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

Mon, 08/24/2020 - 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

Purchase & download the full report from our research store

 

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Read the pitch deck that helped Divvy raise $30 million to provide alternate financing for prospective homebuyers

Sun, 08/23/2020 - 8:02pm

Buying a home, particularly for Millennials, is a complicated and expensive process – at times it can be complicated and expensive enough to discourage potential buyers from even trying.

Enter Divvy, one of the many Silicon Valley startups working to change the way people buy homes. The company is specifically interested in providing alternative financing options for prospective homebuyers who don't qualify for traditional mortgages.

Divvy accomplishes this by purchasing homes outright and allowing customers to pay the company back through monthly installments — 25% of the total goes toward building equity and 75% goes toward paying "rent."

And some top venture capitalists have bought into Divvy's mission as well. In October 2018, Divvy raised a $30 million series A round led by Andreessen Horowitz, with participation from Caffeinated Capital, DFJ, and Affirm CEO Max Levchin.

Divvy helped purchase homes for more than 100 buyers in its first year, but it has much higher hopes. The startup's official mission is to put 100,000 families into their first homes within five years.

To really understand Divvy's strategy, Business Insider Prime has published the investor deck the company used to acquire that $30 million in funding. Simply enter your email address to receive a FREE download of the full deck!

BI Prime is publishing dozens of stories like this each and every day, chock full of exclusive content and industry analysis. Get started by reading the full investor deck.

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The Future of Fintech: AI & Blockchain

Sun, 08/23/2020 - 1:00pm

Sweeping global regulations, the growing penetration of digital devices, and a slew of investor interest are catapulting the fintech industry to new highs.

Of the many emerging technologies poised to transform financial services, two of the most promising and mature are artificial intelligence (AI) and blockchain.

74% of banking executives believe AI will transform their industry completely, and 46% of global financial services employees expect blockchain to improve transparency and data management.

In The Future of Fintech: AI & Blockchain slide deck, Business Insider Intelligence explores the opportunities and hurdles of adopting the two technologies within financial services.

This exclusive slide deck can be yours for FREE today.

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SALARY COMPARISON: What top companies like Apple, Nike, PwC, Walmart, Spotify, and more pay their staff

Sun, 08/23/2020 - 10:21am

Hello everyone! Welcome to this weekly roundup of Business Insider stories from executive editor Matt Turner. Please subscribe to Business Insider here to get this newsletter in your inbox every Sunday. 

Hello!

There's often a large degree of secrecy over salaries.

To shed a little light on who pays what, our reporters have been analyzing disclosure data for permanent and temporary foreign workers released by the US Office of Foreign Labor Certification to gauge how much companies offered to pay foreign staffers they sought to hire in the US through work visas.

As I've noted in the past, the data only reveals what companies pay foreign workers in roles for which they hired immigrant workers in fiscal year 2019. And the database also does not appear to include equity grants. 

But the data is still valuable. Want to get a sense of how much the PR industry pays? Here you go. Or if you're thinking of making a move, you can get a sense of how much you can earn in the tech industry based in Seattle or Texas.

Below are a range of titles at 10 different companies. Click on the link to see salaries for other roles at that company and at others like it.

You can also check out this interactive database from Rob Price, Skye Gould, and William Stevens breaking down how much Apple, Tesla, Amazon, and 10 other tech giants pay their workers, from engineers to salespeople.

Amazon's new No.2

Eugene Kim reports:

Amazon is turning to a 20-year company veteran with deep logistics chops for its new retail CEO position, a highly influential job that is widely considered the second most powerful after company founder and CEO Jeff Bezos.

Amazon announced that Dave Clark, SVP of worldwide operations, will become CEO of worldwide consumer when Jeff Wilke, who has been seen as Bezos's right-hand man, steps down from the position early next year. The job oversees everything from Amazon's core retail business to its massive shipping and logistics arm, as well as its growing physical stores segment, including Whole Foods.

You can read more on Clark's elevation here:

Eugene, Rachel Premack, and Hayley Peterson profiled Clark back in May, focusing on his role in charge of shaping Amazon's COVID-19 response, including changes in the supply-chain network and warehouse safety policies. You can read that story here:

Amazon also added three new executives to the company's "S-team," a group of 25 top leaders who work on the company's most important issues, Eugene reported. Most notably, it added Alicia Boler Davis, VP of global delivery services, to the S-team, making her the first woman of color to join the group. Here's the full list:

Operation Warp Speed

Moncef Slaoui, the chief adviser to Operation Warp Speed, the US government's program to deliver a safe and effective coronavirus vaccine as soon as possible, talked to Andy Dunn in a rare interview. Here are some of the highlights: 

You can read the full transcript here:

Below are headlines on some of the stories you might have missed from the past week.

— Matt

THE GATEKEEPERS: 12 top headhunting firms to know if you want to land a career in private equity or hedge funds

7 cities real estate investors should target in the 2020s, from a property management CEO who built a $3 million portfolio from scratch

A Republican central to Trump's reelection campaign led secret talks to remove him from the 2016 ballot, sources say

POWER PLAYERS: The 18 leaders at Google Health shaping the tech giant's secretive healthcare business

Inside Eagle Investors, the 20,000-member online community run by 2 Indiana University students that's helping spearhead the Gen Z day-trading revolution

The 20 retail startups VCs have pegged as most likely to take off in 2020 — and how they'll redefine the retail landscape

An Instagram 'micro' influencer with 45,000 followers explains how much money she charges for a sponsored post and story slide

Inside the drama at Blackstone's $129 billion credit division, where pay changes, PR black eyes, and disapproval of its internal hedge fund preceded an exodus in distressed trading

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THE BANKING-AS-A-SERVICE REPORT: The major players and best practices behind the business model that's reshaping incumbents' DNA

Sun, 08/23/2020 - 10:01am

Banking-as-a-Service (BaaS) — when banks or fintechs offer up their own services for other companies to use, enabling third parties to provide banking services — is starting to explode as an offering as more providers get on board.  A flood of providers from all different backgrounds, including incumbent banks such as BBVA, fintechs like Synapse, and neobanks like Starling Bank, are now diving headfirst into BaaS, driven by incentives like fee revenue, the potential for data-sharing deals, and insights they can gain from working with clients that can improve their own offerings.

But despite the rush of major providers into the space, no single company is managing to dominate it. They all follow different strategies as they compete along several metrics like breadth and depth of services, reputation, speed to market, and scalabilit, striving to stand out to clients and drive new business.

