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ACCOUNTS PAYABLE AUTOMATION: The multitrillion-dollar accounts payable market is finally digitizing — here's how payments providers can grab a piece of it

Wed, 07/08/2020 - 2:03am

 

The $22 trillion business-to-business (B2B) US payments market is facing a paradox. High invoice volume (a business can see anywhere from hundreds to tens of thousands of invoices per month) and small departments that still use largely analog process are driving a desire to digitize: Enterprises using digital payables platforms can see 81% lower processing costs and 73% faster processing cycle times, per Kofax.

But accounts payable is a complex process, and entrenched habits and limited resources have stymied digitization and kept companies set in their ways.

Today, more firms are starting to seek accounts payable solutions that automate the invoicing and payments process, as they look to cut costs, decrease fraud, improve efficiency, and gain more visibility into payment data. These changes are bringing a deluge of providers — including software companies, card networks and providers, banks, and payment networks — into the ecosystem.

By moving into B2B payments, players in the space can diversify their businesses by capturing a new source of volume and attracting a new set of clients, attractive prospects as growth in digital consumer payments begins to slow.

For these providers, striking while the iron is hot and chasing the classes of businesses with the most opportunity — including small sellers, the middle market, cross-border companies, and the gig economy — will prove the top strategies in a successful pursuit of the B2B market.

In this report, Business Insider Intelligence will size the accounts payable market in the US; evaluate the breakdown between analog and digital processes at all three stages of an accounts payable transaction; and evaluate barriers toward digitization.

We will then identify four key segments where there's particular opportunity in accounts payable and assess the value in each. Finally, we will examine four best-in-class providers serving these areas and explain why their solutions could be a blueprint for other providers entering B2B.

The companies mentioned in this report are: Bottomline Technologies, Intuit, JPMorgan Chase, MineralTree, Oracle, SAP, SWIFT, Tipalti, Visa, Xerox.

Here are some key takeaways from the report:  

  • The $22 trillion US B2B payments market has been slow to digitize, with 36% of firms using paper invoicing, 47% relying on manual processes for approval, and 49% of payments made by check.
  • Forty-four percent of businesses are looking to add automation to their payables processes as a way to capitalize on the efficiency and cost-cutting benefits it brings in, while also cutting fraud and increasing access to payment data.
  • Large enterprises have the highest budgets for digital solutions, but they're also the most likely to already be using them, which makes small businesses, middle-market companies, cross-border businesses, and the gig economy the ripest targets for innovation.

In full, the report:

  • Explains the typical accounts payable process and identifies pain points within each stage.
  • Lists the benefits of automating accounts payables and highlights friction points preventing businesses from digitizing.
  • Analyzes how payments providers can best move into the space and capture a large volume share as the market is on the cusp of rapid digitization.
  • Evaluates four best-in-class strategies that payments providers looking to move into payables can take to scale quickly.

Interested in getting the full report? Here's how to get access:

  1. Purchase & download the full report from our research store. >> Purchase & Download Now
  2. Sign up for Payments & Commerce Pro, Business Insider Intelligence's expert product suite keeping you up-to-date on the people, technologies, trends, and companies shaping the future of consumerism, delivered to your inbox 6x a week. >> Get Started
  3. Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to this report and more than 250 other expertly researched reports. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now
  4. Current subscribers can read the report here.

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Why are Apple Pay, Starbucks' app, and Samsung Pay so much more successful than other wallet providers?

Wed, 07/08/2020 - 1:01am

This is a preview of a research report from Business Insider Intelligence, Business Insider's premium research service. To learn more about Business Insider Intelligence, click here.

In the US, the in-store mobile wallet space is becoming increasingly crowded. Most customers have an option provided by their smartphone vendor, like Apple, Android, or Samsung Pay. But those are often supplemented by a myriad of options from other players, ranging from tech firms like PayPal, to banks and card issuers, to major retailers and restaurants.

With that proliferation of options, one would expect to see a surge in adoption. But that’s not the case — though Business Insider Intelligence projects that US in-store mobile payments volume will quintuple in the next five years, usage is consistently lagging below expectations, with estimates for 2019 falling far below what we expected just two years ago. 

As such, despite promising factors driving gains, including the normalization of NFC technology and improved incentive programs to encourage adoption and engagement, it’s important for wallet providers and groups trying to break into the space to address the problems still holding mobile wallets back. These issues include customer satisfaction with current payment methods, limited repeat purchasing, and consumer confusion stemming from fragmentation. But several wallets, like Apple Pay, Starbucks’ app, and Samsung Pay, are outperforming their peers, and by delving into why, firms can begin to develop best practices and see better results.

A new report from Business Insider Intelligence addresses how in-store mobile payments volume will grow through 2021, why that’s below past expectations, and what successful cases can teach other players in the space. It also issues actionable recommendations that various providers can take to improve their performance and better compete.

Here are some of the key takeaways:

  • US in-store mobile payments will advance steadily at a 40% compound annual growth rate (CAGR) to hit $128 billion in 2021. That’s suppressed by major headwinds, though — this is the second year running that Business Insider Intelligence has halved its projected growth rate.
  • To power ahead, US wallets should look at pockets of success. Banks, merchants, and tech providers could each benefit from implementing strategies that have worked for early leaders, including eliminating fragmentation, improving the purchase journey, and building repeat purchasing.
  • Building multiple layers of value is key to getting ahead. Adding value to the user experience and making wallets as simple and frictionless as possible are critical to encouraging adoption and keeping consumers engaged. 

In full, the report:

  • Sizes the US in-store mobile payments market and examines growth drivers.
  • Analyzes headwinds that have suppressed adoption.
  • Identifies three strategic changes providers can make to improve their results.
  • Evaluates pockets of success in the market.
  • Provides actionable insights that providers can implement to improve results.
Subscribe to an All-Access membership to Business Insider Intelligence and gain immediate access to: This report and more than 250 other expertly researched reports Access to all future reports and daily newsletters Forecasts of new and emerging technologies in your industry And more! Learn More

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THE MONETIZATION OF OPEN BANKING: How legacy institutions can use open banking to develop new revenue streams, reach more customers, and avoid losing out to neobanks and fintechs

Tue, 07/07/2020 - 7:04pm

Open banking has arrived, and it's transforming the UK's banking landscape — next up could be the world. Regulatory efforts in the UK are transforming retail banking, reshaping incumbents' relationships with customers, and easing entry for fintechs.

Regulators across every continent are responding with actions of their own. Underpinning open banking initiatives is the idea that ownership of transactional data belongs to consumers instead of incumbent financial institutions.

The implications of this change for established lenders in the UK are significant. For those that act, open banking presents substantial revenue-generating opportunities.

But the consequences of inaction are even more severe: Business Insider Intelligence estimates that by 2024, £6.5 billion ($8.4 billion) of UK incumbents' revenues will be under threat of being scooped up by forward-thinking companies like fintechs and neobanks. Yet even through the financial incentives to act are clear, many incumbents are struggling to determine the best path to monetization. In fact, some aren't even sure what their options are.

In The Monetization of Open Banking report, Business Insider Intelligence identifies monetization strategies incumbents have at their disposal, describes how they can determine the best approach for their specific needs, and outlines actionable steps they need to make their chosen open banking initiative successful.  

The companies mentioned in this report are: Allied Irish Bank (AIB), Bank of Ireland, Barclays, Danske Bank, HSBC, Lloyds Banking Group, Nationwide, RBS Group, and Santander, Monzo, Starling, ING, Yolt, Fidor, BBVA

Here are some of the key takeaways from the report:

  • Driven by regulatory action, open banking is transforming the UK's banking landscape, but it's also gaining momentum globally.
  • For incumbents, open banking entails a significant threat to their entrenched position.
  • But for forward-looking banks, there are substantial opportunities for revenue generation, both directly and indirectly.
  • To seize these opportunities — and avoid losing revenue to fintechs and neobanks — it's critical that legacy players focus their efforts in the right direction, including identifying their strategic priorities.

 In full, the report:

  • Details the UK's Open Banking regulation in depth.
  • Forecasts the size of the UK's Open Banking-enabled banking industry over the next five years.
  • Discusses the types of monetization opportunities available for incumbents, as well as non-direct revenue-generation opportunities.  
  • Provides actionable steps on how banks can best determine the best strategic approach from the options available.

Interested in getting the full report? Here are two ways to access it:

  1. Purchase & download the full report from our research store. >> Purchase & Download Now
  2. Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to this report and more than 250 other expertly researched reports. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now

The choice is yours. But however you decide to acquire this report, you've given yourself a powerful advantage in your understanding of the fast-moving world of fintech.

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THE PAYMENTS ECOSYSTEM: The biggest shifts and trends driving short- and long-term growth and shaping the future of the industry

Tue, 07/07/2020 - 6:04pm

The power dynamics in the payments industry are changing as businesses and consumers shift dollars from cash and checks to digital payment methods. Cards dominate the in-store retail channel, but mobile wallets like Apple Pay are seeing a rapid uptick in usage.

