Thursday December 29 2016, Daily News Digest

FinTech 2017

News Comments Today’s main news: 42% of Belfast residents will start year off short due to lending to family and friends. Today’s main analysis: Three reasons for small business optimism for 2017. Today’s thought-provoking articles: Bloomberg Intelligence (video). Chinese tech trends. i2ifunding is a leading P2P platform. United States Three reasons small business owners are optimistic about […]

FinTech 2017

News Comments

United States

  • Three reasons small business owners are optimistic about 2017. AT: “What’s interesting about the sudden surge in bank loans isn’t so much the optimism it represents about the economy. Rather, it makes me wonder what the short-term effect on marketplace and alternative lending will be. There may be optimism about the economy in general, but I’m hearing a lot of pessimism coming from industry ranks, in part due to the rough year in 2016. Whether you are optimistic or pessimistic about the industry, one thing is clear: 2017 will be a pivotal year. I remain optimistic over the long-term.”
  • Bloomberg FinTech predictions for 2017. AT: There are lots of reasons to believe China’s FinTech sector will outpace the U.S.’s next year. For one thing, China has a lot of consumers, and their consumers are much more into mobile than our consumers, who are much more consumed with privacy and security concerns.”

United Kingdom

European Union




United States

Three Reasons for Small Business Optimism About the Economy in 2017 (Forbes), Rated: AAA

Indeed there are reasons for continued optimism for small business owners in the new year:

  1. Although rates went up, the increase was small, which is good news for borrowers seeking capital. Lenders are showing signs of opening up the purse strings. Big banks and institutional lenders are approving higher percentages of loan applications, and smaller banks are granting about half of the requests.
  2. While the Fed signaled it would raise rates in 2017, the amounts will likely again be small.
  3. Inflation remains low, despite an interest rate hike and strong consumer spending this holiday season.

Meanwhile, loan approval rates at big banks ($10 billion+ in assets) improved to a new all-time post-recession high in November 2016, according to the latest Biz2Credit Small Business Lending Index, a monthly analysis of more than 1,000 small business loan applications on In addition, it marked the eighth time in the last nine months that lending approval rates improved at big banks.

Small banks also experienced an uptick in loan approval rates last month, granting 48.8% of funding requests from borrowers.

Institutional lenders, which have emerged as major players in the marketplace lending industry are approving an all-time Index high 63.3% of funding requests from entrepreneurs after an increase of two-tenths of a percent in a month-by-month comparison.

Institutional lenders, which have emerged as major players in the marketplace lending industry are approving an all-time Index high 63.3% of funding requests from entrepreneurs after an increase of two-tenths of a percent in a month-by-month comparison. Credit unions, which are currently approving 41.1% of loan requests, have experienced steady declines in their loan approval rates over the last 18 months. While loan approval rates at alternative lenders (59.2%) have dropped for five straight months.

Bloomberg Intelligence: FinTech in 2017 (Bloomberg), Rated: A

United Kingdom

5 ways to make your money work harder for you in 2017 (The Motley Fool), Rated: A

Funding Circle focuses primarily on small business lending, which can offer higher returns but is also riskier. Landbay organises peer-to-peer mortgages offering an expected return of 3.75% secured against property. Meanwhile, RateSetter offers unsecured lending to everyday customers. Peer-to-peer lending does come with a certain degree of risk and isn’t a substitute for savings accounts, so it may not be suitable for all investors.

Herefordshire Council withdraws from crowdfunding initiative (Hereford Times), Rated: A

THE COUNCIL will no longer lend funds to small businesses through a crowdfunding initiative.

Since 2015 Herefordshire Council has been in a partnership with crowdfunding group Funding Circle to help boost lending in the county.

The council has contributed to seven business loans since January 2015, lending a total initial principle of £15,560, towards loans with a total value of £ 29,500.

European Union

Nearly half of Belfast people to start New Year £100 out of pocket due to friends and family owing money (BelfastLive), Rated: AAA

According to latest research 42% of Belfast residents are already £100 out of pocket, on top of their own Christmas debt, due to friends not repaying loans.

New findings also show that half of us have lent up to £500 and nearly one in 20 (4%) have lent more than £5,000.


How Small Businesses Can Use Fintech Companies (Intuit QuickBooks), Rated: A

Between 2000 and 2016, approximately 100 startup businesses in Canada raised more than $1 billion in funding. Fintech companies attract enthusiastic investors, from the casual speculators at crowdfunding sites to seasoned venture capitalists.

Several Canadian fintech companies offer payment processing services, allowing consumers to utilize a smartphone as a credit card or as an e–wallet.

Toronto-based Lendified utilizes a proprietary algorithm to assess the reputation and potential of a small business to make a lending decision. Lendified’s platform allows the small business owner to apply online and get approved for a loan of up to $50,000 within five minutes.

Lending Loop is Canada’s first and only regulated crowdfundng platform focused on small business.

Canadian Fintech Firm MOBI724 Completes Third Equity Private Placement (Crowdfund Insider), Rated: A

MOBI724 Global Solutions Inc., (CSE: MOS), a Candian fintech startup that offers an all-in-one fully integrated EMV payment, card link couponing, and digital marketing system, announced on Tuesday it closed a third tranche equity private placement in the aggregate amount of $167,500 by issuing 3,350,000 common shares at $0.05. For each common share received, the subscribers were issued one common share purchase warrant at an exercise price of $0.15 exercisable on or before August 31st.


Tech Trends 2017: China’s WeChat, and Alipay Surpasses Outdated Western Technology (University Herald), Rated: A

China sets tech trends for 2017 with WeChat, and Alipay, surpassing outdated Western Technology and skipping phases in technological progression while catering to middle-class consumers.

Alipay, Alibaba’s payment system, enables users to pay using their mobile devices, one of the top tech trends for 2017 that could see less of credit cards since a good 40 percent of Chinese consumers now use the new payment scheme, Forbes reported.

Peer-to-peer lending is now gaining popularity among those who do not have the credit score to apply for loans with traditional banks. China Rapid Finance is now the largest consumer lending company facilitating access to loans of its more than 1 million borrowers.


YEAR-RBI 3 LAST (DCM24)  (India Today), Rated: AAA

The era of differentiated banking finally became a reality during the year, with the first of the small finance banks and payments banks getting operational. RBI also started discussions on starting peer-to-peer lending.

i2ifunding is a Leading Peer to Peer Lending Platform in India (BWDisrupt), Rated: A

i2iFunding is much more than P2P marketplace. Apart from providing end to end loan servicing, i2i diligently evaluates the credit risk of each of the loan projects, post which it assigns risk category and recommends an iWe raised Rs. 2 crore from individual angel investors in May 2016 and we are in discussion with various VC firms to raise $4-5 million in next few months.nterest rate for that project (a borrower can borrow at an interest rate which is higher than or equal to this rate). This helps the borrowers as well as the investors to have a benchmark interest rate. In the process, the investors get an opportunity to earn higher ‘risk adjusted returns’ while the borrowers get an opportunity to get funded at the lowest cost possible as per their risk profile and market based demand. We also provide legal and recovery support to investors in case of default by any borrower along with Principal Protection to ensure downside is limited for investors in case of default.

We raised Rs. 2 crore from individual angel investors in May 2016 and we are in discussion with various VC firms to raise $4-5 million in next few months.

In next couple of years, we would like to disburse at least 20-30 cr rupees every month.

P2P market size in India:
Following table is Based on a NSSO, Census of India report:

In 2011

Target Income class

3.9 – 9.75 Lakhs

Urban Households in this income range

579 Lakhs

Average Debt per household

INR 1.25 Lakhs

Total Debt Market

INR 7.2 Lakh Crores

Share of Non-Institutional Debt


Non Institutional Debt

INR 1 Lakh Crores


George Popescu
Allen Taylor

Why Direct Mail is More Profitable For Lending Companies Than Email

direct mail marketing

Despite the emergence of digital marketing, direct mail still has a lot of steam. In fact, it’s hard to believe any product or service can not be promoted through strategic direct mail marketing. It is still important in marketing to be personal. According to a recent study, 70 percent of Americans feel direct mail is […]

direct mail marketing

Despite the emergence of digital marketing, direct mail still has a lot of steam. In fact, it’s hard to believe any product or service can not be promoted through strategic direct mail marketing.

