Thursday October 10 2019, Weekly News Digest

Lend Academy

News Comments Today’s main news: Affirm debuts shopping app. Zopa profits tick upward. RateSetter recovering from loan scandal. PPDAI stock rises 7% with lift in institutional-funded loans. Oportun ends Nasdaq debut with 8% gain. Australia: RBA cuts interest rates, online lenders follow. Today’s main analysis: The Future of Finance: Marcus, Neobank, and fintech. (A MUST-READ) […]

The post Thursday October 10 2019, Weekly News Digest appeared first on Lending Times.

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News Comments

United States

United Kingdom

European Union

International

Other

News Summary

United States

OnDeck Survey: Economy is Top Concern for Small Businesses Ahead of 2020 Election (New Kerala), Rated: AAA

OnDeck today announced the results of a national survey of U.S. small business owners that finds economic issues are the most important factors in determining their choice for president in 2020.

  • Economic concerns arise in several dimensions, including tax policy, job growth, support for small businesses, government spending and the overall economic climate. These issues were cited as the top concerns of more than 33% of those surveyed;
  • Immigration was an issue of interest for 11.3% of small business owners surveyed, ranking second behind the economy as a concern.
  • 57% of small businesses surveyed said they were either Very Optimistic or Somewhat Optimistic about the economic outlook for their businesses;
  • 93% of those surveyed said they plan to vote in the 2020 election.
  • 60% of small business owners surveyed said they already know who they plan to vote for in the 2020 presidential election.

Affirm debuted a new app encouraging customers to start their shopping journeys with it (Business Insider), Rated: AAA

The point-of-sale (POS) financing provider 

Source: Business Insider

Affirm ships new shopping and bill splitting app (Finextra), Rated: A

Affirm’s app also allows consumers to pay at any brick-and-mortar store that accepts Apple Pay or Google Pay, which is increasingly important as 24% of consumers want the flexibility to look online and shop in-store.

Those with Apple Pay or Google Pay enabled have also seen up to 14% of transactions driven in-store, making the Affirm app a rare omnichannel solution for customer acquisition.

Max Levchin On The Future-Present Of Everywhere POS Lending (PYMNTS), Rated: A

Since Affirm’s launch, the landscape in the POS space is radically different than it was when Affirm entered. It is, first and foremost, a much bigger and more populated space than it once was. Other startups have come to the field — AfterpayUplift and Sezzle for example — but also bigger and more established names in financial services. In the last 12 months alone SquareMastercardPayPal and Chase have all rolled out POS installment lending products or enhancements as the market continues to pick up popularity among consumers, particularly younger ones.

Latest Macro; latest from Marcus; Oportun goes IPO (PeerIQ), Rated: AAA

Q4 is off to a brisk start. The jobs report released this past Friday shows 114K in net new jobs (vs expectations of 120K), generally flat wages, and a drop in the unemployment rate to 3.5%.

On the one hand, the US economy is near ‘stall speed’ – around 1 to 1.5% growth rate.

Source: PeerIQ, The Daily Shot, Conference Board

House prices are expected to rise 5.8% over the next year due to low mortgage rates.

Two major financing announcements this week. FinTech lender, Oportun, led by CEO Raul Vazquez, ends its Nasdaq debut with an 8% gain. The debut is notable as it represents a positive shift in the sentiment to the reception of lenders to the IPO market.

My Quarterly Marketplace Lending Results – Q2 2019 (Lend Academy), Rated: AAA

The upward trend in my returns continued in Q2, making it the fifth quarter in a row with increasing returns. My preliminary return for the 12 months ending June 30, 2019 is 6.20% (one investment is still not final), the best I have achieved since Q3 2017.

Source: Lend Academy

The Maybe-Dubious Rise of the Loans-for-Sneaker Business (GQ), Rated: AAA

Afterpay is one of a number of platforms that have sprouted up over the past couple years that are willing to float customers a couple hundred or thousand dollars to shop. In addition to it, there are Affirm, Sezzle, Klarna, and Quadpay. They are positioned as a more consumer-friendly option than credit cards, a whole host of services bent on—because this is 2019—disrupting the powers that be.

Globally, Afterpay, which launched in Australia, has over 4.6 million customers and 35,000 retail partners. In the U.S., where Afterpay only launched in May of last year, it has two million customers and is available at 6,500 retailers. Over three million people use Affirm, while another 500,000 have shopped with Sezzle.

Silicon Valley promises aside, Afterpay is, at best, a platform that allows you to take out what amounts to a small loan on an item. After an approval process—Afterpay does not check a credit score; others like Affirm do—the customer pays a fourth of the price upfront and the rest is paid off in three equal installments every two weeks.

Also new is the $1,500 limit, up from $500, that Afterpay raised after Hyde-McCormick proved himself a responsible shopper and the $87.50 payments currently due every two weeks.

What Happened to Borro? (deBanked), Rated: A

In 2013, Borro, an innovative online lending company that was poised to disrupt pawn shop lending forever, invited me to their stylish offices at 767 Third Avenue in Manhattan.

Borro made $50 million worth of such loans in 2013 and doubled that number in 2014.

Auto, home equity are soft spots in consumer lending (American Banker), Rated: A

In its quarterly report that tracks consumer delinquency trends, the American Bankers Association said that 30-day past-due rates ticked up in eight of 11 categories in the second quarter when compared with the first quarter, but stressed that delinquencies remain well below historic norms.

Finally! Maker Offers Multi-Collateral DAI Lending (Cryptovest), Rated: A

Maker DAO, the most active decentralized finance app on the Ethereum network, has announced a date for its long-awaited multi-collateral DAI generation. According to observers, November 18 may be the date MKR starts accepting other assets as collateral.

Multi-collateral DAI creation has the potential to be riskier in comparison to ETH-based models. Currently, Maker is deliberately over-collateralized at above 300%, with the minimum at 150%, due to the high volatility of crypto assets.

A $ 40 Billion Pile of Leveraged Loans Is Battered by Big Losses (Bloomberg), Rated: A

Loans tied to more than 50 companies have lost at least 10 percentage points of face value in just three months, according to data compiled by Bloomberg. Some have dropped a lot more, with lenders lucky to get back just two-thirds of their investment if they tried to sell.

It’s hardly a full-blown apocalypse for the junk-rated leveraged loan market, which totals $1.2 trillion.

Energy is the hardest-hit sector on the list, with more than $12 billion of loans falling more than 10 cents on the dollar. Consumer and health care follow, comprising around $8 billion and $5 billion of loans outstanding, respectively.

Source: Bloomberg

Ruling cuts short debt collectors’ victory lap over CFPB proposal (American Banker), Rated: B

Under the CFPB’s May proposal, debt collectors could have unlimited contact with debtors through email and text messages, though consumers could opt out of such communications. Additionally, collectors could satisfy disclosure requirements with a hyperlink embedded in an email that takes consumers to a description about how they can dispute a debt.

The SEC is hiring a chief data officer (Business Insider), Rated: B

The Securities and Exchange Commission is hiring its first chief data officer, according to a job posting for the role.

Voyager Selects Celsius Network to Manage Certain Assets (AP News), Rated: B

Voyager Digital, LLC, a subsidiary of publicly-traded Voyager Digital (Canada) Ltd (Ticker VYGR.CN), an industry-leading best execution crypto asset broker, today announced a partnership with Celsius Network, in which Celsius will manage a portion of Voyager’s digital assets.

United Kingdom

Zopa’s P2P profits tick up but group losses widen due to heavy investment in bank (P2P Finance News), Rated: AAA

Zopa Group – which incorporates the P2P platform and upcoming digital bank – reported a pre-tax loss of £18.295m for the year ended 31 December 2018, compared to a pre-tax loss of £5.536m the previous year.

Zopa: nine in 10 shoppers confused by car finance options (Verdict), Rated: A

In a survey of 2,000 consumers, 47% of people who had recently bought a car with finance are unable to identify which type of finance deal they signed up for. Zopa estimates that the average car buyer could save up to £11,000 over the course of their lifetime by working out the best finance deal available.

Ratesetter recovering from loan scandal (The Times), Rated: AAA

One of Britain’s largest peer-to-peer lenders appears to be recovering from a toxic loan scandal after its latest results showed it edging towards breaking even.

Accounts for Ratesetter, which links 56,000 ordinary investors with consumer and business borrowers, show that pre-tax losses narrowed by 69 per cent in the year to March.

Wonga customers’ average compensation payout may be just £118 (The Guardian), Rated: A

Customers who were mis-sold loans by the collapsed payday lender Wonga are expected to receive less than 10% of what they are owed in compensation after administrators revealed that only £41m will be put aside for claimants.

Payday loan alternative Savvy secures £20 million funding facility (Finextra), Rated: A

Stockport and Wilmslow based fintech company Savvy.co.uk is to create 25 jobs after securing a £20 million investment.

The funding, from London-based Cairn Capital, will increase lending capacity for the company who provide an ethical alternative to pay-day loans.

MEET THE FRENCHMAN WHO WANTS TO SOLVE THE UK’S HOUSING CRISIS (Business Leader), Rated: A

WHY DID YOU START BLEND NETWORK?

I started working in the financial industry as an FX trader before moving to trading gold and copper, both much more inefficient markets than FX. I realised that the UK property market was a hugely inefficient market in the sense that lenders and borrowers are not meeting. On the one hand, you have very experienced property developers across the country who are trying to access funds to build homes but traditional lenders are no longer active in providing development finance.

Instead, we lend in places such as Coventry, East Anglia, Doncaster, Northern Ireland. Northern Ireland is a very good example of our strategic approach to lending. Last year, we did around 80-85% of our business in Northern Ireland.

Crowdfunding a start up options explained for businesses and investors (What Investment), Rated: A

Crowdfunding a start up brings to mind the statement ‘Nothing worth having comes easy’, never truer than in the case of launching a start-up. Getting a new business off the ground will often require capital. Something which a lot of people don’t know how to go about getting.

These are:

  • Reward based crowdfunding;
  • Equity based crowdfunding;
  • Debt based crowdfunding, and
  • Donation based crowdfunding.

Landlords wary of tax changes (Money International), Rated: A

Half of the 200 landlords approached agreed tax changes and tougher mortgage borrowing criteria have thwarted their plans to buy more properties, while 15% admitted they had been put off buying homes to rent.

A third who still wanted to invest are considering a switch from buy to let to peer-to-peer lending secured against property, while 8% have already done so.

China

PPDAI Stock Soars 7% on Increase in Institutionally-Funded Loans (Capital Watch), Rated: AAA

The stock in PPDAI Group Inc (NYSE: PPDF) closed 7% higher on Wednesday, at $2.83 per American depositary share, after it announced a positive trend in funding of loans by its institutional partners and increased loan origination volume.

For the third quarter, the Shanghai-based company, which operates an online consumer finance marketplace, said in a statement on Wednesday that the volume of loans facilitated by its institutional funding partners jumped to $2.64 billion, up 91% from the second quarter. Total loan origination volume was above PPDAI’s guidance, it said, as it reached $3.51 billion, up 14% from the previous quarter.

European Union

What we learned at this year’s LendIt Fintech Europe (Business Insider), Rated: AAA

At the conference, Business Insider Intelligence identified four emerging themes that we expect to set the tone for the space for the next year: further proliferation of partnerships between banks and fintechs, increased focus on digital banks’ sustainability, accelerated innovation and disruption from small- and medium-sized business (SMB) lenders, and more challenges ahead for the UK’s P2P lenders.

  • CYBG bank and price comparison site GoCompare recently partnered to offer an energy compare and switch service for all of CYBG’s B customers.
  • Barclays bank partnered with SMB finance fintech MarketInvoice last year to give Barclays’ SMB clients access to MarkeInvoice’s solutions. 
  • French Banking-as-a-Service platform Treezor was acquired by Société Générale last year, as the bank looked to enhance its ability to innovate and decrease time to market.
Source: Business Insider

Linked Finance launches ‘Beyond Brexit’ business loans (Bridging and Commercial), Rated: A

The new 18-month loan period will allow borrowers to access working capital facilities of up to €300,000 (approximately £265,194) in just 24 hours.

ID on track to double revenues as it eyes €300m+ of revenue within 2 years (Fintech Finance), Rated: A

ID Finance, the fintech operating in Europe and Latin America, saw revenue growth of over 100% in the first 9 months of 2019 and is on track to double its revenues to €90m revenue this year. The data science, credit scoring and digital finance company is now planning its first equity crowdfunding round via Crowdcube as it targets €300m+ of revenue within 2 years.