At the same time, e-commerce will chip away at brick-and-mortar retail as smartphones attract a rising share of digital shopping. Digital peer-to-peer (P2P) apps are supplanting cash in the day-to-day lives of users across generations as they become more appealing and useful than ever.

And change is trickling down into bigger industries long-dominated by cash and check, like remittances and business-to-business payments.

In response, providers are scrambling for market share. Skyrocketing consolidation that creates mega-giants is forcing providers to diversify in search of new volume.

New entrants, especially from big tech, are threatening the leads of giants. And as payments become increasingly effortless, new types of fraud are threatening data security and privacy. While demand for richer payments offerings is creating opportunities across the space, it's also leaving the industry in search of ways to adapt to change that is putting trillions in volume and billions in revenue up for grabs.

In this report, Business Insider Intelligence examines the payments ecosystem today, its growth drivers, and where the industry is headed. It begins by tracing the path of an in-store card payment from processing to settlement across the key stakeholders. That process is central to understanding payments, and has changed slowly in the face of disruption.

The report also forecasts growth and defines drivers for key digital payment types through 2024. Finally, it highlights three trends that are changing payments, looking at how disparate factors, such as new market entrants and surging fraud, are sparking change across the ecosystem.

The companies mentioned in this report are: ACI Worldwide, Adyen, Amazon, American Express, Apple, Bank of America, Braintree, Bento for Business, Capital One, Citi, Diebold Nixdorf, Discover, Earthport, Elavon, EVO, Facebook, First Data, Fiserv, FIS, Global Payments, Goldman Sachs, Google, Green Dot, Honda, Ingenico, Intuit, JPMorgan Chase, Kabbage, Macy's, Mastercard, MICROS, MoneyGram, NatWest, NICE, NCR, Oracle, Paymentus, PayPal, Rambus, Remitly, Ria, Samsung, SiriusXM, SF Systems, Square, Stripe, Synchrony Financial, The Clearing House, Target, Tipalti, Toast, Transfast, TSYS, Venmo, Verifone, Vocalink, Visa, Walmart, Wells Fargo, WePay, Western Union, Xoom, Zelle

Here are some of the key takeaways from this report:

  • In-store payment methods are still on the rise in the US, comprising 89% of retail volume this year. Credit and debit cards continue to lead the segment, as cash and check usage slowly ticks downward. But surging contactless penetration is set to bring mobile in-store payments to prominence for the first time in the years ahead.
  • Surging e-commerce will eat away at in-store payments' share of overall retail. PCs will continue to lead the way, but smartphones will inch closer to being the top channel for purchasing, in turn driving growth. At the same time, new payment tools, like voice assistants, wearables, and even cars will begin to give consumers even easier ways to pay.
  • The digitization of payments isn't just contained to retail, though, with mobile P2P payments, digital remittances, and digital business payments continuing to blossom as change spreads through the ecosystem.

In full, the report:

  • Traces the path of an in-store card payment from processing to settlement across key stakeholders.
  • Discusses emerging alternatives to card payments.
  • Examines the shifting role of key categories of providers as the ecosystem digitizes and matures.
  • Forecasts growth in key categories, including in-store payments, e-commerce, mobile P2P payments, remittances, and B2B payments.
  • Identifies three trends set to shape payments in 2020 and evaluates what changes the ecosystem is set to undergo.

Interested in getting the full report? Here's how to get access:

  1. Purchase & download the full report from our research store. >> Purchase & Download Now
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Here's the pitch deck used to raise a $4.4 million seed round for an AI chatbot looking to change how people find apartments

Tue, 07/07/2020 - 4:28pm

  • RealFriend, launched in 2018, is a startup that created a chatbot to simplify the apartment-hunting process.
  • RealFriend first went live in Tel Aviv. After a year-long beta test, it is now officially launching in New York.
  • RealFriend's cofounders shared the pitch deck that helped them raise a $4.4 million seed round earlier this year with Business Insider.
  • Visit Business Insider's homepage for more stories.

In the hottest markets, finding the right apartment can feel like a full-time job, wading through fake listings and apartments that don't fit the needs of the renter. Even a rental broker, who can help with some of this, has a smaller, siloed view of the market because they're tied to a specific brokerage and a limited amount of listings.

That problem is what convinced long-time collaborators Omri Klinger and Hadar Landau to apply the AI-chatbot they had been building to the world of real-estate rentals in 2017 with the launch of RealFriend.

RealFriend first went live in 2018 in Tel Aviv. In 2019, the chatbot spoke to almost 54,000 renters in a city where 50,000 apartments are rented a year. The company also launched a beta run in New York last year, renaming the chatbot from Dooron, its Israeli name, to Luke, as it began to operate stateside. 

RealFriend raised $4.4 million in a seed round this March, with backing from Gaia, a NYC real-estate investment fund; Eyal Waldman, CEO and founder of Israeli-American computer hardware company Mellanox Technologies; Israeli venture capital firm F2; angel investor and former SVP of product at WeWork Ron Gura; and German media  company Axel Springer.

Now, RealFriend is launching more widely in New York, with the hope of helping renters navigate the famously challenging New York rental market as it rapidly changes due to the coronavirus.

Business Insider spoke to Klinger, the company's CTO; and Landau, the company's CEO about their pitch deck and why they think chatbots will massively change real estate. 

Here's the pitch deck RealFriend used to win over investors and raise its seed round.

(Disclosure: Axel Springer is Business Insider's parent company.)

Realfriend first launched in Tel Aviv, and has now been running a beta for over a year in New York.

The company gave the chatbot a traditional name in order to facilitate more natural conversations with the bot. 

"You tell Luke things you tell only to friends," Landau said. "In real estate, which is an emotional process, having someone who has your back is what you're looking for."



Landau and Klinger have been working together for 15 years, and first met in the Israeli Defense Force.

Israel is one of the world's leaders in successful startups, with Tel Aviv having the most startups per capita outside of Silicon Valley.

Startup experts told Business Insider last year that the IDF is one of the main reasons for this, because of its use of cutting-edge technology and the discipline that is instilled in its soldiers. 

Landau and Klinger met in the IDF in 2005, and by the time they launched RealFriend, they had already launched one startup together, OneFeed. 

OneFeed was a browser extension for Chrome that turned the "new tab" page into a dashboard with personalized news, email notifications, and social-media alerts. 



Early experiments with chatbots and a bad experience apartment hunting led the two to make real estate their focus.

After selling their previous startup in 2015, Landau and Klinger began to experiment with chatbots. It took them more than a year to create a conversation engine for the chatbot that satisfied their demands, which coincidentally lined up to when Landau was searching for a new apartment in Tel Aviv. 

He spent hours sorting through many listings, some of which were fake, to find potential apartments to rent. Afterwards, Landau realized that apartment rental would be a perfect application for the conversation engine they had built. 

"We realized that what we built could be the future of real estate," Landau said.

 



RealFriend's central concern is making sure its chatbot can interact with people as if it were actually someone they could speak to.

The company used the above chat log, which shows a user "introducing" Luke to their mom, as an example of the bot's conversational skill, especially in relation to other rental search options online.



The company used chat because it is more personal than other options, is accessible to more people, and allows for more flexibility in the amenities and requests it can accommodate.

Key to their choice to use a chatbot was the more personal nature it brings to the real estate rental process, which is one of the most important financial and personal decisions that people make. 

Chatbots are also more widely accessible to users who aren't as comfortable with tech and don't want to learn a whole new app. Landau gave the example of an older customer who uses voice-to-text to communicate with Luke, something that would be significantly more challenging if Luke were an app.

Chatbots are also more flexible, allowing the system's database to easily add other considerations or features that might be hard or impossible to find on a traditional website, and would be a user-experience nightmare to code into a traditional website. 

"You can tell it things that are not in an app, like an open kitchen layout and south-facing view from my living room," Landau said. "This is something you wouldn't be able to search on StreetEasy." 



This sample chat shows Luke's ability to suggest properties on the market, provide data about the market, schedule showings, and iterate on feedback.

The chat begins with a user telling Luke what their requests are for an apartment, leading Luke to provide a potential option. Luke's engine, which combines information from many apartment listing sites, is able to give data about its affordability compared to the market as well. 

The app then schedules a rental showing, and then after the showing, asks for feedback. The user explains why they want to pass on it with quite specific details, prompting Luke to suggest another apartment that matches one of the user's concerns. Those concerns are also logged into RealFriend's backend database, so that the company doesn't recommend this apartment to people with the same concerns.



This slide helps to explain why RealFriend is using a chatbot, and why it sees such an opportunity in the US.

