Now, amid warnings that the “fragile” fiat currency system will be put under strain in years ahead, Germany’s troubled Deutsche Bank has asked, “will fiat currencies survive,” in what it calls the “multi-trillion dollar (or bitcoin) question.”
“The forces that have held the current fiat system together now look fragile and they could unravel in the 2020s,” Deutsche Bank strategist Jim Reid wrote in a report looking at 24 alternative ideas for the next 10 years.
“If so, that will start to lead to a backlash against fiat money and demand for alternative currencies, such as gold or crypto could soar. The demand for alternative currencies will therefore likely be significantly higher by the time 2030 rolls around.”
Central banks are still struggling to offset the effects of the global financial crisis that birthed bitcoin, with worries another so-far-unidentified crisis could be looming on the horizon.
“Will fiat currencies survive the policy dilemma that authorities will experience as they try to balance higher yields with record levels of debt,” Reid asked. “That’s the multi-trillion dollar (or bitcoin) question for the decade ahead.”
Bitcoin is often touted as an antidote to the central bank, debt-based monetary system, picking up the moniker “digital gold” for its built in scarcity. There will only ever be 21 million bitcoin, with the supply drying up in the distant year of 2140.
Deutsche Bank, which has seen its value cut by 90% in the ten years since bitcoin was created, has also predicted corporate and government banked cryptocurrencies will drive crypto adoption.
“Assuming governments back cryptocurrencies, and consumers want them, adoption rates will drive the timeline for mainstream use,” Reid wrote. “If current trends continue, there could be 200 million blockchain wallet users in 2030.”
Meanwhile, other banks are warning that the year ahead could bring an overhaul of the “status quo.”
“We see 2020 as a year where at nearly every turn, disruption of the status quo is an overriding theme,” Saxo Bank’s chief economist Steen Jakobsen wrote this week in a report titled “10 Outrageous Predictions for 2020.”
“The year could represent one big pendulum swing to opposites in politics, monetary and fiscal policy and, not least, the environment. In policy making, it could mean that central banks step aside and maybe even slightly normalize rates, while governments step into the breach with infrastructure and climate policy-linked spending.”
I am a journalist with significant experience covering technology, finance, economics, and business around the world. As the founding editor of Verdict.co.uk I reported on how technology is changing business, political trends, and the latest culture and lifestyle. I have covered the rise of bitcoin and cryptocurrency since 2012 and have charted its emergence as a niche technology into the greatest threat to the established financial system the world has ever seen and the most important new technology since the internet itself. I have worked and written for CityAM, the Financial Times, and the New Statesman, amongst others. Follow me on Twitter @billybambrough or email me on billyATbillybambrough.com. Disclosure: I occasionally hold some small amount of bitcoin and other cryptocurrencies.
The sky is the limit,” gushes MoneyLion founder and CEO Dee Choubey as he strolls into Manhattan’s Madison Square Park, the oak and ash trees turning color in the October sunshine.
Choubey, 38, is taking a midday constitutional from MoneyLion’s cramped offices in the Flatiron District, where 65 people labor to reinvent retail banking for the app generation. He ticks off a couple businesses he looks up to—ones that have fundamentally changed the way money flows around the world—putting his ambitions for his six-year-old startup into sharp relief. “PayPal,” he says. “Square.” Two companies worth a combined $150 billion.
“The promise of MoneyLion is to be the wealth manager, the private bank for the $50,000 household,” Choubey says.
At last count, MoneyLion’s app had 5.7 million users, up from 3 million a year ago, and a million of those are paying customers. Those people, many from places like Texas and Ohio, fork over $20 per month to maintain a MoneyLion checking account, monitor their credit score or get a small low-interest loan. In all, MoneyLion offers seven financial products, including unexpected ones like paycheck advances and, soon, brokerage services. Choubey expects revenue of $90 million this year, triple last year’s $30 million. His last round of financing, when he raised $100 million from investors including Princeton, New Jersey-based Edison Partners and McLean, Virginia-based Capital One, valued the company at nearly $700 million. By mid-2020, he predicts, MoneyLion will be breaking even. An FDIC-insured high-yield savings account will be rolled out soon, while credit cards are on the schedule for later in 2020. To retain customers, he says, “we have to be a product factory.”
Like most other entrepreneurs, Choubey thinks his company’s potential is essentially unlimited. But having spent a decade as an itinerant investment banker at Citi, Goldman, Citadel and Barclays, he’s also a guy who knows how far a horizon can realistically stretch. And he is far from the only one to see the opportunity for upstart digital-only banks—so-called neobanks—to transform retail banking and create a new generation of Morgans and Mellons. “I just heard a rumor that Chime is getting another round at a $5 billion valuation,” he says.
Leading the Neobank Pack
In 20 years, these VC-backed startups could dominate consumer banking, but they’ll face plenty of competition. Fintech companies that originally offered investing are rushing to add bank services.
Sources: the companies, CB Insights, PitchBook.
Globally, a vast army of neobanks are targeting all sorts of consumer and small-business niches—from Millennial investors to dentists and franchise owners. McKinsey estimates there are 5,000 startups worldwide offering new and traditional financial services, up from 2,000 just three years ago. In the first nine months of 2019, venture capitalists poured $2.9 billion into neobanks, compared with $2.3 billion in all of 2018, reports CB Insights.
Underlying this explosion is new infrastructure that makes starting a neobank cheap and easy, plus a rising generation that prefers to do everything from their phones. While it can take years and millions in legal and other costs to launch a real bank, new plug-and-play applications enable a startup to hook up to products supplied by traditional banks and launch with as little as $500,000 in capital.
