- Today’s main news: Lending Club Q3 results and $1.3 bil deal with Credigy. The Forbes FinTech 50.
- Today’s main analysis : The size of the UK FinTech market by transaction value.
- Today’s thought-provoking articles: States take action on FinTech rules. A warning for FinTech. Regulators in Australia, Canada sign co-op agreement. China tops global FinTech.
- Good Q3 for Lending Club. GP : “Lending Club’s Q3 origination at practically $2bil is very close to Q3 2015 which was $2.24bil. As mentioned before, the crisis put LC back about 1 year and unless there are other surprises on the way, it is back on track. My main concerns are the lack of emphasis on the p2p aspect. P2P is what built Lending Club, nothing else. And of course the need to find the next borrower pipeline beyond credit card refinancing via direct mail.”
- Lending Club gets a big investment. GP:”Lending Club lands an investment deal from Credigy, a subsidiary of the National Bank of Canada, for $1.3bil. Well done. ” AT: “Following on the heals of the OnDeck news from yesterday, Lending Club’s status proves there’s nothing wrong with online lending as a sector.”
- The Forbes FinTech 50. AT: “This is a list to look forward to every year. This year, there are the usual mainstays, but you’ll see some new names too.”
- States eye their own FinTech regulations. AT: “Most of these are go after digital currencies or blockchain technology. The significance is that states consider FinTech worth of regulating, which could lead to a power play between Washington and some states as more interest in taken in the FinTech sector regarding regulation.”
- Commercial real estate crowdfunding. GP: ” The online real-estate flip loan market is getting crowded. I really believe in the online real estate market, I just wish they would be able to offer different products. If a yield of 10% is needed why not look at offering Real Estate investments with leverage ?”
- A former Bear Stearns trader takes an interest in MPL. GP: “An interview with DV01 whom we covered as well previously. A very interesting firm. “
- FinTech in the capital markets. GP : ” This was news in 2007. Right now I am not sure how interesting it is.”
- Square Capital hits $1 billion mark. GP: ” This is interesting compared with Lending Club’s volumes to date , about $20bil, and OnDeck’s volumes
- Developers return to RealtyShares. GP: ” I am glad to hear however this PR sounds rather bad. It is expected they would return. Why is this news? This makes people think: was there a doubt they will return ? I am not sure this is good PR. Just to be clear: I have absolutely no information either way about any return rate for Realty Shares borrowers/developers. “
- InAuth wins FinTech award. GP:
- The size of UK FinTech by transaction value. AT: “The interesting thing here isn’t that FinTech has grown. We knew that. It’s also growing per individual transaction value. In other words, those who are using FinTech are using more and trusting it more.”
- A warning for FinTech. AT: “Hacking and fraud are still major concerns for the industry. This case study with UK grocer Tesco can teach the FinTech sector something.”
- Wake me up when online lenders are done turning into banks. GP: ” I am not so sure sleeping beauty will wake up. Please see how SoFi is planning to use life insurance. Or IFISA source of capital. Or other sources. No online lender, as far as I know, has decided that the pros outweight the cons of becoming a bank, yet. Maybe prince charming will appear one day…”
- Machine learning scrutinized by FSB. AT: “It will be interesting to see what the FSB’s conclusions are regarding machine learning applications for FinTech.”
- Is the battle between banks and FinTech companies just a bunch of nonsense? AT: “It depends on who you ask. Some are saying there’s more cooperation than fighting.”
- Soldo launches multi-user accounts for families.
- Addleshaws invests 500 BP into FinTech.
- Aussie and Canadian regulators sign co-op agreement. AT: “Let’s just sign one big worldwide agreement. We’ll get there faster.”
- China at the top of global FinTech. GP: “China numbers, as far as we can trust them, are gigantic in comparison with the fintech industries in other geographies. Chinese Fintech is however still tiny in comparison to what it could become. London, Tokyo, Singapore, New York , Sydney, etc. have established financial industries which are lacking in China. This , combined with the internet, the Chinese government controls of institutions, has encouraged and will continue encouraging the growth of an internet based, decenrtalized, unregulated, fast and innovative financial sector, which we came to call Fintech. “
- SuperCharger announces 8 new startups.
