Thursday July 11 2019, Weekly News Digest

Asset-backed securities

News Comments Today’s main news: Morningstar completes DBRS purchase. Figure issues $85M in loans per month. Zopa chief says banks are trying to put fintech lenders in a box. DBRS praises Funding Circle. Yirendai’s Q1 results. Octopus expands into Germany. Today’s main analysis: Over 60% of purchase borrowers received mortgage rates under 4.5% last week (A […]

The post Thursday July 11 2019, Weekly News Digest appeared first on Lending Times.

Asset-backed securities

News Comments

United States

United Kingdom

China/Hong Kong

European Union

International

Other

News Summary

United States

Former SoFi CEO Mike Cagney’s New Blockchain Startup Is Issuing $ 85 Million In Loans A Month (Forbes), Rated: AAA

Since the streamlined HELOC Mike Cagney, the co-founder and former CEO of fintech unicorn Social Finance (SoFi), knows that it is essential to focus on customer experience to build a loyal client base. Today, he is using that knowledge to create a platform aimed at driving mainstream adoption of blockchain technology in the financial sector.

Over 60% of Purchase Borrowers Received Mortgage Rates Under 4.25% Last Week (LendingTree), Rated: AAA

Mortgage Rate Distribution

  • For 30-year, fixed-rate mortgages, approximately 60.1% of purchase borrowers received offers of 4.25% or less. That is up from 57% of borrowers the previous week. A year ago, 0.06% of offers were under 4.25%.
  • Across all 30-year, fixed-rate mortgage purchase applications on LendingTree, 4.125% was the most common interest rate. This rate was offered to 14.3% of borrowers.
  • Of 30-year, fixed-rate mortgage refinance borrowers, 72.8% received offers of 4.25% or less, which is up from 70.4% the previous week. A year ago, no refinance offers were under 4.25%.
  • Across all 30-year, fixed-rate mortgage refinance applications, the most common interest rate was 3.875%, offered to 18.9% of borrowers.

Mortgage Rate Competition Index

  • Across all 30-year, fixed-rate mortgage purchase applications on LendingTree, the index was 1.19, down from 1.22 the previous week.
  • How big of a deal is it to get a mortgage APR that’s 1.19 percentage points lower than the competition? Over 30 years, that could translate to $56,826 in savings on a $300,000 loan (see Mortgage Savings Tracker graphic below).
  • The index was wider in the refinance market at 1.35, up from 1.34 the previous week. Refinance borrowers could have saved $65,108 by shopping for the lowest rate.
Source: LendingTree

It’s Taking Less Time to Close on a Mortgage in 2019 (LendingTree), Rated: AAA

  • The time to close in new purchase transactions has been steadily declining, from 74 days in 2017 to 51 days in 2018 and just 40 days thus far in 2019.
  • For refinances, the decline has been less dramatic: from 55 days in 2017 to 43 days in 2018 and just 38 days so far in 2019.
  • Some of the decline can be attributed to lower mortgage volumes, as refinancings have been on a downward trend. But increased digitization is also playing a major role.
  • Closing times vary based on the characteristics of the mortgage type and borrower. Having a higher credit score can knock a few days off: Purchase borrowers with scores above 760 averaged 38 days in 2019 compared with 45 days for those below 720. Refinancings did not show much variation by credit score.
  • Loan-to-value ratios below 80% had shorter closing times for refinances, at 37 days compared with 42 days on mortgages with a ratio above 95% in 2019.
  • Loan amounts also affect closing times, with lower amounts, perhaps surprisingly, taking the most time. Loans under $150,000 averaged 47 days compared with 39 days for those above the conforming limit ($484,350 in 2019). Why? Higher loan amounts are typically being made to more credit-worthy borrowers. Lower-priced homes may be in some form of distress or have some type of damage; lenders thus may require more extensive appraisals to better estimate the home’s value and this adds time to the process.

Mortgage Fintech Innovation (PeerIQ), Rated: AAA

In broad-brush strokes, mortgage innovation centers on:

  • Customer experience (Better, Roostify, Blend, HomeCaptain) solutions are re-inventing the onerous mortgage with a digital experience, speeding decision times and opening up the lending buy box in the process.
  • Intermediation (OpenDoor, HomeLight, Zillow) – Some platforms are stepping in between buyers and sellers to provide liquidity, capturing transaction fees in the process
  • Data (House Canary, Zillow, Atom Data) – are amassing large data sets to providing accurate, standardized pricing models for investment decisioning
  • Banking 2.0 (SoFi, ZeroDown) – seek to provide a range of banking or investing services to consumers
Source: PeerIQ

Guaranteed Rate Companies Breaks 15 Company Records with Exceptional June Production Volume (Yahoo! Finance), Rated: A

Guaranteed Rate Companies, one of the largest retail mortgage lenders in the nation, announces 15 new company milestones—breaking its monthly total locked volume for the fourth consecutive month in June.

Breaks its record of total locked volume with $5.31 Billion earned across more than 15,000 units

Can Commercial Real Estate Investment Truly Be Democratized? (Commercial Observer), Rated: AAA

Most real estate crowdfunding sites continue to highlight the equalizing benefits of the model. Fundrise provides “access to a once-unattainable investment class,” and Rich Uncles, which has a minimum of $5, wants to “level the playing field” for the average investor. The sites offer investments in funds that focus on income-producing assets, like single-tenant office, multifamily housing and convenience centers nationwide.

Jeff Holzmann, the former COO of crowdfunding site iintoo, says the definition of an accredited investor is very divisive: “You can have an economics degree, and if you make $199,000 a year, you can’t invest, but Kim Kardashian can walk right on up and buy a multifamily building for $200 million. Should our bar be set by how much money you make?”

Ryan Williams Is Bringing the ‘Proptech’ Revolution to Real Estate Investing (Fortune), Rated: A

Real estate is an industry notoriously stuck in its ways and slow to change. Cash-generating, bricks-and-mortar assets are at the very heart of the enterprise, and in many ways, business is conducted the same way it was 100 years ago. Until recently, real estate owners, investors and brokers had little patience for the kinds of technological advances that have swept through myriad other industries.

But that’s all changing now. Just as there’s fintech, medtech, edtech and regtech, so is there proptech—and there are few companies in the realm of real estate technology as closely watched as Cadre, led by a 31-year-old Blackstone Group and Goldman Sachs alum named Ryan Williams.

7 Reasons Why Long Distance Investing Isn’t As Risky As You Think (Forbes), Rated: A

In 2019 we have many ways we can verify the information we are provided when we invest outside of our own market. These methods will be the focus of this article. By the time you’re done with this, I think you’ll have a much better understanding of how to conduct due diligence, why out out state investing isn’t as risky as you thought, and why I’m such a big proponent of it

1.The Internet

There is very little you can’t find out with a little online searching.

2. You Can Find Rent Estimates Easily

Websites like Rentometer and Craigslist make a preliminary rent search fast and easy.

7. You Can Find Comps Yourself Online

BlueVine Reaches $ 2 Billion In Total Funded Volume (Bluevine), Rated: A

This past month, BlueVine achieved a major milestone, having provided access to more than $2 billion in total working capital to businesses across the nation.

Finitive Announces $ 100 Million Credit Facility For Platinum Auto (Crowdfund Insider), Rated: A

Finitive announced on Monday its client Platinum Auto of Tampa Bay secured a $100 million credit facility through its platform. Platinum notably purchases auto loan contracts from a network of over 300 auto dealers in the southeast region of the U.S.

Affirm lets you pay off a large online purchase over time — here are 35 stores that accept it (Business Insider), Rated: A

You can apply for a loan as you’re shopping at one of many Affirm’s partner stores, which include women’s and men’s fashion, furniture, sports and fitness, electronics, jewelry, and watch brands.

You can see which online retailers accept Affirm below.

They’re divided by category and we’ve also designated which ones offer loans starting at 0% APR with an asterisk.

Will Abercrombie & Fitch’s “Buy Now, Pay Later” Plan Lock in Gen Z Shoppers? (The Motley Fool), Rated: AAA

Abercrombie & Fitch (NYSE:ANF) recently partnered with payment solutions provider Klarna to let U.S. shoppers split purchases into up to four interest-free payments over two months. A&F is aiming this “buy now, pay later” system — which its rival Urban Outfitters (NASDAQ:URBN) has also adopted — at younger shoppers with less spending power.

But will “buy now, pay later” work?

Only a third of millennials have credit cards according to Bankrate. The average millennial in the U.S. also has a net worth of just $8,000 according to Deloitte, which gives them significantly less spending power than previous generations. Most Gen Z shoppers don’t have credit cards yet. They mostly use debit cards or linked payment apps, which restrict purchases to the amount of cash in their bank accounts.

rue21 is Totally on Trend with the Addition of Klarna (Yahoo! Finance), Rated: A

Klarna, the global alternative payments provider, is getting trendy with the Millennial favorite fashion brand rue21. Customers can choose to pay with four equal payments collected bi-weekly – with no interest or fees. With Klarna, these cool customers get the ability to stay ahead of trends even faster with a smooth checkout and a payment option that boosts flexibility and purchase power.

The necessity for businesses to keep up with the customer is increasingly important considering that U.S. shoppers admit to buying clothes and accessories online an average of 10 times a year. For Gen Z shoppers, aged 16-24, this number increases to 18 times per year, with nearly a quarter (23%) of them admitting to shopping online 1-3 times per month. Millennials are shown to shop online 14 times per year and the 55+ age group, 8 times per year. Considering these Millennial and Gen Z demographics are credit card averse and debt conscious, Klarna delivers an appealing and accessible method for shoppers to take control of their finances in a manageable way.