Binance Launches New Lending Program Phase (CoinCodex), Rated: A

The Binance cryptocurrency exchange has launched the latest phase of its relatively new lending program. For the program’s eighth installment, Binance is sticking with the model of short-term loans, as users only have to commit their crypto for 14 days.

International

A Guide to What’s Happening in the Fintech Revolution (Bloomberg), Rated: AAA

These underbanked markets, led by countries in Asia and Africa, have inspired fintech innovation that’s leapfrogging the technology available in the developed world. Ant Financial Services Group’s Alipay and Tencent Holdings’ WeChat Pay in China, Paytm in India, and Safaricom’s M-Pesa in Kenya are some well-known examples.

Source: Bloomberg

Take Facebook Inc.’s plan to launch a digital currency called Libra in 2020. The social network’s gigantic reach—more than 2.4 billion active monthly users—could draw a much wider audience to Libra than has used previous cryptocurrencies. For instance, global remittances by migrants reached a record $689 billion last year, according to the World Bank.

Source: Bloomberg

San Francisco-based 500 Startups staked 43 such companies in the 12 months ended June 30.

Goldman’s $ 1.3B Marcus burn, Neobank £200MM loss; plus 14 short takes on top developments (Lex), Rated: AAA

Goldman is losing $1.3 billion on Marcus, trying to build a Fintech leader. Etrade is going to lose $75 million from cutting trading fees to $0 to keep up with Robinhood. Revolut is losing £35 million on £60 million in revenue, with another £140 million burned by Atom, Monzo, Tandem, and the rest.

Source FT Research and Future of Finance

Generally speaking, from a deposit point of view, these are still all small businesses at £1 billion in assets (e.g., Betterment manages $20 billion).

Source: ARK Invest and Future of Finance

The first is that the Robinhoods and Monzos of the world are 10x overpriced relative to the payments apps. I can sort of buy this — though money in motion is way easier to capture than money at rest. The second is that venture investors think a finance user is worth $1,500 in a digital bank.

Source: Future of Finance

Blockchain: the future of finance (Financier Worldwide), Rated: A

Recent examples of blockchain’s impact on financial markets go well beyond these initial applications or P2P lending or crowdfunding.

The first wave of applications in finance and banking is being driven by easily achievable gains in actively traded assets.

MasterCard incorporated a blockchain payment system providing vendors real time, lower cost settlements on cross-border transactions. Representing a consortium of more than 40 of the world’s largest banks, fintech firm R3 launched a payment system built on DLT platform Corda, to expedite intra-bank transfers.

St. Regis Aspen, a Colorado resort, is a partnership formed with a crowdfunding site, Indiegogo, that in lieu of a traditional IPO completed a private placement via DLT financing real estate. This sale of ‘tokens’ – fractional interests in the underlying property – raised $18m, compliant with securities laws.

Australia

Hot home loan rates starting with a 2 (mozo), Rated: AAA

The RBA has cut official interest rates for the third time this year, and already a handful of lenders have responded by slashing rates across their range of variable rate home loans. Right now, if your home loan doesn’t have a ‘2’ in front of it, you’re missing out.

loans.com.au jumps on October RBA home loan rate cut party (mozo), Rated: AAA

The online lender has announced its response to the 0.25% drop in the official cash rate though, with loans.com.au taking 0.15% off a number of variable rate home loan offers for both owner occupiers and investors.

The changes, which come into effect on October 17, will have an impact on a number of  loans.com.au home loan offers including:

• Essentials Variable loan – reduced by 0.15% with rates now as low as 3.04% (3.06% comparison rate*).

• Smart Home Loan – reduced by 0.15% with rates now as low as 2.88% (2.90% comparison rate*).

• ZIP Home Loan – reduced by 0.15% with rates now as low as 3.08% (3.10% comparison rate*).

• Offset Variable loan – reduced by 0.15% with rates now as low as 3.12% (3.14% comparison rate*).

OnDeck appoints Robbie Fidler as new national broker chief (IT Wire), Rated: B

Online SME lender OnDeck Australia has appointed experienced commercial lending operator Robbie Fidler as its national broker channel manager.

Asia

SPV 2030: Sharing of risks and reward (The Malaysian Reserve), Rated: A

The growth and success of peer-to-peer (P2P) lending is a testament of the viability of risk-sharing contracts, where the investors take on some risks (for higher return) from the ventures they are financing. This way, finance will be grounded in the real economy, which is another core principle of Islamic finance.

MENA

Beehive funds first SME in Bahrain (Arabian Business), Rated: AAA

Dubai-based Beehive, the region’s first regulated peer-to-peer lending platform, has funded its first SME in Bahrain.

Canada

BFS Capital Opens New Data Science and Engineering Hub in Toronto (Financial Post), Rated: B

BFS Capital, a leader in small business lending, has officially launched a data science and engineering hub in Toronto as the company accelerates its plans to develop best-in-class digital financial products for small businesses across the globe.

Authors:

George Popescu
Allen Taylor

The post Thursday October 10 2019, Weekly News Digest appeared first on Lending Times.

Thursday February 22 2018, Daily News Digest

Servicing portfolio recurring revenue

News Comments Today’s main news: LendingClub spared from sharing underwriting docs with investors. Wealthsimple raises $65M. Zopa warns investors of increased defaults. Raisin now operates in UK. RaboDirect to bow out of Ireland. Today’s main analysis: LendingClub’s Q4 2017 results. Today’s thought-provoking articles: LendingClub’s CIO issues an update on Q4 results. LendingTree ranks best places for fresh start. Faster payments mean […]

Servicing portfolio recurring revenue

News Comments

United States

United Kingdom

China

European Union

International

Other

News Summary

United States

Fourth Quarter 2017 Results (LendingClub), Rated: AAA

Source: LendingClub

View the reported Q4 2017 earnings results from LendingClub right here.

Q4 2017: An update from our CIO (Lending Club), Rated: AAA

A core strength of LendingClub’s marketplace model is the ability to incorporate data insights quickly in order to responsibly adapt for the benefit of borrowers and investors.

From 2009 to 2014, credit supply was tight, so consumer loans experienced better-than-average loss rates. Since then, credit supply has increased, and the industry has seen a return to long-term average delinquency rates and higher losses in higher risk populations.

As a result of cumulative actions taken, our loss forecast for newly originated loans remains unchanged in aggregate compared to last quarter.

Economic backdrop

U.S. economic growth remains slow but steady, with annual GDP growth rate increasing to 2.6% in the fourth quarter of 2017. A primary driver of GDP growth since the financial crisis has been a historically low unemployment rate, which is down to 4.1% from its peak of 10% in 2009.

Updated pricing and return forecast

We continuously refine our methodology and recalibrate interest rates based on shifts in risk across the portfolio. This quarter, interest rates are increasing for certain subgrades in grades D and E.

Loss forecasts are remaining stable in aggregate for the platform relative to last quarter.

Platform Summary and Projections as of February 20, 2018

Source: LendingClub

Judge Nixes LendingClub Investor Bid For Underwriter Docs (Law360), Rated: AAA

Morgan Stanley, Goldman Sachs and the other underwriters of LendingClub Corp.’s $1 billion initial public offering for now don’t have to produce roughly a thousand documents sought by a class of investors suing the peer-to-peer lending company for alleged stock fraud, a California federal judge ruled Tuesday.

 

 

LendingTree Ranks Best Places for a Fresh Start in 2018 (PR Newswire), Rated: AAA

LendingTree, the nation’s leading online loan marketplace, today released the findings of its study on the best cities for those seeking a fresh start.

First, the study looked at eight elements to consider when going through a financial recovery, such as the local median income and rents, and if the state has laws to protect debtors from aggressive collections and penalties, in case methods like debt consolidation or refinancing to lower rates aren’t enough to manage liabilities.

Next, to determine what opportunities there might be for people seeking a solid job and income, the study looked at the percentage of people in these metros who are between the ages of 35 and 64, single, employed, have health insurance coverage and are currently enrolled in school.

Lastly, to get an idea of how well people in an area are recovering from financial calamity, LendingTree calculated how quickly credit scores are rising after a bankruptcy by using proprietary data on the average credit score, on a geographic basis, of LendingTree customers who declared bankruptcy between three to four years earlier.

1. Buffalo, N.Y. – 67.6
At $738Buffalo has the lowest median rent among the 50 cities reviewed, and 94 percent of adults over the age of 35 are insured (second highest). Residents who declare bankruptcy have an average credit score of 664 three years on, tied for the second highest score for the cities reviewed, suggesting that conditions are favorable for financial recovery. However, Buffalo ranks poorly in two metrics: at $52,303, median income is the seventh lowest, and only one other city has fewer students over the age the 35.

2. Minneapolis – 62.9
At just 3.7 percent, the exceedingly low unemployment rate for citizens in Minneapolis between the ages of 35 and 64 helps push the city to the No. 2 spot. Not only are most over-35s employed, but they also earn a median salary of $70,915, the eighth highest in the cities reviewed, 94 percent have health insurance and median rents are relatively low at $963.

3. Salt Lake City – 62.6
Only two other cities have more over-35s enrolled in school (Virginia Beach and Washington), and only five have more unmarried over-35s (New Orleans has the most). That could be due to the lowest unemployment rate for over-35s of any city reviewed (3.6%), and higher-than-average median income of $64,564 for that same group. That combines nicely with a moderate median rent of $967.

Source: LendingTree

The full report is available here: 

Why faster payments mean faster fraud (Tearsheet), Rated: AAA

Less than a month ago Early Warning Services, the network that powers peer-to-peer payments platform Zelle, touted $75 billion in funds moved through its bank-supported platform with plans to expand its member network. One member bank, however, also reported a fraud rate of 90 percent shortly after implementing Zelle last year, said someone familiar with the statistics who wished to remain anonymous.

Fraud detection in banks, however, is no longer just about building a wall to keep outsiders out; cybersecurity teams need to install a filter that can identify who can and should enter the system.

Bank of America will spend $600 million this year on cyber defense alone, its chief operations and technology officer Cathy Bessant recently told Tearsheet. In December Menlo Security, a company that provides malware isolation solutions, raised $40 million in Series C funding, bringing its total funding to $85 million. JPMorgan Chase, HSBC and American Express Ventures are among its investors.

Greenlight raises $ 16m for kids’ debit card (Finextra), Rated: A

Greenlight Financial Technology, the startup behind an app and debit card for kids and college students, has raised $16 million in a Series A funding round joined by SunTrust Bank, Ally Financial and the Amazon Alexa Fund.

 

7 COMPANIES REIMAGINING REAL ESTATE INVESTMENT AND FINANCE (Builder Online), Rated: A

Companies like Better Mortgage, Blend and LendingHome are reengineering the way mortgages are applied for and underwritten. While Cadre and Fundrise are moving real estate investments from Excel spreadsheets to the digital world.

GreenSky offers on-the-spot loans of up to $65,000 for home improvement projects with generous zero-interest promotional periods. Lemonade offers urban renters and homeowners insurance for as little as $5 and $25, respectively. LendingHome provides financing for house flippers, and more recently, homeowners.

Enodo delivers quantifiable insights for property investors (Realty Biz News), Rated: A

With the Enodo platform investors can cut to the chase with a platform that supports their decision-making through acquisition all the way to renovation, with features including rent price forecasting. In other words, Enodo is a real estate investing platform that provides quantifiable data, meaning investors no longer have to rely on hunches alone.

Enodo allows investors to carefully analyze any property in the country using basic physical and investment parameters. Users can also identify comparable properties, predict operating expenses and more. Parameters include things such as the year the home was built, number of units, amenities, market demographics and more.

Savings and Deposit Rates in a Rising Rate Environment (Lend Academy), Rated: A

This thread called Cash Parking on the Lend Academy Forum was created back in December 2016 and since then, forum members have discussed opportunities at banks and credit unions.

The discussion caught my eye when one user posted a 3% 5 year CD which happened to be offered by my local credit union.

Signing Up for a Savings Account at Marcus

Marcus by Goldman Sachs has been near the top of the list since I began checking. We last did a piece on savings account rates back in June 2017 when Goldman Sachs’ deposit accounts were still branded under GS Bank. Rates are now 30 basis points higher at 1.5% on Marcus accounts.

Their investment has paid off and it was recently reported that they had $17 billion of deposits. Since Goldman Sachs acquired GE Capital’s retail deposits, deposits have grown a whopping 90%.

 

Kabbage’s Kathryn Petralia Talks Small Business Loans (LendEDU), Rated: A

She’s been hailed by Forbes as one of the most powerful women in the world, and TechCrunch recognized her for “crushing it” last year. Both sources refer to her success as a leader at Kabbage, Inc. which has financed over $4 billion to more than 130,000 businesses to date.

