Ever since the concept of alternative lending took hold in 2013, proponents have made substantive claims of what alternative data could achieve by bringing disadvantaged consumers into the lending economy. At the time, however, traditional models such as FICO and Vantage were the status quo. While recent versions of these scoring models now incorporate alternative […]
Ever since the concept of alternative lending took hold in 2013, proponents have made substantive claims of what alternative data could achieve by bringing disadvantaged consumers into the lending economy. At the time, however, traditional models such as FICO and Vantage were the status quo. While recent versions of these scoring models now incorporate alternative data and provide some insight into consumers without complete credit files, acquiring this data has remained a challenge both for lenders and the credit bureaus.
Today, an estimated 45 to 60 million consumers lack the credit history needed to generate reliable credit scores under the current system, and millions more don’t have access to affordable credit because of low scores, according to FinRegLab, a nonprofit research organization.
But now, alternative lending is on the cusp of widespread adoption by lenders. In fact, some lenders are already considering alternative data, such as records of consumer payments from telecoms and utilities, in their decision to extend credit. And there’s solid evidence that alternative lending works. Research from McKinsey found that new alternative data models reduced credit losses in lower-income segments by 20 to 50%, while doubling application approval rates.
According to Accenture, bringing underbanked adults and small businesses into the formal banking sector could generate approximately $380 billion in new revenue. Equifax estimates that more than 91 million consumers in the U.S. alone are thin-file or no-file. About 22 million of those consumers currently qualify only for subprime credit offers, but that can change, with new data sources to inform risk models and the growth of alternative lending options.
Perhaps the best news is that lenders are embracing alternative lending after learning that they can bring disadvantaged consumers into their customer bases without increasing the risk of loan defaults. Those include thin-file or no-file consumers, such as:
Seniors who are unscorable, particularly widowed or divorced adults. Many have relied on lines of credit in their partner’s names for most of their lives, leaving them with a lack of credit history and a sudden lack of credit access.
Immigrants, who can present a conundrum to lenders, as their credit data does not immigrate with them. Lenders are left to make assumptions about credit history, and often the safer decision has been to exclude or decline the individual.
Minority groups, who today are disproportionately underserved. According to a LexisNexis study, 41% of Hispanics and African Americans were unscorable using traditional methods, compared to only 24% of the general population.
Millennials tend to rely on credit less frequently and a significant portion prefers debit cards. This leads to thin credit files and “hidden” financial transactions that do not help boost credit scores.
Here is another proof point that alternative lending has arrived: Adding utility payment data into VantageScore’s credit scoreincreased approval ratesfor low-income adults, African-Americans, and Hispanics by more than 20% – without overextending credit.
Alternative data has become the Holy Grail for lenders because they can increase the size and improve the quality of their approvable populations. But, even with mountains of evidence of the viability of alternative lending, it may be that only the word of regulators has the power to move alternative lending from trend to a sustainable mainstream industry practice.
On Dec. 3, 2019, regulators backed the use of alternative data, such as borrowers’ cash flow, as an alternative to the traditional credit-evaluation system, which relies on applicants’ history of borrowing and repayments. Alternative data “may help firms evaluate the creditworthiness of consumers who currently may not obtain credit in the mainstream credit system,” the regulators said in a written statement. “To the extent, firms are using or contemplating using alternative data, the agencies encourage responsible use of such data.”
Now, with increasing adoption of alternative data by lenders, there comes word that “innovative” new options in lending will gain momentum. According to researchers, “It [alternative lending] has already gained momentum in developed countries. The growing significance of innovative lending practices is foreseen to put a positive impact on the growth of the global alternative lending market. Demand for peer-to-peer (P2P) marketplace lending and crowdfunding, in particular, is expected to increase in the near future. This could play a crucial role in the development of the global market.”
As always, the proof is in the numbers. In a recent report of more than 300 lenders by TransUnion, the agency said that “83% of adopters using alternative data to score credit applications report seeing tangible benefits.”
It’s been said that the best test of an innovation is to observe its acceptance and performance in the marketplace. By that measure, alternative lending has been thoroughly tested and is here to stay.
News Comments Today’s main news: SoFi gets BitLicense in New York. Funding Circle unveils 250M GBP securitization of SME loans. Zopa raises 1.4M GBP. RateSetter to close family finance product. RMBS gears up for securitization windfall. Reserve Bank of India raises P2P lending limit by 5x. Today’s main analysis: Prosper performance update – October 2019. […]
New York State Department of Financial Services (NYDFS) has approved SoFi’s BitLicense application, allowing SoFi Invest customers in New York to trade cryptocurrencies on its platform through SoFi Digital Assets, LLC.
Through the use of artificial intelligence, Upstart examines approximately 1,600 variables pertaining to loan applicants, says CFO Sanjay Datta. But he doesn’t like to draw attention to the artificial intelligence per se.
In a Nov. 8 report, Kroll rated the performances of five loan securitizations, worth a cumulative $1.5 billion, that Upstart offered from mid-2017 through early this year. Each one has significantly outperformed Kroll’s forecast at the time of the deal.
Kroll predicted that Upstart’s first securitization, dated June 21, 2017, would experience 13.07% credit losses by October 2019. But the actual losses were only 9.96%, 24% better than forecast.
Kabbage placed Vermont at the third-highest in the nation at 173.90 on the Kabbage Index Value, based on monthly median-revenue growth for small businesses.
The Kabbage Index Value (KIV), a value used to track revenue growth of small businesses, increased almost 22 points, from 136.8 to 158.4 points, indicating U.S. small businesses’ median revenue grew 15.7% in the first six months of the year. This represents a 22% increase compared to the same time period in 2018 and a large contrast from the second half of 2018 when small business revenue only grew 1.8 percent.
StreetShares quietly discontinued a major part of its financing business on November 15, a new disclosure filed with the SEC revealed.
The company has only facilitated $180 million in funding to small businesses since inception in 2014. That would indicate that the invoice factoring portion was roughly half of the company’s funding volume.
Monzo has hired a Visa executive — who was previously with Standard Chartered — to lead its US business as it ramps up efforts to become a fully-fledged bank in the country even though complex rules have deterred some rivals, according to the FT.
Innovation in online lending has shifted consumers away from traditional payday lenders. And while that’s a safer bet, the shift has also sparked a misguided policy conversation around online lending that is focused on the wrong thing: capping interest rates.
Consumers with spotty or no credit histories might find it easier to get loans after federal banking regulators endorsed alternatives to traditional methods of assessing creditworthiness.
The regulators on Tuesday backed the use of information such as borrowers’ cash flow as an alternative to the traditional credit-evaluation system, which relies on scores issued by companies such as Equifax Inc. and Experian PLC based on applicants’ past history of borrowing and repayments.
Fintech lenders were supposed to be the next big thing in finance. Big data, machine learning, peer-to-peer platforms, social networking data: the list of buzzy new ideas that were supposed to upend the business of money lending went on and on.
Whether their families are higher income, lower income, or somewhere in between, a majority of all students today take out loans to cover at least part of their undergraduate degree. Which wasn’t always the case.
In fact, over the last 20 years, the percentage of students from higher-income families — defined here as making more than $114,000 a year — who take out loans to get a bachelor’s degree has more than doubled, from 30% in the mid-1990s to 60% now, according to a new report out Wednesday from the American Enterprise Institute. The percentage of students from low-income families who take out loans is higher, just over 75%, but hasn’t increased nearly as much since the 1990s.
Curo Group Holdings Corp. failed to shake off a proposed shareholder class action after the District of Kansas found sufficient allegations that the company didn’t disclose facts that were bound to impact its financial performance.
Elevate Credit, Inc. (NYSE: ELVT), today announced that its Chief Executive Officer, Jason Harvison, and Chief Financial Officer, Chris Lutes, will attend the Jefferies’ Crossover Consumer Finance Summit on December 12, 2019 at The New York Lotte Palace Hotel. Mr. Harvison and Mr. Lutes will be available for 1×1 meetings with investors.
On Tuesday, November 20, Harvard University’s Real Estate Development Club together with ArborCrowd (the “Company”), the first crowdfunding platform launched by a real estate institution, hosted a panel of experts at Harvard University to discuss the future of commercial real estate investing. The panel was attended by graduate students interested in pursuing a career in commercial real estate.
Finicity, a provider of real-time financial data access and insights, and Ellie Mae, the cloud-based platform provider for the mortgage finance industry, today announced that Finicity’s digital Verification of Assets (VoA) solution is now available through Ellie Mae’s Encompass Consumer Connect, part of the Encompass Digital Lending Platform.
Marketplace lending company Funding Circle (LSE:FCH) recently unveiled its £250 million securitization of SME loans with Waterfall Asset Management. The duo reported that the portfolio brings the total amount of UK Funding Circle loans securitized to £1 billion and the deal will notably open up the small business loans asset class to an even wider range of investors such as insurance companies and pension funds.
On, average Funding Circle collects 4.86% of the total amount of new loans generated annually as transaction revenue and 0.82% of the annual principal balance of loans under management in servicing fees.
Uncapped, a London-headquartered and Warsaw-based startup that wants to provide “revenue-based” finance to growing European businesses, is officially launching today and disclosing that it has raised £10 million in funding.
Finastra today announced that it has joined the World Economic Forum. The move will see the company collaborating with industry leaders and policy-makers to drive change across financial services, world trade and beyond, to help build a better, sustainable future.
Southwest China’s Sichuan Province became the country’s latest province to ban all peer-to-peer lending (P2P) businesses amid regulators’ tightened grip on the internet financial industry due to monetary risks.
Volumes have picked up since then, and RMBS-related issuance is forecast to reach $100 billion in 2019, up from $86 billion in 2018, according to Standard & Poor’s. However, the market is still a shadow of its former self. The banks still dominate mortgage lending, but not nearly to the extent that they used to. Most are quick to point out that their online disruptors have yet to perform through a cycle.
The banks still dominate mortgage lending, but not nearly to the extent that they used to. Most are quick to point out that their online disruptors have yet to perform through a cycle.
German fintech N26, valued at $3.5 billion in its latest funding round, views a stock market listing as an attractive option, but rather in 4-5 years than in the short-term, its Germany head told Reuters.
In a move to aid faster expansion and provide more security and regulatory compliance tools, Klarna Bank in Sweden is strengthening its longtime relationship with Amazon Web Services by making it the bank’s preferred cloud provider.
Klarna says it will leverage the AWS global infrastructure to support its scale, now at 60 million customers across 170,000 merchants in 17 countries.
Despite the influence of the US, we are finding something quite different when exploring the way the FinTech market is evolving. European technological innovation is having a profound effect on the approach US companies are taking, reversing the well-known ‘cultural influencing trend.’
