Thought for the weekend

Home Capital Group’s financial problems clearly raise questions about the state of the Canadian property market and also in a broader sense about financial stability in Canada and it is hard not to see the similarities with the US subprime crisis.

However, as with the subprime crisis – which turned into the Great Recession – we would argue that this is less about a property market bubble bursting than about monetary conditions becoming too tight…The most obvious thing to do would be to announce an open-ended quantitative easing program with the aim of keeping nominal demand on a stable path.

Continue reading: Thought for the weekend

Home Capital Group’s financial problems clearly raise questions about the state of the Canadian property market and also in a broader sense about financial stability in Canada and it is hard not to see the similarities with the US subprime crisis.

However, as with the subprime crisis – which turned into the Great Recession – we would argue that this is less about a property market bubble bursting than about monetary conditions becoming too tight…The most obvious thing to do would be to announce an open-ended quantitative easing program with the aim of keeping nominal demand on a stable path.

Continue reading: Thought for the weekend

Portrait of a Marketplace Lending Investor

direct lending

Alternative lending start-ups have entered mainstream consumer and SMB lending, but have yet to establish themselves as additions to traditional fixed income portfolios for investors. Marketplace lenders started out as peer-to-peer lenders, but institutional capital and accredited investors are now accounting for the lion’s share of lending capital on such platforms. Direct Lending Investments, LLC […]

direct lending

Alternative lending start-ups have entered mainstream consumer and SMB lending, but have yet to establish themselves as additions to traditional fixed income portfolios for investors. Marketplace lenders started out as peer-to-peer lenders, but institutional capital and accredited investors are now accounting for the lion’s share of lending capital on such platforms. Direct Lending Investments, LLC (DLI), a growing and active participant in this developing world of private credit, focuses on buying loans and extending loans to alternative lending platforms and other business partners. In particular, the firm provides credit to the growing sectors of the market that are no longer served by traditional bank lending and, more importantly, structures its funding in a way so that the originator takes on default risk.

Inspiration and founding

Brendan Ross, the founder and CEO of DLI, first began investing in marketplace lending personally and on behalf of his clients through Lending Club (LC) and Prosper loans. In 2012, he launched DLI to expand his investment horizon beyond peer-to-peer lending, which he has since moved away from altogether. The firm’s inaugural deal in November of 2012 was with IOU Financial, a SMB loan originator. Since then, the firm has expanded to include receivables as well as real estate and consumer loans in its portfolios, and has grown to over $900 million in assets under management.

Regulatory premium

DLI targets segments, such as small business lending, which are not well served by traditional banks for their capital needs. These areas have what Mr. Ross calls a “regulatory premium” where legislation or regulation has disrupted historical financing methods. This premium allows these lenders to earn higher returns as they do not have to compete with banks, which previously served this market segment. Areas that DLI has identified with regulatory premiums include small business lending, receivables, consumer lending, and real estate.

Customer acquisition

Direct Lending strives to work with lenders that acquire borrowers in a unique way, instead of going down the overcrowded, undifferentiated path of acquiring borrowers through direct mail or from brokers. By emphasizing disintermediation and proprietary customer acquisition, the firm identifies business partners with competitive advantages in their industry. Being able to bring down customer acquisition costs is an important differentiator for a platform, and often, it is a boon to the credit worthiness of the platform.

Shift in investment structure

Over time, DLI has shifted its emphasis from buying loans directly to extending credit facilities to single purpose entities that loans and other financial assets originated by the originator. The assets serve as collateral, and the risk of individual defaults lies with the originator. This structure is designed to provide DLI’s capital with a strong first position with regard to the originator’s assets and align incentives between DLI and its business partners. In addition, various credit enhancements, such as corporate guarantees, may be utilized in each agreement. This is a markedly different approach than acquiring loans directly from originators, which do not share any of the credit risk once the loan is off their books.

Carving its own niche

DLI seeks to capitalize on inefficiencies in the lending market for its investors. The strategy may be seen by investors as a form of diversification from high yield debt, emerging market debt, and business development companies. In the niche area of private debt, there are many large companies with massive AUMs like KKR, BlackRock, Fortress, Ares and Apollo, but the company believes in quality rather than quantity and feels that performance and agility within the space is more important than contending with the largest private debt managers.

