Thursday June 20 2019, Weekly News Digest

ASIC borrowers

News Comments Today’s main news: LendingClub expands borrower program. Funding Circle forced to narrow range of valuation. Yirendai revenues come from haircut loans. Chinese P2P lenders explore southeast Asia. Borrowell passes 1M members, raises $20M. Today’s main analysis: 5 ASIC findings on marketplace lending. Today’s thought-provoking articles: US Core, inflation ease. Fintech lending algorithms discriminate […]

The post Thursday June 20 2019, Weekly News Digest appeared first on Lending Times.

ASIC borrowers

News Comments

United States

United Kingdom

China

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News Summary

United States

LendingClub Expands Program to Help Borrowers Actually Pay Off Debt (Lend Academy), Rated: AAA

LendingClub shared a few stats on borrowers who choose this method:

  • Save an average of nearly $900 over the course of their loan
  • Cut their credit card interest rate nearly in half
  • Increase their credit score in just three months

The product has been tested for over a year and LendingClub is working with a partner network of over 1,700 credit card, bank and loan companies to make the process seamless. What’s interesting is borrowers can add up to 12 creditors per loan which is an important feature since borrowers often hold balances across many cards.

Turning Lending Club’s Worst Loans into Investment Gold (Towards Data Science), Rated: A

This is a writeup of a machine learning project I completed. In this post I hope to:

  • Describe my algorithm for predicting loan defaults.
  • Use the algorithm to construct a portfolio of clean loans

Inflation Miss (PeerIQ), Rated: AAA

US Core CPI rose by 2% YoY in May, just at the Fed’s target rate but below economists’ expectations. Consistently low inflation is boosting calls for a rate cut next week. The market is pricing in a 24% probability of a rate cut next week and a 76% probability of a rate cut in September.

Source: Bloomberg, PeerIQ

Fintech algorithms discriminate 40% less than traditional lenders (Quartz), Rated: AAA

Algorithmic fintech lending is less discriminatory against minorities than traditional loan officers, according to a recent study of US mortgages. The findings signal hope that technology could provide financing that’s more fair, but the research also underscores how widespread discrimination remains.

The US housing market has long been prejudiced against minorities. When Latino and Africa-American borrowers are looking to buy a home, they usually end up paying 7.9 basis points (0.079 percentage points) more than whites to take out the mortgage, and 3.6 basis points more when they refinance the debt, according to a National Bureau of Economic Researchworking paper published this month.

Buttigieg worries tech may add racial bias to credit decisions (American Banker), Rated: A

Pete Buttigieg said the way credit scoring is done in the U.S. is fraught with inequality and he’s worried the process may get worse with systems based on artificial intelligence.

Commercial Real Estate Crowdfunding Eyes ’18-Hour Cities’ for Small Investors (The Street), Rated: A

When Clear Point Gardens, a 604-unit apartment complex in Columbus, Ohio, recently changed hands, it produced a nearly 43% gain in 16 months, an amazing windfall for investors in the deal.

All 68 of them.

The sale of Clear Point, financed with help from investors on CrowdStreet’s online platform, is the latest example of how online syndication is revolutionizing the way deals are financed in the $6 trillion commercial real estate market.

HSBC launches digital mortgage platform with help from Roostify (HousingWire), Rated: A

One of the world’s largest banks is about to join the digital mortgage revolution, as HSBC Bank USA, the U.S. arm of HSBC Group, announced that it is partnering with Roostify to launch a digital mortgage platform.

Mirador’s Trevor Dryer: ‘The world doesn’t need another high price lender’ (Tearsheet), Rated: A

Trevor started Mirador to fill this void of bank-originated small business lending. We talk about why he started Mirador with a lending as a service model and what painpoints he was addressing.

Dave is launching a checking account that helps users build their credit score (Business Insider), Rated: A

The Los Angeles-based company, backed by investors including Mark Cuban, the DJ Diplo, and hedge fund Mark 2 Capital, said on Tuesday it’s rolling out a new checking account product that reports all rent payments to credit agencies. The new feature, added to Dave’s original app, helps customers to build their credit. Dave plans to begin reporting utility payments later this summer.

CoreLogic Launches Marketrac Platinum (CoreLogic), Rated: A

With Marketrac Platinum, lenders and title companies can utilize the interactive platform to identify top performing real estate agents and brokerage firms to prioritize professional relationships based on market trends.

Zirtue Revolutionizes Peer-to-Peer Lending (IT Business Net), Rated: A

Sprout Mortgage Launches ACORN Automated Underwriting System (Yahoo! Finance), Rated: A

Sprout Mortgage, the innovative force in Non-QM lending, today announced the launch of its ACORN automated underwriting system (AUS) as part of an ongoing effort to deliver value-added services to its third-party origination clients.

Finicity Integrates with LendingQB to Optimize Mortgage Origination Process (PR Web), Rated: B

Finicity announced today an integration with LendingQB. LendingQB’s platform now uses Finicity’s digital Verification of Assets (VoA) solution to allow lenders to free up resources, increase processing speed and reduce mortgage fraud while providing borrowers with a more efficient and positive experience.

Cardholders Seek to Capital-ize on Madden (The National Law Review), Rated: A

Last week, three Capital One cardholders filed a putative class action in the Eastern District of New York, Cohen v. Capital One Funding, LLC,1 alleging that the rates of interest they paid to a securitization trust unlawfully exceed the sixteen percent threshold in New York’s usury statutes.  The Plaintiffs seek to recoup the allegedly excessive interest payments and an injunction to cap the interest rates going forward.

Fundbox Tapped By Top B2B E-Commerce Software Provider OroCommerce to Power Net Terms (Fundbox Email), Rated: A

According to a 2019 research study by

Cross River poaches execs from student refinancing firm Laurel Road (American Banker), Rated: A

Cross River Bank, a Teaneck, N.J.-based bank that focuses most of its energy on supporting fintechs, is hiring several people from the student loan refinancing company Laurel Road to its capital markets team.

Cross River’s fintech partners include Affirm, Circle, Best Egg, Coinbase, Rocket Loans, Stripe, Upstart and Transferwise.

Optimizely Closes $ US105M Financing Round (Which-50), Rated: A

Optimisation platform Optimizely has closed US$105 million in financing, including US$50 million in Series D funding. The funding, led by Goldman Sachs Private Capital Investing, also included Accenture Ventures.

Austin Niemiec Named New Executive Vice President of Quicken Loans Mortgage Services (Yahoo! Finance), Rated: B

Quicken Loans Mortgage Services (QLMS), the second largest mortgage lender serving the needs of brokers, regional banks and credit unions, today announced that Austin Niemiec has been named Executive Vice President.

Self Lender Awarded Inaugural Inclusive Fintech 50 (PR Newswire), Rated: B

Self Lender is pleased to announce its inclusion in the inaugural list of winners of the Inclusive Fintech 50. The Inclusive Fintech 50 is a competition launched in February to help early-stage fintech companies attract capital and resources to benefit the world’s 3 billion financially underserved people. The competition was organized by MetLife Foundation and Visa Inc., with global nonprofit Accion and World Bank Group member IFC.

United Kingdom

No sign yet of breaking out of circle (The Times), Rated: AAA

The early days of a company’s life on the stock market tends to set the tone for what follows. The grief around Funding Circle’s listing began even earlier and has continued to plague it.

Days before trading in shares of the specialist online lender began at the end of September, Funding Circle and its bankers were gunning for a valuation of up to £1.75 billion, only to be forced to narrow the expected range shortly before it came to market, and then to price the shares at the lower level of 440p apiece.

Source: Refinitiv

Three Biggest Overperformers And One Underperformer In Peer-To-Peer Lending (4th Way Email), Rated: AAA

Landbay

  • Over £300 million lent.
  • Maximum loan size to property valuation (LTV) 80% – better than all the major high-street banks.
  • Average LTV: 72% – highly suitable for these kinds of mortgages.
  • Average rent: 190% of the monthly mortgage payment.
  • Over 90% of mortgages are to experienced and professional landlords.
  • Reserve fund: 0.6% of outstanding mortgages – modest but useful.
  • Type of lending: residential BTL.
  • Typical risk of this type of bank lending: very low.
  • P2P bad debts: none.
  • Interest rate: 3.54% after expected bad debts.

Proplend

  • £65 million lent.
  • Maximum loan size to property valuation (LTV) 75% and investors can choose to limit to 50% – lower than all high-street banks.
  • Average LTV  60% – highly suitable for these kinds of mortgages and loans.
  • Minimum rent on rental properties usually 110% of the monthly mortgage payment.
  • Type of lending: residential and commercial rented properties up to five years; some development lending; a mix of senior and junior debt (junior means other lenders get repaid first if the borrower’s property has to be forcibly sold to repay the loans).
  • Typical risk of this type of bank lending: low to moderate for shorter-term rental properties; moderate to high for developments and junior debt.
  • P2P bad debts: none.
  • Interest rate: 7.32% to 9.43% after expected bad debts (7.32%-12.13% before bad debts).

CrowdProperty

  • £35 million lent.
  • Maximum loan size to property valuation (LTV) 70% and investors can choose to limit to 50% – lower than all high-street banks.
  • Average LTV  61% (against starting value of property) – very low for these kinds of loans.
  • Type of lending: property development lending.
  • Typical risk of this type of bank lending: moderate to high.
  • P2P bad debts: none.
  • Interest rate: 8% after expected bad debts (7.32%-12.13% before bad debts).

Rebuildingsociety – the Underperformer

  • £15 million lent.
  • Type of lending: unsecured small business lending to sub-prime.
  • Typical risk of this type of bank lending: moderate to high.
  • P2P bad debts: 17% of total lent in pounds
  • Interest rates: estimate an average 5% after heavy losses.

British Business Bank adds £60m firepower to non-bank lender (AltFi), Rated: A

Simply, a non-bank lender, focused on SME asset financing has scored a a third financing tranche of £60m from the British Business Bank.

One fifth of UK investors upping exposure to debt investments (Investment Week), Rated: A

One-fifth of UK investors are increasing their exposure to debt amid low interest rates and Brexit uncertainty, according to research from FJP Investment, which found this number climbs to 34% when 18-to-35 year-olds are considered in isolation.

However, the independent survey – which comprises 950 investors – discovered 44% of participants are more focused on short-term debt investments over this financial year due to both political and economic uncertainty; this figure rose to 68% among under 35s.

OakNorth completes loan to Oncore IT for the acquisition of Fuse Technologies (Fintech Finance), Rated: A

OakNorth – the bank for entrepreneurs, by entrepreneurs – has provided a loan to Oncore IT, a managed service and cloud platform provider.

The finance has been used for the acquisition of Fuse Technologies, a London based provider of unified communications tools.

Brexit and drive for growth sees IT fintech salaries surge (AltFi), Rated: A

London-based java developers lead the pack, commanding starting salaries of up to £60,000, followed by software developers in the capital on up to £55,000.

Intense competition between UK-based fintechs – lead by Revolut, TransferWise, OakNorth and Funding Circle – and high street banks attempting to upgrade their services has led to bidding wars in order to gain top level IT professionals, said the report called The UK Fintech Revolution.

Lloyds first to launch open banking app for credit cards and savings (Fintech Futures), Rated: A

Customers of Lloyds Bank, Halifax and Bank of Scotland are the first to see their savings accounts and credit cards in one place, thanks to open banking technology, reports Jane Connolly.

J.P. Morgan working on a secretive digital banking project based out of London (TechCrunch), Rated: A

A number of incumbent banks are known to be developing new digital-first products in a bid to keep the new wave of challenger banks at bay and now it appears that the latest to make that move is J.P. Morgan.

According to sources, the investment bank has begun recruiting for a secretive skunkworks project within London’s booming fintech industry. Very few details are known about what exactly J.P. Morgan plans to build, although TechCrunch understands the bank is busy hiring high level developers with full-stack and cloud-based dev skills for the new project, along with other personnel.

Following Facebook’s Libra launch, UK regulator hints at greater Big Tech scrutiny (AltFi), Rated: A

The FCA says technology is dramatically changing the markets it regulates and blurring regulatory boundaries in a new report into its activities.

China

Yirendai Revenues Come From Suspect Haircut Loans (Seeking Alpha), Rated: AAA

Over 60% of YRD’s FY 2018 revenues stem from “haircut loans” (P2P service fees charged to borrowers) that are prohibited by Chinese regulation. Recent developments in the P2P lending sector with regards to questionable lending practices, unethical collections, and usury are not being disclosed in YRD’s SEC filings, leaving U.S., Canadian, and international investors completely in the dark.

The Chinese P2P Lending Market

Unlike in developed countries, there are no administrative bodies (such as the U.S. Securities Exchange Commission) which regulate peer to peer lending exchanges in China. Instead, such services are regulated by self-organized internet associations and retail banks. The lack of meaningful oversight has caused the Chinese P2P lending market to bubble into $178.9 Billion in FY2018, almost 22 times the size of the P2P lending market in the United States and 447 times that of Japan’s.

Over 850+ fraudulent/ponzi lending platforms were exposed in FY 2018 alone.

Source: iiMedia Research

But the bad numbers don’t end here:

– The total loan volume amounted to 245.9 billion in Q12019, down -55.5% Y/Y.

– 85.7 in new loans were lent in March 2019, down -53.5% Y/Y.

– Principal balance of all loans: 8,029 CNY billion, down -3.6% Y/Y.

– sum of P2P lenders and borrowers, up 21%.

Chinese P2P lending platforms look to Southeast Asia amid industry purge back home (Technode), Rated: AAA

A slew of Chinese fintech and peer-to-peer (P2P) lending platforms are looking to more lenient markets in Southeast Asia (SEA), following a prolonged industry crackdown in China that has left the sector reeling.

Over the past year, China’s regulatory clampdown on risky financial practices has wiped out more than half of the country’s P2P lending platforms. As of May, just 900 survived, down from almost 1,900 recorded a year ago.

In early June, Indian daily newspaper the Economic Times reported that Chinese fintech companies, including WeShare, 9F Group, and CashBUS, are exploring investment opportunities in the country’s burgeoning online lending sector, particularly in the P2P lending space.

XW Bank Welcomed by IMF as One of 6 Outstanding FinTech Companies From China (Yahoo! Finance), Rated: A

The International Monetary Fund (IMF) welcomed 6 outstanding FinTech companies from China including Ant Financial, WeBank and XW Bank.

European Union

Snask helps Klarna to communicate its ‘smooth’ banking offer with off-the-wall film and photography (Creative Boom), Rated: A

When Stockholm studio Snask was approached by Klarna, one of Europe’s biggest banks, to help communicate how its revolutionary payment solutions make life easier for its customers, it set out to create seven “never-seen-before” worlds.

LHV Bank Integrates Estateguru Investments in Online Banking Dashboard (P2P-Banking), Rated: A

You might wonder why that is relevant as most readers are unlikely to be LHV Bank customers. LHV Bank is a bank in Estonia.

I think it is highly interesting, as it is – to my knowledge – the first time a bank has integrated p2p lending investments in its customer interface. So the LHV bank customers, not only see their accounts and stock depots, but also their Estateguru investments conveniently listed in their online bank dashboard. Much has been talked about what role could banks have in p2p lending (mere transaction banks? providing credit lines?) and also there is a lot of speculation if PSD2 (open banking) will help fintechs to seize the access to the customer from banks because they could control the user interface in the future. But this is actually a first step a bank takes in the opposite direction. By aggregating “non-bank” information inside the dashboard, they aim to make the banking interface more useful for the customers.

International

How Klarna is Helping the World Shop Like a Queen (Power Retail), Rated: AAA

Klarna is the latest Buy Now Pay Later (BNPL) app to sweep through the world. Originating in Sweden, the BNPL platform allows users to purchase goods and schedule repayments in timeslots. At this point in time, Klarna is the first and only BNPL platform that’s available in the U.S. It’s also available in the UK, Denmark, Norway, Belgium and many other European countries.

Australia

Five key ASIC findings on marketplace lending (Cuffelinks), Rated: AAA

In April 2019, the Australian Securities and Investments Commission (ASIC) released its third report on marketplace lending, the Survey of marketplace lending providers: 2017–18The report paints a clear picture of a once-nascent industry enjoying growth with new borrowing increasing by nearly 45% in the 2017-18 financial year. The report notes that this growth is moderating compared to the near doubling in funds borrowed the previous year (from $156 million to $300 million). By contrast, the Australian Bureau of Statistics (ABS) reports that overall personal lending has declined by an astonishing 24% in the 12 months to March 2019.

Source: Cuffelinks

The ASIC report found that the average interest rate charged for marketplace loans entered into during the 2017–18 financial year was 11.5%, up from 10.5% in the 2016–17 financial year.

Source: Cuffelinks
India

All you need to know about P2P lending and Commodities (India Times), Rated: AAA

Vinay Mathews, Founder and COO, Faircent and Sanjay Gakhar, Vice President, MCX talks about the benefits of investing via the P2P platform and Commodities, ET Wealth investment Workshop in Delhi Listen in!

Watch the video here.

Asia

Indonesian firms turn to P2P lenders for funds (Asia-First), Rated: AAA

Small companies in Asia-Pacific are tapping new funding sources, according to the Economist Intelligence Unit (EIU) study commissioned by Mastercard, with peer-to-peer (P2P) lending platforms in Indonesia reportedly posting USD1.4bn worth of transactions in 2018, an increase from USD20m in 2016.

Canada

Borrowell passes one million members, raises $ 20 million in new capital (Zone Startups), Rated: AAA

RFI alumni company Borrowell announced that it had reached significantly more than a million users, making it Canada’s largest consumer fintech company by that measure.

In addition to this membership milestone, Borrowell also confirmed that it has received $20 million in Series B funding.

AltFi Toronto Summit 2019 (AltFi), Rated: B

WED, 9 OCTOBER 2019, 08:30 – 17:30 EDT

Blind Bird tickets are now on sale at a 50% discount ahead of the Summit’s agenda being announced later this Summer.

Authors:

George Popescu
Allen Taylor

The post Thursday June 20 2019, Weekly News Digest appeared first on Lending Times.

Tuesday May 9 2017, Daily News Digest

Lending Club

News Comments Today’s main news: OnDeck reports Q1 2017 results. dv01 partners with SoFi. Elevate Credit announces Q1 2017 results. SoFi lets employees sell 20% of vested stock. Crowd2Fund announces new venture debt product. Klarna, Trustly fight EBA on bar screen scraping. Today’s main analysis: LC may  have hit a dead end. The real returns for Prosper investors. Today’s thought-provoking articles: […]

Lending Club

News Comments

United States

United Kingdom

China

European Union

International

India

Canada

News Summary

United States

OnDeck Reports First Quarter 2017 Financial Results (PR Newswire), Rated: AAA

OnDeck® (NYSE: ONDK) today announced first quarter 2017 financial results, additional planned cost savings, and a target to achieve GAAP profitability in the second half of 2017.

Loans Under Management increased to $1.2 billion, up 25% from the comparable prior year period, driven primarily by the growth of originations over the period.  In the first quarter of 2017, originations were $573 million, up 1% from the prior year period, primarily reflecting the impact of credit tightening implemented during the quarter.

Gross revenue increased to $92.9 million during the first quarter of 2017, up 48% from the comparable prior year period.  The increase in gross revenue was primarily driven by higher interest income, partially offset by lower gain on sale revenue. Interest income increased to $87.1 million during the quarter, up 63% from the comparable prior year period, and primarily reflected the growth of average loans, which increased 66% versus the comparable prior year period.  The Effective Interest Yield for the first quarter of 2017 was 33.9%, down from 34.5% in the comparable prior year period, primarily reflecting changes in portfolio mix over the period, partially offset by recent price increases.

Gain on sale was $1.5 million during the first quarter of 2017, down 79% from the comparable prior year period. The decline primarily reflected a lower Gain on Sale Rate during the quarter and the decision to reduce the amount of loans sold through OnDeck Marketplace.  OnDeck sold $42.0 million1 of loans through OnDeck Marketplace at a 3.5% Gain on Sale Rate during the first quarter of 2017, compared to $123.7 million1 of loans at a 5.7% Gain on Sale Rate in the first quarter of 2016.  Loans sold or designated as held for sale through OnDeck Marketplace represented 9.0% of term loan originations in the first quarter of 2017 compared to 25.9% of term loan originations in the comparable prior year period.  To optimize long-term financial performance, OnDeck plans to reduce the percentage of term loan originations sold through OnDeck Marketplace to less than 5% for the remainder of 2017.

Net revenue was $35.4 million during the first quarter of 2017, down 13% versus the comparable prior year period. The decline in net revenue reflected the reduction of OnDeck Marketplace sales, which led to lower gain on sale revenue, and higher provision expense in the first quarter of 2017 versus the prior year period.

Provision for loan losses during the first quarter of 2017 increased to $46.2 million, up from $25.4 million in the comparable prior year period.  The increase in provision expense primarily reflected a 20% increase in originations of loans designated as held for investment in the period and the comparatively lower original loss estimate for loans originated in the prior year period. The Provision Rate in the first quarter of 2017 was 8.7% compared to 5.8% in the prior year period, reflecting that the credit tightening in the first quarter of 2017 was not in effect for the full quarter and the previously mentioned lower loss estimates in the prior year period.  The Provision Rate decreased sequentially from 10.2% in the fourth quarter of 2016.  OnDeck expects the Provision Rate for the remainder of 2017, taken as a whole, to be approximately 7%.

The 15+ Day Delinquency Ratio increased to 7.8% in the first quarter of 2017 from 5.7% in the prior year period and from 6.6% in the fourth quarter of 2016 due primarily to the continued seasoning of the portfolio.  At the end of the first quarter of 2017, the average term loan age in OnDeck’s portfolio was 4.5 months, up from 3.3 months in the prior year period and 3.9 months in the fourth quarter of 2016.  The Net Charge-off rate increased to 14.9% in the first quarter of 2017 from 11.2% in the prior year period and increased sequentially from 14.2%.

The Cost of Funds Rate during the first quarter of 2017 increased to 5.9% from 5.5% in the prior year period primarily due to the increase in short-term rates.

Operating expense was $46.7 million during the first quarter of 2017, up 5% over the comparable prior year period.  Operating expense in the first quarter of 2017 was favorably impacted by the company’s previously announced cost rationalization plan which is expected to produce approximately $20 million of annual savings relative to its 2016 exit operating expense run rate.  Additionally, operating expense in the first quarter of 2016 benefited from a $1 million release in the reserve for unfunded loan commitments and a $1 million gain related to changes in foreign currency values.  Without these benefits, operating expense between the two periods would have been relatively flat.  The company is implementing an additional $25 million of operating expense run rate savings compared to OnDeck’s 2016 exit run rate, the majority of which will be implemented over the remainder of 2017.  The savings are focused on the company’s U.S. lending operations and will be achieved primarily through a workforce reduction to be implemented in the second quarter of 2017.  Combined with the company’s prior workforce reduction, total headcount at the end of the second quarter of 2017 is expected to be approximately 27% lower than December 31, 2016 levels, due to both involuntary terminations and actual and scheduled attrition.

GAAP net loss attributable to On Deck Capital, Inc. common stockholders was $11.1 million, or $0.15 per basic and diluted share, for the quarter, which compares to GAAP net loss attributable to On Deck Capital, Inc. common stockholders of $12.6 million, or $0.18 per basic and diluted share, in the comparable prior year period.

Adjusted EBITDA* was negative $5.2 million for the quarter, versus negative $7.3 million in the comparable prior year period.  Adjusted Net Loss* was $7.6 million, or $0.11 per basic and per diluted share for the quarter versus Adjusted Net Loss of $8.8 million, or $0.13 per basic and per diluted share, in the comparable prior year period.

Unpaid Principal Balance was $1.03 billion at the end of the first quarter, up 57% over the prior year period.  The increase primarily reflected originations growth over the year and OnDeck’s decision to retain more loans on its balance sheet in connection with reducing OnDeck Marketplace loan sales.

Total Funding Debt at the end of the first quarter of 2017 was $788 million, up 69% over the prior year period, which primarily  reflected the growth of Unpaid Principal Balance as well as the increased utilization of debt facilities during the period.  OnDeck continued to expand its funding capacity in 2017. During the first quarter of 2017, OnDeck extended the maturity date of its asset-backed revolving debt facility with Deutsche Bank to March 2019 and increased the facility’s borrowing capacity to approximately $214 million. During the first week of May 2017, OnDeck extended the maturity date of its asset-backed debt facility that finances OnDeck’s line of credit offering to May 2019, increased the facility’s borrowing capacity to $100 million, and decreased the funding costs by 200 basis points.

At the end of the first quarter of 2017, cash and cash equivalents were $73 million, as compared to $80 million at December 31, 2016.

Guidance for Second Quarter and Full Year 2017

Second Quarter 2017

  • Gross revenue between $85 million and $89 million.
  • Adjusted EBITDA between negative $3 million and positive $1 million.

Full Year 2017

  • Gross revenue between $342 million and $352 million.
  • Adjusted EBITDA between positive $5 million and $15 million.

Adjusted EBITDA guidance for the second quarter and full year 2017 includes an approximately $3.5 million charge to be recognized in the second quarter of 2017 associated with the planned workforce reduction.

On Deck Goes From Hot Tech Startup to Dull Lender (WSJ), Rated: AAA

The online lender said Monday that it would put a renewed focus on achieving profitability by slowing growth and cutting costs. Shares fell by nearly 7% in response. Fundamentally, investors are finally waking up to the fact that On Deck is more of a niche financial company than a revolutionary technology platform.

Loan originations may decline by a fifth next quarter, and total originations will be lower this year than last.

