Competing With Banks Through a Mobile App

mobile banking

According to the Federal Deposit Insurance Corporation (FDIC), over 7% of Americans are still without banking services. Even more shocking is the number of the underbanked population – a whopping 19.9%. These numbers only go to show that brick-and-mortar banks have left the general American population down. Especially since the financial crisis, people have lost […]

mobile banking

According to the Federal Deposit Insurance Corporation (FDIC), over 7% of Americans are still without banking services. Even more shocking is the number of the underbanked population – a whopping 19.9%. These numbers only go to show that brick-and-mortar banks have left the general American population down. Especially since the financial crisis, people have lost trust in traditional banks, and millennials don’t see the appeal in standing in line for banking services. To fill the void, Varo Money has launched a mobile banking business. The aim is to disrupt how banking is done in the United States. Its goal as to help customers cover their expenses, pay their bills, and build wealth over time.

Varo Money was founded in 2015 by Assaf Guery, Colin Walsh, Mykola (Kolya) Klymenko, and Roger Van Duinen. Its headquarters is located in San Francisco, California. The company has managed to raise over $78 million in various funding rounds with PE giant Warburg Pincus as the lead investor. CEO and Co-Founder Colin Walsh previously served for over 25 years in various reputed financial institutions like Amex in Europe, Lloyd Banking group, and Wells Fargo.

More Than a Bank

Throughout his professional career, Walsh realized a growing need to empower the next generation with tools that will help them improve their overall financial condition. He also realized incumbents were too entrenched in their existing business models to concentrate on developing products for the millennial generation. This became the driving force behind Varo Money. So he built a talented team with deep financial services expertise and a strong consumer technology knowledge. Varo Money is trying to be a one-stop shop for users’ banking needs and wants to inculcate better financial habits among customers by providing them with the right tools and financial guidance.

Last year, Varo Money launched their mobile app and banking products through a partnership with The Bancorp Bank. The partnership helped the platform come to the market with a FDIC-insured product. This helped them compete against incumbent banks and appeal to a larger cross section of the population. But Varo has big ambitions and wants a bigger share of the pie. That’s why the company applied for a national bank charter through the OCC. Even though obtaining this charter will be an uphill task, considering no new charter has been issued in the last decade or so, it’s a courageous move. It puts the spotlight on the young entrant and highlights its intention to be a serious regulated player in the industry.

Varo’s Business Model

The foundation of the Varo Money platform is relationship banking. It offers a basic consumer checking account just like any other bank, but the difference is a customer can perform all the basic functions like deposits and money transfers without having to go visit a bank branch. It even issues a debit card to customers and has started offering savings accounts. A customer can open a savings account on his or her mobile app and Varo offers interest rates up to 50 basis points as compared to 1 or 2 basis points offered by traditional banks.

Apart from the bank account, Varo also offers short- and long-term financing solutions. The short-term line of credit is a flexible line of credit (LOC) and is available to customers unexpected financial challenges. The LOC helps customers manage cash flows while avoiding the need to take a payday loan or cash advance. Also, 3- and 5-year fixed rate installment loans are aavailable for long-term financial needs.

Varo Money’s Technology and Competitive Posture

Varo Money is available as an iOS application with an Android version coming soon. The app is loaded with features like touch ID, a geolocation service to spot nearby ATMs, and the ability to link other accounts through APIs. The app is free and requires no minimum balance to open an account. Also, there are no foreign exchange charges or overdraft fees. Its customer base has access to over 55,000 ATMs worldwide as compared to 18,000 ATMs for Chase and 12,000 for Wells Fargo.

Varo charges a nominal fee for debit card usage. It also sells financial products of its partner bank earning income from that partnership. However, its lending products are a primary income generator. The pricing and structure of LOC products are developed to compete with other alternative lenders in the market.

Varo has a lot of competitors in different niches of banking. Players like Discover, Ally, and Goldman Sachs concentrate on only a few lending segments; these lenders do not follow a complete relationship model, but only offer a specific product. On the other hand, there are neobanks like Chime, Simple, and BankMobile that are single-purpose saving apps. Though they are doing a great job when it comes to user experience, the range of products offered by them is narrow compared to a full suite of products offered by a traditional bank.

This is where Varo Money is different. It is focused on customer relationships and wants the ability to offer the entire gamut of banking services to consumers. This gives it multiple cross-selling opportunities and reduces the cost of client acquisition. Its strategy seems to be paying off. In just 7-8 months, Varo has garnered tens of thousands of customers and over 100k downloads.

Conclusion

Varo Money is focused on replacing traditional banks with its comprehensive suite of online banking services and products. Coupled with its obsession for helping millennials make smarter financial decisions, Varo Money is looking to be an emerging player in the digital bankin sector.

Author:

Written by Heena Dhir.

Wednesday February 21 2018, Daily News Digest

LendingClub originations by funding source

News Comments Today’s main news: Lending Club losses extend to Q4 2017. LendingClub to settle lawsuit for $125M. Groundfloor launches online public offering. Even Financial gets backing from American Express. LendInvest launches buy-to-let calculator online. Today’s main analysis: Lend Academy reviews LendingClub’s Q4 2017 results. Today’s thought-provoking articles: Equity sharing and home ownership. How millennials move emerging markets. Why Australia needs […]

LendingClub originations by funding source

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United States

Lending Club extends losses for fourth straight year (Financial Times), Rated: AAA

Lending Club lost money for a fourth year in a row last year, as it wrote a big cheque to settle class-action lawsuits connected to its governance glitches of 2016.

The San Francisco-based company, the biggest listed online lender in America, said on Tuesday that net losses for the fourth quarter almost tripled from a year earlier, to $92m, as it agreed a $125m settlement to resolve civil suits stemming from the loan-mis-selling scandal that blew up almost two years ago. About $48m of the sum would be covered by insurance, the company said, with the remainder to be paid from liquid assets of about $650m.

The loss for the full year came to $154m, wider than the previous year’s $146m.

LendingClub agrees to settle shareholder litigation for 5M (American Banker), Rated: AAA

Under the agreement, which was announced Tuesday, the San Francisco-based online lender expects to pay $77.25 million. An additional $47.75 million is expected to be covered by LendingClub’s insurance, bringing the total payout to $125 million. The deal is subject to court approval.

LendingClub Corp (LC) Shares Sink on Q4 Earnings Miss (InvestorPlace), Rated: A

Lending Club also underwhelmed in its revenue as the company raked in $156.5 million during its fourth quarter, below Wall Street’s consensus estimate of $157.6 million, according to FactSet. The figure did increase 20% compared to the year-ago quarter.

On an adjusted basis, the company posted earnings of a penny per share, compared to a loss of 2 cents in the year-ago quarter.

The company also experienced a 23% annual growth in originations, which reached over $2.4 billion.

LendingClub Q4 2017 Earnings Results Review (Lend Academy), Rated: AAA

LendingClub delivered another record quarter of $156.5 million in revenue up slightly from their previous quarter. Originations were slightly down from the third quarter at $2.436 billion. They reported a GAAP net loss of $92.1 million in the fourth quarter which was affected by the class action litigation settlement expense.

Source: Lend Academy
Source: Lend Academy

LendingClub provided the below guidance for Q1 2018 and reaffirmed their guidance for 2018:

First Quarter 2018

  • Total Net Revenue in the range of $145 million to $155 million
  • Net Income (Loss) in the range of $(25) million to $(20) million
  • Adjusted EBITDA in the range of $5 million to $10 million
  • Reconciling Items between net loss and non-GAAP adjusted EBITDA consisting of stock-based compensation of approximately $19 million, and depreciation and amortization and other net adjustments of approximately $11 million

Full Year 2018

  • Total Net Revenue in the range of $680 million to $705 million
  • Net Income (Loss) in the range of $(53) million to $(38) million
  • Adjusted EBITDA in the range of $75 million to $90 million
  • Reconciling Items between net loss and non-GAAP adjusted EBITDA consisting of stock-based compensation of approximately $77 million, and depreciation and amortization and other net adjustments of approximately $51 million

Stocks making the biggest moves after hours (CNBC), Rated: B

LendingClub stock plunged 10 percent after the bell. The peer-to-peer lending company reported earnings and revenues that missed Wall Street estimates.

Groundfloor Launches Online Public Offering Amidst Increased Stock Market Volatility (PR Newswire), Rated: AAA

Groundfloor, the first issuer qualified by the U.S. Securities & Exchange Commission to offer real estate based payment dependent notes that are available to non-accredited investors, today announced that it has raised a total of $4.3 million from 687 participating investors in a combination of two recent financings, a private online bridge note closed late last year and an initial closing of its online public offering of equity. In each case, the company kicked off the invitation-only raises to customers and friends of the company with a $1M target, surpassing that in under 48 hours. Due to increased growth opportunities and strong demand, the company has today expanded the equity raise to the public.

Groundfloor is offering a total of up to 530,000 shares of Common Stock at $10 per share in its online public offering. Investor benefits include: no investor fees for life2; access to regular shareholder-only loan offerings; and invitations to attend annual Groundfloor shareholder events.