While they turn to online banking, and given the rise in digital transformation, the most customers still appreciate the need for financial advice face-to-face, especially for complex transactions or help. Accenture’s recent study of financial service consumers show that on average two-thirds of consumers favour face-to-face interaction with their bank.
Today, the entire crypto loaning industry is estimated at $4.7 billion and the number of crypto loan platforms is growing rapidly, according to a report made by blockchain company Graychain Ltd. While lenders have only earned a combined $86 million in interest since 2018, the demand for cryptocurrency loans is growing. In the first quarter of 2019, over 5,400 new loans were issued, and in the second, at least 18,500. The volume of lending also increased, with lenders issuing $64.8 million in loans in the first quarter and $159.3 million in the second.
India’s central bank has raised the lending cap for peer-to-peer platforms fivefold, providing a boost to such lending.
The aggregate exposure of a lender to all borrowers at any point of time, across all non-banking financial company-peer-to-peer platforms, will be capped at Rs 50 lakh against Rs 10 lakh at present, the Reserve Bank of India said in a statement on Developmental and Regulatory Policies issued on Dec. 5.
MyMoneyMantra is taking on rivals like BankBazaar and Paisabazaar head on. The company is growing its giant distribution network even as it swiftly expands its digital footprint to scale faster. But its physical network will remain the core business. A digital-only model just doesn’t deliver, believes its founder.
The new venture is an app called Mi Credit, and it’s a marketplace for personalized lending, offering users credit between Rs 5,000 ($70) and Rs 100,000 ($1,400). Xiaomi said it offers a “low” interest rate.
The NBFC (non-banking financial company), which lends to the young salaried segment with a monthly income of Rs 15,000 and upwards, is already profitable. With a monthly run-rate of 19000 loans, the lender has 30,000 unique customers. Its CEO Ketan Patel, who had spent 18 years in Kotak Mahindra Bank before joining CASHe, told IBS Intelligence that as long as lenders use technology to focus on strong underwriting, they need not worry about collections or NPAs.
FinAccel’s mission is to improve financial inclusion across Southeast Asia’s “vast and fast growing middle class”. Its starting point is Indonesia, where most of the country’s 265 million people lack access to formal financial services but do have a cell phone.
Goldman Sachs Group Inc. agreed to lend $125 million to Mercado Credito, the bank’s third loan to a Latin American fintech this year and the biggest ever in Mexico.
MercadoLibre dominates Latin American e-commerce with an almost 25% market share and 40 million unique monthly visitors, Julie Chariell, a senior analyst at Bloomberg Intelligence, said in a November report. It’s based in Argentina, but almost two-thirds of its $603 million in third-quarter net revenue came from Brazil, according to the company’s financial statements. Its market value more than doubled this year to $29 billion.
The borrower, a unit of MercadoLibre Inc., plans to use the money to triple in about one year its $100 million working-capital portfolio provided to small and midsize companies in Mexico, Martin de los Santos, a senior vice president, said in a phone interview.
Migo, a fintech startup offering credit-as-a service to large companies, has raised $20 million in a Series B round led by Brazil-focused venture firm, Valor Capital Group. The round also saw participation from existing investors including The Rise Fund and Velocity Capital. It follows a $13 million Series A round in August last year.
Modern Small and Medium Enterprises (SMEs) represent a significant part of the global economy, accounting for nearly 90% of all modern businesses. Modern SMEs are large contributors to the creation of workplaces and economic growth, especially in developing countries. Although they’ve become a vital part of the financial ecosystem, these businesses are facing extreme difficulties […]
Modern Small and Medium Enterprises (SMEs) represent a significant part of the global economy, accounting for nearly 90% of all modern businesses. Modern SMEs are large contributors to the creation of workplaces and economic growth, especially in developing countries.
Although they’ve become a vital part of the financial ecosystem, these businesses are facing extreme difficulties in accessing finances. SMEs are often associated with higher risks, sizeable transaction costs, and a lack of collateral—about 50% of small business loans get rejected.
Many business owners cite this financial exclusion as a key obstacle to the growth of their venture. The common hurdles in obtaining a loan include burdensome processes, low level of transparency, and the high costs associated with searching for a loan. For instance, the research by the Federal Reserve indicates that small business borrowers spend nearly 24 hours on paperwork alone during the loan application process at a bank.
The problem is global: businesses from East Asia and Pacific regions represent the largest share (46%) of the total number of underbanked SMEs worldwide, followed by Latin America and the Caribbean (23%) and Europe and Central Asia (15%). In 2018, the finance gap between the needs of global SMEs and available funds reached $5.2 trillion, according to SME Finance Forum.
Following the financial crisis of 2008, with the idea of de-risking their balance sheets, large banks started to avoid lending to SMEs by introducing stricter requirements to receive funds. For instance, in the UK, where SMEs represent a tremendous 99.9% share of the 5.7 million businesses, the value of issued bank loans fell to £55.6 million in Q4 of 2018, a 78% drop from its maximum of £255 million in 2009.
The other reasons include the variety of regulations banks have to cope with, insufficient credit history, and the high transaction costs of underwriting and onboarding customers. All in all, providing loans to small businesses has become less of a priority for banks. “If you look at the great recession, what you’ve seen is a bounce-back of commercial lending, but lending to small businesses really hasn’t come back,” sums up Darrell Esch, Vice President of global credit at PayPal. The majority of banks are not interested in lending relatively small amounts of money on a frequent basis. Some banks have introduced a sort of a loan threshold (commonly around $100,000 to $250,000), and won’t engage in loans below this level. The others will not address requests from SMBs with less than $2 million in revenue.
But technology changed the scenery for many small and medium-sized enterprises. In comparison to traditional financial institutions, digital lending companies provide favorable terms on credits. With low-interest margins, faster approval, and without initial fees, they are scaling up quickly and already capitalizing on new scoring methods.
On the Path to Digitalization
Top decision-makers in the banking sphere are aware of the success of alternative lending companies. However, still slowed down by legacy systems, banks are only dipping their toes in digital lending. The outdated technology at banks isn’t the sole issue. At the recent Lending Fintech Europe in London, lga Zoutendijk, a career banker with several decades of experience, said that “legacy culture is a bigger problem at large banks than legacy tech and a much more difficult challenge to overcome.”
For traditional lenders, fintech is an opportunity to innovate and modernize. However, one can’t fight legacy culture alone: on their path to embrace digitalization, bank institutions need a fintech partner to bring technology, speed, and flexibility to the table.
Fintechs are looking for such partnerships as well. With all the improvements in customer experience, they predictably lack the expertise in areas such as risk management, loan monitoring, and servicing that banks have in spades. This mutual knowledge gap creates partnership opportunities. Denise Leonhard from Paypal is sure that “nobody is going to be able to do it alone. To get to the next evolution of payments, it’s going to be really partnership-driven.”
Addressing the Challenge
But what is the biggest challenge in initiating the loan process for banks? Moody’s Analytics, a financial intelligence provider, conducted a poll among bank institutions. The results revealed that 56% of bankers consider manual collection and data processing to be the greatest obstacle in the process of underwriting.
These outdated methods lack consistency, accuracy, and auditability, not to mention, they are time-consuming. This results in additional work for risk officers at a bank, and assessing an SME’s creditworthiness becomes a challenging and unprofitable task. Traditional players just can’t compete with agile, fast-moving alternative lenders and their “time-to-money” credit decisions which take less than a day.
Lending to SMEs is not profitable for banks unless they change their operational approach. The solution lies in the automation of manual processes. Banks have to adopt such solutions for enhanced data collection, scoring, and further rule-based decisions, and solve the problem of the data’s inconsistency and delay. Igor Pejic, the renowned author of Blockchain Babel, sums it up: “It is simply not possible to offer the customers the speed they need in today’s economy with manual processes.”
But what’s more important for banks, those changes mean investing in the future: alternative lending options make customer experience of SMEs convenient, transparent, and adapted to the way those businesses operate.
The Future of SME lending
Partnerships between banks and fintechs are one of the most-discussed topics in the industry as they have the immense potential to impact long-term growth, customer experience and client retention for both parties. Industry professionals agree that bank-fintech collaboration is evolving as a common industry practice that will shape the future of the lending domain.
By partnering with alternative lenders, traditional players fight the challenges associated with the process of credit risk assessment, increase the quality of the loan portfolio, and stay competitive in the SME lending sector. More importantly, they have the opportunity to offer small businesses a shortcut to finance with fast access to cash, less paperwork, and fewer rejected applications.
In return, alternative lenders benefit from partnerships by getting experience in handling a complex regulatory environment, reaching new markets, and scaling quickly. In regards to this, old-fashioned “collaboration” is the new industry trend, while “disruption” is regarded somewhat as a thing of the past. Effectively, change is almost impossible without industry-wide cooperation and consensus.
The question: is how will banks and fintechs manage their respective strengths to proceed with deeper integration in a newly-formed system? It’s important to note that these integrations shouldn’t be regarded as acquisitions by any means. In other words, the technological vision of fintechs shouldn’t be at odds with the slow processes within banking institutions: one needs to convince multiple stakeholders and departments that the partnership makes sense. Here’s Chris Skinner on the partnerships: “Banks are slow to move, particularly at the beginning. Realistically, you should consider allowing at least 12-months from the moment you engage to the moment you have a partnership agreement signed.”
However, the financial industry holds little pessimism about collaborations: 82% of top executives at banking institutions have plans to partner with a fintech within the next 5 years. That’s only a matter of time before both parties streamline their processes to completely change the dynamics of SME lending.
All in all, given the competitive advantages that come with strategic partnerships, banks and fintechs have better chances to achieve their scale ambitions and reinvent their business models.
According to the CGAP report, the global opportunity for SME credit is estimated to be around $8 trillion. At the same time, more than 50% of overall applications are being rejected regularly. If banks want to take their share of the lucrative market, they need to modernize, and that’s totally good news for small businesses, technological partners, and the whole fintech ecosystem.
Dmitri Koteshov is the digital content marketer at HES (HiEnd Systems), a fintech company behind comprehensive lending and credit scoring solutions. As a seasoned professional, Dmitri maintains a longstanding interest in providing insights on fintech software development and analyzing current technology trends.
News Comments Today’s main news: SoFi to get its name on a football stadium. Petal raises $300M. Funding Circle closing in on 1-year anniversary of float. Zopa sends warning of imitation scams. Cumulative UK alt lending hits 11.3B GBP. Companies to get social credit in China. Today’s main analysis: Student loan refinancing rates are down. […]
China to take social credit to companies. This is a big deal, especially for U.S. companies doing business in China. Also, it has major implications for P2P lenders in China in the wake of China’s crackdown on the sector.
