The vertical integration of SoFi has the core entry point right!

sofi

There is a question that beckons for an answer.

In this fluid world, owning the customer is the challenge.

Each individual is managing a balance sheet, e.g. assets and liabilities.

Serving which side of the balance sheet, will prove to be the best entry point to develop a long lasting relationship with the end-customer?

Tech-enabled financial services are not a dream anymore. From telcos, to internet providers, to social networks, they can all aspire to offer financial type of services. Starting with basic personal financial management tools (PFM), to transactions services, all the way to investments. Most PFM and transaction related services are already very low margin services and heading to zero. The remaining higher margin services are further down the value chain and mainly related to investments. Despite the fact that margins in some segment of investment services, are being squeezed from low cost online offerings (robo-advisors), there are still substantial margins that remain. Even though they are decreasing also, they don’t seem to be heading to zero.

Markets are efficient but the time needed to reach this equilibrium type of state, is uncertain. Technology is altering the investment segment of financial markets and creating havoc for financial advisors and asset managers alike.

Seems like there is a new segmentation being formed in the investment segment of the market, with one part of it being cannibalized and another part not. But the latter one, has no other option but to redefine its value proposition and is being pushed towards some kind of Vertical Integration.

At the same time, we have to admit that technology has not been able to sweep the unadvised assets, still sitting around despite the negative deposit rates in most of the world and despite the old-fashioned vault keeping services that deposit taking institutions offer. We have been pointing to this fact,

The Unadvised Assets, and the quarterly data that we collect show no significant change in the “Lazy Cash” figures.

(Read Oh, the things you could do with the enormous Cash pile!). That covers the asset side of most balance sheets of individuals.

On the other side of the balance sheet, there are our liabilities or our debt. This is the part that actually weighs more than saving and investing. From a more holistic perspective, the debt side of our balance sheet is heavily defining our decision making, our life-style and is more sticky. Debt decisions and debt management, affect much more our life. They not only are typically, larger in size, both absolute and percentage wise, but our life is much more sensitive to these factors.

In other words,

allocating capital and managing the risk on the debt side of our balance sheet is larger, more complex, and determines whether we reach our goals or how far away do we end up. This is primarily where we all need advice (human, bionic, hybrid) in the first place, and subsequently in the investment segment of our finances.

Incumbents and Fintechs, for the most part, have got this order of priorities wrong!

Incumbents have a long history of silos between business units, segmentation by product areas, and very low cross-selling rates. The large ones are struggling with the daunting task of integration, platformification, or a holistic approach to the existing large customer base.

Lets watch and see, whether Marcus for example, the consumer lending innovation from Goldman Sachs truly succeeds in destigmatizing personal debt (check out Will Goldman become a verb? Watch the Marcus ads!)? And then, in an invisible way, manages to simplify your first mortgage. And create a full stack for the customer, by integrating their deposit taking offering, their debt offering and management, and their investment capabilities.

On the Fintech side, will it be Betterment which is investing its recent large (for the robo space) funding round into the investment segment of our financial needs, that will invisibly move from its current Home improvement loan offering in certain states, to a full fledged mortgage offering?

Or will it be SoFi, who is investing its ten fold recent funding, into the mortgage segment already, that will easily move into the investment robo-offering later?

SoFi has been growing through the refinancing part of the value chain starting from student loans. From that same niche, they have been growing for more than 3yrs, their mortgage business. In other words, they have been advising their customers on how to manage their debt, from student loans to mortgages! In November, SoFi announced a partnership with Fannie Mae and a new offering, the Student Loan Payoff ReFi.

With SoFi’s new offering, the Student Loan Payoff ReFi, homeowners will have the ability to refinance mortgages at a lower rate and pay down the balance of an existing student loan. With its cash-out refinance student loan payoff plan, SoFi will pay down the student loan by disbursing payment directly to the servicer of the student debt. SoFi is a Fannie Mae approved seller servicer. Source

 This is not just another offering that is cheaper and faster. This is about parents who have co-signed student loans, that will be able to free up their digital assets. It is also about homeowners that manage student debt, being able to optimize the way they manage their capital and risk.

