As Feds crack down on payday lenders, fintech startups see an opportunity

first_img 7SHARESShareShareSharePrintMailGooglePinterestDiggRedditStumbleuponDeliciousBufferTumblr The future looks grim for payday lenders. Comedian John Oliver has had them in his crosshairs since 2014, attracting millions of viewers and stirring up plenty of outrage. President Obama began expressing concerns about their exploitative lending practices last spring. Google announced last month that it would no longer allow payday lenders to advertise. And now federal watchdogs have unveiled new rules that would dismantle a business model that often traps borrowers desperate for cash in cycles of spiraling debt.“The very economics of the payday lending business model depend on a substantial percentage of borrowers being unable to repay the loan and borrowing again and again at high interest rates,” Richard Cordray, director of the Consumer Financial Protection Bureau (CFPB), told the New York Times.Payday lenders say the risks associated with serving subprime borrowers justify their practices (20% of payday loans result in re-borrowing and default). But regulators aren’t buying that argument and an increasing number of financial technology startups are reinventing the lending business with a model that promises to help borrowers and build their credit at the same time.“I applaud what the CFPB is doing,” says Joe Bayen, cofounder and CEO of a fintech startup called Lenny, which offers young borrowers credit lines up to $1,000 and a chance to improve their credit scores through a partnership with FICO. “We offer increasing balances based on how a user behaves. Everything is aimed at upward mobility and helping people.” continue reading »last_img read more

Payments: The need for speed

first_img continue reading » In payments, fast can be defined in a single word: immediate.“Consumers experience real-time transfers across a variety of fintech tools. That expectation carries over to their relationship with traditional providers, including credit unions,” says Tom Church-Adams, SVP/lead, payments solution line, for CUES Supplier member CO-OP Financial Services, Rancho Cucamonga, California. “And nearly everything is immediate, thanks to digital channels, faster network speeds and innovation in supply chain models.”Church-Adams reflects on other areas of immediacy in our lives.“In many cities, groceries are at your door in a matter of hours. In all parts of the world, doctors and mental health practitioners diagnose ailments in real-time from an iPad. We buy cars and homes in online marketplaces. Paying rent, getting paid for a gig, sending cash to a friend—these are everyday tasks consumers expect to be simple, seamless and speedy.” ShareShareSharePrintMailGooglePinterestDiggRedditStumbleuponDeliciousBufferTumblrlast_img read more