Recently increased expectations that the Fed may raise interest rates in the future has investors rebalancing their portfolios, with a shift out of equity into debt, as bond yields are expected to increase. Twelve-month bond yields have recently inched up to 1.97 percent.

By comparison, Groundfloor investors have earned an average of 13.6 percent per year over the past three years, which represents over 6x the yield of a current one year Treasury note, and over 1,000 percent more than they would have made if their money had been in a CD or savings account over this period.1 Groundfloor’s retail investors create their own portfolios of real estate debt investments in the fix and flip residential housing market, and the loans on which the investments are based are secured by a first lien position against the underlying real asset.

Real Estate Equity Crowdfunding: A New Investment Opportunity for the Investors (EIN News), Rated: A

Talking in context of real estate, there are 3 ways to invest in a crowdfunded real-estate property:

• Equity crowdfunding
• Syndicated debt crowdfunding
• Platform-issued (‘pre-filled’) debt crowdfunding

Following are the pros and cons of going for equity crowdfunding in real estate:

Pros

• High yield potential
• Lower barrier to entry: Even if you have a very less amount of money, you can still invest even in large commercial real estate projects through equity crowdfunding and enjoy the benefits of the real estate i.e., strong returns and lower volatility.
• No self-employment taxes
• Higher returns

Cons

• The risks. An investor should know how to evaluate the risk factors like local economy volatility and chances of higher than expected construction costs. Due diligence is what is required.
• Liquidity constraint: These investments need to be held up for a period of five years or so, and hence one should go for this option if this much bandwidth is available, lack of liquidity is not there, and an investor is comfortable with the invested amount to be tied up for several years.
• It’s still an early option: It is still an early option to be considered as the performance track record and validation is still not complete and individual investors are still trying to figure it out.
• Lack of control: Since it is a passive investment, the investors are not involved in the day to day activities and therefore have limited ability and control over the operations required.

RealyInvest App Empowers Beginners to Invest in Commercial Real Estate (PR Newswire), Rated: A

In a rising tide of fintech apps, RealyInvest is emerging as a new way for beginning investors to access the high-priced world of premier commercial real estate right from their smartphones.

RealyInvestors can purchase fractional shares of REITs (Real Estate Investment Trusts) for as little as $5. Investors can also own shares of commercial real estate NNN Assets, such as a building long-term leased to Starbucks, for as little as $20.

All investments, rental income and dividend earnings can be managed right on your smartphone. Fees range from $1 to $3 per month, depending on investment options.

Silicon Valley Explores a New Investment: Your Home (WSJ), Rated: AAA

A handful of companies, including those backed by marquee Silicon Valley names such as Andreessen Horowitz and Mark Zuckerberg’s philanthropic organization, are experimenting with a product that essentially lets them take an ownership position in a house along with the homeowner. The agreements, called shared-equity contracts, provide a new way for investors to get exposure to rising home prices across the U.S.

Shared-equity products are aimed at new buyers who need help with a down payment, or current homeowners looking for an alternative to a cash-out mortgage refinancing or a home-equity loan. The first use has caught the attention of mortgage-finance giant Freddie Mac ,which recently agreed to buy loans on properties where one firm,Unison Agreement Corp. , contributes to the down payment.

Landed Inc. offers these down-payment contracts to teachers and other educators. Last year, the Chan Zuckerberg Initiative , a philanthropy co-founded by Facebook Inc.’s chief executive, gave Landed $5 million to start a new fund.

The length of the contracts can vary from a few years to 30. Homeowners can repay early, including if they sell their house before the term ends. How much they end up owing depends on how the value of their home changes. Because the funds are equity, not a borrowing, they don’t require monthly payments.

Even Financial inks $ 3 mln (PE Hub Network), Rated: AAA

Even Financial, the technology platform powering financial services online, has secured a strategic investment round totaling $3 million. The round includes an investment from American Express Ventures, the strategic investment unit of American Express, as well as Plug & Play and Arab Angels.

With this investment, Even Financial will expand its team and advance its proprietary technology, which allows financial institutions and other partners to scale customer acquisition and remain competitive in the growing online financial services industry.

Fundrise Reports 2017 Performance. Total Return for the Year Stands at 11.44% (Crowdfund Insider), Rated: A

In brief, this is what Fundrise reported;

“In 2017, Fundrise investments earned an 11.44%* total return on investment, including over $16 million in dividends paid out to investors. Delivering attractive, consistent cash flow is a core part of our mission to offer you a better way to invest.”

Online SMB lending platform Yalber closes $ 20M senior credit facility (Bankless Times), Rated: A

SMB lending platform Yalber closed a $20 million senior credit facility this week, the company announced today.

Blinker Joins With Ally To Enhance The Auto Industry’s Only Peer-To-Peer E-Commerce Platform (PR Newswire), Rated: A

South by Southwest Interactive Innovation Award winner and 2018 LendIt Fintech Industry Award finalist Blinker, the only peer-to-peer e-commerce platform that provides an end-to-end solution for anyone buying, selling or financing cars, announced two major milestones for its business today:

  • Blinker is now available in the largest car markets in the US – Beginning today, Blinker is expanding its proprietary e-commerce and loan origination platform from Texas and Colorado to California and Florida, allowing millions of customers to buy, sell and finance vehicles easier, quicker and safer with other people. Thirty percent of vehicle sales across the US every year are between people, yet private-party marketplaces including Craigslist, Letgo, Autotrader, Cars.com and Facebook Marketplace don’t have services such as integrated financing or lien payoff support. Leveraging artificial intelligence and machine learning, Blinker customers get guidance and tools to complete the entire purchase process themselves, from instant vehicle valuation to real-time auto loan approval to e-signing documents to secure funds transfer, all for free within Blinker’s mobile app.
  • Blinker joins with Ally to offer best-in-class auto protection products – Blinker will now give customers the option to add Ally’s vehicle protection coverage, including Ally Guaranteed Asset Protection (GAP) and Ally Premier Protection vehicle service contracts, for their vehicle purchases in the app. GAP covers the difference between the cash value of a vehicle and what Blinker customers still owe on their loan if the vehicle is totaled or stolen. Ally vehicle service contracts cover the repair cost for over 7,400 mechanical, electrical, safety or digital components, as well as some related expenses like trip interruption, rental car coverage, towing and 24/7 roadside assistance.

Zelle users are finding out the hard way there’s no fraud protection (TechCrunch), Rated: A

Scammers have taken to Zelle, the Venmo alternative backed by U.S. banks, to defraud consumers who believe the service includes the same protections they’ve come to expect from PayPal. A number of customers report having lost hundreds, or even thousands of dollars, over Zelle, when they used it for transactions with people they didn’t know – like tickets bought off a Craigslist posting, for example.

Cyberattacks took $ 56B from U.S. economy in ’16 (American Banker), Rated: A

Malicious cyber activity cost the U.S. economy between $57 billion and $109 billion in 2016, the White House said Friday.

The estimate comes in a Council of Economic Advisers report on the impact of cyberattacks on U.S. government and industry. The report details the range of threats that U.S. entities face from actors including corporations and countries such as Russia, China, Iran and North Korea.

The council’s estimate represents between 0.31% and 0.58% of the 2016 U.S. gross domestic product. For comparison, the report cites a Center for Strategic and International Studies report that estimated the cost of malicious cyber activities against U.S. entities at $107 billion in 2013, 0.64% of GDP that year.

BlockFi Raises 1.55M in Seed Funding (Finsmes), Rated: A

BlockFi, a New York-based fintech company whose first product is a loan for cryptoasset owners, raised $1.55m in seed funding.

Backers included ConsenSys Ventures, Kenetic Capital, PJC, SoFi, Purple Arch Ventures and Lumenary.

The 2018 World’s Most Innovative Companies (Fast Company), Rated: A

03 Square

For extending the benefits of banking

19 Social Capital

For putting values into its ventures

26 Kakao Bank

For marrying social messaging with banking

31 Paytm

For pioneering the cashless economy

42 Stripe

For writing the new startup manual

47 CommonBond

For offering payback

‘Pinterest will get even bigger for us’ says fintech lender Elevate Credit (The Drum), Rated: A

Speaking to The Drum in the final instalment of a four-part video series with Falcon.io exploring social media strategies, she admitted that while it can be a challenge, using data to understand her audience’s wants and needs has helped her shape content which is likely to resonate.

Fox says she has been finding success on the unlikeliest of social media platforms – Pinterest.

“All our content is more lifestyle focused than finance focused,” she explained.

OpenClose Bolsters Software Integration and Support Teams (Send2Press), Rated: B

OpenClose, an industry-leading multi-channel loan origination system (LOS) and mortgage fintech provider, announced that it has added staff to its integration and customer support departments. The new hires will help enhance OpenClose’s existing software products, facilitate digital mortgage processes, produce fintech-level innovation and provide excellence in customer support. The company also recently added three senior software engineers to its development team.

3 Loans for Students You Should Avoid Like the Plague (Student Loan Hero), Rated: B

1. Payday loans

You usually have only a couple of weeks to repay the loan, and the typical APR is almost 400.00%, according to the Consumer Financial Protection Bureau. If you can’t pay it back and have to take out a new payday loan to pay off the first, you could end up stuck in a vicious cycle of predatory debt.

