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Financial technology companies are increasingly active in online small-business lending, and some startups are segmenting the market further to target certain subsets of small-business owners.
On Aug. 8, Heather Tuason left her role as senior vice president of small business at Capital One Financial Corp. to join StreetShares, a Northern Virginia-based startup focused on financing military veteran-owned small businesses. She will serve as chief product officer and said she joins several other Capital One alumni who moved to this particular fintech startup.
Tuason said she was drawn by the company's mission of financing U.S. veterans and believes the beauty of its peer-to-peer model is the inclusion that attracts "mom and pop" investors. StreetShares offers an accredited investment option, but the more popular option facilitates peer-to-peer lending from unaccredited individuals, she said.
The company is competing with lenders that charge exorbitant rates and hidden fees, she said, but StreetShares prides itself on being more transparent. The startup invests a portion of its own capital in each loan it makes, Tuason added.
Veteran-owned small-business borrowers are unique, she said, noting that their drive produces a 30% higher success rate at year five compared with the broader U.S. small-business community.
Also in the digital small-business lending space, PayPal Holdings Inc. said this week that it has agreed to acquire Wilmington, Del.-based Swift Financial. The acquisition is expected to close later in 2017. Credit Suisse analyst Paul Condra pointed out that the deal lets PayPal lend up to $500,000 to larger merchants, compared with its current $125,000 level. The Swift deal will also enable PayPal to lend to companies not currently using its services, the analyst wrote in an Aug. 11 note.
In other fintech deal news, British payments company Worldpay Group plc further extended the deadline for its U.S. suitor Vantiv Inc. to make a firm takeover offer. Vantiv must clarify its intentions by no later than 5 p.m. London time on Aug. 11.
Digital lenders On Deck Capital Inc. and LendingClub Corp. reported earnings this week. On Deck expanded its partnership with JPMorgan Chase & Co. LendingClub executives said the company could see GAAP profitability toward the end of 2017. Cost-cutting and credit-tightening measures have begun to pay off at both companies, according to research from S&P Global Market Intelligence, and their continued improvement could soon bring private digital lenders Social Finance Inc. and Kabbage Inc. into the public markets.
Earnest Inc., a San Francisco-based fintech startup that offers student loan refinancing and personal loans, is working with Barclays Plc to find a buyer, "people familiar with the matter" told Bloomberg.
In virtual currency news, Fidelity Labs rolled out a test that gives Fidelity customers the ability to see their digital asset balances as part of their portfolio of investment accounts on the Fidelity website.
From Aug. 3 to Aug. 10, the SNL U.S. Financial Technology Index fell 1.89%.
S&P Global Market Intelligence released a fintech primer on four areas — digital lending, payments, blockchain and digital wealth management — of particular interest due to their rapid pace of growth, technological disruption, and regulatory and other risks. Click here to read the primer.