Thursday March 28 2019, Weekly News Digest

structured debt

News Comments Today’s main news: Klarna launches open banking platform. SoFi re-engineers home loans. Apple’s new credit card. OakNorth secures guarantee of $133M. Qupital raises $15M to bumrush China. Today’s main analysis: Arbuthnot Banking Group audited final results for 2018. Today’s thought-provoking articles: U.S. yield curve, new fintech products. Cities with most overleveraged mortgage debtors. Household debt. Expanding access to credit […]

The post Thursday March 28 2019, Weekly News Digest appeared first on Lending Times.

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United States

United Kingdom

International

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News Summary

United States

SoFi Refreshes Home Loans, Making Home Buying Painless and Paperless (PR Newswire), Rated: AAA

Today, SoFi announced the refresh of its mortgage offering as SoFi Home Loans, complete with a reengineered process that helps people buy or refinance a home with an online application, no hidden fees, or prepayment penalties.

SoFi Home Loans offer competitive rates including affordable down payments, with as little as 10% down on loans up to $3MM, with no hidden fees or prepayment penalties. SoFi allows applicants to choose between four different loan terms and fixed or adjustable rates. Those interested in refinancing can choose between traditional mortgage refinancing, cash-out refinancing, and student loan cash-out refinancing. If SoFi Home Loans isn’t able to handle a loan request, SoFi provides an easy option to digitally transfer member information to its affiliate partner who may be able to help.

Apple’s new credit card keeps advisors guessing (Financial Planning), Rated: AAA

The Apple credit card is the latest offering by a Silicon Valley tech giant looking for a ready-made avenue into the financial services’ sector. While the new card mostly benefits loyal users of Apple products, it’s also an unwelcome reminder of an ever present question on the minds of wealth managers: Will the FAANG companies like Facebook, Amazon, Apple, Netflix and Alphabet continue their land grab of services historically provided by the financial services industry — and at what cost to traditional RIAs?

Ominously, a majority of investors considering switching financial services providers said they would consider banking with a tech company like Facebook, Google or Amazon if they could, according to a recent survey by Novantis.

US Yield Curve Inverts; New Products from FinTechs (PeerIQ), Rated: AAA

For the first time in 3,000 days, and with much anticipation, the 3-month and 10-year treasury curve inverted. The median time to a recession after this curve inverts is between 1 to 1.5 years. However, unprecedented interventions such as QE (and higher central bank holdings globally) make it difficult to draw hard and fast conclusions. Market participants are pricing in a 41% probability of an interest rate cut in the September meeting.

Source: PeerIQ; Bianco Research

New Products from FinTechs

FinTech innovation continues with new products from PeerStreet and Figure. PeerStreet has launched a 30-year loan to enable private investors to buy rental properties. Residential for Rent loans are targeted towards rental home operators. The rental market in the US has grown exponentially post-crisis people struggle to buy homes. The number of rental homes has grown from 36 Mn in 2006 to 43 Mn in 2017.

Source: FactTank, PeerIQ

2019’s Cities with the Most Overleveraged Mortgage Debtors (WalletHub), Rated: AAA

Buying a home represents an important milestone for most consumers. But for those who dive in to the deep end of real estate without a financial safety net, the decision could lead to buyer’s remorse in the long run. Mortgage rates are slowly falling after reaching their latest peak in November 2018, and are close to the lowest they’ve been in the past 3 decades. This makes 2019 a tempting time to buy a home. Some industry experts believe 2019 is friendlier toward buyers than sellers because of the lower rates.

Source: WalletHub

Household Debt – Mixed Signals (DBRS), Rated: AAA

The most recent Quarterly Report on Household Debt and Credit issued by the Federal Reserve Bank of New York (the Fed) and Equifax Inc. (Equifax) showed that household debt rose for the 18th consecutive period during Q4 2018 to $13.5 trillion, $869 billion higher than the peak reached in 2008. This represented the third-smallest increase (0.24%) over the 18 consecutive periods of growth, partly because of decreasing mortgage loan debt during Q4 2018 to $9.2 trillion from $9.4 trillion at the end of Q3 2018 and flat levels of auto loan debt at $1.3 trillion for both Q3 and Q4 2018.

Expanding Access to Credit in the Land of New “Halves” (Lend Academy), Rated: AAA

Credit is one of the largest, most powerful, lucrative and important industries in the world. It also is one of the best tools for wealth creation – home ownership, small business ownership and growth, and, leveraged investing.  This is readily accessible for prime consumers with more options now than ever before. But for the other half of the country that is non-prime, options are still limited and in many cases non-existent.

