News Comments Today’s main news: Behind the scenes as Orchard platform struggles, Earnest Prices $175 million Securitization, Peer-to-peer lender Wellesley & Co. pauses origination, RateSetter raises funds as it prepares to list, China Minsheng Investment leads $262m pre-IPO Today’s main analysis : LendingClub Files Presentation in Advance of Annual Shareholders Meeting, Parallels to the High Yield Bond Market, Today’s thought-provoking articles: Blackrock’s Consumer […]
UK fintech shrugs off Brexit, trumps Germany GP:”Before Brexit UK was in the EU and was dominating the financial markets. Before it was in the EU it was also dominating the financial markets. Hundreds of years ago it was already dominating the financial markets. So keep calm and carry on.”
The London-listed investment trust said that the loans sold represented 3.65 per cent and 1.48 per cent respectively of the company’s net asset value (NAV) as of 31 March. The firm said it will retain its non-performing Funding Circle US and Upstart loans, which represented 0.68 per cent and 0.21 per cent respectively of NAV as of 31 March 2017.
In a pessimistic new report, researchers from Morgan Stanley have concluded that while fintech companies style themselves as disruptors they will do more to strengthen than undermine incumbents in the long term.
“Only five disruptors have survived as standalone entities out of over 450 fintech firms launched during the dotcom era,” the report said.
Fintech has been most promising in areas lacking infrastructure and where established players have been weakest. This was particularly true of blockchain and robo-advice.
However, these trends are reversing as major financial institutions have started building their own robo-advisors and acquiring blockchain startups.
“Independent start-ups in the robo-advisor space will struggle to be profitable given the high cost of acquisition and intensifying competition.
“We think however that established financial advisors, banks, insurers, etc. will keep automating parts of their value chain…to improve the infrastructure for established incumbents.”
“Marketplace lenders are poised to grow at a… moderate pace leveraging traditional institutions as primary sources of capital; in essence serving as a more efficient customer acquisition and servicing channel for traditional lenders.
“We remain bullish on the potential for marketplace lenders to take share, as they benefit from regulatory arbitrage and changing consumer behavior.”
“We’re launching a full marketplace from scratch,” Mr. Burton said a few months later, at Orchard’s Flatiron district office, and we “hope everyone shows up.” But they didn’t.
More than a year after Mr. Burton revealed his big plans, Orchard has completed just a scattering of transactions. Over that time, it burned through more than $5 million in legal fees and other expenses.
Next month, hoping to add momentum, Orchard plans to unveil a scaled-back version of the platform, eight months later than first planned.
But regardless of the company’s fate, its struggles thus far reveal just how hard it can be for a new entrant — even one with successful founders, a promising service and big-name investors — to break into a highly regulated industry.
Seeking financial expertise, Orchard recruited a few Wall Street veterans from Merrill Lynch and Bear Stearns. In late spring of last year, Mr. Burton had more than a dozen roadshow meetings with executives from the largest loan platforms, including Lending Club, Prosper Marketplace and Social Finance.
He hoped to charge them monthly fees of $2,500 to $5,000 to participate. Orchard also offered them the ability to be its “data partners,” so Orchard could standardize their data for trading purposes — which Mr. Burton called “the big heavy lift.”
Orchard also enlisted the help of Meredith Cross, a lawyer at WilmerHale and the former head of corporate finance at the Securities and Exchange Commission, as it met with Wall Street regulators.
But in July, S.E.C. officials told Orchard that they would consider loans being traded as securities, potentially imposing a tougher level of oversight. That made some lenders nervous about participating. Some lenders were also concerned about exposing investors they had cultivated to loans from competitors.
“We do not have a current need for a trading platform,” said Ryan Rosett, a chief executive of Credibly, which offers small-business loans. “Our capital markets team has the ability to sell our loans directly to a pool of institutional investors.”
Orchard was also fighting a separate headwind. The broader market for online loans was being buffeted by higher consumer loan defaults and investor fears. Some online lenders cut staff members, and others shut down as loan growth dried up.
