Friday September 22 2017, Daily News Digest

APAC alternative finance

News Comments Today’s main news: SoFi hit with a new lawsuit. Former SoFi loan reviewer says company created a hostile work environment. LendingClub launches Android app for investors. ZhongAn prices Hong Kong IPO at HK$59.70, raises $1.5B. Australia passes Japan to become second largest alternative finance market in APAC. Today’s main analysis: APAC alternative finance report. Today’s thought-provoking […]

APAC alternative finance

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United States

United Kingdom

China

European Union

International

Australia

India

APAC

South America

News Summary

United States

SoFi Condoned ‘Rampant Sexual Activity,’ Lawsuit Alleges (Bloomberg), Rated: AAA

A former loan reviewer at Social Finance Inc. claims in a lawsuit she was repeatedly sexually harassed while working there, ratcheting up pressure on the embattled fintech startup.

Sonoma County Superior Court court clerk confirmed by phone that the complaint was filed Thursday.

Top management indulged in the inappropriate behavior, which then trickled down through the ranks, according to the complaint. Cagney dated subordinates at SoFi’s San Francisco office — where his wife works as chief technology officer and vice president of engineering — and attended parties with SoFi’s Healdsburg staff while intoxicated, Zamora alleges.

SoFi Faces New Sexual Harassment Claim Days After CEO’s Departure (WSJ), Rated: AAA

Yulia Zamora, who worked as a loan reviewer at SoFi’s Healdsburg, Calif., office from October 2015 until October 2016, said in a complaint against the company that a manager had propositioned her for sex and retaliated against her when she refused.

She added that SoFi exhibited a “hostile work environment where sexually inappropriate behavior became widely accepted and laudable by upper management.”

In her complaint, Ms. Zamora said that a SoFi director of operations who had authority over promotions approached her during and after an office Christmas party in December 2015. The manager, Adam Cobb, told her that he was “intimidated by [her] beauty” and that he “want[ed] to do sexy things” to her, according to the complaint. She denied his advances, the complaint added.

In the weeks following those comments, Mr. Cobb refused to promote Ms. Zamora and refused to write her a letter of recommendation after she resigned from the company, according to the complaint. She raised the issue with supervisors just after the party, but said that they found the story “entertaining rather than upsetting.”

Why Startup Founders Should Be Required to Sign a ‘No Go, Bro’ Clause (Fortune), Rated: AAA

Startup CEOs like Cagney, Travis Kalanick at Uber, and Taylor Freeman at UploadVR—accused in a recent lawsuit of bragging with his co-founder Will Mason about how many girls they were going to have sex with at company parties, and designating a room at the office as a “kink room”—can destroy as well as create billions of dollars in value for their companies, all while creating toxic work environments.

Whether they resign like Cagney and Kalanick or remain with the company like Freeman and Mason, startup executives typically own a large percentage of company stock. That often leads investors and boards to treat them gently when it comes to sexual harassment allegations and other forms of misconduct—but it should not.

Before making a big investment in a startup, investors should use their power to require CEOs to sign a clause under which they forfeit a large proportion, or potentially all, of their stock, if fired for misconduct, including reasons such as sexual harassment and misrepresentations to investors.

 

 

 

LendingClub, a peer-to-peer loans platform, just launched its Android app for investors (Android Police), Rated: AAA

With the LendingClub Invest app, you can log in via your fingerprint, view information like your current value and return, as well as transfer money.

Keep in mind that this is for investors, not borrowers. It’s for those using the service who want to manage their accounts and view the details of their current investments. Borrowers using LendingClub don’t have an app just yet.

The full log for this initial release is below:

WHAT’S NEW

Access your LendingClub investor account through a convenient experience optimized for your mobile device.
In this initial version you can:
– Log in to your account with a touch of the finger (for Android 6.0 or above)
– View and manage your account
– See your Net Annualized Return (NAR)
– Invest in Notes
– Use your saved filters to find the Notes you want
– Set up and update automated investing
– Transfer money between your LendingClub account and your bank

Hackers Entered Equifax Systems in March (WSJ), Rated: AAA

Hackers roamed undetected in Equifax Inc.’s EFX +2.76% computer network for more than four months before its security team uncovered the massive data breach, the security firm FireEye Inc.FEYE +0.24% said this week in a confidential note Equifax sent to some of its customers.

FireEye’s Mandiant group, which has been hired by Equifax to investigate the breach, said the first evidence of hackers’ “interaction” with the company occurred on March 10, according to the Mandiant report, which was reviewed by The Wall Street Journal.

Equifax has said it didn’t discover the breach until July 29. Days later it called in Mandiant. Equifax didn’t disclose the breach until Sept. 7.

In a progress report that accompanied that announcement last Friday, Equifax said hackers accessed consumers’ data from May 13 through July 30. It didn’t mention in that report that the attack had begun at an earlier date.

Mandiant’s report this week noted the hackers accessed one of Equifax’s servers by taking advantage of a flaw in software called Apache Struts, used by many companies to build interactive websites.

Two days before the access occurred, on March 8, security researchers at Cisco Systems Inc. warned of the flaw in Struts and a patch was issued by the Apache Software Foundation. Equifax in its report last week said its security staff “took efforts” to fix the system, saying it understood the intense focus outside the company on patching efforts and that its review was ongoing.