If these sound like the business objectives for an ordinary bank, that’s no coincidence. The company plans to sell less than 5% of its loans through its online marketplace this year, Chief Financial Officer Howard Katzenberg said, down from 18% in 2016 and 34% in 2015. Of the rest, some will be securitized, but most will be held on its balance sheet.

On Deck’s shares are down 79% from their initial public offering in December 2014. At 1.2 times book value, it is now valued like a financial company and roughly in line with the average bank. This still looks a bit rich because it has no profits.

Lending Club may have hit a dead end (Business Insider), Rated: AAA

Despite the aftermath of a governance

Lending Club Keeps Pushing Its Comeback (PYMNTS.com), Rated: AAA

The last 12 months have undoubtedly been a difficult period for marketplace lending pioneer Lending Club.

But, as Q1 earnings hit last week, it seems clear that progress is happening — albeit at a fairly slow pace.

Retail investors also expanded, though more slightly — reaching 15 percent, up from 13 percent in the prior quarter.

Lending Club also announced $2 billion originations, surpassing $26 billion in total loans since inception almost ten years ago and 2 million total consumers served on its platform.

Moreover, investing in marketplace lending is not so profitable as it has been in the recent past, and returns to investors have dropped sharply.  Competition has forced down interest rates in the marketplaces to attract consumers with cheaper underwriting, and charge-offs have risen.

According to data from Orchard, a technology provider to the industry, total returns from an index of U.S. consumer loans came to 3.95 per cent last year, down from 8.71 per cent in 2014.

Lending Club’s stock performance has been flat over most of the last year, though it has lost roughly 60 percent of its stock value.

The firm has also seen a massive change-over in its staffing and leadership since its more scandalous days a year ago.  CEO Scott Sanborn cut and rehired 179 jobs and brought on a new CFO, COO, general counsel and chief capital officer.

Leading FinTech Analytics Platform dv01 Announces Reporting Partnership with SoFi (PR Newswire), Rated: AAA

dv01, the reporting and analytics platform that brings transparency to lending markets, today announced a reporting partnership with SoFi, a modern finance company taking an unprecedented approach to lending and wealth management. Institutional investors who use dv01 to conduct analysis on consumer loans and bonds will now have access to all SoFi securitizations, including student and personal loans.

Under the first phase of the partnership, dv01 will receive securitization data directly from SoFi, which it will normalize, format, and roll up for monthly level reporting. The data, which includes 23 historical deals, will be available through the Securitization Explorer, dv01’s online reporting and analytics portal for consumer securitizations.

Investors who have been approved to view SoFi data will have 24/7 access to updated loan level performance and composition details, as well as a suite of reporting and analytics tools. dv01 will be responsible for updating deal collateral data monthly, so investors can continue to track the evolution of a pool over time, even after the deal has closed.

dv01 has provided similar reporting services for several other online lenders, overseeing an aggregate securitized collateral balance in excess of $7 billion. The company launched its dedicated Securitization Explorer tool in February, and since then has also announced its role as Loan Data Agent for the Prosper Marketplace loan purchase consortium led by Jefferies LLC, Soros Fund Management, Third Point LLC, and New Residential Investment Corp, a Fortress Investment Group REIT.

Elevate Credit Announces First Quarter 2017 Results (Stockhouse), Rated: AAA

Elevate Credit, Inc. (NYSE:ELVT) (“Elevate” or the “Company”) today announced results for the first quarter ended March 31, 2017.

First Quarter 2017 Financial Highlights

  • 20% year-over-year revenue growth: Revenues totaled $156.4 million, a 19.6% increase from $130.7 million for the prior-year period.
  • Nearly 40% year-over-year growth in loans receivable: Combined loans receivable – principal, were $444.5 million, a 38.6% increase from $320.7 million for the prior-year period.
  • Stable credit quality: Loan loss provision was 52.9% of revenues and within our targeted range of 45%-55%. The ending combined loan loss reserve, as a percentage of combined loans receivable, was 15.7%, slightly lower than the 16.3% we reported for the prior-year period.
  • Record low customer acquisition costs: The total number of new customer loans for the first quarter of 2017 was approximately 53,000 with an average customer acquisition cost of $198, compared to approximately 41,000 customer loans and an average customer acquisition cost of $235 for the prior-year period.
  • Positive net income: Net income of $1.7 million, or $0.06 per pro forma diluted share, which was based on a 2.5 to 1 stock split and all preferred stock converting into common stock upon the IPO but it excludes the 14.3 million common shares issued in the IPO since this happened after quarter end.
  • Continued improvement in Adjusted EBITDA margin: Adjusted EBITDA was $24.9 million and the resulting Adjusted EBITDA margin was 15.9%.

Financial Outlook

For the full year 2017, the Company expects total revenue of $680 million to $720 million, net income of $13 million to $19 million and Adjusted EBITDA of $95 million to $105 million.

With an IPO on the shelf, SoFi lets employees sell 20 percent of vested stock (CNBC), Rated: AAA

Online lender SoFi is letting employees cash out a portion of their holdings to give them liquidity as the company waits to go public.

Last month, SoFi employees and ex-employees were permitted to sell 20 percent of their vested options in a secondary share sale that totaled $336.5 million, according to sources familiar with the matter. The offering priced the shares at $16.30, said one source, who asked not to be named because the deal was confidential.

The real returns for Prosper Marketplace investors (AltFi), Rated: AAA

Yesterday we learnt that leading US marketplace lender Prosper has been misstating investor returns, due to a system error.

The system error did not affect the money received by investors, only the calculation of their annual return.

Prosper has recently been equipping itself to represent its performance more accurately. The firm signed a deal with analytics firm AltFi Data in March, thus opening itself up to third-party scrutiny.

AltFi Data’s returns methodology gives Prosper a net return of 48.8 per cent over 5 years (up to 28 February 2017), equivalent to an annualised compound rate of 8.3 per cent.
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Square is rolling out its first debit card (recode), Rated: A

Last month, Jack Dorsey teased the launch of a Square debit card. Today, the company started allowing some users of its Square Cash money-transfer service to order one of these cards for themselves.

The prepaid card isn’t linked to your bank account, but instead to the Square Cash app. That means you can only use it to spend money that you are holding in your Square Cash account.

A Square spokesperson said these signatures are screened before printing to prevent inappropriate words and drawings from making their way onto the cards. But there is obviously wiggle room to include your Twitter handle, if you want to be like Jack, or just a first name, too. The cardholder’s first and last names are printed on the back of the card.

Creating a deeper relationship with Square Cash customers might also open up other business opportunities in personal finance for the $7 billion payments company. Lending, anyone?

AI may just create the illusion of good credit decisions (American Banker), Rated: A

AI is also second only to blockchain technology as the most overused and overhyped term referring to technologies that are taking over banking and finance, particularly in credit decisions.

The reality is AI will make lending more consistent and efficient; however, it remains to be seen if it will make lending safer.

How will regulators ever know if the AI algorithms are performing in a nonbiased way? Humans are the programmers of the algorithms, and therefore human biases and tendencies cannot but leak into the overall decision process.

We know the saying “bad data in means bad data out.” AI should help to solve that challenge as it more accurately identifies the “bad” or not useful elements. However, the challenge with AI may not be with “bad data” but rather a lack of necessary data as the economic environment changes.

To this end, neural networks, which are self-learning and so complex that the humans who create them are unable to describe them, also present a number of problems. The foremost problem is: If you don’t know how the decision is made, you cannot be confident that the decision is being made correctly. Yes, you can judge by credit performance. But when a lender runs afoul of a regulation, the regulators won’t accept “We just don’t know how it works” as an excuse.

Affirm Looks To Launch Everyday-Use Virtual Cards (Bank Innovation), Rated: A

Affirm, the lending startup that provides loans at the POS, is looking into launching everyday-use virtual credit cards, Bank Innovation has learned.

The company, launched by a PayPal cofounder Max Levchin, provides point-of-sale loans that allow customers, particularly millennials, to finance purchases with participating merchants. Once approved, consumers receive a one-time use virtual card via Affirm’s app, which they can use for the purchase. Then, depending on individual consumers, Affirm splits the bill into monthly payments.

The Future of Fintech and the importance of payments to a SaaS business: WePay’s Week in Payments (Wepay), Rated: A

Scanning the news in the payments world this week was an interesting exercise because the two standout themes are very much aligned with what we do here at WePay and with the future of digital payments. The first theme is around the future of Fintech and where the nascent industry is headed and the second is around the huge impact of delivering payments as a an integrated part of a solution rather than as an afterthought.

David Dunn, of Braintree Europe, has a piece in ITProPortal about why payments are more than plumbing. It’s a good piece and makes a great case for integrating payments. He says that you can help your business by making it easier for your customers to get to a checkout and by making it easier to scale. We would argue that a SaaS business can go even further by using payments to better retain existing customers and help them grow, better adding new customers by scaling as Dunn mentions and also by optimizing revenue for the platform itself. The way to achieve these goals is via white-label payments.

Kabbage’s Next Growth Phase (deBanked), Rated: A

When you consider the recent milestones Kabbage has achieved it makes it difficult to think of the fintech lender as a startup. In recent weeks Kabbage surpassed a couple of major milestones comprised of extending $3 billion in funding to 100,000-plus small businesses. More than half of those loans were directed toward existing credit lines. Kabbage also recently priced a $525 million private securitization, which tips the company’s hand on strategy.

Kabbage is pursuing its growth plans all while performing a confidential search for a new chief technology officer, details for which are expected to unfold in the coming months.

At the LendIt USA 2017 event, Kabbage co-founder & CEO Rob Frohwein alluded to the online lender’s plans to reach new territories, details for which were scarce. Treyger shared, however, that Kabbage’s global growth plans are somewhat tied to the company’s pipeline of banking partnerships.

Kabbage already counts as partners household names including Santander, ScotiaBank, and ING, all of which license software from Kabbage. Meanwhile, as big banks are accessing smaller businesses, Kabbage’s growth blueprint includes serving larger ones.

How fintech startup Elsen helps anyone become a data whiz (Built in Boston), Rated: A

With less than $1 million in total funding, fintech startup Elsen may not have much by way of investments, but a recent partnership with Thomas Reuters should bring some star power to the burgeoning company.

Founded in 2013 by three Northeastern grads, Elsen is a platform-as-a-service company that enables anyone at large financial institutions to harness massive quantities of data for better decision making and problem solving.

Besides offering data storage to some of the largest vendors in the world, Elsen’s product uses machine learning and AI to speed up the testing of financial algorithms by way of backtesting, a process that sifts through historical financial data to see how an algorithm would perform at tasks like automatically picking stocks, for example.

Interim OCC chief should put fintech charter on ice (American Banker), Rated: A

One thing that Keith Noreika, the new acting head of the Office of the Comptroller of the Currency, could tick off of his to-do list is to pause the OCC’s efforts to develop a fintech charter. Noreika should then take some time to assess whether the charter is developing in a way that best serves the public.

Former Comptroller Thomas Curry deserves major credit for getting the OCC to think about how to encourage innovation in the banking sector. The fintech charter is an important piece of this effort. Unfortunately, based on the most recent information put out by the OCC, it appears that the previous leadership wasn’t thinking sufficiently outside of the box. The charter is shaping up to needlessly mimic many of the requirements of traditional depository institutions, even though those requirements do not make sense in the nondepository context.

For example, requiring firms to get OCC permission to change business plans, and to convince the agency that the firm will not fail, are not necessary.

However, the OCC should not press pause on its response to the lawsuit filed by the Conference of State Bank Supervisors challenging the charter.

‘If you change the rules we’re going to disconnect you, fintech’ (American Banker), Rated: A

As one of the banking industry’s largest vendors, FIS says it might be well suited to help banks effectively navigate the world of fintech.

ANTHONY JABBOUR:  When Apple Pay came out, banks weren’t running to Apple Pay because they thought it would drive new streams of revenue for them. A lot of them did it because they were afraid the bank across the street would offer it and they would suffer by not offering it.

One thing we’re trying to do that’s a little different is, if we believe there’s value for our customers, we want to have the disruptor connect to the FIS network and have our banks connect to it from the FIS network, so we can leverage our banks’ negotiating power with the fintech.

What are some of the types of companies you’re thinking of—alternative lenders, PFM app providers, billing companies?

JABBOUR: Payments would be one. The banks that I speak to look at lending and they say banks lost the lending franchise and exclusivity and other companies popped up over the years and took a major portion of that. And they look at payments right now and they feel strongly they can’t lose the payments franchise.

Do you think that banks can take back market share in U.S. person-to-person payments with Zelle?

JABBOUR: We think that has a lot of potential. We offer Zelle to our clients. I believe we can create a capability for P-to-P for our banks that would be better than any fintech’s because we could make it real-time and it would be accessible from an ATM. I could send you money and you can go to an ATM with your mobile phone and withdraw the cash without having a bank account. We could also tie it with prepaid cards, so instead of me sending you $500, I could send you a $500 Home Depot gift card as a housewarming gift. It’s P-to-P, but it’s more thoughtful because we’re integrating it with prepaid.

What does it take for a payment platform to work? It takes brand recognition so people know it exists, and it needs ubiquity, it needs to work in every place you would want it to work. It’s never about the technology. I like with Zelle that banks said look we have to find a way to solve the brand issue, and if we all use the brand Zelle, that’s going to help. And I think it will.

I could see that argument, but you could argue that banks are late to this P-to-P payment party and that PayPal’s Venmo is the clear leader. Do you think the Zelle brand can win hearts and minds?

JABBOUR: Without question, banks are late to a number of capabilities. When you look at P-to-P, Venmo is the brand, it’s a verb. Whether or not banks can catch up with Venmo comes down to how compelling they make the offer, what else they can wrap around it, how much do they ultimately invest in it. What I know is, if they hadn’t pursued Zelle, they would have fallen further behind.

Crowdfunding: Now Anyone Can Own a Skyscraper! (Inside Indiana Business), Rated: A

Have you ever wanted to own a skyscraper? How about an entire apartment complex? Well, good news, now you can! And, you don’t have to meet “accredited investor” requirements. How? It’s called crowdfunding!

According to the University of Cambridge Judge Business School, in 2015 crowdfunding real estate transactions topped $1.2 billion; over three times the amount in 2014.

Research the Crowdfunding Platform: Currently, more than 125 crowdfunding platforms exist. According to Jason Best, a partner at Crowdfund Capital Advisors, you’ll want to consider comparing associated fees, the quality of property management, and the sustainability of the platform. As with any new industry, it’s safer to choose among the larger more-established companies such as Realty Mogul, Realty Shares, and iFunding, to name a few.

If you’re interested in learning more about this topic, I suggest you listen to podcast Episode #108, “Investing in Real Estate Via Crowdfunding Platforms,” on J. David Stein’s website, Money for the Rest of Us.

Listen to the podcast below:

Robot or human financial advice field is changing (VC Star), Rated: A

What if a visit to the financial adviser was more like an impromptu coffee grab than a dental checkup?

Instead of a boring annual visit, imagine a quick call from you adviser in which he makes a couple simple suggestions to keep your portfolio on track.

That’s the future, according to Michael Kitces, research director for Pinnacle Advisory Group in Columbia, Maryland. Speaking to financial advisers attending last month’s Morningstar Investment Conference in Chicago, Kitces tried to reassure them that investors, rather than turning their money over to automated investment platforms, will continue to pay for advice if it’s relevant and timely.

In a future aided by software tracking customer portfolios and everyday spending, advisers will already know their clients’ problems and will use more frequent chats to figure out fixes, he said.

Is Fintech creating Neo-Luddites demanding a “robot-tax”? (Daily Fintech), Rated: A

A (hypothetical) documentary titled “Software has been eating the world” about Microsoft, would have to cover the first decade (‘75-‘86) before the company went public and the stunning and difficult to replicate nowadays fact that about 12,000 Microsoft employees became millionaires, in addition to the 3 billionaires.

So, when Bill Gates spoke in February about the idea of “the robot that takes your job should pay taxes”, the world reacted.

Just recently, the city of San Francisco announced a change in its public policy framework that will make it the first city to implement a robot tax (Business Insider May 2, San Francisco is considering a once unthinkable measure to offset the threat of job-killing robots).

In financial services, there were no such issues raised when ATMs, online brokerage and e-banking transformed the financial industry.

In this second wave that follows the accelerated pace of tech innovation of other sectors, we all agree that we don’t want a world in which no bank submits candidacy for the Global Finance awards  Call For Entries: Digital Bank Awards 2017. Or a world that has an increased tax for the winner and those shortlisted in the Euromoney Best Digital bank awards: for 2016, Singapore’s DBS Bank, and the short list included BBVA, Citi, and ING.  Or a world that taxes more startups providing the “picks and shovels” for the future of Invisible Finance, like:

–       Cloud banking platforms offering Banking as a Service, like Mambu

–       Cloud based investment financial app stores, like Investcloud

–       AI chatbot technology providers like Kasisto

–       Self-Sovereign identity solutions, like Uport

–       Mortgage enterprise solutions providers like Roostify

The Fintech ecosystem is still relatively un-bundled and it would seem even more problematic to develop and apply a framework for a “robot tax” for the Fintech space.

Billionaire investor Draper to participate in blockchain token sale for first time (Reuters), Rated: B

Billionaire venture capitalist Tim Draper soon plans to take a step that even he, a long-time bitcoin aficionado, has eschewed to now: buying a new digital currency offered by a technology startup.

Draper, an early supporter of bitcoin and its underlying blockchain financial ledger technology, told Reuters in an interview he will for the first time participate in a so-called “initial coin offering” (ICO) of Tezos slated later this month.

Tezos, a new blockchain platform launched by a husband and wife team with extensive Wall Street and in hedge fund backgrounds, will launch the ICO on May 22. Draper will also invest in U.S.-based Dynamic Ledger Solutions Inc, the creator of Tezos, but did not disclose details.

Insight, JG Wentworth among top-rated on online marketplace (Mortgage Professional America), Rated: B

Insight Loans, JG Wentworth Home Lending and CBC National Bank have taken the top three spots in an annual ranking of mortgage lenders.

The league table from online loan marketplace LendingTree rates the lenders on its platform in three categories – mortgages, personal loans and auto finance – based on customer reviews.

CVC Credit Partners provides financing to support Wastewater Specialties, LLC (PE Hub), Rated: B

CVC Credit Partners (“CVC”) announced today that CVC’s U.S. Middle Market Private Debt business acted as Administrative Agent on a first lien senior secured debt facility provided to Wastewater Specialities, LLC (“WWS”). The proceeds were used to refinance existing debt and support future growth through equipment purchases.

United Kingdom

Crowd2Fund Announces New Venture Debt Product (Crowdfund Insider), Rated: AAA

On Friday, crowdfunding platform Crowd2Fund announced the launch of its new venture debt product, which is targeted towards early stage businesses that have a short term requirement to access cash to facilitate growth. The funding portal noted that the interest rates for the product’s loans range from 10% to 15%, with a borrow time period of normally no more than 12-18 months.

Crowd2Fund also noted those businesses that are suitable for the venture debt will be able to increase their value during the loan duration.

MOBILE BIOMETRIC PAYMENT VOLUMES TO TRIPLE IN 2017 TO NEARLY 2BN (Juniper Research), Rated: A

A new study by Juniper Research has found that the number of mobile payments authenticated by biometrics will rise to nearly 2 billion this year, up from just over 600 million in 2016.

The new research – Mobile Payment Security: Biometric Authentication & Tokenisation 2017-2021 – found that while Apple Pay had provided the catalyst for initial growth, other leading wallets including Android Pay and Samsung Pay were increasingly offering biometric solutions for authentication.

Furthermore, the size of the opportunity has been boosted by the greater availability of fingerprint sensors. According to the new research, around 60% of smartphone models are expected to ship with such sensors this year, with many Chinese vendors incorporating them into mid-range models.

The research emphasised the increasing momentum behind alternative biometric solutions. It recognised Mastercard as an early leader in this space through its Identity Check Mobile capability, due to go live later this year. Informally known as “selfie pay”, this allows users to scan their fingerprints and/or take selfies to validate their identities and thereby make payments.

PwC appoints leaders for Analytics, AI, Cybersecurity and FinTech arms (Consultancy.uk), Rated: A

In a bid to expand its footprint in the rapidly growing digital and technology-led innovation space, PwC, one of the major players in the field, has in recent weeks appointed a number of new senior technology positions in the UK wing of their group.

In another appointment aimed at driving growth in technology and financial technology (FinTech), Zubin Randeria, a PwC partner for 23 years non-consecutively, was unveiled as the new lead for around 200 cyber security experts in the UK, as the firm continue to focus on advising companies how to resist digital threats; a key concern of modern business.

Mark Leaver, PwC’s head of Financial Services Consulting since 2015, will meanwhile expand his existing role to include the multi-billion pound FinTech market in his scope. The FinTech space is growing fast, with interest in services particularly high among younger tech savvy users, and on the back of the spike global investments in FinTech companies grew to $25 billion last year, according to data from KPMG.

Bank of England criticised for fintech faux pas (Financial News), Rated: A

The Bank of England has come under fire for working with a fintech startup that was fined $700,000 by a US regulator for breaking banking secrecy laws.

Players in the fintech field have accused the central bank of appearing not to have conducted proper due diligence when selecting its partners after it emerged that Ripple, the startup chosen by the Bank of England to help research new blockchain technology, was fined for “willfully violating” several requirements of the Bank Secrecy Act.

RESCUE DEAL FOR MOTOR FINANCE PROVIDER (Insider Media), Rated: A

A Leicester-headquartered vehicle finance provider has been acquired out of administration.

Vehicle Trading Group called in administrators from Grant Thornton on 2 May 2017.

The company provided finance via its subsidiaries Vehicle Stocking Ltd and Vehicle Credit Ltd, which have now been sold to RateSetter.

China

11 Of The Largest Companies In China Dominate Chinese Fintech (Lend Academy), Rated: AAA

Of the 1.4 billion people in China, only about 300 million are in the national credit bureau, which means that more than a billion people have no credit profile.  Hundreds of millions of Chinese “unbanked” consumers are middle class, have high discretionary income, and would be considered prime or super prime borrowers. On top of that, the large Chinese banks have no history in making consumer and small business loans and were never designed for that purpose (they make infrastructure and commercial real estate loans).

We are seeing the leading Chinese companies from a diverse set of industries muscle their way into the fintech sector.  This article highlights some of the key players that have made the horizontal jump into fintech.

Ant Financial Services Group is owned by Alibaba Group, the largest e-commerce firm in the world.  Ant Financial is focused on serving small and micro enterprises as well as consumers. Ant Financial is the largest fintech company in the world.

JD Finance Group operates seven lines of business: supply chain finance, consumer finance, crowdfunding, wealth management, payment services, insurance and securities trading. JingBaobei is their microlending platform and Baitiao is their crowdfunding platform.

Baidu Jinrong is focused on many different verticals under different brands including consumer finance (Baidu Umoney), wealth and fund management (8 Baidu), payments (Baidu Wallet) and financial asset transaction platform services.

Greenland Group (Stock Code: 337.HK) is one of the world’s largest publicly traded real estate development companies with more than 15 million clients. They are the largest Chinese developer in the US. Greenland Financial was formed in December 2015 and it includes three main business sectors: an online wealth management platform for individual investors; a professional asset allocation and wealth management service for middle-class clients; and a cloud platform to provide internet technology and data analysis services.

Wanda Internet Finance Group leverages Wanda’s offline commercial platform to form a business division comprising of four activities: data application, credit service, online lending and payment, and creating an innovative financial offline-to-online model.

Lufax Holdings is one of the world’s largest and most successful fintech firms.  It is owned by Chinese insurance giant Ping An Group. The business consists of three divisions: Shanghai Lujiazui International Financial Assets Commodity Exchange Co (Lufax), Shenzhen Qianhai Financial Asset Exchange Company Ltd (QEX), and Puhui Financial.  Lufax offers wealth management and insurance services to its 23 million registered users, QEX focuses on institutional business and cross-border business, and Puhui Financial provides loans to consumers and micro-businesses.

Zhong An is China’s first Internet-based insurance company utilizing Big Data analytics.

Tencent has recently created Tencent FiT (Financial Technology Group), which includes TenPay (payments), WeChat Pay, Mobile QQ Wallet, Tencent Credit Services, and Tencent Licaitong, its money market fund and wealth management platform.

Tencent also launched WeBank, the first online-only bank in China, a joint venture that also includes Shenzhen Baiyeyuan Investment and Shenzhen Li Ye Group.

SinaPay is a social payments solution. Weiquanbao is a social wallet focused on mobile payments. Weicaifu is their Internet financial services company with a focus on personal financial management.

Phoenix Finance is an online platform, established by Phoenix Satellite Television Holdings, to provide intelligent financial services for Chinese investors worldwide.

Ezubao P2P Lending Fraud Update: 26 on Trial (Crowdfund Insider), Rated: A

Do you remember the Ezubao Ponzi scheme that ended in the single largest peer to peer lending fraud of all time? Investors, saw approximately 50 billion CNY or about USD $7.2 billion flushed down the tube. Reportedly 900,000 investors were impacted as an astounding 95% of the loans listed on the P2P lender’s site were said to be totally bogus.  Well process kicked off at the end of last year and according to a report from Xinhua, 26 Ezubao executives are now on trial. Proceedings are taking place in No. 1 Intermediate People’s Court in Beijing. Ezubao executives Anhui Yucheng and Yucheng Global and 10 company executives, including Yucheng chairman Ding Ning, have been charged with fraud.

European Union

Fintechs fight plan to bar screen scraping and protect European banks (CNBC), Rated: AAA

A coalition of 62 financial technology (fintech) firms including Klarna and Trustly and lobbying organizations such as the European Fintech Alliance (EFA) are fighting plans by the European Banking Authority (EBA) to ban screen scraping of customer data from online banking interfaces.

