A recent trend in fintech is that everyone that has a tech platform of some kind and has lots of customer data is offering financial services through that platform.
It’s nothing new really. Paypal has been lending to its customer base for years. Square has Square Capital for the exact same thing. But the trend is expanding to non-financial tech companies. Like Uber. Yes, you read that right. Uber.
That’s the first of 5 interesting news pieces I found this week. Let’s take a look at them.
Uber announces Uber Money
Uber is expanding its markets. That’s not news. It has Uber Eats and it’s looking for more ways to tap into the data it has in 2 big markets: its customers and its drivers.
Uber’s financial services arm, called Uber Money, is looking for ways to offer financial products to its drivers. This includes a mobile wallet, debit card, credit card, and other future products. The CNBC article mentions Uber may eventually open bank accounts for its drivers too.
My Take: Uber is desperate to try to make money. After what’s happened at their IPO, the shelving of WeWork, and their own stock performance, they are trying to prove they have lots of valuable data. And that this data can be monetized in various ways including financial services. I suspect they will do more in financial services before we find out if this experiment is successful.
Prosper announces Digital HELOC
Prosper, in partnership with BBVA, will be offering digital HELOCs (Home Equity Lines of Credit) both on their website and on a white label platform with BBVA.
This will be Prosper’s first collateralized loan offering. All their loans so far are either personal consumer loans for things like debt consolidation or medical loans.
My Take: This is a smart move by Prosper. Given that they understand prime borrowers, their primary clientele, and many of these borrowers are homeowners this is a no brainer move. Having a collateralized loan option also helps protect them when the next recession comes, whenever that is.
Lending Club Earnings Beat Estimates
Lending Club (LC) announced its earnings this week of 9c per share, beating estimates of 1c per share. Lending Club’s $3.3 billion in loan originations this quarter is a record, beating last quarter’s $3.1 billion. Revenue hit a record level as well and adjusted net income was positive for the first time.
My Take: LC is controlling costs better, operating better and starting to show a profit. CEO Scott Sanborn is doing a good job moving the company towards profitability from its growth only mode where it’s been. Taking the long view, I think LC could stay independent. Yet, if I was a stockholder (I’m NOT one), then I would bank on an acquisition by a bank, private equity firm or hedge fund to drive price appreciation in the leader in marketplace lending.
Kabbage Partners w GoDaddy for SMB Lending
Kabbage is partnering with GoDaddy to offer loans to GoDaddy website customers. The offering will be Kabbage’s standard business credit line for up to $250,000.
My Take: GoDaddy gets lots of valuable customer data on numbers like site views and the amount of resources their customers use for hosting on their servers. In a recent poll of their customers, almost 50% said that lack of funds was inhibiting their online presence or ability to advertise online to try to increase revenue. So access to capital is good for GoDaddy as their customers will spend more on online services including services they provide. For Kabbage, the move is equally good. Kabbage already has a well-established system for qualifying and funding their loans and credit lines. That GoDaddy can provide exclusive hosting information and data as one of the data points they use in lending decisions is good strategy.
Square Beats Quarterly Estimates, Boosted by Bitcoin
Square beat its Q3 estimate of 20c per share by earning 25c per share. Adjusted earnings with the common name of EBITDA (a good proxy for operating cash flow) was $131 million, above the $111 million estimate.
One of the most interesting aspects of this report is the growth of Square Cash aka the Cash app. Its revenues jumped 115% on growth of Bitcoin sales.
Source: Investors Business Daily
My Take: Square is one of the best run fintechs IMO. Their Bitcoin sales alone generated $2 million in profit for them, a stat I’m super excited about. Square is a big believer in Bitcoin and the Cash app is one of the easiest and cheapest ways to buy Bitcoin in small amounts. I’m a big fan. They are growing smart with Square Capital loans for customers where they already have their payment data. And the smart growth continues with the Cash app and Bitcoin.