- United States
- Investors shrug off more losses at Lending Club, (Financial Times), Rated: AAA
- The Fintech 50: The Complete List 2016 (Forbes), Rated: AAA
- Lending Club Gets Big Investment; No Incentives Needed In September (Investor’s Business Daily), Rated: AAA
- States Take Action on Fintech Rules While Awaiting Guidance From Washington (Morning Consult), Rated: AAA
- Crowdfunding in commercial real estate (i2e), Rated: A
- How An Ex-Bear Stearns Trader Is Helping Marketplace Lenders Avoid The Sins Of The Mortgage Bubble (Forbes), Rated: A
- Fintech in Capital Markets: A Land of Opportunity (BCG Perspectives), Rated: A
- Square Capital Has Loaned Over $ 1 Billion To Small Businesses (Fortune), Rated: B
- RealtyShares Reports: Several Developers Return to the Real Estate Crowdfunding Platform (Crowdfund Insider), Rated: B
- InAuth Dubbed Winner of Corporate LiveWire’s 2016 Fintech Excellence Awards (Crowdfund Insider), Rated: B
- United Kingdom
- The Size of UK Fintech Market by Transaction Value (TechBullion), Rated: AAA
- A Warning for Fintech (Bloomberg), Rated: A
- Wake me up when online lenders are done turning into banks (FT Alphaville), Rated: A
- Machine learning being scrutinised by Financial Stability Board (Out-Law), Rated: A
- Battle between fintechs and banks a nonsense (Finextra), Rated: A
- London fintech startup Soldo launches multi-user spending account for families (TechCrunch), Rated: A
- Addleshaws jumps on fintech bandwagon with £500k fund (The Lawyer), Rated: B
- REGULATORS IN AUSTRALIA AND ONTARIO SIGN CO-OPERATION AGREEMENT (FinTech Law Watch), Rated: AAA
- Katipult is Named Canada’s Most Innovative Fintech Company (Crowdfund Insider), Rated: A
- China tops global fintech rankings: report (Xinhuanet News), Rated: AAA
- SuperCharger Fintech Accelerator Announces 8 New Startups as Hong Kong Fintech Week Starts (Crowdfund Insider), Rated: A
- P2P lending startups like Faircent eye product partnerships with auto loans (Economic Times, India Times), Rated: A
- P2P lending platform Funding Societies receives CMS license, launches in Malaysia (The Tech Portal), Rated: A
Investors shrug off more losses at Lending Club, (Financial Times), Rated: AAA
In the third quarter, net losses came to $36.5m. Scott Sanborn, chief executive, said that while the company had made “incredible progress”, noting a slight quarter-on-quarter rise in loan originations to $1.97bn, there was still work to be done. In the same quarter last year the company originated $2.24bn, short of the peak of $2.75bn in the first quarter this year.
Last month, Lending Club tightened its credit policies for the third time in six months.
Mark Palmer at BTIG said that $800m of cash at the end of the quarter, down $32m from June, should be “more than ample to provide the company with the time it will need to fully regain its footing”.
The Fintech 50: The Complete List 2016 (Forbes), Rated: AAA
Mobile app allows worker to get a portion of his paycheck, for hours already worked, deposited into his bank account before payday, with the fee for this advance set by the user.
Bona fides: Workers from more than 10,000 companies, including Apple, Wal-Mart and Starbucks have gotten advances.
Lending Club Gets Big Investment; No Incentives Needed In September (Investor’s Business Daily), Rated: AAA
Shares of Lending Club (LC) spiked Monday after the online lending platform reported Q3 results that beat estimates, said it didn’t need investor incentives in September, and landed an investment deal worth up to $1.3 billion.
That investment, from Credigy, a U.S. subsidiary of the National Bank of Canada, comes as Lending Club tries to diversify its funding after a difficult year. The money will be invested over the next twelve months, Lending Club said.
