Why Apple Pay won’t (and doesn’t need to) be a Venmo-killer

Apple revealed Monday that users of its iPhone devices can now pay their friends (or whoever) through a money transfer service that operates over the iMessage app. It’s obviously a competitor to Venmo, the popular peer-to-peer payments app, but a killer? Probably not, according to analysts in the space.

Firstly, the value proposition is for users of Apple devices, and Venmo users are more diverse than that. Industry observers say people lose sight of the reality that the story of financial technology has a lot to do with creating customer-centric offerings — and customers aren’t all on Apple devices. Android took the majority (82 percent) of the market in the fourth quarter of 2016; Apple captured 18 percent.

“It’s not the p-to-p that gets me so excited, it’s where they’re enabling commerce that’s not happening today: web and app,” said David Sica, a principal at venture capital firm Nyca Partners. “Once you win that consumer it’s very easy to start building other types of payment functionalities. People aren’t using PayPal proper as much as they’re using Venmo, but Venmo doesn’t have the offerings.”

PayPal recently announced that it would soon open Venmo to businesses, so while it’s expanding its one functionality to others, Apple is improving its current value proposition for the customer and solving for real pain points, like the checkout process in mobile shopping experiences. (Shopping cart abandonment rate on mobile devices is about 78 percent — that’s more than three out of every four sales that retailers lose because of friction at the point of sale.)

Venmo may be the dominant force in p-to-p payments, but it’s not alone. Traditional banks are going after it too, worried (at least they should be) that Apple, Venmo, Square Cash or any of the messenger app-based payments offerings like Facebook Messenger, WhatsApp or WeChat Pay will “take a debit card that they spend $7 million a year to market and bury it in someone else’s wallet,” Sica said. The banks in the Zelle Network, the other “Venmo-killer,” processed just $55 billion in p-to-p transactions across more than 170 million transactions in 2016.

“They’re looking to steer you back to their app to send money, which is great, but it’s not a very customer centric approach,” Sica said.

As part of the announcement, Apple also introduced its own digital debit card, Apple Pay Cash, which lets users receive money through the new p-to-p transaction and use it to make Apple Pay purchases wherever and however they’re accepted. That offering could ostensibly be a gateway to mobile payments for younger customers who may not already own traditional credit and debit cards.

But the heart of the actual peer-to-peer service is so similar to all the other wannabe Venmo-killers out there, said Zilvinas Bareisis, a senior analyst at Celent. The real question is which one will be best integrated into where the customer already is.

“To some extent this is a user interface, user experience proposition,” he said. “A lot of these solutions are backed by card-to-card transfers — you’re sending from one debit card to another. If you look at Facebook Messenger and messenger payment, its basically that service integrated into Messenger. With Venmo it’s that service integrated into that app; with Zelle it’s bank-to-bank, account-to-account transfers integrated within from a mobile banking app solution. The underlying service is very similar.”

Despite being named one of the most innovative companies year after year, there’s been an ongoing discussion among the tech industry about how Apple has lost its innovation mojo, or that it’s in an innovation slump, or how innovation left with Steve Jobs.

Now, Apple is saying it’s going to have its own service within its own operating system, integrated tightly into its own process solutions, like iMessage. It’s unlikely to divert people to other messenger apps to send money.

“Folks don’t want to download more apps,” Sica said. “App download is minimal, it’s hard to win that real estate now… There’s room for companies to offer more options. For some people that’ll be perfect for them.”

Oh, Danny Boy: The top 5 things to know about Irish fintech

Americans might have Canada as a fallback plan if Donald Trump is elected as president. UK fintech companies are looking to Ireland with Brexit repercussions shaping up. A 2016 PwC briefing projects that Ireland will come out ahead on Brexit in terms of attracting talent, regulation, and data protection. However, until the Brexit fumes disperse, here are the top five things you need to know about fintech in Ireland.

