Category: Uncategorized

In commemoration of Payments Law’s one year anniversary, I’ve taken a slight departure in this post by quickly summarizing how people come up with the capital to jumpstart their companies.

Where do most (non-tech) entrepreneurs go?

Mostly likely, NOT banks:  According to the Wall Street Journal–“The number of loans for $1 million or less held by banks is down about 14% to 23.5 million since 2008. In nearly one-third of all U.S. counties, small-business lending remains below 2005 levels, estimates PayNet Inc., a Skokie, Ill., tracker of loans by banks, corporations and alternative lenders such as finance companies….Some analysts are encouraged by recent signs of a lending uptick by small banks, which often focus on small businesses. In July, the total amount of commercial and industrial loans held by small U.S. banks rose 11% from a year earlier, according to Moody’s Analytics.”

Those numbers are still very low.

Not surprisingly, “alternative” financing sources have met great success as SMBs clearly needed other sources to obtain capital.  Here’s a short list of various alternative lenders:

Family/Friends

P2P: Prosper, Lending Club

Crowdfunding:  KickStarter

Online Payments Companies: Kabbage, PayPal Working Capital

CDFI: Opportunity Fund (only in CA) but there are CDFIs throughout the country

It’s true that the regulations that these alternative lenders may differ from traditional lenders, and may be providing loans at less competitive rates than traditional lenders.  But it seems, the tide is turning and many entrepreneurs are looking first to these non-traditional lenders.  Which begs the question: who is taking the the real long term risk: banks or borrowers?

 

 

 

In mid-June CFPB issued a notice inquiring about mobile apps geared toward the financially underserved.  Here’s a sampling of the questions the agency is seeks comment on:

(1) What are some of the ways in which consumers use mobile technology to access financial services? What are some of the benefits to consumers of enhanced access via mobile?

(2) How would making access via mobile differ from or improve overall access compared to only accessing financial services through an online channel?

(3) Based on your experience, what percentage of customers access accounts at financial institutions via mobile? Has there been any research that sheds light on level of use by income strata, age, or other demographic factors?

I was interviewed by Mobile Payments Today on the topic:

“There is no question that there is a great need to provide financially underserved consumers with fair and robust products and services,” she wrote in an email. “Right now, all bets are on mobile technology due obviously to the ubiquity of mobile devices, particularly for low- to moderate-income consumers, and the number of companies and new entrants is enormous.

“So, it isn’t surprising that this is an area that the CFPB is interested in, or interested in enough to make a formal request for information. It also isn’t surprising that segments of the industry will be nervous that regulations will soon come next, but in my experience with the CFPB, it is likely the agency is conducting its due diligence in gathering information from all interested and involved stakeholders and will likely be taking its time in figuring out how best to address any issues or concerns that have been or might be raised.”

If this topic is of importance to you, make sure to submit your comments by the deadline, Sept 10, 2014.

 

 

A discussion about debt these days often brings topics around student lending and the financial status of Millennials and following generations front and center.  I have only scratched the surface of this predicted massive financial blowout, I’ve found these bits of information to be both useful and unsettling:

1.  Gap in Data

There is “lack a full understanding of how student debt affects financial decisions and how future problems in repaying student loans may impact other parts of the economy because the student loan market is “quite opaque,” according to Rohit Chopra, Consumer Financial Protection Bureau.”

2.  The Next Bailout (which is already happening)

“[W]hile today’s grads may be part of the most educated generation in history they are also the most indebted twentysomethings the world has ever seen.”

3.  There are about 80 million Millennials!

“The sheer number of millennials — about 80 million — makes them a significant force in the U.S. economy. But many of them have trouble accurately answering basic personal finance questions, spend more than they make and are worried about their debt”

4.  Stats and Facts from Pew’s Recent study on Millennials:

• About half of millennials with student loans say this debt has made it more difficult to make ends meet.

• Unemployment remains high. Pew says 13 percent of the 18-to-24 age group were out of work in the first month of this year.

• The share of young adults living in their parents’ home reached a historical high in 2012, three years after the Great Recession ended.

• Most millennials say they would like to marry. But many, especially those with lower levels of income and education, don’t think they can because they don’t have “a solid economic foundation.”

• When compared with the Gen Xers and boomers, millennials have less wealth and income than the two immediate predecessor generations had at the same stage of their lives.

5.  Tips on Paying for College

Some useful tips for those heading off to college despite the enormous price tag.  I doubt that many college bound students calculate their return on investment…but in the least, some good research will likely pay off.

It’s no surprise there have been new approaches to ease this financial burden:

SoFi offers a new model to help students refinance their federal and private student loans by directly connecting borrowers with lenders.

GiveCollege and GradSave provide crowdfunding platforms so that aunts, uncles, friends can contribute to a student’s

Pave offers a “fair, innovative financial agreement that’s affordable for talent and meaningful to backers” Students provide a portion of their future earnings to funders once they graduate and make more than 150% FPL.

Kalamazoo Promise Anonymous donors are sending their city’s students to college debt free.

My goal has been to officially launch PaymentsLaw.com next Monday, Sept 16, and it looks like we are on track…

My blog will discuss a variety of consumer finance, money and privacy issues, with a sprinkling of other interesting topics that may come along the way.  The primary focus is to help navigate what may be coming down the pike in the ways of regulation, rules and best practices for fintechs, entrepreneurs, and other small businesses.