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FinTech in Focus - April 02, 2019

FinTech in Focus - April 02, 2019

Milken Institute Expands Its FinTech Advisory Committee

Today, the Milken Institute Center for Financial Markets announced the expansion of its FinTech Advisory Committee. The addition of four new members comes roughly eight months after the Milken Institute announced the inaugural members of its committee at a time when new policy and regulatory developments are beginning to emerge around the world.

The Institute welcomes the following members to the FinTech Advisory Committee:

  • Richard Berner, Executive-in-Residence, NYU Stern; former Director, Office of Financial Research
  • Michael Finkelstein, CEO and Founder, The Credit Junction
  • Akber Jaffer, Chief Strategy Officer, Finastra
  • CeCe Morken, Executive Vice President, General Manager, Strategic Partner Group, Intuit

The addition of four new members to the FinTech Advisory Committee is part of the Milken Institute’s effort to enhance its FinTech program. The program focuses on two key themes: 1) informing lawmakers and regulators in the US and abroad on approaches to innovations within the financial services sector and 2) seeking to change the current focus beyond the technology platforms employ to how startups and incumbents are leveraging that technology to address financial inclusion, access to capital, transparency, and compliance.

“Our newest members help fill out a group of experienced public policy professionals. Their views will help shape the increasingly important debate over the role of financial innovation in our lives and economy,” said Tom Curry, chair of the FinTech Advisory Committee.

Since its launch in 2014, the Milken Institute FinTech program has been at the forefront of examining how government and industry should address financial innovations. As one of the first think tanks to establish a FinTech program, the Institute has since produced nearly 100 written reports, blogs, op-eds, and comment letters, and hosted more than 70 private roundtable sessions, public panel sessions, and congressional staff briefings covering FinTech.

“We continue to see a larger focus on the part of regulators and policymakers both here in the United States and abroad as it relates to the role of data in the financial services ecosystem. Whether the focus is on how data is being utilized to address financial inclusion, access to capital, or transparency-related challenges, or a focus on data privacy and data ownership, the new members to our FinTech Advisory Committee have unique perspectives on these issues and we look forward to their insight moving forward,” said Jackson Mueller, head of the Institute’s FinTech program.

The four new members join the original cast of the FinTech Advisory Committee:

  • Tom Curry (Chair), Partner, Nutter and former Comptroller of the Currency
  • Melissa Koide (Vice Chair), Senior Advisor, Milken Institute; CEO, FinRegLab and former Deputy Assistant Secretary of the Treasury for Consumer Policy
  • Steve Antonakes, Executive Vice President, Enterprise Risk Management, Eastern Bank, former Deputy Director of the Consumer Financial Protection Bureau and Massachusetts Banking Commissioner
  • Jo Ann Barefoot, Chief Executive Officer, Barefoot Innovation Group; Co-founder, Hummingbird RegTech; former Deputy Comptroller of the Currency
  • Margaret Hartigan, Founder and Chief Executive Officer, Marstone
  • Karen Mills, Senior Fellow, Harvard Business School; former Administrator of the US Small Business Administration
  • Kathryn Petralia, Co-Founder and President, Kabbage
  • Thomas Philippon, Professor of Finance, New York University Stern School of Business
  • Colin Walsh, Chief Executive Officer, Varo Money

“We welcome the addition of four new members to the Milken Institute’s Fintech Advisory Committee and look forward to even more engaging discussions and proactive engagements with our members moving forward,” said Mike Piwowar, executive director of the Milken Institute Center for Financial Markets.

The Institute is engaged in several FinTech-focused programs this year, including a partnership with FinRegLab to explore the value of cash flow data in the credit underwriting process for small businesses seeking capital, and a quantitative and qualitative analysis of open banking regimes around the world. 

For more information on the Milken Institute’s FinTech program please contact Jackson Mueller ([email protected]) and Dan Murphy ([email protected]). 


Voices from the Committee

Today, the Milken Institute Fintech program is introducing a new section into the newsletter that follows the work of our FinTech Advisory Committee members. This section will be devoted to updating readers on developments from the various firms, academics, and former regulators as they continue to forge ahead in the FinTech space.

