This recap features updates on bank technology, payments, online lending and other news in the U.S. financial technology space. Send tips, ideas and chatter to rachel.stone@spglobal.com. For other recent fintech news, click here.
Shares of newly public GreenSky Inc. rebounded by the end of the company's first trading day after opening lower than the $23.00-per-share price expected in the consumer lender's initial public offering.
GreenSky, which now trades on the Nasdaq Global Select Market, offered 38 million class A common shares in the offering. Those shares opened trading at $22.25 May 24, but rose throughout the day to eventually close at $23.36. As of 11:26 a.m. ET on May 25, GreenSky's shares were up 6.25% on the day to $24.82.
Though GreenSky's consumer-focused lending activities have led to comparisons with LendingClub Corp., the two digital lenders have posted diverging results. GreenSky has been consistently profitable on a GAAP basis, whereas LendingClub has posted GAAP net income in only three quarters since its December 2014 and not since the first quarter of 2016.
Autonomous analyst Robert Wildhack said in an interview he was "definitely expecting a positive reaction" from investors during the IPO thanks to GreenSky's consistent results and "strong margins."
GreenSky's performance is tied to its business model. While LendingClub is a peer-to-peer digital lender, GreenSky runs a technology platform that connects consumers, merchants and banks to offer instant point-of-sale financing for big-ticket purchases in home improvement and elective healthcare.
The company had more than 12,000 active merchants on its platform as of March 31. Since GreenSky's inception in 2006, about 1.7 million consumers have financed more than $12 billion of transactions with the company's bank partners.
GreenSky also offers deferred interest loans to its customers, who are primarily prime or super-prime borrowers with an average FICO score of 770. The company estimates that 89% of deferred interest borrowers will pay off their loans by the end of the promotional period.
The offering has been "weighing on their ability to improve margins in the past few years," Wildhack said, because it puts GreenSky on the hook for paying its bank partners the accrued interest that customers get to avoid.
GreenSky relies on bank partners to originate all loans made through its platform, and just four partners — SunTrust Banks Inc., Regions Financial Corp., Fifth Third Bancorp and Synovus Financial Corp. — provided about 89% of the commitments to originate loans as of March 31.
Another analyst views funding and credit as the biggest risks to the company. However, commitments likely will be extended and expanded if the current macroeconomic landscape persists, Compass Point analyst Michael Tarkan said in a May 21 note.
SunTrust and Fifth Third have both participated in prior GreenSky equity rounds, and "they have some skin in the game tied to GreenSky's success," Tarkan wrote.
Newly organized blank check company Far Point Acquisition Corp. also filed for an IPO this week. Former NYSE CEO Thomas Farley will run the company, which intends to target a fintech, technology or financial services company.
Elsewhere in fintech, PayPal confirmed its interest in pursuing more large deals in the near future. Executives at the company's investor day named India, Brazil, Indonesia, Mexico and possibly China as markets the company may soon look to expand into.
In cryptocurrency news, LMAX Exchange, a private company with a significant foreign exchange trading platform, launched the first physical cryptocurrency exchange. The London-based LMAX Digital exchange, regulated by the Financial Conduct Authority, will offer trading of Bitcoin, Ethereum, Litecoin, Ripple and Bitcoin Cash, the five most established cryptocurrencies.
Coinbase Inc. acquired Paradex, a 10-employee startup that allows customers to trade digital tokens on a so-called decentralized exchange, which uses smart contracts to let users trade tokens without a central authority and records those transactions on a blockchain, Fortune reported. The company also announced a new brand, Coinbase Pro, that will replace GDAX, its longtime trading platform for institutional investors, the news outlet wrote.
On the regulatory front, U.S. and Canadian state and provincial regulators launched a series of enforcement actions against fraudulent initial coin offerings and other cryptocurrency investment products.
From May 18 to May 24, the SNL U.S. Financial Technology Index rose 0.47%.
A recent report from S&P Global Market Intelligence explores how banks and insurers are embracing fintech innovation. The report looks at recent trends and provides outlooks for the insurtech, digital lending, digital investment management, digital banking, payments and distributed ledger technology sectors. Click here to read the report.
