Any entrepreneur will tell you, starting a small business is not for the faint of heart. It takes vision, grit, determination, dedication, an overwhelming willingness to fight to the end, the will to overcome hurdles you never could have anticipated. But the result, for those with enough heart to see it through, can be massively […]
Any entrepreneur will tell you, starting a small business is not for the faint of heart. It takes vision, grit, determination, dedication, an overwhelming willingness to fight to the end, the will to overcome hurdles you never could have anticipated.
But the result, for those with enough heart to see it through, can be massively rewarding. It takes a certain, special type of work ethic to start something from scratch, to build something from the ground up. Many have ideas, but few can execute to fruition.
Perhaps that’s why so many veterans transition from the military to business owners. All of those characteristics mentioned above…those are just standard traits for the men and women who dutifully and proudly serve in the military. So it shouldn’t come as too much of a shock to hear that as many as 25 percent of transitioning service members aspire to become small business owners. In fact, there are more than 2.5 million U.S. businesses today that are majority-owned by veterans.
Yet veterans are at a serious disadvantage when it comes to seeing their business ideas come to light. The issue isn’t a lack of desire, skill, or intent…it’s something else. Where, exactly, is the system broken?
An Overall Decline of Entrepreneurship – Why?
It’s a topic well-discussed by Inc.com in recent years – the fact that entrepreneurship as a whole has been on the decline for decades. Some reports show the trend has been on a downward slide for nearly four decades.
Just why is the ability to fulfill that age-old American dream of starting your own business in a slump? The main answer is simple: lack of access to capital.
For millions of businesses across the nation (both veteran-owned and non), cash flow and capital are a huge struggle. The simple fact is that access to working capital is among the greatest of challenges small businesses face. All too often, business owners just can’t get funding to start or grow their businesses. The term “underbanked” represents the 77 percent of small/medium business owners who are declined by traditional banks after they apply for funding for their business ventures. And for veterans, this is even more the norm.
VOBs – Entrepreneur Assets to Our Economy
U.S. veteran owned businesses (VOBs) are an essential component of our overall economy. The leadership skill sets and values service men and women hone during their time in the military is a big part of what transforms many of them into natural leaders. They develop an uncanny ability to solve problems…many of them are able to overcome the types of challenges most small businesses face during the startup phase. And these leadership skills often carry them throughout their tenure as business owners, even years after they launch. After analyzing four year’s worth of credit data (of both VOBs and non-veteran-owned-businesses), a recent report from Experian notes that VOBs tend to have improved sustainability and longevity when compared to non-veteran-owned businesses.
There are countless other substantial benefits VOBs offer. They’re more likely to provide employees with retirement plans, health insurance, paid leave and profit sharing. They’re also 30 percent more likely than non-veteran-owned businesses to employ fellow veterans. Statistically, research consistently shows that VOBs report impressive numbers in relation to growth, employment opportunities and sales, including:
VOBs with more than two employees = over 490,000
Total number of VOB employees = 5.8 million
Annual payroll = $210 billion
Number of VOBs that are “small businesses” = 99.9 percent
6-digit sales of $100,000 or more = nearly 80 percent
Generate an annual revenue of $500,000 or more = more than 38 percent
VOBs have collective sales of = $1.2+ trillion
What does all this tell us? VOBs are a huge benefit to the economy. That’s in part what makes it so hard to ignore the other side of the story. Despite their success and contribution to our economic sustainability, many VOBs – just like most small businesses today – are struggling to make ends meet. The Small Business Association (SBA) Office of Advocacy says that over 69,000 VOBs closed as a result of inadequate cash flow.
Taking that leap of faith and starting your own business has always been a risk, for any entrepreneur, but with entrepreneurship across the board on an overall decline (for both VOBs and non-veteran owned businesses), that risk seems somehow even greater these days.
Challenges Veteran Business Owners Face
Of the many challenges entrepreneurs face when starting a new business, for most, funding is high on the list. For the majority of veterans, sources of capital can include personal savings (30 percent) and personal or business credit (nearly 11 percent).
According to the same Experian report, veterans tend to have significantly fewer mentorship options and a lack of networking opportunities. They’ve also historically had less access to capital than their non-veteran owned counterparts, says a report from the Federal Reserve Bank, who together with the SBA assessed the stats of both VOB and non-VOB small businesses.
The SBA’s Office of Advocacy partnered with the Federal Reserve Bank of New York to publish FINANCING THEIR FUTURE: Veteran Entrepreneurs and Capital Access. Their research shows that despite need being strikingly similar amongst VOB and non-VOBs, there is a glaring disparage in lending opportunities for the two groups. It’s one major reason why veteran entrepreneurship continues to see a generational decline.
The report notes that even though VOBs submitted more applications for funding than non-VBOs (47 percent versus 43 percent, respectively, submitted three or more applications), from a larger variety of lenders (online lenders, small banks and large banks), VOBs received less financing overall. During 2010 – 2017, SBA loans to VOBs increased by 48 percent, whereas they increased by 82 percent to non-VOBs. This is despite dedicated veteran-dedicated relief programs.
And some more results of those applications? It’s reported that 60 percent of VOBs still have a financing shortfall due to receiving less funds than they applied for. In comparison, only 52 percent of non-VOBs received less than requested.
The report also points out what we’ve already seen in multiple other studies, that:
“military service is highly correlated with self-employment probability,” and
“veterans are at least 45 percent more likely than those with no active-duty military experience to be self-employed”
What should all this data tell us? It’s pretty clear: we should be putting more faith and funding into VOBs.
Real-Life Success Stories
For those veterans who have been able to find funding through alternative resources, the results are both impressive and inspirational.
Just look at veteran and owner of The Texas Silver Rush, Joseph Remini. Remini creates custom jewelry and is considered a “destination” in Fredericksburg. He’s created custom pieces for the likes of stars including Santana, Ringo Starr and countless other country artists. Reliant Funding’s non-traditional funding options allowed him to purchase the silver he needed to make expensive, custom, one-of-a-kind pieces that are allowing him to make a name for himself. Remini knows that Reliant’s dedication to veterans is something unique.
“I will tell you that Reliant has given me peace of mind. I know I am with a company that cares about me, is willing to grow with me.” – Joseph Remini, The Texas Silver Rush
Christopher Adams is VBO of Cedar Creek Builders and a rental management company. When both companies were growing at a rapid speed, Adams used alternative funding to purchase and replace equipment he desperately needed for a job. Borrowed funds also allowed him to cover unexpected costs during the winter months. His success even meant he was able to purchase a personal condo without concern that it would affect his credit, and ultimately, his ability to access capital to grow his businesses. Adams is grateful for the opportunity non-traditional funding has afforded him.
“Reliant is there when you need funding. It is nice to know and have that peace of mind.” – Christopher Adams, Cedar Creek Builders
Reliant Funding is honored to represent so many veterans in small business. By eliminating origination fees for veteran and active duty service members and their families, and releasing a comprehensive resource guide for veteran owned businesses, Reliant has shown its dedication to the veteran community. We believe knowledge is power, so we’re committed to setting VOBs up with the know how to successfully navigate:
Cash flow management strategies
Funding options and how to use them
Certification as veteran owned business
Training and education opportunities
How to take and apply advice from other successful veteran business owners
If you’re a veteran or family member of a veteran looking for funding and working capital for your new or existing venture, our special offering to veterans and the debut of our VOB guide is proof of our commitment to investing VOBs.
Adam Stettner is the CEO and Founder of Reliant Funding
With several fintech companies reporting earnings disappointments over the last two weeks and with FinTech Unicorn GreenSky, Inc. (GSKY) that IPO’d less than fifteen months ago now considering strategic alternatives, both public market and private equity investors have to consider the longer tail implications for the sector. Is the public market fairly valuing the underlying […]
With several fintech companies reporting earnings disappointments over the last two weeks and with FinTech Unicorn GreenSky, Inc. (GSKY) that IPO’d less than fifteen months ago now considering strategic alternatives, both public market and private equity investors have to consider the longer tail implications for the sector. Is the public market fairly valuing the underlying business fundamentals and growth opportunities being pursued by fintech companies? Should GreenSky have stayed private? And given the GreenSky situation, will other FinTechs be able to gain access to much needed capital (both public and private) for further growth and value creation?
GreenSky has repeatedly under delivered relative to market expectations. The company reported second quarter earnings last week of $0.19 (versus consensus expectations of $0.23) due to weaker-than-expected lending volume. Not only were earnings short of expectations but transaction volumes grew 20% year-over-year when the company had indicated that it would deliver 30% growth. Add to these disappointing performance metrics the fact that one of GreenSky’s bank partners announced it would not renew its asset buying relationship with the company and GreenSky is now looking for alternative funding arrangements. All of this news was eclipsed by management announcing that it is considering “strategic alternatives”. The stock declined 37% on the day the quarter’s results were announced, driving its 21% underperformance for 2019 and adding to its 67% decline since its IPO just last May.
Public companies have nowhere to hide when things do not go as planned. When expectations are repeatedly not met and business models do not deliver the profits that technology-enabled business models suggest should be produced, recently minted public companies are punished severely. Public companies cannot contain the bad news to the board room where private equity investors complain loudly but their complaints lack the echo chamber of the public markets. GSKY cannot do a down round in private and has to take its lumps in public. There was similar news for OnDeck (ONDK) last week when it announced alongside its earnings that JPMorgan Chase (JPM) was ending its loan origination partnership (ONDK shares declined 23% that day and is down 43% YTD, and off 83% since its IPO). The FinTech world was banking on these bell weather companies delivering strong, sustainable business models that would reshape the financial services landscape. So far, this is not what happened.
GSKY’s and ONDK’s woes are only the beginning for private fintech companies. Earlier stage FinTechs look to the public FinTechs as reference points and hope that they can replicate their IPOs and deliver sustainable growth. GreenSky could have been that shining success, but it appears to be example of what can go wrong when a FinTech goes public. Growth stage companies tell their private investors that if they grow fast enough and big enough, they can go public — like public companies GSKY and ONDK. But, when these companies underperform with significant market value erosion and talk about exiting the public market, it sends shudders down the backs of private lenders and the investors who back them.
What are the lessons that private companies can glean from the disappointing news coming from the public FinTechs? Under promising is a winning strategy. Fin-techs have to stop falling into the trap of setting expectations so high that they miss delivering against them. The public market has demonstrated that newly minted public companies will be severely punished for missing performance targets. And while founders want big valuations and private equity investors need big write ups to be viewed as successful, they would both be far better served setting expectations lower by accepting lower initial public valuations and thereby allowing themselves to set lower performance targets for the 12 to 24 months after they IPO. This sort of thinking may seem logical to observers of this market, but when you are neck deep in the FinTech market as an operator, investor or banker, it is hard to avoid overheating expectations and valuation. With each capital raise leading to quantum leaps in valuations, private companies have to set very heady goals for their IPOs and for the year post going public. After all, the IPO buyers need a big return too. And this dynamic has ended recently with a very disillusioned FinTech market. If we wish to see FinTech deliver on the promise of next-generation financial services with transformational value add, better economics, and broad adoption, we have to give these companies the time to grow into world beaters. It cannot happen overnight and promising such only leads to creating a cynical market that will think twice about investing in early-stage and later-stage FinTech innovators.
Andrew Marquardt is a partner at Middlemarch Partners, LLC, a merchant banking firm that advises and invests in financial services companies, with a particular focus on fintech and tech-enabled growth companies.
News Comments Today’s main news: Tala raises $65M for international expansion. The House Crowd hits 1M GBP in one day. Silicon Valley investment into UK hits $1B. 100Credit gets $159M from state-owned fund in China. Mintos adds ID Finance loans issued in Kazakhstan. Today’s main analysis: The 5 best personal loans for good credit. Today’s thought-provoking articles: LendIt Fintech […]
LendIt Fintech 2018 wrap-up. AT: “If you didn’t get to attend the conference, this is a good overview of the most important keynotes and talks by industry leaders.”
5 best personal loans for good credit. AT: “The first of several good reads from Student Loan Hero today. Geared toward consumers, there are some worthwhile competitive intelligence takeaways, as well.”
Last week the sixth annual LendIt USA conference took place in San Francisco. Officially known as LendIt Fintech USA 2018 this event was, in my opinion, the best we have ever produced.
The opening keynote, for the second year in a row, was delivered by Scott Sanborn, the CEO of LendingClub. He gave a different kind of presentation this year. He didn’t talk much about LendingClub at all, instead choosing to focus his keynote on financial health and the looming crisis that maybe coming. He gave us all something to consider beyond just disruption, he said we should think about three key areas: financial inclusion, regulatory innovation and customer alignment. He ended with a call to action for the industry. He wanted everyone to focus on what problem you are solving and what you can do to help restore financial health to all Americans.
The average credit score of Americans is 700, based on April 2017 data from Fair Isaac Corp., an analytics company that issues the FICO credit score.
If your score meets or beats that average, it’s enough to put you in the good credit score range, which goes from 670 to 739. As a result, you should have a good chance of getting approved for some of the best personal loans for good credit.
As you compare, you’ll find LendingClub, Citizens Bank, and FreedomPlus— all online lenders that accept cosigners. They all accept FICO scores under 700, with LendingClub accepting FICO scores as low as 600.
Here’s a list of some online lenders that accept cosigners for personal loans:
Wunder Capital, a firm that develops and manages solar investment funds through partnerships, test processes, underwriting framework and its investment portal, announced on Wednesday it secured $112 million in equity and debt financing to accelerate the growth of the company.
Blankfein commented on the other obvious strategic advantage. Their cost of capital is super low. Unlike many of the early entrants into the online lending sector, Marcus has access to deposits via their acquisition of GE Capital Bank several years back – something no other US based online lender can claim. Even with their industry leading interest rate for current accounts (now 1.6% when most banks pay a fraction of that), Marcus can crush the competition in loan originations.
Marcus has originated more than $3bn of loans since inception, recently it has become know that more than 10 percent of the loans were sub prime; they have said this is a natural evolution of the loan business and they are being very selective in approving of applications.
As an online loan servicer, GreenSky works with borrowers and merchants to provide low-cost personal loans for home improvement, specialty retail, and healthcare expenses. It’s funded more than $10 billion in loans to over 1.3 million customers, according to the lender.
