Interesting piece of philosophy in nothing else. Klarna the worldwide phenomenon of the Buy Now Pay Later (BNPL) product puts down his success to the “dirty tricks” played by banks. He also acknowledges that he wants Klarna to become a de facto part of the lending establishment. Nobody would begrudge the chap his success nor his wish to make the world a better place but having been around in the low level finance area for at least some of my career I find the two things somewhat incompatible. His ambition was to start a business. Anyone with that objective does not do it for the good of the planet but to make money. On top of that he wants to take on the credit card companies and why not? But whatever he wants to do lending money to people who he knows nothing whatever about is not really unparalleled good news. The FCA is currently showing interest in the sector. There is a requirement for the product but it will over time attract a large amount of the wrong type of client. Those who can’t afford it, who can’t manage their finances and get themselves into trouble. Making billions out of these people is never going to get you into the establishment. This part of the market will never be flavour of the month.
Apparently Investment banking revenues are booming and with it the bonus allocation for those in the city. If anyone wants to know why this is when the world has just suffered a pandemic that has killed millions of people, I suggest that they read Tom Wolfe’s brilliant novel about Investment banking in New York “Bonfire of the Vanities”. It will tell you all you need to know. When I was trying to sync this article using Google more or less the same headline came up over and over again spanning the last two decades. In between this the masters of the universe had through design exported the systemic collapse of the US real estate market to practically every bank in the world and the taxpayers of multiple countries had borne the bills. Doesn’t seem fair does it: and its not but life isn’t fair. Just because markets are frothy and values extraordinary undeserving people earn lots of money. Giss a job.
In another familiar repeat performance Zopa gets a $ 1 billion valuation from SoftBank and is looking at an IPO sometime next year. Zopa ticks all the boxes. It posted an $ 18 million loss last year although this was mostly due to its spending on the new banking side of its operation. Zopa are acknowledged as experts in the peer to peer lending space but are now branching out into mainstream lending. One of SoftBank’s sallies this year was to have a punt on Greensill. You can’t win them all. The space is already beginning to look crowded and the values are astronomically optimistic. To cap this they have also invested in both Oak North and Revolut who are in the same crowded field. None of them look like they are doing anything very innovative but perhaps that is me just being cynical. All banks operations these days are digital to some extent. But digital banking is increasingly looking like small deposit gathering with payment capability tacked on. This town does not look big enough for all of them and if the losses continue to rack up expect some bargains to emerge from the inevitable wreckage.
Howard Tolman is a well-known banker, technologist and entrepreneur in London,We have a self imposed constraint of 3 news stories per week because we serve busy senior Fintech leaders who just want succinct and important information.For context on Alt Lending please read the Interview with Howard Tolman about the future of Alt Lending and read articles tagged Alt Lending in our archives.
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