Do SoFi and Square Have a Snowball’s Chance at Owning a Bank?

industrial loan charter ILC

A little-known segment of U.S. financial services – Industrial Loan Companies (ILC), also known as industrial banks – have captured the interest of alternative lenders this year. Even though ILCs have been around for nearly 100 years, their flexible structure and compliance has brought them again to the forefront. Fintech majors like SoFi and Square […]

industrial loan charter ILC

A little-known segment of U.S. financial services – Industrial Loan Companies (ILC), also known as industrial banks – have captured the interest of alternative lenders this year. Even though ILCs have been around for nearly 100 years, their flexible structure and compliance has brought them again to the forefront. Fintech majors like SoFi and Square have applied for this obscure charter last granted a decade ago. The charter allows diversified companies to own a bank without having to comply with the requirements of the Bank Holding Company Act. Therefore, it is imperative to understand how this ILC structure could be a game changer. Mike Nonaka, Partner at Covington & Burling LLP, addresses some of the bigger issues around ILCs.

Who is Covington and Burling LLP?

Covington & Burling LLP was founded by Judge J. Harry Covington and Edward B. Burling in 1919 and has its headquarters in Washington DC. The firm employs over 1,000 lawyers and advisers, and provides legal services in fields like litigation and investigations, regulatory and public policy, and mergers and acquisitions. Its clientele ranges from large companies to trade associations. They have also advised various online lenders and other financial institutions on different regulatory issues for decades.

What is an ILC?

An ILC is a state-chartered depository institution that is supervised by the state and Federal Deposit Insurance Corporation (FDIC), and whose deposits are insured by the FDIC. Utah industrial banks are the most popular state charters with eight out of the 10 largest ILCs. The state’s ILCs also account for 90 percent of the industry’s assets.

California, Colorado, Minnesota, Indiana, Hawaii, and Nevada are other states that have permitted ILCs at various times. Since an ILC is exempted from the definition of “bank” in the Bank Holding Company Act, a company that owns an ILC is not subject to Federal Reserve supervision, capital requirements, and a number of other regulatory requirements. This makes the ILC charter an attractive option for commercial companies interested in owning a bank, as well as for financial firms with the same interest.

A company that owns an ILC can engage in banking activities as well as in activities that are commercial in nature, since they are not subject to any restrictions. There generally are restrictions on the types of companies that can own a bank – commercial companies may not own a bank – but the owner of an ILC is exempt from this restriction. Many commercial companies and financial services firms like Merrill Lynch, UBS, Morgan Stanley, BMW, and Harley-Davidson have set up industrial banks.

The ILC Controversy

Regulators fear that mixing banking with traditional commerce will give an unfair advantage to commercial companies and a “parallel banking system” will unbalance the entire financial system of the country.

Controversy erupted when Wal-Mart wanted to acquire an ILC in 2005, and when Home Depot emerged as a buyer for Utah-based EnerBank, an ILC owned by CMS Energy Corp. Applications by these giants attracted a lot of negative attention, and thousands of comment letters were sent to the FDIC, which held a public hearing on the Wal-Mart application in 2006. Subsequently, 98 members of Congress requested a moratorium on approval of new commercially-owned ILCs. In July 2006, the FDIC issued a six-month moratorium on ILC applications.

Federal deposit insurance, access to the Federal Reserve’s discount window and payment systems, all along with the freedom to run the company’s business free from restrictions under the Bank Holding Company Act are what makes an ILC charter extremely appealing for alternative lenders. Banks are taking note of this development, as federally insured deposits would allow alternative lenders to attract savers and low-cost funds, creating competition for deposits.

SoFi’s ILC Application

It is hard to predict whether the FDIC will approve the SoFi application, submitted on June 6, 2017. But Nonaka believes that SoFi has put together a compelling application. Whether SoFi is fulfilling the statutory criteria or not will be decided by the FDIC and state regulators, and it will be interesting to see how regulators react to the public comments on the SoFi application. What makes the SoFi application so compelling in Nonaka’s eyes is the fact that the company is a mature company with established risk management controls in a lot of the areas the FDIC is concerned about. On the other hand, a former SEC head is on the record for saying SoFi’s recent scandals may put the ILC charter further out of reach for the company.

SoFi applied in June 2017, and with an equity capitalization of over $1.9 billion and almost a $170 million war chest for capitalizing bank operations, has a strong story to tell with regard to its financial resources.

Square’s ILC Application

Square applied for an ILC charter in September 2017. SoFi is an online lender whereas Square is more of a payments company, thus their applications will be judged from different angles, Nonaka said. The FDIC will evaluate Square, like other applicants, in terms of its management expertise, controls the company has in place, its business processes, and its financial stability.

Banking agencies tend to impose higher risk-based capital and liquidity requirements on new institutions. For example, regulators require a higher capital base for new institutions as compared to traditional banks already in operation. Considering that Square Inc. is a listed company with a market cap of around $11 billion, these financial uncertainties should not be insurmountable hurdles for the firm.

Varo Money

Varo Money provides a mobile-first banking product to consumers and has applied for a traditional national bank charter with the FDIC and the Office of the Comptroller of the Currency (OCC). If approved, they will also be able to offer insured deposits, and they will operate as any other brick-and-mortar bank.

The company is relatively young and has raised around $27 million from Warburg Pincus.

The OCC fintech charter is currently not available as compared to the ILC charter, for which the state regulator and FDIC are accepting applications. However, the OCC is in discussion stages regarding the charter. Therefore, Varo Money will not see a ruling on its application until the charter is approved.

More importantly, the OCC fintech charter does not necessitate the applicant offering FDIC-insured deposits, and any proposal for a fintech company to obtain the special purpose charter to offer such deposits also would need to apply for FDIC approval. An ILC, on the other hand, will be able to offer deposits insured by the FDIC given its charter and approval from the FDIC. Thus, in order for an OCC fintech charter applicant to have the same funding advantages as an ILC, the applicant would need to follow similar processes as applicants for an ILC.

Consumer Financial Protection Bureau (CFPB): No Action is a Good Action

One groundbreaking event that happened recently was the issuance of a “no-action” letter to Upstart Network Inc, a lending marketplace for personal loans using “non-traditional variables like education and employment, to predict creditworthiness.” According to the CFPB, “the letter signifies that Bureau staff has no present intent to recommend initiation of supervisory or enforcement action against Upstart with respect to the Equal Credit Opportunity Act.”

The CFPB playing catch up to the innovation in credit models is a good sign for fintech startups looking to leverage diverse data points for originating loans.

The Future of Fintech Banks

Nonaka believes financial regulatory reform will be of great interest to the alternative-lending ecosystem. This reform may involve Congressional legislation.

The decisions on SoFi’s and Square’s ILC applications will be noteworthy as other companies currently are waiting on the sidelines to see the FDIC’s and Utah’s decisions. Approvals of the applications will bring in even more interest in the ILC charter. It may not put an end to traditional brick-and-mortar banks, but it could lead to an all new type of bank that fits in somewhere between challenger banks in the UK and neobanks such as Monzo and Moven and the legacy banks opposing ILC charters.

Authors:

Written by Heena Dhir and Allen Taylor.

Allen Taylor

Friday September 29 2017, Daily News Digest

C-PACE financing

News Comments Today’s main news: LendingClub completes 2nd self-sponsored loan securitization with $323M deal. Funding Circle restates IPO ambitions. Robo.cash tops 2M Euro, 1000th investor. AutoGravity surpasses $1B USD in finance amount requested. Singapore banks closing cryptocurrency, payments accounts. Today’s main analysis: Risk evaluation of commercial PACE securitizations differs from residential deals. Goldman Sachs’ aggressive push into consumer banking. Today’s […]

C-PACE financing

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United States

LendingClub Completes 2nd Self Sponsored Loan Securitization with $ 323 Million Deal (Crowdfund Insider), Rated: AAA

LendingClub (NYSE: LC) has sponsored and contributed to its second securitization deal following the the last successful self sponsored deal this past June. The “Consumer Loan Underlying Bond” (CLUB) Credit Trust 2017-P1 (CLUB 2017-P1) issued $323.1 million in prime notes backed by consumer loan assets originated via the LendingClub platform. This is the sixth securitization supported or sponsored by LendingClub, and the fourth rated securitization of LendingClub facilitated loans overall. LendingClub described the deal as further expanding investor access.

LendingClub reported the transaction was backed by approximately $350 million of collateral and includes $217.3 million of Class A notes rated “A-(sf)”, $51.0 million of Class B notes rated “BBB (sf)” and $54.7 million of Class C notes rated “BB (sf)”.

Orchard’s Online Lending Ecosystem Update: “Lendscape” (Crowdfund Insider), Rated: AAA

Orchard Platform, the nexus of loan originators and institutional investing, has updated their ongoing graphical view of the online lending  world or “Lendscape”.  As the online lending universe has moved from peer to peer lending, to marketplace lending to all forms of online lending, the Lendscape has changed and grown. New lending platforms have been launched, new verticals targeted, and a growing number of ancillary services have joined the space.  Orchard points to the addition of lenders like LendingPointLiberty LendingLendmartAllegro CreditUpLiftArtMoneyAscendOppLoans, and Lendistry.

Perhaps the most important shift in online lending is the growing participation by traditional finance firms.

Source: Crowdfund Insider

Risk Evaluation of Commercial PACE Securitizations Differs From Residential Deals (Morningstar), Rated: AAA

Morningstar Credit Ratings, LLC believes the next iteration of property assessed clean energy securitizations will be in the commercial sector. While securitization of residential PACE assessments tops $3 billion, there have been no public transactions consisting primarily of commercial liens.

Evaluating Property Income Generated to Pay Debts In analyzing the credit risk of transactions backed by commercial assessments, Morningstar considers the debt service coverage ratio, because PACE lending is tied to the property rather than the owner’s creditworthiness.

Evaluating Property Income Generated to Pay Debts

Morningstar evaluates a property’s net operating income in relation to its annual debt-service payments. Among securitized commercial mortgages, the average DSCR is approximately 2.14x, according to Morningstar. C-PACE lenders and aggregators typically require a minimum total DSCR in the 1.00x to 1.15x range. Although, in some cases, the DSCR has dipped below 1.00x, especially if total debtto-value is low when operating expenses are higher than revenue. Factors possibly mitigating a lower DSCR, which include county support, property ownership affiliations within a network, liquidity account and equity position require case-by-case analysis. In addition, DSCR of the lien is more important than the DSCR of the overall debt.

Evaluating Divergent Leverage Metrics

The lien-to-value ratio is another leverage metric that Morningstar analyzes. Although a PACE assessment raises a property’s lien-to-value ratio, the increased risk to the underlying mortgage is likely minimal, as the obligation is usually small in comparison to the mortgage.

It can be more challenging to calculate the lien-to-value ratio for C-PACE levies, because the properties can run the gamut from hotels, farmlands, nursing homes, and gas stations to nonprofit buildings such as churches. Across residential PACE deals, we have seen lien-to-value ratios around 6.7% and combined PACE-lien-plus-mortgage-tovalue ratios at around 62.7%. In C-PACE, lien-to-value ratios hover around 25.0%, not including mortgage debt.

While we scrutinize total debt-to-value, the distribution of leverage offers insight into the financial health of the property. For example, we view a property with a 90% debt-to-value ratio that is composed of an 89% mortgage loan and a 1% PACE assessment more favorably than a property whose debt is composed of an 89% PACE obligation and a 1% mortgage because of higher subordination levels.

Growing Market Size

C-PACE financing has grown to about $482 million as of Sept. 1, encompassing 1,097 commercial projects, according to PACENation. More than 2,500 municipalities have C-PACE programs.

Compared with residential programs, C-PACE is in its infancy, as R-PACE financing totaled about $3.67 billion and R-PACE securitizations totaled around $3.40 billion. A sliver of
commercial assets was included in one of those securitizations, GoodGreen 2016-1, with commercial PACE levies representing approximately 4.8% of the pool’s assets.

