A weekly wrap-up from Silicon Valley on what’s making the news in fintech, banking, and disruptive trends
Americans Stuck in Bad Financial Services Relationships
According to a Market Strategies firms survey, 31 percent of American households feel obligated to continue doing business with financial companies that they distrust, including investment services. Market Strategies’ senior vice president Jeremy Bowler said this lack of trust represents a significant risk to profitability, as distrust makes it easier for clients to be persuaded to switch firms. Older customers tend to be more trusting, but a number of factors influence trust including service consistency and quality, so it would be misguided to assume that all millennials distrust financial services. The good news, according to Bowler, is that the distrust among consumers “creates greater opportunity for disruptive change, and with financial technology solutions rapidly emerging, this is a pool of consumers who are ripe for the picking.”
‘Dead People Don’t Pay’: Tech Takes on Marketplace Lending Fraud
Recently allegations of fraud against Lending Club and several Chinese marketplace lenders have some observers calling for more daylight on the loans sold on these marketplaces. Specifically, they’re floating the idea of a technology and service that would register and track ownership of the loans and validate basic facts about them and the borrowers.
This could not only prevent marketplace lenders from altering loan dates the way Lending Club allegedly did (to fit a buyer’s preset criteria), but prevent fraud of all kinds, bring transparency to the market and calm investors’ rattled nerves. BlackRock and Citigroup are among major investors that have reportedly backed out of the market.
This Financial Giant Will Challenge Square and OnDeck With Small Business Loans
American Express is expanding into the lending business for small businesses, according to a new report from Bloomberg.
The financial giant will debut a new lending arm, called Working Capital Terms, which will make online loans to small businesses who use American Express credit cards. Loans will range from $1,000 to $750,000, and interest will be tacked on at a rate of 0.5% for a 30-day loan to 1.5% for a 90-day loan, Bloomberg reported.
Branch of the Future Will Still Be a Branch
Evolving technology continues to influence customer preferences and behaviors. From big bank to community bank, customers now have more banking options than any time in history.
Yet, convenient access to a physical bank branch remains as high on most customers’ lists of why they choose a bank as ever. For all of the media attention whenever a bank strategically closes a few branches, the total number of branches in America has been remarkably stable. Further, the investments being made across the industry in remodeling and retooling existing branches are under appreciated. Banks’ commitment to branches is reflected in more than the building of new facilities.
Millennials Show Financial Savvy
Credit Karma, the San Francisco-based credit and financial management platform, surveyed more than 1,000 millennials — people currently between the ages of 18 and 24 — about their intentions and attitudes toward their spending and saving behavior.
The study shows “millennials are following in the footsteps of generations before them: saving for the future is top-of-mind, loyalty with employers who offer fair pay is a priority and hitting life’s traditional milestones is important to them,” Hardeman added.
Some 52% of the people surveyed indicated they’re already saving for retirement and have an emergency fund, with 75% of savers citing the 2008 financial crisis as influential in shaping their financial management choices.