“Now you can get your [fintech] company off the ground in a matter of a few months versus a few years,” says Angela Strange, a general partner at Andreessen Horowitz, who sits on the board of Synapse, a San Francisco-based startup whose technology makes it easier for other startups to offer bank products.
Using such middleman platforms, tiny neobanks can offer big-bank products: savings accounts insured by the FDIC, checking accounts with debit cards, ATM access, credit cards, currency transactions and even paper checks. That frees fintech entrepreneurs to concentrate on cultivating their niche, no matter how small or quirky.
Take “Dave.” Dave (yep, that’s its real name) is a little app that rescues folks from the pain of chronic bank overdraft fees. Created by a 34-year-old serial entrepreneur named Jason Wilk who had no prior experience in financial services, Dave charges its users $1 a month and, if they seem likely to overdraw, instantly deposits up to $75 as an advance. Nice little business, but nothing to give Bank of America jitters.
Betterment cofounder Jon Stein at his New York City startup. It took a decade to get 420,000 clients for its robo-advisor business managing stocks and bonds; as a neobank newcomer, Betterment already has 120,000 on a waiting list for a checking account.
But then Wilk decided to turn Dave into a neobank. In June, using Synapse, Dave rolled out its own checking account and debit card. Now it can make money on “interchange,” the 1% to 2% fees that retailers get charged whenever a debit card gets swiped. These fees are split between banks and debit-card issuers like Dave. Wilk optimistically predicts Dave will bring in $100 million in revenue this year from its 4.5 million users—up from $19 million in 2018, the year before it transformed itself into a neobank. Dave was recently valued at $1 billion.
Established fintech companies that didn’t start out in banking are getting into the game too. New York-based Betterment, which manages $18 billion in customers’ stock and bond investments using computer algorithms, recently rolled out a high-yield savings account. It pulled in $1 billion in deposits in two weeks. “The success has been unprecedented. In our history we’ve never grown this fast,” marvels Betterment CEO and cofounder Jon Stein. Now he’s launching a no-fee checking account with a debit card, and credit cards and mortgages might be next, he says.
Neobanks are swiftly emerging as a huge threat to traditional banks. McKinsey estimates that by 2025 up to 40% of banks’ collective revenue could be at risk from new digital competition. “I don’t believe there’s going to be a Netflix moment—where Netflix basically leapfrogs Blockbuster—where fintechs basically put the banks out of business,” says Nigel Morris, a managing partner at QED Investors, an Alexandria, Virginia-based VC firm specializing in fintech. “[Traditional banks] are really complicated businesses, with complex regulatory issues and consumers who are relatively inert.” But, he adds, “If [neobanks] can get people to bundle, [they] can get more of a share of a wallet of a consumer. [The] economics can move dramatically. It changes the game.”
Diwakar (Dee) Choubey was supposed to be an engineer, not an investment banker. Born in Ranchi, India, he came to the U.S. at 4 when his father was finishing a graduate degree in engineering at Syracuse University. The family ended up in New Jersey. Choubey’s mom taught autistic children, while his dad worked as an engineer at Cisco—and plotted his son’s future.
When Choubey started at the University of Chicago in 1999, he signed up for a bunch of computer science classes picked by his dad. But after earning a couple of B-minuses, “I cried uncle,” Choubey says. He became an economics major, strengthening his grades and job prospects by taking corporate finance and accounting courses at the business school. After graduating with honors, he went into investment banking, where he remained for the next decade.
From an insider’s vantage point, he saw that traditional banks were excruciatingly slow to respond to the preferences of their customers and exploit the power of smartphones. That, plus a never-ending series of bank scandals, convinced him that there was an opening for a digital “private banker.” In 2013 he walked away from his near-seven-figure salary to start MoneyLion.
Choubey raised $1 million in seed funding and started out offering free credit scores and micro-loans. But he struggled to raise more money. Forty venture investors turned him down, deeming his vision impractical and unfocused. “I was laughed out of a lot of VC rooms in our early days,” he recalls.
While Choubey banged unsuccessfully on VC doors, MoneyLion putt-putted along, bringing in a little revenue from loan interest and credit card ads and collecting a bunch of data on consumer behavior. Finally, in 2016, he persuaded Edison Partners to lead a $23 million investment. That enabled MoneyLion to add a robo-advisor service allowing users to invest as little as $50 in portfolios of stocks and bonds. In 2018, it added a free checking account and debit card issued through Iowa-based Lincoln Savings Bank.
Managing rapid growth, while striving to keep costs low, has proved tricky. MoneyLion was hit with a deluge of Better Business Bureau complaints over the past spring and summer. Some customers experienced long delays transferring their money into or out of MoneyLion accounts and, when they reached out for help, got only computer-generated responses. Choubey says the software glitches have been fixed, and he has bumped up the number of customer-service reps from 140 to 230.
Other neobanks have had operational growing pains too. In October, San Francisco-based Chime, with 5 million accounts, had technical problems that stretched over three days. Customers were unable to see their balances, and some were intermittently unable to use their debit cards. Chime blamed the failure on a partner, Galileo Financial Technologies, a platform used by many fintech startups to process transactions.
Tim Spence, Fifth Third’s chief strategist, in the regional bank’s downtown Cincinnati headquarters. Most of his neobank competitors are losing money, but “the lesson . . . learned from Facebook and Amazon and Google . . . is that the internet is amenable to a winner-take-all market structure.”
On a warm fall day Tim Spence speed-walks his 6-foot-3 frame through the towering, 31-story Cincinnati headquarters of his employer, Fifth Third, a 161-year-old regional bank with $171 billion in assets. Clad in a plaid sport jacket with no tie, Spence doesn’t look like a traditional banker. And he’s not.