Europe: Binance enters phase 5 of crypto lending. And introduces new coins XRM, ZEC, and DASH. Crypto lending is getting to be a big deal. It’s on the rise, and Binance, the largest crypto exchange in the world, is on the cutting edge. As soon as crypto is legitimized, crypto lending will become one of the largest segments in alternative lending.
Online lender SoFi Lending Corp. has secured the naming rights and a 20-year deal with the Rams and Chargers, according to the Los Angeles Business Journal. The firm agreed to pay around $20 million per year, reports say.
SoFi Stadium, which will be the largest in the NFL, is the centerpiece to the much larger $5-billion Hollywood Park project developed by Rams Owner/Chairman E. Stanley Kroenke. Construction is 75 percent complete, and the stadium is expected to open next summer for other events before the NFL preseason begins in August.
The opening of the $2.6 billion SoFi Stadium will happen next summer on July 25th. However it’s not for a Rams or Chargers game. Swift announced that she will play two shows (July 25th and July 26th) at the stadium as a part in her much-anticipated 2020 world tour.
Key Findings from the OnDeck Small Business Survey:
Economic concerns arise in several dimensions, including tax policy, job growth, support for small businesses, government spending and the overall economic climate. These issues were cited as the top concerns of more than 33% of those surveyed;
Immigration was an issue of interest for 11.3% of small business owners surveyed, ranking second behind the economy as a concern.
57% of small businesses surveyed said they were either ”Very Optimistic” or ”Somewhat Optimistic” about the economic outlook for their businesses;
93% of those surveyed said they plan to vote in the 2020 election.
60% of small business owners surveyed said they already know who they plan to vote for in the 2020 presidential election.
President Donald Trump was the choice of 37% of small businesses surveyed, followed by Joe Biden at 18%. When combined, the top five Democratic candidates were the preference of 44% of respondents.
GoCardless, the London fintech that aims to become the one-stop shop globally for businesses that want to let customers pay via recurring bank payments, has launched a U.S. debit solution.
Specifically, GoCardless’ new U.S. product supports debit payments on the ACH (Automated Clearing House) network.
The company has also opened an office across the pond in San Francisco’s financial district, headed up by Andrew Gilboy, general manager, North America, who was previously the company’s chief revenue officer.
Today Nav, a fintech company that matches business owners with their best financing options for free, announced new offerings to help small business owners boost their business credit scores, giving an easy solution to developing a strong business credit profile that alternative and traditional lenders can trust and finance.
Since 2013, the disparate impact rule has objectively examined the effects of business practices with lenders, landlords, insurers, and real estate professionals against the provisions of the 1968 Fair Housing Act. The rule required that first a plaintiff must establish a discriminatory effect in policies and/or practices, before the defendant(s) would bear the responsibility of proving their own practices were nondiscriminatory.
During delivery of Capitol Hill testimony earlier this spring, Nikitra Bailey, an EVP with the Center for Responsible Lending (CRL) also underscored the importance of disparate impact in fair housing.
“Disparate impact analysis encourages creative approaches that both increase effectiveness and inclusion,” testified Bailey. “This process and the value of disparate impact analysis was recently pointed out and endorsed by the largest personal loan company in the country, Lending Club.”
Online lender BlueVine announced on Wednesday it has appointed Brad Brodigan as its new Chief Commercial Officer. BlueVine reported that through this role, Brodigan will be responsible for overseeing revenue-generating functions including sales, customer service, and partner management.
Money360, a technology-enabled direct lender specializing in commercial real estate (CRE) loans, announced today it closed approximately $170 million in loans during July and August. This benchmark brings Money360 close to $500 million in loans closed this year.
Groundfloor, a real estate lending and investing platform that allows anyone to participate directly in real estate investments, has launched a new product to make the lending process more easier for real estate investors. Groundfloor now allows certain developers to gain pre-approval on loans with a new program called “QC Maxx.”
In financing news, student loan fintech “College Ave” locked down a $300MM securitization and a AAA rating this week. The securitization was co-led by both Barclays and Goldman Sachs. Affirm, led by Max Levchin, is reportedly close to wrapping up a $1.5 Bn debt and equity financing with Thrive Capital and Spark Capital leading.
Stripe is mirroring other payments companies that have since built lending capabilities – notably, Square and PayPal. Stripe believes it can compete in an already crowded small business lending market (OnDeck, Kabbage, Fundera, Funding Circle, etc.) due to its data & channel advantages stemming from its payments business.
OppLoans, a growing fintech and top rated direct-to-consumer online lending platform, announced today that it has secured its first bank-led asset-backed revolving credit facility. This facility structure will enable OppLoans to further its mission by broadening access to online personal lending products for more middle-income consumers with credit challenges.
M&G Investments and Community Capital Management, a mutual fund that specializes in impact and Community Reinvestment Act (CRA) related investments, have joined with U.S. and international banks to invest $145 million in Aura’s social bonds to finance the origination of affordable, small dollar installment loans to working families in the United States.
Almost all U.S. challenger banks offer no-fee checking, savings accounts and enhanced personal financial management tools. Now some of the most popular have taken, or are poised to take, their next step: making loans.
Personal loans and credit cards are lucrative but inherently risky, and these young companies — like MoneyLion, Varo and others — will have to prove to regulators, investors and the public that they have the wherewithal to weather downturns in the credit cycle.
Prevu, a customer-focused digital home buying platform delivering industry-leading efficiency and savings, announced today the closing of its $2 million seed funding round. The round was led by Corigin Ventures, a prominent seed-stage venture capital firm with expertise in the real estate technology and consumer industries as well as a history of backing startups disrupting residential brokerage business models.
Prodigy Network founder Rodrigo Niño is stepping down from his position as CEO amid mounting financial and legal issues, The Real Deal has learned.
Prodigy, a real estate crowdfunding platform, has faced criticism from investors in recent months over underperforming investment properties and unpaid distributions. On Monday, an investor in one of Prodigy’s newest projects — the 13-story Standard Hotel in Chicago — filed a lawsuit alleging the firm was “insolvent” and had used investments “for purposes other than those relating to the project.”
Opportunity Zones are new, tax-advantaged vehicles for investors to earn more on their money. Created by the Tax Cuts and Jobs Act of 2017, the first qualified opportunity zones (QOZs) first hit the market in early 2018. Designated by state authorities, there are now thousands of QOZs in the US designed to boost development in selected communities. Investors receive a break on capital gains taxes which can be significant. Local officials can spur economic development which leads to more jobs. Online investment platforms immediately saw the opportunity intrinsic to QOZs with multiple platforms now offering investments in developments that benefit from these tax breaks.
Why are your Opportunity Zone Offerings better than some others available on competing investment platforms?
Soren Godbersen: There are a number of firms out there now marketing Opportunity Zone offerings to investors. We’re proud of what we have been able to offer to our investor network and there are a few things about our Opportunity Zone investments that are unique:
AFTER A DECADE OF steady growth, the economic cycle is due for a reversal, with concerns of a recession.
Consider other types of investments outside of stocks and bonds.
Know that timing the market is difficult.
What to Invest in During a Recession?
Other less correlated assets include the real estate niche. With real estate crowdfunding, hypermarket segmentation is available. Investors can choose their property type and geographic region when investing in real estate. Two real estate crowdfunding platforms for accredited investors are CrowdFund and EquityMultiple. Fundrise and Groundfloor open targeted real estate investing to nonaccredited investors as well.
The Litecoin Foundation is putting its capital to work, lending at interest through another cryptocurrency program.
The Foundation has tapped the Celsius Network, a blockchain-based crypto lending program, to become its preferred crypto wallet, Celsius Network CEO Alex Mashinsky told CoinDesk.
As part of the deal, the Foundation will allocate an undisclosed portion of its treasury to the Network. LTC holders can receive up to 10.53% annually back on their crypto holdings and dollar loans as low as 4.95 percent as well.
In a sign of how much Walmart Inc. is betting on e-commerce, the retailer’s revamped credit-card program with Capital One Financial Corp. offers better rewards for online shopping and checking out with its mobile app.
The new options, which become available Sept. 24 and use Mastercard Inc.’s network, offer 5% cash back for purchases made at Walmart’s website, including groceries. At the chain’s physical stores, shoppers only get that rate for a year and have to check out with Walmart Pay at the cashier. Otherwise, store customers get 2% back.
Finicity, a provider of real-time financial data access and insights, announced today the release of its new Verification of Income and Employment (VOIE) solution using patent-pending TXVerify technology that will speed up borrower verifications and further advance the industry shift toward a fully digital experience.
The Finicity VOIE solution digitally extracts a borrower’s pay statement data from the paystub and then cross-verifies that key data with their income transactions from their financial institutions. Enabled by its TXVerify technology, this detailed vetting process creates a real-time picture of an applicant’s income and employment for fast, accurate reports. The solution does this by leveraging the highest value data – direct from banks – along with a scan, photo or PDF of a borrower’s paystubs. This process significantly shifts the current paradigm from a mostly manual process to one that is fully digital, all while reducing fraud and increasing confidence in the underwriting process.
ConsenSys founder Joseph Lubin announced at the Ethereal Tel Aviv press conference (on September 15) that his New York-based venture studio is launching a new product, Codefi, for the emerging decentralized finance (DeFi) ecosystem.
Despite not having invested in emerging DeFi platforms, Lubin described P2P lending systems such as Uniswap and MakerDAO as some of the blockchain industry’s most promising projects.
ZOPA has warned over a growing number of scam operators targeting UK customers using the peer-to-peer lender’s name to dupe investors.
They include: asking customers directly for their Zopa login details; claiming to work with companies investing money in Bitcoin or other cryptocurrencies; or working with companies who would ask them to take out a Zopa loan to fund an investment.
MORE than 150,000 lenders were invested in 321,483 loans facilitated by Peer-to-Peer Finance Association (P2PFA) platforms at the end of the second quarter, which the trade body deemed “a record level of involvement in the sector”.
Funding Circle is the largest P2P lender among the P2PFA platform members, having lent out a cumulative total of £5.4bn as of the end of the second quarter. It is followed by Zopa at £4.5bn, with ThinCats in third place with just over £491m.
£814m of new loans were made in the second quarter, compared to £866m in the first three months of 2019.
