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Soul Htite’s fintech crystal ball lands on Libra

The Dianrong founder, who is launching a new asset-management venture, shares predictions for digital finance.

Soul Htite, Dianrong & FinEx

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Soul Htite, founder of China’s Dianrong, is launching a new platform for asset management that will match U.S. assets with Asian investors.

He told DigFinthat the new venture is really the brand extension of FinEx, a company launched two years ago using Dianrong’s marketplace technology to source unsecured consumer loans from the U.S. for Asian private banks and accredited investors.

Assured will involve far more asset classes, including private equity, and has required a bespoke technology build.

He told this to DigFin on the sidelines of RISE, a tech startup conference, where he also spoke about the trends that will continue to drive digital finance.

Htite was co-founder of Lending Club in the U.S., the world’s first electronic marketplace lending platform. He repeated the trick in Shanghai with Dianrong, and sits on the board of FinEx, where he is its also its technology advisor. He is currently based in Hong Kong.

Given that background, he notes that many of the original ideas driving fintech a decade ago have been realized. Digital finance has become mainstream, with many people around the world using online or mobile services, and banks now taking it seriously.

But the impact has been uneven. Fintech companies have transformed payments, but less than 10% of credit is issued via digital platforms, and asset management is further behind.

The foundational patterns for digital finance have been set, so extrapolating current trends, Htite made a few notes about where it’s all headed.

Digitalization

First: digitalization will continue, but to parts unknown. Over the past 25 years, consumers’ relationship with technology and information has evolved from television to e-commerce, then to social media and today’s sharing economy.

Htite believes the next phase will involve deconstructing institutions, so that technologies such as blockchain decentralize entities from corporations to governments to civic goods – and internet 1.0 companies like Facebook.

These institutions have always existed to facilitate exchange and set rules, so that people can transact beyond personal relationships. With digital technology, do we still need these moderators? Htite admits he doesn’t know. But it’s notable that he raised the question.

Technology

Second: technology is becoming cheaper and easier to implement. The idea of the platform means that developers are creating tech for industries or ecosystems, not for single companies. 

To make this work, the future of technology will be about integration, which means the evolution of standards. That in turn will change business models. To date, tech companies in the areas of payments and lead generation have done well. But not marketplaces such as Lending Club or Dianrong – Htite’s area of experience – because customer acquisition has turned out to be too expensive.

Payments and settlements is in trouble if Libra works

Soul Htite, Dianrong

Htite didn’t mention a specific outcome but combine his take on decentralization and standards, and it suggests a lot of financial intermediation is going to be entirely commoditized and subsumed into something else.

Disrupting banks

Lastly: bank incumbents versus fintech disrupters. Htite admires the way banks operate by bundling multiple services together, using deposits as basically a loss leader to enable lending and other high-value services to customers. But he is also critical of the most potent of bank products: the credit card. This invention has bundled payments, lending, and lifestyle, and it’s very efficient for banks, and quite popular among users, but it has also been a reliable tool for indebtedness and bankruptcy.

Fintechs, on the other hand, have caused the problem of complexity. Any given fintech may have a great, clean customer journey, but it zeroes in on just a single product or need. The confusion comes from the proliferation; nothing so far matches the simplicity of a bank’s one-stop-shop approach.

Htite suggests Facebook’s Libra is the first real challenge by fintechs to challenge banks on the level of a bundled offering. (See here for our explainer on Libra.)

“At least it will let us test blockchain infrastructure at the level of millions or tens of millions of people,” Htite said. “Critics of blockhain have worried what would happen if, say, Bank of America put all of its business on the blockchain – would it break?”

Libra means this proposition will be tested at bank-like scale. And given its link to the U.S. dollar, Htite expects it will win acceptance by regulators.

“Payments and settlements infrastructure is in trouble if Libra works,” he said.

That is however a continuation, albeit a radical one, of fintech’s encroachment into payments. It doesn’t address the cost of acquisition for marketplaces serving loans, investments, insurance or other products. Htite expects to see fintechs form consortiums, perhaps with smaller banks, to deliver cost-effective, bundled solutions against big banks.

But he predicts people will remain stuck on credit cards.

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Soul Htite's fintech crystal ball lands on Libra