The screen scraping ban would come into force as part of the draft regulatory technical standards (RTS) rule under the European Union’s (EU) revised Payment Services Directive (PSD2) regulation.

Screen scraping is the process of collecting screen display data from one application and translating it so that another application can display it. This is normally done to capture data from a legacy application, such as an IBM mainframe computer for instance, in order to display it using a more modern user interface such as a PC or mobile. However, it can also be used to steal data or, depending on your point of view, legitimately gather business intelligence.

The EBA proposals are meeting fierce resistance from European fintechs that have signed a manifesto to fight the plan.

International

Introduction To P2P Lending Marketplace (Code Brahma), Rated: A

One of the biggest advantages of using an online P2P lending platform is that the loans are usually cheaper as the platforms operate with lower overheads and software powered automation. The P2P lenders charge money for the platform and doing credit checks for borrowers.

So, if a platform decides the unit note to be valued at $10 and an investor decides to invest $10,000 she’ll end up with 1000 notes to invest in borrowers.

One loan is typically funded by multiple investors. An investor willing to invest 1000 notes can choose to fund 10 different loans with 100 notes each or can mix and match the amount with loans.

According to a PwC report, the P2P lending platforms in the United States issued loans worth $ 5.5 Billion approximately. The global P2P market was estimated at $26.16 Billion in the year 2015. Transparency Market Research predicts the market to grow by CAGR of 48.2% year on year, reaching a whopping $897.85 Billion by the year 2024. Research and Markets expects the P2P market to grow at a CAGR of 53.06% between the years 2016 and 2020. Morgan Stanely predicts the market to be valued at $490 Billion by 2020.

Fintech vs Bank: Roles And Advantages Of Both Parties (ValueWalk), Rated: B

Globally, fintech funding was US$5.5 billion since 11 years ago and can be up to US$78.6 billion now.

According to TechinAsia, the reasons why consumers can adopt fintech are because of it is easy for them to set up an account, in fact, rates and fees that fintech offered are more attractive and cheap. On the other hand, fintech helps SMEs to acquire some funds.

Banks provide many services such as savings, loans, transfer of funds and much more. Some said that banks would disappear in the future. However, as long as bank dominates on lending, investing and deposits, they will sustain in the market. Banks basically will keep the customer’s information and will not easily give it to other parties. So the customer will feel more secure and safe doing the transaction with the bank.

India

Fintech Forging The Future For Cashless Economy (Techstory), Rated: AAA

When Prime Minister Narendra Modi announced on November 8 that over 80% of our paper currency would be obsolete thereon, most of the country was left spell bound. While this was a move to discourage and partially halt the flow of counterfeit currency in a supposedly invisible economy, also crippling most industries and investors, there was one industrial sector that sat by the side and smirked – FinTech.

While the ripples of the move are still being felt every now and then, the financial climate is much more stable now than it was 5 months ago.

The first challenge, aided in part by the recent Demonetisation announcement, is that of making the population aware of the ease and comfort associated with online banking and cashless transactions. Not only does this involve an ideological shift, it also requires the population to cross a mental barrier – security.

Looking at it through this lens, it comes as no surprise that a report by Finextra Research Ltd. states that 69% of existing FinTech firms plan on raising their expenditures on content marketing. The scope of development for an online app of such a sort can be exponential, as has been witnessed by the growing popularity of Paytm!

In fact, certain projections point to a 30% decrease in banking employment over the next decade, as the concentration of delivering banking services in person decline with time.

While we have always been used to being dependent on our banking corporations to provide the chunk of capital services that we have always required, over time, it will be these fintech apps that will do the job, with banks holding safe, liquid assets and deposits. The borrowers and savers will now all be available on your smartphone.

While the landscape of lending and borrowing might change when it comes to user experience, the degree and scope of investments will only increase. However, the way we read and process it may change over time. As cryptocurrencies becomes easier to process and handle worldwide, other technologies supporting the development of transactions in such currencies will develop.

As innovation takes the lead while the scope of integration broadens, startups can create a real impact in society through different mediums like the P2P marketplace.

Take Kiva, for example, a wonderful peer-to-peer micro finance website that aims to alleviate poverty by allowing everyday people in developed nations to finance budding entrepreneurs in developing nations. Kiva allows you to make a loan to an entrepreneur across the globe for as little as $25. It is one of the world’s first online lending platform connecting online lenders to entrepreneurs across the globe.

PayActiv is another app that encourages better ways and modes of saving regularly, thereby increasing the independence of many of its users over time.

10 tips to get personal loans despite having low credit score or CIBIL score (Plunge Daily), Rated: B

Banks do not give unsecured loans like personal loans as easily as they do secured loans like home loan or auto loan. They take various parameters into consideration and not everyone can pass the stringent eligibility criteria. Credit score is where most applicants lose out on, especially when half of them have no idea what credit score is in the first place. Lenders are totally dependent on CIBIL (country’s biggest credit bureau) among others to understand customers’ past credit behavior and hence, credit worthiness.

Meanwhile, here are ways to get personal loans despite having low credit score:

  1. Approaching non-traditional or alternate lenders – Qbera offers one such personal loan product that is specifically designed for salaried employees above age 23 with high earning potentials. They offer emergency loans if your CIBIL score is 625 and above.
  2. Having a good salary at present
  3. Getting the help of spouse or other close family member or friend
  4. Applying with the same lender
  5. Applying to lenders that caters to people with low CIBIL Scores – Many online lenders understand that a low credit score doesn’t necessarily translate to low credit worthiness. There could be plenty of reasons for a less-than-ideal score due to technicalities.
  6. P2P lending for personal loans – Quite a popular lending trend in developed countries is peer-to-peer lending, it is not that common in India. Customers haven’t taken to it because the loan amount offered is small while the rates are high.
  7. Work on improving your credit score
  8. Mixing it up wisely – If you have taken more loans, please ensure that you have a wise mix of secured and unsecured loans rather than having only one kind.
  9. Paying taxes
  10. Getting loan against collateral
Canada

Home Capital suspends dividend, taps credit line, bolsters board (Reuters), Rated: AAA

Home Capital Group Inc on Monday suspended its dividend, tapped its credit line and added new directors, the latest attempts from Canada’s biggest non-bank lender to restore investor confidence and stem the flow of customer withdrawals.

The company also estimated that the balance in its high-interest savings accounts (HISA) halved in the past week and said it has withdrawn from its C$2 billion ($1.5 billion) credit line for the second time. Home Capital said the balance in its HISAs is expected to slump to about C$192 million on Monday, down 50 percent from a week ago.

Authors:

George Popescu
Allen Taylor

Wednesday April 12 2017, Daily News Digest

REITs vs. RECF

News Comments Today’s main news: Further comments on Elevate’s IPO. Aspire announces new ALD Data and Analytics Module. Funding Circle to stop property development lending. Morningstar assigns MOR RV1 Residential Vendor Ranking to First Associates as Consumer Finance Servicer. Today’s main analysis: Texas real estate market great for RECF. Today’s thought-provoking articles: UK VC investment up, European funding […]

REITs vs. RECF

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United States

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United States

Elevate Announces Closing of Initial Public Offering (BusinessWire), Rated: AAA

Elevate Credit, Inc. (NYSE:ELVT) (“Elevate” or the “Company”) today announced the closing of its initial public offering of 12,400,000 shares of common stock at a price to the public of $6.50 per share. In connection with the closing, the underwriters fully exercised their option to purchase an additional 1,860,000 shares.

Elevate has now sold a total of 14,260,000 shares of its common stock in connection with its initial public offering for total net proceeds to the Company, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by Elevate, of approximately $81 million.

Elevate will use approximately $15 million of the net proceeds to repay a portion of the outstanding amount under its convertible term notes, approximately $65 million of the net proceeds to repay a portion of the outstanding amount under its financing agreement and the remainder, if any, for general corporate purposes, including to fund a portion of the loans made to its customers.

UBS Securities LLC, Credit Suisse Securities (USA) LLC, and Jefferies LLC acted as joint book-running managers and as representatives of the underwriters for the offering. Stifel, Nicolaus & Company, Incorporated and William Blair & Company L.L.C. also acted as joint book-running managers for the offering.

Texas Real Estate Market Active for Real Estate Crowdfunding (Yahoo! Finance), Rated: AAA

RealtyShares, a leading online marketplace for real estate investing, has just released data showing the total amount of crowdfunded real estate investments in Texas. To date $28.1 million has been raised for 31 real estate deals, ranking Texas among the most popular states for investors on the RealtyShares platform along with California and Florida.

Nearly half of all deals funded in Texas to date have been for multifamily properties with a trend favoring equity over debt. Investments have been spread throughout the state, with the most investments centered around the Dallas-Fort Worth Metroplex, followed by Austin and Houston.

The average investment in Texas since inception is $907,000, with the largest being a $3.25 million Class A multifamily property in Grand Prairie sponsored by Ventures Development Group.

Aspire Financial Technologies Announces New Asset-Level Disclosure (ALD) Data and Analytics Module (Aspire Email), Rated: AAA

Aspire Financial Technologies Inc. (“Aspire”), announced today the release of a new Asset-Level Disclosure module that will provide free access to market participants looking to access and analyze loan-level characteristic and performance data for asset pools of US public securitizations. On an ongoing basis, issuers publish these files to the SEC’s Edgar website. They currently cover the asset verticals of auto-loans, auto-leases, and CMBS, but will soon expand to RMBS and other debt securities. The module is part of Aspire’s more broadly focused Gateway TM platform, which enables users to seamlessly research, workflow, monitor, and forecast their consumer or SME loan risk exposure, across multiple use cases.

The release of consumer credit ALD data publicly provides for unique opportunities. For the first time, Aspire Gateway ABS ALD module gives participants the ability to stratify and compile performance views both within individual trusts and across trusts with similar asset pools on the same platform. Aspire released the product with an initial focus on auto loan asset pools, and will be expanding coverage to other verticals with filings on the SEC website. Aspire also makes available individual raw CSV files converted directly from the issuer postings on its platform.

Morningstar Credit Ratings Assigns MOR RV1 Residential Vendor Ranking to First Associates Loan Servicing as a Consumer Finance Servicer (PR Newswire), Rated: AAA

Morningstar Credit Ratings, LLC today assigned its MOR RV1 residential vendor ranking to First Associates Loan Servicing, LLC as a consumer finance servicer. Morningstar’s forecast for the ranking is Stable.

First Associates, headquartered in San Diego, provides third-party loan and lease servicing for originators and institutional investors. The company was founded in 1986 as First Associates Mortgage Corporation. The current management team subsequently acquired the company in 2008 and reformed it as First Associates Loan Servicing, LLC.

The Morningstar ranking is based on a variety of factors, including:

  • First Associates’ pervasive enterprise risk management culture that consists of consumer finance compliance protocols, internal audit, self-risk assessment protocols, quality assurance, call monitoring scoring and feedback, and a robust vendor management oversight program.
  • The company engages a third-party auditing firm to produce a SOC 1 audit report on an annual basis.
  • The effectiveness of First Associates’ servicing platform is evidenced by above-average call center metrics, portfolio volume growth, strong client diversity, and minimal client turnover.
  • First Associates benefits from a solid technology environment that includes a third-party consumer finance servicing system, a well-defined project management process, effective network security protocols, and a disaster recovery and business continuity plan that leverages the company’s cloud-based infrastructure and multiple office locations for geographic data redundancy and processing.

Real Estate Crowdfunding Is Riskier Than You Think (Seeking Alpha), Rated: A

Real estate crowdfunding is increasingly becoming an alternative to REITs (NYSEARCA:VNQ) for individual investors seeking real estate exposure.

The arguments in favor of real estate crowdfunding are typically the following:

  • Their deals provide higher risk adjusted returns
  • Crowdfunding assets are uncorrelated with the stock markets and are hence more stable than REITs.

Below I provide my counter arguments to real estate crowdfunding:

1. If you are not a real estate expert, you cannot perform adequate due diligence to evaluate individual properties for investment.

Most crowdfunding websites directly target individual investors who are not experts in commercial real estate investing or finance in general. The issue is that without these specialized skills, how are you then supposed to properly assess a given deal on a real estate crowdfunding website? It is simply impossible.

2. Success in real estate investing is largely a function of the management team

Lastly, you would have the same issue here concerning due diligence. It is very difficult to perform proper due diligence of the management team when investing through crowdfunding platforms.

REITs on the other hand are very large and have great resources. They can attract the best talent and retain the best in class managers of the whole industry.

3. Crowdfunding deals are riskier in many ways compared to REIT investments.

Private market sponsors tend to use substantially more leverage than REITs and often target riskier properties. While REITs utilize today on average about 30% leverage, it is not uncommon for private investors to use up to 80% loan to value.

Real estate crowdfunding is also highly illiquid and it may be difficult to exit your investment when desired; especially if the real estate market went into a down cycle.

4. Private sponsors may charge high fees

Most REITs are today internally managed and have great scale which reduces the impact of the G&A expenses. Crowdfunding deals, on the other hand, will be sponsored by asset management firms or real estate developers that will want to earn their fees to make a profit.

5. REITs have historically outperformed private real estate investments.

Over the last 40 years, REITs have returned more than 13% per year to investors according to NAREIT.

 

NCSS Partners with Kabbage, Inc. to Help Small Businesses (PR Newswire), Rated: A

Today, the National Cybersecurity Society (NCSS) entered into a strategic partnership with Kabbage Inc., an online financial technology company that provides funding directly to small businesses through its automated lending platform.

A recent study by FireEye revealed that 77 percent of global cybercrime affects small and medium sized businesses. NCSS is a non-profit organization created to educate and advise small business owners on the complex and changing world of cybersecurity.

NCSS works with victims of cybercrime, government and businesses of all sizes to help fortify cybersecurity on a continual basis to help thwart evolving cyber threats and to mitigate the effects of cyber incidents when they occur.

Mortgage Lenders Maintain Positive Sentiment for 2017 (Marketwired), Rated: A

The Lenders One® Cooperative, a national alliance of independent mortgage bankers, correspondent lenders and suppliers of mortgage products, has issued the results of the second annual Lenders One Mortgage Barometer, a survey of 200 mortgage lending professionals. According to the 2017 Lenders One Mortgage Barometer, a large majority of lenders (94 percent, up from 62 percent last year) expect an increase in mortgage purchase production.

Continued economic improvement should give first-time home buyers the boost they need to enter the market. In fact, about three in five lenders (59 percent) say it is very likely that there will be an increase in first-time home buyers in 2017. The optimism around first-time home buyers aligns with the recent report from the National Association of Realtors® that showed the share of sales to first-time home buyers grew from 2015 to 2016 and was the highest it’s been since 2013. However, many lenders are predicting some challenges to mortgage industry growth with respondents seeing consumer debt as the highest risk factor this year (41 percent).

Lenders Analyze Growth Opportunities
The populations that are most frequently cited as offering robust opportunity in 2017 include Generation X (86 percent) and millennials (85 percent, up from 79 percent last year). Following closely are nontraditional buyers, those who are in the rental and vacation home markets (84 percent, up from 70 percent last year); boomerang buyers, those people who can now qualify for a mortgage after undergoing a short sale, foreclosure or bankruptcy (83 percent, up from 68 percent last year) and baby boomers (82 percent).

Lenders Identify Strong Jumbo Loan Activity
A large majority of lenders (93 percent) report that they already originate non-qualifying mortgage (non-QM) loans. Bolstering one part of the non-QM market is continued home appreciation, especially in higher end markets, which has created demand for jumbo loans. Indeed, 91 percent of lenders project a significant increase in jumbo loan origination volume in 2017 for their organization.

Lenders’ Take on Emerging Trends
Given the growth of the sharing economy and services such as Airbnb, 82 percent of mortgage lending professionals anticipate an increase in people looking to finance larger homes to take advantage of rental incomes.

FinTech’s Shifting Landscape (The M Report), Rated: A

The ever-shifting landscape of technology has leaked into mortgage originations.

mello™ is loanDepot’s new digital mortgage platform including the customer facing platform.  It serves borrowers, sales, operations, and the entire ecosystem of realtors, builders and the title industry on a single platform that allows us to continuously improve and iterate the experience.

What other kind of technologies aren’t being implemented in the mortgage industry that can be brought in? What do think can be implemented to streamline the mortgage application process?

There are numerous foundational technologies that have existed in the mortgage industry and other related industries for a long time that have limited implementation.  In the early 2000s, we saw the first digital mortgage. Since then there has been incremental improvements but limited adoption.  E-Sign is another example of technology that has existed for the last fifteen years, also with limited adoption. With the regulatory changes brought on by TRID, they are becoming a little bit more main stream.  Technical change requires business drivers, effective change management and a platform to enable adoption.

Kabbage Co-Founder & Head Fintecher Kathryn Petralia: Power Lending, Predictions & Progress (Crowdfund Insider), Rated: A

Since launching in November 2008, team Kabbage has grown its global advanced lending infrastructure to enable small businesses to borrow necessary funds through its direct SMB lending product which has been adopted by banks and non-banks worldwide. The FinTech innovator has provided over $3B since its founding and has raised $236M in equity since its formation as well as more than $1 billion of debt.

Kathryn: The Office of the Comptroller’s “FinTech charter” is an exciting proposition for Kabbage. While the details are still being discussed, there is no denying that Fintech is here to stay when the “Big Bank” regulator is talking about bringing our platform into the mainstream of the U.S. financial system. Folks in Washington should think about what the technology actually does instead of how to box it into a rule or regulation.

Kathryn: Every executive hates uncertainty. We currently interact in one way or another with the FDIC, FTC, SEC, CFPB, SBA, Federal Reserve, OCC and other parts of the Treasury and state agencies. I don’t see that as a very efficient or navigable system, and I think the agencies agree because they are always vying with one another for authority. Washington is in a state of (uncertain) transition, and we hope to make our little slice of D.C. a lot more efficient and work to protect customers’ rights instead of checking boxes.

Europe is a different animal altogether. There is plenty of uncertainty in the EU, but I am not planning on a “Frexit” or a “Beljump” this year. We are chugging along with our European partner banks and preparing for GDPR, the EU’s solution to unified data protection for European citizens. Europeans are pragmatic people. They want to share their data with third parties but also know that the process is safe. Safe and open data is squarely with our culture and goals at Kabbage.

Kathryn: I haven’t been shy about my view on brokers—I generally don’t like them. Kabbage avoids the broker model because we want to interact directly with our customers.

As I mentioned, this is the year of the platform model. I expect to see large and medium banks beginning to integrate with third-party Fintech platforms to better serve their customers and expand their product offerings. It makes economic sense—do what you’re good at (working with customers and managing cheap capital) and partner with other specialized firms for technology and innovation. The U.S. market is amazingly under-tapped from both mega-banks to local institutions and we hope to continue to expand here, Europe and elsewhere.

Kathryn: Our strategic, referral and white label partnerships are vital to driving new customers to Kabbage.

US fintech regulation: a divided picture at the federal level (Banking Tech), Rated: A

Marketplace lending has been a topic of regulatory and industry conversation for the last several years.

Currently, marketplace lending is attempting to fill gaps still left in credit availability after the financial crisis, especially in small dollar small business loans. In this case, small dollar means $250,000 or less. Community banks have generally provided the lion’s share of small business and agriculture loans in the US, but the financial crisis and the response to it both eliminated many community banks and created a credit crunch. Marketplace lenders have stepped up to fill in the resulting gaps for both small business and personal loans. While the first generation of marketplace lenders tended to be distinct, separate entities, many are now partnering with banks. Marketplace lenders are not the only ones: money transmitters are exploring bank partnerships in order to avoid costly and time consuming fifty state licensing solutions.

Treasury received about 100 responses to its RFI and the white paper is generally positive about the potential for online marketplace lending to expand access to credit. Treasury offers its view of the RFI responses and provides some advice and recommendations for moving forward in this space. It found that online marketplace lending has expanded access to credit, especially small businesses, though the majority of the loans originated were for consolidating debt. The expansion of data used for underwriting was one of the more exciting innovations by online lenders and is being adopted by a larger segment of the financial services industry. However, these “data-driven algorithms” do not provide the borrower the opportunity to correct information and they may result in fair lending violations and disparate impacts. It’s really too early to determine the impact, but the expansion of data and modeling are an area on which Treasury will continue to focus. In addition, online marketplace lending has emerged in the low cost of credit environment during the Obama years; these lenders have not been properly tested during a higher cost of capital environment.

The SEC is also getting into the game on fintech. It has established a Distributed Ledger Technology (DLT) Working Group to investigate the new technology and its potential uses and abuses. Further, the SEC is looking at the growing field of crowdfunding, both its Regulation Crowdfunding equity crowdfunding model and others, including debt crowdfunding. In addition, the marketplace lending market, especially securitisation of loans, is of particular interest to the SEC.

In the US, Cook County, Illinois, is currently running a pilot program to use blockchain to transfer and track property titles and other public records. The Cook County Recorder’s Office is the second largest in the US, so the adoption and success of a DLT system there would likely encourage other states and counties to use the technology.

On top of DLT, the advent of “smart contracts” has the ability to change payments drastically.

While the CFPB’s policy is quite friendly, its no-action letters are not binding on other agencies, so that leaves a fintech company vulnerable to the determination, by another regulator, that it is not in compliance with all relevant laws and regulations. This is obviously true of any agency’s no-action letter, but considering most of the federal financial regulators are having trouble deciding what to do with fintech, many companies may decide not to take the chance of relying on the CFPB’s say-so. Again though, regulating by No-Action Letter is much less desirable than actually going through the Administrative Procedure Act-mandated rulemaking process.

The CFPB is likely the most vulnerable agency in a Trump government. Its broad mandate and limited congressional oversight has made it a target of Trump and Congressional Republicans. While it is incredibly unlikely the CFPB would actually be dismantled, its structure and leadership will almost certainly change, likely relatively early in President Trump’s term. The Court of Appeals for the D.C. Circuit’s recent decision in PHH Corporation, et al. v. Consumer Financial Protection Bureau found the current structure of the CFPB is unconstitutional.

States are also involved in regulating fintech and their role may grow if President Trump follows through on his early moves to cut down on federal regulation.

Over 50? Welcome to the New Frontier of Fintech! (Finovate), Rated: A

Meet the most financially challenged generation in American history. There are over 111 million Americans aged 50 and older, confronting a financial future with high anxiety, great struggle, and kitchen table economics that are more complex than any generation has ever faced. Financial decisions are numerous and amplified in importance with longevity. Much is at stake.

Although the 50-plus community represents only 35% of the entire U.S. population, they account for $116.8 billion in revenue in 2017 for the traditional banking industry. They are avid users of digital tools, services, and products, and they are increasingly finding that their needs are not met by the bank offerings alone. As a result, they are turning to alternative financial services and products. For 2017, AARP forecasts the 50-plus consumers will spend $15.3 billion in the fast-emerging alternative financial services sector.

To win over this market, innovators need to:

  • Remove friction from the user experience
  • Improve customer service
  • Proactively deliver personalized insight and advice
  • Transform consumer financial anxiety into digital empowerment
  • Influence regulatory change and financial policy to encourage healthy digital disruption

Regions recruits CIO from marketplace lender Kabbage (American Banker), Rated: B

Regions Bank in Birmingham, Ala., has plucked its new chief information officer from the fintech world.

Amala Duggirala, formerly the chief technology officer at the small-business lender Kabbage, is set to become CIO on April 17.

At Kabbage, Duggirala led the technology team’s efforts in advancing the scalability of the lending platform. Her tenure at Kabbage was brief — she joined the firm in November 2016.

Fidelity Investments, American Express and Bank of America Are the Top Scoring TotalSocial(TM) Brands (Yahoo! Finance), Rated: B

In a new, first of its kind analysis of combined online and offline consumer conversations, Engagement Labs released its TotalSocial rankings on the top performing financial services brands (banks, investment companies and credit card companies) in the U.S.

The analysis finds that, of the conversations taking place about financial services brands, the majority of them are happening offline (face-to-face) as opposed online (social media).

One financial institution that stuck out in particular is Citibank. The financial institution has the biggest discrepancy between its online and offline scores. The bank scores significantly better offline than online through all components measured — volume, sentiment, brand sharing and influence. This is what Engagement Labs calls a Social Misfit, brands that perform strongly offline but not online, or vice versa.

Another brand that stands out in the analysis is American Express. This is a brand propelled by particularly strong offline brand sharing, meaning people are talking about their marketing or advertising efforts.

United Kingdom

Funding Circle to stop property development lending (Bridging and Commercial), Rated: AAA

Peer-to-peer lending platform Funding Circle has announced plans to stop all property development lending by mid-2018.
The decision will allow the company to focus resources on its core small business lending product in the UK, US, Germany and the Netherlands.
Funding Circle will continue to service existing property loans and meet facilities to which it has already committed over the next 12 to 18 months.
Funding Circle stated its property loans continue to outperform expectations from a credit risk perspective, generating a 7% return each year and £22m of earnings for investors since 2014.

Advisers urged to be cautious on ‘esoteric’ P2P investments (New Model Adviser), Rated: A

Peer-to-peer (P2P) lending company Goji is launching the UK’s first diversified P2P lending bonds.

The Goji Diversified P2P Lending Bond is a fixed-term product that spreads risk by investing across a range of P2P lending platforms. It is eligible for inclusion in an Innovative Finance ISA. The one-year fixed-term bond has already launched, while the three-year bond is set to launch in April or May, with the five-year bond following soon after.

He said the current fund contains around 600 companies, ‘so there’s loan diversification’. Goji targets a 5% annual yield, and said the current yield after fees (after three months for the one-year bond) is 6.8%.