What you should try instead: payday alternative loan (PAL).

2. Auto title loans

The reality is these short-term loans also have three-digit APRs, and you typically have between 15 and 30 days to repay the loan.

What you should try instead: A short-term campus loan.

$20 / $2,000 = 1%
1% x 365 days = 3.65
3.65 / 60 = 6.08% APR

3. Cash advances

This type of loan isn’t as costly as a payday loan or an auto title loan, but it’s not ideal for two reasons:

  1. Credit cards charge a fee, typically 5% of the advance amount. So, if you withdraw $500, you’ll have to pay $25 upfront.
  2. There’s no grace period with cash advances, so interest starts accruing immediately.

What you should try instead: A 0% APR promotion. Some credit cards offer a 0% APR promotion on new purchases for a period.

United Kingdom

Funding Circle to launch two new mobile apps this year (P2P Finance News), Rated: AAA

The business lender, which currently only has an iPhone app for investors to access, monitor and manage their accounts, is now advertising for a global mobile apps product manager and for an Android developer.

Both positions are based in the UK.

“We have an ambitious roadmap for this year and want to launch two new apps (Android and iOS) for our investors,” the job advert on the Funding Circle website said.

LendInvest Announces Launch of Buy-to-Let Online Calculator for Intermediaries (Crowdfund Insider), Rated: AAA

On Tuesday, LendInvest announced the launch of its new buy-to-let (BTL) online calculator for intermediaries.

 

P2P business lending up 51% (Bridging&Commercial), Rated: A

The value of P2P business lending grew by 51% during 2017, according to new research from the British Business Bank (BBB).

The report also found that the value of SME asset finance deals was up 12%.

Although net bank lending volumes remained positive (£700m in 2017), it was weaker than in both 2016 (£3bn) and 2015 (£2bn).

The BBB found that there had been a significant increase in both the value and number of SME equity deals, up 79% and 12% respectively.

Online lenders and banks may operate as ‘joint ventures’ (P2P Finance News), Rated: A

ONLINE lending platforms may partner with banks to fund and market credit products in the future, even sharing the approval process and compliance, in one scenario outlined by global banking regulators.

A number of peer-to-peer lenders have already partnered with banks on a smaller scale. For example, Metro Bank has lent through Zopa’s platform and Santander has referred borrowers to Funding Circle. However, these tie-ups have not gone as far as the report’s scenario suggests in terms of becoming a joint venture.

Crowdfund sites ‘are not explaining the dangers’ (The Times), Rated: A

Square Pie, which started life as a stall in London’s Old Spitalfields Market, expanded with the help of a “pie bond” that promised 8% annual interest over four years. The bond was offered through one of Britain’s biggest crowdfunding platforms, Crowdcube.

A total of 324 investors signed up, lending more than £650,000 to fund Square Pie restaurants and its efforts to improve supermarket sales. Square Pie has gone into administration — the first failure of a business that issued a mini bond on a crowdfunding site.…

Crypto lending platform nears launch (AltFi), Rated: A

Lendingblock is one such business. The soon-to-launch platform is, in its founder Steve Swain’s words, “an open exchange for cryptocurrency loans”.

Lendingblock is in the middle of a three-stage Initial Coin Offering that will conclude in March. The first phase has already been completed, raising the equivalent of $500,000. The offering has a hard cap of $10m.

Number of farming building conversions falls 20 percent in a year (FarmingUK), Rated: B

The number of conversions of farm buildings into new homes dropped 20% in the last year, denting hopes that these conversions could help solve the rural housing crisis.

According to Lendy, one of Europe’s largest peer-to-peer lending platforms, only 1,511 agricultural-to-residential conversion applications were approved in 2016/17.

China

The New Year to Bring a New Flood of IPOs (CapitalWatch), Rated: A

Golden Bull Ltd., an online peer-to-peer lending platform in China, plans to offer up to $9 million in shares on Nasdaq under the ticker symbol “DNJR.” The Shanghai-based company, which was founded in 2015, provides borrowers access to short-term loans.
European Union

Finnest Expands Online Financing to Larger Corporations, Adds Institutional Investors (Crowdfund Insider), Rated: AAA

Finnest is an interesting online lender operating in the DACH countries. The peer to peer platform was launched to provide SME funding supported by individual investors but the company is now expanding by providing loans of €10 million and higher. Institutional investors such as insurance companies, funds, family offices and banks will now be able to invest in large SMEs on “FinnestPro.”

Why it’s OK that the majority of consumers don’t know about Open Banking – for now (AltFi), Rated: A

The new EU legislation on payment services – PSD2 – and the introduction of Open Banking in the UK seem to have passed the vast majority of people in the country by, according to an AltFi News article last month.

This referred to a report by Which saying that 92 per cent of consumers hadn’t even heard of Open Banking.

International

How Millennials are Moving Emerging Markets (Morningstar), Rated: AAA

Millennials in advanced economies have come under pressure in recent years, thanks to stagnating wages, rising house prices and escalating student debt. But an altogether different trend is taking place in many emerging markets where millennials are seeing their prospects rapidly improve. This in turn is creating an investment opportunity, as millennials in these countries are becoming hugely influential on the prospects for emerging market equities.

Millennials will account for half of the global workforce by 2020, meaning they will be one of the most influential groups in shaping the economy and society, including consumption habits, policy and how companies may want to market and brand themselves. They are disrupting traditional industries and companies are having to adapt. This presents investment opportunities, but it also presents new investment risks.

Latest ICO Updates on VLR Token – Valorem Foundation ICO is LIVE! (TechBullion), Rated: A

Based on ERC-20, the multilayered cryptocurrency platform will host a marketplace that allows developmental phases. The first phase focuses on micro loans (small loans), rent payments, student loans and peer-to-peer payment processing.

As trust grows on the platform, phase 2 will be implemented to cater to sales distribution, global small business investing and global commercial and residential real estate crowdfunding while the third stage will serve charity and insurance. The final phase will be dedicated to maintenance and future developments that may include additional currency adoption, feature adding etc.

Valorem (VLR) is the token offered. The exchange rate stands at 1 ETH= 1000 VLR. There is a total supply of 200 million tokens of which 150 million are available during the ICO and 50 million will be kept in reserve. Valorem will not be mined.

Wealth managers must go digital (Raconteur), Rated: B

People born between roughly 1982 and 2002 are set to receive the biggest inheritance boom of any post-war generation. The Royal Bank of Canada (RBC) estimated the figure will be around $4 trillion in the UK, Canada and United States.

An Interview with Kirill Suslov – The CEO at Finom and TabTrader Founder (NewsBTC), Rated: B

NewsBTC: Now it seems that you have no experience with banking services yet. How do you plan to cover this area?

Now I can say we understand confidently how banking works and how it should work in the crypto industry. By 2020, we’re going to have a licensed bank and transform it into a crypto one with a network of crypto terminals.

A bit sooner, in 2018, we plan to release crypto e-wallets with linked debit cards. Miners will be able to use recently mined coins right away, transferring them to their wallets immediately. We’re also designing a platform for peer-to-peer lending.

Australia

Peer To Peer Lending Increasingly Popular In Australia (compare dinkum), Rated: AAA

Australian investors and borrowers are increasingly adopting peer to peer lending platforms according to the results of survey undertaken by ASIC. The results of the survey suggest that as much as $300 million of personal and business loans were underwritten by peer to peer lenders over the course of the last fiscal year. That represents a doubling in the amount that was lent on such platforms during the 2015/2016 financial year.

Why Australia needs a better system for credit scores (The Converstion), Rated: AAA

Australia’s credit rating system is failing both borrowers and lenders. Many borrowers are unaware of their own credit scores and our research shows they have trouble applying for suitable loans. Lenders are also struggling with too little information, causing them to extend loans to those they shouldn’t and restrict loans to worthy borrowers.

Upcoming changes to Australia’s credit reporting system could remedy these issues.

Under the new credit reporting regime, both lenders and borrowers will have access to more data, such as monthly payment histories on loans and credit cards.

More innovation ahead in mortgage lending

For higher-risk borrowers, novel techniques to assess credit risk (such as analysis of social media accounts) may be the answer to distinguish good borrowers from bad.

But prior experience from an over-reliance on credit scores in the United States shows that careful assessment of borrowers remains vital.

India

Refer to these fintech startups for range of medical loans (Business Standard), Rated: A

Among all the personal the medical loan is the most crucial one which is often required on an urgent basis by the applicants.

Recently a host of Financial technology(Fintech) and Non-financing related start-ups have been launched in providing a variety of medical to the clients.

Canada

They couldn’t get loans from their banks so turned to a legitimate-looking lender online (The Star), Rated: AAA

Unable to qualify for a loan from her bank, Johnston searched online for private lenders and found a website for what appeared to be a legitimate company calling itself North Clear Credit.

Everything about it — the variety of loans offered, the glowing testimonials, the company description — seemed professional. In fact, a customer who later reported North Clear Credit to police says an officer told her the website looked legitimate.

For Johnston and Mood, the terms were appealing. The money could be paid back monthly over five years at an interest rate substantially lower than what they would be charged elsewhere.