Source: Morningstar

Get the full report here.

The Top Sources Of Small Business Financing Based On Approval Rates (Forbes), Rated: AAA

According to the latest Biz2Credit Small Business Lending Index, the monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com. Loan approval percentages of institutional investors have continuously reached new heights this year in terms of approval rates. In August Institutional lenders’ loan approval rates in August reached 63.9%.

Alternative lenders’ approval percentages continue to decline; in August the rate dipped to 57.1%. Approval percentages have dropped every month for more than a year.

Approval percentages at small banks rose one-tenth of a percent in August to 49.0% from July’s 48.9% figure. It is conceivable that the number may cross the 50% benchmark.

Big banks improved one-tenth of a percent to 24.6% in August, setting a new high for the Biz2Credit Index, which has tracked loan approvals since January 2011. The number is creeping up to one-in-four. It’s a good time for bank lending.

Loan approval rates at credit unions dipped to 40.3% in August, falling to a new low for this category of lenders on Biz2Credit’s index.

AutoGravity Surpasses $ 1 Billion USD In Finance Amount Requested, Launches Real-Time Dealership Inventory Nationwide (PR Newswire), Rated: AAA

AutoGravity, a FinTech pioneer on a mission to transform car shopping and financing, today announced that it has reached $1 billion USD in finance amount requested on the AutoGravity platform. Additionally, AutoGravity has announced the launch of real-time inventory for new and used cars from partner dealership groups across the nation. Car shoppers can browse real vehicle inventory on dealership lots, find the specific car that’s right for them and secure up to four finance offers in minutes on the AutoGravity smartphone app.

More over 750,000 car shoppers have downloaded AutoGravity, collectively requesting over $1 billion USD in financing. These users can now search inventory by car brand and model year – as well as characteristics such as body type, drivetrain and color. Car shoppers can find their desired car waiting for them on the showroom lot for the payment they want. With car selected and offers in hand, users can pick up their car and drive off the lot with the confidence of knowing they have secured a fair deal.

AutoGravity partnered closely with the largest dealer groups in the country to design a seamless process by which dealers can easily load inventory feeds, including vehicle details and pictures, to AutoGravity’s secure platform. Inventory is updated and shown to users in real time.

ID-verification firms seize on Equifax moment (American Banker), Rated: A

The Equifax hack, combined with the rise of online lending, may have turned 2017 into a golden age for companies with new ideas for ID.

The software company Mitek plans to roll out a product in the coming year called Mobile Verify for Lending, which offers lenders a five-step process to quickly verify customer identities. Borrowers first share their online bank account information with lenders. They then submit four pictures taken from their smartphones: the front and back of their driver’s licenses, a selfie and a pay stub.

Other players are offering digital lending solutions to make it easier for banks to keep pace with speedy fintech competitors. Upstart, for example, is marketing software, called Powered by Upstart, to banks wanting to get into digital lending.

DFS to Court: OCC Fintech Charter ‘Undermines’ Its Authority (New York Law Journal), Rated: A

The U.S. Office of the Comptroller of the Currency’s plan to offer a special-purpose bank charter for financial technology companies “undermines” the Department of Financial Services’ regulatory authority in New York, the state agency argued in court documents.

“The Fintech Charter Decision is an unlawful assertion of power that usurps New York consumer protection laws and would preempt plaintiff’s ability to regulate any number of the over 600 nondepository institutions she currently regulates,” wrote Matthew Levine, the executive deputy superintendent for enforcement at the department.

Stockpile Raises $ 30 Million to Make Stock Investing Easy for Everyone (PR Newswire), Rated: A

Stockpile, a brokerage popular with millennials that is pioneering fractional share stock investing, announced today that it has raised $30 million in Series B funding led by Fidelity backed Eight Roads Ventures, with participation by Mayfield, Arbor Ventures, Hanna Ventures, Wang Ventures, and others.

This latest investment brings the total raised by Stockpile to more than $45 million.  Mayfield led Stockpile’s $15 millionSeries A in October 2015, with participation by Arbor Ventures, Stanford University, and actor Ashton Kutcher.  Stockpile will use the new funds to bring stock investing to more millennial customers and expand its unique features, Lele said.

Chime raises $ 18 million for mobile banking without the fees (TechCrunch), Rated: A

Chime is raising $18 million in Series B financing for its mobile-first approach to banking. Cathay Innovation led the round with participation from Northwestern Mutual Future Ventures, Crosslink Capital, Forerunner Ventures, Homebrew and others.

It’s a bank account and debit card built for the digital age.

Without monthly fees or overdraft charges, Chime tries to appeal to the millennial generation, touting its affordability and easy-to-use app. Since launching in 2014, Chime has signed up 500,000 customers, who are typically in their late 20s and making between $50,000 and $70,000 per year.

Shinola’s new pitch: the installment plan (Crain’s Detroit Business), Rated: A

Shinola/Detroit LLC is targeting millennials by adding an option to pay for its watches and other luxury goods in an old-fashioned way: the installment plan.

The average order value for Affirm customers is 70 percent higher than the sitewide average, Kopitz said. And about half of those using the service with Shinola are 18-34 years old, the release said.

Around 1,000 retailers now accept payment through Affirm.

Is marketplace lending maturing? (Banking Exchange), Rated: A

As new as fintech and marketplace lending—once known as “peer to peer lending”—may still seem, Noreika suggested that the online lending fraternity may be moving toward maturity.

Noreika said the sweat that went into those ideas has hit $40 billion in consumer and small business credit, with volumes doubling every year since 2010. He noted that some project that at that rate, marketplace lending will hit $1 trillion by 2025—versus the $3.7 trillion in unsecured consumer lending as of yearend 2016.

Noreika pointed out that marketplace lenders have been seeing cracks in their credit since the fourth quarter of 2015.

‘Fintechs tend to march to their own rules’: former SEC chair Levitt (American Banker), Rated: A

“Hardly a day goes by where there isn’t a recording of some scandal or another,” Levitt said. “I think that’s generally true of emerging cultures and emerging standards and cultures. That makes the odds of winning much less than in well established companies with better established cultures.”

His fellow fintech panelists, Sarah Friar, chief financial officer at Square, and Scott Sanborn, CEO of Lending Club, both pointed out that established companies have had their own share of scandals.

Levitt said it’s difficult for startups to attract the kind of quality board members that larger, more mature companies are able to attract.

“Regulators are always playing catch up,” he said. “Regulation today trails the fintech world and often presents impediments and costs that are unnecessary. Regulators are constantly protecting their space so they don’t get caught up in a scandal they’re held accountable for, so there’s a tendency to over-regulate.”

McHenry and Booker Introduce Fintech Bill to Automate Income Verification (House.gov), Rated: B

Today, Chief Deputy Whip Patrick McHenry (R, NC-10), the Vice Chairman of the House Financial Services Committee, and Senator Cory Booker (D-NJ) introduced the IRS Data Verification Modernization Act of 2017. This bipartisan bill will require the Internal Revenue Service (IRS) to automate the Income Verification Express Services process by creating an Application Programming Interface (API) allowing small businesses and consumers to access accurate credit assessments more efficiently. Joining McHenry as an original cosponsor of H.R. 3860 is Congressman Earl Blumenauer (D, OR-03), a senior member of the House Committee on Ways and Means.

Plug and Play Selects Their Winter 2017 Batches (PR Newswire), Rated: B

Plug and Play formally announces the startups accepted into their Winter 2017 batches. Plug and Play will run five programs this quarter focused on Health & Wellness, Insurtech, Internet of Things, Mobility, and Travel & Hospitality.

Wunder Brings on Rich Mauro as Director of Capital Markets (Wunder Capital), Rated: B

We’re incredibly excited to welcome the newest member of Wunder Capital’s team, Rich Mauro. As Director of Capital Markets, Rich will lead Wunder’s institutional fundraising activities, bolstering our capital stack and helping us scale Wunder’s platform to the next level.

United Kingdom

Funding Circle hits £50 million in revenue as CEO restates IPO ambitions (Business Insider), Rated: AAA

Accounts for 2016 filed with Companies House this week show:

  • Revenue rose 59% to £50.9 million;
  • Operating expenses rose by 43% to £103.1 million;
  • Losses dipped by 3% to £35.7 million thanks partly to a foreign exchange boost;
  • £1 billion lent last year;
  • Loans outstanding rose by 61% to £1.37 billion;

‘It goes without saying that international is really hard’

While Desai is bullish on international expansion, the accounts show Funding Circle stopped operations in Spain at the start of the year, a market it entered through the acquisition of Zencap in 2015.

International revenues grew slower than UK revenues last year and Funding Circle parted ways with the head of its continental Europe operations in the middle of last year.

In the UK, economic growth is slowing and consumer debt is ballooning, leading to fears of a possible economic slowdown that could hit lenders.

Funding Circle remains a loss-making business (accumulated losses stand at £116.6 million to date) but Desai says it is on a long-term path to profitability.

Funding Circle is onto a winning strategy (Business Insider), Rated: AAA

Funding Circle, however, has remained a firm market leader, and its annual results for 2016 show it continues to do well.

Its losses narrowed 3% from £37 million ($50 million) in 2015 to £36 million ($48 million) in 2016, as revenue grew 59% year-over-year (YoY) from £32 million ($43 million) to £51 million ($68 million), and originations saw a 61% boost from £846 million ($1.1 billion) to £1.4 billion ($1.9 billion).

Source: Business Insider

Funding Circle posts 59% revenue rise (Bridging&Commercial), Rated: A

Post year-end highlights:

Ranger Direct Lending fund expecting substantial dividend cut (AltFi), Rated: A

The £220m Ranger Direct Lending fund could see its dividend pay-out for the second half of 2017 fall to nearly half of that in the first six months of the year, according to a statement by Ranger.

It is expecting NAV returns in H2 2017 to average 0.4 per cent-0.5 per cent per month (c.5-6 per cent pa), and then recover to 0.6 per cent-0.7 per cent per month (c.7 per cent-9 per cent pa) in 2018, assuming the resolution of Princeton this year.

As a result aggregate dividends of c.25p are expected for H2 2017, compared to 46p in H1.

Source: AltFi

‘Oscars of the start-up world’ has an exciting new winner looking to disrupt property finance (CNBC), Rated: A

LendInvest, an online marketplace platform for property lending and investing, was named the most valuable tech company at the prestigious Investor Allstars event in London on Wednesday evening.

These 20-something Oxford grads just raised $ 30 million for their fintech startup (Business Insider), Rated: A

A “RegTech” — regulation technology — company founded by three Oxford grads all under 30 has raised $30 million (£22.4 million) from investors including Microsoft’s venture capital arm.

Onfido, an identity verification startup, has raised the “Series C” fundraising from Crane Venture Partners, Microsoft Ventures, and Salesforce Ventures, as well as existing investors. It takes the total raised by the London startup to over $60 million.

Onfido’s latest $30 million funding injection follows a $25 million investment last April. Kassai says the latest funding will go towards technology investment and global expansion.

Payday lender Wonga records £65m loss amid overhaul (BBC), Rated: A

Wonga – Britain’s biggest payday lender – posted pre-tax losses of nearly £65m in 2016, but claims its business has been “transformed”.

The lender, which operates in the UK, South Africa, Poland and Spain, saw its losses shrink from £80m in 2015 to £65m in 2016.

How Fintech Is Disrupting Traditional Banking Models (Minute Hack), Rated: A

One of the biggest changes in the financial sector in the UK has been the introduction of challenger banks.

Crucially, these banks have not been mired by the many recent scandals and still rely on customer deposits to build their balance sheets. That’s why fledgling banks such as Metro Bank, Aldermore, Tesco Bank and United Bank UK and currently dominating the best buy tables.

