Is FinTech Failing?

No one is denying that the FinTech space is ripe with innovation. What most fail to realize though, is that mainstream media outlets tend to report on us with a survivor bias. If you look around, you may have noticed quite a few FinTech companies are going under (click here to see a piece by Benzinga that includes a slew of failed companies).

While VC funding is often cyclical, there are still many unicorns in existence. Despite not being household names, Square had a successful IPO, and Stripe, Transferwise, and Addepar all received lofty valuations. In 2016 overall, FinTech companies received $36 billion in funding across from over 1700 unique investors.

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While this was a $2bN decrease from 2015 funding, the growth cycle for FinTech companies is longer. Historically, the average time for IPO or Exit looks something like the chart below. The mass “buzz” factor tends to be quieter, and the sales cycle longer.  

 

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While we don’t deny the foundational shift against app-based ad-supported businesses, we also see big opportunities. As we deploy our SDK solution on more than 100 partner apps, these apps have seen a 3-4x boost in user engagement and awareness. This is a measurement of enabling financial institution customers to take actions on publisher apps, and these financial institutions are increasingly moving towards “action” based compensation. This is a systemic shift towards enabling technologies like ours to provide the basis for monthly recurring revenue (MRR) and action based incentives.

Net Neutrality Update

If you’ve been on the internet in the last week, you’ve probably seen some mention of protecting “net neutrality.” While the term sounds self-explanatory, it’s more important than most realize. Net neutrality is the principle that Internet service providers (ISPs) and internet regulatory entities must treat all data on the Internet equally. It prohibits internet providers from charging differently by user, content, website/application, or communication mode. John Oliver gave a spirited review of the issue. Essentially, without net neutrality, ISPs would be able to charge companies and consumers for preferred speed and access to certain sites.

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Net Neutrality prevents a traffic hierarchy

In 2015, four million people petitioned the FCC to reclassify broadband ISPs to protect net neutrality. This public support was unprecedented, forcing the Commission to enact strong rules, called the Open Internet Order, in favor of a neutral internet. However, in the last couple of months, President Trump and the FCC Chairman, Ajit Pai, are looking to overturn the 2015 Net Neutrality win, despite the prevailing popularity of the rules across party lines: 77% percent of those surveyed still support the FCC’s rules. The only group pushing for a repeal is your friendly neighborhood ISPs, a.k.a. Big cable. It’s worth mentioning that ISPs aren’t exactly taking the outrage well, AT&T even tricked some customers into sending pre-written protest messages that actually are against net neutrality.

The formal “Day of Action” passed this Wednesday (7/12), but if you support better and fairer internet speeds and access, or you’re against padding the pockets of Big cable, you can still sign the actual petitions against the FFCs new proposed changes at a number of sites, these are the top 3: https://www.battleforthenet.com/ | https://www.change.org/p/save-net-neutrality-netneutrality | https://www.savetheinternet.com/sti-home

Luckily, the outcry has been successful. So far, there have been 4 million comments to the FCC, 2.5 million petition signatures, 10 million e-mails to Congress, and 500,000 calls to the FCC and Congress. With those numbers, we can see that many people out there care. However, continuing the dialogue about a free and open web is paramount for both consumers, big sites like Facebook and Google, and us here in the FinTech space.

Read More Here:

–Internet Service Providers Were Not Amused by the Net Neutrality Day of Action

–Apple’s deafening silence on net neutrality

–The net neutrality fight is on: Where do we go from here?

–How to Smoke Out Where Broadband Companies Stand on Net Neutrality

FinTech News: May 26th, 2017

Summer has sprung! Here are our top Friday reads this week:

A Quant Program is the Reason You Just Bought that ETF (WSJ)

BlackRock is using Twitter sentiment data to sell you their funds at the perfect time.

The World’s Largest Bitcoin Exchange Couldn’t Handle this Week’s Crypto Boom (TechCrunch)

Bitcoin hit all-time highs at $2,800 this week, and traffic was so high it crashed Coinbase, spooking some investors.

Teen chat app Kik to launch digital currency (Finextra)

Kik, sometimes called the “WeChat of the West,” launched its own cryptocurrency, “Kin,” for in-app transactions and services offered on the platform.

