August 20, 2021
Image: Ivan Martynov / Getty Images
Hello and welcome to Protocol | Fintech! This Friday: a look back at fintech's role in PPP loan fraud, Square's hardware chief and yet another Binance.US CEO.
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The Paycheck Protection Program kept millions of small businesses from going under during the pandemic. But now, an academic study that says a huge chunk of PPP loans were fraudulent, turning the spotlight on fintech lenders who played a critical role in the government initiative.
The report from the McCombs School of Business at the University of Texas, Austin provocatively asked "Did Fintech Lenders Facilitate PPP Fraud?" in its title. It flagged at least one potential indicator of fraud in about 1.8 million loans, representing a whopping $76 billion — and it said much of the blame lay with fintech lenders.
But at least one fintech lender mentioned in the report is pushing back. The key question: Is fast and tech-enabled synonymous with fraud?
There were lots of suspicious loan applications. Hoping to help small businesses survive the COVID crisis, the federal government, through the Small Business Administration, issued nearly $800 billion in roughly 12 million PPP loans, hoping to reach entrepreneurs and mom-and-pop shops.
Not all fintechs are alike. Cross River is mentioned prominently in the report. The New Jersey-based bank, authors said, was one of the three largest fintechs that "exhibited high and increasing rates of both misreporting and lending volume."
"Online lending does not appear to be the problem in and of itself." That's one of the conclusions of the report which said fintechs like Intuit and Square succeeded because they had "established relationships with customers based on a broad suite of payment, accounting, payroll, and other financial support services."
In other words, fast and tech-savvy doesn't always mean fraud-free. But there are times when fintechs can make a meaningful difference — especially during a crisis.
— Benjamin Pimentel
Singapore is fast becoming a global hotbed of tech innovation. It's easy to see why. Nearly 80 of the world's top 100 tech firms have set up outposts there, including Google, Facebook, Stripe, Salesforce and homegrown unicorns like the super-app Grab.
Meet the Apple veteran building Square's crypto wallet. Thomas Templeton, Square's general manager for hardware, said the goal is to grow the bitcoin market.
PayPal dropped BNPL late fees. The payments giant will no longer charge late payment fees on "buy now pay later" customer purchases, matching Affirm's policy.
What fintech trend are you most excited about?
I'm most excited about "buy now, pay later." I think it's a huge innovation around how credit is handled. I'm excited because it provides a lot of access to consumers and allows them to participate in the economy in a way that they may not have had before.
What fintech trend is most troubling for you?
I do think fintechs come with certain risks that aren't really present (or prominent) with traditional banking. I think it's important to consider a lot of the challenges with fintechs around money laundering, fraud and other related risk components to fintech as we continue to innovate and move with speed and scale. There are a lot of vulnerabilities around fintech that maybe didn't exist quite as much with traditional banking, but I think those challenges will also provide opportunities for solutions and will eventually get solved as well.
What's been your biggest professional blunder and how did it help you?
My biggest professional blunder is probably when I started this company with a different idea around payroll and payments, and thought that there was no possible way that this initial idea wasn't the thing that I was supposed to bring into the world. What it taught me was that you really need to be grounded and rooted in principle, and you need a real vision and a real outcome at scale, but how you get there doesn't quite matter as much.
Business leaders say they choose Singapore for its modern tech infrastructure, strong government support, robust pipeline of talent and pro-business regulations (the World Bank ranks it No. 2 in the world for ease of doing business). Plus, its location in the heart of Southeast Asia serves as a launchpad into the bustling Asian-Pacific market.
That's the value of transactions processed by Dutch payments software company Adyen in the first half of 2021, up 67% from the first half of 2020.
Correction: Tuesday's newsletter had the wrong first name for Makara CEO Jesse Proudman. Apologies, Jesse!
Thanks for reading — see you Tuesday.