In The Banking-as-a-Service Report, Business Insider Intelligence looks at five major BaaS providers, ranging from fintechs to 20-year-old legacy providers that we think represent a good cross-section of approaches to offering BaaS. The report gives an account of the most important aspects of these providers — including their histories, vital details, and the BaaS services they offer — and analyzes some key considerations that yield competitive advantages or disadvantages for these providers. We then briefly examine a noncomprehensive list of other providers that merit mentioning. The report also highlights some best practices that other providers should note to gain an advantage in winning over prospective clients.

The companies mentioned in this report are: 11:FS Foundry, Bancorp, Bankable, BankMobile, BBVA, Cambr, ClearBank, Cross River, Fidor Bank, Green Dot, Marqeta, Railsbank, SolarisBank, Starling, Synapse, Treezor

Here are some of the key takeaways from the report:

  • Despite getting off to a slow start, BaaS is getting hot in the US and UK as providers of all different stripes leap into the fray, seeking new revenue, data-sharing opportunities, and a chance to gain insights that can inform their own offerings going forward.
  • But no one provider is dominating the market and competition remains as stiff as ever as providers compete to establish an advantage in terms of breadth and depth of services, reputation, speed to market, and scalability.
  • The vastly different approaches taken by the giants that offer BaaS reveal some best practices that providers should take note of to optimize their chances of success.

In full, the report:

  • Describes what BaaS is, the metrics by which providers' performances are measured, and the ways they can establish competitive advantages.
  • Provides a competitive showcase analyzing five major BaaS providers in depth.
  • Discusses selected other BaaS providers that are relevant in the space.
  • Recommends some best practices for gaining an advantage in winning over prospective clients.

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

  1. Business Insider Intelligence analyzes the banking industry and provides in-depth analyst reports, proprietary forecasts, customizable charts, and more. >> Check if your company has BII Enterprise membership access to the full report
  2. Sign up for the Banking Briefing, Business Insider Intelligence's expert email newsletter tailored for today's (and tomorrow's) decision-makers in the financial services industry, delivered to your inbox 6x a week. >> Get Started
  3. Purchase & download the full report from our research store. >> Purchase & Download Now

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A billionaire who vowed to pay off student loans for an entire college graduating class is said to be facing a criminal tax probe

Sun, 08/23/2020 - 8:23am

  • The billionaire investor Robert Smith is the subject of a federal investigation into potential tax crimes, Bloomberg reported Friday, citing unnamed sources.
  • Federal authorities have spent four years investigating whether he failed to pay taxes on $200 million in assets that were moved through offshore entities, Bloomberg added, citing its sources.
  • Smith has not been charged with a crime, according to Bloomberg, which said he might be found not to owe taxes on the assets even without any kind of deal with prosecutors.
  • The founder and CEO of Vista Equity Partners hit headlines last year when he pledged to pay off the student debt of the entire 2019 graduating class at Morehouse College.
  • Vista and the Justice Department did not immediately respond to Business Insider's requests for comment on the Bloomberg report.
  • Visit Business Insider's homepage for more stories.

Robert Smith, the billionaire who made headlines last year after saying he would wipe off the student debt of the entire Morehouse College 2019 graduating class, is facing an investigation into potential tax crimes, according to a report from Bloomberg on Friday. 

Bloomberg cited four unnamed sources, some of whom said the Justice Department and IRS agents had been investigating him for the past four years.

Federal authorities are said to be examining whether Smith — a billionaire tech investor and philanthropist who is the founder and CEO of Vista Equity Partners — owes taxes on $200 million in assets that were moved through offshore entities.

Read more: MORGAN STANLEY: Buy these 22 stocks that are slashing costs as sales take a hit from COVID-19 — putting them in position to smash the market as the economic recovery continues 

A key factor in the investigation, Bloomberg reported, is whether Smith was the beneficial owner of Caribbean entities that received proceeds from Vista's private-equity fund.

Some of those proceeds flowed through offshore entities into an American charitable foundation presided over by Smith, who is its founding director, the report said.

Neither Vista nor the Justice Department immediately responded to Business Insider's requests for comment on the Bloomberg report.

Read more: Stocks are making their most extreme moves in 20 years — and one quant expert says the COVID-19 crash was a preview of more 'wild swings' to come

Smith has not been charged with a crime, according to Bloomberg, which said that the investigation might find him not to owe taxes on the assets but also that one source said Smith was seeking leniency in exchange for cooperation with multiple investigations.

Bloomberg said one of those investigations was focused on a Smith associate, Robert Brockman.

Brockman, a businessman from Houston, has a host of connections with Smith involving offshore entities, trusts, and foundations, Bloomberg said.

You can read Bloomberg's full report on the investigation into Smith here.

SEE ALSO: Warren Buffett advised Airbnb CEO Brian Chesky to 'get rich slow.' The home-sharing platform just filed to go public during a pandemic.

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Warren Buffett's silver purchase helped make Thomas Kaplan a billionaire. His gold bet is an even bigger boon: 'I owe him two!'

Sun, 08/23/2020 - 5:30am

  • Warren Buffett helped Thomas Kaplan become a billionaire when he bought 130 million ounces of silver in the late 1990s, just before Kaplan listed his silver-mining company.
  • The Berkshire Hathaway CEO has done the natural-resources investor another favor by taking a stake in Barrick Gold last quarter.
  • Barrick co-owns the Donlin Creek gold deposit in Alaska with NovaGold, which counts Kaplan as its chairman and largest shareholder.
  • "Lightning has now struck twice," Kaplan told Business Insider. "Now I owe him two!"
  • Visit Business Insider's homepage for more stories.

Warren Buffett paved the way for Thomas Kaplan to become a billionaire when he unexpectedly bought silver in the late 1990s.

The Berkshire Hathaway CEO has inadvertently helped the natural-resources investor once again with his surprise bet on a gold miner more than 20 years later.

The silver wager

Buffett purchased 130 million ounces of silver in the late 1990s, restoring the metal's luster as an investment after oil tycoon Nelson Bunker Hunt and his brothers nearly cornered the global market in 1979, and its price crashed the following year.

News broke of Buffett's unusual investment just before Kaplan took his silver company public, shoring up demand for its stock. Kaplan went on to invest in an African platinum miner and a Texan energy company that were both acquired in 2007, netting him two massive windfalls.

"If Warren Buffett is conferring legitimacy on an asset, it changes the dynamics of investor perceptions," Kaplan told Business Insider in May. "Silver was toxic. The toxicity evaporated."

"He made silver safe for the investment world again," he added. "I owe him one."