After interacting with Equifax’s server in early March, the hackers then entered the computer command “Whoami,” Mandiant wrote. This command would have given the attackers the username of the computer account to which they had just gained access, an early step in a hacking attempt.

The Ultimate Anti-Competitive Mergers (Prospect), Rated: A

When you need a new mortgage in the future, will your only options be AmazonWellsFargo or AppleChase? The prospect of a mash-up of banking and commerce keeps people like George Washington University law professor Arthur Wilmarth up at night. “This would mean an end to healthy innovation and startups and competition,” said Wilmarth. “I think it is that dire.”

In principle, these maneuvers could inject competition into a banking industry controlled mostly by four Wall Street giants, making financial services more accessible and flexible to modern needs. But special charters also let fintech evade critical regulatory scrutiny. And the tentative steps by SoFi and Square seem like a dry run for the day Silicon Valley’s giants decide to get in the game, building sprawling businesses the government has aimed to prevent for decades.

Banks get all sorts of privileges from the government—and if banks can also function as ordinary commercial enterprises, they have unfair advantages against other businesses (who are also their clients).

Non-Prime Gen-Xers Lack Financial Stability According to New Research by Elevate’s Center for the New Middle Class (BusinessWire), Rated: A

Members of Generation X (those born between 1965 and 1980) now sit at the age where they anchor the country’s economic and social structure. Yet, new research from Elevate’s Center for the New Middle Class shows that Gen-Xers face a slew of economic challenges that perpetually keep them off balance. Worse still, that lack of balance means they can’t plan for the future or get back on track.

Non-prime Gen-Xers, in particular, lack stability – in their employment as well as their income. They have difficulty predicting their monthly income, and consequently act like cash accountants in managing their day-to-day finances. Non-prime Gen-Xers are thus the least likely generational cohort to be able to save money—an important aspect of financial planning. Compared to their prime counterparts, non-prime Gen-Xers are:

  • 4x as likely to be living paycheck to paycheck
  • 4.5x as likely to worry about meeting monthly expenses
  • 2x as likely to have been laid off in the past year, and almost 3x as likely to be laid off in the last 5 years
  • 5x as likely to feel “significant stress” over finances
  • 5x more likely to say that in the prior 12 months they were never able to plan for a major expense

The planning gap between prime and non-prime Gen-Xers is wider than any other generation, and 1 in 5 reports running out of money every month. When it comes time to pay for unplanned or unexpected expenses, such as medical bills or car repairs, only 13 percent feel confident they could come up with $1,200. This lack of confidence may be due to lack of reliable options. Though 80 percent of prime Gen-Xers have a solid option – savings, credit or turning to family/friends – only 44 percent of their non-prime counterparts have a solution for coming up with the funds.

3 Stocks With eBay-like Return Potential (The Motley Fool), Rated: A

Peer-to-peer lending platform Lending Club is finally starting to show signs of growth after several quarters of stagnant loan originations. With the stock down 74% since its first trading day in 2014, there’s certainly potential for a big investment win if things continue to go well.

For the second quarter of 2017, Lending Club’s loan originations grew by 10% year over year as well as sequentially, which came as a pleasant surprise to investors. Revenue grew by an impressive 35% from last year, and profit margins improved tremendously. What’s more, Lending Club’s CEO said that the company could approach GAAP profitability as we head into 2018, which would be a major improvement from the first half of the year.

Lending Club’s loan portfolio is currently about $11.1 billion in size, which may sound like a lot, but consider that the U.S. nonrevolving (loan) consumer lending market has more than $2.7 trillion in outstanding balances, not including mortgages, according to the Federal Reserve.

US auto-loan fintechs help incumbent lenders stay up to speed (Business Insider), Rated: A

Hyundai Capital America, the car maker’s US lending division, has partnered AutoGravity, a US-based digital car shopping and financing platform, to extend its loans more easily to consumers looking to buy a Hyundai, Kia, or Genesis vehicle.

Hyundai Capital will be one of several auto lenders that consumers can borrow from via the platform.

JPMorgan Chase partnered online car marketplace TrueCar in August 2016 to launch an end-to-end digital platform, Chase Auto Direct, for finding and financing a vehicle. Additionally, Ford Motor Credit Co., the car giant’s lending arm, started leveraging US marketplace lender AutoFi’s software in January to make it easier for customers to buy and finance a vehicle without going to showrooms.

The Saatva Company Partners with Payment Solutions Company Klarna (PR Newswire), Rated: A

The Saatva Company, the largest online luxury mattress retailer, has formed a strategic partnership to offer financing plans to its customers with Klarna, a global payment solutions company that works with other top U.S. brands like Microsoft and Taylormade.

Through this partnership, Saatva customers now have the option to “Slice Up Your Payment” through Klarna and spread the cost of purchases over time with convenient, stress-free low APR financing offers. It is available immediately under all three Saatva Company brands – Saatvamattress.com, Loomandleaf.com and Zenhaven.com.

After selecting the perfect mattress, customers can apply for Klarna financing at checkout through a simple three-step instant credit approval process. Customers are approved for an open line of credit that may also be used at any other merchant where Klarna is accepted.

Digital Lending Dramatically Cuts Down Closing Times (The M Report), Rated: A

In a recent sampling of 10,000 purchase loans from LendingTree, a leading online loan marketplace, the closing times on mortgages saw a sharp decrease thanks to more digital lending; approximately 74 percent on average from May 2016 to May 2017. According to the report, the average closing still takes roughly 72 days, but this rate is influenced by several other buying factors as well as digital integrations.