While the headlines are focused on the Zenbanx acquisition (covered in SoFi buying Zenbanx either signals the first Mega NeoBank or a unicorn losing the plot), what is really happening is

the creation of a platform business that is about managing both sides of the balance sheet for retail customers, that has been built around the core business of advising retail on the debt side.

SoFi is a business innovator because it has the priorities right in building a successful business to serve retail customers.

SoFi has realized early on, that the value lies in managing the debt side of the balance sheet for retail customers.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge Network. Efi Pylarinou is a Digital Wealth Management thought leader.

Wrap of Week #7: CXA, Calpers, Sofi & Zenbanx, P2P lending, Innovation

acquisitionmambo-no5screen-shot-2017-02-10-at-13-02-26

This week we wrote about the discomfort of uncertainty, as an essential part of innovation. Read Embrace uncertainty to give your fintech start-up the edge.

In Insurtech dont miss our insights in CXA Group $25 million Series B shows the maturing of InsurTech and future of Innovation Capital.

We devoted two days in the growing private markets, starting the week with Calpers and the quiet data driven disruption of Private Equity and ending the week with our insights in SoFi buying Zenbanx either signals the first Mega NeoBank or a unicorn losing the plot.

Last but not least, don’t miss reading A little bit of P2P is all I need – Mambo in Lending while listening to the Lou Bega’s classic.

The Fintech Genome platform

Join any of the conversations on the Fintech Genome. The global community is sharing insights, creating great conversations, and business is starting to happen.

Check the latest topics that include ICOs, binary options, crowdfunding, digital asset marketplaces, etc

screen-shot-2017-02-19-at-5-54-55-pm

If you enjoy reading the Daily Fintech insights by our experts è Subscribe to this newsletter.

If you want to engage and converse with the Fintech community è Register on Fintech Genome. 

A little bit of P2P is all I need – Mambo in Lending

mambo-no5

Ladies and Gentlemen, the lending sector merits a Mambo song and I’ve started the lyrics for you all to create your own version.

A little bit of Prosper in my life

A little bit of Lending club by my side

A little bit of Funding Circle is all I need

A little bit of Lending Home all night long

 

A little bit of Monica in my life
A little bit of Erica by my side
A little bit of Rita is all I need
A little bit of Tina is what I see
A little bit of Sandra in the sun
A little bit of Mary all night long
A little bit of Jessica here I am
A little bit of you makes me your man 

There are dozens of platforms for your Sandra, Tina, or Mary; and most of them offer ways for retail to access the primary market of loans, be it consumer loans, small business, student, invoice, real estate loans etc. However, it remains tedious and complicated to manage portfolios be it 10k or 100k or more. Diversification leads to having to deal with Thousands of orders and even then, retail can’t optimally spread holdings across the FICO spectrum and at the same time be diversified with respect to other risk factors (e.g. industry concentration, geographic concentration etc.).

Bottom line it is really hard work to manage a portfolio of P2P loans on a platform. Monica, Erica, Rita,… are high maintenance! Hector, a NY based retail investor on the Prosper platform, attests to that too in Back to the future of P2P Lending, we interview one of those peers.

Add on to that reality that often retail will be “politely” front-run by those managing loan portfolios with the quantitative support that retail doesn’t have.

Most mass affluent retail investors that could allocate 100k or more to P2P loans (viewing it as a fixed income alternative with a reasonable expected risk-adjusted return compared to high yield) would and should be looking to diversify beyond one single platform.

No matter how wonderful Monica is, it is very sensible to have Jessica or Mary also on one’s side. It reduces platform risk and it reduces lending subsector concentration risk (smallbiz, invoice, real estate). These are even more important in a market that has taken a step backwards in terms of its progress in developing a secondary market. Remember that in the US lending market right now, we only have Lending Club that hasn’t shut down its secondary market business. Prosper did. At the same time, note that Small Business loan platforms like Funding Circle require 50k minimum which makes it very hard for retail to include it in a diversified loan portfolio.

Add on to that the Faith and Trust that retail needs to have to any and all of these platforms in terms of their credit assessment algorithms, because realistically speaking there is no way for a retail investor to perform any due diligence on that front.