It is still important in marketing to be personal. According to a recent study, 70 percent of Americans feel direct mail is more personal than email, and 39 percent of customers try a business for the first time because of direct mail advertising. Another study by Epsilon shows that nearly half of U.S. consumers prefer direct mail over email. These stats suggest that, if properly targeted and planned, direct mail still holds substance in the market, and one company that specializes in direct mail is DM Analytics (DMA).

DM Analytics was founded in 2015 and is headquartered in Phoenix, Arizona. Founder and CEO Senthil Ramanath is a credit risk veteran. Before venturing into his ambitious entrepreneurial voyage, Ramanath worked as director of credit risk management for Capital One then moved to vice president at EZCORP, and then finally to Balance Credit where he was chief operating officer. The idea for DM Analytics struck Ramanath after looking at the rapid success achieved by companies like Enova, Rise Credit, Landmark, and Loan Depot in contrast to the majority of big traditional lenders who have struggled over the years. According to Ramanath, the reason so few of the online lending companies grew so fast was because they spent a reported 99 percent of their marketing budget on direct mail and not on other marketing tools like PPC and online advertisement.

The reason companies are hesitant to use direct mail is because of the costs involved. A national campaign might involve sending 500,000 to a million pieces per month. Even then, the company needs to keep sending them for at least five months to get optimum results. With each piece of mail costing 60 cents, that works out to $3 million for a direct mail campaign. It’s always easier to start a keyword pricing war on Google, pay through your nose for a lead, and still be happy because you got results in a week.

DMA comes into the picture to help small start-ups figure out a strategy for direct mail. Every customer and business gets its own customized model. The strategy is structured to the type of the product (loan installment, line of credit, etc.). This helps startups control spending. DM Analytics helps reduce upfront costs in starting a direct mail campaign. If the customer has an existing portfolio, information is extracted from the credit angle accordingly and DM Analytics builds a custom model for the future.

The reason direct mail is still prevalent in the U.S. is because:

  • The regulatory environment in the U.S. does not allow companies to access credit information about an individual until the company is ready with a concrete credit offer. An address can only be retrieved once the company decides on a firm offer. Online marketing is an add-on option. Legally, a company can only do online marketing with direct mail.
  • DM Analytics shortlists customers it wants to send mail to (on the basis of credit characteristics), and once it is pre-approved by the client, the list is submitted to the credit bureau to obtain the name and address. If the customer has specifically opted out (only 1 percent has done so), then the company would not be able to retrieve the data.

Depending on whether the company has credentials with TransUnion, the campaign launch period may vary. It usually takes 4-6 weeks for a company to get TransUnion credentialed. After that, it is a two-week process.

Customer Acquisition Cost (CAC) is directly correlated to product APR: The higher the APR, the higher the CAC. For instance, a product with 500 percent APR will cost about $200. The CAC will be lower for products with APR of 80 percent to 100 percent.

Another deciding factor is loan amount. If the loan amount is higher, so too will be the cost per funding. Ramanath predicts that for a loan amount of $13,000 at 13 percent APR, the client will have a CAC of around $40. Business loans work on a similar track with CAC at 5 cents per dollar funded.

The FinTech scene is littered with companies who could not make direct mail work. A cardinal mistake is using only demographic data, which doesn’t work. The key is to gather the credit data and fine tune the model around it. It’s surprising that old school direct mail trumps online marketing. But Think Finance, and even Lending Club and Prosper, have been able to leverage direct mail for massive growth. DM Analytics has identified a major pain point for young lending start-ups and has the right combination of credit chops and direct mail expertise to succeed in this brutally competitive market.


Allen Taylor
Lauren Twardy

How Data Standardization and Transparency Solves the P2P Problem

peeriq transunion

Due to stricter regulations and the financial crisis, banks have had to reduce credit issuances. This has led to non-bank lenders creating innovative business models to serve the market. The result is, more than half of new mortgages are now originated by non-bank marketplace lenders, which can keep growing only if they have access to […]

peeriq transunion

Due to stricter regulations and the financial crisis, banks have had to reduce credit issuances. This has led to non-bank lenders creating innovative business models to serve the market. The result is, more than half of new mortgages are now originated by non-bank marketplace lenders, which can keep growing only if they have access to permanent capital.

Securitization is an important avenue for young players to access capital and should be accomplished on a common yardstick. Whoever brings about this standardization has the opportunity to be the default setting for analyzing and accessing data for billions of loan dollars. There’s also a lot of capital waiting on the sidelines to invest in this market, but potential funders are hesitant because of regulatory issues or the inability to analyze the data presented to them. PeerIQ has a unique opportunity to be the partner of choice for investors by encouraging transparency and liquidity in the P2P lending market.

Since there’s no standardized data for investors to look at when comparing loans from different platforms or assets originated on the same platform, consensus evaluation of loans a cumbersome process. It has also led to complications in examining benchmark risks associated with credit. Therefore, investors are looking for tools to validate credit, analyze data, and apply the data to multiple scenarios.

These emerging challenges in P2P lending are hindering the natural combination of institutes striving for exposure to high yield assets and marketplace lenders looking for strong and sticky sources of funding.

New York headquartered PeerIQ was founded in 2014 to be the premier “credit risk analytics firm that helps institutions analyze, access and manage risk in the peer-to-peer lending sector,” said PeerIQ Founder and CEO Ram Ahluwalia, who has vast experience in the finance industry. Before starting his entrepreneurial voyage, Ahluwalia was senior vice president at Bank of America-Merrill Lynch. Later, he moved to Winged Foot Capital to serve as principal portfolio manager. His background in traditional lending and asset allocation helped him develop the PeerIQ concept.

The PeerIQ analytics platform aggregates data from leading online P2P marketplaces and offers advanced analytical solutions to investors that allow them to access loan performance and manage risk portfolios through a common framework. The company has raised $8.5 million in three investment rounds from some of the stalwarts of Wall Street (John Mack, Vikram Pandit, Arthur Levitt, Dan Doctoroff, and Eric Schwartz). Its team is made up of veteran capital market and technology executives.

The game changer for PeerIQ was its partnership with TransUnion, the third largest credit reporting agency in the U.S., to incorporate TransUnion’s database in the development of new products. This partnership will benefit both companies while standardizing data collection and foster transparency in the P2P lending market.

PeerIQ will develop new products by channeling TransUnion’s data set. Its mission is to serve investors with robust models and data history so they can participate in the lending space with confidence and drive investment into marketplace lending. TransUnion will also act as a distribution partner for PeerIQ, and its large customer base will help products reach sophisticated buyers. In return, PeerIQ will help Transunion dominate the growing alternate finance market with best-in-class analytics.

PeerIQ offers its advanced solutions to a wide range of institutional participants including FIs, banks, and ABS investors. For loan buyers, it has developed a portfolio monitoring and loan surveillance solution that provides real-time feeds of loan portfolios, purchases, performance, and returns. For ABS investors, it has developed structured finance analytics covering whole loans and ABS products, which provides collateral insight in a stressed environment. With third-party reporting of portfolio summaries, reconciliation, credit facility management, and securitization, PeerIQ provides accurate tracking of cash across tranches.

PeerIQ leverages in-house technology to evaluate the petabytes of data it has accessed after the TransUnion partnership. It is all set to speed up loan performance and analysis, which includes report generation across multiple nodes as well as loan optimization and pre-processing. Its technology helps store and access data in a systematic manner while providing a secure environment for data protection. Further, the company standardizes data by cleansing at scale and then represents that data across multiple platforms and asset classes. This helps develop comparable risk views for institutional investors.

After providing a benchmark to compare loan portfolios with market performance, PeerIQ performs other analytical functions, such as analyzing cash flow projections, and running those through a waterfall structure. Currently, when an investor evaluates a loan, he is able to look at just the loan and performance data. With the broader data set available from TransUnion, PeerIQ can provide the investor proprietary granular insights on loan performance through multiple credit cycles. This is possible because the characteristics of the newly originated loan are synced with previous loans and their history then used to predict outcomes for new loans in a variety of economic scenarios. This is a game changer for the young company.

