On March 6 - 7, Goodwin lawyers Kim Holzel and Mike Whalen represented our Fintech practice at LendIt, and had the following takeaways:
- New York’s Rise as Fintech Hub Continues. LendIt USA’s return to New York set franchise records with over 5,600 attendees – a 50% upsurge over 2016. LendIt’s New York enthusiasm matches the Empire State’s rise as a Fintech hub. In the first quarter of last year, New York City topped Silicon Valley in Fintech venture financing for the first time. Many believe this shift to New York City, traditionally the banking and finance epicenter, shows that Fintech investments have begun migrating from ventures that compete against financial institutions and toward those that partner and collaborate with them. And LendIt was spot on with its programming, installing for the first time a track focused on bank partnerships.
- The Dealmakers. We see more and more business suits at each successive production of LendIt USA. The conference is attracting a greater number of financial institutions, institutional investors and family offices eyeing acquisitions, investments and strategic transactions. When it comes to their relationships with Fintech companies, financial institutions can either buy, build, partner or license. To date, most of the action has been in partnering, but based on the questions we heard, change may be afoot. Financial institutions are focusing their efforts to identify companies that can provide data, talent and technology with the goal of leveraging their brand, capital and compliance, and regulatory resources. If the number of investment and acquisition inquiries fielded by Seth Greenstein is any sign, M&A activity in the space may be poised to ratchet up.
- Just Tech. We also received many questions from Fintech lending platforms on legal issues around re-imagining direct lender or bank partnership models as licensing models. The idea is to take the “Fin” out of Fintech, be just a technology company for more traditional lenders, and perhaps leave behind some compliance obligations. Successfully reforming a platform with state licensed broker or credit repair agency implications to SaaS for lenders could very well achieve this by reducing or even eliminating state licensing, depending on how services are arranged.
- Disruptors Digging Deep. Before building anything, Fintech entrepreneurs first identify a disruption idea – a problem to solve through technology in the financial industry. Obviously, as time goes on, more ideas are claimed. There was no shortage of brainstorms at our booth, though. Kim Holzel, a regulatory expert, answered new product and service questions from all comers on subjects ranging from unique credit terms and features, financial inclusion, AI applications, account aggregation and analysis, alternative credit scoring, and beyond. We heard some great ideas at LendIt USA.
- Full Steam Ahead on OCC Fintech Charter. Thomas J. Curry, Comptroller of the Currency, spoke at LendIt USA of his conviction for the OCC Fintech bank charter, flatly stating: “We will be issuing charters to fintech companies engaged in the business of banking because it is good for consumers, businesses, and the federal banking system.” Comptroller Curry also said the new charter would have “appropriate capital and liquidity standards” and shared his aspirations for the charter to “expand financial inclusion”. Pressing forward, the OCC last week released a draft supplement to its Licensing Manual that explains the Fintech bank charter process and the considerations that the OCC will take into account when evaluating an application, including capital and financial inclusion requirements. Please read our client alert on the OCC’s release.
- Familiar Faces. Two of our clients – Qwil and WeTrust – were among the eight finalists in PitchIt @ LendIt, a competition for Fintech startups to earn exposure to institutions and investors. They pitched their business case to a panel of judges and a standing-room only crowd. WeTrust is a financial inclusion application built on the Ethereum blockchain and is half-way through a crowdsale of its cryptographic tokens. Qwil is a solution for independent contractors, helping them track their invoiced earnings and get paid before their invoices are due. Eight other Goodwin clients prominently had exhibits at LendIt USA.
Goodwin is one of the top 5 most active law firms advising on publicly disclosed Fintech deals according to PitchBook and SNL, and has represented more than 25% on the 2016 Forbes Fintech 50 list. With over 200 lawyers practicing in Financial Institutions and Technology, we have experts in every area of Fintech, including Alternative Lending, Payments, Digital Currency + Blockchain Technology, Wealth Management/Advising, Insurance, Bank Charters and Partnerships, and Transactions.