Thursday November 9 2017, Daily News Digest

credit cards

News Comments Today’s main news: Lending Club plots two ABS before end of year. Scott Sanborn speaks to Lending Club’s Q3 results. Alibaba funds WeLab. Aegon sees strong Q3. Prospa originates over $500M. Jumo wins Mastercard Foundation prize. Today’s main analysis: Top cities maxed out on credit card debt. Today’s thought-provoking articles: Did Lending Club just land another blow to […]

credit cards

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News Summary

United States

Lending Club plots two ABS before year end (Global Capital), Rated: AAA

Lending Club is looking to price two more ABS deals this quarter, as the company plans to shrink its proportion of bank funding in the year ahead, executives said on a third quarter earnings call this week.

LendingClub Corp’s (LC) CEO Scott Sanborn on Q3 2017 Results – Earnings Call Transcript (Seeking Alpha), Rated: AAA

In Q3, we delivered $154 million in revenue, the highest in the company’s history, and up 34% year-over-year, and 10% sequentially. As importantly, we generated an EBITDA of $21 million. That’s almost 5x the level of last quarter. And we’ve narrowed our GAAP losses by almost $19 million, down to $6.7 million.

We processed a record number of applications, bringing the total borrowers served by Lending Club to over 2 million since launch and an improved efficiency from last quarter.

To put that into perspective, it took 8 years for us to reach our first 1 million, and we’ve helped an additional 1 million borrowers in just the last 2 years.

Although we anticipate some short-term volume effects as we calibrate our targeted marketing to the new model, the 58% annual growth in applications we saw in Q3, combined with the conversion efforts we now have in testing, give me confidence about our outlook in 2018.

Separately, we continue to broaden our mix of investors. As part of that, we delivered on our goal to complete a second securitization that included a total of 33 investors, 10 of which were new to the LendingClub platform.

Another Blow to Online Lenders (WSJ), Rated: AAA

Lenders should be judged not on how fast they grow during good times, but how they perform in periods like today when consumer defaults are ticking up. On that basis, LendingClub LC -15.93% looks unprepared and investors are right to be skeptical of the online lender.

LendingClub, the most prominent of the online lenders, said loans to certain borrowers at the low end of the prime credit spectrum “are not currently meeting our expectations.” It will start limiting these loans, which account for around 3% of total loans, and temporarily halt their sale to investors. It will also temporarily halt this lending, which accounts for around 3% of its total loans, and also adopt a new credit model that tightens criteria for these borrowers.

Online lenders’ credit models, which analyze various factors beyond traditional credit scores, are supposedly one of their core strengths. That loans are performing worse than expected at LendingClub is a sign the models might be flawed.

Source: The Wall Street Journal

TOP MAXED-OUT CITIES (Builder Online), Rated: AAA

LendingTree®, the online loan marketplace personified by Lenny the little green guy who has the banks crawling to him, released on Wednesday the findings of its study on which cities have the dubious distinction of containing the most consumers with signs of being maxed-out with their credit cards.

Credit card balances in the U.S. are now almost $800 billion, the highest since 2009, according to Federal Reserve data.

The Most Maxed-Out Places

#1 San Diego, California
Maxed-out score: 98
San Diego residents carry $6,629 in credit card balances on average. Nearly one in five (18%) have at least one card maxed-out. That’s second only to Oklahoma City, where 18.5% of residents have a maxed-out card. San Diego residents also use more of their credit lines overall, with 32.8% utilization.

#2 Los Angeles, California 
Maxed-out score: 93
Los Angeles residents also push their credit further than most, with 17.5% of residents having at least one maxed-out card. Those that do have a maxed-out card have 1.33 maxed-out cards on average. Balances average $6,472, a touch lower than their neighbors to the South in San Diego, helping utilization come in at 32.0% versus San Diego’s 32.8%.

#3 San Antonio, Texas
Maxed-out score: 92
San Antonio residents don’t face the same high cost of living that Southern Californians deal with, but they share an affinity for using their credit cards. The study findings revealed that 17.2% of San Antonio residents have a maxed-out credit card, and their total credit card balances average $6,474, similar to those among Southern Californians.

Federal Court Grants Class Certification in the LendingClub Case, But Denies Motion to Enjoin the State Court Case (The National Law Review), Rated: A

LendingClub is facing two parallel securities litigation cases stemming from alleged false statements it made in connection with its initial public offering (“IPO”).

With respect to the motion to intervene, the federal court granted the motion, for the limited purpose of allowing the state court case plaintiffs the opportunity to “set forth their argument for why they are the better representative” of the class.  Additionally, the federal court granted the motion to intervene “on the condition that they remain under this Court’s jurisdiction so that the undersigned judge may coordinate their action with the federal action to avoid any prejudice to absent class members.”

The California state court plaintiff then argued that class certification should be denied in the federal court case because certain theories of recovery that were dismissed in the federal court case remained active in the California state court case, making the state court case “superior.”

The federal court plaintiffs responded that their proposed class was in fact superior because the price of LendingClub’s stock was lower on the day they brought the federal suit.

The federal court declined to enjoin the California state court case.  However, it did express “concerns” with “the current form of state plaintiffs’ class notice, which fails to notify class members of the parallel federal action, the pendency of Cyan and its potential effect on their case, or the potential that the filing date of their suit could substantially limit damages.”

TRACEABILITY

Lastly, the federal court addressed an issue of first impression raised by LendingClub and the individual defendants regarding the traceability of the federal plaintiffs shares.

Because of this trading pattern, the traceability of the lead plaintiffs shares turned on whether the court adopted a “last-in, first-out” (“LIFO”) or “first-in, first-out” (“FIFO”) method to calculate holdings.

If the lead plaintiff’s transactions were accounted for using LIFO, all of its holdings as of the end of the lock-out period would remain traceable to the lock-up period.  If, however, the court adopted a FIFO calculation, the lead plaintiff would have been deemed to have owned no shares traceable to the IPO.  First, the court noted that “[w]hether LIFO or FIFO applies is a matter of first impression in the Section 11 traceability context.”  The court ultimately held that LIFO applied because the majority of courts use the LIFO method to estimate losses under the PSLRA when determining a putative lead plaintiff’s stake in the litigation, and “[i]t would be incongruous to measure losses by one method, yet measure traceability by the opposite method.”

