SoFi moves into wealth management

By SoFi

Today, SoFi announced the general availability of SoFi Wealth, the first low-cost online wealth management platform to combine an easy-to-use online and mobile interface with unlimited access to live, licensed financial advisors, giving people the guidance they need to understand, define, and then work toward achieving their investing goals.

Features of SoFi Wealth include:

  • Smart Portfolios: SoFi Wealth helps people invest easily and intelligently by automatically building and rebalancing low cost, tax-efficient portfolios to generate long-term returns, while minimizing risk for individual and retirement accounts such as traditional deductible IRA accounts, Simplified Employee Pensions, and Roth IRAs.
  • Live Advice: SoFi is the only wealth management offering at this low price point to offer unlimited access to non-commissioned, licensed financial advisors, who are available via phone or chat.
  • Low Fees: Management fees are waived completely for SoFi loan borrowers over the life of their loan. For everyone else, management fees are just 0.25%, and are waived for the first $10,000 invested.
  • Low Minimums: A $500 initial investment or recurring monthly deposit of $100 gets investors started in SoFi’s goal-oriented portfolios of low-cost exchange-traded funds (ETFs).
  • Member Benefits: SoFi Wealth comes with access to SoFi’s suite of member benefits, like community events, career coaching, and discounts on other SoFi products.

SoFi Wealth users can access their accounts via the web, as well as the SoFi Wealth app, available now for both Android and iOS.

“People love the low fees and automation of robo-advisors, but they struggle with not having an actual human being to talk to when facing big financial questions. We’ve built something that perfectly balances those interests,” said John Gardner, general manager of SoFi Wealth. “For those who haven’t started investing, like younger professionals who make up a large part of the SoFi member base, that guidance from a live advisor can help give them the confidence they need to start planning for a lifetime of financial success.”

According to a recent Bankrate survey, less than a third of millennials invest in the stock market, and the most common reason cited by that group was not knowing enough about the market. A conversation with a financial advisor can be prohibitively expensive for investors just getting started, and the tools that are intended to cater to this group – robo-advisors – aren’t delivering on the advice side. In fact, only 5% of U.S. investors surveyed by Gallup feel that robo-advisors make people feel confident about their investments, and only 15% of investors think robo-advisors are meeting their needs by taking their entire financial picture into account.

To complement the guidance provided by SoFi Wealth Advisors, SoFi is also developing comprehensive financial planning offerings focused on its members most important needs outside of investing: first-time home buying, young family financial planning, and joint financial planning for couples. SoFi will begin delivering these highly-personalized, needs-specific plans this summer.

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Fintech unicorn Transferwise moves into the black

Fintech unicorn Transferwise says the company has reached operational profitability six years after launch.

The London-based currency exchange startup says it is currently amassing £8 million a month in revenue and is on target to reach £100 million for the year.

Transferwise more than doubled revenue in the year to March 2017, pulling in one million customers attracted by the ease and simplicity of its user interface and promise of fee-free foreign exchange rates.

The company, which claims a 10% share of the overseas money transfer market in the UK, says it expects to add another 500,000 customers over the coming year.

CEO Taavet Hinrikus says: “To have hit break-even just six years on from launch shows how strong the foundations of our business are. This is just the starting point. With the unique platform we’ve built, we’re looking forward to creating a new kind of financial services for the future.”

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Open APIs – Leveraging Banking As a Service to Compete and Collaborate

By David Donovan for Finextra

“Rolling in my Uber, that’s just how I use my time” – Travis Scott, Uber Everywhere Remix. 

Welcome to the world where hip hop artists talk about companies created in the digital economy powered by application program interface (API), a term once buried deep in the lexicon of software programmers and tech geeks.

APIs have enabled an ecosystem for companies from the tech titans of Amazon, Google, Twitter and Facebook to new entrants such as Uber and smaller niche companies. They’ve helped promote partnership and innovation, and build disruptive business models and platforms that serve digital consumers and businesses globally. Open APIs fuel the “as a service” model to deliver a frictionless customer experience.

Financial services participants are familiar to the world of open APIs. However, the change on the horizon is far more fundamental. The vision of the future most agree on is one where these organizations are smaller, leaner and much more digitized. That is evolving the conversation from one based on technical considerations, to one about future strategy enabled by APIs.

In Europe, regulators have been the drivers for introducing data sharing and promoting open APIs under PSD2. When compliance drives change it’s sometimes viewed as a necessary evil. But banks must realize there is more to this than a specific compliance deadline.

Banks should seize this opportunity to transform into the base for the connected user and the innovative firms that seek to add to that experience to generate and extract value in new ways. The real opportunity to add value is in building a model for digital customers leveraging partnership ecosystems, encouraging innovation,  and modernizing legacy platforms to offer innovative products and services.

With the goal to move to banking as a service, the open API model offers opportunities for banks to take a big step in that direction. Similar to an Apple store for services, open APIs can offer banks plug and play service capabilities across card issuance, mobile wallets, fraud monitoring, POS integration, customer support and more, all based off capabilities they already possess.