A Colgate University English literature and economics major, Spence, now 40, spent the first seven years of his career at digital advertising startups. He then moved into consulting at Oliver Wyman in New York, advising banks on digital transformation. In 2015, Fifth Third lured him to Ohio as its chief strategy officer and then expanded his mandate. He now also oversees consumer banking and payments, putting him in charge of $3 billion worth of Fifth Third’s $6.9 billion in revenue. Last year, he brought home $3 million in total compensation, making him the bank’s fourth-highest-paid executive.
Fifth Third has 1,143 branches, but today Spence is focused on Dobot, a mobile app the bank acquired in 2018 and relaunched this year. Dobot helps users set personalized savings goals and automatically shifts money from checking to savings accounts. “We reached 80,000 downloads in a matter of six months, without having to spend hardly anything on marketing,” he says.
Scooping up new products is one part of a three-pronged “buy-partner-build” strategy that Spence has helped devise to combat the neobank challenge. Partnering means both investing in fintechs and funding loans generated by the newcomers. Fifth Third has a broad deal with Morris’ QED, which gives it a chance to invest in the startups the VC firm backs. One of Fifth Third’s earliest QED investments was in GreenSky, the Atlanta-based fintech that generates home remodeling loans (some funded by Fifth Third) through a network of general contractors.
The best of these partnerships provide Fifth Third access to younger borrowers, particularly those with high incomes. In 2018, it led a $50 million investment in New York-based CommonBond, which offers student-loan refinancing to graduates at competitive interest rates. Similarly, Fifth Third has invested in two San Francisco-based startups: Lendeavor, an online platform that makes big loans to young dentists opening new private practices, and ApplePie Capital, which lends money to fast-food franchisees.
Global venture capital funding for digital banks is exploding. This year, it’s on pace to exceed 2017 and 2018 combined.
Source: CB Insights
“The thing I’m most envious of, when it comes to the venture-backed startups that we compete with, is the quality of talent they’re able to bring in. It’s really remarkable,” Spence says.
But while Spence envies them sometimes and partners where he can, he isn’t convinced the neobanks will make big inroads into traditional banks’ turf. “None of them have shown that they can take over primary banking,” he says. He also argues that having physical retail branches is still important for building long-term relationships with customers. In a recent Javelin survey of 11,500 consumers, an equal number rated online capabilities and branch convenience as the most important factors when deciding whether to stick with a bank.
Fifth Third has been reducing its overall number of branches an average of 3% a year, but it’s opening new ones designed to be Millennial-friendly. These outlets are just two thirds the size of traditional branches. Instead of snaking teller lines, there are service bars and meeting areas with couches. Bankers armed with tablets greet customers at the door—Apple Store-style.
That raises the question of whether any of the neobanks will be so successful that they’ll eventually open physical outposts, the way internet retailers Warby Parker, Casper and, of course, Amazon have done. After all, it’s happened before. Capital One pioneered the use of big data to sell credit cards in the early 1990s, making it one of the first successful fintechs. But in 2005 it started acquiring traditional banks, and today it’s the nation’s tenth-largest bank, with $379 billion in assets and 480 branches.
I cover fintech, cryptocurrencies, blockchain and investing at Forbes. I’ve also written frequently about leadership, corporate diversity and entrepreneurs. Before Forbes, I worked for ten years in marketing consulting, in roles ranging from client consulting to talent management. I’m a graduate of Middlebury College and Columbia Journalism School. Have a tip, question or comment? Email me email@example.com or send tips here: https://www.forbes.com/tips/. Follow me on Twitter @jeffkauflin. Disclosure: I own some bitcoin and ether.
Dear banks, Game Over. Disruptive challenger banks are here to wipe the floor with traditional banks, who have, according to Chad West, head of comms and marketing at challenger bank Revolut, failed to make their offering open and transparent to customers, and failed to give them control over their money. Digital bank alternative Revolut has scaled to 1.8 million customers in three years – and now offers cryptocurrency processing. ABOUT WIRED SMARTER Experts and business leaders from the worlds of Energy, Money and Retail gathered at Kings Place, London, for WIRED Smarter on October 9, 2018. Discover some of the fascinating insights from speakers here: http://wired.uk/V29vMg ABOUT WIRED EVENTS WIRED events shine a spotlight on the innovators, inventors and entrepreneurs who are changing our world for the better. Explore this channel for videos showing on-stage talks, behind-the-scenes action, exclusive interviews and performances from our roster of events. Join us as we uncover the most relevant, up-and-coming trends and meet the people building the future. ABOUT WIRED WIRED brings you the future as it happens – the people, the trends, the big ideas that will change our lives. An award-winning printed monthly and online publication. WIRED is an agenda-setting magazine offering brain food on a wide range of topics, from science, technology and business to pop-culture and politics. CONNECT WITH WIRED Web: http://po.st/WiredVideo Twitter: http://po.st/TwitterWired Facebook: http://po.st/FacebookWired Google+: http://po.st/GoogleWired Instagram: http://po.st/InstagramWired Magazine: http://po.st/MagazineWired Newsletter: http://po.st/NewslettersWired
Topline: Another major U.S. bank beat earnings expectations on Tuesday, showing that despite ongoing tariff pressures, interest rate cuts and slowing trading revenues, Wall Street had a solid quarter.
Bank of America reported profit and revenue that came in higher than analyst estimates—with a net income of $0.56 per share compared to $0.51 expected—thanks to strong consumer and advisory businesses that helped counter declining trading revenues.
Shares of Bank of America rose over 2% in early trading; the stock has now risen almost 17% so far this year.
The bank is the second-biggest lender in the U.S., making it especially sensitive to interest rate cuts—but despite the Federal Reserve’s recent slashing of rates, Bank of America grew loans by 7%.
Three out of four of the bank’s main divisions saw revenue gains: an 8% increase in its global banking business, a 3% increase on consumer banking revenue and a 2% increase in wealth management revenue.
