• Fasanara Capital

Banking Digitalization, Uber Money, P2P in Asia and Apple Card Billions

Happy Wednesday!

In This Post:

  • Innovation and Digitization in Credit:  A Global Perspective

  • McKinsey: Majority of Banks May Not Be Economically Viable

  • China’s Financial Hub Moves to Shut Down P2P Lending

  • Uber announces deeper push into financial services with Uber Money

  • With the Apple Card, Goldman Sachs has lent out about $10 billion in credit

  • S. Korea passes new law for P2P lenders.

Innovation and Digitization in Credit:  A Global Perspective

Digitization and other forms of technological innovation are dramatically changing credit markets around the world, creating opportunities for consumers and new market participants, but also challenges for traditional financial institutions and regulators. This report draws from a wide range of sources to provide a comprehensive overview of the global digital lending landscape. They survey recent growth trends of peer-to-peer (P2P) and other forms of alternative lending that have been enabled by digitization, and compare and contrast the major digital lending markets around the world. They also discuss applications of new technologies like machine learning and blockchain to lending, and highlight the risks that these developments pose for consumers, firms, and regulatory agencies.

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McKinsey: Majority of Banks May Not Be Economically Viable

Management consulting firm McKinsey & Company published its Global Banking Annual Review 2019 last week. The report finds that most global banks may not be economically viable with more than half of them still not generating their cost of equity 10 years after the crisis. The report also outlines trends affecting the banking sector globally such as the increased usage of online banking, which grew by 13% from 2013 to 2018. The firm believes that there is room for further growth of more than 30% in many markets as consumers are increasingly willing to transact online. The rise in popularity of non-bank service providers has also presented new competition to traditional banking. McKinsey’s report concludes that the call to action is urgent: whether a bank is a leader and seeks to ‘protect’ returns or is one of the underperformers looking to turn the business around and push returns above the cost of equity, the time for bold and critical moves is now.

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China’s Financial Hub Moves to Shut Down P2P Lending

Shanghai’s financial services regulator has ordered more than 40 P2P lenders to exit the business. This is the latest blow to an online industry that’s shrunk by half this year. Some of the nation’s biggest platforms including Ping An-backed Lufax and Dianrong.com have been told to stop issuing new products and to wind down existing P2P lending services. The development indicates China’s determination to overhaul an industry that had more than $150 billion of loans outstanding and upwards of 50 million investors at its peak, but was plagued by fraud and defaults.

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Uber announces deeper push into financial services with Uber Money

Under pressure to turn a profit amid competition from new ride-sharing entrants around the world, Uber is betting that by building out its financial ecosystem, it can keep drivers and riders loyal to its platform.  The ride company announces a new division called Uber Money, which includes a digital wallet and upgraded debit and credit cards. The emphasis, at first, will be expanding Uber’s efforts to give its 4 million-plus drivers and couriers around the world access to a mobile bank account so they can get paid after each ride.  Uber’s ambitions could also bring drivers into the realm of digital finance in parts of the world where cash is still king, like Pakistan and Bangladesh. About 40% of all Uber trips globally are paid using paper currency.

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With the Apple Card, Goldman Sachs has lent out about $10 billion in credit

According to its recent regulatory filing, Goldman Sachs has lent out about $10 billion in credit to Apple customers since it first rolled out its first credit card, the Apple Card, in August. As the new Apple Card rolled out, some of its first members had no credit history or below-average credit scores. The card is Goldman's latest foray into the retail consumer business after establishing its online Marcus brand in 2016. Marcus makes unsecured personal loans, including to consumers who are dealing with credit card debt. In its October earnings call, the bank's chief financial officer said the percent of revenue spent on employee pay is expected to decline as the company zeroes in on tech-based ventures and "four key projects" — which include Apple Card and Marcus.

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S. Korea passes new law for P2P lenders

On Oct. 31, South Korea’s parliament passed a new law that is expected to brush away legal gray areas for peer-to-peer (P2P) lenders once it goes into effect. The separate bill, loosely translated as “Act on Online Investment-Linked Financing,” will be effective nine months after Cabinet approval. This would be the first law in the world solely for players dedicated to marketplace lending. Under the new law, the minimum capital is set at 500 million won ($429,600) for marketplace lenders to gain a license. P2P lenders will also be forced to draw a line between funds raised on P2P lending platforms and their working capital. The law will also allow securities brokerage houses, private equity funds, private lenders, as well as P2P lenders themselves, to invest in marketplace loans, which is currently open to retail investors and institutional investors.

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