Johnston completed an online application and was approved for a $20,000 loan.

Within a few days, Johnston and Mood had lost $3,500, and two North Clear Credit “representatives” with whom Johnston had been corresponding had disappeared.

Blackchain Announces Private Placement (Stockhouse), Rated: A

Blackchain Solutions Inc. (the “Company” or “Blackchain”) (CSE: BIS), announces a private placement of up to 3,400,000 units at a price of $0.18 per unit, for gross proceeds of $612,000.  Each unit consists of one common share and one share purchase warrant.  Each warrant is exercisable at a price of $0.22 per share for a term of two years.

Proceeds generated from this financing will be used to initiate and support the filing of multiple patents and trademarks related to the Blackchain Crypto Credit Rating API and P2P Lending Platform.

Authors:

George Popescu
Allen Taylor

Monday May 15 2017, Daily News Digest

alternative lending

News Comments Today’s main news: New York sues OCC. SoFi prez to leave for biotech firm. RateSetter clarifies types of lending. Prudential chairman to join RateSetter. JP Morgan launches virtual branch in China. BNI Europa invests in MarketInvoice. Nubank reports $39M net loss. Today’s main analysis: How bad Brexit will be for UK households. Alt lending deals on pace for new low. […]

alternative lending

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United Kingdom

China

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International

India

Asia

South America

Philippines

News Summary

United States

New York regulator sues U.S. OCC over ‘fintech’ charters (Reuters), Rated: AAA

New York’s banking regulator on Friday sued the U.S. Office of the Comptroller of the Currency over its decision to offer special-purpose charters that would let online lenders and other “fintech” companies do business nationwide.

In the lawsuit, filed in U.S. district court in Manhattan, Maria Vullo, superintendent of the New York Department of Financial Services, called the decision to grant the national charters “lawless, ill-conceived and destabilizing of financial markets” that are properly and most effectively regulated by the state.

Weekly Industry Update: Future of Fintech & OnDeck Earnings (PeerIQ Email), Rated: AAA

PeerIQ held a panel discussion this Tuesday titled, “What’s Next in Fintech Lending” featuring speakers including moderator, Peter Rudegeair (WSJ), and panelists Ram Ahluwalia (PeerIQ), Zhengyuan Lu (Victory Park), William Black (Moody’s Investors Service) and Greg Nowak (Pepper Hamilton). Discussion centered on credit performance, regulatory developments, and company news. Access the full replay here.

Also, Michael Gilroy, a Cannan Partners VC, penned an op-ed in American Banker, “Fintech’s Future is In the Backend”.

OnDeck released earnings this past Monday. The stock was down 7% on earnings day and, remarkably, trades slightly above book value, fueling M&A speculation and investor interest. Gross revenues and loan loss provisions were up 48% and 82% respectively from the prior year period. Tighter underwriting criteria slowed origination growth to 1%. Guidance for sale of loans thru the marketplace channel reduced from 18% to 5%. Balance sheet funding is now central.

  • Our interpretation is that OnDeck is taking actions that are at least consistent with pursuing a bank charter:
  • Bank regulator friendly actions – OnDeck has gradually lowered rates over time, tightened underwriting, and announced a focus on profitability rather than growth (targeting 2018 GAAP profitability).
  • Increasing bank executive on board and management – Seasoned banking executive, Jim Rosenthal (former COO of Morgan Stanley), joined OnDeck’s board. Seasoned banking personnel are a key requirement ahead of any bank charter approval.
  • Continued focus on originating loans under the JPM bank-approved credit policy.

A PeerIQ analysis shows that a shift to deposit funding would create ~$30 to $40 Mn in savings by reducing financing costs from ~5.9% to funding costs observed in the brokered CD market.

SoFi President Nino Fanlo to Leave Firm for Biotech Startup (WSJ), Rated: AAA

The No. 2 executive at online lender Social Finance Inc. is exiting the company to take a senior job at a biotechnology startup.

Nino Fanlo, SoFi’s president and chief financial officer, is leaving the firm at the end of the month to take over as finance chief at Human Longevity Inc., a four-year-old genomics company, the two companies said. After that time, Mr. Fanlo plans to remain a board observer and adviser to SoFi.

On an interim basis, Mr. Fanlo’s duties will be assumed by Steven Freiberg, a former top executive at E*Trade Financial Corp. ETFC -1.43% and Citigroup Inc. who joined SoFi’s board earlier this year. The company plans to launch a formal search for Mr. Fanlo’s successor.

The next battlefield for Alipay and WeChat is in the US (The Asset), Rated: AAA

As the two most successful payment platforms in China, Alipay and WeChat both share aspirations for overseas expansion.

In China’s domestic online payment market, which is now the largest in the world, Alipay accounts for 42.7% of online payments, while Tenpay (WeChat) accounts for 19.2%, as of Q4 2016.

Data from Iresearch show that mobile payments in China totalled US$5.5 trillion in 2016. In the US, the equivalent figure was only US$112 billion, according to Forrester.

A Birdseye Views Of Alternative Finance (PYMNTS), Rated: A

The Consumer Financial Protection Bureau (CFPB) has kicked off an inquiry into the U.S.’ SME finance space to understand how lenders lend to small businesses — or even define what they are.

The bureau has requested information from industry stakeholders to kick off its inquiry and also released a white paper to explore SME lending, in which it concluded there is a “current lack of comprehensive data in this area.”

The bureau has requested information from industry stakeholders to kick off its inquiry and also released a white paper to explore SME lending, in which it concluded there is a “current lack of comprehensive data in this area.”

$34.2 trillion is held by the world’s shadow banking market, with the U.S. holding the most of that money than anyone else in the world, according to the latest data from the global Financial Stability Board (FSB).

57.4 percent of U.K. SMEs are unaware of alternative lending options, finds the newest analysis from Close Brothers in its Business Barometer. Just over a third, the report found, said they are familiar with how invoice financing works.

OnDeck shares fell 8 percent last week immediately following the alternative lender’s announcement that it would be increasing credit requirements further in an effort to boost long-term profitability.

The 1 percent decline in loan origination volume posted by Lending Club could have investors worried as analysts said progress for the alternative lender has, on a whole, stalled.

The 1 percent decline in loan origination volume posted by Lending Club could have investors worried as analysts said progress for the alternative lender has, on a whole, stalled.

Ron Suber of Prosper Marketplace to Keynote at LEND360 (Lend360 Email), Rate: A

Join Prosper Marketplace President Ron Suber on Thursday, October 12, at 9:00 AM CT as he discusses the opportunities on the horizon in marketplace lending and how non-banks are solidifying their role in providing financial services.
Ron will also explore how the industry can work together and invent ways to deliver much needed access to credit to millions of consumers and small businesses.

New York joins common state licensing platform for fintechs (American Banker), Rated: A

The New York State Department of Financial Services announced Thursday it will allow fintech companies to register through a common platform used by a majority of state regulators, marking another step toward better regulatory coordination that will help states compete with the Office of the Comptroller of the Currency’s fintech charter.

Upstart Loans with Interest Rates Calculated by AI (Nanalyze), Rated: A

Founded in 2012, San Carlos California startup Upstart has taken in $85.65 million in funding so far from the likes of Peter Thiel, Mark Cuban, Google Ventures, and Khosla Ventures among many others. The Company first unveiled their peer to peer (P2P) lending product in May of 2014 and since then they have originated over $700 million in loans with an average loan size of around $12,000:

We’re not really sure what to make of that double-digit interest rate for a used car loan but that seems to be normal for Upstart since they claim that their average borrower pays 12% for a loan.

Whereas in peer-to-peer platforms like Lending Club you are allowed to select the loans you want to take part in for as little as $25, Upstart allocates loans to lenders randomly with  a minimum requirement of $100. The minimum amount you need to invest to use the platform is $5,000 and that means that you have a 98.9% chance of achieving a rate of return greater than zero. You can also expect an average return of 5.8% using the platform.

From a lenders point of view, it doesn’t appear that AI gives you that much value add. You get around the same rate and the same likelihood of a positive return.

Lending Club Upstart
A 1.55% 3.19%
B 3.16% 3.65%
C 5.91% 5.47%
D 9.72% 13.62%
E 14.09% 11.59%
Total 5.476% 5.483%

River North marketplace lending fund reaches $ 72m, joins Fidelity investor platform (AltFi), Rated: A

Back in September 2016 River North, an alternative asset manager based in Chicago, launched a new fund targeting income investors and offering exposure solely to marketplace – often called P2P – lending.

The fund is a registered 1940 Act closed-end interval fund dedicated to the rapidly growing marketplace lending online lending asset class.

Since inception, the fund has returned 4.46 per cent, which is largely inline with expectations.

Source: River North

InterNex Capital Raises $ 3.85 Million in Oversubscribed Offering (PR Newswire), Rated: A

Digital asset-based lender InterNex Capital (“InterNex”) raised $3.85 million from family offices and private investors in an oversubscribed seed offering. The convertible notes offering, which originally targeted $2.5 million, closed last week.