Early pioneers of securitizations like SoFi, the scaling of marketplace lending like Lending ClubProsper and Best Egg, and new distribution models like Greensky and Affirm have contributed towards increasing comfort of these “new asset classes” that were mostly locked up in bank’s balance sheets.

There are a lot of new “halves” in today’s world.

Amount Delivers Seamless Digital and Mobile Lending Platform to TD Bank (PR Newswire), Rated: A

Amount, a technology provider for financial institutions, today announced a strategic partnership with TD Bank. TD Bank, a top ten U.S. bank, is leveraging Amount’s platform to power the bank’s TD Fit Loan, which launched in August 2018. This initial offering allows consumers to consolidate higher-interest debt, while helping TD meet growing consumer demand for a seamless digital and mobile lending experience. Through this partnership, TD and Amount will roll out additional offerings, as well as standalone tools addressing fraud, verifications and decisioning.

5 Freebies With Your Student Loans (NerdWallet), Rated: A

1. Career coaching

Who offers it: SoFi.

SoFi members have received over 15,000 coaching sessions to date.

4. Referral bonuses

Who offers it: Multiple refinance lenders.

  • Education Loan Finance offers $400 for each successful referral, as well as $100 for the loan applicant.
  • Laurel Road lets you split its $400 bonus however you and your referral see fit.
  • Splash Financial provides $250 apiece for both parties.

5. Charitable work

Who offers it: CommonBond.

If you prefer freebies that help others, CommonBond has a one-for-one social impact mission. For each loan the lender issues, it donates an amount based on a formula that funds a child’s education in a developing country through the nonprofit Pencils of Promise. Those donations have totaled over $1 million to date.

CNote Launches Wisdom Fund to Close Lending Gap for Women (PR Newswire), Rated: A

Women are the fastest-growing group of entrepreneurs in the U.S. Yet less than 5 percent of small business lending—only $1 in $23—goes to women. CNote aims to fix this disparity with the Wisdom Fund, a new impact investment opportunity launching today.

Investors in the Wisdom Fund will earn an estimated 4 percent annual return, over a 60-month term, on a loan portfolio that’s diversified across established CDFIs. Email wisdomfund@mycnote.com to learn how you can help fund more women-owned businesses today.

Women seeking loans should contact a participating CDFI. Partners in the Wisdom Fund’s first phase include:

  • Carolina Small Business Development Fund, which provides small business loans and financial training to startups, existing businesses and community organizations in North Carolina.
  • LiftFund, a Texas-based organization that empowers underserved entrepreneurs with capital and support services in 13 states.
  • TruFund, a national nonprofit organization that provides affordable capital to small businesses and nonprofits in AlabamaLouisiana and New York.

Study Finds 70% of Americans Would Share More Personal Data for Fairer Credit Decisions (PR Newswire), Rated: A

More than half (54%) of loan applicants don’t even have a clear understanding of why they receive the interest rate they do from a lender, while a majority (70%) say it is difficult finding lenders who will look at them as something other than their credit score.

  • 7 in 10 American adults (71%) wish there was another way to prove themselves to credit lenders outside of the standard credit score.
    • Hispanics (82%) and African Americans (81%) are more likely than Whites (67%) to want lenders to look at additional factors in lending decisions.
  • 77% believe more data is better when evaluating potential borrowers’ credit.
  • 71% would be willing to share more personal data with a lender if it resulted in a fairer credit decision. The motivation is even higher among middle-class earners. 79% of people making $50,000 to $75,000 would share more personal data to prove their creditworthiness, compared to 66% of people making over $100,000.
  • 84% think their bank should use modern technology to assess their creditworthiness.
    • Specifically, about half of loan applicants (53%) would like their ideal lender to use machine learning to make fairer credit decisions.
    • More than 2 in 5 (42%) would like their ideal lender to use machine learning to make the credit for homeownership more accessible to everyone.
    • Surprisingly, older generations want newer technology even more. Baby boomers and seniors (83% and 87%, respectively) wanted their banks to use new technologies to score them, compared to 79% for Millennials and Gen Zers.