Retail banking is the area that has seen the biggest change as a result of the FinTech sector, but that’s not to say there hasn’t also been a significant impact in the commercial banking sector.

A perfect example is Barclay’s mobile payments service Pingit, designed to compete with Apple Pay, while other banks have launched new mobile banking businesses away from their legacy businesses in an attempt to compete in a digital age.

Bringing financial services to small businesses

One example is peer-to-peer lending, a sector that has sprung up from nothing ten years ago to lend a total of £2.9bn in 2016. This is now filling the capital void for many growing businesses and lending at lower rates than many firms would be able to access elsewhere.

New trustees join Finance Innovation Lab’s board (P2P Finance News), Rated: B

SIX new trustees have been appointed to the board of the Finance Innovation Lab.

The new trustees include Caroline Ellis, a social and organisational change consultant who is taking on the role of chair of the board, and Kate Ormiston Smith, director of finance and operations at The B Team, who is taking up the post of treasurer.

The other new members of the board are: Hanna McCloskey, founder and chief executive officer of Fearless Futures; Toyin Ogundana – investment manager at CAF Venturesome; Paul Riseborough – chief commercial officer at Metro Bank and Julian Thompson, social innovation and fundraising strategist.

How and where to get Crowdlending to fund your Business (TechBullion), Rated: B

When considering your initial application for funding, crowdlending platforms will review your business plan, financial information and other details about your company. In other words, the platforms will review your company’s financial information as well as your personal information in much the same way as banks will do before offering you a loan. Therefore, it is imperative to ensure that your business plan is engaging, comprehensive and well thought out.

Investors will usually seek to get more information about you and your business from social networks like FacebookTwitterand LinkedIn. It will serve you well to ensure that you have an online presence before you seek for funds through crowdlending.

Going by the FundingKnightresearch, most UK investors have a love for the community and would want to give back to some UK SME to ensure its prosperity.

China

More Chinese fintech firms to eye Hong Kong IPOs, says JP Morgan (SCMP), Rated: AAA

More Chinese fintech firms vying to go public could choose Hong Kong as their listing venue, after the city’s first fintech IPO received a hot response from investors, and that Hong Kong has unique advantages compared with other global financial hubs, said JP Morgan’s head of global investment banking in China.

Zhong An Online Property and Casualty Insurance, China’s first online-only insurer, closed nine per cent up from its IPO price on Thursday in its Hong Kong debut. With an oversubscription of nearly 400 times from retail investors, the company had priced its IPO at the top end of the expected range, raising US$1.5 billion in the city’s biggest ever fintech offering.

“The next Zhong An could show up in online payment, P2P lending, [financial] product distribution, or online insurance.”

In particular, revenue from online payment is estimated to increase to 202 billion yuan by 2020. Revenue from online distribution of financial products could grow to 52 billion yuan by then, while that for online lending and online insurance may reach 142 billion yuan and 60 billion yuan respectively.

ZhongAn Insurance Starts Trading on the Hong Kong Stock Exchange (Lend Academy), Rated: AAA

ZhongAn’s IPO will likely make the company the 4th most valuable fintech company in the world with a market cap of about US$10.4 billion, following the top three fintechs, which are Paypal ($78bn), Ant Financial ($68bn) and Lufax ($18bn).

Peter Renton interviewed the CEO of ZhongAn Insurance, Jeffrey Chen, on the Lend Academy Podcast over the summer. Jeffrey said in the interview that ZhongAn has 492 million insurance customers as of December 31, 2016. That is more than four times that of insurance giant AXA’s customer base (107 million, as of December 31, 2016). By this measure, ZhongAn truly is the world’s largest insurance company. And this is just a four-year old company!

Why ZhongAn is So Succesful

For the technology part, ZhongAn has been using artificial intelligence and big data analytics in each step of the insurance value chain, from marketing, underwriting, pricing to claims processing.

Another example is that ZhongAn has partnered with a Chinese automaker to develop internet of things (IoTs) and telematics solutions. Telematics devices can capture drivers’ behavioral data, which can be fed to algorithms using big data techniques to tailor product pricing to observed risk levels.

In ZhongAn’s early days, the revenue generated by shipping return policies accounted for almost 90% of the total revenue. This product would not have been such a success were it not for its partnership with Alibaba. Ant Financial, the financial affiliate of Alibaba, is also the single biggest shareholder (16.04%) of ZhongAn.

Source: :Lend Academy

KKR Invests in Shenzhen Suishou Technology (BusinessWire), Rated: A

Shenzhen Suishou Technology Co. (“Suishou” or the “Company”), a leading personal finance management platform in China, and global investment firm KKR today announced the signing of a definitive agreement under which KKR will invest in Suishou’s Series C funding round to support the Company’s expansion across China.

European Union

Robo.Cash Tops €2 million with 1000th Investor (Crowdfund Insider), Rated: AAA

Emerging peer to peer lender Robo.Cashhas topped €2 million in loans with the advent of the 1000th investor.  According to Robo.Cash, investors are spread across most of Europe with lenders now coming from 28 different countries. The short term loans are coming from Spain and Kazakhstan.

The total sum of earned interests has amounted to more than €50,000 since the start of the platform’s work.

The End of Fintech Is Nigh (FiNews), Rated: AAA

Switzerland is one of the major global fintech centers and the industry is booming: Swisscom counted fewer than a hundred fintech startups in 2015, today there are 208 companies active in wealth management, comparative consulting, crypto finance, data management, payment services and lending (see illustration below).

Blurred Dividing Line

And this may also spell the end of fintech as we know it, in Switzerland, and abroad. That’s at least what Armands Broks (pictured below) believes. The founder and CEO of Twino, a peer-to-peer lending platform, thinks that the fine line between finance industry and fintech is about to be blurred and that fintech eventually will disappear.

The only way forward for fintech is through cooperation agreements and in doing so, «the fintech industry is signing its own death sentence,» Broks said.

PWC consultants said that about 60 percent of Swiss banks have links to fintechs. Four out of five banks are eyeing partnerships in the near future or are planning to expand existing ones.

International

Goldman Sachs’ foray into consumer banking is getting aggressive (Tearsheet), Rated: AAA

The same year it launched GS Bank, it began building a digital-only consumer loan product, Marcus, that was fully developed and on the market 12 months later. Without having the legacy infrastructure under previously existing consumer products and services, the overhaul other major banks have been experiencing don’t exist for Goldman.

“[The] platform approach has not been an obvious approach on Wall Street. Our competitors are generally structured in deep vertical silos and we have a different architecture: these shallower silos built on top of many layers of software, tech infrastructure, cybersecurity, enterprise platforms and increasingly, client platforms,” Marty Chavez, an engineer and Goldman Sachs CIO-turned-CFO this year, said in a keynote at Harvard University earlier this year.

46 percent of Goldman jobs are in technology 
CB Insights analyzed more than 2,000 open Goldman Sachs job listings by division and business unit to confirm it’s focused on building its technology and digital finance units.

Many of the jobs are in digital finance. Earlier this month it reportedly poached 20 employees from New York-based online lending startup Bond Street — engineers, product developers, and risk and marketing specialists — presumably to build out a lending product.

According to the research, published Tuesday, 46 percent of all of the firm’s jobs as of Sept. 14 are in technology, with the highest amount for core platform roles, followed by operations engineering and then equities technology.

Source: Tearsheet

Marcus is expanding in the U.K.

Marcus, the online lending startup built inside the investment bank, has been growing tremendously in the eight months since it launched in October 2016. It has one product: a customizable personal loan for Prime borrowers, with at least a 660 credit score, of up to $30,000. It promises no fees and straightforward repayment terms. It recently passed $1 billion in loan originations with expectations to originate $2 billion by the end of this year. By comparison: SoFi, which launched in 2011, reached its first billion after 14 months; Avant, founded in 2012, took 28 months; 10-year-old Lending Club took 65 months; and Prosper, launched in 2006, passed $1 billion in 98 months.

Goldmoney Inc. Adds Bitcoin and Ethereum to the Goldmoney Holding (Globe Newswire), Rated: A

Goldmoney Inc. (TSX:XAU) (“Goldmoney”) (the “Company”), a precious metal financial service and technology company, today unveiled the addition of vaulted Bitcoin and Ethereum as secure and fully-reserved offline investable assets within the Goldmoney® Holding, a major enhancement that allows qualified clients to buy, sell, and exchange cryptocurrencies with nine global currencies as well as gold, silver, platinum and palladium bullion. With today’s launch, Goldmoney becomes the world’s first publicly traded and regulated financial service to offer insurable, auditable, and Anti-Money Laundering (“AML”) compliant exposure to cryptocurrencies.

  • Buying and selling of digital assets that are safely secured in vaulted cold storage. Cryptocurrency offerings currently include Bitcoin and Ethereum; additional leading digital assets will be added over time.
  • Funding of Goldmoney Holdings with 50 types of cryptocurrency, enabling wallet holders to sell a variety of cryptocurrencies and fund their Goldmoney Holding with fiat currency to access precious metals and other Goldmoney service offerings.
  • Will seek the establishment of peer-to-peer (“P2P”) lending capabilities on digital assets in partnership with Lend and Borrow Trust, allowing owners of Bitcoin and other assets to safely borrow against their positions.

HNWs Would Use Amazon for Wealth Management (Financial Advisor IQ), Rated: A

The majority of high net investors would turn to GoogleAppleFacebook and Amazon for wealth management, Bloomberg writes.

If one of the four tech giants were to enter the advice space, 56.2% of wealthy individuals would entrust them with their money, according to a Capgemini survey of 2,500 individuals with a net worth of $1 million or more in North America, Latin America, Europe and Asia-Pacific cited by the news service. And among people under 40, more than 81% would use one of the four tech firms, according to the survey.

Australia

New fintech “Study Loans” aims to help cash-strapped students (Mozo), Rated: AAA

It’s called Study Loans and is said to be the first online platform dedicated to providing loans to students for both vocational and higher education.

Working closely with education providers, the fintech will track student performance and provide funds as you study through ‘tranches’ – which are based on the number of units you do and when they are completed.

Think of tranches as a ‘pay as you go’ kind of deal. So whether you pass one unit or four, Study Loans will release the funds according to your course progression.

Study Loans has raised $5 million debt equity so far, which is ready to be distributed as the first tranche to Aussie students who have already applied through the platform.

Financing options for students: 

  • Student loans – Student personal loans are designed to help fund your education. They often have a more lenient application criteria and have lower interest rates than standard personal loans. But you are expected to make monthly repayments – so you’ll need to make sure your budget can handle the amount.
  • Peer-to-peer lending
  • HECS-HELP – This is a Government funded scheme for students enrolled in Commonwealth supported institutions with no real interest charged on the loan. You won’t have to pay your student fees upfront, however, you are expected to make repayments once you start earning a salary of $54,869.

MONEFLY LAUNCHES FREE FINTECH PLATFORM WITH ENVESTNET | YODLEE FINANCIAL DATA (Yodlee), Rated: A

Monefly is an innovative new Fintech platform in Australia, focused on providing tools and resources that empower its members to grow income, reduce expenses, build assets, eliminate debt and protect themselves from risk. Some of these exciting tools include free property valuations, automated budgeting, credit scores, bank account consolidation and much more.

Monefly has partnered with Envestnet | Yodlee to help its members access comprehensive financial data available across banking and wealth management from over 15,500 data sources globally.

The data being integrated into Monefly includes superannuation, cash, credit cards, personal debts, mortgages, assets, shares, real estate, credit scores and other investment data.

India

MyAdvo Ties Up with Online Loan Advisor Square Capital for Loan Services (newKerala), Rated: AAA

MyAdvo, India’s leading Legal Tech Startup has entered into an agreement with Square Capital, the digital lending arm of India’s largest real estate transaction platform Square Yards to enable loan facilitation for lawyers on its panel.

