Monday August 6 2018, Daily News Digest

China alternative assets

News Comments Today’s main news: Barclays buys stake in MarketInvoice. N26, Revolut are coming to America. Zopa raises 44M GBP for new bank. China private equity funds suffer. Linked Finance ink 10M Euro in loans in Q2. Today’s main analysis: The states where payday lending charges almost 700 percent interest. Today’s thought-provoking articles: PeerIQ’s MPL Securitization Tracker. Debut of the […]

China alternative assets

News Comments

United States

United Kingdom

China

European Union

Other

News Summary

United States

Will Europe’s fintech banks conquer North America? (AltFi), Rated: AAA

Revolut and N26 will be launching in the US soon, but what sort of market will they be entering? How are local banks adapting their offerings to suit younger users? And what will be the impact of the newly-announced bank charters for fintechs?

PeerIQ’s MPL Securitization Tracker for 2Q2018 (PeerIQ), Rated: AAA

  • Twelve marketplace lending securitizations priced this quarter totaling $5.0 Bn, the highest level of quarterly issuance, representing 36% growth YoY.  To date, cumulative issuance equals $38.4 Bn across 126 deals.
  • We observed spreads widening and yields rising on new issuance. Weighted average all-in yields on consumer deals increased from 2.9% to 4.2% QoQ, and on student deals from 3.0% to 4.5% QoQ.
  • All deals issued this quarter except SoFi’s student loan passthrough securitizations were rated.   
  • Tranches continue to get upgraded. So far, ratings’ agencies have upgraded 51 consumer MPL tranches and 67 student MPL tranches that are outstanding.
  • Citigroup, Deutsche Bank, and Credit Suisse continue to top the issuance league tables with 54% of MPL ABS transaction volume.
  • Freedom Financial issued its inaugural deal and OnDeck returned to the market. SoFi issued over $2 Bn in student loan passthrough securitizations.
Source: PeerIQ

Debut of the OCC’s FinTech Charter + Supervisory Standards (PeerIQ), Rated: AAA

The US economy added 157k jobs in July and the unemployment rate dropped to 3.9%. Wage growth came in strong at 2.7%, potentially fueling inflation down the road and keeping the Fed on its stated rate hike path.

OCC Asserts its Authority and is Open to Accepting SPNB Charters

Immediately following the report, Joseph Otting, Comptroller of the Currency, announced that the OCC would start accepting applications from “fintech companies that are engaged in the business of banking but do not take deposits.”

An SPNB can engage in a limited range of banking or fiduciary activities like credit card operations, taking deposits, paying checks, lending money, community development, or cash management activities. The policy is a significant development as companies with the Fintech charter would be able to perform banking activities like lending and payment processing nationally.

Who are the Likely Winners and Losers?

The long-term winner of the charter is the US consumer who will benefit from greater competition, innovation, and access to credit. Payments companies that seek to compete with Visa/Mastercard also stand to benefit. Lenders that qualify for the charter may also have a competitive advantage. Payments arms of firms like Google, Apple, Amazon and PayPal would fit the profile, as well as large non-bank lenders that can demonstrate sustainable profitability de-risked their business models. Fintechs that have liquidity, funding, or going-concern risks will struggle to obtain charters.

Less is more for OCC’s fintech financial inclusion plans (American Banker), Rated: A

The Office of the Comptroller of the Currency is threading a tricky needle.

It has affirmed that it plans to evaluate fintech charter applicants based on their fair lending efforts, but it’s pulled back on specifics for how that process might work. That has made some consumer groups nervous.

The OCC published an updated version of its licensing manual supplement for fintechs on July 31, in connection with an announcement that it’s begun accepting applications for fintech charters.

Fintech charter: Be wary of innovating into another crisis (The Hill), Rated: A

But before we allow fintech firms to bound over the regulatory mound, it’s important to take a hard look at why we regulate the financial services sector so thoroughly to begin with.

Many also claim that fintech will bank the unbanked and lead to financial inclusion. The only thing standing in the way of all of this change and disruption, many claim, is overbearing government regulation.

With OCC’s door officially open, will fintechs enter? (American Banker), Rated: A

Fintech companies now have the federal option they have long sought after the Office of the Comptroller of the Currency green-lighted firms to apply for a special-purpose bank charter. But winning OCC approval on charter bids will not be a walk in the park.

One day after the OCC announcement, some fintech firms signaled clear interest in the charter. But the agency’s decision also prompted a slew of additional questions, including whether firms would be able to meet the regulator’s tough criteria, and whether state regulators would continue to fight

Does a Bank Charter for Square Still Make Sense? CEO Jack Dorsey Thinks So (Bank Innovation), Rated: A

POS payments provider Square is still interested in pursuing a bank charter, but how? It may be more challenging given that the company will be paying more attention to its customer-facing prepaid products like Square Cash and its Cash Card, according to CEO Jack Dorsey in the company’s earnings call yesterday.

This map shows the states where payday loans charge nearly 700 percent interest (CNBC), Rated: AAA

Some short-term loans cost over 20 times more in interest than the average credit card. And yet one in 10 Americans have used them.

In the U.S. today, these loans are a $9 billion business. In the past two years, 11 percent of U.S. adults say they’ve taken out a payday loan, according to a recent survey of approximately 3,700 Americans that CNBC Make Itperformed in conjunction with Morning Consult.

Source: CNBC

This Rebrand Is Not Barking Up The Wrong Tree (Forbes), Rated: AAA

For 

$ 203.49 Million in Sales Expected for Elevate Credit Inc (ELVT) This Quarter (Fairfield Current), Rated: A

Equities analysts expect Elevate Credit Inc (NYSE:ELVT) to announce sales of $203.49 million for the current fiscal quarter, according to Zacks. Two analysts have made estimates for Elevate Credit’s earnings, with the lowest sales estimate coming in at $201.00 million and the highest estimate coming in at $205.97 million. Elevate Credit reported sales of $172.85 million in the same quarter last year, which indicates a positive year-over-year growth rate of 17.7%. The business is scheduled to announce its next earnings report on Monday, October 29th.

NCUA’s Proposed Payday Alternative Loans Unattractive to CUs: Trades (CU Times), Rated: A

A new payday alternative program proposed by the NCUA is unlikely to convince many more credit unions to offer short-term loans because the loan terms are too prescriptive, credit union trade groups said.

Why Real Estate Deals, Not Startups are the Big Success Story of Equity Crowdfunding (Crowdfund Insider), Rated: A

In the year after Title III went into effect, startups received only $38 million in equity crowdfunding, according to Bloomberg—an amount that amounted to “a rounding error” in the larger system.

Before the JOBS Act, there were three formidable barriers to widespread individual investment in commercial real estate.

  1. Limited access to deal flow
  2. Inconvenience
  3. High minimums

Online crowdfunding has eliminated all three barriers

To begin with, the process is far more transparent and accessible, with minimum investments dropping to as low as $10,000.

ICBA calls for a new FDIC moratorium on industrial loan charter applications (American Banker), Rated: A

Renewing longstanding opposition to industrial loan charters, the Independent Community Bankers of America urged the Federal Deposit Insurance Corp. to impose a two-year moratorium on such applications.

The trade group also pressed the FDIC to reject an application from the student loan servicer Nelnet for an industrial loan charter.

Lenders One Names Michael Kuentz as Chief Executive Officer (Altisource), Rated: A

Lenders One Cooperative, a national alliance of independent  mortgage bankers, announced that Michael Kuentz has been promoted to the role of Chief Executive Officer of Lenders One by its Board of Directors. Mr. Kuentz previously held the title of President. In his new role, he will assume responsibility for Lenders One’s day-to-day operations and strategic execution as well as continue to lead and manage the cooperative’s sales effort.

United Kingdom

Barclays takes stake in SME lender MarketInvoice (Banking Tech), Rated: AAA

Barclays has taken a “significant” minority stake in UK-based SME lending platform MarketInvoice.

Details were not disclosed, because we live in the age of secrecy, but the bank says the deal is a key part of its plans to invest in new business models for growth, and MarketInvoice’s ambition to broaden its reach across the UK.

P2P lender Zopa raises £44m to fund new bank (Financial Times), Rated: AAA

Zopa has raised £44m in a new funding round to aid its expansion into traditional banking as its traditional peer to peer business comes under pressure from regulators.

Wonga investors inject £10M so cash-strapped payday lender can fund claims (TechCrunch), Rated: A

Yesterday Sky News reported that those same two, Accel Partners and Balderton Capital, are among a group of Wonga investors that have agreed to inject a further £10M (~$13M) into the business to help fund compensation claims related to its past censured practices.

Can this new breed of robo-advisers help you take control of your money? (The Telegraph), Rated: A

Savers have historically been forced to choose between picking and managing their own investments, paying for financial advice, or, recently, handing their money over to a “robo adviser” to do it for them.

China

China private equity funds suffer wave of closures (Financial Times), Rated: AAA

Chinese alternative asset managers have become the latest casualty of the country’s crackdown on debt and financial risk, with a record number of private equity and hedge funds dissolving in recent months as new regulations limit their fundraising.

In the first six months of this year, the Asset Management Association of China (Amac) — a government-controlled industry body — “lost contact” with 163 private fund institutions, more than 70 per cent of the total for which contact was lost for 2017.

Source: Financial Times

Chinese P2P chief Yao Kunjie makes the Forbes high achievers list while under investigation (SCMP), Rated: A

Yao Kunjie, 28, is the CEO of peer-to-peer lending platform Beimi Wallet and was named on the financial sector list on Thursday.

Forbes magazine puts out regional lists of high achievers born after January 1, 1988, in 20 sectors every year.

The announcement came just a week after Shanghai police said Yao had been detained on July 13 on suspicion of “illegally absorbing public funds”, without elaborating, in a statement last Saturday.

Qudian Tries to Distance Itself from Other P2P Lenders (Capital Watch), Rated: A

Qudian Inc. (NYSE: QD) defended its business model Friday, saying that it is not undergoing the same “[volatility] and uncertainty” suffered by China’s broader peer-to-peer industry.

The announcement sent the company’s stock up nearly 5 percent mid-afternoon to $7.59 per American depositary share.

Source: Capital Watch

China lends trillions to SMEs, farmers as part of inclusive finance push (Global Times), Rated: A

For example, banks’ balance of loans to farmers stood at 30.95 trillion yuan ($4.53 trillion) as of the end of 2017, up 48.2 percent from 2013. The balance of lending to small and micro-sized businesses stood at 34.74 trillion yuan in 2017, up 73.1 percent from 2013, according to Feng.

European Union

€10m loans mark record quarter for Linked Finance (Independent), Rated: AAA

Linked Finance, an Irish peer-to-peer (P2P) lending platform, recorded its strongest quarter to date in the three months to the end of June, facilitating over €10.1m to Irish SMEs.

This followed on from a strong start to 2018, with total lending for the year now more than €18.7m, up 65pc on the same period in the previous year.

The increase in lending is down to both the volume and size of loans. The number of loans that went live on the platform rose by 39pc in the period to 335, with average loan size up 19pc to almost €56,000.

