Wrap of Week #45: Open API thematic week

 

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The week started introducing the technology of Open APIs for financial services. Read the primer in Introducing Open API Week on Daily Fintech.

Banks are jumping on the bandwagon of “Open API hubs” for B2B experiments. For now, Fintechs are the ones engaging rather than other banks. More in Banking APIs: shapes, colors, and focus and in Banking on the API bundle of the future.

In insurance we covered a great example in the space, Root Insurance, where stacks communicate via Open APIs. Read more here.

In trading, brokerage and in investing, we already see more adoption of the API technology to create value, both from financial services players and from tech firms services the sector. More in WealthTech Open APIs: shapes, colors and focus.

The Fintech Genome platform

Join the conversations in this space on the Fintech Genome

Let’s build a List of Banking APIs

Will America and Asia follow the European lead with PSD2?

NLP and FinTech – Introducing a free text search API

Open Bank Project & JB Financial Group Launch Global FinTech Hackathon in South Korea

Join more insightful conversations on the Fintech Genome on other topics too.

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Wrap of Week #44: Business planning, Cash pile, Banking pipes, Swiss Insurtech, PFM

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As year-end approaches (store decorations are already reminding us), we have started reflecting on all sorts of issues in financial services.

Starting from business planning methodologies of Fintechs vs. incumbents Banks can learn from how Fintech Startups do Business Planning; read about the Zoom-in Zoom-out framework.

Staring into the huge pile of cash globally and by region (US, Europe etc) and inquiring about the places this could go. Oh, the things you could do with the enormous Cash pile! The conversation continues on the Fintech Genome here.

Examining Who’s building the banking smart pipes?, just as three VCs got radical by investing in a US regional bank that is selling pipes, Cross River Bank. The conversation continues on the Fintech Genome here.

Making the point that people don’t want neccesearily bank accounts, they want their money to grow. Another post related to PFM services in The Family CFO and how PFM and PSD2 could commoditize the bank account.

Finally, reflections and insights inspired in Reporting from #InsurTech2016 in Switzerland – the first country where Bitcoin may go mainstream.

The Fintech Genome platform

Join the conversations on the Fintech Genome with a snippet of your insights and knowledge; if you are interested in

A new Fintech rating agency

The controversy of free real-time market data

Virtual reality in Finserv

An open source Fintech business failure list

Fintech GBP sentiment

More in Lending, Insurtech etc…..

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Wrap of Week #37: MortgageTech, Catastrophe Swaps and Insurtech, Swiss Cryptofinance, Xero

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We curated a two-part series focused on MortgageTech, which was inspired by a conversation initiated by one of the members of the Fintech Genome – the P2P Fintech knowledge platform. The first part was an introduction to mortgage space (enjoy etymology and video) and the second part was a landscape report.

We zoomed into Xero as an enabler for small Business, in “A fintech apple a day can keep bankers away”.

We connected many different themes: Insurtech, blockchain, Catastrophe Swaps, financial inclusion innovation from incumbents. An example of unbundling in insurance.

We reported from the annual Finance 2.0 conference in Zurich that was focused on CryptoFinance, the vertical that is leading Swiss Fintech. The Internet of Value, Suing Smart contracts, and Bitcoin use cases; were the highlights

Check out the recent conversations on the Fintech Genome platform on:  Banking innovation in India, Fintech and financial advisors, the Fintech fixed income alternative, crowdfunding in home equity, social trading, challenger banks, etc

Read or engage; Check out  How to generate great conversations or listen to a podcast version from the moderators of the platform.

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. 

 

 

The Digital Mortgage Market II: Software, Platforms, Analytics, Apps, Chatbots, and Bitcoin payments!

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Kevin Simback and Josie Lee seeded the list of US companies using technology in the broad Digital Mortgage Market – MortgageTech. I keep the conversation categorization and add on a few names.

1 – Mortgage Enterprise Solutions – this includes offering Loan origination system (LOS) providers, marketing/lead gen/application/underwriting/fulfillment/closing platforms, servicing platforms and other component solutions targeted primarily towards originators, issuers and servicers.

Blend Labs, Cloudvirga, Preclose, Roostify, RealKey, and Ellie Mae

2 – Tech-Enabled Mortgage Lenders – companies who are in the business of originating mortgages directly to consumers. Also any form of tech-enabled brokerages, as long as the company has responsibility for taking the customer’s application all the way through underwriting and funding decision.

Better Mortgage, Lenda, LendingHome, Sindeo, Clara

In this broad category, Quicken/Rocket is the old time disruptor in the space that continues to innovate. Rocket is their new digital Launchpad already in the App store. However, they aren’t using any alternative data for credit scoring and approval. Sofi, on the other hand is using a different approach to this process for the approval of home loans. Bank of America, BoFa, is window dressing their processes by adverysiing a mobile mortgage approval process in this video. Along the same lines, an crossing over to Europe, Rabobank launched an Online mobile mortgage advice via video chat, In partnership with 24sessions, whose motto is to technology for online advice. In Germany, Interhyp, is already the best Mortgage provider for close to 10yrs. This is the fintech that ING has been operating successfully and covers more than 400 German lenders.

3 – Mortgage Data and Analytics Providers – companies aggregating and/or supplying data to mortgage originators, issuers, investors or servicers.

CE Anlytics, Cignifi, Loanlogix, Scorelogix, Nomis Solutions

I add four additional, more alternative startups that will enrich the conversation since they are worth monitoring.

Income& (Income And) that is offering investors access to PRIMO investing. In plain words, an alternative fixed income investment into to Prime rated individual mortgages. This is P2P investing focused on prime mortgages. The company launched early 2016, so very early stage.