InterNex was founded in May 2015 by former GE Capital senior executives & fintech experts. The company’s digital lending platform offers small- and mid-sized businesses an optimized client experience while enhancing asset-based underwriting and monitoring reliability through integrated technology, data analytics and artificial intelligence.

Small- and mid-sized businesses are heavily underserved when it comes to their working capital needs. The seed offering closed on the heels of InterNex securing a $100 million debt financing from 400 Capital Management in late 2016 and growing its digital asset-based revolving line of credit financing solution. InterNex has funded over $5 million to its business clients to date.

SOFI’S 2017 NURSING SCHOOL RANKINGS—WHAT YOU’LL MAKE AND WHAT YOU’LL OWE (SoFi), Rated: A

The mean wage for registered nurses is $72,180 a year, and rises to over $100,000 for nurse midwives, nurse practitioners, and nurse anesthetists, who make a mean annual salary of about $164,000, according to the Bureau of Labor Statistics (BLS).

But nurses can also end up carrying tens of thousands of dollars in debt. Graduate nursing students have a median debt of $40,000-$54,999, according to a 2017 loan survey by the American Association of Colleges of Nursing (AACN). Just under a third have to swallow the bitter pill of owing $70,000 or more.

Nursing grads from all of our 10 least lucrative schools had more debt owed than salary paid.

It’s worth noting that one of our least lucrative schools–-Seton Hall University, one of U.S. News & World Report’s top 100 graduate nursing schools–-is in the same state (New Jersey) as one of our most lucrative schools, Fairleigh Dickinson. Seton Hall nursing grads earn an average of $87,510 a year, but have to pay back over 1.5 times as much.

“When Markets Quake” Online Banks and Their Past, Present and Future” (Orchard Platform), Rated: A

It seems like every few months, or so, another article or paper appears that retells the history of online lending. Orchard published one a few years back, and I’ve written one or two on the subject before joining the team last year. And although I personally have no interest in retreading that ground anytime soon as a writer, I do keep up with the reading. The latest example, “When Markets Quake” Online Banks and Their Past, Present and Future,” comes out of the Mossavar-Rahmani Center for Business and Government at the Harvard Kennedy School, written by Marshall Lux and Martin Chorzempa.

The authors paint a mostly positive picture of a rapidly evolving industry—acknowledging the fits, starts, and bumps experienced over its short lifespan, doubtless there will be more as we head into the next leg of the credit cycle but confident that the industry will survive (in one form or another) and that the innovation demonstrated by online lenders will likely continue to have “significant benefits for the financial economy.” 

The pair also provides examples of how banks and online lenders are working together today. The 2016 partnership between Avant and Regions Bank resulted in a co-branded portal that channeled borrowers to one or the other company based on underwriting criteria, and SoFi has sold more than $1 billion of its loans to banks and insurers.

The co-authors also voice concerns about the risk of standardizing loans to allow for a more liquid secondary market via open-end funds—because of the liquidity mismatch between the open-end fund (often with daily liquidity) and the underlying asset (loans with three-to-five-year maturities).

AlphaFlow Adds Veteran Fintech Executive AdaPia d’Errico To Management Team (AlphaFlow Email), Rated: A

AlphaFlow, the first automated portfolio service for real estate investments, announced today that veteran fintech executive AdaPia d’Errico has joined the company as Chief Operating Officer to scale the investor platform and expand AlphaFlow’s customer channels.  Ms. d’Errico is nationally recognized for growing businesses through brand advocacy and designing innovative platforms that build engaged communities. She has been at the forefront of real estate crowdfunding since 2014, advocating the power of increased transparency, education and technology to provide opportunities in real estate investments.

Ms. d’Errico’s career spans retail banking, investment management, intellectual property and brand development, and financial technology. Most recently she was Chief Marketing Officer at Patch of Land where she led brand, marketing strategy and operations, and built the investor platform. Prior to Patch of Land, she provided brand and online growth strategy services to consumer and media companies in the US and the UK, and co-founded two businesses.  Ms. d’Errico has over 10 years of experience in banking and investment management with a focus on customer management, client communications and investor relations.

AlphaFlow continues to grow its team with key people from the marketplace lending industry; earlier this year the company hired Miles Deamer, an early LendingHome employee who scaled lending operations there. Mr. Deamer is responsible for portfolio management along with Mr. Sturm.

AlphaFlow Optimized Portfolios are a truly passive, highly diversified and fully transparent managed portfolio service, bringing to real estate what ETFs brought to stocks. For a low minimum investment, each client’s capital is invested in 1st lien real estate loans to produce a personal portfolio of 75-100 notes spread across 15+ states, selected, rebalanced and managed by portfolio managers with the help of smart automation, algorithms and analytics.

SoFi is One Quirky Lender, But It’s Working (Fortune), Rated: A

Fast-forward seven years and SoFi is on fire, the rare example of a startup that hasn’t seemed to flounder after advertising during the Super Bowl.

Whatever SoFi is doing is working. Cagney says the company originated $8 billion in loans last year, a figure that will double this year. He reckons the company will earn $200 million on a pre-tax basis in 2017 on revenues of $650 million.

Podcast 100: A Retrospective With the Lend Academy Team (Lend Academy), Rated: B

For our 100th episode I thought we would do something a little different. We decided to bring the Lend Academy team (pictured above) together to get their perspective on their favorite episodes in the first 100 podcasts.

In this podcast you will learn:

  • Mike Cagney of SoFi (podcast 89) highlights:
    • The speed, scale and unparalleled execution that is SoFi.
    • The user experience when taking a loan at SoFi.
    • The club-like feel that SoFi promotes among its customer base.
  • Stephen Dash of Credible (podcast 78) highlights:
    • How deeply integrated they are with their lending partners.
    • The concept of customer co-ownership because you can’t offer them everything.
    • The idea of intermediation as a way to better serve customers.
  • Todd Nelson of Lightstream (podcast 73) highlights:
    • A great example of a bank (SunTrust) buying an online lending platform.
    • They are under the radar, they have built one of the top five online consumer lenders.
    • Many years before Marcus by Goldman Sachs Lightstream was originating loans.
  • Andrea Jung of Grameen (podcast 95) highlights:
    • How they underwrite risky entrepreneurs with a tiny 0.3% default rate.
    • The importance of social support for successful loan payback.
  • Brew Johnson of Peerstreet (podcast 58) highlights:
    • How grounded they are in data analytics.
    • The importance of finding good partners for a steady stream of borrowers.
  • The Founders of Streetshares (podcast 71) highlights:
    • Using an affinity model to create a unique community driven business.
    • Their groundbreaking offering for non-accredited investors.
  • Brendan Ross of Direct Lending Investments (podcast 74) highlights:
    • The incredible growth record of the DLI fund.
    • The way Brendan was able to negotiate protection for his investors.
    • Their consistent track record as seen in Peter’s quarterly reports.

Ally to Add Digital Signature and Contract Management Capability to Clearlane (PR Newswire), Rated: B

Customers looking to finance or refinance their vehicles through Ally’s newly launched auto finance marketplace, Clearlane, will soon be able to complete financing online through a new digital signing capability. Built on top of the industry’s leading digital transaction management platform, the SmartSign technology from eOriginal will be incorporated into the Clearlane platform in July 2017, and will allow customers to sign and submit their financing documents online or via mobile devices, facilitating a more efficient transaction.

A top banker explains why he left Wells Fargo to join a tech company (Business Insider), Rated: B

DeVall, who served as Senior Vice President of Wells Fargo for two years, recently joined Tipalti, a California-based fintech company that seeks to simplify business to business transactions. He joined the company in March as its director of alliances and business development after a career of more than a decade in banking.

United Kingdom

Mark Carney on how bad Brexit will be for the UK’s household finances (Business Insider), Rated: AAA

On Thursday afternoon, Bank of England Governor Mark Carney did what he does every three months and took questions from the press after the bank released its Quarterly Inflation Report.

As Carney made clear, sclerotic wage growth is not something that is solely happening because of Brexit, and in the past handful of decades myriad factors — including but certainly not limited to the rise of zero-hours contracts and the waning influence of trade unions — have helped subdue the speed at which pay packets are growing.

However, with the return of inflation since June last year, a real and painful squeeze is underway for British households. Inflation, at the last reading, is running at 2.3%, while wage growth was just 2.2%. Inflation’s surge from close to zero reflects the growing cost of imports triggered by the crash in the pound since the referendum.

RateSetter clarifies types of lending (P2P Finance News), Rated: AAA

NEW MONEY invested through RateSetter’s platform may be matched to existing wholesale loans, the firm said on Friday.

The ‘big three’ peer-to-peer lender announced in late 2016 that it was winding down its wholesale loan book as the activity may be in breach of regulations.

RateSetter lands FTSE 100 heavyweight as new chairman (Business Insider), Rated: AAA

The chairman of global insurance giant Prudential is joining to board of online lender RateSetter as non-executive chairman.

Paul Manduca will join the board of the peer-to-peer lender in June and will become chair on July 17 when current chairman Alan Hughes’ three-year term expires.

The appointment of a veteran of public markets will likely fuel speculation that RateSetter could soon look to list on the stock market.