Individual borrowers can apply for home improvement loans, which can be used for flooring, windows, landscaping, or other projects. Home improvement loans come with fixed APRs between 3.99% and 23.99%, as of April 18, 2018. You can choose terms of 42, 66, or 90 months. For the most up-to-date rates, check GreenSky’s website.
Right now, real estate crowdfunding companies are becoming very popular because they allow you to pool your resources in order to buy property or to finance real estate companies who are looking to build properties.
About 48 million records of detailed personal information on tens of millions of individuals have been leaked, containing Cambridge Analytica–style information gathered and scraped from multiple sources.
The culprit, as is the case all too often, is a misconfigured cloud storage repository, in this case belonging to a company called LocalBlox. LocalBlox bills itself as a personal and business data search service, but it’s bread and butter is data-harvesting and the creation of psychometric profiles of individuals.
Point, a fintech platform that allows homeowners to unlock home equity wealth without taking on new debt, has agreed to a forward flow purchase program with investment firm Atalaya Capital Management to purchase up to $150 million of Point’s structured home equity investment instruments.
Financing military veteran-owned small businesses lender StreetShares announced on Wednesday it has appointed Mohan A. Rao as Chief Product and Technology Officer. According to the online lender, Rao is the former Chief Technology Officer of Hobsons, Inc., and brings more than 25 years of experience with building software products, R&D, and management consulting to the StreetShares team.
Millennium Trust Company, LLC, was honored at LendIt Fintech USA 2018 as the “Professional Services Company of the Year,” which is awarded to the service provider that has demonstrated deep expertise, unique value, strong ROI, commitment to clients, and the fostering of a deeper understanding of fintech. Organizations such as Cloud Lending Solutions, Deloitte, First Associates, Manatt and Salesforce also received nominations for the award.
Capsilon, an enterprise SaaS digital mortgage solution partner to the mortgage industry, today announced the expansion of its digital mortgage platform through the addition of big data capabilities and a new set of smart tools designed to radically improve back office workflows and accelerate loan production. With this new data audit functionality, Capsilon can reduce manual data entry and speed up data auditing across the loan process, enabling companies to automate up to 80% of manual processing functions.
Property crowdfunding platform The House Crowd have raised just over £1.3 million over a 24-hour period to support housing developments in Greater Manchester. This is the first time the business has broken the £1 million mark in a day.
Most of the money – £1.2 million – was for its Egyptian Mill Development of 42 house and 15 apartments in Lees, just outside of Manchester. Attracted by a typical return of 10 per cent each year over a 15 month investment term, investors have clambered to raise funds and support new build houses and flats as the UK housing crisis continues.
The new report found that software companies take the lion’s share of this investment, benefiting from £2.2 billion in funds since 2011. The number of deals from Silicon Valley into UK firms has increased by 252% over that period.
LENDING at the UK’s largest peer-to-peer finance platforms is fast approaching £9bn.
Data from the industry’s trade body the Peer-to-Peer Finance Association (P2PFA), released on Thursday, showed its eight members – Crowdstacker, Folk2Folk, Funding Circle, Landbay, LendingWorks, MarketInvoice, ThinCats and Zopa – reached cumulative lending of £8.96bn at the end of the first quarter of 2017.
The figure is up 11.5 per cent on the fourth quarter and 57 per cent higher year on year.
Research shows that most SMEs turn to traditional sources of funding – such as overdrafts, credit cards and bank loans – when they need a cash injection. What’s more, many are unaware of – or are unclear about – the recent expansion in alternative forms of business financing such as crowdfunding or P2P lending. That’s a shame, because many of these new funding options are very well suited to the needs of SMEs and start-ups.
Mechanics Cooperative Bank has selected the Fusion Phoenix core banking system from Finastra, as well as a full suite of ancillary offerings, to provide its new technology foundation. The solution will bring together a wide-range of proven, specialized software into a single environment that is more easily managed in the back-office, providing greater workflow and interface efficiencies for the bank’s staff, and ultimately customers.
As the exclusive “Global Leader” partner of LendIt Fintech USA 2018, Yirendai was awarded “Top Consumer Lending Platform” and was the only Chinese enterprise to receive a LendIt Fintech industry award, which demonstrates high recognition of its outstanding contributions to the innovation of the financial services industry. In addition, Ms. Yihan Fang, CEO of Yirendai was nominated for “Executive of the Year” and CEFIF was nominated for “Top Fintech Equity Investor”. Both nominations are strong recognition of the great achievements CreditEase has made in both wealth management and Fintech investment fields.
China Reform Fund Management Co.,Ltd, a private equity firm backed by China Reform Holdings Corporation Ltd and other central state-owned enterprises, has led a RMB1 billion (US$159 million) series C round in 100Credit, a fintech start-up that uses big data to provide credit services.
Existing investor Sequoia Capital China also participated in the round, according to 100Credit’s announcement on its official WeChat account.
Alipay pilots digitized national ID cards (China). The digital payments app run by Alibaba affiliate Ant Financial is testing out integration of the Chinese government’s pilot digital ID card scheme, which could one day replace physical ID cards.
Orange Bank has already onboarded more than 100,000 customers since launch, only Revolut and Boursorama, Société Générale’s digital banking arm have made more progress in the same timeframe; this continues the wider trend across Europe as digital banking becomes a bigger part of the financial services ecosystem.
Last year, after raising €14 million in funding from a consortium of traditional and online banks, Tink pivoted to licensing its technology to banks so they can build their own apps and fintech services.
The startup is now doubling down on its B2B business by launching a third-party developer platform. This means that the same technology that Tink has provided to banks like Nordea and SEB, will now be open to any company that wants to gain access to a given consumer’s account data (with the consumer’s permission).
There are some concerns that the rise of crowdfunding will cause major disruption across industries. According to the world bank, 2016 saw more money raised from crowdfunding than from venture capital.
In Finland, for example, there is no requirement for crowdfunders to have an MiFID licence, which means that companies who have obtained a licence are more strictly regulated than their unlicensed competitors. Other nations have been quicker to adapt – in France and the UK existing legislation has been brought smoothly up to date to be compatible with crowdfunding.
The difference between ‘data’ and ‘sensitive data’ – that is, between Article 6, which we considered in more detail here, and Article 9 – is that the individual must give explicit consent to the processing of each type of special category of data.
If, for example, a firm will be asking someone whether they are a smoker and will also be recording they are a member of a specific trade union, then the firm would to need capture explicit consent from the individual that they are happy for the firm to collect and process this data about their health and their trade union membership.
For financial advisers, this consent will need to be gathered early in the customer engagement process, with it being made clear the data will be processed and what it will be processed for.
Mintos, an online marketplace that provides individuals with a simplified way to invest in loans originated by a variety of alternative lending companies, announced on Wednesday that fintech firm ID Finance has further diversified investment opportunities on the Mintos marketplace by launching personal loans listed in Euro (EUR) and Kazakhstani tenge (KZT) under its Solva brand in Kazakhstan.
According to the companies, Solva uses a scoring system built around machine learning, advanced risk assessment techniques, multiple search technologies, big data and text mining. The system also evaluates the device on which the loan application is being filled out and the user’s behaviour when filling out the application.
California-based fintech company Tala said that it is bringing its lending app to India. This expansion was announced along with a new $50 million Series C funding led by Revolution Growth its operations in the country which is already in progress. In addition to Revolution Growth, Tala’s Series C round includes existing investors IVP, Data Collective, Lowercase Capital, Ribbit Capital, and Female Founders Fund. Steve Murray, managing partner at Revolution Growth, will join Tala’s board of directors.
The Singapore Fintech Association (SFA) today announces the launch of the Marketplace Lending committee and website, in response to the rapid growth in the sector.
In 2016, Southeast Asia’s alternative finance market reached a record US$215.94 million, a growth of 362% compared with 2015. Data for 2016 showed that Singapore’s alternative finance market size was valued at US$163.75 million, more than double the entire value from 2013-2015. This upward trend is reflected internationally. The global lending market valued at US$3.5 billion in 2013, expecting to reach US$1 trillion by 2050, according to Statista, a market research company.
Rishi Stocker, head of partnerships at Revolut, is currently focused on coordinating the banking challenger’s entry into Japan. Speaking to AltFi, Stocker said that the Japanese market, unlike others in Asia, is a tough nut to crack.
He said that regulators are “very keen on local presence and very concerned about international companies entering and then suddenly changing their strategy and leaving”.
To allow Revolut to set up shop in Japan, regulators have insisted that the fintech firm appoint an experienced local Japanese expert as a director of the entity. “That’s quite an interesting nuance of Japan whereas a lot of other markets are a lot more open – so long as there’s a strong compliance team based in our head office in London,” explained Stocker.
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 […]
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)
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 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)
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.
News Comments Today’s main news: Prosper performance update for July 2017.Top Mozido executives quietly left company.White House OKs delay of fiduciary rule.Funding Circle kicks off 12M marketing campaign with TV ad.LATTICE80 to open London fintech hub.Klarna profits up 130%+.RateSetter hits 2,000 broker milestone. Today’s main analysis: Millennials prefer auto, personal loans to credit cards. Today’s […]
Factors that push millennials toward auto, personal loans instead of credit cards. AT: “The larger story could be that digital lending is so disrupting credit card usage that we could be witnessing the decline of bank cards altogether. It’s still too early to tell, but Gen Z is coming up behind Gen Y (millennials) and they were born the year the World Wide Web went commercial. That means Gen Z is the first truly digital native, and who knows where they will stand on credit cards? The future of bank cards may be the mobile app. In fact, I would say it is likely the mobile app.”
Non-prime boomers struggle financially, but less than other generations. AT: “This study is a nice complement to TransUnion’s study on millennials and Gen Xers. It follows, of course, that non-primes of any generation will struggle more than primes, and I would expect that older generations have figured out some way to cope with their financial struggles more so than younger generations, so I’m not sure we learn much from this research.”
How Gen Z will affect the future of the P2P economy. AT: “Beyond P2P lending, this touches on many aspects of the sharing economy. Gen Z could be a greater economic force to reckon with than the millennials, but they are just becoming of age so it remains to be seen exactly how they will impact the economy and how they will use financial services technology. My guess is that Gen Z will accelerate what Gen Y started, but by how much?”
Our risk team implemented a credit tightening in July aimed at removing certain populations of borrowers from originations on a go-forward basis. As a result of this credit tightening, the overall distribution of the book shifted slightly towards lower risk loans. This slight shift resulted in an overall portfolio coupon decrease of 45bps and an overall return estimate decrease of 26bps.
Additional highlights from the July Update include:
Charge-off levels in 2016H2 vintages continue to show meaningful improvement compared to 2016H1 vintages.
Periodic delinquencies moved higher for 2016 and 2017 vintages.
The top two executives of Mozido, a financial technology company that raised some $300 million to develop a mobile payments business, have quietly left the company.
On its web site, Mozido currently lists Todd Bradley as its CEO, but Bradley said in a brief interview that he left the company in June. Bradley’s departure appears to have left Mozido without a chief executive officer. Bradley has also left Mozido’s board but the company’s web site still lists Bradley as a director.
Scott Ellyson, Mozido’s chief financial officer who is listed on Mozido’s web site as its second-most senior executive, has also left the company, according to Bradley. Ellyson’s LinkedIn page currently does not mention his time at Mozido. He did not respond to a request for comment.
Three weeks ago, Michael Liberty, the founder of Mozido, was sentenced to four months in prison and a $100,000 fine by a federal judge. Liberty pleaded guilty in November 2016 to making illegal campaign contributions.
As the first generation to be fully immersed in mass-market digitalization, Millennials are slowing their credit card usage while increasingly using other credit products such as personal loans. A just-released TransUnion (NYSE:TRU) study found that Millennials are carrying on average two fewer bankcards and private label cards than Generation X (“Gen X”) consumers at the same respective ages. Conversely, Millennials’ appetite for new auto and personal loans has grown at a faster rate than Gen X borrowers at the same age points.
Credit Cards Out of Fashion; Cars and Personal Loans in Style
The study found that, in addition to carrying fewer credit cards than Gen X consumers, Millennials also are maintaining lower balances on those cards. TransUnion analysts believe that this is partly driven by the CARD Act of 2009, which limited the marketing of credit cards on college campuses. The increased use of debit cards also plays a role in this shift. The study pointed to recent Federal Reserve data, which found that debit card transactions grew from 8 billion in 2000 to 60 billion in 2015. In contrast, credit card transactions only increased from 16 billion to 34 billion in that same timeframe.
Millennials and Mortgages
Among all major credit products, the mortgage market has been the slowest to recover from the Great Recession, with home ownership rates still below levels observed in 2009. Overall, homeownership is down 0.8% since the Recession, but this number grows to -1.6% for 35-44 year olds and -2.1% for those under 35.
As a result of credit access being limited and, per the U.S. Census Bureau, affordability being affected by income gaps between the two generations, TransUnion’s study found the percentage of Millennials opening mortgages between the ages of 21-34 (5%) is nearly half of the Gen X group (10%) when they were that age. TransUnion observed a smaller but still material gap (13% for Millennials vs. 16% for Gen X) within the Super Prime risk tier, suggesting that this dynamic is not driven solely by credit supply.
TransUnion’s study found that access to mortgages has declined dramatically for 21-34 year olds. In 2000, 39% of mortgage originations in this age range were comprised of non-prime borrowers. In 2016, non-prime borrower originations declined to 20%.
Further impacting mortgage originations to Millennials are lower income levels. Per the U.S. Census Bureau, median household income of consumers ages 25-34 declined from $60k in 2000 to $57k in 2015. The impact can be seen in the housing status of these consumers: a larger portion of younger adults ages 25-29 are living with their parents, rising from 15% in 2000 to 25% in 2014.
Despite these challenges, a TransUnion survey of 1,340 consumers in July 2017 found that nearly 75% of Millennials ages 23-37 said they plan on purchasing a home in the future.
The Office of Management & Budget of the White House has approved the Department of Labor’s request to push back the final implementation date of its fiduciary rule — originally scheduled for January — to July 2019, the Wall Street Journal reports.
Being a key transmission mechanism for savings, investment and spending, the banking sector is worth watching as a barometer for the health of the overall economy. Lately it has been acting as one would expect toward the end of an expansion phase.
Most glaringly, after strong lending growth for several years, momentum clearly is slowing. In its quarterly report on the sector, the Federal Deposit Insurance Corp. found that total loans and leases by banks and other insured institutions rose by just 3.7% from a year earlier at the end of June. That is the third consecutive quarterly deceleration and is down from a 6.7% pace of growth a year ago.