Square Capital currently facilitates USD 30- 40Mn(INR 200cr – INR 260cr) of loan disbursals every month, contributed majorly by secured mortgages spread across 50+ banking partners for their different products in home loan, loan against property and business loan.

This exclusive tie-up will benefit MyAdvo registered lawyers in receiving immediate loan solutions without any hassle.

Indians are warming up to robo-advisers (livemint), Rated: A

Robo-advisers, or automated services based on computer algorithms, are catching on in the Indian market due to the relatively lower penetration of financial products in India compared to developed markets.

According to a Business Insider Intelligence forecast, robo-advisers (with some element of automation) will manage investment products worth $1 trillion by 2020, which will go up to $4.6 trillion by as early as 2022.

Scepticism notwithstanding, financial institutions in the country are realising the benefits of robo-advisory services by either building the product in-house or partnering with fintech companies to develop robo-advisers. Take the case of FundsIndia.com, which has a robo-advisory service for which it is forging partnerships with financial biggies. “We have a partnership with Axis Securities and one more company. There is a growing acceptance from the industry, and we are trying to enable better product design,” said Srikant Meenakshi, co-founder, FundsIndia.com. According to him, 15% of his company’s overall portfolio comprises robo-advisory services. Similarly, 5nance has an agreement with HDFC Mutual Fund for its robo-advisor.

Robo-advisory start-up ArthaYantra uses a patented methodology called the Personal Financial Lifecycle Management on its online platform, Arthos. Since its launch in 2008, the site claims to have helped 120,000 customers across more 650 cities and 30 countries.

Asia

Singapore Cryptocurrency Firms Facing Bank Account Closures (Bloomberg), Rated: AAA

Singapore banks have closed accounts of several companies which specialize in providing cryptocurrency and payments services, according to two local bodies which represent financial-technology firms.

Chia Hock Lai, president of the Singapore Fintech Association, which has broader membership than Access, said some of his organization’s members also experienced account closures, though he didn’t provide figures.

Access has 106 members and the Fintech Association has 185, though the two organizations said some companies belong to both groups.

How technology drives a new Taiwanese banking landscape (The Asset), Rated: A

According to Joseph Huang, president of E.Sun Bank, speaking in an interview with The Asset, payments is one area that every bank is looking to explore, although it does not generate huge profits for most banks.

Banks are also more frequently working with technology companies. E.Sun Bank partnered with IBM Taiwan in building its digital branch, which opened in February 2017, making it the first digital branch in Taiwan. Similarly, CTBC partnered with LINE Pay to help merge its banking services with communication apps and social media.

Taishin Bank’s e-banking application, Richart, which attracted over 120,000 subscribers, is targeting young Taiwanese users, while Cathay United Bank is also providing its products to retail customers through its platform My MobiBank.

Authors:

George Popescu
Allen Taylor

Friday September 29 2017, Daily News Digest

C-PACE financing

News Comments Today’s main news: LendingClub completes 2nd self-sponsored loan securitization with $323M deal. Funding Circle restates IPO ambitions. Robo.cash tops 2M Euro, 1000th investor. AutoGravity surpasses $1B USD in finance amount requested. Singapore banks closing cryptocurrency, payments accounts. Today’s main analysis: Risk evaluation of commercial PACE securitizations differs from residential deals. Goldman Sachs’ aggressive push into consumer banking. Today’s […]

C-PACE financing

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International

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News Summary

United States

LendingClub Completes 2nd Self Sponsored Loan Securitization with $ 323 Million Deal (Crowdfund Insider), Rated: AAA

LendingClub (NYSE: LC) has sponsored and contributed to its second securitization deal following the the last successful self sponsored deal this past June. The “Consumer Loan Underlying Bond” (CLUB) Credit Trust 2017-P1 (CLUB 2017-P1) issued $323.1 million in prime notes backed by consumer loan assets originated via the LendingClub platform. This is the sixth securitization supported or sponsored by LendingClub, and the fourth rated securitization of LendingClub facilitated loans overall. LendingClub described the deal as further expanding investor access.

LendingClub reported the transaction was backed by approximately $350 million of collateral and includes $217.3 million of Class A notes rated “A-(sf)”, $51.0 million of Class B notes rated “BBB (sf)” and $54.7 million of Class C notes rated “BB (sf)”.

Orchard’s Online Lending Ecosystem Update: “Lendscape” (Crowdfund Insider), Rated: AAA

Orchard Platform, the nexus of loan originators and institutional investing, has updated their ongoing graphical view of the online lending  world or “Lendscape”.  As the online lending universe has moved from peer to peer lending, to marketplace lending to all forms of online lending, the Lendscape has changed and grown. New lending platforms have been launched, new verticals targeted, and a growing number of ancillary services have joined the space.  Orchard points to the addition of lenders like LendingPointLiberty LendingLendmartAllegro CreditUpLiftArtMoneyAscendOppLoans, and Lendistry.

Perhaps the most important shift in online lending is the growing participation by traditional finance firms.

Source: Crowdfund Insider

Risk Evaluation of Commercial PACE Securitizations Differs From Residential Deals (Morningstar), Rated: AAA

Morningstar Credit Ratings, LLC believes the next iteration of property assessed clean energy securitizations will be in the commercial sector. While securitization of residential PACE assessments tops $3 billion, there have been no public transactions consisting primarily of commercial liens.

Evaluating Property Income Generated to Pay Debts In analyzing the credit risk of transactions backed by commercial assessments, Morningstar considers the debt service coverage ratio, because PACE lending is tied to the property rather than the owner’s creditworthiness.

Evaluating Property Income Generated to Pay Debts

Morningstar evaluates a property’s net operating income in relation to its annual debt-service payments. Among securitized commercial mortgages, the average DSCR is approximately 2.14x, according to Morningstar. C-PACE lenders and aggregators typically require a minimum total DSCR in the 1.00x to 1.15x range. Although, in some cases, the DSCR has dipped below 1.00x, especially if total debtto-value is low when operating expenses are higher than revenue. Factors possibly mitigating a lower DSCR, which include county support, property ownership affiliations within a network, liquidity account and equity position require case-by-case analysis. In addition, DSCR of the lien is more important than the DSCR of the overall debt.

Evaluating Divergent Leverage Metrics

The lien-to-value ratio is another leverage metric that Morningstar analyzes. Although a PACE assessment raises a property’s lien-to-value ratio, the increased risk to the underlying mortgage is likely minimal, as the obligation is usually small in comparison to the mortgage.

It can be more challenging to calculate the lien-to-value ratio for C-PACE levies, because the properties can run the gamut from hotels, farmlands, nursing homes, and gas stations to nonprofit buildings such as churches. Across residential PACE deals, we have seen lien-to-value ratios around 6.7% and combined PACE-lien-plus-mortgage-tovalue ratios at around 62.7%. In C-PACE, lien-to-value ratios hover around 25.0%, not including mortgage debt.

While we scrutinize total debt-to-value, the distribution of leverage offers insight into the financial health of the property. For example, we view a property with a 90% debt-to-value ratio that is composed of an 89% mortgage loan and a 1% PACE assessment more favorably than a property whose debt is composed of an 89% PACE obligation and a 1% mortgage because of higher subordination levels.

Growing Market Size

C-PACE financing has grown to about $482 million as of Sept. 1, encompassing 1,097 commercial projects, according to PACENation. More than 2,500 municipalities have C-PACE programs.

Compared with residential programs, C-PACE is in its infancy, as R-PACE financing totaled about $3.67 billion and R-PACE securitizations totaled around $3.40 billion. A sliver of
commercial assets was included in one of those securitizations, GoodGreen 2016-1, with commercial PACE levies representing approximately 4.8% of the pool’s assets.

Source: Morningstar

Get the full report here.

The Top Sources Of Small Business Financing Based On Approval Rates (Forbes), Rated: AAA

According to the latest Biz2Credit Small Business Lending Index, the monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com. Loan approval percentages of institutional investors have continuously reached new heights this year in terms of approval rates. In August Institutional lenders’ loan approval rates in August reached 63.9%.

Alternative lenders’ approval percentages continue to decline; in August the rate dipped to 57.1%. Approval percentages have dropped every month for more than a year.

Approval percentages at small banks rose one-tenth of a percent in August to 49.0% from July’s 48.9% figure. It is conceivable that the number may cross the 50% benchmark.

Big banks improved one-tenth of a percent to 24.6% in August, setting a new high for the Biz2Credit Index, which has tracked loan approvals since January 2011. The number is creeping up to one-in-four. It’s a good time for bank lending.

Loan approval rates at credit unions dipped to 40.3% in August, falling to a new low for this category of lenders on Biz2Credit’s index.

AutoGravity Surpasses $ 1 Billion USD In Finance Amount Requested, Launches Real-Time Dealership Inventory Nationwide (PR Newswire), Rated: AAA

AutoGravity, a FinTech pioneer on a mission to transform car shopping and financing, today announced that it has reached $1 billion USD in finance amount requested on the AutoGravity platform. Additionally, AutoGravity has announced the launch of real-time inventory for new and used cars from partner dealership groups across the nation. Car shoppers can browse real vehicle inventory on dealership lots, find the specific car that’s right for them and secure up to four finance offers in minutes on the AutoGravity smartphone app.

More over 750,000 car shoppers have downloaded AutoGravity, collectively requesting over $1 billion USD in financing. These users can now search inventory by car brand and model year – as well as characteristics such as body type, drivetrain and color. Car shoppers can find their desired car waiting for them on the showroom lot for the payment they want. With car selected and offers in hand, users can pick up their car and drive off the lot with the confidence of knowing they have secured a fair deal.

AutoGravity partnered closely with the largest dealer groups in the country to design a seamless process by which dealers can easily load inventory feeds, including vehicle details and pictures, to AutoGravity’s secure platform. Inventory is updated and shown to users in real time.

ID-verification firms seize on Equifax moment (American Banker), Rated: A

The Equifax hack, combined with the rise of online lending, may have turned 2017 into a golden age for companies with new ideas for ID.

The software company Mitek plans to roll out a product in the coming year called Mobile Verify for Lending, which offers lenders a five-step process to quickly verify customer identities. Borrowers first share their online bank account information with lenders. They then submit four pictures taken from their smartphones: the front and back of their driver’s licenses, a selfie and a pay stub.

Other players are offering digital lending solutions to make it easier for banks to keep pace with speedy fintech competitors. Upstart, for example, is marketing software, called Powered by Upstart, to banks wanting to get into digital lending.

DFS to Court: OCC Fintech Charter ‘Undermines’ Its Authority (New York Law Journal), Rated: A

The U.S. Office of the Comptroller of the Currency’s plan to offer a special-purpose bank charter for financial technology companies “undermines” the Department of Financial Services’ regulatory authority in New York, the state agency argued in court documents.

“The Fintech Charter Decision is an unlawful assertion of power that usurps New York consumer protection laws and would preempt plaintiff’s ability to regulate any number of the over 600 nondepository institutions she currently regulates,” wrote Matthew Levine, the executive deputy superintendent for enforcement at the department.

Stockpile Raises $ 30 Million to Make Stock Investing Easy for Everyone (PR Newswire), Rated: A

Stockpile, a brokerage popular with millennials that is pioneering fractional share stock investing, announced today that it has raised $30 million in Series B funding led by Fidelity backed Eight Roads Ventures, with participation by Mayfield, Arbor Ventures, Hanna Ventures, Wang Ventures, and others.

This latest investment brings the total raised by Stockpile to more than $45 million.  Mayfield led Stockpile’s $15 millionSeries A in October 2015, with participation by Arbor Ventures, Stanford University, and actor Ashton Kutcher.  Stockpile will use the new funds to bring stock investing to more millennial customers and expand its unique features, Lele said.

