Wednesday December 13 2017, Daily News Digest

Wednesday December 13 2017, Daily News Digest

News Comments Today’s main news: Court dismisses case against OCC Fintech Charter. Affirm’s valuation confirmed at $1.75B. RateSetter Australia reaches $200M milestone. SoftBank invests $450M into Compass. Starling Bank expected to profit in 2019. Linked Finance launches P2P lending pension accounts. ID Finance raises $85M through ETF bonds. Today’s main analysis: TransUnion reports on consumer credit markets. Today’s thought-provoking articles: What […]

Wednesday December 13 2017, Daily News Digest

News Comments

United States

United Kingdom

China

European Union

International

Australia

India

Asia

MENA

Israel

South America

News Summary

United States

Court throws out New York regulator’s suit against OCC fintech charter (American Banker), Rated: AAA

A New York District Court judge threw out a lawsuit by the New York Department of Financial Services that sought to block the Office of the Comptroller of the Currency’s attempted fintech charter, saying the charter doesn’t exist yet so the suit is premature.

Lending startup Affirm valued at $ 1.8 bln in latest financing round (Business Insider), Rated: AAA

Silicon Valley lending startup Affirm said on Monday it has raised $200 million in a fresh round of funding, boosting prospects as the firm aims to go after the market for millennial shoppers needing loans.

The new financing put Affirm’s total fundraising to date at about $450 million, and increases its valuation to $1.75 billion, according to a source with knowledge of the matter.

Max Levchin On What Comes After $ 200M Worth Of Capital Affirmation (PYMNTS), Rated: AAA

The CEO with the measured response is PayPal co-founder Max Levchin, who told Karen Webster that with any capital raise of size, the temptation is to believe that “it is a big victory and it is validation … but all it really is, is a temporary tally of how far you have gone.”

He noted that with big investments come big responsibility (and Affirm has raised roughly $450 million to date), as he remarked that there is the implicit end goal of taking the money and parlaying vision and strategy into strong returns on that cash.

Affirm says that its retailers report that consumers who use Affirm leave with a basket size 75 percent greater than those who don’t use Affirm to pay for their purchases, and enjoy site-wide conversion rates as much as 20 percent higher, with revenue per visitor lifts of more than 10 percent.

Doing customers wrong allows your competitor to make things right (American Banker), Rated: A

Consider Affirm, a startup that offers consumers installment loans for individual purchases and markets the loans as a simpler and more honest financing alternative — a message that is clearly targeted at consumers who are frustrated by a perceived lack of transparency in the costs associated with using credit cards. This message appears to be resonating in the market; Affirm is processing relationships with more than 1,000 internet retailers and is reportedly working with Walmart on a pilot project.

In an interview with American Banker, Douugh founder and CEO Andy Taylor said: “When we dug deeper, we realized the consumer debt levels are out of control. Big banks are running off legacy business models that are driven to keep customers within these debt cycles. They’re not properly incentivized to foster financial wellness.”

Affirm, Marcus and Douugh are all basing their strategic direction on a simple but powerful insight: There is a difference between the way many consumers use credit cards and the way that those consumers should use their credit cards in order to maximize their financial wellness.

Retailers now offers Instaloans to pay for purchases (ABC30.com), Rated: A

A growing number of major retailers offer shoppers instant loans to pay for your purchases.

But how do they work? And are they better than credit cards?

Each lender may be slightly different, but typically: you give basic information, decide the length of the loan -usually anywhere from three to twenty-four months and in less than a minute you’ll know if you’re approved.

Prosper Appoints Former J.P. Morgan Chase CMO Claire Huang to Board of Directors (Crowfund Insider), Rated: AAA

Peer-to-peer lending platform Prosper announced on Tuesday it has appointed former Chief Marketing Officer of J.P. Morgan, Claire Huang to its board of directors. According to Prosper, Huang has held senior leadership positions at various well-known financial services companies, which includes Bank of America, Fidelity Investments, and American Express.

OnDeck Adds Former GE Capital and SunTrust Executives to Finance Team (PR Newswire), Rated: AAA

OnDeck (NYSE: ONDK), the leading online lender to small business, today announced the hiring of two senior financial services executives to join its management team. Kelly Merrill and Erich Wust will assume new leadership roles that directly support OnDeck’s mission of empowering small business owners with the fastest and most flexible credit solutions.

Kelly Merrill joins OnDeck as the Senior Vice President for Finance, where she will help lead the company’s short-term and long-term financial planning initiatives. Merrill brings over a decade of finance experience to OnDeck from GE Capital, where she played a leading role in developing and executing the disposition strategy for GE Capitals’s $200 billion balance sheet.  Previously, Merrill was the Chief Financial Officer (CFO) of GE Capital Real Estate, where she led a team of more than 50 employees.

Erich Wust has been appointed as the Senior Vice President for Portfolio Management at OnDeck. He will be responsible for managing portfolio credit strategies, balance sheet optimization and other components of the company’s loan portfolio. Wust joins OnDeck after more than a decade in credit and risk leadership roles at SunTrust Bank.

Compass gets $ 450M from SoftBank; real estate portal now valued at .2B (TechCrunch), Rated: AAA

Less than a month after raising $100 million led by Fidelity, real-estate startup Compass is striking while the iron is hot. The company has now picked up an even bigger investment of $450 million, this time from the SoftBank Vision Fund, plus another $50M in secondary deals, to fill out a vision of its own: taking its real estate rental and sales platform global.

New York-based Compass is now valued at $2.2 billion post-money, up from $1.8 billion just four weeks ago, with $775 million raised to date.

Consumer Credit Market Expected to Remain Strong in 2018 Even in a Rising Rate Environment (NASDAQ), Rated: AAA

In spite of rising interest rates, the U.S. consumer credit market is poised to perform well in 2018, with well-managed delinquencies and continued wide access to credit across all products. TransUnion’s (NYSE:TRU2018 consumer credit forecast found that expected increases to GDP, personal income, total employment and the Housing Price Index, among other factors, will outweigh potential negatives such as increasing interest rates and slowing vehicle sales.

5-Year Trends: Serious Borrower-Level Delinquency Rates for Key Credit Products**
Credit Product Q4 2013 Q4 2014 Q4 2015 Q4 2016 Q4 2017* Q4 2018* PCT Change in Last 5 Years (2013-2018)
Auto Loans  

1.23

%  

1.19

%  

1.27

%  

1.44

%  

1.43

%  

1.46

%  

+18.7 %

Credit Cards 1.60 % 1.48 % 1.59 % 1.79 % 1.86 % 1.96 % +22.50 %
Mortgage Loans 4.31 % 3.40 % 2.46 % 2.28 % 1.83 % 1.65 % (-61.7%)
Unsecured Personal Loans 4.01 % 3.73 % 3.62 % 3.83 % 3.37 % 3.36 % (-16.21%)
*Projections; **Serious mortgage, auto loan and personal loan delinquencies are defined here as those with payments 60 or more days past due. Serious credit card delinquencies are defined as those with payments 90 or more days past due. 

