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.
Financial technology, or fintech, has become a well-known buzzword in recent years, but the term's definition has been difficult to pin down.
When five experts at a Jan. 30 House Financial Services subcommittee hearing were asked to define what the fintech space means to them, each person gave a different answer. One lawyer said he focuses his definition of fintech because that is what is helpful to his clients, and otherwise, the term becomes "impossibly broad."
"To me, it is offering financial products and services to consumers and small businesses over this," Andrew Smith, partner at Covington and Burling, said, holding up his cell phone.
Nathaniel Hoopes, executive director at Marketplace Lending Association, prefaced his answer by saying that he was defining fintech only within the lending space, while Brian Peters, executive director of Financial Innovation Now, said he tries not to even use the word "fintech" because it is too broad.
Rather than focus on a specific subsector, Peters said: "For us, it's using technology to make people's lives simpler and safer."
Adam Levitin, professor of law at Georgetown University Law Center, argued that a fintech company is a financial institution without a brick-and-mortar presence. But Brian Knight, director of the program on financial regulation and senior research fellow at the Mercatus Center of George Mason University, drilled into a more specific definition.
"The provision of financial services by non-banks via nontraditional underwriting or delivery mechanisms," he said.
In a later interview, Covington's Smith said it is clear that "fintech" means a lot of different things to different people. He said it could be payments for some, blockchain and cryptocurrency for others, digital lending and even robo-advisory.
The lawyer also noted that "fintech experts" are really going to be experts on a specific area within the fintech space.
"If we talked about robo-advisers [at the hearing], I think we would have been lost because I think none of us were really prepared to talk about that," he said. However, Smith highlighted that fintech is a "useful buzzword," a way to give people a general idea of the discussion.
To really shed light on specific issues within the space, however, he said the conversation has to become more focused.
PayPal Holdings Inc. reported strong earnings this week, but that was largely overshadowed by the company's announcement that it did not renew its operating agreement with eBay Inc. Instead, the two companies signed an agreement to make the PayPal technology available on eBay through July 2023, while eBay signed an operating agreement with a European partner.
Although uncertainty looms around the long-term implications, some analysts are not concerned and actually view the change as a positive step for the payments processor.
Visa Inc. and Mastercard Inc. each reported net revenue increases, and both companies announced plans to use benefits from the recent U.S. tax overhaul.
Earnings season continues next week with Fidelity National Information Services Inc., Fiserv Inc., S&P Global Inc. and more scheduled to report.
Square Inc. rolled out bitcoin buying and selling to all users. CEO Jack Dorsey tweeted the announcement, saying the company supports the cryptocurrency "because we see it as a long-term path towards greater financial access for all."
South Korea's ban on anonymous bitcoin trading accounts went into effect this week, although CNBC reported that market participants believe this action will actually bring greater legitimacy to the crypto space in the long run. Under the new rules, cryptocurrency traders will need to maintain a linked bank account in their name to be able to withdraw or deposit cash. The rules also ban foreigners and minors from trading activity.
On Mastercard's earnings call, CFO Martina Hund-Mejean estimated that cryptocurrency transactions caused a 1% transaction tailwind in the fourth quarter of 2017, but said trends have slowed in recent weeks.
Bitcoin at one point fell below $8,000 this week, its lowest price year-to-date. It stood at $8,676.74 as of 3:30 p.m. ET on Feb. 2.
From Jan. 26 to Feb. 1, the SNL U.S. Financial Technology Index fell 0.95%.
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.