The study shows the average amount of days to close in Boston (79.5) strongly differs from the time spent in a city like Denver, (56.2); a 23.3 day difference.  New York closely followed Boston at 79.2 days and Cleveland at 71.5. Phoenix and Dallas barely ranked above Denver at 57.5 and 57.6 days respectively. The time to close also varies largely by state, with Montana measuring at 52.7 days until closing and New York at 91 days.

Activehours raises $ 39 million for its new take on cash advances (TechCrunch), Rated: A

Nine months after raising $22 million for its unique take on the cash-advance business, Activehours has gone back to the venture capital well and pulled out another $39 million in financing.

Led by Andreessen Horowitz, with participation from the company’s early-stage investors Matrix Partners, Ribbit Capital, and March Capital Partners, Activehours has managed to now raise nearly $65 million since its launch in 2013.

The Palo Alto-based company skirts regulation as a payday lender because it doesn’t charge interest on the cash that it fronts to customers. Instead, the company asks that users pay a small voluntary fee for access to their money ahead of their payday.

Tribal Lender Claims Immunity From Challenge To Immunity (Law360), Rated: A

An online lender accused of striking “rent-a-tribe” deals with a Native American tribe in order to benefit from tribal immunity urged a Virginia federal judge Tuesday to dismiss a proposed class action over its lending practices, saying it is, in fact, a sovereign arm of the Chippewa Cree tribe and therefore immune from the litigation alleging false immunity.

The Government Shouldn’t Collect Private Financial Information from America’s Poor (National Review), Rated: A

The CFPB, which was created under Dodd-Frank supposedly to protect consumers and prevent the next big financial crisis, is now being used to try to discourage payday lending, vehicle title, and certain high-cost installment loans.  The rule will require customers applying for a small-dollar loan – the average of which is $350 — to submit extensive personal financial information in support of their applications. In addition to determining a customer’s ability to repay the loan, the lenders will be required to share this information with each credit reporting agency (CRA) registered with the Bureau.

With this data all in one place, it will be vulnerable to a potential hack.

And just this week the SEC reported a hack.  Now government will have a new pool of data for hackers to try to infiltrate.

Embracing Blockchain Is in the ‘National Interest’ (Coindesk), Rated: B

Giancarlo continued:

“Everything we do has been digitized. The one thing that has not yet been digitized is regulation. We’re still very much an analog regulator of digital markets.”

And most importantly, Giancarlo stressed that it is imperative that U.S. regulatory structures catch up with the fast-moving digital economy.

eOriginal Announces Coluzzi as New Chief Financial Officer (Benzinga), Rated: B

eOriginal, Inc., today named Michael Coluzzi as Chief Financial Officer (CFO), another valuable addition to the executive team of the rapidly growing financial services technology firm.

Coluzzi is the third key addition to eOriginal’s leadership following a growth capital investment by LLR Partners. In addition to the new CFO, Brian Madocks joined as Chief Executive Officer in April 2017 followed by Timothy Wall as Chief Revenue Officer earlier this month. These hires and the existing eOriginal management team together will drive the business towards achieving full potential.

Veteran CFO Bruce Felt Joins Personal Capital’s Board of Directors (Business Insider), Rated: B

Personal Capital, the leading digital and professional advisor based wealth management firm, today announced that Bruce Felt, the Chief Financial Officer of DOMO, has joined Personal Capital’s Board of Directors and will chair the Audit Committee.

Felt is the CFO of DOMO, one of the fastest growing SaaS companies in the country. Previously, he was the CFO of SuccessFactors, where he guided the company through six acquisitions, a public offering and the sale of the business to SAP. Felt has spent 25 years managing financial operations for high-tech companies and serving on multiple boards of directors.

Form 8-K Elevate Credit, Inc. For: Sep 15 (StreetInsider.com), Rated: B

The Registered Office of the corporation in the State of Delaware is changed to 251 Little Falls Drive, in the City of Wilmington, DE, County of New Castle, Zip Code 19808. The name of the Registered Agent at such address upon whom process against this Corporation may be served is Corporation Service Company.

United Kingdom

Ex-Barclays CEO Antony Jenkins raised £34 million for his fintech startup (Business Insider), Rated: A

Former Barclays CEO Antony Jenkins has raised £34 million ($46 million) for his fintech startup 10X Future Technologies.

The Series A funding round was led by Chinese firm Ping An Insurance and consulting firm Oliver Wyman.

London-based 10X, which went public last October, will help banks and financial institutions modernize their back office technology.

Older people are underserved by financial services, says the City watchdog (City A.M.), Rated: A

In its Ageing Population Project, the FCA found that older people’s needs are not being fully met which may result in exclusion, poor customer outcomes and possibly even harm.

It has called on retail banks, advisors and the savings industry to think about the vulnerabilities which older people – defined as those who are aged 55-plus – may face.

Cautious investors blind to risks of alternative favourites (FT Adviser), Rated: A

The aftermath of the financial crisis has seen investors pour capital into income generating alternative assets perceived to be low risk but market watchers have warned the dangers won’t be evident until interest rates rise.

The AIC said 70 per cent of the investment trust launches over the past five years have been in the alternative income sector.