The company said that it entered September without the need for investor incentives, after offering them earlier this year in an attempt to prevent financial firms that buy Lending Club’s loans from fleeing. Lending Club had said earlier that it hoped to end the incentives by year-end.
States Take Action on Fintech Rules While Awaiting Guidance From Washington (Morning Consult), Rated: AAA
As federal regulators contemplate a new regulatory framework for financial technology firms, some states have taken their own approach to the burgeoning sector.
Many state fintech priorities center on digital currencies or the blockchain technology underlying them.
In North Carolina, a law enacted in July exempts virtual currency users and blockchain software providers from licensing requirements, a move that garnered praise from organizations such as the Chamber of Digital Commerce.
A Connecticut law “leaves substantial legal choices to the discretion of regulators,” said Peter Van Valkenburgh, Coin Center’s director of research, who compiled the state regulation tracker.
New York uses state-by-state licensing requirements, an approach the Chamber of Digital Commerce says is burdensome to companies using blockchain.
New Hampshire lawmakers introduced three bills on digital currency in 2015, but a Nov. 1 report from a legislative study commission recommended no legislative action on the matter in 2017.
Crowdfunding in commercial real estate (i2e), Rated: A
I had the opportunity to visit this week with Ashley Smith, who along with Tim and Marylee Strange, is adding convenience and efficiency to the fragmented commercial real estate crowdfunding platforms with their new company called CrowdSeekr.
Crowdseekr’s proprietary technology customizes searches of deals from multiple platforms revealing investment opportunities that match the investor’s desired results. We can be proud that a technology company right here in Oklahoma City is making its mark in this rapidly growing and maturing industry.
How An Ex-Bear Stearns Trader Is Helping Marketplace Lenders Avoid The Sins Of The Mortgage Bubble (Forbes), Rated: A
Rahbar’s startup currently tracks the loans of Lending Club and eight other originators and counts 55 institutions as clients. All told it has logged in some $34 billion in loans. DV01 is backed by $7.5 million in capital from Leucadia National (Jefferies’ parent), Pivot Investment Partners and a fund controlled by George Soros.
DV01 is paid two basis points on the principal amount for its services as a loan data agent, and buy-side investors pay a bit more for access to its analytics platform. Demand is brisk. Rahbar expects DV01 will serve as a data agent on three more deals by the end of the year. “When an investor tells a marketplace that they won’t invest without the data going to DV01, there’s no decision to be made,” says Ron Suber, president of Prosper.
Fintech in Capital Markets: A Land of Opportunity (BCG Perspectives), Rated: A
The financial technology (fintech) phenomenon first started to evolve in the capital markets (CM) industry more than 40 years ago. Today, accelerated both by the electronification of trading in the 1990s and the subsequent thrust of the entire financial services industry toward digitization, fintechs—which we define as firms that use innovative technology at scale to either enable or compete with other financial institutions—have experienced exponential growth in the CM domain.
Simply put, fintechs focus on creating new value propositions or improving existing ones. They help build capabilities that can enhance client relationships, reduce costs through automation and simplification, and facilitate regulatory compliance. They also enable disaggregation of the value chain as they become more embedded in the supply chain.
Square Capital Has Loaned Over $ 1 Billion To Small Businesses (Fortune), Rated: B
In addition to processing payments for merchants, Silicon Valley payments company Square has another growing business—lending. Square’s two-year-old lending arm, Square Capital, has lent $1 billion in cash advances and loans to more than 100,000 businesses, the company said Monday.
RealtyShares Reports: Several Developers Return to the Real Estate Crowdfunding Platform (Crowdfund Insider), Rated: B
On Monday, RealtyShares announced several developers have returned to its real estate crowdfunding platform for additional projects.
InAuth Dubbed Winner of Corporate LiveWire’s 2016 Fintech Excellence Awards (Crowdfund Insider), Rated: B
InAuth, a digital device intelligence company, announced on Monday its products received recognition for “Excellence in Providing Mobile-First Products for Authentication” at Corporate LiveWire’s Fintech Excellence Awards for the second year in a row. The company stated its products deliver intelligence capabilities to authenticate, reduce risk, remove customer friction, and help organizations around the global to maximize their digital transactions through mobile apps, mobile browser, and desktop browser.