Square Patent Suggests Potential Move Into Crowdfunding (CB Insights), Rated: A

Is Square considering a move into crowdfunding? A patent filed in March 2015 and granted in September 2017 suggests that might be the case.

The patent, titled “Mobile point-of-sale crowdfunding,” outlines a method for merchants to request crowdfunding from patrons based on their processing history.

The patent reads:

“Thus, the merchant has conveniently acquired a new espresso machine, customers may benefit from the new espresso machine, and investors have received a return on investment with the added security that the techniques described herein provides (e.g. underwriting of the crowdfunding project by the payment processing system and direct repayment to the investors from POS transactions processed for the merchant by the payment processing system).”

Source: CB Insights

Square Filed a Crowdfunding Patent that was Granted in September 2017 (Crowdfund Insider), Rated: A

Will Square ever pursue this concept? Probably not, at least not in the near term. They are still too busy figuring out vendor loans, which is probably are far more profitable vertical.

Wela Announces Record Year of Growth, Passes $ 1 Million in ARR (Marketwired), Rated: A

Wela today announces it has passed $1 million in annual recurring revenue (ARR), one of several achievements to mark 2017 as a record year of growth for the personal finance app. In the last two quarters, Wela doubled its total users and amount of linked accounts. Additionally, Wela Strategies, an extension of the app that manages investment accounts, passed $135 million in assets under management. Wela’s growth is evidence of a demand among millennials and young families for a personal finance solution that delivers advice in the way they want to receive it — through the convenience of an app that incorporates artificial intelligence (AI), through the skill provided by a human advisor, or a combination of the two offerings.

In 2017, Wela’s staff doubled in size, adding key management roles, including a chief technical officer, product manager and user experience manager. In an effort to better serve its rapidly growing user base, Wela plans to hire additional support for its customer experience, financial advisory and development teams in the next few months.

Acorns Buys Retirement Savings Fintech Startup Vault (Benzinga), Rated: A

Acorns, the fintech app that lets users automatically invest small amounts, announced Tuesday the purchase of Portland-based fintech startup Vault, which sells automated retirement investment plans to small businesses.

One financial fear scares millennials even more than death (CNBC), Rated: A

Death can be a frightening thought. But, according to a survey from financial-advice website Credible, there’s one thing that scares millennials even more: having credit-card debt.

Of the 500 Americans polled who are currently in credit card debt, more than 33 percent said debt is the scariest aspect of their daily lives.

The findings make sense, according to Credible. Americans hold more than $1 trillion in credit card debt and, among the respondents, the average debt is a whopping $5,290.

When asked how they got into debt, 34 percent said it was due to an emergency expense, 32 percent said their debt is due to a large one-time purchase and 4 percent said they choose not to pay their debt despite having the resources to do so.

Source: CNBC
Source: CNBC

Behavioral finance can attract fee-based assets (Investment News), Rated: A

Based on the latest research conducted at our annual ELEVATE fee-based advisory conference, one of the most important ways for independent firms to help advisers succeed in this kind of asset gathering is to help them lead with behavioral finance, and to complement that effort with client segmentation that captures qualitative and emotional factors for the adviser.

Aging pre-retirees and retirees need enhanced guidance in navigating the emotionally charged life planning decisions many of them increasingly face. Meanwhile, the highest long-term growth potential client segment, Millennials, generally opt for advice from individuals who build a truly personal connection with them, in a relationship that is as much social as it is professional.

Small Business Administration’s New York office tops billion in guaranteed loans (Westfair Online), Rated: A

Loans to small business owners backed by U.S. Small Business Administration guarantees increased 36 percent in number and 15 percent in dollar amount in the SBA’s New York district in the 2017 federal fiscal year, putting the district office over $1 billion in annual loan program lending for the first time.

In the seven-county lower Hudson Valley region, the SBA guaranteed 500 loans worth $191 million.

Goldberg said 36 percent of the region’s SBA loans were under $50,000; 42 percent went to minority-owned businesses; and 16 percent, or $160 million, went to women-owned businesses.

The top five lenders by dollar amount in the Hudson Valley were Empire Certified Development Corp. $40,726,000; Manufacturers and Traders Trust Co., $11,393,800; Noah Bank, a minority-owned bank headquartered in Elkins Park, Pennsylvania, $9.12 million; Celtic Bank Corp., based in Salt Lake City, $7,886,400; and Cross River Bank, based in Fort Lee, New Jersey, $7,768,100.

In Westchester County alone, the top five SBA lenders in number of loans were TD Bank, with 42; JPMorgan Chase Bank, 39; Wells Fargo, 14; Citibank and Manufacturers & Traders Trust Co., both with 11; and New Millennium Bank, headquartered in Fort Lee, with nine loans.

The top five lenders in Westchester County by dollar amount were Empire State Certified Development Co., $8,866,000; Newtek Small Business Finance Inc. in New York City, $5,917,400; Live Oak Banking Co., of Wilmington, North Carolina, $5,165,000; TCF National Bank, based in Wayzata, Minnesota, $4,995,500; and NewBank, $4,540,000.

Wells, JPM go mobile-only in pursuit of millennials (American Banker), Rated: A

There’s any number of reasons megabanks are rolling out mobile-first banking offerings, from evolving consumer demand to increased competition from fintechs to a significant generational transfer of wealth.

But the biggest motivation for banks like Wells Fargo to develop new smartphone apps may be to ensure they get clients early in their financial lives and keep them.

The ten-year ticking timebomb (The Finanser), Rated: A

I’ve been saying for so long now that banks need to replace core legacy systems that I’m boring myself, but here I go again. The reason I’m talking about it again is that, even though some disagree and think they can fudge the issue with plug-ins, I believe that the new competition will decimate banks that don’t replace their core systems.