Chime raises $ 18 million for mobile banking without the fees (TechCrunch), Rated: A

Chime is raising $18 million in Series B financing for its mobile-first approach to banking. Cathay Innovation led the round with participation from Northwestern Mutual Future Ventures, Crosslink Capital, Forerunner Ventures, Homebrew and others.

It’s a bank account and debit card built for the digital age.

Without monthly fees or overdraft charges, Chime tries to appeal to the millennial generation, touting its affordability and easy-to-use app. Since launching in 2014, Chime has signed up 500,000 customers, who are typically in their late 20s and making between $50,000 and $70,000 per year.

Shinola’s new pitch: the installment plan (Crain’s Detroit Business), Rated: A

Shinola/Detroit LLC is targeting millennials by adding an option to pay for its watches and other luxury goods in an old-fashioned way: the installment plan.

The average order value for Affirm customers is 70 percent higher than the sitewide average, Kopitz said. And about half of those using the service with Shinola are 18-34 years old, the release said.

Around 1,000 retailers now accept payment through Affirm.

Is marketplace lending maturing? (Banking Exchange), Rated: A

As new as fintech and marketplace lending—once known as “peer to peer lending”—may still seem, Noreika suggested that the online lending fraternity may be moving toward maturity.

Noreika said the sweat that went into those ideas has hit $40 billion in consumer and small business credit, with volumes doubling every year since 2010. He noted that some project that at that rate, marketplace lending will hit $1 trillion by 2025—versus the $3.7 trillion in unsecured consumer lending as of yearend 2016.

Noreika pointed out that marketplace lenders have been seeing cracks in their credit since the fourth quarter of 2015.

‘Fintechs tend to march to their own rules’: former SEC chair Levitt (American Banker), Rated: A

“Hardly a day goes by where there isn’t a recording of some scandal or another,” Levitt said. “I think that’s generally true of emerging cultures and emerging standards and cultures. That makes the odds of winning much less than in well established companies with better established cultures.”

His fellow fintech panelists, Sarah Friar, chief financial officer at Square, and Scott Sanborn, CEO of Lending Club, both pointed out that established companies have had their own share of scandals.

Levitt said it’s difficult for startups to attract the kind of quality board members that larger, more mature companies are able to attract.

“Regulators are always playing catch up,” he said. “Regulation today trails the fintech world and often presents impediments and costs that are unnecessary. Regulators are constantly protecting their space so they don’t get caught up in a scandal they’re held accountable for, so there’s a tendency to over-regulate.”

McHenry and Booker Introduce Fintech Bill to Automate Income Verification (House.gov), Rated: B

Today, Chief Deputy Whip Patrick McHenry (R, NC-10), the Vice Chairman of the House Financial Services Committee, and Senator Cory Booker (D-NJ) introduced the IRS Data Verification Modernization Act of 2017. This bipartisan bill will require the Internal Revenue Service (IRS) to automate the Income Verification Express Services process by creating an Application Programming Interface (API) allowing small businesses and consumers to access accurate credit assessments more efficiently. Joining McHenry as an original cosponsor of H.R. 3860 is Congressman Earl Blumenauer (D, OR-03), a senior member of the House Committee on Ways and Means.

Plug and Play Selects Their Winter 2017 Batches (PR Newswire), Rated: B

Plug and Play formally announces the startups accepted into their Winter 2017 batches. Plug and Play will run five programs this quarter focused on Health & Wellness, Insurtech, Internet of Things, Mobility, and Travel & Hospitality.

Wunder Brings on Rich Mauro as Director of Capital Markets (Wunder Capital), Rated: B

We’re incredibly excited to welcome the newest member of Wunder Capital’s team, Rich Mauro. As Director of Capital Markets, Rich will lead Wunder’s institutional fundraising activities, bolstering our capital stack and helping us scale Wunder’s platform to the next level.

United Kingdom

Funding Circle hits £50 million in revenue as CEO restates IPO ambitions (Business Insider), Rated: AAA

Accounts for 2016 filed with Companies House this week show:

  • Revenue rose 59% to £50.9 million;
  • Operating expenses rose by 43% to £103.1 million;
  • Losses dipped by 3% to £35.7 million thanks partly to a foreign exchange boost;
  • £1 billion lent last year;
  • Loans outstanding rose by 61% to £1.37 billion;

‘It goes without saying that international is really hard’

While Desai is bullish on international expansion, the accounts show Funding Circle stopped operations in Spain at the start of the year, a market it entered through the acquisition of Zencap in 2015.

International revenues grew slower than UK revenues last year and Funding Circle parted ways with the head of its continental Europe operations in the middle of last year.

In the UK, economic growth is slowing and consumer debt is ballooning, leading to fears of a possible economic slowdown that could hit lenders.

Funding Circle remains a loss-making business (accumulated losses stand at £116.6 million to date) but Desai says it is on a long-term path to profitability.

Funding Circle is onto a winning strategy (Business Insider), Rated: AAA

Funding Circle, however, has remained a firm market leader, and its annual results for 2016 show it continues to do well.

Its losses narrowed 3% from £37 million ($50 million) in 2015 to £36 million ($48 million) in 2016, as revenue grew 59% year-over-year (YoY) from £32 million ($43 million) to £51 million ($68 million), and originations saw a 61% boost from £846 million ($1.1 billion) to £1.4 billion ($1.9 billion).

Source: Business Insider

Funding Circle posts 59% revenue rise (Bridging&Commercial), Rated: A

Post year-end highlights:

Ranger Direct Lending fund expecting substantial dividend cut (AltFi), Rated: A

The £220m Ranger Direct Lending fund could see its dividend pay-out for the second half of 2017 fall to nearly half of that in the first six months of the year, according to a statement by Ranger.

It is expecting NAV returns in H2 2017 to average 0.4 per cent-0.5 per cent per month (c.5-6 per cent pa), and then recover to 0.6 per cent-0.7 per cent per month (c.7 per cent-9 per cent pa) in 2018, assuming the resolution of Princeton this year.

As a result aggregate dividends of c.25p are expected for H2 2017, compared to 46p in H1.

Source: AltFi

‘Oscars of the start-up world’ has an exciting new winner looking to disrupt property finance (CNBC), Rated: A

LendInvest, an online marketplace platform for property lending and investing, was named the most valuable tech company at the prestigious Investor Allstars event in London on Wednesday evening.

These 20-something Oxford grads just raised $ 30 million for their fintech startup (Business Insider), Rated: A

A “RegTech” — regulation technology — company founded by three Oxford grads all under 30 has raised $30 million (£22.4 million) from investors including Microsoft’s venture capital arm.

Onfido, an identity verification startup, has raised the “Series C” fundraising from Crane Venture Partners, Microsoft Ventures, and Salesforce Ventures, as well as existing investors. It takes the total raised by the London startup to over $60 million.

Onfido’s latest $30 million funding injection follows a $25 million investment last April. Kassai says the latest funding will go towards technology investment and global expansion.

Payday lender Wonga records £65m loss amid overhaul (BBC), Rated: A

Wonga – Britain’s biggest payday lender – posted pre-tax losses of nearly £65m in 2016, but claims its business has been “transformed”.

The lender, which operates in the UK, South Africa, Poland and Spain, saw its losses shrink from £80m in 2015 to £65m in 2016.

How Fintech Is Disrupting Traditional Banking Models (Minute Hack), Rated: A

One of the biggest changes in the financial sector in the UK has been the introduction of challenger banks.

Crucially, these banks have not been mired by the many recent scandals and still rely on customer deposits to build their balance sheets. That’s why fledgling banks such as Metro Bank, Aldermore, Tesco Bank and United Bank UK and currently dominating the best buy tables.

Retail banking is the area that has seen the biggest change as a result of the FinTech sector, but that’s not to say there hasn’t also been a significant impact in the commercial banking sector.

A perfect example is Barclay’s mobile payments service Pingit, designed to compete with Apple Pay, while other banks have launched new mobile banking businesses away from their legacy businesses in an attempt to compete in a digital age.

Bringing financial services to small businesses

One example is peer-to-peer lending, a sector that has sprung up from nothing ten years ago to lend a total of £2.9bn in 2016. This is now filling the capital void for many growing businesses and lending at lower rates than many firms would be able to access elsewhere.

New trustees join Finance Innovation Lab’s board (P2P Finance News), Rated: B

SIX new trustees have been appointed to the board of the Finance Innovation Lab.

The new trustees include Caroline Ellis, a social and organisational change consultant who is taking on the role of chair of the board, and Kate Ormiston Smith, director of finance and operations at The B Team, who is taking up the post of treasurer.

The other new members of the board are: Hanna McCloskey, founder and chief executive officer of Fearless Futures; Toyin Ogundana – investment manager at CAF Venturesome; Paul Riseborough – chief commercial officer at Metro Bank and Julian Thompson, social innovation and fundraising strategist.

How and where to get Crowdlending to fund your Business (TechBullion), Rated: B

When considering your initial application for funding, crowdlending platforms will review your business plan, financial information and other details about your company. In other words, the platforms will review your company’s financial information as well as your personal information in much the same way as banks will do before offering you a loan. Therefore, it is imperative to ensure that your business plan is engaging, comprehensive and well thought out.

Investors will usually seek to get more information about you and your business from social networks like FacebookTwitterand LinkedIn. It will serve you well to ensure that you have an online presence before you seek for funds through crowdlending.

Going by the FundingKnightresearch, most UK investors have a love for the community and would want to give back to some UK SME to ensure its prosperity.

China

More Chinese fintech firms to eye Hong Kong IPOs, says JP Morgan (SCMP), Rated: AAA

More Chinese fintech firms vying to go public could choose Hong Kong as their listing venue, after the city’s first fintech IPO received a hot response from investors, and that Hong Kong has unique advantages compared with other global financial hubs, said JP Morgan’s head of global investment banking in China.

Zhong An Online Property and Casualty Insurance, China’s first online-only insurer, closed nine per cent up from its IPO price on Thursday in its Hong Kong debut. With an oversubscription of nearly 400 times from retail investors, the company had priced its IPO at the top end of the expected range, raising US$1.5 billion in the city’s biggest ever fintech offering.

“The next Zhong An could show up in online payment, P2P lending, [financial] product distribution, or online insurance.”

In particular, revenue from online payment is estimated to increase to 202 billion yuan by 2020. Revenue from online distribution of financial products could grow to 52 billion yuan by then, while that for online lending and online insurance may reach 142 billion yuan and 60 billion yuan respectively.

ZhongAn Insurance Starts Trading on the Hong Kong Stock Exchange (Lend Academy), Rated: AAA

ZhongAn’s IPO will likely make the company the 4th most valuable fintech company in the world with a market cap of about US$10.4 billion, following the top three fintechs, which are Paypal ($78bn), Ant Financial ($68bn) and Lufax ($18bn).

Peter Renton interviewed the CEO of ZhongAn Insurance, Jeffrey Chen, on the Lend Academy Podcast over the summer. Jeffrey said in the interview that ZhongAn has 492 million insurance customers as of December 31, 2016. That is more than four times that of insurance giant AXA’s customer base (107 million, as of December 31, 2016). By this measure, ZhongAn truly is the world’s largest insurance company. And this is just a four-year old company!

Why ZhongAn is So Succesful

For the technology part, ZhongAn has been using artificial intelligence and big data analytics in each step of the insurance value chain, from marketing, underwriting, pricing to claims processing.

Another example is that ZhongAn has partnered with a Chinese automaker to develop internet of things (IoTs) and telematics solutions. Telematics devices can capture drivers’ behavioral data, which can be fed to algorithms using big data techniques to tailor product pricing to observed risk levels.

In ZhongAn’s early days, the revenue generated by shipping return policies accounted for almost 90% of the total revenue. This product would not have been such a success were it not for its partnership with Alibaba. Ant Financial, the financial affiliate of Alibaba, is also the single biggest shareholder (16.04%) of ZhongAn.