LendInvest Finances 66 Affordable Homes in Key Crossrail Town (Landlord News), Rated: A

LendInvest, a leading specialist mortgage lender, has completed its largest development finance deal to date with an experienced borrower, who will build 66 new affordable homes in West Drayton, Hillingdon, a town set to benefit from a Crossrail station in 2019.

LendInvest has been working with the borrower since June 2016, when it provided a bridging loan to acquire the site, while the client applied for enhanced planning for 53 new homes. The borrower then transitioned to a £17m development loan to finance the construction.

The total loan provision for both sites is £21m, with the total gross development value forecast to exceed £31m.

makepositive secures £1m funding round (London Loves Business), Rated: B

makepositive, a London-based consultancy that helps firms to make better use of Salesforce, has raised £1m, made up of £800k in equity finance plus a £200k loan facility from P2P provider RateSetter Business Finance. The additional funding has enabled the business to invest in consultants, sales and marketing as well as in R & D to support the creation of new solutions on the Salesforce platform.

UCL Will Host the P2P Financial Systems International Workshop 2017, July 20-21 (Crypto Insider), Rated: B

The upcoming P2P Financial Systems International Workshop 2017 (P2PFISY) will be held at University College London (UCL), Wilkins Building, on 20-21 July 2017. Partners of the event are the Federal Reserve Bank of Cleveland, De Netherlandsche Bank, and the Bank of Canada with the patronage of the UCL Centre for Blockchain Technologies (UCL CBT).

China

JP Morgan launches virtual branch in China (The Asset), Rated: AAA

JP Morgan has launched a virtual branch in China. The service eliminates the need to be physically present at bank branches. JP Morgan hopes to reduce manual interventions and improve turnaround times through faster transaction processing.

P2P Industry News (Xing Ping She Email), Rated: A

DYCD and Jingdong Finance issued 625M RMB
On May 12th , Diyichedai, a Chinese P2P lending platform focused on auto loans, announced that they have jointed with Jingdong Finance to issue an 625 million RMB ABS of “Zhejing•Weirong-7 ABS trust plan”, and Zhejin Trust acted as trustee agency of the basic assets. The product was launched in otc structured financing market, consisted of ABS products based on used car financial assets.

According to DYCD, Jingdong Finance took part in the program as the credit monitoring services agency, monitoring the basic assets of duration in real time. Up to now, with the uproar of ABS origination in China, it has already become one of the most important source of finance for auto financing companies.

Yu’E Bao Rates Back to 4%, Banks Shrug
Recently, the annualized interest return for 7days of Yu’E Bao, the world’s biggest money funds, has reached over 4%. It is the first time for the rates back to this level after June 2015. Up to Q1 of this year, Yu’E Bao’s accumulative assets up to around 1.14 trillion RMB.

It was revealed that the reason for the increase of Yu’E Bao’s rates was based on the regulator intensifying control on the leverage ratio, along with the liquidity of the financial system has been keeping tightening. As one of the “Big 2” online payments in China, Alipay has been proposing the cash free time. However, unlike official banks, Alipay is not allowed to pay interests directly to their customers according to related Financial Regulatory Policy. Therefore, it created “Yu’E Bao” to provide financial services on Alipay account.

Great interest in peer-to-peer lending (Startup Ticker), Rated: B

Lendity connects alternative lending platforms with the traditional banking system using its infrastructure and technology.

Lendity has been accelerated by F10, Switzerland’s Fintech accelerator founded by SIX, PwC and Julius Baer.

The event proofed that there is a great interest in investing in peer-to-peer lending, marketplace lending, crowdlending and factoring. 200 participants flocked to the event.

European Union

Fintech lender MarketInvoice gets a boost as Portuguese bank puts £45 million on its platform (Business Insider), Rated: AAA

Portuguese bank BNI Europa has agreed to lend £45 million ($57.87 million) over MarketInvoice, a UK peer-to-peer lender for small businesses.

MarketInvoice recently launched a new product, Pro, that allows small businesses to access a rolling credit line and Coelho namechecks this as a reason BNI signed on.

BNI Europa was launched in 2014 and is Portugal’s fastest growing digital-only bank.

Contrarian Lending Marketplace Younited Credit Crosses €500 million Milestone (Crowdfund Insider), Rated: A

Since it opened for business in 2012, French lending startup Younited Credit has thrived by implementing strategic choices that ran contrary to common practice among lending marketplaces. It was the first of its kind (and still is the only one so far) to get a full banking license and to start fueling its growth through loan securitization.

What sets Younited Credit apart from its competitors is not so much its record growth, as how the company achieved it and how this positions it for the future.

Whereas other lending marketplaces opt for a broker or other financial intermediary status, and often, like Lending Club in the US and Auxmoney in Germany, use a fronting bank to actually issue the loans, Charles Egly and his partners decided that Younited Credit should get its own banking license, an agreement as a credit institution and investment service provider. This came at very high cost in terms of capital requirements, including €5 million in equity plus a €3 million buffer, as well as in financing the two years needed to obtain the agreement from the French regulator, the Autorité de Contrôle Prudentiel et de Résolution.

The faster Younited Credit grows, the more its needs large institutional lenders. Major international institutional investors such as the Dutch insurer Aegon, investment companies Zencap, Eiffel Investment Group and Hexagone Finance are investing through Younited Credit. The company favors institutional investors with patient money such as insurers, investment funds and family offices, rather than the more volatile ones, such as hedge funds.

Millennial wealth gap leads to concerns over intragenerational fairness (The Herald), Rated: A

Online property lending is becoming big business in the UK, generating £700 million worth of investment in 2015 alone. Newer entrants to the industry include Bricklane, which is selling its own property ISA, and Octopus Choice, which offers a target rate of 4.2 per cent.

A further boost has been provided by the introduction of the Innovative Finance ISA, which shields all P2P returns from tax, although only a handful of providers have regulatory permission to sell the product so far, including Lending Crowd, Landbay and LandlordInvest.

The trend is being driven not just by institutional investors but young web-savvy investors who are disillusioned with poor rates of savings. One P2P platform – ThinCats – reckons that millennials are four times more likely to choose this option as those aged over 55.

Property investors also need to note the difference between P2P lending and crowdfunding, which is the category that Housecrowd falls into. Haaris Ahmed, founder of property crowdfunding platform uOwn, said P2P lending consisted of property-backed loans where a lender will pay an interest rate that is “set in stone”, unless a borrower was to default.

Registration for LendIt Europe 2017 is Now Open (Lend Academy), Rated: B

Our 2017 event will be a little different to last year. Similar to what we have done at our USA event we are expanding to include other aspects of fintech beyond online lending. While we will still be covering lending in some depth we also want to highlight the innovations happening in other areas of financial services.

Early confirmed keynote speakers include Jaidev Janardana, the CEO of Zopa, Francesco Brenna, an Executive Partner at IBM Global Business Services and Shane Williams, the co-head of UBS Smartwealth. Our current confirmed speakers are here and if you are interested in becoming a speaker at LendIt Europe 2017 you can submit an application here.

The launch price of £795 is in effect until June 2nd, but as a Lend Academy reader you can receive an additional 15% discount by using the code LENDACADEMYVIP at checkout. The discount code is always good for 15% off but you will receive the best pricing if you purchase before midnight on June 2nd. You can register now on the LendIt website.

International

Alternative Lending Deals On Pace For New Low (CB Insights), Rated: AAA

Today, 8 of the 22 global private fintech companies valued at $1B or more are alternative lenders. But 11 years after the founding of Lending Club, investments to private alternative lending companies are hitting new lows, according to CB Insights data.

China Rapid Finance, which last year raised funds at a $1B valuation, went public last month at a $350M valuation.

Deals and dollars to alternative lending companies trended up between 2012 through 2015. Funding saw a 188% funding increase from $1.54B in 2014 to a record $4.43B in 2015 across 94 deals. But at the current run rate, 2017 will see a dip to approximately 42 deals worth $2.01B. And this funding run-rate is actually inflated by SoFi’s $500M Series F, which represents 73% of funding in the year-to-date. The full-year total could come in far lower than $2B.

Alternative lending companies saw both deals and dollars retreat on a year-over-year basis in 2016 with 78 deals worth approximately $2.45B in funding.

Digging into the quarterly data, Q2’15 saw a record 30 deals worth approximately $1.45B in funding.

Q3’15 was a record quarter for funding with approximately $2.14B invested across 24 deals.

India

Indian millennials are taking to peer-to-peer lending for investment (India Times), Rated: A

When 28-year-old Karan Lalchandani had to take a call on expanding his investment portfolio, he steered away from the common options -real estate, equities and precious metal.Instead, he took a small loan on peer-to-peer (p2p) lending platform Faircent.

Lalchandani is part of a growing tribe of young professionals who, not happy with the rate of return or long lock-in period that traditional investment options have, are looking at the p2p lending model.

According to Rajat Gandhi, chief executive of Faircent, about 60% of the 10,000 lenders on the platform are under the age of 35, with a significant chunk being under 30. “Most 30-year-olds haven’t experienced a good asset class.This offers quick returns monthon-month,“ he said.

