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Essential Fintech Reading: May 7-13

May 13, 2016 4:31:22 PM


LendingClub CEO Ousted, Loan Buyers Flee

LendingClub CEO Renaud Laplanche was fired after the peer-to-peer lending firm acknowledged it had sold $22 million worth of loans that did not meet a buyer's criteria. While LendingClub quickly bought the loans back from the buyer, investment bank Jefferies, the news triggered a chain reaction. A consortium of 200 small banks has suspended a program of loan purchases from LendingClub and Goldman Sachs and Jefferies have both stopped buying the company's loans. “It is clear this is bad news not just for Lending Club, but for our entire industry,” Peter Renton, who founded Lendit, a leading industry conference, wrote in a blog post on Monday. There is now worry that the flow of capital into marketplace lending will drop dramatically. The New York Times wrote that LendingClub's "woes are part of a broader reckoning in the online money-lending industry," as Prosper recently laid off a quarter of its workforce. "The problems at Lending Club, in particular, threaten to confirm some of Wall Street’s worst fears: that as favorable economic conditions begin to turn, they will reveal many upstart companies with weak internal controls that have been feeding inaccurate information to starry-eyed investors." LendingClub Corp (LC: NYSE) closed at $3.76 a share Thursday, down over 80% from its 52 week high of $19.48.

Will Fintechs Seek Charters?

Writing for American Banker, Bryan Yurcan suggests that fintech companies could increasingly seek to become banks and obtain charters. "For lenders, deposits insured by the Federal Deposit Insurance Corp. are one of the cheapest funding sources around," writes Yurcan. "Having a charter could eliminate the middleman and the risk associated since many rely on bank partners to execute their business." The hesitance from regulators has largely led fintech companies to seek partnerships with banks but that could soon change. The Office of the Comptroller of the Currency said on May 9 that it was contemplating a "limited-purpose" charter designed for fintech companies

More Than 600 UK Branch Closures In Past Year

BBC reports that more than 600 bank branches have closed across Britain in the last year, with rural areas most affected. The data came from Lloyds, Royal Bank of Scotland, HSBC, Santander, Barclays and the Co-operative. The Campaign for Community Banking Services estimates that 3,000 branches have shut over the last decade, with 8,000 remaining. Figures from RBS show that over-the-counter transactions have fallen 43% since 2010 while online and mobile banking usage has picked up significantly.

Mapa Research: PFM On The Verge Of A Revival

Chris Ward of Mapa Research says that personal financial management is not dead, "it's just that nobody has got it quite right yet." Mapa predicts that PFM could be "on the cusp of a comeback and a long overdue revival." In order for PFM to take its next step forward, it will have to sit at the core of the mobile experience and have users routinely aggregate multiple accounts. FIs are "not able to offer real insight into an individual’s financial situation if they draw solely on information from a single account," writes Ward. The usefulness of PFM will further hinge on its ability to answer increasingly complex consumer questions. "Can I afford to take risks on an investment? How much can I borrow to buy a home? What’s better for me, using savings to buy a car or buying it with finance?"  

Swift Again Falls Victim To Cyber Attack

Swift, a messaging system used by 11,000 financial institutions around the world to move large amounts of cash, has fallen victim to a second cyber attack. Investigators are still examining an $81 million heist from the central bank of Bangladesh in February and the second attack involves a commercial bank which Swift has declined to identify. In both instances the core messaging system of Swift was not breached and thieves instead attacked the banks' connections to the Swift network. While the Bangladesh attack was initially attributed to crude defenses like a $10 router and an absence of firewalls, the New York Times reports that "details of the second attack ... suggested a highly sophisticated threat that did not necessarily hinge on weak digital defenses. Somehow the thieves obtained a valid Swift credential that allowed them to “create, approve and submit” messages on the network. Those messages — sent from PCs in the bank’s back offices or from laptops — were then used to move money from one of the bank’s accounts."

Jeff Meredith

Written by Jeff Meredith

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