Phil Young, managing director of support services provider Threesixty, has concerns. ‘Advisers should steer clear of these products,’ he said. ‘It has an impact on PI [professional indemnity] insurance, as these insurers are sceptical of P2P lending.

Numerous advisers have also voiced concerns. ‘I don’t think the market is mature enough,’ said David Bashforth, partner at Derbyshire-based Belmayne Independent. ‘It’s untested in a downturn,’ said Mark Begg, director at London-based Mark Begg Asset Management. ‘We would need at least a three-year track record,’ said Andrew Brady, director of East Sussex-based Prosperity IFA.

FCA prepares for the march of ‘robo advisers’ (Financial Times), Rated: A

New rules aimed at “robo advisers” have been set out by the Treasury and the City watchdog as part of their efforts to make financial advice more widely available.

The guidelines are intended to free online providers from the heavier regulation associated with traditional financial advice, making it easier for them to offer low-cost help for less wealthy investors.

The regulator said it wanted to encourage the growth of “robo-advisers” — websites that suggest investment portfolios to investors based on online questionnaires — as a way to offer investment help to a greater number of people.

AltFi Data brings needed industry transparency (Bankless Times), Rated: A

An originator participating in independent verification of their data is motivated to continue to source good and well-priced assets, because the track record is there, in a clear and concise format, for all to see.

But there’s little transparent about dumping megabytes of data on investors and thinking you can go to sleep at night with a clear conscience, not in the era with the data aggregation and interpretation capabilities of ours.

This added transparency is especially necessary now that marketplace lending is out of the novelty stage and beginning to scale, Mr. Taylor said. It is no longer enough for platforms to originate assets which were previously hard to access. Investors need to be able to definitively understand what return the assets have delivered historically and to identify originators that have an ongoing motivation to keep originating assets based on quality not quantity.

Equally interesting is that Funding Circle, Zopa, MarketInvoice and RateSetter, the UK platforms that provide this enhanced disclosure, have gained market share relative to the rest of the market. Having represented 65% of UK market origination when they began to offer this disclosure, they now represent 75%.

Revenue-Based Finance Provider Fleximize Closes £16.3M Financing Facility (Finsmes), Rated: A

Fleximize, a London, UK-based revenue-based finance provider, closed a £16.3m financing facility.

Hadrian‘s Wall Secured Investments Limited, a specialised investment fund, provided the financial resources.

The company intends to use the funds to increase its lending capacity, towards its goal of lending over £100m to SMEs by 2019, to further develop and diversify its product offering, and continue to advance its proprietary technology platform with the introduction of dedicated areas for brokers and direct clients.

Britain’s finance watchdog is worried about ‘wild west’ fintech in some parts of the world (Business Insider), Rated: A

Christopher Woolard, the FCA’s director of strategy and competition, said in a speech earlier this week that that some regulators are using “sandboxes” to let fintech companies operate with little or no supervision.

Woolard said in a speech at the Innovate Finance Global Summit in London on Monday:

“But in a world where many governments and regulators have begun to show an interest in innovation there are challenges.

“As different jurisdictions begin to set up their own sandboxes, with different models and standards, some believe a ‘Wild West’ version could emerge.”

Fintech is now worth £7 billion to Britain’s economy and employs 60,000 people (Business Insider), Rated: B

The Treasury said ahead of the event that the UK’s fintech sector — which includes everything from online lending to applying blockchain to capital markets — is now worth £7 billion to the UK economy and employs 60,000 people.

Growth Street announces two senior hires (P2P Finance News), Rated: B

GROWTH Street has unveiled two new senior appointments that it hopes will aid the peer-to-peer lender’s expansion plans this year.

The platform, which was purely a business-to-business lender until it receivedregulatory permission to accept retail investors last December, has hired April Nardulli (pictured) as general counsel and Chris Weller as commercial director.

European Union

UK VC investment up in Q1 2017, but funding across Europe is down (Real Business), Rated: AAA

While UK VC investment may be up, European funding has fallen however. The KPMG Venture Pulse Q1 2017 revealed UK VC investment over the quarter reached $1.02bn, having dropped to under $1bn in Q4.

That was achieved despite a lower number of completed deals, with 196 secured versus 219 the previous quarter. KPMG suggested the “robust levels” of UK VC investment signals optimism and confidence for British business this year despite Brexit.

Imbach pointed to financial services, life sciences and biotech as key sectors where startups are securing UK VC investment and highlighted firms such as Currency Cloud, Funding Circle and Atlas Genetics.

While UK VC investment rose in Q1, there was a fall in VC investment across Europe overall, reaching $3.4bn, which was attributed to fewer angel and seed rounds. Meanwhile, deal volume was at its lowest for five quarters.

Lend Closes CHF3.5M Series A Funding (Finsemes), Rated: A

Lend, a Zürich, Switzerland-based fintech startup, closed a CHF3.5m Series A funding.

Backers included angel investors and Polytech Ecosystem Ventures.

The company will use the funds to further develop its platform and market its brands, LEND and splendit, enhancing automation, customer usability and increasing marketing efforts within Switzerland.

China

China’s Banking Regulator Clamps Down on Illegal P2P Lending (YiCai Global), Rate: AAA

China’s Banking Regulatory Commission (CBRC) issued its Guiding Opinions on Risk Prevention and Control in the Banking Sector yesterday, requiring banking institutions to step up risk prevention efforts related to internet finance businesses, focusing on ten types of high-priority risks. The P2P lending risk rectification program will be pushed forward, alongside the clean-up of student and microcredit businesses.

The regulator called for an effective clampdown on illegal student loan operators. Online lending agencies are prohibited from offering loans to people failing to meet the minimum income requirement, or to students aged under 18. They are also banned from engaging in misleading marketing or sales activities, or extending usurious loans.

With microloans, online lending agencies must ensure the legitimacy of funds provided by lenders in compliance with the law, and fraudulent marketing is prohibited. Provisions laid down by the supreme court regarding interest rates on private loans must be rigorously observed to prevent usury and the use of violence in debt collection.

To ward off risks associated with illegal fund-raising schemes, the CBRC required regulators at all levels to ramp up investigation into illegally-established banking organizations, and suppress illegal absorption of public funds and illicit lending businesses carried out under the guise of banking services.

Authors:

George Popescu
Allen Taylor

Monday April 10 2017, Daily News Digest

orchard platform key indicators

News Comments Today’s main news: FICO launches cloud-based origination solution for mid-market lenders. Monzo granted full banking license. FC SME Income Fund nearly doubles in size. Orca launches P2P comparison site. Supporting America’s Innovators Act passes. Today’s main analysis: Liberum/AltFi Financial Disruptors Index up 8.86% MoM, Yirendai down 16.06%. Today’s thought-provoking articles: How fintech is serving subprime lenders. Time to buy […]

orchard platform key indicators

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News Summary

United States

FICO Launches Cloud-Based Origination Solution to Help Mid-Market Lenders Automate Small Business Lending Decisions (Yahoo! Finance), Rated: AAA

FICO has launched FICO® Origination Manager Essentials to help smaller financial institutions make faster, smarter small business lending decisions. Delivered as a cloud service, the easy-to-use loan origination system streamlines and automates the decision process and gives smaller institutions access to the same powerful analytics in risk assessment for which FICO is known. Lenders using the solution can process small business loan applications in as little as 60 seconds, as opposed to days, which is still the average processing time for many lenders today when dealing with small business credit.

Currently, small banks and credit unions are challenged by nimble lenders who operate online and can give auto-approvals for loans in minutes. Origination Manager Essentials, delivers banks the same technical advantage so they can compete on experience and relationships rather than technology.

Orchard Weekly Online Lending Snapshot (Orchard Platform), Rated: AAA

Source: Orchard Platform

How fintech is serving subprime lenders—inside Elevate Credit’s IPO (SRN News), Rated: AAA

 

 

Should Elevate Credit IPO Worry Other Online Lenders? (NASDAQ), Rated: A

Texas-based lending company, Elevate Credit, Inc. went public on New York Stock Exchange, priced at $6.50 per share. This was the company’s second attempt to be listed after postponing its IPO in Jan 2016 due to unfavorable market conditions.

On the first day of trading, Elevate Credit’s shares increased 10.9% versus LendingClub’s gain of 1.7% and On Deck Capital’s closing at the price it opened with. But this outperformance in terms of price might not be an indication of threat for the peers.

The model of lending and customer examination used by the company have not been experienced at times of recession and the changing interest rate environment, making it a risky investment as of now. Moreover, it reported high net charge-off rates in the last few years. Hence, other lending companies might appear more lucrative to investors at present compared to Elevate Credit.

5 Metrics to Help Advisors Master Online Commercial Real Estate Investing (Think Advisor), Rated: A

According to a recent study conducted by Accenture, 90% of advisors say clients are more educated about investing than they were five years ago.

However, even in this DIY-friendly arena, financial advisors still play a pivotal role in analyzing single-asset investment opportunities and providing expert guidance. In order to do so, they must educate themselves on the following five metrics:

  1. Capitalization Rates.
  2. Cash Flow.
  3. Capital Improvements.
  4. Occupancy and Lease Rates.
  5. Leverage.

US lending agents make inroads into peer-to-peer space (Global Investor Magazine), Rated: A

Major US lending agents are continuing to move into the peer-to-peer space, bypassing traditional lines of intermediation to connect clients with end borrowers.

The growing interest in peer-to-peer, or direct lending, has been spurred by the constraints being felt by typical intermediaries, including broker-dealers, which have limited capacity to service market activity to the levels they once did.

However, this non-traditional activity appears to be growing within the framework of the traditional banking system. Banks may not act as a credit intermediary, but their infrastructure and technology is sought after.

States Oppose OCC’s proposed Fintech Charter (JD Supra), Rated: A

Because of their opposition, the states are likely to mount legal challenges to any final rule. For instance, there is a significant open question about whether OCC’s enabling statute, dating back to 1863, even conveys authority to grant such charters. States might also argue that the charter represents a violation of state sovereignty. Absent a distinct shift in Supreme Court precedent, however, this position seems dubious because such companies are almost always engaged in interstate commerce and because the benefits of state regulation are easily outweighed by the access created by a unified federal system.

Investors want a blend of digital and traditional financial advice (Investment Executive), Rated: A

A slight majority of investors don’t want to deal with either upstart robo-advisors or established, traditional financial advisors. Instead, they want a hybrid scenario that marries the best of both worlds, according to a new report from global consulting firm Accenture LLP.

Specifically, 51% of investors in the U.S. and Canada across a range of asset classes who were surveyed for the report prefer combination of face-to-face, personalized advice and access to low-cost digital tools, rather than retaining only a dedicated advisor or relying on a robo-advisory service.

That sentiment is also shared among high net-worth investors with investible assets of between $1.5 million and $10 million as 56% of them say they need more than just traditional advice.

Cohn said to support Glass-Steagall (American Banker), Rated: A

Gary Cohn, the former president of Goldman Sachs and current director of the White House National Economic Council, told federal lawmakers in a private meeting that he could support legislation to reinstate the Glass-Steagall Act, which separated commercial from investment banking. According to the Wall Street Journal, Cohn said he “could support a simple policy completely separating the two businesses” and “expressed an openness to working with” Sen. Elizabeth Warren, D-Mass., an ardent critic of big banks, on the issue.

Supporting America’s Innovators Act Passes the House of Representatives (Crowdfund Insider), Rated: A

The US House of Representatives passed the Supporting America’s Innovators Act (HR 1219) today. The bill received solid backing with a vote of 417 for and 3 against. The bill now moves to the Senate for review.

The Act amends an exemption under the Investment Company Act of 1940 increasing the investor limitation from 100 to 250 people for qualifying venture capital funds. The bill would also eliminate a significant barrier facing small businesses and startups by incentivizing venture capital funds to grow their investments in rural-state entrepreneurs, helping local economies grow and thrive.

NYCUA and SimplyCredit agree to new business partnership (CU Insight), Rated: A

A new partnership between the New York Credit Union Association and San Francisco-based fintech company, SimplyCredit, aims to help New York’s credit unions combat online disruption and accelerate lending growth. Through the partnership, SimplyCredit will enable consumers to refinance high-APR credit card balances with participating New York credit unions using a seamless mobile and web interface.

SimplyCredit’s online tools enable members to not only apply for personal lines, but to also enroll credit cards and schedule balance transfers and line payments. As a result, many members are saving $2,000 or more in interest payments a year. Combined with this service are sophisticated analytics and marketing support that have achieved application rates of nearly 6% on marketing campaigns.

United Kingdom

Monzo, a UK digital-only challenger bank, granted full banking license (TechCrunch), Rated: AAA

Monzo, one of a number of so-called “challenger” banks in the U.K. aiming to re-invent the current account, has had the “restrictions” on its banking license lifted and says it will begin rolling out full current accounts to its pre-paid card and beta app users.

This can also include being able to lend those deposits out at some point in the future, which, like rival Starling and traditional banks, forms the basis of the company’s initial business model.

Funding Circle SME Income Fund Near Doubles In Size With Placing (ALLISS) (Morningstar), Rated: AAA

Funding Circle SME Income Fund Ltd on Friday said it has raised GBP142 million in a placing of 142 million C Shares at 100 pence, nearly doubling the fund’s size.

Shares in Funding Circle SME were up 0.4% at 103.25 pence Friday.

Orca launches peer-to-peer comparison site (Bridging&Commercial), Rated: AAA

Orca – a data, research and analysis provider to the UK P2P lending market – has announced the launch of its new platform, which offers unique standardised metrics to compare P2P investments.

The platform allows users to perform in-depth due diligence on P2P investments and benchmark them in a similar manner to a traditional asset class so that they can make risk-adjusted, informed investment decisions or recommendations.

The Orca platform will also offer market data on items such as interest rates, default rates, bad debt rates and a platform’s financial standing.

Forget about banks buying fintechs — this deal happened the other way around (Yahoo! News), Rated: A

StatPro, a fintech company long before fintech was even a term, on Friday announced a deal to buy UBS’ Delta platform for €13 million (£11.1 million).

Shares in AIM-listed StatPro jumped 10% on news of the deal, which both the company and house broker Panmure Gordon called “transformational.”

Industry urges for standard default definition (P2P Finance News), Rated: A

Peer-to-peer lenders are backing calls for a standardised definition of defaults in the sector.

Although actual default rates are low, the definition of when a loan has failed is not consistent across all platforms, making it harder for investors to compare.

Members of the Peer-to-Peer Finance Association (P2PFA), such as Zopa and RateSetter, define a loan as being in arrears if repayments haven’t been met for more than 45 days. A loan is then declared as being in default, and recoveries started, if the amount owed becomes 120 days late.

MoneyThing founder Ed Pearce says the business lending platform defines a default as when a borrower fails to repay for two consecutive months.

Property lender Kuflink declares a default at three missed payments at any point in the loan period. Meanwhile, an asset-backed loan from Lendy, formerly known as Saving Stream, is in default if the amount owed is not paid within 180 days, which the platform calls a tolerance period.

Despite the differences, the P2P rules are actually slightly more definitive than those in the mainstream banking sector.

There’s a simple reason why no sector is immune from becoming obsolete (City A.M.), Rated: A

Financial institutions exist to reduce transactions costs. Without them, somebody saving money for a rainy day or for their pension would have to seek out and assess the credit worthiness of a vast number of individuals or companies before lending them money. And, without securities markets and banks providing on-demand deposits, the cost of individuals realising their investments at convenient times would be huge.

Airbnb can thrive because the internet means that those who wish to rent out rooms temporarily don’t have to group them altogether in one building in a permanent business.

Peer-to-peer lending radically simplifies the “middle-man” in credit transactions; and other innovations are on their way in finance. In China, 2,000 platforms intermediate £100bn of peer-to-peer lending. And a combination of the development of drones, the internet and modern computerised logistics means that Amazon provides services from a warehouse in Dundee to people who have never heard of Dundee.

If you want to predict major developments in business and commerce, you should look at how technology will change transactions costs.

RateSetter’s Peter Behrens joins George Banco board (P2P Finance News), Rated: B

RATESETTER’s co-founder and chief operating officer Peter Behrens has joined the directors’ board of guarantor loan provider George Banco.

The specialist lender, which provides finance to borrowers with poor or no credit history by involving a third person who can step in if the former run into repayment issues, is looking to increase its penetration into the broader consumer finance market.

European Union

4finance Group Ensures Compliance with New Anti-Money Laundering Requirements Using Cloud Solution (PR Newswire), Rated: A

Silicon Valley analytic software firm FICO today announced that consumer online lender 4finance Group is using the FICO® TONBELLER® Siron® Anti-Financial Crime Solutions to ensure anti-money laundering regulatory compliance across its global network. Supported by the FICO® Analytic Cloud and Amazon Web Services (AWS), the FICO solution has been deployed by 4finance Group in nine EU countries and in Georgia in six months, and is being rolled out across the rest of the lender’s global network.

Headquartered in Latvia, 4finance Group uses the FICO modules Siron®AML (Anti-Money Laundering) to monitor customer activity, and Siron® KYC (know your customer) to do customer due diligence, including PEP (politically exposed persons) sanctions, and known criminals screening.

Kreditech Appoints Senior Global Consumer Bankers to its Advisory Board (Kreditech), Rated: B

Consumer finance technology company Kreditech has appointed two new independent Board Members to further strengthen its Advisory Board: Michael Lenora joined as Independent Chairman, Andy Golding as Independent Board Member. These recognized experts from the consumer finance industry will support Kreditech further in its mission to provide access to credit for the underbanked.

China

The Best Low P/E Chinese Stocks to Buy in April (Madison.com), Rated: AAA

Chinese tech stocks have a reputation for being pricey and volatile stocks. But if we look closer at this market, we’ll notice that several high-growth plays are still trading at surprisingly low multiples.

YY Is a Chinese social network, powered by family of apps, which enables users to share photos and stream live videos. Revenue from YY’s live streaming business rose 42% annually to 2.22 billion yuan ($319.5 million) last quarter, which accounted for 89% of its top line.

Yirendai is basically China’s version of LendingClub (NYSE: LC), a peer-to-peer (P2P) lender which directly connects investors to lenders while cutting banks out of the loop. This is a very hot market — research firm Yingcan estimated that China’s P2P industry brokered about 982 billion yuan ($142 billion) in loans in 2015 — nearly quadruple the amount brokered in 2014.

WeiyangX Fintech Review (Crowdfund Insider), Rated: A

On March 31, Ant Financial, the finance arm of Alibaba Group Holdings, revealed its new payment service for virtual reality shopping at the Shenzhen Innovation Week.

On March 28, Shanghai Insurance Exchange (SHIE) and nine insurance institutions announced that they had successfully verified the feasibility towards applying blockchain technology to their insurance exchange.

Omni Prime, a consumer finance provider, announced that it had completed the asset-backed securitization of RMB 500 million of notes in a transaction that closed on March 28. The asset-backed securitization was carried out as a joint effort of JD Finance, Hony Capital and Omni Prime. The consumer loans, which were rated as A notes and B notes, were purchased by JD Finance and Hony Capital, and Omni Prime.

On March 28, Ant Financial and China Construction Bank signed a strategic cooperation agreement to develop a QR code payment business.

On March 27the National Internet Finance Association of China held the Third Member Conference and announced to establish the P2P Finance Association. The association would be led by the People’s Bank of China, in conjunction with China Banking Regulatory Commission, China Securities Regulatory Commission, and China Insurance Regulatory Commission etc.

On March 28, Credit Intelligence Company Yongqianbao closed on RMB 466 million ($67 million) in Series C funding led by Golden Brick Capital and CICC Alpha. Other participants in the round included Cash Capital, Source Code Capital, WeWork and GX Capital.

On April 1, Chinese online finance and lending company China Rapid Finance announced it would file for an IPO on the New York Stock Exchange with a fund-raising target of US$100 million. Morgan Stanley, Credit Suisse and Jefferies will be the underwriters.

India

FinTech Tracker: Lendbox Joins The P2P Lending Club (Bloomberg Quint), Rated: AAA

Peer-to-peer (P2P) lending was among the first forms of fintech that Indian consumers were exposed to. In a country where access to formal credit has always been a problem, and loans from friends and family are common, P2P lending seemed like a no-brainer. And it didn’t disappoint.

Early entrants into the market like Faircent saw a strong response to their P2P lending platforms, which, in turn, has attracted newer entrants like Lendbox which launched P2P lending operations in November 2015.

At Lendbox, business has been growing at an average of 20 percent month-on-month over the past year, Bhuvan Rustagi, one of the three co-founders of Lendbox told BloombergQuint in a phone conversation. The platform currently has outstanding loans of Rs 20 crore, Rustagi said. BloombergQuint could not independently verify these claims since Lendbox is a private company.

State Bank of India to Enter Digital Fintech Era With New Brand Identity (BW Disrupt), Rated: A

State Bank of India, the nation’s largest banking and financial services provider, unveiled on 7th April, 2017, its new brand identity, designed to position SBI as a modern, progressive bank, ready to meet the financial needs of all Indians.

While the legendary SBI monogram has been the de-facto symbol of State Bank of India, combining it with the abbreviated SBI word mark was pivotal to the new identity. It made the brand more concise, modern and approachable, infusing new energy, while retaining its core values.

Asia

Here are 5 future trends that would disrupt Singapore’s real estate industry (Singapore Business Review), Rated: A

Wang said e-commerce and changing consumer habits render shopping malls obsolete.

The second trend is the utilisation of data analytics. Wang said big data and advanced analytics allows for richer insights into all types of transaction data.

There is also a growing trend in terms of green and sustainable buildings.

Wang also cited crowdfunding as a major driver, saying real estate crowdfunding brings a greater variety of quality real estate assets with lower barriers of access.

Lastly, Wang said that the most important trend that would be unfolding is towards education, where the next generation of real estate professionals must be prepared for the evolutionary challenges that technology will bring. –

Authors:

George Popescu
Allen Taylor

Thursday March 20 2017, Daily News Digest

China mobile payments

News Comments Today’s main news: New York investigates online lenders. Elevate’s roadshow. AltFi adds Lendix to Data Analytics Platform. Kreditech Russia achieves MFC status. Today’s main analysis: Age of advice manufacturing has arrived. Today’s thought-provoking articles: How fraudsters are gaming online lenders. Framing the debate around disclosure standards in Europe. Chinese smartphone users flock to risky investments. United States New […]

China mobile payments

News Comments

United States

United Kingdom

European Union

China

Canada

News Summary

United States

New York Regulators Investigating Online Platform Lenders (BNA), Rated: AAA

New York state regulators will continue investigating online platform lenders to see if they have violated state lending laws or if their activities require licensing, regardless of how the Legislature handles a proposal to broaden regulation of the industry by statute, an official with the state Department of Financial Services (DFS) said March 27.

The proposal would extend state licensing requirements to all lenders making loans of $25,000 or less for personal uses and of $50,000 or less for business uses. The requirements now apply to those loans only if the interest rate exceeds the state’s 16 percent usury cap.

The proposal also specifies that the licensing requirement applies to any company that solicits loans and buys loans. That apparently would cover online lenders that partner with banks in some standard industry set-ups, such as one in which the online platform originates the loan and a bank partner issues the loan and then sells it within days to the online lender, which then both securitizes and services the loan.

Elevate Performs a Roadshow (Retail Roadshow), Rated: AAA

Download the documentation here.

The age of advice manufacturing is here (Financial-Planning), Rated: AAA

The new DoL fiduciary rule is about fully aligning the interests of the individual investor and the investment management industry. While the original lobbying efforts against the new fiduciary rule argued that it would drive up costs and reduce access to investment advice for regular Americans — we are witnessing the exact opposite in the marketplace.

The current administration has moved to delay the rule’s applicability and could repeal the new rule entirely. However, the financial services industry has already moved to comply with the rule and smaller investors who did not have access to financial advice previously will benefit from a best interest standard as well as digital advice technology.

However, even without the fiduciary rule in place, technology is the other disruptive force, which will move us towards new standards. Personalized digital advice solutions are helping advisers take into account more than just financial products. As a result, investors have more awareness of their entire financial picture. Advisers would be smart to embrace change, whether from regulations or technology, because the industry is quickly moving in a new direction.

ADVICE MANUFACTURING RISES

The new DoL rule, coupled with the rise of technology-driven TAMPs, managed account platforms, and now more holistic digital advice platforms, is fundamentally shifting the entire industry from product manufacturing to “advice manufacturing.” The investment management business, while perhaps not yet a fully formed concept yet in the minds of all industry executives, is now in a race to manufacture scalable personal advice solutions. Digital advice platforms will be utilized to fulfill both the near term regulatory requirements of the fiduciary rule, but perhaps more importantly, to ensure long-term offensive competitiveness.

How fraudsters are gaming online lenders (American Banker), Rated: AAA

Online lenders’ advantage in speed has exposed them to a growing problem: a type of fraud called loan stacking.

People are taking advantage of the quick loan approval times online lenders offer to game the system by applying for multiple online loans in a short time before credit files update to reflect the increased debt load. By doing so, they are able to get more money than they would typically qualify for in any one loan.

One surprise in investigators’ early findings is that online lending fraudsters tend to hit phone companies first.

According to TransUnion data, stacked loans in the superprime segment are 10.5% more likely to default than loans without stacking, whereas stacked prime loans are only 3.2% more likely than non-stacked loans to go bust.

ID Analytics buckets loan stackers in three categories: fraudsters, shoppers, and the over-leveraged. Fraudsters deliberately apply for loans they have no intention of repaying. Loan shoppers are financially savvy consumers who apply for several loans because they’re smart enough to know they can shop around and get the best rate. The third category is consumers with financial problems who need more than one loan to make ends meet.

