Tag: investment

FinTech 101: What is a Green Bank?

On February 8, 2021

What Is a Green Bank?

You may have heard the term “Green Bank” and wondered what it meant. This short article will explain the term and concept behind it.

Green Banks in a Nutshell
A green bank is a bank that exists for the sole purpose of battling earth climate change by funding projects that may be able to decrease the global carbon emissions and increase the use of alternative and renewable fuels and energy. They tend to support infrastructure spending in wind, solar, and other renewable energy space.

Green Banks: Functional Model
Green banks are not climate charities. Their funding is expected to be paid back with a profit for the bank. Currently, they are supported by some states in the U.S. and also by private funding. Green Banks utilize philanthropic and public funds. They generally fund energy projects that beyond the research stage and “good to go”. The Coalition for Green Capital (CGC) is a nonprofit agency that is deeply involved in advocating for green banks’ continued development.

Where Did the Idea for Green Banks Originate?
The idea for green banks started in 2008 when two entrepreneurial-minded, Ken Berlin and Reed Hundt, came up with the concept as part of the Obama transition team’s plans for promoting cleaner energy changes in US society. A proposal to enact federally supported green banks was attached to the American Clean Energy and Security Act. The concept never made it as legislation at the federal level. Green bank supporters were not daunted. Consequently, green bank advocates persuaded some states to take up the cause.

Green Banks: Some Statics
Currently, there are at least ten states that have at least one green bank. In addition, they are in the early stages of catching on globally as well. They also exist in Australia, the United Kingdom, and Malaysia. Within the U.S., green banks have already been involved in the funneling of some $3 billion in funds for clean-energy projects.

Green Banks: Their Future Development
With the advent of the Biden presidency, green banks may again find a firmer footing at the federal level. Indeed, in December 2020, Mr. Biden proposed the idea of a national green bank. They appear sure to gain more traction internationally as the desire to dampen climate change takes hold.

Benefits of FinTech for Small Companies

By Jacob Parker-Bowles

On October 3, 2018

In FinTech, Jacob Parker-Bowles

Financial technology, known as FinTech, is changing the way many small business owners run their companies. Struggling to find financing from lenders and strict regulatory compliance is leading many smaller companies to focus on FinTech. Instead of relying on traditional lenders to help support their companies, many entrepreneurs are now turning to affordable solutions from financial technology companies.

FinTech Product and Service Offerings

FinTech companies offer a range of solutions for small companies. Business owners have access to lending, foreign exchange services, and digital business solutions. Many finance experts agree that the rise of FinTech is not just a passing fancy, but a real shift in the way small business owners generate revenues and profit. A report from the World Economic Forum suggests that FinTech will change the entire business environment.

From invoicing solutions, peer to peer lending, and supply chain financing, FinTech companies are gaining a real market presence in the business world with their low-cost solutions. Additionally, these companies are not hamstrung by the regulations that many traditional banks face.

One of the largest gaps FinTech companies fill is lending solutions. Traditional banks often turn away small business owners seeking smaller loans. By offering so-called “micro-loans,” FinTech companies provide a critical lending solution for smaller companies that need less than $50,000. The Small Business Administration considers any loans of $50,000 or less as “micro-loans.”

Many FinTech companies also offer strategic invoicing and expense solutions. In many cases, small business owners have free access to these solutions using easy to download apps.

Other FinTech Solutions

Lending and tracking invoices are only two of a countless array of solutions offered by FinTech companies. Property management companies can accept payments from tenants using the solutions. Additionally, loans are available to help some of the costs of repairs and security deposits that many residents struggle with while property management companies still receive those funds upfront.

Many experts agree that FinTech for smaller companies is still in its infancy. Adopting FinTech as the primary source of business solutions for entrepreneurs is still a challenge. However, many experts do agree that FinTech companies have found a niche by providing services to smaller companies that largely go unrecognized by bigger banks.