While revenue fell 2% in the bank’s trading division, total company revenue was largely unchanged from a year earlier at $23 billion, beating analysts’ $22.8 billion estimate.
Tangent: Bank of America is one of billionaire investor Warren Buffett’s favorite stocks. Through his holding company, Berkshire Hathaway, Buffett recently asked the Fed for permission to raise his stake beyond 10%, according to a Bloomberg report.
Crucial quote: “In a moderately growing economy, we focused on driving those things that are controllable,” CEO Brian Moynihan said in a press release.
I am a New York—based reporter for Forbes, covering breaking news—with a focus on financial topics. Previously, I’ve reported at Money Magazine, The Villager NYC, and The East Hampton Star. I graduated from the University of St Andrews in 2018, majoring in International Relations and Modern History. Follow me on Twitter @skleb1234 or email me at firstname.lastname@example.org
Aug.16 — Bank of America Chief Executive Officer Brian Moynihan said this week’s bond-market turmoil has been driven by issues outside the U.S., and that recession risks are low in the country as consumer spending remains strong. He spoke to Bloomberg’s David Westin in New York.
Applicants with criminal records are being considered for entry-level jobs like account servicing … [+]
Topline: JPMorgan Chase announced an expansion of its efforts to hire people with criminal backgrounds Monday, continuing the trend of big companies “banning the box” and giving people second chances.
JPMorgan Chase hired 2,100 people with criminal records in 2018, which equals about 10% of their total hires last year.
The bank knows those people have records, because they conduct background checks on applicants after a job offer has been made.
Applicants with criminal records are being considered for entry-level jobs like account servicing and transaction processing, according to the bank’s press release.
The unemployment rate for formerly incarcerated people is 27%, while the nationwide unemployment rate is 3.5%, according to the bank.
But the tight labor market could be more beneficial to people with criminal records—a July survey from staffing firm Adecco showed that 35% of respondents would consider those applicants, and 21% of respondents are no longer drug-testing them.
Koch Industries, Starbucks, McDonald’s, Target and Home Depot are among other corporations that have increased hiring efforts of the formerly incarcerated since at least 2013.
Surprising fact: The U.S. loses up to $87 billion annually in GDP by excluding people with criminal backgrounds from the workforce, said the bank.
Key background: “Banning the box” refers to removing questions about criminal backgrounds from job applications, a movement that’s been growing over the past two decades. According to the Pew Research Center, as of April black and Hispanic people make up 56% of the jailed population, leading experts to believe the groups are unfairly discriminated against in hiring. But “ban the box” legislation began to pass in the early 2000s, with laws on the books in 35 states and over 150 cities and counties as of July, according to the National Employment Law Project. And the 2018 First Step Act means thousands of people could be eligible for early release from prison, on top of the 700,000 already released annually—signaling a shifting political attitude towards these workers, according to FastCompany.
I’m a New York-based journalist covering breaking news at Forbes. I hold a master’s degree from Columbia University’s Graduate School of Journalism. Previous bylines: Gotham Gazette, Bklyner, Thrillist, Task & Purpose, and xoJane.
From the railroad and steel consolidations brokered by John Pierpont Morgan on Wall Street more than a century ago, to banking consolidation, the financial crisis and Jamie Dimon’s leadership, J.P. Morgan Chase has been at the center of finance for more than a century. Here’s the story of how the country’s largest bank got to where it is today. Biographer of J.P. Morgan Jean Strouse, longtime bank analyst Mike Mayo and CNBC banking reporter Hugh Son help tell the story. You’ll learn about how Aaron Burr and Alexander Hamilton are part of the bank’s history, along with the first ATM, and the company’s position moving forward into the future of digital banking. Watch the video above to see how the country’s largest bank got to where it is today. ***Clarification*** Since 2004, investors in JPM stock have outperformed the bank stock index by an average of 6% return every year. That’s more than 6x the return of the index yearly (13:52) In February, J.P. Morgan Chase announced it was in growth mode, expanding its branch network to cover 93 percent of the U.S. population by the end of 2022. The aggressive growth plans will allow it to reach 80 million more consumers, or about one-quarter of the U.S. population, versus its footprint in 2018, the New York-based bank says. The expansion of physical branches comes amid a consumer shift to mobile and online banking. The average number of teller transactions per customer has plunged 41 percent since 2014, according to J.P. Morgan’s presentation at its investor day meeting. But convenient branch locations are a key consideration for people thinking about switching banks, and most of the firm’s growth in deposits has been fueled by people who use branches frequently, the bank said. The company made it clear it had flexibility in its growth plans: More than 75 percent of its branches could be shuttered within five years or kept open for more than a decade. » Subscribe to CNBC: http://cnb.cx/SubscribeCNBC About CNBC: From ‘Wall Street’ to ‘Main Street’ to award winning original documentaries and Reality TV series, CNBC has you covered. Experience special sneak peeks of your favorite shows, exclusive video and more. Connect with CNBC News Online Get the latest news: http://www.cnbc.com/ Follow CNBC on LinkedIn: https://cnb.cx/LinkedInCNBC Follow CNBC News on Facebook: http://cnb.cx/LikeCNBC Follow CNBC News on Twitter: http://cnb.cx/FollowCNBC Follow CNBC News on Google+: http://cnb.cx/PlusCNBC Follow CNBC News on Instagram: http://cnb.cx/InstagramCNBC#CNBC How JP Morgan Chase Became The Largest Bank In The US
The bankers you work with may seem like great men and women, and they probably are truly nice people. They greet you by name, ask about your spouse and kids and appear to take a real interest in how well your enterprise is doing. Their financial products may be meeting your needs to a T.