Metro Denver businesses mostly seeing green, not red (Denver Post), Rated: A

Of 42,610 businesses in metro Denver, 29,560 or 69.4 percent reported turning a profit, according to an analysis from online lender LendingTree.

That placed fifth out of the 50 metro areas that LendingTree ranked based on Census Bureau data. Seattle had a business profitability rate of 70.9 percent, making it the leader nationally. The only other cities ahead of Denver were Louisville, Ky.; Indianapolis and Portland, Ore.

U.S. Consumer Borrowing Climbs on Bigger Credit Card Balances (Bloomberg), Rated: A

U.S. consumer debt climbed in May at about the same pace as a month earlier, led by the largest advance in revolving debt outstanding since October, suggesting Americans’ favorable economic outlook is underpinning continued spending.

Total credit rose $17.1 billion from the prior month, in line with the median estimate of economists, following a $17.5 billion gain in April, Federal Reserve figures showed Monday. While credit card and other revolving debt outstanding increased at a faster rate, non-revolving credit posted the smallest increase in almost a year.

Small Business Loan Approvals at Big Banks Hit Record Highs (Yahoo! Finance), Rated: A

Approval rates for small business loan applications inched up to yet another record high of 27.6% at big banks ($10 billion+ in assets) in June, while the approval percentage also climbed at small banks, hitting 50% for the first time in 2019, according to the Biz2Credit Small Business Lending Indexreleased today.

Small bank approvals of small business loan applications climbed one-tenth of a percent from 49.9% in May to 50% in June.

Small business loan approval rates among alternative lenders dropped one-tenth of a percent to 57.0% in June, down a notch from 57.1% in May.

LendingTree Survey Finds 45% of Newlyweds Went into Debt for Their Wedding (PR Newswire), Rated: A

Approximately 45% of newlyweds between the ages of 18 and 53 went into debt to pay for their wedding. And once married, nearly half of the newlyweds who obtained wedding-related debt said money has caused them to consider divorce. On the flip side, only 9% of couples without wedding-related debt contemplate divorce.

LendingTree released its study on newlyweds and wedding expenses.

How Using Fintech Can Help Pay Off Student Loans (Yahoo! Finance), Rated: A

Companies like SoFi, Laurel Road and Splash Financial are just a few of the fintech industry names that have made their way into the student lending world.

Credible. This is a platform that allows you to compare student loan refinance rates from eight different lenders.

LendKey. Similar to Credible, Lendkey is a platform that allows the borrower to compare refinance rates side by side.

CommonBond. CommonBond for Business offers a flex contribution program that includes an option to directly contribute to paying down employee student loans, or to work with employees on financial literacy techniques for reducing their debt.

Gradifi. Gradifi is another fintech offering refinance options, bundled with employee benefits packages called SLP, or “student loan paydown”.

Earnest. This fintech offers refinance options to individuals with a more limited credit history that may not qualify for other traditional options.

FutureFuel. FutureFuel uses behavioral economics, which is the study of human behavior to explain economic decisions people make.

3 Alternative Financing Options for Small Businesses in 2019 (Digital Journal), Rated: B

Online finance is a very popular option to emerge of late. A few click on the website can bring about quick processing and loan approval.

Another alternative financing option is that of merchant cash advance.

Crowdfunding is an innovative and extremely popular way to raise money for new ideas, concepts, prototypes and creative products.

New Study on Digital Identity Shows Changing Consumer Behaviors (Lend Academy), Rated: A

Today, according to Pew Research Center more than 50 million American adults are mobile-only consumers.

Each year, IDology publishes a Consumer Digital Identity Study aimed at giving businesses visibility into how consumer preferences and opinions related to identity and fraud are shifting. This year’s study confirms the continued movement toward mobile, finding that in the last 12 months, for the first time, consumers opened more new accounts online with their mobile devices than on computers. A closer look at the data shows that 50 million American consumers (20% of all online adults) registered for new accounts exclusively on a mobile phone, up 10% from last year. This growing number has implications for financial service providers as they strive to keep fraud out while giving consumers a seamless digital experience.

Online Lending Startup Tries To Push Usury Suit To Arbitration (Law360), Rated: B

Online lending startup MoneyLion told a North Carolina federal court Tuesday that a suit over alleged unlicensed payday lending belongs in arbitration, arguing the proposed class of borrowers had signed valid arbitration agreements when taking out their loans.

United Kingdom

Zopa boss Jaidev Janardana: big banks are trying to ‘put fintech lenders in a box’ (The Telegraph), Rated: AAA

In just a few months, a string of Zopa’s rivals in peer-to-peer lending have collapsed. Others have exited the sector altogether.

The latest company to fall into administration, Lendy, resulted in £165m of customer cash being put on the line and affected more than 20,000 investors.

Zopa survey finds Brits are more open about bank balance than Netflix password (P2P Finance News), Rated: A

A survey of 2,000 adults by the peer-to-peer lender found that 47 per cent of respondents felt more comfortable revealing details about their bank accounts with their partner than their most intimate secret, while the same percentage would prefer to give an insight into their finances over their Netflix password.

Zopa looks to grow secured car finance offering (P2P Finance News), Rated: B

ZOPA is readying to launch its secured car finance product as a direct offer on its website, as it looks to expand this segment of the business.

Ratings agency backs Funding Circle strategy to tighten lending (AltFi), Rated: AAA

SME focused peer-to-peer lender Funding Circle was correct to proactively take the decision to tighten its lending criteria in pulling back from higher-yielding lower-quality loans, according to ratings agency DBRS.

Investor fintech demand drives record six months for Crowdcube (AltFi), Rated: A

Crowdcube saw revenues soar 39 per cent to £3.72m in the first half of 2019, compared to the same period in 2018, with £103.4m pledged to companies through the platform.

NatWest-backed Esme hits £60m lending milestone (AltFi), Rated: A

Esme Loans said it has hit over £60m of lending to UK small businesses just two years after its launch.

The small business lender unit said its loans have leapt 20 per cent since the end of April.

Habito launches buy-to-let mortgages (Which), Rated: A

Online mortgage broker Habito has launched a comprehensive range of buy-to-let mortgages, as it makes its first foray into lending.

The brokers offers a range of two and five-year loans for landlords, as well as more niche three, seven and 10-year fixed terms.

FCA misconduct probes into retail financial services firms increase by a third (P2P Finance News), Rated: A

THE NUMBER of Financial Conduct Authority (FCA) cases opened into misconduct in retail financial services has increased by 29 per cent in the past year.

The number of cases has increased to 101 for the 12 months ended 31 March, up from 78 the previous year, the FCA said in its annual report on Tuesday.

The regulator also said that the overall number of enforcement cases it is undertaking is up by 31 per cent over the past year – rising to 650 from 496 at the beginning of the year.

OakNorth lends £19.5m to Care Concern Group (Fintech Finance), Rated: B

Klarna teams up with UK festival We Out Here (Retail Tech Innovation Hub), Rated: B

PayTech venture Klarna has announced a partnership with new jazz and electric festival We Out Here.

It will unveil a ‘Smoooth Sanctuary’ at the event, which will be held in Cambridgeshire in August.

China/Hong Kong

Yirendai Reports First Quarter 2019 Financial Results, Closing of Business Realignment Transactions with CreditEase (GlobeNewswire), Rated: AAA

First Quarter 2019 Operational Highlights

Consumer Credit—Yiren Credit

  • Total loan originations in the first quarter of 2019 reached RMB 10.9 billion (US$1.6 billion), representing a decrease of 45% from RMB 19.8 billion in the first quarter of 2018.
  • Cumulative number of borrowers served reached 4,404,812, representing an increase of 15% from 3,824,341 in the first quarter of 2018.
  • Number of borrowers in the first quarter of 2019 was 149,715, representing a decrease of 48% from 287,166 in the first quarter of 2018.
  • The percentage of loan volume generated by repeat borrowers was 38.8% in the first quarter of 2019.
  • Total outstanding principal balance of loans reached RMB 63,213.8 million (US$9,419.2 million) as of March 31, 2019, representing a decrease of 16% from RMB 75,271.5 million March 31, 2018.

Reviewing China Rapid Finance Limited (XRF)’s and X Financial (NYSE:XYF)’s results (NBO News), Rated: A

This is a contrast between China Rapid Finance Limited (NYSE:XRF) and X Financial (NYSE:XYF) based on their analyst recommendations, profitability, institutional ownership, risk, dividends, earnings and valuation. The two companies are Credit Services and they also compete with each other.

Earnings & Valuation

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
China Rapid Finance Limited 1 0.27 N/A -0.85 0.00
X Financial 5 0.00 N/A 0.85 6.34

Table 1 shows the top-line revenue, earnings per share (EPS) and valuation for China Rapid Finance Limited and X Financial.

Court Upholds Ruling That Sent Two Peer-to-Peer Lending Executives to Prison for Life (Caixin Global), Rated: AAA

Shanghai Kuailu Investment Group Co. Ltd., along with two affiliated companies, and 15 defendants were convicted of fraudulent fundraising or illegal fundraising or both, according to the final ruling (link in Chinese) made by the Shanghai High People’s Court on Tuesday.

Kuailu, along with its affiliates, illegally raised more than 43.4 billion yuan ($6.3 billion) from the public, causing 40,000 people to take financial losses, the court said.

Foreign Investment Restrictions in P2P Lending Intermediaries (Lexology), Rated: A

The Interim Administrative Measures for the Business Activities of Peer-to-Peer Lending Information Intermediaries define “peer-to-peer lending” as direct lending/borrowing realized between peers on an internet platform. Peers include natural persons, legal persons and other organizations.