The consensus valuation for the securitized assets can also be derived through PeerIQ’s platform, which is essential for large fund managers to evaluate fund performance, reporting, and trading.

It will be interesting to see what the future holds for this rising platform, and the investors that use it.


Allen Taylor
Lauren Twardy

Wednesday December 28 2016, Daily News Digest

fintech payments lending India

News Comments Today’s main news: CreditEase named “Best Non-Bank Private Wealth Product”. Today’s main analysis: FinTech no longer the new kid on the block. Today’s thought-provoking articles: The evolution of RECF. Alternative SME finance will survive 2017. United States The evolution of RECF. AT: “RECF has come a long way, but there’s still a way to […]

fintech payments lending India

News Comments

United States

  • The evolution of RECF. AT: “RECF has come a long way, but there’s still a way to go. This article provides a sampling of links from the past year, most, if not all, of which we’ve reported on. Nevertheless, these are must reading, so if you haven’t delved into them–happy reading.”
  • Alternative SME finance poised to survive 2017. AT: “I fall on the side of positive optimism. Despite the rough year in 2016, I see the industry bouncing back. The election of Donald Trump as our next president may pose some challenges for alternative finance. Early indications show he’ll play more of a protectionist role, but he is unpredictable, so we’ll have to see what takes place in the coming year. If CFPB and SEC plans for regulatory control come to fruition, we could see some much needed stability. The interesting thing here is, there are still voices predicting consolidation in the market.”

United Kingdom

  • P2P lenders morph into traditional banking. AT: “Not much news here, but it’s important to point out the trend. P2P lenders are offering more traditional banking products even as traditional banks adopt the technology the P2P lenders pioneered.”

European Union

  • BBVA acquires Openpay. AT: “With BBVA’s capital, Openpay could expand into international markets and offer other marketplace products to its target audience. Of course, the bank could be interested in Openpay for the technology.”



United States

The Evolution of Real Estate Crowdfunding — Some Links (JDSupra), Rated: AAA

Below are some links to articles outlining the continuing evolution of the real estate crowdfunding industry in 2016:

Alternative SME Finance Just Might Survive In 2017 (, Rated: AAA

Earlier this month, marketplace lending site Biz2Credit released the findings of its most recent small business lending index. The data revealed that SME loan approval rates at big banks were at an all-time high, hitting 23.7 percent in November. Small banks saw their loan approval rates tick up, too, to 48.8 percent. Meanwhile, approval rates among alternative lenders sunk down, a finding that Biz2Credit CEO Rohit Arora said could be a sign of negative times ahead.

This week, Financial Times reported a shift in the sector that sees alternative and P2P lenders turning more into traditional lenders, with companies like Zopa seeking out banking licenses in the U.K.

PYMNTS decided to speak with Biz2Credit’s Arora to gain more of his insight into the future of the alternative business lending landscape.

“I think there will be more consolidation in the market,” he said. “A lot of the alternative lenders were dependent on ISO affiliates and brokers to source deals, and customers are moving away from that trend.”

Banks, on the other hand, continue to invest in technologies that mean traditional institutions can offer borrowers the same online experience and speed that became alt-lending’s key proposition.

On a positive note for alternative lenders, though, regulation is unlikely to crack down on the sector.

Greater clarity and stability on incoming regulatory pressures for the industry mean the sector won’t likely go entirely defunct altogether. But market consolidation and greater competition from traditional lenders will quickly sort out the winners from the losers in alternative SME finance. According to Arora, that means 2017 will certainly be a challenging year for the space.

United Kingdom

Peer-to-peer lenders morph into traditional banking (Financial Times), Rated: A

The arrival of peer-to-peer companies in the UK a decade ago was supposed to start a lending revolution.

As online sites that channel investors’ cash directly to borrowers, P2P groups trumpeted their ability to cut out the banks as middlemen. The online lenders said they could facilitate loans more efficiently than banks and offer a superior service, while giving investors attractive interest rates.

But 10 years on from the launch of Zopa, the world’s first P2P site, the nascent sector is muscling in on traditional banking — the very market it set out to disrupt.

Their moves into mainstream banking have raised questions over whether the peer-to-peer model is viable for the long term — or if it will ultimately mirror the industry it is trying to upend.

He said there would likely be more online lenders offering banking products, partly to attract cheaper, stickier funding over time. “P2P is going to become much more integrated into the existing financial ecosystem.”

The evolution of P2P and its shift towards banking is making it more complicated and arguably less transparent, according to industry analysts.

European Union

Spanish Banking Group BBVA Acquires Fintech Startup Openpay (Crowdfund Insider), Rated: A

Spanish banking group, BBVA, recently announced it has acquired, Openpay, a fintech startup and payment service provider (PSP) that facilitates e-commerce, including on mobile devices, for large businesses and SMEs. 

According to BBVA, Openpay combines a cutting-edge, real-time platform that allows users to make card, cash and loyalty points payments and banks transfers in a single integration. It also uses advanced tools to prevent fraud. The company operates in Mexico through Paynet, its own global network that consists of more than 12,000 associated point-of-sale, which also allows cash payments for online purchases.


CreditEase Anointed “Best Non-Bank Private Wealth Product” (Crowdfund Insider), Rated: AAA

CreditEase has been recognized as the  “Best Non-Bank Private Wealth Product” by The Asian Banker, a Singapore-based provider of strategic intelligence on the financial services industry.

CreditEase is a both a peer to peer lending platform and wealth management firm. While the platform started out as a Chinese peer to peer lender it has since morphed into a global financial operation.  Yirendai (NYSE:YRD), traded on the NYSE, is a subsidiary of CreditEase and part of its strategy to expand operations vertically and horizontally. At the end of 2015, CreditEase had established a strong service network covering 244 cities (including Hong Kong) and 93 rural regions in China.

In recent years, CreditEase Wealth Management has globalized its business, with branches in more than 40 cities in Mainland China and overseas offices in Hong Kong, Singapore, New York and Tel Aviv.


Fintech: no more the new kid on the block (Livemint), Rated: AAA

Year 2016 was not as glamourous as 2015 was for fintech in terms of interest from investors. According to start-up data analytics provider Tracxn, investments in 2016 were $484.79 million, compared with $1.18 billion in 2015.

The number of companies founded was also lower—186 in 2016 as against 390 in 2015, according to Tracxn data.

Here’s a look at some of the major themes that played out in fintech and how they fared in 2016.


Though National Payments Corporation of India (NPCI) doesn’t allow e-wallets to use UPI, payments solutions and payment gateway companies look at it as an alternative means of making payments, which is likely to pick up pace in 2017.


Since formal lending systems in India are not far reaching, a number of platforms that connect lenders and borrowers saw interest from investors and large commercial banks. Since formal lending systems in India are not far reaching, a number of platforms that connect lenders and borrowers saw interest from investors and large commercial banks.

Other sectors

Besides payments and lending, there was interest in other fintech segments as well, such as cryptocurrency, forex, artificial intelligence and bill payments.

In 2016, the number of companies in the cryptocurrency vertical shot up to over 20. In India cryptocurrency businesses are built around exchanges, portfolio management, technology solutions, trading platforms and bitcoin mining.

Currently, there are over 10 online portals that offer forex or forex-related services. These are online marketplaces to buy or sell foreign currency and make international money transfers.

The dawn of P2P lending (Business Today), Rated: A

When Prime Minister Narendra Modi announced the decision to scrap Rs 500 and Rs 1,000 notes, one sector was suddenly thrust into the limelight. Indeed, companies operating in the fintech space are scrambling to take advantage of the new situation.

P2P unlocks the supply side by connecting individuals who have surplus money to lend with the ones seeking a loan. Add technology into the mix and you get a powerful tool that can negate the problems traditional banks face. At Faircent we are building the infrastructure for a technology and data-driven credit appraisal system. We have entered into alliances with best in class players like Transunion and Yodlee.

P2P is looked at differently in different parts of the world. For example, Canada and UK regulate P2P platforms as an intermediary, while France and Germany regard it similar to a bank. In the US, however, regulations vary from state to state. In India, the estimated nascent P2P lending is already worth Rs 20 crore, which is significant considering the sector did not exist about two years ago. We are growing at a fast pace and lending about Rs 1.25 crore per month. This has been possible because of the utility and value that P2P lending has been able to provide.