Despite having no marketing beyond word of mouth, the company became quite popular in Tel Aviv.

Dooron spoke to more people in 2019 than there are apartments being rented in Tel Aviv.



The company's New York beta, launched in 2019, now has 2,500 monthly active users.

The company soft-launched Luke in the notoriously-challenging New York rental market in March of 2019, and has seen a 25% month-over-month growth in engagement. 

New York was always planned as another market to launch in, as Klinger was actually living in the city when the pair decided to apply their conversation engine to rental real estate. 



RealFriend shared some of their customer's responses to Luke to show how users treat Luke more like a person than a chatbot.

The replies are the company's proof that they're able to connect with users in a much more personal way than a traditional real-estate search service.

"The more they talk with us, we gain more knowledge and the bot becomes smarter," Klinger said. "It's more of a relationship than a transaction."

Landau said that the company has even received selfies from users on vacation, explaining to Luke that they'll be back and ready to keep apartment hunting when they get home.



Luke and Dooren's Net Promoter Scores are higher than those of other, larger AI assistants and dwarf other real-estate portals.

The company's service is free, but they're hoping to eventually make money by charging agents a referral fee of 25% of their commission.

As of now, Luke and Dooron are totally free, but the company plans to eventually charge referral fees from brokers. 

"We collaborate with brokers, and we do some of the tedious work they used to do to save them time and help them focus," Landau said. 

While the company looks to eventually make money through referral fees, not too dissimilar from models like Zillow's search portal, they don't plan to actually sell their services to a whole brokerage. 

Landau said that they've received a lot of offers to partner with brokerages, but have decided not to because they want Luke to be a neutral arbiter who helps out the person looking for an apartment and is not financially aligned with a specific broker or apartment. 

"Staying unbiased is important," Klinger said.



The company has found coronavirus to accelerate the adoption of their product, after a short period of slowdown.

With renters relying on virtual tours and minimizing the amount of apartments they enter, Luke and RealFriend have seen huge spikes in demand. 

At the beginning of the crisis, the company saw use of the app plunge by more than half of its previous demand. But as economies began to open back up, demand has spiked. 

The demand came from users who were reevaluating their current apartment after being locked-inside, as well as those looking for lower prices and potential concessions, said Klinger. 

In New York, Klinger said they're seeing lower prices and landlords offering many concessions to potential tenants, with landlords offering winter pricing during the peak summer months. 

Hadar said they've also seen a change in amenities that potential renters are looking for, with less people asking for a gym nearby and more people asking for open living space and in-unit laundry.



The stock market cares more about the makeup of Congress than it does the winner of the presidency. Here's why.

Tue, 07/07/2020 - 4:05pm

  • The stock market cares more about which party controls Congress than it does about which party wins the presidency, historical data suggests.
  • In a report published on Monday, Senior Market Strategist Ryan Detrick at LPL Financial wrote that "stocks have tended to do their best when we have a split Congress."
  • On average, stocks have done better when Congress was split between Republicans and Democrats, rather than controlled by one party.
  • The reasoning supporting the data is clear. Detrick explained, "Markets tend to like checks and balances to make sure one party doesn't have too much sway."
  • Visit Business Insider's homepage for more stories.

Investors often put too much focus on the potential impact a presidential election outcome might have on the stock market and their investment portfolios. Instead, they should shift their political attention to Congress.

That's according to LPL Financial Senior Market Strategist Ryan Detrick. In a note published on Monday, Detrick looked at historical data dating back to 1950 and found that the stock market performed best when Congress was split between Republicans and Democrats.

Stocks, as measured by the S&P 500, returned 17.2% on average when Congress was split between the two parties. The average annual stock return drops to 13.4% when Republicans are in control of Congress, and drops to 10.7% when Democrats control both the House and Senate.

What's driving a split Congress to be most favored by investors? According to Detrick, it's that "Markets tend to like checks and balances to make sure one party doesn't have too much sway."

Read more: The No. 1-ranked tech analyst on Wall Street says these 6 stocks have potential for huge gains as they transform the sector

It's probably no surprise that investors favor push and pull in Washington D.C. rather than one party writing and approving the laws, as the tension limits market uncertainty in terms of legislative risk. 

Some of the best stock market years occurred during a split Congress. The stock market gained more than 30% in 1985, 2013, and 2019, all years when congressional control was split between Republican and Democrats.

And based on data from Natixis cited by Financial Times, the market rallied more when Congress was split than it did when a particular party held the presidency.

According to Natixis, since 1976, stocks delivered an average annualized return of 14.3% with a Democratic president, just higher than the average annualized return of 10.8% for a Republican president.

Both return figures based on which party occupies the presidency are lower than the average annual return of 17.2% delivered when Congress is split, suggesting that if investors are concerned about market implications of politics, they should focus more time on who wins the legislature than they do on who wins the presidency.

Meanwhile, presidential candidates have a big reason to care about the stock market – that's because the stock market has correctly predicted who will win the presidency since 1984. 

Read more: The most accurate analyst covering companies like Amazon says these 7 stocks are great bets for the future of e-commerce - even as the coronavirus bump fades

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Knotel is facing claims of $230,000 in unpaid rent and construction bills at one Atlanta location, adding to a growing list of legal woes for the flex-space firm

Tue, 07/07/2020 - 3:53pm

  • A tenant in Atlanta that subleased space at the Salesforce Tower to Knotel late last year is suing the firm for over $150,000 in unpaid rent.
  • The tenant also wants to boot the flexible workspace provider from the nearly 25,000 square foot space.
  • A construction contractor, meanwhile, has placed a lien against the building for almost $80,000 it says it is owed by Knotel for work on the space.
  • The debts are the latest to pile on the company, which is said to owe brokerage firms unpaid commissions and has fallen behind on office rent at other locations.
  • For more stories like this, sign up here for our Wall Street Insider newsletter.

Signs of stress continue to hamper the flexible-workspace firm Knotel.

A company in Atlanta is suing to boot Knotel from an office space at the Salesforce Tower in the city's Buckhead Heights section and recoup over $150,000 in unpaid rent and other expenses.

Separately a contractor that performed construction work on the space has filed a lien against the property, claiming that Knotel owes it nearly $80,000.

Rubicon, a waste-management software firm, sued Knotel in Georgia state court last month, accusing the workspace firm of failing to pay rent for the Salesforce Tower's 18th floor in May or June. Knotel subleased the 24,653 square foot space last December from Rubicon, agreeing to pay $77,318.24 a month for the office, according to the complaint.

Read More: Knotel and insurance startup Rhino didn't disclose its CEOs were brothers when it struck a complex financial deal. Now a key partner could be on the hook as Knotel scrambles to pay bills, slashes staff, and plans to shed portions of its portfolio.

Rubicon claims it is not only owed rent, but a 10% late fee that Knotel agreed to pay in the sublease deal, and that it is entitled to reimbursement for costs it incurs for the litigation, such as attorneys fees. The company is asking the court to remove Knotel "immediately from premises," according to the suit.

A spokesman for Rubicon declined to comment on the case

The Warren-Hanks Construction Company, which filed a $77,729 mechanic's lien in March against the building for unpaid work it claims it performed on Knotel's space, did not immediately respond to a request for comment.

A spokeswoman for Knotel didn't immediately respond to a request for comment on the situation.

In a letter sent to Rubicon on May 29 by Knotel's chief investment officer, Jonathan Goldberg, that is included as part of the court records related to the case, Knotel indicated that the economic dislocation from the Covid-19 pandemic had prevented it from paying rent for the space and that it would seek "an abatement of all rent due and an extension of time to perform any other obligations under the sublease."

Read More: Leaked Knotel financials reveal that the WeWork rival had huge pre-pandemic losses and now has more unpaid bills than cash. It's a grim sign for the flex-office space.

"The duration of the force majeure event, under the circumstances is not determinable at this time," Goldberg stated in the letter to Rubicon, referring to a legal argument being used in court by a growing group of tenants that seeks to label the virus crisis as an "act of god" that should relieve them from rent and lease obligations. "During the period of the force majeure event, any rental payments under the sublease shall be abated to the extent permitted under the sublease or under any applicable laws or governmental orders."

The pandemic crisis has prompted flexible-workspace clients to withhold rent or vacate spaces, placing a strain on providers such as Knotel and WeWork. It wasn't clear if Knotel had found a user for its space at the Salesforce Tower and whether that party was paying Knotel for the space.

Knotel has faced mounting unpaid bills as its once fast-growing business has struggled. It was recently sued by a landlord in San Francisco who alleges the company failed to pay over $110,000 in rent for space it leased at 972 Mission Street in April and May, along with other charges. A landlord in New York has also sued Knotel, claiming $169,000 in unpaid rent. 

Knotel also owes hundreds of thousands of dollars in unpaid commissions to major brokerage firms who helped find takers for its 2.5-million-square-foot portfolio in New York. Recent information for the company uncovered by Business Insider painted a bleak financial picture for the firm.

