London Daily

Focus on the big picture.

Need a loan? There's a tech company for that.

Need a loan? There's a tech company for that.

Once something Silicon Valley avoided, financial services such as consumer loans have crept in to the offerings of just about every tech company. The transition to such services highlights the increasing pressure on tech companies to find new sources of revenue. Many tech companies claim that innovation, along with consumer choice, will help people who haven’t had access to traditional banking, but lending carries risks that tech companies are not used to.
Technology companies have a new product to sell: debt.

Once something Silicon Valley avoided, financial services such as consumer loans have crept in to the offerings of just about every tech company, a transition that highlights the increasing pressure to find new sources of revenue.

Many of those services come with claims that innovation, along with consumer choice, will help people who haven’t had access to traditional banking. But some Silicon Valley veterans are also warning that lenders to consumers and small businesses are already plentiful and that the practice of lending carries different kinds of risks than tech companies are used to.

And tech critics aren’t keen on the idea either, pointing to a history of using automated systems that end up discriminating against already marginalized groups.

Uber became the most recent tech entrant in October when it announced a new division called Uber Money that will offer financial products, including a digital wallet containing debit and credit cards. The ride-hailing company has struggled to turn a profit.

Other major tech companies have also come up with similar consumer or small-business offerings. Apple has teamed up with Goldman Sachs for a credit card. Payment companies Stripe and Paypal offer small-business loans. Facebook has teased an entry into finance through its embattled Libra digital currency project. Amazon has offered short-term loans to businesses since 2011 and added Bank of America as a partner in 2018. Even China’s tech giants are getting in on the act.

Those companies are also competing with a variety of startups solely focused on financial services technology -fintech, in Silicon Valley parlance -that offer a variety of tools and services that are underpinned by lending.

It’s the kind of trend that has some investors seeing a future in which tech companies without a financial services business are the outliers. Michael Gilroy, a partner at the investment firm Coatue Management, published a blog post in August declaring that “all big brands will become fintechs.”

“You need to have a business that’s already working,” Gilroy told NBC News. “Then you can get into lending.”

But he also offered a warning: The downside of lending is as big as its upside.

“Credit can be a very bad thing depending on how it’s packaged and how you give it, but credit can also be an incredible driver of the economy,” Gilroy said.

Some major tech companies are already experiencing the pitfalls of consumer lending. A New York regulator is investigating possible sex discrimination in the way Goldman Sachs set credit limits for the Apple Card. Uber’s credit effort has attracted criticism from labor activists and politicians who say the company already has a predatory relationship with its drivers.

The rise of peer-to-peer lending -in which tech platforms connect individuals in need of loans with people interested in lending money - in the mid-2000s led to the first “tech-enabled” consumer debt companies, with some, like Lending Club, going public at multibillion-dollar values. But those companies remained a very small percentage of the larger U.S. consumer and small-business debt industries, which lend hundreds of billions of dollars each year.

That began to change after the U.S. financial crisis, which led banks to pull back from consumer and small-business lending.

“The banks, post-crisis, never really got back into expanding their consumer lending or small-business lending, so there’s this whole market that’s underserved,” said Logan Allin, general partner at Fin Venture Capital, which invests in financial technology startups. “And there’s a portion of that market that definitely deserves credit.”

Bringing financial services to underserved populations has been a rallying cry for tech companies seeking to enter the world of banking. The race to bring banking to poor people around the world has been called a ”$100 trillion opportunity.”

The size of that market, combined with the importance of payments as an everyday consumer service, make lending a tempting proposition for big tech companies even if they’re not bringing anything new to the industry.

“It’s not a shiny industry in the sense it’s not feature-rich,” said Gene Munster, a veteran tech analyst and managing director of the venture capital firm Loup Ventures. “The concept of payments being central to us is timeless, and I think these companies recognize you need to build products that capitalize on just the usage of them.”