As Orchard X struggled to get going, he said, legal documents for trades had “ballooned to 150 pages from a 20-page contract,” leaving him exasperated. “I’m a tech guy!” he said.
As it moves forward, Orchard has played down the regulatory issue, proceeding without an explicit formal S.E.C. ruling on whether the loans are securities. It is a potentially risky move, but one the company believes will work in part because it has dropped its goal of legal standardization, cutting the need for lending platforms to agree on regulation issues. The S.E.C. declined to comment.
In January, Orchard X arranged its first sale of about $30 million in loans from an ailing platform, a small-business lender called CAN Capital. The auction took a lengthy four weeks to complete. But Orchard X did receive a fee of 0.5 percent of the sale price.
Looking back, Mr. Burton said on April 4, Orchard should not have tried to persuade lenders to join the trading platform all at once. Having raised $30 million in 2015, Orchard plans to announce next month that it has raised an additional $20 million or more and to formally roll out its revised Orchard X transaction platform.
LendingClub (NYSE:LC) has filed a new form with the SEC (DEF 14A) in advance of the annual shareholders meeting which is scheduled to take place on June 6, 2017. The addition to the Annual Meeting Proxy Statement, a standard filing, includes a presentation on the company asking shareholders to support Director nominees, executive compensation and ratification of the auditor.
Perhaps the most interesting aspect of the filing is the synopsis of the events in 2016 that led to the departure of founding CEO Renaud Laplanche and the ensuing aftershocks that pummeled the online lender.
The CFPB has pursued lawsuits, as well as formal enforcement actions, concerning misrepresentations of attorney involvement in debt collection-related communications.
On April 17, the Consumer Financial Protection Bureau (CFPB) filed a lawsuit in Ohio district court against the Weltman, Weinburg & Reis law firm (WWR), alleging violations of the Fair Debt Collections Practices Act (FDCPA) stemming from the firm’s issuance of debt collection demand letters. The CFPB’s allegations against WWR closely resemble the FDCPA allegations that were considered by the D.C. Circuit Court of Appeals in Jones v. Dufek, 830 F.3d 523 (D.C. Cir. 2016). Dufek also concerned a debt collection letter that was sent by an attorney acting as a debt collector and not as legal counsel. On March 20, 2017, the U.S. Supreme Court denied the Dufek plaintiff’s petition for a writ of certiorari to review the Court of Appeals’ decision in favor of the defendant attorney/collector. Notwithstanding Dufek, however, debt collectors and first-party creditors are well-advised to be extremely diligent when using law firms as debt collectors.
In actuality, the CFPB’s complaint alleges that “no attorney had assessed any consumer-specific information . . . [a]nd no attorney had made any individual determination that the consumer owed the debt, that a specific letter should be sent to the consumer, that a consumer should receive a [collections] call, or that the account was a candidate for litigation.” Thus, according to the CFPB, the subject letters contained numerous misrepresentations that violated both the FDCPA and the prohibitions of the Consumer Financial Protection Act against unfair, deceptive or abusive acts or practices.
The specific deficiencies cited in the CFPB’s complaint against WWR include the fact that subject letters were printed on law firm letterhead, which prominently included the phrase “ATTORNEYS AT LAW” (in bold type and in all caps) and included the law firm’s name in the signature line.
In determining whether the Dufek letter violated the FDCPA as a false, deceptive or misleading representation, the Court of Appeals noted, as a threshold matter, that “if an attorney is acting only as a debt collector and has not formed a legal opinion about the case, he or she cannot send a letter [stating or implying] otherwise” without misleading the recipient/debtor..
Misrepresentations regarding attorney involvement in collections letters and other communications continue to be a “hot button” issue with the CFPB. The collections letters targeted in the CFPB’s lawsuit against WWR are distinguishable from the letter at issue in Dufek in that the Dufek letter included a disclaimer regarding the attorney’s review of the underlying account. Yet, the CFPB’s complaint against WWR can be read as implying that the use of attorney letterhead and the inclusion of the law firm’s name in the signature line were per se improper.