BANCO BNI EUROPA LAUNCHES EQUITY RELEASE IN SPAIN WITH ÓPTIMA MAYORES (Fintech.Finance), Rated: A

Banco BNI Europa launches equity release in Spain in partnership with Óptima Mayores, the Spain’s leading financial advisor specialized in this segment.

Altisource Names Justin Vedder as Chief Operating Officer of Origination Solutions (Altisource), Rated: B

Altisource Portfolio Solutions S.A. (“Altisource” or the “Company”) (NASDAQ: ASPS), a leading provider of services and technologies to the mortgage and real estate industries, today announced the appointment of Justin Vedder as Chief Operating Officer, Origination Solutions.

International

How Fintex Capital Enabled the $ 30M Banco BNI Europa Investment in Upgrade Loans (Lend Academy), Rated: AAA

Last month we learned about the new $30 million investment received by Upgrade from the Portuguese digital bank Banco BNI Europa.

In reality BNI Europa did not actually purchase Upgrade loans, they invested in a privately placed bond that was backed by Upgrade loans. This bond was issued by Fintex Capital.

India

Regulations Shrink India’s Peer-To-Peer Lending Industry (Bloomberg Quint), Rated: AAA

When the Reserve Bank of India first brought out a discussion paper on peer-to-peer lending in April 2016, it said that there were 30 such start-ups in the country. It then proceeded to fashion a set of rules for the nascent but fast growing sector and came out with regulations in October 2017. Key among them was a requirement that peer-to-peer lenders register with the RBI.

Nine months since, only five of these lenders are registered in the ‘NBFC-P2P’ category, according to RBI data available until June 30, 2018.

This includes:

  • Fairassets Technologies India Pvt. Ltd.
  • Fincquare Fintech Pvt. Ltd.
  • Bridge Fintech Solutions Pvt. Ltd.
  • Bigwin Infotech Pvt. Ltd.
  • OHMY Technologies Pvt. Ltd.

Cashkumar foresees huge potential in online lending for short-term credit (The Hindu Business Line), Rated: A

Peer-to-peer (P2P) lending company Cashkumar, which offers short-term credit to borrowers, foresees huge potential to lend in the online space.

At present, the company services around 200 loans a month . It is targeting to service about 80 loans a day in the next six months, besides expanding operations to 20 cities by next year.

Asia

Japan’s Samurai Asset Finance Offers Loans Collateralized by Digital Assets (Bitcoin Exchange Guide), Rated: A

A Japanese firm listed on the Tokyo Stock Exchange recently unveiled loans that can be collateralized by three digital assets, namely BitcoinBitcoin Cash and Ethereum. As of now, the maximum amount borrowable is capped at 300 million yen (approximately $2.7 million).

Currently, the loan limits range from a minimum of 20 million yen ($180,000) to a maximum of 300 million yen ($2.7 million). The default repayment period is twelve months, although there are provision for extensions. The interest rates for these loans start from 7% to 155 annually, inclusive of commissions and extensions charges. If a lender fails to repay the loan in time, they will liable to a delinquency charge of 20% per year.

Crypto for real estate (Business Times), Rated: A

WE believe, in time, all real estate assets will reside on the blockchain – this is the grand vision of real estate entrepreneurs Julian Kwan and Alice Chen. The married couple – who co-founded Singapore-based real estate crowdfunding platform InvestaCrowd – has created a new product: RealFuel,

IMDEX ICO (IMDX Token): Decentralized Exchange & Crypto Banking Platform? (Bitcoin Exchange Guide), Rated: B

It’s difficult to ascertain much information about the people behind IMDEX. The company appears to have some connection to a Korean company called Techton Soft that was established in 2016. The Techton Soft website indicates that the company specializes in investment trading solutions, peer-to-peer lending, artificial intelligence, and cryptocurrency exchange. The Techton site states that the company has 10 employees, making it a rather small operation, and lists a man named SangHyun Kim as the CEO.

Authors:

George Popescu
Allen Taylor

The Return of Non-Prime Mortgage Loans

Altisource

Altisource was launched in 1999 and has its headquarters in Luxembourg. In 2009, it was listed under the ticker (NASDAQ: ASPS) it was a spinoff from Ocwen Financial Corp (NASDAQ: OCN); a mortgage loan servicing and asset management company and today its equity market cap stands at just under $500 million. Chart below shows ASPS […]

Altisource

Altisource was launched in 1999 and has its headquarters in Luxembourg. In 2009, it was listed under the ticker (NASDAQ: ASPS) it was a spinoff from Ocwen Financial Corp (NASDAQ: OCN); a mortgage loan servicing and asset management company and today its equity market cap stands at just under $500 million.

Chart below shows ASPS performance for the last two years:

Source: Yahoo! Finance

The company has over 10,000 employees on its payroll and since its inception has acquired Investability, RentRange LLC, CastleLine, and Equator. It offers plethora of products ranging from real estate and mortgage portfolio management, asset recovery, and customer relationship management to securitization, loan origination, insurance etc. It is a one-stop shop and serves over 250 lenders.

Justin Vedder, vice president, national sales for origination solutions, has a strong background in operations, strategic sales and sales management. Prior to this, he held high profile positions in various organizations like CastleLine Holdings, The Prieston Group to name a few. Vedder shared his thoughts with Lending-Times on Altisource and the current tailwinds in the non-prime mortgage ecosystem.

Return of High-Risk Mortgage

Non-prime mortgage securities were once a popular choice among lenders. It offered attractive returns but it all changed when housing market came crashing down in 2008. But in the last year or so, the high-risk mortgage has made a return and the sector is slated to originate about $100 billion this year, though the number is minuscule if compared to $2.2 trillion mortgage market. With an increase in lending volume as well as interest rates, higher yields are expected in the coming future and favorable regulatory environment is another reason why investors are again cautiously optimistic about the future prospects of the industry.

Post-2008, the Consumer Financial Protection Bureau (CFPB) came hard on faulty loans and companies who falsified the loan documents. Dodd-Frank Wall Street Reform and Consumer Protection Act piled on additional mortgage industry regulations to protect consumers. Regulation Z of the Federal Truth in Lending Act provides the backbone of mortgage industry regulations, covering topics such as mortgage disclosures, servicing and appraisal requirements.

Prior to 2008, person earning $30,000 a year with a “D” credit rating, not sustainable income and with no down payment could buy a home, the underwriting process was that easy but it all changed after the 2008 financial crisis. Now, the borrower should atleast have a “B” credit rating, regular sustainable income with proofs, two year job history and 20% down payment and numerous amount of paperwork including tax returns, pay stubs, banks statements, W-2 and much more. With the advent of fintech companies, underwriting has become much more automated and companies are using various technologies like AI to make sure borrowers are genuine. And because of these changes, delinquency rate for 90 days or more including loans foreclosure was 2.2 percent in February 2017. All these changes have made the whole lending ecosystem much more secure than before.

Post-2008, approval rates have gone down significantly as lenders are much more circumspect. Therefore customers with low fico score, self-employed, and retired find it difficult to get loans even though they might have lots of savings and investments. Self employed has always find it tough when it comes to mortgages because they write off far more than the W-2 employees, hence they find it difficult to show the required proof of income through tax returns. Hence, high percentage of self-income individuals, even though they have required prerequisite to qualify for mortgages, struggle to get loans. Because the underwriting and loan processing is more comprehensive than before, the non-prime mortgage sector has the opportunity to tap into the self-employed category.

Requirements and Risk level

Disclosures required from applicants are much more wide-ranging and LTV is now decided by a multi-factor approach to ensure the ability to pay. Recently CFPB introduced “Quality Mortgage” Rule; lenders will use this rule as underwriting standards. Some of its key features are:

  • A borrower may not have a debt-to-income ratio of greater than 43 percent,
  • Fees and points may not exceed 3 percent of the loan amount,
  • Lenders must verify a borrower’s income
  • No mortgages greater than thirty years and no interest only or negative amortization loans.

In 2014, CFPB issued stricter rules for lenders to decide whether the borrower is qualified or not for the mortgages. The “ability to repay” rule, requires the lender to consider more than just the initial interest rate in determining whether the prospective borrower can pay off the loan or not. This rule will make it difficult for the borrowers to qualify for the ARM (Adjustable-rate Mortgage), since lenders will be using higher rates than initial rate available on the loan.

All these additional requirements, along with careful evaluation of collateral, validation of project, income and bank statements, has been the reason why risk level on sub-prime mortgages has gone down considerably and why it is once again becoming popular.

Altisource Products

  • Trelix – Post-2008 era has been tough for the mortgage industry in terms of regulations, and it has become hard to keep track of all regulatory changes and whether every loan is as per regulatory standards or not. Also lack of trained staff has resulted in a high manufacturing cost per loan. Altisource’s Trelix offers “end-to-end licensed underwriting and loan processing services”. This gives a competitive edge to its clients as it manages risk while lowering the cost. Trelix offers host of customized services- processing, underwriting, quality control, loan due diligence etc.
  • CastleLine Insurance Services – This robust risk management and insurance solution is specifically designed for the mortgage banking industry. It helps the clients to safeguard against the losses arising from loan manufacturing defects, underwriting errors, misrepresentations, and borrower, seller, and employee fraud. This is a game-changer as it helps in increasing mortgage quality and reduces funding costs.

Company Numbers

Over the years, Altisource has carved its niche in a highly competitive mortgage industry and has a strong network of on-boarded lenders. Though company as whole has been flourishing but its underwriting business has been on the rise and so far has done over $15 million in volume and its other key business CastleLine insurance business has insured over $15 billion worth of loans.
Industry outlook

The industry will continue to grow but it is expected to evolve over a period of time in terms of process automation. The practice of individually reviewing each loan application is cumbersome and error-prone; therefore by leveraging other credit enhancers like insurance and third party guarantee, the industry can accelerate the process and will also provide a much-needed safety net to the mortgage providers.

Future Plans

The company wants to create an enabling environment so that the mortgage providers can go deep and tap into the non-prime lenders market. Right now the trading environment in the secondary market is non-formal as a lot of work is done using nonpublic information or via emails and the company is on track to change the whole landscape of the sub-prime mortgage industry with the help of its next-generation product line and expertise.

Author:

Written by Heena Dhir.