Startups are, however, looking to bring new angles to lending. Venture capital flooded into fintech companies around the world in 2018 with $36.6 billion invested across more than 2,300 rounds of fundraising -more than the previous two years combined, according to Innovate Finance, a fintech membership association in the United Kingdom.

But the opportunities for fintechs may be limited, particularly in the United States. Americans already have high personal debt levels, spurred in part by fintech companies that now account for a greater percentage of the overall personal loan market than banks, according to data from TransUnion.

And Allin noted that some tech companies are looking to “alternative metrics” such as tracking smartphone usage as an indicator of creditworthiness, rather than relying on traditional data such as credit scores and income.

The technology behind these loan programs also tends to be secretive, employing algorithms and artificial intelligence to determine who should and shouldn’t receive loans.

“It’s a bit black-box,” Allin said.

Fintech lending has added to broader concerns about “shadow banking” -lending that happens outside traditional financial institutions such as peer-to-peer lending and through hedge funds -that now accounts for almost $15 trillion in assets in the U.S. alone. A 2017 survey by the Federal Deposit Insurance Corp. found about 25 million people in the U.S. were unbanked.

Fintechs also face changing consumer appetites for loans. Jordan Nof, managing partner of the startup investment firm Tusk Venture Partners, who also oversaw venture capital investments at Blackstone, said young professionals who might make sense for fintech companies aren’t looking for loans.

“Consumers who are in their 20s and 30s right now have demonstrated time and time again an aversion to taking on any additional debt,” Nof said. “They want to pay off their student loans as quickly as possible, so creating a new debt product for people who don’t want debt, that’s a tough sell.”

Nof said that while he sees plenty of lending-focused startups that offer legitimate value to consumers, a strong U.S. economy combined with intensifying competition among startups can create problems.

“Right now, we’re just seeing people solving problems that don’t exist,” Nof said.

Nof warned that it’s easy for lending startups to end up resembling payday loan companies -something there’s plenty of. CB Insights, a company that tracks startups, found more than 30 companies dedicated to “unbundling the paycheck” in a variety of ways including lending and loan servicing.

And while startups often thrive by forcing stodgy markets to change, disruption is a far riskier proposition when it comes to debt.

“I think that whenever it comes down to the stakes, it’s kind of similar to health care,” Nof said. “The stakes are just really high. You really can’t get things wrong on that side.”
Newsletter

