Friday June 1 2018, Daily News Digest

Greensky financials

News Comments Today’s main news: One student saved $20K on a SoFi student loan. PayPal, Google deepen partnership. Zopa to hire a social media strategist. Ant Financial is a top 10 global bank. Today’s main analysis: Improved MPL pools are no guarantee of ABS performance. Today’s thought-provoking articles: A deeper look at GreenSky. Quants and fundamentalists. Ways to impress a lead investor. Helping […]

Greensky financials

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United States

‘I’m saving over $ 20,000’: Why you should consider refinancing your student loans through SoFi (Business Insider) Rated: AAA

Student debt is growing in the US and looming as a major ongoing issue. With a total of $1.48 trillion in student loan debt in the US, spread among 44 million borrowers, Americans now have more student loan debt than credit card debt, according to Student Loan Hero.

Interest rates, meanwhile, are punishing, even more so depending on the type of loan you get, and the level of education you’re paying for. According to data from the Department of Education, rates range from around 3.5% to as high as 8.5% — with most types of loans floating in the 5-7% range. That’s extraordinarily high when you consider that many auto loan rates and even mortgages are lower.

GreenSky: Clear Skies Ahead (Seeking Alpha) Rated: AAA

The company offered 38.0 million shares to the public that priced at the upper end of the range at $23. The over allotment grant added another 5.7 million shares to the total offering. Selling shareholders offered all of the shares with gross proceeds of $1 billion.

GreenSky ended the day virtually unchanged at $23.26 at a time when most IPOs trade in more volatile ranges. The stock only had a range of $22.05 to $23.36 suggesting minimal initial interest by traders.

At the current price of $26.70, GreenSky has a market value of over $5.1 billion on 190 million shares outstanding (including the 5.7 million over-allotment option) with sales on pace to likely top $400 million this year.

The numbers though suggest anything but a boring company. Transaction volume jumped 47% to $1.0 billion during the March quarter and active merchants grew equally impressive at 52%. The fintech is even profitable.

Source: GreenSky Prospectus

PayPal and Google are deepening their partnership (Business Insider) Rated: AAA

PayPal and Google are extending their payments relationship across Google’s entire ecosystem, according to Finextra and TechCrunch. The two firms have worked together for awhile, as customers are able to integrate their PayPal accounts directly into Google Pay, Google’s mobile wallet.

But now, they’re taking the partnership a step further, allowing customers to enter their PayPal credentials once and then have them available for various types of payments, including bill pay and peer-to-peer (P2P) payments, across Google offerings such as Gmail, Google Play, Google Store, and YouTube. The partnership is expected to roll out in full later this year.

Improved MPL pools no guarantee of ABS performance, says Fitch (Asset Securitization Report) Rated: AAA

Marketplace lenders such as LendingClub and Prosper have made strides in improving underwriting standards in the past year.

In a report issued Thursday, Fitch said investors should still be wary of assuming new-issue MPL securitizations are a step up in quality over previous ABS deals, even though firms such as LendingClub and Prosper have taken steps to tighten lending standards as well as pool greater concentrations of borrowers with higher credit scores into their recent ABS deals.

LendingClub (NYSE:LC), for instance, boosted the weighted average FICO of its most recent prime/near-prime consumer-loan securitizations in December to 703, compared with 692 in its first asset-backed transaction of 2017.

Source: Asset Securitization Report

LendingClub’s most recent self-sponsored transaction, Consumer Loan Underlying Bond (CLUB) Credit Trust 2018-NP1, had its base-case loss range tightened to 13.25%-15.25% by Kroll Bond Rating Agency, compared with 14%-16% in its CLUB 2017-P2 transaction. (In December, LendingClub pooled a collection of subprime loans with credit scores below 660, with a base-case loss range of 19.65%-21.65%.)

QUANTS AND FUNDAMENTALISTS UNITE! (All About Alpha) Rated: AAA

But the Bloomberg Professional Services Blog has run a piece recently on “quantamental” investing, indicating that a merger of the two approaches is underway. Darwinian pressures aren’t kind to presuppositions or to the purity of paradigms. And it is survival of the fittest that is at work here, because fitness requires on the one hand that the quants use good (human) judgment to monitor and adjust the investment process to the prevailing market conditions, while it also requires that any workable fundamental approach employ “promising aspects of technology … to reduce bias and random noise.”

“Alternative data” means what it sounds like it means: every sort of datum that one would not traditionally have expected to come up in a discussion of trades, investments, or portfolio allocations.

These sources can include (Bloomberg’s list), “social media posts, credit card accounts, online browsing activity, foot traffic and weather patterns.” Any and all of these can include clues to ongoing and future trends. The use of any such source, or any cross-referencing of sources that can produce patterns, may be novel this week, customary next week, and a bare minimum for survival in the trading jungle the week after that.

Millennials are leading an investment revolution — here’s what makes their generation different (Business Insider) Rated:AAA

Nuveen’s “Third Annual Responsible Investing Survey” of over 1,000 affluent investors found there was increased interest in working for, buying from, and investing in socially responsible companies. This is even more true among the millennials surveyed.

Some 92% of millennials agreed with the statement “I care more about having a positive impact on society than doing well financially” compared to 52% of nonmillennials.

Source: Business Insider

We interviewed a handful of millennials, asking them what makes their generation different. They answered: access to information, aligning themselves with brands on social media, and growing up in more comfortable economic circumstances than their parents and grandparents.

Source: Business Insider

New Report on the Impact of Online Lenders on Small Businesses (Lend Academy) Rated: A

Most of us are aware of the importance of small businesses in the US economy. Small businesses employ over half of private-sector workers in the US, so access to capital for small businesses is critical to their success. Fortunately, online lenders such as the ones mentioned in the report have focused on serving the needs of businesses and activity has picked up over the last few years. Both awareness of these alternative options and the amount lent on these platforms is increasing. Originations at five leading online small business lenders increased by 50% in three years, from $2.6 billion in 2015 to $3.9 billion in 2017.

Nearly $10 billion of funding was provided to 180,000 small businesses from 2015 to 2017 according to data which included leading platforms OnDeckKabbage and Lendio. This activity has generated $37.7 billion in gross output, created 358,911 jobs and $12.6 billion in wages.

Why Foreign Investors Love U.S. Commercial Real Estate, And Why More Will Follow (Forbes) Rated: A

Despite fears of trade wars and increased protectionism, foreign investment in the United States remains robust. In fact, the U.S. continues to be the single largest recipient of foreign direct investment (FDI) in the world: more than 

Better Get Your AI Game On (Prime Meridian Capital Management) Rated: A

The AI and algo game is nothing new really. A couple decades ago many called it neural networks and neural computing, and that has evolved into today’s version of AI. But what is different today and so disruptive are three elements that were not there in the early days of machine learning: computing power and cloud-based systems, a growing and global population of computer and data scientists and data. Lots of lots of data.

Those three are increasingly working together in the alternative investments markets space, enabling firms to make much more accurate, and potentially, more profitable investments. The AI topic, discussed at Lendit Fintech USA 2018 conference in San Francisco in April, revealed just how integrated it is already and where it is going in the coming months and years. Listen to the full recording HERE.

Former Amex chief backs immigrant credit score provider (Financial Times) Rated: A

The former American Express chief Ken Chenault is backing a start-up company that provides credit scores for immigrants who struggle to rent apartments and access other basic services upon their arrival in the US.

Workers on overseas postings, international students and other newcomers have long struggled to secure credit cards and other loans because American institutions hold no records on them.

Nova Credit, which is among a new breed of Silicon Valley companies seeking to shake up the financial system, aims to address the problem. It has secured funding from General Catalyst, the venture capital group that has stood behind companies including Snap, Stripe and Warby Parker.

OnDeck, Kabbage, Lendio Continue to Drive Up Their Share of Small Business Lending (Bank Innovation) Rated: A

For online lenders, small business lending continues to grow into big business. Online lenders continue to grow their originations of small business loans, according to a new study released today by Washington D.C.-based economic research firm NDP.

Emerge With An Alternative (Scotsman Guide) Rated: A

Alternative financing in the form of crowdfunding may be a trending topic, but it’s hardly new. Mozart used the idea in the 1780s to finance the composition of one of his early piano concertos, offering prospective backers copies of his manuscript in exchange for their financial support.

Why choose alternative financing? Because a lot of great deals may never get done without it. Many banks and other traditional lenders won’t finance transactions valued under $50 million because there’s simply not enough profit in it for them. And, because of the late stage of the current real estate cycle, many other lenders are feeling skittish or are simply tapped out. That leaves a big gap in the financing market — and a big opportunity for nontraditional sources of capital.

Layered Insight Snags Top CISOs As Advisors (PR Newswire) Rated: B

Layered Insight announced today that Tim McKnight, EVP & Chief Information Security Officer at Thomson Reuters, and Richard Seiersen, SVP & Chief Information Security Officer at Lending Club, have joined Layered Insight’s Advisory Board.