If you are tech first, your singular focus is on agility. It’s about fast change cycles in a microservices architecture using a SDK (software developer kit) network of APIs (Application Programming Interfaces). It’s about speed, change, service, updates, vision.

If you are finance first, your singular focus is on stability. It’s about slow change cycles in a monolithic architecture using control systems and sign-off structures that avoid any exposures. It’s about risk, security, stability, control, management.

The good reason why banks make bad fintech partners (American Banker), Rated: A

Banks admit it — they are annoying fintech partners.

But, bank executives counter, fintechs are no treat either.

To manage risk and protect customers, a big part of the bank’s job is to build a “governance structure” on top of the technology that fintech executives have built.

Bankers also said that a key part of their role in fintech partnerships is simply educating tech executives about what, exactly, banks do.

Keith Noreika from OCC: The US Banking Industry Needs More Competition, Not Less #Fintech (Crowdfund Insider), Rated: A

Acting Comptroller of the Currency Keith Noreika delivered a speech today discussing the US banking industry. In the speech, Noreika makes an important point: US banks need more competition, not less. He also intimates that mixing commerce and banking can deliver benefits to consumers. Take this one step further, and Noreika is indicating big tech, like Amazon, Apple, Google, Facebook and more, should be allowed to become banks.

“Meaningful competition could have a number of other positive effects besides tempering the risk concentrated in having just a few mega banks. It could make more U.S. banks globally competitive and promote economic opportunity and growth domestically. For banking customers, particularly those underserved by traditional banks, more competition could result in better banking services, greater availability, and better pricing. If a commercial company can deliver banking services better than existing banks, we hurt consumers by making it hard for them to do so.”

Mr. Cooper Invests in Homeowner’s Insurance Platform Matic Insurance (CoverageR), Rated: B

Mr. Cooper, the nation’s largest non-bank mortgage servicer, today announced that it has led the Series A funding round in Matic Insurance, a digital insurance agency whose technology enables homebuyers to obtain homeowner’s insurance seamlessly during the mortgage process .

Matic’s insurance marketplace will enable Mr. Cooper to provide customers a convenient and modern way to shop for insurance while helping them obtain competitive insurance policy quotes and bind within minutes instead of days, all part of a digital mortgage application interface planned to launch in 2018.

LendUp Hires First Chief Financial Officer, Announces Significant Growth Milestones (PR Newswire), Rated: A

LendUp today announced that Bill Donnelly, former VP of Global Financial Services for Tesla, has joined as its first CFO. The company further strengthened its leadership team with the addition of a General Manager for its loans business and a Chief Data Scientist.

Donnelly is a 30-year consumer credit veteran with extensive experience in credit cards and loans products. Donnelly spent the last four years with Tesla as VP of Global Financial Services, responsible for providing financing solutions for Tesla’s customers across 29 countries. He also served as President of Tesla’s captive finance company, Tesla Finance LLC, which offered an industry-leading leasing program innovative for its consumer-friendly agreement and for being the first end-to-end electronic lease with the ability to execute contracts on a vehicle’s touchscreen.

In addition to Donnelly, Anu Shultes has joined as General Manager of the company’s loans business, which recently surpassed $1.25 billion in originations.

Dr. Leonard Roseman has joined LendUp as Chief Data Scientist, to lead a growing team that uses Machine Learning to improve financial inclusion through expanded credit access and lowering the cost of credit to borrowers.

Concord Servicing Corporation Names New President and COO, and Adds New CFO (PRWeb), Rated: B

Concord Servicing Corporation, a leading force in the financial portfolio servicing industry, has announced a strategic reorganization of its senior management team. Changes at Concord include the promotion of Executive Vice President Shaun O’Neill to President and Chief Operating Officer, and the addition of financial industry veteran Stephen Bertrand to serve as Chief Financial Officer.

Finance Professionals Consider Bank Branch Closings, Fintech (Utah Business), Rated: B

The Economist reports that, nationally, banks have closed over 10,000 branches in the past decade. In the first six months of 2017, 869 branches closed across the U.S.

Mobile banking apps on phones have become the new ‘branches’ even as some brick-and-mortars have shuttered, continued Roger Shumway, EVP of Bank of Utah. “I don’t think branches have declined, they’re just in your hand,” he said. “For community banks, the niche you see in Utah is that they can talk to a real decision-[making] person. If they get into an issue, there’s a face, and [an app on] a phone that they love.”

“We see overall that there’s been a 30 percent drop in branch transactions, but if you look at the overall transactions including electronic, transactions are actually up,” said Zupon.

United Kingdom

Coutts claims Facebook is financial adviser of the future (FT Adviser), Rated: AAA

A combination of the rise of robo-advice and the habits of millenials could mean social media platforms such as Facebook could become major players in the financial advice market in the future, according to Coutts.

He noted that Facebook already has a service allowing individuals to make payments, and said financial advice may be a next step for the social media giant as it seeks to grow.

Analysis from IRN Consultants highlighted recent research which showed each new robo-advice customer signed up is losing the company £162.50 on average in the first year and only making £17.50 in subsequent years.

One of the companies the report pointed to was Nutmeg, whose accounts for 2014 showed revenues of £635,000 compared with operating expenses of £5.9m.

Taming the beast – the need for regulation in peer-to-peer lending (Financier Worldwide), Rated: A

Under existing Financial Conduct Authority (FCA) guidelines, peer-to-peer (P2P) lenders operate within a virtually unregulated space. While this is not damaging in itself, it does create a number of risks, as the FCA has acknowledged. The most significant of these risks are that as companies become more sophisticated, their resemblance to traditional financial institutions increases, but their regulatory obligations do not.

Over the past year, there has been a noticeable rise in the number of P2P lenders using low rates as an advertising measure. Unlike credit card providers that must give 50 percent of all applicants the headline rate they advertise, P2P providers can simply pick a rate and then advertise it, as, unlike their counterparts, it is very difficult for the legitimacy of their offer to be checked.

