FU | April 8-14, 2017

Leading Off

The WSJ writes that Goldman Sachs has made $1B from selling data gained after its purchase of credit bureau TransUnion; China’s Ant Financial plans to expand its DLT initiatives to increase the transparency of and access to its financial services; the ECB said DLT is not mature enough to be part of Europe’s market infrastructure; China may pass restrictive data rules for foreign businesses; and digital savings firm Digit decided to charge for its service.

The Big Idea

The story:  The Wall Street Journal discusses the windfall Goldman Sachs has made from its 2012 acquisition of credit reporting firm TransUnion, bringing in over $1 billion to the firm. Acquiring TransUnion deal gave Goldman access to a trove of new consumer data, which the bank has packaged and sold to online lenders, including LendingClub and Prosper, for significant profit.

Why we care:  A couple months ago, we wrote about the “fight brewing over access to your financial data.” This is why. As financial firms come to rely more on consumer data, the data increases in value and the firms that control it become increasingly powerful. Goldman’s lucrative payoff may incentivize other firms to try similar things — if they haven’t already.

What we think:   If you needed a real-world example of how consumer data is a “natural resource” or why it is incredibly valuable to financial firms, you could do worse than this story. Goldman made $1 billion in the span of approximately five years by selling information about its customers to other firms that needed it to fine-tune their products… to sell to those customers. It’s a circular ecosystem, with billions of dollars at stake, and consumer data sets the gears in motion. The system naturally favors the big banks, since they tend to be the largest repositories of consumer financial data, but there are still some checks on bank power (like Section 1033 of the Dodd-Frank Act, discussed previously). If those checks were to disappear, we could see an escalating bidding war for access to consumer data, which places more power in the hands of big banks.

In Other News…

Examining the present and future of DLT regulation.  The FU‘s Joe Oehmke recently co-authored an article discussing regulatory responses to DLT innovation in financial services and how industry participants can take an active role in shaping regulatory dialogue and subsequent policy developments.

Ant Financial to escalate use of DLT.  The Chinese financial firm behind payments platform Alipay plans to expand and open its blockchain initiatives in an effort to “make financial services more inclusive and accessible,” said CTO Cheng Li.

ECB says DLT is not yet ready for primetime.  In a special report on DLT [full text], the European Central Bank (ECB) said that blockchain technology is not yet mature enough to be part of its market infrastructure.

Ant Financial moves into Indonesia.  Continuing its expansion outside of China, Ant Financial “teamed up with Indonesia’s Emtek Group on a mobile payments and financial services joint venture.” Ant will help upgrade the payments capability of Emtek’s BBM, Indonesia’s most commonly used messenger app.

China considers restrictive data transfer rules.  The Chinese government released draft rules that, if passed, would require foreign companies to “apply for permission to transfer data out of the country.” The rules would allow the government to review any data package over 1TB or with information on more than 500,000 people, and potentially block it from leaving China.

Digit adopts a subscription model.  The firm announced that it will begin charging users $2.99/month for its automated savings app. Digit uses algorithms to monitor users’ spending habits and squirrel away small amounts of cash into a digital savings account for later use. Some users have reacted negatively to the move, apparently preferring to save money for free…

Adyen raises its profile.  Recode touts the ten-year-old, Amsterdam-based online lender’s fast-growing user base and steady profitability, suggesting that it could be “an attractive IPO candidate” in the near future. Adyen has carved out a significant niche for itself by handling online payments for several large customers like Netflix, Spotify, and Uber.

Ofo partners with CITIC Bank.  China’s largest bike-sharing company announced a partnership with Hong Kong’s CITIC Bank to offer deposits, mobile payments, cross-border finance, and credit services to Ofo’s more than 30 million riders.  CITIC’s Guo Danghuai said the agreement will provide “more inclusive financial products and services” within China’s sharing economy.

Have a great weekend!
Joe Oehmke and Austin Tuell

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