Renew Financial Elevates Financial Services Veteran Kirk Inglis to CEO (PR Newswire) Rated: B

Renew Financial, the inventor of Property Assessed Clean Energy (PACE) financing and a leading provider of financing for home improvements, today announced that Kirk Inglis, currently Renew Financial’s Chief Financial Officer (CFO), will succeed Cisco DeVries as Chief Executive Officer (CEO) of the company. Mr. Inglis brings more than 20 years of experience in financial services and technology with a deep expertise in consumer lending. His career includes senior finance and operating roles with Calypso Technology, Prosper Marketplace and Providian Financial Corporation. Mr. DeVries will become the company’s Chief Innovation Officer to focus on key growth opportunities and to help innovate new financing tools for clean energy. DeVries will continue to serve on Renew Financial’s board of directors.

United Kingdom

Zopa to hire first social media executive to broaden customer focus (Peer2Peer Finance) Rated: AAA

ZOPA is hiring its first-ever social media executive in an effort to broaden its customer base.

The peer-to-peer lending platform is currently advertising for a person who can “translate the brand and social media strategy into tangible plans which encompass day to day content, product content and campaign content”.

The role will involve working with the wider marketing and product team, as well as analysing and optimising performance by channel.

LendInvest Debuts First Official BTL Legal Panel Six Months After Product Launch (Crowdfund Insider) Rated: A

LendInvest announced on Thursday it has named firms JMW Solicitors LLP and Lightfoots Solicitors as its first official panel of solicitors for its Buy-to-Let product. According to the online lender, JMW Solicitors is one of the North West’s leading full-service law firms, with significant experience in handling a range of real estate finance cases for both institutional and private lenders. Lightfoots are experts in complex property finance cases and have over 30 years experience providing legal services to mortgage lenders. Both firms are experienced in dealing with introducer-led business, offering dual representation and coverage across England and Wales.

Allianz leads £40m funding round in Moneyfarm (Fintech Futures) Rated: A

Digital wealth manager Moneyfarm has got £40 million in a Series B funding round – meaning it has secured close to £60 million in capital so far.

Moneyfarm calls this the “largest funding round by a European digital wealth manager to date” and the company, which launched a personal pension (SIPP) in March this year, will use the capital to launch solutions and expand its investment strategy.

The round was led by Allianz Asset Management, the investment arm of global insurer Allianz, which first invested in Moneyfarm in September 2016.

SME funding platform partners with Hiscox (Peer2Peer Finance) Rated: B

SWOOP, a new small- and medium-sized enterprise (SME) funding platform, has partnered with Hiscox on the insurer’s business accelerator portal.

Swoop, which is a re-brand of BizFly, connects businesses in need of finance with over 400 lenders including peer-to-peer platforms such as Funding Circle and Growth Street.

Ashley Finance appoints bridging regional sales director (Bridging & Commercial) Rated: B

Ashley Finance has appointed Sam Cousins (pictured above) as a bridging regional sales director.

Sam began his career in finance in the P2P sector focusing on bridging and business loans.

He also spent two years at P2P lending platform Lendy, where he worked on bridging cases and building up a network.

China

Ant Financial is Now a Top 10 “Bank” Globally (Lend Academy) Rated: AAA

Source: Lend Academy

It had been rumored for some time now. Ant Financial, the Chinese financial behemoth, was raising a very large funding round that would value the company at $150 billion. It has been reported extensively today that this funding round has in fact closed. Ant Financial has raised $10 billion at a $150 billion valuation.

For a brief primer on Ant Financial there is a decent summary on their English language websitebut for a deeper understanding I recommend you read Chris Skinner’s new book, Digital Human (the Kindle version is available now). This has a 30,000 word case study that not only shares the history of Ant Financial but also why they are one of the world’s most forward thinking companies. And if you think they are just a Chinese story, think again. Ant Financial embodies the future of financial services and they will, in my opinion, shape the future of financial services more than any other fintech company on the planet.

Dianrong to land on distributed ledger Corda (Tech Node) Rated: A

Dianrong (点融), a leading Chinese online P2P lending service provider today announced cooperation with R3, a global platform specializing in distributed data technology. The Chinese fintech company’s supply chain finance solutions will land on Corda, R3’s open-source distributed ledger.

Dianrong hopes the cooperation will enable the company’s end-to-end service through a comprehensive supply chain and increase efficiency by ensuring transparency. The company’s initiative is to allow micro and small businesses to access credit and financial services.

Australia

Neo lender increases loan limits (Australian Broker) Rated: AAA

As of this week, Wisr will increase its personal loan limit from $35,000 up to $50,000, with a comparative interest rate up to 5% p.a. lower than the four major banks.

Loans will be available for any worthwhile purpose over three or five years, with a comparison rate of 9.36% p.a. for borrowers with a strong credit rating. The neo-lender also offers no early repayment or exit fees.

Analysis of new mortgage lending shows the slump in Auckland home sales has affected all types of buyers (Interest) Rated: A

The report analyses the number of mortgages taken out in the 12 month periods to the end of March from 2014 to March 2018, and breaks them into borrower types – first home buyers, investors, people moving house, those staying put but refinancing and those buying a second home.

According to Real Estate Institute of New Zealand figures, Auckland property sales peaked in their current cycle in the 12 months to March 2016, when 30,631 homes were sold.

That number has steadily declined and in the 12 months to March this year had slumped to 21,628, a decline of 29.4%.

India

Ways to Impress a Leading Investor for Your First Venture Capital Fund (Entrepreneur) Rated: AAA

Today’s investors are undoubtedly looking at technology-driven startups with a difference. The best illustration here is Flipkart which managed to introduce the right technology-driven models at a time when people had to wait endlessly to buy products of their choice. With Walmart now having acquired majority stakes in Flipkart, more technology-driven models could potentially come to the fore.

Mobikwik plans to turn around biz with UPI and loans: But is it too late? (EnTrackr) Rated: A

The digital wallet company finally integrated its platform with government-owned unified payment interface (UPI) last week. A week later, numbers related to UPI have popped up that has reached a 5 million mark via @ikwik handles, a VPA (Virtual payment address) handle for UPI, according to an ET report.

The platform is also planning to partner with NBFCs to disburse loans to small businesses in the range of Rs 20,000 up to Rs 5 lakh.

Asia

Helping SMEs build their business with P2P financing (Tech Wire) Rated: AAA

In Malaysia, regional P2P digital financing platform Funding Societies has announced an alliance with United Overseas Bank (UOB), to provide P2P lending to small businesses.

Using the Funding Societies platform, small businesses banking with UOB Malaysia can raise up to MYR500,000 (US$125,720) in capital directly from investors.

Funding Societies is the first P2P financing service introduced in Malaysia. Based in Singapore, the company also has a presence in Indonesia, where it’s known as Modalku.

Africa

Meet Piggybank.ng, The Nigerian FinTech Startup That Just Raised $ 1.1million (Forbes) Rated: AAA

A two-year old Nigerian fintech start-up this week announced that it has raised a $1.1M Seed Fundraise, to grow its online savings platform, 

SA’s Crossfin, Investec to back early-stage fintech startups (Disrupt Africa) Rated: A

South African investment fund Crossfin has concluded a deal with banking and asset management group Investec that will see the two companies identify early-stage fintech startups in which to invest through Crossfin’s angel funding arm Blue Garnet Investments.

The Crossfin fund, which has a particular focus on fintech startups, was formed in June of last year after South Africa-based private equity and venture capital firm Capital Eye and the Multiply Group signed a strategic investment partnership.

Capital Eye manages a portfolio of investments spread primarily across Sub-Saharan Africa, including South African fintech company wiGroup, which Investec has also invested in.

MENA

Fundbox Wins The Prestigious Israeli Atlas Award For Best Fintech Startup (The Virginian Pilot) Rated: A

Today, Fundbox, the small business growth company, announced that the company has won the coveted Israeli Atlas Award for Best Fintech Start-Up. For a third year in a row, the 2018 Israeli Atlas Award event was held in cooperation with the Ayn Rand Center, The Marker and such leading partners as, BDI, IVC, Bank Hapoalim and Israel Aerospace Industries. The prize is awarded to those Israeli startups that have created a technology, idea or product of exceptional value in Israel over the past year.

Authors:

George Popescu
Allen Taylor

Alternative Credit Council Global Summit 2018

alternative credit summit

The Alternative Credit Council (ACC) is hosting its inaugural flagship event for the private credit sector. This will take place on the morning of 22 May 2018 at Farmers’ & Fletchers’ Hall in the City. Date: 22 May 2018 Time: 8:30AM – 2:00PM Location: Farmers & Fletchers 3 Cloth Street London EC1A 7LD Discussions will look […]

alternative credit summit

The Alternative Credit Council (ACC) is hosting its inaugural flagship event for the private credit sector. This will take place on the morning of 22 May 2018 at Farmers’ & Fletchers’ Hall in the City.

