MatteoRizzi_Lisbon

2017 notes to self

It has been a while guys.

 

I promised myself to blog twice a month this year, but only if I have something interesting to share (at least to my judgement) : I am very tempted to start writing about something else than FinTech or at least balance that with something more engaging.
I will not spit on the plate I eat (free translation from Italian and if this expression does not exist it should) because Innovation in Financial Services is something I love, so maybe what becomes boring is that everyone seems entitled to grasp a bite of it.
And it is more and more difficult to separate substance from mindlessness (but I already blogged about that).

 

Note#1
Building tribes has always been my passion and somehow my destiny : Italiansonline, then the SWIFT Community, then Innotribe, now FinTechStage.
My work at Omidyar Network has a lot to do with that as well. We actually added another component of the work in 2017 which specifically speak about Eco-system Development.
Someone would say “Is that even a thing ? Eco-system Development ?”
If you ask the majority of the FinTech, InsurTech, RegTech lists popping around like mushrooms, everyone will unanimously say “Hell yes !”, and possibly saying it is entirely or partially what they do.
If you ask large corporations, or financial institutions, or Insurance groups, or the Big10 Consulting companies, all of a sudden seems clear there is (more often than not) no such a figure. Most of the time there is someone doing that function, but his or her job title says something else and this role is not something he or she is measured on.
Most people do not understand that is not about you, is about the Tribe : you can write a book and have one million readers who bough your masterpiece, but you are not their leader, nor they are  your tribe. They might want a selfie with you, but you are not building the network. You are using it. The risk of it is that you become slave of your own novelty, because you need to keep finding reasons for these selfies continuing to happen.
Building eco-systems requires a depth and a selfless attitude and the business comes then naturally because no one is more valued that the kind of person who builds bridges.

 

Note#2
I will become better at sharing what I learn and find the right context to amplify that.
This goes beyond FinTech and has to do with self development, lifestyle, entrepreneurship structuring, relationships.
I want to contribute, even if for a fraction of it, in helping people to become a better version of themselves. And I want to get the tools to do it.
More on this, but it has to do with depth (or the lack of it).
When all you can say about a person is the company he or she works for and eventually the job title because saying it implies which role he or she can have in helping you making more money, not only you are not owning that relationship, but you can’t count on it.
I want to surround myself with as many people as possible (no matter where they are physically) knowing each other as a person, not as a business entity. The only way to do this is to give them time, for free, with the sole purpose to open up reciprocally.

 

Note#3
I will perfect Portuguese and explore Lisbon (my new home and the country with it), because I want to add another soul. In order to do that, I need to be more disciplined about my travel and get space for myself and my loved ones.
I have the serious intention to build 2 businesses in Portugal.
One related to FinTech and entrepreneurship (there is very little in this space, despite Portugal smartly took the Tech spotlight hosting WebSummit and making some amazing simplified company building initiatives for Start-ups).
The second initiative is to build on another passion I have : the real estate (which has overlap with the first one, because my very first  real estate investment could become a FinTech hub. I just need to find the right partners for it.

 

Note#4
FinTechStage has to go deeper and vertical.
After Luxembourg (March 1st), the first FinTechStage Inclusion Forum will take place in Jakarta, March 22-24th, go to www.FTSInclusionForum.com and have a look.
Then, 4-5 May, FinTechStage Milano doubles down with InsurTech. We partnered with probably the best connected person in the space, Matteo Carbone, so another Matteo joined the family and I really hope we will build many more events of this kind together.

 

Note#5
Building Tribes for Omidyar Network is one of the most rewarding experiences ever. I want to help ON changing the world. This note is to remind myself to be grateful everyday for this opportunity.
If you read my blog that far without getting bored, you earned a free pass to come to Jakarta. reach out to me and will personally send you an invitation 🙂

 

Stay Tuned

 

Matteo

Alternative lending landscape (for dummies…)

I think this is a good opportunity to talk about something concrete we are actively looking at, explained in a way that (I hope) will catch the attention of everyone (including my mum, who I can see right now with her dictionary on… And no, she does not use Google translate)

The two big families of the new lending landscape are P2P lending (person to person) or SME lending (to small businesses).
There are also some hybrid versions of it like corporate lending money to their employees or persons lending a fraction of the capital to a business, in a crowd funded way, but I would say these are less populars.

Let s start with SME lending.
There is no way a bank can profitably make a 20K loan to a business.
The cost of the paper and the time of the employee(s) required to assess, release, monitor and eventually recover the money back will easily eat all the mark-up that the institution would possibly charge (unless they apply illegal outrageous interest rates, which would put them out of business anyway).
This is what became the core business of many Startups of this space.
Use non-conventional (like aggregated data from the POS or geo-localised transactions data) and conventional (good old bank statements) data to make an assessment on how likely is the chance to recover the money if and when the loan happens.
Now : there are two big families of these Startups (I know, life is a binary tree) : the one competing with  the banks (by collecting their own capital and lending their own money) and the one trying to re-intermediate the banks in this process (in other words, selling their platform and services to the banks so they can use their capital  to perform the loans).

An example of the latter is Advanced Merchant Payments, out of Hong  Kong,
focused on the provision of working capital loans to SME’s based on an algorithm that credit scores Merchant payment and bank account data.
IWOCA, focused on the UK and European eTailer market uses an algorithm to provide working capital loans to eTailers based on their digital footprints across Ebay, Amazon PayPal etc. The latter is an example of a startup in competition with banks.
They are both doing quite well, and of course I will not put my Venture Capital hat on as the purpose of this is purely informative.
The default rate (the loans not repaid back) is reasonably low, and the return is good. Remember, for some businesses there is no other way to have access to capital.

Let s talk about P2P lending.
This space is very crowded, and actually even easier to understand : if I have a decent social presence, if my network is solid, if I am a regular customer of e-commerce platforms (like eBay) that allows some data about my transactions to be pulled off, if on the top of it I give access to my bank statements, you can have a quite educated guess whether or not I will be able to repay a small loan that I am asking.

Interesting enough, this “universal, empirical credit score” can be built using a number of different techniques, including NPL and psychological questionnaires (I am thinking specifically to EFL that releases microcredit based on a very specific profile questionnaire, started in developing countries.
Recently, many Startups have arisen just using Facebook and LinkedIn to assess credit worthiness. Still early stage, but promising.

P2P lending is booming in countries (like Latin America) where the Consumer loans have very high interest rates, but it started in US and more maitre countries as data were of course richer and available in an easier way.

Here is a US panorama of the most famous P2P lending platforms.
I am – on purpose – leaving out the crowd funding, for which a separate post will be due.

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If any of you bothered to read so far, would be great to hear your thoughts on this. Obviously, if you are in the Fintech business you should have stopped a while ago.
The reason for this post is that I saw this morning on my Facebook wall a dear friend asking me : “Matteo, can you explain to my step-father why Bitcoin is or can become so important, in words he can understand?”.

I leave that challenge for a future post, and starts with something else…

Stay tuned

Matteo