Friday May 5 2017, Daily News Digest

Friday May 5 2017, Daily News Digest

News Comments Today’s main news: Lending Club’s Q1 2017 results: a little disappointing. SmartFinance to IPO in U.S. Prosper says system error overstated returns. Details on NAV’s raise of $38mil Series B. Next Insurance secures $29M during Series A. Metro Bank hits 1 million accounts. LendIt Europe to meet in London this year. Mexican fintech raises $4M in Series A. Today’s main […]

Friday May 5 2017, Daily News Digest

News Comments

United States

United Kingdom

  • Metro Bank hits one million accounts. GP:”This is a very large number of accounts. I am very impressed.”AT: “Great achievement. Congratulations.”
  • Sand. Meet Head. GP:”Certainly worth a read.”AT: “I love Anand’s sense of humor, but his insights are prescient, as well. I’m always amazed at the hubris of incumbents in any industry. Any time there is market disruption, the surest path to survival is humility, not boasting.”
  • LendIt Europe returns to London. GP:”I think there was no doubt it will be in London and stay in London. “
  • Robo-advisor to provide full retirement advice in two hours. GP:”I am not sure why it takes 2 hours to compute such a simple algortihmic solution. “AT: “This sounds like a joke, but I know it isn’t. I think most people will want the robot’s advice checked by a human until they are 100% comfortable with the technology.”
  • Octopus-backed Moola goes live.
  • What is fintech and why Google and Facebook will be the banks of the future. GP:”Google is already struggling to defent against monopole attacks and Facebook is avoiding carefully to be turned into a credit bureau. I doubt they will move in that direction. Also banks don’t have a good image with the public and aren’t that profitable so I see no reason for Google or Facebook to come even close to being banks.”AT: “The headline is misleading and somewhat overstated.”
  • Fintech: What will bring the most change? AT: “A poll indicates that blockchain may be the most disruptive fintech technology in fintech. I think it certainly has the potential to be, but we haven’t seen it yet.”
  • What does rising inflation mean for your money? AT: “A blog post at Funding Circle.”

China

European Union

India

Middle East

Central America

News Summary

United States

Lending Club Reports First Quarter 2017 Results (Crossroads Today), Rated: AAA

($ in millions)

March 31,
2017

December 31,
2016

March 31,
2016

Originations

$

1,958.7

$

1,987.3

$

2,750.0

Net Revenue

$

124.5

$

130.5

$

152.3

Net Income (Loss)

$

(29.8)

$

(32.3)

$

4.1

Adjusted EBITDA (1) (2)

$

0.2

$

(0.9)

$

26.3

Key accomplishments and developments in the first quarter across the Lending Club platform include:

Investors

  • Banks further increased their purchasing, funding 40% of total originations for the quarter, up from 31% in the fourth quarter, and retail investors expanded to 15%, up from 13% in the prior quarter
  • Developed a retail investor mobile application, now available in the App Store
  • Lending Club initiated activities to support the securitization of Lending Club loans with external partners

Borrowers

  • Achieved another nearly $2 billion originations, surpassing $26 billion in total loans since inception almost ten years ago
  • Continued the Company’s lead as the largest personal loan provider in the U.S. with a borrower base of almost 2 million individuals
  • Introduced an enhanced version of our Joint Application loan program, giving borrowers the ability to jointly apply for a personal loan

Adjusted EBITDA (3) Adjusted EBITDA was $0.2 million in the first quarter of 2017, improving $1.0 million from the fourth quarter of 2016, resulting from the decrease in revenue noted above, and a decrease of $10.3 million in other general and administrative expenses. The decrease in other general and administrative expenses was primarily driven by an insurance recovery of $9.6 million. Adjusted EBITDA also includes $10.6 million of expenses primarily associated with the Board Review that was disclosed in 2016.

Lending Club’s $ 30M quarterly loss is its smallest in the last year (American Banker), Rated: AAA

Lending Club, the online consumer lender whose fortunes were hurt by scandal last year, lost $29.8 million in the first quarter amid lower revenues and rising expenses.

BRIEF-Lending Club reports Q1 adjusted loss per share $ 0.02 (Reuters), Rated: AAA

  • LendingClub corp – qtrly originations $1,958.7 million versus $2,750.0 million
  • Q1 adjusted loss per share $0.02
  • Q1 loss per share $0.07
  • Q1 earnings per share view $-0.03 — Thomson Reuters I/B/E/S
  • Q1 revenue $124.5 million versus i/b/e/s view $122.8 million

Here is the Lending Club Q1 Earnings Deck (Crowdfund Insider), Rated: AAA

Below is the Lending Club Q1 earnings deck. The company is predicted Q2 growth of 6% to 10%. Full year sequential growth is expected to be 15% to 19%.

See the Lending Club Q1 2017 results in full here.

Lending Club slowly woos investors back after last year’s scandal (Financial Times), Rated: AAA

In the first quarter the San Francisco-based company originated $1.96bn of loans, it said on Thursday, down slightly from the $1.99bn of the fourth quarter. Banks bought 40 per cent of the loans, up from 31 per cent in the fourth quarter, indicating that many are now satisfied that the company has ironed out its problems.

But net revenues for the quarter were $125m, down 5 per cent from the fourth quarter. The quarterly net loss was $29.8m, slightly less than the previous period.

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

Online Lender Prosper Says System Error Overstated Returns (Bloomberg), Rated: AAA

Prosper Marketplace Inc., one of the largest U.S. online-lending platforms, notified the majority of the investors that buy its loans that it had overstated their annual returns due to a system error, a spokeswoman said.

The error has been fixed, according to spokeswoman Sarah Cain. Some of the investors that were affected saw their annual returns fall in half, but in most cases returns fell less than 2 percentage points, Cain said. The issue has been going for “several quarters,” she said.

The glitch didn’t affect the cash that investors received, tax documents, expected future returns, or any other information the startup provided to loan buyers. In a small number of cases, returns were understated, Cain said.

Q1 2017 Shareholder Letter (Square), Rated: AAA

Our first-quarter results demonstrate our continued ability to grow the business at scale while balancing investment and margin expansion. Improvements in net loss and Adjusted EBITDA reflect strong top-line growth, coupled with ongoing operating leverage and improvements in transaction loss rates. Similar to previous quarters, we saw strong momentum across our products, with revenue growth driven by both transaction-based and subscription and services-based monetization.

We launched in the UK, our fourth international market, where small and medium businesses (SMBs) generated £1.8 trillion of revenue in 2016.

Square is a great fit for the UK market, which has 5.5 million SMBs2 and a thriving entrepreneurial scene. The annual revenue of SMBs in 2016 was £1.8 trillion, which is 47% of all private sector UK revenue. In the UK, the average adult now carries less than £25 in cash and 70% of shoppers prefer to pay by card, yet industry research estimates that half of UK small businesses still do not take card payments. Our contactless and chip reader aims to meet the needs of the UK market, where there are more than 100 million contactless cards.

See Square’s full Q1 2017 report.

FT Partners Advises NAV on Series B Financing (FT Partners), Rated: AAA

Read the full announcement here.

PeerStreet Hits New Milestone: $ 300 Million in Loans Funded (PeerStreet), Rated: A

Under a year ago, we announced PeerStreet had funded $75 Million, October we rounded $150 Million and now, thanks to the ongoing support from our investors and lenders, we’ve just surpassed $300 Million with zero losses to date.

The number of lenders PeerStreet works with has grown from 25 to 89. The loans we’ve recently made available for investment are more diverse than ever, with 11 new states added since this time last year, now totaling coverage across 28 states and Washington D.C. Currently, we are publishing triple the number of loans we did a year ago. To support this growth, our underwriting and portfolio management teams have doubled since last year.

Next Insurance Secures $ 29 Million During Series A Funding Round (Crowdfund Insider), Rated: A

Next Insurance, an insurtech company that specializes in small to medium businesses, announced on Wednesday it secured $29 million during its Series A funding round, which was led by Munich Re/HSB Ventures with participation from  Markel, Nationwide, and other existing investors.

The funding from the Series A funding round will go towards continuing to grow Next Insurance’s insurance products and expand the company’s offering to new business sectors. The announcement follows Next Insurance’s recent release of the first ever Facebook chatbot for small business insurance.

CAN ALTERNATIVE DATA SOLVE ONLINE LENDERS’ ‘ALGORACISM’ PROBLEM? (The Alternative Lending Report), Rated: A

A March 2017 letter written by Congressman Emanuel Cleaver, II (D-Mo.), to Consumer Financial Protection Bureau Director Richard Cordray raises fresh concerns about “algoracism” tainting the creditrisk-scoring models used by online lenders.

Cleaver’s letter highlighted five predatory practices cited by the HBS paper as pervasive in the “Wild West” of online lending and alleges that risk-scoring algorithms may be designed to discriminate against minorityowned, small business borrowers.

Minority-owned businesses comprise roughly 15% of the 28.8 million small businesses in the United States, according to a 2016 Small Business Administration report.

Biased algorithm design can occur if engineers code data correlation parameters with attributes that make inadvertently discriminatory assumptions, which could be violating the Equal Credit Opportunity Act. ECOA prohibits creditors from discriminating against borrowers on the basis of race, color, religion, national origin, sex, marital status, age or because they receive income from a public assistance program.

In fact, FastPay’s loan algorithm is over 80% weighted towards the credit risk of the brand counterparties, which typically average 90-days sales outstanding before they pay their creative and advertising technology vendors. Despite prolonged payment terms, Proctor & Gamble and other Fortune 500 brands pose extremely low credit-default risks to invoice financiers like FastPay.

Ultimately, Arora attributes flawed credit-risk modeling in fintech to the big banks that refuse to share data. But banks in the U.S., unlike in Singapore and the UK, where lenders are opensourcing their loan algorithms, see no incentive to make accountholder data available to third parties.

Regardless, Mills said Kabbage, which charges an annual percentage rate, ranging from 24% to 99%, is an interesting fintech small business lender because they factor variables like borrower credit card data and the company’s Facebook page into their risk scoring models.

Source: The Alternative Lending Report

See the full report at SmallBusinessLending.io.

How Lending Club Is Differentiating Itself From Other Online Lenders (Forbes), Rated: A

In less than a year, Sanborn cut and rehired 179 jobs and hired a new CFO, COO, general counsel and chief capital officer. In addition, the company launched a new auto refinance product and an investor mobile application, Lending Club Invest.

Sanborn: Nearly 75% of borrowers also say that their FICO score has increased by 19 points after consolidating debt or paying off credit cards, which can help put them on a better financial track.

Sanborn: Today we have more than 148,000 retail investors – more than any other online lender. Part of the evolution of our marketplace is growing and balancing the mix of investors – having the right mix of investors strengthens our marketplace and makes us more resilient, scalable, and better able to serve a wide range of borrowers of all credit profiles.

Sanborn: Our mission has been to transform the banking system to make credit more affordable and investing more rewarding. So, everything that we do comes from this goal and with the intention of delivering a great experience for everyone who comes to our marketplace. With 10 years of experience and incredibly powerful data and insight that informs us on our customers’ behaviors, choices and needs. We’re also able to calibrate this data into our models to price credit risk and better manage our marketplace and the success of both our borrowers and investors.

A traditional bank uses government-guaranteed deposits to lend to make a spread and can only give loans to a narrow spectrum of borrowers. Our credit marketplace attracts investors that span retail, asset managers, funds and banks, all with different risk appetites, to invest in loans across the credit spectrum so we can say yes to more borrowers. Our diverse investor base also means we’re not reliant on any one type of investor to fund our loans, so we have the agility to pivot funding channels to meet changing market conditions.