Date: 22 May 2018
Time: 8:30AM – 2:00PM
Location: Farmers & Fletchers
3 Cloth Street
London
EC1A 7LD

Discussions will look at a range of themes including:

  • Building an asset class to last: market discipline in private credit
  • Responsible lending, investor protection and access to finance
  • Technology in private credit: enthusiastic adoption or reluctant acceptance
  • Standing out from the crowd

Confirmed speakers include:

  • Deborah Zurkow, Allianz GI
  • Iain Forrester, Aviva Investors
  • Steve Sabatier, Chenavari Credit Partners
  • Stuart Fiertz, Cheyne Capital
  • Chris Fowler, CVC Credit Partners
  • Max Mitchell, ICG
  • Ludo Bammens, KKR
  • Rod Lockhart, Lendinvest
  • Elissa Kluever, OMNI Partners
  • Christian Hinze, Stepstone
  • Maxime Laurent-Bellue, Tikehau Investment Management

Register here.

Wednesday February 28 2018, Daily News Digest

marketplace lending investment

News Comments Today’s main news: Virgin Money to launch a challenger bank. Equifax partners with Entersekt on digital ID authentication. 1st loan originator in UK joins Mintos. Citi drops $75M into Pagaya. IOU Financial extends Midcap credit facility. Today’s main analysis: Global fintech VC investment sets new record. Global marketplace lending investment in 2017. Today’s thought-provoking articles: Goldman Sachs’ plan […]

marketplace lending investment

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United States

 

Goldman Sachs, Adviser to the Elite, Wants to Be Your Local Bank (WSJ), Rated: AAA

In a glass-walled tower in Utah’s capital, hundreds of Goldman employees are building what amounts to one of the world’s most ambitious consumer-finance startups.

Their address, 111 Main St., stands as a symbol of the changes afoot inside the firm, better known as an elite adviser to big companies and billionaires. Struggling to make money in the postcrisis world, Goldman is pushing into businesses it once dismissed as pedestrian and gimmicky, assembling a suite of banking products for the middle class it hopes will power growth.

Goldman 18 months ago began making online loans of a few thousand dollars under the brand Marcus, named after founder Marcus Goldman. Individuals once needed $10 million to get the attention of Goldman’s elite private bankers. Today, customers can open a Marcus savings account with as little as $1.

 

Where’s the best place to open a small business? (The Sacramento Bee), Rated: A

LendingTree said Sacramento ascended to the top of the list in a study that included data from more 80,000 queries submitted by new small business owners seeking loan offers through LendingTree’s small business loan marketplace to determine where businesses tend to do the best.

Sacramento was one of three California cities on the 10-best list, joining Fresno at ninth and Los Angeles at 10th. Following Sacramento on the list were Grand Rapids, Mich; Portland, Ore.; Knoxville, Tenn.; Denver; Seattle; Tulsa, Okla; Albuquerque, N.M.; Fresno; Los Angeles; and Oklahoma City, respectively. Los Angeles and Oklahoma City tied for 10th.

Cincinnati topped the list of the 10 worst cities to start a new small business. No California cities were on the 10-worst list.

Fiserv Consumer Survey Finds Digital Experiences Factor in Life’s Most Important Financial Decisions (BusinessWire), Rated: AAA

For instance, four of the top five loan payment methods are now electronic, and 21 percent of millennial investors use a robo-advisor service to make investments.

Affluent Consumers and Financial Advice
Human interactions remain an important part of financial advice, especially for the 34 percent of consumers with at least $100,000 in household investable assets. Fifty-eight percent of these affluent consumers work with a financial advisor. Among those without an advisor, only 11 percent report high interest (8-10 on a scale of 0-10) in using one. At the same time, 32 percent of affluent consumers who invest their own money grade their knowledge and expertise as a “C” or lower, suggesting an opportunity to bridge the gap with a hybrid of human and digital advice.

Among all consumers who invest on their own, only 8 percent use a robo-advisor service. However, use of such a service is much more likely among millennials (21 percent) and urban consumers (18 percent).

Rates, Fees and Service Prevail
Topping the list of selection factors among those with at least one loan are interest rates (83 percent) and low fees/service charges (83 percent), followed by customer service (75 percent), company reputation (70 percent), and knowledge of staff (65 percent). Sixty-five percent of consumers say prior experience with a lender is important.

Many consumers expressed willingness to try new ways of interacting with their lender, if there’s a benefit. For instance, if it makes the loan process faster, more than half of consumers would be willing to use a mobile device to e-sign loan documents (56 percent), take and upload photos of loan documents (54 percent), and verify their identity with a photo (51 percent). Forty-two percent of consumers indicate they would be willing to provide access to their financial information by providing their credentials to other online banking applications, up from 32 percent in 2016.

Digital channels, especially mobile, are now leading ways of communicating with a lender, although context matters based on the interaction. A lender’s mobile app is the preferred way to check when a next loan payment is due (21 percent), check the balance term (20 percent) and request a payoff (17 percent), among consumers who have conducted each of these activities in the past six months. For account questions, consumers significantly favor speaking live with a representative via phone (21 percent) over using an automated voice response system (12 percent), e-chat (11 percent) or the mobile app (11 percent).

As online lending grows up, banks work to strengthen partnerships (Tearsheet), Rated: A

Marketplace lending as an industry is hitting its stride. Some platforms are becoming profitable, some are diversifying, new players are entering the market with new business models and the competition is heating up. But that means banks need to start strengthening ties with their online lending partners.

As more consumer-facing fintech companies are learning, that’s best done by building products that make people’s lives easier.

 

 

Fintech Startups Need Industry Partners to Thrive, Report Says (Bloomberg), Rated: B

More than 75 percent of fintech executives surveyed in a new report said their primary business objective is to collaborate with traditional firms, such as banks and insurance companies. Only 18 percent said the main goal was to compete with the established players.

According to the World FinTech Report 2018 from consulting firm Capgemini and corporate networking website LinkedIn Corp., most of the startups are likely to fail if they don’t build partnerships, despite raising more than $110 billion since 2009. The survey, published Tuesday, was based on the responses of 110 global financial technology firms.

Varo Money is bringing bank fees and financial health into its marketing (Tearsheet), Rated: A

Varo Money has been targeting customers of big banks whose fees they’re tired of having to understand and pay. Despite its appeal to potential customers to switch to Varo, its ads don’t call out specific companies, as some of its peers do.

Coming to your banking app soon: Predictive analytics (Bankrate), Rated: A

Bank of America will let mobile banking customers use its new digital assistant, Erica, in March. Besides helping consumers complete routine tasks like transferring funds, Erica will offer financial advice tailored for each user.

If you have a low balance and you’ve spent a lot of money, Erica might warn that you are in danger of overdrawing your checking account. Or she could share opportunities to save additional money.

Wells Fargo has made providing customers with advanced digital tools a top priority. In February, its 17 million mobile users with consumer deposit accounts found themselves with a new predictive banking feature.

Wells Fargo confirmed that these new mobile capabilities are powered by Personetics, a company providing banking solutions that anticipate what consumers might need in the future. Personetics also powers Royal Bank of Canada’s free automated savings tool, NOMI Find & Save, which gives mobile banking customers customized tips and alerts.

Companies like Saylent are trying to help banks make sense of their data resources by identifying the customers they should focus on. Saylent gives customers tools to target people that are shopping for a car loan or a mortgage. The platform will be used by institutions like BankFirst Financial Services, a community-based institution headquartered in Mississippi.

B of A is latest big bank to announce aggressive branch expansion (American Banker), Rated: A

Bank of America plans to open more than 500 branches over the next four years as part of a large-scale investment in retail banking.

The $2.28 trillion-asset company said in a press release Monday that it will hire more than 5,400 employees as part of the expansion. The Charlotte, N.C., company did not specify where the new branches will be located, nor did it say how much the proposed brick-and-mortar expansion plan would cost.

Don’t write off branch banking yet, says KeyBank Colorado exec (Denver Business Journal), Rated: B

Customers “want to talk to people. They want to be guided,” says Michael Walters.

Fintechs’ charter hopes may lie with new FDIC board (American Banker), Rated: A

Among federal bank regulators, the Office of the Comptroller of the Currency has been the most active on fintech chartering options. But another agency, the Federal Deposit Insurance Corp., may provide crucial guidance for fintechs in the shorter term.

The FDIC still has pending an application by Square for an industrial loan company, a limited-purpose bank typically chartered in Utah that receives deposit insurance.

Can Crowdfunding Mortgage Down Payments Make Homes Affordable? (SavingAdvice), Rated: A

A lot what’s being called crowdfunding is actually more like matching funds or subsidies for down payments. The growth of these options seems to be a sign of the times — so few people can afford to buy homes nowadays that the industry has gotten creative.

Unison Financial (formerly known as Rex Home Buyer) offers down payment subsidies in exchange for equity stakes in the home. The program requires that the home buyer put up a down payment of at least 10%.