In this issue, we cover some of the more recent developments from our members. In subsequent releases, we will provide further updates on our members when relevant and introduce a question and answer format with our members covering some of the latest company updates or industry headlines.

Kabbage: In late October 2018, the cash-flow technology and lending platform for small businesses announced it is extending access to more than $10 million per day to small businesses, added more than 30,000 new customers in 2018 and provided small businesses access to more than $2 billion in flexible working capital. In January 2019, the company also announced it is powering's new Pay Later program for the millions of US small businesses transacting on its site. The program provides US small businesses a full-automated funding decision in minutes, at the point of sale, and access to lines of credit as high as $150,000. Lastly, as concerns mount over a potential economic downturn in the US (and globally), Kabbage Co-Founder and President Kathryn Petralia, stated in a recent interview with Forbes that the platform is prepared to weather an economic downturn if it were to arise due to its ability to monitor the live business data of its customers. With more than 2 million live data connections with over 170,000 customers, Kabbage has helped small businesses access greater than $6.5 billion in working capital. 

Marstone: The digital wealth management and advisory platform has been on quite a tear recently. After partnering with HSBC to develop its software-based investment advice platform back in October, the company went on to announce the launch of BlackRock Model Investment Portfolios on its platform later that month. Since then, the platform connected with Interactive Brokers to provide a new, fully-integrated wealth management solution and announced a partnership with the World Economic Forum's Centre for the Fourth Industrial Revolution. In February, Marstone announced its Board of Directors led by Chairman and CEO of Aperture Investors, Peter Kraus.

FinRegLab: Since coming onto the scene in 2018, FinRegLab is an independent organization bringing together policymakers, regulators, technology and financial sector innovators, and consumer advocates, and providing them with an evidence-base understanding of new financial technologies, their impact on consumers, and the implications for public policy. Headed by Melissa Koide, who is also the Vice-Chair of the Institute’s FinTech Advisory Committee and a former Deputy Assistant Secretary for Consumer Policy at the US Treasury Department, FinRegLab is already pushing forward on analyzing the role and importance of cash flow data in underwriting consumers and small businesses. In addition, FinRegLab has responded to several requests for comment (FDIC small dollar lending proposal and Senate Banking Committee's request for feedback on data privacy, protection, and collection). FinRegLab recently expanded its leadership team, filling the roles of Deputy Director and Director of Science and Technology.

Nutter Law: In mid-December, Nutter introduced ‘FinTech in Brief’—a FinTech newsletter focused on US policy issues. FinTech Advisory Committee Chair Tom Curry, along with several other legal professionals, continue to provide in-depth perspective on FinTech developments at the state and federal level. Separately, William Galvin, Secretary of the Commonwealth of Massachusetts, recently announced the formation of a FinTech Working Group. Both Tom Curry and Jay Cabral are listed as members of the working group.

Intuit: Newly appointed CEO Sasan Goodarzi is now at the helm starting Jan. 1, 2019. Intuit, makers of QuickBooks, TurboTax, and Mint, recently announced that revenue increased in the second quarter driven by a nearly 40 percent rise in small business online ecosystem revenue. QuickBooks Capital has funded close to $300 million in cumulative loans since launching more than a year ago, with roughly $90 million in loans outstanding at the end of the fiscal second quarter. In addition, Intuit’s personal finance applications, Turbo and Mint, have more than 25 million users with a growing partner platform. 

Varo Money: Since receiving a conditional approval from the Office of the Comptroller of the Currency on its pending national bank charter, the mobile-based financial institution announced the launch of its Android app, raised the annual percentage yield on its savings account to an industry leading 2.80%, and published a survey that highlighted how underfunded Americans are if an emergency event were to occur. When Colin Walsh, Co-Founder and CEO, has time to come up for air, he hires a Chief Technology Officer.