With all these considerations in mind, I go back to humming

A little bit of P2P is all I need

A little of Prosper in my life

A little bit of Lending club by my side

A little bit of Funding Circle is all I need

A little bit of Lending Home all night long

This is the exact mix of platforms included in a soon To Be Issued fund by LendingRobot, a SEC registered investment advisor. They have been assisting investors to manage P2P loan portfolios over the past 5 years. They have recently offered an automated service for 45bps per year that employs ML algorithms. This has been in the form of a managed account up to now. Lending Robot will soon launch a hedge fund for accredited investors that employs the ML algo and invests in these 4 platforms.

In the US, there aren’t many listed vehicles for retail to invest in the marketplace lending space. There are a few publicly traded stocks (if the equity part of capital structure is what you are looking for)

Market capitalization in Bil

Lending Club – LC

$2.4

Lending Tree – TREE

$1.33

Yirendai – YRD an ADR from the East

$1.17

OnDeck – ONDK

$0.3

There are plenty of quasi-lending bets that a retail investor can also consider through ADRs of Chinese companies in the Internet of Finance space which has heavy lending components. The likes of Alibaba, JD Finance, Tencent could be considered but of course, these are broader plays. Renren (RENN) is one that retail may have missed because the brand is associated with a social internet platform with a focus on games, social commerce, social networking etc. The market cap of this tech platform is close to $14bil. Did you know however, that Renren has significant equity holdings in SOFI, Lending Home? Lendacademy reported

“Renren has participated in SoFi’s series B, D, E and F rounds for a total investment of over $242 million. According to the 2015 year end report, “The Company held 28.85% and 21.20% equity interest of SoFi as of December 31, 2014 and 2015, respectively.” 

I suggest that it would be better to consider buying SoftBank, the Japanese telco & internet giant (SFTBY ADR) because through the Vision Fund ($100billion!) they have invested heavily in SOFI.

“the conglomerate – Softbank- convinced SoFi to eliminate the idea of an initial public offering (IPO) and allocate the $1 bln investment to accommodate SoFi’s growth.” Source

Moving to another part of the capital structure, River North Marketplace just recently (in Sep 2016) launched a closed-end fund RMPLX which investors can buy any day but you can only redeem four times a year (AUM $40mil). Lots of diversification offered:

“buying from a few different originators, we get diversification there from an idiosyncratic risk that might arise at one originator, as well as we get different types of loan segments, so unsecured consumer, small business and specialty finance… there’s diversification in those different segments. Then, again, to further thinking about diversification, there is diversification across geography. We have loans in all 50 states. We have a variety of different credit characteristics, so there’s lots of diversification in this pool.”

In the US, retail investing in marketplace lending requires and will require for a while, Monica, Rita, Jessica, Tina and Mary on our side. Lets keep Mambo humming and diversifying as we are chasing investments that can generate yield on a reasonable risk-adjusted basis.

Europe offers more closed-end funds that make sense to consider for UK residents but are have additional complexities for other Europeans due to differential taxation and currency risks. Orchard platform, a leading Fintech focused on the secondary P2P loan market for institutional (NsrInvest is more for retail) tracks these funds in their weekly snapshot.

orchard-snapshot

 

Premium/Discount (rounded) NAV in millions
P2P Global Investments (P2P)

-20%

£608 Mixed with equity
VPC Specialty Lending (VPC)

-17%

£293 Pure multi sector loans
Funding Circle Income Fund (FCIF)

+7%

£172 Pure SME loans
Ranger Direct Lending (RDL)

-8%

£160 Multi sector (pure) loans
SME loan Fund (SMEF)

-7%

£49 Pure SME loans

A glance at this ranking, explains why Funding Circle will be looking to raise more shares this year (ordinary upon approval of existing shareholders or C shares). Seems also that the SME focused fund structures are favored over the multi-sector ones (including consumer loans etc). This snapshot also leads us to continue mambo humming in lending with Monica, Rita, Jessica, Tina and Mary on our side.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge Network. Efi Pylarinou is a Digital Wealth Management thought leader.