Knotel lost $49 million in the first quarter of 2020, according to an income statement seen by Business Insider, and its balance sheet listed $110 million of assets versus $238 million of liabilities and a little less than $36 million in the bank at the end of the first quarter. 

Have a tip? Contact Daniel Geiger at dgeiger@businessinsider.com or via encrypted messaging app Signal at +1 (646) 352-2884, or Twitter DM at @dangeiger79. You can also contact Business Insider securely via SecureDrop.

SEE ALSO: Leaked Knotel financials reveal that the WeWork rival had huge pre-pandemic losses and now has more unpaid bills than cash. It's a grim sign for the flex-office space.

SEE ALSO: Knotel and insurance startup Rhino didn't disclose its CEOs were brothers when it struck a complex financial deal. Now a key partner could be on the hook as Knotel scrambles to pay bills, slashes staff, and plans to shed portions of its portfolio.

SEE ALSO: Leaked memo reveals Knotel CEO's playbook for burying news about jobs cuts at the flex-office startup

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Tesla hits an all-time high for the 5th trading session in a row (TSLA)

Tue, 07/07/2020 - 3:30pm

  • Shares of Tesla hit an all-time high again on Tuesday, rising 4.22% to $1,429.5o per share. It's the fifth trading session in a row where Tesla has notched a fresh record-high stock price.
  • The stock's most recent rally comes amid better-than-expected second quarter vehicle deliveries numbers and a slew of Wall Street analyst upgrades from bears and bulls alike. 
  • On Tuesday, Adam Jonas of Morgan Stanley boosted his Tesla price target to $740 from $650 and increased his bull case to $2,070, saying that the company's resilient second quarter makes it appear less risky and stronger financially than other OEMs. 
  • Still, Jonas has an "underweight" rating on shares of Tesla, as long-term concerns around profitability, fundamentals, and electric vehicle competition remain.  
  • Tesla has gained about 230% year-to-date. 
  • Watch Tesla trade live on Markets Insider
  • Read more on Business Insider.

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'People are getting nervous again': Fed president says virus resurgence could prematurely freeze economic recovery

Tue, 07/07/2020 - 3:21pm

  • The coronavirus' rapid spread throughout several states could dramatically slow the US economic rebound, Raphael Bostic, president of the Federal Reserve Bank of Atlanta, said in a Tuesday web conference.
  • The increase in infections is already driving fears that the US recession could last longer than first anticipated, he said.
  • "People are getting nervous again. Business leaders are getting worried. Consumers are getting worried," Bostic added.
  • The central bank president highlighted consumer confidence as "critical" to whether a recovery continues or freezes up.
  • Visit Business Insider's homepage for more stories.

The coronavirus' accelerated spread throughout the US threatens to halt the nation's economic recovery before it takes off, Raphael Bostic, president of the Federal Reserve Bank of Atlanta, said Tuesday.

Several states reported record increases in COVID-19 cases over the weekend, reviving fears that a second wave of infections could push the US back into strict lockdowns. The uptick is already hitting business sentiments, and the nation is starting to grapple with the prospects of a lengthy recession, Bostic said.

"People are getting nervous again. Business leaders are getting worried. Consumers are getting worried," he said during a web conference with the Tennessee Business Roundtable. "There is a real sense that this might go on longer than we had hoped and we had expected and we had planned for."

Read more: An investment chief who doubled 3 of her firm's ETFs within 3 years told us the most overlooked technological innovation on her radar — and shared the 3 stocks she's been snapping up since the pandemic started

Economic data detailing the pandemic's toll has yet to reveal such a slowdown. June's jobs report showed the unemployment rate falling for a second straight month to 11.1% and American businesses adding 4.8 million payrolls last month. Yet the lasting damage isn't yet visible. Bostic recently told the Financial Times his "biggest concern in this whole period" is the extent of permanent job loss throughout the US.

The central bank president also pointed to consumer confidence as an indicator to watch for whether a recovery continues or freezes up. Retail spending data has picked up from its March lows, but experts caution that a full rebound in sentiments may not take place until a coronavirus vaccine reaches the market.

"That worry, that lack of confidence, is a critical thing that we all need to be mindful of, that I definitely need to be mindful of, as so much of the US economy is based on confidence," he said.

Bostic reiterated that the Fed has no plans to close any of its nine emergency relief programs anytime soon. He also noted that, as cases are rising slower in some areas, studying those regions' containment methods may be the best way to aid the economy.

"We might need to do better and do more in terms of following and respecting our social distance requests and do things like wear masks," he added.

Read more: The most accurate analyst covering companies like Amazon says these 7 stocks are great bets for the future of e-commerce — even as the coronavirus bump fades

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COVID-19 Executive Survey

Tue, 07/07/2020 - 3:02pm

The coronavirus pandemic has sparked a public health crisis, the effects of which are now rippling throughout the global economy.

Cities have been shut down, travel is limited, and major central banks have begun to intervene in financial markets at levels unseen since the 2008 recession.

To find out how industry leaders think COVID-19 and related containment efforts will impact their companies and the economy as a whole, we surveyed executive decision makers from around the world.

Simply enter your email for a FREE download of our executive survey results.

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Here are the 11 largest IPOs of all time

Tue, 07/07/2020 - 2:28pm

  • The IPO market is slowly recovering after its coronavirus slump, but no recent deal stacks up to the record-breaking debuts of the 2010s.
  • Seven of the top 11 IPOs took place in the 2010s, when unicorn startups and industry giants leveraged insatiable investor demand to rake in billions.
  • Here are the 11 largest IPOs in history, ranked in ascending order.
  • Visit the Business Insider homepage for more stories.

Initial public offerings are returning to the market after a pandemic-driven pause, but no recent deals have come close to setting fundraising records.

The IPO market reached a fever pitch in 2019, with unicorns including Uber, Lyft, Zoom, and Beyond Meat all going public as investors flocked to fresh offerings. Yet the frenzy calmed after a number of high-profile offerings flopped on their first trading days. The market replaced its desire for rapid growth with an appetite for profitability, and companies looking to leverage hype in massive IPOs turned back to the drawing board.

The shake-up follows a decade of record-setting market debuts. Of the 11 biggest IPOs by cash raised, seven took place in the 2010s. The largest offering to date was completed just before the decade ended and the coronavirus outbreak ravaged global stock markets.

Here are the 11 largest IPOs in history, ranked in ascending order of funds raised.

Read more: JPMORGAN: The coronavirus crisis has decimated one of the safest defenses against stock-market crashes. Here are 4 ways to pivot your portfolio now.

11. Facebook

Date: May 18, 2012

Amount raised: $16.0 billion



10. Enel

Date: November 2, 1999

Amount raised: $16.6 billion



9. NTT Docomo

Date: October 22, 1998

Amount raised: $18.1 billion



8. General Motors

Date: November 17, 2010

Amount raised: $18.2 billion



7. Visa

Date: March 18, 2008

Amount raised: $19.7 billion



6. AIA

Date: October 29, 2010

Amount raised: $20.5 billion

Read more: The most accurate analyst covering companies like Amazon says these 7 stocks are great bets for the future of e-commerce — even as the coronavirus bump fades

 



5. Industrial and Commercial Bank of China

Date: October 27, 2006

Amount raised: $21.9 billion



4. Agricultural Bank of China

Date: July 6, 2010

Amount raised: $22.1 billion



3. SoftBank

Date: December 19, 2018

Amount raised: $23.5 billion



2. Alibaba

Date: September 18, 2014

Amount raised: $25.0 billion



1. Saudi Aramco

Date: December 11, 2019

Amount raised: $29.4 billion

Now read more markets coverage from Markets Insider and Business Insider:

Citigroup and Morgan Stanley shares are best positioned to endure a 69% plunge in 2nd quarter bank earnings, Goldman Sachs says

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An investment chief who doubled 3 of her firm's ETFs within 3 years told us the most overlooked technological innovation on her radar — and shared the 3 stocks she's been snapping up since the pandemic started

Tue, 07/07/2020 - 2:18pm

If Cathie Wood wanted to gloat and say her investing philosophy has been vindicated, she could probably get away with it.

She founded Ark Invest in 2014 to bet on companies and technologies that had the potential to change the world and says that innovation itself should be a piece of any investor's portfolio, similar to fixed income or emerging markets. To get the word out, Wood decided that her firm would launch actively traded exchange-traded funds and give away its research.

Results in the first few years were mixed at best. Ark wants to invest in transformative technologies that are headed for widespread, profitable adoption. Wood, the firm's CEO, investment chief, and portfolio manager, acknowledged that many of its stocks look expensive based on traditional financial metrics.