HomeFundMe provides incentives for individuals to seek out grants that are actually matching funds on down payments. Although the match ratio is impressive, two-to-one, the total grant limited to $2,500 — do the math and you see that the buyer would need to come up with another $5,000 at that maximum amount.

With most residential mortgage lenders requiring minimum down payments of at least 5%, that limits the buyer to homes worth no more than $150,000. That’s well below the average home price in the U.S. — and even beneath affordable housing program prices in many cities.

HOW INVESTING IN CROWDFUNDED REAL ESTATE IMPACTS YOUR TAXES (The College Investor), Rated: A

There are two types of investors in a crowdfunded real estate investment: Accredited and non accredited.

An accredited investor has more opportunities to invest than a non accredited investor but they also bear more risks. SEC Rule 501 of Regulation D defines accredited investor.

These investors have an annual income of least $200,000 for the previous two years and a net worth of more than $1 million.

Non accredited investors buying shares of a fund have the simplest tax impacts.

They receive a 1099-INT from the crowdfunding real estate company they are investing with and are taxed at their ordinary income tax rate.

If the investor is invested in multiple funds, their investments can be aggregated into one 1099-INT rather than receiving an individual 1099-INT for each fund.

For investors who are investing in equity investments, things get more complicated. These investors will receive a K1 tax form. A K1 is for income through business partnerships.

PeerStreet Named a Finalist in Top Real Estate Platform Category in the Second Annual LendIt Fintech Industry Awards Competition (BusinessWire), Rated: B

LendIt Fintech recently announced that they have selected PeerStreet as a finalist in the Top Real Estate Platform category for the LendIt Fintech Industry Awards.

PawnGuru pulls in $ 2.5 mln Series A (PE Hub), Rated: A

PawnGuru, an online marketplace connecting pawn shops and consumers, today announces the close of a $2.5 million Series A. With this funding, PawnGuru intends to expand its network of shops within the US, as well as to international markets, giving consumers worldwide the power to buy directly from local pawn shops online.

 

5 Financial Mistakes That Push Striving Startups Into Bankruptcy (Newsmax), Rated: A

  1. Think Big/Start Big Syndrome – You are permitted to think big but start small to have adequate fund to invest in other areas of the business. When you don’t properly handle these areas, your business might join the 90% businesses that never survived after 5 years.
  2. Lack of Financial Mentorship
  3. Inability to Utilize Viable Loan Options – Bank loans, equipment loans, invoices financing, car title loans, peer-to-peer lending networks and more, are avenues small business owners can obtain loans. It’s however pertinent to get information and evaluate the cost implications of taking a loan to finance your business.
  4. Under-utilization of Digital Technology – In terms of advertising, marketing, automation, time management, human resource functions, cloud computing, data management, blockchain technology etc. digital technology has infused speed and efficiency which has resulted in reduced cost to carryout daily business operations.
  5. Poor Recording of Cash Flow

Understanding the International Student Lending Ecosystem in the U.S. (Lend Academy), Rated: A

There are almost 1.2 million international students currently studying in the United States. They hail from countries all over the world with almost a third – more than 360,000 – coming from China and just over 205,000 coming from India. South Korea and Saudi Arabia follow behind dropping down to just over 70,000 and 55,000, respectively. With education costs often approaching six figures and beyond, an international student loan ecosystem has emerged both in the U.S. and abroad to serve the educational funding needs of this demographic.

Navigate your student-loan maze with this Philly-made calculator (Technical.ly), Rated: B

From his home office in Fishtown, Temple University grad Mason Gallik, 23, is hoping his college debt calculator can help others from making bad choices.

“It’s about being realistic about your decisions,” said Gallik, the founder of LoanMajor. “Sometimes it’s smart to look at college from a financial side and not just an emotional one.”

Currently, the company’s source of income is through affiliate links with loan marketplace Credible. For every visitor that LoanMajor leads to Credible, they get a fee. Another source of revenue Gallik hopes to set up is through affiliate links to credit card companies and banks.

United Kingdom

U.K.’s Virgin Money to Launch Digital Challenger Bank (Bank Innovation), Rated: AAA

U.K.-based lender Virgin Money said it will offer current accounts and savings products.

In its earnings call today, Virgin Money said it will begin testing these products later in the year and has already spent £38.3 million ($53.3 million) over the past year developing this digital bank.

Amigo Loans hires JP Morgan and RBC to prepare 500 million pound London IPO (Reuters), Rate: AAA

British subprime lender Amigo Loans is preparing for a stock market float in London that could value the consumer credit firm at more than $700 million.

1PM Joins Online Business Loan Marketplace For Retail Investors Mintos (London South East), Rated: AAA

1pm PLC said Tuesday that it has entered into a cooperation agreement with AS Mintos Marketplace to be a loan originator on its online loan marketplace.

The AIM-listed financial services provider to UK businesses said that it is the first loan originator from the UK to join the Mintos marketplace, which already has about 30 other loan originators globally.

British banks ordered to help people pay off credit card debts (Reuters), Rated: A

Britain’s Financial Conduct Authority ordered banks on Tuesday to take steps to help people with persistent credit card debt to keep up with repayments.

The FCA’s new rules will, however, will still allow banks to ultimately suspend a credit card if a customer fails to make any progress in repaying debts.

European Union

MIFID II aids RoboAdvice (AltFi), Rated: A

Unfortunately, in the current marketplace many opaque structures lead to charges that even a Finance degree can’t help unravel.  But technology is here to help and most of the new Robo-Advisors have simple and transparent fee structures enabling savers to compare different product offerings quickly and easily.

Whilst many in Financial Services have been critical of the growing ‘regulatory burden’ the changes MiFiD II will bring should be net positive for end users and ultimately society. Although legacy providers are likely to see revenues and margins shrink.

International

Equifax is partnering with a digital ID verification company (Business Insider), Rated: AAA

US credit bureau Equifax has formed a partnershipwith South Africa-based Entersekt, a company specializing in customer authentication and device security.

Fintech Pagaya Receives $ 75 Million in Debt Financing from Citi (Crowdfund Insider), Rated: AAA

Pagaya Investments, a Fintech company in the asset management space, has received $75 million in debt financing from Citi. Simultaneously, Pagaya announced the creation of the “Opportunity Fund” to meet growing institutional interest in consumer credit as an asset class.

Global Venture Capital Investment in Fintech Industry Set Record in 2017, Accenture Analysis Finds (BusinessWire), Rated: AAA

Fintech financing rose 18 percent in 2017, to US$27.4 billion, with the value of deals in the U.S. jumping 31 percent, to $11.3 billion. Deal values almost quadrupled in the U.K., to US$3.4 billion, and soared nearly fivefold in India, to US$2.4 billion. The number of fintech deals also rose sharply, from just over 1,800 in 2016 to nearly 2,700 in 2017, underscoring continued appetite from investors scouring the globe for innovation in insurance, banking and capital markets startups.

“Much of the growth, particularly in the U.S. and UK, has been driven by big new investment flows from China, Russia, the Middle East and other emerging economies,” said Julian Skan, senior managing director in Accenture’s Financial Services practice.

“Much of the growth, particularly in the U.S. and UK, has been driven by big new investment flows from China, Russia, the Middle East and other emerging economies,” said Julian Skan, senior managing director in Accenture’s Financial Services practice.

India, US, UK drove global growth

Kabbage Inc, a U.S. online lender for small businesses, alone raised US$900 million in three separate rounds in 2017. Online lender Social Finance Inc, also known as SoFi, raised US$500 million in February, and LendingPoint raised US$500 million from a credit transaction in September. As startups grow and their businesses mature, funding rounds have increased in size, while some companies have opted to use credit facilities to speed up their expansion.

In the U.K., digital insurance distributor BGL Group raised US$900 million, pushing overall fintech investments in the country to an all-time high of US$3.4 billion. Payments venture TransferWise had the second-largest fundraising in the U.K., raising US$280 million.

India’s digital payments startup Paytm received US$1.4 billion in venture capital, helping drive fintech fundraising activity in the country to nearly five times the 2016 levels. The number of fintech deals in India increased 65 percent over 2016.

More deals in China, fewer megadeals

Mega fintech deals that had catapulted China to the top destination in the world for venture capital money in 2016 fell in 2017, as investors pulled back after pouring billions of dollars into giant-sized transactions. Fintech funding in the country declined 72 percent in 2017, to US$2.8 billion, from a record US$10 billion in 2016, when several companies – including Ant Financial and wealth management platform Lufax – had multi-billion-dollar financing rounds. The average deal size in China in 2017 was US$19 million, down from US$186 million in 2016, though the country still had large transactions, such as the US$440 million that real estate broker Homelink raised in April and the US$290 million that online finance firm Tuandai raised in June.

P2P and marketplace lending equity investments recover in 2017 to set new record (AltFi), Rated: AAA

Deals in the sector slowed down in 2016 with a year on year decrease of 12.8 per cent, possibly as a result of Lending Club’s annus horribilis. Total amount invested fell from $8.6bn in 2015 to $7.5bn the next year.