 

Wrap of Week #6: Regulatory competition, Robos & systemic risk, Xero & SMEs, N26, Reinsurance as a service.

daily_fintech_email_logo_portrait-01-02

We started the week with a focus on policymaking and regulations. Fintech Regulatory competition heats up as governments calculate the economic return on innovation.

We prompted great discussions after sharing our insights regarding the comments of the Governor of BOE. Read I am with French when it comes to robo-advisors.

Consumer banking is being transformed; N26 is using an app store to become a digital universal bank.

In Insurtech we are moving from vertically insurance companies that control the whole stack to a horizontal stack with services at the application layer by consumer facing born-digital ventures. Read Reinsurance As A Service.

Fintech for small businesses is a huge opportunity. Read Xero opens the door for fintech banks to become SME advisors.

The Fintech Genome platform

Join any of the conversations on the Fintech Genome. The global community is sharing insights, creating great conversations, and business is starting to happen.

Check the latest topics that include ICOs, binary options, crowdfunding, digital asset marketplaces, etc

screen-shot-2017-02-12-at-11-40-20-am

If you enjoy reading the Daily Fintech insights by our experts è Subscribe to this newsletter.

If you want to engage and converse with the Fintech community è Register on Fintech Genome. 

I am with French when it comes to robo-advisors

“Do the Brits continue to be ill-informed?”

As a standalone statement it is definitely very political. But bear with me and I will explain myself.

For this post, I looked around for an image for Systemic Risk. My inclination comes from being a graphic novel aficionado and having flirted with the idea of graphic storytelling while living in the birthplace of Marvel and Drawn and Quarterly.

Should I have picked explosives, or an earthquake, or simply the year 2008? None of these capture the essential element of “Systemic Risk”, which is an event whose consequences will require Central level intervention because the stakes are too high to leave it to the market forces.

Even though it has been 10yrs since the last major systemic event, the memory hasn’t dissipated especially behind the walls of Central banks, Regulators, Treasuries and the such.

Brits behind the walls sniffing around for signs of systemic risks

Jan 2016

Lord Alain Turner spiked Twitter impressions with his media comments in early 2016 around the systemic risks of the P2P lending space. As is customary in the media, his remarks were singled out.

“The losses which will emerge from peer-to-peer lending over the next five to 10 years will make the bankers look like lending geniuses,” said Turner on a BBC program.

Lord Turner, ex-chairman of the FSA, reversed his thinking before year end at the Fall London Lendit conference that I personally attended. He said that MPLs (market place lenders) may prove to be the spare tire in the next crisis. He claimed that peer-to-peer lending platforms could actually help reduce the risk of a future financial crisis. I agree with him in that the MPL sector is more than a spare tire already, in terms of mitigating the “Too big to Fail” risk that was the nightmare of the 2008 financial crisis. I also agree with Lord Turner that the multiple and complex risks of the broad, predominantly over-the-counter lending market are very similar within the “Castle” of the regulated financial system and within the “Fintech valley” of the self-regulated (partly) Altfi scattered ecosystem. From cyber security issues, to due diligence, to legal structuring, etc; these are structural issues that are inherent no matter what the delivery process is.

The conversation around this topic is live on the Fintech Genome and insights are welcome.

If one is sniffing around for the exact same kind of 2008 systemic risk (i.e. too big to fail) then I say that you wont find out coming out of the MPL space. Of course, black swans include those risks that we haven’t thought of.

Jan 2017

Carney, the governor of the Bank of England, showcased his concern around robo-advisors posing systemic risk to the financial system at a recent G20 conference meeting.

“Robo-advice and risk management algorithms may lead to excess volatility or increase pro-cyclicality as a result of herding, particularly if the underlying algorithms are overly-sensitive to price movements or highly correlated,” Carney told the conference.

Scalable Capital UK chief Adam French, decided to publicly defend the sector through an open letter which you can read on their site (instead of media excerpts).

I agree with French that for now, the money managed by robos globally (standalone and from incumbents) are clearly less than1% of managed assets. Honestly, the Customer Acquisition Cost (CAC) has proven to be very high and the growth rates of standalone robo-advisors are nowhere close to showing signs of overtaking the asset management industry. Actually, what is growing faster is the leapfrogging of incumbents into the robo space. Brokerage houses are the main adopters simply because their business is experiencing a type of second world war threat (first WW was the online brokerage digitization wave); followed by incumbents like Vanguard, Blackrock, ING, etc that are adopting variations of the business model parallel to their business as usual.