It is clear that there is a requirement for greater industry guidelines, so it can sometimes seem mystifying that bespoke regulations have not already been put in place. Simply put, this is because the P2P industry is developing at a much faster rate than the regulatory bodies are acting.

Challenger bank teams up with direct lending fund (AltFi), Rated: A

The RM Secured Direct Lending investment trust has signed a Revolving Credit Facility of £10m with challenger bank OakNorth.

Yolt announces integration with Starling Bank (AltFi), Rated: A

The money management app backed by ING has integrated with its first mobile-only bank, adding Starling Bank to its platform alongside incumbents.

Starling Bank marks the 29th bank, and first digital bank, to partner with Yolt using API integration.

New £20m fund to invest in companies helping the poor (Financial Times), Rated: A 

The Fair By Design fund will invest in companies tackling the so-called “poverty premium” — the extra costs the poorest pay for essential goods and services, such as energy, credit and food. About 6m households pay an average of £500 a year in higher charges.

The £20m fund was launched on Wednesday and hopes to raise £11m from companies, charitable foundations and rich individuals.

It will invest in companies tackling four areas: energy, finance, insurance — where the poor pay more because they cannot get credit or live in high-crime areas — and so-called “geo-based premiums” based on location.

Fair for You, an online lender, is one business seeking investment. The not-for-profit company offers cheaper loans to those with bad credit records, who go to rent-to-own providers such as BrightHouse, which an independent survey found charged more than £1,000 over three years for its cheapest washing machine. The regulator in October forced it to pay £14.8m compensation to 249,000 customers.

Committee considers how to help during Universal Credit roll out (ViewNews), Rated: B

COUNCILLOR Ros Kayes is calling on Bridport Town Council to support the local Citizens Advice Bureau as the roll out of Universal Credit in the town draws closer.

Cllr Kayes reported that Universal Credit would be rolled out in Bridport on December 4th and it is then when those claiming benefits will have to start the process of receiving the credit and will no longer receive any money from existing credit.

China

Alibaba funds lending startup WeLab to help it break out of China (Tech in Asia), Rated: AAA

Lending startup WeLab is flush with cash today after announcing US$220 million in its latest funding round. It operates WeLend in Hong Kong and Wolaidai in mainland China.

Online shopping giant Alibaba is among the investors, throwing in cash from the Alibaba Hong Kong Entrepreneurs Fund it set up in 2015.

China Financial Super Regulator Begins Operations (Caixin), Rated: A

A new cabinet-level committee that will coordinate various regulators to oversee China’s sprawling financial industry started operating, according to the state-run Xinhua News Agency.

The committee, known as the Financial Stability and Development Committee, held its first meeting on Wednesday, Xinhua said.

The committee will review a strategic plan of financial reforms; coordinate China’s monetary policy and financial regulation; and forge policies on financial risk management so as to maintain country’s financial stability, Xinhua said.

Will President Xi Jinping Let Markets Decide China’s Future? (Wharton), Rated: AAA

The outlook for reforming China’s developing financial markets and the banking system remains obscured, in part, by a lag in the timing for key appointments such as a successor for Zhou Xiaochuan, longtime head of the People’s Bank of China. Some newly appointed party leaders, including Xi’s close economic adviser Liu He, are thought to support more market-oriented reforms.

With the economy still growing at an annual pace of over 6% and financial markets seemingly on an even keel, Xi’s team can claim to have weathered the post-2008 financial crisis with few major hiccups. But rising levels of corporate, banking and government debt have prompted the International Monetary Fund to raise the alarm. Estimates of the ratio of non-performing loans to total lending in the banking sector range as high as 35%. Most economists and banking analysts say the real level is likely much lower.

The level of debt in the Chinese economy skyrocketed after Beijing unleashed record amounts of stimulus — at least 17.5 trillion yuan ($2.6 trillion) — to help fend off the worst impact of the 2008 financial crisis. That credit binge has not yet been fully digested. In the years since, the level of debt surged further, much of it as “off balance sheet” lending by so-called shadow banks that operate outside the state-dominated formal banking industry.

Moody’s Investor Service estimates that the size of shadow bank lending has more than doubled since 2012, growing more than 20% in 2016 to reach 64 trillion yuan ($10 trillion), or about 86.5% of China’s GDP.

European Union

Aegon Reports Strong Increase in Earnings and Capital Ratio in 3Q 2017 (Guru Focus), Rated: AAA

Net income increases by 31driven by US

  • Underlying earnings up by 20% to EUR 556 million reflecting favorable claims experience, higher fee revenue as a result of favorable equity markets, and lower expenses in US
  • Gain from fair value items of EUR 159 million driven by positive real estate revaluations and hedging gains in US
  • Charge from assumption changes and model updates of EUR 198 million caused by conversion of the largest block of universal life business to a new model
  • Higher underlying earnings, fair value items and realized gains drive increase in net income to EUR 469 million
  • Return on equity for the quarter increases to 8.9%

Strong increase in Solvency II ratio to 195%

  • Solvency II ratio increases by 10%-points compared with last quarter to 195%. Capital generation and benefit from divestment of UK annuity book more than offset interim 2017 dividend
  • Capital generation of EUR 809 million including favorable market impacts and one-time items of EUR 485 million
  • Holding excess capital temporarily decreases to EUR 0.9 billion driven by capital injection into Dutch business
  • Gross financial leverage ratio improves by 20 basis points sequentially to 29.2% as a result of retained earnings

Strategic highlights

  • Aegon launches mutual fund joint venture in Mexico
  • Robot processes customer requests to improve administrative efficiency in Dutch business
  • Aegon Asset Management receives top ratings for responsible investment
  • Launch of mobile- and user-friendly global careers site

French Lending Platforms Adopt Common Performance Indicators (Crowdfund Insider), Rated: A

On 8 November 2017, the French Crowdfunding Association Financement Participatif France released the common set of performance indicators that member platforms specializing in loans, mini-bonds (a debt instrument specific to SME lending marketplaces) and bonds are invited to publish.