Inside the Mortgage Forecast

60-Day+ Mortgage Delinquency Rate and Average Mortgage Debt per Borrower
Q4 2009 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014 Q4 2015 Q4 2016 Q4 2017* Q4 2018*
7.16% 6.65% 6.15% 5.38% 4.31% 3.40% 2.46% 2.28% 1.83% 1.65%
$190,324 $186,488 $185,594 $184,753 $187,228 $187,311 $189,914 $194,415 $200,935 $205,534
*Q4 2017 and Q4 2018 include projections

Inside the Credit Card Forecast

90-Day+ Credit Card Loan Delinquency Rate and Average Credit Card Loan Debt per Borrower
Q4 2009 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014 Q4 2015 Q4 2016 Q4 2017* Q4 2018*
2.97% 2.17% 1.90% 1.75% 1.60% 1.48% 1.59% 1.79% 1.86% 1.96%
$6,043 $5,609 $5,485 $5,371 $5,324 $5,329 $5,337 $5,486 $5,626 $5,675
*Q4 2017 and Q4 2018 include projections

Inside the Auto Finance Forecast

60-Day+ Auto Loan Delinquency Rate and Average Auto Loan Debt per Borrower
Q4 2009 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014 Q4 2015 Q4 2016 Q4 2017* Q4 2018*
1.59% 1.27% 1.11% 1.15% 1.23% 1.19% 1.27% 1.44% 1.43% 1.46%
$14,922 $15,031 $15,377 $16,061 $16,781 $17,456 $18,004 $18,391 $18,588 $18,694
*Q4 2017 and Q4 2018 include projections

Inside the Personal Loan Forecast

60-Day+ Personal Loan Delinquency Rate and Average Personal Loan Debt per Borrower
Q4 2009 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014 Q4 2015 Q4 2016 Q4 2017* Q4 2018*
4.98% 4.78% 4.20% 3.93% 4.01% 3.73% 3.62% 3.83% 3.37% 3.36%
$6,650 $6,138 $5,895 $5,904 $6,247 $6,741 $7,360 $7,640 $8,066 $8,461
*Q4 2017 and Q4 2018 include projections

Why JPMorgan, Amex, HSBC are backing ‘isolation’ web browsing (American Banker), Rated: AAA

Often users are tricked by phishing emails that mimic a legitimate note from the boss or a senior corporate leader. And the links and sites can look secure. According to PhishLabs, nearly 25% of all phishing sites in the third quarter were hosted on HTTPS domains — almost double the rate of the previous quarter.

As part of their effort to deflect these attacks, some banks are turning to isolated browsing, or remote browsing, technology. Such systems force all internet activity to happen in a protected space on the cloud, preventing malicious code from reaching a company’s network. The technology is not brand new, but it is starting to gain traction as some large banks have finished their testing of it and are going public with their use of it.

JPMorgan Chase, American Express and HSBC announced Monday that they are leading a $40 million round of funding in the isolation-tech provider Menlo Security, bringing its total funding to $85 million.

Source: American Banker

 

Niche lending and fintech cross paths in Silicon Slopes (Utah Business), Rated: A

There are, however, entire demographics not serviced by tried-and-true lending institutions. Often, these folks’ credit score fails to meet a bank’s minimum standards. Or they need unconventional terms on an equipment or business loan. Whatever the reason, these transactionally marginalized sectors find themselves at the mercy of high-interest lenders. Or with no access to capital at all.

“There is a significant population of U.S. consumers who can’t get a loan,” notes Nate Heward, CFO at Acima Credit, a company that provides a point-of-sale credit platform.

Capitalism abhors a void

From the ubiquitous strip mall payday lender to the world of microfinance, a plethora of entrepreneurial solutions has emerged to get cash in the hands of would-be borrowers cut off from other avenues. These alternative lending practices have various degrees of reputability; a wide spectrum exists between the purely predatory lending shop, on the one hand, and the creative value-adding venture, on the other.

Scratching the consumer itch

In practical terms, Acima asks four simple questions of the would-be borrower:

  1. Do you have a three-month history with your current employer or source of income?
  2. Do you deposit $1,000 or more into your checking account each month?
  3. Have you had a checking account for at least 90 days?
  4. Is your checking account free from NSFs, excessive overdrafts and negative balances?

It’s all fintech

The companies profiled in this article may not be considered fintech firms per se; they’re not using technology to create a new financial paradigm a la Paypal, Indiegogo or Coinbase. They’re merely offering tried-and-true solutions to untapped consumer markets. Viewed from another angle, however, they’re fintech companies through and through. Acima, Progressive, et al are racing to deliver the most convenient financial solutions to the most people in their target customer base. And to do so, they’re relying on technology all the way.

Finance teams are ‘bottlenecking’ banks’ digital transformations (Tearsheet), Rated: A

Banks are working hard to beef up their technology and innovation teamsembrace agile developmentand move to acting like digital companies, but bank finance departments still do a lot of manual work and will start to hold their companies back from becoming digital entities. Finance teams are the control functions and scorekeepers of an organization, but if they can’t process data at the same speed as the rest of the organization they could slow down the speed of company mergers or product rollouts when competing transactions are already taking place.

Royal Business Bank Invests $ 500K in Lendistry Loan Fund, Providing Opportunity for Small Businesses in Underserved Communities (Digital Journal), Rated: A

Royal Business Bank, a wholly-owned subsidiary of RBB Bancorp, has made a $500K commitment to the Lendistry CRA Loan Fund I. Launched at a time when most banks were struggling, Royal Business Bank has been successfully serving the Asian-American community since 2008. While specializing in businesses engaging in trade with Pacific Rim countries, the bank also offers small business loans and residential mortgages.

First financial industry brief filed in CFPB English v. Trump case (Ballard Spahr Email), Rated: A

This afternoon (LT Editor: December 12,2017) the Credit Union National Association (CUNA), represented by Ballard Spahr’s Alan Kaplinsky, filed the first amicus brief from the financial industry in the English v. Trump litigation over who will succeed Richard Cordray as the head of the Consumer Financial Protection Bureau. CUNA supports the President’s authority to appoint an acting director.

Lawsuit: Trump appointee Mick Mulvaney has ‘no more right’ to lead CFPB ‘than Santa’ (Washington Examiner), Rated: A

A new federal lawsuit says President Trump’s “plainly illegal” appointment of Mick Mulvaney to be acting director of the Consumer Financial Protection Bureau must be reversed in favor of Leandra English, who also claims the title.

Ilann Maazel, an attorney for the Lower East Side People’s Federal Credit Union, told the Washington Examiner that the credit union is suing because of the feared effect of Mulvaney policies.