DLI over banks

Although bank capital, or a securitization, can be a cheaper source of financing for originators, it involves rigid formalities. What gives DLI the upper hand is it provides a higher loan-to-value ratio as compared to banks, and is more flexible in structuring relationships. Bankers are not typically comfortable with any tweak in their borrowers’ business models, whereas DLI understands that it is important to be nimble. This additional maneuverability has proven extremely dear to Silicon Valley start-ups and gives DLI a leg up against its banking counterparts.

Edge over its rivals

Direct Lending Investments, unlike some competitors, does not insist upon warrants or any equity stakes in its business partners; instead, it is focused on earning a high ROI and, in the process, providing lenders with unprecedented flexibility to utilize their own equity.

Founder and legal team

Brendan Ross, Founder and CEO, has been a C-level executive prior to launching DLI. He has been responsible for nurturing and turning around many businesses, including Reserve America, Fanfare Media Works, and Razorgator. He started his career at Mercer Management Consulting (now Oliver Wyman) and later started investing in consumer loans through Lending Club and Prosper in 2011.

DLI has an in-house legal team, which allows it to examine loan deals faster and more thoroughly. Research is headed by Dr. Bryce Mason, who is well known for his elaborate analysis of Lending Club loan history and was also the founder of P2P Picks. The team roster is expected to increase from 24 to 40 within the year. DLI’s ability to identify best in class originators with proprietary customer flow, coupled with a structure focused on strong capital protection without taking any originator equity is a win-win for both the originators and the limited partners.

Authors:

Written with Heena Dhir.

George Popescu

Friday April 28 2017, Daily News Digest

10-year Treasury yields

News Comments Today’s main news: U.S. VC fintech investment rises to $1.2B. P2P Global Investments sees NAV bounce. Kuflink receives FCA authorization. Robo-advisor launches in Luxembourg. OnDeck Canada partners with Lightspeed. Ant Financial plans expansion into Japan. Today’s main analysis: Behind the 2017 bond-market rally. Today’s thought-provoking articles: China P2P industry news. Xero: Best overall fintech. Brazilians embrace robo. Who leads Africa’s fintech, […]

10-year Treasury yields

News Comments

United States

  • U.S. VC fintech investment rises to $1.2B. GP:”Total raise if you include non-VC sources is $1.5bil. New record since Q1 2016. Focs continues on lending and robo. “AT: “What I find interesting is in the report itself: The biggest deals of the quarter – SoFi’s Series G round, UniRush M&A, Zenbanx M&A, ProducePay early-stage, and Kensho Series C2 are the top 5 in the U.S. Also in top 10 are CommonBond and Upstart. Get the report here.”
  • Behind the 2017 bond-market rally. GP:”A very interesting piece worth reading to understand market reactions to the world and in fact cost of capital.”
  • Banks loosening up internally to work with startups. GP:”There is always a risk in relaxing control which translates into a cost, usually fines. To be practical, if the cost of the fines is significantly lower than the return from the business perhaps the fines become just the cost of doing business. On the other side, a regulator regularly fining a financing institution usually has a major impact on the institution reputation which has nonnegligible effects on the business. It is a very difficult to quantify where to relax by how much and the cost of doing so, especially the indirect costs. “AT: “What’s interesting are smaller banks are now starting to see the light.”
  • Mark Cuban backs an app that saves people overdraft fees. GP:”I don’t know anybody who never paid an overdraft fee. There shouldn’t be any overdraft fees, transactions should just be rejected by the bank. Or there should be a real product to compensate for it that has a reasonable cost, in line with the cost of a loan or or a credit card.”AT: “Overdraft fees are a huge frustration for a lot of young people learning how to manage their finances as an adult. It’s a part of growing up. The best solution is to learn how to balance a checkbook, but an app that does it for you on the fly isn’t a bad idea because most young people aren’t that great at balancing checkbooks.”
  • OCC: Fintech charter not a ‘ticket to light-touch supervision’. GP:”The OCC has always been very clear that the fintech charter is not light-touch; if anything it is the same-touch as for a bank while enabling them to offer a smaller amount of services. “AT: “When you’re being sued, the best course of action is to offer some sort of consolation. But you can’t say too much or it will be used against you.”
  • Chatting with PeerStreet’s founders. AT: “Expecting every type of real estate loan to go through a marketplace platform is a tall order, but I like the way BJ thinks.”
  • Debt is a deal-breaker for millennials considering marriage.
  • Quovo raises $10M in Series B. GP:”Quovo offers a series of finance APIs to enable innovation. Worth a look for sure.”
  • Robinhood hits 2 million users, raises $110M in Series C. GP:”RobinHood offers free stock trading. The consolidation that happened in the stock-brokers market from charging a large commission to free is an interesting lesson. The main driver of this cost cutting has been electronic and online trading which pushed brokers to seek an alternative business model, which happens to be in many cases selling order book data or ancillary services and products. “
  • Bitcoin values increases as SEC reconsiders ETF decision. GP:”I continue to believe that cryptocurrencies are a good remittance system. There is also a slew of new ICOs happening. And last but not least Ethereum and the smart contract world are also seeing a very large increase in demand. The main barriers to cryptos seem to be unclear regulation, unclear business model, and security risks.”AT: “It will be interesting to see if the SEC overturns its own decision to turn down the Bitcoin ETF.”
  • Easy Solutions launches AI anti-fraud service. GP:”Detection abnormal behavior on a credit card has been in place for sometimes. Government agencies have also been using abnormal behavior detection on large data for sometimes. Perhaps there is still space for improvement. “