OCC fintech charter plans in jeopardy as Curry departs (Finextra), Rated: A

Proposals by the US Office of the Comptroller of the Currency to issue special purpose banking charters to fintech firms are up in the air following the departure of leading advocate Thomas Curry and his replacement as acting head of the Federal agency by Simpson Thacher & Bartlett partner Keith Noreika

Curry completed his five-year term as Comptroller last month but planned to stay on and push through his controversial fintech charter.
Noreika, a member of the Trump transition team, has extensive experience advising banks on regulatory issues, although his views on Curry’s fintech plans are not known.

Crowdfunding Real Estate Isn’t Just For Millionaires Anymore. (Yes Magazine), Rated: A

In up-and-coming neighborhoods, it’s not uncommon for developers to swoop in and alter historic buildings beyond recognition, or tear them down completely to make way for new projects. But when Eve Picker, president and founder of the real estate crowdfunding portal Small Change, came across a three-story property called the Buvinger Building in Pittsburgh’s Lawrenceville neighborhood, she saw a way to both preserve history and add much-needed housing units in a thriving area.

Luckily for Picker, the funding process is easier than it used to be. She posted a detailed project overview on Small Change’s website, which included information about the building’s history and aesthetics, the financial returns and risk factors, and a link to invest. Small Change met their investment goal of about $240,000 in just under three months, and construction on the project began in late Feb. 2017.

Though the internet paved the way for Title III crowdfunding, it solves a problem that existed long before the digital revolution. When securities regulations were put in place to protect non-wealthy investors after the stock market crash of 1929, one unintended consequence was that those very same investors were frozen out of a broader range of investment opportunities. It took years for the SEC to approve the Title III regulations in the JOBS Act, Roderick explains, because of the challenge inherent in striking a balance between protecting investors and making it easier for developers to raise money.

Small Change, however, is raising more than just capital. It’s a crowdfunding platform that backs real estate development projects only if they benefit underserved communities.

It also means that, in addition to financial returns, many Small Change investors are seeking investments that align with their values. It’s not something easy to quantify—and that’s where the Change Index comes in. The index is Small Change’s proprietary system for measuring a project’s viability in terms of transportation, the environment, and economic inclusiveness.

The Index also provides a metric for potential partners and investors to gauge their compatibility with a particular project.

Small Change plans to launch its first Reg CF offerings later this spring. It’s still one of only about 25 Title III electronic crowdfunding portals that the SEC has approved. While most Title III portals are focused on startup and small business financing, Small Change deals exclusively with real estate, which makes it even more of an outlier.

Major Credit Unions Will Unveil New Blockchain Tech Next Week (Coindesk), Rated: A

CULedger, a consortium project unveiled late last summer, is supported by more than 50 credit unions and four of the biggest credit union service organizations in the US. Spearheading the project are the Credit Union National Association and Mountain West Credit Union Association (MWCUA).

Those involved in the initiative say they want to utilize the tech in a bid to improve how credit unions function – while also making them more competitive in an increasingly tough environment for financial institutions. The idea is to create a blockchain-powered utility through which credit unions could send money or exchange other types of information.

FinTech and Digital Wallets are the Core of Financial Inclusion (Due), Rated: B

In a FDIC survey released in 2016, the Federal organization found the roughly 7% of American households are unbanked. That is 9 million households with no checking account or savings account. No direct deposit. No credit cards. These families utilize virtually no mainstream financial services. In some parts of the country, as much as 40% of the population is unbanked!

With no bank relationship, these individuals have little if any credit history and poor credit scores. There is a lack of trust and understanding of how banks and mainstream financial services work. This is a serious problem the entire financial industry needs to overcome.

Instead, less savory businesses are often chomping at the bit for this demographic’s financial business. Payday loans, title loans, and other expensive, low-quality financial products are all these people have had access to.

In many ways, digital wallets work like a bank account. You can store funds, make payments, and transfer to other financial accounts. In the case of Bluebird, you can even write checks!

Digital wallets look a lot like a regular checking account to outsiders, but there are some important technical differences between bank accounts and digital wallet accounts.

Financial technology startups are not encumbered by those sentiments. While the rules of the game are the same, startups can quickly adapt to new market trends, customer feedback, and more.

Unlike a giant bank where you have to navigate a series of annoying phone menus to reach a live human, startups are right on the pulse of what their customers are saying and doing. That is a major advantage.

United Kingdom

Challenger bank hits one million accounts (AltFi), Rated: AAA

Metro Bank surpasses one million customer accounts less than seven years removed from launch.

Metro Bank, which became the first new high street bank in the UK for over one hundred years in 2010, now has more than a million customer accounts. The milestone was reached, fittingly, on the bank holiday Monday, when the majority of incumbent banks are closed.

Some stats from the last seven years include: being open 75 per cent longer than the average bank, saving customers over 4 million days by printing over 1 million cards instantly in-store, and preventing over 20,000 cards from being cancelled unnecessarily.

Sand. Meet head. (CB Insights), Rated: AAA

Source: CB Insights
Source: CB Insights

It goes by many names.

Hubris.
Arrogance.
Cluelessness.

It’s also worth understanding that there is no upside to saying stuff like this.

Cuz more often than not, you’ll find yourself on the wrong side of history like so many of these CEOs.

And then we’ll make slides to immortalize your cluelessness.

Europe’s largest lending and fintech event, LendIt Europe, returns to London this autumn (LendIt Email), Rated: AAA

LendIt Europe 2017 launched last night with a cocktail reception for 75 of London’s fintech elite at the Dion in St. Paul’s. The 2017 event is set to be Europe’s largest lending and fintech event, with over 1,000 participants from the UK and Continental Europe as well as North America and Asia. Taking place at the Intercontinental O2 Hotel on October 9-10, this year’s conference is expanding with the industry to cover the hottest topics in fintech including blockchain, insurtech, digital banking, and much more.

Early confirmed keynote speakers are Jaidev Janardana, CEO of Zopa, Francesco Brenna, Partner at IBM Global Business Services, and Shane Williams, co-founder of UBS Smartwealth. With six tracks of content including Digital Banking, Credit & Underwriting, Policy & Regulation, The Cutting Edge in Fintech, Innovations in Lending, and Investor Insights, this year’s LendIt Europe agenda will be the most comprehensive yet, with more details being released on www.lendit.com/europe in the coming months.

A featured component to this year’s conference, and back for its second year running, is the PitchIt startup competition. PitchIt allows innovative fintech startups from across EMEA to present their solution in front of the LendIt audience of international investors and industry leaders. The PitchIt programme has been an exciting part of the LendIt series of events, with past winners and finalists going on to secure significant investment and publicity.

Robo-adviser to provide full retirement advice in 2 hours (FT Adviser), Rated: A

Robo-adviser Wealth Wizards has launched a new automated paraplanner tool to help firms provide retirement advice in less than two hours.

Wealth Wizards said the tool generates a “regulated advice solution” made up of an annuity, drawdown or a blend of the two.

The report could then be edited by an adviser to make sure it suited the client’s needs.

Octopus-backed robo advisor Moola goes live (AltFi), Rated: A

Investors have a new robo advisor to choose from following the soft launch of Moola.

The firm, which is backed by private equity specialist asset manager Octopus, announced back in December that it had received full regulatory approval from the Financial Conduct Authority (FCA) as well that it had arranged a tie-up with Blackrock-owned ETF provider iShares.

The passive only portfolios are risk targeted and cost just 0.75 per cent per year.

What is FinTech and why Google and Facebook could be the banks of the future (Manchester Evening News), Rated: A

In total, the sector generated almost £7bn revenue last year and now employs more than 60,000 people.

Not only that, but the big players are wising up to this need for disruption with Barclays opening a flagship FinTech accelerator in May, offering 500 workspaces for start-up innovators.

HSBC and Tradeshift have also confirmed that their new ‘procure-to-pay’ product will go live in summer allowing businesses to manage their entire supply chain and working capital requirements in one place, from any device.

The innovation specialist at SoftwareONE said: “Back in the 80s, when ATMs came into play, people thought it would be the end of bank branches and jobs, but instead it freed up clerks to perform other tasks, like mortgage advice, which actually added value to the customer.

“Moving on to the current day and bank branches have now become mobile phones – or apps – people can access their accounts and information at a touch of the screen.”

AccessPay, which moved from London to Manchester, is flying after a recent £2m funding boost.

Based in City Tower, the fast-growing firm is looking to recruit 60 new staff and expand into the US after securing funds from Clydesdale and Yorkshire Banks’ Growth Finance team.

The specialist in cloud-based payments and cash products has been driving innovation in the sector since it was founded in 2012.

Fintech: What Will Bring the Most Change? (City A.M.), Rated: A

Finance professionals have two basic questions about fintech and what it means for them:

  • How will fintech positively affect their careers?
  • How will fintech negatively affect their careers? For example, will peer-to-peer (P2P) lenders replace banks as the preferred platform or intermediary for borrowing and lending? If the answer is yes, then bank loan officers and credit risk analysts should start looking for alternative careers. The particular areas of fintech that evoke this sort of existential concern include blockchain, mobile payment, P2P lending, and robo-advisers.

 

The responses of our 333 poll participants suggest that interest in blockchain technology has risen to an all-time high, with four out of 10 readers opting for that choice. Another 22% are believers in robo-advisers.

Read between the lines: What does rising inflation mean for your money? (Funding Circle), Rated: B

Inflation is rising – and is set to climb even higher by the end of the year. Official figures revealed a surprise jump in the headline rate of inflation to 2.3% in March, its highest rate for four years. And it is estimated to climb to 2.8% by the end of the year.

But there’s one area where inflation is hitting hard right now – our savings. If you can’t get a savings return higher than inflation, you’re losing money. The cash in your nest egg will be worth less and less as inflation outstrips the returns you get. And right now, no-one can get an inflation-beating rate from traditional banks and building societies with even the much-heralded new Government-backed savings bond paying less than inflation at 2.2%.

China

Chinese online lender SmartFinance targets IPO in US (Deal Street Asia), Rated: AAA

SmartFinance, a Chinese internet loans business that judges borrowers on factors including how often they charge their phones, has consulted banks about a possible U.S. listing that could happen as soon as this year.

The rapidly expanding company, which anticipates it will reach a $1 billion valuation by the end of 2017, has hired former Cheetah Mobile Chief Financial Officer Andy Yeung to help better manage investor relations and smooth the path to an eventual listing.

Jiao, who is known to colleagues by his English name UBee, told Bloomberg the company’s next step is an initial public offering, probably in the U.S. By the end of 2017, he expects to have more than 2,000 staff and facilitate as many as 4 million loans a month.

SmartFinance is more commonly known as Yongqianbao, which translates as “need money pal,” and taps into as many as 1,200 data points collected by its smartphone app to assign credit ratings for would-be customers. Making calls that go unanswered or failing to frequently charge your phone are all potential signs of a problematic borrower.

China’s Ping An to launch first overseas fintech and healthcare fund of $ 1 bln (Reuters), Rated: A

Ping An Insurance Group Co of China Ltd, the country’s largest insurer by market value, is launching its first overseas fund to primarily invest in financial and healthcare technology worldwide, underscoring its push beyond its home market.

