A secular growth trend in the real estate market and a growing US economy is expected to be a strong tailwind for real estate financing companies and should have a commensurable positive effect on asset management companies in the space. AlphaFlow, a California registered investment advisor, is amongst the first and fastest growing automated real […]
A secular growth trend in the real estate market and a growing US economy is expected to be a strong tailwind for real estate financing companies and should have a commensurable positive effect on asset management companies in the space. AlphaFlow, a California registered investment advisor, is amongst the first and fastest growing automated real estate investment services in the US. The company launched operations in 2015. Its first avatar was focused on bringing consolidated reporting, transparency, and insights to real-estate crowdfunding investments on multiple platforms. The company, under Founder and CEO Ray Sturm (formerly founder of RealtyShares), has now graduated to cutting-edge algorithmic investing.
Meet The New AlphaFlow
The company has raised a total of $6.4 million with $4.1 million coming in the latest funding round (September 2017). The round was led by Hedge Fund titan Steven Cohen’s Point72 Ventures while other marquee names likes Social Capital and Y Combinator also joined in the raise. The funds are being deployed to build infrastructure, develop underwriting resources, finance partnerships with leading online lenders & investors, and to update the company’s technology.
AlphaFlow launched the industry’s first fund allowing investors to diversify their portfolios through multiple real estate loans with an option to reinvest earnings automatically. Investors now have a true opportunity to diversify.
In March 2017, AlphaFlow launched an Automated Investment Platform incorporating SMA (Separately Managed Accounts) and artificial intelligence technology offering portfolio optimization and diversification services in a way that each client has his unique asset portfolio at minimal cost. This relieved clients from the hassle of managing their portfolios as the entire administration and monitoring is in the hands of experienced professionals.
The AlphaFlow Working Model
AlphaFlow is working on an asset management model and not a marketplace lending model. The company stands out from the crowd because its investments are spread across 75-100 loans aiming at net returns of 8-10% and targeting lower LTVs.
Loans are purchased/underwritten from lending platforms after performing a detailed due diligence process. Each client’s portfolio is under automatic review on a daily basis to keep it diversified. Loan underwriting is not a fully automated process, however. The algorithm and allocation methodology used are proprietary while loans not fulfilling predefined criteria are rejected. This ensures that the fund is not on an auto-underwriting mode and every loan is analyzed to evaluate suitability for client’s portfolio.
The platform charges a fee of 1% on invested capital and its loans are usually for a tenure of 6-12 months. The minimum investment amount is $10,000 for each investor. AlphaFlow currently has over 280 investors on board.
Normally, loans are repaid earlier than the credit period sanctioned, where AlphaFlow’s automatic system re-balances the entire portfolio. Also, the portfolio of each client is re-balanced with the addition of new loans to the platform.
The Current Scenario
Sturm shares his thoughts on the real estate crowdfunding industry freely. “Most platforms are facing challenges related to managing customer acquisition costs (CAC),” he says, “which have started topping $5,000. Growing competition further fuels the CAC. Though VC funding has been strong in the segment, this has shifted the balance towards institutional investors as compared to originally empowering retail investors. The winner in the space will be the one who can control his CAC and develop an artificial intelligence-powered underwriting technology.”
With sufficient capital in hand, AlphaFlow is now looking for partnerships with online lenders to expand its business reach. Its criteria for selecting partners is to focus on their underwriting technology, reporting infrastructure, and transparency. Another challenge the industry as a whole is facing is that it has become harder to determine which lender is doing better. For an investor, it is fundamental to their job, but transparency has taken a hit in the current ecosystem.
A changing economic environment will lead to shifting trends in the housing market, in terms of job growth, affordability, increased demand, and nominal interest rates. Credit models need to be able to stomach this shift. AlphaFlow is still building out its technology, but the solution developed has helped it lower delinquency rates by more than 80 percent as compared to the rest of the industry. Also, most platforms talk about the need to synthesize information using AI and machine learning, but few have done it well.