This trend has been visible across various p2p lending platforms like Lendbox and i2iFunding, many of which rely solely on social media to reach out to this lender profile. Chaudhary, for instance, came across p2p lending through a simple online search on investment options.

Should you invest in Bitcoins, crowd funding, P2P lending? (India Times), Rated: A

After dabbling in traditional investment avenues like stocks, fixed deposits, gold, mutual funds and real estate, some investors are
venturing into more adventurous territory—digital currency, crowdfunding and P2P funding—to make their wealth grow.

There are a little over 15 million bitcoins in circulation today and no more than 21 million will be mined ever, making the virtual currency attractive to investors. The rising demand for and lack of supply of have pushed up the price of bitcoins from $16 per coin in 2013 to $1,700 today.

P2P platforms have brought lenders and borrowers closer. Technology allows easy credit to borrowers, while lenders earn high returns on idle funds. Chennai-based Jose Joseph, 45, has been lending on P2P platforms since 2015. On the Rs 1 lakh he has put in so far, he has earned an average return of 20%.

Microfinance and P2P lending – Twin Brothers? (Telangana Today), Rated: B

Microfinance consists in providing of financial help to low-income families or individuals who traditionally lack access to banking and loans (a.k.a. the “unbanked”).

Going by the above, there is no relationship or link between microfinance loan product and peer to peer lending. Urban MFIs have a income household parameter of minimum 1.6 lacs per annum. Do they have an individual income parameter? If yes, they could partner with P2P platforms and lend on the platform.Going by what we have above, it is not possible to design a P2P platform to suit the needs of microfinance landscape. But it is a very important question to ask how MFIs can decrease their operational and transactional costs using technology. This is being addressed since almost 10 years with less success. Is it really possible to successfully implement BC/CSP model?

Asia

Indonesian P2P lending platform Taralite raises US$ 6.3M, aims to build “world class” R&D team (e27), Rated: AAA

Jakarta-based P2P lending platform Taralite today announced that it has a raised a funding round from Japanese fintech conglomerate SBI Group.

It operates a US$300 million finTech-focussed fund.

To achieve this, it partners with various online marketplaces and booking platform such as Tokopedia, Bukalapak, Lazada, MatahariMall, and Airy Rooms.

Taralite offers swift application processes and affordable loans starting from 0.99 per cent per month. It claimed to have disbursed loans to 1,000 borrowers with more than 70 per cent retention rate.

South America

Nubank reported a net loss of $ 39 million (Conexao Fintech), Rated: AAA

Nubank, Brazil’s biggest Fintech startup, reported a net loss of BRL 122 million last year. In 2015, the loss had been BRL 32.7 million. Operating income in the period was BRL 77.09 million, a significant expansion of BRL 10.4 million from the previous year.

In order to finance the operations with the rotary – whose rates vary from 2.75% to 14% per month – Nubank allocates part of its card receivables portfolio to a fund. The portfolio totals BRL 1.4 billion, while the receivables fund closed 2016 with approximately BRL 150 million.

Philippines

Peer-to-peer lending The Basics and The Benefits (Manila Bulletin), Rated: A

Peer-to-peer lending, sometimes referred to as “social lending”, allows individuals to borrow and lend money without the intervention of standard or official financial institutions, like banks.

  1. It’s hassle-free.
  2. It’s a win-win process.
  3. Hello flexible fees!
  4. It’s user-friendly.
  5. Enter into a new community

Authors:

George Popescu
Allen Taylor

Tuesday April 4 2017, Daily News Digest

Lending Club

News Comments Today’s main news: Invoice Cycle offers underwriting via API. LC hires JPMorgan’s head of new technologies. China Rapid Finance files for U.S. IPO. Today’s main analysis: Robinhood valued at $1.3B. Today’s thought-provoking articles: Zopa and Funding Circle disagree on becoming a bank. Banks no longer fear P2P lenders and robo-advice. United States Robinhood valued at $1.3B. […]

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  • First lender/broker API goes live. GP:” Nearly every single company in our space uses Lending Club data to build their underwriting. Invoice Cycle goes even further and is offering underwriting as a service. I think this is a great product, great service and as long as it’s priced properly, I think they will do very well. I expect other firms should rather offer this service instead of trying to sell technology platforms as there are a dime a dozen already. ” AT: “I wonder why we haven’t seen more. Kudos to Invoice Cycle for breaking the ice.”
  • P2P lending bosses split on whether to become a bank. AT: “Zopa is taking the right path. Funding Circle may be too, for its own business model. But I’m in favor of digital-only banks. For those who get in now, the competitive playing field of the 21st century will treat them well. This is the time to start a digital bank if you’re going to do it. I see Zopa being a leader in banking soon.”
  • LendInvest launches pre-construction product.
  • Robots can do more, if we let them.
  • New members for the AABF. GP:” The creation of a new association in the UK.”

European Union

Australia

News Summary

 

United States

Robinhood stock trading app valued at $ 1.3 billion with big raise from DST (TechCrunch), Rated: AAA

Zero-fee stock trading app Robinhood is completing a huge fund raise to fuel its attack on old brokerage firms that charge around $7 to $10 per trade. According to sources, the round is led by Yuri Milner investment vehicle DST Global and values the company at $1.3 billion.

Last year, it launched its primary revenue stream, a $10 per month premium Robinhood Gold option. That allows users to skip the three-day waiting period for deposits and make trades instantly, as well as borrow up to double the amount of money in their account to trade on margin with leverage.

Earlier today, Fortune reported that Robinhood was seeking a round of financing valuing it at more than $1 billion. Sources tell us that the deal is essentially done, and was led by DST Global, which put in money at a $1.3 billion pre-money valuation.

Loan Validation Firm Global Debt Registry Adds Prosper to Network (Crowdfund Insider), Rated: AAA

Global Debt Registry (GDR), a loan validation platform for institutional investors, has added leading online lending platform, Prosper Marketplace to its verification network. GDR says the partnership will enable Prosper investors access to their due diligence tools to ensure loan data integrity. Prosper successfully piloted GDR connectivity in 2016 and is now enabling investors to access GDR’s solutions as a turn-key autonomous solution.

JPMorgan’s Head of New Technologies Gets Hired by LendingClub (Bloomberg Quint), Rated: AAA

JPMorgan Chase & Co.’s head of new technologies has been hired by LendingClub Corp. as the peer-to-peer lending pioneer seeks to rebuild business following a scandal over its corporate controls.

Santiago Suarez will join the San Francisco-based company as Head of Strategy and Mergers and Acquisitions, he said on Twitter.

China Rapid Finance Ltd files for U.S. IPO of $ 100 Mln (Reuters), Rated: AAA

  • China Rapid Finance Ltd files for U.S. IPO of $100 million – sec filing
  • China Rapid Finance Ltd says ADSS have been approved for listing on new york stock exchange under the symbol “XRF”
  • China Rapid Finance Ltd says Morgan Stanley. Credit Suisse, Jefferies are underwriters for the IPO

5 things to know about Elevate Credit before the subprime online lender’s IPO (MarketWatch), Rated: A

Now, following an opening of the IPO market and a possible easing of financial regulations, Elevate ELVT, +0.00% has set a $12 to $14 price range and plans to sell 7.7 million shares, which would raise up to $107.8 million. The company is expected to price its shares this week and begin trading on the New York Stock Exchange.

UBS Investment Bank, Credit Suisse and Jefferies are the lead underwriters on the offering.

  1. Rise and Sunny are both installment loans, commanding average percentage rates of 156% and 230% respectively. Elastic is a line of credit with an average interest rate of 91%. The company’s average APR was 146% for 2016, which the company notes is a drop from 2013, when the annualized premium was 251%.
  2. The company targets consumers with credit scores below 700, which is a sector Elevate calls the “New Middle Class” but most consider subprime. About 95% of loan applications are automated, without human review.
  3. Elevate recorded revenue of $580.4 million in 2016, up from $434 million in 2015, but net losses grew from $19.9 million in 2015 to $22.4 million in 2016.
  4. But President Donald Trump issued memorandums in January that could change Elevate’s risk level.
  5. Elevate receives debt financing for its Rise and Sunny loans from Victory Park Management, an affiliate of Victory Park Capital.

Fundbox Partners With Zoho To Solve Cash Flow Gaps (Yahoo! Finance), Rated: A

Fundbox, the leading cash flow optimization platform for small businesses (SMBs), and Zoho, the leading cloud-based business operating system, today announced a partnership in which Zoho will offer Fundbox to its user base in the U.S. Under the partnership, Zoho will provide access to Fundbox’s technology to streamline and automate the business borrowing experience within the Zoho ecosystem.

Fundbox addresses one of the biggest pain points for small businesses and freelancers: cash flow. A recent Fundbox study revealed that 64 percent of small businesses are adversely affected by late payments. Over 80 percent of small business invoices are over 30 days due. This integration will allow Zoho customers approved for Fundbox Credit to advance funds tied up in their receivables so they can focus on business growth.

Fintech Firm Plaid Raises $ 44 Million (WSJ), Rated: A

Plaid Technologies Inc., whose software allows a variety of financial-technology startups to access their customers’ bank account information, has raised $44 million in a new round led by a fund at Goldman Sachs Group Inc.