European fintech company Transferwise has recorded its third year in a row of profits; the company reported its net profit after tax climbed to £10.3 million in the fiscal year ending March 2019, up 66% from the previous year on revenue of £179 million;
The product range includes five Cash ISA Notice accounts, exclusive to Smarterly, ranging from 35 days at 1.05% to one year at 1.25%; Customers will not be able to apply for these products with OakNorth directly;
First Quarter of Fiscal Year 2020 Operational Highlights
Total loan volume facilitatedwas US$ 28.2 million (RMB192.3 million) during the first quarter of fiscal year 2020, a decrease of 93.5% from the first quarter of fiscal year 2019.
Gross billing amount (net of VAT)was US$4.7 million during the first quarter of fiscal year 2020, a decrease of 90.7% from the first quarter of fiscal year 2019.
Gross billing ratio (net of VAT)for credit loans was 16.7% during the first quarter of fiscal year 2020, an increase from 11.7% during the first quarter of fiscal year 2019.
Number of borrowerswas 18,546 during the first quarter of fiscal year 2020, a decrease of 36.0% from the first quarter of fiscal year 2019.
Number of investors was 9,534 during the first quarter of fiscal year 2020, a decrease of 85.9% from the first quarter of fiscal year 2019.
First Quarter of Fiscal Year 2020 Unaudited Financial Highlights
Net revenue was US$4.9 million during the first quarter of fiscal year 2020, a decrease of 90.5% from the first quarter of fiscal year 2019.
Operating costs and expenses were US$12.6 million during the first quarter of fiscal year 2020, a decrease of 18.9% from the first quarter of fiscal year 2019.
Net loss was US$7.2 million during the first quarter of fiscal year 2020, compared to net income of US$29.7 million in first quarter of fiscal year 2019.
Basic loss per ordinary shares in the first quarter of fiscal year 2020 was US$0.15, compared to basic earnings per ordinary shares (“EPS”) of US$0.62 in first quarter of fiscal year 2019.
Diluted loss per ordinary shares in the first quarter of fiscal year 2020 was US$0.15, compared to diluted EPS of US$0.56 in first quarter of fiscal year 2019.
Adjusted net loss attributable to Hexindai Inc.’s shareholders (Non-GAAP) in the first quarter of fiscal year 2020 was US$7.0 million, compared to adjusted net income attributable to Hexindai Inc.’s shareholders (Non-GAAP) of US$29.9 million in the first quarter of fiscal year 2019.
Adjusted EBIT (Non-GAAP) in the first quarter of fiscal year 2020 was (US$5.8) million, compared to US$36.6 million in the first quarter of fiscal year 2019.
Hong Kong has built a strong environment for fostering innovation and financial technology or FinTech. With its large financial sector and its strategic role with Mainland China and gateway to the rest of Asia and the world, Hong Kong has the potential to take on an important role in being a leader in FinTech. In March 2019, for example, Hong Kong issued its first virtual banking licences, which will likely increase adoption of FinTech in the financial services sector.
Emerging technologies used in Fintech services and operations come in different forms, and include:
data analytics that support the operations of financial institutions (for example, credit scoring, loan processing);
peer-to-peer (P2P) financing (such as P2P lending and crowdfunding platforms);
distributed ledger technology, such as cryptocurrency, bitcoin transactions and smart contract applications, as well as blockchain services to help reduce fraud by keeping provenance data on the blockchain; and
financial investments, such as stock trading apps, robo-advisors and algorithmic trading and budgeting apps.
Leading cryptocurrency exchange Binance has announced its launch of the fifth phase of its cryptocurrency lending product in which it customers subscribe to an allocation to lend other users their funds for interest rates as high as 15% Apr.
the 15% interest rate was only available to Binance’s native coin lenders in the first phase. On Tuesday, the exchange revealed three coins that will be included in the crypto lending product including only privacy-centric coins Monero [XMR], Zcash [ZEC] and Dash [DASH]. Their annualized interest rates will be a constant 3.5% but the lending period is only two weeks starting from this Friday September 20th through October 4th.
According to a company release, the purchase price was in the “low seven-digit amount.” Payment will take place in two separate tranches. creditshelf has the option of settling both tranches in the course of two capital increases via a contribution in kind.
Today, Singapore sits proudly atop the Euromoney Country Risk (ECR) rankings. Based on ECR’s blend of financial and economic data, combined with the views of leading economists, no country in the world today has a stronger financial position.
When MAS said in July 2019 that it planned to issue five new digital banking licences, analysts soon spotted that three of them were wholesale licences, open to banks and non-banks alike.
Winners will be encouraged to lend, using digital means, to small and medium-sized enterprises and other non-retail segments – further evidence that corporate banking will be the next segment to feel the hot breath of disruption on its neck.
Equifax Inc. (NYSE: EFX) and Urjanet today announced a global partnership that empowers consumers and businesses to share their payment data from thousands of utility, telecom and cable providers worldwide for a more complete picture of individual payment history, easier identity verification and the potential for better access to credit. This partnership builds on Equifax’s leadership in alternative data, using the Urjanet Utility Data Platform to incorporate consumer-permissioned data into the Equifax differentiated data approach.
According to Deloitte, we shouldn’t view DLT as just a new type of “database ” but rather as a new way to organize the security value chain from issuance to custody. But what exactly can be transmitted through this chain?
Fractional ownership – take as much as you want
Digitizing shares makes them highly divisible, meaning that investors can buy very small percentages of tokenized assets.
So long, intermediaries!
Security tokens have a simpler investment structure and lower fees.
On the way to maximum liquidity
Cherry on top
A security token is basically a digital signature connected with a smart contract responsible for facilitation and verification of ownership rights transactions.
Groww, an online investment platform that sells mutual fund products, has raised $21.4 million (Rs 152.5 crore at current exchange rate) in a Series B funding round led by Silicon Valley-based venture capital firm Ribbit Capital.
Groww said existing investors Sequoia India and Y Combinator also participated in the funding round.
The Reserve Bank of India (RBI) is studying how non-bank lenders and home financiers price their loans, close on the heels of directing commercial banks to link their loan rates to external benchmarks.
The Reserve Bank of India has ordered commercial banks and non-banking lenders to stop providing unregulated entities access to consumer data held by credit bureaus, dealing a blow to scores of fintech startups that have based their business models on such information.
The banking regulator is not in favour of hybrid loan products or ‘teaser loans’, a senior Reserve Bank of India (RBI) official today clarified. The remark gains significance in the light of State Bank of India chairman Rajnish Kumar’s recent comment that SBI would seek the regulator’s view on whether banks can introduce fixed-cum-floating rate products.
FlexiLoans.com, an online lender for MSMEs in India, said that it has crossed a milestone number of disbursing over INR 5 billion of unsecured business loans across the country with its unique digital-only model. The Mumbai-based company, which has disbursed over 16000 loans across 1000 cities and towns in the country, says that there is no dearth of demand on the credit side. The company caters primarily to micro, small and medium-sized businesses.
How has the online lending market shaped up in the last few years?
Digital Lending market is currently at about USD 2 billion, up from about USD 1 billion in 2016. Significant traction and market niches discovered by various FinTech startups across the country have made this space very exciting, holistic and game-changing.
The declining demand for peer-to-peer (P2P) lending in China has prompted firms to find business elsewhere. LearnBonds report that Chinese P2P companies are eyeing Vietnam, which alarmed local lending companies.
About 70 per cent of the population in the Middle East and north Africa do not have access to banking services, says Ian Dillon, co-founder of Now Money, a Dubai-based financial technology group.
The GCC recorded outbound remittances of $120bn in 2017, according to World Bank data. However, Gulf banks tend to exclude workers earning less than $1,400 a month, leaving most of them reliant on exchange houses to remit cash home.
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: Funding Circle closes $198M ABS for U.S. SMBs. KBRA assigns preliminary ratings to Consumer Loan Underlying Bond Credit Trust 2019-P2. SoFi to create 300 jobs in Jacksonville, Florida. LendInvest postpones IPO until at least 2020. Binance offers crypto lending. Today’s main analysis: The nonbank and alternative lending industry in 2019. […]
Cities with the most swimming pools. LendingTree continues to publish the most interesting reports. This one isn’t trivial. A swimming pool can add significant value to a property. For real estate investors, this is a must-read.
Binance offers crypto lending. Crypto lending is already growing and expanding in popularity. This could catapult it into becoming a larger part of the alternative lending industry. Why? Because Binance is the largest cryptocurrency exchange by volume.
Funding Circle today closed its first asset-backed securitization (ABS) of US small business loans originated through its platform. The $198 million deal marks the debut of Funding Circle’s US securitization sponsorship capability, and is the fifth securitization of Funding Circle business loans globally.
Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Consumer Loan Underlying Bond (CLUB) Credit Trust 2019-P2 (“CLUB 2019-P2”). This is a $287.80 million consumer loan ABS transaction.
Preliminary Ratings Assigned: Consumer Loan Underlying Bond (CLUB) Credit Trust
A new LendingTree study ranks the 50 largest cities by its share of homes with a swimming pool. We found that about 10% of homes have pools, ranging from nearly 33% in Phoenix to 1% in Portland, Ore. We also looked at the values of homes with and without swimming pools to show how much this amenity is worth. Let’s dive in.
You’ve gotta pay to play: The median home with a pool is valued at $469,187, while the median home without a pool is valued at $305,152 — a 54% premium. The highest premium is in Memphis at a whopping 157%.
Go West: It’s no surprise that six of the top 10 cities for swimming pools are in the West — four in California and one each in Arizona and Nevada.
Hot, hot, hot: Phoenix, which experiences more than 100 days above 100 degrees a year, leads the way with 32.7% of homes having a swimming pool.
Sunshine State: Florida is not far behind California with three cities in the top 10. Miami, Tampa and Orlando rank second, third and fourth, respectively.
Rain and water don’t mix: Two of the cities with the least swimming pools are in the rainy Northwest. Portland is in last place with just 1% of homes with pools, while Seattle is not far ahead with 1.3%.
GOBankingRates found that 25 percent of consumer prefer banking with a mobile app, though nearly half preferred banking in person at a branch or ATM. Yet 76 percent said they wouldn’t open an account with a bank that doesn’t have a mobile app.
According to Fiserv, the preference for digital interactions (online plus mobile) is 58 percent, considerably ahead of the preference for branch interactions (32 percent).
When breaking out online, though, there is a preference for online (37 percent) compared to mobile (17 percent).
Fifth Third Bancorp is building out its renewable energy banking business, highlighting how the alternative power niche isn’t just for the biggest banks.
The $169 billion-asset Fifth Third recently added three new managing directors to its renewable energy investment banking group. With the additions of Timothy Beach, Ari Citrin and Oliver Janssen, the bank intends to offer more specialized capital markets and M&A advisory services to renewable energy firms, most of which are in solar.