Current evidence shows, that

The majority of robo-advised AUM is by incumbents not by standalone robos. So, leave those kids alone.

Why voice concern for assets managed through robos, since the processes used don’t differ from those used by conventional practices?

  • Algorithms used are no different than those used by conventional managers or financial advisors. Mostly MPT based and in some case risk attribution (like Scalable Capital).
  • The ingredients are basic and liquid and used by conventional asset managers and financial advisors.

Would or should there be an central concern, if we woke up one day and realized that flows of funds shifted into actively managed vehicles that were using predominately passive low cost financial structures? I don’t think so.

Such kind of “herding” has been inherent in the system and more so, as the asset management business is consolidating and we live in a world that a few Blackrocks, Vanguard, etc can survive. Independent asset managers of medium size are struggling to stay afloat as standalone businesses. Did you not notice the recent move from Calamos (NASDAQ: CLMS) one of the few remaining public independent asset managers, that has been taken private?

Shouldn’t the attention be on those entities managing the majority of AUM through basic MPT asset allocation frameworks?

Look for concentrations within incumbents not at standalone robos. So, leave those kids alone.

I’ve always thought that robos could and should differ from the conventional way of servicing smaller amounts of wealth, in two main ways:

Batch One:

(a) Reduced Cost and transparency,

(b) Risk-adjusted performance transparency,

(d) fiduciary duties

Batch Two:

(a) Goal-based investing

Reduced and transparent costs have been the marketing strength of the robo-advisory business model. This is of no concern to central authorities, on the contrary.

The fiduciary responsibility or lack thereof, is of course the main concern. To put this in very simplistic terms, as long as you leave your money to be managed (i.e. not withdraw) the robo-advisory business model entail less incentive conflicts (i.e. a financial advisor selling a fund etc).

It is a simple algorithm (asset allocation – e.g. x% equities, y% fixed income, z% commodities etc) or a more sophisticated one (risk attribution and maybe coupled with momentum analysis; tax loss harvesting may also be incorporated). The only human or emotional decision, which is no different in the digitized asset management delivery or the conventional, is to liquidate part of whole of the portfolio or to Top Up.

As the robo-advisory business model is moving to a hybrid (auto asset allocation + Call a human for an extra cost), I really don’t see the difference in terms of the incentives and the fiduciary duty.

Central authorities should start thinking of mass-market, true AI-driven, asset management. Now that is a tricky one. It has been around for the elite, through the Bridgewater likes. What if technology makes it a viable business model for the mass? How can we think of Deep-Learning (a specific AI application) being used for managing our 10k or 50k savings? The fiduciary responsibility lies with whom?

Add to your radar screen Deep learning applications to asset management, as a future source of concern. In the meantime, please leave these kids alone.

If you want to understand more on AI, ML, Deep learning, listen to this primer because “Software is eating the world”.

Robo-advisory businesses will evolve and grow up and in some ways look more like their old-fashioned ancestors. My concern is that they have not taken the next step in terms of Transparency. They started with the Cost Transparency and reduction campaign. But the bottom line of the financial business is to create wealth. This means offering performance.

Lowering costs of execution, advise, custody, reporting etc is the first step. This is actually low-hanging fruit in 2017. Now, where is the performance? Where is the Risk-adjusted transparent performance?

Why are robo-advisors not reporting online, transparent risk adjusted Actual performance? Simply moving model portfolios online, isn’t an innovation. Simply measuring internally, performance and risk isn’t an innovation.

Contributing actual performance statistical data towards the development of some kind of Robo-Index, that can be used for internal improvement and for offering transparency to end-customers; is the way to go.

Are you a robo-advisor managing assets and want to know more? Drop us a note in the comments below.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge Network. Efi Pylarinou is a Digital Wealth Management thought leader.

Wrap of Week #5: Mainland China Fintech thematic week

The year of the Rooster is upon us and both the size of the market in China and the unique accelerated pace of fintech innovation beckons us to turn our head towards the East and pay attention to what is happening there.

