Weekly Briefing No. 38 | Blockchain 2016: Doers, Dust Kickers and Crazy-Haired Guys

By FinRev | Fin Rev | 9 Aug 2020

Summer is in full force, but the financial innovation keeps on keepin’ on. Separating the blockchain achievers from the posers, a new fintech index and lessons from Dollar Shave Club grabbed our gaze this week. Also making the docket: Student loan’s big week, Ethereum’s hard fork, Umpqua Bank’s clever branch strategy, an insurance twist in marketplace lending and LikeFolio.


Blockchain 2016: Doers, dust kickers and crazy-haired guys.

If we could, we’d buy long-dated call options on blockchain tech and sell short-dated ones against it. That’s because we believe in distributed ledger technology (DLT) and its ability to fundamentally change everything in financial services — but just not immediately. Still, despite table-pounding white papers from Bain, Oliver Wyman/JP Morgan and others, many firms are kicking up dust rather than really digging into DLT because they too are hedging in a different way. For the dust kickers, who believe that DLT is much ado about not much, the preferred modus operandi is to join a blockchain consortia and have the PR department issue press releases demonstrating that your firm “gets it.” Box checked. For the doers, the work is more difficult, but we think it will be beneficial in the long-term. Banco Santander, which is working on a blockchain-powered payments app, is a doer. So are State Street, ING and Lloyds. To be sure, given all the blockchain hype, there’s value in bringing skepticism to the table. Still, five years from now, we believe that the firms who remain dust kickers will risk looking like the crazy-haired guy featured in this amazing Newsweek article from 1995. Our favorite quote: “Even if there were a trustworthy way to send money over the Internet — which there isn’t — the network is missing a most essential ingredient of capitalism: salespeople.” Memo to funds and banks everywhere: Stop kicking dust and put real effort into DLT. Investments you make today may not pay off for a long-time, but at least your firm will have valuable options in its portfolio — and no funny Newsweek articles referencing you (or your hair style).

A fintech fountain of youth index?

Stifel’s KBW has launched an index of 49 “fintech” companies, representing approximately $750 billion of market capitalization. Qualifications to be deemed a fintech involve use of technology to deliver financial products and services and little or no bricks-and-mortar distribution (KBW research coverage helps, too). The list includes companies you would expect (e.g., PayPal, Fiserv, Green Dot, Virtu and EverBank). It also includes some names not usually perceived as fintech companies, including American Express (founded in 1850) and Western Union (founded in 1851), both of which have extensive physical locations, and S&P Global (known as McGraw Hill for 128 years). Our take on this rather broad definition? Great, especially if it can remind employees of the more traditional companies in the index that prospering for another century will require remaining young at heart.

Dollar Shave Club is now an X.

The ‘Uber for X’ convention jumped the shark a long time ago. And thanks to Unilever’s announced acquisition of Dollar Shave Club for $1 billion, entrepreneurs in consumer fintech and beyond will now have a fresh successful company to reference when describing their business model. As this post by Venrock’s David Pakman illustrates, Dollar Shave founder Michael Dubin used a few key insights to build a successful company on the back of a simple razor. Some of those insights: 1) Using asymmetric marketing to attack incumbents overly reliant on broadcast advertising; 2) Avoiding product categories that can be ‘Amazoned’; and 3) Choosing categories where the incumbents’ CEOs are professional managers, not founders. When we think about fintech entrepreneurs looking to disrupt financial incumbents (and insurance companies who rely on broadcast advertising in particular), we see some analogous morsels of wisdom in Dubin’s approach.


Student loan developments from the sublime to the ridiculous. First, the sublime: Online student loan platform, CommonBond, announced that it raised $30 million in a fresh equity round led by Neuberger Berman. It also secured $300 million of debt financing and closed a tuck-in acquisition of Gradible. Also in the positive camp: Amazon and Well Fargo cut a deal to shave 50 basis points off student loans for Amazon’s “Prime Student” customers. And the ridiculous? The White House’s Council of Economic Advisors published a report that claimed the doubling of US student loan debt to $1.3 trillion under the President is a good thing for the economy. Does that mean the CEA hopes that CommonBond and Amazon-Wells Fargo fail in their efforts to ease student loan burdens?