Survey: Alternative Data Sharing (Urjanet), Rated: B

Urjanet surveyed more than 300 U.S.-based adults to assess consumer sentiment around alternative data sharing in the lending process. Key findings include:

  • A majority of consumers have multiple alternative sources of payment history
  • Alternative data sharing represents a huge opportunity for lenders to drive financial inclusion
  • Most consumers (59%) are willing to share utility and telecom data to boost chances of approval

SigFig launches platform to help retail banks sell financial products (Investment News), Rated: A

SigFig, the financial technology firm that developed digital advice platforms for several large financial institutions, wants to help banks automate more than investment management.

Technology to Play Crucial Role in Preparing ABS Professionals for Next Economic Cycle (ABL Advisor), Rated: A

An overwhelming majority (90 percent) of asset-backed securities (ABS) professionals feel that adopting new technologies will be important to preparing their businesses for the next economic cycle, according to Capital One’s sixth annual survey at SFIG Vegas 2019.

The survey also revealed that ABS professionals believe the biggest risks to their businesses are uncertainty around regulatory risk and increased credit risk, both at 29 percent. However, despite regulatory risk being a top concern, the industry’s apprehension has nearly cut in half over the last two years. In 2018, 48 percent noted regulations were the biggest risk to their businesses while 58 percent thought so in 2017. Additional top-of-mind concerns for 2019 include increases in interest rates (18 percent) and increased competition (17 percent).

TrustToken’s Stablecoin Now Available On Cred’s Crypto Earning Platform (BlockTribune), Rated: A

Asset tokenization platform TrustToken has announced a strategic partnership with crypto lending platform Cred.

Founded by former PayPal financial technology veterans, Cred is a decentralized global lending and borrowing platform that allows stablecoin issuers, exchanges and wallets to provide valuable earn and lending services worldwide.

Fintech in Brief: Update on Legal Challenges to OCC Fintech Charter (JDSupra), Rated: A

On March 19, 2019, the New York State Department of Financial Services (“NYDFS”) filed a brief in opposition to the Office of the Comptroller of the Currency’s (“OCC”) motion to dismiss the NYDFS’ lawsuit challenging the OCC’s statutory authority to grant special purpose national bank charters to Fintechs (the “Fintech Charter”). The brief in opposition signals that the NYDFS will continue its opposition to the Fintech Charter under the leadership of Acting Superintendent Linda Lacewell, who replaced outgoing Superintendent Mari Vullo in February. In opposing the OCC’s motion to dismiss, the NYDFS argued that it has standing to challenge the Fintech Charter, the matter is ripe for judicial review, and its claims are not time-barred. The NYDFS also argued that the OCC’s interpretation of the “business of banking” is not entitled to Chevron deference and “should be invalidated in its entirety.”

Mortech Partners with Roostify for Enhanced Online Mortgage Experience (Business Wire), Rated: A

Today, Mortech, a Zillow Group business providing mortgage technology solutions for mortgage lenders and secondary market teams, announced a new partnership between Mortech’s product and pricing engine (PPE) and Roostify, a digital lending platform that gives customers more control of their home buying process while allowing loan officers to utilize the latest technology to more easily process loans. The strategic partnership will integrate two proven mortgage technology solutions to improve the digital mortgage experience for many industry-leading lenders.

Finastra brings community banking services outside the branch with the launch of Fusion Digital Front Office (Finastra), Rated: A

Finastra has launched Fusion Digital Front Office, an innovative tablet-based banking platform that enables community banks and credit unions to take services directly to the consumer, outside of the branch. The solution provides a simple gateway to manage account origination, sales and service, and transaction processing from any remote location.

Huobi’s US Arm Launches Institutional Group for OTC Crypto Trading (CoinDesk), Rated: A

“We’re entering the market now with a real institutional offering, we’re definitely going to be offering some new products and services,” such as token lending and over-the-counter (OTC) trading, in the coming months, he added.

Elevate Named as a Finalist for LendIt Fintech 2019’s Financial Inclusion Award (AP News), Rated: B

Elevate Credit, Inc. (“Elevate”), a leading tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, has been named as one of six finalists in the “Excellence in Financial Inclusion” category for the LendIt Fintech Industry Awards 2019. This award is given to the company that has made the biggest impact in expanding access to financial services in new and innovative ways.

J.D. Power ranks Regions among top alternative lenders for personal loans (Biz Journals), Rated: B

Birmingham’s largest bank has ranked among the top alternative lenders in the U.S. for providing personal loan satisfaction through digital applications.