Bitmain’s Affluent Co-Founder Establishes the New Crypto Startup Matrixport (All Stocks), Rated: A

With the hope of capitalizing on the recent rise of the Bitcoin price, the co-founder of the mining giant Bitmain, Wu Jihan, has organized a group to develop “Matrixport,” a financial services startup for cryptocurrencies. According to its CEO Ge Yuesheng, Matrixport will function as a one-stop-shop for not just safekeeping of digital assets but also for crypto lending and over-the-counter trading.

European Union

Online Lender October Pushes into Germany as it Continues Expansion (Crowdfund Insider), Rated: AAA

Marketplace lending platform October, which is based in France, has expanded in Germany, according to a blog post by CEO and founder Oliver Goy.

October has selected Thorsten Seeger, a Funding Circle veteran, as CEO of October Deutschland as its plots its ongoing expansion across Europe. October currently operates in France, Spain, Italy, and the Netherlands.

Investors are putting £9bn to work in P2P Lending across Europe, UK still dominating (AltFi), Rated: A

The peer-to-peer lending market is now funding more than £9bn of loans across Europe each year with two thirds (67 per cent) of this funding coming through UK platforms.

Revolut brings the fintech battle to Berlin with a new hub (Yahoo! Finance), Rated: A

British fintech startup Revolut is opening a new European tech centre in Berlin, the home turf of its online-banking rival N26.

Lagan Investments takes 10% stake in Property Bridges (Irish Times), Rated: A

Lagan Investments, a fund founded by the North’s biggest house-builder, Kevin Lagan, has taken a 10 per cent stake in peer-to-peer lender Property Bridges and is to supply it with €5 million in lending capital.

International

Morningstar Names Detlef Scholz President of Expanded Credit Ratings Organization (Morningstar), Rated: AAA

Morningstar, Inc. (Nasdaq: MORN) has named Detlef Scholz as president of its expanded, global ratings organization. The leadership announcement comes as Morningstar today completes its previously announced acquisition of DBRS, the world’s fourth largest credit ratings agency, for a purchase price of US$669 million.

Scholz will assume his new role Aug. 1, 2019 and report to Morningstar Chief Executive Officer Kunal Kapoor.

Source: Morningstar

View the Morningstar/DBRS overlapping ratings.

Deutsche Bank in partnership talks with SoftBank-backed OakNorth (Reuters), Rated: A

Deutsche Bank (DBKGn.DE) is in talks with SoftBank-backed (9984.T) British fintech firm OakNorth to use the latter’s credit analysis and monitoring platform, a source with knowledge of the discussions told Reuters.

CoVEX Exchange — A Single Platform to Complete the Entire Crypto Lifecycle (Coinfomania), Rated: B

P2P loan: The CoVEX platform also implementing a decentralized p2p lending service. This allows users across the world to receive loans in lesser time and even reduces the repayment fee while at the same time protecting the interests of the lender.

Australia/New Zealand

An alternative loan scheme could help 2.1 million Australians in financial distress (UNSW Sydney), Rated: AAA

A social lending scheme could help bridge the gap between traditional lenders and government welfare for the 2.1 million Australians under high levels of financial stress.

Alexa Chung partners with Klarna challenger Laybuy (AltFi), Rated: A

Payments platform Laybuy has struck a new retail partnership with fashion brand of Alex Chung  – called ALEXACHUNG – allowing customers to spread the cost of purchases over six equal weekly payments.

New Zealand’s largest digital buy now, pay later app launched in March with its first partnership with Footasylum.

The true role of the SME broker (Australian Broker), Rated: A

Yet SMEs are being stiffed by traditional lending practices: 44% of small businesses have been knocked back for finance in the last 12 months. Put simply, SMEs are being underserved and ignored by the banks.

India

‘NiYO’ Raises US$ 35 Mn in Series B Round led by Horizons Ventures & Tencent (Yahoo! Finance), Rated: AAA

Indian new-age digital banking start-up NiYO Solutions has raised US$ 35 million in Series B funding round from Horizons Ventures, Tencent and existing investor, JS Capital. NiYO is founded by banking veteran Vinay Bagri and technology veteran Virender Bisht. NiYO had previously raised US$ 14 million in funding rounds led by Prime Venture Partners. With the current round the total fund raised by NiYO is US$ 49 million.
Authors:

George Popescu
Allen Taylor

The post Thursday July 11 2019, Weekly News Digest appeared first on Lending Times.

What Investors Should Know About Non-Bank Lenders

nonbank lenders

Investors looking to add private debt and private equity to their portfolios may feel overwhelmed by all the choices. From peer-to-peer lending to crowdfunding, there are countless industry players across a wide range of alternative lending and financing models, serving everyone from individual borrowers to small and medium-sized businesses. Any funding model ultimately comes down […]

nonbank lenders

Investors looking to add private debt and private equity to their portfolios may feel overwhelmed by all the choices. From peer-to-peer lending to crowdfunding, there are countless industry players across a wide range of alternative lending and financing models, serving everyone from individual borrowers to small and medium-sized businesses.

Any funding model ultimately comes down to matching the needs of those who want capital with those who can supply capital. Typically, banks or other large financial institutions would act as the intermediary between investors and borrowers or entrepreneurs. But with many banks pulling back after the financial crisis, and the internet making it easier than ever to play matchmaker, the alternative finance universe is attracting more and more capital.

However, there is still broad-based confusion among both institutional and retail investors about the differences between the various alternative funding models. This confusion is exacerbated by how often the terminology is used interchangeably in the media and the larger financial community. The truth is that each funding model has distinct nuances, rewards and challenges, and it’s important for investors and their financial advisors to understand the differences before incorporating alternative lending or financing into an investment portfolio.

In general, these models can be broken down as either debt or equity investments, with a similar risk-reward profile as any other debt or equity investment.

DEBT (lower risk, lower reward)

Peer-to-peer lending

In a peer-to-peer (P2P) lending model, an individual or business borrows from an outside source or sources – a “peer” – rather than a bank. This process is facilitated through a third party, such as an online platform, which makes it easier to aggregate enough peers to fund the loan. These loans typically come with fixed terms and set repayment schedules. Many loans will also include details about the borrower—such as their income, credit score, occupation, and risk level—to help the “peers” (or lenders) determine whether to fund the loan and at what amount. Examples of peer-to-peer loans include consumer loans, student loans, small business loans, and fix and flip loans on single family homes.

Investors can get into the peer-to-peer lending market by purchasing the whole loan, a fractional interest in a loan or building a portfolio of fractional and/or whole loans. Investors then collect the proceeds of each loan payment, with the peer-to-peer lender taking a fee to cover the costs of running the platform. While even the most creditworthy borrowers may default on their loans, investors can mitigate this risk by building a diversified portfolio that includes multiple loans across different risk spectrums. Investors should also consider if the P2P loans they are investing in are unsecured or have some form of collateral securing the loan. Consumer and student loans tend to be unsecured, while small business and fix and flip loans tend to be secured.

Marketplace lending

Marketplace lending is another term used to further describe peer-to-peer lending. While the two terms are used interchangeably, an important differentiator is the source of capital. Whereas P2P lending platforms tend to rely on a group of small retail investors or large institutional investors to fund loans, marketplace lenders prefer to first pre-fund loans and then offer them to investors.

The marketplace lending model, therefore, offers qualified borrowers a guarantee that their loan will be funded within a specific timeframe, which may be an important consideration for some borrowers. For example, while a consumer borrower may be willing to wait until his loan is assessed and funded by multiple peers, a borrower looking to finance a real estate transaction has a closing date that must be met otherwise he will lose his down payment.

Direct lending/balance sheet business lending

In contrast to marketplace or peer-to-peer lending models, a direct lender will rely on its own balance sheet or proprietary access to funds as its primary source of capital. Instead of having to find enough retail and institutional investor capital to match the needs of borrowers, a direct lender can look to its unrestricted access of funds before making a lending decision.

The advantage of this approach is that the direct lender is better positioned to survive a potential downturn since each of the loans on its balance sheet represents a piece of collateral that can be used to offset any potential losses. Investors in these loans will therefore have a better opportunity to allocate capital in all market cycles. Many direct lenders may also manage a fund for accredited investors that consists of a portfolio of some, but not all, of the loans made by the lender.

EQUITY (higher risk, higher reward)

Crowdfunding

In the crowdfunding model, investors are given the opportunity to provide seed capital in up-and-coming products and businesses. Capital is provided in several forms including equity, preferred equity, mezzanine debt and senior debt . While equity stakes are typically small—often less than 1%—even a modest upfront investment can generate a large eventual payoff if the company is successful. This is particularly true of technology start-ups, which can grow quickly if their product or service is well received among customers.

This model is also popular in the arts and entertainment industries. For example, people might choose to fund an independently produced movie, music album or play in exchange for a small piece of revenues and/or additional perks like attending rehearsals and premiere parties, meeting the artist, or receiving a memento from the set. In real estate, crowdfunding is most typically used by developers seeking to raise money to fund development or redevelopment projects.

Investors should find out if the crowdfunder is providing equity and debt on the same project. This is critical should a recovery plan need to be put in place if the project does not go as expected. Typically, equity investors want to hold on and wait for an increase in value , while debt investors want to liquidate immediately in hopes of recovering their investment. A crowdfunder that is representing both equity and debt investors in the same project will have a conflict of interest. In addition, these investments also tend to be fairly illiquid, so investors should tread carefully. While these early stage equity investments could potentially pay off handsomely, there’s always the risk that the company or project is a flop.