According to Tracxn, mobile payments ($212 million) and lending ($199 million) accounted for nearly 80 per cent of the total funding that went into the Indian Fintech space, year to date.


George Popescu
Allen Taylor

Tuesday December 27 2016, Daily News Digest


News Comments Today’s main news: Landbay receives full FCA authorization. Bizfi hits $2B origination milestone. Today’s main analysis: The rise of proptech. Today’s thought-provoking articles: What we learned about alternative finance this year. What can P2P lending offer SMEs? What to expect in MPL in 2017. United States Bizfi originates $2B in small business loans. AT: “Lending Club […]


News Comments

United States

United Kingdom




Middle East

News Summary

United States

Bizfi Hits $ 2B Origination Milestone; Providing Financing to More Than 35,000 U.S. Small Businesses (Yahoo! Finance), Rated: AAA

Today, Bizfi, the premier fintech company with a platform that combines aggregation, funding and a marketplace on a single platform for small businesses, announced that it has surpassed $2 billion in financing – through both growth and working capital – to more than 35,000 small businesses across America.

Lending Club Announces Bonus Incentive for New IRA Investments (Crowdfund Insider), Rated: A

Lending Club (NYSE:LC) recently announced it is now offering a bonus incentive for IRA investments. From now through April 30, 2017, investors that open an IRA investment will receive a bonus of up to 3% of their investment.

What to Expect for Marketplace Lending in 2017 (Crowdfund Insider), Rated: A

2017 will be a pivotal year for the marketplace lending (MPL) space as the market will seek stabilization in both confidence and venture funding, following a challenging 2016, but also as leading companies look to establish themselves as mainstay providers of consumer credit. According to PricewaterhouseCoopers’ DeNovo team, the main issues facing the MPL industry in 2017 include:

  1. ) an emphasis on improved transparency;
  2. ) next steps following regulatory changes;
  3. ) expansion to ancillary asset classes; and
  4. ) the potential impact from tax policy changes.

Transparency remains the single largest input affecting the overall health and sustainability of marketplace lenders.

Signs of market stabilization are evident with several recent wholesale bond sales and new credit facilities. Although originations have declined for three consecutive quarters, year-to-date (through September 2016) originations of $7.8 billion are nearly equivalent to the $8.2 billion for the first nine months of 2015, according to Orchard Platform.Further encouraging data is the growth in securitizations, with year-to-date issuance of $5.4 billion up from $3.0 billion for the equivalent period in 2015.

The two key takeaways from recent global regulatory announcements are 1) the lending industry has changed with validation of the MPL model; and 2) the uncertain regulatory path for MPLs is over. The onus is now on marketplace lenders to take the next steps which could play a critical role in becoming a mainstay provider of credit.

In addition to non-bank optionality in pursuing special purpose charters, 2017 could mark the transition of a major marketplace lender to a traditional banking structure. The benefits of lower cost deposit funding and the potential need to increase balance sheet lending options could entice an established MPL to pursue a traditional bank structure.

Fintech Payments: 5 Ways to Get Paid Without PayPal (Huffington Post), Rated: A

One of my favorite developments in the fintech payments space is Venmo. You can send money from bank account to bank account for free. I use Venmo to pay some of my own service providers.

Unlike PayPal, which will charge you to receive money, Google Wallet doesn’t take a fee when you receive money.

Beyond Bitcoin, there are other cryptocurrencies, all of which use blockchain technology to make sure you get paid as a freelancer.

You can use Due to send and receive global payments. Due offers a digital wallet, and we offer eCash solutions. It’s a new world out there, and you really don’t need to rely entirely on PayPal to get paid as a freelancer.

Insurtech european-style (Medium), Rated: A

There are numerous successful attempts to create an online accessible, paperless and flexible insurance. Companies like FinanceFox, Clark, Guevara, Friendsurance or Lemonade are not only offering a more suitable way to communicate, but also create new business opportunities themselves. That explains why FinanceFox received a total funding of $33.5m in 2 rounds from 9 investors, Friendsurance $15.3m in 3 rounds from 3 investors, or Lemonade $13m, just to name a few.

The first obvious approach to reach the market of Millennials is to build a bridge between them and established insurance companies.

With the intent to lower customer acquisition costs a different type of model emerged that may be classified as a B2B2C approach in the field of online insurance. Although the best model is still to be found out, so far it looks like this approach might be superior compared to the previously mentioned ones as it allows to significantly lower CAC through being included in already pre-existing channels and therefore scale faster.

What We Learned About Alternative Finance In 2016 (, Rated: A

A year ago today, you had never heard the word “Brexit,” never seriously said the words “President Trump” and never once considered that you would have to make sense of a world where Brad and Angelina had fallen out of love. Wells Fargo was just a bank that was really good at getting its customers to sign up for credit cards, and Lending Club and its P2P counterparts were coming to eat mainstream banking’s lunch.

The CFPB has had a busy year every year since it was created in 2011. Still, the breadth of topics the Dodd-Frank consumer protection watchdog took on in 2016 was fairly impressive — even by the CFPB’s aggressive internal standards.

Last year saw the agency offer up major revisions to regulation governing payday (and short-term) lending, arbitration in consumer contracts, car loans, marketplace lenders and prepaid cards. The agency also handed down the largest fine to a bank in its history — $100 million to Wells Fargo for creating an incentive system that pushed its employees to set up a series of consumer accounts without actually getting consumer permission. Wells was additionally hit with $85 million in fines from the Office of the Comptroller of Currency and the L.A. DA’s office.

Two things to watch this year. One, where do those default rates go, because a lending platform that can’t get people to pay back their loans isn’t a lending platform at all — it’s a charity. Two, which players survive and how they do it. Will they partner with the banks they were once primed to destroy, or will they find a way to keep on going it alone (mostly)? And those default rates, we should note, won’t just be important to watch in P2P lending.

Two things to watch this year. One, where do those default rates go, because a lending platform that can’t get people to pay back their loans isn’t a lending platform at all — it’s a charity. Two, which players survive and how they do it. Will they partner with the banks they were once primed to destroy, or will they find a way to keep on going it alone (mostly)? And those default rates, we should note, won’t just be important to watch in P2P lending.

Though much changes in the credit marketplace, one thing remains the same: Consumers have to pay their loans, and those that lend to consumers have to either be pretty sure the repayment is coming or price the loan to account for the risk. Whether regulation and the loan products next year reflect that unchanging reality remains to be seen.

5 Fintech Startups to Watch in 2017 (Fast Company), Rated: A

After flying under the radar for its first four years of operations, San Francisco-based Metromile dropped a bombshell in September: It had quietly raised nearly $200 million in a series of unannounced investment rounds, while at the same time positioning itself to grow nationwide as an independent auto insurer. Pay-per-mile auto insurance, the company’s core offering, is now poised to go mainstream.

Real estate technology moved into the spotlight in 2016, with blockbuster rounds going to Compass ($75 million) and OpenDoor ($210 million). In parallel, crowdfunding real estate platforms have been proving their mettle—bootstrapped Sharestates, for example, recently passed $230 million in funded projects.

Cadre, as its name implies, is less interested in crowdfunding and more interested in capturing the large pools of capital required to fund major commercial deals.

Whether the company’s high engagement leads to equivalent growth in assets under management remains to be seen. Stash’s strength lies in its “start small, think big” ethos; users can invest as little as $5, allocated according to their beliefs and values. The catchy, curated portfolio options include “Roll With Buffett” and “Social Media Mania.” At the end of the day, Stash is Blackrock ETFs, rebranded for nest egg newbies. But there might just be a business in that.

Is Venmo ripe for disruption, too? That is the thinking behind Tilt, which bills itself as a “social network built around money” and claims to be the fastest-growing app on college campuses. From Friday night pizza with roommates to a sorority-sponsored fundraiser, Tilt brings the functionality of peer-to-peer payments, crowdfunding, and Eventbrite under one roof.

Cross River Bank made headlines (and induced some head scratching) when it announced $28 million in venture capital funding last fall.