Ethereum takes a mulligan. Wednesday was a big day for the Ethereum community as a hard fork was implemented to undo a $60 million theft of ether obtained via the hacking of the DAO. The hard fork of the Ethereum protocol set up a choice for developers to either go with the new version of the software or stay with the existing one. In commenting on the hard fork, Union Square Ventures’ Fred Wilson said, “I see the successful Ethereum hard fork this week as an important milestone for public blockchains.” Meanwhile, Ethereum guru and Cornell professor Emir Gün Sirer referred to the hard fork as “a rite of passage.” Read more here.

If Apple wanted to buy a bank… “Our stores build a sense of community,” according to Umpqua Bank’s Brian Read. But the design of the bank’s branches — replete with glass, murals, dog bowls and artisanal coffee — is just part of the story. The bank’s approach to client and community engagement is also notable. Employees who know how to handle a variety of banking and financial planning tasks patrol the floor. Community organizations are invited to use the bank’s common space for meetings (a truly win-win idea). And as far as millennials are concerned, Read says that when it comes time for advice, they still want to engage with a person. All of this sounds positively Applesque in our view. For more, see Brian Read’s interview on

Santander doubles down in the UK. “The fund’s base in the UK has allowed it to benefit from London’s position as a fintech hub, while talent-spotting our investments on a global basis. Santander remains committed to the UK and excited about its fintech enterprises.” That’s the statement made by Banco Santander Chairwoman Ana Botín in announcing the bank will double the allocation of fintech investments it will make using its own balance sheet. Deploying another $100 million, a decision likely made long before Brexit, is nonetheless a good sign that at least one major financial institution is going to continue to view London as the best base for its fintech initiatives.

An insurance twist in marketplace lending. Singapore-based EQ Insurance has agreed to provide its partner, Validus Capital, with an insurance blanket for online- originated loans made to small- and medium-sized businesses. That’s notable in our view, and we hope that other insurances providers, lenders and platforms take note of the arrangement. This kind of creativity could bring some useful new blood into the space. Read more here.

AI Lite: less filling and easier to digest. Machine learning and other forms of artificial intelligence technology don’t have to be all-encompassing before they bring value to an organization. Sure, it’s scary-but-interesting to think about a world full of Cyborg PMs and ex Machina bank tellers, but as this guest post in Harvard Business Review points out, the small-business insurance division of Allstate has successfully implemented a virtual assistant known as ABIe to support 12,000 of its agents. The writer’s firm, Earley Information Science, helped Allstate implement its solution, so there’s an obvious bias. Still, it looks to us that AI, when presented as an enabler for financial professionals to do their jobs better, can certainly go down a bit easier.

Company of note: LikeFolio.

We’re skeptical of social media analytics vendors that purport to generate alpha courtesy of a standalone trading-signal product whipped out of a trench coat. But that’s not to say that social media data doesn’t have value. It does, especially as a component of a trading process that includes other factors to complete the picture. That’s why we are taking note of LikeFolio, a provider of tools to analyze social mentions of brands and products of public companies. The company just inked a deal with TD Ameritrade’s trading platform, thinkorswim. Check out the press release announcing the partnership here and the company’s site here.

Comings and goings.

In a smart move, Lending Club has hired Patrick Dunne as Chief Capital Officer. A seasoned executive, Dunne played leadership roles at BlackRock, iShares and Barclays Global, where he managed multiple investment products and teams.

Quote of the week.

“I’d always end up broken down on the highway. When I stood there trying to flag someone down, nobody stopped. But when I pushed my own car, other drivers would get out and push with me. If you want help, help yourself — people like to see that.”

~ Chris Rock

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Fintech, disruption, innovation.

Fin Rev
Fin Rev

FinTech, Financial Innovation, Industry Disruption.

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