Initial coin offerings

An initial coin offering, or ICO, is a brand-new type of funding model that is attracting many of the same types of companies that previously relied on crowdfunding. However, instead of acquiring an equity stake in the company, investors in ICOs receive cryptocurrency coins, like Bitcoin or Ether, which are redeemable for cash on certain exchanges. The idea is that as the company grows and becomes more valuable, the coins will also become more valuable.

Since ICOs are still loosely regulated, investors should take extra precautions when evaluating a crypto-related investment opportunity. While a business idea may sound great on paper, investors should look for growth signs like recurring revenues and a large potential market.

These five models only scrape the surface of the full universe of funding options for individuals and businesses. A company or a funding model doesn’t always fit neatly into a box either, and investors should take care to understand how each funding platform generates revenue and where its capital comes from.

When choosing which segment of the market to pursue, investors and advisors should also consider their risk tolerance, which will help determine whether a debt or equity investment is most appropriate, and at what scale.

Author:

Written by Evan Gentry, CEO of Money360.

Tuesday February 27 2018, Daily News Digest

LendingClub

News Comments Today’s main news: SoFi’s new CEO wants to get the company ready to go public. Revolut’s transaction volumes increased 700%. China to crackdown on non-bank lending. Blender raises $16M. Today’s main analysis: Stay away from LendingClub’s notes and shares. Today’s thought-provoking articles: Legacy banks, digital startups see opportunity to go beyond storing money. LendingBlock aims to mainstream […]

LendingClub

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United States

Anthony Noto’s Mission as SoFi CEO: Get the Startup Ready to Go Public (Bloomberg), Rated: AAA

Anthony Noto, the new chief executive officer of Social Finance Inc., is looking to steer the company out of crisis and get it in shape for a potential initial public offering.

The vision for SoFi outlined by Noto didn’t stray far from the one set by his predecessor Mike Cagney, who was ousted after accusations of sexual misconduct inside the company. Noto wants to create a broad online financial-service company, adding checking and savings accounts and wealth management to the main business of refinancing student loans.

SoFi’s new CEO says bank charter remains an option (American Banker), Rated: A

In an interview during his first day on the job, Anthony Noto did not promise any big course changes, though he did leave open the possibility that SoFi will revive its quest to get a banking license.

LendingClub’s Underwriting: Stay Away From The Notes And The Shares (Seeking Alpha), Rated: AAA

I bought my first batch of $25 notes on April 22, 2016. Now, it is important to note that LendingClub is very clear in its advertising that “99% of portfolios with 100+ Notes have seen positive returns.” So I suppose I added a level of risk by not having a portfolio worth at least $2500. But even still, returns can be .1% annualized and count as ‘positive’, but that is not an acceptable return by anyone’s standards given the risks involved in lending to strangers.

My Portfolio

To date, I have received $436 in payments, $96 of which is interest. I have lost $100 on notes that have charged-off, meaning that there is zero expectation of future payment and LendingClub collectors have stopped attempting to reach the borrower. I also have a note that is late, and based on how things have gone so far, I fully expect that to charge-off too and will lose the $11.50 still owed. In short, I have already lost almost 20% of my initial investment, crossing my fingers that none of the 14 notes I still have that are current don’t enter a late status with more than a year to go before the oldest reaches full term. My results have been dismal.

Source: Seeking Alpha

LendingClub’s ratings are A-G, with A being the safest. As you can see, the vast majority of my portfolio sits in A-C, with one E and one G note (LendingClub did away with F and G notes last year).

Source: Seeking Alpha

Legacy Banks and Digital Startups See a Big Opportunity to Move Beyond Simply Storing Money (AdWeek), Rated: AAA

Change can be hard for the financial industry, which is dominated by decades of processes and internal systems. But with a slew of upstarts making their way into the trillion-dollar industry, the old guard is finding innovative ways to beat these challenger brands at their own game.

“A lot of these companies have what we call ‘technical debt’—very expensive mainframe systems that are very difficult to change, run [and are] expensive and obviously that limits their ability to innovate,” said Oliwia Berdak, principal analyst at Forrester Research. “The biggest challenge is often culture … In banks the attitude has always been to perfect [products] before it’s unleashed on customers and [technology] is a big change where you’re working with a certain degree of uncertainty and risk.”

According to data collected by Accenture, 90 percent of banking executives said that their companies needed to “innovate at an increasingly rapid pace just to remain competitive,” but only 47.8 percent say that they are actually “investing comprehensively” in digital.

Another challenge: For all the talk about slick mobile banking apps and services, consumers—gasp—still like going to physical banks to manage financial decisions. Eighty-seven percent of customers enjoy going to a physical bank and prefer to interact with a human while there, per Accenture.

Source: AdWeek

Retail Banks Are Missing Opportunities to Give Digital Financial Advice (Wealth Management), Rated: A

Most customers who received face-to-face financial advice from their retail bank felt their needs were completely met (58 percent), but satisfaction drops when advice is delivered by other means, according to J.D. Power’s 2018 U.S. Retail Banking Sales Practices & Advice Study. Only 45 percent of customers who received digital advice through their bank’s website or mobile app felt their needs were met and only 33 percent felt their needs were met via email.
The majority of customers surveyed for the study (58 percent) said they want to receive advice through their bank’s website and mobile app, but only 12 percent said they received advice in that manner.

Why neobanks need to find a niche offering (Tearsheet), Rated: A

Customers still aren’t excited about digital-only banks. Less than 10 percent of Americans looking to open a checking account would consider doing so at a digital bank, according to a new report by Cornerstone Advisors.

For example, San Francisco-based neobank Chime’s customers are mostly middle-income millennials, with a median age of 29 and incomes between $45,000 to $65,000. Chime says it caters to a gap in the market for younger customers who felt larger institutions weren’t meeting their needs.

Neobanks should focus on a “clear, differentiated value proposition” for the customer, but too many of them are just adding a little technology to a customer experience that’s not terribly different from what the big banks offer, said Satya Patel, a partner at Homebrew, a seed-stage venture capital firm based in San Francisco and an investor in Chime.

How Capital One is rethinking its approach to products (Tearsheet), Rated: A

For the past year, Capital One has been rethinking how it can get out of the too-common approach of “innovating” by layering new technology on top of an old product — it’s realized it needs to entirely reconsider the customer’s interaction with it.

Are banks too blasé about mobile security? (American Banker), Rated: B

About a third of companies have knowingly sacrificed security for expediency or business performance, according to a newly published study, and researchers said that bankers’ responses were consistent with the group as a whole, which included health care and other sectors.

Bringing Credit Invisibles Into Focus with Alternative Financial Data (LendIt), Rated: A

Ten percent of the U.S. adult population do not have a credit score or history with any of the big three credit bureaus.

That’s 1 in 10, or roughly 26 million people who are considered “credit invisible.”

But the financial underserved market spends $173 billion in fees and interest to use $1.94 trillion in financial services, according to the 2017 Center for Financial services Innovation study.

There are four basic categories of people who fall under the credit invisibles umbrella:

  • Millennials: People between 18– 34 and have not yet borrowed money or gotten a credit card.
  • Low-Income: People who don’t make enough money to gain access to credit.
  • Recent immigrants: People who recently moved to the U.S. but haven’t established credit.
  • Mass-affluent: People who earn more than $100,000 per year and pay with cash instead of credit.

Mobile Payments In US To Reach $ 3 Trillion Within Two Years (Payment Week), Rated: A

in 2015, mobile payments in the US represented $550 billion. That’s good by most any standard, but the growth expected is staggering. By 2020, that number is projected to hit $2.8 trillion. That represents a compound annual growth rate (CAGR) of 39.1 percent, which is far beyond most any but the most unlikely investments.

China represents $5.5 trillion in mobile payments use as of right now, a combination of various societal factors like a comparative eschewing of the personal computer in favor of the mobile device, as well as a near-ubiquity of locations that accept the system.

BREAKFORM | RE Closes a Small Lot Subdivision Development in Record Time Via Crowdfunding (PRWeb), Rated: A

BREAKFORM | RE closed its latest small lot subdivision development project in the prime West Hollywood adjacent neighborhood in record time using Equity Multiple, one of the leading real estate crowdfunding platforms. The offering was 145% subscribed in 72 hours.

Credible Appoints Chris Bishko as Chief Financial Officer (BusinessWire), Rated: B

Credible, the consumer finance marketplace that helps consumers save money and make smarter financial decisions, today announced that it has appointed Chris Bishko as chief financial officer. Mr. Bishko will report to Credible’s founder and CEO Stephen Dash.

New York Lawmakers Open to Revisiting the BitLicense (CoinDesk), Rated: B

A bill to reform the regulation could be introduced “very soon,” State Senator David Carlucci told CoinDesk.

But what is likely to remain is the animosity toward the BitLicense, as evidenced by the small but dedicated protest gathering outside just before the roundtable began, not to mention the grievances aired by the two dozen or so attendees.

United Kingdom

Transaction volumes increase 700pc at fintech firm Revolut (Independent.ie), Rated: AAA

Fintech start-up Revolut has seen its monthly transaction volume increase by over 700pc in the last 12 months to $1.5bn (€1.2bn).

Lendingblock Aims to Popularize Crypto Lending in a Secure and Transparent Way (cryptovest), Rated: AAA

Lendingblock aims to become the first to build a marketplace where cryptocurrency lenders meet borrowers, and can exchange their assets across blockchains. The platform aims to bring securities lending to the crypto economy. The current estimates of the market paint a picture of enormous potential for development: in 2017, $2 trillion of assets on loan in traditional securities lending brought approximately $4 billion in revenue. Replicating this in crypto could generate up to $300 million within 3 years as the project notes in its white paper.