According to Oracle’s Digital Demand in Retail Banking study of 5,200 consumers from 13 countries, over 40% of customers surveyed think nonbanks can better assist them with personal money management and investment needs, and 30% of respondents who haven’t tried a nonbank platform said they’re open to trying one.
Business Insider Intelligence’s Online Mortgage Lending Report found that the top five US banks – Wells Fargo, Bank of America, and JPMorgan Chase, US Bancorp, and Citigroup – only accounted for 21% of total mortgage originations, which is a huge decline from their 50% combined market share in 2011.
According to a survey from the Federal Reserve Bank of Richmond, in 2016 only 58% of loan requests from small businesses were approved by incumbent banks, compared to 71% approved by alt lenders that same year.
SimpleNexus makes it easy for loan originators to create co-branded mobile apps for Realtor partners to share with borrowers. The shared platform enhances the borrower experience by keeping partners up-to-speed on loan progress and putting mortgage calculators and other handy tools at partners’ fingertips.
Pagaya, a global financial technology company using artificial intelligence (AI) to reshape asset management, today announced the closing of a consumer credit asset-backed security (ABS) at $115 million. Led by structuring agent Cantor Fitzgerald, the ABS will be actively managed by Pagaya’s AI.
Pagaya has been working closely with Prosper to develop innovative financing solutions for consumers, which will be featured in this securitization.
Blooma, a tech startup that reduces time to revenue for commercial lenders, launches out of stealth with $2.75 million seed funding to transform the lending experience for commercial and private lenders and other organizations. The financing was led by Floodgate, a Palo Alto, Calif.-based investor. Other backers include: Abstract Ventures, Crescent Ridge Partners and Serra Ventures.
Fashion event agency, A-List Communications announces their lineup and new title sponsor Klarna for their 15th year of STYLE360, which will take place during the latter portion of Spring/Summer 2020 New York Fashion Week from September 9 – 11, 2019.
White Oak Commercial Finance (“White Oak”), an affiliate of White Oak Global Advisors, announced today the origination of a new revolving credit facility to healthy meal service company The Good Kitchen. Originally founded as a meal delivery service, The Good Kitchen will use the proceeds of the credit facility to expand its business into packaged meals sold at 1,500 stores across the United States.
Over three-quarters of consumers in the UK use a finance app, according to a new study from Speedie Consultants that surveyed 200 people in the country. Twenty-four percent of those surveyed use their finance apps around twice a week, and 23% said they use it daily. The most common finance app users were aged 25-45, in addition to consumers over 65.
According to the latest press release, leading crypto lending firm Celsius Network has seen an increase of 2,165% growth in deposits. The network has already surpassed 20,000 BTC through mobile app deposits during the first year of operations.
The Zurich-based fintech, whose investors include former Deutsche Bank CEO Josef Ackermann, raised $40 million at a valuation of over $1 billion, reports Bloomberg. The latest investment brings Numbrs’ total raise to date to almost $200 million, CEO Martin Saidler told the outlet.
Notably, in contrast to many of its peers, Numbrs has joined the unicorn club not by focusing on venture capital and private equity funding, but instead by relying mostly on individuals and families — 50 have invested in the company thus far. The startup’s app enables users to aggregate their various bank accounts and manage their finances, and offers a marketplace for consumers to purchase various financial products.
The University of Oxford received an immense £150 million donation to create a centre studying the ethics surrounding AI in the modern world, whilst global audiences continue to be fascinated by shows like Black Mirror which explore the worst-case consequences of AI accessing personal data.
The project is composed of three distinct, albeit related, parts, run in sequence from January 2019 to December 2020:
Part 1: Application of AI for risk management in bank and peer to peer lending
Part 2: Application of AI for risk management in financial investments and robot advisory
Part 3: Application of AI for risk management in blockchain payments and crypto assets
Binance has launched a lending service allowing its users to earn cryptocurrency without trading, in a passive way. Currently the service is open for only a few tokens – its Binance Coin (BNB), Tether’s USDT stablecoin, and Ethereum Classic (ETC). Annualized interest rates are of 15% for BNB, 10% for USDT, and 7& for ETC.
Ten years after the financial crisis, Alternative Finance continues to exhibit strong growth. The sector is estimated to account for nearly €300 billion of inflows worldwide, a market exhibiting 25% annual growth and largely dominated by the Chinese (75%), which percentage was already recorded in 2015 by a study conducted jointly by KPMG and the University of Cambridge.
The United States takes second place with 19% of the market, while Europe currently represents just 6%, 60% of which comes from the United Kingdom. In France, alternative finance raised €1.4 billion in 2018, a year-on-year increase of 39% according to the annual report of KPMG and the non-profit group Financement Participatif France (FPF).
The global crowdfunding market is estimated to be expanding from 2018 to 2022 to $89.72 billion. From the first recorded successful crowdfunding in 1997, to how the first dedicated crowdfunding platform ArtistShare had come about in the year 2000, crowdfunding has indeed disrupted many industries in different levels.
The problem of investment scammers is much bigger than cryptocurrency though, Wong pointed out, and much bigger than Invest: Asia.
“I don’t think Invest: Asia is big enough to move the needle if you’re running a scam in China,” he said. “That just speaks to the size of the population in China. In general, I think there’s lots of financial scams in general in China, right? For example, a couple years ago there was a big peer to peer lending scandal.”
“The peer to peer lending was legitimately becoming a hot growth FinTech sector in China, but then people were running these peer to peer scams. Because it was so hot, everyone’s talking about it. It creates the conditions for scammers to launch whatever scheme that they want to launch.”
• FY19 loan originations of $501.7 million up 36.6% on the prior year (FY18: $367.3 million), 3.1% ahead of prospectus forecast.
• FY19 revenue of $136.4 million up 31.2% on the prior year (FY18: $104.0 million), in line with prospectus forecast.
• FY19 pro forma EBITDA of $6.8 million, ahead of prospectus forecast by 11.5%.
• Prospa has now delivered approximately $1.2 billion in loans since inception and total customer numbers in Australia and New Zealand grew to over 20,000 in FY19, up 58% on the prior year.
• Customer satisfaction remains consistently high, with Prospa’s annual average Net Promoter Score in excess of +77 in 2019. Prospa also has a rating of 9.8/10 on independent review platform TrustPilot.
• Business expansion has continued with the successful launch of new cash flow products and services and diversification into New Zealand.
• Further investment in executive strength, with new Chief Technology Officer, Chief Commercial Officer and Executive General Manager, Growth Channels appointed.
P2P lending has also become increasingly popular as an alternative lending route as small businesses find it easier to obtain loans directly from other individuals. Going forward, we can expect more cloud-based services backed by advanced analytics that offer personalized loan limits and payback schedules, based on the borrower’s credit history.
Traditional players will also get into online lending and emulate the strategies of P2P lending companies. More businesses will start adopting work-from-home policies to increase cost savings and productivity. On the tech front, businesses will start investing more in AI and analytics to get a deeper insight into customer behaviour.
– Kewal Kapoor, director and creative strategist of CHAI Kreative and Return of Million Smiles
The fourth-largest mobile phone vendor plans to launch a consumer-lending business, dubbed Mi Credit, in India in the next few weeks, according to Reuters. It will offer loans of up to 100,000 rupees ($1,451), with interest rates starting at 1.8%.
Xiaomi is positioned as a leading smartphone manufacturer in India, with 70 million mobile phones in use throughout the country. It already launched its payment app, dubbed Mi Pay, in the country in March, which is reportedly “doing well,” per Reuters. For context, in China, Xiaomi’s lending business shows a loan book worth $8 billion.
In July 2019, the company secured Rs 1.16 crore from Renaud Laplanche, the Co-founder and CEO of Upgrade, who earlier participated in the startup’s Series C funding round of Rs 77 crore in May, along with Accel Partners, Chiratae Ventures, IDG Ventures, and Bain Capital. At that time, the startup said the funds will be used for accelerating its growth and expansion to new cities.
The linked dangers of an inverted yield curve and a slowing economy have hammered banks stocks in recent months, and profit margins are already compressing. But the banks’ worries pale in comparison to challenges confronting the peer-to-peer or “market place” lenders — the start-ups that have set out, over the past decade or so, to upturn the banking industry.
Non-prime lending has revolutionized the lending sector. In times where people lack a stable credit history, securing a traditional loan is not easy—and non-prime has become a go-to option in such scenarios. In the past few years, alternative financial services have gained momentum in terms of acceptability and volume. There are various companies in the […]
Non-prime lending has revolutionized the lending sector. In times where people lack a stable credit history, securing a traditional loan is not easy—and non-prime has become a go-to option in such scenarios. In the past few years, alternative financial services have gained momentum in terms of acceptability and volume. There are various companies in the market that offer instant loans even to the borrowers who have a weak credit history. But how do we infer how many people have migrated to non-prime online borrowing from the traditional borrowing set up, and how many people have migrated back to the traditional set up?
Experian’s Clarity Services, a credit reporting agency specializing in near prime and subprime consumers, offers credit data to alternative financial service (AFS) providers. This helps lenders gain a wider perspective of non-prime applicants and further enables them to make more informed decisions.
The company furnishes the AFS trends report that specifies the prevailing trends and consumer behavior in the market by studying the underlying factors. In the 2019 AFS Lending Trends Report, Clarity studied a sample of 350 million consumer loan applications and more than 25 million loans to evaluate the market trends for the 2014 to 2018 time period. Clarity also leveraged Experian’s national credit bureau data to analyze consumer behavior.
Alternative Financial Services — What Do the Market Trends Say?
Non-prime consumers include people who may have been irresponsible with credit previously, youngsters with inadequate credit history, people who face sudden and unexpected emergencies, recent immigrants in the US or someone in immediate need of cash. The basis for the report includes factors of loan origination (involves the online and storefront channels) and loan types (includes installment payments and single pay).
In order to study the rise of the online lending market from 2014 to 2018, Clarity studied online installment and single pay loans by the number of loans originated and total dollars funded.
The graphs illustrate how online installment loans have been steadily growing from 2014 to 2018. The volume of online installment loans in 2018 was 7.4 times higher than the volume in 2014. Whereas, the volume grew up until 2016 in the case of online single pay loans, plummeted in 2017 and held steady in 2018.
As per the report, more than half of online borrowers are new to the alternative credit space. The table below illustrates the consumers who opened an online loan in 2018, tracking their past behavior from 2014 to 2018.
Clarity also tracked the activity of 2017 alternative financial borrowers in 2018 and if they continued with online platforms. The results showed that 41% of online borrowers again availed an alternative loan, while 24% of the borrowers did not show up in 2018. Also, 35% of the borrowers applied for a loan but did not open one.