United Kingdom

ARBUTHNOT BANKING GROUP (“Arbuthnot”, “the Group” or “ABG”) Audited Final Results for the year to 31 December 2018 (Morningstar), Rated: AAA

FINANCIAL HIGHLIGHTS

·      Profit Before Tax £6.8m (2017: £2.5m)

·      Underlying profit before tax £7.4m (2017: £3.2m)

·      Operating income increased by 24% to £67.9m (2017: £54.6m)

·      Negative earnings per share 134.5p (2017: positive 43.9p)*

·      Continuing earnings per share 38.0p (2017: 14.0p)

·      Underlying earnings per share 40.3p (2017: 17.6p)

·      Final dividend per share 20p (2017: 19p), an increase of 5%

·      Total full year dividend per share 35p (2017: 33p)

·      Bonus share issue to create new class of non-voting shares

·      Net assets £196m (2017: £236m)

·      Net assets per share 1283p (2017: 1547p)

·      Underlying return on deployed equity 5.6% (2017: 4.2%)

Consolidated statement of financial position

 

At 31 December

2018

2017

Note

£000

£000

ASSETS

Cash and balances at central banks

17

405,325

313,101

Loans and advances to banks

18

54,173

70,679

Debt securities at amortised cost / held-to-maturity

19

342,691

227,019

Assets classified as held for sale

20

8,002

2,915

Derivative financial instruments

21

1,846

2,551

Loans and advances to customers

22

1,224,656

1,049,269

Other assets

24

12,716

20,624

Financial investments

25

35,351

2,347

Deferred tax asset

26

1,490

1,527

Interests in associates

27

– 

83,804

Intangible assets

28

16,538

15,995

Property, plant and equipment

30

5,304

3,962

Investment property

31

67,081

59,439

Total assets

2,175,173

1,853,232

EQUITY AND LIABILITIES

Equity attributable to owners of the parent

Share capital

37

153

153

Retained earnings

38

209,083

237,171

Other reserves

38

(13,280)

(949)

Total equity

195,956

236,375

LIABILITIES

Deposits from banks

32

232,675

195,097

Derivative financial instruments

21

188

931

Deposits from customers

33

1,714,286

1,390,781

Current tax liability

236

705

Other liabilities

34

18,549

16,239

Debt securities in issue

35

13,283

13,104

Total liabilities

1,979,217

1,616,857

Total equity and liabilities

2,175,173

1,853,232

Read the full report here.

Tech Nation Lists 10 Fintech Pioneers In Future Fifty 2019 Cohort (Forbes), Rated: AAA

Revolut, Monzo, Starling Bank, Currencycloud, Aire, Blockchain, MarketInvoice, Quantexa, Nested and Salary Finance were revealed to be among the 24 most dynamic and fast-growing late-stage technology companies to be chosen to join Future Fifty’s 2019 cohort.

Tech Nation and Dealroom data has also revealed that the U.K. has attracted a whopping $7.9 billion in funding in 2018 and closed the gap for exits of venture-backed companies with the U.S. As well as this U.K. sales, IPOs and mergers were worth $40 billion – ahead of every other European country – which points to the success of the tech sector as a whole in the country.

OAKNORTH ANNOUNCES BRITISH BUSINESS BANK ENABLE GUARANTEE OF £133M (Business Leader), Rated: AAA

OakNorth has today announced its participation in the ENABLE Guarantee programme, securing a guarantee of £133m from the British Business Bank, the UK government’s economic development bank. OakNorth will use the guarantee to strengthen further its lending support to fast-growth businesses and established property developers and investors.

The ENABLE Guarantee programme is designed to encourage banks to increase their lending to smaller businesses by reducing the amount of capital required to be held against such lending. Under an ENABLE Guarantee, the UK Government takes on a portion of the lender’s risk on a portfolio of loans to smaller businesses, in return for a fee.

Inside OakNorth’s plan to take its lending technology global (Tearsheet), Rated: A

As a challenger bank, OakNorth charts a different course. While Revolut, Monzo, and N26 focus on putting their digital current accounts in the hands of millions, OakNorth doesn’t even offer a current account. While other challengers are racing to acquire banking licenses all over the world, OakNorth is happy with just a UK license.

OakNorth is also posting profits while other challengers aren’t.  The bank announced a £33.9m profit for 2018, up 220 percent from 2017.