But fintech regulations are due for big changes in 2017, and Cross River may find itself at a sudden disadvantage. The Office of the Comptroller of the Currency (OCC), the nation’s top bank regulator, announced plans for a new type of license on December 2. Under the special charter, fintech startups would be able to grow more quickly nationwide by sidestepping the arduous process of navigating state licenses and rules. They would also subject themselves to greater scrutiny on the part of the OCC with regard to consumer protections, capital controls, and more.

More Americans Resolve to Seek Financial Advice in 2017: Allianz (Credit Union Times), Rated: B

Much uncertainty exists about what lies ahead in the coming year, but many Americans are optimistic about their personal finances, Allianz Life reported this week.

Allianz Life’s annual New Year’s Resolution Survey found that consumers’ positive financial outlook is prompting them to get their finances in order, either with professional advice or on their own.

United Kingdom

Landbay wins full FCA authorisation (P2P Finance News), Rated: AAA

LANDBAY has been given an early Christmas present from the Financial Conduct Authority (FCA) with the news that it has been granted full regulatory authorisation.

The peer-to-peer lender now plans to apply to HMRC for approval to offer the Innovative Finance ISA (IFISA) early next year.

Landbay specialises in buy-to-let property investments, and recently partnered with Zoopla to offer investors the chance to access buy-to-let mortgages via the property website for as little as £100.

Fintech Lending Platform BillFront Secures $ 35M During Series A Funding Round (Crowdfund Insider), Rated: AAA

Fintech platform for digital media companies, BillFront, recently announced it raised $35 million during a Series A Funding round. Investors who participated in the funding round included 4Finance, NIBC Bank, and FinLeap.

It offers financing solution for digital media companies by providing access to revenues and enables customer growth potential.

Funding Circle Takes a Look Back at 2016 Memorable Moments (Crowdfund Insider), Rated: A

With less than two weeks until 2016 comes to an end, Funding Circle took a look back at its marketplace lending platform’s memorable moments of the year.

London fintech firm Nutmeg adds £12 million to Series D, bringing total to £42 million (, Rated: A

UK fintech firm Nutmeg has raised £12 million in a Series D funding round led by Taipei Fubon Bank, Taiwan’s second largest financial services firm. The company announced the round last month, which at the time brought in £30 million, in a round led by Convoy, Hong Kong’s largest listed independent financial advice firm. Now the total is £42 million.

The Practitioner: Financing landscape gloomy for small businesses (AccountancyAge), Rated: A

It’s interesting to sit in with the banks and hear about how they are restructuring again, and still open for business. However, when push comes to shove, the best bit of advice they can give the client is to consider other sources of funding, such as Funding Circle.

They also said that banks are no longer interested in offering the traditional overdraft. This much I do believe. From our client bank, I would say less than 5% have a bank overdraft. Over 25% have or have had an EFG loan a bank loan, 20% have asset or invoice finance, and about 10% have used a crowdfunding, Funding Circle, option.

I tend to agree with the finance house, who stated that companies such as Funding Circle may not be around forever: while they make it so easy to get money, there are going to be business owners who take advantage of it. Whether they end up growing their business as a result, well, the loan company won’t find out until it’s too late.

The rise of ‘proptech’: how the fall of the traditional estate agent has opened the door to upstarts (The Telegraph), Rated: AAA

Traditional property companies are under attack from many fronts: transactions in November were 7.3pc lower than a year ago.

This old-fashioned industry is in the throes of being upended by new technology start-ups, given the moniker ‘proptech’. It’s a diverse field, from data analysis to lending and investment, and from software providers to property management, conveyancing and online agents.

One upstart that emerged this year, becoming a serious thorn in the side of traditional companies, was the online estate agency Purplebricks. As a hybrid agency, it dispenses with expensive physical offices, and employs freelance ‘local property experts’ to advise sellers.

But there are limits to how far some companies can scale, according to Wilson. There are a few market leaders in the peer-to-peer lending sector, such as Lendinvest, which caters to buy-to-let investors. In this area, there is a ceiling, and the market is saturated: “the savings ratio is low, and who has money to put into crowdfunding in property?” he asks.

Other big property companies are looking to proptech start-ups to help them diversify and take on upcoming challenges for the sector, such as Savills which in June invested in online estate agent Yopa, and Connells, which bought a similar company, Hatched, in 2015.

VPC Sells P2P Loans Originated on Funding Circle as it Re-Focuses on Balance Sheet Investments (Crowdfund Insider), Rated: A

VPC Specialty Lending Investments has sold its portfolio of peer to peer loans that were originated on Funding Circle UK.  VPC stated it was seeking “less volatile returns” in selling the P2P assets.

Peer-to-peer lending: what can it offer SMEs? (The Telegraph), Rated: A

After eight months of searching, Mr Adams and Ms Bloomfield eventually obtained a loan to buy the building from peer-to-peer lender, Folk2Folk, which specialises in rural business projects local to the South West. The interest-only loan works like a mortgage and has a rate of 6.5pc, with repayments made monthly. It’s secured against the property, so will be repaid if and when it is sold. The lender adopts a relatively cautious attitude and will only lend up to 60pc of the property’s forced-sale value.

Experts say the downside of peer-to-peer loans is that they often carry higher rates than an equivalent bank loan. Without the protection of the Financial Services Compensation Scheme, investors are putting their money at greater risk than depositors in a bank, and rates are higher as a result.

Questions have been raised over the quality of some of the loans on some platforms’ books – and the risk to lenders if they default. There are concerns that the industry could not survive a downturn, which could cause large numbers of borrowers to default at around the same time. If you can get a bank loan, it’s probably still a better idea.

Ms Jones recommends that businesses try specialist lenders such as Folk2Folk once they have decided to go down the peer-to-peer or crowdfunding route.Different firms have different specialisms. For example, SpaceHive, a crowdfunding company, gives out loans for community projects and regeneration.

Equally, the stage the business is at is crucial. Many peer-to-peer lending companies, such as Funding Circle, require two years of trading accounts, so they aren’t appropriate for brand new start-ups.

For a totally new business, Ms Jones recommends starting with reward-based crowdfunding through a website such as Kickstarter or Indiegogo, so owners can avoid giving away equity in the business at an early stage.

Once the initial funding is complete, a business could consider equity-based crowdfunding, where a portion of the business is given away in exchange for funds.

Unicorn and Maven announce VCT top-ups (Professional Advisor), Rated: B

Unicorn Asset Management announced it would launch a £15m offer for its popular AIM VCT early in the new year.

Also seeking a new subscription is Maven VCT 6, which hopes to raise £6m in top-up funds. It will be the only one of Maven’s funds to raise money in this fund-raising season.

Maven has also revealed its VCT funds have invested £1.1m in Growth Capital Ventures (GCV), which is developing a peer-to-peer lending platform that will provide access to pre-vetted investment opportunities.

Let Your Clients Buy the Farm and Manage the Risk (Financial Advisor IQ), Rated: B

According to the survey, clients were interested in parking their finances in other alternative spaces as well. Private equity received high marks with 26% saying they would look to invest there. Notes and peer-to-peer lending rounded out the top spots.


Chinese billionaire with ambitions to reshape investment models (Financial Times), Rate: A

Chinese retail investors may be able to dream of Picasso while hanging share certificates on their walls.

A Singapore-based Chinese billionaire investor, who this year acquired stakes in peer-to-peer group Lending Club, the fund manager Legg Mason and Sotheby’s, has proposed “securitising” the artist’s work to create fractional ownership and tap a wider market in Asia.

The investors would profit if the artwork rose in value, Mr Chen adds.

Beijing court accepts P2P fraud case (China Daily), Rated: B

Beijing First Intermediate People’s Court announced Thursday that it is hearing a high-profile peer-to-peer (P2P) fraud case involving tens of billions of yuan.


10% interest rates: Money lenders make a comeback due to currency shortage (Business Standard), Rated: A

While one of the objectives of was supposed to create a transparent economy by obliterating black money, it has created a parallel one led by informal money lenders, say bankers.

Even in urban areas, cash crunch is forcing people to look at non-bank financial avenues for short-term loans. As a result, several individuals or small and micro enterprises are now turning to online portals working in the space of peer-to-peer lending. Under this, one individual can lend money to another without assistance from any financial intermediary.