The legal dispute centers on whether the 2010 Dodd-Frank financial reform, which set up the CFPB, makes the deputy director the acting director if there’s a vacancy, or whether the older Federal Vacancies Reform Act gives the president that power.

US Bank sees success with Zelle (Business Insider), Rated: A

US Bank integrated Zelle — which has over 30 other banking partners like Bank of America (BofA), JPMorgan Chase, and Citi — last year. The bank saw a 104% increase in Zelle transactions in the past four months, and a 50% increase in customer enrollment in the P2P offering during that time.

Source: Business Insider

To compete with big tech firms, banks need big-tech talent (American Banker), Rated: A

Nine years ago, D.J. Patil and Jeff Hammerbacher coined the term “data scientist.” Four years later, Patil and Thomas Davenport deemed the profession “the sexiest job of the 21st century” in the pages of Harvard Business Review.

For banks, this imbalance is particularly challenging at a time when the industry is increasingly vying for the same talent the tech giants are aggressively courting. To stay competitive, the financial services industry must defend against a new cast of competitors by changing how it attracts, hires and develops data science talent.

 

BitGo Raises $ 42.5M in Series B Funding (Finsmes), Rated: A

BitGo, a Palo Alto, CA-based company which makes digital currencies usable for businesses in a regulated economy, raised $42.5m in Series B financing.

The company intends to use the funds to accelerate enabling businesses to integrate digital currencies into their existing financial systems.

AI 100: The Artificial Intelligence Startups Redefining Industries (CB Insights), Rated: A

Source: CB Insights

5 Promising Early-Stage Startups to Watch (Tech Startups), Rated: B

Throtle is a 2nd generation data onboarding company focused on deterministic matching, identity resolution and closed loop enablement, powering brands and companies with their omnichannel marketing efforts.

Affirm is a San Francisco-based financial service startup that offers installment loans to consumers at the point of sale. Its aim is to improve the banking industry to be more accountable and accessible to consumers.

Homebuying With Alternative Credit (Microbilt), Rated: B

Source: Microbilt
United Kingdom

Digital challenger Starling to hit profit in 2019 says founder Anne Boden as European expansion takes crucial step (City A.M.), Rated: AAA

Digital-only challenger bank Starling will “definitely” be in profit by the end of 2019, its chief executive told City A.M., as it announced a major step in its plans for European expansion.

The bank will today announce it has become a direct member of the single euro payments area (Sepa), which allows credit transfers, direct debit and card payments in euros across the whole of the EU.

Crowdfunding a mission to save capitalism from itself (Financial Times), Rated: AAA

Jeff Lynn is on a mission to save capitalism from itself at a time when millions feel locked out, and unable to foresee themselves better off than their parents. His answer: to democratise capital.

That is one reason he founded Seedrs, an online platform through which individual investors can buy shares in high-growth companies at an early stage — a privilege once reserved for institutions and private equity funds. The other reason was to make money.

Seedrs, which along with Crowdcube dominates the UK market, has funded more than 540 deals, representing £280m of investment. Some were follow-on rounds, and in total about 400 companies have been funded. About 20-30 companies are live on the site at any time.

Crowdfunding by numbers

Critics say a big difference between crowdfunding and the stock market is liquidity — you cannot just sell your stake. But Seedrs has begun a secondary market and says it has had several exits already.

Free Agent, a Scottish maker of accounting software, floated in November 2016 at 87p. Its shares remain below the 100p Seedrs investors paid, though some sold when it hit 140p this year. Chapel Down, a vineyard, was already quoted on the Nex exchange (formerly ISDX) when it raised money at 28p a share in October 2014. It has been trading around three times that level.

China

SenseTime Raises US$ 410M Series B Financing (Finsmes), Rated: A

SenseTime, a Chinese artificial intelligence company focused on computer vision and deep learning technologies, raised US$410m series B1 B round of financing.

SenseTime has powered many industries such as finance, security, smart phone, mobile Internet, robotics, and automobile with core computer vision technologies including face recognition, video analysis, character recognition, and autonomous driving.

European Union

Linked Finance Launches New P2P Lending Pension Accounts (Better Business), Rated: AAA

Irish peer-to-peer lending company Linked Finance has launched a new type of account that allows holders of self-administered pensions to make P2P lending to Irish SMEs part of their pension investment portfolio.

With net returns of between 7 and 8.5 per cent, 24/7 online account access, complete control of lending activity, and monthly repayments of principal & interest, P2P lending is becoming an attractive asset class for a growing number of investors.

Mobile bank N26 partners with crowd-lending platform Younited Credit in France (Telecompaper), Rated: A

European start-up N26 has expanded the range of its banking services on offer in the French market via a partnership with Younited Credit, a fintech start-up specialising in short-term loans and crowd-lending.

The Advantages of #Peer-to-Peer Lending (EU Reporter), Rated: A

For many years, if someone wanted a loan, they would have to apply for one through a bank. Before they received that loan, the bank investigated their credit and decided what the rate of interest would be applicable.

However, there is another way to get a loan without worrying about a low credit score or high interest rates. This is peer-to-peer lending or P2P. Through peer-to-peer lending platforms, individuals can invest their money in other individuals, with an interest rate that the two groups have agreed is fair.

Hungarian fintech secures EUR 6 mln in Czech funding (Portfolio.hu), Rated: A

The investor will first acquire a 20% stake in Barion, which is active in online and mobile payments, for EUR 2 mln.

Finnish Crowdfunding & P2P Lending Platform Fellow Finance Receives Payment Institution Authorization (Crowdfund Insider), Rated: B

Finnish crowdfunding and peer-to-peer lending platform Fellow Finance announced on Tuesday it received payment institution authorization from the Financial Supervisory Authority of Finland. The online lender claims it is the first funding platform to receive this type of authorization, which will notably enable Fellow Finance to provide new services to its consumer and corporate customers, to expand its services further in Europe and to utilize the new payment service directive (PSD2) in the development of Fellow Finance service.

With Norrsken House, ex-Klarna executive envisions a global network of co-working spaces focused on impact (TechCrunch), Rated: A

He launched the Norrsken Foundation later that year with about $20 million of his own money. By early 2017, the first fruits of that funding took shape with the opening of Norrsken House, a co-working space in Adalberth’s hometown of Stockholm dedicated to companies that are developing technologies that have a social impact.

Now, Adalberth has committed an additional $62 million of his own money to expand that vision. The goal, he said, is to eventually create a network of 25 impact-focused co-working spaces and foundation hubs around the globe in the next 10 years. The first Norrsken House has 112 companies in it and seven have received direct investment from the Norrsken Foundation’s fund (more on that in a bit).

International

ID Finance raises $ 8.5m via exchange-traded bonds to support growth (Finextra), Rated: AAA

ID Finance, the emerging markets fintech company, today announced successful completion of its first issuance of exchange-traded bonds.