Jonathan Davis, who runs Jonathon Davis Wealth Management in Hertford, said he has been preparing his clients portfolios for higher inflation, and higher interest rates, and generally avoiding UK equities.

LendInvest hires Aldermore’s Boden (Mortgage Strategy), Rated: B

Aldermore head of commercial mortgages Ian Boden has joined specialist lender LendInvest.

Boden joins the group as sale director, after five years at Aldermore Bank.

He has previously worked at Lloyds Bank and HSBC and has an advanced diploma in financial planning from the CII.

In his new role, Boden will help grow the business development team at LendInvest. He will help the group expand to new markets.

Deadline nears for pub purchase (County Echo), Rated: B

THE 30 September deadline to secure the necessary funds to purchase the threatened Tafarn Sinc pub in Rosebush is fast approaching.

“The aim now is to see a sum of £200,000 in shares achieved by 1 October and also the committee has endorsed a special Peer to Peer (P2P) lending scheme where a four per cent gross interest rate is offered to individuals who can lend a £5,000 sum to the co-operative to secure the total funds.

“As a target for the P2P we have 20 lots of £5,000 loans we are seeking and then this will bring in the needed final sum to purchase the pub and ensure it is owned by local people.”

China

China online insurer ZhongAn prices HK IPO at top end, raises $ 1.5 bln (Kitco), Rated: AAA

ZhongAn Online Property & Casualty Insurance Co priced its IPO at the top of an indicated range, raising $1.5 billion in Hong Kong’s biggest ever financial technology stock offering, IFR reported on Friday.

China’s first internet-only insurer priced 199.3 million new shares at HK$59.70 ($7.65) each, the top of a HK$53.70-HK$59.70 range said IFR, a Thomson Reuters publication. It cited people close to the deal.

ZhongAn Online Property & Casualty Insurance Co priced its IPO at the top of an indicated range, raising $1.5 billion in Hong Kong’s biggest ever financial technology stock offering, IFR reported on Friday.

China’s first internet-only insurer priced 199.3 million new shares at HK$59.70 ($7.65) each, the top of a HK$53.70-HK$59.70 range said IFR, a Thomson Reuters publication. It cited people close to the deal.

China’s first Internet Insurance Company is set to list in Hong Kong on 28th Sep (Xing Ping She), Rated: A

Zhongan Insurance, which was co-founded by Jack Ma of Alibaba, Ma Mingzhe of PING AN and Pony Ma of Tencent, is the first internet insurance company in China. Because of its strong background, every move of Zhongan Insurance is closely concerned. On September 17, Zhongan Insurance revealed it would be listing in the main board of Hong Kong stock exchange. More details, the price range will be set at HK$53.7- 59.7, and the company plans to raise HK$10,948 million in total, it is scheduled to begin trading on the main board of the Hong Kong stock exchange on September 28. If the plan is implemented, Zhongan will become the first publicly listed fintech unit of China.

Chinese online stockbroker Tiger Brokers gets investment from US firm Interactive Brokers (SCMP), Rated: A

Tiger Brokers, a Chinese online securities brokerage start-up backed by Wall Street billionaire investor Jim Rogers, said on Thursday it has landed an investment from Interactive Brokers Group, one of the largest electronic brokers in the United States.

The Beijing-based Tiger Brokers, which offers an app to allow Chinese investors to trade on US stock markets and the Hong Kong exchanges and in Chinese A shares, did not disclose the size of the investment by Interactive Brokers.

The Top 10 Most Valuable Unicorns (Benzinga), Rated: B

The United States is home to the most unicorn companies in the world, with over 100 such companies, according to a new report by HowMuch.

8. Lu.com ($18.5 billion): China

Lu.com is an online finance marketplace which started as a peer-to-peer lending platform. Since 2011 it has service over $2.5 billion peer-to-peer loans.

 

European Union

EU’s new data privacy law creates headaches for U.S. banks (American Banker), Rated: AAA

What happens when a cookie of a Brit in London lands in the server of a community bank in the U.S. if, on an off-chance, the Brit browses the bank’s website?

It’s unclear, experts say, but U.S. banks — especially small and midsize banks — need to go find out because the European Union’s General Data Protection Regulation (GDPR) could affect them, unlike the EU privacy regulations before it.

The countdown is ticking on GDPR’s website. The law, approved by the European Parliament in April 2016, will take effect in late May 2018. It will apply to “all companies processing and holding the personal data of data subjects residing in the European Union, regardless of the company’s location,” the website said.

International

SoftBank’s Banker Stash (Bloomberg), Rated: AAA

Their presence begs a question of the Vision Fund, whose backersinclude Apple Inc. and Saudi Arabia. Is its long-term goal to get into everything from ride-hailing apps to indoor farming, or is it more about getting juicy returns?

One Fund to Rule Them All
SoftBank’s $93.2 billion Vision Fund is the world’s largest private equity fund.
Anshu Jain, Deutsche Bank’s former co-chief executive officer and key architect of its rapid growth in markets prior to the credit crunch, was an adviser at SoftBank-backed U.S. based online lender Social Finance Inc. until recently.

While SoftBank put in equity to the tune of $28 billion, its partners, including the government funds of Saudi Arabia and Abu Dhabi, hold part of their stakes via preferred instruments, also known as mezzanine capital. It means they’re owed yearly payouts, similar to a dividend.