Q: What sets Kabbage apart from other online small business lenders?

A: Our focus on real-time access to third-party data and our ability to stay connected to our customer’s data all the time. This technology allows us to provide an automated experience.

Q: So, user experience seems to be a big advantage for non-traditional lending sources. While that’s an advantage, what disadvantages does a lender like Kabbage have against a traditional lender?

A: There are lots of things. First, traditional lenders like banks have well-known brands; they have access to really cheap capital. They have a lot of customers already. They already have access to a framework which they operate with the ability to move funds. 

The only thing they don’t have is the ability to serve the market, because it’s too expensive for them to serve our customers with the type of product they need.

Q: Was there a typical small business customer that you would lend to? Do you lend to certain business more often than others today?

A: Well, we got our start making loans to eBay sellers which you may or may not know. The reason we started there was because that’s where the first API was available, so we could get information on a business’ performance. Then as more APIs became available, we were able to expand our business. So for a long time, all of our customers were eCommerce businesses.

But about three years ago, we began expanding to service brick & mortar businesses, and today, about 85% of our customers are brick & mortar businesses. 

Q: Over the last 5 years, fintech lending has grown to take up more of the small business lending market. Where do you see the market share in 5 years? Where’s Kabbage in this equation?

A: If you’re talking about businesses seeking less than half or a quarter million dollars, I think it’ll stay the way it is with largely non-traditional players, like Kabbage, filling that space. And I think banks could serve that market through partnerships, but overall, I think it’s going to look much the same as it is now.

The Expanded Military Lending Act Regulations (The National Law Review), Rated: A

The Military Lending Act’s (“MLA”) lending restrictions are expanded to apply to consumer credit card issuers and unsecured consumer lenders. Compliance in most areas was mandatory as of October 3, 2016, but as to credit cards the mandatory compliance date is October 3, 2017.

The MLA applies to active-duty military personnel, active Reserve and National Guard personnel serving on Title 10 orders, and their dependents with a valid military identification card.

How to Invest in Private Loans (The Student Loan Report), Rated: A

The $1.45 trillion student loan market is made up of public and private student loans.

We now live in a world where crowdfunding and P2P investment opportunities are everywhere. The student loan market is no different. Companies like Sofi are shaking up what it looks like for both students and investors alike.

Sofi (short for Social Finance) has funded over $25 billion in student loans, with over 437,000 members around the country.

As challenger banks seek to enter the US, the business model still faces hurdles  (Tearsheet), Rated: A

European digital banks N26 and Revolut will launch in the U.S. later this year, and there are reports that U.K. challenger bank Monzo is mulling a move into the U.S. market. Meanwhile, three U.S. banking startups — Varo Money, Square and Moven — recently announced plans to apply for or acquire U.S. banking licenses.

For N26, winning means customers loving N26 like in Europe. U.K.-based Revolut, which plans to launch in the U.S. later this year with a multi-currency bank account, said winning means acquiring millions of customers, particularly those who travel often; and to San Francisco-based Chime, a win is to bring large numbers of customers away from traditional institutions.

Why BankMobile has launched an online magazine (Tearsheet), Rated: B

BankMobile has launched a content marketing website called Paradigm Money to help customers navigate personal finance.

The site, which launched this month, includes news, opinion pieces, interviews and advice.

BankMobile, which was born as the mobile-only offshoot of Customers Bank which sold it last year, has 1.8 million customers to date and opens about 300,000 new accounts each year.

WHAT FAMILY OFFICES WANT FROM ALTERNATIVE INVESTMENT MANAGERS (All About Alpha), Rated: A

Competition within the alternatives sector for family office investments is at an all-time high, as these investors get more comfortable with the range of assets available to them and their general understanding of alternatives rises. Fund managers want to win these wealthy investors over, but often find they are unsure of how best to pursue them. The family office client is increasingly demanding a more tailored approach to wooing them over. Managers who can adapt their prospecting tactics stand a better chance of winning a partnership with these prized investors.

A Q4 2017 research study, “Single-Family Offices and Alternative Investments,” by Institutional Capital Network, provides a framework for the changing dynamics in family office activity within the alternatives space. Some of the research findings that stand out in particular include:

First-generation founders have a “stay-rich” mentality, while second-generation are more likely to have a “get-richer” perspective.

About 40% of second generation single-family offices are investing 15% or more of their total portfolios into alternatives, compared to 20% of first generation single-family offices that are investing at similar levels. In 2017, 71% increased their direct allocations relative to 2016, and 82% intend to do so in the future.

33% of Americans do not have more savings than credit card debt (KHOU), Rated: A

In the latest survey by personal finance site Bankrate.com, 33% of Americans say they do not have more emergency savings than credit card debt. That includes 21% who say their credit card debt exceeds their emergency savings and 12% who indicate they have no savings or credit card debt.

While one in three Americans are financially ill-equipped for an emergency, that is down from 41% in 2017 and 43% in 2016 and is the lowest level in the eight years of the survey.

Fifty-eight percent say their emergency savings fund exceeds their credit card debt, which is up from 52% in the last two years and ties 2015 as the best seen in eight years.

US Mobile Payment Market to Reach $ 3 Trillion by 2020, Fintech Stocks Lead the Way (Investing News), Rated: A

A new Market Research Reports Search Engine report states the US mobile payments will grow from $550 billion in 2015 to reach $2.8 trillion by 2020, representing a compound annual growth rate (CAGR) of 39.1 percent over the course of that period.

Marlette Funding Named a Finalist in Top Consumer Lending Platform in LendIt Fintech Industry Awards Competition (Business Wire), Rated: B

LendIt Fintech, the world’s leading event in financial services innovation, announced today that they have selected the Best Egg Personal Loan Platform provided by Marlette Funding, LLC, as a finalist in the Top Consumer Lending Platform category for the LendIt Fintech Industry Awards. The Top Consumer Lending Platform finalists were selected from companies that demonstrate a combination of loan performance, volume, growth, product diversity and responsiveness to stakeholders.

Klarna North America to Highlight “Smoooth” Payment Products at eTail West 2018 (Klarna Email), Rated: B

Klarna, a global payments provider, is a sponsor of and will be exhibiting at next week’s eTail West 2018 in Palm Springs, Calif.

Carl Gish Joins Varo Money as Chief Marketing Officer (PRWeb), Rated: B

Mobile banking startup Varo Money, Inc. today announced the hire of Carl Gish as Chief Marketing Officer. Gish is a marketing and general management executive with more than 20 years of experience across well-known, high-growth consumer brands and e-commerce businesses, including Amazon, Unilever, Dyson, eBay and Affirm. He will lead all aspects of the company’s branding and marketing, and will work directly with CEO Colin Walsh to drive large growth in Varo’s customer base across multiple marketing channels and partnerships.

United Kingdom

Zopa warns over defaults as investor returns decline (Financial Times), Rated: AAA 

The UK’s oldest peer-to-peer service is warning investors that defaults on its recent loans will be running at a higher rate than during the financial crisis.

Fintech Raisin Crosses the Channel to Offer Services to UK Savers (Crowdfund Insider), Rated: AAA

Savings marketplace Raisin has launched in the UK.

Revolut’s Nikolay Storonsky on long hours and high staff turnover (Financial Times), Rated: AAA

Over the past three years, and with the backing of Balderton Capital and Index Ventures, two European venture capital firms, Mr Storonsky’s company has raised about £60m and had a valuation of £300m last year.

How Startups Can Gain Traction In The Financial Services Market (Forbes), Rated: A

The United Kingdom’s financial technology sector attracted a record £1.34bn in venture capital  investment in 2017, with 90% of that money going to startup and early stage businesses based in London.

Those raising cash last year included peer2peer lending platform Funding Circle (£81.9m); payments company, Transferwise (£211m) and challenger bank, Monzo (£71m).

Last week I spoke to two fintech entrepreneurs – Ollie Purdue of online bank account provider, Loot and Jared Jesner, CEO of currency exchange, WeSwap – about their reasons for entering the fintech arena and how they hope to carve out a niche in a crowded market.

Lloyds Bank Marks $ 4.1B for Digital Strategy (Bank Innovation), Rated: A

British bank Lloyds has put aside £3 billion ($4.1 billion) for digital development and growth, the bank announced today.

The  £3 billion is a 40% increase on the spend Lloyd marked for its previous three-year expansion plan.

P2P lending to form part of inquiry into SME finance (P2P Finance News), Rated: A

POLITICIANS are going to consider the availability and uptake of peer-to-peer lending as part of an inquiry into finance for small-and-medium-sized enterprises (SMEs).

 

Ultimate guide to Innovative Finance ISAs: Part two (P2P Finance News), Rated: A

Lending to small- and medium-sized enterprises (SMEs) has soared in recent years. Members of the Peer-to-Peer Finance Association have cumulatively lent a total of £5bn to businesses versus £3bn to individuals, as of the end of 2017.

Loans to SMEs tend to produce a higher rate of return than loans to consumers, but they can also be riskier in some cases. The average size of loan is also much higher.

How Short Term Lender Wonga Went Worldwide (Silicon India), Rated: A

Today the brand eclipses its competition, with many of its 400 failing to survive in 2016 as fresh price caps on loan and repayment charges came into action.

With UK-domination taken care of, the lender has been expanding rapidly overseas, starting its journey by launching in Canada, South Africa and Poland, before going on to purchase and assimilate a number of foreign short term lenders as part of its global growth.

To launch Wonga Spain, the lender purchased Spanish credit agency Credito Pocket in 2013, going on to purchase German “pay later” payment firm BillPay (with two million users to its name) and a stake in Indian firm Nahar Credits Private in October of the same year.

China

China tries to bring order to sprawling online finance sector (Asian Review), Rated: A

China’s 1.2 trillion yuan ($189 billion) internet finance industry has reached a turning point as regulators tighten regulations after one too many cases of bankruptcy and fraud.

European Union

RaboDirect to quit Irish market in May (The Irish Times), Rated: AAA

RaboDirect Ireland, an online savings bank owned by the Dutch lender Rabobank, will quit the Irish market in May. The bank has up to 90,000 Irish customer accounts with a total of €3 billion on deposit.

The bank says it has decided to withdraw from the Irish market after 13 years following “moves by our parent, the Rabobank Group, to simplify its business model across the world and reduce costs”.

Bizarre Buybacks and Expensive Takeovers (The Washington Post), Rated: AAA

In November, Swiss fintech company Temenos Group AG spent 150 million Swiss francs ($160 million) buying back its shares at an average price of 122 francs each. Weeks later, with the stock at 115 francs, it’s preparing to sell shares to fund a $1.9 billion takeover of British rival Fidessa Group Plc.

The return on invested capital looks set to be just over 6 percent in 2020, based on the stated cost synergies plus Fidessa’s forecast operating performance. That’s well below the target’s 9 percent cost of capital.

Anyfin raises €4.8 million to refinance loans with a statement selfie (Finextra), Rated: A

Anyfin, a Swedish startup that offers to refinance consumer loans and credit card debt using a combination of artificial intelligence and a photo of the current statement and repayment terms, has bagged €4.8 million in Series A funding led by Accel and Northzone.

BNI Europa and Code for All partner to train new generation of IT developers (Finextra), Rated: A

BNI Europa, through Puzzle, its online credit brand, created a partnership with <Code for All_> to provide financial aid to anyone who wants to learn to become a IT developer.

This partnership provides an intensive code training program of 14 weeks supported by an online credit solution that offers special payment conditions to the program’s students.

International

What Is the Ripio Credit Network? (The Merkle), Rated: A

The Ripio Credit Network wants to offer a real global credit ecosystem which is more suitable than traditional solutions and even than similar peer-to-peer lending services. While that sounds like a tall order, the RCN protocol will connect lenders and borrowers all over the world via the native RCN token.

As is the case with any blockchain ecosystem, the Ripio Credit Network has its own native RCN token. It is the network’s payment channel first and foremost. Although credit transactions can be settled in any local currency, one does need RCN tokens to access the network and facilitate transactions.

Etherty launches blockchain-based, real estate trading platform (Construction Business News), Rated: A

A new investment portal, Etherty, has launched offering a real estate linked-crypto currency that enables investors to seize property investment opportunities all over the world, primarily in key markets such as Dubai, Mexico, and Australia.

500 Startups, Huobi Labs to Incubate Blockchain Projects (CoinDesk), Rated: B

500 Startups, the Silicon Valley startup accelerator, announced Tuesday it is partnering with cryptocurrency exchange Huobi’s incubator wing, Huobi Labs.

