As you may know I’ve been spending time recently with some of the leading figures from the world of fin-tech as part of my ongoing Fintech World Tour.
The San Francisco Bay Area, aka Silicon Valley, is undoubtedly one of the world’s leading centers — in addition to which California can claim Silicon Beach, in LA, among others with their own claim to fin-tech fame.
Ryan Ortega is a founder and head of research for the California Fin-tech Network — alongside his role as founder and research director at fin-tech startup Marketplace Alternatives.
We met in the heart of Silicon Valley, in San Mateo — just down the road from Draper University, leading VC Timothy Draper’s fin-tech accelerator. I asked him:
What’s your background and what got you get into fin-tech (and when)?
I started off my career with an internship in 2001 just after the dot-com craze, working for a large telecom company. I was lucky enough to experience a role in technology early on and saw the Web 2.0 movement take hold over the years that followed.
After graduating with a bachelor’s degree in finance, I was working for a small family office when I experienced the run up of the U.S. housing market and equities from 2004-2007 and then the credit crisis of 2008. Seeing this changed my prospective on markets and I realized that models can only do so much since humans are still at the helm of banks.
Two years ago I started getting excited about the fin-tech space and left my job at a large investment consultant. I was particularly interested in alternative ways of investing through these new platforms and being able to use my background in technology and finance to add value.
Tell us a little about your current focus and what you’re doing — and why?
I currently head up the research effort at California Fin-tech Network where I’m a founding board member. California Fin-tech Network is a nonprofit trade organization for professionals, founders, executives, and investors that work and invest in the financial technology sector.
I helped start the organization since there was a need for a third-party between platforms and investors. To serve our members, we focus on the areas of lending, payments, and investing and our mission is to offer education, research, networking, and education.
What excites you most in Fin-tech (apart from the above of course)?
I’m excited to see so many new startups innovating at early stages by using technology. The financial industry has used technology many years, but mainly for back-end systems at large institutions. Now we are seeing consumer-facing solutions come to market in ways we never saw before. I’m also excited to see companies solving real problems and making lives better. There are many examples of this including someone getting their product idea off the ground using crowdfunding, a P2P Lender helping someone get a loan they couldn’t at a bank, or someone saving money on remittance fees sending money to family overseas.
What’s the single most exciting thing that’s happening — present company excepted of course?
The single most exiting thing happening in my view is how the second market for p2p lending is evolving. Having a secondary market and a robust securitization pipeline will be crucial for the space to take the next step forward.
What threats and opportunities do you see in the road ahead — for banks and other financial institutions, for Fintech ventures and for the business community and society at large?
The opportunities in the fin-tech space, especially consumer, are quite abundant seeing as if the financial industry makes up a large part of the world’s economy. Currently the threat of regulation is weighing heavily on investors and entrepreneurs. This is especially true for the lending and alternative payments areas. We have seen some regulator guidance on bitcoin come from the SEC and more recently, the CTFC. On the lending side, the U.S. Treasury put out a request for information as they look into the P2P Lending space. Only time will tell how things play out, but the hope is that laws will be made to benefit consumers and not incumbent institutions.
Where, in your opinion, are the biggest areas of change or growth in the next couple of years or so?
Mortgages are the largest area of consumer lending and the space hasn’t been disrupted yet. Social Finance (SoFi) has started offering a mortgage product after doing well in student loans, but they have just scratched the surface. We also a new mobile facing product called Rocket Mortgage from Quicken Loans, which could be a game changer.
What advice would you offer people entering the field at this stage?
Make sure you do your homework on past companies that have failed and why. There is a lot to be learned about their failures and you save time and energy by learning to avoid these same mistakes.
Tell us something we didn’t know about you or your venture.
I first got exposure to “fin-tech” through online trading with a Datek account, if there’s anyone that remembers them! The company was eventually acquired by Ameritrade.
Finally the People’s Bank of China just announced they are creating their own cryptocurrency — with major implications for fin-tech and the world. How do you see this changing the landscape?
This was an important milestone in the blockchain space. One of the interesting things that has been discussed is if and when a country could create their own currency. It has been discussed in the past as “Fed Coin”; where the U.S. Government could issue notes on its own private blockchain. Many in the bitcoin space are against the idea of a permissioned blockchain, since we already have the bitcoin blockchain that is permission-less — anyone can write to it. Having a country create its own currency does have value though, as far as moving away from paper money and coins — into a digital form. Unfortunately, a currency like this would still be within the confines of monetary policy.