United Kingdom

China

  • Top 5 P2P lending ratings. GP:”In China a lot of websites are trying to rate online lenders. And there is a rating of raters. Here people take a position of the top raters. Most lenders pay money to the rating websites to be rated in a process which can not always be impartial. Caution is advised and perhaps an index of the average rating per lender accross many rating websites is needed. “
  • MaizinJinfu raises Series B. GP:”Congratulations!”

European Union

Australia

India

Canada

South America

Africa

Asia

  • Ant Financial looks to expand into Japan. GP:”Japan is a mature financial system where the mentality is very conservative. I hope Ant has a Japan-adapted plan for the expansion which takes into account Japanese mentalities. In my experience this means at the minimum having Japanese employees, in Japan, and having everything done the Japanese way from the way the contracts are bound to the way you treat your customers. Japan is open to foreign products, but only if they have been well tested and are mature. In fact they seek them. I have brought multiple companies to Japan succesfully.”

News Summary

 

United States

VC Investment in Fintech Rises to $ 1.2 Billion in US: KPMG (Think Advisor), Rated: AAA

U.S. venture capital investment in fintech companies rose to $1.2 billion in the first quarter, the highest activity since last year’s first quarter, according to KPMG International’s Pulse of Fintech report, released Thursday.

Non-VC fintech investment in the U.S. reached $300 million, resulting in a total of $1.5 billion in fintech investment in the U.S. for the quarter.

“Payments and lending continue to attract the most funding globally, although we’re seeing increasing interest in a variety of technologies,” Brian Hughes, national co-lead partner in KPMG U.S. venture capital practice, said in the statement.

“In addition to continued growth in regtech and insurtech, areas such as artificial intelligence, machine learning and Internet of Things are gaining increasing investor attention.”

Next quarter, it said, robo-advisory, artificial intelligence and data analytics look to be “hot investment areas.”

KPMG reported that private equity firms in the U.S., including not-technology-focused ones, are proving robust actors in the late-stage fintech arena, with $1.2 billion in total deal value across 11 deals in the first quarter.

During the same period, however, U.S. fintech M&A got off to a slow start at just $200 million across 24 deals.

The West Coast continued to account for the largest concentration of U.S. fintech investment, with 67.6% of total value of deals in the first quarter and 39% of the total number of deals.

Get the report here.

Behind the 2017 Bond-Market Rally (WSJ), Rated: AAA

When the yield on the 10-year U.S. Treasury note fell to a record low in July, many investors agreed that the developed world was stuck in a “new normal” of ultralow growth, inflation and interest rates. Stronger U.S. economic data in subsequent months helped chip away at that view, lifting yields. They got another boost from Mr. Trump’s victory, as investors bet on a turn to expansionary fiscal policies–including an overhaul of the tax code–that would boost growth and inflation and allow the Federal Reserve to raise rates at a faster pace.

While the yield on the 10-year note is still well above its level on Election Day, that is partly because the Fed has raised short-term interest rates twice since then.