OakNorth provides debt financing to entrepreneurs in growing businesses, lending £0.5M to £40M to profitable, scale-up, British businesses. To fund its underwriting, OakNorth offers digital savings accounts. It currently has 40,000 customers with digital savings accounts and has lend £3 billion in under four years.

Successful UK Payday Lender Western Circle Limited Begins Offering Personal Loans Online (Finger Lakes Times), Rated: A

Western Circle Limited has made a name for itself by offering responsible payday loans online. Their decision to branch out into the personal loans market through the new brand PersonalLoansNow.co.uk was well received by their customers.

Five last-minute IFISA ideas (P2P Finance News), Rated: A

THE END of the tax year is fast approaching, so if you haven’t yet taken full advantage of your £20,000 ISA allowance to make tax-free returns, now is the time. The peer-to-peer lending industry is expecting to see an uptick in inflows into Innovative Finance ISAs (IFISA) this year now that there is a much wider choice of products available and the potential for higher returns than cash with lower volatility than the stock market.

FINTECH LAUNCHES AI LOAN COMPARISON SERVICE (Business Cloud), Rated: A

Loan marketplace Monevo has launched a new platform to give consumers comparisons of pre-approved loans.

Based in Macclesfield, the business is a licensed credit broker for personal and business loans and is Europe’s largest personal loan marketplace.

An Alternative Approach (IFA Magazine), Rated: A

When it comes to asset allocation, advisers constantly face the challenge of finding real diversification in client portfolios. Sue Whitbread met with Matthew Ardron and Benedict Yung of Basset & Gold Group, to talk about their approach of offering fixed rate bonds that invest in alternative lending.

Half of Brits running out of cash before payday – pushing them to rogue lenders (Mirror), Rated: A

Exclusive research for Mirror Money shows by the end of this month, those turning to payday loans will have shelled out more than £214million – that works out at £28 per second

P2P to have strong presence at Innovate Finance Global Summit (P2P Finance News), Rated: B

FOUNDERS of the ‘big three’ peer-to-peer lenders are among the confirmed speakers at Innovate Finance Global Summit (IFGS), which takes place next month at London’s Guildhall.

Giles Andrews of Zopa, Samir Desai of Funding Circle and Rhydian Lewis of RateSetter are all participating in various sessions at the fintech industry trade body’s flagship conference on 29-30 April 2019, which marks the start of UK Fintech Week.

Other confirmed speakers from the P2P world include Zopa chief executive Jaidev Janardana, ArchOver’s Angus Dent, Ali Celiker from British Pearl and Roxana Mohammadian-Molina from Blend Network.

China/Hong Kong

Hong Kong SME financing platform raises $ 15m for China push (Finextra), Rated: AAA

Hong Kong-based online SME trade financing platform Qupital is targeting the mainland after closing a $15 million Series A funding round led by CreditEase FinTech Investment Fund.

Consumers hunger for loans, lenders popping up everywhere (Shine), Rated: AAA

Qin Shuifeng, 30, who lives in the suburban district of Jiading, went to a branch of the Postal Savings Bank of China in 2016 to seek a loan for home improvements.

The lender granted her and her husband a credit line of 1 million yuan (US$148,600), of which they drew 600,000 yuan, with an interest rate 10 percent higher than the benchmark rate.

Competition 

The central government has issued a series of policies favorable to consumer lending since the second half of 2018.

Still, risks remain. To realize sustainable development, players need to build strong operational and risk control capabilities, either by themselves or in partnership with financial technologies firms.

European Union

Klarna Launches Open Banking Platform (PR Newswire), Rated: AAA

Today, Klarna, one of Europe’s leading payment providers and the global market leader in payment initiation services, announces the launch of its own Open Banking Platform. This platform will enable access to more than 4,300 European banks through a single Access to Account (XS2A) API in line with Payment Services Directive (PSD2). Klarna’s XS2A API is the most established and proven solution that has been developed at scale across markets for almost 15 years through the Klarna Group company Sofort.

This platform provides a fully proven and mature infrastructure, superior market coverage and connectivity, with access to 99% of online banking consumers currently across 14 European markets. By opening up its own advanced technology and capabilities, Klarna is simplifying and democratising access to APIs securely. Both established and newer banks and fintechs as well as other licensed businesses, will be able to build smart and personalised offerings that meet the evolving needs of consumers across Europe. Klarna has been one of the leading proponents of the PSD2 legislation and believes high-quality APIs will drive innovation and competition but most importantly will empower consumers across Europe with increased choice, control and clarity on their finances, and ability to access better products.

