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Essential Fintech Reading: Dec 12-18

Investment In Digital Banking Startups Triples

Quartz reports that investments in digital banking startups will hit $6.9 billion this year, nearly triple the 2014 tally. While most of the backing for these startups has come from Silicon Valley firms, a recent report from Standard & Poor's notes that banks are "starting to collaborate and engage by acquiring or partnering with Fintech companies, setting up venture funds to invest in them and incubating or launching their own digital finance companies."


Prosper Loan To Alleged San Bernardino Shooter Prompts Investigation Of Online Lending

A loan from Prosper Marketplace to one of the alleged San Bernardino shooters weeks before the attack has prompted increased scrutiny of the online lending industry, reports Bloomberg. The LA Times reports that Syed Rizwan Farook borrowed $28,500 from Prosper just weeks before the December 2 shooting, money that federal officials believe may have helped the shooters pay for ammunition and pipe-bomb components. While credit cards can take awhile to arrive and offer an average credit line of about $5,000, online loans from entities like Prosper can be for seven times that much and arrive in just days. Jeb Hensarling, Chairman of the House Financial Services Committees, said that he's planning hearings and legislation related to the Farook loan. The CFPB is also considering a proposal that could make it more difficult for online lenders to arrange loans and California has opened an inquiry into the activities of 14 online lenders, including Prosper, SoFi, LendingClub and Kabbage. Industry experts worry that regulators may overreact. “You have a borrower who has no known ties to any terrorist organizations and who presumably has a good credit record,” said Brian Korn, an attorney with the law firm Manatt Phelps & Phillips, which represents online lending companies. “I don't believe any new regulations, short of allowing outright racial or ethnic discrimination, would have resulted in a different outcome.”

More Chinese Fintech IPOs On The Way After Yirendai?

Chinese online P2P lender Yirendai raised $75 million in its Thursday IPO on the New York Stock Exchange, opening the door for more listings of Chinese fintech companies. The firm joins U.S. counterparts like LendingClub and On Deck Capital, which have seen the share prices decline by more than 50% this year. A significant number of Chinese fintech companies have obtained funding from private investors – private investment in Chinese fintech reached $3.5 billion this year, up from $927 million in 2014 – and exits via IPO are expected throughout 2016. The largest expected IPO is for P2P lender Lufax, which could generate $5 billion in a Hong Kong listing. 

Fed Hike Means Higher Lending Rates, Not Higher Interest Rates For Savings Accounts

While the Federal Reserve's quarter point hike in interest rates has caused the nation's largest banks to raise their prime lending rates, interest rates on savings accounts and certificates of deposit have not budged. And account holders shouldn't expect that to change anytime soon, as rates on savings accounts and CDs are not tied directly to the federal funds rate. "Banks are flush with deposits, and margins have been squeezed by low interest rates," Greg McBride, a senior vice president at Bankrate.com, told USA Today. "A rate hike is an opportunity to breathe some life into those margins by raising rates on loans, but not deposits." Home equity lines of credit, credit cards and other consumer loans with variable interest rates tied to the prime rate will see their rates increase.

46 Percent Of Americans Utilize More Than One Bank

A survey conducted by GoBanking Rates finds that older millennials (age 25-34) and young Gen Xers (age 35-44) are the age groups most likely to have an account with more than one bank, at 50.3 and 49.4 percent respectively. On the flip side young millennials are the most likely to be customers of just one bank, with 63.7 percent choosing one institution:


The survey found that fewer than one in five Americans (18.7 percent) has accounts with three banks or more.