Banks are loosening up internally so they can work with startups (Tearsheet), Rated: A

With public confidence in them in the U.S. below 50 percent across the political spectrum, banks have a branding problem — one that gets even more problematic when they have to work with those outside the industry.

Wells Fargo is one of the banks that has taken active interest in facilitating dialogues with startups. While most most major banks have accelerator programs, Wells Fargo said one of the focuses of its startup program is helping banks understand startup culture and vice versa. Wells Fargo’s accelerator program mentors companies for six months and provides up to $500,000 of equity investments for selected companies. The companies may also work on proof of concepts across different business lines within the bank after the completing of the program.

For smaller banks, a focused approach ensures that the relationship will be productive. Boston-based branchless virtual bank, Radius Bank, has a staff member dedicated to partnerships with startups who carefully vets each startup for compatibility.

Mark Cuban is backing an app that’s trying to help people avoid overdraft fees (Business Insider), Rated: A

The billionaire has invested in a new app called Dave that aims to predict coming expenses for users to help prevent them from overdrafting on their bank accounts.

Once Dave connects with a user’s checking account it forecasts the account’s lowest possible balance in seven days based off the person’s spending habits.

Users are notified when their seven-day forecast is negative. That way they can be proactive and potentially avoid overdrafting and being burdened with bank fees.

According to a report by CNN Money, the top big banks – Chase, Wells Fargo, and Bank of America – raked in over $5 billion in ATM and overdraft fees in 2016. In total, overdrafts cost customers $36 billion a year.

OCC: Fintech Charter Not a ‘Ticket to Light-Touch Supervision’ (ABA Banking Journal), Rated: A

Gardineer emphasized that fintech firms granted a national bank charter would undergo the same supervision process and be held to the same capital, liquidity and consumer protection standards as OCC-supervised banks. She added that state laws on fair lending, debt collection and other things would still apply, just as they do for nationally chartered banks. Her comments came after a lawsuit filed earlier this week by the Conference of State Bank Supervisors, which said that in moving forward with the limited-purpose charter, the OCC overstepped its authority under the National Bank Act.

Chatting with Brew & Brett, Co-Founders of PeerStreet (Simple Innovative Change), Rated: A

Brew Johnson was in real estate law by chance back in the mid-2000’s, which is when he happened upon the dismal reality that our housing market was built on a house of cards through his deep research and desire to figure out what was going on. He knew something needed to change, and he had a plan for how to do it.

When the time was right he brought in Brett Crosby, Co-Founder and COO of PeerStreet to take his tech background from building Google Analytics to help revolutionize the housing market with a new approach to financing the mortgage markets.

BJ: A lot of what we’re doing at PeerStreet is informed by what I learned during that time as a real estate attorney within the securitization market.

Fast forward to 2013, and all the barriers to entry that existed in 2008 had been significantly reduced. After the market crash, government regulation started to favor the startup community, and with the advancements in technology, I felt that it would be a lot easier to create a company like this.

BJ: For me, it was about seeing the movement in marketplace lending, and the growing comfort in investing in this asset class through a new type of platform. This sudden shift in comfort coinciding with easing regulation led to a huge boom for private lending.

The reason we believe it’s so important to build a tech-enabled platform like this is because there are more independent lenders now than ever, and they’re scattered around the country, leading to a significant amount of fragmentation in the market.

What PeerStreet does is use technology to make sense of this fragmentation, and then layer a whole level of positives onto it.

BC: In other spaces like consumer credit, auto loans, and student loans, the location of the lender is not important so it’s possible to lend from a central position. In the mortgage and real estate development space, however, having local knowledge matters a great deal.

BJ: Since we partner with and provide capital to local lenders who lend to small businesses, who in turn lend to other small businesses or real estate entrepreneurs in their communities, we’re enabling our investors to support the value chain of local economies. Essentially, we are investing in communities and helping to promote the up-cycling of housing stock in those areas.

BC: The reality is many of the new business models may go out of business because they are simply taking too much risk on their loans. We’re positioning PeerStreet for the ups and downs of the American economy.

BJ: We think every type of real estate loan will go through a platform like ours eventually, so we are taking a very measured approach to how we decide to move into each of those asset classes.