A tale of two continents

Banks have the one thing that challengers crave: scale. The problem is that banks cannot expect to emerge as the winners based on their size and ability to throw budget at the problem.

Today, incumbent banks guard their data and services making it hard to access them. Bundeskartellamt, the German regulator, recently said the country’s banking industry violates competition law by using roadblocks to deter competing online payment services. It’s clear that implementation of the regulation will focus heavily on access.

In Europe, PSD2 clears the barriers to entry for new players and removes revenue “sacred cows” making the position of certain service providers extremely precarious. It also defends the right of individual choice and information security in a transparent and easy-to-understand world as a basis, not a service. This is one of the reasons you also see a number of European banks with open API implementations moving into the market, be it Atom, Fidor (recently acquired by BPCE), Monzo, N26, Starling and so on.

In the US, the push for open API is more market than regulatory driven. It is also fueled by banks finding ways to move away from third parties pulling customer data to banks pushing data.

A very public example comes from JPMorgan Chairman and Chief Executive Officer Jamie Dimon. He dedicated an entire page of his shareholder letter last year to discuss the bank’s policy on sharing customer data with outside parties. To prevent customer data from being misused, JP Morgan, Wells Fargo and others stopped customer information “data sharing” and moved to build systems that allow banks to push data to third parties rather than pulling data at their discretion.

Wells Fargo made a splash last year when it created an API so small businesses can have their bank account data poured directly into the accounting software provided by Xero. CapitalOne has also announced a similar deal with Xero, with the API-based integration strengthening data sharing security for Capital One’s small business customers.

JP Morgan, Visa and MasterCard are also building an API ecosystem with selected partners and I expect we’ll see many, many of these types of announcements in the next six to nine months.

Building the right framework

Implementing open APIs is a journey. But with the PSD2 deadline approaching in Europe, there’s a real sense of urgency to enable an API framework. However, as a trusted partner, banks need to ensure open API efforts have the customer at the center of the decision making. It’s up to the customer to manage who sees their data, and the information must be shared in a way that is secure and encrypted with the proper checks in balances in place to see who is using the information.

Balancing transparency with data security and privacy is key to building an open API framework.

As you embark toward API frameworks, some key success factors to consider include:

  1. Customer value proposition—How does an open API framework impact customer experience?
  2. Architectural considerations—What’s the impact on cloud platforms, scalability, legacy system coupling and internal versus external API approaches? How are those married together?
  3. Regulatory framework—In Europe, PSD2 is driving open adoption. How can US banks educate regulators on what open API could mean for the US?
  4. Partnership guardrails—How do you define models for partners to leverage open APIs? Is it open for all to use or do you define a subset of partners and how they will be governed?
  5. API platforms and tools—With a number of well-established API management platforms, do you build your own or buy a platform to build upon?
  6. Monitoring and metrics—How do you report and manage the success of APIs?
  7. Data security and privacy framework—How do you ensure data security and privacy for customer data and transactions exposed through the APIs?
  8. Building ROI models and a business case—How do you build a business case for internal justification and investments into API framework?

Suppressing competitive threats 

In an API world where data is currency and a customer-centric experience is king, banks are lagging behind the tech titans. However, the advent of open banking legislation may just force the hand of banks to innovate around the customer before tech firms enter the financial services market.

Banks should look at APIs as a way to enhance service offerings, improve customer engagement, increase digital revenues and build partnership models with fintech while ensuring regulatory and data guardrails are in place.

As Stefan Weiss, head of APIs at Fidor said, “Just because you can offer an API for something doesn’t mean that you have to offer an API for something. APIs are products, have to be handled as products. You must have a customer, and a reason for the customer to buy the product.”

I don’t see mainstream hip hop artists jumping at the opportunity to talk about their “banking everywhere experience” anytime soon. But there is an unprecedented opportunity for banks to make every customer interaction more seamless and strengthen their partnership ecosystems by building a core API strategy.

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Online Lender Earnest Said to Be For Sale

According to a report by Bloomberg,Earnest is up for sale. The San Francisco based online lender is said to have an asking price of $100 million. Founded in 2013, Crunchbase reports Earnest has raised over $99 million not including an undisclosed sum in a VC round in January 2016 and $200 million of debt financing.

Loans the New Fashioned Way

Earnest crossed a major milestone last November when it reported having helped to refinance $1 billion in student loans. CEO Louis Beryl said at the time, “it’s tremendous in that we have reached this milestone far quicker than many companies before us.” Earnest appeared to be tracking a similar path to SoFi, a Fintech rockstar, by adding personal loans to its offerings. But Bloomberg also reports that recently Earnest had to shelve a securitization round which probably delivered a setback to the online lender.

Earnest is not alone in its challenges. Other online lenders have struggled to regain the momentum initially experienced when institutional money discovered the sector that promised outsized risk adjusted returns. Publicly traded online lenders LendingClub and OnDeck delivered subdued Q1 earnings results. OnDeck is on a mission to deliver profitability. LendingClub wants to regain growth.

While no one doubts that lending is moving online a growing number of traditional financial firms and other non-bank lenders are entering the space to challenge early players. Meanwhile some of the fast money has moved on looking for greener pastures.

 

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