The company raised $8.5m from the bond registered in Russia and listed on the Moscow Exchange. It was the first tranche of a $170m bond issuance programme that the company plans to support global expansion.
The bond, which was oversubscribed, has a maturity period of three years and a quarterly coupon payment frequency.

Banks, fintechs and a Brit royal to build green-lending blockchain (American Banker), Rated: A

Could fintech help the planet cope with climate change?

Some major players — Prince Charles; bankers from Barclays, Standard Chartered, and BNP Paribas; three fintechs; and professors from the University of Cambridge — all hope the answer is yes.

On Tuesday at the One Planet Summit in Paris, they are expected to announce they are developing blockchain technology that lets banks see which potential borrowers use environmentally sustainable practices and therefore are worthy of preferential lending terms. Such disclosures presumably would put pressure on companies to pollute less.

Australia

RateSetter’s Australian business hits $ 200m milestone (AltFi), Rated: AAA

RateSetter Australia has hit the AUD$200m mark in lending a little over three years removed from launching down under. The platform, which lends to both businesses and individuals, has doubled its lending volumes over the past six months.

Interestingly, 56 per cent of its investors withdrew money from bank savings accounts in order to divert them into the platform, while a further 17 per cent reallocated money from bank term deposits. The greatest proportion of the platform’s investors are millennials, at 58 per cent, although they invest the least amount of money on average of any age group at $9,454. Retirees (aged 65 and over) by contrast invest an average of $66,118.

India

Understanding the Data Protection White Paper Part XI: Establishing proper deterrent consequences for privacy violations (Tech 2), Rated: AAA

This article is Part 11 of a multi-part series explaining the recently issued white paper on data protection in India. You can read Part 1Part 2, Part 3Part 4Part 5Part 6Part 7Part 8Part 9 and Part 10.

Consider also the case of Sitesearch in the US, where the company bought payday loan applications and sold them to third parties, which included fraudsters, who used the data to steal more than $25 million from user accounts. Such careless buying and selling off of data should not be justifiable in the name of consent. While safeguards such as requiring that companies transfer data to only to companies with a comparable level of privacy provisions help, these must be backed up by huge penalties for violations.

For example, consider the Equifax data breach, the breach of a credit information company, leading to the loss of crucial data of over 143 million Americans. This breach was the result of a vulnerability in their web application software, a vulnerability that was discovered and for which a patch had been issued at least 2 months before the actual hack. The breach of this crucial data was thus the result of negligent, or non-implementation of the patch.

A landmark privacy judgment in India is the Canara Bank case, which struck down a provision in a law, which allowed the authorisation of ‘anyone’ to conduct investigations and demand the production and seizure of documents, including bank documents. Such a wide delegation of powers can allow any and everyone, even unscrupulous actors, permission to gain access to confidential data, which should not be allowed.

This case draws attention to an important aspect of data protection — it must be ensured that investigations, at all times, must be authorised, and by authorised personnel only. Any violations, or even exceeding of powers must be punishable.

Asia

8Percent leverages power of platform (Korea Herald), Rated: A

Companies that have used the 8Percent platform include Korea’s leading vehicle-sharing app operator Socar, solar energy firm S-Power and restaurant chains Power Plant and The Booth.

For example, a P2P investor into Socar was given a 1-hour free-driving offer each month for a year, until the loan matured. The offer was part of a return to about 600 retail investors, who lent a combined 1.3 billion won ($1.19 million) to the car-sharing firm in July 2015.

Vouchers for restaurants, such as Power Plant and The Booth, were given as rewards to investors.

According to a December estimate by 8Percent, three-fourths of investors, who offered an accumulated 97.7 billion won in loans, were from metropolitan areas — either Seoul or Gyeonggi Province — while those in their 20s or 30s accounted for over three-fourths of investors. The investors, without tax being deducted, are offered on average 9.78 percent interest for investments.

Some 65 percent of its borrowers — about 5,000 – had a credit rating between 4 and 6 on the scale of 1 to 10.

MENA

Crowdfunding real estate: a new reality booming? (Gulf News), Rated: AAA

Similarly, online REITs use online platforms and digital technology to enable wider access to REITs and quicker dissemination of REIT information. This allows mass participation and broader wealth distribution.

The ticket size to crowdfund a $1-billion airport is not exactly for everyone. However, a three-bedroom apartment in Mumbai, Manchester or Dubai Marina jointly owned by a hundred individuals sounds realistic. It also helps diversify risks for investors.

Smart Crowd is a crowdfunding platform, very different from an online REIT. The company believes it can enable anyone with Dh5,000 in savings to enter the Dubai property ladder. Its platform is awaiting final regulatory approval from the Dubai Financial Services.

Israel

MK Rachel Azaria threatens banks with P2P legislation (Globes.co.il), Rated: AAA

MK Rachel Azaria, chair of the Knesset Reforms Committee (officially known as the Special Committee on the Planning and Building Bill and the Maternity Leave and Parenting Bill) did not like the draft circular released by the Bank of Israel on regulating the relationship between the banks and the digital peer-to-peer (P2P) lending platforms on Sunday.

Azaria is now threatening to promote legislation that will regulate relations between the banks and the platforms, but this appears to be designed to pressure the Bank of Israel to publish new, more focused guidelines .

South America

Creditas Raises $ 50M in Series C Funding (Finsmes), Rated: A

Creditas, a Sao Paulo, Brazil-based digital secured loan platform provider, raised $50m in Series C funding.

Authors:

George Popescu
Allen Taylor

July 5th 2016, Daily News Digest

July 5th 2016, Daily News Digest

News Comments United States According to the bond market yield-curve there is 60% chance of recession. However, the equity market doesn’t agree. Interesting times. A short survey on the different US regulators’ interaction with the marketplace lending space. New Capital Rules likely to be imposed on wall street will likely push bank-dealers to shut down […]

July 5th 2016, Daily News Digest

News Comments

United States

  • According to the bond market yield-curve there is 60% chance of recession. However, the equity market doesn’t agree. Interesting times.
  • A short survey on the different US regulators’ interaction with the marketplace lending space.
  • New Capital Rules likely to be imposed on wall street will likely push bank-dealers to shut down trading units in debt-securitization due to insufficient return on equity. This change could have a huge impact on marketplace asset backed securitization.
  • Wells Fargo continues to push FastFlex, their own quick SME financing product competing with OnDeck, Kabbage, CAN Capital and all other SME marketplace lenders.
  • Morgan Stanley is pointing out all the positive data coming out of Lending Club: higher origination than predicted in Q2 2016 and much more.
  • Lending Club’s CIO unvailing the future plans for Lending Club : Point-of-Sales, offline and a cloud-base micro-services platform.
  • CFPB’s monthly report points out the most-complained-about companies in consumer loans. It would be interesting to plot company size vs number of complaints.
  • Square analysts believe that more regulation in marketplace lending will favor Square vs its competitors.
  • Last week news, worth a reminder after the long weekend: Avant is downsizing, again.
  • Boston, feeling left behind in fintech, is launching a fintech hub initiative supported by Fidelity, Putnam, Santander Bank, U.S. Bank and Boston Private Financial.