Related Articles

London Daily
0:00
0:00
Close
Unelected PM of the UK holds an emergency meeting because a candidate got voted in… which he says is a threat to democracy…
You Are So Beautiful
Rob Schneider explains California reparations legislation.
Postmodern Jukebox European Tour Version
Who knew badminton could get so intense?
An old French tune (by Georges Brassens) Pomplamoose ft. John Schroeder
Farmers break through police barriers in Brussels.
Sattahip Motor Show 20
London's Iconic British Telecom Tower Sold To Become Hotel
SONATE AU CLAIR DE LUNE - Moonlight sonata
Ukraine Arrests Father-Son Duo In Lockbit Cybercrime Bust
A kiss to build a dream on
US Offers $15 Million For Info On Leaders Of Cybercrime Group Lockbit
Wonderful Tonight - Eric Clapton (Boyce Avenue acoustic cover)
Russia Claims UK Cultural Agency Spied for Ukraine
Mean Blues
Apple warns against drying iPhones with rice
La Chansonnette
Alexei Navalny: UK sanctions Russian prison chiefs after activist's death
Pattaya Addicts
German economy is in 'troubled waters' - ministry
Franz Liszt - Liebestraum - Love Dream
In a recent High Court hearing, the U.S. argued that Julian Assange endangered lives by releasing classified information.
Dream a little dream of me
New video
Unchained Melody sung like you've NEVER heard!
Tucker Carlson says Boris Johnson wants "a million dollars, in Bitcoin or cash, from Tucker Carlson to talk about Ukraine.
Dave Brubeck - Take Five
Russia is rebuilding capacity to destabilize European countries, new UK report warns
Édith Piaf - Non, Je Ne Regrette Rien (Sofie)
EU Commission wants anti-drone defenses at Brussels HQ
Rondo Alla Turca
Von der Leyen’s 2nd-term pitch: More military might, less climate talk
Kiss of fire
Global Law Enforcement Dismantles Lockbit Ransomware Operation
Tom Jones - I´ll Never Fall In Love Again 1967, 1989, 2001
Prince William Urges End to Gaza Conflict
Israel Cachao López - Guajira Clásica
UK court to hear Assange's final appeal against extradition to the US, where he faces charges related to his journalistic work—the publication of a classified video in 2010 that exposed US war crimes against humanity.
Edward Maya - Stereo Love (feat. Vika Jigulina) (Extended Mix)
About 50-60% kids either chose to be YouTuber or influencer
Strauss - Radetzky March - Karajan
A viral video of Nationals MP Barnaby Joyce lying on a Canberra footpath is celebrated by his media mates.
La vie en rose
European Countries React to Navalny's Death by Summoning Russian Diplomats
The Temptations - My Girl (Smokey Robinson Tribute) 2006 Kennedy Cent
Israel has gone ‘beyond self-defence’ in Gaza, says Labour’s Streeting
Orlando Cachaito Lopez Redencion
English farmers to be offered ‘largest ever’ grant scheme amid food security concerns
Edith Piaf - NON, JE NE REGRETTE RIEN
Cameron government knew Post Office ditched Horizon IT investigation
RADETZKY MARCH-2008-Wien, New Year Concert
EU Calls for Immediate Ceasefire in Gaza Conflict
Only you (And you alone)
EU Vows To Hold Putin "Accountable" After Meeting Alexei Navalny's Wife
Strangers In The Night
EU Launches Probe Into TikTok Over Child Protection Under Digital Content Law
Charles Aznavour - La Boheme
The EU Initiates Naval Mission to Defend Red Sea Trade Routes
Summer time
EU and UK Announce Joint Effort on Migration
Sting and Stevie Wonder - Fragile (from Sting's 60th birthday concert)
Brazil's Lula Likens Gaza Operation to Holocaust, Israel Says "Red Line" Crossed
Aux Champs Elysees
Ministers Confirm Proposal to Prohibit Mobile Phone Usage in English Schools
Stand By Me - Ben E. King (Boyce Avenue acoustic cover)