Buffett bets on gold

"If history doesn't repeat itself, it certainly rhymes," Kaplan, who holds a doctorate in the subject from Oxford University, wrote in NovaGold's 2015 annual report, paraphrasing a quote attributed to Mark Twain.

Kaplan, the chairman and largest shareholder of the exploration-and-development company, didn't know how right he was until last week.

Buffett's Berkshire revealed a $564 million stake in Barrick Gold, despite the investor being one of gold's most famous detractors. Barrick owns 50% of Donlin Creek, a gold deposit in Alaska.

The project's other owner? You guessed it — NovaGold.

"The fact that Buffett has chosen Barrick means more eyes will be focused on Donlin," Kaplan told Business Insider.

"For me, this is as important news — and actually more financially rewarding — than when Buffett anointed silver as investible again and removed forever the stigma associated with silver investment that remained since the Bunker Hunt era," he continued.

"Lightning has now struck twice," he added. "Now I owe him two!"

Gold could gain mainstream appeal

Kaplan also discussed how Buffett's comments could transform how gold is perceived by the broader investment community.

The legendary investor's tacit endorsement, coupled with a recent op-ed by top economist Mohamed El-Erian's about the rise of gold, will be seen as a "huge 'detoxifier' for gold," Kaplan said.

"People can now find it safe to go into the water again ... and not be shown to be swimming naked when the tide rolls out," he continued, referencing a famous Buffett quote.

The price of gold has already soared this year, and recently zoomed past $2,000 a troy ounce for the first time ever.

The gold rush reflects mounting concerns about not just the pandemic, but also central banks and governments' unprecedented interventions to offset its economic impacts and shore up markets.

Gold is famously viewed as a haven during tumultuous periods and valued for its scarcity, as authorities can't simply print more of it.

Investors are also betting it can be a hedge against both inflation and deflation, an asset they can easily convert to cash in a crisis, a superior alternative to government bonds paying almost no yield, and a way to cut their exposure to a depreciating US dollar.

Buffett could still bash the metal in a future interview and attribute the Barrick investment to one of his deputies. But for now, Kaplan has the bragging rights as the unlikely beneficiary of two of the Berkshire chief's most oddball investments ever.

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The Death of Cash

Sat, 08/22/2020 - 10:01pm

Both globally and in the US, the payments ecosystem is evolving.

Two related trends: the slow death of cash and the fast rise of digital payments, are transforming how consumers, businesses, governments, and even criminals move money.

Annual global non-cash transactions are expected to pass the 1 trillion milestone by 2024. This major transformation is being propelled by several factors, including increased usage of digital wallets, more small vendors adapting to accept credit cards, and the explosive growth of mobile commerce.

In The Death of Cash slide deck, Business Insider Intelligence projects what the payments ecosystem will look like through 2024 by examining the driving forces powering digital payment proliferation.

This exclusive report can be yours for FREE today.

Join the conversation about this story »

The Death of Cash

Sat, 08/22/2020 - 10:01pm

Both globally and in the US, the payments ecosystem is evolving.

Two related trends: the slow death of cash and the fast rise of digital payments, are transforming how consumers, businesses, governments, and even criminals move money.

Annual global non-cash transactions are expected to pass the 1 trillion milestone by 2024. This major transformation is being propelled by several factors, including increased usage of digital wallets, more small vendors adapting to accept credit cards, and the explosive growth of mobile commerce.

In The Death of Cash slide deck, Business Insider Intelligence projects what the payments ecosystem will look like through 2024 by examining the driving forces powering digital payment proliferation.

This exclusive report can be yours for FREE today.

Join the conversation about this story »

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

Sat, 08/22/2020 - 1:55pm

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
  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. Join thousands of top companies worldwide who trust Business Insider Intelligence for their competitive research needs. >> Inquire About Our Enterprise Memberships
  4. Current subscribers can read the report here.

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18 Big Tech Predictions for the Second Half of 2020

Sat, 08/22/2020 - 12:04pm

The coronavirus pandemic has ushered in a period of rapid change and uncertainty across the global economy.

Prolonged lockdowns, government stimulus, and accelerated digitization have fundamentally changed how businesses operate and how consumers are spending. Due to this disruption, our outlook for the rest of 2020 has changed significantly from when we made predictions for the upcoming year in December 2019.

Considering the impacts of the pandemic, Insider Intelligence has put together a list of 18 Big Tech Predictions for the Second Half of 2020 across Banking, Connectivity & Tech, Digital Media, Payments & Commerce, Fintech, and Digital Health.

This exclusive report can be yours for FREE today.

Join the conversation about this story »

18 Big Tech Predictions for the Second Half of 2020

Sat, 08/22/2020 - 12:04pm

The coronavirus pandemic has ushered in a period of rapid change and uncertainty across the global economy.

Prolonged lockdowns, government stimulus, and accelerated digitization have fundamentally changed how businesses operate and how consumers are spending. Due to this disruption, our outlook for the rest of 2020 has changed significantly from when we made predictions for the upcoming year in December 2019.

Considering the impacts of the pandemic, Insider Intelligence has put together a list of 18 Big Tech Predictions for the Second Half of 2020 across Banking, Connectivity & Tech, Digital Media, Payments & Commerce, Fintech, and Digital Health.

This exclusive report can be yours for FREE today.

Join the conversation about this story »

A record 46 billion-dollar companies have filed for bankruptcy in the US this year as the pandemic continues to wreak havoc and it's far from over, say experts

Sat, 08/22/2020 - 11:35am
    • A record 46 companies with at least $1 billion in assets have filed for Chapter 11 bankruptcy this year, the Financial Times reported, citing BankruptcyData.com.
    • The previous record was 38 billion-dollar businesses during the same period of 2009.
    • JCPenney, Brooks Brothers, and Chesapeake Energy are among the big companies that have filed for bankruptcy this year as the coronavirus pandemic continues to hammer multiple sectors.
    • "It's going to be a bumpy ride," Ben Schlafman, operating chief of New Generation Research, which owns BankruptcyData.com, told the Financial Times.
    • Visit Business Insider's homepage for more stories.

Billion-dollar US companies have filed for bankruptcy at an unprecedented rate this year as the coronavirus pandemic continues to plague numerous industries.

A record 46 companies with at least $1 billion in assets filed for Chapter 11 bankruptcy as of August 17, the Financial Times reported, citing BankruptcyData.com.

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That figure exceeds the 38 billion-dollar businesses that filed in the same timespan in 2009 — at the height of the financial crisis — and easily surpasses the 18 companies of that size that filed in the same period last year.