 

Britain’s big banks play catch up with fintech with new apps (Reuters), Rated: A

British retail banks are poised to introduce money management apps to compete with those already launched by financial technology start-ups, betting their trusted brands, broad client base and deep pockets will help them make up lost ground.

NatWest sets up network of fintech accelerator hubs (Finextra), Rated: B

The UK’s NatWest is launching four specialist fintech accelerators based in its Bristol, Edinburgh, London and Manchester sites.

China

Screws to tighten further on non-bank lending (The Standard), Rated: AAA

China will tighten its crackdown on illegal fundraising to fend off financial risks, according to an inter-agency meeting.

European Union

European Fintech Alliance raises bank API fears (Finextra), Rated: A

The European Fintech Alliance has fired another broadside in its tussle with the financial services establishment over PSD2, raising fears that banks will develop substandard APIs as a way to fend off competition.

Specifically, the alliance of 74 fintechs, challenger banks and fintech associations is unhappy that the Regulatory Technical Standards on strong customer authentication and common and secure communication under PSD2 allow banks the possibility to be exempted by their National Competent Authority from having to accommodate licensed Third Party Payment Services Providers (TPPs) to access accounts via the so called fallback option in case of malfunction of the API.

International

Marketplace lenders worldwide raised nearly bn last year (P2P Finance News), Rated: AAA

THE GLOBAL marketplace lending sector saw nearly $9bn (£6.45bn) invested across 233 deals last year, marking a new funding record for the industry.

Consultancy firm Fintech Global, who compiled the data, found that equity investment in the sector rebounded to $8.9bn last year after a slowdown in 2016. The total was boosted by the top 10 deals, which raised a combined $4.4bn.

The second half of the year was strongest for funding, with the largest deal of the year closing in the fourth quarter when Shanghai-based peer-to-peer lender Lufax raised $1.2bn.

Online lender ID Finance bolsters security with beahvioural biometrics (Finextra), Rated: A

ID Finance, the emerging markets fintech company, is incorporating behavioural biometrics into its AI-based fraud scoring engine to eliminate fraud, boost loan approvals and reduce the incidence of non-performing loans.

The behavioural biometrics system studies the unique typing and behavioural patterns users display during the loan application process to capture a range of patterns. These include mouse movements, to how fingers interact with a keyboard. The biometrics record patterns such typing speed, typos, flight time between keys, keystroke depressions, as well as the patterns from actual input.

Celsius: Get Dollars When You Need Them or Get Paid to HODL (cryptovest), Rated: A

The global financial system is wobbling. Banks and other traditional financial institutions have so far managed to survive the crisis resulting entirely from their errors, greed, and arrogance. Now, many believe, they won’t live through the crypto revolution unless they embrace it.

Meet the Celsius Wallet – a combination of a digital wallet and a peer-to-peer lending platform where members can earn passive interest on their crypto holdings and use them as collateral to get loans in fiat currencies.

Australia

‘Essential’ brokers advising Xinja on mortgage strategy (TheAdviser), Rated: A

The chief executive of banking disruptor Xinja has revealed that mortgage brokers have been involved in the group’s home loan plans and will be “essential” to its strategy.

The crowdfunded online lender recently received an Australian credit license (ACL) from the Australian Securities and Investments Commission (ASIC) and plans to utilise the broker channel to facilitate its digital home loan approval process.

Mortgage franchise sees decline in loan settlement (AustralianBroker), Rated: A

Mortgage franchise Yellow Brick Road posted a 2% decline to $7.74bn in loan settlement volume in the first half of FY18 over the previous period as it reduced its number of branches.

Overall, the company delivered 85% growth in profitability, with net profit before tax increasing to $0.53m in the first half of FY18 over the same period of FY17. It cited higher revenue – up by 5% – and lower costs – down by 4% – as drivers of its result.

The company also expects the addition of a small business lending product through its partner Prospa to provide additional revenue opportunities for its network and support growth in commercial lending.

India

P2P platforms as NBFCs gaining popularity in small cities, but there’s a catch (Financial Express), Rated: AAA

P Kanwal is from Punjab’s Bhatinda. He has a furniture business which mainly deals in cash, because of which it was difficult for him to get a secured loan from the formal banking system. For him, a Peer-to-peer (P2P) lending platform came as a rescue, which got him an unsecured loan for his kid’s education and expanding his business.

This not just the story of Mr Kanwal, but many more small entrepreneurs who are operating their businesses in Tier-1, Tier-2 cities and far-flung areas, some not even on Google map, who are getting financial support through P2P lending.

The pattern that emerges currently from the P2P lending is that borrowers from tier-2 and tier-3 cities comprised 20% and 17% of the total number of loans disbursed through the platform. The new-to-credit borrowers comprise 35% of fulfilled borrowers, while those with poor credit ratings accounted for 10% of the overall number.

MENA

Peer-to-Peer Lending Startup Blender Raises Million in Debt Financing and Equity (CTech), Rated: AAA

Israel-based peer-to-peer lending startup Blender P2P Israel Ltd. has raised $16 million in equity and debt financing, the company announced Monday.

Latin America

Airfox Launches Mobile App in Brazil, Giving Unbanked Access to Financial Services (PRWeb), Rated: A

Airfox, a mobile financial services company, today launched its free Android app in Brazil, giving millions of people unprecedented access to much-needed financing solutions.

More than 44 percent of Brazil’s population is unbanked, another 30-44 percent lack sufficient access to mainstream financial services, and those with credit cards face interest rates upwards of 200 percent (sources: World Bank, Bloomberg).

Canada

Big banks strive to give better digital financial advice (BNN), Rated: AAA

CTV’s Chief Financial Commentator Pattie Lovett-Reid discusses the Canadian banks’ quest to deliver quality online financial advice in an effort to catch up with the digital age.

Africa

PayJoy Partners With Vodacom & CBA to Bring Smartphone Financing to Tanzania (Crowdfund Insider), Rated: AAA

PayJoy, a San Francisco fintech startup, announced this week it has teamed up with Vodacom and CBA to bring smartphone financing to the country of Tanzania.

PayJoy Teams Up With Allied Mobile to Bring More Smartphones to Africans (Crowdfund Insider), Rated: A

PayJoy, a San Francisco fintech startup, announced on Friday it has teamed up with mobile distributor Allied Mobile to bring affordable smartphone payment plans to markets across the continent of Africa. According to the duo, Allied Mobile will use PayJoy Checkout, an instant paperless finance system for customers without access to formal credit, and the patented PayJoy Lock which enables “pay-as-you-go” access to the phone. 

Authors:

George Popescu
Allen Taylor

Singapore Fintech Market: Overview

southeast asia fintech lending

South East Asia (SEA) is finally embracing financial technology and marketplace lending is at the heart of this boom. The breadth and depth of solutions across FinTech Lending in the region is quite impressive and clearly signifies that a digital revolution is underway in the South East Asian lending industry. Top and Emerging Fintech Sectors in […]

southeast asia fintech lending

South East Asia (SEA) is finally embracing financial technology and marketplace lending is at the heart of this boom. The breadth and depth of solutions across FinTech Lending in the region is quite impressive and clearly signifies that a digital revolution is underway in the South East Asian lending industry.

Top and Emerging Fintech Sectors in South East Asia by Country

Singapore in particular has become a hub for the nascent fintech lending industry. It is the runaway leader in the region and holds 52% of the market share (both by number of deals and money invested). It is followed by Philippines which accounts for 14%, Thailand 13% and Indonesia 12%.

However, with so many different governments involved, SEA poses an overregulation risk. Already, P2P lenders here have to criss-cross through various layers of regulations that their competitors in other regions don’t have to face.

Singapore Fintech Market: Overview

Singapore has always been known as the technology capital of Asia; MNCs and financial institutions have considered it a natural choice as HQ for their Asian operations. Though Singapore has deep roots in technology and innovation but ironically it got on the Fintech bandwagon rather late. But with the support of regulators, Singapore has established itself as the “Fintech Hub” of South East Asia. Singapore fintech market crossed $83 million in deals during the second quarter of 2017. In 2016, investment in Singapore based fintech companies dropped by staggering 65 percent (US$605 million to US$214 million), as per KPMG International study- Pulse of Fintech. But interestingly the number of deals decreased by only two to 28 during the same period. The main reason for the fall was complicated authorization process for fintechs, but Monetary Authority of Singapore (MAS) is working aggressively to streamline the authorization process, in order to attract more fintechs to Singapore.

Regulatory Ecosystem

“Over the longer term, MAS hopes to see more fintechs using Singapore as a base to pilot and then deploy solutions to other countries within South-east Asia, such as Indonesia and Thailand,” said Mr Chia Tek Yew, the head of financial services advisory at KPMG Singapore.

Monetary Authority of Singapore; the regulatory body has backed the fintech industry right from the get go and that is the reason why Singapore has become the leader in South East Asia. Some of those favorable regulations are mentioned below:

  • Last year, under the “FSTI” scheme, MAS committed S$225 million (US$164.2 million) over the next five years to foster the innovation ecosystem in Singapore.
  • It also developed the road map that showed the central bank’s move toward an open Application Programming Interface (API) architecture.
  • In association with National Research Foundation, it announced the establishment of a dedicated FinTech office to facilitate the use of technology and innovation in the financial sectors (FinTech office to review, align and enhance FinTech-related funding schemes across government agencies).
  • It also released a consultation paper on proposed guidelines for a ‘regulatory sandbox’ that will enable financial institutions (FIs) as well as non-financial players to experiment with financial technology (FinTech) solutions.
  • Struck partnership with the Australian Securities and Investments Commission (ASIC) to help FinTech companies from their respective countries scale into each other’s markets and help reduce regulatory uncertainty and time to market and it is trying to strike such more partnerships with other countries as well.
  • MAS have also announced it will be opening a fintech innovation hub “the looking glass” to promote innovation.
  • It also released a consultation paper on proposed changes to the payments regulatory framework and establishment of a National Payments Council, whose key initiatives are to promote interoperability and adoption of common standards.

