Weekly Briefing No. 148 | Red vs. Blue Insurtech Disruption Opportunities; Money2020; FICO’s new score

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While much of the financial innovation world was in Las Vegas this week, we stayed home. Here’s what we took in:

  • A red vs. blue state insurtech future

  • Money2020 recap; FICO upgraded

  • Caspian completes ICO; StockTwits

  • The Wing; Breather; Data industrial complex

  • Tiger Global; Metrc; StoneCo; Ribbon

  • Saros; Hummingbird; Alpaca

  • Medical crowdfunding; Warehouses; Square

REFLECTIONS

Red vs. blue insurtech disruption opportunities.

This election season, healthcare, that economic Pac-Man which has never met a dot it didn’t gobble, has once again taken center stage. With that in mind, we’re highlighting Exhibit A: a new study indicating that two years after a new cancer diagnosis (9.5 million new cases occur each year), 42.4 percent of people have fully depleted their assets (See below). Now to Exhibit B: the Trump administration’s decision to expand waivers to the Affordable Care Act. The likely outcome? Red states will redesign their insurance markets to allow for more flexible, cheaper and less generous plans while blue states double down to defend the ACA and/or promote single-payer systems. Finally, consider Exhibit C: the political map. No, we don’t mean the congressional one, we mean the gubernatorial map. Right now, the nation has 33 Republican governors to the Democrats’ 16. But as things look today, Democrats are poised to make dramatic strides towards reversing this imbalance and may seize the governor’s mansion in 12 of the 13 largest states (Minute 22). Taken alongside the continued rise of the gig economy, these facts/trends suggest that as coverage differences between red and blue states widen, healthcare will figure more prominently into habitation choices. It also suggests more solutions will be needed to help people in the individual health insurance marketplace make sense out of a health system that is (amazingly) about to get more divergent, complex, uneven and economically consequential — all thanks to where you live.

NEWS ROUNDUP

2,020 highlights from Money 2020?

There were too many highlights from this year’s event to do them all justice. However, we have plucked out a few based on our (biased) view of things. First, the buzz over biometrics in payments is getting buzzier and has emerged as a core techfin trend. Second, large financial institutions and established fintech companies are in a bull market when it comes to collaborating with each other. A case in point: JP Morgan and Plaid, which used the conference to unveil a partnership that will enable Chase customers to better control which external apps can access their data. Third, the fintech sector continues to disassociate itself from the malevolent meme of moving fast and breaking things that feels as dated as doing the Macarena in a Members Only jacket. To that point, Ripple’s Chris Larsen firesided with Core Innovation’s Arjan Schütte on how Silicon Valley is experiencing a “techlash” thanks to its cavalier attitude towards consequences. Fintech, he said, needs to adhere to compliance and regulations. Finally, we heard from our friends at Unconventional Ventures about the degree to which empathy was emphasized. Indeed, from highlighting gender inclusion and unconscious bias, to empowering older people to benefit from fintech, to retaining the person-to-person aspects in financial services, humanity-infused innovation is “in.” Our hope is that the “people matter” movement is not a dead cat bounce and that it lasts long after Money 2020’s event in 2020.

A new and better FICO solution (maybe).

And speaking of Money2020, Fair Isaac, Experion and Finicity used the event to announce plans to pilot a new scoring system next year that will assess how consumers manage cash across their accounts. The stated intent is to boost loan approvals by providing a lender an alternative way to judge creditworthiness. We sincerely hope that this change will boost scores for deserving people lower on the economic totem pole. However, we hope that lenders who use this sensitive information take care to invest in their security systems. Because being hacked when you’re rich is annoying. But when you’re not, it’s worse.

Real-deal holyfield Caspian completes its ICO.

When we covered Caspian in July (Caspian: a crypto company for grown-ups), we did so with the acknowledgement that covering shiny new things in crypto wasn’t our forte. However, we made an exception because the company, a JV between TORA Trading and Kenetic Capital (and its CEO Robert Dykes), was the real deal. As such, we’re delighted to see that despite the volatile backdrop for crypto these days, Caspian completed its ICO ahead of schedule.