Payments is Ireland’s biggest fintech sector

Ok, so maybe mobile payments haven’t lived up to all their hype. But payments continues to be one of the forefront fields of fintech innovations, drawing $500 million in investments in the second quarter of 2016. The promise of payments as a lucrative field hasn’t been lost on Ireland’s fintechs. According to Ginger Techie’s September 2016 map of Irish fintech companies, payments is winning the Ireland fintech company count with 30 startups, followed not so closely by funds and investing (13), accounting tech (11) and regtech (10).

Banking platforms are Ireland’s least popular fintech field

Ginger Techie only lists two Irish startups developing platforms specifically for banks – leveris and Sentenial. So, banking platforms are at the bottom of the Irish fintech food chain. To be fair to the field, though, Ireland only has 3 bitcoin startups to its name.

Personal P2P lending hasn’t even launched yet

Even though P2P lending was already a $3.5 billion market back in 2013, Ireland is just now in the process of launching its first personal P2P lending platform.

Bank of Ireland is trying to keep up with social media

Ireland has its own specific social media trends, with Facebook clearly leading the way in the percentage of social account owners in Ireland in Q2 2016. Bank of Ireland at least is trying to be a social media innovator. With the help of a Snapchat influencer and a model (no joke), the bank launched its FeelFree student reward program via Snapchat in August 2016. Bank of Ireland is pretty good about updating its YouTube channel — we’re big fans of the singing sandwich ad for the bank’s MortgageSaver product.

Irish credit unions still dominate the retail banking market

Credit unions continue to be the major retail banking players in Ireland, claiming over 3 million people of the country’s population of 4.6 million as members. This, in spite of a 2016 survey conducted by the Central Bank of Ireland, which found that only 12 percent of credit unions have more than 20 percent of members doing some business online. Still, that same survey found that most credit unions believe that by 2018, the ways in which these financial institutions use information and communication technology will have changed significantly. Meanwhile, credit unions in Ireland are preparing for the technology transitions up ahead by staying innovative. For instance, in October 2016, 16 Irish credit unions began offering fast-track loans through Facebook. 

What fintechs and credit unions have learned from each other

Like all financial institutions, credit unions have had to adapt to changing technologies. From back-end to front-end, credit unions have made changes to meet growing customer expectations for better banking experiences.

For credit unions, this demand to become a sparkly digital thing of wonder does not come easily. Credit unions often don’t have the budgets needed to make considerable changes, and big bad core IT providers often make it difficult or impossible for smaller banks and credit unions under contract to access newer technologies.

Still, you’d be hard-pressed to find a credit union in the U.S. without an online or mobile app. Interestingly, as fintech continues to drive change in credit unions, some credit union practices are also finding their way into fintech companies.

Member-owned, not-for-profit credit unions function as the wellness gurus of the industry in a number of ways. For one, they have lower checking fees. A 2015 Bankrate survey found that 72 percent of credit unions offer free checking accounts, as opposed to just 38 percent of banks. What’s more, as Andrew Downin, CPA and managing director of the Filene Research Institute told Tradestreaming, credit unions’ philosophy has them constantly searching out new and better ways to help their members improve their financial behavior.

ChimpChange, a digital banking service provider, seems in many ways to be a digital credit union copycat. Launched in August 2015, the company set out to provide lower account fees with a free, or nearly free, basic bank account.

So far, the company is hitting its credit union-like fee goals. The account is free to open, there are no monthly fees, deposits into the account are free, and there is free real-time check deposit and P2P payments to other ChimpChange users. According to ChimpChange founder and CEO Ash Shilkin, the company is also scheduled to abolish its 60-day inactivity fee. 

There are, of course, some fees, like when a ChimpChange user uses the company’s debit card to make a withdrawal from an ATM outside of the 24,000 on the company’s network. Nevertheless, “you can by and large get by with a free account,” said Shilkin.

What enables all of the frees in the above paragraph is that the company’s revenue model has shifted from the customer to the merchant. According to Shilkin, ChimpChange takes a cut of the interchange fees a merchant pays every time a ChimpChange debit card is swiped. If, as Shilken claims, the company has 100,000 customers, this system just might work.

Aside from the lower fees, ChimpChange, like credit unions, is developing a suite of products intended to improve customers’ financial health. A feature that will auto-categorize spending and present it in an easy-to-digest fashion, a budgeting feature, and a round-up savings account are all in the works.