Key indicators give a clear picture of crowdlending risk and its cost:

  1. The share of borrowed capital already repaid. The older the loans, the higher the portion already repaid.
  2. The portion of interest due already paid. The older the loans, the higher the share of interest already paid.
  3. The net internal rate of return representing the annual profitability of the loans, net of known or proven losses at the date of calculation.
  4. The maximum possible internal rate of return representing the annualized yield of loans if all loans were repaid in accordance with the original schedule.
  5. The annual cost of risk represents the decrease in profitability caused by delays and defaults relative to the maximum possible rate of return. This is the difference between (4) and (3).
Source: Crowdfund Insider

German fintech company TIS raises $ 12 million from 83North (Tech.eu), Rated: B

Treasury Intelligence Solutions (TIS), a German fintech company, has raised $12 million in funding from 83North with Target Partners and Zobito.

International

Post-crisis restrictions on international banking can blunt growth prospects in developing countries (The Financial), Rated: AAA

Growing restrictions imposed on foreign banks operating in developing countries since the 2007/9 global financial crisis are hampering better growth prospects by limiting the flow of much-needed financing to firms and households, a World Bank report warned on November 7.

Rise of Developing Economy Banks

As advanced economy banks retrenched after the crisis, developing country banks stepped into the void and expanded across borders, accounting for 60 percent of new bank entries since the downturn. The result has been an increase in banking relationships between developing countries and regionalization of international banking operations.

For example, Africa’s Ecobank started in Togo and now has operations in 33 countries across the continent. It also has offices in Paris, Beijing, Dubai, Johannesburg, and London, which allows it to attract capital from wealthy countries to invest across Africa.

At the same time, the total asset size of the world’s largest banks increased by 40 percent, raising concerns that regulatory efforts since the crisis have failed to address the risk of banks that are too big to fail. Nearly 30 percent of developing countries have put in place restrictions on foreign bank branches. These curbs are depriving many economies of opportunities to access global credit that could benefit businesses and households.

How blockchain will change major industries (The Next Web), Rated: A

Real estate

There is a long string of middlemen (think brokers, titling agencies, inspectors, etc.) who slow down the process, amplify human error, and drive up the costs of doing business.

A public, distributed blockchain ledger that acts as a living database for all deals, negotiations, and settlements in the industry can overcome many of these shortcomings and reduce the need for “trust managers.”

One of the most exciting companies in the space is REALISTO, who employs the Ethereum blockchain to overcome many of these inefficiencies. Every investment made via their crowdfunding platform is mirrored on their blockchain and verified via smart contracts.

Banking

With the formation of blockchain consortia – or groups of financial institutions that collaborate to develop blockchain solutions – blockchain is already set to affect the way financial institutions process payments and handle settlements.

Traditionally, settlements between merchants and banks can take up to days. As consumers, you would have to wait three to five days for your payments to be cleared and verified behind the scenes after swiping your debit card at a local merchant.

By digitizing payments on a secured network, blockchain can serve the 2 billion unbanked people ignored by institutional banks. To use cryptocurrencies, all you need is a smartphone – no minimum account balance, credit history, or banks.

A Combination of Blockchain and Standard Verification for Effective Decentralized Lending (Live Bitcoin News), Rated: B

Blockchain lending is a development that is growing in popularity and offering alternative and less stressful ways of acquiring loans quicker and more efficiently even at lower interest rates.

Lendoit offers a robust system which overlaps between blockchain technology and conventional verification systems. Therefore, prior to borrowing, intending borrowers are subjected to standard KYC verification during application, while other aspects of the loan acquisition and repayment processes are based on an Ethereum Smart Contract.

Australia/New Zealand

Australian Online Lender Prospa Tops Key Milestone as it Originates Over $ 500 Million in Loans (Crowdfund Insider), Rated: AAA

Prospa has claimed first in the race to originate over half a billion in small business loans. The online lender states that over the past 12 months, Prospa has experienced dramatic growth, doubling the size of its loan book. Prospa has now provided credit to more than 12,000 SMEs in Australia and is the number one online lender in the country. Prospa will provide loans of up to $250,000 with a term of 3 to 24 months.

Peer-to- peer home lending restrictions in Queenstown welcomed (Voxy), Rated: A

Queenstown Lakes District Council’s (QLDC) announcement and vote to amend its District Plan, restricting the number of days some houses can be used for short term peer to peer lending through sites such as AirBnB, will go a long way to improving rental affordability and shortages for workers in the region.

The report commissioned by QLDC from Infometrics shows AirBnB occupied 14% of the District’s housing stock in the June 2017 quarter.

Asia

Asian fintech funding exceeds $ 1b in 2017 (Deal Street Asia), Rated: AAA

Asia experienced a solid increase in fintech investment in Q3 2017, with $1.21 billion raised across 41 deals. China accounted for more than 50 per cent of all Asian fintech investment at $745 million.

Notably, corporate participation in Asia fintech venture capital (VC) deals remained high at 22 per cent of overall round counts, although actual direct investment was minimal in 2017 with just $840 million invested YTD in associated deal value.

In Singapore, an Indo-Asia Pacific business hub, the fintech sector saw $25.3 million over six deals in Q3 2017, with the Monetary Authority of Singapore (MAS) continuing to be the key driver of the city-state’s fintech ecosystem.

Source: Deal Street Asia
Middle East

National Bonds challenges UAE’s ‘financial advice dilemma’ with new investment app (The National), Rated: A

Dubai-based investment company National Bonds is moving into the financial advisory space with a new digital app offering low-cost investment options, its chief executive has revealed.

The company plans to challenge poor advice, offered by UAE financial advisory firms, by launching an upgraded app in the second quarter of next year to offer customers access to a variety of investment choices – not just National Bonds, Mohammed Al Ali, its chief executive told The National.

Africa

Jumo Wins Third Annual Mastercard Foundation Clients at the Centre Prize (BusinessWire), Rated: AAA

The Mastercard Foundation today presented its third annual Clients at the Centre Prize to Jumo. The US$150,000 prize recognizes the innovative work of the South African-based company as a large-scale, low-cost financial services marketplace that serves poor people.