"Every time the market sold off, our strategy was hit hard," Wood told Business Insider. "We underperformed the broad-based indices because investors and the analysts were selling our stocks and moving closer to the benchmarks. That's what they're measured by."

But things started to turn around in 2017, and over the past three years, Ark has three of the best stock ETFs, according to Thomson Reuters Lipper. Its ARK Next Generation Internet ETF has surged 217% over that time, the flagship ARK Innovation ETF has rocketed 170%, and the ARK Genomic Revolution ETF is up 158%.

Other funds have started creating their own innovation-focused products, while MSCI partnered with Ark to create several of its own.

Ark invests in five fields it calls innovation platforms: DNA sequencing, robotics, energy storage, artificial intelligence, and blockchain technology.

The Genomic Revolution ETF is the best performer of the firm's five ETFs lately, as it's soared 64% so far this year. A global healthcare crisis helped, but Wood said that technology was still the cheapest relative to its potential.

"We think the genomic revolution is the most inefficiently priced of all of the innovation platforms," she said. "People  don't believe that diseases are going to be cured because of DNA sequencing, CRISPR, gene editing, and other gene therapies. So the old world still dominates in terms of valuing the healthcare sector."

The fund's biggest positions include the gene-sequencing and -testing company Illumina, the testing-kit maker Invitae, and the gene-editing company CRISPR Therapeutics. Major additions in the first quarter of this year included the flash-storage company Pure Storage and 10x Genomics, which makes gene-sequencing technology.

Ark wants to bet on innovations that can revolutionize several parts of the economy at once. Wood says the genomic revolution won't just help cure diseases — it will revamp agriculture and help create a healthcare "golden age" where research becomes dramatically more effective and costly trial failures become less common.

"We think that the returns on R&D that we're going to see in the genomic space therapies and diagnostics and tools are going to be phenomenal," she said.

That helps explain why she's willing to put money into expensive companies that are often money losers when most investors adopt an approach that looks more traditional and defensive.

"All of the genomics names are treated the same way because they're all high-cash-burn names. So we picked up incredible bargains," she said. "While other investors are rushing back to their benchmarks, selling our stocks, we're buying those stocks. We lie in wait for those opportunities," she said.

Stock picks beyond healthcare

Wood also explained her thinking for three companies beyond healthcare that will benefit from those changes in thought. Each is a component of the high-flying flagship portfolio, and she said each one is now in a stronger position than it was before the pandemic began.

(1) Facebook

Wood put Facebook in the ARK Innovation portfolio during the first quarter, and not because the pandemic forced more people to use social media.  She said three key changes prompted the move.

First, Facebook is emphasizing commerce inside its Instagram and Facebook apps by letting users buy things directly.

"When WeChat did this several years ago, it caused an explosion in their sales," Wood said. "So Facebook could actually get into commerce in a way that we never expected."

Secondly, she said the company has the potential to become a huge player in the payments world through its Novi digital wallet. And thirdly, Facebook gaming is starting to take off. That gives the company a lot of areas for growth that could help it overcome the growing advertising boycott it's dealing with.

"Facebook is growing much, much faster now than Twitch," she said. "So you've got gaming, you've got payments, you've got commerce, which are not, of course, advertising. It's bread and butter now."

(2) 2U

Wood added the online education company 2U to the innovation fund in November 2018 and built up her position after investors started abandoning the stock during the market turmoil in February.

"That stock in two weeks went from $30 to $11 and a half. We bought it hand over fist," she said. The stock has more than tripled in value from that low point.

She said a lot of sellers were concerned about 2U's cash burn, but she sees it as a worthwhile bet on the company's future.

"I think people are going to be more willing to invest in this company and accept dilution to scale the exponential growth in online education that we're going to see," she said.

(3) Zillow

The online real-estate company dropped from a high of $66 per share to a low of $18 in the space of a month and is now trading over $60 again. Wood said investors simply assumed Zillow would suffer if the real-estate market slowed down and didn't think about how its technology was suited to the moment. 

"They have 3D virtual tours. They are a solution to the problem," she said. "The irony is innovation always takes off during difficult times, when consumers and businesses are afraid and they're willing to change the way they do things or think about things."

Read more:

SEE ALSO: The most accurate analyst covering companies like Amazon says these 7 stocks are great bets for the future of e-commerce — even as the coronavirus bump fades

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These 5 banks offer the most sought-after mobile features in the US

Tue, 07/07/2020 - 2:01pm

This is a preview of a research report from Business Insider Intelligence, Business Insider's premium research service. This report is exclusively available to enterprise subscribers. To learn more about getting access to this report, email Senior Account Executive Haydn Melia at hmelia@businessinsider.com, or inquire about our enterprise memberships.

Citibank, USAA, BBVA USA, Bank of America, and NFCU lead the US market in offering the most in-demand mobile features in 2019, according to Business Insider Intelligence's third annual US Mobile Banking Competitive Edge Study. 

Mobile is a pivotal banking channel and a vital driver of how customers choose banks, according to our study, which found that 79% of respondents use the channel. Respondents were selected to closely align with the US general population on the criteria of age (18-73), gender, and income. Of respondents who use mobile banking, 38% selected the channel as one of the top three factors they'd consider when choosing a bank — making it the third-ranking answer, edging out online banking, rates, and proximity to ATMs. 

To help banks attract and retain the large base of mobile-oriented customers, our 2019 US Mobile Banking Competitive Edge Study selected 37 sought-after mobile banking capabilities — 18 of which were added to the study this year — and ranked them according to how valuable 2,000 respondents said they are. Next, we determined which of the top 20 US banks and credit unions lead in offering the mobile banking features customers crave.

For more info about the report, use the form at the bottom of the post.

Here are the leaders in supporting sought-after mobile banking tools:

1st: Citibank cemented its reputation as an innovation leader. The bank earned the top spot for a second consecutive year thanks to its broad suite of in-demand mobile banking features. This year, Citi redesigned its app to boost convenience, adding "smart shortcuts" that simplify access to regularly used features. Other new tools introduced include alert enablement when customers withdraw cash from an ATM or receive credit from a merchant, and new credit card activation directly from the account dashboard. Citi also led in the "customer service" category. 

  • Score: 84/100
  • Rank in 2018: 1st

2nd: USAA excelled in security and account management. The military bank offers a robust mobile feature set that includes rare tools, such as the ability to view the status of a card transaction dispute, set spending limits, and get alerts via push notifications that customers can respond to. Further, as a bank with no branches, it focuses on better serving its users on mobile, offering the option to converse with either a human agent via chat or a conversational AI assistant in the app. Taking second place overall, USAA tied for first in the "security and control" and "account management" categories.

  • Score: 82/100
  • Rank in 2018: 3rd (+1 place)

3rd: BBVA USA jumped from ninth to third place. Amid its ongoing digital transformation, BBVA USA focused on building out greater money management capabilities: For instance, users can now transfer money from their credit card to their checking, savings, or money market account, as well as enable push notifications and redeem rewards with each qualifying credit card purchase. The bank tied for first in the "account management" and "transfers" sections by offering poorly supported category tools, such as the ability to change a debit card PIN and send money to people abroad.

  • Score: 78/100
  • Rank in 2018: 9th (+6 places)

4th: Bank of America led in digital money management. To better serve its 29 million active mobile banking users, the bank maintained a rapid pace of feature development over the last year, while in October it unveiled a redesigned app aiming to enhance the user experience with greater ease and convenience. Fresh capabilities include improvements to Erica, the bank's virtual assistant, like new notifications that enable easy enrollment by informing users when balances are trending low. Erica also now offers proactive insights and guidance to help customers stay on top of their finances. 

  • Score: 67/100
  • Rank in 2018: 5th (+1 place)

5th: NFCU set a high bar for sought-after alerts features. The credit union simplified the user experience on mobile through updates that enabled a number of new features, especially within the "alerts" section. NFCU customers can now enable a slew of new alerts, including notifications for daily and low balances as well as deposits and withdrawals. These can be recieved via any combination of push notification, text, or email. 

  • Score: 66/100
  • Rank in 2018: 4th (-1 place)

Business Insider Intelligence's Mobile Banking Competitive Edge Study ranks banks according to the strength of their mobile offerings and offers analysis on what banks need to do to win and retain customers. The study is based on a September benchmark of what features the 20 top US banks offer, and a survey of 2,000 US mobile banking users on the importance of 37 cutting-edge features in choosing a bank. The survey was conducted using the Attest Consumer Growth Platform, and fielded during August and September 2019 to a sample closely aligned with the US population on the criteria of age (for those between 18 and 73), gender, and income.  

The full report will be available to Business Insider Intelligence enterprise clients in December. The Mobile Banking Competitive Edge study includes: Ally, Bank of America, BB&T, BBVA Compass, BMO Harris, Capital One, Chase, Citibank, Fifth Third, HSBC, KeyBank, Navy Federal Credit Union, PNC, Regions, SunTrust, TD, Union Bank, US Bank, USAA, and Wells Fargo.