This highlights that though the regulator was slow from the blocks, but has aggressively covered ground to create a supportive environment for the fintech lending community.

Leading players in the Singapore Market

Capital Match ( an online peer-to-peer lending marketplace for SMEs based in Singapore and Southeast Asia. It provides SMEs with affordable working capital from professional investors through its online platform. It was founded in 2014 by Arnaud Bailly, Kevin Lim, and Pawel Kuznicki. Since inception, it has facilitated over S$60 million in cumulative origination. It has raised S$1,000,000 from three investors; Innosight Ventures being the lead investor. It offers business and SME loans and invoice financing facilities of S$50,000- S$200,000 with loan duration ranging from 3-12 months.

Minterest ()- Minterest is a peer-to-business financial technology platform founded by a team of former bankers with more than 120 years of collective experience in corporate and structured finance. It was founded in 2016 by Charis Liau, Ronnie Chia, and Wei Choong Loo. It offers various flexible funding options with interest rate as low as 1% and loan terms ranges from 3-12 months.

SmartFunding ( is a platform that provides trustworthy alternative financing solutions that are 100% focused on small and medium businesses. It was founded in 2016 and raised S$700,000 as seed funding. It offers invoice financing to SMEs.

FinAccel ( FinAccel is a financial technology company creating products for the retail credit sector for Southeast Asia. With an all-star team of investors, founders and employees, FinAccel is currently focused on disruption in the unsecured lending space. It was founded in 2015 by Akshay Garg, Alie Tan, and Umang Rustagi. It raised S$1,100,000 from various rounds of funding. Kredivo is the flagship product developed by the company; it gives ecommerce shoppers instant credit financing based on real-time decisioning. Jungle Ventures led the funding round in the company.

InvoiceInterchange ( is a peer-to-peer invoice-trading marketplace that provides working capital solutions to fund growth for small- to medium-sized enterprises. It offers both selective invoice discounting and the whole turnover invoice discounting to SMEs. It was founded in 2015 by Brian Teng and Nalinee Chinowuthichai. Investor fee is typically between 0.8% – 1.5% (per 30-days) of the advanced amount. Transaction fee is typically between 1.0%-1.5% of invoice amount.

Conclusion

Singapore has emerged as an undisputed leader in the SEA region but considering it has always been the gateway to Asia, it will certainly want to have a bigger share of the fintech lending pie. The MAS has laid out a well-thought out road map to attract startups and investments. With a massive demand-supply mismatch in credit, Singapore is poised to witness a marketplace-lending boom.

Author:

Written by Heena Dhir.

Wedneday March 29 2017, Daily News Digest

ron suber fraud

News Comments Today’s main news: How to build a $100 billion company. Square launches in UK. Century-old Thai bank plans digital revamp. ClaimVantage raises funds to expand into Asia. Today’s main analysis: Tech will lead to new sub-prime crunch. Today’s thought-provoking articles: An unofficial chat with Ron Suber. How technology is changing online credit checks. Legal considerations of running a […]

ron suber fraud

News Comments

United States

United Kingdom

China

Asia

MENA

Africa

News Summary

United States

Tech will lead to new sub-prime crunch (TechCrunch), Rated: AAA

The tables below demonstrate cumulative changes in interest rates for Lending Club and Prosper. Although the rate for high-grade loans for Lending Club has slightly increased over time, while dropping a little for Prosper, the tendency for both companies is similar: They are widening the gap between low and high-grade borrowers.

Since 2013, the top 40 percent of earners have accounted for 84 percent of all new income and 34 percent of new debt, which led to a material reduction in aggregate leverage relative to income and provided for consistent growth of retail sales, as this cohort represents 65 percent of total consumption. According to the article, the recession will be a result of a material reduction in consumption from these top earners, who have historically followed the deterioration of lower and middle-income households.

With the penetration of technology, more and more labor-intensive work is shifted to computers or machines. People employed in manual labor, who mostly get an hourly wage, are in less demand on the market, which leads to the number of such jobs decreasing. Most jobs that were previously done manually are being substituted by machines, which, accordingly, increases competition among workers of respective industries.

The statement is easily supported by the last data available: A new study by Forrester forecasts that cognitive technologies such as robots, artificial intelligence, machine learning and automation will replace 7 percent of U.S. jobs by 2025 (with 16 percent of jobs replaced and the equivalent of 9 percent jobs created).

By the end of 2016 there were more than 4.1 million people who drove for a living, with more than 3.5 million doing it full time. The automatization of driving will lead to all of them being forced to change their jobs, and obviously turning to software and tech industries is not an easily affordable option for these people.

Employment in the tech industry is, on the other hand, quickly growing. According to the results of a Cyberstates 2016 report prepared by nonprofit IT trade association CompTIA, employment in tech hit its highest growth rate in more than a decade in 2015, reaching 6.7 million people for companies with formal payroll in place in the U.S., up about 200,000 from the year prior.

Summarizing the above, we can expect that for workers employed in labor-intensive industries, the wages are not going to rise as a result of increased competitiveness for jobs in these sectors. Stagnating wages will lead to credit of such workers suffering (which is, in fact, already happening), as their anticipated increase in income is not realized even when the economy is doing well in general.

How To Build a 0 Billion Company (Newco Shift), Rated: AAA

Mike Cagney, the CEO of financial services startup SoFi, does not lack for confidence. But then again, confidence is what you need to raise billions of dollars and take on some of the largest and most powerful companies in the world — global financial giants like Chase, Citi, and Bank of America. To get there, Cagney’s got a pretty clever playbook: He’s partnering with those same banks, who buy the loans he originates and profit from SoFi’s unique skill at acquiring new customers.

An Unofficial Chat with Ron Suber, the Tom Brokaw of Fintech (finTEK News), Rated: AAA

If you circulate within fintech, pretty much anywhere on the planet, there is a high likelihood you’ve heard of Ron Suber.  And in case you haven’t, he’s the president of Prosper Funding, the marketplace lending platform that has now funded over $8B in loans, and recently closed a deal with a group of institutional investors to purchase up to $5 billion worth of loans over the next 24 months.

I asked him how he deals with all the travel, plus the highs ($5B deal-yeah!) and lows (Lending Club-OMG!) of the job, and he jokingly responded “Funny – (with) a unique combination of Yin Yoga and Johnny Walker Black”.  He also said he does “intention setting” before he gets out of bed every day, which he has found incredibly helpful.

The full deck for the Lendit 2017 presentation can be downloaded at this link: LendIt.FINAL

The last deck he shared with us from the AltFi Australasia Summit in Sydney.  The event was attended primarily by Australians and New Zealanders, with some Asians in attendance as well and also had a slightly different angle.

The speech compared online lending to online trading, showed a 5 point overview of the industry since inception, and included a picture showing traditional banks already involved in marketplace lending.

How to Start a Real Estate Crowdfunding Platform (Crowdfund Insider), Rated: A

Tech development is not cheap. Those hoping to raise angel or VC capital for a real estate crowdfunding platform have, in my humble opinion, missed the boat by a couple of years.

That said, if venture funding isn’t available, it doesn’t make sense to spend a lot of money on technology. Many of the RECF platforms out there today would like to command a tech multiple, but in reality, function more so as technology-enabled brokering or origination shops. For the vast majority of RECF platforms, their value is is not in their technology, but their ability to fund or originate deals.

  • Will this be a personal platform for your own deals, or will the platform raise funds for deals from other parties? If the latter, you may be brokering or dealing, and may need to obtain a license.
  • Will you be selling equity or debt securities? What type of debt will you be selling? What will it be secured by, if anything? What type of equity will you be selling?
  • What type of real estate will you be raising funds for? Will the properties be residential properties? Commercial? Rehab? New development? Is there a geographic scope involved? You should have a specific business plan in mind.

It’s great that RECF platforms are hot right now, but remember – you’re still selling a security, and securities laws really aren’t the type of laws one should take lightly.

RealtyShares Raises Its Largest Joint Venture Capital Investment to Date for Avesta Biscayne Apartment Complex in Miami (Yahoo! Finance), Rated: A

RealtyShares, a leading online marketplace for real estate investing, today announced that its network of accredited investors has raised $3.5 million in equity capital for the $67.3 million acquisition and renovation of Avesta Biscayne in North Miami, Florida. This is the largest equity investment that RealtyShares has raised to date through its real estate investing marketplace.

Avesta Biscayne is a 402-unit apartment community near the Biscayne Bay shoreline, consisting of six mid-rise buildings and amenities including a clubhouse, two pools and a tennis court. The deal is sponsored by Avesta Communities, a vertically integrated multi-family owner-operator specializing in apartments serving the middle-income renter. Previously, Avesta raised $2.25 million through RealtyShares to recapitalize and renovate Avesta Bridgewater, a 344-unit apartment complex in Orlando, Fla.

Shadow banking is getting bigger, not better (Standard.net), Rated: A

In the U.S. mortgage market as a whole, shadow banks held a 38 percent share in 2015, compared with 14 percent in 2007.

