The Wall Street Journal - 03.09.2019

THE WALL STREET JOURNAL. ** Tuesday, September 3, 2019 |B5

in bank overdraft fees and $6

billion in payday loans.

The payroll-advance apps

come in different business de-

signs from companies such as

Earnin, PayActiv Inc. and Even

Responsible Finance Inc. Some

work directly with consumers

while others work with large

employers such asWalmart

Inc. andUber Technologies

Inc. The companies say the

services simply advance work-

ers part of the wages they

have already earned. That,

they say, sets them apart from

payday and other consumer

lenders and keeps them out-

side of existing payday-lending

laws and regulations.

“In the U.S., we have this

pay cycle that holds back peo-

ple’s pay,” said Ram Palaniap-

pan, chief executive of Earnin.

“What we have been able to

do is to give people access to

their pay as they earn it.”

Earnin tracks users’ work

and pay schedules using time

sheets or location services and

will deposit up to $500 per

pay period in their bank ac-

counts. Rather than charging

fees for its service, Earnin

asks users to consider volun-

tary tips of up to $14.

Earnin received a subpoena

from New York regulators in

March, industry experts said.

Several other payroll-advance

Manylower-incomehouseholdslackaccesstobanking,

oftenrequiringthemtoturntocostlyfinancialservices.

Note: Percentages don't add up to 100 due to rounding.

Source: Federal Reserve survey of 11,440 adults conducted Oct. 11-Nov. 12, 2018

Lessthan$

$-$

Morethan$

Highschooldegreeorless

Somecollegeorassociatedegree

Bachelor'sdegreeormore

14% 21% 64%

1 7 92

13% 21% 66%

4 18 77

1 9 89

Unbanked Underbanked Fullybanked

2 17 80

By income

By education

Bankingstatus:

Venture-capital firm An-
dreessen Horowitz, known for
early investments in innovative
companies such asFacebook
Inc., is putting up a fight
against Washington’s crypto-
currency crackdown.
The aim is to advance its
latest bet on futuristic technol-
ogy. In late May, at a full-day,
private conference in San Fran-
cisco, the firm was host to offi-
cials from the Treasury Depart-
ment and Washington’s
alphabet soup of regulatory
agencies.
The unusual event brought
together securities- and fu-
tures-markets watchdogs. Marc
Andreessen, in opening re-
marks, compared cryptocurren-
cies with the early internet,
which started as an informa-
tion network for computer sci-
entists and evolved into the
world’s information hub and an
engine for commerce. Crypto,
he said, could solve some of
the internet’s biggest chal-
lenges, including privacy
threats, if Washington would
adopt a less stringent form of
regulation.
The message back from
Washington wasn’t accommo-
dating, according to people
who attended. J. Christopher
Giancarlo, who was chairman
of the Commodity Futures
Trading Commission until step-
ping down in July, said he
warned Andreessen Horowitz
that regulation of crypto
couldn’t be brushed aside.
“Some of the things you
learned from your older VCs,
this won’t transfer,” he said.
The Treasury Department’s
undersecretary for terrorism
and financial intelligence told
startups at the conference,
many of them funded by An-
dreessen Horowitz, that com-
pliance with global anti-money-
laundering rules needed to
improve.
Securities and Exchange
Commission Chairman Jay
Clayton, who didn’t attend the
conference, clamped down on
cryptocurrencies and related
investments when he arrived in
Washington in 2017. The SEC
has told companies that they
can’t raise funds by selling dig-
ital assets without following
SEC rules, effectively killing off
the growth of initial coin offer-
ings in the U.S.
Investors such as Andrees-
sen Horowitz face the risk that
digital coins they bought or
sold could be deemed securi-
ties, which would restrict their
trading, potentially damping
value and adding layers of reg-
ulation. The firm also has bet
on a range of crypto startups
whose businesses could take
off if regulators lighten their
approach.
“It wasn’t something they
did purely out of altruism,”
said Kevin Werbach, a technol-
ogy scholar at the University of
Pennsylvania who attended the
conference. “Everyone under-
stands they are investors in the
space and have viewpoints
about what the regulatory envi-
ronment should look like.”
Regulated companies often
meet with regulators in private.
While regulators often attend
industry conferences that are
usually open to the public, An-
dreessen Horowitz’s event was
unusual, according to regula-
tory experts, because the firm
got so many government offi-
cials with influence over crypto
to show up and hear about the
industry on its terms.
“For one VC that has such a
clear monetary interest in get-
ting favorable regulatory treat-
ment for crypto assets to host
the event in a private, invite-
only setting, it does strike me
as unusual and untoward from
a public standpoint,” said Lee
Reiners, executive director of
the Global Financial Markets
Center at Duke University.
Andreessen Horowitz says it
is trying to bridge a gap be-
tween financial regulators and
the crypto industry, which
sprang up with a goal of dis-
placing traditional Wall Street
middlemen and making most
regulation obsolete.
“Regulation itself is not the
problem, it’s the lack of clarity
around crypto regulation that
our companies and the crypto
space overall grapple with,”
said Kim Milosevich, a spokes-
woman for Andreessen Horo-
witz.