Second-Quarter 2017 Corporate Credit Market Insights (Morningstar), Rated: A

Key Takeaways

  • Rising federal-funds rate did not preclude fixed-income indexes from rising in the first quarter.
  • Corporate credit spreads remain near the tightest quartile they have registered over the long term.
  • Corporate credit rating upgrades continue to outpace downgrades.

Chinese Lender Says It Didn’t Gloss Over Regulation Risks (Law360), Rated: A

Peer-to-peer lender Yirendai Ltd. urged a California federal court on Tuesday to toss a shareholder suit alleging it glossed over risks from the Chinese government’s crackdown on online lending fraud, saying investors’ “dire predictions” of revenue loss from the new regulations were never actualized.

The China Banking Regulatory Commission’s new peer-to-peer lending regulations have not caused revenue losses by limiting offline customer sourcing, Yirendai said, arguing the stock-drop suit fails because securities fraud claims cannot rely on false premises.

Online Lenders: The ‘Modern Day Loan Sharks’ (The Epoch Times), Rated: A

Jamar White had no idea what he was getting into when he took out a nearly $50,000 loan with an online lender in 2013 for his New York-based restaurant Buffalo Boss. “Like a lot of small businesses, we made a bad decision by getting into high-interest loans,” he said.

He later realized that the annual interest rate on his loan was in fact between 40 and 50 percent.

White is just one of the small-business owners around the country who, having failed to secure a traditional loan from a bank, turned to online-based alternative lenders to stay open. What they encounter are loans without clearly stipulated terms and a dearth of regulation and oversight.

According to Doxford, many of the predatory lenders approve loans based on the average daily bank balance of the company they’re lending to.

California-based Opportunity Fund, the nation’s largest nonprofit microlender, has formed a dataset about the conditions provided by these alternative lenders. They gained the data through their own clients who they refinanced.

They found that the APR was 94 percent. One loan was for 358 percent, which Opportunity Fund called “shocking.”

Proliferating AI-backed tools remake wealth management (Financial-Planning), Rated: A

It’s a piece of the continued creep of AI into financial advice — a recent study by Bloomberg determined that 58% of an adviser’s work can now be digitized and done by computers.

Like IBM’s Watson, Salesforce says its Einstein can analyze client sentiment based on data profiling and content analysis to provide insight. The suite of tools combines with aggregation to allow advisers to scan across a client’s wealth holdings.

That’s the name financial services consultancy Synechron chose for its matrix of 14 financial management tools, from robos to chatbots, all powered by proprietary AI as well.

How states can still outmatch OCC over fintech (American Banker), Rated: A

The OCC’s draft charter requirements, while well-meaning, appear too cumbersome to help the firms most likely to benefit from more consistent regulations. The agency’s misfire presents the states with an opening to come back, but they will need to change their playbook — and will likely need to ask Congress for a little help.

So far states have objected to the OCC’s fintech charter on technical and substantive grounds. The states’ primary technical argument is that the OCC lacks the authority to offer charters to fintech firms, an assertion the OCC disputes.

The “dangerous” argument holds that a federal charter will preempt state consumer protection laws and replace them with inferior federal laws or the more lenient laws of the bank’s home state. The “unnecessary” argument holds that states are better positioned to facilitate innovation and growth by fintech firms and the OCC would muck things up. The “state sovereignty” argument holds that the OCC charter represents an inappropriate intrusion by the federal government into state jurisdiction.

Further, our current system already allows some states the de facto authority to regulate the entire country. Large states or states uniquely important to the financial system, such as New York, have outsize influence on what products and services can be provided. Companies need to build their product to meet bigger states’ regulations to remain competitive — effectively allowing large states to limit the options of the citizens of smaller states.

Open Source Data:The Last Frontier of the Fintech Revolution (Crowdfund Insider), Rated: A

In today’s Fintech ecosystem and the larger consumer privacy concerns, there are questions regarding the regulatory oversight looming over issues like the United States’ Office of Currency and Comptroller’s newly proposed Fintech charter.

Should we take a lesson from the open source movement of the 1980’s and 1990’s and rise to the occasion as an industry to embrace the ability to make our data and information transparent? To enable the inner workings of how we approve transactions, issue credit and making investments available for consumers, regulators, and competitors?

In particular, they point out the following value propositions over proprietary formats:

  • Security
  • Affordability
  • Transparency
  • Perpetuity
  • Interoperability
  • Flexibility
  • Localization
United Kingdom

P2P fund manager cuts regular fixed income exposure as inflation worry kicks in (AltFi), Rated: A

Thesis Asset Management is slashing its exposure to fixed income across its range of seven model portfolios as uncertainty has increased over the outlook for inflation and interest rates.

He says the firm had briefly considered adding a little to fixed income exposure, but with the election of Donald Trump to the Whitehouse and the subsequent trend of rising inflation, they reversed course.

How to lend your money (PC Advisor), Rated: B

With savings accounts offering increasingly poor interest rates, what else can you do to boost your finances. Aside from stocks and shares, buying property or even selling your unwanted stuff online, you could try peer-to-peer lending.

Funding Circle

This is a well established peer-to-peer lender that specialises in loans to small businesses. So far the company has lent over £2.5bn, with 25,0000 businesses on its books. The UK government even granted Funding Circle £40m so it could help small companies with loans.

Zopa

The loans offered by Zopa are to a mixture of individuals and organisations, which provides a wide range of risk and rewards to choose from.

Ratesetter

Financial advice site moneyexpert.com says Ratesetter is a good place for beginners, mainly due to the layout and style of accounts.

European Union

Disclosure standards: framing the debate (AltFi), Rated: AAA

And while regulation is beginning to catch up with the burgeoning industry, disclosure standards and levels of transparency still vary massively amongst the myriad of marketplace lenders.

The European alternative finance sector is estimated to have grown 92 per cent to €5.4 billion last year. It continues to experience substantive growth. The players are diverse and the stakes are high.

At present both regulation and disclosure standards vary widely across Europe. In the UK the big four (MarketInvoice, Zopa, RateSetter and Funding Circle) are providing sufficient disclosure to allow third-party validation of their lending data. The consistency and proactive approach is positive – a good start that benefits investors as well as the wider industry. The Dutch are also starting to move towards jointly agreed upon standards. The ongoing debate is centered on the who, how and when.

Perhaps one of the most interesting initiatives in Europe is that of the crowdfunding sector in Germany. The German Crowdfunding Association (Bundesverband Crowdfunding) recently announced that its twenty-one members have adopted common rather stringent standards for reporting to investors.

AltFi Data Announces the Addition of Lendix to the AltFi Data Analytics Platform (AltFi Email), Rated: AAA

AltFi Data has today announced that the historic origination data of Lendix, the leading European SME lending platform, has been added to the AltFi Data Analytics platform. This allows all the information relating to loans originated by Lendix to be represented into AltFi Data’s established standards. Investors can now review a track record of net return, together with all supporting metrics, and perform like-for-like analysis against the other marketplace lending platforms that make up AltFi Data Analytics – including Zopa, Funding Circle, Ratesetter and MarketInvoice in the UK, and Prosper Marketplace in the USA. This represents the first time that standardised comparison has been made available outside of the UK and USA.

Kreditech Russia achieves Microfinance Company (MFC) status (Finextra), Rated: AAA

A new federal law in Russia aims to make the microfinance market transparent and understandable. It therefore requires the MFC status for all alternative lending companies operating in the country. As a Microfinance Company, Kreditech Russia is going to offer both consumer credit and deposit products.

Marketplace and P2P Lending: Viable or Not? (AltFi), Rated: A

Conceptually, the beauty of the matching nature of marketplace and peer-to-peer lending is that it is a perfect solution for matching supply and demand of capital and risks. Finding the right risk profile for the investor and matching maturity, currency, and tenor would eliminate a lot of regulatory hassle and burdens.

How do we get conventional fixed-income investors (pension funds, insurance funds, large asset managers) to properly engage with marketplace lending as an asset class?

Despite these obvious advantages, institutional investors have not yet fully embraced marketplace lending. Why?

Standardisation of data: How important is it for investors to be able to accurately compare risk and reward across the asset class?

At present, the lack of a uniform set of standards places severe obstacles for investors willing to invest across multiple marketplace lenders.

China

Swipe by Swipe, Chinese Smartphone Users Flock to Risky Investments (WSJ), Rated: AAA

In China, about 700 million people carry a smartphone, and many of them are comfortable sending money from their screens through the world’s busiest mobile-payment networks. That has created a crowdfunding wave bigger than anywhere else, a real-time experiment in a type of online investing proponents have long pushed in the U.S.

Swipe by swipe, the online money supply is helping to democratize investing and loosen capital markets. It also is propping up indebted Chinese companies and inflating bubbles in asset types from bonds to plastic pellets. And it is shifting more of the risks from China’s corporate debt load onto consumers.

Last April, crying investors flocked to Shanghai Kuailu Investment Group to demand their money back after its 13 fundraising platforms halted redemptions for about 38,000 customers who invested more than $2 billion, according to company documents reviewed by The Wall Street Journal. It had invested in at least 20 feature films, one starring former boxer Mike Tyson.

In a recent survey, about 70% of Chinese internet users said carrying cash is no longer a daily necessity. It is common for consumers to swipe from deal to deal on apps that advertise investment opportunities. The apps usually are connected to online payment services that supply the customer’s personal details and link to bank accounts.

Online finance is part of China’s wider shadow-credit system, where borrowings totaled $9.22 trillion in 2016, equivalent to 90% of gross domestic product, according to UBS Securities. The term shadow credit refers to lending outside the formal banking system and its regulations.

 

Chinese P2P Lenders Are Still Having Trouble Finding Bank Custodians (Crowdfund Insider), Rated: A

In the face of numerous scandals plaguing P2P lenders, commercial banks in China have been reluctant to take up custodial duties.

Even though the CBRA clarified that banks would not be responsible for P2P defaults, banks clearly only want to act as custodians to P2P lenders with a reputable track record.

Canada

A 5-year look at fintech in Canada (MaRS), Rated: A

The data demonstrates that over the last five years both highs and lows were evident in Canadian investment activity from angel investors, VCs and corporate VCs. Growth was marked, with a rise from US$87.21 million in investments in 2012 to US$367.51 million in 2016.

RBC introduces MyAdvisor to digitally connect clients with advisors for real-time advice (Newswire), Rated: A

A new digital experience for clients, using live video to connect them in real time with advisors, has been introduced by RBC.

MyAdvisor uses an online advice platform to digitally connect a client to an advisor, where both can view and adjust a dynamic “dashboard” showing the client’s savings and investment goals and establish actions to achieve those goals – all in real time.

Now being piloted in Ontario, MyAdvisor is using feedback from pilot participants to further shape the final product ahead of full national launch, to ensure it meets the financial needs of Canadians.

Authors:

George Popescu
Allen Taylor

Monday March 6 2017, Daily News Digest

Monday March 6 2017, Daily News Digest

News Comments Today’s main news: Lending Club wins motion to compel arbitration, avoids class action.  Orchard: Q3 originations move up. A quiet crash in bank lending? Abundance IFISA attracts nearly 10m GBP investment. Dubai regulates first P2P lender. Today’s main analysis: The Velocity of money. Today’s thought-provoking articles: SFIG Vegas 2017 recap. Legacy banking systems are the risk. Indian FinTechs attracting […]

Monday March 6 2017, Daily News Digest

News Comments

United States

  • Lending Club (LC) wins motion to compel arbitration, avoids class action. GP:”While the agreement between Lending Club and the borrower was supposed to compell arbitration, the industry was concerned that a ruling could override that clause of the contract. Had that been the case the cost of disputes would have been much higher, which is great for the attorneys but not that good for anybody else. We are glad the arbitration clause held the scrutiny of the court.” AT: “This is a huge plus for Lending Club, and for all platforms.”
  • AltFi adds Prosper to AltFi Data Analytics platform. GP:” A good validation point for AltFi Data. We continue to believe that data transparency is a must in order for the industry to succeed. We would like to see more student loan, SMB lending data and Real Estate Crowdfunding Data. I strongly believe that Lending Club’s openness with their data put this industry on the map. And for Prosper having a 3rd party independent company validate and publish their own research on their raw data also should serve as an addition point of confirmation and comfort for anybody doing business with them.”
  • How the velocity of money affects economic growth. GP:” Inflation is controlled by inventory of money and velocity of money. This piece means that inflation is still nowhere in sight, which should affect decisions on central interest rates. And interest rates are at least a little bit important for our industry. ” AT: “Some interesting points, but it isn’t good news for optimism.”
  • SFIG Vegas 2017 recap. GP:” MPL ABS issuance up 59% YoY.”
  • Money360’s unique variable for real estate lending success.
  • REITs vs. RECF. AT: “Again, a good read, but not favorable toward RECF. Actually, this piece attacks head on the selling point RECFs use to attract investors over REITs. Investors shouldn’t make decisions based on sales pitches, anyway.”
  • Cinch is the Uber of financial advice.

United Kingdom

European Union

Australia

India

Asia

MENA

 

News Summary

United States

Lending Club Wins Motion to Compel Arbitration. Avoids Class Action. (Crowdfund Insider), Rated: AAA

Lending Club (NYSE:LC) has was a significant court victory regarding its ability to compel arbitration. The case Bethune v. LendingClub Corp. was filed in the Souther District Court of New York in 2016.

The issue pertained to the interest rate a New York resident was being charged (29.5%). The amount was higher than the statutory limit of 16% under New York’s usury laws. The judge presiding on the case sided with the defendant, Lending Club, by granting the motion the motion to compel arbitration on an individual basis and thus stayed the case pending the outcome of the arbitration. The decision also means Lending Club will dodge a class action lawsuit.

 

Lending Club Bethune Case 1:16-Cv-02578-NRB Document 46 Filed 01.30.17 by CrowdfundInsider on Scribd

AltFi Data Announces the Addition of Prosper Marketplace to the AltFi Data Analytics Platform (AltFi Data Email), Rated: AAA

AltFi Data today announced that it has added the Prosper loan portfolio historic origination data to AltFi Data Analytics USA. The data for loans originated through the Prosper platform can now be presented according to AltFi Data’s established standards. This allows investors to review a track record of net return, together with all supporting metrics, to perform like-for-like analysis against the other marketplace lending platforms that make up AltFi Data Analytics UK – including Zopa, Funding Circle, RateSetter and MarketInvoice.

The availability of standardized data will further facilitate the due diligence that ultimately drives investor adoption of this asset class. The addition of loan data from the Prosper platform also represents the first time that a viable comparison has been made available across geographies.

Prosper Marketplace Net Return to the AltFi Data Marketplace Lending Returns Index methodology

The 12 month trailing net return that investors have achieved through Prosper Marketplace can now be reviewed based on the same standard as the major UK platforms.  In addition to analysis of net return, AltFi Data also provides further analytics covering lending rates, bad debt, arrears, term, gross origination, and net lending/change in outstanding principal.

Champagne corks pop as a ‘Trump rally’ sends Wall Street stocks parabolic (Generatioal Dynamics), Rated: AAA

Back in the 1980s and 1990s, politicians could always count on having their debts and spending programs bailed out by economic growth. Politicians are expecting the same thing today. All they talk about is how they will spend money to grow the economy, and the economic growth will wipe out the debt. It’s a fairy tale that used to work at the end of the last century, in a generational Unraveling era, but stopped working about 13 years ago when we entered a generational Crisis era.

What nobody wants to talk about is the velocity of money. This indicates the rate at which people are willing to spend money. You can’t have economic growth if people aren’t willing to spend money, which means that the velocity of money would have to increase. Instead, we have this:

When the real estate bubble burst in 2007, and the financial crisis occurred, millions of people went bankrupt or lost their homes. At that point, people stopped spending money. They used what money they had to pay off their debts and save money. As a result, the velocity of money has continued to fall steadily since then, just as it did during the Great Depression and World War II.

Investors who are pushing the stock market to new parabolic heights are completely oblivious to the fall in the velocity of money, and in fact have the vaguest clue what it means. Similarly, they’re oblivious to the debt ceiling crisis that’s approaching.

Orchard Publishes Quarterly Online Lending Report: Originations Move Up From Q3 (Crowdfund Insider), Rated: AAA

Orchard’s platform published their quarterly report a few days back covering Q4 of 2016. According to Orchard, loan volume increased in Q4 reversing a trend that began in Q4 of 2015.  While originations ticked up in Q4 versus Q3, they are still nowhere close to where they were back in Q4 of 2015 where they hit an all-time high of more than $3.8 billion.

According to Orchard:

  • Loan originations totaled $2.045 billion in Q4. In Q3 of 2016, loan originations came in at $1.85 billion
  • 2014 and 2015 vintage charge-offs have increased more steeply than in prior years.
  • Borrower rates continued their decline in Q4, falling another 42bps from Q3 levels, largely due to a sharply falling share of subprime originations in the second half of 2016.

SFIG Vegas 2017 Recap (PeerIQ), Rated: AAA

The SFIG Vegas conference set an attendance record this year, mirroring improved investor sentiment amidst an improving economic backdrop. Several participants drew comparisons to the 2004 environment which also featured a rising rate environment, deregulatory agenda, and conditions leading to an acceleration in ABS volumes.

On the regulatory front, the US District Court of the Southern District of New York issued a decision in Madden v. Midland on remand.

Money360’s Unique Variable for Real Estate Lending Success (Crowdfund Insider), Rated: A

Money360 is experiencing rapid growth in the marketplace lending sector for real estate. Recently Money360 announced it had surpassed $200 million in commercial real estate loans after exceeding $100 million last August. Money360 expects to top $500 million in real estate financing by the end of the year representing a rapid acceleration for the peer to peer lending site. Money360 launched in California in 2010 and expanded across the US two years later.

The company looks to provide financing for real estate loans between $200,000 and $5 million.

REITs Vs. Real Estate Crowdfunding (Seeking Alpha), Rated: A

When searching for ‘REITs versus Crowdfunding’ on Google, one can quickly find many different Crowdfunding websites trying to sell their product in a very biased manner relative to REITs. The main arguments that they seem to make are always the same: REITs are not real estate, REITs are riskier, and REITs are therefore less attractive than real estate crowdfunding investments. I disagree with all these points and will aim to explain why REITs offer in fact much superior investment characteristics compared to any crowdfunding platform.

MYTH #1: REITs are not real estate

Crowdfunding websites make sure to quickly point out that REITs are traded in the form of stocks to try to scare investors away from these supposedly “highly volatile and risky” investments. On the other hand, crowdfunded real estate investments are independent of the stock market and are hence pure real estate.

While this is true, it is in my opinion very unreasonable to assume that REITs are less of a real estate investment than crowdfunded deals simply because of how they are traded.

MYTH #2: REITs are riskier

REITs offer the opportunity for investors to invest in broad and widely diversified portfolios of properties in a liquid and cost efficient manner. Crowdfunding websites, on the contrary, allow you to invest in a concentrated, illiquid and often cost inefficient manner with potentially higher conflicts of interest between sponsor and investor.

Crowdfunding investors are also able to diversify by investing small sums in multiple deals. But this will never achieve the same scale as investing in REITs, which (often) own thousands of properties across different property types and geographical locations.

MYTH #3: Crowdfunding is superior to REIT investments

You are at the mercy of the deal sponsor and pure luck. Real estate is a local business and if you are not actively involved in the local market, you simply cannot assess an individual property investment. You need to be able to analyze the macro and micro location, the surrounding infrastructure, the growth trends, the demand and supply factors, etc.

This is the beauty of REITs: You do not need to know everything; you have a professional management team taking care of all the operational work.

My conclusion: If you are not a professional real estate investor, forget any form of private real estate investing including crowdfunding. And even if you are a professional investor, you might be better off investing in REITs.

Uber Of X: Cinch Is The Uber Of Financial Advice (PYMNTS.com), Rated: A

One company looking to help with that advice is Cinch with its on-demand app. We sat down with Cinch’s cofounder and head of company development, Kerri Moriarty, to learn more about how the company is helping guide everyday financial consumers with on-demand finance advice.

KM: Cinch is about making it easy for everyone to have access to unbiased financial advice, specific to their personal situation.

KM: Cinch comes with a free trial and then has a monthly fee for continued use. We think of it like a true client and advisor relationship. To truly remain unbiased, we ask customers to pay a fee.

KM: There are some budgeting and credit card tools like Mint or NerdWallet that we consider competitive that offer on-demand financial recommendations, but hardly any do so in the context of consumers’ entire financial situation. We think there is a big opportunity for Cinch to be one of the first companies in the FinTech space to offer a dedicated and unbiased financial advisor anytime it’s needed.

KM: We’ve definitely learned a lot along the way. I think one of the most important lessons learned, especially when it comes to tech or software, is that it’s important to just get something out in front of users. The longer you wait to test designs or features or even launch your product, the more risk you have of something “better” coming along or the needs of your customers changing.

United Kingdom

A quiet crash in big bank lending? (AltFi), Rated: AAA

Net loans to small businesses by the largest UK banks fell by a hefty £536m from December to January, according to the latest statistics from the Bank of England. It’s by far the biggest retrenchment in SME lending in the past two years, which is as far back as the data set stretches.

Gross lending by the banks in question fell further still, nosediving from approximately £5.1bn in December to £4.05bn in January. The figure for January is, again, by some distance the lowest figure for monthly gross lending by the banks to SMEs over the past two years.

Brexit may well lie at the root of the problem. It’s no secret that the banks have been pulling back from certain segments of the small business lending space since the UK’s vote to leave the European Union, but the January drop-off is by far the sharpest we’ve seen.

Funding Circle, the world’s largest marketplace lending firm for small businesses, lent £103m in January (£50m net). Meanwhile the peer-to-peer lending sector as a whole lent £208m during that same period, according to AltFi Data. There are then a raft of balance-sheet based alternative lenders, which are also lending millions of pounds to SMEs each month.

Abundance receives £10m boost from IFISA (P2P Finance News), Rated: AAA

ABUNDANCE has attracted almost £10m of investment into its Innovative Finance ISA (IFISA), the peer-to-peer lending platform’s managing director has revealed.

Davis said £6.5m has now been invested and £3m is being held in a new cash holding account launched last month, which pays two per cent interest, in anticipation of new projects coming onto the platform.

Crowdstacker last month revealed it was attracting £7,000 on average in its IFISA, which is just above the average subscription of £6,338 across cash and stocks and shares ISAs in the 2015-16 tax year.

It’s the end of Crowdfunding 1.0… but that’s a good thing (Property Week), Rated: A

Crowdfunding platforms have recently enjoyed great successes, with Simple Equity having raised £1.4m in a handful of days for East Eight Developments.

Only last week, Cogress confirmed that it had already raised £4m for Bellis Homes’ latest project in Chalk Farm. Two years ago, fundraises of this size were almost unthinkable.

Consequently, some retail investors – and some ‘sophisticated’ ones too – are going to lose money in the next 24 months as the effects of Brexit show up some very poor underwriting.

Another problem for the platforms is the number of them currently in the market, particularly in the lending space. The sheer competition for deals is forcing platforms to take on riskier positions than they should or alternatively investing in or lending against security that is highly illiquid.

I predict that only a few well-established operators in the market will survive the next 18 months.

I still believe that property crowdfunding is here to stay in the long term and will become a dominant funding method over the next 10 years. In many ways, the end of Crowdfunding 1.0 is a good thing.

I have £1,000 to invest in buy-to-let: Should I opt for peer-to-peer or invest in a property Isa? (This Is Money), Rated: A

Bricklane.com offers a property Isa that buys buy-to-lets with cash and provides a return based on rental income and capital appreciation.

Landbay, on the other hand, is a peer-to-peer lender that allows landlords to borrow from private investors so they can purchase buy-to-lets. Returns are generated as the landlord repays the loan with interest.

It’s possible to put some peer-to-peer investments into the new innovative finance Isa, with many of these set to launch in April.

If you do consider investing, make sure that you do your own research, question any suggested returns carefully and weigh up the fees that are charged, which will eat into any money that you make.

Simon Heawood, chief executive of online Property ISA Bricklane.com, replies: People often like the security of investing in real bricks and mortar, and it has historically delivered strong returns – around 9.6 per cent a year through a combination of price growth and rental income.

You should remember though that property prices can rise and fall, and rental income isn’t guaranteed, so as with all investing, you need to do your research and invest sensibly. Any investment platform should clearly explain the risks to you and you need to make the decision that’s right for you.

If you’re looking for a simple way to invest your money in the property market, then you might want to have a look at something like our residential property Isa, which launched last autumn.

It is similar to an investment Isa and offers the same tax benefits as both a cash and stocks and shares Isa.

However, rather than returns being linked to interest rates or stock performance, they come from rental income and property price changes. As an example, whilst the best cash Isas are currently offering returns of between 0.9 per cent and 1.3 per cent, our Bricklane.com property Isa is presently delivering an average return of 3.5 per cent from the rental income alone.

Unlike crowdfunding, it can be included within a £15,240 2016/7 Isa allowance. If you find a property Isa that also uses the Real Estate Investment Trust (REIT) structure, then it will give you even greater benefits, with zero tax to pay on property price increases and rental income.

John Goodall, chief executive of buy-to-let peer-to-peer lender Landbay, adds: Your situation sounds similar to that faced by a growing number of people, keen to reap some of the well-publicised rewards from the UK property market, but without getting directly involved with the demands of owning, renovating or renting yourself.

As you rightly say, investing through a platform that lends to property developers, such as LendInvest is one obvious option – these loans help finance mid to large scale developments and offer returns of around 4 to 8 per cent depending on the risk you’re willing to take on.

Property development is a relatively higher risk investment than buy-to-let, there all manner of complications that could potentially derail a development project, but the returns do typically reward the higher risk.