In other markets, financial organizations that are not subject to bank regulation have flourished, too. According to the Financial Stability Board, the august body that makes recommendations to the global financial system from Basel, Switzerland, “other financial intermediaries” — the category that includes non-bank lenders but not insurance companies and pension funds — increased their assets to $80 trillion, or 23 percent of total financial assets, in 2014. Their average growth reached 5.6 percent in 2011 through 2014, while the global banking system’s assets stopped growing during that time.

The reason shadow banks have largely escaped public scorn, regulatory scrutiny and high capital requirements is that they often came in the guise of high-tech disruptors. Quicken Loans Inc., the third biggest mortgage lender in the U.S. in 2015, does business online and on the phone, and that somehow makes it less interesting to regulators than a bank that does the same through an old-style branch network. Lending Club and other “peer-to-peer” lending firms quickly became conduits for large investors, not “peers,” yet they avoided regulation as though they were innovative tech platforms.

By 2015, 85 percent of the mortgages they originated was sold to government-sponsored enterprises such as Fannie Mac, Ginnie Mae, Freddie Mac and Farmer Mac. They benefit from implicit and explicit government guarantees originally supplied to banks — without shouldering the same regulatory burden or facing the same stigma. In other words, they profit from regulatory arbitrage.

Kroll Bond Rating Agency Releases U.S. Consumer Loan ABS Rating Methodology (Business Wire), Rated: A

This report describes KBRA’s rating methodology for U.S. consumer loan asset-backed securities (“Consumer Loan ABS”). This includes transactions secured by collateral originated by traditional consumer loan companies, as well as, through online consumer loan marketplace lending platforms (“MPL Platform”).

Wells Fargo’s Robo is Pricier Than Competitors (Financial Advisor IQ), Rated: A

Wells Fargo is betting that having access to a live financial advisor will convince clients to put up higher minimums and pay more for its robo-advice platform than for its competitors’ platforms, the Wall Street Journal writes.

The company’s Intuitive Investor automated advice service requires a $10,000 minimum investment and costs 0.5% of assets annually, according to the paper.

By contrast, Merrill Lynch’s Edge Guide Investing platform and Schwab Intelligent Portfolios only require a $5,000 minimum, while Wealthfront requires $500 and Betterment has no minimums, the paper writes. All of these platforms charge fees ranging from 0.25% to 0.45% of assets, except Wealthfront, which only starts charging 0.25% on accounts with more than $10,000, according to the Journal. Vanguard Personal Advisor Services, meanwhile, comes with a hefty $50,000 minimum but charges only 0.3%, the paper writes.

What’s more, Wells Fargo and other full brokerages aren’t necessarily competing with pure robo-advice pioneers such as Betterment and Wealthfront, William Trout, a senior analyst at research firm Celent, tells the Journal. Rather, they’re aiming to tap into their existing client base, he says. Wells Fargo is targeting its retail bank clients who currently don’t receive any form of advice, Lai tells the paper.

Jed Morey And The Art Of The Publishing Pivot (Innovate LI), Rated: A

So the New York Financial Press, launched in April 2016 by Syosset-based Morey Publishing as an “alternative financial news journal” that would dive deeper than earnings statements and trading indexes (not to be confused with the Wall Street-based media company founded in 2005 by Pierre Alexandre) – is now feeding Mayava Capital Inc., a Syosset startup created to facilitate small-business lending.

The other five sites – each focused on lending in a particular vertical market, such as healthcare or transportation or IT – were created by Morey et al specifically to usher visitors directly into Mayava Capital’s arms.

FUTURE DIGITAL FINANCE AND PERFORMANCE HORIZON RELEASE NEW INDUSTRY BENCHMARKING REPORT (Future Digital Finance Email), Rated: A

Today, Future Digital Finance and Performance Horizon released their findings from their new report titled “Benchmarking Performance Marketing Adoption within Financial Services Strategies”. As the consumer revolution in retail banking continues, the whole financial services vertical has seen dramatic shifts towards electronic interactions across their consumer and business-to-business operations. This new study takes a look at the wider variety of marketing channels firms have begun to leverage, especially ones with clear measurement methodologies that contribute towards revenues.

Key statistics from the survey include:
– Performance marketing, including affiliate marketing, primarily drives customer retention for 21% of financial services companies.
– Almost a third of companies spend at least 20% of their overall media budget on performance-oriented programs, while 21% of companies spend at least 40% of their overall media budget on performance oriented programs.
– Finance companies are looking to grow performance-based marketing programs as 77% of companies prefer to pay new partners based on performance.
– 93% of companies expect mobile website sales will increase, and 92% expect mobile app sales will increase in 2017.
– 86% of companies agree that data and insights from their existing partner marketing programs enable them to make better business decisions.

Mortgage Automation Pioneer cloudvirga Raises $ 15 Million in Series B Funding (PR Newswire), Rated: A

cloudvirga℠, developer of the automated, cloud-based intelligent Mortgage Platform® (iMP), announced today it has raised $15 million in a series B funding round led by Incenter, a Blackstone Group portfolio company. The new funding will support cloudvirga as it scales its technology and expands its product offerings.

Cloudvirga’s flagship mortgage point-of-sale (POS) system, the iMP empowers consumers to take the helm of a completely re-engineered mortgage workflow that automates the entire initial disclosures process and delivers unmatched transaction speed and efficiency to both borrowers and lenders. Central to cloudvirga’s success is its ability to maintain strict regulatory compliance, reduce time to close and save lenders money by moving many traditional back-office tasks to the front of the loan process.

Why squeeze fintech into a bank regulatory box? (American Banker), Rated: A

Within the constraints of its jurisdiction and mission, the OCC is clearly trying to do its part to address the regulatory issues raised by financial service providers in the technology sector. The agency is not simply pursuing a “bank-lite” charter.

The regulation of financial services in the U.S. is highly fragmented, and fintech is challenging every aspect of that structure. Federal and state agencies can stake claim over the regulation of fintech, yet both are ultimately limited by narrow lanes and tightly defined jurisdictional boxes prescribed to them by their respective charters. As a result, even the most well-intentioned efforts are only able to address the trees, but not the forest.

The goal of its proposal is to encourage the entry of fintech firms into federally regulated financial services. But if the actual pool of applicants ends up being extremely small, that’s going to be a real problem.

Random Forest Capital Raises $ 1.75 Million for Strategic Talent Acquisition (Random Forest Email), Rated: B

Random Forest Capital () completed its seed round in January 2017 with $1.75 million led by a very impressive group of angel investors. The money will be used to build out its full stack software and machine learning algorithms and acquire strategic talent for helping institutional investors find the right opportunities in consumer, residential, and commercial credit.

“There are 400+ platforms that originate many types of secured & unsecured debt,” said Kevin Farrelly, chief operating officer, general partner, and co-founder of Random Forest Capital. “We can analyze a massive amount of data from those platforms in seconds whereas a human analyst will take days to weeks.”

Random Forest Capital uses machine learning algorithms and third-party systems with APIs to source investment opportunities from eight platforms (and growing). Their custom algorithms then price the risk and can execute in microseconds.

“Loan originators make money originating loans – so it’s in their best interest to bucket all the loans together. Our goal is to preserve investor capital. These competing interests create a fundamental divide where alpha in marketplace lending is easily found,” said Austin Trombley, chief technology officer and co-founder of Random Forest Capital.

Random Forest Capital recently added two new members to its expert leadership team. Julie Choi, Ph.D. has been named the chief risk officer.  Carl Siemon, Ph.D. has been named the principle data scientist for Random Forest Capital. Siemon is a Physics Ph.D. graduate from UT Austin where he was supported by the prestigious National Defense Science and Engineering Fellowship.

MoneyLion Wins Gold at PYMNTS Innovation Project Awards for Best Credit Innovation (MoneyLion Email), Rated: B

MoneyLion, the mobile personal finance platform that puts consumers in control of their financial lives with AI-driven tools and smarter credit products, has won the gold medal for Best Credit Innovation at the PYMNTS 2017 Innovation Project Awards. The award coincides with a major growth milestone for MoneyLion, which now has over a million users.

Real estate crowdfunding platforms raising American real estate prices (STL Real Estate), Rated: B

But, with the rise of third-party crowdfunding platforms, most notably of Chinese origin, middle class people can get in on a piece of the real estate pie – no matter where they live.

Today, Brooklyn is where it’s at, with the price of Brooklyn town homes and apartments growing 16 percent between 2015 and 2016, while Manhattan properties decreased by 1 percent.

United Kingdom

JACK DORSEY LAUNCHES MOBILE PAYMENTS COMPANY SQUARE IN THE UK (Irish Tech News), Rated: AAA

Mobile payments company Square launched for UK based businesses today. This launch is the fifth market for Square since launching in the US in 2010 and since expanding to Canada, Japan and Australia.

Square Point of Sale has actually been available in the UK, among other markets around the world, for a few years already, however the full features of the product that’s available in Square’s four main markets were not available.

LendInvest Property Development Academy Expands Course Offerings (Crowdfund Insider), Rated: A

LendInvest, a leading UK online property finance lender, is launching the LendInvest Property Development Academy in four more key cities around the country following overwhelming demand for its London & Southeast courses.

In addition to three more courses for London & Southeast candidates this year, the Academy has expanded to:

  • Northern England: Manchester, 25 – 26 May
  • Scotland: Edinburgh, 22 – 23 June
  • Midlands: Birmingham, 7 – 8 September
  • Southwest England: Bristol, 9 – 10 November

All courses are carefully tailored to resonate with common issues facing developers in their respective regions. All modules are taught by industry specialists from the local area who will drawn on locally relevant case studies and anecdotal evidence.

