Welcome Marcus to the rebranded Goldman asset mgt division and to the UK

I can’t believe that it is already 2 years from the launch of Marcus from Goldman. I wrote about it Nov 2016 in Will Goldman become a verb? Watch the Marcus ads!

  • The consumer pays a fixed interest rateon the loan (which includes a profit margin for Goldman). It has no complexities (APRs and all the usual hidden in a credit-card type of arrangement).
  • It is simple and clear. No fees for late payments.
  • It is transparent and simple! No credit-score changes! There is nothing hidden, no optionality (hiding misunderstanding and potentially Goldman outsmarting the user).

My right hand, Gaston Greindl, briefed me last week on Marcus. Goldman has decided to add a dedicated loan specialists workforce who deliver live, personalised support to client, which goes well beyond the flexibility already offered on the platform to choose payment dates and payment options to fit their payroll schedule.

During the first year of Marcus – by the end of 2017 – Marcus had more than $2.3 billion in loans ranging from 12 months to 4 years.

The deposit part of the business – Online Savings Accounts for retail – is FDIC insured, no-fee again, and offering rates higher than the national average. During the first year of Marcus – by the end of 2017 – Marcus had more than $17 billion in deposits.

After extensive research and surveying, Goldman found that customers preferred to speak with human advisers for their borrowing and savings inquiries. So, all of Marcus calls are answered by loan or deposit specialists, improving the customer experience.

What caught my attention this time around, was the Barron’s article about Goldman Sachs moving Marcus into its asset management unit, which will be renamed the consumer and investment management division. Previously, Marcus had been part of Goldman’s investing and lending division.

I always talk about Fintech towards serving your existing customers in ways not possible before. Goldman has been fearless in experimenting with new business models in serving customers and in acquiring new customers. Over the past decade, Goldman has been an investment bank that wasn’t shy to get a banking license after the subprime crisis; has opened its proprietary IP to its Buy side clients (read more in my contributing chapter in the WealthTech Book ); and has acquired 37 Fintechs already making it the No.1 bank in Fintech investments (as of end of 2017)

fintech

Marcus was born in a neighbourhood catering to the basic consumer banking retail needs. Goldman now feels that it can and should be integrated in the next generation wealth offering of Goldman in the US. No fees, human advisors, flexibility even for the very basics: online savings and personal loans. This makes sense as product lines are blurring. Clients don’t want to have shop for their financial needs in 5 different places. Integration is the name of the game. Goldman is moving gracefully in that direction.

Screen Shot 2018-10-29 at 20.05.54

While Marcus is being integrating in the US in the wealth offering, at the same time Goldman is launching Marcus retail in the UK. It started just a month ago and up 50,000 customers signed up in less than two weeks. UK residents can deposit from £1 to £250,000 – and withdraw their money as many times as they like, with no fees or charges. Fully digital onboarding plus customer service with a specialist available. Now this can’t be great news neither for the challenger banks nor for the high-street banks. Marcus has a brand name and offers an interest rate of 1.5% (for the first year), which is well above the UK average of 0.6%. The Marcus account rate drops to 1.35% the 2nd year. The closest easy access savings rate is currently 1.41%, offered by Yorkshire Building Society.

Expansion in Germany was also announced in May but there is nothing talked about since.

Marcus in the US has built a loan book that is not even 5% of the $72billion loan book of Goldman. It’s value is not the amount of loans or their margin. It is the new retail customers and moreso it is the learnings that Marcus is offering Goldman Sachs’ so that they can enhance their wealth offerings with consumer best banking services (deposits and loans) which means below cost and with human specialist customer service.

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer.

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Crowd Sourced DD the future to unlisted asset investment explosion

Lately I’ve been thinking a lot about the flow of capital.

You do that when you run a super fund. Especially when you are thinking about the opportunities that exist when you have the ability to be significantly more agile with your investment strategy.

And when you link the use of capital to where it is needed most, to grow the economy, you naturally gravitate towards the small business sector, and the unlisted asset space.

It’s not as easy as flicking a switch though – investing pension fund money is a huge responsibility, and how it is handled is a serious business. Small business and the unlisted space is notoriously risky, and pricing and handling that risk is the dark art of this game.

But it is relatively patient capital, and there are some interesting dynamics that can be explored, based on this principle.

But before you even get to that point, you need to find good businesses, and that is another huge problem that still needs to be solved.