To learn more about getting access to this report, email Senior Account Executive Haydn Melia at hmelia@businessinsider.com, or inquire about our enterprise memberships.

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Warren Buffett's Berkshire Hathaway struck a $10 billion deal to buy Dominion Energy's natural gas business. Here's why the energy giant sold.

Tue, 07/07/2020 - 1:57pm

  • Warren Buffett's Berkshire Hathaway recently agreed to buy most of Dominion Energy's natural gas storage and transmission assets for about $10 billion.
  • Dominion accepted the conglomerate's offer because it agreed to protect its workers, it has the money and expertise to maintain a high level of service, and the valuation of 10 times EBITDA was a "very fair price," the energy giant's bosses told analysts on Wednesday.
  • The deal promises to accelerate Dominion's growth, free up cash, and speed up its shift to state-regulated utilities and clean energy, the executives said.
  • Visit Business Insider's homepage for more stories.

Warren Buffett's Berkshire Hathaway recently struck a $10 billion deal to acquire most of Dominion Energy's natural gas business.

The energy unit of the famed investor's conglomerate agreed to pay $4 billion in cash and take on $5.7 billion of Dominion's debt in exchange for assets including over 7,700 miles of natural gas pipelines, 900 billion cubic feet of natural gas storage, and a 25% stake in Cove Point LNG — one of only six liquefied natural gas export terminals in the US.

Dominion's bosses accepted the offer because it ticked a bunch of boxes, they told analysts on a Wednesday. Business Insider analyzed a transcript of the call on Sentieo, a financial-research site.

Berkshire was the right buyer

The deal came together after Dominion launched a review of its storage-and-transmission assets last year. Berkshire expressed interest in acquiring them early this year, Dominion CEO Thomas Farrell said on the call.

Dominion agreed to sell after Berkshire committed to protecting its workers and honoring union commitments, Farrell said. Buffett's company also has the industry experience and financial reserves to maintain a high level of customer service, he added.

Moreover, Berkshire's offer valued the assets at 10 times their $1 billion in yearly earnings before interest, tax, depreciation, and amortization (EBITDA), Dominion's finance chief, James Chapman, said on the call. Similar companies were valued at 9 times EBITDA, he added.

"We thought that if we could exit this business and make sure that our employees ended up in a very good home with very good people, that our customers were protected for the service that they had become used to and we got a very fair price, that the best thing to do ... was to exit the business," Farrell said.

Dominion's bondholders will also benefit from the transaction, Chapman said. Berkshire has agreed to deleverage the assets it's buying, partly by not refinancing about $1.2 billion in debt maturing over the next 12 months, and by considering further debt-reduction measures after next year, he said.

Dominion is reshaping its business

Dominion sold the assets to galvanize its growth and speed up its shift to clean energy, Farrell said on the call.

Securing permits for gas storage and transmission projects has become "increasingly litigious, uncertain, and costly," he said, which "threatens the pace at which we intended to grow these assets."

As a result, transmission assets are becoming less and less attractive compared to utilities, Farrell continued.

"These steady, cash-yielding assets may garner more value for a temperate type of owner," he said.

The deal narrows its focus on state-regulated utilities, which are set to generate 85% to 90% of its operating earnings in the coming years, Farrell said.

That will help to boost Dominion's long-term earnings growth rate by almost 1.5 percentage points to 6.5%, representing a 30% increase, he added.

The sale also feeds into Dominion's environmental, social, and governance (ESG) strategy, which includes achieving a net-zero carbon footprint by 2050, Farrell said. Selling the assets to Berkshire will halve its emissions from gas infrastructure, he said.

Moreover, passing debt to Berkshire will strengthen Dominion's credit profile and balance street as it prepares to invest $55 billion into emission-reduction programs, Farrell said. The company had $5.1 billion in short-term debt and $31 billion in long-term debt as of March 31, SEC filings show.

Dominion also plans to use the cash proceeds to repurchase around $3 billion of its stock, Farrell said.

Fewer outstanding shares will lower its dividend costs, and it's also cutting its dividend-payout ratio from north of 80% in recent years to 65%, meaning it could conserve about $1.3 billion of cash next year and onward, Chapman said.

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Citigroup and Morgan Stanley shares are best positioned to endure a 69% plunge in 2nd quarter bank earnings, Goldman Sachs says

Tue, 07/07/2020 - 12:39pm

  • Bank earnings are set to tank 69% year-over-year for the second quarter, Goldman Sachs said in a Tuesday note.
  • Morgan Stanley and Citigroup are Goldman analysts' top picks among the seven biggest US banks.
  • Both firms enjoy a greater focus on capital markets, leading fee income to serve as a "partial offset to earnings headwinds," Goldman said.
  • Citigroup also trades at a lower "burned down" tangible book ratio, suggesting the stock can rise even if the bank suffers some damage to its book value.
  • Watch Morgan Stanley trade live here.
  • Watch Citigroup trade live here.

Bank stocks are in for a drubbing this earnings season, but Goldman Sachs sees two firms' shares rising above the rest and one losing out.

Second-quarter earnings among the seven major US banks are set to nosedive 69% year-over-year as the companies divert profits to their loan-loss reserves, Goldman projected Tuesday. Near-zero interest rates will stifle net interest income and disproportionately harm companies with a greater focus on lending markets.

Morgan Stanley and Citigroup are favored to ride out the storm "given they have the least rate sensitivity" within the sector, Goldman analysts led by Richard Ramsden wrote in a Tuesday note. The two firms' greater focus on capital markets and fee income will provide "a partial offset to earnings headwinds" and the need to boost loan reserves, they added.

Read more: The most accurate analyst covering companies like Amazon says these 7 stocks are great bets for the future of e-commerce — even as the coronavirus bump fades

Citigroup shares are also set to benefit simply due to their valuation. The bank trades at 0.8x price-to-"burned-down"-tangible-book ratio, setting it apart as the cheapest of its peers. The segment trades with an average 1.3x ratio. Citigroup shares have room to appreciate even if the bank's second-quarter report reveals some damages to its tangible assets, the team wrote.

Wells Fargo is projected to be the only bank in the group of seven to report negative profitability for the quarter, Goldman said. US banks' loan provisions are projected leap 27% — or $32 billion — from the already elevated first quarter, particularly harming credit-focused firms.

Looking into the second half of the year, the analysts expect loan-loss provisions to fall 60% through 2020 as reopenings soothe credit stresses. Any bank commentary on dividend health and Federal Reserve stress test resubmissions will also offer a look at future performance. Talk of pre-provision net revenue trends can further detail how liquidity operations, larger balance sheets, and lower rates are changing banks' income streams, Goldman said.

Now read more markets coverage from Markets Insider and Business Insider:

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This is the 19-slide pitch deck two 22-year-olds used to nab $57 million in funding from Silicon Valley

Tue, 07/07/2020 - 12:00pm

Technology is shattering legacy financial systems that can't keep pace with market demand — and Brex is at the forefront. It's one of fintechs buzziest startups, aiming to rebuild B2B financial products starting with corporate cards for technology companies.

The company was quietly launched in 2017 by Henrique Dubugras and Pedro Franceschi, two 22-year-old engineers who previously founded Pagar.me, one of Brazil's largest payment processors.

Brex already has more than 1,000 customers signed up with the help of backing from investors including PayPal co-founders Peter Thiel and Max Levchin, early Facebook investor Yuri Milner, former Visa CEO Carl Pascarella, and esteemed startup incubator Y Combinator.

And we caught a glimpse of the Series B pitch deck Dubugras and Franceschi used to win them over. 

In it, they lay out a clear problem: Technology startups often had trouble securing corporate credit cards — even if they had millions in the bank — because legacy banks and card issuers wanted to see company credit histories, which young institutions simply couldn't produce.

They had a simple solution: Remove the restrictions of legacy technology by giving instant approval to startups based on their available cash balance, including money raised through venture, rather than credit history. 

In the deck, the founders outlined their plans to help startups of all sizes instantly get cards with higher limits, as well as automatic expense management and seamless integration with existing accounting systems.

As part of our coverage of the genesis of today's successful companies, BI Prime received Brex's permission to offer a look into the startup's full 19-slide pitch deck, which includes considerations such as:

  • The startup's mission
  • Key team members and previous backers
  • The size of the market opportunity
  • A step-by-step plan of how to solve credit cards for startups
  • Some of the card's coolest features
  • Data points showing how to scale the business

BI Prime is publishing dozens of stories like this each and every day. Want to get started by reading the full pitch deck?