The new funding is a boost for apps and websites that use Plaid, which has now raised about $60 million total, as they work to ensure access to customer data held by banks.

John Mack Joins Lantern Credit as Chairman (Yahoo! Finance), Rated: A

Lantern Credit, a financial technology company working to solve systematic inefficiencies in the consumer credit industry, appoints esteemed banking industry veteran John Mack as Chairman of its Board of Advisors, joining current board members John Sculley, former chairman of Apple Computer, James Held, former president and CEO of the Home Shopping Network, Seth Johnson and Kevin Knight.

Mack brings vast leadership experience including Chairman and CEO of Morgan Stanley, Co-CEO of Credit Suisse Group and CEO of Credit Suisse First Boston. Mack is actively serving on several boards including Lending Club, Glencore International AG and Bloomberg Family Foundation. Mack has accumulated 25 years of experience as chairman, serving on the boards of Morgan Stanley, Pequot Capital Management Inc. and New York-Presbyterian Hospital.

Lantern Credit’s white label platform for financial institutions draws personal financial data including credit data, account information and personal goals to provide customers with real-time information to make informed choices designed to improve their financial wellness. Financial Institutions providing the Lantern Interactive Credit Report™ to their customers benefit from more engaged consumers and are better equipped to provide relevant offers to their customers. Instead of the traditional static credit report, Lantern’s Interactive Credit Report delivers access to a free credit report and score, model the effects of financial actions, receive and accept offers directly from lenders, and make payments on existing accounts.

Ally debuts online auto financing market (Automotive News), Rated: A

Ally Financial Inc. is launching an online auto finance marketplace that connects lenders and consumers.

Clearlane, which launches today, derives from Ally’s third-quarter acquisition of BlueYield, an online auto-lender exchange.

The Clearlane network includes more than a dozen national, regional and local finance providers that will connect with consumers to finance or refinance their auto loans. Consumers can also speak with live agents and purchase Ally’s F&I products.

CFPB’s Cordray defends agency’s enforcement actions (American Banker), Rated: A

Richard Cordray, the director of the Consumer Financial Protection Bureau, defended the agency on Thursday from industry allegations that the CFPB engages in “regulation by enforcement.”

Financial inclusion rules tougher than CRA in OCC fintech charter (American Banker), Rated: A

The Office of the Comptroller of the Currency’s proposal to require fintech charter applicants to draft and comply with a financial inclusion plan appears to have more teeth than similar Community Reinvestment Act requirements for banks.

The OCC has made it clear that it is not seeking to institute CRA requirements on nonbanks, in part because the 1970s-era law is widely considered outdated in how it promotes financial inclusion.

Fallen Stars: Lending Club (Seeking Alpha), Rated: A

I believe that the tide is turning for Lending Club. I believe there are a number of factors that will contribute to its success going forward. I believe the company will leave negative PR in the dust, grow, and regain a positive EPS. Make no mistake, this is a high risk (potentially) high reward opportunity. This is not an investment for the faint of heart.

The company has a market cap of $2.2B. It has fallen nearly 80% since its IPO and currently has negative earnings per share.

Regarding full year 2017 guidance, Lending Club expects 17% growth, a GAAP net loss of $84 to $69m, and positive EBITDA. In my opinion the company will go positive again in 2018 if current trends continue.

The company’s balance sheet is a star among mud. Lending Club has no debt. It has $1.29 of cash per share and a total book value of $2.45 per share. I love a company that has no debt.

Lending Club is obviously at the mercy of the consumer credit cycle. It goes without saying that if borrowers can’t pay their loans, the company will suffer. If charge offs increase Lending Club may lose investors providing the capital for the loans. Lending Club may also have to increase its rates which would reduce its competitive advantage over traditional banks.

United Kingdom

First Lender/Broker API goes live (Invoice Cycle Email), Rated: AAA

Invoice Cycle – the UK SME lender – is excited to announce the release of a new API for partners. This development allows partners to interface directly with the Invoice Cycle proprietary risk algorithm and gain a pre-approval for an SME financing facility within seconds. The first partner to integrate this offering is FundingXchange – the cutting-edge business finance marketplace. This means that FundingXchange customers will be able to get an Invoice Cycle facility in place within hours of starting their funding search!

Gideon Shaw CEO of Invoice Cycle said of the development “One of our core principals is to provide the highest level service to our customers. In the fast paced world of business, decisions need to be made as soon as possible, we aim to turn an application around within 24 hours. This new API will help us meet these targets and allow us to provide a better service to both our client and partners. This release demonstrates how we strive to be at the forefront of technological innovation in the industry.”

Peer-to-peer lending bosses split on whether to become a bank (AltFi), Rated: AAA

Funding Circle and Zopa don’t disagree on much. But when it comes to whether or not to launch a bank, CEOs Samir Desai (pictured above) and Jaidev Janardana have reached a divergence point.

“We at Funding Circle have no plans to launch a bank,” said Desai.

He went on to identify the three types of bank collaboration that have sprung up across the marketplace lending space: banks buying marketplace loans, banks referring customers to platforms and “co-branding” opportunities. He was critical of “lending-as-a-service” integrations, which broadly speaking entail platforms letting banks make use of their technology. Desai said there is “only one winner” in such arrangements.

Janardana confirmed in his speech that Zopa will be using deposits to fund loans through the marketplace.

LendInvest launches pre-construction product (Financial Reporter), Rated: A

LendInvest will offer a loan term of up to 18 months, and borrowers who then wish to apply for development finance with LendInvest after gaining planning permission will have their applications fast-tracked.

The pre-construction product has no exit fees and is available on loans between £75,000 and £5 million up to 65% LTV. Interest is charged at 1% – 1.50% per calendar month.

Robots can do more, if we let them (Actuarial Post), Rated: B

Ultimately the use of automated solutions will provide a more standardized service and increase the control the compliance department has on the quality of the service delivered. It will also help to reduce costs, thereby ultimately benefitting the customer by reducing the charges that need to be applied to the policy.

We should be looking at the arrival of robo-advice, not in terms of making huge changes but in terms of providing incremental improvements to our customer service levels, our ease of achieving our regulatory compliance and our ability to provide better value to life and pension customers. The impact of robots on the industry should be less like a technological disruption than a technology-supported evolution of service levels.

New Members for the AABF (Fintech.finance), Rated: B

Three new alternative lenders have joined the recently launched Association of Alternative Business Finance (AABF)  – Invoice Cycle, Merchant Money and Reward Finance Group.

The AABF was launched on 1 February this year with the major ambition of championing and promoting the best standards of industry practice.

The seven founding members, Capify UK, Catalyst Finance, Credit4, Fleximize, Liberis, The Just Loans Group and YesGrowth established  four clearly defined operating principles that members will be required to adhere to:

  • Transparency
  • Responsibility
  • Fairness
  • Security
European Union

Banks “no longer fear” marketplace and P2P lenders and robo advice, finds study (AltFi), Rated: AAA

The new report from the Economist Intelligence Unit finds bank/fintech collaboration will be key to the survival of both ends of the market. 

While P2P and marketplace lenders as well as robo advice firms are increasing their market share, big banks are less concerned by their technology-enabled competitors than before. The report found PSD2 and open architecture framework is widely seen as a game changer between banks and fintechs.

Acquisition costs are often higher than expected, compliance costs are climbing and margins are already falling in P2P lending and robo advice, Freidman says.

Computer says . . . invest: the robo-advisers are coming (The Irish Times), Rated: A

Now London-based ETFmatic is targeting the Irish market along with 31 other European countries, hoping that investors will be attracted by annual management charges starting from 0.3 per cent.

The minimum initial investment for ETFmatic, for example, is just €100. Portfolios with less than €25,000 carry a management fee of 0.5 per cent, falling to 0.3 per cent for portfolios above €25,000.

Consequently, the all-inclusive fee for an ETFmatic portfolio ranges from 0.4 to 0.85 per cent.

For now, robo-advisers remain a niche option, accounting for less than 1 per cent of assets under management. However, the space is a rapidly-expanding one that may account for 10 per cent of global assets by 2020, according to a BI Intelligence report last year. Almost half of wealthy investors not currently using robo-services would consider using them in the future, according to a PwC report last year.

Robo-advice may be here to stay, but the beneficiaries may be the big players who are increasingly moving into the space rather than startups such as ETFmatic.

Australia

Today our experience shows most superannuation executives instinctively accept that digital advice will increase in importance as one means of delivering better service to all members. However, like any business investment, it needs a business case.

Retention of members is the number one priority for many superannuation providers. Decimal’s research shows it is also the area in which the greatest financial gains can be made.

Nevertheless, our data indicates that funds implementing digital advice that includes contribution related advice topics can reduce retention risk by approximately 15 per cent.

In the cases analysed, it was found 40 per cent of these passive members could be engaged with digital advice. Of that 40 per cent, 25 per cent moved through to actioning a Statement of Advice (SOA). That equates to 10 in every 100 passive members making some level of additional financial contribution.

In cases where members have had some level of engagement in the past but have never taken a real course of action, digital advice was found to be successful in re-engaging approximately 30 per cent.

Authors:

George Popescu
Allen Taylor