After a period of strong lending, it is also typical for defaults to start ticking up as levels of indebtedness rise and bills come due. This is indeed happening, at least among consumers. Credit-card charge-offs soared by 24.5% in the second quarter, according to the FDIC, marking the seventh straight increase. Charge-offs on loans to commercial and industrial borrowers, however, declined by 9.7%, possibly due to a recovering energy sector.
The Madden case held that National Bank Act preemption of state usury laws applies only to a national bank, and not to a debt collector assignee of the national bank. The decision has potentially broad implications for all secondary markets in consumer credit in which loan assignments by national banks occur: securitizations, sales of defaulted debt and rent-a-BIN lending.
Unfortunately, the “Madden fix” bills are overly broad and unnecessary and will facilitate predatory lending.
The actual “valid-when-made” doctrine provides that the maker of a note cannot invoke a usury defense based on an unconnected usurious transaction. The basic situation in all of the 19th-century cases establishing the doctrine involves X making a nonusurious note to Y, who then sells the note to Z for a discount. The discounted sale of the note can be seen as a separate and potentially usurious loan from Y to Z, rather than a sale. The valid-when-made doctrine provides that X cannot shelter in Y’s usury defense based on the discounting of the note. Even if the discounting is usurious, it does not affect the validity of X’s obligation on the note. In other words, the validity of the note is a free-standing obligation, not colored by extraneous transactions.
A small business lender knows that a certain percentage of loans will become NPLs and typically has parameters the business must stay within to remain profitable. The lender may pursue NPLs on an in-house basis indefinitely past the charge-off date or turn them over to a collections agency at some point. Both options create problems in the fintech business model.
The best recovery option for online small business lenders is to manage NPLs in-house until they become charge-offs, then use the services of a reputable commercial debt buyer. This is how it works.
The lender works with the commercial debt buyer on a one-time basis, periodically, or in a forward-flow relationship where NPL information is sent regularly to the buyer.
A non-disclosure agreement (NDA) is signed and the lender provides information to the buyer on the pool of non-performing assets. This includes the number of accounts and amount of outstanding balances.
Buyer assigns a value to the NPLs and offers a price.
Lender signs the purchase agreement. Typically, buyers in forward-flow relationships will send payment within 24 hours.
Reputable buyers then work to collect the debts over time, without using the lender’s name and in a sensitive manner, and without reselling the debt.
Ten-X Commercial, the nation’s leading online real estate transaction marketplace, today announced that it has partnered with Money360, a technology-enabled direct lender focused on commercial real estate (CRE), to offer financing for properties available for sale. The partnership will expand the investor pool for commercial properties listed on Ten-X by giving prospective buyers assurance they will be able to procure the necessary financing to fill the deal’s capital stack, while providing sellers and their brokers increased confidence that once terms are agreed upon, buyers will be able source a loan and close the deal.
Under the agreement, Money360 will work with Ten-X to determine which commercial properties listed on the Ten-X platform are appropriate for pre-arranged financing, and will then pre-underwrite bridge and/or permanent loans for qualifying properties. The lender’s offers will be listed on the Ten-X property detail page, informing prospective buyers about the available financing terms. After the property trades, Money360 will work with buyers to underwrite, process and close the loans to facilitate the transaction.
Despite the widespread perception that Baby Boomers (ages 51-64) are struggling to make ends meet more than any other generation, new research from Elevate’s Center for the New Middle Class has found that Baby Boomers are actually struggling the least. In fact, Baby Boomers are the most likely to have steady employment and run out of money less often, compared to data from previous studies.
“These findings come as a surprise, as they are counter-intuitive to many of the trends we have seen widely covered around Baby Boomers,” said Jonathan Walker, executive director of Elevate’s Center for the New Middle Class. “Recently, it was reported by the Federal Reserve that Baby Boomers are leaving the workforce in such large droves that they are skewing employment numbers, but we’ve found that 60 percent of non-prime Boomers have had no employment change in the last 12 months, compared with 59 percent of Gen-X and 43 percent of Millennials.”
But even though they struggle less than other non-prime generations, they are still facing challenges in the new economy, especially when compared to their prime counterparts. Non-prime Boomers are more likely to hold more than one job and are 10 times more likely to run out of money every month.
Additional key findings include that – compared to their prime cohorts – non-prime Boomers are:
2.2x as likely to say that their finances cause them significant stress
4x as likely to live paycheck to paycheck and 1 in 6 use payday loans
14x as likely to express difficulty predicting monthly income and are 2.5x more likely to overdraft on bank account
3x as likely to take a loan against their 401k
46 percent less likely to go on vacation
More likely to be living in households with 3 or more working adults
Born in the mid-1990s to late 2000s, Gen Z accounts for one-quarter of the U.S. population. They are considered the most diverse and most multicultural generation the U.S. has ever seen. The highly influential Gen Zers are the first digital native generation. They are already impacting the current peer-to-peer (P2P) economy and will have an enormous effect on how this economy evolves.
A Gallup study found that about 8 in 10 students in grades 5 through 12 reported that they wanted to be their own boss rather than work for someone else.
Additionally, a millennial branding studyreported that 72% of high school students and 64% of college students want to start their own business.
The SEC may suspend trading in a stock when the SEC is of the opinion that a suspension is required to protect investors and the public interest. Circumstances that might lead to a trading suspension include:
A lack of current, accurate, or adequate information about the company – for example, when a company has not filed any periodic reports for an extended period;
Questions about the accuracy of publicly available information, including in company press releases and reports, about the company’s current operational status and financial condition; or
Questions about trading in the stock, including trading by insiders, potential market manipulation, and the ability to clear and settle transactions in the stock.
Online real estate marketplace RealtyShares announced on Tuesday the closing of two industrial real estate financing transactions in San Francisco and Boston MSA. The amount raised between the deals was $10.3 million.
RealtyShares stated it secured $8.7 million industrial debt loan for a San Francisco located mixed-use, industrial warehouse and office space in the city’s South of Market (SoMa) neighborhood.
Following impressive results using Clear FraudTM to mitigate losses in targeted auto lending transactions, Westlake Financial Services has expanded its relationship with Clarity Services to strengthen its auto portfolio nationwide.
Westlake, which has a network of more than 50,000 new and used auto and motorcycle dealers throughout the United States, began testing Clear FraudTM a year ago in select markets. The California-based finance company has enhanced its profitability by using Clear FraudTM to provide loan terms that are more attractive to both consumers and dealers.
By incorporating Clarity’s credit data, Westlake is able to more accurately price and structure deals with profitable loan terms, and determine down payment requirements. Westlake’s use of Clear FraudTM helps the lender evaluate subprime applicants with credit scores below 600. Clear FraudTM also makes it easy to integrate scores into Westlake’s existing scorecard.
AirFox, the company making mobile data and the internet more affordable for millions of people, today announced it closed its $6.5 million ICO pre-sale weeks earlier than scheduled. The ICO will open at 10 a.m. ET on September 19, 2017. AirFox will use the ICO funds raised to further develop and launch its new blockchain consumer platform, AirToken (AIR), in order to tokenize mobile access by unlocking mobile capital from the smartphone for the underserved and underbanked prepaid mobile subscribers in emerging markets.
Not too long ago, when small- to mid-sized business (SMB) Orion First, a business credit ratings firm, needed a loan, its only option was to visit a local bank, fill out myriad application forms and wait several weeks or months to (maybe) get approved. Fast forward to today, and the small business lending process has undergone a significant overhaul.
With a growing number of FinTech players competing in the lending space, small businesses now have improved access to a range of loan options — and, in most cases, funds are disbursed in as little as 24 hours.
New services that can expedite the lending process for companies like Orion First are already gaining popularity with SMBs and consumers who need short-term loans. The Innovative Lending Platform Association (ILPA), a trade organization representing several companies in the space — including prominent players like small business loan provider Kabbage and financial consultant and insights provider PayNet — says its member companies have distributed more than $14 billion in capital loan disbursements to small businesses to date.
The millennial population is estimated at roughly 83 million, and a recent survey found almost half of millennials (49 percent) plan to start their own businesses within the next three years.
A recent survey by YouGov found 81 percent of both retail consumers and SMBs who turned to digital lenders said the ease and speed of completing a loan application were the reasons they made the switch. In the same survey, 77 percent of respondents cited the rapid pace of loan decision making as the key appeal for these platforms.
Online lenders have faced increased competition from other more established fintech companies. Furthermore, banks such as Goldman Sachs have started their own lending arms
Publicly traded firms have made great strides in improving financials; the analyst consensus has Lending Club moving into positive GAAP earnings by year end in part driven by securitizations as a lower-cost source of capital
SoFi has made strides towards becoming more bank-like after adding mortgage loans, wealth management services and acquiring (and subsequently shuttering) online bank and money transfer service Zenbanx
As the latest PitchBook fintech analyst note points out, some of the most notable companies are becoming more like banks, with SoFi the most prominent example, as it expands from student loan refinancing into unsecured consumer credit, wealth management and more. Yet as some online lenders establish a foothold, there are still significant hurdles to overcome.
LATTICE80, a fintech hub owned and operated by Singapore-based private investment firm Marvelstone Group, announced on Monday it is set to open a fintech hub in London as part of its global expansion. The organization revealed that as of August 2017, its UK entity has been registered, but a suitable hub space remains to be found. It is currently in talks with relevant parties in the private and public sectors, with plans to secure and open a hub by 2018.
In particular, the UK market has lots of new entrants (now in excess of 100 providers) but the number of clients seems to be static at about 40,000-45,000. In order to remain competitive, lenders are required to compete on price and terms, which increases their risk and often reduces their return.
Customers also have more choice in the market, in that they have access to working capital both from banks and alternative lenders such as peer-to-peer (P2P) platforms. Consumers are becoming increasingly aware of the non-traditional players in the market that are harnessing technology. The new generation of borrowers is more tech-savvy and more comfortable embracing P2P capabilities, which makes new players more attractive.
Richard Spielbichler, ABL director North West, Independent Growth Finance
“The main pitfall to consider is whether the business has a USP that will protect their position in the market. Many businesses suffer from ‘me too’ syndrome, where their USP is very similar to an existing organisation.”
Angelika Burawska, COO, Startup Funding Club
“It depends on the type of financing. In the case of loans and various types of trade finance, the main pitfalls lie in payment terms, such as how much and when, late payment fees and what happens if a company fails to pay.
“In the case of equity funding, businesses have to pay attention to the valuation they raise which may be too high or too low; and the control rights they give to investors.”
On 25th August, Zhushang Financial, a P2P lending platform specialize in providing auto financing services, announced the closing of Tens million RMB in series A funding. Toulang Capital led the round, with participation from Cailang Capital. The “Zhushang Financial” brand has been upgraded from the “Zhushang Dai” brand and announced with this round of financing.
Zhushang Financial is based in Chengdu, a developed city in west China, providing P2P auto financing services for small companies and individuals. Currently, it has established branches in many western cities, including Chongqing, Guizhou Province, Kunming, Xi ‘an, Taiyuan and Lanzhou. Also, the company has signed agreements on depository with both Zhejiang Mintai Bank and Hunan Rural Commercial bank (Youxian Branch). Up to now, the total volume of the platform has reached over 500 million RMB.
According to the report of Central Bank, China’s auto financing market reached 700 billion RMB in 2016 and may exceed 1.85 trillion RMB in 2018. Its rapid growth comes not just from the wave of “car service”, but also from the policy support. Actually, according to the policy issued last year, the net loan assets must be small and dispersed, and since then auto finance has become a new hotspot of P2P lending industry.
August 29, the first financial reporter from a block chain technology business executives were informed that the China Securities Regulatory Commission recently to some of the block chain enterprises on the ICO (Initial Coin Offering, virtual currency initial public offering) for advice, the current In the stage of collecting comments and discussions, the SFC expressed particular concern about ICO projects for pyramid schemes in the name of virtual currency.
On Friday the company reported sales and profit results for the first half of 2017 that represented gains of 21% and 138%, respectively. The strong financials come amid a series of headlines that show the Swedish payments company making strides on a number of fronts. This includes rumors that Klarna is partnering with Stripe to better access the U.S. market. Such a partnership would make Klarna the only non-credit card option available on the platform, and enable customers to take advantage of Klarna’s signature “pay after delivery” service. A deal between Klarna and Stripe also would provide what an anonymous source quoted in Nordic Business Insider referred to as “potentially an important piece of the puzzle” of Klarna’s plan for expansion in the U.S.
Last year, Klarna launched the “Smoooth” campaign with a series of award winning and critically praised advertisements showing just how smooth payments should be. Now Klarna takes the next step by fully implementing the concept of “Smoooth” across all aspects of the brand. This includes not only a new logo, graphic identity and checkout touch-points but towards a completely new user experience – transforming rational payment transactions into an emotional shopping experience for consumers.
Ice-cream melting on warm car hoods, shampooed long-haired dogs and pencils being pushed into huge jelly pastries. Klarna`s new identity is definitely not your average bank speaking.
“We are on a journey to transform Klarna from a traditional payment provider to a stronger consumer brand. Our new identity is more modern and expresses our focus on the consumer experience, innovation and simplicity in payments. It’s time for a new kind of bank.” Sebastian Siemiatkowski, CEO of Klarna
This is not only an update of the visual identity of Klarna but also changing the way consumers interact with the company. The concept of “Smoooth” will be evident when watching an ad or pushing a button to pay in the Klarna app. Every Klarna touchpoint has a new unique graphic and will be smarter and more intuitive. That will ensure a better user experience for consumers, but will also support in driving growth, conversion and consumer loyalty for all Klarna merchants.
There are three intuitive ways to shop with Klarna:
Pay now. – Pay directly at checkout. No credit card numbers or passwords to remember.
Pay later. – Try first, pay later. Klarna lets you have 14 days or more to decide if you want to keep your goods or not.
Slice it. – Get all your payments on one invoice and choose how much to pay each month.
As of today, Klarna has released all touchpoints that can be updated automatically, and over the coming months will continuously roll out “Smoooth” updates to the touchpoints of all merchants.