But how strongly do you feel about your relationship with your bank? How do you think they’ll cooperate with you when the stuff hits the fan — which it most certainly will at some point? That’s the real test.
Here’s a true-life example: I’ve been working with an entrepreneur who finds himself in a down cycle. The company’s business plan is sound, the management team is experienced, and the product remains viable, so the problem isn’t terminal. But it may be awhile before the company’s prospects brighten.
The company works with a popular bank, which is starting to get nervous about its loans and is considering adding demanding conditions or even calling the loans.
The entrepreneur, however, feels a sense of loyalty to the bank, which has worked with him for several years. I have counseled him to consider other options. The reality is that bankers seven states away that he’s never met, not his local team — are the ones making the decisions.
He’s holding fast– and that’s a big mistake.
The entrepreneur has the opportunity to move to a smaller, regional bank. That bank’s rates may be slightly higher, but they’re more interested in a relationship.
And there’s certainly value in being in the room with the actual decision-makers — for both sides. Yes, your financials are going to be the primary determinant in lending decisions, but the human element can sway an on-the-fence lender to your team. Meantime, you’ll be able to tell a lot about the banker by meeting in person. Sometimes, it’s okay to trust your gut.
Loyalty only takes you so far
I get why entrepreneurs are loyal to bankers that have brought them success, but passing up the opportunity for a better financial situation is a kin to resting on your laurels.
As an entrepreneur, your best chances for success are by finding every possible edge you can. Incremental gains add up nicely over time, you should be taking advantage of them.
As for your spurned banker — they will get over it. Yes, that’s cynical, but that’s the way the business world works, especially with the larger banks. Remember also that your financial needs are a living, changing thing. What worked for you at one point may not be the most appropriate thing for you now.
The most successful entrepreneurs and companies are never satisfied with the status quo. Neither should you.
Are you struggling in your business? Does each month feel like it’s a mad dash to figure out who’s going to get paid? I want to teach you what I do to turn around businesses to make them profitable again. Are you an entrepreneur? Get free weekly video training here: http://www.danmartell.com/newsletter + Join me on FB: http://FB.com/DanMartell + Connect w/ me live: http://periscope.tv/danmartell + Tweet me: http://twitter.com/danmartell + Instagram awesomeness: http://instagram.com/danmartell I’m the guy that gets the call when a business is in trouble… … when a business is on the verge of bankruptcy. Friends call me. Banks call me. If I’m lucky, the entrepreneur calls me before it’s too late. The truth is, it’s always challenging for me to see another entrepreneur failing… … especially when they have major debt owed, personal guarantees and their biggest dreams hanging in the air as collateral. It’s even more heartbreaking when kids are involved. It crushes me inside. That being said, the game plan to turn things around is ALWAYS the same. The #1 thing it takes is uncomfortable discussions, honest assessments and quick decisions. Hard? You have no idea. However, staring at the light waiting for the train to hit you isn’t the right move either. Recently I was able to take a company losing tens of thousands each month, to profitable in 14 days. In this week’s video I provide a step by step process for getting you off the tracks, and pulling a sharp 180 regardless of the challenges you’re facing. When it comes to the steps and process they go like this: 1) Get clarity on the numbers (scary as hell, but necessary) 2) Test the business model 3) Cut deep but not the bone 4) Focus on the customers 5) Write the rules 6) Build it back up The truth is, this strategy is something most companies should use to evaluate their real success. Too many times I’ve had founders tell me their business is doing “GREAT” only to ask a few questions and have them realize they’re way below the market norm. Stop being romantic about your business and get serious about how you’re measuring your progress. Leave a comment below with your business, industry and top question you have about your business model or challenges and I’ll be sure to provide some insights to help you evaluate your progress! Dan “saving businesses daily” Martell Don’t forget to share this entrepreneurial advice with your friends, so they can learn too: https://youtu.be/JyfE6jzcOGI ===================== ABOUT DAN MARTELL ===================== “You can only keep what you give away.” That’s the mantra that’s shaped Dan Martell from a struggling 20-something business owner in the Canadian Maritimes (which is waaay out east) to a successful startup founder who’s raised more than $3 million in venture funding and exited not one… not two… but three tech businesses: Clarity.fm, Spheric and Flowtown. You can only keep what you give away. That philosophy has led Dan to invest in 33+ early stage startups such as Udemy, Intercom, Unbounce and Foodspotting. It’s also helped him shape the future of Hootsuite as an advisor to the social media tour de force. An activator, a tech geek, an adrenaline junkie and, yes, a romantic (ask his wife Renee), Dan has recently turned his attention to teaching startups a fundamental, little-discussed lesson that directly impacts their growth: how to scale. You’ll find not only incredible insights in every moment of every talk Dan gives – but also highly actionable takeaways that will propel your business forward. Because Dan gives freely of all that he knows. After all, you can only keep what you give away. Get free training videos, invites to private events, and cutting edge business strategies: http://www.danmartell.com/newsletter
Big banks to kick off reporting season the week of October 14
Earnings for sector expected to fall slightly, analysts say
Brexit, trade, consumer health on topic list for Financial earnings calls
During Q2 earnings season, Financial sector results helped renew investor confidence in the U.S. consumer.
The question heading into Q3 is whether banking executives still see the same kind of strength, and if they think it can continue amid trade wars, Brexit, and signs of weakness in the U.S. economy.
Over the last three months, as the broader stock market rallied to an all-time high, slammed the brakes, and then re-tested earlier peaks, consumer health arguably did much of the heavy lifting. It felt like every time stocks pulled back, they got a second wind from retail sales, housing or some other data or earnings news that showed consumers still out there buying.