Source: :Lend Academy

KKR Invests in Shenzhen Suishou Technology (BusinessWire), Rated: A

Shenzhen Suishou Technology Co. (“Suishou” or the “Company”), a leading personal finance management platform in China, and global investment firm KKR today announced the signing of a definitive agreement under which KKR will invest in Suishou’s Series C funding round to support the Company’s expansion across China.

European Union

Robo.Cash Tops €2 million with 1000th Investor (Crowdfund Insider), Rated: AAA

Emerging peer to peer lender Robo.Cashhas topped €2 million in loans with the advent of the 1000th investor.  According to Robo.Cash, investors are spread across most of Europe with lenders now coming from 28 different countries. The short term loans are coming from Spain and Kazakhstan.

The total sum of earned interests has amounted to more than €50,000 since the start of the platform’s work.

The End of Fintech Is Nigh (FiNews), Rated: AAA

Switzerland is one of the major global fintech centers and the industry is booming: Swisscom counted fewer than a hundred fintech startups in 2015, today there are 208 companies active in wealth management, comparative consulting, crypto finance, data management, payment services and lending (see illustration below).

Blurred Dividing Line

And this may also spell the end of fintech as we know it, in Switzerland, and abroad. That’s at least what Armands Broks (pictured below) believes. The founder and CEO of Twino, a peer-to-peer lending platform, thinks that the fine line between finance industry and fintech is about to be blurred and that fintech eventually will disappear.

The only way forward for fintech is through cooperation agreements and in doing so, «the fintech industry is signing its own death sentence,» Broks said.

PWC consultants said that about 60 percent of Swiss banks have links to fintechs. Four out of five banks are eyeing partnerships in the near future or are planning to expand existing ones.

International

Goldman Sachs’ foray into consumer banking is getting aggressive (Tearsheet), Rated: AAA

The same year it launched GS Bank, it began building a digital-only consumer loan product, Marcus, that was fully developed and on the market 12 months later. Without having the legacy infrastructure under previously existing consumer products and services, the overhaul other major banks have been experiencing don’t exist for Goldman.

“[The] platform approach has not been an obvious approach on Wall Street. Our competitors are generally structured in deep vertical silos and we have a different architecture: these shallower silos built on top of many layers of software, tech infrastructure, cybersecurity, enterprise platforms and increasingly, client platforms,” Marty Chavez, an engineer and Goldman Sachs CIO-turned-CFO this year, said in a keynote at Harvard University earlier this year.

46 percent of Goldman jobs are in technology 
CB Insights analyzed more than 2,000 open Goldman Sachs job listings by division and business unit to confirm it’s focused on building its technology and digital finance units.

Many of the jobs are in digital finance. Earlier this month it reportedly poached 20 employees from New York-based online lending startup Bond Street — engineers, product developers, and risk and marketing specialists — presumably to build out a lending product.

According to the research, published Tuesday, 46 percent of all of the firm’s jobs as of Sept. 14 are in technology, with the highest amount for core platform roles, followed by operations engineering and then equities technology.

Source: Tearsheet

Marcus is expanding in the U.K.

Marcus, the online lending startup built inside the investment bank, has been growing tremendously in the eight months since it launched in October 2016. It has one product: a customizable personal loan for Prime borrowers, with at least a 660 credit score, of up to $30,000. It promises no fees and straightforward repayment terms. It recently passed $1 billion in loan originations with expectations to originate $2 billion by the end of this year. By comparison: SoFi, which launched in 2011, reached its first billion after 14 months; Avant, founded in 2012, took 28 months; 10-year-old Lending Club took 65 months; and Prosper, launched in 2006, passed $1 billion in 98 months.

Goldmoney Inc. Adds Bitcoin and Ethereum to the Goldmoney Holding (Globe Newswire), Rated: A

Goldmoney Inc. (TSX:XAU) (“Goldmoney”) (the “Company”), a precious metal financial service and technology company, today unveiled the addition of vaulted Bitcoin and Ethereum as secure and fully-reserved offline investable assets within the Goldmoney® Holding, a major enhancement that allows qualified clients to buy, sell, and exchange cryptocurrencies with nine global currencies as well as gold, silver, platinum and palladium bullion. With today’s launch, Goldmoney becomes the world’s first publicly traded and regulated financial service to offer insurable, auditable, and Anti-Money Laundering (“AML”) compliant exposure to cryptocurrencies.

  • Buying and selling of digital assets that are safely secured in vaulted cold storage. Cryptocurrency offerings currently include Bitcoin and Ethereum; additional leading digital assets will be added over time.
  • Funding of Goldmoney Holdings with 50 types of cryptocurrency, enabling wallet holders to sell a variety of cryptocurrencies and fund their Goldmoney Holding with fiat currency to access precious metals and other Goldmoney service offerings.
  • Will seek the establishment of peer-to-peer (“P2P”) lending capabilities on digital assets in partnership with Lend and Borrow Trust, allowing owners of Bitcoin and other assets to safely borrow against their positions.

HNWs Would Use Amazon for Wealth Management (Financial Advisor IQ), Rated: A

The majority of high net investors would turn to GoogleAppleFacebook and Amazon for wealth management, Bloomberg writes.

If one of the four tech giants were to enter the advice space, 56.2% of wealthy individuals would entrust them with their money, according to a Capgemini survey of 2,500 individuals with a net worth of $1 million or more in North America, Latin America, Europe and Asia-Pacific cited by the news service. And among people under 40, more than 81% would use one of the four tech firms, according to the survey.

Australia

New fintech “Study Loans” aims to help cash-strapped students (Mozo), Rated: AAA

It’s called Study Loans and is said to be the first online platform dedicated to providing loans to students for both vocational and higher education.

Working closely with education providers, the fintech will track student performance and provide funds as you study through ‘tranches’ – which are based on the number of units you do and when they are completed.

Think of tranches as a ‘pay as you go’ kind of deal. So whether you pass one unit or four, Study Loans will release the funds according to your course progression.

Study Loans has raised $5 million debt equity so far, which is ready to be distributed as the first tranche to Aussie students who have already applied through the platform.

Financing options for students: 

  • Student loans – Student personal loans are designed to help fund your education. They often have a more lenient application criteria and have lower interest rates than standard personal loans. But you are expected to make monthly repayments – so you’ll need to make sure your budget can handle the amount.
  • Peer-to-peer lending
  • HECS-HELP – This is a Government funded scheme for students enrolled in Commonwealth supported institutions with no real interest charged on the loan. You won’t have to pay your student fees upfront, however, you are expected to make repayments once you start earning a salary of $54,869.

MONEFLY LAUNCHES FREE FINTECH PLATFORM WITH ENVESTNET | YODLEE FINANCIAL DATA (Yodlee), Rated: A

Monefly is an innovative new Fintech platform in Australia, focused on providing tools and resources that empower its members to grow income, reduce expenses, build assets, eliminate debt and protect themselves from risk. Some of these exciting tools include free property valuations, automated budgeting, credit scores, bank account consolidation and much more.

Monefly has partnered with Envestnet | Yodlee to help its members access comprehensive financial data available across banking and wealth management from over 15,500 data sources globally.

The data being integrated into Monefly includes superannuation, cash, credit cards, personal debts, mortgages, assets, shares, real estate, credit scores and other investment data.

India

MyAdvo Ties Up with Online Loan Advisor Square Capital for Loan Services (newKerala), Rated: AAA

MyAdvo, India’s leading Legal Tech Startup has entered into an agreement with Square Capital, the digital lending arm of India’s largest real estate transaction platform Square Yards to enable loan facilitation for lawyers on its panel.

Square Capital currently facilitates USD 30- 40Mn(INR 200cr – INR 260cr) of loan disbursals every month, contributed majorly by secured mortgages spread across 50+ banking partners for their different products in home loan, loan against property and business loan.

This exclusive tie-up will benefit MyAdvo registered lawyers in receiving immediate loan solutions without any hassle.

Indians are warming up to robo-advisers (livemint), Rated: A

Robo-advisers, or automated services based on computer algorithms, are catching on in the Indian market due to the relatively lower penetration of financial products in India compared to developed markets.

According to a Business Insider Intelligence forecast, robo-advisers (with some element of automation) will manage investment products worth $1 trillion by 2020, which will go up to $4.6 trillion by as early as 2022.

Scepticism notwithstanding, financial institutions in the country are realising the benefits of robo-advisory services by either building the product in-house or partnering with fintech companies to develop robo-advisers. Take the case of FundsIndia.com, which has a robo-advisory service for which it is forging partnerships with financial biggies. “We have a partnership with Axis Securities and one more company. There is a growing acceptance from the industry, and we are trying to enable better product design,” said Srikant Meenakshi, co-founder, FundsIndia.com. According to him, 15% of his company’s overall portfolio comprises robo-advisory services. Similarly, 5nance has an agreement with HDFC Mutual Fund for its robo-advisor.

Robo-advisory start-up ArthaYantra uses a patented methodology called the Personal Financial Lifecycle Management on its online platform, Arthos. Since its launch in 2008, the site claims to have helped 120,000 customers across more 650 cities and 30 countries.

Asia

Singapore Cryptocurrency Firms Facing Bank Account Closures (Bloomberg), Rated: AAA

Singapore banks have closed accounts of several companies which specialize in providing cryptocurrency and payments services, according to two local bodies which represent financial-technology firms.

Chia Hock Lai, president of the Singapore Fintech Association, which has broader membership than Access, said some of his organization’s members also experienced account closures, though he didn’t provide figures.

Access has 106 members and the Fintech Association has 185, though the two organizations said some companies belong to both groups.

How technology drives a new Taiwanese banking landscape (The Asset), Rated: A

According to Joseph Huang, president of E.Sun Bank, speaking in an interview with The Asset, payments is one area that every bank is looking to explore, although it does not generate huge profits for most banks.

Banks are also more frequently working with technology companies. E.Sun Bank partnered with IBM Taiwan in building its digital branch, which opened in February 2017, making it the first digital branch in Taiwan. Similarly, CTBC partnered with LINE Pay to help merge its banking services with communication apps and social media.

Taishin Bank’s e-banking application, Richart, which attracted over 120,000 subscribers, is targeting young Taiwanese users, while Cathay United Bank is also providing its products to retail customers through its platform My MobiBank.

Authors:

George Popescu
Allen Taylor

Opening Quote: Carillon reduces revenue outlook

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Thursday September 28 2017, Daily News Digest

Chinese billionaires

News Comments Today’s main news: PayPal likely to buy big target like Square or Klarna soon. LendingTree acquires non-lending assets of SnapCap. Funding Circle boost revenues, narrows losses. ZhongAn raises $1.5B in Hong Kong IPO. Funding Societies intros first crowdfunding chatbot in Southeast Asia. Today’s main analysis: Hong Kong private wealth sees double-digit growth. Today’s thought-provoking articles: The next […]

Chinese billionaires

News Comments

United States

United Kingdom

China

European Union

International

Australia

India

Middle East

Canada

News Summary

United States

PayPal A Buyer, Not Seller, And May Seek A Big Target (Investors.com), Rated: AAA

Cash-rich PayPal Holdings (PYPL) is likely to pull the trigger on a big acquisition soon, and may be eyeing Europe or a big target like Square (SQ), says a Wall Street analyst.

Ellis says PayPal has $6 billion in cash on its balance sheet and could raise $4 billion or more by selling off its consumer credit business.

“While there are a number of potential candidates, we see the acquisition of a European payments asset as the most likely,” added Ellis in the report. “We believe the top candidates are Adyen, Klarna, Square and Stripe.”

Both Square and Stripe, however, would be costly acquisitions. Square’s market valuation tops $10 billion, while privately-held Stripe’s latest funding round in December gave it a whopping $9.2 billion valuation.