United Kingdom

  • An interesting way to leverage your p2p investments: buying discounted P2P public fund shares at the present 20% discount, and relying on stock buy-backs to bet on up side in yield + equity appreciation.
  • Brexit: in short, fintech firms fear for staff shortages and lost EU customer access.

European Union

  • Insurer Aviva France, in partnership with Eiffel Investment Group and AG2R La Mondiale launching a €100 million fund to invest in “crowdlending SME debt” in France and elsewhere.
  • A list, without any transparency on the inclusion criteria,  of the top 11 p2p lending platforms in Europe, (Pre-Brexit), per Fintechnews.ch. And a very interesting map of relative p2p lending market size in European countries.

Australia

  • Public p2p lender DirectMoney preparing a new share issuance to finance loans as loan demand outstrips funding.”DirectMoney chief Peter Beaumont yesterday defended the fintech company’s stockmarket listing and expressed disappointment over losses worn by shareholders.”
  • OnDeck Australia and Commonwealth Bank (CBA) receiving the Fintech-Bank Collaboration of the Year Award.

India

  • P2P players are moving towards institutional capital for growth. Following in the footsteps of their US cousins, we hope the Indian p2p lenders have learned their lessons from Prosper, Lendnig Club and Avant’s experiences with institutional capital.

China

  • P2P lenders exiting office space in Shanghai have brought office space vacancies supply to a 10-year-high level.

Korea

  • Interesting data and information on one of the 1st Korean p2p lending companies we learn about.

News Summary

Unites States

Bond Markets Have a Message About the Economy That Stock Investors Might Not Want to Hear, (Bloomberg), Rated: AAA

There’s a big disagreement brewing in global markets.

There’s 60 percent chance of recession, according to a Deutsche Bank model.

While risky assets including equities have surged following the U.K. electorate’s historic vote to leave the European Union, government bonds have also rallied; two things that ought to suggest different outlooks for economic growth. Soaring bond prices have sent yields on the perceived safe havens of government debt plumbing fresh lows, even while expectations of looser monetary policy produce a burst of animal spirits in stock markets.

The flight to safety has prompted some analysts to question the durability of the rally in equities, where the S&P 500 was up 3.5 percent last week and the FTSE 100 has erased its post-referendum dip — at least, in local-currency terms. Still others say that money is pouring into stocks as lower bond yields force investors to search for returns in alternative asset classes.

The spread between the yield on 10-year and two-year U.S. Treasury notes narrowed in the immediate aftermath of the June 23rd referendum, widened briefly, and is now shrinking again as investors continue to flock to the perceived safety of U.S. government debt. A model maintained by Deutsche Bank AG’s Steven Zeng, who adjusts the spread for historically low short-term interest rates, suggests the yield curve is now signaling a 60 percent chance of a U.S. recession in the next 12 months — up from a 55 percent probability as of mid-June, and the highest implied odds since August 2008.

“This relentless flattening of the curve is worrisome,” Deutsche analysts led by Dominic Konstam said in their note on the model. “Given the historical tendency of a very flat or inverted yield curve to precede a U.S. recession, the odds of the next economic downturn are rising.”

The 10-year yield is currently at 1.44 percent, making a recession just about 40 basis points away according to this particular interpretation of the bond market’s moves.

Rundown of Regulator Interest in Marketplace Lending, (Lend Academy), Rated: AAA

U.S. Treasury

The Treasury first publicly showed interest in marketplace lending with a request for information(RFI) back in July 2015. Over 100 companies responded to the RFI and the Treasury reported on their findings in May 2016 where they shared their response in the form of a white paper. It did not provide any recommendations for new regulations and was generally quite positive on the industry.

Office of Comptroller of the Currency (OCC)

On March 31, the OCC released a white paper titled Supporting Responsible Innovation in the Federal Banking System: An OCC Perspective. More recently, the head of the OCC, Thomas Curry, reaffirmed his commitment to responsible innovation in a speech just last week. He brought up the idea of a “regulatory sandbox” – a place where fintech companies can have a conversation about what the rules of the road are for their new ideas. He also brought up the idea of a limited purpose charter for fintech firms as a possible way forward.

Federal Deposit Insurance Corporation (FDIC)

The FDIC first addressed marketplace lending in a paper titled Supervisory Insights. They are concerned about the impact on banks as well as the general risk to financial services.

Consumer Financial Protection Bureau (CFPB)

Early this year, the CFPB made two announcements impacting marketplace lending. They said that they would begin accepting complaints directly from consumers about marketplace lending companies. Around the same time they issued a new No-Action letter policy that was designed to encourage innovation in financial services.

According to the Wall Street Journal the CFPB is planning to supervise marketplace lenders and will release a proposal some time in the fall. The CFPB has not commented publicly on this news so right now it is just a possibility but it makes sense.

Securities and Exchange Commission (SEC)

SEC involvement in marketplace lending goes back to the early days of Lending Club and Prosper. In 2008 the SEC decided that the notes issued by these companies were securities and should be registered as such. The result was Lending Club and Prosper filing a S-1 registration and becoming quasi public companies with quarterly financials being filed with the SEC.

Now that Lending Club is a public company it is has more responsibilities to both equity and debt investors both of which come under the purview of the SEC. The reality is while the SEC keeps a close eye on marketplace lending it is unlikely there will be much in the way of new developments here.

Federal Trade Commission (FTC)

The FTC recently hosted a financial technology forum on marketplace lending. The forum sought to look at consumer protections in marketplace lending and fintech more broadly. According to Jessica Rich, director of the FTC’s consumer-protection bureau marketplace lenders haven’t done enough in borrower protection.

United States Congress

In May 2015, the House Small Business Committee held a hearing on Capital Hill.

In January, in the wake of the San Bernardino shooting tragedy, the House Financial Services Committee held a hearing on terrorism financing that included a discussion of marketplace lending. But no new initiatives have come yet from these hearings.

Financial Stability Oversight Council (FSOC)

The FSOC most recently included their thoughts on marketplace lending in their annual report. Although the report highlights the lower cost and efficiencies of marketplace lenders they also discuss risks and concerns. One of the main concerns listed are the new and untested underwriting models used by platforms.

Conclusion

This list is only a start of the involvement we are likely to see from regulators as it pertains to marketplace lending. Due to the attention, we’ve seen many industry associations created to ensure a productive dialogue is being undertaken in Washington with all the organizations discussed here. We sincerely hope that any new regulation to come is thoughtful and comes from a well informed view of the industry.