As banks retreat, fintech muscles into SME financing (The Asset), Rated: AAA

Considered the backbone for most economies within Asia, SMEs (small to medium enterprises) have been for the longest time neglected by the financial system.

Funding Societies based in Singapore is just one of the many P2P (peer-to-peer) providers in the region that aim to connect investors looking for additional yield to SMEs searching for funding. Moreover, Fundnel another Singapore based firm is aiming to help institutional investors discover private companies with promising growth potential. Currently Fundnel was able to raise US$49 million for approved companies on its platform.

Middle East

Central Bank of Iran Set to Launch Regulatory Fintech Body (Crowfund Insider), Rated: AAA

Central Bank of Iran (also known as CBI) announced earlier this week that it is planning to launch its very own fintech regulatory body. According to the director of CBI’s Office for Innovative Technologies, Ali Kermanshah, the organization has been working on fintech regulations since 2012, and it is planning to develop an ecosystem to authorize financial startups and fintech firm operations.

According to the Financial Tribute, unofficial reports now show that over 50 fintech firms are currently operating in Iran, most of which were developed in the past three years.


George Popescu
Allen Taylor

MotorEnvy Aims to Solve the Used Car Leasing Problem

MotorEnvy Aims to Solve the Used Car Leasing Problem

In 2015, the auto industry witnessed a 5.7 percent surge in new car sales. Of the 17.5 million new cars sold, 30 percent of were leased, which means almost one-third of all cars in the U.S. are leased. However, only three percent of those were pre-owned vehicles. Considering the used car market is bigger than the […]

MotorEnvy Aims to Solve the Used Car Leasing Problem

In 2015, the auto industry witnessed a 5.7 percent surge in new car sales. Of the 17.5 million new cars sold, 30 percent of were leased, which means almost one-third of all cars in the U.S. are leased. However, only three percent of those were pre-owned vehicles. Considering the used car market is bigger than the new car market, a huge gap needed to be addressed, which led to the founding of MotorEnvy.

MotorEnvy founder Michael Chuang wanted to lease a used Porsche, but since it was a pre-owned vehicle, the dealer refused to lease it to him. One of the biggest factors in auto financing is value depreciation. New cars depreciate in value much quicker than older vehicles. Because of that, dealers are less willing to lease a pre-owned vehicles. And auto manufacturers do not want to promote leasing.

Headquartered in New Jersey, MotorEnvy was founded in 2015 on the concept of electronic trading of fixed income products. The company was later sold to a larger trading technology company.

Chuang’s resume includes experience in high profile investment banks like UBS and Lehman Brothers, where he served as director of MBS/ABS sales, and vice president, respectively. MotorEnvy is funded solely by Chuang, but they are in the nascent stages of monetizing their portfolio by selling leases to other lenders and debt investors. The company has also recently completed a funding round, “so we have officially started to monetize the portfolio,” Chuang said.

Motor Envy is the premier leasing company focused on luxury pre-owned vehicles. It has leased a broad range of cars from classic vehicles to swanky new sports cars. Some of the cars are only three months old, because as soon as a car has a previously-titled owner, the manufacture’s financing company is no longer willing to lease it.

Some reasons why more customers are going for leasing over buying and why MotorEnvy is becoming increasingly popular among the masses include:

  • Value to the consumers – Since pre-owned cars depreciate less, it makes great sense to lease them out. Payments on MotorEnvy’s vehicles can be 20%-30% less than on new vehicles.
  • Smaller commitment – The company provides leasing for tenure as low as one year and at flexible terms and conditions, hence MotorEnvy is very popular among auto enthusiasts who prefer to switch cars more often
  • Latest – Most of the consumers have the same craze for cars as they have for mobile phones. They only want the latest one. Hence 1-year lease commitment is more suited and preferred as compared to traditional three- or four-year lease agreements.

MotorEnvy is concentrating on two different verticals of leasing and therefore has two different distribution channels:

  • Speciality Lease Finance – This is the primary business whereby MotorEnvy leases pre-owned vehicles to consumers. There are three ways to get a lease from MotorEnvy:
  1. Leasing from Dealers – If the consumer finds a car with a MotorEnvy dealer, the finance manager of the dealer will be able to provide lease quotes on MotorEnvy’s behalf.
  2. Leasing from Private Parties – Just provide certain relevant information and MotorEnvy will pre-approve the lease.
  3. Leasing own vehicle – If someone wants to take equity out of a car they own, or would like to take advantage of certain tax savings from leasing, they can sell MotorEnvy the vehicle and lease it back.
  • Car Dealer – MotorEnvy has a dealer license, which lets the company operate as a dealership company. MotorEnvy stocks some fantastic cars then leases them to consumers at a great deal.

Most customers range from prime to super primes and APR varies from vehicle to vehicle. Mostly, APR ranges from 5.5 percent to 12 percent, average maturity time is 1.8 years, average FICO score is around 760, and average transaction size is $40,000.

MotorEnvy is a more lucrative proposition for investors than a P2P or alternative lending start-up because it offers investors a secured lending product. All loan are collateralized with ownership of the vehicle, as investors are the lien holders on the car. Therefore, the risk profile is completely different from unsecured lending and chances of recovery are significantly higher as compared to other unsecured lending avenues. The second advantage is MotorEnvy provides investors additional yield pickup compared to traditional auto loans. Usually, a super prime borrower can borrow money for five years at 3 percent-4 percent whereas at MotorEnvy, a one-year term can yield a return between 5.5 percent-10 percent, which is an attractive way to generate additional returns without going down in credit. The third advantage is, it takes out the collateral risk and residual risk from leasing. MotorEnvy ensures residual value at the end of tenure and takes out all the usual risks associated with the residual value. Basically, the lender is assuming the credit risk, but all other parts of the risk equation (residual return + domain knowledge) are taken care by MotorEnvy.

This young startup plans to add more lenders on its leasing portfolio platform. The market is looking for alternative assets to invest in and MotorEnvy is bringing investors value in the very large and untapped market of auto lending/leasing. For now, it has leases in New Jersey, New York, Pennsylvania, Maine, and Florida but is looking to grow aggressively.

MotorEnvy envisioned keeping the car enthusiast in mind, and the company enjoys a huge fan following. Eventually, the company plans to add more commuter friendly and affordable cars (Honda, Toyota) in its fleet. For now, it has high-end cars like Porsche, BMW, Audi, and Tesla. The company has been able to understand the market needs and is targeting a specific niche to dominate. Given its unique product, it is a matter of time before MotorEnvy establishes itself as the major force in the leasing industry.


Lauren Twardy
Allen Taylor

Alphachat: Trading Places and those frozen orange juice futures

Izabella Kaminska and a panel of trading and markets experts analyse the film which launched thousands of trading careers and made frozen orange juice futures a household name, the 1983 classic Trading Places.
Continue reading: Alphachat: Trading Plac…

Izabella Kaminska and a panel of trading and markets experts analyse the film which launched thousands of trading careers and made frozen orange juice futures a household name, the 1983 classic Trading Places.

Continue reading: Alphachat: Trading Places and those frozen orange juice futures

How Factor Trust is Setting a New Standard for Alternative Credit Scoring

alternative credit scoring

The big three credit bureaus in the United States are Equifax, TransUnion and Experian. Though there are many smaller and regional players, the big three have a stranglehold on the market. However,  the alternative lending revolution has given an opportunity to smaller, nimbler competitors to offer products for the nascent-but-growing fintech industry. Factor Trust is […]

alternative credit scoring

The big three credit bureaus in the United States are Equifax, TransUnion and Experian. Though there are many smaller and regional players, the big three have a stranglehold on the market. However,  the alternative lending revolution has given an opportunity to smaller, nimbler competitors to offer products for the nascent-but-growing fintech industry. Factor Trust is one of the players looking to create a niche by providing alternative credit data, analytics, and risk scoring information.

Factor Trust, headquartered in Atlanta, Georgia, opened its doors in 2006. Its latest round of funding ended in November 2015, and the company managed to raise $42 million from ABS Capital Partners and MissionOG. CEO and Co-Founder Greg Rable held many high profile positions in companies like PGi and Empagio before embarking on his entrepreneurial voyage, etc. President and Co-Founder Michael Heller served as president of Argus Information and Advisory Services.