Deal Breaker?! Dating and Debt (CBN News), Rated: A

According to a new study from online personal finance company, SoFi, debt is a big deal breaker to 20 percent of Millennials (ages 25-35).

“It depends on what they are paying for with their debt. If she has 10-15k in cc debt for B.S. that’s obviously a red flag. If it’s student loans, I can’t complain. If she’s not paying on any of it, run,” said another.

SoFi also looked into how much Millennials cared about a person’s future earnings when deciding whether to date them or not.

According to SoFi, Millennials don’t think debt needs to come up right away. 58 percent say it only needs to be talked about when the relationship gets serious.

Finally, SoFi asked Millennials if they would dump someone over debt. A majority, 55 percent, said no. (Still, 24 percent said they may not consider marrying someone with more than $100,000 in debt.)

Quovo Raises $ 10 Million in Series B Funding to Fuel Fintech Platform Expansion (Crowdfund Insider), Rated: A

Quovo, a Fintech company that leverages data to provide insights alongside connectivity for financial accounts, has raised $10 million in Series B funding.  Existing investors FinTech Collective and Long Light Capital were joined by F-Prime Capital and Napier Park Financial Partners to provide the capital. As one would expect, the cash will be used to fuel platform growth and build out the suite of data analytics offers which include the newly launched bank authentication API and Quovo Connect module.

Robinhood Hits Two Million Users & Raises $ 110 Million During Series C (Crowdfund Insider), Rated: A

California-based fintech company Robinhood announced on Wednesday it not only has reached two million users, but it also secured $110 million during its recent Series C funding round, which was led by DST Global, with participation from NEA, Index Ventures, Ribbit Capital, Thrive Capital and Greenoaks Capital. This brought the company’s total funding to $176 million.

Bitcoin’s value increases as the SEC reconsiders its ETF decision (The Merkle), Rated: A

Not long ago, the three-year effort put in by the Winklevoss twins to bring the Bitcoin ETF to the market was blocked by the SEC, after the agency ruled against them. What followed was a major crash bringing along a 15% decrease in Bitcoin value.

The initial Winklevoss proposal was to list the Bitcoin ETF on the Bats BZX exchange, which is one of the largest equities market operators in the United States. The exchange then decided to file a petition with the SEC, kindly asking the exchange commission to review last month’s decision. Luckily, the petition was accepted, therefore the SEC will proceed to reconsider their decision.

Optimism in the market has appeared all over again, and the price of Bitcoin again the U.S. dollar is further increasing due to these new speculations. Precisely, it has managed to increase to $1,294, from $1,251 in a single day.

Easy Solutions Launches Artificial Intelligence Anti-Fraud Service (Yahoo! Finance), Rated: B

Easy Solutions, the Total Fraud Protection company, today unveiled its new Detect TAArtificial Intelligence (AI) Fraud Assessment Service for banks and other financial institutions. Artificial Intelligence delivers a competitive edge to any business that leverages it effectively, and it is already being applied by leading financial institutions to improve fighting fraud.

United Kingdom

P2P Global Investments sees NAV bounce, expands into alternative credit (AltFi), Rated: AAA

The £833m P2P Global Investments fund saw its net asset value [NAV] rise 0.55 per cent in March, including a 0.16 per cent uplift from its share buybacks, prompting a boost to its latest quarterly returns.

Its latest numbers, however, show a boost in returns with total NAV return for Q1 2017 of 1.18 per cent, while its discount has narrowed to 15 per cent.

Kuflink’s P2P Lending Platform Receives FCA Authorization (Crowdfund Insider), Rated: AAA

On Thursday, Kuflink received full authorization from the Financial Conduct Authority (FCA) for its peer-to-peer lending platform. According to the registration, Kuflink has been given permission to provide regulated products and services, which includes accepting deposits, provide credit to consumers, offer investment advice, and arrange deals with investments.

B&C Awards 2017 shortlist announced (Bridging&Commercial), Rated: A

The top brokers, lenders and individuals in the bridging, commercial, development finance, peer-to-peer and specialist banking markets have been shortlisted and are now in the running to win one of the industry’s most prestigious awards.

The shortlist includes new categories ‘Best Use of Fintech’, ‘Specialist Product of the Year’ and ‘Best Bridging Lender Newcomer’.