SAN FRANCISCO, CA–(Marketwired – May 24, 2017) – Earnest today announced the close of the $175 million Earnest 2017-A transaction backed by refinanced student loans. The offering received an AA (high) rating on the senior notes by DBRS which is now only one notch below the highest attainable rating of AAA. The transaction was three-times oversubscribed and traded at the tight end of market guidance.
Earnest has now completed five securitizations of refinanced student loans since February 2016 for a total value of over $877 million. In 15 months, the company has increased its rating on the senior notes from A to AA (high), a progression that often takes several years. This speaks to the quality of the underlying collateral and the advancement Earnest has made as a programmatic issuer in the capital markets.
“This marks another strong securitization for Earnest, providing us the opportunity to welcome new investors and continue building our capital markets program. We’re thrilled at the appetite and investor confidence in our offerings,” said Louis Beryl, CEO and co-founder of Earnest.
Elastic line of credit surpasses $ 200 million in outstanding loans, (Email), Rated: A
More than $680 million funded and 155,000 customers served since 2013 validates need for expanded access to credit in the U.S.
FORT WORTH, TX – May 31, 2017 – Elevate Credit, Inc. (“Elevate”), a leading tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, today announced the Elastic product has surpassed $200 million in total principal outstandings, with more than 120,000 open accounts.
Elastic, a bank-issued line of credit offered by Republic Bank & Trust Company (“Republic Bank”), has loaned over $680 million dollars to more than 155,000 customers, since its launch in 2013. The $200 million in total principal outstandings includes the 10% of outstandings Republic Bank retains. Elastic passed the $100 million in outstandings mark in May 2016.
Elevate (NYSE: ELVT) has originated $4 billion in non-prime credit to more than 1.6 million consumers to date. Its responsible, tech-enabled online credit solutions provide immediate relief to customers today and help them build a brighter financial future. The company is committed to rewarding borrowers’ good financial behavior with features like interest rates that can go down over time, free financial training and free credit monitoring. Elevate’s suite of groundbreaking credit products includes RISE, Elastic and Sunny. For more information, please visit .
Interest Rates on Connext™ Private Student Loans Decrease as Federal Student Loan Rates are Set to Rise, (Email), Rated: A
ReliaMax®, the complete private student lending solutions provider, today announced that the banks and alternative lenders participating in the Connext® Private Student Loan program will lower the interest rates on those loans. EffectiveJune 1, 2017, the lowest rates for variable- and fixed-interest rate Connext® loans for undergraduate and graduate programs will be reduced to 2.87 percent APR* and 5.40 percent APR*, respectively, and the borrower will not be charged an origination fee.
Federal student loan interest rates on new loans are scheduled to increase on July 1 for the 2017-2018 school year. These interest rates are adjusted each year based on the annual Treasury Department auction plus a set percentage amount added for each type of loan program. According to
Blackrock’s Consumer ABS ETF and Parallels to the High Yield Bond Market, (PeerIQ Email), Rated: AAA
Shares of Lending Club and OnDeck surged last Monday 3.9% and 9.5% respectively, on reporting from the
MPOWER Financing Secures Add-on Investment from 1776 Ventures, (Email), Rated: A
MPOWER Financing (www.mpowerfinancing.com) announced today that 1776 Ventures (www.1776.vc) has doubled-down its investment in the company with an additional $500,000 investment ahead of MPOWER’s planned Series B for this summer. 1776 Ventures is an investment fund focused on seed-stage investments seeking to transform complex industries. In addition to being seed and Series A round investors, their partners have also served as a mentor and close advisor to MPOWER Financing.
MPOWER Financing is an innovative fintech company and provider of educational loans to high-promise international students who do not fit the traditional credit criteria of banks or lenders.
Through the partnership, JetBlue’s TrueBlue members who refinance their student loans with SoFi will now earn 1 TrueBlue® point for every $2 they refinance through the lender, up to 50,000 points. With average monthly savings of $288*, refinancing student loans with SoFi frees up extra money that members can use to pursue travel plans, save and invest for the future, or buy a home.