StockTwits and Zacks get cozy.

Perhaps after hearing complaints from onlookers, StockTwits and Zacks finally got a room. Specifically, the two risque firms hooked up ahead of Stocktoberfest to launch Zacks Charts of the day in StockTwits’ new premium room feature. Meanwhile, it’s official, stocks have broken off their nine-year relationship with the bull market on the back of hurtful Q3 reports from Amazon and other Big Techs.

The Wing and Breather expand offerings.

This week, women’s co-working company The Wing made the no-brainer great move to bring daycare to its SoHo location (Does Prada make onesies?).  Also, Breather, the Montreal-based flexible workspace provider backed by Temasek, Menlo Ventures, Valar Ventures and others, announced an expansion of its pay-what-you-use offering to include longer periods of time.

The data industrial complex is now a thing.

The “industrial complex for X” thing jumped the shark this week after Tim Cook used the device to describe the state of data misuse: “Our own information — from the everyday to the deeply personal — is being weaponized against us with military efficiency,” said Cook in a recent speech. He’s right, of course. He’s also correct when he says that while technology is capable of doing great things, it takes people to direct technology to those great ends. That’s why we hope that Cook, who arguably has the firmest ground upon which to lecture other Big Techs, accepts the comments from Alex Stamos with an open mind. Stamos, who left Facebook after disagreeing with other Facebook executives on how to address the Russian hacking mess, took Cook to task for Apple’s approach to privacy in China.

TRANSACTIONS

From the huge to the small, this week had it all (even Alpacas).

In addition to revealing its co-leading participation (along with Casa Verde Capital) in a $50-million financing for cannabis regtech Metrc, Tiger Global has let it be known that it has closed on a new $3.75-billion fund, perhaps fueled by its gains from its Flipkart investment. Also, Brazilian payments processor StoneCo raised over a unicorn in an IPO (See below), and Ribbon, a New York start-up attacking the still-absurd amount of time it takes to secure a mortgage, announced a $225-million debt and equity raise. On the modest side of the ledger, Saros raised $7 million to advance artificial general intelligence technologies emanating from CalTech’s Jet Propulsion Laboratory to shake up the consumer credit market. Finally, Hummingbird, a next-generation AML solution, and Alpaca, a zero-commission platform for systematic traders, each closed on $3 million.

TROVE

Medical crowdfunding needs a full exam.

A new report published in the medical journal JAMA has shed an important light on the dubious practice associated with raising money for medical treatments that lack scientific validation. According to the report’s chief author, Emory University’s Ford Vok, medical crowdfunding represents a “huge new economy” that saw 1,059 medical campaigns between November 2015 and December 2017 that lacked credible support. “Medical crowdfunding has created a difficult conundrum,” said Kelsey Weaver, head of fintech advisor Empact Innovation and a board member of the (very legitimate) SebastianStrong childhood cancer nonprofit. “Crowdfunding should be a powerful mechanism for raising money for meaningful, worthy causes. However, there are big downsides to the current Wild West environment, which enables just about anyone to put up a website and engage in false advertising. A more transparent approach is needed.”

The future is warehouses.

First it was real estate, then it was plastics, then it was semiconductors, social media, Big Data, AI, etc…. But lately, we’ve been thinking that the future (once again) is real estate. But this time, it’s in the football field-sized caverns standing between e-commerce sites and the end customer.

Is Square fueling inflation?

Kudos to The Wall Street Journal (Subscription) for raising the issue of tipping on Square. Mind you, we don’t mind giving a 20-percent tip or more at a restaurant for services rendered. But when you sidle up to a coffee bar, fork over $3 or more for a coffee and a carb, and pay with your card (because a rising number of places are going cashless), what’s up with the Square tip options that can almost double the price? If you’re like us, you often choose the middle of the pre-selected options because you don’t want to look like the Montgomery Burns of your hood. But come on, Square, don’t be like that. Yes, there are no-tip and customized tip options. But you know that most people won’t use them while being stared at by a barista.

QUOTE OF THE WEEK

"In case you ever foolishly forget: I am never not thinking of you.”

Virginia Woolf