Meanwhile, 157 companies with at least $50 million in liabilities have filed for bankruptcy this year, the Financial Times reported. They include 24 retailers with JCPenney, Brooks Brothers, and Neiman Marcus, all seeking protection from creditors in recent months.

Large oil-and-gas companies have also been hit hard. There have been 33 filings in the industry this year, including Chesapeake Energy, Whiting Petroleum, and Diamond Offshore Drilling.

"It's going to be a bumpy ride," Ben Schlafman, operating chief of New Generation Research, which owns BankruptcyData.com, told the Financial Times.

"We are in the first innings of this bankruptcy cycle," he continued. "It will spread far across industries as we get deeper into the crisis."

Read more: Steven Goldstein successfully played the market for 25 years before starting to coach traders who manage billions. Here are his 15 'golden' rules that helped him ensure investing success.

There has also been a flurry of smaller-scale bankruptcies this year. As many as 424 companies declared bankruptcy this year through August 9, according to an S&P Global analysis of public companies and private companies with public debt.

The surge in corporate bankruptcies is striking because the Federal Reserve and Treasury have taken unprecedented steps to shore up markets and buttress the economy in recent months. Their efforts range from buying corporate bonds to bailing out the airlines and mailing stimulus checks to households.

The spike also underscores the disconnect between the distressed US economy and the stock market, as both the S&P 500 and Nasdaq indexes climbed to all-time highs this week.

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An inside look at the investment strategies guiding Blackstone's real estate portfolio — and why it's still betting big on logistics while the competition crowds the asset class

Sat, 08/22/2020 - 10:21am

  • Blackstone, the world's largest corporate landlord, has $46 billion of dry powder allocated for real estate, as the pandemic commercial real estate shakeout begins.
  • Global co-head of real estate Ken Caplan spoke with Business Insider about how the firm is thinking of investing its money in the post-lockdown landscape. 
  • Logistics, already the biggest part of Blackstone's portfolio, remains a major opportunity, even as others look to the already crowded asset class.
  • While office, retail, and hotels have all had some ill-effect from the pandemic, Blackstone continues to see long-term tailwinds about the hotel and certain sectors of the office market, while retail is more challenging.
  • Visit Business Insider's homepage for more stories.

When the world's largest corporate landlord Blackstone acquired GLP's logistics assets last year in the largest private real estate deal ever, it was just the tip of a much bigger iceberg. The firm has been laser-focused on the real-world infrastructure that supports e-commerce for a decade, adding over one billion square feet of logistics space in more than 200 separate transactions in that time. Logistics assets are now the largest asset class in Blackstone's portfolio. 

This strategy was winning before the coronavirus, but now it's looking even better as online shopping soars amid the pandemic. 

"Logistics is a very popular sector right now, but not one we just decided last week was interesting," Ken Caplan, global co-head of real estate, told Business Insider. 

Caplan has been thinking about the broader industrial world since he first started at the firm in 1997, and actually worked on the firm's first warehouse purchase in Europe back in the late 90s. The firm's current strategy on logistics took hold around 2010. At the time, logistics was only 2% of their real estate portfolio, and now makes up a third of its $324 billion real estate portfolio. 

Blackstone, which is currently sitting on a record amount of dry powder, $156 billion, is starting to gear up to invest in assets in the post-COVID world. It has $46 billion allocated for real estate investments. 

Caplan sat down with Business Insider to talk about how the firm is thinking about investing in the time of COVID. Blackstone, famous for its thematic investing style, is using data from its properties to come up with themes about the changing world, and then investing based on those themes. The pandemic has shuffled some of the deck, but the firm believes that many of the themes it was following continue to remain good investments now.

"Our business is driven by investing thematically in sectors with powerful secular tailwinds, like content creation, logistics, and life science," Caplan said.

Despite being popular, logistics real estate is undervalued 

The pandemic's effect on logistics real estate can not be overstated. It turned a hot sector into the hottest sector, as more people used e-commerce for more purchases than ever before. Prologis, the largest REIT in the logistics space, is actually trading at a higher price per share now than it did before the public markets collapsed in late February. REITs in other categories like retail or hotels can't say the same.

This has brought more players into the space than ever before. While there aren't many companies that can compete with Blackstone on giant transactions like the GLP deal, more and more players of all sizes are trying to strike gold in the category. 

Read more: Cold storage is 2020's red-hot real estate play. Here's how the private-equity backed industry leader is spending $500 million to tighten its grip on the market.

Still, Caplan and Blackstone continue to see many opportunities for new deals, and new opportunities to make money. The reasoning is deeply tied to the theme that undergirds their investments, e-commerce. 

Caplan said that the market is still undervaluing just how essential and valuable logistical real estate is, and the market hasn't yet caught up to the realities of what e-commerce means.  

"There has been such a fundamental shift in utility for this asset and demand for this asset that the value has shifted very meaningfully as well, and we think that it is still under-appreciated," Caplan told Business Insider. 

There are still great opportunities for the firm, he added, especially in markets that don't have as high levels of e-commerce adoption as the US, such as Europe and parts of Asia.

Why offices are still good opportunities

On Blackstone's second-quarter earning's call, COO Jon Gray said that the firm would look to invest in offices and hotels, where challenges appear to be more "cyclical," while avoiding the retail sector which has more fundamental "secular" issues. 

Some think that remote work has the potential to be a long-term threat to offices. However, Blackstone's view here is quite clear: while fully remote work is able to keep businesses operating in a crisis, it poses significant challenges for training new employees, collaboration, and company culture.

While some office locations, like New York City, will see significant challenges in the near-term, Blackstone is confident that office demand will return. It doesn't have the same feeling about struggling retail. 

"One of the challenges in retail is that it oftentimes is not a better experience than the alternative, whereas, with office, it is often a better experience than the alternative," Caplan said, comparing the ease of e-commerce to the struggle of running a building remotely. 

Read more: Markets for retail and office space are under enormous pressure. A foreclosure in the works for a building on NYC's glitzy Fifth Avenue shopping corridor shows just how bad it's getting.

In the office space, Caplan said there are "powerful secular tailwinds" for the life sciences and content-creation/media sectors specifically. Both sectors require in-person activity, whether a lab or a movie studio, which insulates them from the potential downside of an increasingly remote world. 

These trends, which Blackstone was already invested in, have been bolstered by the effects of the pandemic. Blackstone's life sciences office company, BioMed, is one of the firm's four largest investments, and the firm owns over half of the Class A office space in film studio-rich Burbank, California.