Submit your application to PitchIt, a competition for fintech startups, taking place at LendIt Europe–one of the largest international lending and fintech conferences in Europe. This exclusive programme will nurture emerging talent throughout the competition, provide selected finalists with unparalleled access to industry expertise as well as invaluable exposure, branding and more at the event.
The August edition of the PYMNTS.com Disbursements Tracker™, powered by Ingo Money, highlights several notable developments that explain the waning influence of the paper check, and how new disbursement tools could impact the workplace, pension systems and mobile payment options.
The August edition of the PYMNTS.com Disbursements Tracker™, powered by Ingo Money, highlights several notable developments that explain the waning influence of the paper check, and how new disbursement tools could impact the workplace, pension systems and mobile payment options.
Hike recently added a digital payments wallet to its app, allowing money transfers between customers using the country’s United Payments Interface (UPI) service. Skype is another messaging service helping users quickly send money to one another using popular payment option PayPal. The partnership between Skype and PayPal enables users to send money to fellow Skype users in 22 countries, including the U.S., Canada and more than a dozen nations in Europe, through PayPal in the Skype mobile app.
Australian businesses are turning to crowdfunding, peer-to-peer (P2P) lending and online loans for finance, according to new research from Businessloans.com.au. The Small Business Credit Survey, conducted by ACA Research, found that the most sought-after alternative funding source was equity finance (34%), followed closely by online lenders (30%) and P2P business loans(21%).
However, while small- to medium-sized enterprises (SMEs) are embracing alternative sources of capital, not all of them are receiving the loans they hope for. The survey revealed that while 84.1% of businesses were successful in their applications, less than half of those (38.9%) of those were approved for all of the credit they applied for.
It is interesting to note that the number of businesses which were declined a loan is only 1.6% of respondents. The remaining 14.3% of the “unsuccessful applicant” group was approved for less than half of the loan they had asked for. Over one-third of this group (35%) had applied for more than or equal to $250,000.
The survey found that a rejected application seriously affects a business. Respondents that did not receive the full amount applied for delayed or could not expand their businesses (34%), delayed or were not able to fulfil existing orders or contracts (27%) or did not hire new employees (17%).
Peer-to-peer lender RateSetter has accredited 2,000 brokers on its lending platform, amidst a rise in P2P popularity within the general public.
Lending volumes through the broker channel, especially in auto and home improvement loans, are doubling every six months, according to the lender’s most recent settlement figures.
Across the direct and broker channels, RateSetter has also passed $150m in lending facilitated since 2014. In the last five months alone, lending grew 50% across both channels, passing the $100m milestone in March.
The other “illustrative outcomes” are developing alternatives to banks and improving access to capital for MSMEs through ‘Peer to Peer Lending’ and ‘Crowd funding’, providing a credit rating mechanism for MSMEs to provide them easier access to funds, addressing the problem of inverted-duty structure and also balancing it against obligations under multilateral or bilateral trade agreements, studying the impact of automation on jobs and employment, ensuring minimal/zero waste from industrial activities and targeting certain sectors to radically cut emissions.
Dianrong and FinEX Asia today announced the launch of Asia’s first financial technology (fintech) asset management platform. FinEX Asia was established in 2017 to connect Asian investors with US consumer lending assets, such as credit card loans.
FinEX Asia combines its risk management expertise with Dianrong’s advanced fintech capabilities to give Asian investors access to a diverse and attractive portfolio of U.S. consumer lending assets. FinEX Asia’s fintech solutions offer advanced risk modeling capabilities, blockchain data security, performance monitoring, and secondary marketplace liquidity.
This seminar looks at the regulation of P2P lending in the US, People’s Republic of China, Japan, and the UK, and discusses how regulators can help develop P2P as a safe and effective source of financing for SMEs.
Top VC funds in Fintech in Argentina (TechFoliance), Rated: A
Currently, Argentina has four major investment funds that have Fintech companies within their portfolios.
Kaszek – Founded in 2011, it recently announced the release of a third fund of $200 million to be used for young technology throughout the region. To date, Kaszek has invested USD 1.4 billion in 43 companies, including Nubank, Brazil’s largest digital bank.
Canada’s largest bank has announced that its mobile banking app will soon provide users with “actual insights about our client’s financials and a fully automated savings solution that uses predictive technology to identify money in a client’s cash flow that can be automatically saved.”
Dubbed ‘NOMI Insights’ and ‘NOMI Find and Save,’ the services are currently in a pilot release. A full launch is expected later this fall.
IOU FINANCIAL INC. (“IOU” or “the Company”) (TSXV: IOU), a leading online lender to small businesses, announced today its results for the three and six month period ended June 30, 2017.
Loan originations for the second quarter ended June 30, 2017 were US$26.2 million versus originations of US$31.8 million for the same period last year. Loan originations decreased by 17.8% due to changes made to the Company’s lending policies in response to increased delinquency levels. We anticipate that these changes will have a positive impact on our loan portfolio over the course of 2017. For the first half of 2017, loan originations amounted to $48.2 million, representing a decrease of 15.7% over the origination of $57.1 million for the same period last year.
As of June 30, 2017, IOU’s total loans under management amounted to approximately $65.7 million as compared to $79.6 million in 2016. On June 30, 2017, the principal balance of the loan portfolio amounted to $41.6 million compared to $35.5 million in 2016. The increase is consistent with the Company’s strategy to retain more loans on its balance sheet. The principal balance of IOU’s servicing portfolio (loans being serviced on behalf of third-parties) amounted to approximately $24.1 millioncompared to $44.1 million in 2016.
IOU recorded gross revenue during the second quarter of $4.4 millionversus $3.5 million for the same period last year, representing a 24.5% increase. The increase in gross revenues was primarily driven by a 55.3% increase in interest income from $2.4 million in 2016 to $3.7 million in 2017, as a result of an increase in the size of the loan portfolio. For the six-month period ended June 30, 2017, gross revenues improved to $8.7 million compared to $6.8 million for the same period in 2016.
Interest expense during the three-month period ended June 30, 2017increased by 44.3% to $1.0 million, up from $0.7 million over the previous year. The increase is attributable to an increase in borrowings under the credit facility partially offset by a reduction in the cost of funds borrowed versus the previous year. For the six-month period ended June 30, 2017, interest expense amounted to $1.9 million compared to $1.3 million in 2016.
Provision for loan losses (net of recoveries) increased to $2.4 million for the three-month period ended June 30, 2017, up from $1.2 million for the previous year. The increase is primarily attributable to an increase in defaults by borrowers and partially due to an increase in the size of the loan portfolio. To improve loss performance, IOU Financial has made changes to its lending policies and deployed its next generation proprietary IOU Risk Logic Score. In addition, the Company has implemented certain process changes to improve its servicing and collections which includes an aggressive litigation process against businesses who intentionally default on their loan obligations. For the six-month period ended June 30, 2017, IOU recorded a provision for loan losses of $4.3 million compared to $2.0 million in 2016.
Excluding non-recurring costs, operating expenses decreased 18.1% to $2.5 million for the three-month period ended June 30, 2017 as compared to $3.1 million for the previous year. During the quarter ended September 30, 2016, the Company adopted a plan to reduce operating expenses. The Company is on track to achieve its target of quarterly operating costs of $2.0 million to $2.2 million on a normalized basis in the third quarter. In the second quarter, IOU recorded non-recurring costs of $0.5 million related to vendor contract cancellations and impairment of intangible assets. For the six-month period ended June 30, 2017, operating expenses amounted to $4.9 million, excluding non-recurring costs, compared to $6.0 million in 2016.
IOU closed its second quarter 2017 with a net loss of $2.1 million, or $0.03per share, compared to a net loss of $1.5 million or $0.02 per share during the same period of 2016. For the six-month period ended June 30, 2017, the net loss amounted to $3.1 million versus $2.8 million in 2016.
IOU closed its second quarter 2017 with an adjusted net loss of $1.3 million, which excludes certain non-cash and non-recurring items, compared to an adjusted net loss of $1.1 million in the second quarter of 2016. For the first half of 2017, the adjusted net loss was $1.9 millioncompared to an adjusted net loss of $1.6 million for the same period in 2016. Assuming the cost reduction plan was fully implemented on January 1, 2017, IOU’s pro forma adjusted net loss for the three-month and six-month period ended June 30, 2017 would have been approximately $0.8 million and $1.2 million, respectively.
The same quandary that now faces established banks stood before landline telecoms operators 15–20 years ago. In terms of fintech, it seems likely that the answer will become clear over the next few years, as different banks adopt different strategies.
Global consultancy Accenture calculates that fintech threatens more than a third of traditional banks’ revenue. Due to the march of technological innovation and the emergence of more attractive investment regimes, the challenge posed by fintech is only likely to grow.
Fintech is not just a threat to established banks but also to other companies in the financial services sector. Visa, for instance, is built on technology developed during a previous financial technology revolution, and should be able to capitalise on the fintech boom.
Other attempts to integrate the two worlds include PayDunya, an online payments system that allows African e-businesses to accept payments from credit and debit cards, as well as mobile money wallets. Similarly, Yoco provides retailers with an integrated card acceptance and point-of-sale solution, incorporating a mobile app, and either wireless or plug-in card reader.
Some established banks have sought to compete by becoming incubators for fintech. Standard Bank and Barclayshave both launched startup support programmes, with the most successful companies taken under their wing at the end of their periods of support.
News Comments Today’s main news: SoFi loses another senior executive. Prosper performance update for June 2017. Lending-Times listed as #3 P2P lending website. Zopa’s lent 2.46B GBP since March 2005. Zopa sees 35% rise in home improvement loan originations. Revolut partners with robo-advisor. Today’s main analysis: A closer look at Amazon’s lending business. Today’s thought-provoking articles: 5 ICO platforms in China. A […]
Sofi loses another senior executive. AT: “There’s no evidence executives are leaving due to problems with the company. They are likely leaving because their own personal reputations have risen along with the company’s. Having been instrumental in driving SoFi’s success, they are getting better offers and going out on their own. Remember, the same thing has been happening with Google employees for years. This is a sign of SoFi’s success and a boon to the entire fintech sector.”
Online finance startup SoFi has lost yet another senior executive, the company has confirmed. Chief revenue officer Michael Tannenbaum is the latest exec to leave, following a string of departures in the company’s senior ranks.
Tannenbaum joined SoFi as VP of finance in 2014, but quickly moved up the ranks over the last few years. After the company moved beyond its student loan refinancing business to also include mortgages, he took over that business.
Most recently, Tannenbaum served as CRO, where he was responsible for driving the company’s growth strategy across all of SoFi’s core lending products, including student loan refinancing, mortgages and personal loans.
Tannenbaum is reportedly looking to work on his own startup in the finance space, according to a person familiar with the matter.
Amazon (AMZN) has disbursed more than $1.0 billion in small business loans in the past 12 months, implying that the company has supplied about $2.5 billion in loans to sellers on its marketplace since it launched its credit business in 2011. These loans, in the range of $1,000 to $750,000, have gone to more than 20,000 sellers in the United States (SPY), the United Kingdom (EWU), and Japan (EWJ).
The consumer interest in low-cost or free shipping, as highlighted by the survey, could embolden Amazon to add even more perks to Prime to make it more attractive. Prime is vital to Amazon as it fends off competition from the likes of eBay (EBAY), Wal-Mart (WMT), and Target (TGT). According to research company Consumer Intelligence Research Partners, there are more than 80 million Prime subscribers in the United States (SPY).
About Blog – Lend Academy is the leading resource for people interested in peer to peer lending. Lend Academy has been bringing you all the news and information about peer to peer lending since 2010. Founded by Peter Renton, Lend Academy not only has the most active news site, but also the largest online forum and the first and most popular podcast in the industry.
Frequency – about 5 posts per week
About Blog – Daily News, Analysis and Data for the Alternative,Peer-to-peer (p2p) and Marketplace lending space. Lending Times provides daily News, Analisys and News Digest for the Peer to Peer and Alternative Lending industry. We also provide data for the industry.
Frequency – about 9 posts per week
U.S.-based platforms Wealthfront and Betterment are joining the green investing trend, giving users the option to invest in socially responsible companies.
The rivals are approaching the green investment options differently. Betterment is investing in ETFs that track socially responsible indexes. Wealthfront will allow users to invest directly in stocks and screen out four areas that might not match their socially conscious criteria, including fossil fuels, deforestation, tobacco and weapons.
Online lending has doubled in size every year since 2010, and the global marketplace lending space is expected to reach $290 billion by 2020, a 50 percent growth year-over-year, according to a Morgan Stanley report.
A SurveyMonkey study released this month found that millennials (defined as 18- to 34-year-olds) tend to adhere to traditional methods of banking. In fact, 80 percent of millennials surveyed say they want to be able to visit a brick-and-mortar bank branch, and more than half reported visiting a branch at least once in the last month. Even the most digitally connected generation in history values personal touch when it comes to financial transactions.
A panel convened by the Federal Reserve has established an ambitious new goal: By 2020, anyone with a bank account in the United States should be able to receive payments that are highly secure and delivered in something close to real time.
The three-year target is disclosed in the final report of a task force organized by the Fed two years ago.
Non-accredited investors have always had fewer investment options than accredited investors. That is starting to improve as some companies take advantage of a law called Regulation A+, created as part of the JOBS Act, to do offerings to the general public.
In this podcast you will learn:
The story behind the founding of Fundrise.
How the financial crisis shaped the way Ben thought about raising capital.
How Fundrise put together their investor deal before the JOBS Act.
Why the non-accredited investor is core to Fundrise’s mission.
How Fundrise has evolved since doing those early deals.
How their eREITs work.
The differences between a publicly traded REIT and a Fundrise eREIT.
How Fundrise sources their deals.
Details of their successful Reg A+ equity fundraise early in 2017.
Why Ben thinks Fundrise can be the Blackstone of the internet age.
Technology has undoubtedly created, destroyed and changed countless industries in the last 20 years.
The financial services has not been immune to this disruption. In 1980, there were approximately 5,500 people working on the floor of the New York Stock Exchange. Today, that number has dwindled to around 700.
In the United States, there are currently over 200 robo-advisors and more are launching every single day. In general, the fees associated with this new way of investment advice range from free to about 0.75 percent. There is normally not a minimum that is needed to start investing, unlike many financial advisors.
Fintech lender and asset manager Applied Data Finance (ADF) has signed a marketing agreement with iHeartMedia which will see ADF promote its online lender Personify Financialacross the iHeartMedia series of networks.