Saudi Arabia’s Public Investment Fund, for instance, is injecting $45 billion, but only $18 billion of that is straight equity, the Wall Street Journal reported in May. The preferred units will earn about 7 percent interest annually over the life of the fund, expected to be 12 years.

Source: Bloomberg

Which banks are leading digital (and who are the laggards)? (The Finanser), Rated: A

Banks typically spend 80% of their IT budgets on legacy technology maintenance and a tier one bank could easily spend up to $300m a year on existing software which constantly needs expensive updates in order to meet regulatory requirements.

Why so much? Because most of those systems are written in programming languages that no one knows anymore. Anna Irrera writes on Reuters that 43 percent of US banks’ core systems are written in COBOL.

$3 trillion in daily commerce flows through COBOL systems. The language underpins deposit accounts, check-clearing services, card networks, ATMs, mortgage servicing, loan ledgers and other services.

In another report, Autonomous Research said the banks with the most potential to do better than analysts’ profit expectations because of digitisation were: JPMorgan Chase and SunTrust in the US, Spain’s CaixaBank, Lloyds Banking Group in the UK and KBC in Belgium.

Autonomous ranked the banks based on two criteria: their current level of digitisation and their transformation outlook. It assessed 18 attributes from customer ratings of mobile banking apps to IT expertise on the board of directors. Banks viewed as being behind on digitalisation included HSBC, BNP, Credit Suisse, Intesa Sanpaolo and Standard Chartered; the three biggest Japanese banks: MUFG, Mizuho and Sumitomo Mitsui Financial Group; and the four big Canadian banks: TD Bank, Royal Bank of Canada, Bank of Montreal and Bank of Nova Scotia.

Bitcoin’s connection to the real economy (Business Live), Rated: A

Among those leaving the building is Wayniloans (‘an online peer to peer lending platform based on bitcoin technology. Wayniloans INC was founded in 2015 and is based in Buenos Aires, Argentina’).

According to Juan Salviolo, Wayniloans co-founder:

On Wayniloans part of our business is achieved thanks to bitcoin, and in May we agreed to a sentence to reach consensus for the good of the ecosystem. This sentence was later changed to a longer agreement without our notice, and it was known as the New York Agreement (NYA). At the time we didn’t know that existing developers wouldn’t support it, or that most Latin American bitcoin users, our customers, would view it as a contentious proposal.

Which brings us back to Fickling’s point. The connection between Bitcoin and the real economy is sentiment and therefore, ipso facto, prima facie, mutatis mutandis, sentiment is the sole driver of value.

Australia

Australia ranked as the second largest alternative finance market in the Asia Pacific (Finextra), Rated: AAA

Findings from a joint study by KPMG, the Cambridge Centre for Alternative Finance and the Australian Centre for Financial Studies, released today, reveals that Australia’s alternative finance market size grew by 53 per cent from 2015 to 2016 and has now reached US $609.6 million.

According to the Second Asia Pacific Alternative Finance Industry Report, Australia has leap-frogged Japan to become the second largest alternative lending market (behind China) across the Asia-Pacific.

Outside of China, Australia now contributes 30.42% of the total market in Asia Pacific and stands well ahead of Japan (US $398.45 million) and South Korea (US $376.31 million) in terms of market size.

CCAF Asia-Pacific Report Shows Dramatic Rise for Alternative Finance in Australia (Crowdfund Insider), Rated: A

China is the biggest kid on the block when it comes to the emerging alternative finance market in the Asia Pacific region. In fact, China has the largest alternative finance market in the world driven by a fast growing economy, a highly connected population via mobile devices, and a need for access to capital not serviced by traditional state owned banks. But rapid alternative finance growth is not isolated to just China in the Asia Pacific region. Australia experienced growth of 53% from 2015 to 2016, according to the recent research report published by the Cambridge Centre for Alternative Finance. Australia’s alternative finance market has now reached US $609.6 million.

MoneyPlace CEO Stuart Stoyan echoes Bertoli’s sentiment regarding online lending;

“We have now moved on from being an ‘early stage’ and ‘cottage’ industry to be a legitimate source of funding for Australian borrowers,” he said.

Daniel Foggo, CEO of RateSetter Australia, explained that while trust and confidence in banks continues to erode, peer-to-peer lenders are building a sustainable, technology-led alternative to the bank model, offering better value to Australian investors and borrowers.

Trademarks and fin-tech (Lexology), Rated: A

Technology is an increasingly important aspect of the financial marketplace. With the rapid introduction of platforms such as crowdfunding, peer-to-peer lending and new crypto-currencies, it is important for fin-tech users and providers to protect their intellectual property (IP) from infringement and ensure they are not at risk of infringing the IP of another.

Businesses that provide fin-tech services are at risk of infringing the trademarks of other such providers. For instance, one European peer-to-peer facilitator attempted to register a trademark for their brand, only to be challenged by a similarly branded business. This resulted in an expensive negotiation that lasted for almost a year and a half.

India

RBI move on P2P lending companies may affect small players, say experts (The New Indian Express), Rated: AAA

While the recent Reserve Bank of India (RBI) notification treating all peer-to-peer (P2P) lending platforms as non-banking financial companies (NBFCs) is likely to bring some credibility to the business, experts say it’s a battle half won by the fintech firms.

The RBI proposal, they say, might cripple the operations of small players who won’t be able to comply with some of the new requirements such as keeping net available funds of Rs 2 crore.