Coinshark.io, is an app focused in the P2P lending space. They offer the ability to pay your loan with Bitcoin. Housing payments often are a large part of family budgets and for those compensated in bitcoin, this is app is useful and at the same, is storing all the relevant data.

Freedom Mortgage, an incumbent mortgage lender in the US, that is independent and privately held, has launched through a subsidiary BigFreedom, which is an App using Chatbot technology (watch a demo here) and aspiring to become an true online lender, the Uber of lending as they claim on AngelList.

Jungo is the mortgage app from Salesforce. But it is also the name of a Dutch startup (now over to Europe) that is looking to disrupt the mortgage market through crowd funding. They recently got approval from AMF to operate the P2P funding of mortgages form the crowd. In Holland there are already SamenInGeld and MetElkaarhypotheek of Obvion operating.

The conversation will continue on the Fintech Genome. The list is a starter; the challenges of the mortgage market are another broad topic that the community has started touching upon.

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.

The Digital Mortgage Market I: Mort (Dead) & Gage (Pledge)

This is Part I of a series looking into the Mortgage Market. The inspiration came from a great conversation that Kevin Simback , Director of Strategy at IBM Lending Solutions, started on the Fintech Genome, MortgageTech – the last frontier for Fintech? A starting list of companies focused on Mortgage.

The value of mortgage debt outstanding in the US is close to $14 trillion and around $1.5 trillion of new mortgages are originated annually. The market is complex in many ways. There are residential and commercial mortgages, and within each category there are primary or secondary residential, commercial or multifamily; there are FHA, VA, and all other sorts of Federal Home loan programs. There is the institutional lending part of the market and the private lending portion. The institutional continues to be dominated by a few large banks –Wells Fargo, Chase, JP Morgan Chase, Bank of America.

The process from approval, underwriting, closing, and then servicing, is complex and has a long life. Typical length for the closing of mortgage has been 25days. Typical lengths of the (debt-promissory) Note, is 10-30yrs. A variety of debt instruments are used; from floating rate, to fixed rate, step-up, amortizing with multiple types. Covenants related to the pledge, the property itself, vary and are covered in the second legal document that goes with a mortgage.

I can’t even scratch the surface of the history and the ancecdotes in the mortgage industry. I started my career at Salomon Brothers, 7 WTC in the ’90s and just behind the Structured products desk (where my post was), there was the Salomon Brothers Mortgage Desk. This was one of the trading isles where Financial Innovation was happening during trading hours. Sophisticated analytics were applied to arbitrage mispricing of all sorts of mortgages. The creation (in collaboration with Freddie Mac in the mid 80s) of CMOs (Collateralized Mortgage Obligations) happened right there. The slicing and dicing of home mortgages was invented on that trading floor; the stripping of IOs (interest Only), POs (principal Only), PACs, TACs ….etc

The entire ecosystem (agencies, underwriting banks, lenders, brokers etc) was thereafter, involved in growing the market through the securitization process which allowed replenishing of capital. Of course, many more benefits and risks that I won’t list here.

The accident happened in 2008. It started from the subprime lending part of the market (which seemed small compared to the overall size) but permeated the entire financial system in a way that NOBODY had predicted. There were players that had foreseen the subprime blowup and had shorted the shares of subprime lenders or had entered in credit default swaps with financial counterparties that had large exposure to the business; but the Black Swan that unfolded was not foreseeable.

Over the next couple of years, after the Lehman debacle, there are many noteworthy lessons to keep in mind around the complexities of the mortgage market. I will only pick on one, relatively simple, which Fintech can solve today in a heartbeat. This is the clock that was created in the US justice system, due to foreclosed houses that couldn’t actually be sold. The reason being that the lenders (pledging the collateral) were not able to find the Original promissory note (debt). The homeowners that found themselves in this situation, were lucky.

Back in 2009 I taught Real Estate Finance at Mcgill University and I created a fun fictional video, of an interview of Madame La Lendie from Larry King about his issue. Enjoy the storytelling, from the origin of Mort & Gage, to the facially defective foreclosure procedures.

Was the note not found because of negligence during robo-signing? Could it be that the mortgage ended up in a pool of securitized mortgages and the Trustee of the SPV (special purpose vehicle) was negligible? Could the lender have incorrectly, pooled this mortgage in more than one SPV?

DocMagic, providing solutions for loan document preparation, compliance, eSign and eDelivery solutions for the mortgage industry, can surely can deal with these issues. Roostify, has integrated the solution, as they have developed mortgage automation technology targeting all the chain form origination, issuance to servicing. Just a few days ago, they also announced their collaboration with the Mortgage Collaborative, an independent mortgage lending network of small, mid-sized and community-based lenders, in order to provide network members with access to Roostify’s mortgage technology platform.

Regulation around the mortgage market is one of the pain points that is keeping up at night those involved in the market. The costs associated with the reporting and monitoring requirement of this complex market, have been rising after the 2008 crisis. This is probably the main driver for innovation.

Accenture reports:

…that by 2020, today’s traditional lenders, who are not agile, do not embrace online technologies and are unable or unwilling to become more customer-centric, could lose up to 35 percent market share to new and current institution and non-institution lenders who adopt new business models.

…. Coupled with an expected rise in interest rates, which could slow the pace of refinancing and purchases, and as much as a 79 percent increase in origination costs since 2009, it’s clear that institutions need to focus on increases in efficiencies to reduce expenses.

Today, I close noting that the first Digital Mortgage conference is scheduled for December in San Francisco. Tomorrow in the second part of this series, I will look at companies that are using tech to address the issues at stake, some of which are presenting at the conference.

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.

How to generate great conversations on the Fintech Genome.

This is a podcast from the two moderators of the Fintech Genome, the new P2P Fintech knowledge paltform. Bernard Lunn and Efi Pylarinou, share a short conversation about the platform.

 

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