Blackstone has already completed another major transaction since the pandemic began: signing a deal in late June for a 49% stake in three Hollywood studios and five offices owned by Hudson Pacific Properties and valued at $1.65 billion. These acquisitions count Netflix, CBS, and Walt Disney as tenants. Disney is also a tenant of some of Blackstone's Burbank office space. 

Outlook on hotels and retail

The hotel industry has understandably been hit extremely hard by the coronavirus, with some hotels having essentially no income at all for the first two months of the pandemic. However, Blackstone still believes that the long-standing trend of increased travel will continue once consumers feel comfortable to travel again. 

"In other areas where we've had high conviction in a longer-term trend and have seen that trend interrupted, like global travel, we believe it will return over time," Caplan said.

Blackstone sold Hilton after 11 years in 2018, but the company still owns hotels. Blackstone hotels that have reopened are beginning to see demand from regional leisure travelers, though business travel will likely take longer to bounce back.

Read more: Investments in risky hotel debt could get wiped out as travel gets slammed — and one group of lenders may see an outsized hit

While the larger trend of online shopping dims most enthusiasm for the space, some retail, especially a shopping center anchored by a grocery store or a high performing Asian mall, remains an attractive deal.

"In retail, we see a more secular change happening, where you have this shift to online or e-commerce that is reducing demand in the space and causing challenges that we don't think will reverse," Caplan said.

SEE ALSO: Real estate giant CBRE has an 'unparalleled' amount of data. Its tech chief lays out how it's putting it to good use.

SEE ALSO: Real-estate developers are betting on a risky strategy to reimagine retail space in hopes of rescuing struggling shopping centers

SEE ALSO: Meet the 4 dealmakers driving Blackstone's $325 billion commercial real estate portfolio. They walked us through how they're thinking about opportunities in the downturn.

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Palantir's direct listing breaks with Spotify and Slack in one critical way that affects insiders' ability to cash in their shares

Sat, 08/22/2020 - 9:25am

  • Palantir Technologies is reportedly adding a lockup period to its direct listing, limiting investors' ability to sell shares immediately after the company starts trading. 
  • Through the plan, investors could sell about 20% of their shares immediately. 
  • Spotify and Slack, the two companies that paved the way for direct listings, didn't have such a lockup period. 
  • The lockup plan could limit insider trading, address investor expectations, and limit volatility, public offering experts said.
  • Visit Business Insider's homepage for more stories.

Palantir Technologies is planning to go public via a direct listing, the same method pioneered by Slack and Spotify, but it may do so with a twist that could help shore up confidence in the money-losing tech company. 

Palantir plans to adopt a so-called lockup provision in which its current investors will be able to sell up to 20% of their holdings in the direct listing, but would be barred from selling additional shares for 180 days, according to reports in The New York Times, The Information, and Tech Crunch.

The lock-up provision left some observers scratching their heads. Lockup periods are common in traditional IPOs. But neither Slack nor Spotify — the only two companies that have thus far used the direct listing method to go public in the US — included one in their offerings.

Unlike its two direct listing predecessors though, Palantir will enter the public markets amid great political and economic uncertainty if, as expected, its goes public in September. And because the secretive data analytics company is bleeding hundreds of millions of dollars in red ink and opting for a novel path to the public markets, a lock-up could provide a critical measure of stability. 

Right now, experts told Business Insider, the direct listing is still an emerging alternative to the traditional IPO, with no set standards or commonly accepted terms — giving Palantir the freedom to call its own shots.

"It's just two" direct listings to date, said Reena Aggarwal, a finance professor and director of the Center for Financial Markets and Policy at Georgetown University. "That doesn't set a trend yet," she continued.

Lockups are common in traditional IPOs

In a traditional IPO, companies raise money by selling shares to institutional investors who then turn around and create a market for the stock by selling some of those shares on a stock exchange. While employees, executives, or early investors often sell shares in the IPO, such insiders are typically barred from selling after that, generally for a period of 180 days. Some companies have had provisions in their IPOs that allow them to lift the lockup period early if their shares trade above a certain price for a sustained period.

By contrast, in a direct listing, companies are currently barred from selling shares. Instead, insiders make a market for their firm's stock by selling some of their holdings directly to the public on a stock exchange. At least in the case of Slack and Spotify, employees, executives, and early investors could continue to sell in the days after the listing without any prohibitions. That allowed those insiders to cash in their stakes much earlier than they would have in a traditional IPO.

It's unclear exactly how Palantir's lockup period will work. The reports didn't state whether it could be lifted early or whether it will apply to rank-and-file employees as well as to executives and early investors. It's also not clear why Palantir planned to include a lock up with its offering.

The laws and regulations governing public offerings don't mandate lockup periods, but they're typically required by the investment banks that underwrite IPOs. 

See more: The IPO market is on fire after a short-lived drought — here are the hottest public debuts to keep an eye on, and which banks are eyeing big fees for pulling them off.

Lockups can prevent insider trading

The theory behind lockup periods is that they help prevent insiders who are aware of negative confidential information about the company from dumping their shares in the excitement following the IPO — and before that information becomes public, said Jay Ritter, a finance professor at the University of Florida who closely studies the IPO market. The side benefit of that is that they can lead to higher share prices, because investors don't have to apply a discount to the stock for the possibility that insiders are selling based on such negative news, he said.

"I'm not at all surprised that Palantir has agreed to a lockup," Ritter said.

Indeed, underwriters might add a lockup provision to the direct listing because investors expect them, said Greg Rodgers, a partner at Latham & Watkins who spoke generally about the thought process, not Palantir in particular. Rodgers represented Spotify on its 2018 listing and Slack's financial advisers in the 2019 direct listing.

He said companies that use lockups in a direct listing can direct them at large, new, or other notable shareholders, while allowing employees or other smaller or longer-term investors to sell. 

"In the direct listings seen to-date, they have not been used, largely I think due to the view that the larger the supply of shares, the truer the price set in the two-sided market place," Rodgers said. "However, if the company is concerned about the short-term impact of over-supply on the trading price of the stock, there is nothing to keep them from imposing the disciplined release that lock-ups might provide."

They may also limit volatility — or not

Palantir's desire to shore up its share price may well have played role in its decision to include a lockup provision, Aggarwal said. Spotify and Slack's shares traded down for weeks and months, respectively, following their direct listings.

If anything, the reception Palantir is likely to see from public investors is even more uncertain, given what's been going on the markets. While the major indices have all bounced back from their coronavirus lows this spring and the S&P 500 and the Nasdaq are both at or near record levels, the markets have been highly volatile in recent months, Aggarwal said.