Capital Rules Stifling Securitized-Debt Trading Profit: JPM, (PeerIQ), Rated: AAA

New layers of regulatory capital expected to be imposed on Wall Street are likely to further pressure banks to exit trading of securitized-debt, JPMorgan analysts John Sim, Kaustub Samant, Carol Zhang wrote in client note Friday.

NOTE: Reports of dealers paring or shutting down trading units have grown; banks include Barclays, DB, MS, SocGen, Jefferies, RBS, Nomura, CS

  • There’s “no path to profitability” under current and recently released capital rules
  • JPM analysts calculated ROE (return on equity) for hypothetical RMBS portfolio based on impact from Basel’s Fundamental Review of the Trading Book
  • Concluded ROE of ~4%, “clearly not attractive enough to entice dealers to enter the space and make markets”
  • Adjusted model to various hypotheticals, such as reallocation, bid-ask, turnover rates
  • Concluded the “cumulative effect of all of these realistic and unrealistic changes would only increase the return to 7%, which is far short of our 10% to 15% ROE threshold”
  • “Running ROEs for hypothetical ABS and CMBS businesses would not result in markedly different results”
  • Primary market and business of underwriting new-issue securitizations can still be attractive, however, contingent  underwriting volumes
  • Revenue derived from underwriting fees without consuming much capital; when balanced with secondary trading, ROEs for the business can become attractive, depending on volumes
  • Liquidity will continue to be constrained for non-agency RMBS, particularly in legacy space where dealers have no commensurate underwriting
  • CRT deals will also suffer from limited trading activity relative to market size; expect limited liquidity for Jumbo RMBS and SFR deals

How Wells Fargo Aims to Satisfy ‘Need for Speed’ From Millennial Borrowers, (The Street), Rated: AAA

Known as FastFlex, the San Francisco-based bank’s product offers customers with a business checking account a one-year loan of up to $100,000. Wells Fargo is considering expanding the availability of the loan next year, Lisa Stevens, the company’s head of small business, said in an interview.

FastFlex is designed for businesses with under $5 million a year in revenue who have “quick short-term needs to do some type of expansion or cash management,” Stevens said.

Some 67% of millennials are willing to take some financial risks to grow their businesses, compared with just 54% of older owners.

The FastFlex loan is one effort to meet that demand, he said, by providing a digital service with a rapid turnaround, two of the qualities that millennials have said they value most highly in financial services products. “We wanted to design our own product that would compete well in the marketplace-lending environment,” Case said.

Lending Club Corp : Positive Updates from the Annual Meeting, (Morgan Stanley), Rated: AAA

2Q16 originations down ⅓ from 1Q equates to ~$1.8bn in originations or -4.4% YoY,vs. our $1.4bn (-25% YoY) estimate.Assuming volumes for the first five weeks in the quarter (prior to

Assuming volumes for the first five weeks in the quarter (prior to announcement of irregularities and CEO resignation) were consistent with the 1Q run rate, this suggests volumes over the remaining 8 weeks were down ~50% sequentially and 37% YoY.

LC has had dialog with hundreds of investors,and none have outrightly refused to come back as an investor on the platform. Most investors need to go through a due diligence process and LC appears confident in its ability to bring them back to prior levels of investment over the long term.

While investors from every category have returned to the platform, banks and large investors are taking longer with their audits, which is in-line with our expectations.It is unclear if 2Q represents the trough in terms of origination volumes, but management commentary on investor appetiteand conservativeapproach on origination expectations suggests 3Q and

It is unclear if 2Q represents the trough in terms of origination volumes, but management commentary on investor appetiteand conservativeapproach on origination expectations suggests 3Q and
4Q volumes should be similar to 2Q with potential for upward bias.

LC expects to incur $9mn of investor incentives (to be booked as contra-revenues) in 2Q , which are likely to continue in 3Q with a plan to eliminate these by 4Q.

LC expects to “resume revenue and EBITDA growth in 1H17” though it remains unclear to us if this comment suggests sequential or YoY growth.We expect LC to return to origination, revenue,and adjusted EBITDA growth by 2Q17, though we expect 1H17 to remain below 1H16 given tough comps on 1Q17e.

2016 Bay Area CIO of the Year Innovation/Transportation finalist: A conversation with LendingClub’s John MacIlwaine, (Silicon Valley Business Journal), Rated: AAA

How do you predict your company will be different in two years, and how do you see yourself shaping that change?

We’ll also have a wider set of financing products that will be accessible online, offline, and at point of sale, while expanding our partnerships with banks and other non-financial institutions. We’re enabling that change by building our cloud-based micro-services platform, which simplifies integration of our solution for our partners and allow us to quickly and efficiently scale our core business and expand our product set.

What do you feel has been your biggest impact/success at this company? My biggest impact on LendingClub has been building a world-class team of engineers, scaling our technology platform to support the company’s incredible growth (compound annual growth rate of 124 percent Q4 2009 to Q4 2015 and well over $16 billion in loan originations to date), and setting a clear vision for a technology platform that is flexible and adaptable enough to handle future loan origination growth, partnership integration, and regulatory compliance updates.

What are your top three priorities for 2016-2017?

  1. Transform our current technology platform into a suite of cloud-based micro-services;
  2. Move our platform hosting environments to AWS (Amazon Web Services);
  3. Double the size of our world-class technology team.

CFPB June 2016 complaint report highlights consumer loan complaints, complaints from Arkansas consumers, (JDSupra Business Advisor), Rated: AAA

The CFPB has issued its June 2016 complaint report which highlights complaints about consumer loans and complaints from consumers in Arkansas and the Little Rock metro area.

The report does not specifically identify any complaints as involving marketplace lending.  Unlike prior monthly complaint reports, the June 2016 report includes a “Sub Product spotlight” section that highlights auto lending.

  • The most-complained-about issue involved managing the loan, lease or line of credit.  Other complaint issues included problems arising when the consumer was unable to pay, such as issues relating to debt collection, bankruptcy, and default.
Source: CFPB June complaint report.

General findings include the following:

  • Complaints about student loans showed the greatest percentage increase based on a three-month average, increasing about 61 percent from the same time last year (March to May 2015 compared with March to May 2016).  As we noted in our blog posts about the April and May2016 complaint reports, rather than reflecting an increase in the number of borrowers making student loan complaints, the increase most likely reflects that in March 2016, the CFPB began accepting complaints about federal student loans.  Previously, such complaints were directed to the Department of Education.
  • Payday loan complaints showed the greatest percentage decrease based on a three-month average, decreasing about 15 percent from the same time last year (March to May 2015 compared with March to May 2016).  Complaints during those periods decreased from 479 complaints in 2015 to 405 complaints in 2016.  In the March, April, and May 2016 complaint reports, payday loan complaints also showed the greatest percentage decrease based on a three-month average.

