Week of May 9, 2016

1. Online Lending: Lending is hard. And not just because of the difficulty of assessing creditworthiness. Lenders are intermediaries, matching borrowers and investors, which means there are lots of principal-agent problems and a thicket of rules, regulations and practices to manage them (in most places). When lending goes online it can dramatically increase access for both borrowers and investors, but principal-agent problems don't go away. (That's a report from the US Treasury Dept., but it's good! You should read it!) That's the sub-text of the downfall of Lending Club, perhaps the largest of the online lending "platforms" that have emerged in the US in recent years. This week the CEO was forced to resign after it emerged that he had approved misleading investors about how the company was managing some of those principal-agent problems in ways reminiscent of the sub-prime crisis.

2. Unexpected Regulators: Speaking of online lending and regulation, this week Google became a de facto financial services regulator by banning ads for online payday lenders. Perhaps that was in response to this unexpected regulator using Google to make terms and conditions of online payday lenders more transparent. Meanwhile, if you still need quick access to cash online, you may want to study more about the rules enforced by Reddit's volunteer lending regulators.

3. Savings: But perhaps you take a more conservative approach to building up lump sums: saving. If so, you won't have much company in the United States. But you'll also be pretty lonely in Korea (10,000 Won is less than $10USD). And in Japan. Time for me to update my priors about savings rates in Asia.   

4. Digital Finance: I'm not sure how many people would call the undermining of branches and groups an "unexpected" consequence of digital financial services, but what will become of them is still a good question. If you're curious about how to measure the impact of those consequences, expected or otherwise, IMTFI has a helpful new guide to conducting consumer finance research.

5. Feedback: IMTFI helpfully includes a link to offer feedback on the guide. Feedback was the theme of a conference I attended yesterday put on by Feedback Labs, to examine the value of feedback in development programs. They have a new paper on the topic, which, of course, they'd like feedback on (with a very cool web tool--why don't we have this for working papers?). The best thing I heard yesterday (but not the only good thing!) was from a panel about the role of feedback in medicine, where Erin Holve introduced the concept of "evidence-generating medicine" as a better construct than "evidence-based medicine" since even in the medical field we have shocking little good evidence, and even what we have is frequently ignored (ask your doctor to wash her hands!). Evidence-generating policy--that's something we all can get behind. Right?

Bonus Updates:
Insurance/FinTech: Oh those pesky regulators and their insistence that CEOs don't actively help their employees cheat on their licensing exams.
Our Algorithmic Overlords: Sometimes they're not so bad. Sometimes they're just a guy with access to open data on New York City parking tickets.

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