LendingTree Acquires Non-Lending Assets of SnapCap (PR Newswire), Rated: AAA

LendingTree, Inc. (NASDAQ: TREE) announced today that it has acquired certain assets of Snap Capital LLC, a tech-enabled online platform connecting business owners with lenders offering small business loans, lines of credit and merchant cash advance products through a concierge-based sales approach.

The acquisition purchase has a possible total consideration of $21 million, which consists of $12 million in cash at closing, and contingent consideration payments of up to $9 million.

The Next Billion-Dollar Startups 2017 (Forbes), Rated: AAA

Every year for the past three, Forbes has gone looking for 25 young U.S. companies with a strong shot at reaching a valuation of $1 billion or more. This year, with the help of TrueBridge Capital Partners, we asked venture firms which companies they thought most likely to hit the billion-dollar mark soon. Then we cut that list down to a final 25, evaluating strategies, funding and competitive challenges as well as estimating current revenues.

Blend

Founders: Erin Collard, Nima Ghamsari (CEO), Eugene Marinelli; Equity raised: $160 million; Estimated 2017 revenue: $27 million; Lead investors: 8VC, Founders Fund, Greylock Partners, Lightspeed Venture Partners

What it does: Makes cloud-based software that lenders use to originate mortgages online. Today, Blend works with about 30 mortgage originators, including Wells Fargo, U.S. Bancorp and Mason-McDuffie Mortgage. It also plans expansions into student and auto loans.

Fundbox

Founders: Yuval Ariav, Tomer Michaeli, Eyal Shinar (CEO); Equity raised: $108 million; Estimated 2017 revenue: $55 million; Lead investors: General Catalyst, Khosla Ventures, Spark Capital

What it does: Provides short-term financing to small businesses. Fundbox intends to reduce the cash-flow headaches of small companies, both those waiting for payment and those that need short-term credit to pay what they owe. Fundbox started as an invoice-financing company, lending money to small businesses against their accounts receivables at rates lower than those for cash advances and without prepayment penalties. Its new model, expected to launch in 2018, is meant to work like a credit card for business-to-business transactions. A company that owes money has Fundbox pay the invoice. The company that is owed gets its cash immediately (minus a small interchange fee). Meanwhile, the first company has 60 days to repay Fundbox before being charged interest. With U.S. businesses doing some $41 trillion in business-to-business transactions a year, the potential market is enormous, but setting up such a network is hard.

Plaid

Founders: William Hockey, Zach Perret (CEO); Equity raised: $60 million; Estimated 2017 revenue: $40 million; Lead investors: Goldman Sachs, New Enterprise Associates, Spark Capital

What it does: Makes software that helps technology startups and banks work together. Plaid’s products provide authentication of accounts and routing numbers, income validation and real-time balance checks. Among its customers: Venmo, Robinhood, Coinbase and Clarity Money.

Shinola Finds Kindred Partner in Affirm (BusinessWire), Rated: A

Affirm, Inc., the company started by Max Levchin to provide fair and honest consumer financing, today announced that Detroit-based design brand, Shinola, is using Affirm’s point of sale service to put customers first in an era when a merchant’s values often outstrip price for shoppers’ making a buying decision — especially among millennials.

Known for its dedication to thoughtful manufacturing by creating jobs and making watches, bicycles, leather goods, journals, jewelry, and audio equipment of the highest quality, Shinola is obsessive about customer experience to ensure a high-touch shopping experience that accurately matches the finely crafted watches, bicycles, jewelry, bags, accessories and gifts for sale on its website.

Since Shinola began offering Affirm’s financing to its shoppers, the company’s average order value (AOV) has increased by 52 percent. Also, 50 percent of the Affirm users on Shinola’s site are now between the ages of 18 and 34, a market Shinola has been working to grow.

Nearly 90 percent of marketers said customer experience would be their primary differentiator this year, according to a recent study by research and advisory firm Gartner, Inc. And, the majority of respondents — 55 percent — in a recent survey conducted by Affirm and Qualtrics of more than 1,000 22 to 44-year-olds in the U.S. said they prioritize a company with high values and ethical business practices, over minimizing their out-of-pocket costs.

How CRE Fundraising Is Changing and Why (Commercial Property Executive), Rated: A

Jason Burian: The number of closed-end private real estate funds in the market raising capital over the past three years:

  • January 2015 – 478
  • January 2016 – 492
  • January 2017 – 525 (record high)

Closed-end private real estate dry powder over the past three years:

  • December 2015 – $229 billion
  • December 2016 – $237 billion
  • July 2017 – $255 billion (record high)

CPE: Is the real estate crowdfunding industry a solution? What are the risks?

Burian: I see real estate crowdfunding as an alternative to traditional private equity real estate and an alternative source of investors and not as a solution to any problem. As we know, it is just an avenue for every day individual investors seeking exposure in their portfolios to real estate without acquiring shares of REIT’s.

Government regulation is always a risk for this relatively new industry sector. There are questions about the amount of government regulation and whether there is enough to make it a safe playing field. Until crowdfunding matures, with the proper level of regulation, there is always a risk that someone is taking advantage of that gap that currently may exist.

A new survey has concluded that then it comes to researching mortgages, Millennials prefer the D.I.Y. aspect of the online world, while Baby Boomers prefer to communicate with people.

According to the survey, “The Digital Mortgage Experience: A Study of Shifting Borrower Expectations,” from Los Angeles-based Velocify, more than one-third of all borrowers prefer self-service websites, especially during the research stage of getting a mortgage. But as the process evolves, demographic shifts occur. The survey found Millennials were 45 percent more likely to find their lender online than Baby Boomers, who were 87 percent more likely to use their current bank or lender for their home loans.

Boost Insurance Raises $ 3M in Funding (Finsmes), Rated: A

Boost Insurance USA, a NY-based technology-enabled insurtech development platform provider, raised $3m in funding.

The round was led by Norwest Venture Partners with participation from IA Capital Group, Greycroft Partners, and re/insurance industry leaders State National Companies (NASDAQ: SNC) and Nephila.

3 Stocks That Could Double Your Money (The Motley Fool), Rated: A

Company Recent Stock Price
Lending Club (NYSE:LC) $5.97
Fitbit (NYSE:FIT) $6.52
Etsy (NASDAQ:ETSY) $17.01

DATA SOURCE: TD AMERITRADE. PRICES AS OF SEPT. 26, 2017.

Finally starting to grow again

Peer-to-peer lending platform Lending Club has lost roughly three-fourths of its market value since its first trading day in 2014, thanks to several quarters of stagnant growth and a scandal that worried investors.

However, the company’s most recent earnings report shows that things may finally be starting to pick up, with 10% growth in loan originations, higher profit margins, and impressive revenue growth. In addition, the company said it could be on the verge of profitability by the start of 2018, and it expects double-digit sequential revenue growth in the third quarter of this year.

Lending Club’s current loan portfolio represents roughly 0.4% of the U.S. consumer lending market, and if the company could even manage to boost its market share to one or two percent, it could mean a big payday for the company’s investors.

Sumero Leads $ 45M Growth Equity Round in Treasury Fintech Kyriba (Xconomy), Rated: B

After raising $23 million in a Series D funding round last September, Kyriba says today it has raised $45 million in a growth equity round led by Sumeru Equity Partners, a tech-focused private equity firm that specializes in mid-market deals. Previous investors Bpifrance, Iris Capital, Daher Capital (all growth equity funds) joined the deal, along with HSBC.

The venture rounds are over for Kyriba, a cloud-based provider of corporate treasury and financial management software that is based in New York and San Diego.

Amazon effect’ makes advising smaller clients less profitable (Financial Times), Rated: B

Daniel Ketchum prides himself on his low fees and independence, but after 27 years as a financial adviser he is finding it harder to make a living working with smaller clients.

Increased government regulations and savers becoming more knowledgeable about investing have created what he calls the “Amazon effect” for US financial advisers.

But the US Department of Labor’s fiduciary rule, which came out this year, is making it harder for him to make a profit from advising small plans, he says.

The regulation requires advisers servicing retirement accounts to work in the best interest of the client and has disrupted the wealth management industry.

“I am trying to see if there’s an area where we can do this online and don’t need to leave the office,” he says. “If every plan had the economics of the smaller guys, it would be tough to pay staff, office rent and marketing.”

PayPal’s Cofounder Says Amazon Is “Not Yet” A Monopoly (BuzzFeed), Rated: B

Max Levchin, a cofounder of PayPal and former chairman of Yelp who is now CEO of the online lending startup Affirm, told BuzzFeed News on Wednesday that Amazon has “not yet” become a monopoly because of competition from major retailers like Walmart as well as from smaller brands, which are investing in ways to attract and keep customers in the real world as well as online.

Walmart is still much larger than Amazon in terms of net sales. During 2017 fiscal year, Walmart reported$485.9 billion in revenue and $481.3 billion in net sales. Amazon, on the other hand, reported about $136 billion in net sales in 2016.

United Kingdom

Funding Circle boosts revenues, narrows losses in 2016 results (AltFi), Rated: AAA

The UK’s largest marketplace lending platform marginally narrowed its losses in 2016. Funding Circle, a business loans marketplace, lost £35.7m in 2016, slightly down from £36.9m in the previous year. Meanwhile the platform boosted revenues by 59 per cent to £50.9m, and saw its total loans outstanding climb 61 per cent to £1.37bn, according to a Companies House filing.

Funding Circle has also flagged that its group operating results for the first half of 2017 demonstrate that revenue growth has accelerated further, approximately doubling year-on-year.

The UK Punches Above its Weight in Alternative Finance & Crowdfunding Can Provide a More Robust Funding Ecosystem (Crowdfund Insider), Rated: AAA

Crowdfund Insider recently spoke with Raghavendra Rau to better understand his perspective on the crowdfunding market. Rau is the Sir Evelyn de Rothschild Professor of Finance at Cambridge Judge Business School. He is also a founder and Director at the Cambridge Centre for Alternative  Finance (CCAF). At the most recent CCAF annual conference in Cambridge, Rau shared some insightful research he had recently completed on the global crowdfunding market.

First, to clarify, in the UK crowdfunding encompasses both debt and equity so peer to peer lending (IE Marketplace Lending) is included in aggregate terms. It is more about many people (and perhaps some institutions) funding a single project. Rau, in his research, emphasizes that in the UK the debt crowdfunding market is far larger than the equity side. This makes sense and mirrors the public markets. Yet access to capital at a very early stage may require equity capital. But globally, over 90% of the crowdfunding market is debt, not equity. It is a debt financed world, at least for SMEs, said Rau.

“Yes, there is definitely potential here. Usually you have two types of firms. Most small enterprises do not require equity. They require debt. Debt means you have to have approximately stable cash flows. Equity means you have to convince the investors that you have an amazing idea that is going to pay off in several years and I am going to let you (the investor) share in this. This is more risky for the investor and so all SMEs are not suitable candidates to raise equity.”

Rau said there are two different paths. Banks or crowdfunding. With crowdfunding there is less paperwork. It is easier to process and in some instances less risk averse. Banks are pulling back from lending across the spectrum. SMEs, the engine of economic growth, are not getting the necessary capital via the traditional route.

So has the UK crowdfunding system been effective?

In the broader scope of things, China is the largest alternative finance market in the world. The US comes in a distant second. The UK is a strong third. But given the relative size of the UK economy, Rau calls the UK performance “extremely impressive.”

The UK is recognized as the top Fintech hub in the world but this required policymakers to be more creative and to take some chances. So far, it has paid off.

How FAs Engage Third-Party Services is Changing (Financial Advisor IQ), Rated: A

Wealth Mosaic aims to build “a resource covering all of the main business needs of wealth managers” in about a dozen verticals, says its co-founder Stephen Wall, who has worked as a wealth management consultant with Boston-based Aite Group and Scorpio Partnership in London. At first, though, he says the service will focus where it’s needed most: on technology and data resources as well as consulting and research options.

