|Bid||2,706.00 x 0|
|Ask||2,709.00 x 0|
|Day's range||2,655.61 - 2,704.00|
|52-week range||1,884.50 - 2,704.00|
|Beta (5Y monthly)||0.29|
|PE ratio (TTM)||33.90|
|Earnings date||12 Nov 2019|
|Forward dividend & yield||0.37 (1.38%)|
|Ex-dividend date||02 Jan 2020|
|1y target est||25.64|
(Bloomberg) -- Financial technology startups will enter the next decade with a little more street cred than the last time around.Nearly 60 upstarts focusing on financial services -- from Stripe Inc. to Chime Inc. to Plaid Inc. -- have garnered valuations of more than $1 billion in recent years, according to CB Insights. Personal loans -- a category popularized by fintechs like GreenSky Inc. or Affirm Inc. -- are now the fastest growing form of debt in the U.S., Experian data says. And Robinhood sparked a movement toward free stock trading that has shaken the business models of the likes of Charles Schwab Corp. and E*Trade Financial Corp.Still, analysts and experts say there’s more to come. Sweeping mergers and acquisitions have transformed some of the industry’s largest incumbents in payments, who are gearing up for a bigger fight for market share with newcomers. And regulators are looking to have more say over how technology companies venture into financial services.Here’s our annual list of the most important trends, challenges and companies to watch in the New Year.Exit StrategiesMergers and acquisitions have historically been small and rare in the fintech space, but that changed in a big way in 2019. Fiserv Inc., Fidelity National Information Services Inc. and Global Payments Inc. did a series of deals that transformed payment processing in the U.S. More recently, PayPal Holdings Inc. made its largest acquisition ever and Charles Schwab announced it would buy TD Ameritrade Holding Corp. for about $26 billion. That frenzied pace of deal-making might continue through (at least some of) 2020.Lindsay Davis, senior intelligence analyst, CB Insights: “Wealth management will likely see more consolidation from incumbents, who are under pressure to compete for next-gen customers and an army of virally growing fintech apps who have abstracted the client relationship away from the old guard. Charles Schwab buying TD Ameritrade is just the beginning of more strategic consolidation to come.”Matt Harris, partner, Bain Capital Ventures: “I think there is a window during the first half of the year for IPOs, but once summer hits people will be fundamentally distracted by the election. I certainly don’t think it will be fast and furious.”Regulatory ScrutinyMemorably, in 2019 Mark Zuckerberg defended Facebook Inc.’s plan to overhaul the world banking system in front of Congress. (Legislators were not amused.) Our experts think there’s plenty more government scrutiny ahead for financial technology players. That’s even though regulators including the Federal Reserve and the Federal Deposit Insurance Corp. have sought to encourage banks to work with newer technologies like alternative data in their underwriting in an attempt to bring more people into the financial services ecosystem. Companies will need to adjust their strategies accordingly.Alyson Clarke, principal analyst, Forrester: “Regulators are going to start taking a closer look and scrutinizing artificial intelligence. The whole Apple Card and the supposed gender bias -- I think we’ll see more things like this surface. Transparency in AI is critical and ethics in AI is critical and it needs regulatory oversight.”Vanessa Colella, Chief Innovation Officer, Citigroup Inc.: “We want to make sure the people who are transacting are who they say they are. As we get to 40 billion devices online, you can see it’s not just about KYC, or Know Your Customer, it’s KYM, or Know Your Machine -- and being sure that, as these transactions are happening at the edge, that you’re able to validate what the machine is, and whether the machine has the permission and the capability to make that transaction.”The Rise of Digital BanksChime, the leading U.S. digital bank, is now valued at $5.8 billion. That makes it more valuable than some of the country’s largest banks, including New York Community Bancorp, CIT Group Inc. or Synovus Financial Corp. It’s part of a new class of entrants, known as “challenger banks” or “neo-banks,” that’s raised more than $3 billion in venture funding in the first three quarters of this year. With that has come millions of customers. Will they remain loyal? Or will traditional lenders be able to win them back?Frank Rotman, founding partner, QED Investors: “While these neo-banks can’t yet match the complete suite of banking products that a traditional branch-based bank can, this doesn’t matter to the typical consumer because they rarely, if ever, use any of the hundreds of products that are in a bank’s arsenal. So we’ll be talking about challenger banks in 2020 and in 2021 and in 2022 and eventually the ‘challenger’ title will be dropped because they’ll be major players in the ecosystem.”Mitch Siegel, principal, KPMG: “I do believe 2020 is an arms race: You’re going to see a lot of people launching digital banking initiatives. Personalization is what’s changed that game. Cross-selling without personalization seems sleazy but if you can personalize offers, and give me things that are high probability that I actually want them, I’m OK with you trying to sell me other products and services. Make it easy. Know me. Value me. Protect me.”The Bank of Apple? Big Tech Moves InIf you’ve read this annual post before, you’ll be no stranger to predictions that the technology giants of the world will move deeper in to finance. The pace of those moves accelerated this year, however, with Apple launching a credit card with Goldman Sachs Group Inc., Alphabet Inc. announcing a checking product with Citigroup, and Facebook attempting to make a new global currency.Matt Harris: “I think this is inevitable. Tech companies, large and small, will be looking to incorporate payments, lending and insurance in their business models in the coming years, and the smartest and most capable banks will want to be part of that movement. I do think this raises the stakes for pure fintech startups.”Frank Rotman: “The trend is broader than ‘tech getting into finance.’ It should be seen as ‘customer-facing organizations’ offering their customers banking products. Many customer-facing organizations have built up trust with their customers -- as evidenced by high engagement and high net promoter scores -- but don’t want to, nor see the need for, officially becoming a bank. Instead, they can partner with banks that are willing to co-brand or white label their services and offer great banking products to their loyal customers.”Lindsay Davis: “Netflix could also leverage financial services to compete and enable gig-economy workers and freelancers in the film and TV industry, which have been traditionally too niche to serve, and have a unique set of pain points.”To contact the reporters on this story: Julie Verhage in New York at firstname.lastname@example.org;Jenny Surane in New York at email@example.comTo contact the editors responsible for this story: Michael J. Moore at firstname.lastname@example.org, Anne VanderMey, Molly SchuetzFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Apple Inc. pitches its new card as a model of simplicity and transparency, upending everything consumers think about credit cards.But for the card’s overseers at Goldman Sachs Group Inc., it’s creating the same headaches that have bedeviled an industry the companies had hoped to disrupt.Social media postings in recent days by a tech entrepreneur and Apple co-founder Steve Wozniak complaining about unequal treatment of their wives ignited a firestorm that’s engulfed the two giants of Silicon Valley and Wall Street, casting a pall over what the companies had claimed was the most successful launch of a credit card ever.Goldman has said it’s done nothing wrong. There’s been no evidence that the bank, which decides who gets an Apple Card and how much they can borrow, intentionally discriminated against women. But that may be the point, according to critics. The complex models that guide its lending decisions may inadvertently produce results that disadvantage certain groups.The problem -- in Washington it’s referred to as “disparate impact” -- is one the financial industry has spent years trying to address. The increasing use of algorithms in lending decisions has sharpened the years-long debate, as consumer advocates, armed with what they claim is supporting research, are pushing regulators and companies to rethink whether models are only entrenching discrimination that algorithm-driven lending is meant to stamp out.“Because machines can treat similarly-situated people and objects differently, research is starting to reveal some troubling examples in which the reality of algorithmic decision-making falls short of our expectations, or is simply wrong,” Nicol Turner Lee, a fellow at the Center for Technology Innovation at the Brookings Institution, recently told Congress.Wozniak and David Heinemeier Hansson said on Twitter that their wives were given significantly lower limits on their Apple Cards, despite sharing finances and filing joint tax returns. Wozniak said he and his wife report the same income and have a joint bank account, which should mean that lenders view them as equals.One reason Goldman has become a poster child for the issue is that the Apple Card, unlike much of the industry, doesn’t let households share accounts. That could lead to family members getting significantly different credit limits. Goldman says it’s considering offering the option.The bank said in a tweet it would also re-evaluate credit decisions if the borrowing limit is lower than the customer expected.“We have not and never will make decisions based on factors like gender,” the company said. “In fact, we do not know your gender or marital status during the Apple Card application process.”With this month’s snafu, Goldman has found itself in the middle of one of the thorniest laws in finance: the Equal Credit Opportunity Act. The 1974 law prohibits lenders from considering sex or marital status and was later expanded to prohibit discrimination based on other factors including race, color, religion, national origin and whether a borrower receives public assistance.The issue gained national prominence in the 1970s when Jorie Lueloff Friedman, a prominent Chicago television anchor, began reporting on her own experience with losing access to some of her credit card accounts at local retailers after she married her husband, who was unemployed at the time. She ultimately testified before Congress, saying “in the eyes of a credit department, it seems, women cease to exist and become non-persons when they get married.”FTC WarningA 2016 study by credit reporting agency Experian found that women had higher credit scores, less debt, and a lower rate of late mortgage payments than men. Still, the Federal Trade Commission has warned that women may continue to face difficulties in getting credit.Freddy Kelly, chief executive officer of Credit Kudos, a London-based credit scoring startup, pointed to the gender pay gap, where women are typically paid less than men for performing the same job, as one reason lenders may be stingy with how much they let women borrow.Using complex algorithms that take into account hundreds of variables should lead to more just outcomes than relying on error-prone loan officers who may harbor biases against certain groups, proponents say.“It’s hard for humans to manually identify these characteristics that would make someone more creditworthy,” said Paul Gu, co-founder of Upstart Network Inc., a tech firm that uses artificial intelligence to help banks make loans.Upstart uses borrowers’ educational backgrounds to make lending decisions, which could run afoul of federal law. In 2017, the Consumer Financial Protection Bureau told the company it wouldn’t be penalized as part of an ongoing push to understand how lenders use non-traditional data for credit decisions.AI PushConsumer advocates reckon that outsourcing decision-making to computers could ultimately result in unfair lending practices, according to a June memorandum prepared by Democratic congressional aides working for the House Financial Services Committee. The memo cited studies that suggest algorithmic underwriting can result in discrimination, such as one that found black and Latino borrowers were charged more for home mortgages.Linda Lacewell, the superintendent of the New York Department of Financial Services, which launched an investigation into Goldman’s credit card practices, described algorithms in a Bloomberg Television interview as a “black box.” Wozniak and Hansson said they struggled to get someone on the phone to explain the decision.“Algorithms are not only nonpublic, they are actually treated as proprietary trade secrets by many companies,” Rohit Chopra, an FTC commissioner, said last month. “To make matters worse, machine learning means that algorithms can evolve in real time with no paper trail on the data, inputs, or equations used to develop a prediction.“Victims of discriminatory algorithms seldom if ever know they have been victimized,” Chopra said.(Updates with Goldman comments in ninth and 10th paragraphs.)To contact the reporters on this story: Shahien Nasiripour in New York at email@example.com;Jenny Surane in New York at firstname.lastname@example.org;Sridhar Natarajan in New York at email@example.comTo contact the editors responsible for this story: Michael J. Moore at firstname.lastname@example.org, Steve Dickson, Daniel TaubFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
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