The initial size of the so-called Ping An Global Voyager Fund will be $1 billion, the insurer said in a statement on Thursday. It will be managed from Hong Kong and led by Jonathan Larsen, an 18-year stalwart of Citigroup who joined Ping An as its chief innovation officer.

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

IPO boom of P2P Lending platforms is coming!
China Rapid Finance (CRF) has gone public in the US and it is also the second P2P Lender listed successfully in America, which may bring an IPO boom of Internet finance industry.

It was revealed that Qudian, a P2P lender focusing on providing consumer finance products for young people, has already submitted their IPO prospectus to the SEC, expecting to finish IPO process by the second quarter of this year. Fintech companies such as PPDAI, Lego Group Inc. Are also actively preparing for US IPO. Several giants are among the long waiting list of IPO candidates, including Ant Financial, Lufax, Zhongan Insurance and Jingdong Finance etc. In fact, the assessment value of Ant Financial has already reached to $60 billion, and once the IPO could be successful, the director Jack Ma may become the China’s richest person again with holding at least 5% shares.

Ant Financial planning to buy MoneyGram with $3.5 billion Loan
Recently, an insider revealed that Ant Financial is going to sign a loan contract valued $3.5 billion for the acquisition of an American company MoneyGram International.

The loan application has attracted 14 providers, including ANZ, Barclays, Citi, Credit Suisse, DBS, Goldman Sachs, HSBC, ING, J.P. Morgan, Mizuho Bank and Morgan Stanley. With Deutsche Bank and Societe Generale participated as leading banks, and BNP Paribas SA is the sponsor. Ant Financial has got the Green Light for the acquisition by raising the biding price by 1/3 and surpassed its rivals.

European Union

Altisource Launches Enhanced Vendor Oversight Platform to the Market (Yahoo! Finance), Rated: AAA

Altisource Portfolio Solutions S.A. (“Altisource”) (ASPS), a leading provider of real estate, mortgage and technology services, today announced the expansion of the Vendorly™ platform, an innovative vendor oversight platform for financial institutions. The platform launched last year exclusively for members of the Lenders One® Cooperative, a national alliance of independent mortgage bankers, and is now available to the broader mortgage and community bankers market outside of the Lenders One network. The Vendorly platform is designed to help streamline vendor due diligence, document maintenance, monitoring and audits.

The scrutiny of vendor oversight practices continues to be a focus of regulators. It’s important for mortgage and community bankers to have a multifaceted vendor oversight program. Through the Vendorly platform, and its vendor oversight offerings, Vendorly can help strengthen its customers’ compliance management framework and increase their operational efficiencies. Vendorly offers managed vendor oversight services, including due diligence, document management, annual assessments, information security assessments, financial condition reviews and on-site audits.

Vendorly is announcing collaboration with Secure Insight, an innovator in the mortgage industry in providing settlement agent risk evaluation, rating, monitoring and database reporting on fully vetted mortgage closing professionals. Currently servicing close to 100 clients nationwide, Secure Insight will deliver real-time risk ratings and related settlement agent data to clients through the Vendorly platform. Together, Secure Insight and Vendorly intend to develop a platform that produces a transaction-based tool with risk data on each transaction prior to a closing (and just before the proceeds are wired). It is expected that this process will provide data in a more efficient, streamlined manner and give lenders greater comfort in the protection of their money, documents and consumer data at each closing.

India

i-lend plans to venture out with funds from 50K  (India Times), Rated: A

Peer-to-peer lending startup i-lend has raised an undisclosed amount in a pre-series A round from early-stage venture capital firm, 50K Ventures. It plans to spend the money on marketing, scaling up and expanding its core team.

The Hyderabad-based company recently started operations in Bengaluru and plans to expand to a few more cities in the coming months. It is also looking to raise Series-A funds later this year.

The company has disbursed more than 600 loans since its inception in Ventures is thinking 2013 and 50K Ventures is thinking about expanding i-lend to other verticals.

Why Nomura, Google, IBM and Amazon are Investing in Indian Fintech (Edgy Labs), Rated: A

In a press release, Nomura Holdings, Inc. unveiled its initiative, called the “Voyager-Nomura FinTech Partnership in India.” Through the Voyager Program, the company invites startups and entrepreneurs with innovative Fintech solutions for the financial industry, especially capital markets and investment banking.

To further consolidate the Voyager Program, Nomura Holdings has recruited the expertise of many authoritative partners, including Google, Amazon, IBM, PwC and Internet Services Pvt. Ltd.

Middle East

Responsible finance summit focus on Islamic fintech (Middle East Association), Rated: AAA

With the retail share of responsible investment doubling to 26 per cent in 2016, ethical, responsible and Islamic fintech can support further growth to deliver the financial products, experts said at a summit in Zurich, Switzerland.

The Responsible Finance & Investment (RFI) Summit opened yesterday (May 3) with leaders from across the responsible investment, impact investment and Islamic finance sectors gathering to discuss how to promote greater awareness of and engagement within responsible finance.

The first day’s sessions focused on ethical, responsible and Islamic fintech and the power they harness which can disrupt financial services and in doing so address the inequities in society and support equitable, inclusive and sustainable economic growth.

Central America

Sr. Pago raises 4 million dollars in its Series A investment round (Crossroads Today), Rated: AAA

Sr. Pago, the first 100% Mexican financial integrator for acceptance of credit and debit cards provided for the country’s non-banking population, through the placement of its Series A has successfully raised four million dollars in capital, thus ensuring the acceleration of its operations and underpinning its long-term vision.

This raising of capital is taking place thanks to the confidence of three recognized investment funds: IGNIA and EB Capital, with headquarters in Mexico City, and an international fund with its headquarters in Miami, FL, which through this capitalization have become strategic partners of Sr. Pago, supporting the business model of this Mexican Fintech company as the only one that has the country’s non-banking economically active population as its primary market and main consumer.

Authors:

George Popescu
Allen Taylor

Tuesday March 7 2017, Daily News Digest

p2p industry growth

News Comments Today’s main news: Ron Suber’s updates on MPL. Amazon’s history points the way for online lending. Best Egg exceeds $3B in personal loans.eOriginal to lead Fannie Mae’s next-gen electric vault. Experian joins MLA. First FinTech fund for inclusion of the underserved raises $141 mil. Trillion Fund up for sale. Today’s main analysis: How to join the P2P lending […]

p2p industry growth

News Comments

United States

United Kingdom

Israel

Asia

News Summary

United States

Amazon’s history points the way for online lending: Lending Club CEO (American Banker), Rated: AAA

As the online lending sector seeks to rebound from a wrenching year, it should look to Amazon for inspiration, the CEO of industry bellwether Lending Club said.

In many ways where online lending is in 2017 parallels the early days of online retail, Scott Sanborn said at the LendIt conference in New York on Monday. In that situation, new entrants disrupted an established industry, before going through a period of pain and change themselves during the dot-com bubble.

The original online retailers that survived and thrived after that period reinvented and expanded what they did, Sanborn said, citing Amazon as the prime example.

Much like how Amazon went from selling books to selling cloud services, Sanborn predicted online lenders that succeed well into the future will change how they do business.

eOriginal to Lead Fannie Mae’s Next Generation Electronic Vault (PRWeb), Rated: AAA

eOriginal, Inc., the trusted expert in digital transaction management, has been selected as the technology solution provider for the Fannie Mae next generation electronic vault (eVault). Fannie Mae is committed to enhancing the digital mortgage revolution and removing obstacles to eMortgage adoption through a modern, secure, and scalable platform. eOriginal’s hosted platform enables the secure management of electronically signed assets (eNotes) throughout their post-execution lifecycle.

By utilizing eOriginal’s hosted solution, Fannie Mae will accelerate deployment and greatly reduce costs for ongoing support efforts. The movement to cloud-based/vendor-hosted solutions is an industry best-practice that the lending community is embracing.

How To Join The P2P Lending Revolution And Earn +10% Yields (Forbes), Rated: AAA

In 1999, I was a partner in launching one of the world’s first pure online banks. At the time, the idea was controversial to say the least.

Since launching our online bank, the industry has, in fits and starts, adopted the technologies necessary to provide some form of online banking to their clients.

While earning fees on deposits, overdrawn checks, and so forth are an important component of the typical bank’s revenue statement, the real juice comes from lending.

And that’s where the banks have a real problem.

With the credit freeze locking out many ordinary Americans, the door opened wide for Peer-to-Peer lending platforms. A radical new approach to lending, P2P platforms act as intermediaries between borrowers and investors, bypassing the traditional gatekeepers of credit… the banks.

In 10 short years, P2P lending has facilitated over $35 billion of loans in the US.

Loans made through P2P platforms currently account for just 3% of the total unsecured consumer loans in the US.

Given the positives, the P2P share of unsecured consumer loans is projected to enjoy a compounded annual growth rate of 47%, rising to 8.4% of the market by 2020.

With P2P investing thriving in the sub $250k space, banks are beginning to take note. As a senior banker friend of ours commented, the bankers are now paying very close attention to the rising competition.

Unlike the Boomers, Millennials have no loyalty or connection with banks. That’s why they are twice as likely to switch banks. Over 94% consumers under the age of 35 are active users of online banking.

Already about one-third of 18-to 34-year-olds have used P2P lending, with the average age for Lending Club users just 30.

Prosper President Ron Suber Updates on Marketplace Lending Industry (Crowdfund Insider), Rated: AAA

Ron Suber, the President of Prosper and a perennial keynote speaker at the annual LendIt conference, delivered a rousing update on the status of marketplace lending.

The previous 12 months have been tough on the online lending sector, funding dried up as institutional money panicked leaving platforms gasping for cash. Platforms were compelled to revisit operating models looking for efficiencies while honing the credit process. Yet the platforms that have survived stand to benefit and grow from the new resilience and confidence created from shared survival.

The key to future success included the following foundational elements: loan performance, data transparency, platform profitability, customer acquisition, and automation.

 

Ron Suber LendItUSA 2017 Presentation by CrowdfundInsider on Scribd

Experian joins Marketplace Lending Association (Finextra), Rated: AAA

As part of our commitment to driving responsible financial innovation, Experian has joined the Marketplace Lending Association as an associate member.

Now more than ever, the financial industry is seeking new and innovative ways to provide valuable financial services to consumers and businesses. Experian has been at the forefront, and is leading this charge by focusing on combining technology with the power of data to help drive an economy that is continually changing. This is critical, especially in the marketplace lending sector, which has brought many innovations to the market over the last decade.

Experian is already an active partner with many of the nation’s leading marketplace lenders, providing powerful data, analytics and consulting services to consumer and small-business lenders. We are uniquely positioned to help marketplace lenders attract more consumers to our platform, reduce fraud risk and navigate the complex world of regulatory and compliance.