Last year’s Bridging Lender of the Year, Octopus Property, has been shortlisted again in 2017 for the coveted title and will be up against fellow nominees Precise Mortgages, Together, Amicus, Funding 365, Masthaven, MTF and LendInvest.

The brand new category ‘Alternative Lender of the Year’ brought in scores of votes, with Assetz Capital, Funding Circle, LendInvest, RateSetter, Lendy and Kuflink making the shortlist.

Pariti adds second online lending partner (AltFi), Rated: A

Pariti, the personal finance management app which helps users to manage their debts, has teamed up with Lendable to broaden its range of loan options. Pariti made leading marketplace lender Zopa its first lending partner in September of last year. Pariti users looking to consolidate their debts will now receive offers from both lenders.

China

P2P Industry News (Xing Ping She Email), Rated: AAA

Top Five P2P Lending Ratings in China
Rating is an important reference for investors. A senior industry player taking the following as the top five P2P lending rating agencies in China: Online Lending House Rating, Xeenho Rating, Net Credit Eye Rating, Rong 360 Rating and Dailuopan Rating.

Online Lending House Rating
Online Lending House is one of the biggest P2P lending portal sites in China. It has been engaged in platforms’ rating since August 2013. Up to now, Online Lending House has issued 44 rating reports maintaining over 100 rated objects.

Xeenho Rating
Xeenho Rating is the first rating agency from the buyer’s perspective, and it was launched by the P2P lending funds Xeenho in October 2016. Yet it has issued its fifth report, with a selection of around 45 P2P lending platforms. The rating is neutral for it stand on the investors’ side, so its rating could be more reliable. Actually, Xeenho’s risk-control management keeping the Zero Bad Debt in the industry.

Net Credit Eye Rating
Net Credit Eye Rating is similar to Online Lending House Rating in terms of contents’ provision. It was launched in September 2015 and has issued 18 periods of reports with over 70 P2P lending platforms.

Rong 360 Rating
Rong 360 Rating is quarterly issued, so far it has 8 periods of rating reports on 70 platforms. Rong 360 includes a wider range of content compared by other agencies, therefore some low rating results may exists.

Dailuopan Rating
Dailuopan launched its own ratings services mainly based on big data method. It started from May 2016, and has issued 10 periods of reports on over 500 P2P lending platforms.

Jack Ma: We need a reliable credit system on P2P lending industry
On April 23rd, the 2017 Annual Summit of China Green Companies was held in Zhengzhou. Jack Ma attended the occasion and said, “Only when a reliable credit system has been built, the real P2P business could be exist.” He also pointed out that new finance is to create a share-benefited and fair environment for residents, which should reach the effect that “an old woman has the same rights with a bank CEO .”

In fact, Jack Ma has previously said that the P2P lending should based on three elements: data, credit system and risk control system with big data. Unlike the negative view on P2P lending five years ago, this time Jack Ma show an optimistic attitude to the industry.

MaiziJinfu Raises Series B Funding (Yahoo! Finance), Rated: A

UniFi ‘s parent company Shanghai Wheat Asset Management Co., Ltd. (“MaiziJinfu”, “Maizi” or “the Company”), a China -based Internet-based financial information service provider, today announced that it has received Series B funding,  at the Internet Finance Development and Innovative Application Forum (IFDIA), which was co-hosted by Money Weekly in Shanghai .

European Union

FINANCIAL ADVICE FROM A ROBOT LAUNCHES IN LUX. (Delano), Rated: AAA

From about $19bn under management by robo advisors in the US in 2014, this figure has since quadrupled. However, this is still small compared with traditional financial services. For example, the Luxembourg wealth management industry alone had four times these assets under management in 2015. Nevertheless, these are early days.

The grand duchy is now part of this trend with the launch of the KeyPrivate service by Keytrade Bank Luxembourg. Residents and non-residents alike can use the service. You tap in how much you want to invest, for how long, and with what risk profile, and then there’s a questionnaire to check that you have the necessary financial means.

The site will then design a portfolio based on 12 funds invested principally in shares and bonds in different international markets.

After investment, each portfolio is reviewed automatically by the robot to take the latest market developments into account. KeyPrivate chose exchange-traded funds (ETFs) to power this system. Not only is it easier and cheaper to move in and out only of ETFs than with standard funds, but these “tracker” products seek to mirror industry benchmark indexes that tend to give average returns.