Though Wall sees a role for Wealth Mosaic with all “different types of wealth managers,” he sees particular growth opportunities helping “smaller independent” firms that lack in-house consulting arms to help them match their needs to third-party providers, whether the services in question are critical to the firm’s core mission or add value around the edges.

Advisers warned of robo-advice ‘cliff edge’ (FT Adviser), Rated: A

A panel of experts at the Chartered Institute for Securities and Investment’s financial planning conference in Newport today (26 September) said robo-advice did not necessarily pose a risk to financial advice as long as advisers adapted.

George Rooke, head of UK portfolio management at Wealthsimple, said there were advisers who would “struggle” because of their refusal to engage with robo-advice.

Michelle Pearce, co-founder of robo-adviser Wealthify, said advisers did not necessarily have to worry about being replaced by companies such as hers.

British Business Bank reaffirms support for fintech in new report (P2P Finance News), Rated: A

THE BRITISH Business Bank (BBB) has published a new report underlining the importance of diverse sources of funding for smaller businesses, including peer-to-peer lending.

The report, titled The Benefits of Diverse Finance Markets for Smaller Businesses, explains why and how the state-backed lender works to increase the number of providers and finance options available to small firms in the UK.

“To date £135m is committed to five fintech alternative lending partners. These partners cover a wide range of products including P2P term loans, invoice finance and merchant cash advances.”

Spotcap Announces UK Fintech Fellowship Winner (Crowdfund Insider), Rated: B

Spotcap, an online lender for SMEs, has announced Mohammed Hussan as the winner of its Fintech Fellowship 2017. The Fellowship awards one aspiring masters or MBA student with a £8,000 stipend towards their studies.

China

Online Insurer ZhongAn Raises $ 1.5 Billion in Hong Kong IPO (Caixin), Rated: AAA

ZhongAn, the online insurance seller with ties to China’s two largest internet companies, raised $1.5 billion from its Hong Kong IPO as investor flocked to the biggest listing to date by a new generation of Chinese financial technology (fintech) companies.

Shares of ZhongAn Online Property & Casualty Insurance Co. Ltd. were priced at HK$59.70 ($7.64) apiece, representing the top of their previously indicated range, according to a company announcement on Wednesday to the Hong Kong stock exchange. The offering raised HK$11.5 billion after being nearly 400 times oversubscribed.

ZhongAn Surges in HK Debut, Boding Well for Future Tech Listings (The New York Times), Rated: A

ZhongAn Online Property & Casualty Insurance Co jumped 18 percent on debut on Thursday after the biggest ever IPO by a financial technology firm in Asia, boosting Hong Kong’s hopes of luring future Chinese technology startups away from New York.

It also bodes well for expected listings from other fintech giants in Hong Kong, including Alibaba affiliate Ant Financial and peer-to-peer lending and wealth management platform Lufax.

Both Ant Financial and Lufax are considering IPOs in the city, sources previously told Reuters, although the timing for the deals is uncertain.

Private wealth in Hong Kong sees double-digit growth in 2017 (The Asset), Rated: AAA

THIS July, Hong Kong’s private wealth management industry recorded a 14% increase in assets under management (AUM) compared to a year ago. Hong Kong’s wealth management professionals believe that the growth is primarily driven by mainland China’s growing wealth, according to a recent report.

The estimated total private wealth in terms of AUM in Hong Kong is over US$800 billion as of July 2017, according to a survey by Private Wealth Management Association (PWMA) and PwC. This is an increase of 14% from US$700 billion in July 2016. PWMA’s annual members survey was produced with PwC in July 2017, with 33 out of 45 PWMA member firms participated.

In the survey, 100% of respondents cited mainland China as the main driver of growth in Hong Kong’s private wealth AUM. This may be unsurprising, as China has become home to the highest number of billionaires in the world. According to Hurun Report in 2016, China now has 568 billionaires, surpassing the 535 billionaires in the US, and now ranks first globally.

China’s Ant brings in CK Hutchison as Hong Kong payments partner (Reuters), Rated: A

Ant Financial, the payment affiliate of Alibaba Group Holding Ltd, said it will create a joint venture this year with CK Hutchison Holdings Ltd to operate its payment app in Hong Kong, ending Ant’s solo management of the service.

The new venture will allow Ant Financial’s Alipay to offer services via companies under CK Hutchison, which operates ports, retail, infrastructure and telecommunications businesses across 50 countries.

Ant Financial currently operates its payment app under the Alipay brand in Hong Kong, which offers transaction services at around 4,000 outlets in the city. The new joint venture will take over operation of the app, though it will still be branded Alipay, it said on Tuesday.

European Union

Fintech Group signs Kommunalkredit (Finextra), Rated: A

Kommunalkredit is a specialist bank for infrastructure financing based in Vienna, with a branch office in Frankfurt am Main. Its new online offering KOMMUNALKREDIT INVEST targets retail investors, who want to deposit their savings at attractive conditions. Their funds will be used to support key infrastructure investments made by Kommunalkredit such as schools, hospitals, care homes, wind farms, solar energy installations, waste-to-energy facilities, and transport projects.

FinTech Group provides a broad range of fully digital solutions and interfaces for KOMMUNALKREDIT INVEST: they include frontend processes such as online account openings, e-banking, and identification solutions such as video identification, e-signature and mTAN. On the backend side, FinTech Group will also run a data warehouse and carry out compliance monitoring as well as regulatory reporting.

Milan opens ‘Fintech District’ (Finextra), Rated: B

Thirty firms – ranging from start-ups to established corporates – have already selected the Fintech District as their home; they include businesses working in crowdfunding, peer-to-peer lending, blockchain and cryptocurrency-based technologies, and robo-advisory.

International

FinTech Has Yet To Make Impact On Trade Finance Gap (PYMNTS), Rated: AAA

Trade finance revenue is slipping at the world’s largest banks, especially as companies struggle in a global trade environment operating with a $1.5 trillion gap in trade finance availability.

According to the ADB’s latest survey findings, though, outlined in its Trade Finance Gaps, Growth and Jobs report, FinTech players have yet to make a meaningful impact on the trade finance industry.

The survey polled more than 515 banks and 1,336 companies across 103 countries, finding that FinTech innovators can, indeed, help address the $1.5 trillion trade finance gap which disproportionately impacts small- and medium-sized businesses (SMBs).

Approximately one-fifth of the companies surveyed said they had used some type of digital finance, alternative lending or FinTech platform to access trade finance, according to the ADB results.

Leveraging Alternative Data to Energize Your Lending Portfolio (LendIt), Rated: A

Banks aren’t just dealing with customers who want lending and credit information faster. Government regulations are also requiring them to do so, such as Australian banks requiring affordability checks as part of new consumer loans.

Venkat Srinivasan, Head of Lending at Monzo, said that as a new digital bank, they began to question why it was often a month or two months before consumers could see the transaction come through on their banking or credit card. Venkat noted that while technology is improving and customers are evolving, data availability is evolving at the same time.

Roger Vincent, Head of Banking and Innovation at Equifax, discussed how they’re finding new ways to store data, facilitate data movement, and turn data into insights in the form of scores and characteristics.

Phil Grady, CEO of Castlight Financial, discussed how they created a business that has taken traditional credit data from consumers and integrated it with transactional data. This involves categorizing income and expenditures, and then determining essential expenditures versus non-essentials. This enables Castlight to determine consumers’ real disposable income, which in turn helps lenders make better lending decisions. This type of granular level data has allowed Castlight to create the first real-time Financial Capability Formula.

Only three per cent of advisers offer robo-advice (AltFi), Rated: A

Only three per cent of 162 advisers surveyed said they offered fully automated wealth management services, the research found.

The study, which was conducted by research firm Platforum on behalf of JP Morgan, also found that only 14 per cent plant to implement it in the next two years.

Australia

Alternative Finance: Australia Becoming Regional Leader (Canstar), Rated: AAA

Australia’s alternative finance market has grown by 53% over 12 months according to a report released by KPMG, becoming the second largest in the Asia-Pacific region.

The report revealed Australia’s alternative finance market increased from US$27 million in 2015 to US$610 million in 2016 as Aussies turn to peer-to-peer lending (P2P), balance sheet business lending and crowdfunding.

In the US$245.28 billion Asia-Pacific alternative finance market, China was found to be the leader, accounting for 99.2% and representing 85% of the total global market.

P2P consumer lending was Australia’s second most popular alternative finance model behind balance sheet business lending, increasing from US$43 million in 2015 to over US$158 million in 2016.

India

Funding Societies introduces Miyu, the friendly Chatbot (Business Insider), Rated: AAA

Funding Societies, Singapore’sand Southeast Asia’s leading crowdfunding platform, has announced the launch of its chatbot Miyu. This is the first such chatbot created by a crowdfunding company in Southeast Asia. Miyu works round the clock to answer queries that a business owner or an investor may ask about the products and services offered by Funding Societies.

“We created Miyu via self-learning with guidance from our seniors. She is different from most other chatbots in the financial services space. Personally, I like that Miyu can escalate to human support whenever required, giving our users a seamless experience,” said Sherman Lim, who is a Singaporean and majors in Economics and Strategic Management at Singapore Management University (SMU).

The future plans for Miyu include acting as a Virtual Relationship Manager who can assist SMEs in loan application, and help investors navigate through the platform, initiate video chats with real customer experience managers as well as perform account opening and management activities such as investments, deposits, withdrawals, etc. without human intervention at any time of the day.

Fintech firms look to disburse loans, offer digital expertise under Mudra (livemint), Rated: A

Financial Technology (Fintech) firms are in early discussions with the government and Micro Units Development & Refinance Agency Ltd (MUDRA), exploring opportunities under the Pradhan Mantri Mudra Yojana (PMMY), said three people close to the development.

So far, PMMY loans have been extended by all public sector banks, regional rural banks (RRBs), cooperative banks, private sector banks, foreign banks, micro finance institutions and non-banking finance companies. Fintech companies have not been involved yet.

Under Shishu, refinancing is provided for loans up to Rs50,000. Kishor offers refinancing for loans above Rs50,000 up to Rs5 lakh whereas, Tarun provides refinancing for loans above Rs5 lakh up to Rs10 lakh. Mudra also offers services like credit guarantee for micro units and securitization of loan assets against micro enterprise portfolios.

Middle East

Dubai Economy signs new deal to develop emCash (Tahawul Tech), Rated: A

Emcredit, a subsidiary of Dubai Economy, and the UK-based Object Tech Group have signed a partnership deal to facilitate financial transactions through contactless payment.

Emcredit and Object Tech will develop a competitive, accountable and legally compliant emCash ecosystem together. Several associated products to protect emCash wallet and digital documents, enable direct real-time settlement and peer-to-peer lending, and provide credit rating based on the distributor ledger of emCash will also be developed.

emCash is based on blockchain technology and will be the digital currency in emPay wallet. The payment method, according to Dubai Economy, will allow the UAE residents to make varied payments through the near field communication (NFC) option on their phones. With emCash, emPay users will have the option of a secure digital currency, and merchants can receive such payments in real time without going through intermediaries.

Canada

The Digital Banking Underdog: Toronto Emerges as Global FinTech Leader (Let’s Talk Payments), Rated: A

It’s estimated that in 2017 alone, nearly $60 billion worth of payments will be made on mobile platforms. Comparing these figures to just two years ago, only $8.71 billion worth of transactions were made digitally in 2015.

In line with other frontrunners in the industry, such as London, Silicon Valley and New York City, Toronto, Canada, my hometown, stands apart as an emerging FinTech ecosystem, and it’s become a well-recognized leader amongst the largest and most stable financial centers in the world.

Ontario has been a global leader in digital payments for more than a decade, with Toronto leading in a high concentration of cryptocurrencies,blockchain, alternative lending and e-commerce growth verticals.

Authors:

George Popescu
Allen Taylor