By including a lockup period in its offering, Palantir will likely be able to avoid some of that volatility, she said. Its stock would likely be subject to much more extreme swings if insiders were permitted to dump shares whenever they wanted in the days, weeks, and months after the listing, she said.

"I kind of think of a lockup as managing that volatility," Aggarwal said.

Benchmark partner Bill Gurley isn't so sure about that. Some research he's seen indicates that Slack and Spotify actually had less volatility following their listings than the typical IPO, said Gurley, one of the most prominent advocates of direct listings in Silicon Valley.

Lockup periods tend to delay the process of finding an equilibrium price for a stock, he said. Many institutional investors refrain from establishing full positions in companies until after the lockup period has ended and all the insiders who wanted to sell have unloaded their shares, he said.

"If anything, I think the lockup could cause more volatility," he said.

Bill Gurley's a fan of direct listings, lockups or no

Regardless, Gurley doesn't think the lockup provision, even if it's widely adopted, will halt the momentum behind direct listings or make them less preferable to IPOs. Even with such a provision, direct listings still address the two big failings he sees in traditional IPOs — the fact that humans set the initial price of the stock and determine who gets the shares. Those factors can lead to big rises in prices when the stock starts trading and those rises can effectively represent huge transfers of wealth from the companies to the institutional investors that buy shares in the IPO.

"A direct listing that has those two problems fixed, I love," Gurley said. "I kind of think of ... the lockup change as
was the car mauve or red. I don't care. That's not the variable that matters."

Palantir, founded by Peter Thiel, has spent nearly two decades as a private, venture capital-backed company, but one that's been extraordinarily secretive about its operations and financial results. Those secrets are starting to come to light as it prepares to go public. The company announced last month that it had confidentially filed its draft offering paperwork.

On Friday, TechCrunch the New York Times reported leaked Palantir financial information, including that the company tallied about $742 million in revenue in 2019 while losing $580 million.  

public filing from early July shows the company is in the process of raising $961 million in private capital. So far it has raised $550 million, mostly from the Japanese holding company Sompo Holdings. 

SEE ALSO: Schmoozing is making a comeback in the midst of the pandemic: Here's a look at how Wall Street is entertaining clients, from golf games to lavish outdoor dinners.

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How much incoming investment bankers get paid at the 10 bulge-bracket banks

Sat, 08/22/2020 - 9:20am
Welcome to the weekend!

The competition for young talent is fierce and it's no secret that investment bankers are among America's highest-paid earners out of college. This week Business Insider got the details behind the base salaries and annual bonuses top investment banks and boutiques pay.

Reed Alexander combed through data from online forum Wall Street Oasis to round up what the 10 bulge-bracket banks pay their first-year analysts. Read the full story to see which bank pays the most total compensation.

From Goldman Sachs to JPMorgan, here's what you can make at all the bulge-bracket banks as a first-year IB analyst

But it's not only the Goldmans of the world that attract top talent. Boutique investment banks also pay top dollar to stay competitive. Meghan Morris and Alex Nicoll dove into government data to shed light on what firms like Moelis, Lazard, and Evercore paid employees at different seniority levels.

How much investment bankers get paid as they rise the ranks at firms like Moelis and Evercore, from analyst up to VP

Whether it's poaching from investment-banking analyst programs or more seasoned practitioners finishing up an MBA, private-equity firms, hedge funds, and other buy-side investors duke it out to ensure they're landing top prospects to replenish their ranks and shore up their future generation of partners and portfolio managers. 

Reed, Alex Morrell, and Casey Sullivan tapped their sources at investment firms, business schools, and the world of recruiters to identify the top headhunters that private equity and hedge funds rely on to identify future Wall Street all-stars. 

THE GATEKEEPERS: 12 top headhunting firms to know if you want to land a career in private equity or hedge funds

Read on for more big stories, including the drama at Blackstone's credit division, the hottest public debuts, and why American Express bought small businesses lender Kabbage. 

If you're not yet a subscriber to our finance newsletters, you can sign up here.

Have a great weekend, 

Michelle

(Meredith is on a break and will be back next week.)

Inside the drama at Blackstone's $129 billion credit division, where pay changes, PR black eyes, and disapproval of its internal hedge fund preceded an exodus in distressed trading

Blackstone's acquisition in 2008 of credit-investing platform GSO has been a massive success, with assets growing from $10 billion to nearly $130 billion today.

But, as Casey Sullivan and Alex Morrell reported, the absorption of GSO wasn't entirely smooth, with two distinctly separate cultures that sometimes clashed — especially as it pertained to its distressed-investing unit.

The distressed-credit group in particular featured a slew of all-star investors, but it also created PR black eyes for the firm and mixed-performance over the years.

Many of the firm's top distressed traders and analysts left amid the turmoil.

Sullivan and Morell also tracked the firm's 11 top distressed-investing alumni who joined shops like Ares and Angelo Gordon and are now helping them go bargain hunting during the downturn.

The investment chief at $7 billion healthcare specialist Perceptive Advisors breaks down why the COVID-19 vaccine race will have many winners 

Longtime healthcare, pharmaceutical, and biotech investor Perceptive Advisors sees a future where a vaccine for the coronavirus is being mass-produced and distributed in the next 12 to 18 months. And Adam Stone — the CIO for the $7 billion manager — told Bradley Saacks that he believes many different companies will have a chance to make some serious money off of it.

Blackstone has $46 billion of dry powder for commercial property deals. Its real estate head lays out why it's still betting big on logistics while the competition crowds the asset class.

Blackstone, the world's largest corporate landlord, has $46 billion set aside for real estate deals, just as the pandemic commercial real estate shakeout begins.

Alex Nicoll spoke to the firm's global co-head of real estate Ken Caplan about how the firm is thinking of investing its money in the post-lockdown landscape. Logistics, already the biggest part of Blackstone's portfolio, remains a major opportunity, even as others look to the already crowded asset class. 

The IPO market is on fire after a short-lived drought — here are the hottest public debuts to keep an eye on, and which banks are eyeing big fees for pulling them off.

Airbnb confidently filed its paperwork for an IPO this week, giving its biggest indication yet that it plans to go through with an initial public offering this year. In this report, Meghan Morris broke down the eight companies that are poised for a public-markets exit, though how they do so – traditional IPO, direct listing, or special purpose acquisition vehicle (SPAC) – is often still up in the air.

An alt-data firm says it's found a way to replace Robinhood trading data after a decision to shut if off left big investors scrambling. Here are 20 charts that show how it's tracking web traffic.