While revealing a “refresher” of its lending policies, UK-based peer-to-peer lender, Zopa, announced that as of July 20th it has lent £2.46 billion and is lending around £80m per month.
Zopa also noted that it believes diversification is a key tool for the individual investor risk mitigation. The lending platform notably spreads investments across multiple loans, starting in £10 chunks, so that no one borrower has more than 1% of the overall investment.
Lendinvest have issued a 5.25 percent ORB Retail Bond.
Hargreaves Landsdown have decided not to participate in the IPO so unless investors who use that platform set up an account elsewhere, e.g. Interactive Investor, it isn’t possible to buy at launch as the bond has to be in a nominee account.
A forthcoming paper in Law, Innovation and Technology laces payment innovations within a payment system. The payment system comprises the initiation of payments, transfer, as well as clearing and settlement. We argue that existing payment systems are defined by certain institutional tenets that serve commercial objectives, but, more importantly, deliver public goods and public interest objectives for users and policy-makers.
Three types of payment innovations have been hailed to have disruptive potential in recent developments. First, innovations in retail payment interfaces or options at point of sale, such as mobile or app payments, may displace the use of cash and cards. Second, virtual currencies, such as Bitcoin, may come to be accepted as legitimate forms of payment by merchants and businesses. Third, new ledger technologies, such as the distributed ledger or autonomous organisation technologies, may replace existing infrastructure in payment clearing and settlement systems.
If you are a start-up, or an SME, you know that money does not come easy. In the early days, you might need to tap up your savings, your family or even friends to get started. Even more established companies can fall between the cracks when it comes to bank loans or government funding. For all of these reasons, peer-to-peer lending was created.
A report has been released showing the barriers young entrants into farming face in today’s often uncertain times.
The report said that only 13% of farmers were under the age of 45 in 2015, but while fewer young people are entering the sector, their ideas are still needed to harness the technologies that can make farming an up-to-date industry.
Finance is seen as the biggest obstacle to growth; 28% are trying peer-to-peer lending and one fifth have tried crowd-funding to help with projects.
Recently there comes a wave of ICO (Initial Coin Offering) around the world. Many people are enthusiastic about the investment on ICO. So, here is the information of five well-known ICO platforms founded in China, which was collected by Nan Gongyuan, a famous Internet finance columnist as well as special commentator on Xing Ping She.
Founded time：In 2015
background：Affiliate ICO website of block chain media Babbitt
Registered Capital：$ 1,481,613 USD
Legal person：Zhi-Peng Liu（the well-known science fiction writer, Changjia, a consecutive Galaxy Award winner from 2006 to 2008.）
Location：Zhejiang, Hangzhou Province
Founded time：In 2017
background： Affiliate ICO website of Blockchain asset trading platform BTC9.COM
Registered Capital：$740,795 USD
Legal person：Liu Jingchao
Location：Nanchang, Jianfgxi Province
Founded time：In 2017
background：Affiliate ICO website of Shanghai Qukuai Information Technology co. LTD
Registered Capital：$ 17,996 USD
Legal person： Fu Xiaoqi
In China there are more than a billion consumers that are generally underserved across a broad spectrum of financial services, making for a diverse and exciting array of opportunities to address. Yet China is dominated by giants – institutions like Bank of China and technology firms like Alibaba –companies that have tens of thousands of employees and hundreds of millions of customers. The scale of the opportunity is enormous, and so is the size of the companies trying to address it.
When 90% of the world’s data were created in the last two years, it is obvious that our ability to create data has far outstripped our ability to measure and analyze it. This is why companies like ZhongAn (online insurance), Phoenix Finance (wealth management), Lexin (green finance), Wedai (car finance), Credit Karma (financial education), Upgrade (consumer lending in the US), and Lufax (consumer lending & wealth management in Asia) all tout AI/ML as a cornerstone of their strategies.
In the end, fintech is leading us to a more inclusive financial system, which is to say that financial services will be more accessible, more comprehensive, more affordable, and more sustainable.
At the FINTalks forum, held on July 17, 2017 at KPMG in Hong Kong, Renaud Laplache, co-founder and CEO of Upgrade, described online lending as a massive improvement over lending as offered by banks and traditional lenders. “Online lending generally helped lower costs by about 400-500 basis points – massive cost reductions coming from the ability to use technology to automate tasks that were manual at many banks and also to do away with the branch network – a very costly infrastructure,” he explained in simplified terms.
Klarna, the Swedish startup that works with e-commerce businesses and retailers to provide financing and other payment services, today announced that it has picked up yet another large investment, its third inside of two months. Permira, the private equity firm and prolific late-stage tech investor, has taken a minimum 10 percent stake in the fintech business. Klarna and Permira are not confirming the exact amount getting invested, or the valuation. But TechCrunch understands that it is more than $225 million, and the FT is reporting a value of $250 million.
Klarna the startup was last valued at $2.25 billion in 2015 and a source confirmed to us that this valuation has gone up as the business has grown. If a $250 million investment works out to 10 percent of its valuation, that would mean Klarna’s overall value has ticked up to $2.5 billion.
Added up, this means that Klarna has raised somewhere in the region of $500 million in the last 7 weeks.
App-based banking disruptor Revolut intends to partner with its first robo-advisor. A report in this morning’s Citywire suggests that Revolut has already partnered with ETFmatic to roll out its wealth offering. Revolut has confirmed that this is its intention.
Revolut, however, is yet to formally announce the ETFmatic partnership, and it is possible that the proposition that ultimately emerges will look somewhat different.
Bank of Finland reports that household debt grew five percent in May on the previous year, with so-called unsecured consumer credit, via international online credit providers and peer-to-peer lending services, up by 13 percent in the same period.
As the selection of loan alternatives grows, increasing numbers of Finnish consumers are now moving beyond traditional new home and housing cooperative loans to secure expensive consumer credit from sources that Finland’s central bank says are difficult to monitor.
Figures show that every fourth Finnish resident now holds some kind of consumer debt. Cars, trips abroad, boats and appliances are the most common purchases behind the loans.
The good news in this scenario is that regulators and credit ratings agencies agree that Finnish banks are very stable.
Shares of U.K. company Paysafe Group Plc — whose businesses include payments processing, digital wallets and money transfers — are trading at an all-time high after an approach from private-equity bidders Blackstone and CVC.
In December, Paysafe’s shares suffered a nasty blow because of fears about its exposure to China’s crackdown on gambling, although they recovered. This is not your run-of-the-mill Worldpay-style payments giant, even if that may be the goal of its prospective private equity buyers.
The rapid innovation in the financial technology, or FinTech vertical, shows no signs of slowing down. In the past year, global investments in FinTech increased 11 percent to a staggering 17.4 billion USD.
1. The Majority of Executives Are Worried
A recent report from Pricewaterhouse Cooper (PwC) revealed that a staggering 80 percent of executives globally feel their business is at risk due to the rate of innovation in the FinTech sphere.
2. Governments Are Getting Behind FinTech
Per KPMG’s recent report on the pulse of FinTech, governments worldwide are beginning to show visible support for innovation in financial technology. The UK, Australia, Singapore, Malaysia, and Thailand have all debuted sandbox programs for regulatory innovation.
3. Blockchain Is Predicted to Take Over in 2017
4. 30 Percent of Consumers Love FinTech
PwC reports that 30 percent of today’s customers plan to increase their use of nontraditional ways of payments, fund transfers, finance, loans, and saving.
5. Robot Bank Tellers May Not Be a Far-off Fantasy
Robo-Advice, Digital-Advice, Automated-Advice. Whatever you choose to call it, the appetite to access financial advice online is growing, and New Zealand’s legislation is yet to catch up.
The law is currently hindering the development of personalised robo-advice models in New Zealand, as it states financial advice must be given by a natural person.
The Financial Services Federation (FSF) has submitted in support of the Consultation Paper: proposed exemption to facilitate personalised robo-advice, which could accelerate the provision of personalised robo-advice services ahead of law reforms which aren’t likely to take effect until 2019.
There are an estimated 600 fintech operators in Australia. The industry is burgeoning and continues to attract new players, so receiving less than double-digit complaints in 16 months isn’t a bad track record.
“So the growth rate is quite phenomenal and there’s more to come. We know of at least another 20 to 30 that are yet to launch.”
With the Reserve Bank of India guidelines on peer-to-peer lending firms likely to be released in a few weeks, city-based companies are getting ready to increase their registered lenders. They are optimistic that demand for loans will rise significantly as the haze surrounding the lending platforms will be cleared.
For instance, city-based i-lend says there is loan demand of about Rs 500 crore in one year while another firm Oxyloans says there could be a demand for Rs 600 crore in the same time.
Another player, Oxyloans, has 1,300 users including 264 lenders and 1,000 plus borrowers. “We see a loan demand of Rs 600 crore and are hoping to achieve Rs 200 crore in six months or so,” said Radhakrishna Thatavarti, founder and chief executive officer of SRS Fintech Labs, which operates Oxyloans.
Private sector lender Axis Bank has selected three fintech startups from the first batch of its accelerator programme ‘Thought Factory’ whose solutions it will commercially deploy at its business units, it announced at an event in Bangalore on Friday.
Six startups, namely S2Pay, Pally, Perpule, FintechLabs, Paymatrix and Gieom graduated from the first batch. Axis Bank will collaborate with Pally, FintechLabs and Gieom for their tech solutions.
Using AI, Pally enables businesses in the financial domain to deliver better customer experiences. It has created a chatbot that creates an investment portfolio for tax savings when it is fed an image of a salary slip.
S2Pay’s solution forms a layer over any payments app and users can make secure payments from their mobile app, even when they are offline.
A Kalaari Capital-funded startup, Perpule allows users to scan products from their mobile app and pay from within the app once the list is complete.
Monsoon CreditTech Technologies Pvt Ltd, a fintech startup that has been in stealth mode till recently, has raised an undisclosed amount of funding from marquee investors, the startup said in its statement.
The investors include independent angel investors Sunil Kalra and Aditya Singh, former senior Microsoft executive Rishi Srivastava, and Google India’s Rajan Anandan, the statement added.
Ron Suber, perhaps the most prominent global Fintech Ambassador and President Emeritus of Prosper Marketplace, is on an extended swing across Asia visiting various platforms and presenting at events. Visiting with CNBC Asia this week, Suber explained how important transparency is for online lending and how both sides win: investor and borrower.
Mitrausaha Indonesia Group, a homegrown marketplace that provides peer-to-peer lending, introduced a new mobile application that will allow individual lenders to offer loans to small businesses using a crowdfunding scheme.
Mitrausaha, which flies the Modalku flagship, offers small and medium enterprises (SMEs) access to non-collateral loans with interest rates ranging from 12 percent to 26 percent.
Modalku had launched a mobile app in January called “Modalku Dana Usaha,” customized for prospective debtors looking to replenish their working capital. The app is available on Android and iOS.
Lenders can start investing with Rp 1 million ($75).
New individual lenders need to deposit Rp 10 million into their account before giving out loans.
Two years ago, the Securities Commission gave out licences to operate equity crowdfunding platforms and last November, it gave out the licences for peer-to-peer lending.
pitchIN, one of the six operators of the equity crowdfunding platforms, has raised the most among the operators since end-2015, raising more than a third of the RM16mil raised by issuers up until this June.
Funding for early stage start-ups has become much harder due to grants becoming bleaker and investors looking for quality deals.
Awareness remains an issue, with entrepreneurs who want to raise funds through either ECF or P2P lamenting the lack of awareness or understanding.
Throughout paradigm shifts, banks’ operations have changed dramatically. Many global lenders are now setting up branchless and digital operations as the way to go ― a move that is in stark contrast to the strategy they took over the past century.
According to a 1932 Federal Reserve report, the Bank of Italy had 25 offices by the end of 1919 and it rapidly increased to 292, 10 years later. Except for 40 branches in San Francisco, home to its headquarters, 252 were out-of-town branches, scattered literally all over California.
JPMorgan Chase is scaling down its branch networks, Citigroup is accelerating its move to transform into a digital bank globally and Wells Fargo is downsizing its branches so it can hire fewer employees and sit in a smaller space.
A CNN Money report said the number of the bank’s branches in the U.S. dropped by 10 percent to 4,789 as of the end of the second quarter of 2015.
Korea’s homegrown banks are also joining global giants’ moves.
According to six banks ― KB Kookmin, Shinhan, Woori, KEB Hana, NH NongHyup and Industrial Bank of Korea (IBK) ― the total number of their branches across the country declined to 5,493 at the end of May this year, down 442 from 5,953 at the end of the first quarter of 2013.
California-based mobile app marketing and retargetting platform Liftoff announced its official launch to the Japanese market today with the appointment of Country Manager Kota Amano, former Senior Director of Partner Development, APAC at Criteo.
In a press statement, Liftoff said that it has opened a data centre in Tokyo and is hiring a team of Sales and Customer Success Managers.
News Comments Today’s main news: OCC policy on exam treatment of violations goes into effect July 1. Comparisons of Zopa’s IFISA to others. RateSetter hits highest valuation. Seedrs, NatWest partner to offer alternative funding options. Zhong An seeks Hong Kong IPO. Today’s main analysis: Alternative Lending Market Analysis. International P2P lending volumes. Today’s thought-provoking articles: Under the hood of asset-level […]
Nutter Bank Report. AT: “I’m having trouble understanding how city interests violate a federal law. Also, the OCC’s new policy on exam treatment of violations goes into effect on July 1, 2017. Nutter’s comments on both issues are insightful.”
Crowdfunding needs better language to curb confusion. AT: “I have noticed that many terms are used interchangeably without a clear definition. It seems that industry insiders, regulators, and news agencies create their own definitions to fit the moment. It remains to be seen which terms will survive and whether there will ever been agreement about key terminology used to describe products and services in the crowdfunding ecosystem. Kathleen Minogue makes some good points.”
Supreme Court Rules That Cities Can Sue Lenders Under the Fair Housing Act
The U.S. Supreme Court has issued a decision that reaffirms the standing of municipalities to sue lenders, including banks, for certain discriminatory mortgage lending practices that violate the federal Fair Housing Act (“FHA”). The Court’s decision stated that this provision of the FHA “reflects a congressional intent to confer standing broadly,” and held that the city’s claimed injuries are within the FHA’s zone of interests. Click here for a copy of the Court’s decision.