The banks played a huge role in setting the stage by reporting better-than-expected Q2 results that showed signs of strong consumer demand even as some of the banks’ trading divisions took a hit. Next week, six of the biggest banks come back to talk about their Q3 experience and what they expect for Q4. Analysts expect Financial sector earnings to drop slightly in Q3.
That said, most of the major banking names have done an excellent job keeping costs in check as they wrestle with fundamental industry headwinds like falling interest rates and slowing revenue from their trading divisions. This time out, it wouldn’t be surprising to see more of the same, and you can’t rule out a bit more vigor from the trading business thanks to all the volatility we saw in the markets last quarter.
Earnings growth may not be there for Financials this time around, or it could be negligible. At the end of the day, though, Financial companies are still likely to be remarkably profitable considering a yield curve that remains relatively flat and global macroeconomic concerns, according to Briefing.com. This sector knows how to make money, but it might just not make as much as it did a year ago. Earnings will likely show large banking companies still in good financial condition with the U.S. consumer generally in decent shape for now, as the U.S. economy arguably remains the best-kept house on a tough block.
Investors have started to pick up on all this, judging from the S&P 500 Financial sector’s good health over the last month and year to date. The sector is up 3.4% from a month ago to easily lead all sectors over that time period, and up 15% since the start of 2019. The 15% gain is below the SPX’s 17% year-to-date pace, but it’s an improvement after a few years when Financials generally didn’t participate as much in major market rallies.
What to Listen For
No one necessarily planned it, but it’s helpful in a way that banks report early in the earnings season. Few other industries have larger megaphones or the ability to set the tone like the biggest financial institutions can. The other sectors are important, too, but they often see things from their own silos. Combined, the big banks have a view of the entire economy and all the industries, as well as what consumers and investors are doing. Their positive remarks last quarter didn’t really give Financial stocks an immediate lift, but it did apparently help reassure investors who were nervous about everything from trade wars to Brexit.
Going into Q3 earnings, those same issues dog the market, and bank executives have a front-row seat. How do they see trade negotiations playing out? Can consumers hold up if trade negotiations start to go south? How’s the consumer and corporate credit situation? Will weakness in Europe spread its tentacles more into the U.S.? And is there anything bank CEOs think the Fed or Congress can do to fend off all these challenges?
On another subject closer to the banks’ own business outlook, what about the shaky initial public offering (IPO) situation? That’s getting a closer look as a few recent IPOs haven’t performed as well as some market participants had expected. One question is whether other potential IPOs might get cold feet, potentially hurting businesses for some of the major investment banks.
All the big bank calls are important, but JP Morgan Chase (JPM) on Tuesday morning might stand out. Last time, CEO Jamie Dimon said he saw positive momentum with the U.S. consumer, and his words helped ease concerns about the economic outlook. More words like that this time out might be well timed when you consider how nervous many investors seem to be right now. On the other hand, if Dimon doesn’t sound as positive, that’s worth considering, too.
While few analysts see a recession in the works—at least in the short term—bank executives might be asked if they’re starting to see any slowdown in lending, which might be a possible sign of the economy putting on the brakes. Softer manufacturing sector data over the last few months and falling capital investment by businesses could provide subject matter on the big bank earnings calls.
Regionals Vs. Multinationals
While big banks like JPM operate around the world and might be particularly attuned to the effects of trade, regional banks make most of their loans within the U.S., potentially shielding them from overseas turbulence.
Regional banks also might provide a deeper view into what consumers are doing in the housing and credit card markets. With rates still near three-year lows, we’ve seen some data suggest a bump in the housing sector lately, and that’s been backed by solid earnings data out of that industry. If regional banks report more borrowing demand, that would be another sign pointing to potential strength in consumer sentiment. Refinancing apparently got a big lift over the last few months, and now we’ll hear if banks saw any benefit.
One possible source of weakness, especially for some of the regional players, could be in the oil patch. With crude prices and Energy sector earnings both under pressure, there’s been a big drop in the number of rigs drilling for oil in places like Texas over the last few months, according to energy industry data. That could potentially weigh on borrowing demand. Also, the manufacturing sector is looking sluggish, if recent data paint an accurate picture, maybe hurting results from regional banks in the Midwest. It might be interesting to hear if bank executives are worried more about the U.S. manufacturing situation.
Another challenge for the entire sector is the rate picture. The Fed lowered rates twice since banks last reported, and the futures market is penciling in another rate cut as pretty likely for later this month. Lower rates generally squeeze banks’ margins. If rates drop, banks simply can’t make as much money.
The 10-year Treasury yield has fallen from last autumn’s high above 3.2% to recent levels just above 1.5% amid fears of economic sluggishness and widespread predictions of central bank rate cuts. The long trade standoff between China and the U.S. has also contributed to lower yields as many investors pile into defensive investments like U.S. Treasuries, cautious about the growth outlook.
Another thing on many investors’ minds is the current structure of the yield curve. The 10-year and two-year yields inverted for a stretch in Q3, typically an indication that investors believe that growth will be weak. That curve isn’t inverted now, but it remains historically narrow. Still, some analysts say the current low five-year and two-year yields might mean healthy corporate credit, maybe a good sign for banks.
Q3 Financial Sector Earnings
Analysts making their Q3 projections for the Financial sector expect a slowdown in earnings growth from Q2. Forecasting firm FactSet pegs Financial sector earnings to fall 1.8%, which is worse than its previous estimate in late September for a 0.9% drop. By comparison, Financial earnings grew 5.2% in Q2, way better than FactSet’s June 30 estimate for 0.6% growth.
Revenue for the Financial sector is expected to fall 1.6% in Q3, down from 2.6% growth in Q2, FactSet said.
