Friday December 16 2016, Daily News Digest

digital-only banks

News Comments Today’s main news: LendIt partners with 500 startups on PitchIt 2017. Victory Park Capital provides $100M credit facility and $3M preferred equity to Cognical. Today’s main analysis: Report details UK’s consumer credit picture. Today’s thought-provoking articles: The future of banking is digital. China begins execution of P2P fraud case. Where are the women in alternative investing? […]

digital-only banks

News Comments

United States

United Kingdom

European Union

Australia

China

Asia

Ukraine

Africa

 

News Summary

United States

LendIt and 500 Startups Partner on PitchIt 2017 to Identify Fintech’s Next Stars (PR Newswire), Rated: AAA

LendIt, the world’s largest show in lending and fintech, today announced its partnership with 500 Startups for PitchIt 2017, a leading global competition for fintech startups who can earn mentorship, endorsement and exposure to leading institutions, investors & press. Online applications also officially opened to qualifying fintech startups.

This year’s competition is slated to see hundreds of applicants all vying for a prestigious spot in the finals, and a chance to present on the keynote stage in front of thousands of members and high ranking executives from the fintech industry. This year’s Exclusive PitchIt Partner will be global venture capital fund 500 Startups, the world leader in investing in and mentoring early-stage fintech startups. The finalists will present to a panel of expert judges and thousands of conference attendees at LendIt USA on March 6, 2017 in New York City.

PitchIt @ LendIt attracts hundreds of investors, asset managers, funds and entrepreneurs, bringing together a community of influencers in the lending marketplace. To apply to PitchIt 2017, firms must meet the following criteria:

  • Must be a fintech company
  • Two or more full-time co-founders/employees
  • 2-10 full-time employees
  • Less than 3 years in business (companies founded before 2014 not eligible)
  • Raised less than 4 million USD since launch date
  • Must have a professional business website
  • Everyone registering on behalf of a specific company must have an email with that company’s domain

Any company that applies for PitchIt and fits the criteria automatically qualifies for our startup ticket pricing of only $295 per ticket.  Also, prior to the event, shortlisted companies will receive coaching from 500 Startups as well as industry leaders and other mentors. Eight selected finalists will receive a free all-access pass to attend the entire LendIt USA conference, up to $1,000 for travel to PitchIt, and a 50% discount Startup Zone booths. The overall PitchIt winner will receive a Bronze level sponsorship to future LendIt events, promotion and media support.

BlackRock to lead funding round for fintech startup (Reuters), Rated: AAA

BlackRock Inc plans to lead the next funding round for the startup iCapital Network, which gives individual investors access to private equity funds, hedge funds, and other alternative investments, the two companies said on Thursday.

Last year BlackRock bought FutureAdvisor, a robo-adviser that manages savings for individual investors.

Roofstock Expands its Single-Family Rental Real Estate Investment Marketplace to Dallas (BusinessWire), Rated: A

Roofstock (), the leading online marketplace and transaction platform in the $2 trillion single-family rental sector, today announced that it has expanded into the dynamic Dallas real estate market. In addition to strong home price appreciation forecasts, Dallas is expected to have robust rent and employment growth making it an excellent market for single-family rental investors. Recent measures estimate annual rent growth in Dallas of 5.1%, which is significantly ahead of the national average of 3.7%, and employment growth of 4.3% compared to the national average of 1.8%.

Roofstock has developed a proprietary marketplace for investors to find, evaluate and invest in single-family rentals online with tools and transparency never before available to either retail or institutional investors. With the addition of Dallas, Roofstock has now expanded to include 11 markets since its public launch in March of this year. The marketplace currently has over 130 exclusive investment properties available, representing a variety of investment characteristics, with new properties being made available daily. Roofstock differentiates its real estate investing marketplace by focusing on single-family rental properties that are fully leased, allowing buyers and sellers to benefit from immediate rental income from the date of purchase.