However, investment rebounded in 2017 to reach $8.9bn, a year on year increase of 18.6 per cent. The top ten P2P and marketplace Lending deals in 2017 raised half of the total funding for the year, raising a combined total of $4.4bn. The largest deal in 2017 was the previously mentioned $1.2bn Series B round to Lufax, led by COFCO with co-investment from China Minsheng Bank and Guotai Junan Securities.


Creditcoin Turns Digital Wallets into an Investment Market (Coinspeaker), Rated: A

In response to this, two reputed fintech innovators, Gluwa and Aella Credita have joined forces to launch Creditcoin, an inter-blockchain P2P lending market that operates across distributed ledgers ensuring permanent record of transactions that cannot be alter or tampered with.

Allianz Investment Arm Co-Leads Funding Round in Fintech C2FO (Bloomberg), Rated: B

Financial technology startup C2FO raised $100 million in funding in a new round led by the investing arm of global insurance and asset management giant Allianz SE as well as Abu Dhabi’s Mubadala Investment Co.

MSTS Taps World Fuel VP As Head Of Business Development For APAC (Payment Week), Rated: B

Australia

Fintech business lenders to self-regulate (Financial Review), Rated: AAA

A lack of transparency around fintech borrowing costs for small businesses has prompted the industry committing to adopt a code of conduct and standardised interest rate and fee disclosures.

The fintech sector hopes moves to self-regulate will help start-ups win trust and avoid concerns that helped prompt the royal commission into the banks.

The Australian Small Business and Family Enterprise Ombudsman, FinTech Australia and the Bank Doctor, an SME advocate, will drive start-ups to improve disclosures that will allow small business customers to compare total costs, understand obligations and penalties if payments are missed, and ensure disputes are dealt with quickly and fairly.

India

Extending access to credit: Are alternate finance platforms creating tangible impact? (ET Rise), Rated: A

In its ‘Consultation Paper on Peer to Peer Lending’, the RBI highlighted how these web-based platforms are providing easier access of credit to small entrepreneurs by bringing prospective borrowers and lenders together. With more individuals lending to one another, interest rates for borrowers are going down, even as the increased availability of affordable credit stimulates greater financial activity and drives business growth. As a result, consumer segments such as MSMEs – until now either com ..
Borrowers from tier-2 and tier-3 cities comprised 20% and 17% of the total number of loans disbursed. New-to-credit borrowers comprised 35% of fulfilled borrowers on the platform, while those with poor credit ratings accounted for 10% of the overall number. Most strikingly, an analysis of credit bureau reports revealed how only 2.5% of the borrowers from tier-3 cities who received funds from the platform got any loans from other banks or financial institutions after the Faircent loan, underlining the major credit gap that the online platform is plugging within the economy.
Asia

Equity crowdfunding in Japan poised to grow fivefold this year (Asian Review), Rated: AAA

Crowdfunding campaigns that offer stock in exchange for capital are set to swell this year in Japan as the prospect of high returns draws investors to a relatively new channel for fledgling companies.

Indonesia’s P2P firm UangTeman likely to raise up to m Series B (Deal Street Asia), Rated: A

Indonesian peer-to-peer lending platform UangTeman said it is set to raise a Series B financing round by mid-2018, claiming it would be one of the largest such rounds for a fintech firm in Southeast Asia.

Canada

IOU Financial Extends Credit Facility with Midcap Financial (Cision), Rated: AAA

IOU FINANCIAL INC. (“IOU” or “the Company”) (TSXV: IOU), online lender to small businesses (IOUFinancial.com), announced today that it has modified and extended its secured credit facility (the “Credit Facility”) with MidCap Financial, (“Midcap”) until December 31, 2020. The amount of the Credit Facility is USD $20 million, with a term portion equal to USD $15 million and a revolver amount of USD $5 million.

IOU and Midcap have further agreed to allocate USD $1 million from the Credit Facility amount of USD $20 million, to support Canadian loan originations. This will be formalized in a separate amendment to this facility.

Authors:

George Popescu
Allen Taylor

Monday April 24 2017, Daily News Digest

credit card delinquency rates

News Comments Today’s main news: Credit Card ABS vs installment loans ABS comparison. Assetz Capital hits 240M GBP in four years. Octopus Choice close to 50M GBP in first year. Lendix expands to Italy. Today’s main analysis: 90+ wealthtech companies. Today’s thought-provoking articles: 88% of global banks sweat losing revenue to fintechs. 17 fintechs that may become unicorns. China SME […]

credit card delinquency rates

News Comments

United States

  • Credit Card ABS vs installment loans ABS comparison. GP:” People often try to use credit cards data, which there is plenty of, and goes back very far, to predict installment loans behavior. However, Americans have a priority in defaults which is proportional to the pain point if the product stops working. We believe unsecured personal loans are very low on the totem pole of default priorities. PeerIQ here analyzed the difference quantitatively and concluded very interestingly: ‘Peak delinquencies in credit card ABS are ~8% in a stress scenario. By contrast, three-year unsecured personal loans (such as loans in the seminal CHAI shelf) are typically associated with a ~12% cumulative loss estimate (under a benign base case).’ “
  • 90+ companies transforming investment, wealth management. GP:” We saw Wealthfron enter lending last week. Perhaps we should look at a few other companies for partnerships.” AT: “WealthTech as a sub-niche seems to have come out of nowhere. Yet, many of these companies are important to the overall fintech ecosystem, and I see WealthTech growing by leaps and bounds worldwide in the foreseeable future.”
  • Why having a trust strategy is key to fintech’s future. AT: “Building trust is the single most important thing for any financial services company.”
  • Allianz invests in Lemonade. GP:”Insuretech is coming? Is Lemonade the Lending Club of insurance?”
  • NASDAQ announces venture investment program for fintechs. AT: “This is interesting. I like reading the NASDAQ analyses on the industry on NASDAQ’s blog. I’d be interested in seeing how their investments perform, and how they choose which companies to invest in.”
  • North American Financial Institutions go social. GP:” Our readers are already aware of this trend I believe. Nothing really new.”
  • Fintech puts payday lending in old wine in new bottles. GP:” It is very hard to point exactly when innovation happens. Before 1990 there was no online payday lending, because there was no internet. Today it exists. Something did change. Everything we build is built on top of online lending. Perhaps lending was invented when the first money was invented and searching who invented something, for the glory, is not very useful in this case. We are losing time with the history of lending or with the exact meaning of certain words. I would rather look who is making the money, Elevate Credit or brick and mortar stores? Who’s revenue is growing?”
  • Fintech lures MBAs away from banking and consulting. GP:”Fintechs even lures executives and CEOs of Wall Street banks, no wonder MBAs are also following. “AT: “We’re also starting to see banks and traditional financial institutions poach talent from the fintech companies.”
  • Biz2Credit to expand to Puerto Rico. GP:” Puerto Rico doesn’t often make the lending news. I wonder if it is underserved.”
  • Inside Online gives off good vibes with digital branded magazine. AT: “I applaud Elevate Credit starting an online brand magazine. This is one of the most underrated and most effective online marketing strategies to implement, and I’m glad to see at least two companies in this space pursuing this channel.”
  • Elevate appoints Tony Leopold as GM.
  • BMO Harris Bank launches fintech partnership program with 1871.

United Kingdom

European Union

International

Australia

China

India

Asia

  • Indonesia’s fintech landscape. GP:” The Indonesian market is particularly closed to international ownership, investment, etc. However, they are the 4th most populous country in the world and their financial sector is far from being mature. Which leaves a lot of opportunity if people are willing to approach the Indonesian market properly, perhaps in partnership with local entrepreneurs and by structuring firms through local law firms .”
  • ASIC signs agreement with Indonesia.

Africa

News Summary

United States

Credit Trend Through Delinquency Rates (PeerIQ), Rated: AAA

Banks earnings season continued this week following strong Q1 results from JP Morgan and Citi last week. Morgan Stanley beat expectations on each line of business increasing year-over-year profits by 82%. The investment bank also generated 122% YOY revenue growth in the fixed income currency and commodities business. Bank of America exceeded expectations and benefitted from the greater net interest income due to a rise in long-term rates.

For the first time since 2015, GS surprised analysts by missing expectations on top and bottom line performance. Fixed income revenues were flat year-over-year trailing double-digit business unit gains across peers including JPM, C, MS, and BAC.

Bloomberg reports that, Navient, the largest servicer of student loans, reached an agreement to purchase JPMorgan’s approximately $6.9 Bn FFELP education loan portfolio.

In the ABS space, Yirendai reported its progress in funding consumer loan products via ABS. Another Chinese online lender, China Rapid Finance, announced that it plans to list on the NYSE, making it the second Chinese online lender to go public in the US.