APAC

Asia Pacific Alternative Finance Report “Cultivating Growth” Released (Lend Academy), Rated: AAA

The Cambridge Centre for Alternative Finance together with the Australian Centre for Financial Studies at Monash University and Tsinghua University today released their second annual alternative finance report.

Source: Lend Academy

Alternative finance volume totaled $245.28 billion in 2016, up from $103.31 billion in 2015. It’s amazing to see alternative finance continue to grow in the region. Not surprisingly, China is the main driver accounting for 99.2% of the total Asia Pacific market. China represented approximately 85% of the entire global market in 2016.

Other findings from the report include:

  • China continues to see “distinctively low levels” of institutional participation in alternative finance compared to other markets such as the US and UK, with only five per cent of peer-to-peer business lending coming from institutions in 2016.
  • In the Asia Pacific outside of China, about $1.5 billion was raised by businesses through alternative finance channels, up 72 per cent from the previous year, with an estimated 43,000 business entities utilising alternative channels of business finance.
  • In China, 72 per cent of peer-to-peer consumer lending platforms see cyber-attacks as the biggest threat to the industry, while more than 50 per cent across all platforms in China see current and proposed regulatory norms to be adequate.
  • Outside of China, 69 per cent of platforms in Japan see existing regulation as inadequate or too relaxed, while in Singapore, Australia, New Zealand and Malaysia around two thirds of platforms see current regulations as adequate.
Source: Lend Academy
South America

Venezuela Said to Be Late on $ 185 Million Sovereign Bond Payment (Bloomberg), Rated: A

The intermediaries tasked with passing along interest payments for the cash-strapped nation haven’t received the funds for an $185 million coupon that was due Sept. 15, according to people with knowledge of the matter. Investors interviewed by Bloomberg say they haven’t been paid, and brokers say their clients are still waiting on the cash.

The government has a 30-day grace period — now 25 days — to make good on the payment before triggering an event of default on the notes.

Authors:

George Popescu
Allen Taylor

August 12th 2016, Daily News Digest

August 12th 2016, Daily News Digest

News Comments Our readers have commented on yesterday’s Lending Times section titled: “Why Did Funds Appear To Have Poor Q1/Q2 Returns?” . Our reader’s comments : LCA has 1 or 2 months of negative returns over several years. Yes, VSL and other publicly traded funds have lesser performance. Flip side is the dividend yield is […]

August 12th 2016, Daily News Digest

News Comments

  • Our readers have commented on yesterday’s Lending Times section titled: “Why Did Funds Appear To Have Poor Q1/Q2 Returns?” .
  • Our reader’s comments :
    • LCA has 1 or 2 months of negative returns over several years.
    • Yes, VSL and other publicly traded funds have lesser performance. Flip side is the dividend yield is higher as price drops – 7.5%. Hard to find that return in fixed income markets.
    • Here is a document showing returns for various HF strategies. P2P returns have consistent risk-adjusted returns across years as compared to these other strategies. Not shown in the document are the monthly returns. P2P returns are also generally positive most months. To say returns have been bad recently seems to miss the broader point about the high consistency of risk-adjusted returns, and low correlation.
  • Today’s most interesting news are Square who is lending to non-clients as well now, Uber who is building a lending/lease arm, and Faircent in India who raised $1.5mil.

United States

United Kingdom

India

United States

Square Capital Outgrows Square, (deBanked), Rated: AAA

You don’t need to process payments through Square anymore to get a loan from Square Capital. Restaurants that use Upserve, a restaurant payments and data analytics system, are now eligible as well.

“We are proud to partner with Upserve and offer loans through Square Capital to even more small businesses who traditionally face barriers when seeking access to funds,” said Jacqueline Reses, Head of Square Capital.

The move puts them on a path to truly competing with other alternative lenders such as OnDeck and CAN Capital.

Uber hitches a ride with car finance schemes, (Financial Times), Rated: A

Uber launched its Xchange in-house vehicle leasing programme in the US a year ago and later gave it a shot in the arm with a $1bn credit facility, arranged by Goldman Sachs and funded by more than half a dozen Wall Street banks.

When Grace Mora found herself strapped for cash in 2014, her son recommended she try driving for Uber. With a “terrible” credit score and few options for buying a car, she took out a loan from one of Uber’s partners, Exeter Finance, which would see payments deducted from her earnings as an Uber driver each week.

Ms Mora, who took out a car loan two years ago from Blackstone-owned Exeter, says monthly payments of $726 for her Toyota Prius cost more than the rent on her apartment. “I told them this is usury, absolute usury,” she complains. Yet she still keeps driving for Uber because she receives a 10 per cent discount when she makes repayments through her weekly Uber pay cheques. Mark Williams, a finance professor at Boston University, says the programmes remind him of the “company store model” and describes the terms of the loans as “onerous”.

“Uber is vertically integrating, becoming more of an Uber bank,” he points out.

Last year, more than 50,000 Uber drivers got their cars through such schemes, and Uber expects 100,000 more to do so by the end of this year.

The Silicon Valley-based ride-hailing app is also putting considerable financial firepower behind its lending programme, with a $1bn credit facility that allows its subsidiary, Xchange Leasing, to buy cars and then lend them out.

In addition, Uber is testing a scheme called Advance Pay where new drivers can get a $1,000 interest-free loan — to be paid back from earnings — in partnership with lending start-up Clearbanc.