Factor Trust has a team of 60 on board. The company has enjoyed rampant growth in last 3-4 years.

What started as a small alternative credit bureau quickly turned into the largest alternative customer tradeline data provider. Factor Trust covers most of the major loan markets including short-term lending, installment lending, nonprime auto, POS finance, and credit cards.

130 million U.S. adults have a FICO score lower than 700, which is why Factor Trust concentrates on the non-prime credit segment. This segment is generally underbanked.  Factor Trust calls them “Credit Climbers” because they are struggling to improve their credit scores.

Factor Trust’s biggest USP is its proprietary database, which has allowed the company to established itself as an alternative credit bureau. Most of the established players in the market focus on repackaging and reselling third-party products, but Factor Trust focuses on in-house solutions. The strategy has been successful as the company has consistently added half a million users per month.

Every new application or inquiry is treated as a new consumer without performance data. Once an application is accepted, performance data supporting the application is then collected. Factor Trust’s data comprises of application and tradeline information, and, with the help of these data, the company is able to get comprehensive knowledge about consumer spending patterns and the types of products these consumers use. Other important information like stability, payment history, and income stream provide additional insight into financial habits of consumers.

The product range is similar to what traditional credit bureaus like Equifax or TransUnion offer, but Factor Trust serves consumers at or below prime whereas other bureaus serve consumers at or above prime. Cross-over lenders in the auto and credit card industries use traditional rating bureaus in addition to Factor Trust while lenders like Installment, POS, and short-term lenders don’t use traditional ratings at all. This highlights that the company is chasing a massive market that is growing rapidly.

Factor Trust continues to develop its products to stay in tune with the regulatory developments and technological changes in the FinTech ecosystem. Expected CFPB regulations in the coming year will make it compulsory for the lenders to determine the borrower’s ability to repay (ATR) before they can provide borrowers with a loan. In order to help lenders meet ATR regulations efficiently, Factor Trust has introduced the Flexible Technology platform. Lenders can quickly compare residual income to the requested loan amount to determine whether a consumer has the ability to pay back a loan. This product will help lenders keep tabs on the factors that trigger a change in a consumer’s credit situation and alter a credit line accordingly. Saving lenders from the hassle of sending multiple file formats to different bureaus, Factor Trust has also developed a CRA gateway, which is executed based on CFPB regulations. This will allow lenders to automatically update all credit bureaus rather than wasting resources on dealing individually with those bureaus.

Factor Trust uses a flexible pricing schedule. Pricing depends on product demand within a particular region. Higher the demand, lower the price, and vice-versa. On average, the company charges a fee of $1-$1.30 per score and can adjust pricing as it does not use third parties to fetch data. Factor Trust has a dedicated team of experts to make onboarding hassle-free. This allows companies to go live in just two weeks. There is no setup or minimum monthly fee. Along with setup, Factor Trust provides scores and purpose built-in different vertical and segments, which no other alternative bureau provides.

The reason Factor Trust is the preferred choice for the alternate lending industry is because it can pull data through its ATR product and also through traditional data from Equifax, presenting lenders with the best of both of worlds. One telling difference between Factor Trust and other bureaus is the updating of reporting data. In Factor Trust, data is accessed and processed in real time whereas other bureaus update performance statuses monthly. This also allows lenders to ensure that borrowers are not attempting loan stacking. With the emergence innovative technologies and short-terms loan products, the technology used a few years ago is obsolete. Therefore, solutions offered by Factor Trust should become the new industry standard in a few years.


Lauren Twardy

Thursday December 22 2016, Daily News Digest

new MPL loans UK

News Comments Today’s main news: Prosper switches from Experian to TransUnion. RateSetter sells 2.1M BP of non-performing debt. Today’s main analysis: Why 2017 will be a turning point in MPL. Today’s thought-provoking articles: 4 ways U.S. student loan industry could change. Is risk retention the future of MPL? United States Prosper changes credit bureaus. AT: “In […]

new MPL loans UK

News Comments

United States

United Kingdom

European Union

United States

Notice of PMI7 / TransUnion Migration (Prosper Email), Rated: AAA

Dear Investor,

We are writing to notify you that effective today new borrower applications are being scored on our PMI7 credit model, leveraging TransUnion credit attributes for underwriting.  The primary considerations for the bureau migration are:

  1. TU is the only bureau that delivers historical time-series data in real-time and this information provided meaningful incremental predictive power relative to a snapshot of the current credit bureau alone.

4 big ways America’s student loan industry could change in 2017 (Business Insider), Rated: AAA

There are

Is Risk Retention In The Future Of Marketplace Lending? (Mondaq), Rated: AAA

As marketplace lending continues its dramatic growth and regulators consider how best to protect consumers without limiting financial innovation, the U.S. Treasury has openly expressed an interest in whether marketplace lenders should be subject to some form of “risk retention.” Under new regulations that go into effect later this month, most issuers of asset-backed securities (ABS) will be required to retain a percentage economic interest in the collateral they securitize.

Some believe that applying similar rules to marketplace lenders would ensure that lenders originate high-quality loans, but marketplace lenders uniformly disagree, arguing they are sufficiently motivated to implement stringent underwriting standards and that such rules would hinder innovation.

Although the new risk retention rules likely apply to marketplace lenders that securitize loans and act as a sponsor, it remains unsettled whether similar rules should apply to marketplace lenders in the non-securitization context. Some believe they should.

Marketplace lenders, in contrast, oppose the application of risk retention rules in the non-securitization context. Moreover, online lenders contend that risk retention rules are unnecessary since most investors in marketplace loans are institutional and therefore have the ability to protect themselves through due diligence and representations and warranties.

The subprime mortgage crisis, however, does not necessarily demonstrate the need for risk retention in marketplace lending.

Given federal regulators’ increasing interest in financial technology companies generally, greater regulatory oversight of marketplace lenders seems all but inevitable, and industry participants are bracing themselves for potential changes in the way they do business.

An ‘Uncommon’ Investing Idea for the New Year (Uncommon Wisdom Daily), Rated: A

These days, investors are increasingly venturing outside the stock and bond markets to juice up their returns. This means turning to “alternatives” like precious metals, real estate, trust deeds, promissory notes, limited liability companies and crowdfunding investments, among others. (You can even own them in an IRA!)

It’s called marketplace, direct, online or person-to-person (P2P) lending.

The innovative thing about P2P lending is people can lend and borrow money without ever going to a bank.

Transparency Market Research reports the P2P market was $26 billion in 2015. (Over 60% of which came from the world’s largest P2P lending platform, Lending Club.)

Charles Moldow, a renowned venture capitalist and P2P investor, thinks this market could hit $1 trillion by 2025.

As Ron Suber (Prosper’s CEO) told me last year …

“At some future moment, you will be asked at the point of sale: How do you want to pay for this: cash, credit card, check, PayPal ormarketplace lending? It’s coming.”

Here’s How P2P Investing Works

The main reason I’m recommending P2P investing is outsized yield.

Plus, there are several additional reasons — beyond higher yields — why P2P investing should resonate with mom & pop investors …

  • Higher yields. P2P investing provides a unique opportunity to earn higher yields relative to other asset classes.
  • Low volatility. Prime consumer credit has existed for decades — with a proven track record for consistent returns.
  • Uncorrelated. P2P investing doesn’t follow the traditional ups-and-downs of the market.
  • Safety. According to Lending Club, since 2008, 99% of investors who owned 100-plus notes of relatively equal size have seen positive returns. 81% of those investors have earned 5%-plus over that time.
  • Simplicity. Why try to handpick individual loans?

How to Evaluate Investment Opportunities in CRE Marketplace Lending (NREI Online), Rated: A

It’s no secret that investors are always looking for the best return on their investments. In an effort to achieve that goal, investors have been turning in increasing numbers to peer-to-peer and marketplace lending platforms to achieve a greater return on their fixed-income investments than more traditional vehicles such as U.S. Treasury bonds and CDs. This search for higher yield has led to great growth in the marketplace lending arena. In fact, according to a recent report by American Banker, the industry grew by nearly 700 percent over the past four years.