We are often asked by investors whether credit card receivables are a proxy for installment loan performance. This week, we dig into credit performance of credit card securitizations representing over $100 Bn+ in consumer credit ABS deals. We include the following issuers in our analysis: American Express, Bank of America, Discover, Capital One, JP Morgan Chase, and Citi.

We compare delinquency and loss levels of credit card ABS to installment loans and conclude that credit card ABS performance is a poor proxy for installment loans, and that installment loan delinquencies are arguably a leading indicator of credit risk.

Credit Card ABS – A Strong History of Credit Performance

The credit card ABS market has historically been the benchmark sector in consumer ABS due to its liquidity, transparency, and strong performance including through the Great Recession.

The Credit Card ABS market is not an originate to distribute risk-transfer market, but rather a critical channel for funding and liquidity. Issuer incentives are strongly aligned with investors due to their dependence on debt capital markets for funding.  Credit Card ABS provides over 50% of funding for card issuers (followed by deposits). New Credit Card ABS issuance is expected to grow in the wake of higher rates and funding costs from deposits.

Post-2008, new ABS issuance contracted significantly, including in the credit card markets. Consumers entered a de-leveraging phase reducing demand for loans. Large banks, in response to the new capital and liquidity regime, shifted to borrowers with higher credit scores and focused on existing relationships. Wider spreads and higher capital charges also reduced available sources of funding for consumer credit.

Post-crisis, non-bank lenders emerged to fill the lending gap by offering installment loan products to expand access to credit. Since installment loans sometime re-finance higher rate credit card debt, some investors have drawn analogies between credit card performance to installment loan debt.

Credit Card ABS Delinquencies are Near Multi-Decade Lows

In our March 2016 newsletter, we discussed credit card master trust performance, noting that delinquencies from 2011 through 2015 followed a downward trend for major credit card issuers.

We continue our analysis below, observing delinquencies continuing the downward trend in 2016, reaching historic lows in early 2016.

While the Composite index shows this trend, there is variability among the individual trusts. Discover and Capital One, with a mass-market tilt in customer base, experienced larger rises in delinquencies, compared to Amex and Chase which have a mass affluent footprint.

Source: Federal Reserve

Installment Loans Lead Credit Card Losses

There are limitations in comparing delinquency rates on credit card ABS to installment loans. For instance, unlike MPL ABS deals which consist of static pools, credit card trusts are revolving securitizations that re-invest principal and interest over time. Also, we do not have access to the credit score distributions for credit card issuers to compare risk on an apples-to-apples basis.

Nevertheless, when comparing credit card ABS performance to the PeerIQ loan performance monitor we can draw some conclusions:

Delinquencies on credit cards reached multi-decade all-time lows in early 2016.

Credit card delinquencies are in early stages of reverting to historical levels, whereas the Loan Performance Monitor indicates that the unsecured personal installment loans have started a pattern of higher losses in successive vintages starting in 2015.

Through-the-cycle losses on credit card products are lower than losses on installment lending products.

Peak delinquencies in credit card ABS are ~8% in a stress scenario. By contrast, three-year unsecured personal loans (such as loans in the seminal CHAI shelf) are typically associated with a ~12% cumulative loss estimate (under a benign base case).

Note: We should expect higher losses on installment loans as non-banks offer access to credit to borrower segments outside of a traditional bank’s higher credit score underwriting box.

Historical credit card performance data is a poor proxy for measuring installment loan performance.

We can also offer the following tentative hypotheses which we look forward to testing with our TransUnion partnership:

Installment loans are lower in the consumer payment priority stack.

Installment loan losses lead performance in other asset classes such as credit card.

Credit card account management strategies (e.g., re-pricing of delinquent loans, credit line decrease tactics, etc.) are powerful levers for managing risk as compared to installment loans where issuers can only set terms at time of approval.

Deeper borrower relationship engagement (as measured by breadth of product penetration) reduces borrower’s credit risk all things being equal.

90+ Companies Transforming Investment And Wealth Management (CB Insights), Rated: AAA

Wealth tech investments reached a record of 74 deals in 2016.

We identified over 90 companies in the wealth tech space and organized them into 7 main categories based on the services and software they offer, then sub-categorized them by the client group they serve, whether business-to-consumer (B2C), business-to-business (B2B) or both.

Wealthfront has raised approximately $129.5M from investors, including Social Capital, Spark Capital, Greylock Partners, and Index Ventures.

This includes AdvisorEngine which raised a $20M Series A investment from WisdomTree Investments.

Stash, for example, is a goal-based digital investment platform that lets investors contribute as little as $5. Another company, Acorns, rounds up credit and debit card purchases to the nearest dollar then automatically collects and invests that spare change.

This category is exclusively B2B focused and includes Plaid Technologies, a software intermediary that securely connects financial application users with their respective bank accounts.

Click here to see a full list of WealthTech startups.

Why Having A Trust Strategy Is Key To The Future Of FinTech (Forbes), Rated: A

FinTech continues to see massive investment across the board and according to the annual FinTech Report, global cumulative investment will exceed $150 billion in 2017 alone. At least 80% of financial institutions PwC recently surveyed believe that they are at risk to innovators whether that be mobile banks like Monzo and N26 or more hardcore technological innovations like Lemonade and Algodynamix who want to change FinTech from the inside out with AI and other technologies like Blockchain. Trust is central to all of these emerging propositions whether it is from an emotional perspective because of previous traditional banking issues or a technological one like Blockchain.

Tom Blomfield, CEO, Monzo wants the youth market to come through word of mouth; “We’re focused on people who live their lives on their smartphones. Generally (but certainly not exclusively), these people tend to be younger and more willing to try out new products and services. For these customers, ‘trust’ is earned by making a product or service that demonstrably works well. It’s less about expensive advertising campaigns or branches on the high street… For us, it’s centred around transparency and community. We have a very active community forum.”

Ajay Bhalla, President, Global Enterprise and Security, Mastercard wants to increase trust by removing friction from the tedium of security.

Allianz Invests in Lemonade (PR Newswire), Rated: A

Lemonade, the insurance company powered by artificial intelligence and behavioral economics, today announced a strategic investment by Allianz, the world’s largest insurance company.

Nasdaq Announces Venture Investment Program For Fintech Companies (Crowdfund Insider), Rated: A

U.S. stock exchange group Nasdaq (Nasdaq: NDAQ), announced on Wednesday the launch of its venture investment program, Nasdaq Ventures, which is dedicated to discovering, investing in and partnering with unique fintech companies worldwide. According to the group, this program’s main objective is to identify and collaborate on new technologies and groundbreaking services and solutions which align with its clients’ needs an d the company’s long-term objectives in the global capital markets.

Innovation spotlight: North American FIs going social (Banking Tech), Rated: B

As banking continues to go digital, online innovators and niche players in North America are getting personal by adding social activities to their customer services.

SoFi, short for Social Financial, combines better rates on student loan refinancing with parties for its members (aka borrowers), around the country. It even offers career and financial counselling.

CommonBond offers an online student loan evaluation tool to help prospects determine the best ways to manage their debt. It estimates that members save an average of $14,581 as they repay their student loans, and even more for people like doctors and dentists with advanced degrees and higher debts.

Fintech Puts Payday Lending Old Wine in New Bottles (Naked Capitalism), Rated: A

And before you conclude that I am being a reflexive skeptic, Georgetown law professor Adam Levitin weighed in via e-mail:

First, Fintech is a meaningless term. The consumer-facing stuff is mainly (1) gussied up payday lenders (see, e.g., Think Financial and their tribal lending alliances), (2) money transmitters, and (3) BitCoin Bros. The money transmitters are probably harmless enough, but the first group are just trying to escape state usury laws and rollover restrictions, while the third group are grab bag of fools and con artists who think they are much more clever than they actually are. People on the Hill go ga-ga for Fintech without having any real knowledge of what they are and assuming that a digital platform represents a material (and better) transformation of a product.

The Lyric Financial website is remarkably content-free, particularly for specific product features and details of terms and conditions. Apart from the cloying trendiness which it is far too early in the morning to stomach, it’s very hard to find out what the deal really is.

You’re subjected to mandatory binding arbitration, which for a sophisticated product aimed at financially unsophisticated customers is a very bad sign.

It gets worse. In the bowels of their T’s and C’s I found this:

Governing Law

These Terms & Conditions, as well as any claims arising from or related thereto, whether in tort, contract or otherwise, are governed by, and are to be interpreted and enforced in accordance with, the laws of the State of Tennessee, without regard to New York’s conflicts of laws principles.

Which sounds suspect  – my take is that they are under Tennessee’s statutes (don’t know if that signifies anything noteworthy, either good or bad) but they don’t want to be liable under an aspect of NY law (which I’m guessing is much better settled and consumer-friendly than TN’s).

Fintech lures MBAs away from banking and consulting (Financial Times), Rated: A

Many fintech founders went to business school. Insead’s MBA alumni include Giles Andrews, British founder of peer-to-peer lending platform Zopa, and Taavet Hinrikus, the Estonian-born chief executive of online foreign exchange marketplace TransferWise. Jeff Lynn and Carlos Silva jointly developed the business plan for equity crowdfunding business Seedrs as part of their MBA course at Oxford’s Saïd Business School.