One fintech in that space trying to solve part of that particular problem for wealth managers, like pension funds, is Delio. Based out of Cardiff, Wales, the platform offers ‘infrastructure as a service’ to help manage the entire unlisted asset investment process, from origination to exit.

Wealth managers, private banks, investment banks, family offices and many more can use the platform’s white label digital insfrastructure to upload deals and manage the entire process, end to end. The company is already partnered with UK Business Angels Association, connecting over 15,000 angel investors with high quality deal flow.

DelioConnect also offers platform to platform integration, so clients can originate, syndicate or distribute within the trusted network.

These sorts of platforms are the future of getting capital to small business. They are potentially far more powerful than neobanks in the SME space. And they solve the crowd-sourced due diligence problem. Which until technology is sophisticated enough to manage on its own – for which we are still a way off – is critical to increasing the flow of money into productive, growth investments.

The principles behind how platforms like Delio work should be attractive to smart pension funds and new age wealth managers, looking for efficiencies and an edge in the unlisted space.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a new superannuation startup in Australia.

The Internet of Finance from the East & the 50mil unbanked in Brazil

chinaltam

Much has been written about China’s growing commercial relationships with Latin America. Some have suggested that China is replacing the United States as the region’s most important partner. The focus has been mostly on Chinese infrastructure investments in Latam.

This October one of the Internet of Finance leaders, Tencent invested $180 million in the Brazilian neobank ‘NuBank[1] the largest Latin American digital bank and credit card operator. Nubank, is a 5 yr old Latam FinTech pioneer, who has raised a total of $330 million since it was founded in 2013 by Sequoia Capital ex-partner David Vélez. Clearly, one of the best-funded start-ups in Brazil. To date, it has issued 5 million no-fee credit cards and has opened 2.5 million digital payment accounts.

Nubank’s impressive expansion has spurred growth in the Brazilian Fintech market, with 188 ventures being launched in the past 18 months. This includes standalone Neobanks such as Banco Original, SDBank, LabsBank, beBank. Incumbents have also joined the competition with Digio being one example, launched by Banco do Brasil and Bradesco in 2016 to compete directly with Nubank’s fee-free business model. These strong recent developments have earned Brazil the title of leading FinTech ecosystem in Latin America. [2]

Nubank has streamlined the onboarding process and is offering fast, transparent consumer banking mobile services to make transfers, pay bills and earn interest on deposits. Just recently Nubank got clearance from Brazilian Central Bank to offer loans to its customers which will allow the already well-funded start-up to expand further.

Nubank is the high-growth Latam Fintech that has managed to attract major international attention and investment. The recent Tencent investment is increasing Nubank’s capital by $90 million and repurchasing the equivalent amount from Nubank’s existing shareholders, pushing the neobank’s valuation up to $4 Billion. Tencent President Martin Lau explained that the investment will help Nubank “build a full-service personal finance platform.”[3] The Chinese conglomerate is no stranger to these transactions, with major shareholdings in other FinTechs and Neobanks such as the online bank WeBank, fintech business Voyager of Philippine telco PLDT, online insurer ZhongAn Online P&C Insurance Co Lt, supply chain financing provider Linklogis.

According to Nubank CEO David Velez, the investment is for Nubank a great strategic standpoint to gain insight on- and learn from the Chinese financial market. For Tencent, this is a means of expansion of their existing portfolio of challenger banks and technology-based financial services ventures as well as a robust point of entry to the booming Brazilian FinTech Market.

The Internet of Finance from the East in synergy with the 50mil unbanked in Brazil.

This not Chimerica, the term coined by Niall Ferguson to describe the symbiotic relationship between China and America more than 10 yrs ago.

chimerica

This could be “Chilatam” led by Brazil who has put forward new Fintech regulations to encourage competition in their financial sector that is dominated by the Big 5 banks, much like in the UK or Australia.

#AndtheIronyIs that Chimerica, the award-winning play of Lucy Kirkwood, became 4 part TV series –  “Chimerica”. The play examines contemporary global politics and the relationship between East and West.

#AndtheIronyIs is my Twitter hashtag for cynical Finance tweets.

[1] Reuters, 2018, ‘China’s Tencent invests $180 million in Brazil fintech Nubank’

[2] Finnovista, 2018, ‘Brazil recovers the leading position as largest Fintech ecosystem in Latin America with over 370 Fintech startups

[3] Reuters, 2018, ‘China’s Tencent invests $180 million in Brazil fintech Nubank’ 

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

 

Crowdfunding, investing, & listing – DESICO for STOs

Interesting times! I am not referring to politics but financial markets both the traditional stakeholders and the disruptors. From Roubini lashing out on the crypto ecosystem, to Morgan Stanley gearing up to trade crypto derivatives, and Circle buying crowdfunding and broker-dealer Seedinvest.