>> Download it now FREE

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US hires jump to a record and job openings increase, fueled by economic reopenings

Tue, 07/07/2020 - 11:38am

  • US hires jumped a record 2.4 million in May to an all-time high of 6.5 million, according to the Job Openings and Labor Turnover Survey, or JOLTS, released Tuesday by the Labor Department. 
  • Job openings also increased to 5.4 million during the month. The JOLTS report lags the nonfarm payrolls release by one month. 
  • "These improvements in the labor market reflected a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic and efforts to contain it," the Labor Department said in the report. 
  • Visit Business Insider's homepage for more stories.

US hires jumped a record amount in May and job openings increased as the economy reopened following lockdowns to contain coronavirus that began in mid-March. 

The number of hires jumped 2.44 million in May to an all-time high of 6.5 million, according to Tuesday's Job Openings and Labor Turnover Survey, or JOLTS, from the Labor Department. The hires rate rose to 4.9% from 3.1% a month earlier. The hires numbers do not include rehired workers. 

Available jobs also unexpectedly increased, rising to 5.4 million during the month from 5 million in April. The median estimate from economists was for a decrease to 4.5 million openings, according to Bloomberg data. 

"These improvements in the labor market reflected a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic and efforts to contain it," the Labor Department said in the report. The JOLTS report lags nonfarm payrolls by one month. 

Separations, which include quits, layoffs, and discharges, decreased by 5.8 million to 4.1 million, the largest decline in the survey's history. The layoffs and discharges rate fell to 2.4% in May, the second monthly decline since hitting a record high of 7.6% in March.  

Read more: JPMORGAN: The coronavirus crisis has decimated one of the safest defenses against stock-market crashes. Here are 4 ways to pivot your portfolio now.

The quits rate, which measures the number of quits in the month as a percentage of total employment, rose to 1.6% from 1.4%. In February, before the coronavirus pandemic hit the US labor market, the rate was 2.3%, near an all-time high. 

While the report shows that the labor market began to bounce back in May, job openings are still down more than 20% from pre-pandemic levels in February, showing that demand for workers is still depressed. 

At the same time, the number of unemployed workers has surged, meaning it's harder to get a job. In May, there were 3.9 workers for every job opening, a stark contrast from earlier in the year when job openings outnumbered unemployed workers. 

The May data "suggest that even if workers start to search more intensely, they have fewer job opportunities," said Nick Bunker, an economist at Indeed. 

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NOW WATCH: What makes 'Parasite' so shocking is the twist that happens in a 10-minute sequence

Palantir, a secretive tech company started by members of the 'PayPal mafia' with close ties to the Trump administration, could be one of the biggest tech IPOs ever. Take a closer look at how it makes money

Tue, 07/07/2020 - 11:30am

  • Palantir has confidentially filed a draft of its S-1 paperwork for its planned IPO listing, the company announced Monday
  • Activists have long protested the $20 billion big-data company for the ICE's use of its software to gather, store, and search for data on undocumented immigrants, and reportedly played a role in workplace raids.
  • Palantir has also been notoriously secretive due to its work with government, policing, and military organizations like the Department of Defense, the Army, the Marine Corps, the FBI, and the CIA.
  • Here's everything you need to know about the company, which could go public in the next month or two.
  • Visit Business Insider's homepage for more stories.

The big-data company Palantir has confidentially filed its paperwork to go public, the company announced Monday.

Palantir, first launched in 2003, has been secretive for most of its existence. Rumors about its plans to IPO have been around since last year, but Business Insider and others reported last month the $20 billion company is preparing go public as early as September.

Palantir's earliest claim to fame is through one of its cofounders: venture capitalist Peter Thiel, who serves on Facebook's board of directors and is one of President Donald Trump's biggest backers in Silicon Valley.

Since 2003, Palantir has grown into one of the most valuable startups in the country, with a $2.75 billion in venture capital raised and a $20 billion valuation — despite the fact that it operates under a veil of secrecy.

Palantir also works closely with the US government and law enforcement agencies, counting the FBI, CIA, the Department of Defense among its customers. Palantir has boasted about the good that it does, especially as pertaining to its work with government agencies: Previously, CEO Alex Karp has said that he hears about a foiled terrorist attack in Europe almost every week.

However, Palantir has found itself scrutinized for its dealings with Immigration and Customs Enforcement, the US agency responsible for enforcing President Donald Trump's crackdown on undocumented immigrants in the country. WNYC reported in 2019 that ICE agents use the company's apps in the field during workplace raids.

Activist organizations have long protested Palantir for working with ICE by providing the software that makes many of its core operations possible. That controversy has touched Amazon as well, as Palantir relies on Amazon's cloud to run its big data software. 

At the same time, Palantir's creators are going on the offensive, criticizing tech companies that don't work with the US government and proclaiming Palantir's patriotic bona fides. Karp has even blasted other tech companies for what he perceives as a reluctance to work on defense-related projects. Joe Lonsdale, a VC who cofounded Palantir but is no longer involved in company's operations, said last year that Palantir is "probably the most patriotic company" in Silicon Valley.

Here's what to know about this richly valued and controversial data-mining company.

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What is Palantir?

Based in Palo Alto, California, Palantir was founded in 2003 by a group of PayPal alumni and Stanford computer scientists, including CEO Alex Karp and venture capitalist Peter Thiel. 

Palantir creates software to manage, analyze, and secure data. Its name comes from a mystical, spherical, mystical object in the "Lord of the Rings" that allows its owner to "see from afar." In total, the company has raised $2.75 billion in venture capital.

As for Karp, he is a self-described socialist, even though Palantir works with large corporations and government agencies to provide big data tools.

The company was born out of Thiel's experience working at PayPal, where credit card fraud cost the company millions each month. To solve the problem, PayPal built an internal security application that helped employees analyze suspicious transactions.

Palantir takes a similar approach by finding patterns in complicated data. For example, law enforcement agencies can use it to search for links in phone records, photos, vehicle information, criminal history, biometrics, credit card transactions, addresses, and police reports.

VICE reported Palantir's software allows law enforcement to enter a license plate number and quickly get an itinerary of the routes and places the vehicle has travelled. Police can also use it to map out family and business relationships. Palantir's technology has also been used in New Orleans for predictive policing, according to The Verge — a practice that has been shown to increase surveillance and arrests in communities of color. 

Palantir has been involved in various lawsuits in the past few years. For example, in 2017, Palantir settled a lawsuit from the Department of Labor saying that its hiring practices discriminated against Asians

In 2016, Oracle reportedly considered buying Palantir, but the deal never panned out. 

As a privately held company, Palantir's valuation is believed to be anywhere from $11 billion to $41 billion, depending on who is doing the estimates. PitchBook pegs its valuation at $20 billion.



Why is Palantir so secretive?

Palantir is notoriously tight-lipped. That's because many of its customer agreements include non-disclosure clauses due to the nature of their work. As a result, Palantir tends to keep a low profile, sharing almost no information about how its software is used or its own finances. 

Earlier this year, Bloomberg reported Palantir expects to generate $1 billion in revenue this year and to break even for the first time in its 16-year history.

While it counts commercial businesses and nonprofits as customers, it also works with many government organizations, banks, and legal research firms. Some customers include Credit Suisse, JP Morgan Chase, the Department of Defense, Merck, Airbus, the NSA, the FBI, and the CIA.

On its website, Palantir says that people work with the company to uncover human trafficking rings, analyze finances, respond to natural disasters, track disease outbreaks, combat cyberattacks, prevent terrorist attacks, and more. 

Working with government agencies is a core part of Palantir's business. For the first several years, Palantir only sold its data analysis products to US government agencies. Palantir works with various military organizations and combat missions to gather information on enemy activity, track criminals, identify fraud, plan logistics, and more.  

For example, its software has been used by the Marine Corps to gather intelligence, and it's building software for the US Army to analyze terrain, movement, and weather information in remote areas. It's even been rumored to have been used to track down Osama Bin Laden, although Palantir did not comment directly on it. 

Palantir has also been selective about the customers it works with. For example, Karp previously told Fortune that Palantir turned down a partnership with a tobacco company "for fear the company would harness the data to pinpoint vulnerable communities to sell cigarettes to."



What is Palantir doing with ICE?

According to USAspending.gov, Palantir has received over $170 million in contracts with ICE, including active contracts worth about $94 million. Palantir provides investigative case management software to ICE to gather, store, and search troves of data on undocumented immigrants' employment information, phone records, immigration history, and more.

Some Palantir employees asked the company to end the ICE deal in 2018 after the Trump administration's family separation policy led to a crisis along the US southern border, according to The Wall Street Journal. Karp reportedly responded by saying Palantir's software was being used for drug enforcement, not separating families. Palantir also said ICE uses its technology for investigating criminal activity like human trafficking, child exploitation, and counter-terrorism. 