You can start with our introduction and follow the order of our posts, on WealthTech, Smallbiz, Insurtech and MPL. Or you can pick what interest you the most.

Introducing China Fintech Week

Digital Wealth – Shùzì cáifù – in China

No score, no problem. The lenders opening up access to SME credit in China

The Zhong An IPO in China could be the Netscape moment for InsurTech

With Lufax, Marketplace Lending is becoming a 4 horse global race

The Fintech Genome platform

Join any of the conversations on the Fintech Genome. The global community is sharing insights, creating great conversations, and business is starting to happen.

Check the latest topics that include P2P investments, digital asset marketplaces, mortgageTech. etc

screen-shot-2017-02-05-at-10-30-35-am

If you enjoy reading the Daily Fintech insights by our experts è Subscribe to this newsletter.

If you want to engage and converse with the Fintech community è Register on Fintech Genome. 

 

Digital Wealth – Shùzì cáifù – in China

screen-shot-2017-01-27-at-3-03-03-pm

Heading into 2015, China had US$21 trillion dollars pent up in bank deposits. With such a large, investment hungry population with so much ready-to-invest capital, anyone with a WealthTech business idea can only start salivating.

Be careful and contain your excitement around this huge single market opportunity. There is no doubt that strong favorable winds are blowing in China because of:

  • Very high internet penetration
  • Reduced anxiety over data privacy
  • The internet of finance birthplace
  • Government support for innovation
  • A nationwide credit scoring system underway
  • Openness to Collaboration of restrained banks with fintechs
  • Capital looking for investments

On the other hand, look at who is already positioned in China to offer wealth management products and examine how they are delivering these services.

The Internet of Finance refers to financial services delivered through digital platforms (digital from birth).

Digital money-market type of funds

The money-market funds typically sold by the Charles Schwab’s or the HSBC’s in the West; are offered e-commerce giants in China. We are all familiar with the Yu’e Bao fund of Ant Financial (Alibaba when it was launched in June 2013), which by the way was met by the media with great skepticism since there were already more than 200 such funds in the Chinese market. Was it for small-size savers or was it for typical clients of wealth mgt services at banks?

To cut a long story short, the remarkable path of asset accumulation (summer of 2016 AUM 772 billion yuan (=$116 billion)) is even more stunning as the AUM growth occurred even though rates of return declined.

The fund started with initially offering 7.5% interest rates compared to 0.39% maximum interest rate that China’s national banks could give out. The Yu’E Bao rates are now only able to pay out an annual interest rate of 2.5%.

The fund is run by Tainhing Asset management and integration with Alipay, facilitated the growth of the retail user base. By mid 2016, there were close to 300,000 users reported.

Li Cai Tong’s fund by Tencent and Baifa fund offered by Baidu; are also major players in this space which continues to incentive users by offering better rates and better user experience.

Stock Trading apps

Broader Fintech type of activity in China is seen in the PFM space both from the e-commerce giants and the P2P lending platforms. Stock trading apps have been launched by several such platforms and are the first signs of integrated platforms that address investment and funding needs of individuals and their businesses.

These apps offer access to trade-invest in A-shares and mutual funds or structured products that are more diversified options. They are all heavily used by brokers (over 90% of usage) who form their end, tap into the growing customer base of these tech businesses. Some of the players are the ever present trio BAT, JD finance, Credit Ease, Wacai, and Tongbanjie. The latter two are standalone Chinese mobile apps. JD Finance is the financial subsidiary of e-commerce giant JD. They are in the process of following restructuring the organization and following pretty much the spinoff steps of Alibaba-Ant Financial. Credit Ease, run by publicly traded Yirendai (NYSE: YRD) was setup as both a lender (small business and consumer) and a wealth mgt business focused more on the middle and upper end of the wealth spectrum.

In addition to these local players, there are already noteworthy moves from foreigners positioning themselves through local partnerships in the stock, fund trading space. These strategic moves makes sense given the much anticipated increase of the limit for Chinese individuals for overseas investments and at the same, establishing a sensible presence in the local market.