The two companies will support startups in various areas, including developing business plans, focusing on elements such as white papers, marketing strategies, community engagement and fundraising efforts, the accelerator said in a press release.

Australia/New Zealand

FMA opens applications for personalised digital advice (Scoop), Rated: AAA

The FMA is now open for applications from providers seeking to offer personalised financial advice to consumers through digital tools and platforms (so-called robo-advice).

India

P2P lending, payments platform JaldiCash to merge with parent firm Weizmann Forex (Financial Express), Rated: A

Weizmann Forex Limited (WFL), a foreign exchange and inward remittances platform, has approved the acquisition of its unit Weizmann Impex Enterprises Ltd (WISE). The proposed deal is supposed to take place on April 1st and will be done through a Scheme of Amalgamation, the company said in a press release. WISE is authorized by the Reserve bank of India to issue and operate semi-closed prepaid payment systems in India. The company owns ‘JaldiCash’, a payments platform that claims to have a network of more than 18,000 channel partners across 29 Indian states and more than 520 districts through their B2B model. JaldiCash works on a P2P model lending model, enabling loans for retailers, hotels and other services

APAC

ALAMI is on a journey to popularise sharia-based finance in Indonesia. (e27), Rated: A

Islamic banking assets is only 5.03 per cent of the total banking sector’s assets in the country, with a market share of IDR356.5 trillion (US$26.7 billion).

According to ALAMI CEO Bembi Juniar, this is due to the lack of infrastructure, support from key opinion leaders, and education on the benefits of sharia-based financial services.

So ALAMI offers a platform that serves as an aggregator for sharia-based financing for SMEs.

Canada

Wealthsimple raises $ 65 million in funding from Power Financial group of companies (Cision), Rated: AAA

Canada’s digital investor has raised a $65 million investment from the Power Financial group of companies, bringing their total investment in Wealthsimple to $165 million. Wealthsimple manages approximately $1.9 billion for over 65,000 clients in Canadathe United States, and the United KingdomMore than 80 per cent of people who use digital investing in Canada use Wealthsimple.

Authors:

George Popescu
Allen Tayl

What is 506(c), and What Does It Mean for Fundraising?

recorded capital commitments

Regulation D is a set of rules under which an issuer can sell its securities without having to register with the SEC. Rule 506 under Regulation D has been the most widely used means of raising capital in the US. Rule 506 was basically bifurcated into two separate rules — 506 (b) and 506 (c) […]

recorded capital commitments

Regulation D is a set of rules under which an issuer can sell its securities without having to register with the SEC. Rule 506 under Regulation D has been the most widely used means of raising capital in the US. Rule 506 was basically bifurcated into two separate rules — 506 (b) and 506 (c) — after the passing of Title II of the Jumpstart Our Business Start-ups (JOBS) Act in September 2013. 506 (b) is merely the extension of the old Rule 506, and 506 (c) is the new section that has completely revolutionized the world of private investing.

Under rule 506 (b), companies are free to accept backing from accredited investors and 35 non-accredited investors for an unlimited amount. Under rule 506(c), companies can sell to accredited investors only. On top of that, they need to verify that each investor is accredited.

An accredited investor is one who has a net worth of $1,000,000 excluding his primary residence, or if he has made $2,000,000 on an annual basis in the past two years.

So what is the advantage of this new rule? It allows for general solicitation.

506(b) does not permit general solicitation. The issuer needs to prove a pre-existing relationship with investors. This reduces the pool of investors a company can target. With general solicitation allowed under 506(c), start-ups can leverage the internet, TV, radio, and other media to attract a larger base of investors. This has “democratized” investing and the ability to raise capital. A company offering securities need not have any prior relationship with investors. Rather, they can publicly promote their capital-raising offer.

Crowdnetic, now FinMkt, tracked 6,063 investment crowdfunding private offerings under JOBS Act Title II 506(c) rules, which have combined recorded capital commitments (“RCC”) of approximately $870.0 million in the two years between September 23rd, 2013 (when Title II rules went into effect) and September 23, 2015 (the date of the report).

There is not an ounce of doubt that Rule 506(c) has brought a lot of upside for the issuers as they can broaden their reach by advertising their offering. The issuing company can raise more capital at a much faster pace without relying on the traditional gatekeepers that earlier helped them to find suitable investors. From the perspective of the investor, under rule 506(c), the advertised offering benefits them, as well. They now have a much larger choice available and can get on board a startup much earlier in its life as compared to waiting for an IPO.

Effect of 506(c) changes

There is an additional burden of verifying investors and making sure they meet the SEC’s definition of “Accredited Investor.” Many companies have sprung up to help start-ups outsource this tedious legal due diligence.

Startups have been using social media to attract users and customers since at least a decade. Now, they are able to leverage their skill set to attract money for their ventures. We are used to hearing about CAC (i.e. Customer Acquisition Cost); we will soon be reading about CAI – Cost of Acquisition of Investor. This metric will become a key success factor for start-ups looking to grow aggressively, and it allows them to even sidestep venture capitalists for funding.

Research by Crowdnetic shows that investors are comfortable investing in startup equity, thus highlighting that markets and investors have accepted this new rule with open arms.

What does it mean for alternative lenders?

This rule is a boon for marketplace lenders. They have proved adept at bringing thousands of lenders onto their platforms. P2P lenders have generally been a happy lot due to higher risk-adjusted returns they’ve been able to generate through platforms. The company should be able to tap this base for equity fundraising, as well. If you’ve invested $50,000 through SoFi, you might be predisposed to invest $10,000 in its equity.

And not only start-ups, even VCs and accelerators are taking note of the rule and its implied implications. 500 Startups has recently filed a Form D under 506( c ) for a fintech fund targeting a raise of $25 million. It is a prominent accelerator and has invested over $350 million in 1800 companies. This shows that the entire ecosystem of fundraising is poised for an upheaval with the 506(c) rule.

Conclusion

Rule 506 will break the hegemony of investment bankers and VCs over the fundraising process. A startup doing well can target its own user base for accredited investors rather than having to pay sky-high fees or dilute control to VCs. The startup community has been extremely receptive to the change, and you can see multiple platforms launched for the sole purpose of helping thousands of start-ups raise funding from a wider pool of investors. It is easy to see that 506(c) has been a win-win for all involved.

Author:

Written by Heena Dhir.

Monday May 22 2017, Daily News Digest

cumulative net trigger loss

News Comments Today’s main news: DBRS confirms SoFi professional loan program 2016-B LLC.  Bond buyers return to online lenders. RateSetter acquires Vehicle Trading Group. Linked Finance receives full FCA authorization. Australian banks have paid $60M in forced refunds. StashAway raises $2.2M. Today’s main analysis: Prosper Marketplace Issuance Trust PMIT 2017-1. Today’s thought-provoking articles: Bond buyers return to online lenders. China, […]

cumulative net trigger loss

News Comments

United States

United Kingdom

China

European Union

International

Australia/New Zealand

India

Asia

Canada

Barbados

News Summary

United States

DBRS Confirms SoFi Professional Loan Program 2016-B LLC (DBRS), Rated: AAA

DBRS, Inc. (DBRS) has today reviewed and confirmed the four outstanding publicly rated classes from SoFi Professional Loan Program 2016-B LLC. All four classes were confirmed because performance trends are such that credit enhancement levels are sufficient to cover DBRS’s expected losses at their current respective rating levels.

RATINGS

Issuer Debt Rated Rating Action Rating Trend Notes Published Issued
SoFi Professional Loan Program 2016-B LLC Post-Graduate Loan Asset-Backed Notes, Class A-1 Confirmed AAA (sf) May 19, 2017 US
SoFi Professional Loan Program 2016-B LLC Post-Graduate Loan Asset-Backed Notes, Class A-2A Confirmed AAA (sf) May 19, 2017 US
SoFi Professional Loan Program 2016-B LLC Post-Graduate Loan Asset-Backed Notes, Class A-2B Confirmed AAA (sf) May 19, 2017 US
SoFi Professional Loan Program 2016-B LLC Post-Graduate Loan Asset-Backed Notes, Class B Confirmed A (high) (sf) May 19, 2017  US

Weekly Industry Update: Prosper Marketplace Issuance Trust (PMIT 2017-1) (PeerIQ), Rated: AAA

Prosper priced its first unsecured consumer deal of 2017 on May 19th, representing the sixth deal consisting of Prosper collateral, and the first deal backed by Prosper’s consortium of institutional investors. The deal was structured by Credit Suisse and co-led by Jefferies.

The Consortium appears on track to deliver the $5 Bn loan purchasing commitment to Prosper as evidenced by i) size of the deal size ($470.8 Mn), ii) average age of the portfolio (two months), and speed to marketing th deal. The deal generates incremental revenue for Prosper which holds unrestricted cash and cash equivalents of $22.3 MM.

We note that Kroll has added 4.5% points for base case loss range reflecting the somewhat higher path of losses on CHAI 2016-PM1 than initially expected. (CHAI 2016 PM-1 has a revised base case loss range of 12 to 14% from 10.61% initially). 

 The deal’s excess spread is substantially tighter, reflecting higher coupons, improved market conditions, and stronger investor appetite for MPL ABS bonds. The attractive excess spread of ~10% implies a significant return for residual tranche investors assuming base case loss estimates are borne out.

Improved Predictive Risk Model PMI-7 

Prosper made a significant change in the in the credit underwriting by switching from Experian to TransUnion, the dominant credit bureau in the FinTech sector. The switch to TransUnion affords Prosper access to trended bureau data, more diverse credit attributes, and alternative data. Trended data provides lenders with a longitudinal view rather than merely a snapshot into a borrower’s credit behavior.

Prosper rolled out a new proprietary credit risk model PMI-7 on December 20th based on the TransUnion dataset. Although the trended bureau data is a significant long-term enhancement, it will take some time for Prosper to re-calibrate models based on new performance data. Investors and Prosper will be monitoring the vintage performance from PMI-7 closely to assess the smoothness of the transition.

Source: PeerIQ

Bond investors in the deal benefit from credit enhancement consisting of over-collateralization, subordination, reserve accounts, and excess spread. For PMIT 2017-1, the A, B, and C tranche has a total credit enhancement of 43.9%, 31.1%, and 10.4%.

Pricing Tighter

The Prosper deal priced tighter than a recent LendingClub prime deal ARCT 2017-1, in part due to the much higher initial credit enhancement in PMIT as compared to other recent deals.

We observe a parallel shift in the credit curve: For instance, PMIT 2017-1 A (A-rated) has about 44% credit enhancement and 0.8 year WAL; ARCT 2017-1 A (BBB-rated) has about 29% credit enhancement with a similar WAL. PMIT 2017-1 A was priced 95 basis points tighter than the senior class in ARCT 2017-A.

Walking down to lower junior tranches, PMIT 2017-1 C (B-rated) was priced about 40 basis points wider than ARCT 2017-1 B (BB- -rated). The steepening in the pricing curve again reflects demand for senior rather than equity-like risk profile.

Trigger Talk

We continue to observe a pattern of higher CNL triggers in recent deals, reflecting conservative outlook from market participants. Exhibit 4 shows several cumulative net loss (CNL) trigger profiles in recent personal loan ABS deals. Here, we summarize the cumulative loss trigger profiles from recent deals and contextualize the CNL triggers of the new Prosper deal with those of CHAI 2015-PM1.

All Is Forgiven? The Bond Buyers Return To Online Lenders (PYMNTS), Rated: AAA

After the rather spectacular fireworks display that Lending Club had going on this time last year, it was not great surprise when the bond buyers who had been snapping up P2P marketplace debt suddenly got a case of cold feet and starting fleeing those marketplace lending platforms.

Since April of this year, over $2 billion in securities backed by loans have either been sold or are being prepared for an imminent sale, according to credit-rating firms and people familiar with the matter.

That is some much needed good news for the segment, as it represents more than was issued in the entire second quarter of 2016, according to data tracker PeerIQ.

And it seems to be a continuation of recent activity that saw $3 billion in bonds backed by online loans that were issued in the first quarter of 2017, double the amount from the same period a year earlier.

Bonds backed by online loans is a small part of the securitization market — as of 2016, $7.8 billion of bonds backed by online loans were issued, compared with $191 billion in total issuance of asset-backed securities, according to S&P Global Ratings.

