Wall Street hugs LA companies that are shaking up the financial system

Camino CFO Sean Salas

Local fintech companies move payments and execute financial transactions at lightning speed. They are turning credit models upside down and lending money to small business owners from underrepresented backgrounds.

But stationary Wall Street and traditional big money houses are not keeping a watchful eye. Instead, they are investing billions of dollars in fintech. In a September report, S&P Global Market Intelligence estimated that fintech companies in the United States attracted nearly $ 7.5 billion in venture capital funding in 194 transactions in the second quarter of 2021, up nearly 70% year over year.

Much of these deals have been snapped up by Los Angeles-based companies.
In LA, a few fintechs have gone public, like West Hollywood-based Dave Inc. and Marina del Rey-based Aspiration Partners Inc. They have done deals with blank check companies on Wall Street and expect to see the sooner Trading begin at the end of the year.

Others are in a build-up phase with hundreds of millions of dollars behind them, preparing for their next growth spurt.
These heavily funded companies include Altruist Corp., a Venice-based fintech startup building a digital investment platform for registered investment advisors, and BSD Capital Inc., which operates as Lendistry, a downtown-based fintech company that is building billions of dollars of Covid-19 Aid provides finance for minority-owned small businesses.

There’s also Welcome Tech Inc., a Brentwood-based digital platform that gives Latin American immigrants access to banking, healthcare, and other day-to-day services without paying any predatory fees. Burbank-based Zest-Finance Inc., meanwhile, is focusing on credit underwriting standards and software to improve credit assessment methods for financial institutions looking to avoid lending.

These four companies alone – Altruist, Lendistry, Welcome Tech, and ZestFinance – have raised $ 238 million in venture capital in the past two to three years.
And investors are ready to put more wallets in LA fintechs.

Just last week, Santa Monica-based Grow Credit Inc., a Black-owned fintech lender that helps consumers use their subscription payments to build loans for free at Equifax Inc., TransUnion, and Experian, raised $ 106.3 million Distribute US dollars provided for equity and debt financing. Investors include Jason Robins, CEO of sports betting company DraftKings Inc .; National Basketball Association All-Star Player Baron Davis; and New York-based investment firm Arena Investors.

Over the next several weeks, Camino Financial Inc., a downtown-based fintech lender, plans to expand its $ 100 million loan platform to small businesses in the Latino community, according to Sean Salas, co-founder and head of Camino Financial with low bank account double executive.

In July, the company passed a milestone by loaning $ 100 million to more than 5,500 underserved small businesses. The fintech now has plans to enter into a debt contract to increase its line of credit to a much higher level than its current lending platform before the end of the year. According to Salas, the company is also completing a much larger capital increase than its $ 8 million Series A.

Old money
In February, privately owned auto lender Westlake Financial Corp., founded in 1978 by billionaire Don Hankey, decided to take part in the fintech campaign.

In April, the Mid-Wilshire-based lender reorganized as a fintech, with $ 755 million in profits last year on $ 2.3 billion in revenue. His new name is NowLake Technology, the unit that oversees Westlake, its auto loan business and all other businesses.

NowLake has companies developing software for the automotive finance, technology, real estate, and insurance industries. It is also considering using the software to assist with lending for jewelry purchases, consumer credit, credit cards, cell phones, solar devices, and elective medical procedures.

Large commercial banks and credit unions are also paying attention to the fintech world, especially because the pandemic has put a new focus on digital banking due to office closures and restrictions on personal shopping.

Last month, Santa Ana-based Banc of California Inc., which opened its double seat on the west side of Los Angeles this summer, invested $ 8 million in fintech OneNetworks Inc., which operates as Finexio, an Orlando-based payment service provider , Florida, for business. The Banc of California would like an exclusive right to use Finexio’s payment service to expand its product offering for its business customers and to use the fintech software to expand payment and related credit and deposit services, said Ernest Rolfson, founder and Finexio CEO.

“They’re really a big player in the Southern California economy and growing across the state,” said Rolfson. “I think they are trying to expand.”
Downtown City National Bank invests in the fintech space, as does some local credit unions through a venture capital group intended to invest in fintechs.

Nearly two dozen credit unions across the country have joined forces in their own venture capital fund called Curql Collective to invest heavily in fintechs like Zest.
Curql Collective, based in Des Moines, Iowa, unveiled its $ 150 million war chest in April. Local members include Unify Financial Credit Union, based in Torrance, and SchoolsFirst Federal Credit Union, based in Santa Ana.

City National has bought two Silicon Beach-based companies, Filmtrack and Exactuals, in the past two years, said Verna Grayce Chao, executive vice president of City National Bank and responsible for fintech subsidiaries.

Filmtrack modernized City National’s entertainment payments division, and Exactuals is a cloud-based platform that enables the bank’s entertainment customers to calculate, track, and analyze billions in sales revenue and equity payments.

The newer deals build on the 2010 acquisition of Datafaction from El Segundo, a software developer for accounting solutions, by City National.
“It deepens our relationship with our customers and expands that commitment that every business is looking for,” said Chao.

New rules
As the popularity of the fintech sector has increased across California, so has interest in regulating it.

Of particular interest are peer-to-peers who pass money between the parties over the Internet without the help of a bank. They operate in a gray area in the banking world without having to do much in terms of registering with or licensing from state and federal regulators, as they technically don’t charge interest or fees on their services.

In May, the new Office of Financial Technology Innovation, California’s premier government fintech agency, appointed consumer fintech attorney Christina Tetreault to lead the agency.

Her office was born out of a reorganization of California’s new Consumer Finance Act. The office is not a regulator, but it will play a crucial role in setting new rules for fintech. It will raise red flags about how new technology could harm consumers.
“We’re here to help entrepreneurs understand our expectations and support responsible innovation and job creation in California,” said Tetreault.

“The office itself allows us to better coordinate our efforts so we can pay more attention to how the department is tracking the arrival of new financial products and services,” she added. “Technology is at the heart of all of these developments. This bureau’s collaboration with these entrepreneurs is critical to understanding how these new products may raise unique legal issues. “

Jason Wilk, CEO of the Digital Banking App Dave, welcomes the dialogue with Tetreault.

“It is still relatively early and we are seeing more conversations taking place; People are generally interested in learning more about the (fintech) companies as we all acquire a lot of customers. It is natural that there is some interest in overseeing the industry to make sure the good actors are actually good and the bad get kicked out, ”he said.

“If anything, we’re a fan of oversight to make sure people aren’t trying to ruin the party for everyone else.”

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