Given the current economic climate, while many investors are still looking for higher yield, they are also careful to weigh risks associated with their fixed-income investments, seeking out transactions that will serve as a foundation for their financial stability in the future. As a result, investors are beginning to shift their focus from the unsecured debt platforms to those that offer opportunities in secured debt, such as commercial real estate.

The first step to evaluating a marketplace lending platform is to seek out technology processes that help, not hinder, the investment process.

Also, find out whether the investments are backed by collateral, and if that collateral is an income-producing property.

Finally, some platforms also offer low-cost, professionally-managed funds that provide a lower risk because your investment is pooled with others and applied to a unique portfolio of viable transactions.

The key to successful marketplace lending investment, especially in the commercial real estate realm, is knowing when and where to apply the technology, and when and where human judgment and expertise are required.

DV01: Peering into peer-to-peer loans (Forbes India), Rated: A

Rahbar’s all-nighter gave him an insight that would serve him well nearly a decade later. His two-year-old New York City firm, DV01, offers analytics and reporting software for the burgeoning peer-to-peer market, giving investors the ability to track the performance of thousands of loans in a few clicks. Named after a formula traders use to calculate their exposure to interest rate changes, DV01 also automates the laborious financial gymnastics that are needed to model loan performance, and it is on its way to becoming a fixture in the industry’s biggest deals as firms like Lending Club, Prosper and SoFi issue securities to finance their loan pools.

Peer-to-peer lenders originally connected borrowers directly with individual investors, but rising loan demand forced them to turn to Wall Street-style securitisation—the packaging of thousands of individual loans into tradeable securities. Three years ago, Lending Club was the first to market with such a securitisation, and Prosper, SoFi and OnDeck Capital quickly followed. As of the end of September, roughly $11 billion of these loans, according to PeerIQ, has been bundled into securities since 2015.

Rahbar’s startup currently tracks the loans of Lending Club and eight other originators and counts 55 institutions as clients. All told it has logged in some $34 billion in loans. DV01 is backed by $7.5 million in capital from Leucadia National (Jefferies’s parent), Pivot Investment Partners and a fund controlled by George Soros.

IPO Dreams: Fintech Turmoil Is Disrupting SoFi (LC, ONDK) (Investopedia), Rated: A

So it may be no surprise that startup Social Finance Inc. (SoFi), which boasted last year that it was profitable and planned an IPO in spring of 2016, has announced its postponing pubic offering plans — again. SoFi has been one of the poster children of fintech’s potential with a value of $4 billion.

There’s no doubt that SoFi’s prospects for an IPO have been hurt by broader problems in the online lending market, illustrated by Lending Club and On Deck Capital.

How machine learning can redefine lending (Bobs Guide), Rated: A

Technology has played a significant role in the rapid evolution of the lending industry. One such technology, machine learning, is beginning to create new avenues in the lending market.

Though machine learning is not a novel concept, the influx of big data and data mining has given it a shot in the arm by integrating it in our day to day lives. Machine learning today is being implemented in various industries, from financial services, healthcare and retail to transportation, and multiple domains like accounting, audit, marketing and sales. Gartner identified it as a top ten strategic technology trend in 2016, with advances occurring rapidly.

Machine learning enables predictive modelling in credit scoring. Credit scoring is an important process in loan management. While the traditional credit score uses basic statistical tools to arrive at the result, machine learning involves data mining at a large scale by aggregating data through wider channels like Yelp scores, social media activity, and real-time shipping trends. This consecutively delivers a more accurate and meticulous portrait of creditworthiness.

Machine learning can also help in streamlining the lending process, eliminating errors and expediting the loan application approval process.

Machine learning can also help in predicting bad loans and in on-going monitoring of loans.

Schwab RIAs: Accept and adopt digital platforms, or lose your competitive edge (Financial Planning), Rated: A

Schwab surprised the industry with the recent launch of a hybrid robo adviser offering, since it had already two operational digital platforms with over $10 billion in AUM — Schwab Intelligent Portfolios and Schwab Institutional Intelligent Portfolios.

Heburn: First of all, we’re not scared of it. We didn’t look at it as this coming gloom and doom of robotic investment management that’s going to put us out of business. We really looked at it as an opportunity to reach a whole different segment of clientele efficiently in a way [where] we could eventually make money.

Kessler: We don’t consider Betterment or Wealthfront competitors actually. They’re playing in an entirely different field of service than we are. We’re giving a dedicated adviser and a personal relationship.

AI Could Take Over Routine Financial Advice Tasks (Finanial Advisor IQ), Rated: B

Financial advice firms need to embrace artificial intelligence to replace mundane tasks carried out by humans so they can remain competitive, according to a new report from natural language recognition software provider Narrative Science.

Thirty-two percent of companies across the financial services industry are already using AI for predictive analytics, voice recognition and response and recommendations, according to a survey of more than 100 executives in the industry conducted by the National Business Research Institute and Narrative Science this spring.

AI is also coming to the fore when it comes to controlling spending. Apps such as Moven and Simple already deliver personalized automated recommendations based on machine-learned spending and earning habits of their users, according to the report, although it could be a matter of time before such programs reach the financial advice market.

United Kingdom

RateSetter Sells £2.1 Million of Non-Performing Debt to 1st Credit (Crowdfund Insider), Rated: AAA

RateSetter, a leading UK peer to peer lending platform, has completed the sale of £2.1 million of non-performing debt. RateSetter sold the assets t 1st Credit, a debt purchaser.  Exact terms of the transaction were not revealed but RateSetter said it was the first transaction of its kind for a UK peer to peer lending platform.

The non-performing loans were written between 2010 and 2015. RateSetter said it believed there was a low chance for them to collect on the assets. RateSetter said that typically in these situations they have not been able to contact the borrower for a long period of time, or where it has not been possible to put in place a debt management plan with the borrower.

Here’s why 2017 will be a turning point for the UK marketplace lending industry (Business Insider), Rated: AAA

The UK’s marketplace lending sector is one of the world’s

Zopa Named Winner at AltFi Awards & F5 Awards (Crowdfund Insider), Rated: A

Zopa announced on Tuesday it was named a winner at both the AltFi Awards and F5 Awards. The peer-to-peer lender revealed it took home a number of prizes at AltFi and was dubbed Best P2P Lending Platform at the F5 awards.

One to One: Filip Karadaghi, chief executive, Landlordinvest (Mortgage Strategy), Rated: A

We are quite late to the party and many P2P lending platforms have been operating under interim permission with time to develop their business, so we will have to learn from them and use that knowledge to develop our own value proposition quickly.

I believe that the future for P2P buy-to-let and bridging is very bright.

According to the latest crowdfunding report from Nesta, which publishes the leading research report in the P2P industry, real estate loans is the fastest growing sector in P2P.

The future of fintech (Credit Strategy), Rated: B

Speaking at Credit Strategy’s inaugural F5 conference this month, at the London Hilton Bankside, Stefan Franzke, chief executive of Berlin Partner for business and technology, was complimentary about the importance of London as a business centre.

He described the initial impact Brexit had on fintech firms recalling how he received hundreds of messages from businesses contemplating leaving the UK.

However, Franzke said he believes London will still be the financial centre like it is today in 10 years.

He discussed how the peer-to-peer lending market is working to target SMEs and how some banks are even looking at acquiring or creating their own platforms.

European Union

Online Lending Platform Credimi Signs Agreements with Four Primary Investment Funds (Crowdfund Insider), Rated: AAA

Four primary investment funds have signed agreements with Credimi, an Italy-based online lending platform. The funds have subscribed the entire portfolio of (performing) commercial credits originated by the invoice financing platform in the first year. Credimi is the first fintech company authorized by Bank of Italy to the public financing activity, according to art. 106 of Testo Unico Bancario, entailing extremely rigorous control and governance requirements.

The four partners are Anima Sgr, Anthilia Capital Partners Sgr, BG Fund Management Luxembourg S.A. and Tikehau Capital.

Unlike other similar products in Europe, the Credimi model foresees the subscription of the loans portfolio even before Credimi originates the commercial credits (Credimi focuses exclusively on the acquisition of performing receivables). This, alongside the proprietary risk analysis technology and Credimi’s capability to carry out public financing activity, allows to instantly finance SMEs’ invoices.


George Popescu
Allen Taylor