The Prize highlights best practices in financial services where client satisfaction is a priority. Close to 100 financial service companies around the world submitted entries to the competition.

The other two Prize finalists were ftcash, one of India’s fastest-growing financial technology ventures which aims to empower micro-merchants and small businesses with the power of digital payments and loans, and Destacame, a free online platform in Latin America that empowers users by giving them control over their data to build their financial capabilities and to access financial products.

Uganda: Accra Summit to Pave Way for Financially Empowered World (The Monitor), Rated: A

The Mastercard Foundation is hosting its fifth annual and largest Symposium on Financial Inclusion (SoFI) in Accra, Ghana.

The symposium, which ends today, champions the idea that, to achieve greater financial inclusion, financial service providers in developing countries must do more to meet the needs and expectations of people living in poverty.

Uganda launched its National Financial Inclusion Strategy (NFIS) 2017 – 2022 which seeks to reduce financial exclusion from 15 to five per cent by 2022.

Canada

Borrowell wins Deloitte Fast50 award (Borrowell Email), Rated: A

Borrowell has won a Companies to Watch award as part of the Deloitte Fast50 program. We are one of only eleven companies across Canada to win that award this year, and the only company from Toronto. Fast50 winners in the category for established companies include well-known names like Shopify, SkipTheDishes, Wave and Influitive. The list was announced an hour ago. 

George Popescu
Allen Taylor

Friday April 7 2017, Daily News Digest

global fintech

News Comments Today’s main news: Lending Club media sentiment of 0.27. P2P ISA data disappoints. 83North closes $250M fund for EU and Israeli startups. AnyTimeLoans fights its way into Singapore. Today’s main analysis: FinTech’s growing influence on financial services. Wealth Tech exit activity in one timeline. Today’s thought-provoking articles: Top 8 Renaud Laplanche/Upgrade news stories. MarketInvoice has ambitious expansion plans. Fintech […]

global fintech

News Comments

United States

  • LendingClub receives media sentiment score of 0.27. GP:” We strive to be objective but we are still humans. Modestly, I do wish that more media was objective and looked at the numbers more though. I do think that being public did attract a lot of SEO and PR to Lending Club which shouldn’t be discounted. Also, the story based on ‘we are replacing the evil banks’ caught very well with a majority of the public. One shouldn’t underestimate a good story, or a pitch that is popular with the public. I am sure everybody remembers Google’s ‘don’t be evil’.  “AT: “Lending Club’s press is getting better, signifying the company is making a comeback even as its ousted former leader is making his own comeback with a rival startup. This will be an exciting year for alt lending.”
  • FinTech’s growing influence on financial services. AT: “FinTech has been likened to Uber’s move in on taxi services and Napster’s disruption of the music industry, but I see one fundamental difference. Instead of fighting the trend, legacy financial institutions seem to be embracing it with partnerships and innovative initiatives of their own. We can debate the effectiveness of these attempts to embrace FinTech, but they are at least trying. We couldn’t say that about the music industry’s response to Napster or taxi services’ reception to Uber and Lyft. The takeaway: Financial services have changed, for better or worse, because of FinTech (I say better), and legacy financial institutions are embracing that change, even if they are doing so with much chagrin.”
  • Wealth Tech exit activity in one timeline. GP:” Investors usually invest based on exits, the likelihood, and their size. This info is key for fundraising. Very few people build companies with a large EBITDA and cash flow for dividends in mind.” AT: “In the world of finance, the exit every bit as important (maybe more so) as entrances).”
  • Top 8 Renaud Laplanche news stories concerning Upgrade since yesterday. GP:” We would like to thank Renaud Laplanche for personally reaching out to Lending Times with the story.” AT: “Lending-Times was the first to report this news. Here are eight of the top news stories from the biggest news agencies in the world.”
  • The long and short of MPL. GP:” A very short summary, which is rather focused on the negative sides using words like gamble when there is no real gamble in fact.”
  • JPMorgan is rolling out a robo-advisor this year. GP:” What if JP Morgan Cahse rolled out their own small business lending product like Wells Fargo? What would happe to OnDeck’s stock for example?”
  • 9 things that separate good lenders from bad. GP:” There is a lot to say here, from underwriting, to focusing on quality of the loans vs quantity over time. And the trade off between growth and yield.”
  • Benefits of alt lending. GP:” A good summary is the phrase ‘ while equity markets were falling, the performance of these loans was unaffected’ “
  • JPMorgan’s fintech strategy. AT: “Jamie Dimon’s annual shareholder letter has received a lot of press lately, mainly for his regulatory requests. But he also disclosed some of JPMorgan’s fintech plans. Remember when he was deadset against fintech?”

United Kingdom

  • P2P Isa data disappoints on year on. AT: “What’s interesting is what Stuart Law has to say about Isas. They may not have overwhelmed us in the last year, but when the Big 3 finally are approved, you could see a wave of acceptance and activity.”
  • MarketInvoice has ambitious expansion plans. GP:” What I would do if I was in charge Learning from Lending Club’s experience: opening its underwriting data for free to the internet will attract a lot of attention, PR , SEO and build its credibility. Also having a secondary market will probably enable people to invest more freely as they will not be worried being stuck with paper for 3, 4 or 5 years.”

European Union

International

China

  • Renren dumps SoFi shares. GP:” SoFi shares are a hot commodity as I can’t imagine their valuation going down any time soon. Most likely this was driven by RenRen’s needs for cash. Note that they still kept 85.9% of their shares in SoFi. “

India

Asia

United States

LendingClub Corp (LC) Receives Media Sentiment Score of 0.27 (Sports Perspectives), Rated: AAA

Headlines about LendingClub Corp (NYSE:LC) have trended positive recently, AlphaOne reports.

LendingClub Corp earned a daily sentiment score of 0.27 on AlphaOne’s scale.