International

Has Alternative Lending Seen Its VC Peak? (PYMNTS), Rated: AAA

U.S. FinTech funding reached its highest level in five years in 2018, according to CB Insights data published last month, hitting $11.89 billion. Yet at a time when analysts say VCs are focusing more on late-stage investment, alternative lenders are having a tougher time securing funding, particularly market newcomers in a crowded market.

But there is evidence that investors’ appetite for alternative lending startups is on the wane, even as overall FinTech funding continues to climb — and as the success of the alternative lending market grows, too.

eToro buys blockchain company Firmo (Fintech Futures), Rated: A

Just weeks after launching in the US, trading and investment platform eToro announced plans to purchase Copenhagen-based blockchain firm Firmo, reports Julie Muhn  at Finovate

Founded in 2017, Firmo offers a programming language called FirmoLang that runs on a sidechain. Exchanges can leverage FirmoLang to create financial instruments such as P2P lending platforms or cryptocurrency derivatives with tokens. And Firmo is versatile, allowing the tokens to be run on any blockchain.

Battlestar Capital Earns 30% Returns For Holding Crypto (ChainBits), Rated: B

Battlestar Capital, which is a blockchain staking-as-a-service company, revealed that customers could potentially earn up to 30 percent on a yearly basis when it comes to their idle crypto holdings. Here is everything about the startup’s claims in a nutshell.

In an interview, the company said that it has teamed up with crypto lending startup called Celsius Network in an attempt to launch a large-scale service capable of offering potentially high returns.

Australia

APRA Proposes Stricter Credit Risk Management Standards (Regulation Asia), Rated: AAA

The revised prudential standard enhances board oversight of credit risk and requires more intensive credit checks on borrowers. APRA also highlights the risks of P2P originated loans.

India

New modes of lending, fund raising on cards (The Asian), Rated: AAA

In a bid to change the market dynamics of the banking and financial sectors, the Reserve Bank of India (RBI) will soon come up with alternative models of lending and capital raising for the sectors.

Asia

Bukalapak partners three P2P lenders to provide loans for offline businesses (Tech in Asia), Rated: AAA

Bukalapak is teaming up with Indonesian P2P lending startups Amartha, Modalku, and PohonDana to provide loan facilities in a program called Modal Mitra. The loans are available to offline vendors who are part of the company’s Mitra Bukalapak program.

The financing offered through Modal Mitra ranges between US$70 and US$700 and can be paid back in up to six months, with weekly installments starting from US$6. It can only be used for purchases in the Mitra Bukalapak app.

Eurasia

Russian fintech launches digital bank 131 (Finextra), Rated: AAA

Bank 131, a new digital bank focused on Russian companies and entrepreneurs that work for global internet companies and/or buy from global ecommerce companies with a Russia presence, announced today they have received their banking license from authorities – the first and only new bank to do so in four years.

Canada

Shadow banking has grown, but risks to financial systems are modest (Advisor’s Edge), Rated: AAA

Canada’s shadow banking sector has grown substantially in recent years, but the overall financial system has grown even faster, keeping risks in check, suggests a new report from the Bank of Canada.

In the report, the central bank details the results of its monitoring of so-called “non-bank financial intermediation” (NBFI), also known as shadow banking. Among other things, the report finds the Canadian NBFI sector has grown by 1.7 times since 2006, driven by strong growth in investment funds, securities financing transactions and private lending.

Authors:

George Popescu
Allen Taylor

The post Thursday March 28 2019, Weekly News Digest appeared first on Lending Times.

Monday May 7 2018, Daily News Digest

Morgan Stanley collateral comparison

News Comments Today’s main news: Square funded $339M to SMBs in Q1. RateSetter joins Finsure, LoanKit panels. WeLab to become licensed virtual bank. CredoLab nabs $1M investment. Today’s main analysis: MSRP 2018-SC1 resecuritization deep dive. Today’s thought-provoking articles: CommonBond highlights desire for student loan help from employers. Contrasting OnDeck with peers. Financial inclusion in the rich world. P2P lending, MPL unicorns […]

Morgan Stanley collateral comparison

News Comments

United States

United Kingdom

China

International

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News Summary

United States

Square Funded $ 339M to SMBs in Q1 (deBanked) Ranked: AAA

Square’s small business funding arm, Square Capital, made over 50,000 business loans for a total of $339 million in Q1, according to the company’s latest earnings report. That figure is a 35% increase year-over-year and puts them on pace to break last year’s $1.177B total. OnDeck, by comparison, who is arguably their top rival, made $2.11B in business loans last year.