Nutter Notes: Despite the Court’s ruling in favor of the city on the issue of standing, the Court’s ruling on the issue of proximate cause may make it more difficult in the future for cities to sue lenders for FHA violations.
OCC Issues Updated Guidance on Exam Treatment of Violations of Laws and Regulations
The updated policies and procedures direct OCC examiners to communicate violations to supervised institutions using a consistent format consisting of legal citation and description, a summary of relevant statutory or regulatory requirements, facts supporting the violation and root causes, corrective actions required, and board and management’s commitments to corrective action. The updated policies and procedures also emphasize the importance of timely and thorough follow-up and tracking of management’s corrective actions and related milestones. This policy will become effective on July 1, 2017. Click here for a copy of the OCC Bulletin.
Nutter Notes: Specifically, the OCC’s updated policy requires that examiners communicate all substantive violations to the bank in a report of examination (“ROE”) or supervisory letter, including substantive self-identified violations in certain circumstances. Examiners will be required to communicate less substantive OCC-identified violations in a separate written document if the examiners decide not to include them in an ROE or supervisory letter. The updated policy gives examiners discretion to determine whether less substantive, self-identified violations may be communicated separately. The OCC stated that it expects the bank’s board and management to take timely and effective correction of all violations regardless of how they are communicated. According to the updated policy, if management fails to correct a violation previously communicated in a separate written document by the OCC, the examiner should include the violation in the next ROE or supervisory letter. The updated policy also requires examiners to identify violations as “New,” “Self-identified,” or “Repeat,” as applicable.
Bloomberg published an article last week focusing on a recent auto loan securitization by Santander Consumer USA Holdings, where only 8% of loans in the ~$1Bn collateral pool had income verification on the borrower.
At Aspire Financial Technologies, we’re already believers in the power of loan level data to give Investors better visibility, understanding, and decisioning around huge volumes of consumer loans, having created the Aspire Gateway platform for Alternative and Marketplace Lending participants. In this sector, loan-level data is paramount to understanding and decisioning for Investors, and Banks providing credit facilities. So, when we learned of the new securitization ALD data files being made available this year, and a requirement from Investors to be able to consume this data, we saw an opportunity for our data engineers to clean, vet and normalize the XML (text-based) data files and load them into our infrastructure API, which is well-suited to accommodating loan level data. The result of this, was our release of the ALD Explorer in April. (Free access to the ALD Explorer is available here.)
Although our numbers differ from Moody’s as to the % of loans where income was verified (13% vs. 8%), we note a similar conclusion: the vast majority of ~90k loans had no income verification, and were given to low credit score borrowers (WAVG score = 559).
This is borne out through looking at another ALD Explorer report on a prime auto securitization: Ford Credit Auto Owner Trust 2017-A. This deal has less than 2% of the loans with income verification, but had a WAVG credit score of 740 (note that we have excluded in this table Credit Score Types that were either Commercial (9,437 occurrences) and Unknown/None (2,276 occurrences)).
In Part 1 of this series on How To Fix Crowdfunding Education, I made the case for beginning all crowdfunding education by teaching the core fundamental that cuts across all forms of crowdfunding: participation.
To begin, we need to be more careful in our use of the word “crowdfunding.”
Since the passing of the Title III equity crowdfunding rules in the U.S., many who write and speak about equity crowdfunding have stopped using the “equity” part of the phrase. Among other impacts, I’ve watched conversations on LinkedIn forums about rewards crowdfunding strike terror into the hearts of project creators as someone offhandedly introduces the terms “investor” and the “SEC” into the discussion of their campaigns. “Investor” is a particularly problematic word when it is used interchangeably to describe both the people who back rewards campaigns (often described as “investing in a creator’s ideas”) and investment in equity or debt offerings. Even the word “equity” itself is confusing since many securities are not actually equity, but debt. And “rewards” doesn’t come close to expressing the power of this kind of crowdfunding to galvanize communities around ideas.
Then there is the issue of jargon.
So if “online” is what distinguishes equity crowdfunding from an IPO (Initial Public Offering), does that mean online lending and online donation are crowdfunding, too? To add to our alphabet soup, there’s the DPO (Direct Public Offering) U.S. investment crowdfunding that predates the JOBS Act, and the CPO (Community Public Offering) the acronym used to describe intrastate crowdfunding offerings in Oregon. And then, there’s the “crowdfunding IPO” the term being floated about in publications the likes of The Wall Street Journal and Fortune to describe Spotify’s potential Direct Public Offering (DPO).
We need consistency in our language to build trust. Looking around the industry, there is language already in use that we could adopt and use consistently. For example, a recent Forbes article by Devin Thorpe was titled “Investment Crowdfunding: What Works And What Needs Fixing” rather than “equity crowdfunding.” By using the word “investment” or “crowdinvesting” instead of “equity” we can make a clear distinction that participants in this type of crowdfunding are investors, but that not all of these investments result in an equity stake in a business.
Omer Ismail, the chief operating officer of Marcus by Goldman Sachs, described the online lending business as “more casual” in an interview on the Lend Academy Podcast.
Ismail believes that some of that more relaxed, creative culture is beginning to find its way into other parts of Goldman Sachs.
“I was with the chief technology officer of Goldman and I went down to his office a couple of days ago and I noticed that now he has white walls so it’s actually really cool to see how folks at Marcus are actually influencing other parts of Goldman.”
The Consumer Financial Data Rights (CFDR), an industry group formed by leading companies in the financial sector to support the consumer’s right to access their financial data, has expanded its membership to now include 27 companies. Recent additions include ActiveHours, Clarity, DataCoup, Draft, LifeLock, Morningstar, NextCapital, Onist, Oportun, Petal, Quovo, SnapCheck, Vested, and WorldRemit.
The Token Fund is akin to a traditional market mutual, index, or hedge fund.
So this is a digital fund management group that is aiming to bring non-crypto savvy traders and investors into the digital market, while also providing a service to the veterans users and traders of crypto.
Disclaimer: This is a sponsored post and does not necessarily reflect the views of any employees of The Merkle.
Zopa, one of the major peer-to-peer lenders in the UK, has announced it will roll out its Innovative Finance ISA (IFISA) from 15 June offering returns of up to 6.1%.
The new Zopa Core deal will join Zopa Plus, while the Zopa Access (offering returns of up to 2.9%) and Zopa Classic (3.7%) deals will close by 1 December 2017.
Minimum Investment Amount*
Zopa Core IFISA
A*, A, B, C
Zopa Plus IFISA
A*, A, B, C, D, E
The new Zopa Core product will lend in the same risk markets (A*-C) as Access and Classic did, but, crucially – like Zopa Plus which launched in March 2017 – it will not be covered by the Safeguard fund.
Zopa says it’s scrapping Safeguard as tax laws have changed, allowing investors to claim tax relief from bad debts, so it’s no longer needed, plus it emphasises retiring Safeguard will provide greater expected returns and make products easier to understand.
Lending Works is Zopa’s closest rival with an IFISA option. It also allows investors to lend to individuals, but it expects lower returns of 3.3% over three years and 4.4% over five years, after fees and bad debts.
The Crowd for Angels IFISA for example offers returns of up to 9%. This crowdfunding platform raises cash for companies wanting to expand, diversify or develop their business through crowd bonds and shares.
Rivals in this space include the Crowd2fund IFISA , which can earn you 8.7%, the Crowdstacker IFISA offering rates between 5-7% and LendingCrowd IFISA offering 6% returns.
Peer-to-peer platforms in this market include Landlord Invest (offering rates of up to 12%), Relendex (10%) and Landbay (3.75%).
If you’re happy to take on more risk you could try Abundance, an ethical peer-to-peer platform raises money from investors for green energy projects.
RateSetter raised £13 million from existing shareholders, including Woodford Investment Management and Artemis on Tuesday. Since this round of funding, the London-based peer-to-peer lender announced that its valuation now exceeds £200 million. The investment formed its eighth fundraising round, and took RateSetter’s total amount raised in equity to £41.5 million.
Through the programme, the crowdfunding platform will be joining a panel of funders to provide alternative finance solutions to business and commercial customers of NatWest and RBS in the UK who are unable to access the financial support they need through traditional funding routes.
Seedrs is currently the only equity-based finance provider on the panel, which features other finance providers such as iwoca, Assetz Capital, Funding Circle, Royal Bank of Scotland Social & Community Capital and Together.
LendInvest Capital, a UK-based specialist real estate lender and fund manager, has announced that its flagship private debt fund, the Montello Real Estate Opportunity Fund, is now managing over £100 million ($128m) on behalf of private and institutional clients.
The Fund hit its three-year track record in January 2017 and surpassed the £100 million milestone at the end this past April, reported LendInvest, “the culmination of a very active year” during which the Fund more than doubled in size (up 113% from £47m AUM at 30 April 2016 to c. £100M AUM at 30 April 2017). The Fund also had a record quarter for fundraising between January and March of this year, receiving £30 million of new investment.
BASSET & GOLD is launching a new four-year bond backed by marketplace lending deals, with regular reinvestment of the interest stream set to deliver higher yields.
The new debt offering from the direct lending and alternative finance specialist will return a compounding fixed yield of 30.9 per cent at the end of the term, equivalent to an annual return of 7.72 per cent.
Quick, simple, jargon-free – the Finimize My Life plan seeks to sort your finances out, giving you sensible savings goals, investment options and easy plans to pay off debt.
As many as two-thirds of those aged 18 to 34 wish they had received more money advice at a younger age, according to research from Santander.
Do you think financial literacy remains a problem then?
Max:I do. We’ve done some research with YouGov and the results speak for themselves: 59 per cent of millennials could not confidently explain what an Isa is, 84 per cent couldn’t tell you what the term ‘equity’ means and 90 per cent couldn’t confidently explain what ‘asset management’ is.
Of the 1,000 people surveyed, 50 per cent were not confident explaining ANY of the financial terms listed in the survey.
Why do you think managing our personal finances has been hard for millennials?
Max:It is unsurprising that financial literacy levels are so low amongst my generation. We were never taught these terms in school and it can be daunting to try and plan your financial life when you feel in the dark about how the industry works.
Do millennials have money to save and invest?
Max: Yes. It comes down to confidence: of the millennials we surveyed, 52 per cent of those with between £10,000 and £24,999 of savings do not feel confident explaining what an Isa is.
How does it work?
Max: Once you’ve registered with Finimize you enter a few simple personal details.
These include your country of residence, age, salary, savings, passive income, spare income, whether you own a house (this is a yes or no question), if you have income protection and whether you have any bad debt such as credit cards or personal loans.
Once a user has provided the basic inputs, the platform generates a financial plan for someone like you.
HSBC has become the latest of the major banks to announce a low-cost online investment service that will use algorithms to match customers to an investment portfolio.
The service is aimed at those with less than £15,000 to invest, and the bank promised costs would be “far lower than industry standards”.
The services typically take customers through a questionnaire online to get a picture of their finances and determine how much risk they are willing to take, before advising which investments to put their money in.
NatWest launched its Invest service in February to its existing customers. The service offers five funds run by Coutts & Co, each with a different portion in stocks, bonds and cash. It charges investors 0.95pc on the first £500,000 they invest and then 0.7pc on any investments above that amount.
Barclays users pay 0.2pc on money held in funds and 0.1pc on all other investments, with a minimum fee of £4 a month and maximum of £125 per month. Fund and other investment trading costs £3 and £6 respectively if completed online.
Wellesley has entered a period of retrenchment as CFO Alasdair Lenman has departed the company after less than a year on the job. The Wellesley Group consists of Wellesley & Co Ltd, Wellesley Finance Plc and Wellesley Group Investors Ltd.
Stephen Bell, Wellesley’s Chief Risk Officer, updated on the performance of their loans including non-performing assets;
“The Wellesley loan book continues to evolve and now stands at 65 loans with combined committed facilities of £271 million. During 2016 the drawn balanced increased by 10% to £163.6 million which was made up of new loans and additional drawdowns on existing loans of £118.6 million.”
Zhong An Online Property and Casualty Insurance, China’s first online-only insurer, has resumed a plan to raise $1 billion or more in a Hong Kong initial public offering (IPO) in the second half of this year, said two people with knowledge of the matter.
Zhong An, whose major shareholders include Tencent Holdings Ltd (0700.HK) and Alibaba Group Holding Ltd (BABA.N) affiliate Ant Financial, plans to apply for listing in the coming weeks, said one of the people, who declined to be identified as the matter is confidential.
The Shanghai-based insurer chose Credit Suisse, JPMorgan and UBS in October to lead the IPO, but later suspended the plan to explore a mainland listing.
As of Dec 2016, CFPA Microfinance currently has branches in 229 counties and 18 provinces throughout China, and 85% of the branches are located in areas designated by the Central or Local Governments as poverty stricken counties.
As of Nov 2016, CFPA Microfinance has disbursed loans valued at RMB CNY 18.4 billion ($2.7 billion) to 1.61 million clients, with average loan size of CNY 11,000 ($1,620). 62% of all loans have been deployed for the purpose of raising livestock, breeding fish and farming and etc.
Approximately 3 million low-income villagers have received microloans from CFPA Microfinance for improving their livelihood and raising local production.
91% of all CFPA Microfinance clients are women
At least 80% of CFPA Microfinance clients would not have been able to borrow from anywhere else, according to a survey by the China Agriculture University and China Academy of Social Sciences
49 out of the 53 CFPA Microfinance operating outlets are in China’s Nationally Designated Poverty Countries, the poorest areas in the country.
Case study 2: Ant Financial
When it comes to poverty alleviation, Ant Financial chose CFPA Microfinance to partner with.
With the two parties cooperation in technology and channels, it is possible that when a farmer needs to borrow money, the lending decision would be made based on big data, rather than the information collected by loan officers.
Research shows that, by the measure of “digital financial inclusion index” created by Prof. Huang Yiping, the condition of underdeveloped areas in China in 2015 are relatively better off compared with five years ago.
Case study 3: CreditEase
CreditEase’s efforts in financial inclusion to reduce poverty can be best illustrated by the example of Yinongdai.
What Yinongdai does is that it helps to match “charitable lenders” with impoverished credible rural borrowers. To be more specific, “charitable lenders” can choose a farmer’s project and “donate” at least RMB 100 ($14.70), and lenders can get roughly 2% return annually.