For those after a more secure route into property-backed peer-to-peer, the buy-to-let sector is another option. A few platforms now allow investors to lend money to a diversified pool of buy-to-let mortgages lent to experienced and professional landlords.

Not only has this proven itself to be statistically the lowest risk sector in the peer-to-peer mix, but the demand for rental property is growing at pace, as the UK’s housing shortage leaves millions of people unable to buy a property outright.

Landbay for example lends solely to experienced and credit-worthy landlords and as such is positioned at the conservative end of the market, offering interest of up to 4 per cent, with many layers of protection for investors’ money.

4 in 5 British housebuilders have gone out of business in the last 30 years (Business Insider), Rated: A

A report by LendInvest, an online property marketplace, found that in 1988 — when Britain’s last housebuilding boom stalled — the number of smaller UK housebuilders stood at 12,200.

That figure fell to 5,700 by 2006, and to 2,400 by 2014.

It says that, by driving that figure back over 5,000, Britain could build 25,000 more homes every year. Currently, just over 140,000 are built every year.

How to work out which Isa is right for your money (BT), Rated: A

With four adult Isas now available, you could be confused as to which one is right for you.

The total amount of money you can invest in one or more Isas is capped at £15,240 for the 2016/17 tax year. However, this limit will rise to £20,000 for the new tax year, which starts on 6 April.

Cash Isas

You can save all or part of your annual Isa allowance into a cash Isa.

These accounts are available from banks, building societies and credit unions and can take the form of an easy access account, notice account or a fixed-rate bond.

Right now the top rate on an easy access account is 1.05% from Paragon Bank which you can open with £1.

Suitable for: Anyone uncomfortable with risk and willing to accept a lower rate in return for security.

Stocks & shares Isas

Alternatively you can invest all or part of your annual ISA allowance into a stocks and hares Isa.

You should only really invest in a stocks and shares Isa if you are happy to take a risk with your savings as investments can go down as well as up in value.

Suitable for: Long-term investors who are happy taking on an element of risk in order to get a potentially better return.

Innovative Finance Isas

Investors can use an Innovative Finance Isa to get tax-free returns from the money they put into peer-to-peer loans made via platforms like Lending Works and Landbay.

What kind of returns can you get? Annoyingly, most of the biggest peer-to-peer lenders, including Zopa and RateSetter, have yet to launch their Innovative Finance Isas.

However, you can get a rate of 7% at Crowdstacker.

Suitable for: Investors who understand the risks involved with peer-to-peer lending and crowdfunding.

Help to Buy Isas

The Help to Buy Isa was launched to help first-time buyers save a deposit for a home worth up to £450,000 in London or up to £250,000 in the rest of the country.

You can save up to £200 a month into a Help to Buy Isa (or £2,400 a year) and when you first open an account you can deposit a lump sum of £1,200. The money you save will boosted by a government bonus of 25% when you come to buy your first home.

Suitable for: Aspiring first-time buyers trying to build up a deposit. Ideally able to set aside money each month rather than in a lump sum.

European Union

It’s legacy banking systems that are the risk, not fintech (BANKNXT), Rated: AAA

Every once in a while the financial community gets itself in a fluster about fintech. Mark Carney, governor of the Bank of England, is the latest person to raise concerns about the technology. Speaking at a G20 conference in Berlin, Carney said fintech presented “systematic risks” to the banking system, hinting that the next financial crisis could be caused by tech. The usual reasons were rolled out: liquidity, risk of cyber attacks, and the ability to subvert anti-money laundering laws.

Many bankers are mortally scared of new technology; of changing their systems or reforming the way things are done.

Secondly, you can’t ‘contain’ the reach of fintech.

The truth is that technology can actually make banks and the financial system safer.

Regtech allows regulatory officers in investment banks to detect suspicious figures submitted by potentially rogue employees; banks to detect hidden signals in their data which might suggest fraudulent activity or money laundering; and regulators to monitor the early warning signs of crises.

New machine learning technology also gives us the power to monitor the financial markets in real-time, looking for telltale warning signs of crises, and alerting regulators and officials when something needs investigating more thoroughly with a human eye.

The irony is that the real risks lie in the legacy core banking systems that many of our banks run on.

The result is that three quarters of a bank’s IT budget is now spent on maintaining legacy systems rather than acquiring new technology that could make their systems safer.

Australia

Ex-ING chief Richtor joins RateSetter board (The Australian), Rated: AAA

RateSetter, the nation’s second-biggest peer-to-peer lender, has wooed former ING Direct chief Vaughn Richtor to accelerate the fintech company’s quest to gain scale and take on the big banks.

The appointment expands RateSetter’s board to five, including co-founder of the British group Peter Behrens, chief of the Australian arm Daniel Foggo, Stratton Finance boss Rob Chaloner and Martin Dalgleish.

India

Gender Agnostic Fintech Space Inducting More Women Entrepreneurs (Entrepreneur India), Rated: AAA

When money and technology is gender agnostic, then any space of the business cannot be gender bias towards women, be it fintech. However, the smart phone penetration happening rapidly across the country and fintech has become a vibrant space before and after the demonetization. Now we see more number of women entrepreneurs venturing in fintech space.

There is no more talk of absence of women entrepreneurs instead the focus is on their competencies and equipping them to be more competitive and exploring the potentials.

Indian women are very good money manager, responsible investors and wealth creators in the world. In the fintech space women can be a great leader and rise to the top of the hierarchy with the help of regular mentorship.

In India Inc the participation of women as an entrepreneur and board of director is just 8 percent compared to 33 percent globally.

Asia

Credit Suisse Partners with Singapore based Fintech Firm Mesitis (Crowdfund Insider), Rated: AAA

Credit Suisse has announced, “enhancements” to its digital private banking platform in Asia by partnering with Fintech company Mesitis Pte Ltd to provide its clients the ability to access “Canopy”, an automated account aggregation platform and reporting solution through Credit Suisse’s digital private banking platform.

MENA

Dubai’s DFSA regulates first peer to peer lender (Reuters), Rated: AAA

Dubai-based Beehive said on Sunday it had become the first peer-to-peer lender to become regulated by the Dubai Financial Services Authority (DFSA), the regulator for the Middle East and North Africa’s largest financial centre.

Beehive is one of the few peer-to-peer lenders in the region. Nearly 4,500 investors have provided more than 75 million dirhams in loans via Beehive since the platform launched in November 2014.

The DFSA last month launched a consultation on its proposed framework for regulating loan-based, crowdfunding platforms.

Authors:

George Popescu
Allen Taylor

Monday February 27 2017, Daily News Digest

funding circle sme income fund

News Comments Today’s main news: SoFi raises $500M for international expansion. Funding Circle business jumped 50% post-Brexit. Bank lending in UK soars. Today’s main analysis: My adventures in various p2p lenders. How P2P funds have fared over the last 12 months. Today’s thought-provoking articles:  Rise of P2P in Korea puts government on edge. Canadian regulators welcome FinTechs. United States SoFi […]

funding circle sme income fund

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United Kingdom

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United States

SoFi Raises $ 500 Million Led by Silver Lake for Global Expansion (Bloomberg), Rated: AAA

Social Finance Inc. said it raised $500 million in a financing round led by private equity firm Silver Lake Partners. It plans to use the funds for international expansion of its online lending business and development of new financial products.

Other investors in the round include SoftBank Group Corp. and GPI Capital, and the funding brings SoFi’s total investment to $1.9 billion, the company said. Several sovereign wealth funds from countries in Asia and Europe invested as well, said Mike Cagney, SoFi’s chief executive officer and co-founder. The international group will purchase SoFi’s loans in addition to taking an equity stake, he said.

SoFi said it plans to develop new personal finance tools, including mobile deposit, credit and payment products that will be rolled out this year. It also anticipates bringing its lending products to Australia and Canada by the end of the year.

My Adventures in Fintech (Wealth Management), Rated: A

Two major factors have come together to make fintech platforms so popular. First, the rise of smartphones puts the apps right into the hands of millions of users who feel alienated by slow-moving traditional banks. Second, the financial crisis of 2008 eroded the borrowing ability of many middle-class individuals and small business owners as banks curtailed unsecured lending and other high-risk loans.

From 2010 to 2015, investment in fintech has grown from $1.8 billion to $22.3 billion, according to Accenture.

Lending Club

I started investing in Lending Club in 2011. My experience is limited to being an investor. I am a fractional owner in a total of 3,167 notes (see Figure 1).

So, if any one note defaults, my downside is generally limited to $25. Of those notes, 1,387 are current (that is, the individual borrowers are current in their payments), 1,269 notes have been fully paid off, and 432 notes have defaulted and been charged off.

 

My 12.97 percent net annualized return will probably be reduced by 1 to 2 percentage points given the predictable defaults, but I’m very satisfied with the results to date.

I faced two major issues in managing a P2P account. First, how to select notes. Second, how to manage the small amounts of cash that accumulate every day. The Lending Club website lists tens of thousands of notes available for investment at any time, each with details about the underlying borrower such as income, credit score, whether he or she owns or rents, state of residence, purpose of loan, etc. At first, I inspected each note and selected the ones that appealed to me, but that can be a full-time job and is probably counterproductive. It’s much easier, and probably more reliable, to trust the Lending Club automated investment system.

Upstart

Almost all Upstart borrowers are recent college graduates at the beginning of their careers. This population has a much thinner conventional credit history, so Upstart developed an algorithm that looks beyond traditional credit data such as earning potential and employability. To invest with Upstart, you must be an accredited investor.

But lately, the platform is encouraging investors to determine a risk grade then automate the selection. Risk grade notes run from AAA to D. Almost every borrower signals that they intend to use Upstart funds to consolidate high interest credit card debt.

I have funded on a fractional basis 140 three-year notes from exclusively Grade B borrowers. Eight notes have matured. One borrower has defaulted. The value of my account is $13,933. I’ve made $452 in interest and my annualized IRR is 7.24 percent (Figure 3). Based on Upstart’s performance statistics (Figure 4), my performance of 7.42 percent is apparently better than the average across all notes (5.72 percent).

Acorns

I easily linked Acorns with my checking and credit card account more than a year ago. Since then, it has been systematically rounding up my purchases to the next dollar and investing the difference in a diversified portfolio of ETFs.

At the end of a year, I had contributed a total of $283.57, and earned $3.17 in dividends. I’ve paid a total of $8 in fees. The current value of my account is $282.23—not too great of a return until you consider I chose the “conservative” balanced portfolio with 39 percent in government bonds and 18 percent in corporate debt.

Fees are $1 per month or 0.25% per year, depending on your balance. The app is free and fees are waived to college students for four years.

Weekly Online Lending Snapshot – February 24, 2017 (Orchard Platform), Rated: AAA

In China, as reported by the Beijing Bureau of Financial Work, nine out of 10 of the roughly 5,000 lending platforms across the country may not survive the coming year as the government begins a well-telegraphed tightening ofregulatory supervision of these lending platforms. NatWest Bank, in the U.K., announced the launch of a digital platform for small and medium-sized businesses to apply for unsecured loans up GPB$150,000. Australian small business lender Prospa raised an AU$25 million funding round led by Sydney-based AirTree Ventures valuing the firm at AU$235 million.

3 Industries Being Disrupted by Crowdfunding (Entrepreneur), Rated: A

1. Corporate finance: From software to farm equipment

Large finance organizations can use it as a catalyst for gaining small businesses who seek to harness leased products that are tailored to them specifically. What’s more, the lower cost credit of the products they offer will appeal more to businesses that pay sky-high APRs.

For leaseholders of larger equipment, crowdfunding platforms will allow leaseholders such as farmers to finance crops and equipment from other farmers and associates.

2. Real estate: From housing to business establishments

Before crowdfunding, closing an actual real-estate deal required back and forth passing and signing of documents among lawyers. Beyond being slow, the process often added up to thousands of dollars in legal fees. Crowdfunding allows businesses of all sizes to bypass the monotonous process and dodge expenses. What’s more, real-estate crowdfunding allows potential investors access to a wider array of deals.

3. Consumer lending: Cars and home appliances

For financial institutions, this means learning to leverage a crowd’s interest to inform their lending offers. As the trend continues, new crowdfunding platforms will pop up to cater to specific lending verticals. Imagine a crowdfunding space where consumers can get loans for anything related to transportation or kitchen appliances. In this way, brands will be able to save on financing costs while gaining on capital returns.

AUTOFI UNVEILS ONLINE MULTI-LENDER SALES SOLUTION FOR USED CAR DEALERS (iLendingDirect Email) Rated: A

Today AutoFi, a financial technology company that is transforming the way cars are bought and sold, announced the launch of the first fully online sales and multi-lender financing solution for used car dealers. Financing on AutoFi’s platform will be provided by its lender network of banks, speciality lenders, and credit unions. Today, the company announced that its credit union financing will be offered in partnership with iLendingDIRECT.

The AutoFi platform is the first online point-of-sale solution for auto finance. It allows customers to purchase and finance a car completely online, either through a dealer’s website or an in-store digital experience. The company recently announced the world’s first online car sales and financing solution for new car dealers in partnership with Ford Motor Credit. Today’s announcement further expands AutoFi’s ability to serve the multi-billion-dollar used car sales market through its partnership with iLendingDirect.

AutoFi’s platform will now allow used car buyers to research a vehicle on the dealership’s website; select “Buy Now”; receive an automated credit decision; and get loan offers from banks, specialty lenders and iLendingDIRECT’s credit union network who compete for the car buyer’s business in real time.

Consumers can then customize their financing deal by selecting down payment and loan  terms; choose vehicle protection products; and e-sign all financing documents online. The new platform gives used car dealers and buyers the ability to transact online with competitive financing options in a fully automated process.

Lending Club Alters Grace Period for Borrowers (Crowdfund Insider), Rated: A

Lending Club (NYSE:LC) has tweaked the way it manages the “grace period” for borrowers when they make payments past the due date. Previously, borrowers received a 15 day grace period for any penalties on payments less than 15 days late.  Beginning today, Lending Club requires borrowers to pay the additional accrued interest as a result of their late payment.

RentRange Identifies 25 Markets with the Largest Rental Rate Increases (MarketWatch), Rated: A

RentRange, one of the premier providers of market data and analytics for the housing industry, today released data ranking the top 25 U.S. Metropolitan Statistical Areas (MSAs) by average rental rate increase for single-family1 homes between the fourth quarter (Q4) of 2016 and the same quarter in 2015. The data analysis also identified the average vacancy rate within these markets in Q4 2016.

The Q4 2016 RentRange® data identified rental rate increases in areas like Cape Coral and Portland, both of which moved up the list into the top five, as well as newcomers including McAllen, Denver, Boston, Nashville and Miami. While rents remain high in the Bay Area, San Francisco dropped several positions, indicating that the year-over-year rent change was not as significant as seen in past years. Comparatively, San Jose made the list as a new addition in Q4 2016.

Analyzing the average vacancy rate, which demonstrates the percentage of all available units in a rental property that are vacant or unoccupied at a particular time, shows that the highest rates, as reflected from the list, are seen in the Southeast region, where vacancy rates range from 10.5 percent in Charleston to 20.4 percent in Myrtle Beach. In these areas, builders and investors may need to compete for a limited number of renters. An oversupply of new properties can drive up the vacancy rate and eventually push rental rates down. This scenario is currently happening in Myrtle Beach, where more than 3,100 new homes were built in 2015, a 94 percent increase compared to two years earlier.

United Kingdom

Brexit Terrified This CEO. Then Business Jumped 50% (Bloomberg), Rated: AAA

At sunrise on June 24, Samir Desai rushed to his offices near St. Paul’s Cathedral in London. Britain had just voted to quit the European Union and he knew his staff at peer-to-peer lender Funding Circle Ltd. would be freaking out.

As the pound tumbled and the government quaked following the resignation of Prime Minister David Cameron, Desai walked the floor of Funding Circle’s whiteboard-decked offices, fielding anxious questions. The non-British EU citizens feared they’d have to leave the country. The sales team feared that investors funding the firm’s loans to small businesses would bail.

In the eight months since the Brexit vote, Funding Circle has been on a tear. The firm originated more than 530 million pounds ($685 million) in loans during the second half of 2016, a 50 percent jump from the same period a year earlier, according to AltFi Data Ltd., which analyzes the British peer-to-peer industry. In the fourth quarter, Funding Circle’s U.K. division became profitable for the first time.

The question now is whether Funding Circle’s post-referendum run has legs. Meekings theorizes that volume has been driven by the Bank of England’s decision to lower interest rates to 0.25 percent from 0.50 percent in August. That spurred more retail investors to chase yield in the firm’s loans, which are returning an average 6.2 percent annually. Meantime, credit-hungry borrowers may also be flocking to Funding Circle as banks retrench from lending to small companies.

The great British credit boom: Bank lending soars in January (P2P Finance News), Rated: AAA

Figures from the British Bankers Association (BBA) showed that total consumer borrowing growth rose to £538m, more than doubling from December’s figure. This was primarily driven by the increase in personal loans and overdrafts, which rose to an eight-month high of £422m.

Meanwhile, bank lending to businesses rose by £3.4bn in January, which was the largest increase since January 2015.

Banks tightened up lending after the financial crisis which had a detrimental impact on economic recovery, although it created an opportunity for the peer-to-peer lending sector.

At 44,657 in January, mortgage approvals for house purchases were up 18.6 per cent from their August 2016 low, although they were still 2.5 per cent below the January 2016 level.

Gross mortgage borrowing came in at £13.8bn, with re-mortgaging approvals 15.7 per cent higher year on year.

How P2P funds have fared over the past year (P2P Finance News), Rated: AAA

Net asset value (NAV) returns range from three per cent to 20 per cent while discounts to NAV have fallen as low as 20 per cent.

P2P Global Investments

Almost 60 per cent of the assets are in the US, with 23.2 per cent in Europe, 8.7 per cent in cash, 6.4 per cent globally and 2.2 per cent in Australia.

Over the past 12 months its NAV has grown 5.34 per cent and it is currently on a discount to premium of 20.8 per cent.

SME Loan Fund

Almost two thirds, 63 per cent, of assets are in the UK, with 13.1 per cent in the US, 18.6 per cent in Europe and the rest in cash.

The trust has seen its NAV total return grow by seven per cent over the past 12 months and it is currently trading at a discount to net asset value of 10.3 per cent.

Ranger Direct Lending

The ordinary income share class is currently on a discount to NAV of 10.5 per cent while the zero preference and c share classes are on 2.2 per cent and 1.2 per cent respectively.

Funding Circle SME Income Fund

Its regional exposure is currently broken up as 73 per cent in the UK, 17 per cent in the US, two per cent in continental Europe and eight per cent in cash.

It has seen its NAV deliver total returns of 6.7 per cent over the past 12 months and is currently on a premium of 1.6 per cent.

VPC Specialty Lending

The investment trust is composed of 36 per cent marketplace loans and 39 percent in balance sheet investments, with the rest in shares, securitisation and cash.

Its NAV has returned 3.1 per cent over the past year and it is trading at a discount to NAV of 19.4 per cent.

Honeycomb Investment Trust

It has returned 8.7 per cent over the past 12 months and is on a premium to NAV of 7.7 per cent.

RateSetter Forms Partnership With Accountancy Advisor TaxAssist to Engage With SMEs (Crowdfund Insider), Rated: AAA

Online lender RateSetter has formed a partnership with accountancy advisor TaxAssist Accountants to help engage with small and medium-sized enterprises (SMEs). TaxAssist Accountant notably specializes in all businesses with a turnover of £2 million of less. It has more than 290 locations throughout the UK.

I’d use peer-to-peer lending to beat the banks (Moneywise), Rated: A

This growing market, which is now regulated, is dominated by three players – Funding Circle, RateSetter and Zopa. The annual interest on offer varies, ranging from 2.9% (RateSetter) through to in excess of 7% (Funding Circle), but so does the degree of risk you will take.

While the 2.9% interest on offer from RateSetter comes with the backing of a ‘provision fund’ (designed to protect your capital from losses if loans turn bad), the 7% from Funding Circle has no such underpin. If a loan goes bad, your capital could be compromised.

My peer-to-peer money is spread across 16 businesses operating in everything from retail through to IT. It is effectively an investment play on UK plc. When the economy is strong, my companies are more than likely to keep repaying the loans they have secured.

Welendus Live on Seedrs (Welendus Email), Rated: A

I am pleased to announce that Welendus is now back live on Seedrs. I would like to invite you to visit our campaign and watch our video at (

The Funding Network celebrates 15th anniversary (UK Fundraising), Rated: B

The Funding Network celebrates its 15th anniversary this March, having so far raised over £9.8 million for more than 1,450 social change projects through its live events since its 2002 launch.

TFN is celebrating with a special event on 16th March at the Funding Circle’s Funderbar in London.

International

Marketplace lending news roundup 27/02/17 (AltFi), Rated: AAA

In the UK, the overall market for alternative finance has just ticked over £10bn – including crowdfunding – in terms of the amount of money lent and invested into the equity of companies via crowdfunding platforms.

UK P2P business lending Growth is still in rude health as proven by AltFi Data’s number crunching, in the same week that Funding Circle tops £2bn mark. In the funds world, P2P GI has continued its share buyback strategy while the SME Loan Fund may be about to see an investment management change by New York-based SQN.

Not so good for US-based OnDeck, which despite a surge in Q4 lending is looking to cut jobs amid rising losses.

Financial technologies that make banks better (Finextra), Rated: A

A Reykjavik-based company strongly commits to improving the way the banks function. Meniga is, mostly, known for its money management software that allows the banks to start offering great personal and business financial management applications to their clients without investing heavily into the development.

Recent developments in Payment Services Directive 2 make banking APIs so important as never before. On the one side, banks are required to provide open technology for accessing their customers’ data to third parties. And, instead of investing into the development of open APIs, a bank can pick the technology up from Kontomatik as it already has the API in place. On the other side, smart banks will not only release open APIs but will also do everything at their disposal to benefit from the access to the data of other banks.

Started in 2009, it has taken Kabbage roughly 5 years to come up with a white-label solution that allows financial companies to use its technology for assessing the risks and issuing the loans online. With white-label technologies from Kabbage, a bank should be able to launch a great B2B lending platform without investing into development, testing and implementation of the modern risk assessment models.

Australia

US Market leader delivers keynote address to AltFi Australasia (The Bull), Rated: A

A reluctance by banks and government agencies to share data with alternative lenders is driving up the cost of borrowing in Australia, a global fintech leader told the AltFi Australasia conference in Sydney today.

Rob Young, Senior Vice President, International at OnDeck Capital Inc, said that a lack of open data is a major issue for alternative lenders in the fintech space.

He explained that in Australia, there is limited sharing of credit, banking or tax data, while the UK’s open data regime has forced banks to share customer data and open up their APIs to third parties.

“The UK is a great example of where open data has been in place for several years, the alternative finance sector is flourishing, and even the banks have benefited by opening up cross-sell opportunities within their own businesses. It’s a win-win for the lending sector and its customers,” Mr Young said.

Fintech Business Awards announces 2017 winners (EconoTimes), Rated: B

Midwinter Financial Services that has developed a range of cutting edge financial planning software packages, has been recognized for the Fintech Business Excellence Award for company category, having been awarded the highest points of all winners.

Other awards in the fintech category include Fintech Mentor of the Year that was awarded to Claire Wivell Plater from The Fold Legal and Fintech Start-Up of the Year given to Valiant Finance. Apart from this, Crowdfunding Innovator of the Year, Insurance Innovator of the Year, Payments Innovator of the Year, Investment Innovator of the Year, among other awards were also recognized.

China

The day of reckoning is nigh for fintech startups (SCMP), Rated: A

What started as a venture capital-driven, primal scream against the perceived backwardness of traditional banks and financial institutions has run into problems that no other new technology has faced.

The last two years saw an expansion of incubators and platforms to cultivate fintech startups. And this year, I am observing clues in major fintech centres where leaders are quitting startups and bank sponsored vehicles.

The hope and dream of being able to disintermediate financial institutions and the entire industry is unrealistic given how much protection and restriction is needed to prevent another financial meltdown that threatens to cast a 1930s style depression across the world.

Besides BlackRock’s acquisition of the roboadvisor site FutureAdvisor in 2015 (valuing it between US$150 million to $200 million) other asset managers like Fidelity and Schwab believed they could accomplish roboadvisor front ends on their own.

So approaches and results are very mixed.

India

Fintech aims to facilitate Rs. 100 cr. loan in 100 days (The Hindu), Rated: A

Peer-to-peer lending platform Oxyloans is targeting to facilitate disbursement of Rs. 100 crore as loans in 100 days beginning March 1. The firm, which neither mobilises deposits nor disburses loans, earns revenue from the commission — 1.5% from lenders and 2.5% from borrowers — it charges.

The loans disbursed through the platform are typically short-term, from 6 months to 11 months, and the rate of interest ranges between 14% and 36%.

India to Get Its Own Fintech Hub in Vizag (NewsBTC), Rated: A

India has been making a lot of noise in the banking, fintech and cryptocurrency sector lately. The country, currently heading towards a financial revolution now has plans to set up a fintech hub. The proposed fintech hub will be established in the city of Vizag.

According to reports, the concerned government has allocated resources to set up the necessary infrastructure in the “Fintech Tower”. Slated to go live next month, Thomson Reuters and Visa will be among the first few companies to set up shop in the Fintech Tower.

Asia

Rise of peer-to-peer financing puts gov’t on edge (Korea JoongAng Daily), Rated: AAA

Starting this week, a guideline that sets ground rules for P2P platforms will go into effect nationwide. Other steps to safeguard investors from risk include ongoing efforts by the Financial Services Commission, the country’s financial regulator, to make credit businesses linked to P2P platforms register with the FSC regardless of size.