New Fed Mortgage rolls out the “Fast Track Mortgage” (PRWeb), Rated: A

NewFed Mortgage Corp., a multi-state residential mortgage lender is excited to announce their “Fast Track Mortgage” loan origination technology integration with BeSmartee, an online mortgage automation company based in Huntington Beach, California. This smart technology platform utilizes intuitive artificial intelligence targeting the specific needs and qualification of borrowers.

Fast Track is an online self- serve platform offering mortgage shoppers the convenience of 24/7 access to obtain a personalized rate and cost quote with the option to continue to apply and obtain a conditional loan approval in less than 15 minutes. Fast Track streamlines the application process by allowing the borrower online to pull their own credit report, calculate costs, obtain loan disclosures on the spot and receive an automated loan approval and along with the option to order their home appraisal. The ease of Fast Track Technology allows borrower to send documents right through their specially created account.

Nuance Strengthens Biometrics Security Portfolio and Attacks Fraud with Advanced, Multi-Modal Offering (NASDAQ), Rated: A

Nuance Communications, Inc. (NASDAQ:NUAN) today took a major step towards reducing the risk of consumer fraud by announcing a new suite of biometric security solutions, driven by the latest in artificial intelligence (AI) innovations.  The new Nuance Security Suite includes not only the company’s award-winning voice biometrics technology, but also new advances in facial and behavioral biometrics that combine to provide advanced protection against fraud, across customer service channels.

Applying deep neural networks (DNN) as well as advanced algorithms to detect synthetic speech attacks, and integrating facial and behavioral biometrics means the Nuance Security Suite takes fraud prevention to new levels.  By combining a range of physical, behavioral, and digital characteristics to provide secure authentication and more accurately detect fraud across multiple channels – from the phone to the Web, mobile apps and more – Nuance’s new Security Suite allows enterprises to attack fraud head-on, while at the same time offering an improved customer experience.

With its latest Security Suite, Nuance can equip an organization with one or more of the following options to fight fraud, improve security and boost the customer experience:

  • Voice biometrics – authenticates the customer when they say a predetermined phrase like “My voice is my password,” or during the course of normal conversation with an agent to determine if the customer is indeed who they say they are.
  • Facial biometrics – utilizes the camera on a smart phone to verify the person in real time.
  • Behavioral biometrics – tracks how users interact with Web and mobile applications, (e.g. scrolling, mousing, or tapping), creating a pattern against which to compare.
  • Additional biometric modalities – In addition to offering support for voice, facial, and behavioral biometrics, the Nuance Security Suite can also accept plug-ins for other emerging authentication technologies such as retinal scans.

The mortgage search goes digital (American Banker), Rated: A

Interest rates on the rise and a lower inventory of homes on the market are tightening access to the housing market. At the same time, nonbank, online-only lenders have boomed, accounting for 73% of loans originated, according to the Federal Housing Authority.

This trend is likely to continue in the coming years. And members of the digital-native Millennial generation, who rely on online search to find home loans–and everything else–are taking over as the primary home-purchasing segment of the population–Millennials accounted for 84% of closed home loans in January 2017, according to the Ellie Mae Millennial Tracker™ report. In this environment, an effective organic local search strategy is no longer just beneficial for traditional mortgage lenders; it’s existential.

Of 5,849 loan officers whose online presence Yext studied across the online ecosystem (including sites like Google, Facebook, Bing, Yelp, and many others), 64% of their business listings contained incorrect addresses, 42% had phone number errors, and 46% had errors in business names. 9.25% of loan officer listings were duplicates, and 57.8% of loan officers studied had no online presence at all.

CFPB Explores Ways to Assess the Availability of Credit for Small Business (CFPB), Rated: A

The Consumer Financial Protection Bureau today launched an inquiry into ways to gather and use new and existing information to identify the financing needs of small businesses, especially those owned by women and minorities. Small businesses typically need access to credit to take advantage of growth opportunities, yet public information on this lending market is inconsistent and incomplete. The Request for Information asks for public feedback to help the Bureau better understand how to bridge this information gap. The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the CFPB to collect data about small business lending to help identify needs and opportunities in the market and to facilitate enforcement of fair lending laws.

500 Startups Creates Pooled Investment Fund for Fintech (Crowdfund Insider), Rated: A

500 Startups has filed a Form D 506(c) for a pooled investment fund targeting Fintech. The 500 Fintech LP is seeking $25 million according to a filing with the Securities and Exchange Commission.

The Silicon Valley based operation has committed over $350 million in early stage investments. Over 1,800 companies have benefited from both funding and support around the world since the global seed fund was launched in 2010.  Some of the better known investments include Twilio, Credit Karma, Maker Bot and more.

TSB offers online consumer lending (The Mountain Press), Rated: A

PIGEON FORGE — Tennessee State Bank is excited to announce online consumer lending, powered by Lending Club, the world’s largest online credit marketplace, is now available.

These loans range from $1,000 to $40,000, are unsecured (which means no collateral is required), and can be used to eliminate high interest debt, kick-off a home improvement project, or make a major purchase.

JPMorgan formally quits R3 (LinkedIn), Rated: A

Not subscribing to a consortium like R3 is not the same as banks not leveraging blockchain/DL. Here is a link to an excerpt from a report we did on a bankers perspective (former head of digital banking at Deutsche Bank) on blockchain which may provide some insights:

At the same time, Ripple is posting amssive gains, overtaking Etherium on market cap:

First Federal Lakewood invests in Boston startup Numerated Growth Technologies (Cleveland Business), Rated: B

The mutual bank, with $1.6 billion in assets, has announced an investment partnership with Boston’s Numerated Growth Technologies Inc., a fintech (the term ascribed to programs and technology that support financial services) startup spun out of Boston-based mutual Eastern Bank own in-house fintech accelerator, Eastern Labs.

Numerated’s platform focuses on small-dollar loans, allowing the loan process to be managed in real-time — reportedly conducting the process in as quick as five minutes, according to the firm — in addition to automating marketing to existing and prospective bank customers, which helps feed the loan pipeline as fewer consumers visit brick-and-mortar bank branches.

Nicki Minaj Is Starting An ‘Official Charity’ To Pay Off Student Loans (Huffington Post), Rated: B

Last weekend, hip-hop living legend Nicki Minaj made waveswhen she decided ― seemingly spontaneously ― to start making tuition and student payments for straight-A students who reached out to her via Twitter.

Most notably, Minaj announced that she was in the process of launching an “official charity for Student Loans/Tuition Payments,” meaning kids who are having trouble paying their way through school could soon get some much-needed help.

United Kingdom

HSBC tech chief on digital challenger banks: ‘We are building similar stuff ourselves’ (Business Insider), Rated: AAA

One of HSBC’s most senior technology executives says that the big bank is not far behind digital-only challenger banks when it comes to consumers offerings.

Raman Bhatia, HSBC’s head of digital for retail banking and wealth management in the UK and Europe, told Business Insider that while startups enjoy a technological advantage, HSBC is working hard to catch up.

Bhatia pointed to HSBC’s SmartSave app as an example of how the bank is keeping pace with digital rivals. The app helps people automatically put money into savings based on pre-set rules. It evolved from Nudge, an internally developed and trialled savings app HSBC worked on last year. SmartSave was trialled with around 2,000 HSBC customers in December.

Assetz Capital reaches quarter of a billion lending milestone (P2P Finance News), Rated: AAA

ASSETZ Capital announced that it has now lent £250m to UK businesses.

The peer-to-peer lender said it has provided up to £25m of secured loans a month since its launch in 2013, with more than £55m lent so far this year.

Stuart Law (pictured), chief executive of Assetz Capital, said investors have earned more than £21m with actual rates of between 3.75 per cent and 18 per cent.

Sub-prime vehicle finance provider bought out of administration (AM Online), Rated: AAA

Peer-to-peer lending company RateSetter has acquired sub-prime vehicle finance provider Vehicle Trading Group out of administration.

The Leicester-based operation has now been sold to RateSetter, which is planning to rebrand the business, but Insider Media reported that the deal “will not impact its day-to-day operations”.

Linked Finance receives full authorisation from UK regulator (The Irish Times), Rated: AAA

Linked Finance, a peer-to-peer lending platform, has received full authorisation by the UK’s financial conduct authority to enter the UK lending market.

Figures from the first quarter of 2017 show that the company’s Irish platform increased lending activity by more than 326 per cent on the same period a year earlier.

Since its launch in 2013, Linked Finance has facilitated more than 870 loans and more than €25 million in funding for Irish small to medium enterprises.

Deloitte Launches Enhanced Digital Banking Offering (PR Newswire), Rated: A

Deloitte today announced the launch of its enhanced Digital Bank offering to further accelerate a bank’s digital transformation. Based on the Salesforce Intelligent Customer Success Platform and utilizing the Salesforce Financial Services Cloud, Digital Bank helps banks create exceptional experiences by providing tailored banking capabilities with accelerated implementation and realization of value.

Digital Bank’s capabilities and potential benefits include:

  • Augmented Salesforce Platform with many technologies, fintech solutions and AppExchange partners, as well as personalized channel engagement through automated marketing using Salesforce Marketing Cloud
  • Ability to expand relationships by having full visibility into bank relationships across business units
  • Established customer trust through multifactor secured cloud banking platforms and improved onboarding for customers through a fully mobile process enabled by many technologies
  • Increased speed and agility to meet customer needs, as well as the regulatory needs of the banking industry, using predictive analytics based on account behavior to recommend next best offers and next best actions
  • Accelerated implementation allowing banks to generate ROI faster, including linking newly created accounts in Salesforce to a blockchain secured digital identity

The job creation contradiction in fintech (AltFi), Rated: A

It got me thinking about the broader impact of fintech lenders in the UK, especially those built to fund businesses. Companies like Funding Circle – the country’s largest marketplace lender for SMEs – regularly reference their impact on job creation in corporate updates. The logic is that the loans that Funding Circle and other platforms like it facilitate help small businesses to grow, and so too to hire more staff.

Leading US firm OnDeck released a report in late 2015 analysing the economic impact of the first $3bn lent through the platform. The report found that OnDeck loans had powered $11bn in business activity, creating 74,000 jobs across the country. Similarly, Funding Circle published findings last summer suggesting that its lending had supported the creation of 40,000 jobs in the UK since 2010, boosting the economy by £2.7bn.

In this way, they are unquestionably killing jobs, as well as creating them – but nobody ever talks about that.

Barely a month goes by without news of a fresh round of bank branch closures. In March, for example, we learnt that RBS and NatWest would be cutting 158 branches and 400 jobs across the country.

Welsh start-ups can become unicorns with a $ 1bn plus valuation (Wales Online), Rated: A

As a result, Improbable has become one of the few UK start-ups to achieve the so-called ‘unicorn’ status, namely having a valuation of over $1bn.

Since then, their numbers have grown to nearly 200 firms globally and that are collectively valued at £523bn. The most valuable is Uber, the online taxi company that, in only four years, has reached a valuation of over £50bn.

A recent article in Forbes Magazine suggested that investors, with few places to put their money during an era of near zero interest rates, are fuelling the growth in unicorns as they look for better returns.

Property is top pick less than a year after funds gated (FT Adviser), Rated: A

According to research from peer-to-peer lending platform Kuflink, conducted in the first week of May, nearly a third of UK investors are planning to direct their attention to traditional asset classes such as property over the course of the financial year.

This comes after some of the largest property funds in the UK temporarily stopped investors from cashing-in their money last summer when thousands of people panicked after the European Union referendum and pulled out of the asset class.

The Kuflink survey, which questioned 1,100 investors across the UK, also found that Brexit and the snap election have impacted UK investment decisions more than any other political event in their lifetime.

Almost 40 per cent of investors are taking a more cautious approach by favouring ‘safe-haven’ asset classes, while 38 per cent are waiting until after the 8 June election to make any further investment decisions.

China

WeiyangX Fintech Review (Crowdfund Insider), Rated: AAA

Belt and Road Forum for International Cooperation, also known as the Belt and Road Initiative, was held in Beijing on May 14-15.

On May 12, the State Council Information Office of China announced that China has reached a series of agreements with U.S. related to agriculture, investment, energy and especially in financial service area.

Key points of the Initial Agreements of the China – US Economic Cooperation 100-Day Plan in financial service area:

  1. By July 16, 2017, China is to allow wholly foreign-owned financial services firms to provide credit rating services in China, and to begin the licensing process for credit investigation.
  2. The People’s Bank of China and The U.S. Commodity Futures Trading Commission (CFTC) are to work towards a Memorandum of Understanding (MOU) concerning the cooperation and the exchange of information related to the oversight of cross-border clearing organizations.
  3. By July 16, 2017, China is to issue further necessary guidelines and allow wholly U.S.-owned suppliers of electronic payment services (EPS) to begin the licensing process.