For over the seven years, Yinongdai has collected over 200 million RMB ($29 million) from 150,000 lenders, and helped about 20,000 needy farmers, Tang Ning said in an interview in Apr 2017.
The shortage of financial services in China’s rural areas amounts to $ 447 billion. (Xing Ping She Email), Rated: A
According to data from Chinese Academy of Social Sciences, the market space of rural finance in China reached to $447 billion since 2014. With policy supports on rural finance and the maturing and saturation of the urban financial market, there comes up an attractive blue ocean market in rural finance.
In recent years, many participants have flooded into rural market, including traditional financial institutions, agriculture service providers, as well as e-commerce platform and internet finance companies, but few of them succeed.
Up to now, the traditional institutions such as rural credit cooperatives are still the main force to serve rural areas, however, it could not meet the capital needs of farmers’ production and livelihood.
Blockchain payments startup Wyre has acquired industry startup Remitsy in a cash and equity deal of an undisclosed amount.
According to CEO Michael Dunworth, it was Remitsy’s close proximity to China’s market that was the chief factor prompting the move. (Remitsy uses a combination of blockchain technology and banking relationships to convert user currencies for China-based users).
The Frankfurt-based Robo-Advisor Ginmon has now received the license from the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) for financial portfolio management pursuant to section 32 of the German Banking Act (KWG). Up to now, the digital asset management had only one permission for financial intermediaries according to §34f of the trade regulations.
Accountants referring clients to robo-advice tools need to be wary of licensing constraints.
We understand that a number of accountants who have chosen to operate without an AFS licence authorisation have entered into arrangements with digital financial advice providers (or “robo-advisers”) to allow their clients to access digital advice about SMSFs.
Under these arrangements, accountants refer their clients who need financial product advice (for example, about whether or not to establish an SMSF), to a digital advice tool which can provide that advice.
While digital advice providers might indicate that their tools can be used in such a way that unlicensed accountants who refer clients to the tools would not be providing financial services, this may not always be the case.
Homegrown e-commerce major Flipkart is mulling over providing financial products and services online, a segment that has seen tremendous growth in India in the last few years.
A dedicated team for financial services and products is already in place and lead product manager for fintech and consumer credit products at Flipkart, Monomita Roy Avasarala, has already initiated talks with online lending startups, the report said.
Flipkart would offer mutual funds and insurance products besides credit and loans, the publication reported citing undisclosed sources.
This is the only fintech startup from India to make it to the latest Launchpad batch. IndiaLends – like the name suggests – is a lending product.
It offers personal loans, free credit reports, home loans, and credit cards to consumers. You can check your loan eligibility using the IndiaLends app, which can also alert you when an EMI is due and help you manage and track all your credit accounts as well as monthly spending. IndiaLends uses artificial intelligence tech for credit rating, loan eligibility, and so on.
Bank Negara Malaysia, the central bank, on May 22 announced the merger of Malaysian Electronic Clearing Corporation (MyClear) and Malaysian Electronic Payment System (MEPS) to form Payments Network Malaysia or PayNet.
On May 5 DBS introduced its Smart Nation Ambassador Programme (SNAP). The programme will see DBS recruiting up to 1,000 ambassadors that will encourage small, cash-based merchants to adopt DBS PayLah! QR codes as a payment method in Singapore.
Bank of China Hong Kong and WeChat Pay Hong Kong announced a collaboration to promote mobile payments in Hong Kong, on May 19.
Swift introduced a new cross-border payments tracker that enables international payments to be traced in real-time on May 23.
Cash-heavy Japan aims to double digital payments to 40% in the next decade by helping metropolitan-area businesses afford cashless services to better attract foreign visitors and open their wallets.
The goal, set by the Financial Services Agency and the industry ministry, will be part of a plan to promote fintech, the intersection of finance and information technology, in a growth strategy to be compiled in June. The move is also a step toward better accommodating foreign tourists, with an eye toward the 2020 Tokyo Olympics.
Japan’s current 19% rate of cashless payments is less than half the over-50% level seen in nations including South Korea and China, but the targeted 40% rate would put it roughly on par with the U.S.
Broken down by industry, around 90% of Japan’s lodging facilities accept card payments, compared with roughly 70% of supermarkets and just half of taxis.
News Comments Today’s main news: SoFi raised new $105M fund.Landbay unveils March 2017 UK Rental Index.P2P-Banking launches IFISA comparison database.Personal loan applications surge in Australia. Today’s main analysis: Development of fintech in Hong Kong.Fintech startups in MENA raise $100M last decade. Today’s thought-provoking articles: OCC fintech plan uncertain as comptroller term expires.Goldman’s internal fintech revolution can’t […]
SoFi raises $105M fund. AT: “While $105 million is a drop in the bucket for SoFi, this represents a new channel for raising capital.”
OCC fintech plan uncertain as comptroller term expires. AT: “The Trump Administration is preparing for a showdown with Dems over the fate of CFPB and the proposed fintech charter. It’s clear that Curry’s fate is signed, but what isn’t clear yet is how long the president will allow him to keep his post before replacing him. It will be an interesting year.”
The tax implications of RECF. AT: “You know the usual disclosure. Taxes can get sticky, so consult your tax advisor for specific tax implications for your particular situation if you plan to invest in RECF.”
MortgageHippo raises $2.25M. AT: “Not a bad seed round, but I think new entrants to the mortgage technology sector will arise with bigger and better pools.”
Inside Bond Street’s conent marketing strategy. AT: “I’ve done content marketing since before it was called content marketing and I like that Bond Street is concerned first with building its brand. That’s what all marketing is about. Specifically, it’s online marketing chanels are to be commended. A blog is a near necessity, but you need a dedicated content producer to keep it up. An online magazine is one of the best branding tools for content marketing, and I like that Bond Street is pursuing that channel, though I have to say its design could use a little work. Podcasting is another content marketing tool that is gaining momentum. Again, hats off to Bond Street for focusing on content that isn’t all about them.”
SoFi, the online lending start-up sporting a lofty $4.3 billion valuation, has just raised a $105 million fund to give outside investors another way to buy into the company’s loans.
In a regulatory filing Monday afternoon, SoFi Prime Income Fund is listed as the issuer of equity in a limited partnership. According to the filing, the fund has 33 investors that put in a minimum of $500,000 each.
Nino Fanlo, SoFi’s chief financial officer, said the fund is the first of its kind for SoFi and provides another avenue to raise capital for issuing loans. Returns after fees are expected to be in the low double digits, he said.
As the term of Comptroller of the Currency Thomas Curry expires and with no replacement in sight, the OCC could be headed toward a showdown with Congress over the agency’s decision to issue special charters to fintech companies.
In March, the OCC published a draft supplement to its licensing manual, which contains existing regulations for chartering national banks.
And although Curry said the OCC will issue charters to fintech companies, his own future is in doubt. His term expired this month and President Trump has not nominated a replacement, although Joseph Otting, a former associate of Treasury Secretary Steven Mnuchin at OneWest Bank ,has been mentioned as a possible nominee.
Sens. Sherrod Brown (D-OH), ranking Democrat on the Senate Banking Committee and Jeff Merkley (D-OR) said earlier this year that authority to issue such charters must come from Congress.
Meanwhile, traditional banking and credit union trade groups are divided over the charter proposal.
Earlier this year, NAFCU said that the OCC must ensure that online lenders are subject to the same consumer protections and data standards as banks and credit unions.
The American Bankers Association has said it supports the concept of the OCC issuing fintech charters, but wanted it to ensure that companies meet the same standards as traditional banks.
Goldman Sachs’s internal technology revolution cannot come soon enough.
Goldman’s fledgling Main Street operation is a bright spot. With more than $115 billion in deposits, it’s already one of the top 25 banks in the United States by that measure. Marcus, as the online consumer-lending unit is called, is experiencing “demand more robust than we thought,” the unit’s boss, Harit Talwar, said recently.
Consumer lending can earn at least a 3 percent return on assets — triple what Goldman has been managing as a whole of late.
For now, lending through new web platforms remains a small industry, with just $40 billion of credit extended over a decade, according to Deloitte.
Texas-based Elevate Credit (NYSE: ELVT), which recently held its IPO at the exchange, exists because of what it sees as an opportunity in the financial services market.
In between are working people, roughly 170 million residents of the U.S. and the U.K., whom Elevate refers to as “the New Middle Class.” These are people with low or no credit scores, who often have to resort to non-prime lenders in moments of personal or medical emergency.
Elevate offers three products. The first, called Rise, is an unsecured, online loan vehicle; Sunny is its U.K. counterpart, and Elastic is a line of credit issued by Kentucky-based Republic Bank, Member FDIC. While the company’s customers have credit scores typically in the 560 to 600 range, those with lower credit or no credit can also be approved, depending on what Elevate’s data analysis reveals about their reliability.
Elevate’s analytics platform, DORA, is home grown. It’s based on open-source software tools that enable model development and risk analytics. DORA inputs and outputs are monitored and evaluated to help ensure legal and regulatory compliance. Elevate’s IQ platform deploys business logic and algorithms. And driving the analytics and decision-making technology is the very human decision to create specific data sets, generated from sources that monitor non-prime customers.
The platforms draw on more than 10 different sources of consumer information, including the big three credit bureaus as well as other bureaus that specialize in non-prime customers. In addition, Elevate acquires data from LexisNexis, ID Analytics and other unique data sources to validate the applicant’s identity and to draw inferences about the applicant’s intent to repay. Elevate uses this data in ongoing tests to optimize its underwriting, to ensure that fraud and serious credit risks are more easily distinguished from acceptable risks.
In the last year, Elevate’s charge-off rates have remained steady, while its customer acquisition costs have dropped, says Rees.
Elevate also uses its nimble, data-driven underwriting model to reward its best customers. Borrowers who establish a history of on-time repayment, and who take advantage of online financial literacy tools and videos, will see their APRs drop over time. Currently, the most responsible Elevate customers pay APRs as low as 36 percent.
When OnDeck completed its IPO in 2009, it entered the public markets with a massive amount of buzz, ending the day with a share price north of $20 dollars and a valuation around $1.9 billion.
Two years out, and the banks’ lunch remains uneaten — because those alternative lenders like OnDeck have had a rather bumpy two years. OnDeck’s share price is down 75 percent since its 2014 IPO — in the last 12 months the firm has shed 37 percent of its value.
Today OnDeck’s market cap stands at $330 million.
Marathon Partners Equity Management, LLC has owned 1.75 percent of OnDeck since the end of 2016 — and the activist investor is now pushing for a new direction, preferably one that involves a sale.
That letter apparently did not get quiet enough of a reaction from the board — OnDeck’s official response was that they “value dialog with their shareholders,” and so as of the end of last week, the campaign ramped up.
Whether or not very drastic changes are coming soon to OnDeck remains to be seen — the annual meeting for shareholders will likely be spirited.
Public comments are now available from companies, regulators, advocacy groups and individuals weighing in on the Office of the Comptroller of the Currency’s licensing manual draft supplement for special purpose national bank charters.
The OCC received only 17 total comments on its March 15 supplement for evaluating bank charter applications from financial technology companies, far from the 120 it received on the broader whitepaper Exploring Special Purpose National Bank Charters for Fintech Companies, which introduced the idea of the OCC granting fintech companies these bank charters back in December 2016.
“While many states have made admirable efforts to align their regulations with technological innovation, state laws by and large were drafted for a physical branch banking environment that did not envision online delivery of financial services,” wrote Robert Lavet, general counsel of San Francisco-based personal finance company Social Finance, or SoFi, in his comments to the OCC.
In her comments, personal lending company Oportun Inc.’s chief compliance officer Joan Aristei voiced no concerns with the financial inclusion standards. She wrote the guidance on this type of plan will “inform our discussions regarding how we can modify and enhance the efforts we have already undertaken,” adding that she “appreciates the OCC’s willingness to innovate and look beyond traditional measures of financial inclusion.”
New York State Department of Financial Services superintendent Maria Vullo called the OCC’s proposal for fintech charters a “hasty and misguided effort.” She said that regulation for the financial technology providers is better left to the states, not the OCC.
The first thing to understand is that an equity investor in a syndication is actually a partner in partnership. Investments in syndications will generally be considered “passive” activities.
When combining all passive activities, if the investor has a net passive loss, then the remaining net loss is effectively “suspended” whereby they are carried forward to future years and subject again to the passive activity rules. If an investor has passive income then that is taxed at the taxpayer’s marginal tax rate.
In the subsequent tax year, any passive losses that carried over can offset passive income that is generated.
Crowdfunding syndications offer one additional special tax advantage and that is favorable long-term capital gains rates. When a property (apartment building, retail center, etc.) is acquired through a syndication and is held for longer than one year, the sale of the property would typically result in long-term capital gains. These gains are taxed at a rate of 15% (with certain exceptions). Any depreciation that was deducted on the property would be subject to tax rates not to exceed 25%.
MortgageHippo, a mortgage-technology startup based in Chicago, has raised about $2.25 million in seed funding, the company announced Tuesday.
CMFG Ventures, based in Madison, Wis., led the $1.5 million round that closed last week, Saportas said. CMFG is the venture capital arm of CUNA Mutual Group, which sells insurance and investment products to credit unions. The investment closed MortgageHippo’s seed funding.
Jones said the company is “passionate about building a brand,” which it does by creating editorial content. It has a blog that profiles business owners Bond Street serves across the country, like the guys behind the Two Hands cafes and restaurants or the women that launched Sky Ting Yoga in New York City; and an online magazine that looks at the cultural and economic impact of independent businesses in New York (celebrity restaurateur Daniel Boulud and artist Baron von Fancy are among many interviews that address the importance of supporting local businesses). It also has a podcast called the Nitty Gritty that features the entrepreneurs behind brands like Sweetgreen, charity:water, McNally Jackson and Smitten Ice Cream; and a series of city-specific resources for female entrepreneurs.
Jones declined to share Bond Street’s annual content marketing budget, but said the company has two dedicated employees working on content marketing, out of about 40 total employees.
Marketing has become expensive for online lenders because of the high cost of customer acquisition. Partnerships are an easy way to bring that cost down, Benton said. To date, Bond Street has partnered with WeWork to offer loans to member companies of the co-working space company; SMB-focused software companies like Booker and Front Desk to offer their clients discounted loans; and most recently, with NerdWallet, the comparison shopping site for credit cards and other financial services, to help provide small business owners with financing options.