First FinTech Fund for Inclusion of the Underserved Raises $ 141 Million (Cryptocoins News), Rated: AAA

The Accion Frontier Inclusion Fund closed with $141 million in capital contributions. This is a global non-profit dedicated to building a financially inclusive world with economic opportunity for all, by giving people the financial tools they need to improve their lives. It is managed by Quona Capital, which invests in entrepreneurs and growth-oriented businesses seeking to change how financial services are delivered in emerging markets.

Altisource launches mortgage trading platform (Housingwire), Rated: A

Altisource Portfolio Solutions, a provider of real estate, mortgage and technology services, announced the launch of its new mortgage trading platform – noteXchange.

noteXchange is a secondary market trading platform that brings buyers and sellers together. It enables communication, shorter sales cycles and automated processes, according to the company.

The platform creates a uniform, compliant, secure and efficient technology solution in the mortgage trading market. It is designed to replace the current system of transacting through spreadsheets and email.

This move comes as no surprise to HousingWire readers, who read in the March magazine about mortgage companies increasing their securityafter a record number of hacks.

Credit Cards, Friends and Family and Savings Aren’t Helping Nonprime Americans (BusinessWire), Rated: A

It’s no secret that nonprime (subprime) Americans have limited personal resources to weather unexpected expenses – but new data from Elevate’s Center for the New Middle Class reveals that informal, relationship-based options for emergency loans are largely unavailable as well. According to research released today by the Center, which researches and reports on the realities of being nonprime in America, almost 70 percent of nonprime Americans couldn’t cover an urgent expense of $500 or more with their savings and 64 percent wouldn’t be able to borrow that amount from friends and family. These findings complement the Federal Reserve Board’s 2016 finding that 46 percent of Americans do not have $400 in savings to cover an emergency expense.

This latest study focuses on how nonprime Americans – defined as those having a credit score below 700 – borrow money as they are largely barred from traditional prime products, like personal loans from banks or even loans from new online lending companies that are focused on prime consumers.

Additional key findings include:

  • 71 percent would not be able to borrow $2,000 from family or friends if an urgent need arose
  • 72 percent of nonprime Americans would not be able to put $500 on a credit card
  • 80 percent would not be able to put $2,000 on a credit card
  • 59 percent said they “regularly” carry a credit card balance
  • Only 1 in 5 nonprime Americans have borrowed from friends or family in the last 12 months
  • 7 percent use overdraft protection strategically, using it to cover expenses for which they did not have money

ID Analytics’ Online Lending Network Helps Members Reduce Fraud (Yahoo! Finance), Rated: A

ID Analytics LLC, a leader in consumer risk management, today announced that the company’s Online Lending Network has helped reduce fraud for members. The Online Lending Network is a consortium formed to enhance responsible lending, help protect consumers and businesses, and address credit and fraud risks. Early research shows that 1.5 percent of online loan applicants were seen applying at or seeking offers from other lenders within six hours of submitting their application, and this group was found to be twice as risky as the average online loan applicant.

PeerStreet Integrates with Betterment via Quovo to Provide More Detailed Investment Overview (Yahoo! Finance), Rated: A

PeerStreet, an award-winning platform for investing in real estate backed loans, has announced an integration with Betterment, the largest independent online investment advisor. Using account aggregation through Quovo, customers of both Betterment and PeerStreet can view their PeerStreet positions within the context of their investment portfolio on the Betterment dashboard.

Customers of both services are increasingly seeking an easy way to see their all of their investments in one place, even across multiple investment platforms. Integrations with Betterment and similar financial services have become one of the top requests from PeerStreet users. Both PeerStreet and Betterment were able to quickly respond to their clients’ needs using Quovo, the industry leader in financial account connectivity, to aggregate and integrate consumer financial data.

This integration is another example of both PeerStreet and Betterment using technology to help provide greater transparency, ease of use and control. It stems from a core philosophy of listening to customers and being responsive to requests that fundamentally improve the user experience, even across multiple platforms.

LendIt keynote: Online lending is an industry built to last (Housingwire), Rated: A

At first look, it seemed to be an unlikely crowd for a conference involving technology-focused disruptors, but perhaps the formality of the event was indicative of the startups in attendance – growing companies beginning to rub shoulders with the establishment.

Prosper and its peers Lending Club and OnDeck are part of the “older guard” of fintech companies, and find themselves at the front lines of conversations with regulators, banks, venture capitalists and private equity firms.

Looking to the future, Mr. Suber is convinced that in order to grow sustainably and in order to be “built to last”, the next evolution of online lenders involves partnering with banks to find long-term capital and achieve profitability. He believes there are five ways for banks to engage with online lending:

  • Loan Sales: Banks purchase loans through online lending platforms to diversify asset base and gain access to assets they don’t directly underwrite
  • Lenders as a Service: Banks utilize lending platforms created by startups for origination and servicing that can be leveraged in discussions with regulators
  • Vendor relationships: Banks can leverage, securitize, custody cash, and serve as trustees for online lenders
  • M&A advisory: Banks can help fulfill every entrepreneurs’ dream of an exit
  • Greenfield operations: Some banks build their own online platforms while taking advantage of their low cost of capital

Best Egg Exceeds Billion in Personal Loans with Focus on Debt Consolidation (BusinessWire), Rated: A

Best Egg announced today its loan origination has surpassed $3 billion as it reaches its third year in business. With its A+ rating with the Better Business Bureau, Best Egg is a personal loan product that leverages technology to simplify and speed the process for getting a loan.

Online personal loans have surged over the past three years. Consumers were underserved by the options available from the incumbent banks and credit unions, which are many times saddled with slow processes, small loan amounts, and lack of product innovation. TransUnion’s February 2017 Quarterly Industry Insights Report highlights significant growth in personal loan uptake over the last few years.

AlphaFlow Announces New Investment Platform (Crowdfund Insider), Rated: A

On Monday, AlphaFlow announced the launch of its new investment platform, AlphaFlow Managed Portfolios.

Sturm claimed that he, along with co-founder and CTO of AlphaFlow, Bogdan Cirlig, launched the industry’s first multi-platform funds.

The AlphaFlow Managed Portfolios platform will do the following:

  • Build, monitor, and automatically rebalance a portfolio of 75-100 real estate loans for investors
  • AlphaFlow Advanced Analytics drive every investment decision
  • Investors earn 8-10% with the protection of real estate collateral
  • Simple 1% AUM fee, with no additional hidden costs

Fidelity’s New Robo Ups Ante for Advisors (Financial Advisor IQ), Rated: A

After launching its robo for retail investors last summer, Fidelity Investments is forging ahead on a revamped technology platform for advisors. By mid-year, the asset manager and financial services custodian expects to offer its 3,000-plus customer base of RIAs and brokerages a whole new set of online tools to manage client portfolios.

But Fidelity isn’t the only industry heavyweight trying to develop robo technologies for advisors, says Sean McDermott, an analyst with Corporate Insight in New York.

SigFig, which includes backing by UBS and Eaton Vance, is one such rival listed by the veteran robo analyst as already making significant inroads.

Another established player in U.S. wealth management is FutureAdvisor, McDermott adds. FutureAdvisor is owned by asset manager BlackRock.

EULER HERMES DIGITAL AGENCY, FLOWCAST PARTNER: CREDIT INSURANCE BENEFITS FROM AI (Euler Hermes), Rated: A

Euler Hermes, the world’s leading trade credit insurer, today announced a pioneering partnership between its Digital Agency and Flowcast, a fintech company focused on revolutionizing trade and supply chain finance with artificial intelligence (AI). The announcement was made as the partners attended LendIt USA, a major lending and fintech conference in New York this week.

Euler Hermes provides trade credit insurance solutions to protect companies against non-payment of accounts receivables by customers. Its Digital Agency recently launched its first breakthrough product – Single Invoice Cover – which protects B2B companies from non-payment, transaction by transaction, while optimizing end-to-end supply chains by extending the optimal credit terms to buyers. Based on a proprietary API (application program interface), it creates a seamless process for businesses, while facilitating a comprehensive and granular management of credit exposure.

Flowcast will use its strength in analyzing transaction data to significantly evolve the concept by developing smart algorithms to create the foundation of an innovative underwriting solution within Single Invoice Cover. Benefits include improved working capital and financing along the supply chain.

Based on invoice-level data, Flowcast has developed smart algorithms that predict a range of risk parameters, such as the probabilities of default or expected timing of invoice payment – critical factors for business. The process applies sophisticated machine learning techniques that significantly outperform more traditional models. EHDA and Flowcast are working together to extend the scope and the performance of these models to “reinvent” trade credit insurance and risk management offerings, particularly at the transaction and Single Invoice Cover levels.

Innovative Lending Platform Association and Coalition for Responsible Business Finance Join Forces (PR Newswire), Rated: B

The Innovative Lending Platform Association (ILPA) and the Coalition for Responsible Business Finance (CRBF) today announced they are joining forces and will now operate as the ILPA – the leading trade organization representing a diverse group of online lending and service companies serving small businesses. Joining ILPA’s existing members, OnDeck® (NYSE: ONDK), Kabbage® and CAN Capital, are CRBF member companies Breakout Capital, Enova International’s The Business Backer™, PayNet and Orion First Financial. United by a shared commitment to the health and success of small businesses in America, the newly expanded ILPA is dedicated to advancing best practices and standards that support responsible innovation and access to capital for small businesses.

In addition, leading national small business organizations that formerly served as the CRBF Advisory Board will now represent small business customers as formal advisors to the ILPA. The Advisory Board includes individuals from the National Federation of Independent Business (NFIB), the National Small Business Association (NSBA), the Small Business & Entrepreneurship Council (SBE Council), the U.S. Chamber of Commerce, and new representatives from the Association for Enterprise Opportunity (AEO). These small business organizations have provided key input into the collective group’s best practices and standards initiatives over the past year, ensuring that the needs of their small business constituents are addressed.

United Kingdom

Trillion Fund P2P & Crowdfunding Platform Up for Sale (Crowdfund Insider), Rated: AAA

Trillion Fund, a peer to peer lending and crowdfunding platform that also offers white label services is up for sale. The company announced today that it was putting all assets on the auction block. Trillion Fund initially launched as a renewable energy investment platform but struggled to gain traction as the market for renewable energy projects shifted in the UK – in part due to changes in governmental support. Trillion Fund is now inviting offers from businesses looking to enter the P2P lending sector.

Burton expects the purchase opportunity to be of interest to firms considering an entry into the P2P sector as the platform is fully operational and approved by the UK government.

LendInvest: “The UK Risks Losing Another Generation of Property Entrepreneurs” (Crowdfund Insider), Rated: AAA

LendInvest, an online property finance marketplace, is demanding the government to revise its treatment of small and medium-sized property investment and development companies. Noting that four in five SMEhouse builders have disappeared since last housebuilding boom, LendInvest is calling on the government to recognize the positive contribution they can make to resolving the UK’s deep-rooted housing crisis.

In a new report entitled Starting Small To Build More Homes: a blueprint for better policymaking for property SME market LendInvest shares industry evidence to examine the root cause – and subsequent impact – of challenges faced by property SMEs such as constrained access to finance and distorted policy around regulation, taxation and access to land.