Wall Street is eager to get data on Robinhood users' trading activity following the startup's decision to shut down access to the info. SimilarWeb, an alt-data provider that tracks web traffic for millions of websites, compared trading volume on individual US stocks with weekly visits to their respective pages on Robinhood.com.

As Dan DeFrancesco and Dakin Campbell reported, its findings suggest traffic to Robinhood's website represents the app's actual order flow and can be used to better understand retail influence on the overall market's trading volumes.

Amex is targeting SMBs even as the pandemic crushes business owners. An exec explains why acquiring Kabbage is a key part of that plan.

American Express is acquiring Kabbage, the SoftBank-backed small-business lending fintech, in a bid to boost its small business customers. Shannen Balogh chatted to Anna Marrs, its president of global commercial services, about how it's building out its suite of products for businesses.

Charles Schwab is taking on Betterment and Wealthfront by launching a free tool that helps you plan your retirement, and it shows how firms are aggressively competing to cut the cost of financial advice

As Rebecca Ungarino reported, Charles Schwab launched a new digital tool that automates the financial planning process —  a sign of the fierce competition among wealth managers offering low-cost advice. The new platform resembles approaches from robo-advisers Betterment and Wealthfront, which evaluate users' financial situations and create plans for them.

On the move

Fintech Plaid hired a former regulator as its new general counsel to help it work with banks that have become wary of giving the firm unlimited access to customers' accounts and data

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THE GLOBAL NEOBANKS REPORT: How 26 upstarts are winning customers and pivoting from hyper-growth to profitability in a $27 billion market

Sat, 08/22/2020 - 9:01am

Neobanks — digital-only banks with industry-leading capabilities that don't operate physical branches or rely on legacy back-ends — have exploded onto the global scene in recent years.

Increased consumer interest in neobanks is stimulating competition globally, creating an increasingly competitive landscape which has driven neobanks to roll out extravagant features, like overdraft protection and sign-up incentives. 

Beyond scaling rapidly by user count, neobanks are navigating the best route to profitability. Today, the average neobank loses $11 per user, per Accenture, and though neobanks' expenses are partially offset by not operating costly branch networks, they still need to find sustainable business models.

Some major strategies are beginning to coalesce: Most neobanks operate under a "freemium" model, in which they offer their product for free, but charge for additional features, while others offer multitier subscriptions with varying levels of premium accounts. Additionally, other players are targeting niche segments, like small businesses or gig economy workers, in their pursuit of profitability.

In The Global Neobanks report, Business Insider Intelligence explores how the neobank market has grown rapidly, and what's in store as the industry pivots from hyper-growth to sustainability. We discuss how 26 neobanks in key global markets are prioritizing scale versus profitability, identifying best practices to emulate and pitfalls to avoid.

The companies mentioned in the report include: ABN Amro, Adyen, Ant financial, ANZ, Aspiration, Banco Inter, Bank Leumi, Banco Sabadell, Banco Votorantim, Bnext, bunq, Chime, Commonwealth Bank of Australia, Dave, Finleap, ING, Judo, Klar, Kuda, Mastercard, Monzo, Moven, MYbank, National Australia Bank, Neon, Nubank, N26, OakNorth, Open, Pepper, Penta, Revolut, Raising, Rabobank, Santander, Starling, Standard Chartered, Tandem, TD Bank, TransferWise, Tencent, Uala, Uber, Volt, Varo, WeBank, Westpac, Xinja, 86 400.

Here are some key takeaways from the report:

  • With an estimated 39 million users globally, neobanks' valuations have skyrocketed thanks to their attractive value propositions which include personal finance management features, low rates, and superior user experiences.
  • But the same features that have helped neobanks catch on have pushed profitability further out of reach. Neobanks have been forced to roll out flashy features to stand out to users, and marketing these features has driven up expenses. 
  • There's no universal path to profitability for neobanks — but a few major categories are emerging. Freemium pricing strategies, multitiered subscriptions, and targeting niche demographics are three strategies neobanks are employing in pursuit of profit.  
  • Individual neobank landscapes vary by market, but their inherent advantages are allowing neobanks to emerge in markets globally. Regional factors have made certain markets particularly ripe, such as fintech-friendly regulations, negative consumer perceptions of incumbents, and gaps in banking services for underbanked populations. 

In full, the report:

  • Sizes the neobank market by value, number of users, and number of accounts to 2024.
  • Explores the factors that will propel the neobank market to new heights over the next five years, and the challenge of reaching profitability underpinning this growth.
  • Highlights key players in various global markets — including Europe, North America, Latin America, Asia Pacific, and the Middle East and Africa — that are representative of the general neobank landscape and that have excelled in global footprint, features, users, or total funding raised. 
  • Spotlights some of the smaller players that represent the emerging opportunity in a given market.
  • Discusses how different neobanks in key global markets are prioritizing scale versus profitability, identifying best practices to emulate and pitfalls to avoid. 

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 Banking Pro, Business Insider Intelligence's expert product suite tailored for today's (and tomorrow's) decision-makers in the financial services industry, delivered to your inbox 6x a week. >> Get Started
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  4. Current subscribers can read the report here.

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India, Brazil, and South Africa will face the 'harshest' economic impact from the coronavirus in major nations as they're corrupt and badly run, a report says

Sat, 08/22/2020 - 7:01am

  • India, South Africa, and Brazil can expect the "harshest repercussions" from COVID-19 on their economies among G-20 members, according to a report released this week.
  • These three economies lie at the very bottom of risk consultancy Verisk Maplecroft's "Recovery Capacity Index" when it comes to the coronavirus.
  • "A drawn-out recovery for these markets will have severe repercussions for the investment community, consumer markets and multinationals," Verisk Maplecroft's report said.
  • Visit Business Insider's homepage for more stories.

The G-20's "least-resilient" nations are set to face far worse economic consequences than wealthier ones in the aftermath of the pandemic, according to a report by global political risk consultancy Verisk Maplecroft.

India, South Africa, and Brazil will experience the "harshest repercussions" as they attempt to recuperate economic losses this year, analysts David Wille and Joshua Cartwright wrote.

G-20 countries in Western Europe and East Asia have the capacity to recover more rapidly than emerging market members, the report said.

More affluent countries adopted strict lockdowns and managed to support citizens when their economies entered a "self-induced coma," the report found, while poorer G-20 members could not launch such widespread programmes, it added.

The clear outlier was found to be the US with the "least effective pandemic response of any developed market" due to a politicized re-opening of state level eceonomies, which allowed the virus to keep spreading, the report said.

However, it added, as soon as a vaccine is developed, the high fiscal power of the US will lessen the impact of the downturn.