Roofstock’s revolutionary model features a proprietary marketplace of certified, cash-flowing homes for sale. Listings include detailed inspection, valuation and title reports, as well as information about the tenants and local property managers who have also been certified by Roofstock. The company stands behind its marketplace with a bold 30-day Money-Back Guarantee which investors can exercise if they are unhappy with the purchase for any reason. The unique technology tools and platform allows investors to purchase U.S. rental properties with confidence online from anywhere in the world.

Tech start-ups target financial services (Gulf News), Rated: A

It may not be much longer before bank branches join video-rental stores and record shops as relics of a bygone era.

At this point, the fintech sector hasn’t proven it can be a viable or trustworthy alternative to traditional banks and stock brokerages. Few of the start-ups have ever posted a profit, and one of the biggest, the Lending Club, is trying to recover from a breakdown that triggered the resignation of CEO Renaud Laplanche earlier this year. The Justice Department is investigating the events that led to Laplanche’s abrupt departure.

Banks, meanwhile, have demonstrated their resiliency and resourcefulness.

A recent survey of the financial services industry by the research firm Gartner Inc. found that 70 per cent of respondents considered fintech start-ups to be a bigger threat than their traditional rivals.

With their guard up, the much bigger banks are more likely to drive many of the fintech start-ups out of business if they don’t acquire them first, says Gartner analyst Rajesh Kandaswamy.

Although many consumers rarely expect big banks to act in their best interests, they typically consider them to be a safer place to keep money because of their long histories in business, says Forrester’s Berdak. Like the big traditional banks, most digital-only banks also offer government-backed insurance on deposits, but Berdak says that is not enough to overcome lingering doubts about their long-term prospects.

4 Real Estate Investment Types to Consider for 2017 (Equities.com), Rated: A

The good news for investors is that you can find projects that fall into each of these categories within the real estate crowdfunding (RECF) sector. RECF usually offers higher returns and lower fees than traditional investment classes, which makes it attractive for investors serious about growing their income.

Another benefit to RECF is that it allows investors the opportunity to partially fund projects they are interested in.

The World of Alternative Investing Is Exploding — Where Are the Women? (Observer), Rated: A

Remarkably, women even outperform men in their investments — when they invest, that is. Traditional equity market investing data indicates virtually no differencebetween men’s and women’s participation rates. If you look only at standard investment products, such as 401(k) accounts, stocks, ETFs, and retirement plans, the participation rates of the sexes appear to be equal. However, alternative investing tells a different story.

So I was surprised to find, when my team analyzed our user data, that our investor base was 90 percent male. This didn’t make sense to us. Alternative platforms also provide ways to make socially conscious investments, which we know matter deeply to women. In a 2015 survey, 95 percent of women said that helping others through their investing is important to them, and 90 percent prioritized environmental responsibility.

Alternative investing should also appeal to those who prefer stable investments, and women tend to mix or re-balance their portfolios less frequently than men do. There is no re-balancing or trading involved in alternatives, as they’re often set for a fixed duration, making them a more predictable option.

Fintech-led alternative platforms should emphasize the character of their investments. Opportunities to create jobs or have a positive social impact are particularly attractive to Millennial women. Not only do such investments make an economic impact on the community, but they also increase the amount of capital available to entrepreneurs who don’t fit into traditional bank underwriting.

Keeping It Real And Thinking Consumer First Is The NerdWallet Way (TechDay), Rated: A

Amongst the many challenges of being a fully functioning adult, responsibly managing finances is one of the most confounding. From choosing the right credit card to understanding what the heck a 401(k) truly is, personal finance can be a daunting and complicated struggle.

The millennial struggle of #adulting is driven a great part through the generation not having a firm understanding of finances. How does NerdWallet play into this discourse and thrive because of it?

The majority of people, including millennials, make financial decisions in the dark so we want to provide consumers with expert, honest and personalized information to empower them to make the best possible decisions- everything from selecting a credit card, mortgage lender to how to save and invest.

How did your own experiences influence the inception of NerdWallet and how have these continued to impact the brand as it’s grown into what it is today?