According to Crowd Institute, a research center in Korea dedicated to P2P finance, the P2P market size grew to as much as 700 billion won ($616 million) by January this year, growing almost 14 times from 2015. The number of P2P platforms also skyrocketed to 131 in January this year from 16 in January 2016.

The Crowd Institute projects that by the end of this year, the size of the market will grow to as large as 1.5 trillion won.

Of the 700 billion won already in the P2P market, over half, or around 408 billion won, is in real estate, according to the institute.

Roof Funding’s model is project financing, which means investors crowdfund a project to build a building from scratch. If the builder goes bankrupt, the ownership is transferred to the investors, and they can choose to auction off the building or sell the units after completing construction with additional funding.

For instance, interest rates on one-year fixed deposits at local commercial banks as of Feb. 21 range from 1.10 percent to 1.75 percent, according to data from the Korea Federation of Banks.

Despite the rising popularity of real estate P2P platforms, financial authorities in Korea warn that the investments may not be as safe as they seem. In one case, a firm called Money Auction declared bankruptcy last November after it was saddled with debt. Founded over a decade ago as one of the first P2P platforms in Korea, it faced a liquidity crunch after payment delays led the firm to owe over 4 billion won to investors.

Those working in the P2P industry note that many apartments are struggling to attract buyers, and when the market suffers, smaller buildings like duplexes and multiplexes (the main investment targets of most P2P platforms) will likely feel the impact first, jeopardizing lenders’ interest and principal.

Lee complains that some clauses in the guideline are too restrictive. “For instance, about 80 percent of all investment made through January exceeded 10 million won, which is especially the case for real estate P2P projects,” he said. “If investors can only invest less than 10 million won per year, it is possible that the entire industry will take a heavy blow.”

SBXbank to Launch Crypto Currency Marketplace (JakartaGlobe), Rated: A

Smart Banking Exchange, better-known as SBXbank, a London-headquartered company, is set to launch a unique marketplace called “Coinxmart,” in which transactions are done using crypto currency, an alternative digital currency not dissimilar to the old bitcoin.

Abdul Rahman Said, SBXbank’s Asean vice president of marketing, told the Jakarta Globe in an interview on Wednesday (25/2) the company seeks to sink up to Rp 100 billion ($7.5 million) into developing financial technology services that offer not only e-commerce, but also peer-to-peer investment and peer-to-peer lending, all of which will use a crypto currency.

Sedania to buy fintech firm for RM12m (The Star), Rated: A

Technology empowerment company, Sedania Innovator Bhd, has proposed to acquire a syariah-based financial technology (fintech) company, Sedania As Salam Capital (SASC), for RM12 million.

In a statement on Monday, Sedania Innovator said the purchase consideration would be satisfied via RM4 million cash, and RM8 million via the issuance of 25.8 million new Sedania Innovator shares at 31 sen each.

Sedania Innovator said under the proposed acquisition, SASC would provide a profit guarantee of RM1.5 million per year for the financial years ending Dec 31, 2017 and 2018.

To-date, it has processed over 300,000 personal financing transactions worth more than RM25 billion.

Canada

Canadian regulators welcome fintech amid rising global oversight interest (Reuters), Rated: AAA

Recognizing the need to shift its regulatory focus to accommodate the use of advanced technology in the delivery of financial services, the Ontario Securities Commission (OSC) has launched initiatives aimed at providing compliance advice and flexible regulatory requirements for fintechs.

The OSC Launchpad initiative provides some flexibility in regulatory compliance for fintechs with the aim of making it easier for startups to innovate. The types of relief or support available through the OSC LaunchPad include informal guidance on regulatory compliance matters from OSC staff and, on a case-by-case basis, eligibility for time-limited registration or exemptive relief. At the same time the OSC has stated (here) that it will continue to scrutinize fintechs for potential investor protection risks.

While the OSC is the first provincial securities regulator to undertake formal fintech initiatives, other provinces and territories have begun to recognize a need for more flexibility in overseeing fintechs. When Lending Loop, a peer-to-peer lending platform, began in Canada in 2015, it had to obtain approval from provincial securities regulators for a prospectus and comply with other securities-related regulatory requirements. The Toronto-based company subsequently paused its operations and re-launched in late 2016 under an exempt market dealer license (here) that was granted by the OSC.

Authors:

George Popescu
Allen Taylor

Wednesday February 8 2017, Daily News Digest

uk p2p average growth interest rate at origination

News Comments Today’s main news: What the SoFi acquisition of Zenbanx means for FinTech’s future. Promontory Interfinancial Network clears path for community banks to purchase SoFi loans. Fund investments into UK FinTech plunge 33%. Today’s main analysis: AltFi takes a closer look at the UK P2P sector. Today’s thought-provoking articles: Review, takeaways from 2017 private placement conference. 3 reasons FinTech […]

uk p2p average growth interest rate at origination

News Comments

United States

  • What the SoFi acquisition of Zenbanx means for FinTech’s future. GP:” With SoFi able to take deposits and looking at credit cards next, I now believe SoFi is the new leader in the fintech credit market. I continue to believe it is a market that is ripe for disruption, innovation and hundreds of billions of dollars in size.” AT: “This is really stating the obvious.”
  • Community banks to have ability to purchase SoFi loans. GP:” Lenders have two main problems: finding borrowers and capital. The bigger the lender the worse the capital issue becomes as borrowers you can nearly always buy by spending more money. Another great move for SoFi, but not a new move: Lending Club and many other lenders had done this years ago. ” AT: “This is a step in the right direction. Online lending really needs a secondary market.”
  • Review, takeaways from 2017 private placement conference. GP: “A healthy active issuance market.”
  • Patch of Land hires CFO, CMO. AT: “It looks as if the new CMO is already making great strides.”
  • Breakout Capital secures credit facility with Drift Capital Partners. GP:” A $25mil in revolving debt.”
  • 3 reasons FinTech is failing. GP:” Failing is in the eye of the beholder. Did Apple look like a failure at any point? Is losing billions of dollars failing? How much did it cost to develop the iPhone and was that expense a loss until revenue started coming in? I personally believe that, like in politics, one can really tell what is success and what is failure only once history has settled. “AT: “While an interesting read, it seems self-serving. FinTech isn’t failing so much as experiencing a few growing pains. I agree with the three points mentioned as “reasons,” but I don’t so much think the implication that all FinTech companies must follow a similar path to success is true. The key to success is differentiation.”
  • We need a government that embraces financial innovation. AT: “The underlying premise is a sound one, but the U.S. has never done anything like the rest of the world. That said, if we’re going to have a FinTech charter, it should foster innovation and help the industry grow.”

United Kingdom

United States

What the SoFi Acquisition of Zenbanx Means for the Future of Fintech (Lend Academy), Rated: AAA

Fintech companies of all kinds have started to partner with banks but this deal is different. It marks the first time that an online lending platform will have the ability to accept deposits.

The size of this deal brings to mind a similar deal from a few years ago when Spanish bank BBVA acquired the digital bank startup Simple for $117mn. Since that acquisition occurred, reporting shows that customer acquisition and disruption in the banking space is not as easy as it may sound. According to a Quartz report in May of 2014 the BBVA-Simple deal was a challenge from the start as the size of the deal raised alarm in the banking community and Simple’s customer growth was slowing down.

BBVA is still grappling with the ramifications of their 2014 acquisition, American Banker reports today that BBVA has taken nearly $90mn in goodwill impairment charges related to the Simple deal. While the charges seem steep, the company is still happy with the Simple deal from a digital standpoint and they have hired 260 more employees to help that part of the business run. Valuing a digital bank seems to be an inexact science to say the least; Simple went to BBVA for $117mn in 2014 and now BankMobile is on the market from Customers Bancorp in what analysts think will be a deal valued around $100mn.

Mike Cagney has also said that also on the list for SoFi will be their move into offering a credit card. As the roll out of their banking products begins, we will learn more about how this acquisition will affect their overall strategy.

Promontory Interfinancial Network Clears a Path for Community Banks to Purchase SoFi Loans (Yahoo! Finance), Rated: AAA

Promontory Interfinancial Network, LLC and Social Finance, Inc. (SoFi) today announced a new program to enable community banks to purchase super-prime student loans originated by SoFi. The program will help community banks gain access to SoFi’s high quality assets by streamlining the due diligence process.

To assist banks in assessing these loans, Promontory Interfinancial Network commissioned Promontory Financial Group, LLC, an IBM Company, to review and report on SoFi’s underwriting, operations, and systems.  The report provides information and analysis banks can use to complement their own due diligence and assists them in their efforts to satisfy regulatory expectations for loan purchases and third-party risk.

The report describes SoFi’s current loan origination and post-origination practices and outlines the controls that SoFi has in place, including those that promote regulatory compliance, consumer privacy, and information security.  In preparing the report, Promontory Financial Group reviewed SoFi policies, procedures, and contracts related to underwriting and servicing and tested loan files so as to confirm compliance with federal laws, regulations and guidance.

SoFi President and Chief Financial Officer Nino Fanlo said, “This unique partnership opens us up to a new group of bank investors and further diversifies our funding sources. Large banks have been buyers of our loans for several years, but this program will help small to mid-sized banks participate in the growth of this asset class, and we look forward to building relationships with them. With one of the largest bank networks of its kind, representing more than 47% of all U.S. banks, Promontory Interfinancial Network is an ideal partner for us.”

Review and takeaways from the 2017 private placement conference (Morningstar), Rated: AAA

The corporate bond market started 2017 with a healthy dose of new issue volume priced in the public debt markets. New issue supply in the corporate bond market totaled $178.5 billion in January. New issuance last week included several large new bond deals, such as Microsoft’s (rating: AA+, stable) $17 billion transaction. In December 2016, Morningstar Credit Ratings, LLC downgraded Microsoft by one notch, placing our AA+ corporate credit rating one notch lower than Moody’s and S&P. Our downgrade took into account the company’s trend toward higher use of debt, the result of a more aggressive shareholder-payout policy, and funding for the $26 billion acquisition of LinkedIn. Apple (rating: AA-, negative) also brought a large deal to market, pricing a $10 billion multitranche new issue. Again, our credit rating is lower than the other agencies, as we believe Apple’s credit profile has been affected by management’s trend toward more aggressive capital allocation and a dramatic increase in debt.

Patch of Land Adds Executives Including New CFO and  CMO (Crowdfund Insider), Rated: AAA

Real estate crowdfunding platform Patch of Land has announced several management changes with two executives. Min Lee will be joining the real estate marketplace as the Chief Financial Officer and Robert Greenberg has been appointed as its Chief Marketing Officer.  Patch of Land said the executives would help accelerate platform growth while stating the company has grown at a compound annual growth rate of more than 290%.

Greenberg has already implemented a program that has apparently grown monthly leads by nearly 270 percent compared to the average monthly totals of the previous nine months. Greenberg has also grown the number of crowdfunding investors registered on the company’s platform to more than 20,000 at year-end 2016.

Breakout Capital Secures Credit Facility with Drift Capital Partners (Benzinga), Rated: A

Breakout Capital, a technology-enabled small business lender, announced today it obtained a new revolving credit facility from Drift Capital Partners, LLC, an alternative asset management company based in Charleston, South Carolina. The facility is structured to scale in alignment with Breakout Capital’s rapid growth, and at least $25 million in revolving debt is expected to be available to provide working capital solutions to Breakout Capital’s current and future customers. Drift’s commitment equips Breakout Capital with significant incremental funding capacity to continue on its strong trajectory and to meet the robust and accelerating demand among small businesses nationwide for Breakout Capital’s transparent, flexible, and innovative financing solutions.

In addition to becoming one of the fastest growing lenders in the market, Breakout Capital is a Founding Member of the Coalition for Responsible Business Finance and a vocal advocate for comprehensive, standardized product and cost disclosure, and full transparency across all alternative finance products.

3 Reasons Fintech Is Failing (Forbes), Rated: A

Everyone from online lenders to bank technology companies has experienced elongated fund-raising cycles, missed targets, and mounting losses.

Right now, the pain is most acute in the online lending space, with industry juggernauts like OnDeck, Lending Club, and CAN Capital seeing depressed stock prices or worse.

While fears of a popping fintech bubble are justified, there is good news. It is by no means too late for the sector to pivot. The first step in saving the industry is to understand why it is failing.

Reason #1: There is a fundamental strategic contradiction between tech and finance

According to Mr. Flowers, “the tech idea that you must get big fast and dominate a sector” is at odds with the slow-moving nature of finance, and lending in particular.

Reason #2 Market realities encourage short-term thinking

If you engage with online lenders like Lending Club or OnDeck, you’d think that they were data companies first, and lenders second.

As competition increases, fintech organizations begin making riskier and riskier decisions. For companies like mine, it could mean accepting clients and deals that aren’t an ideal fit for our product. For online lenders, it means riskier and less desirable loans.

Reason #3: Incumbents in the market are powerful and resistant to change

Incumbents in the finance sector are incredibly powerful and complacent. Most don’t fear fintech companies looking to take their business because, frankly, not a single one poses a real threat at this time.

We Need a Government that Embraces Financial Innovation (Crowdfund Insider), Rated: A

The proposed Fintech charter is anti-FinTech. That’s right. Many Fintech firm founders started their companies because of the already undue burden placed upon the American populace. Most people struggle to access reliable banking products, cheaper credit, real-time payments and investment opportunities. Unfortunately, these are services and products that are rarely made available for the masses.

The OCC’s proposed charter will put us back at least a 100 years.

The white paper published by OCC spends most of its time arguing that the bureau has the “grounds” and certainly the “right” to establish a Fintech specialty charter. It reads like a legal opinion and argument on why the OCC is the single bureau to establish the Fintech charter and they are the ones that should regulate the charter membership. The white paper does not provide any incentive for Fintech companies to seek membership and gave no consideration to the undue burden the additional regulation will place on Fintech firms and established Fintech startups. It simply does not make any sense for any Fintech companies even to consider applying for the OCC’s proposed Fintech Charter.

OCC’s Proposed Fintech Charter is Anti-Innovation

The OCC provided us an illusion that somehow Fintech companies are at a disadvantage and only with a Federally issued bank charter would we finally become competitive to the banks.

This is simply not the case. The Banks support Fintech companies because they are not bound by outdated and overzealous regulation.

Innovative products and services from firms such as SoFi would have died on the table day one within larger institutions that are regulated by bureaus such as the OCC.

OCC’s Proposed Fintech Charter is Anti-Competitive

I have spent a fair amount of time recently in Australia and Asia, talking to Fintech founders and CEOs. Regulation and compliance is always a focal point of our conversations. Often, these conversations end up with their perceptive countries Fintech Sandbox.

The USA is Falling Behind

The United States has fallen far behind some of our global competitors such as China, India and the UK.

The last thing we need is for another government agency to throw its weight around and cast another shadow on our global competitiveness.

We want the OCC and other agencies to revise their proposal and provide the following:

  • A single national charter that allows Deposits, Money Movement and Lending regulated by a single agency and supersedes all state regulation. Not multiple charters for multiple activities and an industry that must adhere to local and state regulations on top of federal rules.
  • A Fintech sandbox that immediately allows all Fintech startups to move money through existing and alternative money movement rails. 
United Kingdom

Fund investments into UK fintech plunge 33% (Fund Strategy), Rated: AAA

A report by Innovate Finance and Pitchbook shows investment from venture capital funds fell 33.7 per cent in 2016 to $783m (£632.7m) compared to $1.2bn in 2015. Total investments following the referendum were $368m.

Fifty four per cent of investments came from UK-domiciled venture capital funds.

“Some of the steam is perhaps coming out of the peer-to-peer phenomenon with a shake out of the sector appearing likely as some of their portfolios start maturing.”

Globally the report found fintech investment increased 10.9 per cent to $17.4bn, compared to $15.6bn in 2015.

Alternative lending and financing accounted for 29 per cent of investment and challenger banks accounted for 20 per cent.

The US also saw investment decrease in 2016 to $6.2bn, down 12.7 per cent on the previous year. It was surpassed by China with deal value at $7.7bn.

Alternative Finance – a closer look at P2P (AltFi), Rated: AAA

Since the EU referendum vote last year, inflation in the UK has accelerated (thanks to sterling’s depreciation) but wage growth has remained stagnant, and mortgage rates have risen from their record lows but the interest rates on our savings haven’t budged. Life, as we’re often reminded, just isn’t fair.

Thanks to AltFi Data, we have also been able to track how this nascent industry has evolved since its conception. In particular, it is interesting to note how gross yields across the UK’s largest P2P lending platforms, despite the differing characteristics of their various business models, appear to have converged over time and currently sit around the 8 – 9 per cent range.

RateSetter, which pioneered the concept of a “provision fund” to shelter investors against losses from borrower default, is an outlier here with its consistently low average yields (around 4 per cent).

Another observation worth highlighting is how arrears have crept higher in recent years, driven predominantly by borrowers with lower credit ratings. AltFi Data’s numbers on Zopa, which provide us with the most granular data we have, suggests that borrowers in the A* band almost never fall behind on payments, while those in the lowest bands, C, D & E have seen their arrears rise steadily since 2014 (see Fig. 2 below). This has contributed to more instances of bad debt in the 2014 and 2015 vintages (see Fig. 3 below), although the overall picture remains fairly robust thanks to Zopa’s core A* offering anchoring the numbers.

Saving Stream Milestone: Value of Outstanding Loan Book Grows By 126% (Crowdfund Insider), Rated: A

On Tuesday, P2P lending platform Saving Stream announced its value of outstanding loan book grew by 126% during 2016. In its year review, Saving Stream stated over the last year, its outstanding loan book increased from approximately £73m in December 2015 to £165m in December 2016.

Saving Stream, which was founded in 2012 and is regulated by the FCA, stated its loan portfolio has also significantly increased, having now lent over £250m to property developers and purchasers. In addition, £60m has been repaid to investors. The platform has grown and has more than 13,000 registered users.

Nasdaq-listed fintech Pioneer Mitek launches in the UK (Yahoo! Finance), Rated: B

Mitek (MITK), a global leader in mobile capture and identity verification software solutions, has launched in the UK with a new office established in London. The US-based company works with over 5,500 organisations providing its technology to 70 million consumers across the globe. Mitek provides financial institutions and other highly regulated businesses with mobile verification technology underpinned by artificial intelligence (AI) that establishes an individual’s identity remotely to accelerate the digitisation of Know Your Customer (KYC) and Customer Due Diligence (CDD) processes around on boarding and payments.

This technology is already used by more than 70 million consumers, and is embedded in over five thousand apps by banks, insurance providers, payments providers, and other financial services. Mitek also offers “selfie authentication”, where the user can use their mobile device’s camera to perform a facial recognition scan in order to on-board into a service or authorise a transaction.

 

Authors:

George Popescu
Allen Taylor

Thursday December 22 2016, Daily News Digest

new MPL loans UK

News Comments Today’s main news: Prosper switches from Experian to TransUnion. RateSetter sells 2.1M BP of non-performing debt. Today’s main analysis: Why 2017 will be a turning point in MPL. Today’s thought-provoking articles: 4 ways U.S. student loan industry could change. Is risk retention the future of MPL? United States Prosper changes credit bureaus. AT: “In […]

new MPL loans UK

News Comments

United States

United Kingdom

European Union

United States

Notice of PMI7 / TransUnion Migration (Prosper Email), Rated: AAA

Dear Investor,

We are writing to notify you that effective today new borrower applications are being scored on our PMI7 credit model, leveraging TransUnion credit attributes for underwriting.  The primary considerations for the bureau migration are:

  1. TU is the only bureau that delivers historical time-series data in real-time and this information provided meaningful incremental predictive power relative to a snapshot of the current credit bureau alone.

4 big ways America’s student loan industry could change in 2017 (Business Insider), Rated: AAA

There are

Is Risk Retention In The Future Of Marketplace Lending? (Mondaq), Rated: AAA

As marketplace lending continues its dramatic growth and regulators consider how best to protect consumers without limiting financial innovation, the U.S. Treasury has openly expressed an interest in whether marketplace lenders should be subject to some form of “risk retention.” Under new regulations that go into effect later this month, most issuers of asset-backed securities (ABS) will be required to retain a percentage economic interest in the collateral they securitize.

Some believe that applying similar rules to marketplace lenders would ensure that lenders originate high-quality loans, but marketplace lenders uniformly disagree, arguing they are sufficiently motivated to implement stringent underwriting standards and that such rules would hinder innovation.

Although the new risk retention rules likely apply to marketplace lenders that securitize loans and act as a sponsor, it remains unsettled whether similar rules should apply to marketplace lenders in the non-securitization context. Some believe they should.

Marketplace lenders, in contrast, oppose the application of risk retention rules in the non-securitization context. Moreover, online lenders contend that risk retention rules are unnecessary since most investors in marketplace loans are institutional and therefore have the ability to protect themselves through due diligence and representations and warranties.

The subprime mortgage crisis, however, does not necessarily demonstrate the need for risk retention in marketplace lending.

Given federal regulators’ increasing interest in financial technology companies generally, greater regulatory oversight of marketplace lenders seems all but inevitable, and industry participants are bracing themselves for potential changes in the way they do business.

An ‘Uncommon’ Investing Idea for the New Year (Uncommon Wisdom Daily), Rated: A

These days, investors are increasingly venturing outside the stock and bond markets to juice up their returns. This means turning to “alternatives” like precious metals, real estate, trust deeds, promissory notes, limited liability companies and crowdfunding investments, among others. (You can even own them in an IRA!)

It’s called marketplace, direct, online or person-to-person (P2P) lending.

The innovative thing about P2P lending is people can lend and borrow money without ever going to a bank.

Transparency Market Research reports the P2P market was $26 billion in 2015. (Over 60% of which came from the world’s largest P2P lending platform, Lending Club.)

Charles Moldow, a renowned venture capitalist and P2P investor, thinks this market could hit $1 trillion by 2025.

As Ron Suber (Prosper’s CEO) told me last year …

“At some future moment, you will be asked at the point of sale: How do you want to pay for this: cash, credit card, check, PayPal ormarketplace lending? It’s coming.”

Here’s How P2P Investing Works

The main reason I’m recommending P2P investing is outsized yield.

Plus, there are several additional reasons — beyond higher yields — why P2P investing should resonate with mom & pop investors …

  • Higher yields. P2P investing provides a unique opportunity to earn higher yields relative to other asset classes.
  • Low volatility. Prime consumer credit has existed for decades — with a proven track record for consistent returns.
  • Uncorrelated. P2P investing doesn’t follow the traditional ups-and-downs of the market.
  • Safety. According to Lending Club, since 2008, 99% of investors who owned 100-plus notes of relatively equal size have seen positive returns. 81% of those investors have earned 5%-plus over that time.
  • Simplicity. Why try to handpick individual loans?

How to Evaluate Investment Opportunities in CRE Marketplace Lending (NREI Online), Rated: A

It’s no secret that investors are always looking for the best return on their investments. In an effort to achieve that goal, investors have been turning in increasing numbers to peer-to-peer and marketplace lending platforms to achieve a greater return on their fixed-income investments than more traditional vehicles such as U.S. Treasury bonds and CDs. This search for higher yield has led to great growth in the marketplace lending arena. In fact, according to a recent report by American Banker, the industry grew by nearly 700 percent over the past four years.

Given the current economic climate, while many investors are still looking for higher yield, they are also careful to weigh risks associated with their fixed-income investments, seeking out transactions that will serve as a foundation for their financial stability in the future. As a result, investors are beginning to shift their focus from the unsecured debt platforms to those that offer opportunities in secured debt, such as commercial real estate.

The first step to evaluating a marketplace lending platform is to seek out technology processes that help, not hinder, the investment process.

Also, find out whether the investments are backed by collateral, and if that collateral is an income-producing property.

Finally, some platforms also offer low-cost, professionally-managed funds that provide a lower risk because your investment is pooled with others and applied to a unique portfolio of viable transactions.

The key to successful marketplace lending investment, especially in the commercial real estate realm, is knowing when and where to apply the technology, and when and where human judgment and expertise are required.

DV01: Peering into peer-to-peer loans (Forbes India), Rated: A

Rahbar’s all-nighter gave him an insight that would serve him well nearly a decade later. His two-year-old New York City firm, DV01, offers analytics and reporting software for the burgeoning peer-to-peer market, giving investors the ability to track the performance of thousands of loans in a few clicks. Named after a formula traders use to calculate their exposure to interest rate changes, DV01 also automates the laborious financial gymnastics that are needed to model loan performance, and it is on its way to becoming a fixture in the industry’s biggest deals as firms like Lending Club, Prosper and SoFi issue securities to finance their loan pools.

Peer-to-peer lenders originally connected borrowers directly with individual investors, but rising loan demand forced them to turn to Wall Street-style securitisation—the packaging of thousands of individual loans into tradeable securities. Three years ago, Lending Club was the first to market with such a securitisation, and Prosper, SoFi and OnDeck Capital quickly followed. As of the end of September, roughly $11 billion of these loans, according to PeerIQ, has been bundled into securities since 2015.

Rahbar’s startup currently tracks the loans of Lending Club and eight other originators and counts 55 institutions as clients. All told it has logged in some $34 billion in loans. DV01 is backed by $7.5 million in capital from Leucadia National (Jefferies’s parent), Pivot Investment Partners and a fund controlled by George Soros.

IPO Dreams: Fintech Turmoil Is Disrupting SoFi (LC, ONDK) (Investopedia), Rated: A

So it may be no surprise that startup Social Finance Inc. (SoFi), which boasted last year that it was profitable and planned an IPO in spring of 2016, has announced its postponing pubic offering plans — again. SoFi has been one of the poster children of fintech’s potential with a value of $4 billion.