Shilkin is quick to distance ChimpChange from credit unions. “What they are not always strong in, to put it kindly, is technology and providing tools over and above that basic bank account,” he said. But he’s just as quick to acknowledge that ChimpChange isn’t exactly a unique product. From the payment side, you’ve got Venmo, Apple Pay, Snapcash, and Stripe, just to name a few. And in terms of low-cost bank accounts, Simple is also out to help people budget and save.

The added value of ChimpChange is supposed to be in the mashup of all of the app’s different components: payments, checking, and financial behavior. Whether or not this mashup actually sets ChimpChange apart from the competition, the company serves as a good example of how credit union practices and principles are influencing emerging fintechs.

The continuum goes both ways.

Lemonade Insurance: I do not think P2P means what you think it means

On September 21st, 2016, P2P renters and home insurance firm Lemonade launched with a great deal of fanfare. There are a number of factors contributing to the positive buzz the app’s launch has generated: its simple, sleek design, the fact that they were able to roll it out after just one year – a rarity in the insurance industry – and of course, it’s finer fintech attributes. According to the Lemonade website, it takes just 90 seconds to get insured, and 3 minutes to get claims paid, all with the help of Jim and Maya, the app’s helpful AI chatbots. Not to worry; policy holders who want to speak to a human at any point in the process can actually reach the real Jim and Maya at Lemonade’s office.

However, one of the fintech concepts blatantly missing from Lemonade is P2P, which seems to be a big part of its marketing strategy. The company bills itself as the world’s first P2P insurance company. The P2P model of lending, in which online platforms match borrowers directly with investors, is fairly straightforward. Yet that model is nowhere to be found in Lemonade.

Instead, it turns out that Lemonade, like its German insurtech cousin, Friendsurance, is using the term very differently than online lenders do. With Lemonade, P2P means that the company pools the premiums of its policyholders to pay out claims…like any other type of traditional insurance.

The Lemonade twist is how the company connects policyholders to one another. While insurtech companies like Friendsurance or the UK’s Bought by Many pool people according to the type of insurance they’re taking out, Lemonade groups people by having them choose a charity when they purchase a policy. Unlike other insurance companies, which retain any unclaimed premium money, Lemonade intends to donate said money at the end of the year to the pool’s charity of choice. The company hopes that connecting people to one another through social action will deter them from submitting fraudulent claims.

The fact is that P2P insurance like Lemonade’s isn’t as P2P as marketplace lending is, nor is Lemonade the first insurtech to pool people around a common thread: Friendsurance’s shareconomy has been around since 2010.

Still, Lemonade is a unique offering in the state of NY, and its clean design, the low premium cut it takes – 20 percent as opposed to the industry’s average 35 percent – and its social component are sure to appeal to the Big Apple’s digitally savvy.

Venmo who? Fiserv expands P2P payments to more Americans

A recent deal between two industry players means more financial institutions will be offering peer-to-peer payments to their banking customers.

Earlier this month, the financial services technology provider, Fiserv, and large banking network, Early Warning, announced a partnership to bring faster payments to Fiserv’s network of banks and credit unions.

One of the most talked about trends in payments has been speed, with calls for real-time payments and faster banks transfers. Consumer expectations for faster financial services have outpaced the speed at which financial institutions have been able to make their aging systems faster.

“The biggest thing going on for U.S. payments is real-time capabilities,” said Tom Allanson, president of electronic payments for Fiserv. “Our payment systems are old, and customers expect to move money as fast as they move everything else, and unfortunately this industry is a bit behind.”

Fiserv’s NOW network, introduced at the 2014 Money 20/20 conference, connects financial institutions with billers, small businesses, and consumers with real-time payment capabilities. Its partnership with Early Warning gives Fiserv capabilities for expanding the number of account holders it can reach. With EWS, the company can facilitate bill payment and deposits, totaling a combined 6,000 banks and credit unions, representing 75% of all deposit accounts in the US.