Key findings from the report include:

  • Four in five housebuilders have gone out of business since the last housebuilding boom
    By returning to the same level of market plurality as in 2007, we could build 25,000 more homes every year
  • Small housebuilders were responsible for 3 in 8 of the UK’s new homes before 1990, today they only deliver 1 in 8
  • The British Business Bank has yet to allocate funding for property firms
  • The Homes & Communities Agency must lend a weighty £56m a month to achieve its target to supply £3 billion of housebuilding finance by March 2021

LendInvest Start Small to Build More Homes by CrowdfundInsider on Scribd

Assetz Capital CEO Stuart Law Predicts Boost for P2P Sector in Upcoming Budget (Crowdfund Insider), Rated: A

Stuart Law, CEO and co-founder of P2P lender Assetz Capital, expects a boost for the peer to peer lending sector in the upcoming budget. Specifically, Law believes a small business tax rise and IFISA rule change could boost the online lending sector.

Law said that businesses and investors remain in limbo since the Brexit vote.

Technology: The power of crowdfunding (IPE), Rated: A

BrickVest has deals worth £250m (€294m) in its platform at the moment, and estimates that figure will increase by £50m-70m at the end of the first quarter of this year.

Institutional investment through credit lines and co-investments is underpinning the industry, making up 73% of the market, according to O’Roarty. In the UK, retail investors account for 75% of the funds raised – although regulatory concerns about the suitability of retail investors could change the landscape in the future.

PropertyCrowd is finalising its first deal, a gross loan of £1.28m, with participation through PropertyCrowd standing at £432,000 (the firm will take on a maximum 50% debt participation).

Its first non-exchange-traded e-REIT, offered to both accredited and non-accredited investors, was oversubscribed by 403% in four hours when it launched in December 2015. In February, Rise Companies Corporation, which owns Fundrise, raised more than $14m in equity online, offering investors the ability to own a share in the platform itself.

As with all new markets, crowdfunding real estate platforms will inevitably experience their share of growing pains. They will also have to get larger. In 2015, the sector totalled only $600m – the total commercial real estate market stands at $704bn.

Millennial Money Matters podcast: Episode 3, Funding Circle (AltFi), Rated: A

In episode 3 of Millennial Money Matters, we look at Funding Circle, one of the leading lights of financial technology in the UK.

Israel

Property Investment In Israel Is Evolving To Offer Ample and Flexible Opportunities (Haaretz), Rated: AAA

There are several conditions in Israel’s economy that are driving an interest in investment properties. The most obvious is the increasingly high sale prices. The average price of owner-occupied residencies in Israel rose by 4.01% during the year to Q1 2016, to ILS1,423,000 (US$369,107), from annual price rises of 6% in Q4 2015, 5.2% to Q3, and 7.3% to Q2, and 7.6% to Q1, according to the Central Bureau of Statistics (CBS). The main reason for the continued rise in house prices is the supply shortage, due to low construction volumes.

One of the more innovative programs to enter the property investment market is the crowd-funding method that a number of leading companies are taking ownership of. Crowdfunding, adopted by high-tech startups as an alternative means to raise funds, was limited in Israel by Israel’s Securities Law until 2016. Section 15 of the law dictated that any offer or sale of shares to the public (i.e. to more than 35 potential investors) requires the issuance of a prospectus approved by the Securities Authority; a timely and costly endeavor, formerly rendering crowdfunding prohibitive in Israel.

Although Crowdfunding for real estate is a relatively new space, crowdfunding for real estate platforms were responsible for raising over $100 million in 2015 alone for hundreds of real estate properties across the U.S.  Real Estate crowdfunding platforms in Israel offer an opportunity for virtually any pocket and the way it works is very simple.

Asia

Bank Mandiri bets on peer-to-peer lender (Nikkei Asian Review), Rated: AAA

The venture capital arm of Bank Mandiri, Indonesia’s largest state-owned bank by assets, on Tuesday said it has acquired a stake in peer-to-peer lending startup Amartha Mikro Fintek.

Amartha Mikro develops credit-scoring technology that evaluates small businesses that conventional banks have deemed too risky to lend to. It then connects them with individual lenders over a website.

It specializes in loans under 10 million rupiah ($750) and has a network of agents in Java that helps potential customers submit online applications.

Authors:

George Popescu
Allen Taylor

Wednesday February 15 2017, Daily News Digest

sme trump president

News Comments Today’s main news: Lending Club originations up 1% in Q4 from Q3 2016, down by 23% against Q4 2015. Today’s main analysis: Lendio survey says SMBs split on the perception of Trump presidency. Today’s thought-provoking articles: Former FICO chief joins XOR Data Exchange. FCA says the distinction between advice and guidance is ‘grayer’. China outpaces […]

sme trump president

News Comments

United States

United Kingdom

China

Asia

Middle East

 

United States

Lending Club Reports Fourth Quarter and Full Year 2016 Results (PR Newswire), Rated: AAA

Lending Club (NYSE: LC), the world’s largest online marketplace connecting borrowers and investors, today announced financial results for the fourth quarter and full year ended December 31, 2016, and provided guidance for the first quarter and full year 2017.

Key accomplishments in the fourth quarter across the Lending Club platform include:

  • Achieved targeted originations of nearly $2 billion, up 1% compared to third quarter 2016
  • Continued the company’s lead as the largest personal loan provider in the U.S. with a borrower base of over 1.8 million individuals
  • Lending Club has now facilitated nearly $25 billion in loans since inception

Other developments

  • Ended the year with a servicing portfolio of $11.1 billion, up 24% from the same period last year and delivering $1.8 billion of principal and interest payments to investors throughout the quarter
  • Ended 2016 with cash, cash equivalents and securities available for sale totaling $803 million, with no outstanding debt

Originations – Loan originations in the fourth quarter of 2016 were $1.99 billion, up 1% compared to the $1.97 billion we reported in the third quarter of 2016 and down 23% compared to $2.58 billion in the same quarter last year.

New Lendio Survey: Perception of Trump Presidency Split Among Small Businesses (Benzinga), Rated: AAA

Lendio, the nation’s leading marketplace for small business loans, today announced the results of a new survey showing that small business owners’ perception of a Trump presidency is split, with 56 percent of small business owners believing the economy will be worse or the same at the close of Trump’s first term.

The survey of over 330 U.S. small businesses with under 250 employees found that only 27 percent approve of Trump’s performance so far. More specifically, small business owners believe Trump’s recent executive order on business regulations requiring federal agencies to cut two existing regulations for every new one will help their business. According to the survey, 41 percent believe it will help, 28 percent believe it won’t help and 31 percent were neutral.

Despite the majority having a negative economic outlook, small business owners are still optimistic about the state of their own businesses. Forty percent of small business owners believe the Trump presidency will have a positive impact on their business, 33 percent believe it will have a negative impact, and 27 percent are neutral.

To view the full survey results, visit

Source:

Former FICO chief joins XOR Data Exchange as investor and board strategist (XOR), Rated: A

Larry Rosenberger, former CEO of Fair Isaac Corporation (FICO) and current research fellow, has joined Austin-based Data as a Service (DaaS) provider XOR Data Exchange as an investor and board observer. Rosenberger’s experience and expertise in implementing data and analytical models for the financial services industry is expected to help the FinTech startup continue rapid growth, development and adoption of fraud risk models to protect consumers and businesses from identity theft and data misuse.

The addition comes as part of XOR’s latest funding round, a $2 million extension of its Series A investment, which closed at the start of February. In a press statement, XOR Founder and CEO Mike Cook stated the funding will be used to expand XOR’s fraud and credit risk models nationally.

Rosenberger is well known across the FinTech and financial services industries for his leadership of FICO between 1991 and 1999, during which time FICO credit scores were made available to all three major U.S. credit reporting agencies and adopted as standards by Fannie Mae and Freddie Mac for mortgage lending evaluation. Those scores remain the gold standard in credit risk used by banks, lenders and service providers nationally and abroad. Since his tenure as CEO, Rosenberger led FICO’s research and development efforts for another eight-year stint before taking on his current role as research fellow.

Fundrise’s Low-Fee Crowdfunding ‘iPO’ (Investopedia), Rated: A

Last week Rise Companies Corporation, the owner of the popular real estate crowdfunding platform Fundrise, successfully raised over $14 million in an online equity offering to investors that they are referring to as an Internet Public Offering or “iPO.” The offering, which was exclusively offered to current Fundrise investors, became oversubscribed by as much as 146% within 24 hours of becoming available.

According to Crowdfind Insider, Fundrise’s online offering is the largest one that the internet has seen to date. Previously, the record was held by a British crowdfunding platform by the name of Crowdcube. Last year, Crowdcube raised over £8 million (USD$10 million).

On Deck Capital says unit amended its existing asset-backed revolving debt facility (Reuters), Rated: A

* On Deck Capital – the facility amendment provides for an increase in lenders’ revolving commitment from an aggregate amount of $100 million to $150 million

FTC sends 2016 ECOA report to CFPB (JDSupra), Rated: A

The FTC has sent its annual letter to the CFPB reporting on the FTC’s activities related to compliance with the Equal Credit Opportunity Act and Regulation B.

The FTC has authority to enforce the ECOA and Reg B as to nonbank providers within its jurisdiction.

With respect to research and policy development, the letter discusses the following initiatives:

  • Auto survey.  In December 2015, the FTC published a notice in the Federal Register seeking comments on its plans to conduct a survey of consumers regarding their experiences in buying and financing automobiles at dealerships.
  • Big data report.  In January 2016, the FTC issued a report warning that certain uses of big data consisting of consumer information may implicate various federal consumer protection laws.  The report focused on big data’s impact on low-income and underserved populations and protected groups and discussed the potential applicability of various laws, including the ECOA, to big data practices and provided a list of ”questions for legal compliance” for companies to consider in light of these laws.
  • Fintech forum.  In June 2016, the FTC launched a series of forums exploring emerging financial technology and its implications for consumers.  The first forum focused on marketplace lending and examined how marketplace lending operates, potential consumer benefits, consumer protection issues, and the potential applicability of various consumer protection laws.
  • Report on fraud in African American and Latino communities.
  • Interagency fair lending task force. 

PeerStreet: Enabling Real Estate Investors To Reach Previously Inaccessible Asset Classes (Benzinga), Rated: B

PeerStreet is a true marketplace, and the company serves several customer bases. At a high-level, there are investors and lenders; PeerStreet investors participate in pieces of loans made available on the platform. They typically include individual accredited investors, RIAs and funds.

There are also institutional investors interested in purchasing loans from PeerStreet. Lenders are PeerStreet’s supply source and this group consists of private lenders across the country financing single-family residential fix-and-flip, buy-to-rent and commercial properties.

Altisource Continues to Expand Client Base and Enhance Product Lines to Meet the Needs of Servicers (Altisource), Rated: B

Altisource Portfolio Solutions S.A. (“Altisource”) (NASDAQ: ASPS), a leading provider of real estate, mortgage and technology services, today announced a specialized Federal Housing Authority (FHA) offering, taking advantage of its end-to-end product suite to assist in improving controls and mitigating risk throughout the lifecycle of servicing an FHA asset.

