How easy is it for Fintech startups to challenge established Wall Street firms?
Charles Moldow, General Partner of Foundation Capital and an early investor in Lending Club, OnDeck and more, recently told CNBC;
“I think it is hard to disrupt any mature industry. This one being a bit harder because you have a regulatory overlay that early stage companies have to become competent in where maybe that is not the case in other sectors. But I would remind you that even when one of our early investments from years ago Netflix started out, the incumbents like BlockBuster thought they were going to be able to put them out of business.”
“There are a number of regulatory bodies that have anxiety on the pace of innovation but really their biggest concerns are security but secondarily they are really looking to protect the consumer so whether it is the CFPB, the FTC, the SEC, or the White House, who are all very actively looking at this space, I think you actually have to subset it into its different component parts. Whether it is lending, or investment management, or wealth management, or remittance, they all have issues and concerns and I think the startup community today is well aware of what those concerns are and are actively looking to work with Washington. Not against Washington.”
Don’t Fight the Feds
CNBC also reported there is a “culling of the herd” in the making as winners and losers start to shake out. Quoting Ron Suber, President of Prosper, the Fintech entrepreneur said he was aware of a lot of competitors shopping themselves. Suber’s comments come at a time when there has been speculation as to whether Prosper is one of these firms.
The marketplace lending sector has taken a bit of a beating lately as the economy stumbled and Lending Club founder Renaud Laplanche was forced to resign from his role as CEO. As the fast and easy money fled the cornucopia of regulatory agencies have quickly moved in to feed.