Wellesley & Co., the peer-to-peer lender best-known for investing alongside its investors, has announced wide-ranging changes to the business. In addition to publishing financial results for 2016, the firm has also made a first stab at publishing its loan book online.
Wellesley has now published its audited results for the year ended 31 December 2016. Its loan book grew 10 per cent during the period, to £163.6m, versus £148.7m lent in 2015. The firm made a loss for the year of £210,288, down from a loss of £2.2m in the previous year. But it made a pre-tax profit of £1.3m in the second half of the year.
Other notable points include having supported the development of 822 “mid-priced” homes in the UK. The firm also made a number of new hires in 2016, including Stephen Bell as chief risk officer in February, and Peter Scott as non-executive director in March. The firm claims to have delivered an average interest rate across all products of 4.49 per cent to investors.
Wellesley’s full accounts will be available via its website next week.
Chief financial officer Alasdair Lenman, who was appointed last summer, has resigned from the company. Lenman was hired to help the firm publish its late accounts up to December 2015 ahead of its abortive fundraise on equity crowdfunding platform Seedrs, which was pulled at the start of this year.
Further to these developments, Wellesley has temporarily paused its peer-to-peer lending operations, and is launching a new listed bond on the Irish Stock Exchange.
Turnbull said that Wellesley is pausing its P2P product in order to allow time for technical changes to be made. He said that these changes are designed to satisfy both investor demand and regulatory requirement.
Once re-launched, Wellesley & Co. will no longer deliver monthly interest payments to its investors. The monthly interest payment model was at odds with the style of development loans that the firm originates, which are repaid at maturity. Henceforth, the firm’s P2P product will offer a target rate of return, with interest repaid at maturity.
Wellesley has just launched its third bond, offering investors an annual interest rate of 4.75 per cent over 3 years, or 4 per cent over 2 years, paid monthly. The bond can be held within an ISA wrapper.
The first Wellesley bond was a mini-bond which raised a little shy of £50m. The second was listed on the Irish Stock Exchange, as is this third issue. The second bond was launched in response to ISA demand, and could be invested in via a stocks and shares ISA.
Wellesley is famed for skin-in-the-game approach to P2P, which in practical terms means that it takes a stake of every loan in a first loss position. It has previously been suggested that the proceeds of its bond listings – which in some cases may explicitly be used as working capital by the firm – have been used to fund this first-loss piece, as well as to top up its provision fund.
RateSetter, one of the UK’s “big three” peer-to-peer lenders, has scooped £13m in equity investment from existing backers. Investors in the round included well-known fund managers Woodford Investment Management and Artemis.
The two funds first backed RateSetter with a £20m investment in March 2015, in a round that valued the platform at £150m. This latest round takes the firm’s valuation to over £200m, with £50m in equity capital raised to date.
The online lender has tapped existing investors for what is set to be its last round of private fundraising as the company prepares to list on the stock market to fuel its growth.
RateSetter, which has raised more than £50m of capital in total, will use the funding to launch its lending product in an Individual Savings Account, enabling investors to lend to borrowers online in a tax-free wrapper.
Funding Circle, which has in the past couple of weeks become the largest peer-to-peer site in the UK, also passed the FCA’s authorisation test last week, paving the way for its Innovative Finance ISA.
Fintech firms based in the UK have received more than double the overall capital invested into German fintechs since the start of 2016. In fact, investments grew 81.7 per cent year on year from $284m in Q1 2016 to $516m in the opening quarter of this year, according to research by FinTech Global, a consultancy,
Investments, however, in both German and UK fintech companies have hit five-quarter high’s in Q1 2017 with $218m and $516m amount invested, respectively.
Both the UK and Germany raised nearly half of their total respective funding for 2016 in the opening quarter of the year. Therefore, fintech investment in both countries is on track to surpass the value invested last year.
UK fintech investments in Q1 was driven by the $101.8m round raised by Atom Bank while Germany’s largest deal went to deposit marketplace start-up Raisin which raised $32m Series C round.