These are some of the headlines that may have impacted Alpha One Sentiment’s scoring:

LendingClub Corp (NYSE:LC) traded up 1.91% during mid-day trading on Thursday, reaching $5.34. The company had a trading volume of 3,066,593 shares. The stock’s market capitalization is $2.14 billion. LendingClub Corp has a one year low of $3.44 and a one year high of $8.41. The company’s 50-day moving average is $5.63 and its 200-day moving average is $5.64.

FinTech’s growing influence on Financial Services (PwC), Rated: AAA

The Financial Services industry continues to be fuelled by FinTech’s influence. The fact that consumers are increasingly doing business with these non-traditional players will do little to calm uncertainty. As incumbents react to this they are attempting to come together with FinTech; to leverage the ecosystem it creates, turn the innovation to their advantage and alleviate their concerns around their business being at risk.

Access the PwC Global FinTech Report 2017.

Buying Options: Wealth Tech Exit Activity In One Timeline (CB Insights), Rated: AAA

Wealth tech startups are disrupting personal wealth management and institutional trading, with companies in the space seeing a record 74 deals in 2016.

Though a relatively nascent subindustry, there have been 29 wealth tech exits since 2012, including 28 mergers and acquisitions (M&A) and 1 IPO. Exit activity surged in 2015, with a record of 11 exits, all of which were from M&A. 2016 lagged 2015 with 8 exits, all of which were also M&As.

2017 is off to a strong start with 3 exits as of Q1’17.

  • One of the earliest exits in the wealth tech space was a merger between Zecco and TradeKing in Q2’12.
  • TradeKing went on to acquire GAIN Capital Securities in Q2’13, TraderOS in Q1’15, and MB Trading in Q3’15. TradeKing was acquired in Q2’16 by Ally Financial at a $275M valuation.
  • Yodlee, a cloud-based data analytics software for wealth managers and investors, is the only wealth tech IPO since 2012.
  • Envestnet, a publically traded wealth management software provider, has been one of the most active acquirers in wealth tech, tying TradeKing with 3 acquisitions.

Top 8 Renaud Laplanche news stories since yesterday (Lending-Times Exclusive), Rated: A

Yesterday, Lending-Times was the first to report that Renaud Laplanche has returned with a new Lending Club rival, Upgrade. Since then, other news agencies have reported on the same news. Here are 10 of the top stories on Renaud Laplanche and his new consumer credit platform Upgrade.

  1. Renaud Laplanche, Ousted at Lending Club, Returns as Rival to His Old Firm (New York Times)
  2. Lending Club founder Renaud Laplanche is back with a new startup and $60 million in funding (TechCrunch)
  3. Former LendingClub CEO Renaud Laplanche launches new online lender (Reuters)
  4. Renaud Laplanche debuts second act post-Lending Club scandal (San Francisco Business Times)
  5. Renaud Laplanche Foregoes Subtlety In His Fintech Rebound Relationship (Dealbreaker)
  6. LendingClub’s Ousted CEO Renaud Laplanche Is Launching a New Online Lender (Fortune)
  7. Upgrade, Inc. Launches New Consumer Credit Platform (Yahoo! Finance)
  8. Lyft, Upgrade, Trov are latest to raise VC cash (Silicon Valley Business Journal)

The Long and Short Of It: Marketplace Lending (Investmentu), Rated: A

Since its inception in the late 2000s, marketplace lending has seen good and bad years. Today, an imminent interest rate hike has made its future uncertain.

Lending Club sorts its loans into almost 40 risk grades. Annual interest rates range from 6% for high-credit borrowers to 36% for risky borrowers. That makes them very competitive with traditional debt investments. It’s no wonder that marketplace loans soared 700% between 2010 and 2014.

Take a quick look at the stock performance of OnDeck and Lending Club. It becomes pretty clear that there are some problems under the hood. Both companies are down almost 50% in the last year.

Oversight said that 30-day delinquency rates were as high as 18% for some marketplace lenders.

An investor might be willing to gamble on a 6% return when Treasury bills are yielding 1%. But if U.S. government debt is yielding 3% or 4%, then marketplace lending is significantly less appealing.

JPMorgan is Rolling out a Robo-Advisor This Year (Financial Advisor IQ), Rated: A

JPMorgan is developing an automated advice platform it says will be ready this year, Bloomberg writes.

The company is developing several “exciting new products,” and among them are “online vehicles for both individual retirement and non-retirement accounts, providing easy-to-use (and inexpensive) automated advice,” JPMorgan CEO Jamie Dimon wrote in his annual letter to the company’s shareholders, according to Bloomberg.

In addition to digital banking and electronic trading, JPMorgan will be rolling out the automated advice service later this year, Dimon says in the letter.

9 Things That Separate Good Business Lenders from Bad Ones (Business2Community), Rated: A

A direct online lender is a company that actually supplies the money it lends to borrowers. Many business-lending websites are mere matching services that send out your application to a network of lenders. That might sound good, but it’s not, because you end up paying much more for you capital.

Look for a lender with a streamlined, paperless online application process that can be completed in minutes.

A good lender looks beyond your credit score, makes a decision in minutes and gets you your money the next business day. A good lender will not do a hard pull on your credit. A bad lender may require extensive underwriting, which can waste days and still end up in a denial.

A business lender with a maximum loan limit of $25K or $50K won’t satisfy many small business borrowers who need more. Look for a direct lender who is willing to lend up to $150K.

Read the rest of the article here.

Benefits Of Alternative Lending (ETF.com), Rated: A

While nonbank loan channels have always existed parallel to traditional banking, these channels were historically small niches in the overall economy. However, a new breed of lender has emerged to become a significant presence in the market.

Today institutions are the predominant source of funding for alternative loans. For example, Lending Club, the largest U.S. platform, shifted from 100% retail funding in 2008 to 84% institutional funding in 2015.

Investors saw the same thing following the Brexit vote in June 2016. In both cases, while equity markets were falling, the performance of these loans was unaffected. Thus, there are times (though not all times), when an investment in these loans will help dampen portfolio volatility.

In both alternative lending and reinsurance, one reason these products offer equitylike expected returns without the equitylike volatility is the illiquidity risk that investors accept.