Robinhood Makes Cryptocurrency Affordable and Accessible

By Jacob Parker-Bowles

On May 5, 2018

In FinTech, Jacob Parker-Bowles

Cryptocurrency is rapidly becoming one of the most popular investments, especially among young people. Dedicated investment platforms that focus on the currencies, such as Robinhood Crypto, are starting to come into use. More than a million people signed up for the platform’s early access program, largely due to the way that it makes trading easy and affordable for the average investor.

Zero-Fee Trading

Zero-fee trading is the primary reason for Robinhood’s popularity. Most trading platforms charge fees of at least 1.5% for trades and fees that reach up to 4$ are fairly common. That isn’t a huge problem for experienced investors, but it does prevent new or casual investors from taking part in the system by eliminating a large portion of their profits.

Robinhood is popular with that segment of the market because it does not charge any fees. That reduces the profit margin that the traders need to attain to justify their risks, which makes it easier for novices to come out ahead. Robinhood funds its platform by collecting interest on money that is deposited into investor accounts, just like the way that a bank makes money on deposits.

Ease of Trading

Part of Robinhood’s popularity also comes from the tools that it offers to make trading easier. Most of these tools were already in use for stock traders but had not become available to people who invested in cryptocurrency.

The platform allows a rapid transfer of up to $1000 from a bank account to the investment account, with the usual ACH transfer being necessary for larger sums. That money can be used to purchase cryptocurrencies at any time, and some transactions will even be automated through the system. Stock trading is also integrated into the platform for the convenience of investors.

Security

Security is the final factor that is causing people to use the Robinhood platform. The platform helps to address security concerns by using a mixture of both hot and cold storage systems for the cryptocurrency, which provides a layer of protection from hackers. Regular reviews of the system’s code and careful management of the company’s personnel will also help to prevent the loss of data that could expose investments to theft. Taken together, these policies provide an adequate level of protection for investors.

Jacob Parker Bowles: The Shifting Paradigm Of Venture Capitalists And Fintech

The Shifting Paradigm of Venture Capitalists and Financial Technology

By Jacob Parker-Bowles

On August 2, 2017

In FinTech, Jacob Parker-Bowles

Several years ago, before fintech (financial technology) became a household name and widely accepted form of banking and finance management, venture capital firms specializing in this area did not exist. In recent years, however, fintech has become one of the fastest-growing areas for venture capitalists.

Venture capitalists invest in companies that they believe to have large growth potential, so it is no surprise that so many venture capitalists have chosen to funnel their funding into fintech startups- the industry is worth nearly $900 billion, comprising over 1,000 companies and $105 billion in funding. According to VB Profiles’ Fintech landscape report, outside funding for fintech companies more than doubled between 2014 and 2015, from $17.8 billion to more than $38 billion.

With all that growth in the past few years, it seems that it would have to plateau at some point, and as recent trends suggest, that just may be the case, with financial technology experiencing a paradigm shift. In 2016, global venture capital investment dropped off to $25 billion from $47 billion in 2015.

So what gives? Venture capitalists are not losing faith in startups, but they’ve had a sort of reality check. According the Morgan Stanley, “Pullback in fintech investment over the past year is indicative of a realization of lower return on investments than initially hoped due to some unique challenges to disrupting in the financials industry, and our suspicion is that VC investors will continue to scale back investment.”

As venture capitalists step back, legacy firms step in. A fear of disruption can be attributed to the reason traditional financial firms are now hopping on the fintech bandwagon. The threat of disruption from fintechs is forcing incumbents to up their investments in technology to gain operating efficiencies and preserve market share,” Morgan Stanley explains.The proposed deregulation of Wall Street from the Trump administration is another factor. Deregulation would free up incumbent firms’ spending as they wouldn’t have to put out as much money for regulatory compliance and would have more to invest in fintech startups.

This shift in investment patterns is unlikely to have a direct, adverse effect on fintech startups. What is likely, though, is that established Wall Street firms will gain a competitive edge with fintech companies, putting them on a more level playing field as they adapt new technologies to improve their business models.