Equity crowdfunding platform Seedrs has become the latest alternative finance provider to join a major Natwest programme that aims to open doors for UK SMEs to sources of finance.
“As the most active equity investor in UK private companies, Seedrs has already funded over 500 investment rounds for fast-growth SMEs, with more than £210 million invested into campaigns on our platform to date.
China Minsheng Investment Group, one of the country’s largest private investment group, has led a RMB1.8 billion ($262 million) pre-IPO investment round in Chinese peer-to-peer lending company Tuandaiwang. Other investors in this round include Beijing Yisheng Innovation Technology and Beihai Hongtai Investment. This investment brings the company’s value up to RMB10 billion ($1.46 billion), said a report in China Money Network.
Tuandaiwang operates a P2P lending platform, which enables users to lend their saving at a higher investment return rate than traditional saving rates. It claims that individuals and companies have borrowed around RMB78 billion ($11.4 billion) since its launch in 2012 and lenders can make RMB2.3 billion ($335 million) in returns. The company said that it would spend this proceeds on the platform’s development and investment in other tech assets. The investors in its previous rounds with a combined funding of RMB675 million include JD Capital, Dongguan Securities and Giant Investment.
Chinese smart phone giant XIAOMI has started a three-year loan refinancing for a 2014 loan agreement, with the maximum amount is $1bn. The borrower is XIAOMI(Hong Kong), and the parent company XIAOMI acting as the guarantor. The deadline for underwriter is 23rd June, and the roadshow will be held on 1st June in Hong Kong. Deutsche Bank and Wing Lung Bank jointly served as book runners. The loan has been divided into two parts: Part A for regular loans ( $500 million) , and part B for revolving credit loan ($250 million).
It was revealed that XIAOMI’s $1 billion three-year loan in Oct 2014 was the company’s first show in the loan market. Deutsche Bank, J.P. Morgan Chase & Co. and Morgan Stanley was the initial leading and bookkeeping banks, and other 25 banks were involved in the loan.
Tuandai Group has closed a new round of financing of $270m. The financing was led by Minsheng Capital with $104 million.
Tuandai was set up in 2011, and transformed its core business to P2P Lending in October 2016, dividing its services into asset sector and the internet sector. In early time this month, Tuandai changed the name of their platform from “Tuandai Network” to “Tuandai Network丨 P2P Lending Investment”, and would be engaged in the intermediary business about network lending information.
Banco BNI Europa boosts European SMEs with €10M investment in Portuguese peer-to-peer platform RAIZE, ( Email), Rated: AAA
European Bank BNI Europa signs strategic partnership with Portugal’s largest peer-to-peer lender RAIZE
Portugal/Eurozone: Portugal’s economic recovery fuels interest in SME lending through peer-to-peer platforms
Agreement follows a £45M deal with the UK’s largest invoice peer-to-peer platform in May, 2017
RAIZE (www.raize.pt) is Portugal’s largest peer-to- peer lender focusing on SME lending. The online lender operates its own payments institution licensed and regulated by the Bank of Portugal and currently has more than 10,000 investors lending to SMEs. The platform expects to lend more than €15 million in 2017.
Lendit, a leading marketplace lending start-up, said Monday that it has raised 10 billion won ($8.9 million) from a group of investors including Altos Ventures, a Silicon Valley-based investment firm. Local venture capital fund YellowDog and Collaborative Fund, a New York-based firm, also contributed to the Series-B financing.
“We aim to cement Lendit’s position as the top lending startup in consumer financing by using the funds to boost R&D and foster professionals for tech and finance,” said Kim Sung-joon, CEO & founder of Lendit.
Founded in 2015, Lendit is the country’s top marketplace lender in the consumer lending segment with accumulated loans at 47.4 billion won as of May 29.
RateSetter’s new marketplace seeks to provide “more affordable finance options” for the purchase of energy efficient products by both businesses and individuals.
The marketplace has been given a ‘kickstart’ with a $20 million cornerstone investment from the government’s Clean Energy Finance Corporation (CEFC), RateSetter said in a statement.
