s actually a pretty dour outlook for today’s banks, according to Pignal and Easton. It seems the only hope the incumbents have is current regulation.

What happens to Marketplace Lenders during a crunch

Next up in the discussion were marketplace lenders, like Lending Club and Prosper. Both participants are surprised that banks hadn’t gotten into this business in a bigger way.[x_pullquote type=”left”]Weren’t banks designed to be marketplace lenders from the onset?[/x_pullquote]

Since the lenders on these platforms haven’t been through a full credit contraction cycle while using the marketplace lending platforms, it’s going to get interesting when these lenders suffer losses for the first time. What happens then?

Pignal and Easton make it clear that banks will never again look like their former selves but regulation will ensure their endurance in a more limited capacity. The competition from startups in the fintech space should force the banks to sharpen their games and specialize in delivering the services they can deliver profitably under the current regulatory regime.

Today’s bankers, tomorrow’s fintechers

The podcast draws to a close with the observation that if you head to a bank, take a look around. It’s clear: bank employees and bank management are not happy. But if you look at fintech firms, people are happy and optimistic about the future.

What’s interesting, note the two hosts of the podcast, is that fintech firms employ people who used to work for banks. They conclude that if bankers are to have joyful futures, it will be working at fintech firms.

London gets its IPO with Worldpay

London fintech IPO: Worldpay

UK-based payments processor, Worldpay floated its shares last week in the UK. Initially priced at a value of £4.8 billion, Worldpay is London’s largest IPO for 2015. This exit netted a reported £3.2B in profit for Worldpay investors, Advent International and Bain Capital.

Reactions to the Worldpay IPO

Reactions to the IPO have been generally positive in fintech land.

Bernard Lund thinks that the Worldpay IPO is a big deal for London:

It is a big deal that Worldpay did its IPO before First Data – both are in payments and both were backed by US Private Equity. With a market cap of $20 billion, First Data is bigger than Worldpay (about #6 in the Daily Fintech Public Index), but we can now do valuation comparables across US and UK exchanges and I expect US and Asian investors interested in the payments space to be checking out Worldpay in London. Square IPO may struggle with these comparables.

Business Insider also thinks the Worldpay IPO is a pivotal moment for London fintech:

We could look back on Worldpay’s stock market listing in a few years and see it as the point fintech in London kicked up a gear. To have a £4.8 billion FTSE 100 goliath batting for the sector is huge.

Not everyone is so bullish on the Worldpay IPO. Some, like the WSJ, think the deal might have been expensive and perhaps auguring a bubble in fintech.

Investors in the IPO seem to be pricing Worldpay on profitability before the ongoing costs of building its own better systems, which it has been doing since being bought from RBS by private equity groups, Advent International and Bain Capital.

Strip these out and it still priced at 22-times underlying net profits forecast for 2016, or at an enterprise value that is 16 times underlying earnings before interest, tax, depreciation and amortization.

Some recent fintech companies that have IPOd, like Lending Club, have gone public with a lot of fanfare, only to see their share price flounder (Lending Club is down close to -40% from its IPO pricing). With Worldpay’s float and Square’s recent S-1 filing, public markets are certainly eyeing up fintech investments.

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Daily Fintech Startup Watch: It’s raining money (Stockpile, Moven, RealtyMogul)

Daily News on Fintech Startups

Stockpile raises $15M

stockpile gift card for stock

Buying stock for your friend’s kid’s bar mitzva has never been easier than with Stockpile, the world’s first gift card for stock. The company just reported the closing of a $15M investment round with some high profile angels (Ashton Kutcher) and A-list VCs, Mayfield and Sequoia, participating.

RealtyMogul passes $150M milestone

realtymogul

Equity crowdfunding platforms seem to be hitting their early strides and RealtyMogul is enjoying the growth. The real estate-focused firm announced it had topped a total of $150M of investments transacted via its site.

Moven gets moving with more investment

moven

Leading example of Bank 2.0, Moven, finished raising a fresh round of investment earmarked for international expansion.

InvestCloud closes $45M growth round

investcloud

App platform for investment managers, InvestCloud, scores big investment. Here’s what InvestCloud is up to:

Founded in 2010, InvestCloud makes use of a technology founder John Wise calls“Programs Writing Programs” to develop new software without having to write much new code. Advisors can select from thousands of applets located on a cloud-based platform to assemble their own client portals, CRMs, reporting tools, or even a robo-advisor.

Hip Pocket rolls out new app

hippocket app

Hip Pocket is launching a mobile app that offers savings suggestions and facilitates deposits based on users’ incomes and goals. Its “swipe-to-save” technology  is intended to encourage Americans to save more with their local banks.

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