Square Inc Better Risk Reflection Leads to Upgrade: Wedbush, (Bidness Etc), Rated: A

Helmed by Twitter CEO, Jack Dorsey, the Square’s lending business encountered a substantial obstacle in May, in the form of new and strict scrutiny from regulatory authorities. In a comprehensive study, the US Department of Treasury along with several other government agencies put forward recommendations, to safeguard the access and growth to credit through the continued developments of online marketplace lending.

Wedbush analysts believe that regulatory scrutiny is likely to increase the company’s lending business.

For the 2Q, Square projects revenue to fall between $151–156 million. Wedbush expects the company to surpass its own expectations — reporting closer to the sell-side firm’s own $168 million estimates — but foresees considerable downside to the financial services company’s shares, if it reports within its given guidance range.

Interestingly enough, in a research note published yesterday, Morgan Stanley lowered its prices target on Square stock from $12 to $10, following a meeting with the company. The sell-side firm also raised its Stock-Based Comp estimates, in light of the company’s transition from private to a public entity and higher comp to select personnel vs. prior expectations.

Why Online Lender Avant Is Cutting Down Its Workforce Again, (Fortune), Rated: A

After also deciding to pull back in May from new verticals such as auto loans to concentrate on its core personal loans business, Avant is now cutting its lending target for that unit by 50% to about $100 million per month, Bloomberg reported.

Avant’s problem, like much of the so-called peer-to-peer lending market, isn’t a lack of demand from potential borrowers. Instead, the company and other online lenders are having increasing difficulty raising money to lend out as hedge funds and other investors outside the usual banking circles that backed the industry have grown wary.

The company had grown quickly for the past few years, reaching $3.5 billion in total loan volume. But with less access to capital, business has slowed recently, and loan volume declined 27% in the first quarter from the fourth quarter—the first such quarter-to-quarter drop since Avant started in 2012.

LendingClub’s Negative Press Blitz Continues, (Yahoo Finance), Rated: A

An $800 million LendingClub Corp (NYSE: LC) fund that invests in the company’s online consumer loans is expected to report its first monthly loss in the past 64 months in June. According to a letter to investors from LendingClub CEO Scott Sanborn, LendingClub’s Broad Based Consumer Credit (Q) Fund’s June return “is likely to be negative.”

The fund is LendingCub’s largest and has regularly returned around 0.5 percent per month throughout its five-year history. However, default rates on the fund’s loans have begun to rise in recent months and returns have dropped, prompting a number of investor redemption requests

The Wall Street Journal’s Peter Rudegeair reported that as of June 17, LendingClub had received $442 million in redemption requests representing about 58 percent of the value of the fund. In response to the large number of redemption requests, LendingClub announced it was placing restrictions on withdrawals and would be considering winding down the fund entirely.

Group led by State Street, Putnam launches fintech initiative, (Boston Business Journal), Rated: A

The Boston Financial Services Leadership Council and the business consulting group Mass Insight have created Financial Technology Boston, under which they will host networking events and possibly job fairs involving fintech professionals from the corporate, startup, government and higher-education worlds.

In addition to State Street (NYSE: STT), Fidelity and Putnam, the BFSLC includes Santander Bank, U.S. Bank and Boston Private Financial (Nasdaq: BPFH).

Boston is already home to fintech-focused incubators FinTech Sandbox and the DCU Center of Excellence in Financial Services, as well as a monthly meetup for fintech professionals.

United Kingdom

Why investors should scoop up discounted P2P funds before putting cash into platforms, (AltFi News), Rated: AAA

Analysis by AltFi Data shows loan origination has more or less been static across the UK P2P lending industry in 2016. This somewhat contrasts with the rapid growth seen in 2015 and 2014. Any number of explanations are given for this including a broad risk-off attitude from markets as well as the ongoing fiasco at the major US platform Lending Club.

However, for professional and private investors alike who are not dissuaded from the adverse headlines, and attracted by the high yields on offer from investing in the market, there is a clear argument to avoid investing directly on platforms. While this is the normal route for many, buying shares in the investment trusts offering exposure to loans originated from the platforms that are heavily discounted at present arguably makes more sense.

Over time in addition to the 7.4 per cent yield on offer, a narrowing of this discount or perhaps even a move to a premium could significantly bolster returns.

The table below shows what will happen to the share price following a 20 per cent return in net asset value alongside changes in the discount/premium. It clearly shows that buying at a premium massively adds to the total return.

Of course there is always the risk that the discount moves out further. This could be caused by investors going off the trusts even more. Or it could be broader negative sentiment towards equity markets that sees index level selling of the FTSE 250 – in the case of P2P GI – or FTSE All Share selling in the case of VPC Specialty Lending. This would add to weakness in both trusts’ share prices, and potentially widen the discount.

However, as AltFi reported last week P2P GI has started to defend its discount by buying up its shares using spare cash. Last week it bought £2m of its shares at an average price of 827p, says Monica Tepes, analyst at Cantor Fitzgerald.

This did temporarily lower P2P GI’s discount to 17.5 per cent although it has since moved back to over 20 per cent.

Brexit: FinTech firms fear for staff shortages and lost EU customers, (Tech Republic), Rated: AAA

London is a major player in the international FinTech market, with startups in the UK capital securing more venture capital funding last year than their European counterparts.

That status won’t necessarily change after Britain leaves the EU but FinTech firms have said it will complicate the picture, particularly when it comes to their ability to sell services to Europe and attract new talent.

Controlling migration was the second most important reason for quitting the EU, according to those who voted Leave in last week’s referendum.

Access to the single market allows goods and finance to be moved between EU countries without tariffs. However, full access also requires free movement of workers between European countries, something many Leave voters oppose.

Nevertheless, for peer-to-peer (P2P) lending platform MarketInvoice, as for many other London-based FinTech firms, free movement of European labor is essential to meet its demands for skills.

“Here at MarketInvoice we have a super-diverse team from all corners of the globe. Most notably within our software-engineering and data-science teams. Many FinTech founders themselves come from outside the UK,” said Anil Stocker, CEO of MarketInvoice.

European Union

Insurer Aviva France to Lend €50 Million to SMEs Through Crowdlending Platforms, (Crowdfund Insider),Rated: AAA

Aviva France, together with two partners, alternative asset management firm Eiffel Investment Group and insurer AG2R La Mondiale, is launching an investment fund called “Prêtons Ensemble” (Lending together) dedicated to financing loans to small and medium-size enterprises (SMEs) provided through crowdlending platforms.

Starting with an initial endowment of €50 million from Aviva France and €20 million from AG2R La Mondiale, the fund is expected to quickly grow to €100 million by rallying other institutional investors around the project.