BYDAVEMICHAELS
ANDALEXANDEROSIPOVICH

VC Firm

Battles

Crypto

Crackdown

BUSINESS OPPORTUNITIES

   

 



 





 







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Photo: The Clement Canopy property dcomplex by the Bouygues group in Singapore.evelopment, a benchmark modular© T. Ching Yee/Orange Cactus Project –construction

Architect: ADDP Architects.

Consult the full press release and results presentation onbouygues.com

Investor Relations: [email protected]

@GroupeBouygues

BOUYGUES FIRST-HALF

2019 RESULTS

SIGNIFICANT

IMPROVEMENT

IN GROUP

PROFITABILITY

OUTLOOK

CONFIRMED

(1) Machine to machine communication: this refers to direct communication between machines

or smart devices or between smart devices and people.

(2) Fiber to the Home: optical fiber rolled out all the way to homes or business premises.

(3) Free cash flow = Net cash flow (determined after (i) cost of net debt, (ii) interest expense on

lease obligations and (iii) income taxes paid), minus net capital expenditure and repayments

of lease obligations. It is calculated before changes in working capital requirements (WCR).

(4) Free cash flow after WCR = Net cash flow (determined after (i) cost of net debt, (ii) interest

expense on lease obligations and (iii) income taxes paid), minus net capital expenditure and

repayments of lease obligations. It is calculated after changes in working capital requirements (WCR)

related to operating activities and excluding 5G frequencies.

(a) The consolidated financial statements at

June 30, 2019 are presented in comparison

with the financial statements at June 30, 2018,

restated to take account of the application

from January 1, 2019 of IFRS 16 on leases.

(b) Up 5% like-for-like and at constant exchange

rates.

(c) Including non-current income of €50m at

Bouygues Telecom and non-current charges of

€8m at Bouygues Construction.

(d) The year-on-year increase mainly reflects

the acquisitions of Alpiq ES by Bouygues

Construction and Colas, and of Keyyo and

Nerim by Bouygues Telecom.

• GOOD COMMERCIAL PERFORMANCE
  IN THE THREE SECTORS OF ACTIVITY


• STRONG GROWTH IN RESULTS AT
  BOUYGUES TELECOM


• INCREASE IN SECOND-QUARTER CURRENT
  OPERATING PROFIT IN THE CONSTRUCTION
  BUSINESSES YEAR-ON-YEAR

The first half of 2019 was marked by good commercial

performance in all sectors of activity:

• Bouygues Telecom gained 280,000 new mobile plan
  customers excluding MtoM^1 , of which 132,000 were in
  second-quarter 2019, and 176,000 new FTTH^2 customers,
  of which 82,000 were in second-quarter 2019;


• the backlog in the construction businesses reached the
  high level of €33.8 billion, stable year-on-year;


• TF1’s audience share of the target market of women under
  50 who are purchasing decision-makers rose 0.2 points
  year-on-year to 32.7%.
  There was a significant improvement in Group profitability
  year-on-year:


• Bouygues Telecom reported strong growth in results;
  a 14% increase in total sales, 7% growth in sales from
  services, and an EBITDA margin after Leases of 29.3%, a
  significant increase of 2.7 points;


• current operating profit in the construction businesses
  was up 4% in second-quarter 2019;


• the current operating margin at TF1 was up 4.8 points to
  14.2%.
  The Group’s current operating margin rose 0.5 points year-
  on-year to 2.6%. Net profit attributable to the Group was
  €225 million, down €36 million year-on-year, notably due to
  a lower contribution from Alstom (€33 million in first-half 2019,
  versus €73 million in first-half 2018).

THE GROUP CONFIRMED ITS OUTLOOK

• In 2019,to improve Group profitability and generate
  €300 million of free cash flow^3 at Bouygues Telecom.


• Within two years,to increase Group free cash flow
  generation after WCR^4 to €1 billion thanks to the
  contribution of the three sectors of activity.

CONSOLIDATED

KEY FIGURESa

SALES

€m

17,446+11%b

CURRENT

OPERATING PROFIT

€m

453 +€120m

OPERATING PROFIT

€m

495

c

+€82m

NET PROFIT

ATTRIBUTABLE

TO THE GROUP

€m

225 €36m

NET DEBT

€m

(6,205)€1,175md

repayments deducted from

workers’ paychecks over four

months to a couple of years.

LenderKashableapproves

more than 60% of applicants,

said co-CEO Einat Steklov. It

considers factors including job

tenure and credit scores. The

average user has a subprime

credit score and pays an an-

nual interest rate of about 20%,

Ms. Steklov said. Kashable’s

default rate is 5%. Borrowers

who leave their jobs before re-

paying in full generally switch

to automated bank transfers.

Pima County, Ariz., has of-

fered its 7,000 employees

Kashable loans since 2016.