The minimum investment is €15,000, and the service is provided at “a fee that is two or three times cheaper than a traditional wealth manager,” said Thibault de Barsy, CEO of Keytrade Bank Luxembourg. It is a flat fee on total assets of 0.75% plus VAT per year. There is no up-front fee, nor is there an extra charge even if the client rebalances their portfolio.

Australia

Xero wins Best Overall Fintech award (Xero), Rated: AAA

We feel humbled to be awarded the Best Overall Fintech platform by the Fintech Breakthrough Awards. It also provides validation that we’re truly changing the lives of our more than one million subscribers.

Award organizers report $36 trillion in digital payments will be processed by the end of 2017. In the past 12 months, Xero alone transacted $1.2 trillion worth of economic activity.

The very foundation of a small business owner’s financial web is secure bank integrations. These enable banking, accounting and business management to come together. Xero is building a strong, global financial web, working with 110 financial institutions and 500 ecosystem partners around the world.

Millennials fast losing interest in low-rate accounts (LendIt), Rated: A

  • Poor rates on savings accounts, pricey property and stock market volatility is leading to an influx of millennial money to P2P lending
  • The number of millennial investors has increased by >250% over the last 12 months as young savers join older investors in seeking out alternatives to traditional saving and investment products
  • Surge in millennial money has helped RateSetter reach $100m of loans funded in record time for an Australian lending platform
  • 80% of all lenders expect to increase the amount invested within the next 12 months
Source: RateSetter

RateSetter: Millennials are driving P2P growth in Australia(P2P Finance News), Rated: A

The London-headquartered P2P platform, which launched its Australian division to the public in 2014, argues that poor rates on savings accounts, high property prices and stock market volatility have pushed people aged 18-35 towards P2P lending.

RateSetter Australia said that its number of millennial investors had grown by 250 per cent over the last 12 months and now accounts for 58 per cent of total active investors.

India

Here’s all you want to know about alternative asset class – P2P lending (Financial Express), Rated: A

What P2P lending offers investors
– P2P lending in India currently gives a net return of 18-22%
– Borrowers repay principal & interest every month so there is a steady cash flow
– Investors can pursue legal recourse against the borrower in case of defaults
– By diversifying your investment across different borrowers, you will begin to mirror the overall default rate of the platform

P2P lending is like investing in debt; the capital risk is lower, and there exist ways to mitigate it. In case a borrower defaults, investors can pursue legal recourse against the borrower.

Cash in on P2P lending (Telengana Today), Rated: B

A good percentage of people in the world are involved in digitally enabled peer-to-peer exchange. This form of exchange has expanded dramatically in recent years, moving beyond simple retailing and free file exchange to personal, human-intensive services such as hosted accommodation, urban and city-to-city transportation, and peer-to-peer lending.

Here is the basic premise of P2P lending: People sign up on a P2P lending platform like PeerLend as a borrower or as a Lender. A borrower submits an application for a loan by providing his details, and KYC documents. The platform back office team performs a credit assessment of the profile and determines his credit worthiness.

From a lender’s perspective, peer to peer lending allows them to directly lend to other people by having them register on the platform by providing their ID and address proof. They also provide the bank account details that they will use to transact on the platform.

Interest rates – Various P2P platforms in India are charging a one-time registration fee ranging between Rs.500/- to Rs.1,500/-, and a loan servicing fee ranging from 3.5% to 6% of the loan amount.

Canada

OnDeck Canada Partners With Lightspeed (Yahoo! Finance), Rated: AAA

OnDeck Canada, a leading online lender to small businesses in Canada , and Lightspeed, a cloud-based point-of-sale platform for independent retailers and restaurants, have announced a partnership that will allow Lightspeed users to secure OnDeck loans. The new offering will be available to Lightspeed customers in Canada and the US providing up to $500,000 (US) term loans and $100,000 (US) lines of credit.

This strategic partnership between OnDeck and Lightspeed, who each share a focus on assisting small businesses, is a major step forward for Canadian businesses, especially those retail, restaurant, and e-commerce companies that can now acquire OnDeck financing to support their investment in the Lightspeed point of sale (POS) solution.

OnDeck loans will also enable Lightspeed clients to take advantage of growth opportunities such as buying inventory, purchasing equipment, and boosting their customer experience.

