By Patricia M. Voorhees
As also reported in Leasing News
The fifth annual LendIt Conference focusing on all things Fintech was held last week at The Javits Convention Center in New York with more than 5,800 attendees – up from 3,600 at last year’s San Francisco conference. The international attendee roster hailing from more than 40 countries was comprised of 29% Fintechs, 26% investors, 18% banks, 25% service providers and 2% media, education and government. In addition to keynote presentations, the conference featured eight Fintech tracks including new tracks addressing asset-based financing for equipment and autos, bank partnerships and digital banking, and financial inclusion.
Scott Sanburn, CEO of Lending Club, kicked off the keynotes by enthusiastically sharing the company’s focus on investing in the future while acknowledging the events last May that led to his predecessor’s departure and dramatic reductions in valuations, confidence, and investment in the online lending sector. Sanborn conveyed a sentiment echoed by many other CEOs throughout the conference: the online lending market is a little more mature and eyes wide open after the events of 2016 nevertheless bullish about the future of Fintech.
Other notable keynotes included Alex Tapscott, the author of Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World. Tapscott discussed the burgeoning blockchain technology –itself the subject of many conference break-out sessions – and reviewed the potential impact in financial services and other sectors such as the music industry. Thomas Curry, comptroller of the currency for the US Department of Treasury, participated in a Q&A session about the proposed national Fintech bank charter. He said that his office is currently accepting comments and will convey more specifics about the potential charter when this process is complete. Noah Breslow, CEO of OnDeck, noted the following five critical steps that online lenders must take to be “built to last.”
- Move from transactions to lifetime relationships with customers
- Manage both credit and operations risks in the business
- Get to scale, then emphasize profitability versus pure growth
- Diversify and lock in longer term funding sources
- Engage with policy makers to develop a sound regulatory framework.
The track on asset-based financing for equipment and autos included my presentation about key trends in equipment leasing as well as panel discussions on asset finance and auto finance. My presentation emphasized the strength of the equipment leasing asset class versus others discussed at the conference, noting that the only asset that has performed better than equipment leasing over the last 20 years is US Treasuries due largely to the secured, essential use nature of equipment leasing assets. The cost of-funds advantage that lessors of scale with demonstrated performance and use of securitization enjoy over Fintech SMB loan providers is over 300 basis points. Comparing the reported third quarter 2016 OnDeck blended cost of funds of 5.8%, to medium-to large-independents with an average cost of funds in the 2.5% range highlights this fact. I further noted the growing trend toward financing decisions being made at point of sale and increasingly on mobile devices. The presentation can be downloaded from the following link:
The “How to Apply Tech to Asset Based Lending” panel was moderated by Bob Trojan, previous CFA chairman, and included Charles Anderson, CEO of Currency, Paul DeDomenico, CEO of InterNex Capital, Miles Herman, president and COO of Leaf Commercial Capital, and Jeffrey Rogers, CEO of Liftforward. A common theme throughout the discussion was the commodity nature of capital and the need to focus on a technology enabled, differentiated customer experience while not compromising sound underwriting and portfolio management.
A panel reviewing existing partnerships between banks and Fintechs discussed the Santandar Innoventures/Kabbage relationship as well at the FifthThird equity investment in ApplePie Capital and the JP Morgan Chase/OnDeck alliance. The focus of the discussion was the delicate balance between completing bank level vendor diligence with the limited resources Fintechs have while preserving their differentiated offering in a compliant manner.
Of note was the large number of Chinese Fintechs in attendance, which, given that China is far and away the world’s biggest market for digital payments (as reported by The Economist), was no surprise. Dianrong, a leading Chinese Fintech, announced the completion of a joint proof-of-concept project with Foxconn, the electronics components contractor, on using blockchain to improve supply chain speed of payments and sub-contractor verification process. The benchmarked processes should result in significant cost savings and improved delivery reliability in Foxconn’s large supplier network.
For the first time, the conference included a Women in Fintech Luncheon hosted by Paula DeLaurentus, LendIt CMO. The invite was sent to all attendees to secure seats for the first 75 RSVPs. Within a few hours, they received 500 RSVPs and 100 of us were lucky enough to attend. The fact that women were in the clear minority at the conference was discussed (my observation is that it was well under 20%). The luncheon featured insights from a panel of LendIt Women-of-the-Year award winners: Olympia De Castro, partner, Strategy & Investments Community Investment Management; Andrea Gellert, CMO, OnDeck; Jilliene Helman, CEO, RealtyMogul; Krista Morgan, CEO & founder, P2Binvestor; Kathryn Petralia, co-founder & head of operations, Kabbage; Denise Thomas, CEO & co-founder, ApplePie Capital; and Eva Wong, co-founder & COO, Borrowell.
Patricia M. Voorhees is a director with The Alta Group who is active in the consultancy’s M&A and Management Consulting Practices. She is a frequent speaker and writer about the intersection of Fintech and equipment leasing and finance. Her email is firstname.lastname@example.org, and she is on Twitter@pmvoorhees.