While estimates are for falling earnings and revenue, the Financial sector did surprise last quarter with results that exceeded the average analyst estimate. You can’t rule out a repeat, but last time consumer strength might have taken some analysts by surprise. Now, consumer strength in Q3 seems like a given, with the mystery being whether it can last into Q4.
Upcoming Earnings Dates:
Citigroup (C) – Tuesday, October 15
JPMorgan Chase & Co. (JPM) – Tuesday, October 15
Wells Fargo (WFC) – Tuesday, Oct. 15, (B)
Goldman Sachs (GS) – Tuesday, October 15
Bank of America (BAC) – Wednesday, October 16
Morgan Stanley (MS) – Thursday, October 17
TD Ameritrade® commentary for educational purposes only. Member SIPC.
I am Chief Market Strategist for TD Ameritrade and began my career as a Chicago Board Options Exchange market maker, trading primarily in the S&P 100 and S&P 500 pits. I’ve also worked for ING Bank, Blue Capital and was Managing Director of Option Trading for Van Der Moolen, USA. In 2006, I joined the thinkorswim Group, which was eventually acquired by TD Ameritrade. I am a 30-year trading veteran and a regular CNBC guest, as well as a member of the Board of Directors at NYSE ARCA and a member of the Arbitration Committee at the CBOE. My licenses include the 3, 4, 7, 24 and 66.
There’s a new fashion trend going on out there, but it might be one that’s hard to see–it’s people accessorizing their bank accounts.
For years, fintech startups have boasted of coming into the market and “disrupting” (i.e., displacing) traditional banks. That hasn’t happened.
Instead, what’s happening is that consumers are using new tools from fintech startups in conjunction with their existing bank accounts. These new tools help consumers:
Optimize their savings. Tools like Digit and Qapital won’t help you get a better rate on savings, but they can help you save more money. Digit analyzes users’ spending behavior, determines how much can be safely saved, and then automatically transfers small-dollar amounts from users’ checking accounts to Digit-managed accounts. Consumers have opened more than seven million automated savings “accounts” and used them to save nearly $6 billion in 2018.
Reduce their bills and negotiate fees. Truebill and Trim both promise to reduce consumers’ monthly bill payments by helping them identify and cancel unwanted subscriptions and get them refunds on fees and outages. Cushion and Harvest provide AI-based tools that identify bank fees and negotiate on behalf of consumers to reduce or eliminate the fee.
Get better interest rates and rewards. Although digital banks like Ally, Chime, and Varo pitch themselves as alternatives to traditional banks, most of their users accounts open accounts with the firms to get better interest rates or better debit card rewards–and keep their existing bank accounts open.
Oxford defines the word accessorize as “provide or complement with a fashion accessory” which accurately describes how consumers are using fintech startups in relation to their primary bank accounts.
Consumers Want Accessories From Their Banks
A new study from Cornerstone Advisors shows strong interest among consumers to get checking account add-ons and accessories from their existing banks, however, in categories like:
Digital services. Many consumers already have–and pay for–services like cell phone damage protection, identify theft protection, and data breach protection. Three-quarters of Millennials said they’d be interested in getting cell phone damage protection bundled with their checking account from their current bank, and six in 10 said the same thing about identify theft protection and data breach protection.
Fuel rewards. Just over half of consumers belong to fuel reward programs. Consumers could be motivated to make more use of their financial institutions’ debit cards, however. A little more than half say they would pay with a debit card instead of a credit card in order to get a 10-cent discount on gas. In addition, 11% of Millennials in their 20s would even open a new checking account in order to get that discount.
Purchase-related services. Purchase protection plans and extended warranties have been around for a while, and nearly one in five consumers pay for these services. Among the Millennials who have–and pay for–these services, roughly 40% expressed interest in getting purchase protection plans from their bank, and a third said they’d entertain the idea of getting subscription-cancelling services from their financial institution.
Banks Need to Accessorize Their Checking Accounts
Although 94% of US households have at least one checking account, today’s reality is that the product isn’t as important in consumers’ financial lives as it used to be. Checking accounts have become paycheck motels: Temporary places for people’s money to stay before it moves on to bigger and better places.
Consumers’ behaviors and attitudes show that they:
Don’t see enough value in today’s checking accounts, and feel the need to turn to accessories to get more value, but…
Are willing to pay for accessories if they see the value in them, and are willing to get them bundled with a checking account from their existing banks.
Fintechs may be providing bank account accessories today, but it’s easy to see how they could become the primary provider in the near future.
For a complimentary copy of Cornerstone Advisors’ report Accessorizing the Checking Account, click here.
Ron Shevlin is the Managing Director of Fintech Research at Cornerstone Advisors. Author of the book Smarter Bank, Ron is ranked among the top fintech influencers globally, and is a frequent keynote speaker at banking and fintech industry events.
Here’s a perfect example of how we can learn from the experience of others. My bank account was recently hacked- not fun and so i share with you several ways to protect your money so it doesn’t happen to you- watch to the end as you need to know how and why to protect your pin number!
Last week’s announcement from Coalition that American and European investment banks’ capital markets and advisory’s revenues hit a thirteen-year low is likely to be the beginning of more challenges to come. Even before that announcement, Moody’s Investor Services had changed its positive outlook on global investment banks to stable precisely due to slower economic growth and lower interest rates.
Drivers of Moody’s Stable Outlook for Global Investment Banks
Moody’s Investors Services
As a recession comes closer, bank risk managers, investors, regulators, and rating agencies will be monitoring banks’ loan impairments carefully. According to the Fitch Ratings’ Large European Banks Quarterly Credit Tracker – 2Q19, released last week, “The economic slow down in Europe has not resulted in material new impaired loans yet, but the substantially weakened economic outlook has increased the likelihood of an at least modest increase in impaired loans.”