“The idea is that EWS has the connectivity and we have the technology. From fraud to customer service to moving money, the connection of those two things is how a partnership comes together,” said Allanson.

The agreement with Early Warning’gives Fiserv the ability to connect financial institutions to EWS’s clearXchange network in addition to the the firm’s own Popmoney. Similar to Venmo, Fiserv’s Popmoney app gives consumers the ability to transfer funds to friends and family directly from their bank accounts using only phone numbers and email addresses.

Fiserv’s technology has been developed for financial institutions, so customers who might hesitate to send money through a third party app now have the comfort and stability of an institutional P2P payment option.

“Our focus is on financial institutions, while Venmo focuses more on millennials,” commented Allanson. “Our dollars and cents have to be clearer since we’re working with financial institutions. It’s unclear to us how Venmo makes money, but that’s PayPal’s problem.”

The firm’s technology stack attempts to simplify the lives of the customers of its banking clients. That’s why it created an agnostic network that facilitates multiple payment rails. Philosophically, Fiserv believes that removing complexity lowers the hurdle to getting more people using digital payments.

Fiserv’s Popmoney doesn’t intend to overload end users with decisions about different payment methods. Users tell Fiserv where, when, and to whom they want money transferred, and the technology takes care of the rest.

“Our goal is not necessarily to try and dominate, but provide services to the consumer that allows them to do the things they want to do. We want them to live their lives and pay their bills when they have to pay them,” he said.

Big banks prepare to crush p2p startups with clearXchange

the bank's counter to p2p payments

Quietly over the past few months, some of the largest US banks have rolled out real-time P2P payment functionality in their banking apps. Now, 5 of the largest US banking institutions, including Chase and Bank America, enable their customers to send and receive money in real-time to one another and eventually, to friends and family who hold accounts at other banks.

Instead of building their own solutions, participating banks have signed up to the clearXchange network, a white label P2P payment platform that has facilitated non-real time P2P payments for banks since it was founded in 2011. After inking deals with leading banks, P2P payments on the clearXchange network are now available to more than 100 million online banking and 70 million mobile banking users in the U.S.

In the first quarter of 2016, customers at banks in the clearXchange network completed more than 46 million P2P transfers, accounting for over $16 billion in combined transaction volume. That number is expected to grow as banks already on the network ramp their marketing of p2p capabilities, and more banks sign up for the service.

P2P startups facing down a speeding train

Before clearXchange, it wasn’t easy to send payments across banks. A whole industry of P2P payment players has sprung up to help bridge this gap by putting a transaction layer on top of existing banking infrastructure. As a workaround to directly moving money between bank accounts, technologies like PayPal and its faster growing service, Venmo move money between stored value accounts. So, while payments may be instantaneous, it can take days for the receiving party to be able to access that cash directly from her bank account, as money moves from the P2P platforms into the banking system.

clearXchange changes all that. Banks on the network are active participants this time, enabling payments to move freely between banks at the account level. clearXchange’s parent, Early Warning, is owned in part by seven of the largest banks in the U.S. Early Warning has been around for 25 years, providing thousands of banks and credit unions across the country with risk, fraud prevention, and authentication solutions.

“The involvement of our owner banks gives Early Warning’s clearXchange network a very large footprint in the U.S.,” Lou Anne Alexander, Group President, Payments, at Early Warning emailed Tradestreaming. “The expansive reach of our network is appealing to financial institutions interested in bringing person-to-person payments to their customers since they know their customers will instantly be able to reach a substantial population.”

Early Warning’s clearXchange lets banks compete head-on with newer entrants like Venmo. And because it’s a technology solution, clearXchange integrates into the existing banking apps its clients have already developed. Users don’t need to download a separate app to access the payment functionality.

It’s not easy getting everyone to play together

clearXchange is a network and joining the network becomes more valuable when they’re more banks on the network.

“As more financial institutions join the clearXchange network, it will become increasingly useful and valuable to consumers who will be able to send and receive real-time payments with each other,” said Alexander, who also held senior payment and innovation roles at Wells Fargo and Wachovia. “As it grows in scale, I expect a substantial amount of payments that are currently made with cash and check to migrate to clearXchange.”