Further investigations gave another interesting insight. Around 34% of 2017 borrowers who did not have any applications or loans in 2018 had switched to traditional lenders. This implies that 7% of overall 2017 borrowers migrated to traditional lending in 2018.
As per an examination of the credit classification of consumers who obtained and did not obtain loans from traditional lenders in 2018, 23% of borrowers who switched to traditional lending possessed a near prime credit score, and only 8% of the borrowers continuing in the alternative finance space were classified as near prime.
Factors Influencing Migration from Online Platforms to Traditional
While the migration of borrowers from AFS platforms to traditional ones might not be a shocker, borrowers who had a subprime credit score and were ineligible to apply for traditional loans were mostly the ones who moved to online or the AFS space to get the credit they needed. As and when their credit scores improved, they reverted to the traditional space. While AFS is convenient in terms of credit scores and repayments, there are strong factors that influence the borrowers to move back to traditional methods.
Frauds: With the advent of technology, fraud too has evolved. With data breaches, the fraudsters create a synthetic identity that cannot be easily decoded. This is leveraged by fraudsters to open fake and additional accounts.
Generation Bias: Gen X is more comfortable with online borrowing and less likely to be inclined towards storefront options. Another study under the report implies that the Silent and Boomer generations only account for 25% to 30% of all AFS borrowers.
Income Trends: In the past five years, online installment borrowers reported a higher income (while the values have been steady since 2016) and the reported incomes of storefront installment borrowers have been stagnant since 2014.
Due to the recession in 2008, the majority of borrowers had suffered a hit to their credit worthiness. On the other side, traditional lenders folded due to the toxic asset built up in their balance sheets. This created a vacuum for the AFS players to capture. It was a win-win as they were able to tap into a multi-hundred-billion-dollar market unchallenged, and the affected borrowers got a chance to get the credit they needed desperately.
With record economic growth, the 2019 scenario is different. Borrowers are returning to traditional ways of borrowing. The trends report puts light on the activities of the borrowers and how their needs have changed over time. In the given scenario, Clarity’s alternative credit data is a key asset when studying borrower behavior in the market.
This past year, significant efforts have been made by the SEC, FINRA, state regulators and CSBS to streamline regulations and processes for all fintech companies. These ongoing changes have presented opportunities and challenges that impact the fintech community around the globe. Please join us for a 60-minute webinar, moderated by Manatt’s fintech leader Brian Korn, […]
This past year, significant efforts have been made by the SEC, FINRA, state regulators and CSBS to streamline regulations and processes for all fintech companies. These ongoing changes have presented opportunities and challenges that impact the fintech community around the globe. Please join us for a 60-minute webinar, moderated by Manatt’s fintech leader Brian Korn, to gain insight to the following key topics:
Updates on the bank partnership model
The latest on charter options, including the OCC fintech charter and ILCs
The state and federal enforcement agenda, including rapidly growing FTC activity
SEC/FINRA Joint Statement on Custody and Customer Protection Rules for cryptocurrency and digital investments: Paradigm shift or more of the same?
State fintech regulatory sandboxes: What are they exactly, and will more states continue to opt in?
Deal terms: How the regulatory environment is driving investor and lender behavior for originators
If you can’t make our live program on September 19, click here.
Chase drops OnDeck, OnDeck to pursue bank charter. It appears that JPMorgan Chase may be developing their own online banking solution, which frees OnDeck up to pursue a bank charter. This is the most interesting development we’ve seen in a while.
Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Upstart Securitization Trust 2019-2 (“UPST 2019-2”). This is a $358.4 million consumer loan ABS transaction that is expected to close on August 7, 2019.
MoneyLion’s “all-you-can-eat” membership pricing model has distinguished itself from the pack. MoneyLion provides customers access to financial advice, loans, and other banking service. Customer’s can enjoy the lion’s share of offerings all at a bundled rate $20/month.
The near-Unicorn FinTech announced a roaring $100 M funding round led by Edison Partners and Greenspring Associates, bringing PIC to ~$200M. MoneyLion is looking to invest in broker dealer, training, and stock-investing capabilities and further distance itself from potential copycats.
Financial advice, loans, integration of other bank accounts
Debit, checking, and savings accounts with no fees
Rounds up purchases and invests the change, financial education
The Federal Reserve’s decision to cut interest rates 25 basis points for the first time in over a decade marked a dramatic shift in monetary policy.
Now, interest rates are historically low, which leaves the central bank with little wiggle room in the event of a recession or if the economy stumbles. The current target range for its overnight lending rate is 2% to 2.25%.
In the past five years, the average interest rate charged on credit card debt has increased 35%.
Considering that the average household currently owes $8,390, credit card users would save roughly $1.5 billion in interest as a result of a quarter-point rate cut, a separate report by WalletHub found.
Elevate Credit (NYSE: ELVT) announced the exit of CEO Ken Rees today a Q2 earnings release missed on top-line numbers and the Fintech lowered guidance for Q3. Current COO Jason Harvison was selected to be interim CEO as the firm seeks a full-time replacement. Rees will remain on the Board of Directors.
Japanese online merchant Rakuten Inc. wants to open a bank in Utah to offer loans, credit cards and other financial services to customers of its existing U.S. cashback-shopping business, the company said Friday.
“We’re going to focus on that customer base we already have,” said Lee Carter, the new head of banking development at Rakuten and a former UBS Group AG executive. “That’s really the community that we want to extend additional financial services to.”
In the early days of my company, Kabbage, we struggled against requests from some potential partners. They wanted customers to be able to upload traditional loan paperwork like bank statements and tax returns.
By insisting on data connections, which in 2008 was usual, we lost some potential upfront revenue but prioritized a unique customer relationship and experience that would make us a more than $7 billion lending platform just a few years later.
Branchless bank Green Dot is launching the highest yielding bank account in the industry.
The Pasadena, California-based bank, which gained traction with prepaid cards in the dot-com era, launched a new bank account Tuesday with 3% annual interest on savings, and 3% cash back on all online debit card purchases. The average rate for savings accounts, according to Bankrate.com, is 0.1%.
The 3% rate on a savings account is the highest for any bank in the country, according to Bankrate.
I was in Detroit recently at the invitation of Rocket Loans CEO, Bill Parker. I do visits to fintech companies quite regularly but usually in the big hubs of New York, San Francisco or London. This was my first visit to Detroit for a couple of decades so I was excited to see how the city had changed. And you can’t really tell the story of Rocket Loans without also talking about the city of Detroit.
Quicken Loans is the crown jewel of the financial component of Rock Ventures. It is now the largest mortgage lender in the country, bigger than even the largest banks. They seem to be slowly moving away from that brand, though, and moving to Rocket Mortgage which has a much more modern and innovative feel.
The merchant cash advance is considered the payday loan for many in the small business lending market — and that’s not necessarily a good thing. While designed to connect small business owners to quick capital for a boost to their cash flow, the MCA has earned a reputation for some predatory behavior, like sky-high interest rates and fees.
Fashion and lifestyle blog Man Repeller is taking operations offline through a pop-up retail collaboration with Klarna. Opening at Showfields in New York on Monday, the “highly instagrammable” retail space was crafted to represent a shopper’s “dream closet,” Man Repeller said in a statement. Curated by the Man Repeller team, the temporary store includes offerings…
Visa is pitching a new way for startups in the fintech space to get to market faster by using its rails and a group of pre-approved partners.
Chiefly, the process makes it easier to integrate with Visa. It’s an attempt to put the payment processor’s network, VisaNet, at the center of a vast array of services ranging from payroll to business to business payments and online banking, online lending and even digital wallets.
Despite the enthusiasm they have received from the private equity world and the billionaire hedge fund set, a majority of investors have been mostly shut out of the conversation surrounding the Opportunity Zones initiative included in the 2017 Tax Cuts and Jobs Act.
Although there is already a flood of capital being funneled into qualified funds (upward of $40 billion according to the National Council of State Housing Agencies’ Opportunity Zone Fund Directory) Opportunity Zones remain an ongoing experiment in maximizing the benefit to both investors and the communities in which they invest.
According to Thomas McDonald, Investment Product and Portfolio Manager of the online real estate investing platform CrowdStreet, the new language is a critical move for the program.
Groundfloor, a real estate lending platform that raises its loan funds via crowdfunding from the public, announced Wednesday it raised $3 million from 1,580 investors, while also doubling its annual revenue in the second quarter of 2019.
Groundfloor is taking private real estate lending public (Groundfloor Email), Rated: B
As we close out the first half of the year, we’re excited to report accelerating growth and strong financial results for the quarter. Once again, GROUNDFLOOR more than doubled its year-over-year revenue for the quarter to $1.6 million, 1H revenue to $2.6 million and trailing 12-month revenue to $4.4 million.
The OCC received 19 comment letters on a pilot program announced in April meant to provide supervisory clarity as national banks pursue “novel activities” in which regulatory uncertainty is perceived to be a barrier to development.
Our next guest on the Lend Academy Podcast is Melissa Koide, the founder and CEO of FinRegLab. They have just published their first research report this week on the use of cash flow data in underwriting. It is the first independent research done on this topic and it is milestone for both FinRegLab and the fintech community.
Genesis, a digital asset trading and lending platform that is also a broker-dealer registered with FINRA, and a BitLicense holder with the New York State Department of Financial Services, reports that its services are booming.
According to a release from last week, Genesis’ Q2 performance was the best over as it topped $746 million in loans/borrowing – a 48% quarter over quarter increase.
Genesis states that total active loans increased to $454 million – a 149% increase over Q1.
Headquartered in Eugene, Oregon, Northwest Community Credit Union (NWCU) launched two new products earlier this year called Northwest Cash and Northwest Cash Plus, offering short-term loans from $150 to $700 and $701 to $4,000, respectively. Both products are designed to help their members deal with unexpected cash needs with an easy to use application process.
An infusion of $37 million in debt financing from BMO will help cloud-based digital banking and low-code platform company Kony “accelerate growth” in its two signature solutions: KonyDBX, the company’s digital banking technology, and Kony Quantum, its low-code development platform. The financing, courtesy of BMO’s Technology and Innovation Banking Group, adds to the more than $115 million in funding Kony has raised to date.
White Oak Commercial Finance (“White Oak”), an affiliate of White Oak Global Advisors, announced today the addition of two new professional underwriters, further increasing the company’s originations presence across the United States. Mr. Sudhir Chaudhry joins White Oak’s Los Angeles office bringing nearly 25 years of structured finance and underwriting experience. Mr. Kevin Maitland joins White Oak in Boca Raton with over 14 years of asset-based lending and commercial banking experience.
