Posted on

Hi 5! The five fintech stories we’re following this week

top fintech stories

Insurtech’s rising star

Insurtech continues to shine on with the hope and possibility of youth. Tradestreaming’s Gidon Belmaker examines how insurers are increasingly offering IoT-enabled policies for different lines of insurance that calculate the risk for each person, digitally. In a world where a house is smart enough to know what room temperature its owners prefer, IoT-enabled policies make a lot of sense. The challenge for insurers looking to get into the IoT game will be filtering, processing, and reacting to really big data in real time.

In the spirit of being hopeful, insurtech’s top women execs spoke with Tradestreaming to share their career advice for women looking to enter this fast-growing field.

Fintech’s murky waters

It’s been a hard couple of weeks at Wells Fargo. After the firm’s pamphlet for Teen Day 2016 angered the theater community by implying that the arts were merely a childhood pastime, scandal struck one of America’s biggest banks yet again, on a much larger scale. After discovering that over 2 million fake bank and credit card accounts had been opened at the bank, Wells Fargo fired 5,300 employees.

Twitter did not approve. Analysts lambasted the bank for trying to shift a top-tier management problem onto hapless employees facing unrealistic sales goals. And while Wells Fargo has since eliminated product sales goals, Carrie Tolstedt, the unit leader in charge of those 5,300 ex-WF employees, walked away with about $125 million in stock and options.

Speaking of crime and payment, Tradestreaming’s Josh Liggett’s in-depth reporting on the shady world of prison payments showed that justice – and fintech – are not always accessible to inmates.

While the financial industry is experiencing a surge in growing transparency and lower fees thanks to growing competition, the prison payment industry isn’t undergoing a similar renaissance. Instead, inmates are held prisoner to high fees and limited services within an old system masquerading as innovative fintech.

Fintech real-estate companies are getting creative

Ok, yes. A fraudulent mortgage market did cause the Great Recession of 2008. But the mortgage market is getting innovative with online offerings that seem to have the consumer – not just profit – in mind. Digital lender Point, which enables homeowners to sell a percentage of their home to investors, is putting borrowers and lenders on more even turf by better aligning incentives between them. Last week, the company raised $8.4 million, bringing total fundraising to $15.4 million.

Real-estate crowdfunding platform Roofstock is also out to change the digital real-estate market, by simplifying the process of buying or investing fractionally in occupied singly family housing. According to Roofstock’s chairman and co-founder, Gregor Watson, Roofstock recently signed a deal with an Asian group that wants to invest a whopping $250 million on the platform.

Work and play

The fintech interview process can be daunting for interviewees. Potential candidates can take solace and solid tips from Tradestreaming’s interview advice from top fintech execs. Keyword takeaways: passion, motivation, openness. Oh, and don’t ask about salary.

Of course, young fintech wannabes might have other things on their minds. Like beer. On last week’s ESPN College Gameday show, a student put up a sign with his Venmo number and a request that his mother send beer money. Instead, over two thousand complete strangers donated to his beer fund. Here’s a selection of what fintech companies’ signs might look like come next College Gameday.

Prophets of Wall Street

No one knows exactly what the future has in store – but people are making some educated guesses. Aon estimates that self-driving cars will cut U.S. insurance premiums by 40%, though automation will carry its own unique risks. Chinese ecommerce giant Alibaba thinks the future of identify verification lies in the red veins of your eyeballs.

And because your week wouldn’t be complete without a blockchain update, Goldman Sachs filed a patent for blockchain-enabled forex, in the hope of speeding up and reducing cost of trading currencies.

Posted on

‘We created a FICO score on a property’: Point raises more money to unlock home equity

Digital lenders are more frequently getting accused of morphing into the same type of institutions they set out to displace. What’s the difference whether you charge usurious rates for a short term loan via a website or from behind bulletproof glass?

One company trying to make a difference in digital lending is Point. The Palo Alto-based lender wants to put borrowers and lenders on more even turf by better aligning incentives between them. With Point, homeowners can tap into their home’s equity without taking on more debt, without monthly payments, and without a fixed interest rate.

“Point is fundamentally transforming the home equity financing landscape,” said Eddie Lim, co-founder and CEO. “This is a truly revolutionary product that aligns the investors and homeowners in a way we haven’t seen before. There’s $18 trillion of U.S. residential real estate equity wealth that is locked up.”

Point allows homeowners to sell a percentage of their home to investors. Borrowers pay back their loans plus some of the upside appreciation in the property when they sell their homes or, if they decide to stay put, repay their lump sum. As a marketplace, Point gives investors, like Airbnb CFO Laurence Tosi, who’s also an angel investor in the firm, the ability to buy fractional interests in owner-occupied residential real estate. “Point offers above market, risk adjusted returns from a diverse and stable set of assets,” said Tosi, who was also the former CFO at Blackstone.

Point’s data science challenge is that it acts as both a lender and investor, so the online lender needs to assess risk on homeowners and their homes. That means the firm sucks in lots of homeowner data, like FICO scores and debt ratios, as well as data on property risk, like foreclosure rates and tax payments. “We’ve spent the past year building our pricing engine,” said Lim. “In a way, we created a FICO score on a property.”

The company’s positioning as a co-owner on a property suggests that it’s better aligned with successful outcomes with its customers. For example, Lim said the company digests 12 months of its borrowers’ bank statements, so it knows if a particular customer subscribes to a credit service or if he’s paying more for Comcast than his neighbors. Point can make personal finance recommendations to assist borrowers’ personal finance management.

The company, which counts Andreesen Horowitz and Citi ex-CEO Vikram Pandit as investors, has created what it feels is a more borrower-friendly consumer finance product. The company announced a $8.4 million investment round today, bringing total fundraising to $15.4 million.

Point’s funding comes at a propitious time. 75 percent of Americans are concerned about losing housing, according to a new survey by the NHP Foundation. When asked how concerned Americans are that they or a friend or relative could lose housing, 30% consider themselves “very concerned”, 27% are “concerned” and another 19% are “somewhat concerned.” Eighty-three percent of respondents are concerned about housing costs in America overall.

Primary residences are a significant store of family wealth in the U.S. and for the most part, that wealth is inaccessible. Debt products like HELOCs and reverse mortgages litter the financial landscape but those are debt products, compounding the financial burden carried by Americans who, as a whole, are decreasing their home ownership. It’s here that Point has its eyes on an even bigger prize.

In addition to providing liquidity for existing homeowners, Point wants to help millennials buy their first homes, too. The product roadmap includes plans for borrowers to be able to take their lump sums and invest them fractionally in other homes around the country. Homeownership is the lowest its been in decades and Lim wants to get young workers on the property ladder for the first time.

“We want homeowners to think about their homes as wealth diversification, not just the single biggest asset they own,” he remarked. “Point unlocks that wealth from homes and can be used to build a portfolio of homes in other markets. We want to make residential real estate a more efficient asset class.”