Consortium efforts can pay off massively, but they’re hard to pull off. Just look at the Merchant Customer Exchange, or MCX, a retail industry consortium that wanted to do an end-around of the credit card networks. Tired of paying interchange fees, companies like Walmart and Target worked for years to roll out a mobile payments solution, dubbed CurrentC. Walmart ended up launching its own payments, Walmart Pay. MCX announced layoffs in May and its future is uncertain.

Ramping up the network

For now, clearXchange network banks are working on customizing marketing programs that encourage mobile adoption, including P2P payments. JPMorgan Chase’s CEO, Jamie Dimon famously said that he expects to win in payments. Chase is an Early Warning client.

“Financial institutions are eager to respond to the growing customer demand for the convenience that P2P payments offer,” said Early Warning’s Alexander.


Photo credit: tj013579 via Visual hunt / CC BY

Chase Pay lands deal with Shell, access to 20 million daily customers

Chase Pay and Shell partnership

What happens when the largest fuel retailer in the US does a deal with the largest credit card issuer? It means you’ll be able to use Chase Pay to buy your coconut water next time you fill up at Shell.

Chase recently announced it had signed a multi-year agreement with Shell to accept Chase Pay at stations across the U.S. Chase credit and debit cardholders can use Chase Pay, JPMorgan’s digital wallet product, to pay at the pump as well as inside convenience stores, online and within an app.

Competing in payments

Chase’s corporate parent, JPMorgan is one of the largest payments companies in the world across all forms of payment, including credit and debit cards, merchant payments, and wire transfers. The bank’s CEO, Jamie Dimon, has famously said that he expects to win in payments and adding distribution into Shell’s 20 million daily customers is a big step forward for Chase Pay.

Dimon has publicly commented that his firm’s investments in merchant payment technology, which include Chase Paymentech and ChaseNet, should pay off “handsomely”, while the outcome of Chase Pay, which includes P2P functionality, was less certain.

“But we think that the investment will be worth it and that it will help drive more merchants wanting to do business with us and more customers wanting to open checking accounts with us and use our credit cards, ” he wrote in his firm’s 2015 letter to shareholders.

Securing distribution via merchants

Building out Chase Pay requires a delicate seesawing between supply and demand. It’s a classic chicken-and-egg problem that marketplaces must contend with: consumers gravitate to payment tools if they’re accepted widely and merchants typically wait to see some traction from the payment provider before signing up. JPMorgan is inking broad distribution deals like this one with Shell and another with Starbucks to help Chase Pay adoption.

“We recognize consumers are looking to mobile solutions for everyday needs, including shopping, travel, restaurant reservations and more,” said Craig Schneider, Shell GM and Vice President of Retail Marketing North America. “Adding Chase Pay to the multiple payment methods Shell accepts will deliver a simplified, differentiated and personalized customer experience while driving loyalty.”

Distribution deals are necessary (but not sufficient) to help get users on new payment platforms. The lack of organic demand for new payment platforms has set off land grab, keeping business development professionals very busy over the next few years. On one side of the marketplace, broad technology firms, including Google, Apple and Samsung, and banks themselves, including Chase, Capital One, and soon Wells Fargo, are battling over distribution deals for their digital wallets. On the other side, large retailers like Walmart and Starbucks have launched their own loyalty and payments tools.

Using p2p to scale up

Another way for consumer payments technology to wage battle on marketplace dynamics is by propagating virally. To that end, Chase Pay can be used to pay other users, whether they bank at JPM or not. Using this new product, QuickPay, JPMorgan customers can send payments directly to one another and access them immediately from an ATM.

“Consumers expect immediate action in our real-time world,” said Barry Sommers, CEO of Consumer Banking at Chase. “That’s why we’re making this faster service available for our customers.”

The interbank hookups come via the clearXchange network, a consortium of 6 banks representing over 60% of the U.S. digital banking population. The group was acquired by Early Warning, a fraud protection and risk management company that shares critical data between 2300 financial institutions. Early Warning, itself, is owned in part by seven of the largest banks in the U.S. JPMorgan Chase joins firms like Wells Fargo and Capital One which, as part of the network, enable their customers to transact directly and immediately to their bank accounts.

