This past week, I had the pleasure to go to the 2nd Annual FinTech Global Expo (produced by Coastal Shows) in San Diego and sit on the Bitcoin panel entitled 'Beyond Bitcoin: The Block Chain Technology and its potential business applications'. It was great fun and there was an interesting focus on small business and real estate based lending platforms. There was some great new updated information there so I thought I'd share some of what I learned.
FinTech and Crowdfunding is truly Global
Due to my frequency of talking about lending to non-Americans in Bitcoin, this may not seem like something new to learn. What I learned is that not only is our industry global but many other countries are trying to put in fair but friendly rules so crowdfunding can become a part of their economy. Thanks to Jason Best of Crowdfund Capital Advisors, I learned about some of these countries including:
Malaysia: This is the most advanced Asian country on the development of both debt and equity crowdfunding platforms. Even Singapore and Hong Kong are trying to play catch up to Malaysia.
Mexico: The country in Latin America with the most current platforms (4 Debt and 2 Equity). Not far behind them and ready to roll out is Chile, Colombia and Peru.
The Funding Gap Continues
In small business lending alone, since the Great Recession, there still exists a funding gap of $550 billion dollars. This is all money that was lent to small business before the recession that is not being lent to them now. And that includes the recovery we've had since then. Per the Lendio presentation, the overwhelming percentage of these requests, 75%, are for loan amounts of $250,000 or less.
When reading about and talking about peer lending and crowdfunding everyday, it's easy to forget that not only do most people still not know what it is, but its original purpose was to step in and do what the banks were not doing. This specific need and purpose is still the primary reason for the existence and success of our industry and the need continues as the gap in funding is still quite large.
Regulation A+ is a big deal
The SEC recently released an update to its Regulation A, known as Regulation A+. The update is part of the JOBS Act. The amendments to Reg A are making access to capital for companies, especially small companies, startup companies and crowdfunding platforms more easily available and allow these companies to raise up to $50 million per year in what is, in essence, a mini-IPO offering. The Reg A+ press release with explanation of what it does from the SEC is right here.
When Bitcoin reduces its friction of use, it will be successful
When people found out I was on the Bitcoin panel, I got asked tons of great questions. Everyone had curiousity about Bitcoin and regardless of whether they were operating a platform, lending money or providing services to FinTech companies, they all wanted to know more. Nearly everyone of them had a cash or currency or payment issue they were hoping Bitcoin might help resolve or they were wondering about the potential applications of Block Chain technology to their field. Over and over, I heard the same thing after having discussions with these smart and engaging people.
'If it was or became easier to use, I would use it in my business'
Preach it brothers and sisters. I'm right there with you. There's no doubt there's a learning curve in Bitcoin although it does not have to be a long curve. Certain types of businesses like service business and consulting and trading goods and services across borders will likely adopt Bitcoin on a larger scale first. I like the super low transaction costs and ease of being able to charge and collect from my overseas clients in a uniform currency instead of having to get them to trade their home currency for dollars and give them to me through the correspondent banking system where both my client and I have to pay fees. A 1/3 of 1 cent charge for the Bitcoin network is pretty sweet.
The line between Lending and Payments will blur
This was a common theme in a couple of the talks and at least one of the panel sessions. The most common version of this discussed is using the peer/marketplace lending model as a way to offer financing at the store for big ticket items like a '6 months same as cash' from a furniture or appliance retailer. Both Prosper and Lending Club have acquired health care finance companies to offer financing on things like elective surgery.
Thanks to the speed and automation of these platforms, an application can be filled out on site at the store and often a decision within minutes. This is definitely one trend to be on the lookout for in the future.
The most collegial and collaborative area of Finance
I've been in different areas of finance for 20 years and this industry is the most friendly and collaborative that I've ever been a part of. The one common thread is wanting the marketplace lending and crowdfunding model not just to work like it already does, but to be sustainable over the long term. The result is an atmosphere where everyone thinks they are playing for the same team even when they are with platforms in direct competition with each other. They know when crowdfunding works on a larger scale, it makes us all successful. This was my favorite thing to learn here although I've seen it at the other meetups I've been to before.
Thanks to Andrea, Lisa, Kristen and the rest of the Coastal team for putting on a great conference.