OnDeck’s advanced lending technology and staunch dedication to customer service has enabled it to deliver more than $6 billion dollars in capital to over 60,000 businesses across the United States , Canada , and Australia.

South America

Magnetis sees more Brazil investors embracing robo-advisory (NASDAQ), Rated: AAA

Magnetis Gestora de Recursos Ltda, Brazil’s first fintech asset manager, expects demand for affordable access to automated investment advice to surge in coming years as interest rates decline and economic uncertainty persists.

As the central bank undertakes the most aggressive rate cutting cycle in eight years, demand for cheap financial advice has fueled a surge in trials for robo-advisers, an automated form of passive money management that identifies a client’s risk-taking preference.

Since March 2015, Magnetis has conducted 30,000 trials for clients eager to understand a platform providing access to 15,000 different domestic tradable assets.

Growing scale has helped Magnetis cut management fees to 0.4 percent, well below the 0.8 percent to 1 percent that banks and brokerages typically charge customers.

Africa

Banks vs startups: Who leads Africa’s fintech innovation? (This is Africa), Rated: AAA

Only an estimated 34 percent of Africa’s adult population has any form of formal bank account. This is an improvement from a decade ago. Much of this progress can be credited to the growth of mobile and agent network-based banking solutions.

To scale up the trend, banks need to figure out how to effectively join Africa’s fintech innovation ecosystem.

A number of banks have launched bespoke accelerator programmes in a bid to reach out to African entrepreneurs and startups. Barclays, Standard Bank, Citi, and DBS Bank are just a few.  Others seek to partner directly with startups to develop new products and services.

In Cape Town, for example, Barclays has launched a business accelerator programme called Rise in a bid to encourage mutually beneficial collaboration between banks and startups.

Others agree. In east Africa, KCB Bank has partnered with more than 10 startups on projects and is involved with multiple projects supporting entrepreneurship in the region. This is bearing fruit: the bank’s mobile banking app was built by a startup.

Peach Payments took part in the Barclays accelerator in 2016. Upon completion, it signed a proof of concept with the bank to explore further collaboration.

However Keith Jones, co-founder at Sw7, believes that despite their efforts banks have so far failed to develop a mechanism to effectively engage with startups.

While the intent is there, he says, the strict corporate mindset of financial institutions has meant they are slow to adapt to new solutions and models. They can also have a tendency to “smother” small businesses rather than help them to thrive.

6 artificial intelligence startups in Africa to look out for (VentureBurn), Rated: A

South African startup DataProphet last year received a significant investment of an undisclosed amount from Yellowwoods Capital Holdings to expand its international offering. As part of the deal, DataProphet will act as the advanced analytics partner for the group.

The startup, based in Cape Town, has developed various machine-learning interventions, mainly for the finance and insurance sector.

Nigerian startup Kudi.ai has developed a chatbot which allows users to make payments and send money to friends and family in Nigeria via messaging. The company is a graduate of the YCombinator Winter 2017 batch.

The company uses AI to understand user requests, drive conversations, understand user spending habits and prevent fraud.

The startup has put together a business-to-business solution too, which it is piloting with banks and telecommunication companies.

Founded by former equity-derivatives specialist Annabel Dallamore (pictured here) together with Julian Dallamore and Mark Karimov in 2013, Johannesburg startup Stockshop.co.za offers a number of artificial intelligence solutions to financial institutions such as banks and insurance companies.

The startup has also developed a bot interface that completes real-time identity verification checks on behalf of banks and financial institutions in line with requirements under the Financial Intelligence Centre Act (FICA).

The startup has also developed a solution that uses an algorithm that pairs financial behaviour, spending and other data along with emotional cues and provides clients with assistance around financial matters such as payments, administration, rewards, education, analytics and tracking.

It’s also launched a micro-insurance platform in April that is unique to the African market.

Asia

Ant Financial Eyes Japan (Finews), Rated: AAA

China’s Ant Financial Services Group has said it wants to increase operations in Japan and is actively seeking a partner there.

With a deal in Korea already in the bag after a $200 million investment in South Korea’s mobile platform company Kakao Talk, the focus has turned to the world’s thrid-largest economy Japan.

Authors:

George Popescu
Allen Taylor