The inspiration for NerdWallet spurred when my sister, Kim –another Internet entrepreneur- asked for my help in finding a credit card at the same time my parents were put into a mutual fund, which was full of hard-to-understand terms.  It took me (a trained financial professional) over a week to make a recommendation after spending weeks researching available financial products and seeing firsthand how many complicated financial products were out there vying for consumer mindshare with no regards to consumers’ well-being. That’s when I realized how much of a barrier the complexity of information out there is for consumers. I put all of the credit card information into a spreadsheet and from there NerdWallet’s first credit cards tool was built in 2009. We saw the clarity we could provide with credit cards, which got us thinking about all the other financial decisions consumers have to face. Today, NerdWallet spans across 11 personal finance topics (Credit Cards, Banking, Investing, Mortgages, Household Spending, Education, Personal Loans, Life, Health and Auto Insurance, SMB, Taxes and Estate Planning) and has grown from 50 employees to more than 400.

Within fintech, regtech gets the spotlight (The Asset), Rated: A

In 2016 the likes of Credit Agricole, HSBC and J.P. Morgan were fined collectively US$521 million for rigging the Euribor rate breaching European Union anti-trust rules. More infamously Deutsche Bank this September was fined US$14 billion for mis-selling mortgage securities in the US.

Aside from avoiding fines, the cost of banking compliance is on the rise. According to the Federal Financial Analytics, a policy analysis firm, in 2013 the six largest banks in the US spent US$70.2 billion on compliance compared to US$34.7 billion spent in 2007.

Victory Park Capital provides $ 100 million credit facility and $ 3 million preferred equity to Cognical, Inc. (BusinessWire), Rated: B

Victory Park Capital (VPC), an investment firm focused on private middle market debt and equity investments, announced today it has provided a $100 million senior secured credit facility to Cognical, Inc. (d/b/a Zibby), to expand its omnichannel lease-to-own payment platform for in-store and online shopping. The credit facility, along with the accompanying equity investment, will help the company grow and scale its lease portfolio, providing underbanked consumers with an affordable alternative for acquiring durable consumer goods such as furniture, appliances and electronics.

3 Ways to Invest without the Stock Market (Modest Money), Rated: B

Lending Club is a part of the new wave of investing called peer-to-peeSo I was surprised to find, when my team analyzed our user data, that our investor base was 90 percent male. This didn’t make sense to us. Alternative platforms also provide ways to make socially conscious investments, which we know matter deeply to women. In a 2015 survey, 95 percent of women said that helping others through their investing is important to them, and 90 percent prioritized environmental responsibility.r lending, which is exactly what it sounds like. There is a person that needs money, and there is a person that is willing to lend money. As a borrower, there are several different reasons that you would want to use a site like Lending Club. With these peer-to-peer avenues, you don’t have the complications of going through all of the hoops of working with banks. You can complete the application on your terms. Additionally, borrowers will be able to secure better rates and will also have more flexibility on the requirements to secure the loan. As a borrower, you’ll be allowed to apply for a loan for just about any reason. You can use the money for home repairs, car loans, refinancing, or just to buy a pool for your children.

On the other side of the coin is the lenders. While there is never a “sure thing” when it comes to investing, Lending Club boasts excellent average return rates. According to their website, they typically see ROIs around 5.06% and over 8%, which is very attractive rates. Additionally, as a new investor, Lending Club is extremely easy to get started and has all of the risks laid out in front of you without the complicated jargon that scares new investors.

With Lending Club, you can open up a self-directed IRA, which means you will have full control of the investments inside of the account. Don’t worry, it’s not as difficult as it sounds. On the site you’ll be able to look through the variety of loans that are being requested and see the specific details of the loan and what the money is going to be used for. Once you find a loan that you want to participate in, you can decide how much money that you want to invest in that person’s application.