It is anticipated that thousands of everyday Australian investors who want to earn attractive returns, while improving the country’s energy footprint, will participate in funding green loans via the marketplace.”
The Reserve Bank is expected to come out by June-July with guidelines to regulate the Indian peer-to-peer (P2P) lending market. The RBI had floated a consultation paper in April 2016 on the Indian P2P lending that has been taking roots in India.
At present, the status is that “it has gone from the RBI to the Ministry of Finance. The Ministry of Finance has put it out to the Ministry of Corporate Affairs and they have to come back (on the subject matter),” Mathews said. Faircent.com, which went live in 2014, has so far facilitated lending to the tune of Rs20 crore from its platform and set a much bigger target for the current fiscal. “So far, we have facilitated around Rs20 crore loans from Faircent platform.
This year we are scaling, we have to do some Rs50 crore of loans this fiscal,” he added. Next week, the company will also enter into loan against property (LAP) domain and match prospecting borrowers and lenders through Faircent.com, Mathews said.
Indian online P2P lending platform Faircent.com announced a new semi-secure student loan product in collaboration with Bangalore-based micro-lending startups.
Under the partnership, college students may fund purchase of items such as laptops, books and smart mobile, by registering their loan requirements on the platform at a “reasonable rate” with a flexible loan period ranging between 6 and 36 months.
Singaporean marketplace lender Capital Match has hit S$40 million in loans funded and has started rolling out infrastructure to onboard European investors.
“The traditional SME lending sector in Singapore is highly inefficient and oligopolistic: at present the largest four banks account for 80 percent of SME Singaporean banking relationships,” Tobias Fischer, Director of Corporate Development, told AltFi.
“[But] banks have been more strict in their lending policies so there has been huge demand on the borrowing side.
“As a result [SME lending] is incredibly profitable, so there are great opportunities for investors to achieve excess returns.”
“Data is a precious thing and will last longer than the systems themselves.” – Tim Berners-Lee, inventor of the World Wide Web. In today’s world, corporations realize that data is currency and leave no stone unturned to protect it. Companies are spending millions of dollars to protect private customer information from hackers, but hackers have become […]
“Data is a precious thing and will last longer than the systems themselves.” – Tim Berners-Lee, inventor of the World Wide Web.
In today’s world, corporations realize that data is currency and leave no stone unturned to protect it. Companies are spending millions of dollars to protect private customer information from hackers, but hackers have become increasingly sophisticated; hence, the number of data breach cases has surged in recent years.
Statistics show the number of data breach incidents that exposed credit and debit cards have increased by 169% in the last five years. It’s also estimated that fraudsters have stolen over a hundred billion dollars in the last six years from consumers and corporations. This presents a huge opportunity for companies like XOR Data Exchange to grow their data-as-a-service business by assisting organizations fight fraud.
The dark web is that part of the internet that requires special software to access and allows users and website operators anonymity. The identity and geolocation of the user cannot be tracked because of layered encryption systems. Thus, communication and transfer between users are kept confidential, and it’s usually impossible to identify the source of information. This has led to the dark web becoming a den of illegal activities with trade in stolen consumer data at the top of the list.
Lumen and E-commerce Partnership
After tasting considerable success with its last product, Compromised Identity, XOR Data Exchange is ready to roll out its new offering Lumen, specifically developed to “to seek out consumers’ personal information on the internet including non-indexed dark web sites that traffic in stolen data and prevent it from being used to perpetrate identity theft and fraud.” The underlying matrix of Lumen is similar to that of Compromised Identity. Through Lumen, XOR Data Exchange is able to discover stolen data available on the dark web and determine whether the data is being used for any kind of fraud.
When Lumen identifies compromised data, XOR Data Exchange automatically includes it in Compromised Identity Exchange. The two products then cross-leverage each other’s strengths. The insights are used to prevent fraud and identity theft.