However, Mijente — a national group for Latinx and Chicanx organizing — reported last year that ICE agents used Palantir's software to build profiles of undocumented children and family members that could be used for prosecution and arrest. WNYC also reported in 2019 that ICE agents used a Palantir program called FALCON Mobile to plan workplace raids. This app reportedly allowed them to search through law enforcement databases with information on people's people's immigration histories, family relationships, and past border crossings. 

Two days after an ICE reportedly sent an email in 2018 notifying staff to use the FALCON app, ICE raided nearly 100 7-Eleven stores across the country.



Why are people protesting Amazon?

All this has also sparked protests against Amazon, since Palantir relies on Amazon's cloud to run its software. Previously at the Burning Man festival, Mijente brought a giant cage to protest Amazon and Palantir's involvement with ICE.

In 2018, an anonymous Amazon employee wrote a Medium blog post that said over 450 Amazon employees wrote to CEO Jeff Bezos demanding it to stop working with Palantir. Employees also confronted Bezos at an all-hands meeting about its connection to ICE. Last year, Amazon employees circulated another internal letter demanding that Amazon stop working with Palantir and take a stand against ICE.

Later that week, at an Amazon Web Services conference, activists interrupted the keynote in protest of Amazon's ties to Palantir and ICE.

In a statement at the time, an AWS spokesperson told Business Insider.

"As we've said many times and continue to believe strongly, companies and government organizations need to use existing and new technology responsibly and lawfully. There is clearly a need for more clarity from governments on what is acceptable use of AI and ramifications for its misuse, and we've provided a proposed legislative framework for this. We remain eager for the government to provide this additional clarity and legislation, and will continue to offer our ideas and specific suggestions."



When will Palantir go public?

Palantir's IPO had long been anticipated, but rumors about its plans picked up in 2019. The company was reportedly in talks with Credit Suisse and Morgan Stanley for an IPO in the second half of 2019, when bankers floated a $41 billion valuation for the company.

But Palantir announced Monday it had filed a draft of its IPO paperwork with the Securities and Exchange Commission, weeks after Business Insider and other news outlets reported the company was prepping its S-1 filing. It's unclear which banks Palantir is working with now on its S-1, or whether the company will pursue its IPO through a direct listing.

It's been five years since Palantir raised its last funding round, which valued the company at $20 billion. Since then, secondary shares have hinted at a valuation between $8 billion and $12 billion.

Palantir is on track to go public by September, setting itself up as one of the most highly anticipated public listings of the year, given that the pandemic has disrupted other companies' IPO plans.

 



US home prices will fall 6.6% over the next year as COVID-19's fallout worsens, report says

Tue, 07/07/2020 - 11:29am

  • US home prices are set to fall 6.6% over the next year as the fallout from the coronavirus pandemic worsens, CoreLogic said in a Tuesday report.
  • The group said its home-price index increased 4.8% in the 12 months through May, supported by strong demand, especially from younger buyers, and low supply.
  • "While activity up until now suggests the housing market will eventually bounce back, the forecasted decline in home prices will largely be due to elevated unemployment rates," the report said. "This prediction is exacerbated by the recent spike in COVID-19 cases across the country."
  • Read more on Business Insider.

US home prices are set to fall over the next year as the coronavirus pandemic continues to slam the economy, according to a Tuesday report from CoreLogic.

The group predicted that its home-price index would slump as much as 6.6% in the 12 months through May 2021, which would mark the first annual decline since February 2012, as the market grapples with the pandemic recession that began in February.

So far, housing has fared well in the coronavirus pandemic. The group's index increased 4.8% in the 12 months through May, supported by strong demand, especially from younger buyers, and low supply, the report said.

"While activity up until now suggests the housing market will eventually bounce back, the forecasted decline in home prices will largely be due to elevated unemployment rates," the CoreLogic report said. "This prediction is exacerbated by the recent spike in COVID-19 cases across the country."

Read more: The most accurate analyst covering companies like Amazon says these 7 stocks are great bets for the future of e-commerce — even as the coronavirus bump fades

New daily coronavirus cases have hit record highs in some states in recent weeks, in some cases leading governments to pause or roll back plans to reopen their economies.

In June, the US economy added a record 4.8 million payrolls, suggesting that a labor-market recovery is underway. Still, the data reflected the early weeks of the month, before spikes in COVID-19 cases threatened reopenings.

Read more: GOLDMAN SACHS: Buy these 13 stocks that are poised to crush the market within the next 2 weeks as earnings season gets underway

"The anticipated impacts of the recession are beginning to appear across the housing market," CoreLogic said. "Despite new contract signings rising year over year in May, home price growth is expected to stall in June and remain that way throughout the summer."

The pandemic recession has had the biggest effect on local housing markets, according to the report. CoreLogic found that there was a 75% chance of price declines in 125 metro areas in the next year.

The hardest-hit areas include states like Florida and Arizona that "faced the perfect storm of elevated COVID-19 cases and the subsequent collapse of the spring and summer tourism market," CoreLogic said.

Read more: Bank of America identifies 3 indicators that could make or break the stock market this summer – and warns they're all deteriorating fast

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NOW WATCH: What makes 'Parasite' so shocking is the twist that happens in a 10-minute sequence

Latest fintech industry trends, technologies and research from our ecosystem report

Mon, 07/06/2020 - 2:00am

This is a preview of a research report from Business Insider Intelligence,  Business Insider's premium research service. To learn more about Business Insider Intelligence, click here.

In recent years, we've seen a ballooning of activity in fintech — an expansive term applied to technology-driven disruptions in financial services. And 2018 has been no different, with fintechs' staggering influence on the market evidenced by record funding levels for the industry — by Q3 2018, overall funding was already up 82% from 2017’s total figure, according to CB Insights.

Additionally, this year marked a watershed moment for the industry, with the once clear distinction between fintechs and financial services proper now blurred significantly. Virtually every incumbent financial institution (FI) is now looking inward and engaging in an innovation drive, spurred on by competition from fintechs. As such, incumbents are now actively investing in, acquiring, and collaborating with their fintech rivals.

In this report, Business Insider Intelligence details recent developments in fintech funding and regulation that are defining the environment these startups operate in. We also examine the business model changes being employed among different categories of fintechs as they strive to embed themselves further in mainstream finance and prove sustainability. Finally, we consider which elements of the fintech industry are rapidly rubbing off on incumbent financial services providers, and what the future of fintech will look like.

The companies mentioned in this report are: Funding Circle, GreenSky, Transferwise, Ant Financial, Nubank, Cellulant, Oscar Health, Stripe, One97, UiPath, LianLian Pay, Wacai.com, Gusto, Toast, PingPong, Flywire, Deposit Solutions, Root, Robinhood, Atom, N26, Revolut, OneConnect, PolicyBazaar, WeCash, Zurich, OneDegree, Dinghy, Vouch Insurance, Laka, Cleo, Ernit, Monzo, Moneybox, Bud, Tandem, Starling, Varo Money, Square, ING, Chase, AmEx, Amazon, Monese, Betterment, Tiller Investments, West Hill Capital, Square, Ameritrade, JPMorgan, eToro, Lendy, OnDeck, Ripple, Quorom, Chain, Coinbase, Fidelity, Samsung Pay, Google Pay, Apple Pay, Bank of America, TransferGo, Klarna, Western Union, Veriff, Royal Bank of Scotland, Royal Bank of Canada, Facebook, ThreatMetrix, Relx, Entersekt, BNP Paribas, Deutsche Bank, Gemalto, Lloyd's of London, Kingdom Trust, Aviva, Symbility LINK, eTrade, Allianz, AXA, Broadridge, TD Bank, First Republic Bank, BBVA Compass, Capital One, Silicon Valley Bank, Credit Suisse, Ally, Goldman Sachs.

Here are some of the key takeaways from the report:

  • Fintech funding has already reached new highs globally in 2018, with overall funding hitting $32.6 billion at the end of Q3.
  • Some new regions, including South America and Africa, are emerging on the fintech scene.
  • We've seen considerable scaling in older corners of the fintech ecosystem, including among neobanks and alt lenders.
  • Some fintechs, including a number of insurtechs, have dipped into new markets to escape heightened competition.
  • Emergent areas like blockchain and distributed ledger technology (DLT), as well as digital identity, are gaining traction.
  • Many incumbents are undertaking business transformations that aim to reimagine everything from products and services to front-end systems and back-end processes.

 In full, the report:

  • Details the funding and regulatory landscape in the US, Europe, and Asia.
  • Gives an overview into a number of fintech segments and how they've changed over the past year.
  • Discusses how incumbents are reacting to fintechs in order to stay relevant in the changing financial services sector.
  • Evaluates what the future of fintech will look like and what trends to look out for in the coming year.
Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to: This report and more than 250 other expertly researched reports Access to all future reports and daily newsletters Forecasts of new and emerging technologies in your industry And more! Learn More

Purchase & download the full report from our research store

 

SEE ALSO: How the largest US financial institutions rank on offering the mobile banking features customers value most

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