Nearly 500 workers, many

with credit scores below 650,

have borrowed an average of

$2,000 each, said county su-

pervisor Richard Elías.

He said nearly half reported

using the loan to pay off

higher-cost debt, and many

purchased or repaired cars.

“Anything we can do to make

the economic lives of our

workers more stable benefits

us” in the form of higher pro-

ductivity, Mr. Elías said.

low-cost tools, though they

disagree on how businesses

should be structured and regu-

lated.

“It hasn’t solved the income

inequality problem,” said Todd

Baker, a senior fellow at Co-

lumbia Business School. “What

it does is replace, for a nomi-

nal cost, the $30, $40 people

pay today for a single over-

draft or a $200 payday loan.”

Financial Health Network, a

research organization partly

funded by financial firms, esti-

mated financially stressed

consumers spent $173 billion

in fees and interest in 2016 for

services that often incur high

costs, including $24.5 billion

advances in late 2017. It has

seen employees rely less on

payday loans and bank over-

drafts, said David Hoke, who

oversees health and well-be-

ing. Employees pay $6 a

month to use PayActiv. It is

embedded in an app called

Even, which includes a budget-

ing service that nudges users

to save surpluses.

Walmart covers the cost for

one month a quarter and caps

the amount workers can accel-

erate at 50% of pay. Of the

company’s 1.4 million workers,

380,000 are frequent app us-

ers, Mr. Hoke said.

For those in need of larger

sums, some employers offer

loan services that typically ad-

vance as much as $5,000, with

Continued from page B1

Payroll

Advances

Get Easier

BUSINESS NEWS

companies, including PayActiv

and Even, also have received

letters from the regulators,

the experts said.

“It’s a new model. We wel-

come their questions,” Mr.

Palaniappan said.

California’s proposed legis-

lation is sponsored by PayAc-

tiv and has support from other

industry participants who see

the bill as a way to sanction

their business model as non-

lenders and set standards to

prevent abusive practices.

“We welcome the regula-

tors’ attention on this issue

because I believe it will pre-

vent the industry from re-

gressing toward the same

mean as payday lenders,” said

Jon Schlossberg, chief execu-

tive of Even, which offers a fi-

nancial-planning tool that in-

cludes instant access to

earned pay through employ-

ers. PayActiv Chief Executive

Safwan Shah said he looks for-

ward to state investigations

bringing clarity to the market.

Some consumer advocates

criticize California’s bill for al-

lowing providers to access the

consumers’ bank accounts di-

rectly, which could trigger

nonsufficient-funds and over-

draft fees charged by banks.

“Our biggest concern is that it

authorizes a new category of

payday loans that don’t have

to comply with interest-rate

limits,” said Lauren Saunders,

associate director at the Na-

tional Consumer Law Center.

The pay-access apps, partic-

ularly those dealing directly

with consumers, have similari-

ties to payday loans, including

a basic feature where the con-

sumers receive payment in ex-

change for information about

their bank account, from

which payments are later au-

tomatically collected. Unlike

payday lenders, however, pay-

access providers have no re-

course, meaning if their cus-

tomers fail to pay back the

money, the companies can’t go

after them and file collection

lawsuits. The payments also

can’t be rolled over for more

fees either, a feature that

makes payday loans costly for

many consumers.

WASHINGTON—A growing

industry of financial apps that

allow workers to access their

pay early is drawing scrutiny

from regulators to prove they

are different from payday

lenders.

Several startups have

launched services to provide

workers with small payments,

ranging in size from pocket

change to several hundred dol-

lars, to be paid back on the

next payday. Tapping into

thirst for fast cash from mil-

lions of Americans who live

paycheck to paycheck, the

companies behind the services

have presented them as

cheaper and safer alternatives

to short-term loans, such as

payday loans, and bank over-

drafts.

Last month, regulators from

New York and 10 other states

said they were investigating

whether some payroll-advance

firms violated payday-lending

laws. In California, state law-

makers are debating a law

that aims to set the legal foun-

dation for the industry and

provide consumer protections,

the first such attempt in the

country.

The moves by state officials

come as the industry is grow-

ing. Leslie Parrish, an analyst

for research firm Aite Group,

said the industry is “poised

for exponential growth.” Aite

Group estimated the app com-

panies handled 18.6 million

early U.S. payroll transactions

valued at more than $3.15 bil-

lion in 2018.

“This investigation will help

determine whether these pay-

roll-advance practices are usu-

rious and harming consum-

ers,” said Linda Lacewell, New

York’s chief financial regulator.

She added that some of the

firms “appear to collect usuri-

ous or otherwise unlawful in-

terest rates disguised as tips,

monthly memberships” and

other fees.

Industry executives and

some consumer advocates say

the services offer the potential

to help lower- and moderate-

income workers by providing

BYYUKAHAYASHI

Pay-App Startups Draw Scrutiny

The Earnin service tracks workers’ schedules and will deposit up to $500 per pay period for them.

EARNIN

NY/NE