Now, as fintech founders grow their businesses, they are heading back to business schools to find well-qualified staff. About a fifth of hires from the international MBA class at Madrid’s IE Business School last year were made by financial services companies. Fintechs made 5 per cent of those hires, up from none last year.

Eight of Nutmeg’s 78 staff are MBA graduates, including two product managers, its chief marketing officer, chief architect and head engineer.

MBA graduates are unlikely to join fintech companies in the expectation of high salaries. Many,particularly those who have worked in private equity, understand start-ups operate differently, Nutmeg’s Mr Hungerford says.

Biz2Credit to Expand Online Access for Small Business Financing in Puerto Rico (Crowdfund Insider), Rated: A

Biz2Credit announce on Thursday it has formed a partnership with Puerto Rico’s Oriental Bank to help develop a digital lending platform for the bank’s commercial clients. According to the Biz2Credit, Oriental Bank will be considered the first bank in Puerto Rico to engage commercial clients through a digital platform that supports applications for business credit cards, as well as lines of credit, term loans, real estate loans, equipment purchase, and SBA loans.

Inside Online gives off Good Vibes with “digital branded magazine” (Prolific North), Rated: A

Inside Online has launched an online magazine as part of a digital marketing campaign for an online lending company.

Good Vibes aims to build a greater owned audience for Elevate Credit brand, Sunny.

Good Vibes will include in-house editorial, an external newsroom and illustrated graphics.

Elevate Appoints Tony Leopold as General Manager, Rise (BusinessWire), Rated: B

Elevate Credit, Inc. (“Elevate”), a leading provider of innovative online credit solutions for nonprime consumers, today announced the appointment of Tony Leopold as the General Manager of its Rise product, effective immediately.

BMO Harris Bank Launches FinTech Partnership Program with 1871 (Yahoo! Finance), Rated: B

BMO Harris Bank today announced a partnership with 1871 – a leading technology and entrepreneurship ecosystem which is currently home to nearly 500 high-growth digital startups in the Merchandise Mart – that will provide a select group of FinTech startups the opportunity to participate in a three-month mentorship program.

United Kingdom

Assetz Capital hits £240m of lending in four years (P2P Finance News), Rated: AAA

ASSETZ Capital hit its fourth anniversary with £240m lent to date and a plan to double that figure over the next 12 months.

The peer-to-peer lending platform, which channels funds to small- and medium-sized enterprises (SMEs) and small property developers, confirmed on Friday that it has returned over £20m of interest to investors since inception, yielding rates ranging between 3.75 and 18 per cent to investors.

Thanks to a recent surge in borrower demand, it also launched a temporary rate hike offer on its 30-day account last week to 4.75 per cent for a 90-day window.

Octopus Choice close to £50m loan target ahead of first anniversary (P2P Finance News), Rated: AAA

OCTOPUS Choice is set to have raised £50m within its first year of operation.

The lender offers average returns of 4.2 per cent based on conservative loans-to-value of up to 70 per cent and currently has 20 loans open for investment.

It pre-funds the loans, which a spokesman said has been given the green light by the Financial Conduct Authority (FCA) – despite several other P2P lenders having to stop the practice in order to gain approval from the City watchdog.

The platform’s loan book shows it has funded loans of as little as £95,000 to more than £5m, secured on properties valued between £175,000 and £8m.

What Brexit Means for London’s First FinTech Unicorn TransferWise (Coin Telegraph), Rated: A

According to a report published by GP Bullhound, TransferWise is one of Europe’s fastest growing unicorns. Also, according to the same report, the UK has the largest number of fastest growing unicorns, which are fast-growth, profitable businesses at 18 with a cumulative value of $39.6 bln.

Despite the clouds of Brexit looming, British tech deals hit a high in 2016 according to GP Bullhound. Whether the growth in the tech sector can be maintained post-Brexit is an interesting question.

Moneysupermarket pioneer sets up new financial advice business eVestor (The Telegraph), Rated: A

Duncan Cameron’s jointly-owned eVestor service aims to cut the cost of full-service financial advice by 80pc. He says it will deliver sophisticated advice to investors “whether they have £1 or £1m”.

He says eVestor will use complex digital “decision trees” to replicate the role of human advisers at a fraction of the cost and “provide more consistent outcomes”.

My Moneything Investment Experience after 13 Months (P2P-Banking), Rated: A

Last year I started investing on British p2p lending marketplace Moneything. Read my past article about opening a Moneything account. Moneything mostly offers property backed loans, with a few different asset-backed deals in between. I used Transferwise and Currencyfair to deposit money from my Euro account. Recently I also used the Revolut App to transfer money from another UK p2p lending marketplace to Moneything.

I am invested in 31 loans right now, mostly at 12% interest rate with small amounts also at 10.5%, 11% and 13% invested. I have had no defaults and there are no fees for investors.

Why choose a robo-adviser? (IG.com), Rated: B

Anyone can use robo-advice to manage their finances, whether that involves a £500 initial investment in a Stocks and Shares ISA, or a £100,000 Self Invested Personal Pension (SIPP).

Just last year, the Financial Conduct Authority (FCA) warned that 16 million UK consumers could be trapped in a ‘financial advice gap’ where they need professional investment advice but simply can’t afford it.

There is a £310 billion shortfall in the UK’s pension savings, according to Aviva’s calculations, while Zurich Insurance recently found that 41% of women and 30% of men aged 25 to 39 have nothing saved in their pension fund.

According to a MetLife survey, 45% of retirement savers are so concerned about their dwindling returns that they feel forced to take on more risk – a decision which could have disastrous consequences in the absence of professional financial guidance.

Fintech Startup Prime Trust Appoints Former Hambrecht Partner Whitney White As New CTO & COO (Crowdfund Insider), Rated: B

Nevada-based Fintech startup Prime Trust announced on Friday it has appointed former Hambrecht Partner and CTO, Whitney White as its new COO and CTO. 

European Union

Lendix Now Offering Loans to Italian SMEs (Crowdfund Insider), Rated: AAA

European marketplace lending platform Lendix has opened its platform to Italian SMEs. As of today, Italian businesses may borrow from €30,000 to €2 million directly financed by international investors. Lendix called the operation “a new step towards a true European credit market.”

International

88% of Global Banks Sweat over Losing Revenue to FinTech Firms (Cryptocoins News), Rated: AAA

The report, Global Fintech Report 2017 [PDF], found that 88 percent of global banks are increasingly concerned that they will lose revenue to fintech businesses. The areas major banks feel they will lose out on include payments, fund transfers and personal finance sectors. In response, 82 percent claim that they intend to increase partnerships with financial technology services over the next three to five years.

The survey found that difference in management and culture in addition to regulatory uncertainty and legacy technology limitations, are identified as being significant challenges for financial technology companies and banks. Not only that, but banks are restricted to a system of checks and balances that can hinder the innovation process while fintechs are able to adapt easily due to a lack of bureaucracy.

The technology is moving from hype to reality and as it does so funding in the sector increased 79 percent year-over-year in 2016 to $450 million.

17 fintech businesses that could one day be worth over billion (Business Insider), Rated: AAA

GP Bullhound, a boutique investment bank focused on tech, on Thursday published an in-depth report looking at the global fintech industry.

The report found 39 fintech companies around the world already valued at $1 billion or over, and found that global venture capital investment into the sector has risen almost fivefold in the past three years to reach $13.6 billion in 2016.

GP Bullhound identified promising businesses in the alternative lending space, data analytics, digital banking, insurance, and asset management. Here are the 17 businesses that made the cut and, in GP Bullhound’s view, could be the next fintech unicorns:

  • LendInvest — Online mortgage platform
  • Prodigy Finance — Peer-to-peer university loans for overseas students
  • ID Finance — Online lending in Russia
  • Ebury — Financing for small businesses trading overseas
  • iZettle — Mobile phone linked card readers
  • WorldRemit — International money transfer on your smartphone
  • Cardlytics — Analytics of card spending
  • Kreditech — Digital credit scoring and lending
  • Taulia — Supply chain finance
  • PolicyBazaar — Indian insurance marketplace
  • Collective Health — Tools for employers to manage company health insurance
  • Atom — Digital-only challenger bank
  • OakNorth — Digital challenger bank pitched at entrepreneurs
  • N26 — App-only bank that is hugely popular across Europe
  • Betterment — Online investment advisor
  • Wealthfront — Online investment manager targeting millennials
  • Nutmeg — Online investment managet

SME Lending Activity: China Spikes, US Banks Reboot (PYMNTS.com), Rated: AAA

Small business lending activity across the globe is in flux. China saw a whopping 17 percent increase in small business lending in Q1, while U.S. banks are rebooting their efforts to capture SMEs from their alternative rivals. The U.K. and Canada, meanwhile, see their small businesses struggling to find financing.