Real estate crowdfunding firms will need artificial intelligence to analyze all the data points on scale, and it will soon become uneconomical to hire a massive team to execute all these repetitive tasks. Moreover, profitability is not the function of growth alone. AI-empowered smart underwriting will be the key differentiator, Sturm believes. He shares that it is always easy to grow by underwriting bad deals, but it is suicide in the long run when capital deployed is not able to hit target returns or, even worse, if principal is destroyed during the process.
AlphaFlow became a Registered Investment Advisor to showcase to investors that it is on their side and that it has a fiduciary duty to protect their interests. Serious players in the segment will have to move in this direction to achieve scale in the asset management industry and better serve their customers.
Although AlphaFlow is doing well with its present underwriting model and clients are satisfied with the results, it is always searching for improvements that can be incorporated into the system. It is also considering multiple avenues to get a diversified exposure in the real estate industry. It might go for a combination of debt and equity deals for better exposure. Different duration debt deals may be targeted (2 or 3 years tenure) with a locked interest rate of 5 percent. To be a market-driven company, strategies will need to be reframed accordingly.
Integration of blockchain technology can transform the entire operational aspect of the real estate industry. But Sturm believes it is still a long way from maturing enough for real estate investing. The technology is currently not on his road map, but he might get interested if someone is able to introduce a breakthrough product.
To achieve scale and a strong position in the industry, AlphaFlow will keep investing in data science and engineering. In today’s fintech world, that is the only moat a business can cross.
News Comments Today’s main news: Amazon partners with Bank of America on lending. Roostify raises $25M for expansion. Lendy’s pretax profits hit 3.3M GBP. Lendix to enter Dutch, German markets. Revolut to launch banking app in APAC. Vested backs Dojo. Today’s main analysis: Important barriers to alternative investing digitization. Today’s thought-provoking articles: Americans can’t get enough consumer debt. Who are Britain’s […]
Amazon partners with BofA on lending. AT: “Pundits spent all last year talking about Amazon dominating alternative lending. This scenario makes a lot more sense. Amazon partnering with a big bank to take on the disruptors in the lending space has the best chance at success, both for Amazon and for the bank. Goldman Sach’s Marcus has upped the game. Lending is not Amazon’s core business, but it can be a big part of the e-commerce giant’s business if it partners with a legacy financial institution with a strong capital position and a history of lending practices. This partnership could very well be a major player.”
Americans can’t get enough consumer debt. AT: “If consumer debt is on the rise, this spells opportunity for all consumer lenders. Perhaps the alternative lending industry will come out of its slump this year.”
CNBC has learned that Amazon Lending, which launched in 2011, ultimately found a partner in Bank of America Merrill Lynch, according to people familiar with the matter who asked not to be named because the alliance is confidential. Partnering with Bank of America allows Amazon to reduce its risk and access capital specifically to provide credit to more merchants so they can acquire inventory.
Amazon Lending is an invitation-only program that makes loans of $1,000 to $750,000, with terms of up to a year, for companies that may have difficulty landing traditional business loans. In June 2017, Amazon said it issued more than $1 billion in loans during the previous 12-month period, compared to $1.5 billion in combined loans for the four years prior to that.
But even with the Bank of America deal, Amazon Lending has been tapping the brakes on growth of late. After almost doubling to $661 million in 2016, outstanding loans just barely increased last year to $692 million, according to Amazon’s annual report earlier this month.
With Americans owing more than $1.48 trillion in student loan debt, (which is $620 billion more than the total U.S. credit card debt) knowing which schools are going to help you pay off your debt faster, is something you should consider if you are looking at business school programs.
Roostify, a digital lending platform provider, today announced the completion of a $25 million Series B round of financing. The round included new investments from Cota Capital, Point72 Ventures, and Santander Innoventures, the venture capital arm of Banco Santander, as well as additional funding from previous investors JPMorgan Chase, Colchis Capital, and a subsidiary of USAA. The new funds will power the company’s ambitious growth goals, including a deeper presence in the enterprise space, rich product enhancements, and expansion into new markets.
In 2016, Kyle Stoner and best friend Carson Junginger were both having a hard time navigating the home-buying process. Between finding a realtor, finding a property and securing a mortgage, the two tech entrepreneurs realized that buying a home was too cumbersome and fragmented. And when they couldn’t find a single platform where they could manage all these separate tasks, they teamed up to create one — Abode.