XOR Data Exchange is also introducing a free product for e-commerce companies based on the Compromised Identity Exchange model. The solution will help e-retailers identify how many data breaches they’ve had, if data is being used to commit fraud, and if particular data is available for sale on the dark web. This allows the company to build insight into specific customers and identify compromised credentials in order to stop them from committing fraud.
Lumen in Numbers
Since formally launching Lumen in May, the company has collected 1.8 billion records from the dark web.
Acquiring this data is not easy. XOR Data Exchange uses a crawler to pull down the data. During the process of selling the breached data, hackers have to make a sample copy, and that too is pulled down by Lumen. The target zone is emails and login addresses, which are hacked to get into bank accounts.
It charges companies on the basis of the number of transactions. The charges depend on the volume and, usually, the cost varies from 0.50 cents to $2 per record. The company sells this service as an anti-fraud product rather than as a credit product.
Funding and Future Services
XOR Data Exchange wants to develop a product that can help a consumer to know if their information is compromised on the dark web. Products like haveibeenpwned.com, which cater to this problem are not that comprehensive, therefore, founders want to develop a combination of XOR and credit bureau products to provide customers an effective solution to the data breach problem.
XOR has been able to raise funds in all investment climates. More importantly, its business is not especially capital intensive. The company focuses on customized products for clients and doesn’t need prior funding for development efforts. They were able to secure $2 million in an extended Series A round at the beginning of this year. In 2015, they secured $8 million in two rounds of funding ($1.8 million seed and $6.2 million Series A)
XOR Data Exchange in the News
XOR Data Exchange roped in former FICO CEO Larry Rosenberger as an investor and board observer. Rosenberger’s expertise in implementing data and analytical models will help XOR achieve the gold standard in fraud mitigation.
The company has also entered a partnership with Zoot Enterprises for offering its suite of products to Zoot clientele.
Dark web and data breaches are a reality in today’s digital-first world. With consumer personal information being saved by multiple entities from banks to e-retailers, personal data is at perpetual risk.
It is vital how corporations deal with a data breach, both internally and as a peer or associated party. How companies deal with external data breaches is also critical as users tend to have same credentials on multiple platforms. This creates an opportunity for hackers to leverage information to attack multiple websites with the same stolen data set. XOR, with its proprietary technology, understands the risk and is developing the next level data technology and networks to create a potent fraud mitigation mechanism.
ICYMI… covfefe; Summers says ‘secular stagnation’ even truer today; bond vigilante story as an affinity fraud; ratings and hegemony; a NYFed comic about the development of monetary systems and backstops; worlds first multiplayer stock market game using real money; other stuff.
ICYMI... covfefe; Summers says ‘secular stagnation’ even truer today; bond vigilante story as an affinity fraud; ratings and hegemony; a NYFed comic about the development of monetary systems and backstops; worlds first multiplayer stock market game using real money; other stuff.
Ronald Reagan once succinctly summarized the US government’s view on regulation the following way: “If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” Taking the UK as an example, financial technology is worth about 7 billion GBP and employs around 60,000 people – safe to say, […]
Ronald Reagan once succinctly summarized the US government’s view on regulation the following way: “If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” Taking the UK as an example, financial technology is worth about 7 billion GBP and employs around 60,000 people – safe to say, the sector is on a roll. On top of the direct economic effect, one has to consider fintech’s wider and broader economic impact from lowering the lower cost of credit or insurance, improving the level of financial inclusion and reducing financial transaction costs across remittances, payments and investments.
Of course, any industry is prone to missteps along the way. The few examples for fintech globally include the proliferation of Ponzi schemes in China together with the growth of P2P lending, the use of bitcoin for illegal purchases, and investor misleading at Lending Club that brought the demise of the company’s founder. Nonetheless, since the industrial benefits are beyond reproach, the ball is in the regulator’s corner to curb the excesses, streamline the judicial framework, and establish the rules of the road for the multi-faceted and rapidly ascending Fintech industry.