Lendy Integrates Saving Stream Platform to Continue Growth (Crowdfund Insider), Rated: A

Lendy, announced on Tuesday it is integrating its popular investor-facing platform, Saving Stream, under its Lendy brand as part of the platform’s continued growth. According to the company, it is merging Saving Stream, with its borrower-facing brand, Lendy Finance, in order to simplify its branding and to make accessing its loan-based crowdfunding platform easier and more accessible to clients.

Lendy revealed that the total amount loaned to property developers and investors through its peer-to-peer platform has now topped £285 million and its 15,000 registered users have received £20 million of interest from the loans they have written. The company also stated its user base has more than doubled from 5,600 at the start of 2016, with the platform’s popularity among lenders being driven by:

  • The security provided by property-backed loans
  • The additional security provided by Loan To Value (LTV) ratios on all Lendy loans being capped strictly at 70%
  • Returns of up to 12% on loans written through the Lendy service.
China

How technology is changing online credit checks (SCMP), Rated: AAA

It generally takes nothing more than a simple click on the ‘yes’ button to authorise an online peer-to-peer (P2P) lender to go through an applicant’s credit history before approving a loan.

But the assessment may in fact go far beyond the borrower’s imagination.

With vast amounts of data at their disposal, the powerful analytical programs behind the screen are often capable of picking up diverse fragments of an applicant’s life story and piecing together a complete picture. And it all happens in a matter of minutes.

Cloud Atlas, a risk management system developed by Finup, is one such example. After obtaining consumers’ consent to access their mobile contacts book and apps as well as information provided by third-party data agencies, the system is able to carry out a thorough analysis to figure out whether the applicant is eligible for loans on the particular P2P platform.

The pass rate of applicants for loans under the Cloud Atlas system is well below 10 per cent, as the three-year-old company uses strict criteria.

High employee turnover sign of transformation in P2P lending industry (Global Times), Rated: A

With the rollout of new regulations in February, there has been a wave of resignations in China’s peer-to-peer (P2P) lending industry, as employees worry about the prospects of the business.

“I resigned in February,” said a woman surnamed Liu, a former employee at one of China’s leading P2P platforms, which she refused to be named.

Liu started her career in Internet finance in October 2016. Half a year later, she worries about the industry’s prospects.

Recently, P2P industry employee turnover has shot up, with some workers joining larger P2P companies and some moving to other industries.

The number of Chinese P2P lending platforms fell from 3,516 in November 2015 to 2,393 in February 2017, according to data from the Shanghai-based P2P lending platform wdzj.com.

Just a few big Chinese P2P lenders seen surviving in sector tarnished by scandal (SCMP), Rated: A

The seemingly relentless proliferation of China’s peer-to-peer (P2P) lending platforms has finally been contained by stringent measures introduced by the government in a bid to tackle a fraud epidemic that tarnished the industry’s reputation.

The sector, which ballooned to host thousands of firms of varying sizes and specialities, will eventually become limited to just a handful of mega participants, according to Zhang Shishi, a co-founder of the Chinese P2P platform Renrendai.

However, the heated competition that emerged as a wave of profit-hungry new players crowded in, all hunting aggressively for investors and money in the markets, led to a rise in illegal activity. Countless cases of P2P lenders promising high returns from non-existent projects and then running off with the proceeds made the headlines.

Asia

Century-Old Bank Plans Digital Revamp to Fight Fintech Risk (Bloomberg), Rated: AAA

Siam Commercial Bank Pcl, Thailand’s oldest homegrown lender, plans to reinvent its mobile digital payment platform as a lifestyle app to help fend off competition from upstart financial technology providers.

The lender is working with companies including Accenture Plc, Microsoft Corp. and International Business Machines Corp. on the project, Chief Executive Officer Arthid Nanthawithaya said in an interview. The long-term goal is an app that allows customers to search and pay for entertainment options such as restaurants and cinemas, going beyond just day-to-day banking, he said.

Siam Commercial Bank’s shares gained 0.6 percent at 10:46 a.m. in Bangkok on Wednesday. The stock has climbed about 4 percent in the past three years, less than the 8 percent advance in the Stock Exchange of Thailand’s Banking Index.

‘Why would we ignore a billion people?’: An Irish fintech firm has raised €2m to expand into Asia (Fora), Rated: AAA

IRISH-BASED FINTECH COMPANY ClaimVantage has secured €2 million in funding to bankroll its move into Asia.

The international firm, which has been headquartered in Dublin since it was founded in 2006, develops and provides cloud-based claim management software for some of the top insurance firms in the US and Canada.

Singapore Inks FinTech Cooperation Pact with France (Cryptocoins News), Rated: A

The Monetary Authority of Singapore (MAS), Singapore’s central bank and financial authority has signed FinTech cooperation agreements with a pair of French regulators to boost FinTech ties between the two countries.

The cooperation agreement sees Singapore’s central bank partner the Autorité de Contrôle Prudentiel et de Résolution (ACPR), the authority monitoring banks & insurance companies in France and the Autorité des Marchés Financiers (AMF), France’s stock market regulator.

Under the agreement, the three authorities will adhere to a framework that fosters the sharing of information relating to FinTech trends and services. Joint innovation projects and regulatory hurdles will also be discussed between the two countries.

MENA

MENA Fintech Startup NOW Money Wants To Help Everyone Get Access To Banking (Entrepreneur), Rated: AAA

According to the World Bank’s Migration and Remittances Factbook 2016 report, migrants are sending earnings worth more than US$441 billion to families in developing countries, contributing to the 10% of GDP of some 25 developing countries. With KSA, UAE and Kuwait among the top ten high-income countries categorized as main sources of remittances in 2014, six GCC countries accounted for $98 billion in outward remittance flows in 2014. As the region’s expat population transfer money to respective home countries, there’s a prevalent reality that there is a struggle (especially among blue-collar workers) to access bank accounts- and this is what fintech startup NOW Money is trying to solve.

With a tagline of “empowering the unbanked,” founders Katharine Budd and Ian Dillon launched NOW Money to provide expat workers who don’t have access to banking and remittance services with direct access to a current account, debit card and remittance from their proprietary app and service center.

Compared to outbound remittances sent as cash (which is often hard to follow), the startup tracks “payments from salary, to remittance, to collection by overseas. This is an important step change in the progress the UAE is making towards combatting money laundering and criminal funding.” With respect to security and privacy, facial recognition tech is used to enable users to log in to the NOW Money app- a photo cannot be used to fake an entry, since movement is accounted for by this feature: the user has to blink to log in. It also records the way you hold your phone and type, so suspicious behavior will cause an alert notification. Although pin codes and passwords are still present as per the current compliance laws requirement, the team believes such a system is still susceptible to hackers, and thus Budd asserts the advantage of biometrics.

Alternative Financing in Africa, Middle East (Microcapital), Rate: A

The authors estimate that approximately USD 475 million was made available in Africa and the Middle East via alternative financing methods between 2013 and 2015, with Israel accounting for USD 125 million of this total. The authors conclude that alternative finance as a whole grew more slowly in Africa and the Middle East than in other parts of the world as the development of the market was in its early stages.

Kabbage: working capital for small businesses unable to obtain credit from traditional sources (MENAFN), Rated: A

As a large percentage of small businesses, online retail sales as a percentage of total retail sales have doubled in the past five years. Ecommerce sales overall in 2006 were just over 107 billion, representing 2.7 percent of total retail sales . There are over 100 million Ebay users in the US today, with an estimated 200 million new listings in 2Q, 2008 alone. There are an estimated 5 million power sellers transacting over 48 billion on Ebay and more than 8 million high-volume sellers representing over 70 billion across all marketplaces.

Rob Frohwein founded Kabbage to get small businesses capital quickly, an area in which banks have long struggled.

Kathryn Petralia has 12 years of experience in the consumer credit and payments space.

Amy Zimmerman has spent 15 years building tech companies by identifying and cultivating talent. Her focus at Kabbage is to foster the company’s inventive culture.

Africa

The legal considerations of running a FinTech startup in Nigeria (Techpoint), Rated: AAA

However the alternative method is for a startup to operate on its own steam by meeting the requirements to obtain the requisite licences although this method requires significant capital outlay. As such, FinTech startups that are seeking to exploit the significant market opportunities in Nigeria are bound to run into several regulatory compliance obligations.

The payment and processing segment of the FinTech sector for example — which has shown the most growth and success thus far — is primarily governed by the same general framework as are traditional financial institutions providing offline financial services (e.g. money/payment transfers, clearing, switching, settlement etc), in addition to regulations related specifically to that sub-sector.

Thus, the legal and regulatory framework that is generally applicable to financial institutions — such as the Central Bank of Nigeria (CBN) Act, 2007, the Banking and Other Financial Institutions Act (BOFIA) and all subsidiary instruments stemming from same — are all relevant to any non-bank led startups providing digital equivalents of offline financial services. This framework brings with it mandatory obligations such as KYC and AML requirements that must be strictly adhered to.

Commercial lending activities are regulated in Nigeria and as such require licensing by either the CBN (for banks and other financial institutions) or the Ministry of Home Affairs of the various states (non-financial institution lenders).

As it stands, insurance penetration in Nigeria is only at 0.6% and the growth of the middle class, alongside increased economic activity, indicates a very bright future for this sector.

The Nigerian Insurance Act provides the overarching framework for operators of all types of insurance business in the country and the National Insurance Commission (NAICOM) is the industry regulator. Under the act, one must be duly registered with NAICOM before engaging in the business of insurance.

Authors:

George Popescu
Allen Taylor