Exploring the Future of Digital Financial Advice: New Findings from CFP Board, Financial Services and Technology Leaders (PR Newswire), Rated: B

The CFP Board Center for Financial Planning today announced the findings of its blue-ribbon panel of experts who explored the future impacts of digital advice on the financial planning profession.

Known as the Digital Advice Working Group, thought leaders and senior executives from the worlds of technology and finance gathered to explore the future of digital advice and the role humans will play in delivering financial advice. The goal was to stretch the professional’s way of thinking about how future environments and events may lead the industry down several conceivable paths.

United Kingdom

Growth Capital Ventures gets £1.1m investment from Maven Capital Partners for new P2P platform (altfi), Rated: AAA

Maven Capital Partners (“Maven”), has completed a £1.1m investment in Growth Capital Ventures (“GCV”), funded through its managed Venture Capital Trusts. GCV is a leading developer and operator of specialist online investment and capital crowdfunding platforms.

GCV will use the investment to develop a new P2P lending platform. The new platform will focus on providing access to pre-vetted, quality investment opportunities that have the potential to deliver strong investment growth, and support syndication between institutional, professional and retail investors.

New report shares details about UK’s consumer credit for 2016 (WhaTech), Rated: A

Key findings:

  • Average credit quality has reached its lowest point in over four years, and default rates have been on an upward trend over the last two years.
  • Lower credit scoring criteria has been priced in by providers, resulting in average interest rates on loans of £5,000 rising 1.9% in a year.
  • P2P remains the fastest-growing sector. The P2P lending market is showing signs it is starting to consolidate, with synergistic partnerships with other sectors being used to increase the scale of operations.

We estimate that P2P lending will comprise 0.42% of total consumer credit in 2016, rising to 1.2% in 2020.

European Union

I Started a Zlty Melon Test Portfolio (P2P Banking), Rated: AAA

A few weeks ago I decided to start a small test portfolio investing in p2p loans at Zlty Melon. Zlty Melon is a p2p lending marketplace in Bratislava, Slovakia (see earlier articles about the Slovakian market). The marketplace lists loans to borrowers in Slovakia in Euro currency and to Czech borrowers in CZK. On the investor side Zlty Melon is open to residents of the European Economic Area. The website is available in English, Czech and Slovak languages.

I deposited 400 Euro via SEPA transfer. If you need currency conversion during a deposit, it might be cheaper to use Transferwise or Currencyfair than to do a direct bank transfer.

I set up an autoinvest (called ‘Investment Manager’) to automatically bid 25 Euro on each new cashfree housing loans, as these seem the most secure loans and so far according to Zlty Melon’s statistics for this loan type there have not been any defaults. I set it up to invest in Slovak loans only as I didn’t want any currency risk.

THE FUTURE OF BANKING: Growth of innovative banking fintech services (Business Insider), Rated: A

Banking is a rapidly changing industry, and the biggest paradigm shift that has occurred is the move to digital-only banks.

Millennials, in particular, are moving more frequently toward digital banking. And as a result, they’re walking into their banks’ traditional brick-and-mortar branches less often than ever before.

Digital-only bank Ally launched in the U.S. in 2008 and at the time, it was one of the first of its kind. But multiple new players have entered the scene in the last few years. These include Monzo, Tandem, N26, and Fidor in Europe, along with Digibank in India and B1NK in Kazakhstan.

These banks hold key advantages over traditional institutions, such as freedom from historical tech restrictions and the fees associated with brick-and-mortar branches. And in many nations, financial regulations also help these banks flourish. In Europe, these digital-only banks will soon be able to access customer data from traditional banks.

There are very few options for digital-only banks in the U.S. but in Europe, the options are plentiful. Digital-only banks across the pond are competing both with legacy banks and with each other for customers. So in order to lure clients away from their existing bank, they have to offer a significantly better product than their competition.

The payments segment is much more mature than other fintech areas, and a small handful of companies now dominate the business-to-consumer (B2C) space in particular.