Fintech News: April 7th, 2017

News this week: How the CFA made fund managers obscolete, the pitfalls of China’s unregulated retail investment products, and Jamie Dimon hints at JPMorgan’s evolving “fintech” strategy:

Swipe by Swipe, Chinese Smartphone Users Flock to Risky Investments (The Wall Street Journal)

The Chinese government has championed personal finance as a way to diversify their economy beyond manufacturing. But rapid growth has led to poorly regulated products – where anyone can create an ETF and market it to consumers.

Who Killed the Active Manager? (Bloomberg Gadfly)

The CFA certification, Vanguard’s rise, and other factors that led to the decline of the active fund manager over the past ten years.

What Dimon Had to Say About Fintech in his Annual Letter (American Banker)

JPMorgan’s chief used “fintech” to refer to new in-house technologies, API partnerships with fintech startups, and digital banking experiences.

FinTech News: March 24th, 2017

This week, lots of drama in the cryptocurrency world: Bitcoin’s community could split the currency, Ethereum continues surging, as governments debate over who regulates fintech. By the way, what is Ethereum?

Bitcoin Price Plunges on Fears of a Currency Split (The Wall Street Journal)

bitcoin-and-ethereum-sitting-on-a-tree@2xThe bitcoin developer community is divided over block size limits, and it’s threatening to split the currency in two. Unlike the volatility that followed Bitcoin’s ETF rejection, this debate carries fundamental implications for the cryptocurrency’s future. A permanent, definitive record of every transaction is central to Bitcoin’s value proposition, so splitting this history into two will cause uncertainty and could provide liquidity problems. Bitcoin price has hovered around $1000 all week, down from its previous highs around $1250.

New York Grants Coinbase License to Trade Ethereum (Fortune)

Ethereum, the current leader of “altcoin” currencies, has been unavailable to investors in New York. This week, the state legislature granted Coinbase a license to provide Ethereum,  and criticized the OCC’s encroachment on fintech reculation. The debate continues over who is best equipped to regulate fintech – states or the federal govermnent.

What is Ethereum, and Could it Actually Replace Bitcoin? (Mashable)

Ethereum 101: what is it, and why are people suddenly talking about it? It’s a nerdier and slightly more complicated version of Bitcoin – and some companies are getting behind it. It’s up 200% in the past month. Get the overview here.

 

Who’s buying $SNAP, and where?

$SNAP’s IPO has dominated financial news for the past month. After the stock gained 45% on its first trading day, bloggers called it “dumb money,” and not a single Wall Street analyst gave it a buy rating until today. In this post, we compare our transaction data for three social media giants: here’s our take on $FB vs $TWTR vs $SNAP.

Not So Millennial:

According to the headlines, $SNAP investors are a bunch of college-aged power-users buying their first stock ever. Our data points to a more diverse group of investors: our average $SNAP order size was over $10,000, which was slightly higher than the average order for $TWTR. A fair share of young people invested in $SNAP, but given the volume and quantity of large retail orders, it looks like Gen-Xers and Boomers are buying shares as well.

Fear of Missing Out

ezgif-3-b9aa9a85bdWhat’s more interesting is where people are trading these stocks. A large portion of our trade data comes from from social trading communities like StockTwits, where investors can share predictions on a stock’s direction. The $SNAP IPO generated huge buzz on these networks, with a steady stream of speculators sharing their opinions and price targets for the company.

 
Social InfluenceIt looks like all the buzz influenced some investors to join the party and buy in. Investors were twice as likely to buy $SNAP from a social investing community when compared to $FB and $TWTR. Sounds like people in the forums are buying $SNAP because, well, everyone is doing it.

Trading the Headlines

Though everyone was talking about $SNAP last week, most financial commentators were talking $SMACK. Investors were much less likely to invest in $SNAP from a news website; they were 10 times as likely to buy $FB and 3 times as likely to buy $TWTR when reading the financial news. If you take a look at the headlines, you can see why:

News InfluenceSnapchat IPO: Don’t Confuse Popular with Profitable (Forbes)

Is Snapchat IPO the Good Kind of Crazy? (Bloomberg)

SNAP is Clown Car 2.0 (Fortune)

The Complete Bearish Case Against Investing in SNAP (Business Insider)


So, if you’re reading the grim headlines in the news, you’re probably not investing in Snapchat without doing more research elsewhere.