If anything, consumers are borrowing more on credit cards or through auto loans than they have in years, and lenders seeking growth are happy to oblige them.
In the fourth quarter, consumer debt, excluding mortgages and other home loans, rose 5.5% from a year earlier to $3.82 trillion. That is the highest amount since the Federal Reserve Bank of New York began tracking the data in 1999. Moreover, consumers’ non-housing debts accounted for just over 29% of their overall debt load, also the highest amount on record.
Overall, households are paying about 5.8% of their disposable personal income to stay current on their nonmortgage debts, according to third-quarter Federal Reserve data. This figure, which is at the highest level since the end of 2008, bottomed out at 4.9% in 2012.
KPMG International and CREATE-Research have jointly prepared a report about the digitization imperative for alternative investment management.
Early on, its authors list eight key digital innovations that are reconstructing the industry:
Application programming interfaces; cognitive technology and machine learning; Big Data; blockchain; new digital platforms; robo-advisors; robotic process automation; and social media.
To that end they have talked to 125 alternative managers located in 19 countries, with combined assets under management of $2.6 trillion.
A Need to Future Proof
They found that the scale of the ongoing shake-up is well understood. Only 2% of respondents saw a “business as usual” scenario playing out over the next 10 years. Roughly one-third (35%) expect marginal changes. But 53% anticipate “partial” disruption and the remaining 10% anticipate “total” disruption.
Is now the time when U.S. banks, credit unions and their regulators finally see eye to eye on small-dollar loans to consumers who have checkered credit histories?
A long-running stalemate between the industry and its overseers has ceded much of the subprime consumer market to payday lenders, pawn shops and other high-cost lenders. But in recent months, banks started to get some insight from Washington about what type of product would be deemed acceptable.
In the latest example, Citi Ventures and PNC on Wednesday announced a strategic investment in the fintech firm HighRadius, which makes business-to-business payments and receivables software. Terms of the investment were not disclosed. HighRadius has an existing partnership with Bank of America on an accounts receivables platform, and also counts as clients Fortune 500 companies such as Walmart, Johnson & Johnson, Procter & Gamble and Starbucks.
U.S. Bancorp, the parent of U.S. Bank, agreed to the criminal and civil penalties in settlements announced by the Manhattan U.S. Attorneys Office in New York, the Office of the Comptroller of the Currency, the Federal Reserve and the Financial Crimes Enforcement Network.
From 2009 until 2014, U.S.Bank set an artificial cap on the number of alerts generated by its customer transaction monitoring systems, authorities said. The Minneapolis-based bank based the number of alerts on low staffing levels, rather than on the level of risk in the transactions.
The lax oversight aided Tucker, a longtime U.S. Bank customer who was sentenced to more than 16 years in prison last month for running an illegal $3.5 billion Internet-based payday lending scheme that victimized thousands of consumers with loan interest rates as high as 1,000%.
Fluid Market, a neighborhood truck sharing application that allows people to rent trucks seamlessly from one another, today announced the nationwide launch of its truck-sharing marketplace, providing a seamless and on-demand utility vehicle rental experience to its peer-to-peer network of users and lenders across the country.
Macquarie Group is seeking to hire a US ABS director for its credit markets team as it looks to grow its presence in US esoteric ABS sectors, including whole business, marketplace lending and renewable energy finance.
Nonbank mortgage firms are seeking formal assurance from the Consumer Financial Protection Bureau that they will not become subject to surprise audits or enforcement without involvement of a state regulator.
In a joint letter to acting CFPB Director Mick Mulvaney, the Community Home Lenders Association and the Community Mortgage Lenders of America said the agency should practice “streamlined supervision” of smaller nonbanks, which is consistent with the Dodd-Frank Act.
Recent moves by the federal Consumer Financial Protection Bureau (CFPB) could signal a friendlier approach to businesses, according to Jay Spruill, a partner in LeClairRyan’s Richmond office and leader of the national law firm’s Marketplace Funding Team.
“The Payday Loan Rule has been heavily criticized by the small loan industry which says the rule will restrict consumers’ access to credit,” Spruill notes in the blog, CFPB Signals Retreat from Aggressive Regulation. The post appears in Marketplace Shift, which focuses on the impact of legal and regulatory developments on financial innovation.