Australia

$ 126 million year heralds significant market challenge from peer to peer lender SocietyOne (Mozo), Rated: AAA

Peer to peer lender SocietyOne has finished a record-breaking year on a high thanks to massive investment and borrowing growth, with November registering $15.3 million worth of lending alone.

With a total of $126 million in lending already in 2016, the company has now recorded $200 million in loans since its inception – a benchmark Managing Director and CEO Jason Yetton attributed to the growing appeal of the peer to peer lending sector.

The latest figures from SocietyOne highlight an increase in the number of borrowers entering the peer to peer lending market, with a 25% increase since August this year.

Default rates among borrowers using the company’s marketplace have also shown to be lower than the market average, sitting at 1.1% as of the end of November 2016 compared to a sector average of 2-3%.

China

China’s $ 8.6 billion P2P fraud trial starts (Reuters), Rated: AAA

Criminal prosecution of 26 people involved in China’s biggest alleged online fraud – a nearly 60 billion yuan ($8.64 billion) case involving online peer-to-peer lender Ezubao – has started in Beijing, the official Xinhua news agency reported on Friday.

Ten individuals, along with Ezubao’s parent companies Yucheng Holdings and Yucheng Global, are charged with fraudulent fund-raising, the news agency said. Sixteen other individuals face charges of illegally taking public deposits.

Ezubao, once China’s biggest P2P lending platform, allegedly collected 59.8 billion yuan of funds from investors through fake investment projects it advertised on its website and failed to repay 38 billion yuan. It collapsed in February, with executives saying the firm was “a complete Ponzi scheme”, which used investor funds to support lavish lifestyles for its executives.

An emerging Asia-Pacific fintech hub: Hong Kong (South China Morning Post), Rated: A

For decades, Hong Kong made its mark as the region’s leading financial centre, vying with New York and London for supremacy as a global nexus of money. Shaken by the Asian financial crisis, SARS, and the rise of Shanghai, gloomy predictions about Hong Kong swirled during the early years of the new millennium.

Two recent events however, may swing momentum back in favour of Hong Kong: The United Kingdom’s vote to leave the European Union in June 2016, and the election of Donald Trump as the incoming 44th president of the United States.

Confirming the growing prominence of financial technology (fintech) startups, InvestHK hosted the inaugural Hong Kong Fintech Week last month (November 7 to 11). More than 2,500 participants took part during the week, taking advantage of the high-calibre speakers and the array of events on offer. Notable participants included China’s biggest peer-to-peer lending and wealth management platform Lufax, online insurer Zhong An, JD Finance, WeBank, and Hong Kong-based bitcoin exchange BTCC.

Asia

Why banks need to be smarter than fintechs (The Asset), Rated: A

According to an Accenture, Asia-Pacific based fintechs as of September 2016 have raised US$10.5 billion from investors. A far cry from the US$103 million the region generated 10 years ago.

The banking opportunity especially in Asia is too significant to miss out on, McKinsey & Company data reveals that out of industry’s US$1.1 trillion 2015 profits close to half was originated from the Asia-Pacific region compared to only 28% in 2005.

Ukraine

P2P lending in Ukraine reaches UAH 5 bln (Interfax), Rated: A

The volume of the P2P lending market since the launch of this service in Ukraine has reached UAH 5 billion, Head of the National Bank of Ukraine (NBU) Valeriya Gontareva has said.

Africa

AlliedCrowds Prepares for P2P Platform AlliedExchange Launch (Crowdfund Insider), Rated: A

London-based AlliedCrowds is preparing to launch its P2P service AlliedExchange soon as it has begun the search for a new Managing Director.

AlliedCrowds/AlliedExchange is backed and funded by FSD Africa, which in turn is backed by the British government.

This proposed platform will use P2P lending technology to present a range of sub-Saharan Africa loans to both retail and institutional investors, including diaspora, HNWIs, hedge funds, family offices, banks, development institutions, etc. The platform will have the ability to transact trades and manage accounts. Initially, the platform will be regulated by the FCA, but regional authorization will be sought in due course.”

Authors:

George Popescu
Allen Taylor