2.3: Lending & Personal Finance (Part 2)

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Do curso por The Hong Kong University of Science and Technology

FinTech Foundations and Overview

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The Hong Kong University of Science and Technology

FinTech Foundations and Overview

9 ratings

Our primary goal is to help you to understand FinTech and to become more confident and persuasive in your ability to analyze and make recommendations to executives within the finance industry regarding how to react to these changes. This FIRST MOOC ON FINTECH IN ASIA-PACIFIC offered by HKUST presents the views of several professors from the top business school in Asia as well as perspectives from industry professionals. HKUST has been ranked for many years as the number one EMBA program in the world, as the number one Finance program in Asia, and as the top MBA program in Asia by multiple independent rating and review journals and surveys. This course offers the combined strengths of HKUST in Business, Finance, and Technology as one the world's leading academic institutions on an important area of technology and business innovations. For students from outside Asia, this also gives an insight into changes happening in the most advanced FinTech markets of the world, since Asia leads worldwide in FinTech adoption and creative innovations. This course (FinTech Foundations and Overview) is part 1 of the HKUST FinTech specialization, there will be 3 other courses in the specialization including FinTech Security & Regulation (RegTech), FinTech Risk Management, FinTech Innovative Disruption: Implications for Society. The FinTech specialization will be launched in Fall 2018, stay tuned!

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FinTech Business Applications

The Business Applications of FinTech are essentially the Fin part of the FinTech world, and in this module, we will examine applications across six categories of FinTech, including lending and personal finance, crowd-finding and business financing, payments and retail transactions, equity, trading and investment applications, various types of cryptocurrencies, and banking infrastructure and tools.

2.2: Lending & Personal Finance (Part 1)11:38

2.3: Lending & Personal Finance (Part 2)8:09

2.4: Crowd-Funding and Business Financing (Part 1)9:05

2.5: Crowd-Funding and Business Financing (Part 2)6:16

2.6: Payments and Retail Transactions (Part 1)7:31

2.7: Payments and Retail Transactions (Part 2)8:32

2.8: Equity, Trading, and Investments (Part 1)9:58

2.9: Equity, Trading, and Investments (Part 2)7:41

2.10: Equity, Trading, and Investments (Part 3)5:36

2.11: Cryptocurrencies (Part 1)10:58

2.12: Cryptocurrencies (Part 2)12:45

2.13: Banking Infrastructure, Tools, and Logistics (Part 1)6:58

2.14: Banking Infrastructure, Tools, and Logistics (Part 2)7:36

Conheça os instrutores

Theodore Henry King CLARK
Associate Professor
Information Systems, Business Statistics and Operations Management Department

Another credit related firm or lending payment system firm is Credit Karma.

A Credit Karma doesn't provide loans directly to consumers.

All they do is help you out with your credit,

they provide you information.

So as a consumer,

you can go get a free credit report from Credit Karma.

You can also get some other value added services that

will help you improve your credit score,

or understand your credit score,

or protest something that's wrong.

Credit Karma will also provide you with

some consulting or additional value added services,

if you wish to have that.

But, if your credit is great,

your credit score is great,

they will also work with you and say,

"Would you like a credit card?

Would you like a mortgage loan?

Would you like a car finance loan?

I assume you were looking at your credit score for some reason.

Would you like some help,

or links to good companies?

That might be able to provide you great rates on loans."

And because Credit Karma has a good reputation,

and hasn't charged anything to its customers,

and they're feeling good about it,

they're feeling happy with it.

When Credit Karma makes these targeted ads or offers of helping you find financing,

it doesn't feel as odd or as commercial in its nature,

as do some bank commercials or ads.

You know, you get a commercial,

"Would you like a mortgage?"

And you're watching a YouTube video and you say,

"Go away. Skip Ad."

With Credit Karma, you're looking at your credit report and you're now thinking,

"I wonder what it would cost me,

if I wanted to borrow money to buy a car."

And Credit Karma says, "Have you been wondering about buying a car?

We have some great lenders that might be able to help you with that."

"Oh, yeah. I'll click there. What do you have in mind?

What do you advise? What do you suggest?"

And the banks love Credit Karma because they're getting

a lot of information and a lot of filtering of the front end to the customer.

So the banks are getting better referrals,

better leads, than they would from just a general ad.

They're getting something much more valuable from Credit Karma,

and they're willing to pay for that.

And the consumers are getting a more customized advertisement

that they're happier with than a general ad.

So Credit Karma is doing very well at making money.

They're doing this through referral fees and through banks,

being willing to pay for leads.

The final company I want to talk about is a company that

has been a pioneer and a leader in this industry.

They started in 1997,

when the internet was young.

Now, the Internet itself wasn't young.

I shouldn't say the internet was young.

The internet has been around a long time in one variation or another.

But the web was young.

The internet, as a visual graphic-based entity

rather than a text-based entity, was young.

And so they were an early e-commerce-like platform,

in the early days of web commerce.

So 1997, they started up.

They are very simple value proposition that would give you loans, easier, faster, simple,

particularly for mortgages and,

or auto financing, they were very easy to work with and very large.

They got some funding from Softbank, from Yahoo,

from Sequoia Capital, and that helped them get started.

In the first year, they raised $25 million in venture funding.

And eventually by 1998,

they had received an offer from Intuit to buy their company for 130 million.

And that's a big increase in valuation.

Now we're talking about four times jump in value in one year,

400 percent a year,

that's pretty good return. They turned it down.

More interesting. They did raise 25 million or 23 million,

I think it was from Yahoo for one quarter of their company,

which was a lower valuation but it allowed them to stay independent.

And eventually, they did sell the whole company to Popular Inc.,

a bank holding company, in 2005,

a couple of years later, for 300 million.

Mind you, this is after the dot com crash.

So even though not all companies were

now magically valued at big numbers like they might have been in 1998.

By 2005, we're well past the dot com crash,

and they're still selling out for huge multiple over

their initial listing of their company and raising of capital,

over their private placements.

So big gains for the founders, for the company.

So this is a success,

a cash out, for an early pioneer in payment systems, eLoan.

Now you may be thinking,

"But I've never heard of eLoan."

Yeah, they went away in 2009.

They went away before there were very many smartphones out there.

Before we have apps,

like we do today of Apple phones,

or Samsung phones, or our Google pay, they were gone.

Why? Because Popular Bank,

who bought them preferred to move

all the direct banking and direct lending under their own name.

So now it was Popular direct, not eLoan.

And so it's just a banks,

front end for originating loans, electronically.

And that bank paid a lot to buy this,

but they wanted to buy the capabilities, the technologies,

the ideas, the ability to assess loan risk in an automated way, and they got it.

They got it, they brought it in-house,

they turned it into their own brand.

And the FinTech startup is gone.

That doesn't mean FinTech is gone,

that means this particular startup was acquired by a bank,

the founder made money,

the early investors made money,

the users got great service,

and then it went out of business as a bank took over that business.

But then other firms started up in this space,

like our lending club,

or like Circle Fund in the UK,

or like Credit Karma,

and linking in to sell your bank lead information to financial service firms.

And so, many firms in this space,

there are lots of startups in this space,

literally hundreds of startups, some are big.

When eLoan was around,

it was more than a quarter of the entire lending space,

by the time it was bought out.

So, big firms, some big successes

sometimes merged into existing financial services firms.

Thus, you may say "The banks' view of this may be like Mark Twain once said famously,

'reports of my death have been greatly exaggerated.'

" Reports of the death of banks,

may well be greatly exaggerated,

but we may see FinTech firms getting merged in or purchased

by large financial institutions and becoming part of those firms. Thank you.

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