Finicity, a provider of real-time financial data access and insights, andEllie Mae, the leading cloud-based platform provider for the mortgage finance industry, today announced that Finicity’s digital Verification of Assets (VoA) solution is now available through Ellie Mae’s Encompass Digital Lending Platform.
But by investing within a large, diverse portfolio of loans (RateSetter’s portfolio is currently £875 million with 250,000+ loans) investors get the stability of scale and this makes for steady and predictable returns.
And putting this inside the ISA tax-free wrapper, it’s no wonder that in less than 18 months since launch, RateSetter’s Innovative Finance ISA has attracted more than £250 million of investments from people looking to put their money to work.
RETAIL investors are at risk of being shut out of the peer-to-peer lending sector due to the so-called 10 per cent rule that will come into force this December.
However, a number of P2P lending platforms have a minimum investment of £1,000, which would mean that individuals must have at least £10,000 in total to invest across a variety of asset classes. Official statistics indicate that most UK adults do not have this amount of money to invest, which could effectively bar them from certain platforms.
P2P lenders such as Zopa, Funding Circle and ThinCats require a minimum investment of £1,000, but the FCA’s latest financial lives survey shows that 49 per cent of UK adults, equating to 25 million people, either have no such assets or have less than £10,000 in value.
Iwoca almost doubled its loans last year, leading to its first annual profit since the small business platform was founded eight years ago.
The London-based fintech, started by chief executive Christoph Rieche (pictured, centre) and James Dear in 2012, said loan originations jumped by 91 per cent to £325m, as its lending hit the equivalent of 12 per cent of the UK’s small business overdraft market over the last year.
A digital asset lending platform is looking to set new industry standards with the launch of a framework using master agreements typically seen from incumbent capital markets bodies.
The Global Digital Assets Lending Agreement (GDALA) was developed by Lendingblock, with legal counsel and support from Norton Rose Fulbright.
The platform, targeting institutional investors, will use master agreements framework similar to ISLA’s Global Master Securities Lending Agreements, ICMA/SIFMA’s Global Master Repurchase Agreements and ISDA’s Master Agreements.
Alternative lending includes business lenders that exist outside of the traditional lending space. The different types of alternative lending these lenders provide include short-term business loans, medium-term business loans, lines of credit, invoice financing, equipment financing, merchant cash advances and more. They don’t typically include bank loans or SBA loans.
At one point in June last year, Zeng Jinpeng was more than 10,000 yuan ($1,500) in debt to a smartphone app.
Formal household borrowing rose to 54% of gross domestic product in the first quarter, up more than 4 percentage points in a year. China’s ratio is still lower than that of the U.S. (66%), Hong Kong (72%), or South Korea (100%), according to S&P Global.
Regulators last year launched a crackdown on peer-to-peer lending, which besides being a source of easy credit had also become a popular investment vehicle. The sector has shrunk to less than half its peak size as a result of forced shutdowns. Official data showed that almost 70% of China’s 50 million P2P investors were younger than 40.
Online attacks against China’s peer-to-peer (P2P) platforms have been rising. An industry report released on Wednesday shows that more than 10 million malicious attacks were encountered by the online financial sector in the first half of 2019, and gambling-related attacks accounted for over 56 percent.
China Lending Corp. (Nasdaq: CLDC) announced Monday its five-year strategic partnership with Zhong Lian Jin An Insurance Brokers Co. Ltd. in the development of consumer financing and litigation guarantee business, sending its shares up 4 percent intraday to 88 cents apiece.
The nascent cryptocurrency sector is renowned for its volatility. It’s very early days in the development of the industry and with that, various niches are emerging within its overall purview. DeFi or decentralised financing is one such area. Over many years, the world of retail and business sector lending has seen little in the way of disruption. However, that may be in the process of changing.
Firms like Ripio Credit Network (RCN), Salt Lending, EthLend, and WeTrust are emerging, providing their unique twists on financing with blockchain as a basis to their respective propositions. Within Europe too, the market is innovating. Hodl Finance is one such entity – which is harnessing this newly emerging economy to provide its unique take on financing.
New research from Klarna, a Swedish firm that offers interest-free installment payments among other payment solutions, suggests shoppers will only tolerate such aggravations for so long.
Through a survey of 2,065 shoppers conducted in May and June, Klarna found 55 percent of consumers say one bad retail experience would stop them from returning to a brand. Nearly 30 percent of consumers said they don’t find shopping as fun as it used to be.
Klarna also noted 39 percent of the 250 retailers surveyed realize shopper loyalty isn’t just driven by rewards programs. Nearly 70 percent understand they have to do more to retain customers, but just over a third of retailers are struggling to keep up with changing consumer expectations because of outdated technology and a short-term emphasis on sales.
In Asia, Africa and Latin America, the percentage of unbanked people exceed 60% in all cases. However, people in this segment of the population do own a mobile device.
The massive use of mobile phones has allowed great successes, such as that of M-Pesa in Kenya and ten other African countries, which over the past decade has enabled more than 30 million users to transfer money, take out loans and make deposits using mobile phones, from the remotest rural areas.
Kiva, with its African headquarters in Nairobi, thrives as a peer-to-peer lending website whereby millions of US dollars get lent from around the world at zero percent interest rates. In 2009, dozens of competitors of Kiva emerged based largely off their business model: get generous individuals to lend their money for a few months up to a few years all while earning no interest return as long as the funds go towards helping entrepreneurs.
And Australian businesses have access to a number business loan sources including traditional banks and online lenders, although according to online lender OnDeck, some small businesses can have trouble securing funding from traditional sources.
New research from the lender found that nearly 25% of small to medium enterprises (SME’s) that have applied for business finance with a bank have been rejected – a figure that rises to 37% of SMEs which have been operating for less than five years.
Digital lending marketplace RupeeCircle has set up a segment-wise model of credit disbursement through its P2P platform. Deserving Individuals and families belonging to certain communities who were hitherto declined loans from banks and NBFCs due to lack of sufficient credit history or lack of a proper bank account can now avail loans on the P2P platform.
Vietnam-based tech company NextTech announces a total of US$10 million injected into Next100, a fund dedicated for backing early-stage startups.
Recently, Next100 invested in VayMuon.vn, a P2P lending platform based in Vietnam, Heyu.asia, a startup that provides order consolidation and shipper services, and Teky.edu.vn, a tech academy for kids.
Brazil-based Nubank, which offers a suite of banking and financial services for Brazilian consumers, announced today that it has raised a $400 million Series F round of venture capital led by Woody Marshall of TCV. The growth-stage fund is best known for its investment in Netflix but has also made fintech a high priority, with over $1.5 billion in investments in the space. According to Nubank, the company has now raised $820 million across seven venture rounds.
Shares in Banco Inter SA surged more than 20% on Tuesday as the Brazilian online lender raised 1.25 billion reais ($329.73 million) in an offering largely sold to Japan’s SoftBank Group Corp, boosting pressure on traditional banks.
In the latest bullish development, OPay, founded by Norwegian browser company Opera and which includes lead investors such as Sequoia China, raised $50m to partly fund its expansion in Nigeria.
While sub-Saharan Africa’s number of adults with a bank or other financial account increased to 43% in 2017, up 9% from 2014, Nigeria’s banked population dropped to 40%, down 4% from 2014. Over half of Nigerian adults — 60 million people — lack access to financial services.
Under the new mobile-money framework, MTN will drive user acquisition with its large existing subscriber base and powerful agent network. With a 42% market share of Nigeria’s 163m active voice subscriber accounts, MTN has a huge pool of untapped demand as each voice subscriber represents a potential new mobile money account.
News Comments Today’s main news: Morningstar completes DBRS purchase. Figure issues $85M in loans per month. Zopa chief says banks are trying to put fintech lenders in a box. DBRS praises Funding Circle. Yirendai’s Q1 results. Octopus expands into Germany. Today’s main analysis: Over 60% of purchase borrowers received mortgage rates under 4.5% last week (A […]
For 30-year, fixed-rate mortgages, approximately 60.1% of purchase borrowers received offers of 4.25% or less. That is up from 57% of borrowers the previous week. A year ago, 0.06% of offers were under 4.25%.
Across all 30-year, fixed-rate mortgage purchase applications on LendingTree, 4.125% was the most common interest rate. This rate was offered to 14.3% of borrowers.
Of 30-year, fixed-rate mortgage refinance borrowers, 72.8% received offers of 4.25% or less, which is up from 70.4% the previous week. A year ago, no refinance offers were under 4.25%.
Across all 30-year, fixed-rate mortgage refinance applications, the most common interest rate was 3.875%, offered to 18.9% of borrowers.
Mortgage Rate Competition Index
Across all 30-year, fixed-rate mortgage purchase applications on LendingTree, the index was 1.19, down from 1.22 the previous week.
How big of a deal is it to get a mortgage APR that’s 1.19 percentage points lower than the competition? Over 30 years, that could translate to $56,826 in savings on a $300,000 loan (see Mortgage Savings Tracker graphic below).
The index was wider in the refinance market at 1.35, up from 1.34 the previous week. Refinance borrowers could have saved $65,108 by shopping for the lowest rate.
The time to close in new purchase transactions has been steadily declining, from 74 days in 2017 to 51 days in 2018 and just 40 days thus far in 2019.
For refinances, the decline has been less dramatic: from 55 days in 2017 to 43 days in 2018 and just 38 days so far in 2019.
Some of the decline can be attributed to lower mortgage volumes, as refinancings have been on a downward trend. But increased digitization is also playing a major role.
Closing times vary based on the characteristics of the mortgage type and borrower. Having a higher credit score can knock a few days off: Purchase borrowers with scores above 760 averaged 38 days in 2019 compared with 45 days for those below 720. Refinancings did not show much variation by credit score.
Loan-to-value ratios below 80% had shorter closing times for refinances, at 37 days compared with 42 days on mortgages with a ratio above 95% in 2019.
Loan amounts also affect closing times, with lower amounts, perhaps surprisingly, taking the most time. Loans under $150,000 averaged 47 days compared with 39 days for those above the conforming limit ($484,350 in 2019). Why? Higher loan amounts are typically being made to more credit-worthy borrowers. Lower-priced homes may be in some form of distress or have some type of damage; lenders thus may require more extensive appraisals to better estimate the home’s value and this adds time to the process.
In broad-brush strokes, mortgage innovation centers on:
Customer experience (Better, Roostify, Blend, HomeCaptain) solutions are re-inventing the onerous mortgage with a digital experience, speeding decision times and opening up the lending buy box in the process.