JPMorgan’s fintech strategy (Business Insider), Rated: B

Here are the areas in which JPMorgan is embracing fintech:

  • Investing in new technologies.
  • Developing new products.
  • Promoting financial inclusion.
  • Collaborating with fintechs.
  • Doubling down on data sharing.
United Kingdom

Peer-to-peer Isa data disappoints one year on (FT Adviser), Rated: AAA

Figures showed 42 companies now have full permissions from HM Revenue & Customs to offer the Innovative Finance Isa, which lets investors tap into alternative types of investment such as peer-to-peer lending.

But just 14 of the Isas are currently on the market, of which eight are offered by peer-to-peer providers, data compiled by P2P comparison service Orca revealed.

By the time the new Isa launched last year, just eight out of 86 peer-to-peer providers were fully authorised, and HM Treasury later admitted the Isa had got off to a slow start.

Stuart Law, founder of P2P platform Assetz Capital, described the Isa launch as “a bit of a damp squib”, adding: “Frankly, it may as well not have started.”

UK marketplace lender has ambitious expansion plans (Business Insider), Rated: AAA

Marketplace lender MarketInvoice, a P2PFA member and one of the UK’s leading alt lenders, has of late enjoyed US Small Business Administration.

European Union

83North closes $ 250M fourth fund focused on European, Israeli startups (TechCrunch), Rated: AAA

European VC firm 83North (formerly Greylock IL), which since 2008 has focused on backing startups in Europe and Israel, has closed its fourth fund — taking $250M in a raise that it says was both oversubscribed and its largest to date, and bringing its total capital under management to $800M.

In a statement she noted that the fund has already backed companies from France, Germany, Greece, Italy, Spain and Sweden, for example, and said it’s expecting European activity to accelerate in tech hubs outside London because of Brexit.

83North has invested in more than 40 startups to date.

International

Fintech partnerships reveal innovation insecurities (Financial News), Rated: AAA

The world’s banks have poured billions of dollars into new technologies but many say their innovation strategies are falling short as concerns about cyber security, intellectual property rights and procurement hinder partnerships with fintech firms.

The law firm found that just 7% called their institution “industry-leading” on digital innovation and only 16% considered their collaboration with financial technology firms to be “highly effective”.

The biggest barrier to successful collaboration with startups was cyber security, according to  71% of respondents.

Among the other hurdles were cultural clashes between fintechs and incumbents and issues around intellectual property rights; in both cases around 50% of respondents to the Simmons & Simmons survey flagged these as concerns, while only 19% said that their procurement processes were ‘highly effective’.

A separate survey of more than 1300 financial services and fintech executives published today by PwC, found that more than 80% believed parts of their business were at risk from standalone fintech companies (SEE CHART).

Top 10 Fintech Lending Companies and Their Worth (TechBullion), Rated: AAA

According to the findings of Transparency market research, the value of fintech lending will command between $150 billion and $490 billion.

  1. Lufax is one of the largest fintech lending company in China and the world at large. The company has provided loans worth over US$2.5.
  2. Founded in 1998 with its headquarters in Chaoyang, China, JD Finance is valued at US$7 billion.
  3. SoFi was established in 2011 with headquarters in San Francisco, United States. Currently, the company is valued at US$4 billion.
  4. GreenSky was established in 2006 with its headquarters in Atlanta. The company is valued at US$2 billion.
  5. Avant Credit was founded in 2012 and is headquartered in Chicago. It is worth US$2 billion.
  6. Founded in 2005, Prosper has its headquarters in San Francisco. Today, the company is valued at US$1.9 billion.
  7. focusing on business loans, Funding Circle has, since its establishment, funded different businesses to the tune of $2.5 billion.
  8. Kabbage was founded in 2009 and is headquartered in Atlanta. The company is currently valued at US$1 billion.
  9. Established in 2013 with the head office in Beijing, Jimubox is a peer-to-peer loan provider.
  10. China Rapid Finance was established in 2001 in Beijing but only started online lending in 2011. The company is a leading peer-to-peer consumer lender in China. It is currently valued at US$1 billion.
China

Renren Inc. Announces Disposition of Certain Shares of Social Finance, Inc. (Yahoo! Finance), Rated: A

Renren Inc. (RENN) (“Renren” or the “Company”), which operates a social networking service and internet finance business in China, today announced that it sold preferred shares of Social Finance, Inc. (“SoFi”) to certain investors on April 4, 2017, in connection with SoFi’s most recent round of equity financing. The Company received net proceeds of $91.9 million for these shares. After this transaction, the Company still has 85.9% of its previous holdings in SoFi.

India

Don’t Let a Low CIBIL Score Come in the Way of your Dream Home (Business-Standard), Rated: B

Want to know your exact score? Visit www.com and pay a fee to carry the process forward. Your score will range between 300 and 900. According to experts, 79% of loans get sanctioned if the minimum credit score is 750.

Peer to Peer Lending: Peer to peer (P2P) lending is also another option to consider if a low score is standing in your way to secure that much-needed Home Loan. P2P lending matches lenders with borrowers and this is generally an online service. The service, because it is online, is more cost effective than traditional financial institutions. Lenders can hope to make higher returns and borrowers can borrow money at an interest that is best suited for them.

Asia

AnyTimeLoan fights its way into Singapore from the India chapter of Get in the Ring (The News Minute), Rated: AAA

Peer-to-peer lending platform AnyTimeLoan (ATL) won the India chapter of Get in the Ring on Thursday. ATL will now compete with startups around the world in the Global Startup Competition, which will be held in Singapore in May.

Twenty four startups participated in the competition of which sixe startups had a faceoff in front of the Jury. Paymatrix, Authbase, Gayam Motor Works, SpotDraft, ATL, NicheAI were the startups that made it to the round.

ATL is a peer-to-peer on demand lending provider which provides mortgages, small loans, overdrafts and loans against property. There is an algorithm that analyses information of the individual seeking a loan from 187 data points.

Authors:

George Popescu
Allen Taylor