$3.2 trillion worth of outstanding SME loans in China means lending activity to small businesses in the community has inched up in Q1 2017. New data from the People’s Bank of China released the statistic, which signals a 17 percent increase from a year ago, reports said.

Three out of five London SMEs have been turned away from lenders, according to data released by SME finance LDF. Its research revealed that more than half of London’s SMEs say the jargon associated with financing has turned them off from accessing a loan, and 57.6 percent said they have been turned down from a loan outright.

Fewer than 15 percent of Canada’s small businesses are run by entrepreneurs aged 25 to 39, said CIBC Capital Markets in a new report.

Three minutes could be all it takes for a small business to get financed from NatWest. The bank said last week that it has rolled out a new platform for its SME customers that have been pre-assessed for financing.

A dip of 1.1 in the PayNet Small Business Lending Index may appear to be bad news — signaling a slight decline in Canadian small business lending in February compared to January. But according to PayNet data, medium-sized business lending increased nearly two points in the index, marking the highest level since January 2016 and reflecting separate data from CIBC Capital Markets that signals strong growth among Canada’s SME community.

Australia

The fake offset accounts that could make your savings vanish (The Sydney Morning Herald), Rated: A

You recently answered a question regarding the safety of a home loan with an online lender (the debt would be on-sold to another provider and the loan would continue). My question relates to the security of money in an associated offset account. How secure would the money in the offset account be? If the lender goes bust would they be able to take all of our savings in the offset account and then on-sell the full value of the loan?

There was a time when a compelling reason not to go with a cheaper online lender was that, not being authorised deposit-taking institutions, they could not offer offset accounts. Some have since begun splitting out certain repayments in a quasi offset – on occasion, simply like a displayed redraw facility.

But there is a downside: offset accounts set up in this way are not subject to the Financial Claims Scheme or the scheme protecting deposits of up to $250,000 in the event the provider goes bust … only truly separate deposit accounts of locally incorporated authorised deposit-taking institutions (ADIs) are, whether they are offset or not.

Note APRA regulates ADIs (mainly banks, building societies and credit unions); online and other non-bank lenders are subject to the Consumer Credit Code and can be ruled on by the Credit and Investments Ombudsman.

Gerard Brody, chief executive of Consumer Action, says: “Non-bank lenders that offer these products should be warning customers clearly that if they go under, the money in the account won’t be protected by the government guarantee.”

China

WeiyangX Fintech Review (Crowdfund Insider), Rated: A

On April 11, Xiaomi Corp., China’s leading mobile phone maker, launched the mobile application Xiaomi Lending in Android market, signaling a strong ambition to expand in the country’s booming Internet Finance sector.

On March 20, Dianrong.com announced to enter into a strategic partnership with Quark Finance, with an aim to launch a new online microcredit platform.

On April 12, Chinese online peer-to-peer lending service Renrendai.com announced that its P2P business would be operated as an independent platform.

National Internet Finance Association of China has announced the first major report to its members regarding the legal and regulatory status of consumer finance. The document, which is echoing to the P2P Finance Association established by the organization in March, is the first to officially classify consumer finance in the eyes of the Chinese government.

On April 8, the first Committee of Internet Finance Law was established in Beijing. The committee held symposiums about the technology innovation and legal protection in Fintech industry, which attracted several representatives of governmental organizations and university professors.

India

P2P lending can play a pivotal role in financial inclusion (India Times), Rated: AAA

However, what is noteworthy is that P2P as a product does have the ability to make a real difference in the financial inclusion space.

According to “Accenture’s Digital Disruption: The Growth Multiplier” report, digital tech could power $2 trillion of global economic output by 2020. The survey states that the US is leading the race with digital revenue making up a third (33%) of output. In terms of industry sector, Financial Services is the largest contributor in terms of their digital contribution to national and global GDP. In fact the same is true for every country across the world.

P2P lending and borrowing ticks all the boxes in terms of being simple, rates that appeal to both borrowers and lenders and is available to individuals often neglected by banks. As a result, it is finding traction regardless of social strata, age or education.

Our lenders are young with 51% belonging to the age bracket of 30-39 years. About 36 % of the lenders are over 40 and 13 % are below the age of 30.

It is well known in India that it is very difficult to get a loan from a bank if you are an SME. When we talk of financial inclusion, it should not be merely limited to an individual, but also ensuring access to finance for companies of all sizes. P2P has done a great job in lending to SMEs and this is largely possible because of wide range of data sets used to arrive at a lending decision.

Financial institutions feeling fintech heat, says PwC study (India Times), Rated: AAA

Financial institutions are increasingly at risk of losing business to fintech innovators, with 67 per cent already feeling the heat, says a PwC study.

According to PwC’s Global FinTech Report, 67 per cent believe their business is at risk from financial technology (fintech) firms and as many as 95 per cent of incumbents seek to explore fintech partnerships to boost innovations.

In India, 67 per cent financial institutions acknowledge that non-traditional fintech poses a threat to their businesses, lower than the global average of 80 per cent, indicating that the market in India is not yet as matured as it is globally.

Can e-KYC Service Providers Like Finahub Ride The Aadhaar Wave? (Bloomberg Quint), Rated: A

Finahub Technology Solutions, a Kerala-based software technology solutions company, is riding a building wave in financial services–the increasing use of Aadhaar-enabled e-KYC (know your customer) by banks and non-banking financial services (NBFC).

The bank or the financial institution is a KYC User Agency, and must first register with the UIDAI. The intermediary, called a KYC Service Agency, transfers the confidential Aadhaar information in an encoded form from the user to the UIDAI, and then back to the bank’s server.

The software solutions provider, in this case Finahub, provides software that connects all the points in the chain.

The software solutions provider, in this case Finahub, provides software that connects all the points in the chain.

The company also offers an Aadhaar e-sign facility as an add-on service. If this option is chosen, once the e-KYC process is complete, the bank’s representative asks the customer to scan his fingerprint a second time.

Asia

Understanding Indonesia’s Burgeoning Fintech Landscape (Global Indonesian Voices), Rated: A

From 2008 until 2013, the investment value in fintech had increased threefold.

As reported by Tech In Asia, in Indonesia fintech is the business sector with the second largest investment in 2016, after e-commerce. According to Bank Indonesia, there are around 142 local fintech companies in Indonesia. They are categorized into four types: Market Provisioning, which includes CekAja and Cermati; Deposit, Lending, and Capital Raising, which includes UangTeman and Investree; Investment and Risk Management, which includes Bareksa and Stockbit; and Payment, Clearing, and Settlement, which includes Midtrans and Doku. This last category is the one with the most players, comprising around 80 companies.

There are at least 11 fintech startups that received funding from investors during 2016.

ASIC signs fintech agreement with Indonesia (InvestorDaily), Rated: A

The agreement, signed on Friday, provides a framework for the two regulators to share information on market trends and regulatory issues that develop from innovation within their respective markets.

The regulator said increased co-operation between the two regulators will support them to promote innovative practice, and described the agreement as “positive confirmation” of the relationship between ASIC and the OJK.

Africa

How Africa’s FinTech Industry Is Impacting Its Growth And Development (The Marketing Mogul), Rated: AAA

The emergence of Africa’s FinTech industry, through its software and platforms, has made financial products and services more accessible to consumers in developing countries with low standards of living. It has also made these products and services more affordable by reducing the cost of doing business for financial institutions and other intermediaries.

Africa’s largest economy, Nigeria has experienced 27% growth in mobile money usage between the years of 2011 and 2016. The country’s FinTech industry currently comprises of over 50 companies with investments exceeding $200m in the last two years. Nigeria, according to Irrational Innovations, has developed effective payment and lending platforms, with 37% of FinTech start-ups focused on offering payment and remittances services (such as Paga and Remitta) while 32% offer lending and financing services (like Renmoney and Onefi). The remaining 31% are divided amongst insurance, banking, trading, data, bitcoin and business solutions.

Kenya has also exhibited very promising potential and growth in the mobile money lending operations. In March 2015, financial times reported that $150m worth of loans had been issued to borrowers, following the collaboration between Kenya Commercial Bank and M-Pesa (a mobile money platform). The vast majority of these borrowers are low income earners previously regarded as un-bankable due to their lack of credit history and access to financial services (financial exclusion).

Ghana has also been on the rise in regards to Africa’s FinTech space. As of 2009, about 70% of Ghana’s population were un-banked, and the country had a GDP growth rate of 4%. But between 2011 and 2015, largely due to the utilisation of mobile money, the country recorded a 41% increase in the population’s access to formal financial services, as well as a compounded GDP growth rate of 7.7% between the same periods.

The use of mobile money in Sub-Saharan Africa has increased over the years, with approximately 70% of adults in Kenya, for example, utilising mobile phones for money transactions. African small- to medium-sized businesses (SMEs) account for over 45% and 33% of the continent’s employment and GDP rates respectively.

Authors:

George Popescu
Allen Taylor