Impaired Loans/Gross Loans
Fitch Ratings, Large European Banks Quarterly Credit Tracker
Banks’ high holdings of leveraged loans and below investment grade bonds and securitizations, especially those that are less liquid and harder to value, will also weigh on their earnings as the global economy slowdown intensifies. Fitch Ratings’ recent ‘U.S. Leveraged Loan Default Insight’ shows that its “Top Loans and Tier 2 Loans of Concern combined total jumped to $94.1 billion from $74.5 billion in July. The Top Loans of Concern amount ($40.9 billion) is the largest since March 2017, with six names added to the list and nearly all bid below 70 in the secondary market.” Unfortunately, underwriting continues to deteriorate. The Federal Reserve Senior Loan Officer Survey showed a modest loosening of lending standards on corporate loans for the second consecutive quarter.
Fitch U.S. Leveraged Loan Default Index.
A slowing economy and low interest rate environment are outside of bank managers’ control. Yet, cost efficiency, is something that banks can influence; it needs to improve for banks to be more profitable. European banks’ median/cost income ratio, for example, is 66%. “The sector’s structural cost inefficiency will eventually have to be addressed given the persistently weak rate and revenue outlook. Improving cost efficiency faster and developing fee-generating businesses are crucial to sustain profitability in 2H19 and beyond.”
Fitch Ratings, Large European Banks Quarterly Credit Tracker
Global investment banks will also have to be very attentive to what changes need to be made to their business models. While there will be demand for their advisory and distribution services, the demand will slow down in what is likely an upcoming recession.
Source: Moody’s Investors
Moreover, as banks continue to lay-off front office professionals, some top latent to effect deals well will be lost. Volatility from Trump’s multiple front trade wars and Brexit will put a lot of pressure on banks with capital market activities.
Aggregate capital markets revenue first-half 2009-19 (USD billions)
Moody’s Investor Services
Banks in emerging markets are also under profit pressure. Many of the banks in Latin America already have a negative outlook by ratings agencies, particularly due to a slowdown in Mexico and recessionary pressures in Brazil. Asian banks are particularly sensitive to US-Chinese trade tensions.
Emerging Markets: Median GDP Growth by Region
More than ever, to increase profitability, bank executives will need to find ways to diversify their revenue streams in all parts of their banks, commercial, investment bank, asset management as well as in custody and clearing services. Banks need to be profitable to be liquid and to be well capitalized to sustain unexpected losses. What worries me is that a slowing global economy, coupled with increasing deregulation in the US, such as the recent gutting of the Volcker Rule, will embolden banks to chase yield even more and take excessive risks that could imperil depositors and taxpayers. More than ever, investors, bank regulators, and rating agencies should remain vigilant so as to spare ordinary citizens the pain of when banks run into trouble.
When you’re thinking about money and wealth is hard not to include in that equation Banks. Someone said: Money makes the world go round” and banks, well, that’s where money likes to hang out. Every Aluxer we’ve met has close relations to at least one bank which makes it possible for us to enjoy life to the fullest. #2 *** HSBC Holdings is previously known as The Hong Kong and Shanghai Banking Corporation which was founded in 1865 in Hong Kong. However, in 1991-1992, after acquiring Midland Bank The Hong Kong and Shanghai Banking Corporation moved it’s headquarters to London because it was much better from a financial and strategic point of view.
HSBC announced the surprise departure of its chief executive officer, John Flint, on Sunday night, saying the bank needed a change at the top to address “a challenging global environment.”
The move comes nearly a year and a half after Mr. Flint, 51, took the helm of the Britain-based global banking giant. His departure was announced along with the company’s second quarter results, initially scheduled for Monday, which showed first-half pretax profit was 15.8 percent higher than in 2018.
The lender also declared that it would buy back up to $1 billion of its own stock, defying some analysts’ expectations that it might pause its strategy of returning extra capital to investors.
“The board believes a change is needed to meet the challenges that we face and to capture the very significant opportunities before us,” Mark Tucker, the company’s chairman, said in a statement. Catch up and prep for the week ahead with this newsletter of the most important business insights, delivered Sundays.
Noel Quinn, 57, the head of HSBC’s global commercial banking unit, will hold the role of interim chief executive, the lender said.
A multi-billion-dollar fraud scandal perpetrated by an investment arm of the Malaysian government appears to have ensnared another major global financial institution — Deutsche Bank (DB – Get Report) — which already is reeling from massive restructuring efforts.
The Wall Street Journal reported on Thursday that the Justice Department is investigating whether the German lender violated foreign corruption or anti-money-laundering laws in its work for the 1Malaysia Development Bhd. fund, which included helping the fund raise $1.2 billion in 2014 as concerns about the fund’s management and financials had begun to circulate.
The investigation comes amid a massive overhaul of the Munich-based bank announced over the weekend, which includes layoffs in the thousands and the creation of a separate entity for bad loans, debt and other problem investments and holdings that have plagued the bank since the 2008 global financial crisis.
Investigators reportedly have been assisted by former Goldman Sachs executive, Tim Leissner, the Journal said, citing people familiar with the matter. Prosecutors have been investigating similar issues at Goldman, where Leissner, a former managing director, pleaded guilty last year to helping re-direct billions of dollars from the 1MDB fund.
A state economic-development fund, 1MDB turned into a major global scandal after billions of dollars were drained from it between 2009 and 2014, leading to multiple government investigations and the downfall of former Malaysian Prime Minister Najib Razak.
The Department of Justice has said the stolen money totals at least $4.5 billion and that it was used to pay bribes to government officials, pad a slush fund controlled by the former prime minister and purchase hundreds of millions of dollars in luxury goods and real estate.
Shares of Deutsche Bank were down 0.54% at $7.36 in early trading in New York on Thursday.