The Size of UK Fintech Market by Transaction Value (TechBullion), Rated: AAA
This year, the size of UK fintech market by transaction value is US$168,522m. According toStatista,transaction value will show an annual growth rate of 20.4 percent resulting in US$353,667m in 2020. “Digital Payments” is the largest market segment, with a transaction value of US$151,682m.
While determining the size of fintech market by transaction value, Statista takes into account digital financial services, digital payments, marketplace lending, Robo-advisors, online crowdfunding and venture financial. The online research firm does not consider insurance related services, lead-generation business models/meta-search engines, B2B payments, API management, credit scoring, and blockchain technology.
A Warning for Fintech (Bloomberg), Rated: A
U.K. grocer Tesco shares took a hit after customer fraud forced its bank to suspend online transactions.
But the financial damage could spread far beyond Tesco. It’s easy to imagine how the rising financial cost of cybercrime could damage the big selling point for fintech firms and challenger banks: being able to acquire customers and operate at a lower cost than established rivals.
Wake me up when online lenders are done turning into banks (FT Alphaville), Rated: A
The new solution is basically this: Ratesetter will have the explicit right to divert interest payments and capital away from investors and into the provision fund:
We will update our Lender Terms in order to make it explicit that in times of severe stress the interest buffer would be available to the Provision Fund. This will allow for the interest received by every investor to be reduced equally and for this foregone interest to accrue to the Provision Fund.
So, for example, if the reduction was 20%, the total interest due to all our investors would reduce by 20% and this amount would instead flow into the Provision Fund. This period would be kept to a minimum duration and as soon as the Provision Fund Coverage Ratio was sufficiently strong, it would stop and return to normal.
If the outlook got worse and investors’ capital was at risk – not just their interest (in other words, the Capital Coverage Ratio was in danger of dropping below 100%) – then all investors’ capital would be reduced equally, as well as all of the interest. This capital and all interest would go into the Provision Fund to strengthen it.
Machine learning being scrutinised by Financial Stability Board (Out-Law), Rated: A
Svein Andresen, secretary general of the Financial Stability Board, announced that the FSB is “beginning work to understand the financial applications of machine learning” in a recent speech (4-page /157KB PDF) at the Chatham House Banking Revolution Conference.
“Much hype surrounds the development of fintech and for regulators it is essential to understand what developments are going to change the way financial markets operate and those that won’t,” Andresen said. “We have been explicit in our desire to look at both financial stability benefits and risks, so as not to bias our work against fintech. Regulators are acutely aware of the need to balance these issues and of the need to be proportionate. We need to monitor and act on risks as they emerge but we need to balance this against the need to allow the development of technologies that can provide real benefits for society.”
Battle between fintechs and banks a nonsense (Finextra), Rated: A
Daniel Marovitz, COO and President for Europe, Earthport, talks about how the trumped up story of conflict between banks and fintechs is resolving into a partnership approach, and discusses the regulatory, cultural and practical challenges for banks in implementing blockchain.
London fintech startup Soldo launches multi-user spending account for families (TechCrunch), Rated: A
London fintech startup Soldo — founded by tech veteran Carlo Gualandri who previously helped create Italy’s first online bank — is launching a multi-user spending account. The cloud-based service, which has been 18 months in the making and is currently available in the U.K. and Italy, is designed to enable and control the flow of money inside organisations with multiple users.
Initially targeting families for things like dishing out pocket money to your kids, splitting household bills, or giving a domestic worker an expense allowance, Soldo also plans to launch for businesses too.
Addleshaws jumps on fintech bandwagon with £500k fund (The Lawyer), Rated: B
Addleshaw Goddard will provide £500,000 in free legal advice to support UK fintech companies.
It is the latest in a series of similar moves by law firms to attract young fintech businesses as clients.