The hotly anticipated initial public offering of Alibaba’s finance arm, Ant Financial, has reportedly been delayed until at least the end of 2018 because of the need to secure regulatory approval and to focus on building the business.

E-commerce giant Alibaba Group and affiliated online payment service Alipay are aiming to use facial recognition technology to help retirees simplify pension authentication. Shenzhen is chosen to be the first pilot city.

The Peoples Bank of China (PBOC), the country’s central bank, announced that it has set up a Fintech committee to enhance research, planning and coordination of work on financial technology.

Happigo Home Shopping Co. Ltd., a leading Chinese multichannel e-retailer, announced that the company had the local government approval to build a small loan company.

The new micro-credit company will be named “Happy Tongbao”, which has about RMB 300 million in registered capital. It will focus on online micro-credit and expects to start its business in Hunan Province, lending to merchants in desperate need of a loan, then gradually expand to the entire Chinese market. Entrusted loans, bill business, financial advisory and other online business models is said to be covered in its future development.

To reduce lending risks, Happigo said it had developed a cloud system for tracking merchants on its online shopping platform to help it keep a record of the business of would-be borrowers’ cash flow.

IFRM: A Risk Control Model keeping No Bad Debt! (Xing Ping She Email), Rated: A

IFRM ( Internal Financal Risk Management) is a unique method created by Xeenho, focusing on the operation modes of platforms. In the IFRM Solution, the risks of P2P lenders are evaluated through three indicators: FOW (qualitative indication system), TOS (quantitative indication system) ,O2O Due Diligence, and Big Data Supervision. By using the model, Xeenho has been keeping the Zero Bad Debt since 2014 with a business volume up to $400M.

FOW ——qualitative indication system
FOW means Forbidden, Observation and Warning. FOW detects and prevents P2P fraud, if a platform is categorized as Forbidden, Observation or Warning then it won’t proceed to the next step.

TOS ——quantitative indication system
TOS means Transparency, Operation and Safety. TOS thoroughly evaluates a platform, from its basic information to its UX, and the risk is ranked thereafter.

O2O ——due diligence from online to offline
O2O means making due diligence from online to offline, in order to ensure a platform that passed FOW and TOS is as good as it seemed to be.

Big Data——Analytics & Observation System
This dynamic surveillance system continuously over watches the performance of a platform, and adjusts the rating accordingly.

The Business Model of Xeenho
European Union

Alternative Lending Index Unveils European Cross-Border Lending Opportunities (Crowdfund Insider), Rated: AAA

Twino, one of the leading Baltic lending marketplace, has produced in conjunction with KPMG Baltics a report called Alternative Lending Index which assesses the potential of alternative finance in 23 European countries based on a set of economic credit data. While the report does not pretend to exhaust the analysis of the drivers and hurdles of alternative finance across Europe, it presents a very useful snapshot of the Pan-European credit landscape that should help support international strategies.

The first platform to tackle cross-border lending was Estonian pioneer Bondora in 2009. Since then, and particularly in the past two years, international lending marketplaces have mushroomed in the Baltics. There are now more than a dozen of them, with a strong dominance of consumer lending platforms. Leaders such as Mintos and Twino have long passed the €100 million mark in cumulated loan funding. They currently grow at a rate of between €10 to €20 million worth of new loans funded a month. If you operate a lending marketplace in the UK, France or Germany you should know these platforms because they are targeting your smartest investors:

Together, these platforms have funded over €500 million in cumulated loan volume – which would make the Baltics, if it were a single country, the 4th largest online alternative lending market in Europe after the UK, France, and Germany.

Together, these platforms have funded over €500 million in cumulated loan volume – which would make the Baltics, if it were a single country, the 4th largest online alternative lending market in Europe after the UK, France, and Germany.

The ALI ranks 23 European countries. It concludes that countries with the highest gaps and inefficiencies in traditional lending, hence the highest potential for alternative lending in Europe are, in that order:

  • Hungary, Slovenia, Latvia, Poland, Romania, Greece and Ireland.

Conversely, the countries where the existing sources of financing available to households and corporate borrowers are sufficient and the potential for the development of alternative lending is therefore considered low, leaving little room for alternative lenders are:

  • France, Germany, Netherlands, Austria, Finland and Sweden.

Read the full report.

International

US Anniversary and the (Possible) Regulation of Crowdfunding in Ireland (Lexology), Rated: AAA

The US has just celebrated the first anniversary of its regulated crowdfunding regime, known as “Regulation Crowdfunding”. It was by all accounts a very happy anniversary for many US start-ups, as Regulation Crowdfunding reportedly raised $40 million in its first year. US advisory and education firm, Crowdfund Capital Advisors report that the average successful crowdfunding campaign raised around $282,000 from around 312 investors. Regulation Crowdfunding allows companies to raise up to $1,070,000 over a 12-month period.

An unregulated environment brings with it its own set of benefits and drawbacks:

  • On the positive side, the absence of a regulatory framework means there are no restrictions on who can invest, or on the amounts that can be raised or invested. In contrast, the Regulation Crowdfunding regime in the US has strict limits on the amount which a person may invest through crowdfunding each year. These limits are determined by an individual’s annual income and net worth.
  • On the negative side, the lack of regulation means that many investor-protection mechanisms are simply not available. For example, the Central Bank’s codes of conduct and client asset rules do not apply to crowdfunding platforms.

The Department of Finance (the “Department”) and the SME State Bodies Group have issued a public consultation paper on the possible ‘Regulation of Crowdfunding in Ireland’. They are considering how to facilitate the development of crowdfunding in Ireland for the benefit of the economy while also ensuring adequate protection for small investors and consumers.

The objective of this consultation is to invite the views of interested parties on whether a regulatory regime would be appropriate for the crowdfunding sector.

Breaking Banks: Small-business fintech around the globe (American Banker), Rated: A

How do we get money to small businesses that make the economy work for most people around the world? What kind of systems do we need to create? And how do we make them flexible so multiple cultures can utilize them?


A ‘paradigm shift’ is taking place in financial technology (Business Insider), Rated: A

Venture capital firms, which poured $117 billion into fintech startups from 2012 to 2016, have been pulling back on their investments.

Financial technology companies experienced a surge in funding from 2012 to 2015, during which time venture capital firms poured $92 billion into the space.

In 2016, global venture capital investment in fintech companies dipped to $25 billion, from $47 billion in 2015.

According to Morgan Stanley, there are a number of factors that will push legacy financial firms to step up their investments in fintech companies. The most obvious factor is the fear of disruption.

Deregulation is another trigger. If the Trump administration follows through on its promises of Wall Street deregulation, then incumbent firms won’t have to spend as much cash on regulatory compliance. That would free up money for fintech investment initiatives. Legacy firms’ focus on lowering cost also provides an incentive to invest in fintech.

Online Financial Advice Lacks The Human Touch (iexpats.com), Rated: B

Robo-advisers can do more or less the same job, but without the human touch and the expensive fees that go with it.

Now, anyone can find financial advice 24/7 as long as they have an internet connection, cash to invest and a smartphone or other gadget to access the web.

The recommendations that come out of the robo-advice process should be similar to those suggested by a human adviser.

Some would argue robo-advisers are less likely to make mistakes, but if a consumer keys the wrong information the ‘rubbish in, rubbish out’ rules applies.

Australia/New Zealand

Big banks pay $ 60m in advice refunds (Financial Standard), Rated: AAA

AMP, ANZ, CBA, NAB and Westpac have to-date repaid $60 million out of an estimated $204 million for charging clients for financial advice that was not provided.

On a per-institution basis, AMP has paid $3.8 million out of an estimated $4.4 million; ANZ paid $43 million out of an estimated $52 million; CBA paid $5.8 million out of an estimated $105 million; NAB paid $4.4 million out fan estimated $5 million; and Westpac has paid its estimated total compensation of $2.6 million in full.

Robo adviser to get access to Westpac’s Panorama platform (Financial Review), Rated: AAA

Small-balance investors that financial advisers usually avoid will now get a chance to use BT Panorama, Westpac’s $500 million integrated banking and wealth operating system, after the bank inked a deal with Barry Lambert-backed robo adviser Ignition Wealth.

Currently the platform has about $110 billion under administration and 800 advisers are using it.

Via Ignition Wealth, which rich lister Mr Lambert took a minority stake in in 2016, customers can go fully advised, use a hybrid model where they control their investments with an adviser, or go fully DIY. Fees slide up and down depending on how it’s used.

Ignition Wealth has announced it is partnering with BT Panorama to offer its digital advice solution to accountants, advisers, and investors using the BT Panorama platform.

The digital advice provider said its 360 advice offering would offer a post-Future of Financial Advice (FOFA) compliant solution for accountants and financial industry professionals who did not hold an Australian financial services licence (AFSL) but were looking to source financial advice for their clients in a post-FOFA environment.

Advisers, accountants, and investors using BT Panorama would have access to digital and full service financial advice powered by Ignition Wealth from Q3 of 2017.

DIY investors reject advice, says ASX study (ifa), Rated: A

The main reason some Australian investors do not use financial advice is because they prefer “to be in control” and are not convinced that advice adds value, recent research from the ASX has shown.

According to the 2017 ASX Australian Investor Study report, which looked at the behaviour and attitudes of 4,000 Australian investors, around 60 per cent of all investors use some form of professional financial advice.

For those not using advice, 90 per cent said it is because they “prefer to be in control”, while 56 per cent said they were “not convinced advice adds value”. Close to 40 per cent said advice was “too expensive” while around 30 per cent said their “investment is too small to need advice”.

Borrowers could save more than $ 3000 a year by switching to an online lender (News.com.au), Rated: A

AUSSIE borrowers could save up to $3184 a year by switching to an online lender, but unfamiliarity and lack of face-to-face customer service are keeping them away, according to Mozo.

The financial comparison website examined 504 home loans from 89 providers, finding nearly two thirds of the best-value home loans on the market are from online lenders, which were 0.7 per cent cheaper on average than the big four for a typical 25-year, $350,000 loan.

Online lenders iMortgage, loans.com.au and UBank scored the highest marks in Mozo’s Experts Choice Awards, while Homestar was named Non-Bank Home Lender of the Year.

But according to a survey of 1000 consumers, Australians are less likely to apply for a home loan online than other financial products despite the huge savings on offer. Australians are twice as likely to purchase car insurance online versus a home loan.

The biggest barrier for applying for a home loan online was lack of familiarity with online lenders, with 56 per cent of respondents saying they simply don’t know enough about them, while 43 per cent said they would prefer to discuss their needs face-to-face with a mortgage expert.

More men than women would consider applying for a home loan online. Of those who said they would, half were aged between 25-44.

OnDeck business loans help franchise businesses get on with it (Professional Planner), Rated: B

Small business loan specialist OnDeck announced a partnership with the Franchise Council of Australia (FCA), the peak body for the franchise sector in Australia. The agreement underscores OnDeck’s go-to-market approach for its joint flagship product with partner MYOB – ‘MYOB Loans Powered by OnDeck’.

By partnering with the FCA, OnDeck aims to reach the thriving $146 billion franchise sector as a supplier of choice for small business loans, which can be approved online in as fast as one business day with minimal paperwork. OnDeck aims to fill a serious gap in the market for franchise owners by satisfying more of their unsecured lending requirements that go beyond equipment financing to renovation, relocation and working capital needs.

India

Fintechs to drive financial inclusion or will banks save the day? (India Times), Rated: AAA

Disintermediation of the lending value chain – Banks would traditionally source, acquire, underwrite, onboard, collect and service customers. Most would do some parts well, and a few parts not so well. This is increasingly now being solved by the entry of new ‘customer owning’ entities into the game, who will acquire, owners of data who can underwrite, and the lenders who can lend and collect. This makes partnerships key.

Alternate data – Lending to the bottom of the pyramid and micro SMEs has always been the problem to solve for financial institutions, due to lack of documented income and collateral. Non-traditional data promises to come in and provide an alternative.

However, most such data algorithms do not seem to be working out. Many fintechs across India, Africa etc, are running NPAs upwards of 8-10%, including some of the flagbearers of the phenomenon, but that is not out in the public domain, and typically shoved under the carpet. The main reason for this is that the algorithms are raw and untested. They have not run their credit cycles yet.
Payments – Payments as an innovation is done. It’s commodity now. Fintechs who continue to invest in incremental experiences will find it difficult to scale. The trend to watch for will be digital ecosystems. What I mean is digital marketplaces, the likes of Ping-an and Alipay, serving the integrated needs of the digital consumer a.k.a the millennials, enabled through digital payments and leveraging financial services cross-sell sitting on top of all of this, as the revenue driver.