Peer to peer lending platform Lendy has released its audited accounts for 2016, showing profits before tax rising to £3.3 million compared to £53,000 in 2015. The company reports that since launch in 2012, Lendy has originated over £376 million in secured loans generating £36 million in interest for investors. Approximately £141.5 million in principle has been repayed with current outstanding loans at £186.5 million.
For some British millennials, Monzo is as close to a cult as a bank can be. Its coral-pink cards are hard to miss. “People in bars will get very excited if they see you are a fellow Monzo user,” says Mr Matthews, who is 29.
Counting the British arm of Santander, Spain’s largest bank takes the share to over 80%. In 2015 Britons had 70m-odd active current accounts. They paid £500 ($750) or more into 70% of them every month.
Supervisors have licensed more than 30 entrants since 2013. But by no means are all the challengers young. One of them, CYBG, owns Clydesdale, a Scottish bank that turns 180 this year, and Yorkshire Bank, aged 159. It has about 1.8m personal current-account customers and assets of £43bn. Nor are all the infants purely digital. Metro Bank has since 2010 established 55 “stores” (ie, branches) and is spreading beyond south-east England.
Among digital purists, Monzo’s chief rival is Starling Bank—where Mr Blomfield used to work. It started current accounts last spring; around 100,000 have been opened. Tandem, which recently acquired Harrods Bank, the banking arm of a posh department store, is also open for business. Atom Bank, part-owned by Spain’s BBVA, focuses on mortgages funded by fixed-rate savings. N26, a German smartphone bank, is due to arrive this year. Another near-cult, Revolut, is seeking a European licence (valid, for now, in Britain).
To ginger up small-business banking, RBS, the market leader, must cede ground and money to competitors as part of the price, agreed on with the European Commission, of its rescue by the government in 2008. RBS will put up £425m, divided into sums from £5m to £120m, to build up rivals’ capabilities, plus £350m for incentives to customers to switch banks. Banks with assets of up to £350bn may bid. That excludes the big four but just lets in Santander (£315bn), to some challengers’ chagrin.
The Treasury’s inquiry will look at the extent of competition in the market, the various sources of funding available to SMEs – including P2P lending and crowdfunding – and whether the current regulatory framework provides enough protection to SMEs when they borrow money.
For example, unsecured lending to an SME borrower for the purposes of their business will only be regulated if the SME is unincorporated and the amount being borrowed is £25,000 or less.
The UK’s Financial Conduct Authority (FCA) on Monday published its report on the supervision of algorithmic trading, which is intended to illustrate best practices and give guidance to firms considering implementing AI to automate trading operations.
The focus areas of the report hint at concerns the FCA harbors about AI use in capital markets. The regulator placed particular emphasis on humans being able to intervene in an algorithm if something goes wrong, and ensuring the technology doesn’t start behaving in a way unintended by its creators.
Sales increased 575% to $43.31 million, driven by loan facilitation growth, which was $388 million – an increase of 187.1% over the prior year. The high sales growth rate contributed to a whopping 1,589% net income growth, which was $26.9 million for the quarter. Gross billing ratio contributed to overall growth with an increase from 7.4% in the previous year to 12.1% in the reported one as the company continues its shift to credit loans.
The company increased its guidance, bumping EPS estimates for the year from $0.74 (see linked article for full estimate calculations) to $1.30 per share, as sales are now expected at $108 million – up from previously expected $90 million. The company believes this will be driven by a bump in loan facilitation, which it expects to be $1.23 billion, up from previously expected $1 billion.
In my previous article I initiated the company with a price target range of $14.80 to $22.20 per share given a 20x to 30x forward earnings multiple, and given recent positive catalysts I believe fair value lies in the same multiple. As the company has hiked its sales and net income guidance, pushing EPS to $1.30 for fiscal 2018, I believe the company’s fair value now lies in the range of $26.00 to $39.00 per share. That represents almost 200% upside from the current share price.
Ascential announced in Hangzhou recently the launch of its trailblazing FinTech event Money20/20 at Hangzhou International Expo Center on 14-16 November 2018.