FHA loans represent a growing share of many Servicers’ portfolios and require specialized processes to comply with complex servicing guidance. The Altisource FHA offering provides servicers the ability to help reduce timelines and increase efficiencies with transparency through a customizable approach. From integrated field services, title services and property repairs to Claims Without Conveyance of Title (CWCOT) Auction Services, the complete suite of products is backed by the power of proprietary data and analytics to help further reduce risk and cost for Servicers.

United Kingdom

FCA: distinction between advice and guidance becoming ‘greyer’ (Citywire), Rated: AAA

New technology means it is becoming harder to set a distinction between advice and guidance, according to Financial Conduct Authority (FCA) chairman John Griffith-Jones.

Speaking at a conference in Cambridge, Griffith-Jones (pictured) said the regulator needed to consider its definitions to keep pace with changes in the market.

‘Rules that were designed for the paperwork era do not work necessarily for the online one. The distinction between advice and guidance, once reasonably clear, has become much greyer with the advent of platforms and the potential of robo-advice,’ he said.

China

China FinTech Booms as Mobile Payments Outpace US by 50x (Cryptocoins News), Rated: AAA

New research has shown that Chinese mobile payments were around 50 times greater than those within the U.S. in 2016, thus illustrating that China’s FinTech market is a strong contender in the market.

Research from iResearch in China has found that Chinese third-party mobile payments more than tripled in 2016 to $5.5 trillion. WeChat Pay and Alipay, operated by Ant Financial, dominated the market. Recent research found that Alipay received the biggest investment in 2016 at $4.5 billion as FinTech funding increased in China.

Whereas, in the U.S., mobile payments increased by 39 percent to $112 billion, according to Forrester Research.

The FinTech market in China is reportedly dominated by two major markets: payments/remittances and insurance. In a December report, it stated that 40 percent of banking services customers rely on FinTech platforms and applications to settle domestic and international payments. A further 35 percent of bank customers are reported to employ smart artificial intelligence FinTech services to handle insurance needs.

The growth of Chinese mobile payments has increased due to the rise in online shopping as the improvement of online financial services.

Asia

Thailand’s Largest Bank to Launch New FinTech Platform (Cryptocoins News), Rated: AAA

Thailand’s largest bank by revenue, Kasikornbank Pcl, has unveiled that it is planning to introduce a new FinTech platform by the end of the year as it attempts to prevent fee income from its rival banks.

According to information from the Bank of Thailand, Thai mobile and Internet banking transactions increased by 26 percent between April and September in 2016.

At the end of last month, a new report came out that illustrated that there will be a sweeping adoption of blockchain technology in a number of areas including finance within Thailand by 2018.

In the past, Thailand has been averse to the adoption of bitcoin. So much so, that the Bank of Thailand has issued several statements as to their feelings on the digital currency.

Yet, while the bank has certainly taken a cautionary view of the currency in the past, it seems that the country is keen to embrace its underlying distributed ledger, the blockchain.

OJK Disseminates Regulations on Fintech and Pawnshop (Tempo.co), Rated: B

The Financial Services Authority (OJK) disseminated two regulations on financial technology lending services and on pawnshops on Tuesday, February 14, 2017.

OJK deputy commissioner for non-banking supervision Dumoly F. Pardede, said that the OJK supports the development of financial technology (Fintech) lending services in Indonesia.

OJK hoped that Fintech peer-to-peer (P2P) lending providers would harmonize and accelerate distribution of funds to micro, small and medium enterprises (UMKM) across the country. The P2P lending is a Fintech product that connects micro business owners with investors.

Middle East

Arab Financial Services to Host First Annual Middle East & Africa Fintech Forum (Crowdfund Insider), Rated: AAA

Payment processing company Arab Financial Services is set to host the first annual Middle East and Africa Fintech Forum. This year’s theme is “Fintech Disruption in the Financial Industry.”

According to Trade Arabia, the event is being sponsored by Bank ABC and Bahrain Economic Development Board (EDB). It will feature various topics, including latest fintech trends and discuss the challenges and opportunities in the fintech sector. The event’s participants will include government officials, regulators, professions and industry experts.

Authors:

George Popescu
Allen Taylor

CFPB’s amendment of the Home Mortgage Disclosure Act, and consequences

CFPB’s amendment of the Home Mortgage Disclosure Act, and consequences

The mortgage industry of the US has matured over the past few years, many distinct phases of evolution has helped it to reach its current status as the largest and most advanced home-financing market in the world. In 2014, around 4.94 million of existing homes were sold within the U.S. Ever since 2008 financial collapse; […]

CFPB’s amendment of the Home Mortgage Disclosure Act, and consequences

The mortgage industry of the US has matured over the past few years, many distinct phases of evolution has helped it to reach its current status as the largest and most advanced home-financing market in the world.

In 2014, around 4.94 million of existing homes were sold within the U.S. Ever since 2008 financial collapse; each and every mortgage is closely scrutinized in an effort to avoid the mistakes that led to the collapse. CFPB (Consumer Financial Protection Bureau) has amended the HMDA (Home Mortgage Disclosure Act) and changes will be rolled out in 2017.

The rules

The final rule reflects the CFPB’s belief that the HMDA data should be updated to handle the informational shortcomings exposed by the 2008 financial collapse and to fulfill the wants of householders, potential owners, and neighborhoods throughout the country. Notable amendments are listed below:

  • Any banks, institution or non-profit organization which has not originated at least 25 covered close-end mortgage loan or at least 100 open end lines of credit in each of two preceding years and does not meet other criteria, will not come under Regulation C. This change will eliminate reporting requirement for low-volume depository institutions.
  • Financial institutions must report information about applications for and originations of closed-end home improvement, home purchase, and refinancing loans.
  • Lending institutes will be required to collect, record, and report information for preapproval requests for home purchase loans that were approved but not accepted. Under the current regulation, such collection is optional.
  • Information about applicants and borrowers, including age, credit score and debt-to-income and combined debt-to-income ratios.
  • Information about the loan process, including whether the application was submitted directly to the institution, whether the loan was, or would have been, initially payable to the institution, and the name of, and results from, the automated underwriting system that was used.
  • Information about the property securing the loan, including value and type (e.g., manufactured home).
  • Information about the features of the loan, such as total loan costs or total points and fees, origination charges, discount points, lender credits, interest rate, prepayment penalty term, loan term, introductory rate period, and non-amortizing features.
  • Certain unique identifiers, such as property address, legal entity identifier for financial institutions, and mortgage originator NMLSR identifier.

Implications

In its endeavor to coordinate  reportage necessities with well-established data standards and thereby reducing the reportage burden on lenders, the HMDA Rule modification includes legal entity identifier, universal loan identifier, purpose of loan, preapproved amount, construction technique, type of occupancy, loan quantity, ethnicity, race, sex, type of buyer, rate spread, status of lien, and reason for denial. Presently under Regulation C, the reportage of the explanations for denial is non-mandatory, though some establishments are needed to report the explanations under separate rules.

Data collections

For data collected in or after 2018, the rules would require an establishment to report whether or not it collected information concerning the applicant’s or borrower’s ethnicity, race, and sex based on visual observation or by surname. Additionally, an establishment has to allow the customer to self-identify their own ethnicity and race by filling out disaggregated ethnic and racial subcategories. These amendments will help to bring transparency and ensure fair lending. Government and other public agencies also use this information to decide how to allocate to community and housing investment.

Enhanced report

Earlier, the major flaw in the HMDA act was if the loan was denied, nobody knew for sure the reason for the loan request being rejected. Was the issue large debt to income ratio or bad credit score or was it because of someone’s race or ethnicity. To overcome this problem, CFPB has mandated to file a detailed report of the applicant which will include income ratio, credit score, charges, and fees. The issue is the enhanced reporting requirements might lead to overwhelming of the current system resulting in erroneous filings. Reporting inaccurate data can have severe implication in the shape of penalties; public agencies rely on this data to decide how well the public is served, and reporting wrong data can have an adverse effect. Another concern lending industry has with regards to reporting the information is CFPB has not yet determined how much information will be made public and what will be kept confidential by CFPB. Ensuring consumer privacy and rendering useful information will be a tough balancing act for the agency.

Information requirements

The new and changed information requirements will generate extra scrutiny for lenders and a proactive approach to these changes is important. The new data sets can embody far more details regarding lender, borrowers, credit, collateral, loan type, pricing, fees, and charges. This information will allow the regulators and personal parties to investigate a lender’s practices in a much more detailed manner than is presently doable. For instance, the age of the person or receiver may probably be analyzed in conjunction with rating, ethnicity, or geographic information so as to spot potential instances of discrimination. Lenders will be compelled to take into account the impression HMDA information has made and make applicable changes to policies, procedures, and pricing concerns. The additional information needed for loan rating (e.g., origination charges, discount points, loaner credits, and interest rate) is possibly of great interest to regulators and the potential complainant. State regulators could utilize this information so as to spot violations of limitations on fees and charges.

2018 timelines

Even though changes do not take effect until 2018, but never the less it is not early to look at the compliance management system in order to determine how new information will be collected and added to current HMDA system. Since HMDA system will be required to manage a large amount of additional data, the current system needs to be assessed if it can handle the additional data or not. Lending institutes should also identify the deficiencies in their systems and take corrective measures before the system takes on the additional load. Will the current staff suffice to manage the new requirements? What training resources need to be introduced to impart knowledge to the staff about the new changes? Internal audit, compliance should begin planning for new changes. Lending institutes should be prepared to conduct a self-analysis of their data well before the effective date of the new rule.

Altisource

One such company that has built its business on facilitating financial and mortgage companies in transition is Altisource. Its client includes one of the nation’s largest sub-prime servicers, government agencies and multiple lenders, servicers, investors, mortgage bankers, credit unions, money services corporations, and hedge funds across the country. It boasts of 9,000 employees across the globe. Its wide range of services includes:

  • Servicer Solutions
  • Origination Solutions
  • Real Estate Investor Solutions
  • Consumer Real Estate Solutions

The company is a leader in proprietary business processes, vendor and electronic payment management software and behavioral science-based analytics. It is redefining the industry standards and helping lending organizations have a renewed focus on compliance. The company is led by William Shepro, an industry veteran and previously COO of Ocwen Solutions.

Compliance burden

With over 20 major regulations supervising the industry in the US, the compliance is burdensome for largest of companies leave alone nimble fintechs looking to disrupt the market.  The 2008 financial crash and the consequent emergence of CFPB has been a good thing but has added a layer of compliance for the lenders. It is essential that Fintech start-ups with relatively little experience ensure that they are on the right side of the law. With no major financial backing, it can be a death knell for a startup to be caught on the wrong side of regulators. Partnering with an established compliance solutions provider like Altisource would not only help in ensuring compliance but will also signal prospective investors that they are not going to find any nasty legal surprises after investing in the company.

Author: Heena Dhir and George Popescu

George Popescu