In the weeks since $SNAP’s IPO, we’ve been surprised by large order sizes of the supposedly “millennial” stock, the large influence of social platforms, and the small number of news-related transactions. Got ideas for our next data dive? Tweet us!

Fintech News: March 17th, 2017

This week: the Bitcoin ETF was rejected last Friday, and alternative cryptocurrencies are rallying, China’s winner-takes-all fintech market, and $SNAP’s IPO could encourage private unicorns to make the jump and go public.

Ethereum Price Tear Continues Setting All Time Highs (CoinDesk)

Ethereum, a bitcoin alternative, rallied 230% this week. The cryptocurrency’s main feature is “Smart Contracts,” which automatically execute when the conditions are met. That’s obviously useful for businesses, and JP Morgan, Intel, and Microsoft are experimenting with it. This week, it rallied from $15 to a peak of $50 as speculators questioned Bitcoin’s ability to remain the dominant cryptocurrency.

Alibaba, Tencent to Get Most of China Fintech (Investopedia)

The Chinese fintech market is predicted to grow to $67 Billion by 2020, and it appears the giant tech companies are going to reap most of the profits.

Snapchat Means IPO Ice Age is About to End (Forbes)

The most valuable private tech companies in the country – Airbnb, Uber, etc – have avoided IPOs at all costs for the past few years. Now, Snapchat’s (relative) success could encourage them to change course and go public.

Fintech News: March 10th, 2017

This week in Fintech: 72 hours until the Bitcoin ETF decision, and discrimination in online lending practices.

Bitcoin May Go Boom if SEC Approves Winklevoss ETF (Fortune Tech)

The Winklevoss twins filed their Bitcoin ETF application four years ago. The SEC’s decision on whether or not to approve it is due Monday the 13th. The decision has huge implications for mainstream adoption of blockchain technologies, beyond illegal transactions and funneling assets out of China. In the short term, Bitcoin price is shooting up from speculation. Stay tuned.

Is it OK for lending algorithms to favor Ivy League schools? (American Banker)

While fintech companies often claim to be more inclusive, online lending algos are drawing criticism for favoring Ivy League graduates. Recent research shows that less prestigious institutions outpace the Ivy League, when it comes to getting poor kids into the 1% in their adult careers. In short, there is still room for debate over which assumptions should govern alternative lending.

 

Fintech News: March 3rd, 2017

This week, the ripple effects of dropping fees in the wealth management industry, and a robo-advisor just for Asian-Americans.

The Asset Management Pressure Cooker (Bloomberg)

As money continues moving to low-fee, passively managed funds, BlackRock, Fidelity and Vanguard are seeing assets soar to new highs. But the revenue that fund managers generate per dollar is falling, putting pressure on the securities industry to rethink the way they do business.

Ex-Scottrade execs see Asian-American, Chinese market ripe for robo advice (Financial Planning)

As robo-advisors have grown in popularity, new entrants have started marketing them to specific demographics, such as Ellevest for women, and FinHabits, for Latin Americans. Now, Scottrade execs are forming a robo for the Asian-American community in LA and NY.

E*Trade is the Latest Entrant in the Online Broker Price War (Yahoo! Finance)

After remaining silent as its rivals, Schwab, TD and Fidelity slashed fees, E*Trade joined the race by dropping its trading fee from $9.99 to $6.95.

 

Trade It Funding Announcement

We are excited to announce that we closed the last tranche of our $8MM seed round. Valar Ventures was the lead investor with participation from Valar Ventures Citi Ventures and France-based Newfund.

Our team set an ambitious goal in 2016 and successful processed more than a billion dollars in trade orders and five billion in assets linked last year.

The new round of funding will allow us to accelerate our growth by adding new partners to our expanding ecosystem of developers, create and launch new products, and continue hiring best-in-class engineers.

We will also continue to expand our API management program for top tier financial institutions, providing a turn-key solution for a secure, compliant and efficient distribution of their services.

We look forward to working with our existing and new partners as we power the retail investing infrastructure.