There’s no doubt that SoFi’s prospects for an IPO have been hurt by broader problems in the online lending market, illustrated by Lending Club and On Deck Capital.

How machine learning can redefine lending (Bobs Guide), Rated: A

Technology has played a significant role in the rapid evolution of the lending industry. One such technology, machine learning, is beginning to create new avenues in the lending market.

Though machine learning is not a novel concept, the influx of big data and data mining has given it a shot in the arm by integrating it in our day to day lives. Machine learning today is being implemented in various industries, from financial services, healthcare and retail to transportation, and multiple domains like accounting, audit, marketing and sales. Gartner identified it as a top ten strategic technology trend in 2016, with advances occurring rapidly.

Machine learning enables predictive modelling in credit scoring. Credit scoring is an important process in loan management. While the traditional credit score uses basic statistical tools to arrive at the result, machine learning involves data mining at a large scale by aggregating data through wider channels like Yelp scores, social media activity, and real-time shipping trends. This consecutively delivers a more accurate and meticulous portrait of creditworthiness.

Machine learning can also help in streamlining the lending process, eliminating errors and expediting the loan application approval process.

Machine learning can also help in predicting bad loans and in on-going monitoring of loans.

Schwab RIAs: Accept and adopt digital platforms, or lose your competitive edge (Financial Planning), Rated: A

Schwab surprised the industry with the recent launch of a hybrid robo adviser offering, since it had already two operational digital platforms with over $10 billion in AUM — Schwab Intelligent Portfolios and Schwab Institutional Intelligent Portfolios.

Heburn: First of all, we’re not scared of it. We didn’t look at it as this coming gloom and doom of robotic investment management that’s going to put us out of business. We really looked at it as an opportunity to reach a whole different segment of clientele efficiently in a way [where] we could eventually make money.

Kessler: We don’t consider Betterment or Wealthfront competitors actually. They’re playing in an entirely different field of service than we are. We’re giving a dedicated adviser and a personal relationship.

AI Could Take Over Routine Financial Advice Tasks (Finanial Advisor IQ), Rated: B

Financial advice firms need to embrace artificial intelligence to replace mundane tasks carried out by humans so they can remain competitive, according to a new report from natural language recognition software provider Narrative Science.

Thirty-two percent of companies across the financial services industry are already using AI for predictive analytics, voice recognition and response and recommendations, according to a survey of more than 100 executives in the industry conducted by the National Business Research Institute and Narrative Science this spring.

AI is also coming to the fore when it comes to controlling spending. Apps such as Moven and Simple already deliver personalized automated recommendations based on machine-learned spending and earning habits of their users, according to the report, although it could be a matter of time before such programs reach the financial advice market.

United Kingdom

RateSetter Sells £2.1 Million of Non-Performing Debt to 1st Credit (Crowdfund Insider), Rated: AAA

RateSetter, a leading UK peer to peer lending platform, has completed the sale of £2.1 million of non-performing debt. RateSetter sold the assets t 1st Credit, a debt purchaser.  Exact terms of the transaction were not revealed but RateSetter said it was the first transaction of its kind for a UK peer to peer lending platform.

The non-performing loans were written between 2010 and 2015. RateSetter said it believed there was a low chance for them to collect on the assets. RateSetter said that typically in these situations they have not been able to contact the borrower for a long period of time, or where it has not been possible to put in place a debt management plan with the borrower.

Here’s why 2017 will be a turning point for the UK marketplace lending industry (Business Insider), Rated: AAA

The UK’s marketplace lending sector is one of the world’s

Zopa Named Winner at AltFi Awards & F5 Awards (Crowdfund Insider), Rated: A

Zopa announced on Tuesday it was named a winner at both the AltFi Awards and F5 Awards. The peer-to-peer lender revealed it took home a number of prizes at AltFi and was dubbed Best P2P Lending Platform at the F5 awards.

One to One: Filip Karadaghi, chief executive, Landlordinvest (Mortgage Strategy), Rated: A

We are quite late to the party and many P2P lending platforms have been operating under interim permission with time to develop their business, so we will have to learn from them and use that knowledge to develop our own value proposition quickly.

I believe that the future for P2P buy-to-let and bridging is very bright.

According to the latest crowdfunding report from Nesta, which publishes the leading research report in the P2P industry, real estate loans is the fastest growing sector in P2P.

The future of fintech (Credit Strategy), Rated: B

Speaking at Credit Strategy’s inaugural F5 conference this month, at the London Hilton Bankside, Stefan Franzke, chief executive of Berlin Partner for business and technology, was complimentary about the importance of London as a business centre.

He described the initial impact Brexit had on fintech firms recalling how he received hundreds of messages from businesses contemplating leaving the UK.

However, Franzke said he believes London will still be the financial centre like it is today in 10 years.

He discussed how the peer-to-peer lending market is working to target SMEs and how some banks are even looking at acquiring or creating their own platforms.

European Union

Online Lending Platform Credimi Signs Agreements with Four Primary Investment Funds (Crowdfund Insider), Rated: AAA

Four primary investment funds have signed agreements with Credimi, an Italy-based online lending platform. The funds have subscribed the entire portfolio of (performing) commercial credits originated by the invoice financing platform in the first year. Credimi is the first fintech company authorized by Bank of Italy to the public financing activity, according to art. 106 of Testo Unico Bancario, entailing extremely rigorous control and governance requirements.

The four partners are Anima Sgr, Anthilia Capital Partners Sgr, BG Fund Management Luxembourg S.A. and Tikehau Capital.

Unlike other similar products in Europe, the Credimi model foresees the subscription of the loans portfolio even before Credimi originates the commercial credits (Credimi focuses exclusively on the acquisition of performing receivables). This, alongside the proprietary risk analysis technology and Credimi’s capability to carry out public financing activity, allows to instantly finance SMEs’ invoices.

Authors:

George Popescu
Allen Taylor

Monday November 14 2016, Daily News Digest

lc marketplace loan originations

News Comments Today’s main news: Orchard weekly online lending snapshot. U.S. Small business borrowing falls while delinquencies rise Today’s main analysis : LC loan volume stabilizes. AltFi Data sees equity crowdfunding market shrinking. Today’s thought-provoking articles: OCC considers FinTech charters. Singapore hosts world’s largest FinTech event. Future of FinTech. United States Orchard Weekly Online Lending Snapshot. AT: “Note the […]

lc marketplace loan originations

News Comments

United States

United Kingdom

European Union

Australia

China

India

Singapore

Africa

Israel

International

News Summary

United States

Orchard Weekly Online Lending Snapshot (Orchard Platform), Rated: AAA

This year saw the launch of the first online lending-focused, registered closed-end funds (or ’40 Act funds) in the U.S. It is a significant step that further legitimizes the industry to U.S. investors by providing a way to gain exposure to the loans of multiple originators via professionally managed, SEC-registered investment vehicles. RiverNorth Capital Management, LLC, the investment manager that launched the

LendingClub Loan Volume Stabilizes (The Wall Street Journal), Ratd: A

LendingClub Corp. said its loan volume stabilized after the surprise ouster of its chief executive six months ago, sending shares climbing 15% to their biggest one-day percentage gain ever.

The San Francisco-based loan-marketplace operator reported Monday third-quarter revenue and adjusted per-share earnings that exceeded analysts’ expectations, in addition to a large, new loan-sale arrangement with a unit of one of Canada’s largest banks.

Third Quarter 2016 Results (Lending Club)





Fundrise Launches RSE Capital as Stand-Alone Company (Multi-Housing News), Rated: AAA
Crowdfunding real estate platform Fundrise is spinning off its real estate investment branch, RSE Capital Partners, into a stand-alone company. The new firm will focus on origination, underwriting, investment and management for the company’s eREIT platform. RSE will collaborate with top brokers and real estate firms nationwide, focusing on institutional-level assets, primarily multifamily acquisitions,multifamily development and infill bridge lending.

RSE has already closed several deals, including three with one its first partners, Arlington-basedInsight Property Group. The two companies aim to invest $200 million in D.C. real estate annually.

Five Issues to Watch as OCC Mulls Fintech Charters (Bloomberg BNA), Rated: AAA

The Office of the Comptroller of the Currency could soon decide whether to offer national charters to financial technology companies, and as a Magic 8 Ball might say, “Signs point to yes.”

More concrete signals come from a couple of arcane regulatory moves by the agency in September: A Sept. 13 proposed rule that deals with receiverships for insured national banks, and a Sept. 28 revision of its charters booklet for the Comptroller’s Licensing Manual that addresses possible trust and special-purpose charters for charter-holders lacking deposit insurance.

If and when the OCC unveils its proposal for a fintech charter, here are five things to look for:

One: Who Will Be Covered?
The OCC exercises charter-granting authority for ventures that engage in at least one of the typical banking functions of taking deposits, lending money or paying checks. The lending criterion would take in online platform lenders, for example, but how wide is the “paying checks” qualification?

Two: Capital Requirements
It remains to be seen how the OCC will set capital and liquidity requirements for companies to receive a fintech charter.

Three: Leveling the Playing Field
Banks are worried that fintech companies may gain an advantage if they’re not held to the same standards as the banks.

Four: Application Process
How long will it take to apply for and receive a charter?

Five: Partnerships With Banks
The OCC will be looking to strike a balance between its primary duty to preserve the safety and soundness of the national banks it supervises and its stated intention to promote what it calls responsible innovation.

Will They Use It?
Some fintech companies look to national charters as a way to simplify their operations by, for example, pre-empting the patchwork of state laws that govern lending. But others are skeptical, viewing the concept as just another layer of government regulation.

Marketplace Lending as a Service Startup Blackmoon Secures $ 2.5 Million in Equity Funding (Fintech Finance), Rated: A

Blackmoon Financial Group has secured $2.5 million in an equity funding round that includes Target Global, A&NN Group, Flint Capital, and several private investors. The valuation of the company and the structure of the investment are not disclosed.

Blackmoon will use the funds for the further development of its technological platform and front-end solutions, and for further expanding its presence in the U.S. market, which will be a key growth area in the next year and a half.

Blackmoon makes money by charging investors for getting access to the unique supply of loans that can not be found on other platforms. According to its own data, monthly transaction volume has grown by a multiple of 2.5 since June 2016 and exceeded $5 million in September 2016.

Four Lessons as Rating Firms Look at Marketplace Lenders (American Banker), Rated: A

Whether we like it or not, independent oversight and regulations exist in financial services for a reason: to protect borrowers, lenders and society’s greater economic health. In other words, they help make industries viable. Therefore, as the marketplace lending industry continues to mature, it needs the oversight equivalent of Standard & Poor’s, Moody’s Investor Services and Fitch Ratings.

In 2008, the credit ratings agencies had clear profit incentives. The agencies were paid by the companies issuing debt — a revenue model that often resulted in ratings agencies bending standards in order to gain business. As we contemplate rating agencies for marketplace lenders, we must avoid repeating this past mistake. Marketplace lenders should not pay the agencies in any way.

Rating agencies for marketplace lender-originated loans need IT solutions that calculate and recalculate, automatically and continuously, consumer and small-business loan ratings. At any moment in time, these ratings should take into account all available information on particular loans and bundles of loans in order to deliver the most accurate risk assessments based on real-time market conditions.

While ratings agencies are very valuable, investors should not over-rely on them, as they often did in 2008.

U.S. small business borrowing falls, delinquencies rise (Reuters), Rated: AAA

Nov 1 Borrowing by small U.S. firms slipped in September, and the percentage of firms late on repaying existing loans rose to its highest in nearly four years, data released on Tuesday showed.

The Thomson Reuters/PayNet Small Business Lending Index fell to 128.9 from a downwardly revised 132.8 in August. Measured from a year earlier, it was the fourth straight monthly decline, with the index at its lowest point since January.

Credible Expands Student Loan Marketplace & Announces Partnership With Massachusetts Educational Financing Authority (Crowdfund Insider), Rated: A

Student loan marketplace Credible announced on Wednesday it has formed a partnership with the Massachusetts Educational Financing Authority (MEFA).  The organization will now be offering student loan refinancing to borrowers nationwide through Credible’s multi-lender platform.

Credible users may now be able to access student loan refinancing options provided by six lenders, which are Citizens Bank, College Ave, CommonBond, iHELP, MEFA, and the Rhode Island Student Loan Authority (RISLA).

Fintech’s Most Powerful Dealmakers of 2016 (Institutional Investor), Rated: A

General Atlantic also stressed partnership in leading a $325 million Series E funding late last year for marketplace lending platform Avant, with Korngold joining the company’s board.

Although there is, by definition, a collaborative element in any investment or advisory relationship, the sector that has come to be known as fintech has special needs. The culture of a start-up is very different from that of an established financial institution; even if the latter wishes to be more nimble and embrace new ideas and technologies, its procurement and compliance bureaucracy can get in the way. Hence the emergence of ecosystems designed to lower such barriers. Eighteen-year-old FTV Capital (<a href=” Bernstein and Richard Garman</a>, No. 7) pioneered in this regard with its Global Partner Network, which includes major financial companies that invest in FTV funds and thereby gain insight into new developments.

Citi Opens APIs to Third-Party Fintech Developers (American Banker), Rated: A

The API Developer Hub was launched Thursday to foster collaboration and partnerships between fintech companies and consumer brands. Such portals allow developers to build their own financial services applications and client solutions that easily connect to Citi. Mastercard, Virgin Money and others are already leveraging Citi APIs to create customer solutions.

There are four APIs currently available to developers: one that allows Citi customers to access their account summaries; an authorization API that gives customers secure access to their account data for more streamlined transactions; one that approves access to shared Citi customer profile information for deeper engagement; and the Pay with Points API, which allows an app to accept a customer’s Citi rewards points to pay for their purchases.

10 reasons fintech startups fail (Banking Exchange), Rated: A

My employer, William Mills Agency, has represented hundreds of fintech companies. We’ve seen startups with (in our opinion) marginally acceptable products or services thrive. And we’ve also witnessed companies with (again, in our opinion) incredible ideas fail—miserably.

Here are 10 deadly mistakes fintech startups make, as well as some simple solutions to avoid them.

  1. Mistake 1. Underfunding the startup. Solution: Before I start any do-it-myself project I’ve learned (the hard way) that it’s going to cost me twice as much and take three times as long.
  2. Mistake 2. Underestimating the length of the sales cycle. Solution: If you’re selling fintech to any financial institution— be it small community or money center bank—expect a long, arduous sales cycle with multiple setbacks and delays.
  3. Mistake 3. Not understanding the market. Solution: Too many startups are blinded by their own arrogance. They’ve sold themselves into believing their solution will completely change the way the financial world operates, and that they don’t need to work within existing parameters.
  4. Mistake 4. Failing to devise a sound sales strategy.
  5. Mistake 5. Don’t put all your sales chips on “Bob.”
  6. Mistake 6. Don’t blow your shot with a poor start. Solution: If your organization is still trying to figure out what it is and to whom you’re selling, don’t make it up on the fly.

Read the rest at Banking Exchange.

Nead.co to Release Open Fintech Platform for Investment Banking (Eries News Now), Rated: A

Nead.co, provider of middle market finance and technology consulting solutions will soon be launching a dedicated fintech platform for mergers, acquisitions and investment banking. In preparation for the launch, the company is inviting independent software developers with a keen interest in financial technology engineering to join the company’s ever-growing ecosystem.

Fintech developers are encouraged to join by submitting detailed information regarding the types of applications they intend on building into the platform. If accepted, Nead & Co. management will open up the firm’s API tools for access by engineers who wish to develop into a growing ecosystem of expert financial and technology experts.

The War Between Fintech And Traditional Finance Reaches A Crossroads (News BTC), Rated: A

To put this into perspective, the financial sector has an annual revenue of roughly US$5tn. As is always the case, they want that number to keep growing. To do so, they partner with fintech startups to realise new ideas and improve existing infrastructure. Combining the US$5tn market with a US$20bn fintech industry can lead to exciting developments.

Change is inevitable at this stage. The sooner banks and financial institutions realise this inconvenient truth, the better for everybody. Fintech should not be ignored, and various subsectors of this industry are making waves. Blockchain, Bitcoin, robo advising, and AI are just a few examples of what the future holds. Exciting times are ahead of us, even though we are all cogs in the global financial war machine.

Kabbage Hires Chief Technology Officer and Chief Data Officer (PRWeb), Rated: B

Kabbage®, a pioneering financial services technology and data platform, today announced Amala Duggirala has been appointed Chief Technology Officer, and Rama Rao has joined Kabbage as Chief Data Officer.

Amala Duggirala is highly accomplished in building large-scale, high-performing systems with a keen eye toward exponential business growth. Bringing nearly two decades of experience to Kabbage, she is responsible for advancing the automation and growth of the Kabbage Platform and for implementing strategic information technology and product initiatives to power financial services for organizations worldwide.

NYU Stern Hosts Inaugural FinTech Conference Featuring President and CEO of PayPal (BusinessWire), Rated: B

New York University’s Stern School of Business, the first business school to establish aFinTech specialization for MBA students, held its inaugural FinTech Conference on November 9, 2016. Featuring keynote speaker Dan Schulman (MBA ‘86), president and CEO of PayPal, the conference addressed many critical issues in the industry, ranging from regulation to public policy, equity crowdfunding, marketplace investing and blockchain technologies

81% OF NONPRIME AMERICANS DO NOT OVERSPEND: STUDY FROM ELEVATE’S CENTER FOR THE NEW MIDDLE CLASS (Elevate Email), Rated: A

In the wake of last week’s seismic election, Elevate’s Center for the New Middle Class today issued new research on how underserved Americans maintain their financial health, showing that 81% of nonprime Americans – those with credit scores lower than 700 – spend only what they earn, or less on everyday expenses.

Elevate’s Center for the New Middle Class is a research-focused body that engages and educates the public about the growing needs of individuals who do not have access to traditional credit options. In this study, the Center outlines how nonprime Americans are financially savvy in a number of ways, especially in comparison to their prime counterparts. Additional key findings from the study include:

  • Nonprime Americans check their bank account balances 50% more often than prime
  • Nonprime consumers check their credit scores 40% more often than prime
  • Two-thirds of this group plan for major expenses
  • 67% consider themselves “careful spenders”
  • 72% say they know how to create a budget

“Our research shows the narrative about the New Middle Class being less engaged in their finances is just not the case. In fact, it’s the opposite in many situations,” said Jonathan Walker, executive director of the Center. “Because they have fewer financial options, the New Middle Class clearly recognizes and appreciates the need to be fully aware of their financial position at any given moment.”

“Although most nonprimes spend what they earn or less, little room is left for unexpected expenses. When you are one car repair away from a significant financial problem, you have every incentive to know exactly where you stand financially,” concluded Walker.

United Kingdom

AltFi Data sees UK equity crowdfunding market shrinking in 2016 for first time (SMN Weekly), Rated: AAA

The UK equity crowdfunding market is set to close 2016 with more than £130 million new equity issuance, posting a slowdown in momentum for the first time, according to a report of financial markets analytics provider AltFi Data. The segment is expected to facilitate young companies in the UK raise more than £130 million growth capital in 2016.

The report includes data for all equity crowdfunding in the UK from 2011 (when when the industry was started), covering a total of 955 equity crowdfunding rounds and 751 companies. The data refers to six platforms that offer equity crowdfunding services – Crowdcube, Seedrs, SyndicateRoom, Venture Founders, Code Investing(previously CrowdBnk), and Angels Den, the last one of which was new addition for 2016.

Following are details about the funded volume for first nine months of 2016 (and 2015) of the six UK equity crowdfuning platforms included in the report:

Financial Stability Board: Fintech Firms Not Posing a Risk to Financial System (Crowdfund Insider), Rated: AAA

Secretary General of the Financial Stability Board (FSB) Svein Andresen announced at a Chatham House conference in London earlier this month that Fintech firms looking to disrupt traditional banking and financial systems are not yet posing an immediate threat, according to Reuters.

The FSB’s mission is to promote global financial stability, conduct outreach to non-member countries, and monitor implementation of agreed policies.  Members include the G20 countries and key financial centers — Hong Kong, Singapore, Spain, and Switzerland.

UK FinTech Bridge to China (Finextra), Rated: AAA

Today it is another significant milestone for the UK FinTech ecosystem as the Financial Conduct Authority (FCA) signed the Co-operation Agreement with the People’s Bank of China.

The purpose of this agreement is to provide a framework for co-operation between the parties with respect to promoting innovation in financial services. The Agreement sets out how the parties plan to share and use information to promote innovation in their respective markets.

Bank of England: We Set Up the Fintech Accelerator to Develop Our Practical Experience of Fintech (Crowdfund Insider), Rated: A

In a speech this past week by Charlotte Hogg, Chief Operating Office of the Bank of England, she welcomed the launch of the Bank’s Fintech Accelerator while explaining their mission.

The Bank of England is currently working with the following Fintech firms:

  • BMLL: This machine learning platform provides access to historic full depth limit order book data. The BMLL platform aims to facilitate analysis and anomaly detection. We have agreed to test their alpha version for this Proof of Concept.
  • Threat intelligence: As part of the Bank’s wider information security and threat intelligence work we have partnered with two firms – Anomali and ThreatConnect– that provide innovative technologies to collect, correlate, categorise and integrate security threat data. For this project, we have asked them to offer a solution to consolidate threat intelligence into a searchable repository that can optimise information collation, enrichment and sharing in support of a proactive intelligence-led defence strategy.
  • Enforcd: In this proof of concept, we are using an analytic platform designed specifically to assess and draw out trends on regulatory enforcement action using publicly available information.

UK’s FCA fully licenses crowdfunding platform UK Bond Network (SMN Weekly), Rated: A

Bond crowdfunding platform UK Bond Network said on Wednesday it has obtained a license from the UK Financial Conduct Authority (FCA). Prior to getting fully licensed, the platform operated under an Appointed Representative temporary authorization.

The platform seeks to grow its business and expand its investment solutions. It considers launching new offering investments which would qualify for the Innovative Finance ISA (IFISA), a program for tax-free peer-to-peer (P2P) lending.

Investor Views: “Peer-to-Peer Lending Boosts my Income” (Morningstar), Rated: A

Harman, who lives in West Sussex with his wife, has built up a portfolio of using pension and ISA wrappers over a number of years. More recently he has also invested in peer-to-peer lending.

Harman says: “It certainly isn’t for everyone but I am comfortable with the risks. I get a steady income stream from the money I’ve lent out, currently around 5 to 6% a year.”

Crowdfunding might make you money but it’s not an alternative to savings (Herald Scotland), Rated: A

For one thing, investors have so far not received any return on their capital and, with BrewDog’s exit route not yet articulated, it is unclear when they will.

For Adam Tavener, chair of both Clifton Asset Management and funding platform Alternative Business Finance, it is for this reason that equity crowdfunding should never be seen as an alternative savings vehicle.

European Union

Fintech Golem’s ‘Airbnb’ For Computing Crowdsale Scores $ 8.6M In Minutes (Forbes), Rated: AAA

Golem Network, the first decentralized global market for computing power, raised more than $8.6 million (m) in just 29 minutes on Friday for its Golem Network Token (GNT) and in so doing became the third largest platform ICO (Initial Coin Offering) ever.

Acting and dubbed as an ‘Airbnb for computers’, Polish-based Golem Network is a peer-to-peer (P2P) network with no central server that allows both application owners and individual users (‘requestors’) to rent the resources of other users’ (‘providers’) machines, and be paid in cryptocurrency.

As the third largest ICO for a platform behind Ethereum, a public blockchain-based distributed computing platform ($18m in 42 days) and Waves, a blockchain-powered tokens platform ($16m in 30 days), Golem claims it “substantially lowers” the price of computations to make applications more accessible to everyone.

Denmark establishes FinTech hub (FS Tech), Rated: A

The Financial Services Union Denmark, the City of Copenhagen and the Danish Bankers Association have collaborated to form Copenhagen FinTech – a new association that will develop an ecosystem for FinTech entrepreneurs in the city.

Copenhagen is currently home to a range of FinTech companies, but many believe it needs investment if the city is to establish itself as a hub for innovation. The City of Copenhagen hopes to see growth and jobs as a result of the new efforts – following a study which showed that FinTech has the potential to create 10,000 new jobs in Denmark.

The association is launching, amongst other things, a co-working space under the name Copenhagen FinTech Lab, where entrepreneurs take lodgings and become part of a FinTech environment with sparring from established companies and other entrepreneurs.

Australia

Australian Treasurer Promotes the Benefits of Fintech & Regtech (Crowdfund Insider), Rated: A

At the inaugural Fintech Australia Summit this month, Scott Morrison MP, the Treasurer of Australia, delivered a speech that addressed this “collision” between Regtech and financial innovation.

Regtech, in Morrison’s opinion, can seamlessly integrate into financial firms creating a “compliance by design” environment where risks can be mitigated as everything is monitored in real-time.

Applying Regtech to Fintech  may ease the burden of the highly regulated industry;

“…we cannot allow our financial regulatory framework to act as a handbrake to this innovation. Excessively stringent rules and obligations result in less business, less competition and ultimately worse outcomes for consumers. RegTech can equip us to avoid these outcomes.”

China

Two banks trialling biometric technology under Hong Kong fintech ‘sandbox’ (Reuters), Rated: A

Hong Kong’s banking regulator received applications from two banks to test emerging biometric technologies under a new regulatory regime, Hong Kong Monetary Authority Chief Executive Norman Chan said on Friday.

The banks have applied to test the use of biometric authentication of securities trading, Chan said at the regulator’s first ever financial technology or “fintech” day on Friday.

India

Authors:

George Popescu
Allen Taylor