Microsoft-backed OpenAI valued at $80bn after company completes deal
La Mer (Beyond the Sea) – Avalon Jazz Band
‘Alexei would want to tell Russia not to give up fighting’
She
Rwandan Footballer's Dismissal Sparks Concerns Over UK Asylum Plan
Nathalie Song by Enzo Petrachi Stjepan Hauser Cello
Whisky Challenges China's Baijiu Market During New Year Celebrations
Shape of My Heart - Sting (Boyce Avenue acoustic cover)
Avdiivka - Symbol Of Ukrainian Resistance Now In Control Of Russian Troops
Radiohead - Creep
Putin Critic Alexei Navalny's "Killers" Refusing To Hand Over Body, Say Allies
Quizás,Quizás,Quizás - Andrea Bocelli - Jennifer Lopez
"Historic Step": Zelensky Signs Security Pact With Germany
Perhaps, Perhaps, Perhaps - Multi-Couples
"Historic Step": Zelensky Signs Security Pact With Germany
Pentatonix Havana
20 Tech Giants Sign Effort To Fight AI Election Interference Across Globe
Paula Cole - Autumn Leaves
Joe Biden Accuses Putin of Causing Navalny's Death
Oscar Benton Bensonhurst Blues
Russian opposition leader Alexey Navalny has died at the Arctic prison colony
OH NANANA vs ABUSADAMENTE
Tucker Carlson grocery shopping in Russia. This is so interesting.
Nina Simone - ”I Put A Spell On You”. Vezi aici cum cântă Jeremy Ragsd
Julian Assange's Wife Warns of His Death if Extradited to US
NIGHTWISH - The Phantom Of The Opera
‘A lot higher than we expected’: Russian arms production worries Europe’s war planners
Motorshow 2016 Tanjay Negros Oriental
Greece Legalizes Same-Sex Marriage and Adoption Rights
Monica Bellucci - Ti Amo
Hungarian Foreign Minister: Europeans will lose Europe, the Union's policy must change drastically
Michael Jackson - Billie Jean Milena The Voice France 2018
In Britain Homeowners are receiving CPO’s (Compulsory Purchase Orders) so their homes can be redistributed to migrants
Michael Buble (Help Me Make It Through The Night) feat Loren Allred
Memories Canon In D - Maroon 5 (Boyce Avenue piano acoustic cover)
Matteo Simoni - Marina
Maroon 5 - One More Night
Maroon 5 - Memories
Mark Knopfler - Brothers In Arms (Berlin 2007 Live)
Mark Knopfler & Emmylou Harris - Romeo And Juliet (Real Live Roadrunni
Marina, Marina - The LUCKY DUCKIES intimist live concert at Guimarães
Major Lazer & DJ Snake – Lean On Mauranne The Voice France 2016
Love Theme from Romeo and Juliet - Joslin - Henri Mancini, Nino Rota
LoLa & Hauser - Love Story
Linkin Park Jay-Z - Numb Encore (Live 8 2005)
Hallelujah Mennel Ibtissem, The Voice France Leonard Cohen
Leonard Cohen - Dance Me to the End of Love
Leonard Cohen & Natasha Rostova - Dance me to the end of love
La casa de papel - Bella Ciao
La Camisa Negra
L'italiano (Toto Cutugno) - The Gypsy Queens
Juanes - La Camisa Negra
Jonathan and Charlotte - Britain's Got Talent 2012 Live Semi Final - U
John Powell - Assassin's Tango
Joe Cocker - You Can Leave Your Hat On (LIVE in Dortmund)
Joe Cocker - Unchain My Heart 2002 Live
Joe Cocker - A Whiter Shade Of Pale
Jay Z & Alicia Keys - Empire State of Mind LIVE
Jason Mraz - Im Yours (live)
Jarrod Radnich - Bohemian Rhapsody - Virtuosic Piano Solo
James Blunt - You're Beautiful
James Blunt - You're Beautiful & Bonfire Heart (Live at The Nobel Peac)
If You Go Away - Helen Merrill & Stan Getz (Tribute to Virna Lisi)
I'LL BE MISSING YOU
I Say a Little Prayer
Hotel California ( Eagles ) 1994 Live
Historia de un amor - Luz Casal. Vezi interpretarea Biancăi Sumanariu
Here Comes The Sun - The Beatles (Boyce Avenue acoustic cover) on Spot
Heart - Stairway to Heaven Led Zeppelin - Kennedy Center Honors
HAVANA by Camila Cabello Zumba Pre Cooldown TML Crew Kramer Pastra
HAUSER and Señorita - I Will Always Love You
HAUSER - Waka Waka
