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Conference Presentation, Panel

FinTech: So Much Potential, Too Little Impact?

Milken InstituteJackson Mueller, Thomas Curry, Sallie Krawcheck, Jonathan Larsen, Sasha Orloff, Anju Patwardhan
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  • Research Context: The Milken Institute's Center for Financial Markets launched its FinTech program in October 2014, positioning itself as an early think tank focused on the sector.
  • Core Objective: The discussion prioritizes current, measurable impact (inclusion, access to capital, transparency) over speculative future potential.
  • Historical Baseline: A 130-year study by NYU Professor Thomas Philippon indicates the unit cost of U.S. financial intermediation has remained constant at approximately 2%, creating a benchmark for evaluating FinTech efficiency gains.
  • Market Scale: Ping An reports 430 million digital users as of December, leveraging technology to operate with 80% of its data processing virtualized and stateless on its own cloud.
  • Efficiency Case Study (Auto Insurance): Ping An's AI-driven claims process allows 30% of 12 million claimants to receive immediate cash transfers instead of traditional processing, reducing friction and cost.
  • Credit Risk Methodology: Ping An's lending platform utilizes 6,000 variables for credit assessment, achieving a loss rate under 3% despite the absence of universal credit bureaus in China.
  • Wealth Management: Ping An's LUFAX platform manages $80 billion in assets, enabling clients to invest with no minimums and extremely low costs.
  • Pricing Dynamics: Sally Susman (Ellevest) noted that while she initially launched with a 50 basis point fee, competitive pressure forced a reduction to 25 basis points, challenging the industry's historical pricing stability.
  • Fee Transparency: Susman hypothesizes that traditional financial services maintain stable fees (e.g., 75–80 basis points ROA at Merrill Lynch) largely due to hidden costs and opaque fee structures that prevent consumer price comparison.
  • Demographic Focus: Ellevest targets the 80% of women who die single, tailoring algorithms to income peaks, career breaks, and longevity, having crossed $100 million in assets under management in record time.
  • Credit Market Stability: Sasha Krieger (LendUp) argues that subprime unsecured U.S. credit is the most stable asset class in the unsecured market, with volatility peaking at 47% during recessions compared to 200% for prime credit.
  • Loss Rate Comparison: LendUp achieves single-digit loss rates on originations, contrasting with 15–35% losses for traditional subprime card issuers, driven by mobile-first data and alternative underwriting.
  • Market Divergence: Andrew Sheng observes that while China leads in B2C FinTech (payments, mobile lending) due to leapfrogging legacy systems, the U.S. leads in B2B FinTech, where 60% of $30 billion in VC investments occurred last year.
  • Competitive Shift: Investment trends have shifted from bank-FinTech competition to collaboration, with both sectors now viewing Big Tech (Amazon, Google) as the primary competitive threat.
  • Regulatory Strategy: Tom Curry advocates for a Special Purpose National Bank Charter to replace the U.S.'s fragmented 50-state licensing maze, ensuring national consistency and a framework for financial inclusion (a hybrid of CRA and consumer protection).
  • Investment Outlook: Creditease's portfolio is split one-third consumer-facing and two-thirds B2B, focusing on U.S. investments to leverage B2B innovation opportunities.
  • Regulatory Philosophy: Sheng emphasizes "proportionate regulation," arguing that rules must scale with a firm's size and risk profile rather than applying uniform bank standards to all FinTechs.
  • Viability Framework: LendUp validates its platform viability across three axes: profitability (high ROA), customer love (4.7–4.8/5 rating on Credit Karma vs. 2.3 industry average), and measurable impact (saving customers $200 million and improving 500,000+ credit scores).
  • Global Inclusion Gap: A 2019 study with the IFC and Stanford found that while 38% of adults are unbanked, an additional 57% have basic accounts but lack access to full financial services (credit, insurance, savings).
  • Oversold Technology: Sheng identifies cryptocurrencies as massively oversold, whereas he views asset tokenization and underlying blockchain DLT as transformative, citing a $2 trillion volume trade on Ping An's interbank blockchain platform.
  • Future Labor Market: Philippon and Curry predict that while data processing tasks (copy-paste, calculation) will be automated, relationship-based jobs will remain irreplaceable in the near term.
  • Forward-Looking Statement: Curry hopes the current OCC Comptroller will issue a definitive position on Special Purpose National Bank charters within 60–90 days to resolve regulatory uncertainty.
  • Advisory Committee Formation: The Milken Institute announced a new U.S. FinTech Advisory Committee, chaired by Tom Curry (former OCC Comptroller) with Melissa Coyne (FinRec Labs CEO) as Vice Chair.