Fintech firm Telr gets $ 3 million funding (The Hindu), Rated: A

Financial technology start-up Telr said that it had received an investment worth $3 million from Innovations East fund as part of its series-B funding round.

Telr, which is a payment gateway aggregator of multiple payment methods such as cards and online banking, has operations in West Asia, South East-Asia and India.

The Rainmakers (Business Today), Rated: A

Year ago, Captain Pankaj Kumar, owner of a New Delhi-based shipping solutions company, was looking to raise Rs 20 lakh. He approached banks for a loan, but soon realised it would be anything but smooth sailing. Then, his former banker suggested that he approach CoinTribe, a Gurgaon-based online lending platform that connects creditworthy micro and small enterprises (the company helps individuals as well) with potential lenders such as banks and non-banking financial companies (NBFCs). This time, paperwork was minimal, and the entire process moved fast.

Then, his former banker suggested that he approach CoinTribe, a Gurgaon-based online lending platform that connects creditworthy micro and small enterprises (the company helps individuals as well) with potential lenders such as banks and non-banking financial companies (NBFCs). This time, paperwork was minimal, and the entire process moved fast.

At present, the company caters to small businesses with Rs1-50 crore turnover; anything below that is treated as a micro business. The ticket size varies from Rs5-30 lakh (the company also offers unsecured loans starting from Rs20,000 to cement dealers, for shorter tenure) with interest rate pegged at 18-20 per cent. So far, it has helped disburse close to Rs170 crore loans, servicing over 500 customers and 250-odd dealers through its marketplace.

Harnessing the power of data, CoinTribe has come up with a three-step screening process that ascertains an applicant’s identity, analyses its ability to repay and gauges its intent to pay. To determine a borrower’s identity, the company checks all available online data and social media footprint. To analyse any given applicant’s ability to pay, it has identified 180 sub-industries and places the potential client in the right category to run it past all relevant data points.

Asia

Singapore Fintech Startup StashAway Raises US $ 2.2 Million in Series A (Crowdfund Insider), Rated: A

According to TechinAsia, StashAway, a Fintech startup based in Singapore focused on providing wealth management, announced it had secured US $2.15 million in funding for its Series A round.

StashAway is a software solution for individual investors to manage their investment portfolio.

Why should security professionals pay attention to the rise of fintech? (MIS Asia), Rated: A

The rise of financial technology (fintech) may result in increased cybersecurity threats and attacks, said Chia Hock Lai, President, Singapore Fintech Association, at the Computerworld Singapore Security Summit 2017.

He highlighted the five areas of fintech that introduce cybersecurity risks:

  1. According to a report by Accenture and CB Insights, global investments in fintech rose from 2012 to 2016 to reach US23 billion.
  2. More than a third (34 percent) of banks globally said they are open to collaborating with a fintech company, according to a study IDC did on behalf of SAP last year.
  3. According to the World Bank Group, only 50 percent of adults in ASEAN have bank accounts. The availability of mobile or peer-to-peer payments from fintech startups will thus enable more underserved to access financial services, said Lai.
  4. “[Gartner predicts that] in the next four years, the number of IoT devices [that will be in use in the consumer sector] will reach 13.5 billion,” said Lai. With every device generating data, machine learning will be required to analyse the large amounts of data generated to churn meaningful insights.
  5. According to Aite Group, banks will increase their investment on blockchain over the next few years to reach US$400 million in 2019.
Canada

futureshare Launches to Help Canadian Homeowners Unlock Their Real Estate Wealth (Marketwired), Rated: A

There is more than $2.9 trillion in unmortgaged real estate equity in Canada (CREA), and today fintech platform futureshare launches to help Canadians unlock that real estate wealth without taking on new debt. The company was founded in 2016 as an alternative to home equity loans, home equity lines of credit (HELOCs) and reverse mortgages and gives homeowners a lump sum free of ongoing payments and interest rates in exchange for a percentage of the home’s appreciation, which can be paid out without penalty at any time or once the property is sold. futureshare’s online platform is the first of its kind in Canada and is now live in beta and accepting online applications for homes within Ontario with plans to launch in Alberta, Manitoba and British Columbia by the end of 2017.

The average Canadian owes $1.67 for every dollar in income (StatsCan), and futureshare is designed to help homeowners access the equity tied up in their home without adding to their ongoing debt burden. Unlike a reverse mortgage or HELOC, futureshare doesn’t require homeowners to have perfect credit scores or to fall within a specific income bracket, and it doesn’t increase monthly payments. A homeowner’s eligibility is based primarily on their home value and whether they have at least 25 per cent equity ownership in their home. Homeowners will be able to access on average up to 10-20 per cent of their home equity using futureshare’s platform, and unlike a loan, there’s no ongoing payments or interest rates.

Barbados

COMPANY AIMING TO PUT IDLE MONEY TO USE (Barbados Advocate), Rated: A

SOME of the $3 billion sitting idle at commercial banks in Barbados will soon be better utilised so as to earn higher returns for depositors and to help grow this country’s economy.

Those funds will be utilised under a new facility known as Peer-to-Peer lending, which was officially launched by finance company Carilend on Thursday night, at the Limegrove Lifestyle Centre, Holetown, St. James.

Authors:

George Popescu
Allen Taylor

Savings by mobile app – an upstart bank without being one

Savings by mobile app – an upstart bank without being one

Rize is an online savings-app focused on Millenial.  All the funds held within Rize are SIPC insured up to $250,000. The popularity of the app is on the rise, with more than 5000 sign ups in the last 2 months alone. Rize is a sort of an upstart bank account that pitches itself as being built for […]

Savings by mobile app – an upstart bank without being one

Rize is an online savings-app focused on Millenial.  All the funds held within Rize are SIPC insured up to $250,000. The popularity of the app is on the rise, with more than 5000 sign ups in the last 2 months alone.

Rize is a sort of an upstart bank account that pitches itself as being built for a more technologically savvy generation. Rize major users emerge from 22- 28 age category who earn close to $30- 45K per annum. Millennials are entering a time when they are seeing their buying power grow along with a need for a wider array of items. They are buying houses, starting families, building new businesses, etc. All these activities require money. Rize enables them to analyse how much cash they should be saving, helps them choose smart financial goals and most importantly automates saving by shifting money from their checking account after each payday to their Rize account. It allocates the monies to the user’s financial goals, pushes them to save more and educates them about relevant money matters.

According to research reports, 80 million Millennials are saving nothing. Imagine young Millennials living a life without a safety net or any kind of financial planning for the future. Rize is just the right platform for the digital generation across the world. An exclusive tool targeted at the Millennials, it enables online savings built around automated behavioral design.

Secret Sauce

The start-up’s secret sauce is helping users visualize their goals and incentivizing them via peer comparison. Strong social pressure is built when you see your friends saving more than you. The baby boomers rat race concept is being inverted on its head by healthy competition encouraged through Rize. The app’s aim is to help users save before they spend, once the money is out of sight from their checking to Rize account, the thought of spending that money just won’t emerge. The young fintech company has been able to push its users towards a saving rate of 10%; compare it to the average savings rate of -2% and it helps us understand what Rize is trying to address. In fact, the user base also has responded with 40% signing up for an emergency fund. This highlights that the knowledge is there, they just needed a financial tool to help them execute the process.

Business model

Rize has a very simple business model. It is not looking to monetize anything so early in its life and has left it entirely to the users to pay as much as they want. They are working on a contribution model, where the user decides if they feel that the app has been helpful and if they would like to pay anything for the service.  Savings can be withdrawn at any time and as many time as one wants, for free of cost. It is a regulated company and just like a Registered Investment Agents (RIA), they will charge brokerage and deals in short-term savings which earn interest. This underlines the second and most probably their major revenue stream. When the app becomes the first choice for savings, the start-up will have the ability to influence a lot of choices for its users. Its platform will become extremely lucrative for financial companies looking to push their services. More importantly, the targeting opportunities are enormous; if the user has saved for a house, he will be shown advertisements featuring loan options from a bank or a marketplace lender and the listing of a local agent to help the user buy his dream house. This curation will be a win-win as the user will only see relevant advertisements and the advertiser will look in to cash in on a predetermined intent to buy their service.

Company history

Rize is based out of San Francisco and Washington D.C; it was launched in December 2015 with a seed capital of $125,000 from 500 startups. Rizeup.io was founded by individuals who have a lot of successful start-ups under their belt. Justin Howell, CEO has a degree in Psychology from Harvard and has been a dedicated entrepreneur – co-founded and worked at several startups (TripUp, Project Avocado), also acted as an advisor to numerous other early-stage companies, including as an investor and board member. Rishi Kumar CTO, he was senior Director of Audience Intelligence before he decided to team up to start Rize. Kirk Voltz, head of design holds a degree in Design from Virginia Tech . He is also the co-founder and creative director for Bronx Brewery. Mizel Djukic, head of product was a senior product manager at Millennial Media and was part of two successful startups (Pixel and Paper design LLC). The company is a team of four and is in private beta currently.

Funds security

Rize uses state of the art security, personal information of all the clients are anonymized, encrypted, and securely stored.  As mentioned above all the funds held within Rize are SIPC insured up to $250,000. These features are necessary to ensure that user feels safe while using the Rize account.  It is currently working with over 2500 banks and credit unions all around the United States; soon they will be providing international features too.

Future of savings

According to a recent study by Card hub, the average household credit card debt is now at its highest level since 2008. Even more alarming is that many people have no savings at all. In fact, almost 30% report having a zero balance and 62% has less than $1,000 in savings. According to a survey by GOBankingRates.com, an additional 21% report having no savings account whatsoever. With all this alarming statistics, Rize can become the best birthday gift from a parent to their millennial child. The important thing for Rize is to differentiate itself from the numerous savings app in the market. The ability of the algorithms to nudge the user into saving will be the key success factor.

Author: Heena Dhir and George Popescu

George Popescu

 

July 7th 2016, Daily News Digest

July 7th 2016, Daily News Digest

News Comments United States EarnUp raises a $3mil seed round to help 200 million consumers smooth their loan repayment experience. Could EarnUp be a good lead source for lenders ? Or a good alternative data source ? A great table of MPL raises and valuations from CrunchBase, who claims that data hints at future down […]

July 7th 2016, Daily News Digest

News Comments

United States

  • EarnUp raises a $3mil seed round to help 200 million consumers smooth their loan repayment experience. Could EarnUp be a good lead source for lenders ? Or a good alternative data source ?
  • A great table of MPL raises and valuations from CrunchBase, who claims that data hints at future down rounds for marketplace lenders. However, we have recently seen BizFi, Promise Financial and more raising good rounds at decent terms. Perhaps there is a difference between fund-raising for mature MPLs and fund-raising for challenger Alt Lending 3.0 start-ups.
  • Very interesting 1st hand data from Morningstar about the state of US consumer debt, including trends and statistics. Credit Cards charge-off rate chart, 90 days delinquent data per asset class.
  • 500 Startups shares fintech investment trends chart and data and discussed government policies that could and should enable fintech innovation.
  • Through the survey of France’s P2P and MPL lenders, a great analysis of the lessons learned from Lending Club’s crisis.
  • Securitization trends in Marketplace Lending. A must read.
  • Acquiring borrowers is difficult. Acquiring borrowers at purchase decision time is easier. Focusing on point-of-sale partnerships to generate credit demand is a very interesting direction which is, therefore, popular and gaining ground. A quick article as a reminder of this interesting direction.
  • Royal of Canada dumped 99.5% of their LC stock in Q1 2016. Interesting timing.

Australia

  • Getting SME lender’s loan data is at best difficult. In a space where we talk about transparency, SME originator’s data is a good example of the opposite. RateSetter stands out for publishing their data which lead to a nice summary, mostly figure based, article. I am not sure if this data is from RateSetter Australia only or includes other geographies.

United Kingdom

  • A small article, that is not well researched, not well documented, but asks a question that is worth exploring a lot more “How can p2p lending companies fail, and what happens in that case ?” . The quick and dirty answer is: if they are setup right, where the operations and the loan books are separate with backup servicing, the only effect is that new loans stop being generated. We would love to publish a long article on this matter.