Currently, Chinese investors can only trade overseas equities through the “QDII = Qualified Domestic Institutional Investor” framework which offers quotas to select institutions, which in turn channel to each Chinese citizen an annual exchange “allowance” of US$50,000.

Robinhood, the US-based free stock trading app, formed a partnership with Baidu in summer 2016 to tap into the mass market of Chinese citizens by offering them US stock trading access. They also launched their Chinese app, named Luobin Xia (罗宾侠), for US citizens in mainland China.

Another different partnership of two Asian Fintechs and an established global financial service provider originating from Europe, is that of Saxo Bank, WEEX, and Lean Work. The Chinese online trading platform WEEX of WallStreetCN, partnered last summer with Saxo Bank, the Danish-origin multi-asset trading business, and Fintech startup LeanWork to tap into the mass market of Chinese speaking users. Lean Work is a Shanghai based startup, focused offering cloud based risk management, back office, trading and brokerage solutions. The 15million monthly users of the WallStreetCN financial media business (a 3yr old financial content startup) will gain access to over 30,000 instruments via this integration.

Brokerage, social trading, robo-advisors

The lines between stock trading apps (linked to third-party brokers) brokerage businesses with bells and whistles, and robo-advsiors; are blurred. The grouping I have chosen is more for the sake of simplicity.

Tiger Brokers (Bejing based) is a 2yr old Fintech broker targeting the overseas investing market segment (Hong Kong and US). One of the largest mainland China brokers, Citic Securities (Shengzen based) participated in the Dec 2016 Series B funding round ($29mil) which will be used mainly to boost Tiger broker’s big data capabilities in financial advice. Xiaomi participated in the Series A round.

Jimubox (Bejing based) the Xiaomi backed marketplace Fintech, launched a trading app mainly to serve the overseas channel, the Jimustock app.

Snowball Finance (Bejing based) is a Fintech with a social information and investment platform that plans to add brokerage capabilities (Sequoia Capital participated in their $40mil series C in 2014).

ChaoTrade, is a newly launched social trading Fintech platform.

At the same time that Robinhood launched Luobin Xia, 8 Securities launched their free-trading app in Hong Kong, with an AI feature, Chloe, that can educate and help users in their investment discovery process.

In the summer of 2016 which is clearly a turning point for the Digital wealth space in China, CreditEase launched a robo-advisor in mainland China, ToumiRA. The offering allows overseas investing via ETFs instead of the expensive and non-transparent way of managed accounts. ToumiRA was launched in partnership with the US based B2B robo-advsior DriveWealth.

Pintec is the other significant player in mainland China. Pintec is a Fintech group that spun off Jimubox. XUANJI is their robo-advsiory offering launched also in summer 2016. They have an onshore and offshore version; and they have a B2C offering in addition to a white liable offering.

Digital apps using machine learning for investment advisory are:

Micai Fintech launched in Spring 2015

Clipper Advisor, launched out of California and with a motto “the Wealthfront of China”.

Our Chinese Fintech startup coverage in this post on wealth management is focused on the B2C segment. Hong Kong is booming right now with B2B offerings that mainly targeting the South East Asian markets (Indonesia, Malaysia ect). Another post will cover those trends.

Wealthtech China

China is leading in the integrated digital wealth management movement.

Credit Ease, is one Fintech launched with that mission; the PINTEC group is similar in its broad scope and aim to become a full range financial services provider. Alibaba, Baidu, Tencent, JD, the e-commerce tech giants, are spinning off subsidiaries and taking the lion’s share from Fintech funding (skewing global reality also, with the huge lump-size funding rounds) and dominating the financial services space. They are leading the way of digital cross-selling.

In a report recently published by EY and DBS on “The rise of Fintech in China” it is noted that:

“ The willingness of Chinese consumers to adopt FinTech services is striking. Forty percent of consumers in China are using new payment methods compared to 4% in Singapore. Thirty-five percent are using FinTech to access insurance products compared to1-2% in many Southeast Asian markets. There are also significantly higher rates of FinTech participation in wealth management and lending.”

Happy new year China.

Thank you April Rudin for tweeting the jewelry designs for the New year in case your gold allocation has some room.

chinese-jewelry

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge Network. Efi Pylarinou is a Digital Wealth Management thought leader.