Intermediation (OpenDoor, HomeLight, Zillow) – Some platforms are stepping in between buyers and sellers to provide liquidity, capturing transaction fees in the process
Data (House Canary, Zillow, Atom Data) – are amassing large data sets to providing accurate, standardized pricing models for investment decisioning
Banking 2.0 (SoFi, ZeroDown) – seek to provide a range of banking or investing services to consumers
Guaranteed RateCompanies, one of the largest retail mortgage lenders in the nation, announces 15 new company milestones—breaking its monthly total locked volume for the fourth consecutive month in June.
Breaks its record of total locked volume with $5.31 Billion earned across more than 15,000 units
Most real estate crowdfunding sites continue to highlight the equalizing benefits of the model. Fundrise provides “access to a once-unattainable investment class,” and Rich Uncles, which has a minimum of $5, wants to “level the playing field” for the average investor. The sites offer investments in funds that focus on income-producing assets, like single-tenant office, multifamily housing and convenience centers nationwide.
Jeff Holzmann, the former COO of crowdfunding site iintoo, says the definition of an accredited investor is very divisive: “You can have an economics degree, and if you make $199,000 a year, you can’t invest, but Kim Kardashian can walk right on up and buy a multifamily building for $200 million. Should our bar be set by how much money you make?”
Real estate is an industry notoriously stuck in its ways and slow to change. Cash-generating, bricks-and-mortar assets are at the very heart of the enterprise, and in many ways, business is conducted the same way it was 100 years ago. Until recently, real estate owners, investors and brokers had little patience for the kinds of technological advances that have swept through myriad other industries.
But that’s all changing now. Just as there’s fintech, medtech, edtech and regtech, so is there proptech—and there are few companies in the realm of real estate technology as closely watched as Cadre, led by a 31-year-old Blackstone Group and Goldman Sachs alum named Ryan Williams.
In 2019 we have many ways we can verify the information we are provided when we invest outside of our own market. These methods will be the focus of this article. By the time you’re done with this, I think you’ll have a much better understanding of how to conduct due diligence, why out out state investing isn’t as risky as you thought, and why I’m such a big proponent of it
There is very little you can’t find out with a little online searching.
2. You Can Find Rent Estimates Easily
Websites like Rentometer and Craigslist make a preliminary rent search fast and easy.
Finitive announced on Monday its client Platinum Auto of Tampa Bay secured a $100 million credit facility through its platform. Platinum notably purchases auto loan contracts from a network of over 300 auto dealers in the southeast region of the U.S.
Abercrombie & Fitch(NYSE:ANF) recently partnered with payment solutions provider Klarna to let U.S. shoppers split purchases into up to four interest-free payments over two months. A&F is aiming this “buy now, pay later” system — which its rival Urban Outfitters(NASDAQ:URBN) has also adopted — at younger shoppers with less spending power.
But will “buy now, pay later” work?
Only a third of millennials have credit cards according to Bankrate. The average millennial in the U.S. also has a net worth of just $8,000 according to Deloitte, which gives them significantly less spending power than previous generations. Most Gen Z shoppers don’t have credit cards yet. They mostly use debit cards or linked payment apps, which restrict purchases to the amount of cash in their bank accounts.
Klarna, the global alternative payments provider, is getting trendy with the Millennial favorite fashion brand rue21. Customers can choose to pay with four equal payments collected bi-weekly – with no interest or fees. With Klarna, these cool customers get the ability to stay ahead of trends even faster with a smooth checkout and a payment option that boosts flexibility and purchase power.
The necessity for businesses to keep up with the customer is increasingly important considering that U.S. shoppers admit to buying clothes and accessories online an average of 10 times a year. For Gen Z shoppers, aged 16-24, this number increases to 18 times per year, with nearly a quarter (23%) of them admitting to shopping online 1-3 times per month. Millennials are shown to shop online 14 times per year and the 55+ age group, 8 times per year. Considering these Millennial and Gen Z demographics are credit card averse and debt conscious, Klarna delivers an appealing and accessible method for shoppers to take control of their finances in a manageable way.
That placed fifth out of the 50 metro areas that LendingTree ranked based on Census Bureau data. Seattle had a business profitability rate of 70.9 percent, making it the leader nationally. The only other cities ahead of Denver were Louisville, Ky.; Indianapolis and Portland, Ore.
U.S. consumer debt climbed in May at about the same pace as a month earlier, led by the largest advance in revolving debt outstanding since October, suggesting Americans’ favorable economic outlook is underpinning continued spending.
Total credit rose $17.1 billion from the prior month, in line with the median estimate of economists, following a $17.5 billion gain in April, Federal Reserve figures showed Monday. While credit card and other revolving debt outstanding increased at a faster rate, non-revolving credit posted the smallest increase in almost a year.
Approval rates for small business loan applications inched up to yet another record high of 27.6% at big banks ($10 billion+ in assets) in June, while the approval percentage also climbed at small banks, hitting 50% for the first time in 2019, according to the Biz2Credit Small Business Lending Indexreleased today.
Smallbank approvals of small business loan applications climbed one-tenth of a percent from 49.9% in May to 50% in June.
Small business loan approval rates among alternative lenders dropped one-tenth of a percent to 57.0% in June, down a notch from 57.1% in May.
Approximately 45% of newlyweds between the ages of 18 and 53 went into debt to pay for their wedding. And once married, nearly half of the newlyweds who obtained wedding-related debt said money has caused them to consider divorce. On the flip side, only 9% of couples without wedding-related debt contemplate divorce.
Companies like SoFi, Laurel Road and Splash Financial are just a few of the fintech industry names that have made their way into the student lending world.
Credible. This is a platform that allows you to compare student loan refinance rates from eight different lenders.
LendKey. Similar to Credible, Lendkey is a platform that allows the borrower to compare refinance rates side by side.
CommonBond. CommonBond for Business offers a flex contribution program that includes an option to directly contribute to paying down employee student loans, or to work with employees on financial literacy techniques for reducing their debt.
Gradifi. Gradifi is another fintech offering refinance options, bundled with employee benefits packages called SLP, or “student loan paydown”.
Earnest. This fintech offers refinance options to individuals with a more limited credit history that may not qualify for other traditional options.
FutureFuel. FutureFuel uses behavioral economics, which is the study of human behavior to explain economic decisions people make.
Today, according to Pew Research Center more than 50 million American adults are mobile-only consumers.
Each year, IDology publishes a Consumer Digital Identity Study aimed at giving businesses visibility into how consumer preferences and opinions related to identity and fraud are shifting. This year’s study confirms the continued movement toward mobile, finding that in the last 12 months, for the first time, consumers opened more new accounts online with their mobile devices than on computers. A closer look at the data shows that 50 million American consumers (20% of all online adults) registered for new accounts exclusively on a mobile phone, up 10% from last year. This growing number has implications for financial service providers as they strive to keep fraud out while giving consumers a seamless digital experience.
Online lending startup MoneyLion told a North Carolina federal court Tuesday that a suit over alleged unlicensed payday lending belongs in arbitration, arguing the proposed class of borrowers had signed valid arbitration agreements when taking out their loans.
A survey of 2,000 adults by the peer-to-peer lender found that 47 per cent of respondents felt more comfortable revealing details about their bank accounts with their partner than their most intimate secret, while the same percentage would prefer to give an insight into their finances over their Netflix password.
SME focused peer-to-peer lender Funding Circle was correct to proactively take the decision to tighten its lending criteria in pulling back from higher-yielding lower-quality loans, according to ratings agency DBRS.
This is a contrast between China Rapid Finance Limited (NYSE:XRF) and X Financial (NYSE:XYF) based on their analyst recommendations, profitability, institutional ownership, risk, dividends, earnings and valuation. The two companies are Credit Services and they also compete with each other.
Earnings & Valuation
Earnings Per Share
China Rapid Finance Limited
Table 1 shows the top-line revenue, earnings per share (EPS) and valuation for China Rapid Finance Limited and X Financial.
Shanghai Kuailu Investment Group Co. Ltd., along with two affiliated companies, and 15 defendants were convicted of fraudulent fundraising or illegal fundraising or both, according to the final ruling (link in Chinese) made by the Shanghai High People’s Court on Tuesday.
Kuailu, along with its affiliates, illegally raised more than 43.4 billion yuan ($6.3 billion) from the public, causing 40,000 people to take financial losses, the court said.
The Interim Administrative Measures for the Business Activities of Peer-to-Peer Lending Information Intermediaries define “peer-to-peer lending” as direct lending/borrowing realized between peers on an internet platform. Peers include natural persons, legal persons and other organizations.
With the hope of capitalizing on the recent rise of the Bitcoin price, the co-founder of the mining giant Bitmain, Wu Jihan, has organized a group to develop “Matrixport,” a financial services startup for cryptocurrencies. According to its CEO Ge Yuesheng, Matrixport will function as a one-stop-shop for not just safekeeping of digital assets but also for crypto lending and over-the-counter trading.
Marketplace lending platform October, which is based in France, has expanded in Germany, according to a blog post by CEO and founder Oliver Goy.
October has selected Thorsten Seeger, a Funding Circle veteran, as CEO of October Deutschland as its plots its ongoing expansion across Europe. October currently operates in France, Spain, Italy, and the Netherlands.
Lagan Investments, a fund founded by the North’s biggest house-builder, Kevin Lagan, has taken a 10 per cent stake in peer-to-peer lender Property Bridges and is to supply it with €5 million in lending capital.
Morningstar, Inc. (Nasdaq: MORN) has named Detlef Scholz as president of its expanded, global ratings organization. The leadership announcement comes as Morningstar today completes its previously announced acquisition of DBRS, the world’s fourth largest credit ratings agency, for a purchase price of US$669 million.
Scholz will assume his new role Aug. 1, 2019 and report to Morningstar Chief Executive Officer Kunal Kapoor.
Deutsche Bank (DBKGn.DE) is in talks with SoftBank-backed (9984.T) British fintech firm OakNorth to use the latter’s credit analysis and monitoring platform, a source with knowledge of the discussions told Reuters.
P2P loan: The CoVEX platform also implementing a decentralized p2p lending service. This allows users across the world to receive loans in lesser time and even reduces the repayment fee while at the same time protecting the interests of the lender.
Yet SMEs are being stiffed by traditional lending practices: 44% of small businesses have been knocked back for finance in the last 12 months. Put simply, SMEs are being underserved and ignored by the banks.
Indian new-age digital banking start-up NiYO Solutions has raised US$ 35 million in Series B funding round from Horizons Ventures, Tencent and existing investor, JS Capital. NiYO is founded by banking veteran Vinay Bagri and technology veteran Virender Bisht. NiYO had previously raised US$ 14 million in funding rounds led by Prime Venture Partners. With the current round the total fund raised by NiYO is US$ 49 million.