In Singapore, Uber subsidiary Lion City Rentals has built a fleet of vehicles that it rents out to drivers.

In India, Uber leases vehicles to drivers through Xchange Leasing — a challenging proposition in a country with no centralised credit score system. “If somebody cannot pay the monthly amount, they can simply return the car,” he added.

Uber says its Xchange leasing programme is not profitable.

3 top online payday loan alternatives,(Tradestreaming), Rated: A

Payday loans are the crud at the bottom of the personal loan product basket. The Pew Charitable Trust’s 2010 report on the use of payday loans shows that the phenomenon is hardly minor: that year, approximately 12 million Americans, or about 5.5% of the entire population, used a storefront or online payday loan.

That same survey found that payday loans are rarely just for emergencies. Borrowers tend to use payday loans for everyday expenses. On average, a payday borrower will take out eight loans of $375 each per year and spend $520, or nearly 40%, on interest.

Online payday loan have made it easier to get quick cash. With great convenience, though, comes even worse payday terms and conditions for users.

A number of online payday loan alternatives have sprung up to provide fair everyday lending alternatives.

LendUp bills itself as payday loan alternative with a mission “to provide anyone with a path to better financial health”. And when they say anyone, they mean anyone – even a person burdened with unsavory credit history.

Avant, a Chicago-based company launched in 2012, positions itself as an alternative to both credit cards and payday loans. Users might not have the right credit history to procure a credit card, and the company’s website notes that payday loans can charge up to 700% in interest. However, Avant provides subprime loans regardless of credit history, with rates ranging from 36.00% to 9.95% APR.

QCash was originally launched by Washington State Employees Credit Union in 2003 as an in-house alternative to payday loans. WSECU had found that alarming numbers of their members were turning to predatory lenders for a product that was not available at the credit union – short term cash needs.

Even doesn’t make the cut simply because it hasn’t launched yet, though its premise is promising.

Yet another alternative payday app is Activehours, which essentially mimics payday loans by allowing borrowers to cash in what they’ve earned through the app before the two week payday rolls around.

Are Payday Loans Really All Bad?, (Pacific Standard), Rated: A

A new paper suggests payday loans improve well-being in some situations, but not in others.
Some researchers have linked payday loans to a host of economic ills, including problems paying mortgages and other bills, higher rates of personal bankruptcy filing, an increased need for government assistance, and lower rates of child support payments. Elsewhere, researchers have found that access to payday loans mitigates foreclosure rates after natural disasters, while regulating the industry only results in more bounced checks and a decline in overall financial condition.
A new paper by the Federal Reserve’s Christine Dobridge suggests that both of these narratives may be correct. More specifically, while access to payday loans improves household well-being during times of financial distress, the opposite is true during normal times.

Lending Club Reports Q2 2016 Results With .96 Billion in Originations, ( Lend Academy), Rated: A

Lend Academy reports on Lending Club’s results and includes a few nice charts from the Lending Club deck.

Lending Club still holds $832 million in cash and equivalents with no outstanding debt. They leveraged a portion of this cash to purchase $135 million in loans in the second quarter with a majority of these loans being resold at a later date.

OnDeck Reports Q2 2016 Results and Continues to Grow Originations, (Lend Academy), Rated: A

Lend Academy also reports on OnDeck results also with some nice slides from the OnDeck presentation. Also worth a look.

When trying to understand OnDeck as a company, it’s important to understand what holding more loans on their balance sheet means from a financial perspective. The financial highlights above at a glance paint a pretty negative picture but there is more to the story.  Historically, OnDeck has captured more revenue directly from the sales charge called “gain on sale revenue” due to selling loans on their marketplace. This gain is realized immediately and boosts quarterly revenue when a larger portion of loans are sold.

When loans are kept on their balance sheet, the income is realized over time as loans repay which explains in part the decrease in net revenue. In addition, the company has higher provision expenses since this expense for loans held on their balance sheet is realized immediately even though the loans pay out over time. Q2 2016 provision expenses were $32.3 million, up from $15.5 million in the same period last year. This increase is to be expected as there was a 74% increase in loans designated to be held on balance sheet over the same time period.

The below donut charts show the funding mix for the past three quarters. While the marketplace made up just under half of funding in Q4 2015, this has dropped to around 25% in Q2 2016. Securitization remains a fairly consistent source over the last three quarters.

Do We Need Bank Branches?, (Lend Academy), Rated: A

An article in American Banker says that large bank branch networks are here to stay. The author is basically saying that people of all ages like to deal with real people, particularly when it comes to finance.

The author went on to say that the argument was made 30 years ago that branches would become obsolete but the fact is that branches are still alive and well today.

According to this Washington Post article from April the World Bank predicts that the number of branches in the US by 2025 will drop 33% from their 2004 levels. In Europe that number will be 45%. Clearly the number bank branches is in decline.

Talk to a typical millennial today and ask them when was the last time they visited a bank branch.

When it comes to investing, something that most millennials are just getting started with, I would argue that the popularity of robo-advisors like Betterment or Wealthfront are better suited to serve the needs of this new generation. SoFi has started making inroads here as well with a similar service that is slightly more high touch but still very much tech-oriented.

I think the bank of tomorrow will be so vastly different to the bank of today that we can barely even conceive of it today.