The G-20, which is made up of the EU and 19 of the world's most powerful economies, can expect its members to see a two-track recovery through Verisk Maplecroft's "Recovery Capacity Index."

The index measures a nation's ability to recover from a crisis.

India, South Africa, and Brazil lie at the very bottom of this index.

The three economies contribute to 20% of the world's population, 10% of the world's GDP, 3.7% of total trade, and 3.2% of foreign direct investment flows.

Read More: A JPMorgan equity chief sees stocks staying rangebound for another year, even if there's a vaccine breakthrough — but says investors can still get big returns in these 11 regions and sectors

In its latest world economic outlook, the International Monetary Fund predicted that emerging market economies will shrink by 3.2% in 2020 — the largest decline for this group on record. 

"A drawn-out recovery for these markets will have severe repercussions for the investment community, consumer markets and multinationals," Verisk Maplecroft's report said.

Smaller G20 members will see their recoveries hampered by weak institutions and corrupt governance, it highlighted. Disruptions from civil unrest pose the biggest roadblock to their recovery, the report added.

Maplecroft's measure for corruption scores India, Brazil, and South Africa as high-risk while Russia, Mexico, and Indonesia fall under the "extreme" risk category.

Read More: A $5 billion chief market strategist shares 5 post-pandemic stocks to buy now for gains as COVID-19 cases level off — and 2 big-tech winners to start cashing out of

"Corrupt, ineffective and unstable governments will be limited in their ability to direct funding to where it is most needed, failing to revive the economy even after the immediate crisis is dealt with," the report noted.

The urban population density of such nations is another weak-point as that indicates high exposure to the virus, and difficulty in containing outbreaks.

The consultancy found that India and Indonesia fall under an alarming high-risk category when it comes to connectivity — a measure of the physical distance between populations and the availability of digital infrastructure that indicates the speed of worker and consumer activity.

On that gauge, South, Africa, China, Mexico, and Brazil are comparatively better off at a medium-risk level.

"Even if they manage to avoid the worst, our Recovery Capacity Index suggests that India, South Africa and Brazil still have a long road ahead," the analysts concluded.

Read More: Jefferies says buy these 7 back-to-school stocks poised for big returns with much of the US going remote

SEE ALSO: A senior Fed official says 'Wall Street has called this about right' after stocks rally to record highs even as fears persist about US economic health

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Billionaire philanthropist Robert Smith, who paid off the student debts of an entire college class last year, is facing a criminal tax probe. Here's a look at his charity work.

Sat, 08/22/2020 - 6:34am

  • Billionaire philanthropist Robert Smith is being investigated by federal officials for potentially not paying taxes on about $200 million of assets, according to Bloomberg.
  • The Vista Equity Partners CEO hasn't been charged and prosecutors may determine that he doesn't owe any taxes, Bloomberg said.
  • Smith's philanthropy includes paying off $34 million of student debt for Morehouse College graduates last year, signing Warren Buffett's Giving Pledge to give away half of his wealth to good causes, and funding scholarships for underrepresented students.
  • Here's a roundup of his charity work in recent years.
  • Visit Business Insider's homepage for more stories.

Billionaire philanthropist Robert Smith, who paid off the student debt of an entire class of college graduates last year, is the subject of a four-year criminal investigation into whether he failed to pay his taxes, Bloomberg reported on Friday.

Justice Department and IRS officials are determining whether Smith has to pay taxes on about $200 million of assets that flowed from his first private equity fund through offshore structures and into his Fund II Foundation, Bloomberg said.

Smith hasn't been charged, and authorities may conclude that he owes no taxes on the assets, Bloomberg said.

Smith is the co-founder and CEO of Vista Equity Partners and the wealthiest Black American with an estimated $6 billion fortune. Vista didn't immediately respond to a request for comment from Business Insider.

 Read moreJPMorgan pinpoints the triggers for a bond sell-off that can cause unusually large losses in everything from stocks to gold — and lays out how to be ready for it (edited) 

Here's a look at his philanthropy in recent years:

Smith spent $34 million of his fortune to erase the student debt of the 2019 graduating class of Morehouse College, a historically Black men's college in Atlanta.

He donated $20 million to the Smithsonian National Museum of African American History & Culture in 2016. He also partnered with Floyd Mayweather to help cover the funeral costs for George Floyd earlier this year.

Smith is the only Black American to sign famed investor Warren Buffett's Giving Pledge, a non-binding commitment to donate the majority of his wealth to charitable causes.

His goals are improving opportunities for Black Americans and supporting ecological causes, while his wife, Hope, focuses on helping children and young people, he wrote on the Giving Pledge website.

"I will never forget that my path was paved by my parents, grandparents and generations of African-Americans whose names I will never know," he said. "My story would only be possible in America, and it is incumbent on all of us to pay this inheritance forward."

"We will only grasp the staggering potential of our time if we create on-ramps that empower ALL people to participate, regardless of background, country of origin, religious practice, gender, or color of skin."

Read moreMORGAN STANLEY: Buy these 22 stocks that are slashing costs as sales take a hit from COVID-19 — putting them in position to smash the market as the economic recovery continues (edited) 8:30Correct JP one:

Smith's Fund II Foundation has also given more than $240 million to good causes, according to its website. It donated $27 million to The Susan G. Komen Breast Cancer Foundation, $48 million to The United Negro College Fund, and $54 million to The National Park Foundation to acquire the homes of Martin Luther King Jr. and other notably Black Americans.

Fund II also gifted $20 million to Cornell University to provide scholarships, graduate fellowships, and program funding for underrepresented students in STEM fields.

Moreover, Smith restored the historic Lincoln Hills fly-fishing resort in Colorado, which hosts 6,000 inner-city children and a few hundred wounded veterans each summer, he said in a 2018 interview. The resort also includes a ranch house catering for foster children who have aged out of the system.

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Financial Services: 6 Key Attributes to Attract Gen Z

Sat, 08/22/2020 - 6:00am

Now the largest generation worldwide, Gen Z accounts for nearly 68 million people in the US alone. As Gen Zers age, financial services providers will be increasingly pressed to shift focus to the burgeoning demographic.

As digital natives, Gen Zers are more receptive to influence from friends and family than traditional advertising. For marketers, strategists, and developers, understanding Gen Z's unique needs — and creating and marketing products accordingly — will be critical to reaping their value.

In Financial Services: 6 Key Attributes to Attract Gen Z, Business Insider Intelligence provides a six-point framework that highlights core traits of the demographic, which banks and payments firms can use to attract, engage, and retain Gen Zers.

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