There is clear recognition worldwide that regulation is needed to ensure long-term and sustainable growth. At the end of last year, the Office of Comptroller of the Currency (OCC), a division of the U.S. Department of the Treasury, proposed to create a federal charter for non-deposit banking products and services – a major change for a country with state-by-state financial regulation, which could lower barriers to entry for companies looking to innovate the financial services industry. While the Governor of the Bank of England Mark Carney has recently stressed the need to create holistic infrastructure to support the flourishing sector.
Having had first-hand experience in a regulated financial services industry from Brazil to EU and Central Asia, I believe there are a number of clear steps that can drive the growth of fintech globally.
Clear communication With the Industry
Although it may appear obvious, it is critical for the regulator to engage with the fintech industry in gaining an optimal understanding of the needs of the industry. Obviously, the industry is only one of the voices, but in the environment of rapid technological and economic change, it makes sense to get first-hand information. This may help the regulator to prioritize and focus on solving strategic issues.
Share regulatory functions
As much as is possible, regulatory functions have to be shared. The fintech umbrella covers multiple industries: consumer and corporate lending, insurance, and payments to name a few. In our experience, it makes sense to functionally compartmentalize the regulation. For instance, the central bank or consumer protection bureau division regulating consumer lending by the banks should be regulating the similar area of fintech activity. This makes sense from the perspective of synchronized standards for consumer protection. It’s in everyone’s interests to have a unified set of standards on anti-money laundering (AML) and know-your-client (KYC) information disclosure as well as collection practices. Furthermore, incorporating fintech regulation together with mainstream financial services firmly places the former into the center of regulatory attention.
Focus on creation of new infrastructure
Any government should be actively seeding, sponsoring, and promoting what Mark Carney calls “hard infrastructure” for the new breed of financial services companies. This type of infrastructure is more often too much of a burden even for shared corporate investment, yet its potential benefits are clear for any country. The area of focus should be within payments, settlement, identification, and data access. One of the best global examples of the sovereign strategic thinking on the subject is undoubtedly Aadhaar in India – a biometric ID system with over one billion enrollees, or most of the country’s adult population. This gargantuan project coupled together with the country’s recent clamp down on hard cash in the economy can really change the lives of hundreds of millions of its citizens by actively encouraging financial inclusion.
Share the use of existing infrastructure
While creation of the infrastructure is clearly needed, there is lower hanging fruit for driving industrial competitiveness available to regulators globally. First and foremost, it is key to empower the citizens to take ownership of their data held by large incumbents including mainstream financial services (banks, insurance companies) and telecom companies. The way to do this is through the mandatory sharing of this information to third parties, obviously with the explicit consent of the ultimate data owner. While on the one hand it enables the latter to monetize the data and get access to more competitive offerings, this also enables the fintech firms to focus on what they do best: deploy cutting edge technologies and data analysis in targeting market inefficiencies. The prime example of data sharing is the PSD2 directive in the EU that is forcing banks to open up the trove of transactional data to third-parties via API. This initiative is clearly laudable and should be mirrored by regulators globally.
Introduce 5-year road maps
Regulatory uncertainty acts as a major overhang, preventing the industry from developing. First and foremost, this uncertainty stops the flow of capital into the industry creating a massive earning multiple compression. This further prevents the reinvestment of capital due to the increase in uncertainty. It’s important to emphasize that in the fintech world global players with technological know-how have optionality over geographical expansion. All else being equal, these companies will always invest in the countries with the most transparent rules of the road. This implies that the countries that take an ambivalent position are in a precarious position of losing out.
The future of the fintech industry will not be shaped by market adoption and technological advances alone. The role of the government in fostering fintech and steering it in the direction of sustainable growth is key.
Gavyn Davies on the Fed’s lowflation dilemma; Hunger Bonds; your evolving Bloomberg keyboard; Facebucks; Trump’s coat of arms… replacing the word “Integritas,” Latin for integrity, with “Trump”; a year of Google vs Apple maps; other stuff.
Gavyn Davies on the Fed's lowflation dilemma; Hunger Bonds; your evolving Bloomberg keyboard; Facebucks; Trump's coat of arms... replacing the word “Integritas,” Latin for integrity, with “Trump"; a year of Google vs Apple maps; other stuff.