HAUSER - Sway
HAUSER - Lambada
HAUSER - Historia de un Amor
HAUSER - Despacito
Great Pretender
Georgia May Foote & Giovanni Pernice Samba to 'Volare' - Strictly Come
Gary Moore - Still Got The Blues
GIPSY KINGS VOLARE Penelope Cruz
Fugees - Killing Me Softly With His Song
French Latino - Historia de un Amor
For A Few Dollars More The Danish National Symphony Orchestra (Live)
Flashdance • What a Feeling • Irene Cara
Filip Rudan - “Someone You Loved” Audicija 4 The Voice Hrvatska Sez
Eric Clapton - Wonderful Tonight
Enya - Only Time
Enrique Iglesias - Bailando (English Version) ft. Sean Paul
Enrique Iglesias - Bailamos
Elena Yerevan Historia de un amor
Ed Sheeran - Shape of You (Official Music Video)
Ed Sheeran - Perfect Symphony [with Andrea Bocelli]
Ed Sheeran - Perfect (Official Music Video)
Easy On Me - Adele (Boyce Avenue 90’s style piano acoustic cover) on S
ERA - Ameno
ELENA YEREVAN- Cancion Del Mariachi-IN STUDIO-2017 DPR
Dust In The Wind - Kansas (Boyce Avenue acoustic cover)
Don't Let Me Be Misunderstood
Despacito x Shape Of You - Pentatonix
Deep Purple - Child In Time - Live (1970)
David Foster When A Man Loves A WomanIt's A Mans World (SealMichael Bo
Dance me to the end of Love ( Pi-Air Design )
Coolio - Gangsta's Paradise (feat. L.V.) [Official Music Video]
Conquest Of Paradise (Vangelis), played on Böhm Emporio organ
Cielito Lindo
Chico & The Gypsies - Bamboleo
Canción Del Mariachi - Antonio Banderas, Los Lobos • Desperado
Camila Cabello - Havana (Audio) ft. Young Thug
Camila Cabello - Havana ( cover by J.Fla )
California Dreamin' - The Mamas & The Papas José Feliciano (Boyce Ave
Buster Benton - Money Is The Name of The Game
Hallelujah Pentatonix
Bobby McFerrin - Don't Worry Be Happy (Official Music Video)
Bob Dylan - Knockin' On Heaven's Door Emilia The Voice Kids France
Besame Mucho - Cesaria Evora
Ben E. King - Stand by Me Sax Cover Alexandra Ilieva Thomann
Bella Ciao
Bella Ciao - INSTRUMENTAL
Beautiful in White x Canon in D (Piano Cover by Riyandi Kusuma)
Bad Romance - Vintage 1920's Gatsby Style Lady Gaga Cover ft. Ariana Savalas & Sarah Reich(1)
BELLA CIAO 2020 - KARAOKE ITALIANO
BAMBOLEO - Gipsy Kings • Antonio Banderas, Katya Virshilas
BAILANDO (original)
Awesome Ukrainian yodeler - SOFIA SHKIDCHENKO (with English subtitles)
Avicii - The Nights
Atom - The Great Gig in the Sky
Aretha Franklin - (You Make Me Feel Like) A Natural Woman (Official Ly
Antonio Banderas - Cancion del Mariachi (Desperado)
André Rieu - Zorba's Dance (Sirtaki)
André Rieu - Can't Help Falling In Love
André Rieu & Mirusia - Ave Maria
Andrew Reyes Elton John - Don't Let The Sun Go Down The Voice 2020 (
Andreas Kümmert Whiter Shade Of Pale The Voice of Germany 2013 Showd
And I Love You So
All About That Bass - Postmodern Jukebox European Tour Version
Alan Walker - Faded (Piano Cover)
Ain't No Sunshine -- Bill Withers (cover by Canen 12 y.o.)
African music
Adriana Vidović - “Creep” Audicija 4 The Voice Hrvatska Sezona 3
Adriana Vidović - “Believer” Nokaut 3 The Voice Hrvatska Sezona 3
A Fistful of Dollars - The Danish National Symphony Orchestra and Tuva
4 Beautiful Soundtracks Relaxing Piano [10min]
2CELLOS - Whole Lotta Love vs. Beethoven 5th Symphony [OFFICIAL VIDEO]
2CELLOS - Smooth Criminal (Live at Suntory Hall, Tokyo)
2CELLOS - Smells Like Teen Spirit [Live at Sydney Opera House]
2CELLOS - Despacito [OFFICIAL VIDEO]
13 Year Old Girl Playing Il Silenzio (The Silence) - André Rieu
094.All About That Bass
00 - SADNESS PART 1
(Ghost) Riders In the Sky (American Outlaws Live at Nassau Coliseum, 1
(Everything I Do) I Do It For You - Bryan Adams (Boyce Avenue ft. Conn
What a wonderful world
Moon river
×