The narrative around tokens has shifted Q1 2018. Utility tokens are no more darlings, STOs seem “the way to go” but pieces are missing still to satisfy the much-anticipated institutional appetite. #AndTheIronyIs that the ICO frenzy aimed to democratize early stage startup investing. It was supposed to allow retail to fund and participate in the startup tsunami that is building the winners of the 4th industrial revolution. Transparency and no gate-keepers were also promised.

#AndTheIronyIs it became about whales (the new gate-keepers) and now it is about crypto funds (the other new gatekeepers) and the conventional institutional money (e.g. the Ivy League US endowments[1]).

On the regulatory front, Europe seems to be leading with frameworks that try to not choke the blockchain early-stage innovation and at the same time provide some guidelines. The recent support from EU parliament of the Blockchain Resolution[2], is significant for several reasons. Switzerland, Liechtenstein, Malta, France, etc have also made progress on the regulatory front. Lithuania is one of the small Baltic countries which has attracted several Fintechs (even the Revolut unicorn) because it has been offered licensing and therefore EU passporting to these Fintech innovators.

In a September Forbes article[3] the Central Bank of Lithuania is singled out because of a new law allowing to invest in crypto assets through Security Token Offerings (STOs) in Europe. DESICO is referenced as it is taking advantage of this retail STO law and building a token platform for issuing, listing and trading security tokens in a fully compliant way.

DESICO has designed a different business model

desico image

The founders of the DESICO platform are Fintechers, founders of Finbee a P2P online lending platform. They saw a business opportunity to not only legally launch an ICO platform for early-stage startups in which both institutional but retail also can invest; they are also designing it to onboard revenue generating SMEs (not necessarily blockchain businesses) that need to raise capital. As Laimonas Noreika, the CEO of DESICO, said to TechStartups “Desico doesn’t want to focus on tokenizing pension funds, investment funds, or real estate projects.”

DESICO will filter companies for scams and will let the crowd vet projects on the DESICO platform. The costs of the entire ICO process will be cut to one third the current costs, and various service providers will be onboarding on the DESICO platform. Once the token sale is successful, the tokens will be listed on the DESICO exchange and investors will be able to trade (no waiting times, no exorbitant costs). Investors (both retail and institutional) will be legally able to buy the tokens on the DESICO platform. Any kind of security token issued on the DESICO platform will be fully compliant. With the support and backing of the Lithuanian Ministry of Finance, the Ministry of the Economy and the Central Bank of Lithuania, and under the crowdfunding law, any funding under 5million euros following the crowdfunding requirements is a legal security token.

The DESICO platform will be an end-to-end platform (for early startups and SMEs) to crowdfund, to list and trade on an exchange, and to invest. The founders are in the process of acquiring the three required licenses, a crowdfunding license, an e-money licenses, and brokerage licenses.

The DESI token is a security token and the sale starts on November 7. DESI token holders will receive a revenue share of 12.5% of DESICO’s gross income over the next 30 years. Payouts will be quarterly, with no cap on the revenues. It is a 30-year Revenue Participation Note that is callable after 5 years at any time.

DESICO revenues will come from primary and secondary market fees of the tokens issued and traded on the DESICO ecosystem. The primary fees will be paid by the security token issuers in a mix of fiat and project security (STO) tokens. Secondary market fees will come from the exchange activities.

DESICO is as close as it gets to the next generation of a crowdfunding platform with in-house liquidity. It’s design is for the crowd too, not only for institutional. It’s business model borrows elements from Angel list, as its revenues include security tokens issued on the platform. The founders know how to work with regulators and license providers and know how to build an investor base. For details, read thoroughly the white paper.

Disclaimer: I am an advisor to the DESICO platform.

[1] Report: Harvard, Stanford, MIT Endowments All Invest in Crypto Funds, Cointelegraph

[2] In the EU Blockchain Resolution we Trust, DailyFintech

[3] Institutional Investors Bet On Crypto Market With Tokenized Securities, Forbes

Efi Pylarinou is a Fintech thought-leader, consultant and investor. 