European Union

 

United States

Paying Loans Sucks – FinTech Startup EarnUp Lands Million To Intelligently Automate Payments, (PR Newswire) ,Rated: AAA

 EarnUp, a consumer-first fintech platform that intelligently automates loan payments, announced its launch today with $3 million in seed funding.  Blumberg Capital, Kapor Capital, Camp One Ventures, Fenway Summer Ventures, and other leading angel investors provided seed capital to accelerate the platform’s development and expand user access with a mission to improve consumer financial health. Forbes recently announced EarnUp as a winner of the prestigious Financial Solutions Lab in partnership with JPMorgan Chase & Co. (NYSE: JPM) and the Center for Financial Services Innovation. Though still in private beta, EarnUp already manages hundreds of millions of dollars in consumer loans on its platform. More information is available at www.EarnUp.com.

“Millions of Americans suffer financial stress from income volatility, where their income doesn’t match up with when loan payments are due,” said Matthew Cooper, co-founder of EarnUp. “Our product solves this issue by effectively budgeting for the consumer. We help put money aside as it comes in, giving people peace of mind in knowing the money they need will be there when loan payments need to be made. We give control back to the consumer.”

There are over 200 million Americans with debt and a typical household may have income and expenses hitting their bank accounts over 20 times a month. This financial chaos causes incredible stress for consumers, who may struggle to come up with even the minimum loan payments on time. EarnUp works by automatically putting a few dollars aside for future loan payments whenever consumers can afford it, then sending those payments and making sure they are applied in a way that reduces debt faster.

EarnUp has been bootstrapped to date and the $3 million in seed financing represents the company’s first institutional funding.

Data hints at down rounds, but not wipeout, for marketplace lending, ( TechCrunch), Rated: AAA

Comment: This is bad news for entrepreneurs. VCs usually have terms that protect them in a down round.

Private valuations across the lending space, where available, showed marked appreciation in 2014 and 2015. SoFi, for instance, was valued at $3.5 billion as of July, up from about 1.4 billion in early 2015 and $400 million in early 2014.

Those are post-money values, but the appreciation is well in excess of the sums invested. Avant showed a similar rise, with its post-money valuation doubling in less than a year. And Prosper more than doubled in less than a year, hitting a $1.8 billion valuation in April of last year.

Alternative lending currently looks like the reverse of the standard VC model, in which private markets are where one builds a business, and public markets are where one gets a lucrative exit.

That said, while we can expect down rounds near-term, it’s not clear VCs will lose their shirts in marketplace lending forays, particularly those who were mid- or early-stage investors.

High VC ownership levels mean that even a lackluster exit could return all or more of invested capital. Even after LendingClub’s stock plummet, for instance, VC’s post-IPO stakes would be worth more than the $392 in disclosed investments before going public.

You can find the report here if you register.

Nonhousing consumer debt levels are increasing, with student-loan debt leading the charge, according to the Federal Reserve. Student-loan delinquencies more than 90 days past due have risen since late 2011. With the proliferation of postcrisis loans made to students, especially to those attending for-profit colleges with focused specialties, Morningstar Credit Ratings, LLC expects to see challenges in the sector.

Credit Card and Mortgage Delinquencies at Lows Since the crisis, credit-card and mortgage delinquencies have

Since the crisis, credit-card and mortgage delinquencies have improved, with the balance more than 90 days delinquent declining, according to the Federal Reserve Bank of New York. After  seaking at 8.9% in the first quarter 2010, mortgage delinquencies have come down considerably from their highs, resting at 2.1% at the end of the first quarter. Credit-card delinquencies have also dropped, with the current level of 7.6% nearly half the 13.7% recorded in the first quarter of 2010. Low interest rates made it easier for consumers to either refinance or stay current on their debt obligations.

Meanwhile, after little change over the past few years, auto- loan delinquencies have edged higher, as competition among underwriters led to an increase in subprime auto loans. While we expect to see an uptick in auto delinquencies given the larger subprime component, overall auto-loan delinquency rates remain at relatively low levels. If unemployment remains in check, those auto-loan delinquency gains should be within reason, while we expect credit-card and mortgage delinquency rates to remain low.

New data that has been released since publishing solidifies the trend of consumer spending improving after a typical slow start of the year, with 1Q16 GDP growth at 1.1%.  In addition, consumer confidence has strengthened.

Eye on the Road: Student and Auto Loans Bear Watching Consumers are adding to their household debt levels, with student-loan debt leading the way behind mortgages. Postcrisis, students enrolled in for-profit colleges in record numbers, with dreams of a future career. For many, those dreams never materialized, and they were left saddled with heavy student-debt obligations that they were unable to meet. This pool of nonpaying indebted students contributed to the student loan delinquency rate rising steadily since the end of 2012. While the pace of student-loan delinquencies has slowed, Morningstar Credit Ratings views the sector as vulnerable to declines in employment as the delinquency rate remains near record levels despite a generally healthy job market.

Fintech Investment is Exploding — 5 Ways Governments & Ecosystem Builders Can Help, (500 Startups), Rated: AAA

Quarterly financing to VC-backed fintech companies has been growing immensely:

But investment is not flowing freely everywhere.  For example, in 1Q2016, Chinese fintech companies received $2.4 billion in funding (albeit primarily from two mega-deals), while the rest of Asia received only $0.2 billion.  Meanwhile in Europe, deal count increased but the amount of capital invested did not.  Even when the investment flows, the performance often does not.

Fintech’s 3 Ecosystem Challenges
1. Regulatory regimes are often ill-suited for fintech. Regulations in the finance sector are often unclear or highly complex, and regulatory processes and agencies may be slow.

2. Traditional financial institutions may hold down fintech startups, intentionally or unintentionally. Not long ago in the U.S., many banks did not even entertain meetings with or extend invitations to fintech startup founders.

3. Customer preferences may not be ready for certain fintech solutions. Customer acquisition is very difficult in fintech. Banks in the US spend over $500 to acquire a single user, and over time many startups will get there as well.

5 Ways Goverments Can Help

1. Create a “regulatory sandbox” that provides startups the opportunity to test new ideas without immediate threat of regulation.
2. Offer fast and transparent regulatory review of potential new fintech products or services.
3. Create a support system or kit to help fintech startups meet regulatory requirements.
4. Roll out consumer awareness initiatives to increase demand.
5. Encourage traditional financial institutions to invest in or partner with fintech startups — preferably non-exclusively.

The Lending Club Predicament & The Lessons Learned, (Crowdfund Insider), Rated: AAA

Lending Club’s problems should make the sector reflect on the governance issues that arise from the mixed business models that some crowdfunding platforms have evolved into.

Banks lend their own money and take risk on their balance sheet; hence, they must meet regulatory requirements such as Basel III. Asset managers manage other people’s money and invest on their behalf; hence, they are regulated as financial advisers. Platforms must clearly choose their business model because it has regulatory consequences. It also has an impact on the market valuation of the company. Marketplaces are currently much more highly valued by investors than banks. Even before the scandal, Lending Club’s stock was valued rather like a bank’s stock. Eventually, mixed business models potentially lead to conflicts of interest of the type observed at Lending Club.

Lending Club lost its way a long time before the scandal and the subsequent dismissal of Renaud Laplanche. By progressively marginalizing retail investors and letting investment funds securitize Lending Club’s loans on their own terms, Lending Club de facto surrendered the control of the platform to the very same established finance that P2P Lending was supposed to present an alternative to. This change of course created a detrimental layer of complexity, and potentially of systemic risk, in what was supposed to be a simple and direct relationship between private lenders and borrowers.

Beyond the image problem, the impact of the incidents has been small. European institutional investors are still very much interested in marketplace lending, as can be seen from two recent announcements: a$100 million loan program through Funding Circle by the European Investment Bank and €70 million multiplatform crowdlending fund by Eiffel Investment and French insurers Aviva and AG2R La Mondiale.

Marketplace Lending Securitization Tracker, (PeerIQ), Rated: AAA

Marketplace lending securitization volume topped $1.7 billion this quarter, up 14.8% from Q1, with cumulative issuance reaching $10.3 billion. YTD issuance of the sector stands at $3.2 billion as compared to $1.8 billion from prior year, a 77% increase. Q2 saw a total of 6 deals: 3 are backed by student loans, 2 by unsecured consumer loans, and 1 by SME loans. SoFi issued its first rated unsecured consumer loan deal and received an industry first ever AAA rating from Moody’s on its recent student loan transaction.

MPL securitizations are moving towards rated and larger transactions. The second quarter was the first to have all deals rated by one or more rating agencies. Further, the growth in average deal size continued, the average deal size grew to $267 million in 2016 as compared to $64 million in 2013.

New issuance and secondary spread tightened by quarter end, a good sign for the industry. Across all segments in MPL, Q2 2016 saw moderate spread compression in senior tranches of newly issued deals and widening in junior tranches as compared to Q1 2016.

Numerous factors, including lending platform rate increases, and spread tightening in both primary and secondary markets, look to improve future deal economics. The increase in rates from platforms increases excess spread and improves the economics of securitization for residual holders. The demand for

The demand for higher standard of due diligence, transparency and analytics will be the norm. With the recent Lending Club headlines, ABS investors are demanding greater transparency and validation to enhance trust.

A total of 6 deals were done in Q2 and spanned several marketplace lenders and categories. Here is the breakdown from Q2 2016:

  • 3 student loan securitizations (Earnest, SoFi, CommonBond)
  • 2 unsecured consumer loan securitizations (Avant, SoFi)
  • 1 SME securitization (OnDeck)

Despite Citi stopping the securitization of Prosper loans, they continue to be the leader in marketplace lending securitizations followed closely by Morgan Stanley and Credit Suisse.

Cited as factors for an improving securitization market are increasing platform rates and spread tightening in both primary and secondary markets. A detailed analysis of specific securitizations are outlined in PeerIQ’s report.

Why mobile point of sale (MPOS) Is Gaining Ground in FinTech, (Tech.co), Rated: AAA

Comment: in our market context I would think that lenders would like to acquire/partner/sign up with Point of Sales solutions to extend credit in physical stores.

One such story goes of Swedish payments giant Klarna that recently announced that they were moving beyond its online services into physical stores, which it will accomplish by partnering up with mobile point of sale (MPOS) and e-commerce company Sitoo.

We are approaching a near future where the value chain for payments as we know it will be forever altered and new constellations will surface. More specifically, we expect to see more payment providers partnering up with POS companies to add value to their services and to diversify their position. There’s also a strong possibility that we’re likely to see some of the more aggressive payment providers outright acquiring POS-companies to accelerate growth and control a larger chunk of the value chain.

Royal Bank Of Canada Sold A Lot More LendingClub Corporation Common (LC) Stock, (Fidaily), Rated: A

Royal Bank Of Canada says it sold 35,334 shares last quarter decreasing its holdings in LendingClub Corporation Common by 99.5%. Its investment stood at $1,000 a decrease of 99.7% as of the end of the quarter.

 

Australia

The average RateSetter business loan, (Finder), Rated: AAA

United Kingdom

If Funding Knight went bust how safe is peer-to-peer lending?, (The Telegraph), Rated: AAA

A peer-to-peer website has been rescued after falling into administration, offering a lifeline to 900 savers who faced being unable to get their cash back.

Funding Knight was promising investors returns of up to 12pc for lending cash to small businesses.

Many feared that they would lose their money when the company ran out of cash and went into administration last month.

However, last week  the firm was rescued by GLI Finance, an investment firm, which said savers cash was safe and could be withdrawn at anytime. GLI has also invested a further £1m in the business.

Despite Funding Knight savers being assured that their cash is safe by the new owners, the incident has raised concerns over the safety of peer-to-peer lending.

Any funds they lend through a peer-to- peer website are not covered by the government-backed Financial Services Compensation Scheme (FSCS), which protects bank savers up to £75,000.

A spokesman for the Peer-to-Peer Association, a trade body of which Funding Knight is not a member, said:

He said: “We have been consistent in calling for, and embracing, regulation of the sector and requires robust adherence to its published operating principles, including the publication of platform loan books in full and clear information on all fees and charges to investors and borrowers.”

“Peer-to-peer lending offers overall a lower risk profile than some other forms of investment with less volatility, but it is not entirely without risk.

“Within the peer-to-peer lending sector, there are a number of different asset classes each with their own risk-return profile.”

 

 

European Union

Why Funding SMEs Within The EU Capital Markets Union Action Plan Is Challenging, (Seeking Alpha), Rated: A

European banks are caught in a conundrum because they still have to clear up their bad loan portfolios, which their US counterparts have largely dealt with. This situation, together with stricter capital requirements, and a challenging policy environment with low or negative interest rates, has led to a double whammy affecting both banks and SMEs. Additionally, credit information is still very fragmented in the EU, as shown by our CFA Institute member survey on the Capital Markets Union from May 2015.

Author:

George Popescu