California a Hot Real Estate Market for RealtyShares Crowdfunding Investors, (Realty Shares), Rated: A

California borrowers and sponsors have raised more than $53 million across 90 properties in the Golden State. “One of the most reliable recipes of entrepreneurial success in the last 20 years has been taking an existing asset class and making it freely tradeable by anyone in the world over the Internet,” said Gene Linetsky, Chief Technology Officer.

RealtyShares continues to target supply constrained markets with diversified economic bases across the United States in an effort to give its tech-savvy investors diversification options they might otherwise not have access to.

A Review Fundera’s process, (Nav), Rated: AAA

Pro:

Fundera lists your available options in a clean table. The application form is easy and can be a time-saver. If you click to see more details about each individual funding option, you’ll see an explanation of the pros and cons of each option. Once you’ve submitted your application, you are assigned a loan advisor who connects you to available funding options.

Con:

Using Fundera’s online application form, it’s hard to get a good idea of the annual percentage rate (APR) of each financing product. The “my profile” dashboard shows what options the applicant is ineligible for, but it’s hard to get a firm idea of why.

OnDeck Appoints Gagan Kanjlia to Lead Product Group, ( Yahoo Finance), Rated: B

.0.0.1.2.0.1.0.0.0.0.0.0.$SideTop-0-HeadComponentTitle-Proxy.$SideTop-0-HeadComponentTitle.0">OnDeck Appoints Gagan Kanjlia to Lead Product Group, ( Yahoo Finance), Rated: B

OnDeck appoints Gagan Kanjlia as Senior Vice President of Product.

Kanjlia joins OnDeck from Capital One, where he co-founded the Capital One Garage, a corporate internal incubator for Capital One Financial Services, ran digital product efforts for the Auto Finance and Home Loans divisions and built out the digital product practice for Capital One Financial Services.

“This newly created role on our senior management team reinforces our commitment to product and technology innovation as key drivers of our growth,”

United Kingdom

It’s game on as Mondo, the UK banking startup, finally becomes a licensed bank, (TechCrunch), Rated: AAA

Mondo, the U.K. mobile banking startup and probably the noisiest of the new breed of British challenger banks, is now officially, well, a bank.

That’s because, until now, the London-based company didn’t hold a banking license and existed entirely in the form of a pre-paid Mastercard and accompanying, albeit rather nifty, iOS and (more recently) Android app.

It offers the ability to do things like track your spending in realtime, view geolocation-marked transactions on a map, view spending by category, and get a graphical timeline of your overall expenditure.

Mondo has been granted a UK banking licence ‘with restrictions’ by the UK regulators FCA and PRA. This means that its beta testers can now in theory begin switching to a Mondo current account and use the startup to do a lot more of their banking.

Competitors Starling (for which Mondo’s founders have history), Atom Bank, and Tandem already secured licenses — Mondo says, at only 18 months old, it is the youngest company ever to be granted a banking licence and proof regulators are becoming more nimble as the country attempts to foster its fintech reputation.

It also notes that Mondo co-founder and co-CEO Tom Blomfield, who previously foundedGoCardless, is now the youngest CEO of a bank in the UK, having turned 31 just one day after the licence was granted.

Centre for Economics and Business Research: Small Business Loans on Funding Circle Boosts UK Economy By £2.7 Billion Since 2010, ( Crowdfund Insider), Rated: A

On Thursday, the Centre for Economics and Business Research released its latest report that revealed small businesses loans facilitated by Funding Circle had boosted the UK economy by £2.7 billion since 2010.

The report also revealed:

  • Over three-fifths (61%) of Funding Circle borrowers saw their revenue increase as a result of the loan, while nearly half (47%) reported a rise in profits.
  • The GVA (Gross Value Add) impact has built up over time, from £39.8 million in 2011, to £401.6 million in 2013, reaching £2.7 billion by mid-2016.

You can find the report here.

UK SMEs flock to p2p lending boosting jobs and housebuilding, report finds, (Alt Fi Credit), Rated: A

Small businesses are increasingly using p2p and marketplace lending platforms to meet their financial needs, according to a report by the Centre for Business and Economics Research (CEBR).

The report also highlights that businesses from the North East use non-bank forms of finance much more than traditional high street banks. North East businesses at Funding Circle make up 10 per cent of all lending but only 3 per cent of the UK business population.

Scott Corfe, director at the Centre for Economics and Business Research said: “Since the financial crisis, UK businesses have increasingly turned to non-bank lending to raise the funds they need to invest, hire new staff and expand to new markets. Companies such as Funding Circle are driving billions of pounds of economic activity and generating tens of thousands of jobs, something that’s set to grow rapidly as the financial landscape continues to evolve.”

India

Peer-to-peer lending platform Faircent raises $ 1.5 mn funding from BCCL, (Your Story), Rated: A

Peer-to-peer lending platform Faircent, which caters to retail and business loans, has raised $1.5 million funding from Brand Capital, the Bennett Coleman and Co (BCCL) arm for ad-for-equity investment.

Faircent was founded by Rajat Gandhi, Vinay Mathews and Nitin Gupta in 2014. In two years, it has over 6,000 and 26,000 registered lenders and borrowers, respectively and has disbursed total loans amounting to Rs 6.5 crore.

The firm had earlier raised an undisclosed amount of funding in a Series A round from Mohandas Pai’s Aarin Capital and JM Financial Products, a subsidiary of JM Financial.

Author:

George Popescu