The goal is to invest in the French real economy by financing SME loans granted through regulated crowdfunding platforms. Eiffel Investment Group is a specialist with more than eight years of experience in investing on crowdlending platforms, notably in the more advanced UK and US markets. Eiffel Investment will be in charge of the due diligence on the platforms and their loan portfolios. Currently, they have identified around 100 platforms and have made contact with 50 of them. Eventually, in five years from now, the fund should be invested to 70% in lending to SMEs and minimum to 50% in France. At the onset, we’re starting with a dozen platforms, mostly, but not only from France as the market is still emerging here. The (soon-to-be published) list includes names such as Younited Credit, Finexkap and Lendix.

The fund will be diversified in terms of the platforms’ business model and of the type of credit provided to SMEs. This means that it will include both unsecured and secured loans, short-term invoice financing as well as mid-term loans. On average, the loans are expected to have a maturity of 2.5 years.

Our decision was made long before the Lending Club problems surfaced. Upon hearing about them, we conducted a thorough analysis of their actual causes and impact. We were quite reassured to find out that the scale of the financial issue was small, that it had been fixed, and that a subsequent audit did not uncover any other impropriety.

Europe’s Top 11 Peer-to-Peer Lending Platforms, (Fintech News), Rated: A

Comment: As author chose to label the article Europe’s top 11, and includes UK companies, we chose to do the same.

In Europe today, although the vast majority of the P2P lending activity is concentrated in the UK – which accounts for over 84% of the whole European market –, Germany, France and Nordic countries are experiencing strong growth and development in the P2P lending space with a number of homegrown startups starting to emerge as regional leaders.

Australia

Fintech losses blamed on rerating, (The Australian Business Review), Rated: AAA

DirectMoney, which writes personal loans, slid to 4.5c a share after coming to market last year at 20c via a backdoor listing. On Friday, the company unveiled a $5.7m non-renounceable capital raising at 4.2c a share on a one-new-share-for-every-two-held basis.

The raising, underwritten by Bell Potter, opens on July 11.

It follows a mixed ride for investors, with the stock exchange in February querying its financial position and DirectMoney subsequently unveiling a deal with Macquarie, which bought $5m of the company’s personal loans and took shares in the company in exchange for advisory services.

In May, DirectMoney revealed loan demand was outstripping funding as the company slowly gained traction for its personal loan fund for retail investors. In the interim, the company turned to two “large financial institutions” for funding facilities, signing a non-binding term sheet with one for $20m.

Part of the cash from the $5.7m raising will be used as upfront collateral for the funding facilities. “We’ve proven our ability to originate loans; that is difficult for some organisations and what we are now doing is establishing committed funding programs of sufficient size so we can leverage the assets we’ve built,” Mr Beaumont said.

DirectMoney has written $17.6m of unsecured personal loans up to $35,000 for three to five years. Revenue in the financial year to the end of May was $1.19m, compared to $435,513 in the six months to December 31.

DirectMoney chief Peter Beaumont yesterday defended the fintech company’s stockmarket listing and expressed disappointment over losses worn by shareholders, arguing there were many benefits and the sector globally had suffered a de-rating.

“We’re disappointed there were investors that came in at higher prices and have had capital losses at this point, but marketplace lending globally has experienced a resetting of valuations, whether it’s LendingClub in the US or others, since last year,” he said.

The inaugural Australian Fintech Awards regonised innovation in the finance industry, with OnDeck Australia and Commonwealth Bank (CBA) receiving the Fintech-Bank Collaboration of the Year Award. OnDeck entered the Australian market last year with CBA and online accounting software provider, MYOB, as distribution partners.

India

P2P players bank on institutional lenders for growth, (Economic Times), Rated: AAA

I-lend has stitched a partnership with Hyderabad-based non-banking finance company Star Finserve, becoming the first peer-topeer online lending platform to join hands with an institutional lender while several other players including MicroGraam, Faircent and LenDenClub are in talks for similar pacts.

“The cost of loan origination is going up steadily for NBFCs and banks, the number of successful applications is declining and through these partnerships the institutional lenders can cut down on incurring origination of loan and administration costs,” said VVSB Shankar, founder of i-lend.

Shankar said the decline in the number of applications could be attributed to several factors such as competition among institutional lenders, quality of borrowers or involvement of non-performing assets. The company’s loan book size is about `1.5 crore and lenders on the platform can opt for borrowers who pay 18-21% interest.

Peer-to-peer platforms have reported an increase in the number of high net worth individuals or HNIs they have attracted over the past six months. “HNIs and family offices are showing interest in the peer-to-peer space. Since there is a criterion for lenders to have an income of over `10 lakh, this is bound to happen. Our top lenders have invested more than `40-50 lakh each, with the highest being around Rs 60 lakh,” said Rajat Gandhi, founder of Faircent, which has a loan book size of Rs 6.5 crore.

Smaller players including LenDen-Club said they have also seen increasing interest from HNIs, specifically from Maharashtra and Gujarat, spending about Rs 15 lakh individually. Since retail investors are central to how such platforms function, the companies aim to firm up a select few partnerships with institutional lenders over the next one year.

China

Exit of P2P lenders from Shanghai office market poses a challenge, (South China Morning Post),Rated: A

The recent collapse and exodus of numerous peer-to-peer lending (P2P) companies in China after a government crackdown on fraud has rattled the Shanghai CBD office market and may “pose a challenge for landlords”, experts say.

In the second quarter of the year, supply spiked to a 10-year high, according to real estate firm Colliers International, as overall vacancy rates in the area increased 3.2 per cent quarter on quarter to 7.2 per cent.

Korea

8PERCENT: Men in 30s Major P2P Investors, (The Korea Bizwire), Rated: A

8PERCENT, a P2P (peer-to-peer) lending company, revealed on July 4 that 30-something men who live in metropolitan areas are their primary investors.

As of June 30, top P2P lending company 8PERCENT’s total accrued loans summed up to 26.6 billion won ($23 million), with a total of 8,283 investors investing 3.21 million won ($2800) on average per person.

The average age of the investors was 34.3, and more than 90 percent of the investors were between the ages of 20 and 40. 8PERCENT also revealed that 77 percent of the investors lived in metropolitan areas, and that 67.5 percent were male and 32.5 percent, female.

The largest investment made so far was 453 million won ($395,000) diversified into 1,115 different bonds.

“Until last year, 90 percent of investors were from metropolitan areas, but the portion from non-metropolitan areas increased to 23 percent this year. Investment from women also increased from the low 20s to 30 percent, and we’re seeing growth in the number of investors in their 50s as well,” said Kang Seok-hwan, chief marking officer of 8PERCENT.

Small credit loans of 24.2 billion won ($21 million) comprise more than 90 percent of the total investments. Out of the total amount, 13.4 billion won ($11 million) was loaned to individuals, and 10.8 billion won ($9.4 million) to corporations.

Besides credit loans, borrowers also obtained real estate mortgage loans of 2.4 million won ($2 million).

 

Author:

George Popescu