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Fintech Talk: October 21, 2016

Adel Raslan

This week peer to peer (P2P) lending through the UK’s largest platforms reached close to £6.5bn, according to the Peer-to-Peer Finance Association (P2PFA). The association, which represents the largest eight lenders, including Zopa and Funding Circle, found that investors lent more than £700m ($858m) through the platforms in the third quarter of the year – up from £658m ($809m) in the second quarter but down from £715m ($879) in the first three months of 2016.

The total number of current lenders has also risen to 161,401 in the third quarter from 150,376, while the number of borrowers rose to 363,198 from 331,107. Commenting on the result, Christine Farnish, P2PFA chair said, “Data from the third quarter of 2016 highlights the strength of peer-to-peer lending in the United Kingdom, and underscores the value that this form of alternative finance is providing to the economy for borrowers – both business and consumer – as well as lenders. Peer-to-peer lending continues to deliver a competitive alternative to traditional lending.”

P2P lending is expected to continue growing at an accelerating pace and extend to segments previously almost entirely dominated by banks. This view is supported by a recent study by KPMG and the Cambridge Centre for Alternative Finance that found that the global P2P market grew by 271% to more than £106.4bn ($130bn) last year, mainly due to China and the US.

While P2P lenders are competing with one another for market share, insurance and reinsurance companies have partnered on a new blockchain initiative, seeking to deliver faster and secure client services, according to The Financial Times. The project, titled the Blockchain Insurance Industry Initiative, or B3i for short, aims to provide a meeting ground for the companies to exchange ideas, test use cases and pursue concepts that could ultimately reshape how they deliver insurance services. The firms taking part are Allianz, Aegon, Munich Re, Swiss Re and Zurich, constituting some of the biggest companies of their kind in the region.

The group is the latest enterprise-driven consortium to emerge, following in the footsteps of initiatives like R3 and the Post-Trade Distributed Ledger Group. Those backing the B3i effort say that it could ultimately lead to new ways of doing business. Mark Bloom, Aegon’s chief technology officer, said “We want to be at the heart of these developments and see blockchain as one of those potential catalysts for change. By actively creating partnerships and making strategic investments we can build smarter solutions together with our clients."

For Allianz, which has explored applications for the exchange of catastrophe bonds and has worked with startups in the space, the technology offers a means to increase transparency for its customers. “This initiative, enabling alternative operating models based on the blockchain technology, can help us increase transparency and efficiency and deliver a better experience to our customer,” said Allianz Group COO Christof Mascher.

Another interesting development in the world of fintech this week was the news that Payoneer, a US fintech company that helps businesses send and receive money across borders online, raised £141m ($180m) in a Series E funding round. The funding comes from Technology Crossover Ventures (TCV), a Silicon Valley-headquartered VC fund that focuses on growth funding for established tech businesses. The funding round takes its total amount raised to £211m ($270m), with the money set to go towards further expansion in emerging markets. At present, Payoneer processes billions of dollars a year, has customers across 200 countries and can do localised payments in 130 countries.

While P2P, blockchain and money transfer companies are all topics that are likely to be discussed and feature in Fintech Talks, there is scope for discussions around the wider application of fintech - for example, the use of fintech and new technologies to promote sustainable finance. In an op-ed in The Financial Times, Erik Solheim, Head of UN Environment, highlighted that emerging financial technologies could go beyond redefining the financial services industry and, extend to eradicating extreme poverty by 2030 and providing a solution for the world’s environmental problems. According to Solheim, the financial sector is not up to the task of providing the necessary capital to reduce climate change and halt the alarming rate of degradation of natural capital (soil, air, water and biodiversity), with ‘less than 1% of global bonds labelled ‘green’ and 1% of the holdings by global institutional investors being environmentally friendly infrastructure assets.’

In response, he provides several examples where fintech companies are enabling sustainability and highlights the recent partnership between the UN Environment and Ant Financial Services, the Chinese online and mobile financial services company, that promotes green finance products. According to the article, Ant has more than 450m small business and individual customers, and provides access to over ninety asset management companies selling green and sustainable investment products, including apps that monitor an individual’s carbon footprint and insurance that gives customers money back for they days they don’t use their cars. The organisation plans to build on this success and convene a coalition of fintech leaders to align the sector’s culture and emerging regulations with the needs of sustainability. 

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