Top 20 global fintech companies: P2P, online payment, trading, personal asset management
The growth of fintech means the pace of change in the traditional structure of the financial services industry continues to accelerate. While many fintech businesses originate from the US or Europe, Japan and China are now emerging as major users of fintech in the Asia-Pacific region.
In this article we look at 20 of the best-known fintech businesses currently grabbing the world’s attention.
1. Lending Club: key player in social lending worldwide
Lending Club, a US business, is the largest player in social lending. Its focus is credit card and mortgage loans. The cumulative amount of financing it has raised is in excess of USD9 billion. It uses Fico scores to calculate a user’s borrowing credentials, and assess the level of risk involved. It has expanded its business to include hedge funds looking to make a return from P2P lending. The loan itself is usually issued by WebBank (based in Utah), in partnership with Lending Club.
The company went public on the NY Stock Exchange in December 2014, and signed a partnership agreement with China’s Ali Baba e-commerce group last year.
2. Prosper: facilitating investment in consumer loans
Prosper was set up in San Francisco, and began offering P2P loans in 2006. The company operates across the spectrum of P2P lending services, and is especially strong in the consumer loan space. The minimum personal loan amount is USD25, with a 1-2% commission rate for borrowers, 0.5-1% for lenders. Any type of investor can participate on its platform.
In 2008, Prosper was ordered to suspend its business (“cease and desist”) pending a nine month investigation by the SEC. The SEC claimed that, effectively, the business was selling securities and investments, and therefore came under the regulatory remit of the SEC. Following its relaunch, however, Prosper has made a spectacular recovery.
Prominent investors in Prosper include Blackrock and Sequioa Capital.
3. Zopa: Europe's largest P2P lending service
Established in the UK in 2005, Zopa is the largest P2P lending business in Europe. Its predecessor was the internet bank, Egg.
Its business is based on offering low interest financing to borrowers, with high returns to lenders. Lenders and borrowers both pay a fee of 0.5% per transaction. It has expanded into Japan but has been forced to withdraw from the US.
4. Funding Circle: lending to small businesses in the US and Europe
Funding Circle was founded in August 2010. It is based in the UK and primarily targets small businesses. It was created to cater for small businesses’ credit needs during the difficult market conditions prevailing at the time of the Lehman collapse in 2009. As UK banks tightened their supply of credit, demand for Funding Circle’s services from the small business sector expanded because the company offered an alternative funding source, with bank credit closed off.It assesses customer creditworthiness in the same way that banks do, but its method of operation is effectively P2P lending.
5. Receivable Exchange: marketplace for accounts receivable
Receivable Exchange is an online marketplace for accounts receivable. It helps companies manage and liquidity and reduce risk, for example by reducing DSO (days sales outstanding) to less than 2 days. It helps businesses with their liquidity ratio, and ROE and ROA metrics, by helping them manage their capital flows.
6. Robinhood: free online mobile stock trading
Established in the US, Robin Hood is a zero commission online brokerage, currently overturning the traditional broking model. It covers the cost of fees with daily interest from margin trading, and interest income from customers’ cash balances.
It keeps its costs low by not spending heavily on advertising, or customer call centers. It does not provide any of the general services which other online or traditional brokerage businesses do (for example, research or investment information).
7. eToro: replicating the trades of leading traders
Established in Tel Aviv in Israel 2007, eToro is the world's largest social investment network. It has well over 100 million registered users, and offers CFD trading via SNS in foreign exchange, stocks and commodities.
The company is best known for enabling users to replicate the buying and selling strategies of skilled traders. Even if you do not know much about trading or have limited experience yourself, you can replicate what a skilled trader does. If you are successful then others will want to copy what you are doing; if that happens, you are rewarded with a bonus by the people who copy your trades.
Smart card payments
8. Square: payments via your mobile device
If you have a square reader which reads smart cards or IC cards on your smartphone or tablet, you can make credit card payments wherever you are with this mobile payment app.
It offers convenient and high speed bank transfers, with a high security capability: card information is encrypted instantaneously as soon as it is scanned. You can use Visa, Mastercard and Amex, with a commission charge of 3.25%.
If you input your card details, you can make payments offline, even if you are not connected to the web.
9. SumUp: a European version of Square
SumUp is Europe’s version of Square, based in Germany.
The SumUp card terminal, in combination with the app, allows small businesses to accept credit and debit cards, using smartphones or tablets, simply, securely and cost-effectively. The charge for using a credit card is 2.75%, cheaper than Square.
It was set up in 2011, and expanded into Japan and South America in 2013.
Companies such as Groupon and Amex have invested in SumUp.
10. Flint Mobile: paying credit card bills with your smartphone camera
Flint mobile is a start-up located in Redwood in the US. Unlike Square, it does not need an IC card reader. You can make payments using your smartphone camera. The service is simple to use. You activate the smartphone app, follow the instructions and input the payment amount. Using your smartphone camera you scan your credit card number and make your payment. One advantage from the retailers’ point of view is that they get access to customer email addresses and Facebook profiles. This is useful for retailer managements in terms of gaining an insight into customer trends.