Addleshaws’ programme is called AG Elevate and will provide 16 fintech companies access to free legal advice. The successful companies will also be assigned a mentor from Addleshaws’ fintech practice.
Elevate will launch on 17 November and is split into two programmes designed to target different levels of the market.
REGULATORS IN AUSTRALIA AND ONTARIO SIGN CO-OPERATION AGREEMENT (FinTech Law Watch), Rated: AAA
The Australian Securities and Investments Commission (ASIC) and the Ontario Securities Commission (OSC) have signed a co-operation agreement to promote FinTech innovation. The agreement will make expansion into the Australian and Ontarian markets easier for growing FinTech businesses.
A referral mechanism has been created under the new agreement which allows ASIC to refer Australian FinTech businesses wanting to enter the Ontarian market to OSC and vice versa.
Both ASIC and OSC have established internal teams to assist FinTech businesses with their regulatory obligations and encourage development of the FinTech industry. ASIC’s Innovation Hub was established in April 2015 and OSC recently established LaunchPad in October 2016.
Katipult is Named Canada’s Most Innovative Fintech Company (Crowdfund Insider), Rated: A
Katipult, cloud-based software infrastructure that allows firms to design, setup, and manage an Investment Crowdfunding, Peer 2 Peer Lending, or Investor Management platform has been recognized as Canada’s most innovative fintech company.
From debt to equity, from real estate to early stage investing and peer to peer lending, Katipult wants to ensure that “secure, flexible and legally compliant software infrastructure” is also in place, especially for businesses that need to safeguard their information.
China tops global fintech rankings: report (Xinhuanet News), Rated: AAA
China’s financial technology (fintech) firms continue to lead globally, securing four positions in the top five in a recent industrial ranking.
Alibaba’s third-party payment platform Ant Financial tops the global ranking for the 100 best performing fintech companies, with micro-loan firm Qudian, wealth management company Lufax and insurance enterprise Zhong An entering the top five, according to a report by international accounting firm KPMG and investment firm H2 Ventures.
A total of eight Chinese fintech companies are on the list, a remarkable rise from just one company in the top 100 in the 2014 ranking.
SuperCharger Fintech Accelerator Announces 8 New Startups as Hong Kong Fintech Week Starts (Crowdfund Insider), Rated: A
SuperCharger Fintech Accelerator 2.0 has kicked off Hong Kong Fintech Week with the announcement of 8 finalists for their program. For a second year in a row, SuperCharger, which aims to help the most promising Fintech start-ups and scale-ups grow in Asia, states it has surpassed other Hong Kong Fintech accelerators with almost 200 applicants from 33 countries.
SuperCharger has focused on the rising tide of Fintech innovation in Asia. Wealth management, regulatory technology (RegTech), artificial intelligence, cybersecurity and blockchain are the areas with the most compelling submissions for the 2017 SuperCharger FinTech Accelerator 2.0 program.
P2P lending startups like Faircent eye product partnerships with auto loans (Economic Times, India Times), Rated: A
P2P players are increasingly looking at more secure product partnerships, aiming to introduce asset-based investment products with Faircent being the first to do so.
The platform has tied up with Mumbai-based on demand bike taxi service Baxi to provide two wheeler loans to drivers.
P2P lending platform Funding Societies receives CMS license, launches in Malaysia (The Tech Portal), Rated: A
Last week equity crowdfunding platform Fundnel received a provisional Capital Markets Services (CMS) license and now it’s peer-to-business online lender Funding Societies which has received an “in-principle approval” of CMS in Singapore. The license will enable the platform to conduct regulated activities of dealing in securities for lending-based crowdfunding to all classes of investors in the nation. The company said it will commence crowdfunding for both accredited and non-accredited investors once it clears some requirements set by MAS.
Not only this, Funding Societies has upped its game by expanding itself to Malaysia, shortly after its launch in Indonesia as Modalku earlier this year.
Incorporated as Modalku Ventures, the platform was one of the 50 firms which had applied and, will be one of the six registered operators in the country to offer crowd-lending services to SMEs. It plans to fully begin its operations in Malaysia in first-half of 2017.