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

Kiwi fintech FNZ lands deal with Al Gore’s investment fund

You’ve got to love the Kiwi entrepreneurs for just getting on with it, and quietly building billion dollar businesses from the middle of nowhere.

And it seems they have a penchant for financial services businesses. While Rod Drury and his team have built a billion dollar SaaS accounting behemoth in the form of Xero, from Wellington, another Kiwi, Adrian Durham is hot on his heels. And his billion dollar wealth management business just landed what is possibly the biggest fintech transaction of the year.

Canadian pension fund CDPQ and Generation Investment Management (Al Gore’s fund) have jointly acquired a stake in FNZ that values the company at £1.65 billion.

Since 2003, FNZ has acquired a stunning £330 billion in assets under administration. It is the caretaker of 5 million investors, courtesy of its partnerships with the likes of Santander, Lloyds Bank, UBS, Barclays and many more. The platforms reach extends across 60 financial institutions across the globe.

What is remarkable about the business – and possibly speaks to the fast-tracked success, which requires intense focus and energy – is that around 400 employees remain shareholders, and will continue to own about one third of the equity of the company going forward.

The platform has also taken on building out Vanguard’s direct-to-consumer platform, which is a significant coup, and something BlackRock will no doubt be watching closely.

Platforms are a big play, and wealth management is grappling with how to bridge the expensive, advisory driven world and the new digital, millennial driven AI advice space. The majority of platforms are still trying to find ways to accommodate the old model while re-skinning for the new.

The big question is can you do both? My intuition says no – at least not particularly well. Which means there is a huge opportunity for a digital wealth platform that doesn’t have to retro-fit to the old.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a new superannuation startup in Australia.

Is Sustainability your driver? Stop Borrowing from the Future.

Sustainable_economy_diagram

Sustainable Finance and Investing, remains misunderstood. Language remains tricky, inaccurate, and subject to interpretation; which inevitably makes Mathematics the only Language that can be trusted (100% internally consistent)[1].

Looking at Sustainable investing, there are different approaches to qualifying.

  • The first sustainable investors, negated sectors like tobacco. This is the exclusion approach.
  • Then came a portfolio management approach, based on which ESG factors are used in traditional investment process always with the aim to optimize risk/return.
  • Lately, impact investing is more direct and explicit, by choosing companies that aim to generate measurable environmental and social benefits (alongside the financial return).

As I review a UBS Global Insights report (What’s on Investor’s minds, Vol.2, 2018) it struck me that Investing is lagging big time in the Shift in Values that is affecting other areas of our life. UBS looks at how our personal values (I would say, the shift in the hierarchy of our personal values) is driving major decisions in our lives. Their statistics show clearly that the Sustainability theme is driving our spending decisions, our willingness to pay a premium, our donations to charity, and even our choice of employment.

Screen Shot 2018-09-19 at 11.53.41 AM

Source: UBS Global Insights report

Sustainability, however, factors considerably less (below 40%) in our investment decisions.

Sustainability investing varies considerably by market. The number of investors with more than 1% allocation to sustainable investments in Singapore and Switzerland are only 35% and China, Brazil, and the UAE + Italy, are in the 50s% and 60s% (probably more investors with smaller amounts).

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Source: UBS Global Insights report

The expectation for growth is also very different. In the US and the UK, there are weak signs of a sustainable investment momentum. Whereas investors in the UAE and China, are largely convinced that this is the way to invest.

In Brazil, which has also a high sustainable investing adoption, there is a strong expectation that returns will outperform traditional investments.

Looking into the UBS report, it is clear that there is a lot of interest that is sitting on the sidelines and that advisors and influencers can play a major role in tipping these non-adopters over. We need to invest in converting these non-adopters because we cannot afford to continue borrowing from the future.

Join me, as I will be moderating a panel on Sustainable Finance at the Fintech+ event on October 1, in Zurich. I will be discussing with Sabine Döbeli, CEO of Swiss Sustainable Finance, Oliver Marchand, founder and CEO of CARBON DELTA, Anna Stünzi, researcher and co-lead of the foraus programme „Environment, Energy and Transportation“, and Rochus Mommartz head of Responsibility Investments. Come to participate in this exciting discussion[2], as I will be asking some tough questions around this topic that touches on a much broader issue:

Shift in values and technology

[1] A major topic that is worthy of a longer interactive discussion.

[2] Register here and use the discount code fpluslimited500.

Efi Pylarinou is a Fintech thought-leader, consultant and investor. 

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.