Commission rates are attractively low. The most used cards are Visa and Mastercard. For credit cards the fee is 2.95%+USD0.20 and for debit cards 1.95%+USD0.20.
11. Transferwise: international money transfer at 10% of the bank cost
Transferwise offers an international currency transfer facility wherever you are located. It was set up by two Estonian IT professionals in 2011 in the UK, who originally worked at Skype and Paypal. Their aim is eliminating the high costs and the process of normal remittance: effectively it is a Skype equivalent for money transfers.
The business’ selling point is its low cost of transferring money internationally – only 10% of what the banks charge. If you are sending less than GBP200, for example, the cost is only GBP1. Transferwise has seen strong demand in the United Kingdom and France. In future it is planning to expand to Asia and Africa.
12. Payoneer: online payments received from the US and Europe
You can use the Payoneer service for US and European-based payments wherever you are in the world. It is like having a bank account: you receive foreign currency bank transfers from the US and Europe in a payment receiving account. There is no deposit required for opening an account, and you can access your cash easily from your receiving account. You can also invoice your customers simply and easily.
13. Remitly: for sending money to India, the Philippines and Mexico
International remittance system for personal users in the United States and Canada to send money to India, the Philippines, and Mexico. Registration is quite simple. On the website you set up your account by inputting your email address, and personal details. The remittance fee depends on which country you are sending money to, and on which payment option you choose: economy or express. If you are sending money to family or friends who live in your home country, and it is difficult for you to use a normal bank remittance service, then Remitly is ideal – easy to use, direct from home.
14. Currency Cloud: well-regarded, London-based currency payments start-up
Currency Cloud is a saas (software as a service) start-up company founded in the UK in 2012, offering international remittance. Its core business is managing B2B payments, using its payment engine and API (application programming interface).
European software giant SAP, via its Sapphire ventures division, and Rakuten in Japan, have taken stakes in the business.
Personal financial management (PFM)
15. Personal Capital: revolutionary one-stop financial management service
Personal Capital enables you to easily manage your entire financial life in one secure place via your mobile, and offers a range of free financial tools and calculators for this.
It has won first prize at FinovateSpring (finovate=finance+innovation).
16. Nutmeg: online investment for a fee of less than 1%
Nutmeg is broadening the market for personal investors, offering a fun, low cost online service. Previously you needed to have a pool of substantial capital available to invest in the stock market. Nutmeg has changed this, and made it possible for anyone who wants to invest in the market online to do so.
Customers connect via their social media platform, and receive investment advice via their smartphone or mobile device. The transaction fee is below 1% (0.3-0.95%).
17. Betterment: lowest ever brokerage commission rate – 0.15%
Betterment is based in the US; its commission fee is 0.15%. Currently, only US residents (permanent resident, social security holders only) are eligible to use the service. Betterment’s strategy is to build up a strong track record in the US before expanding elsewhere.
There is no minimum investment or minimum account balance. Like Nutmeg, its aim is widening market access for individual investors.
18. FutureAdvisor: managing savings and investments for a 0.5% agency fee
FutureAdvisor is based in San Francisco. The company offers the services of an expert investment group, managing and overseeing customer assets for a low 0.5% agency fee. It is a “robo-advisor” offering a guaranteed low cost, low risk hi-tech automated investment service and portfolio rebalancing (realigning your portfolio to the desired mix and weighting of assets).
The business was founded by two ex-Microsoft engineers, who saw the appeal of offering investors a reliable online portfolio management service.
19. Sigfig: invest up to $10,000 at zero commission
Sigfig is based in the US. The minimum investment amount is USD2,000. The first USD10,000 you invest carries zero commission. Individual investor requirements are catered for via a DIY portfolio option. Fees remain low even after the first year. Average portfolio fees are around 1.3% of the value of the portfolio per year, plus a Sigfig management fee of 0.25%. It is a “robo advisor”, just like FutureAdvisor, offering a comprehensive range of services, from advice on tax reduction initiatives to automatic rebalancing.
20. Wealthfront (Sigfig competitor with a difference)
US-based Wealthfront is a competitor to Sigfig. It offers low cost fees, free for your first USDD10,000, the same as Sigfig and 0.25% thereafter. It offers a distributed model investment service. It is a robo-advisor which will set up and construct your portfolio, rebalance it automatically and give you advice about investments. It also offers advice on making your investments tax efficient – for example, through use of tax losses.
The cost of holding a bank account continues to fall, but the consensus opinion remains that the finance industry is still largely overlooking fintech’s potential to fulfil consumers’ underlying financial needs. It is early days. Different companies have different business models and structures, but no fintech company looks to have secured a foothold in its chosen market as yet.