Payixand Nortridge Software Announce Strategic Alliance (BusinessWire), Rated: B
Payix® and Nortridge Software announce they have formed a strategic alliance to help lenders connect with their borrowers and improve their ability to collect payments. The alliance allows Payix to offer real-time integration between its suite of collections tools and the Nortridge Loan System (NLS).
Payix’s collections tools include its intuitive, engaging and affordable mobile collections application, as well as web, interactive voice response (IVR), text, and collector portal applications. Nortridge clients can add the Payix solutions to their existing collections tools with virtually no IT work on their part and in just a few weeks’ time.
The Nortridge and Payix teams collaborated in the development of the seamless web services interface between the Nortridge Loan System and the Payix payment system, ensuring that transactions could be carried out in real-time and without interruption.
Payix’s collections tools are white-labelled to help lenders promote their own brands with their borrowers, and they were specifically designed for any size lender to use easily and affordably.
In late March, 2017 we learned that Chinese online lender China Rapid Financefiled to go public, hoping to raise up to $100 million. They will list on the New York Stock Exchange under the ticker symbol XRF and will be the second Chinese online lender to go public in the United States.
RealtyShares, a leading online marketplace for real estate investing, today announced that its network of accredited investors has collectively funded a $3 million investment for the acquisition of Clarendon Park Apartments, a 138-unit multifamily property in Phoenix, Ariz.
The deal is sponsored by Rincon Partners, an Arizona-based owner and operator of multifamily properties focused primarily on the Southwestern United States. Rincon Partners intends to use the funds to rehabilitate and modernize the apartment interiors and amenities to potentially improve its position within the market.
The property is located in midtown Phoenix, between the city’s two largest employment corridors and close to shops, restaurants and newly developed amenities. The property itself features a swimming pool, spa, clubhouse and fitness center, as well as access to light rail within two blocks.
Last week, UK-based peer-to-peer lending platform Landbay released the March 2017 Rental Index. This report reveals details about the country’s rental market.
“Since March 2016, average rents in the UK have risen by 0.9% to £1,191. In England, rents were up 0.87% to £1,222; in Northern Ireland, they rose by 0.07% to £557; meanwhile in Scotland rents rose to £723 following annual growth of 1.25% and in Wales, the average rent is up 1.41% to £636. Average rents for one, two and three-bed properties hit £1,012, £1,152 and £1,321 respectively in March 2017.”
P2P-Banking launches a new IFISA database, that enables investors an easy comparison of offers by IFISA providers. UK taxpayers can invest up to 20,000 GBP per year tax-free in ISAs. This amount is per tax year, so a person could invest 20,000 GBP this tax year and invest 20,000 GBP in a different ISA next year. The Innovative Finance ISA, short IFISA, was introduced in 2016 with most offers becoming approved by HRMC only in the 2017/2018 tax year.
The new database of IFISA offers allows speedy selection and sorting to review IFISA products by different providers and then links to the provider’s website for in detail information. Investors can filter by interest rate, term, loan type, minimum investment amount, possibility of transfers in and out, flexible IFISA, bonus & cashback promotions and several other criteria.
Starling Bank is partnering with app-based wealth manager Moneybox for real-time savings.
Moneybox’s savings and investment services will be now offered by digital-only bank Starling to enable customers to easily open ISAs and round up their spending in real time.
The service will be available to Starling customers as early as the end of April.
The new service is made possible through Starling’s open APIs. The integration has two distinct features. Firstly, it allows customer data to be securely shared between the two apps, meaning transactions will appear within the Moneybox app in real time as customers spend.
Secondly, the integration with Starling means that customers will be able to set up round ups from their Starling account in a matter of seconds.
Starling Bank publicly launched its API and developer platform to enable external developers and technology companies to integrate with the banking app earlier in April, and Moneybox is the first to launch a live integration on this API.
In response to growing demand from investors in search of better investment returns for their pensions, UK P2P service provider BondMason has launched a new Self-Invested Personal Pension (SIPP) service.
The new SIPP service offers a flexible, tax-efficient way to save for retirement and allows investors to access returns from a diverse set of approved P2P Lending opportunities. Investors can open with a lump sum from £5,000 and there is no tie-in – an investor can typically exit in full within 48 hours. The service also aims to allow SIPP administrators to easily and compliantly grant their clients access to returns from P2P Lending.
THE FOUNDER of ThinCats has said that the regulator’s clampdown on wholesale lending will affect projects that can be funded through his social peer-to-peer lending platform Community Chest.
Kevin Caley (pictured) launched the social enterprise last year and it funded its first loan in February 2017 for £130,000. The debt facility went to a local Birmingham finance company called ART Business Loans, which supports West Midlands enterprises.
But Caley says the Financial Conduct Authority (FCA)’s tighter restrictions on wholesale lending mean that loans like these will no longer be possible, as the money was lent to another lender.
A well kept secret of the UK B2B banking sector, is now public. Clear Bank, a clearing Bank in the UK, is ready to compete with the four UK clearing banks,
Royal Bank of Scotland (RBS).
Clear Bank is the fifth UK clearing bank and the only one that is pure B2B since it does not offer services direct to the consumer.
Back in the 60s there were 16 clearing banks in the UK. Consolidation in this part of transactional banking has left the UK currently with 4 clearing banks that process over 80 Trillion pounds annually worth of payments in the UK.
Clear Bank will be helping Challenger banks to access the payment system at the Bank of England level, at the same level as incumbents.
Clear Bank will help the 44 UK Building societies offer current account services in a cost effective way. Right now, only 2 out of the 44 offer such capabilities to their members due to prohibitive costs.
Clear Bank will boost indirectly retail banking by reducing the substantially processing costs, which will facilitate competition for incumbents in the UK.
Clear Bank will help Fintechs by providing Banking as a service through the Cloud at a very low cost. Clear Bank will be offering an API so that Fintechs can interconnect to the ClearBank Fabric.
According to Venture Beat, U.K.-based startups raised $1.04 billion in venture capital (VC) during the first three months of 2017. That’s a slight decrease from the $1.17 billion raised during same period one year ago, but it’s above the amounts raised in each of the last three quarters.
The U.K. remains number one in Europe for VC raised, with Germany second at $779 million and France third at $665 million.
Peer-to-peer lending service Funding Circle helped push the U.K. into the number one spot, raising $97 million in VC funding and $43 million in debt funding during the first three months of 2017.
The fintech — financial technology — sector has emerged rapidly over the last decade. The Confederation of British Industry expects it to be worth £300bn in the UK alone by 2020.
Given Neil Woodford’s long-prevailing dislike of the big banks, it’s perhaps not surprising that he’s attracted by the relatively simple business models and exciting investment opportunities in the fintech sector.
Woodford is invested in some unquoted fintech companies, such as RateSetter, a peer-to-peer lending platform, and Seedrs, which opens up venture capitalism “to anyone with an internet connection”. However, he also has two holdings that are listed on the stock market — and very interesting they are too.
P2P Global Investments(LSE: P2P) is a FTSE 250 firm with a market cap of around £700m.
VPC Specialty Lending Investments(LSE: VSL) is in the FTSE SmallCap index but is a decent-sized company with a market cap of around £290m. Its business is similar to P2P’s and like the FTSE 250 firm, considerable quantities of cash flow into shareholders’ pockets.
Guarantor lender George Banco has appointed the co-founder of peer-to-peer platform RateSetter as a non-executive director.
Peter Behrens (pictured above) – who also serves as the chief operating officer at RateSetter – co-founded the platform in 2010, and has seen more than £1.8bn of loans facilitated through the company in this time.
Alternative funding options will be a major theme at Business, Innovation, Technology and Efficiency (BITE) 2017 hosted by MHA Carpenter Box at the Amex Stadium, Brighton on Thursday 27 April.
Andy Davis (pictured), former editor of FT Weekend and author of the ‘Beyond the Banks’ report on alternative finance, will be one of the industry experts forming an ‘alternative funding panel’ at the free one-day conference, where he will share his expertise with local business leaders.
The impact on fintech could be significant, as an Emerging Payments Association (EPA) report Passport to the Future makes clear: “HM Treasury estimates the UK fintech market employs 60,000 people and is worth £6bn to the UK economy. Fintech is part of the UK’s financial services sector that employs 1.9 million people and contributes 10 per cent of the UK’s GDP. Payments represents over 40 per cent of financial services in revenue terms and in 2016, 40 per cent of all fintech investments were in payments companies, amounting to £10bn globally.”
In a recent survey of its members, the EPA found that 88 per cent of its members think that passporting rights are important or very important to their current businesses, while over 91 per cent think passporting is important or very important to the UK’s fintech sector and its continued growth.
As the EPA’s report states: “This could see the flight of some or part of the 5,500 licensed companies abroad and have a significantly negative impact on the UK economy.”
Latvia based Alfa Finance Group has launched a new peer to peer lending platform named DoFinance. The company stated it had invested €2 million to get the P2P lender up and running. The online lender is said to be available in all EU and EEA countries.
Simplex Inc., one of Asia’s leading financial services technology firms, announced a strategic partnership with Risk Magazine’s FinTech start-up of the year, Beacon Platform, Inc.
The partnership combines Simplex’s expertise in implementing trading and risk management solutions with Beacon’s experience in building cross-asset trading and risk management platforms for industry leaders including Goldman Sachs, JP Morgan and Bank of America Merrill Lynch.
Australians are shunning high interest credit cards and turning to personal loans for large purchases.
Driving the switch are tech-savvy consumers taking up loans from peer-to-peer (P2P) lenders, a new breed of online competitors to banks.
Credit card applications fell by almost 4 per cent in the March 2017 quarter compared with the same quarter last year, the latest report on consumer credit by credit bureau Equifax shows. That’s the biggest fall since September 2012 quarter.
Reserve Bank figures suggest that more frequent but lower value transactions are being made on credit cards.
One P2P lender is showing an interest rate on its website of 10.3 per cent on a $10,000 unsecured personal loan paid back over three years.
Banks would typically charge 13.02 per cent for a loan on the same terms, while credit cards are higher still – typically 14.15 per cent for a non-rewards credit card and 19.6 per cent for a rewards card, plus annual fees.
This paper provides an update on the local financial technologies (Fintech) landscape and measures to support the development of the industry.
The number of Fintech start-ups operating in co-working spaces and incubator/accelerator programmes in Hong Kong increased by 60% between August 2015 (86) and August 2016 (138), according to Invest Hong Kong (InvestHK)’s Start-up Profiling Survey.
Hong Kong attracted about US$400 million of venture capital (VC) investment in Fintech companies during 2014-2016, lower than the Mainland and India (both of which are economies with huge domestic markets) but ahead of regional peers such as Australia, Japan and Singapore1 .
Universities such as The Chinese University of Hong Kong and The Hong Kong Polytechnic University will launch dedicated, publicly-funded firstyear first-degree and senior year programmes in Fintech starting from the 2017/18 academic year. Moreover, The University of Hong Kong’s School of Professional and Continuing Education has been offering a part-time, four-month programme, Executive Certificate in Internet Finance.
For payment services, the general public is increasingly receptive to new products and services, as Stored Value Facility (SVF) operators are launching new services while banks are rolling out new payment services (such as a note-issuing bank’s mobile App which enables cross-bank P2P fund transfer through mobile messaging). Building on the momentum from the introduction and development of various new payment channels in the market, the Government will strive to provide more convenient means for settling government bills and fees, such as making on-line credit card payment through digital wallets in mobile phones. HKMA will also work with the Government to explore with the industry ways of improving the payment infrastructure (such as introducing the Faster Payment System in 2018) and encouraging more standardisation in payment applications across various services providers, including the use of QR codes in streamlining the payment process, and facilitating the development of new electronic and mobile payment channels by the Government for various government services.
Dallas based MoneyGram (NASDAQ:MGI), a global provider of money transfer services, has become quite popular. This past January, Alibaba’s Ant Financial subsidiary announced it had offered the firm $13.25 per share to acquire the company. The two companies had entered into a definitive agreement to merge. Today, it appears that agreement was not quite as definitive as thought as Ant Financial has now increased the share offer to $18/share.
Last night, MoneyGram and Ant Financial announced they had updated the agreement in an effort to fend off a competing bid by Kansas based Euronet Worldwide.
Chinese peer-to-peer lending platform, Dianrong, announced on Tuesday the following financial leadership changes, effective immediately: Xuxia Kuang, the lender’s CFO, has been named COO. Yawen Cui has joined Dianrong as the new CFO. Kuang and Cui will report to Dianrong founder and CEO Soul Htite.
Fintech startups in the Middle East and North Africa have raised $100-million over the last decade, yet 28% fail in their initial years, says a new report by business support organisation Wamda and online payment gateway Payfort.
The region was home to 105 fintech startups by the end of 2015 (see featured image), with half of these having been launched since 2012. In all 30 firms are situated in North Africa. The UAE leads with 30 fintech startups, followed by Egypt with 17 and Jordan and Lebanon with 15 each.
Just 10% of fintech startups in the region account for 43% of investments and employ 55% of the 1600 employees in the sector.
“The vast majority of the South African market activity – $13,8m – came from peer-to-peer consumer and business lending, with the remaining $1.2 million spread across microfinance, donation-based and reward-based crowdfunding,” according to a report published by the Cambridge Centre for Alternative Funding.
In order to reap the benefits of crowdfunding, it’s important to launch a great campaign. Patrick Schofield, CEO and founder of Thundafund, a crowdfunding platform that has helped several companies start or expand, says there are several things you can do to increase the chances of success for your business.
“Spend as much time on pre-campaigning planning as you would on your actual campaign. If you’re thinking of [running a campaign] for up to 45 days spend, 45 five days getting your ducks in a row,” he says.
Approaching journalists and key influencers will get you enough people who can make noise about what you’re doing.
In an alternative funding benchmarking report by the UK’s Cambridge Centre for Alternative Finance, published last month, South Africa was identified as the potential leader in the growth of online and peer-to-peer lending models in Africa.
In 2015 South Africa represented 18% of the total African online alternative finance market, raising more than $15-million. Kenya was the only African country ahead of it, with $16.7-million raised. South Africa’s online alternative finance market focused more on business activity and less on charitable causes.
Local IT firm Khonology has partnered with the UK’s White Label Crowdfunding to develop bespoke crowdfunding platforms for entrepreneurs here.