Guest speakers includedArthur Zhu, President of LianLian Pay; Raymond Qu, CEO of Geoswift; Jeff Parker, Managing Director of WorldFirst Asia-Pacific; Eric Gu, founder & CEO of Metaverse; and experts such as Dr. Ben Shenglin, Dean of Zhejiang University’s Academy of Internet Finance.
Coming in second and third place, China Rapid Finance Ltd. (NYSE: XRF) and JP Holdings Ltd. (NYSE: JP) both soared 8 percent to close at $5.17 and $19.85 per share, respectively, while Jianpu Technology Inc. (NYSE:JT) rose nearly 6 percent to $7.28 per share.
bitJob, the P2P marketplace that connects students and businesses, is announcing today its partnership with the Blockchain projects division inside the Dutch government, to deploy its pilot project in Holland. The marketplace, developed by bitJob, bridges the gap between businesses and students by enabling both sides to offer/look for employment with a technology that promotes honesty, immediacy, and robustness.
Opiria & PDATA token: peer reviewed token sale from Germany (Opiria email), Rated: B
Opiria allows consumers to sell their personal data and companies to buy personal data directly from consumers without a veiled middleman in a fully transparent and secure way.
The following quick-start guide will explain the 7 steps that you need to follow to launch your business venture.
Make Sure There Is a Market for Your Idea
The very first step you should take is to validate your idea or concept. You need to make sure that there is a market for your idea.
Create a Basic Business and Marketing Plan
If you are trying to launch your product or service as soon as possible, you will still need a solid business and marketing plan. You do not need to be completely detailed, but you should have a good plan in place.
Obtain Funding for Your Idea
Another way to get financing is to use P2P (peer to peer) lending. This is similar to crowdfunding, which is another option. With both P2P lending and crowdfunding, you will need to properly explain the value of your product or service. Also, it may take a while to obtain all the funding that you require.
Research Your Target Demographic
Once you get funding, you will need to start researching your target demographic. You need to know who you are marketing to before you start a marketing campaign.
Create a Website
You do not need to spend a lot to build a website. There are several affordable options with easy to use website builders. These website builders include drag and drop layouts, so anyone can build their own website. A few options include WordPress, Wix, and SquareSpace.
Decide on a Business Structure
The next step is to choose a business structure. This is essential and should be decided before you release your product or service.
Start Marketing Your Product or Service
The final step is to begin marketing your product or service.
Revolut will be using Global Processing Services (GPS) for the launch of its multi-currency FX app in the APAC region.
Revolut will unleash its app, starting with New Zealand, Singapore and Japan. GPS announced the deal during the Lord Mayor of the City of London’s UK Business delegation, which is currently in Australia this week.
She found Beehive, a Dubai-based peer-to-peer lending platform. Through Beehive, Lowmass borrowed $54,000 in late 2016 at an interest rate of 9.89%. Although it took about the same amount of time to get a loan from Beehive as it did through the bank, Lowmass says, “the funds were raised cleanly and extremely quickly and we were delighted with the resultinginterest rate we ended up paying.”
It has 6,000 registered investors—mostly from the U.A.E.—and has channeled a total of $40 million to borrowers.
Africa is now at the forefront of fintech with 57.6% of the world’s 174 million active registered mobile money accounts (100.1 million) in Sub-Saharan Africa. Fintech in Africa is predicted to grow from US$ 200 million to US$ 3 billion by 2020. As Ecobank works seamlessly across 36 countries in total, Ecobank is also the only bank that allows customers to transact more easily across borders.
Ecobank’s mobile app allows customers in any of the 33 African countries in which it operates to check balances, pay bills and merchants, and many other services. Rwanda, where the summit is taking place, has the second highest use of mobiles in Africa, with more than 50% of the population unique subscribers. Kenya has the highest penetration rate of almost 60% of the population.
Vested Ventures, the investment arm of the fastest growing public relations agency globally, Vested, announced it has successfully completed a seed round investment in Vancouver financial software company Dojo Technology Corp (“Dojo”).
Dojo’s iOS and Android-friendly mobile platform reimagines how families and young people interact with their banks and credit unions by providing reward-based gamification and nudging users towards positive financial habits.