Blend’s $ 360 million IPO shows that fintechs are poised to challenge the financial status quo
[Editor’s note: This is a guest post from Dmytro Spilka. He is a tech and finance writer based in London. Founder of Solvid and Pridicto. His work has been published in The Diplomat, Investing.com, IBM, Investment Week, FXStreet, Entrepreneur and FXEmpire.]
Mortgage software company Blend Labs went public last week with sales of $ 360 million and a valuation of more than $ 4 billion. While these numbers seem impressive for a fintech startup that’s barely 10 years old, Blend’s ambitions show that the fintech ecosystem is intensifying its battle for traditional financial institutions to take off.
Blend provided 20 million shares priced at $ 18 each and is listed on the New York Stock Exchange under the symbol BLND.
As a fintech that specializes in leveraging big data and automation to leverage end-to-end customer journeys for mortgages and other banking products, Blend has gained widespread recognition in the real estate world. The company was named one of HousingWire’s Tech 100 2021 winners and has been one since its inception in 2012 Industry leader in mortgage technology.
Blend’s white label technology is what powers mortgage applications through the websites of leading banks such as Wells Fargo and US Bank – the offering was also incorporated into CoreLogic in 2019 to make it easier for borrowers to access loans.
As data released by Insider for the third quarter of 2020 shows, global fintech merger and acquisition activity has accelerated rapidly over the past decade to $ 233.8 billion in 2019 – a full $ 100 billion more than in next best year before. 2020 also turned out to be an extremely successful year at the time of data collection, although uncertainty from Covid-19 dominated the first and second quarters of the year.
This exponential growth of the fintech landscape already heralds extensive changes in the financial world. As technology matures and adoption becomes a natural process, fintechs could pose a challenge to the financial status quo. In fact, data suggests that such changes are already underway.
The fintech revolution
Prior to the Covid-19 pandemic, Experian published a Fintech Marketplace Trends Report that found that competition in personal lending was increasing between traditional financial institutions and fintechs, with fintech companies more than doubling their market share during the year four years to 49.4% – compared to 22.4% in 2015.
The data also showed that the unsecured personal loan category had grown rapidly over the same period, as the volume of new loan organizations reached 1.3 million in March 2019, compared to 656,000 in March 2015.
The pandemic also had an impact on the investment behavior of private investors. Maxim Manturov, Head of Investment Research at Freedom Finance Europe, said: “The pandemic provided additional reasons for the retail investment market to grow. Most countries have taken stimulus measures to prop up the economy, pushing both lending and deposit rates to historic lows. As an alternative to low-yielding deposits, many began investing their savings in equity markets, which grew significantly over the past year despite the lockdown and slump in production.
Because of the greater ability of fintech loan options to take into account the finer nuances of borrowing, companies can not only reduce overall costs, but also reduce the industry’s reliance on credit scoring as the primary determinant of credit. This allows borrowers with no prior credit or poor creditworthiness to access personal loans – regardless of whether they are backed by traditional lenders or more modern digital lending platforms.
While this doesn’t mean that the standards of creditworthiness have been completely wiped out, it does mean that fintechs have the potential to conveniently post their applications further merits. The typical fintech borrower today has an Experian Vantage score of 650 – compared to the 649 FICO held by traditional bank borrowers. Although a good credit lender may want to consider the credit options available to them – like approving credit card offers with 0% purchases and credit transfers – the flexibility fintechs are able to generate users on an individual basis is one important step towards a fairer financial ecosystem.
(Picture: Looking for Alpha)
Finding alpha data shows that the fintech revolution is not limited to personal loans, with a clear transition from traditional credit cards to digital wallets and buy-now-pay-later-payment formats.
By eliminating the use of credit cards and promoting the introduction of digital wallets that can be stored on smartphones, fintechs have opened the doors to a wide variety of opportunities for the public. Instead of going to a bank or filling out an online application for access to a credit or debit card, the entire process can be encapsulated on a mobile device.
Payment innovations have resulted in companies like PayPal and Stripe changing the way individuals do business, make purchases, and use transactions online. The growth rate of fintechs over the past decade has resulted in the business models of leading payment companies changing somewhat to make it easier for merchants to have professional payment tools.
The innovation that fueled Square’s growth focused on bringing a connected online payment experience with a point-of-sale system to everyday life, making it easier to onboard merchants similar to PayPal. Modern fintechs also enabled merchants to use a straightforward back-end system to manage their business – whether they focus on accepting payments, email marketing, loyalty programs, or employee payroll.
Over the decade, we’ll likely see payment solutions go away increasingly in-house so that companies become their own Stripe or Paypal. This new era of fintech can pave the way for companies in a number of industries to make their own payments easier and save money by paying outside service providers. It can also create new opportunities for more innovative models of customer experience.
This unleashes the full potential of digital finance and even encapsulates the possibility of greater integration of cryptocurrencies into modern banking and lending practices. Although Blends $ 360 million IPO seems like a strong statement of intent – it’s just the tip of the fintech iceberg.