Chase customers sent $20 billion in person-to- person transactions through Chase’s P2P tool, QuickPay last year. Chase Pay has a distinct advantage: its sheer size. Chase customers have more than 90 million consumer credit and debit card accounts, and nearly 24 million actively use the Chase Mobile app.

Add more A-list retailers and Jamie Dimon might very well get his winning way.


[podcast] Where Blue Elephant’s Brian Weinstein is finding opportunity investing in marketplace lending

blue elephant capital looks for investments

Brian Weinstein of Blue Elephant Capital
Blue Elephant Capital’s Brian Weinstein
What would it take to get a managing director, managing a hundred billion dollars of fixed income assets at BlackRock, to jump ship to a start up asset manager? That’s the question I posed to Brian Weinstein, Chief Investment Officer of Blue Elephant Capital Management. His firm is a quickly growing investor in the peer to peer and direct lending space.

In Brian’s investment universe, the world is starved for yield and addicted to liquidity. When looking for his next investment, Brian and his firm pore through loan portfolios that are accompanied by lots of data to stress test performance assumptions. In his world, banks really ARE good at lending, so he’s looking at spaces where the banks aren’t participating as much in a pursuit for returns.

Brian joins me to discuss how peer to peer investors like him find opportunities by filling in some of the voids left behind by banks. We’ll hear what types of peer and direct lending he’s looking to invest in and what spaces he’s avoiding. We’ll also talk about boat finance. Yes, I said it, boat finance.

Listen to the FULL episode

What you’ll hear on this podcast:

  • Brian’s story of how he got to Blue Elephant: Why Brian left his PM role at BlackRock, managing $100B, to pursue investing in the burgeoning field of marketplace and direct lending
  • The type of research Brian and Blue Elephant conduct to determine the investability in loan portfolios coming out of marketplace and direct lenders
  • What spaces in direct lending Blue Elephant is looking at and which investments it’s staying away from
  • Why Blue Elephant likes the boat finance industry
  • Brian’s view on what banks are really good at and where they aren’t (or don’t participate)
  • Whether institutional investors should take equity positions in the marketplaces they participate in


This week’s episode of the Tradestreaming Podcast was sponsored by Collective2 — automated trading for humans.

Choose one of the thousands of automated trading strategies at Collective2, and trade it in your brokerage account.

To learn more, go to www.collective2.com/tradestreaming and as a Tradestreaming listener, you will get $55 off the first strategy you publish to Collective2.



Photo credit: Beshef via Visual hunt / CC BY

Why I’m a converted believer in investing in P2P loans

If you’re like millions of people, you’re probably worried about your net worth.

Pretty worried.

The market’s up and then, it’s down. Jobs are being created and lost. Banks are stable and then they lose $3B seemingly overnight. And politicians? Nobody seems to have a strong plan to get us through and certainly not the political will to see it through.

It’s not entirely clear if the economy is recovering or not.

Investments: riskier, less diverse, zero confidence

If you have investments, you’re probably experiencing the following:

Volatility spikes: The market has the great ability to lull people into a false sense of security and then, wham! You get periods like the beginning of May where it feels like the world is ending. Nothing looks good right now. Nothing feels right, either.

Diversification doesn’t seem to be working: It may be exchange traded funds doing it or just a general move towards passive investing, but all types of investments are moving more in tandem. When stocks go down, they bring down other “safer” assets. The theory of diversification isn’t providing the benefits it promised. That’s where we are — when things are bad, it seems that there is nowhere to hide.

Lack of confidence in reaching financial goals: Many investors are just throwing up their hands. No más. They feel the stock market is rigged (it is, somewhat) and don’t want a part of it. But in an environment where bonds and CDs pay so little, underfunded-for-retirement investors need to reach for more risky assets and are forced to play a game that they don’t want to play.

What if I could tell you that you can triple the returns on the fixed income (bonds) part of your portfolio without taking on more risk?
Continue reading “Why I’m a converted believer in investing in P2P loans”