Finastra: Formed as a result of the merger between D+H and Misys in 2017, Finastra has been at the forefront of FinTech-related developments. The company has evolved from a product to a solution company and is on the path to realizing its platform vision, having developed—a platform for open innovation that enables banks and Fintechs to develop new applications on top of proven core systems. By opening its products and services up to a wider audience through open APIs, Finastra empowers others to innovate, supporting Fintechs with a ready-made marketplace that will help them to monetize their applications and enabling the development of new solutions in collaboration with other technology providers. Finastra will host FusionONE in London this May, bringing together hundreds of business leaders and developers to unveil the latest developments in the platform and offer a world-first play with Finastra’s open APIs.

Karen G. Mills: Former Administrator of the US Small Business Administration, member of Obama’s Cabinet and National Economic Council, and current Senior Fellow at Harvard Business School, Karen G. Mills, recently became an investor and advisor to Numerated, a FinTech platform focused on the financing needs of small businesses (American Banker profiled Karen’s move in a recent article). For those unaware, Karen has written extensively on the small business lending market and the role of technology in reducing the various frictions small businesses face in accessing capital. Her 2014 and 2016 Harvard Business School working papers with Fundera’s Brayden McCarthy on the state of small business lending are must-reads for those interested in this space. In April, Karen will also publish a new book, Fintech, Small Business & the American Dream: How Technology Is Transforming Lending and Shaping a New Era of Small Business Opportunity. The book covers her latest thinking on how big data and AI will change the game for lenders and small business owners, and create new challenges for regulators. We are looking forward to receiving a signed copy!

The Credit Junction: 2018 was a banner year for the asset-based lending platform. In April, the company secured a $150 million credit facility from MidCap Financial. Six months later, the platform announced a $23 million equity investment from Century Equity Partners. The company has picked up where it left off in 2018 as it launched its credit risk analytics business and Michael Finkelstein, its Founder and CEO, was appointed as one of 21 individuals to serve on the US Department of Commerce Trade Finance Advisory Council.  

Thomas Philippon, NYU Stern: Having published one of the more interesting studies to come across my desk, The FinTech Opportunity, Philippon is also engaged on several near-term publications including co-authoring the 2019 Geneva Report on the World Economy covering "The Future of Banking" with Kabbage’s Kathryn Petralia. Philippon will also publish a new book later this year titled, The Great Reversal: How America Gave Up on Free Markets.

Richard Berner, NYU Stern: After departing from the Office of Financial Research back in 2017, the former director has since moved on to academia with classes focused on FinTech Regulation, and Risk Management and Financial Stability: RiskTech and RegTech (in preparation). From that platform, Berner has continued to focus on critical data and analytical issues. For example, recently, Berner and Kathryn Judge, Professor of Law at Columbia Law School, published a report, “The Data Standardization Challenge.” The report, calls for improvements in data quality and standards in the US, but finds the financial regulatory framework as a challenge to such adoption. The report also noted that the lack of a single authority to compel regulators to act adds to that challenge. “The Financial Stability Oversight Council, which was created to solve collective action problems among regulators, can make recommendations but it has no authority to require member agencies to adopt data standards,” the report notes.  

Barefoot Innovation Group: As founder and CEO, Jo Ann Barefoot has been at the forefront of the policy and regulatory discussions surrounding FinTech. If she is not speaking at an event in the US or around the world, then she is likely putting together another informative podcast with influential stakeholders in the FinTech space (latest episode here). Recently, Jo Ann published the first in what will be a series of working papers for the Harvard Kennedy School covering how new technology can enable healthier financial lives and protect consumers from harm. The first paper, released in mid-March, covers analog regulation in the digital age and a public policy model for consumer financial protection and inclusion.  

Eastern Bank: As a former Massachusetts Commissioner of Banks, Deputy Director of the Consumer Financial Protection Bureau and current EVP, Enterprise Risk Management at Eastern Bank, Steve Antonakes provides a unique perspective on FinTech-related policy and regulatory developments at both the federal and state levels. Recently, Massachusetts Secretary of State William Galvin named Antonakes as a member of the Commonwealth’s FinTech Working Group. Eastern Bank, America’s oldest and largest mutual bank, is focused on outreach and cooperation with the FinTech ecosystem through experimentation, partnership and investment via Eastern Labs. Eastern is also a “Challenge Partner” in MassChallenge FinTech a new program to support and grow startups in the financial services industry.