MSRP 2018-SC1 Resecuritization Deep Dive (PeerIQ), Rated: AAA

A recent Bloomberg article discussed ratings on and the performance of MPL ABS. According to the article, ratings agencies that provide lower loss estimates on ABS transactions tend to do the most business, in part due to the “issuer paid” model. While there is no way to verify “ratings shopping” behavior, we do believe there are a few observations to share to balance the discussion.

Overall loss estimates have tended to lower with successive deals as ratings agencies gain access to longer performance histories. The securitization structures have also been extremely robust – we have seen about 10% of outstanding balance breaching triggers so far.

Deal Deep Dive MSRP 2018-SC1

Morgan Stanley is resecuritizing a portion of the residual tranche of SCLP 2015-1 (SoFi’s first consumer loan ABS) via MSRP 2018-SC1. SCLP 2015-1 had an original collateral pool of $252 Mn and issued $189 Mn in Class A notes. Today $96 Mn of that pool and $51 Mn of the A notes are outstanding. MS is issuing $37 Mn in a Class B bond with an initial CE of 11.2% that is rated BBB by Kroll.

Realized losses on SCLP 2015-1 are at 5.31%, 1.26% below KBRA’s initial estimates. KBRA is also lowering its total cumulative loss estimate on SCLP 2015-1 from 8.5% to 8.0%.

Source: PeerIQ, KBRA
Source: PeerIQ, KBRA

New Study From CommonBond Highlights Desire for Help with Student Loans from Employers (Lend Academy) Rated: AAA

The market for student loans has continued to climb. According to data from CommonBond, 44 million Americans currently owe $1.4 trillion in student debt with the average student loan debt in 2016 coming in at $37,172.

Source: Lend Academy; Commonbond

CommonBond’s study included 1,500 workers and 500 human resource executives. Their key findings as provided in their press release are copied below

  • Almost 75 percent of all workers have taken out loans to fund their own education, while 21 percent of workers expect to take out a loan for a child or other family member’s education in the next five years.
  • For employees with student debt, student loan repayment is the most-requested financial wellness benefit; however, human resources teams rank student loan repayment as their third priority.
  • Seventy-one percent of human resources executives see their benefits offering as innovative, compared with 50 percent of employees.
  • Seventy-eight percent of employees with current or future student loan debt want their employer to offer this benefit, and 65 percent of employees over age 55 in these categories want the same.
Source: Lend Academy; Commonbond

 

Contrasting OnDeck Capital (NYSE:ONDK) & Its Peers (Macon Daily) Rated: AAA

OnDeck Capital (NYSE: ONDK) is one of 29 public companies in the “Nondepository credit institutions” industry, but how does it contrast to its competitors? We will compare OnDeck Capital to related companies based on the strength of its valuation, risk, analyst recommendations, dividends, institutional ownership, profitability and earnings.

OnDeck Capital’s competitors have higher revenue and earnings than OnDeck Capital. OnDeck Capital is trading at a lower price-to-earnings ratio than its competitors, indicating that it is currently more affordable than other companies in its industry.

Lending Club (LC) Set to Announce Quarterly Earnings on Tuesday (The Lincolnian Online) Rated: B

Lending Club (NYSE:LC) will be issuing its quarterly earnings data after the market closes on Tuesday, May 8th. Analysts expect the company to announce earnings of ($0.01) per share for the quarter.

Elevate: Providing Responsible Credit to Non Prime Lenders (Crowdfund Insider) Rated: A

While interest rates may be high, this is necessary to manage the overall portfolio risk. Elevate’s default rate is pegged at around 23% – which is quite a bit higher than a prime credit provider. The online lender recently announced their Q1 results and there services are booming. Elevate more than quadrupled year-over-year net income with 24% revenue growth and new customer growth of 32%. So they must be doing something right.

Better Mortgage Hires Former OnDeck Chief Financial Officer (BusinessWire), Rated: A

Better Mortgage, a digital mortgage company working to improve access to home financing through transparency, honest guidance and zero commissions, today announced that it has hired Howard Katzenberg as Chief Financial Officer.

Student Loan Genius Raises $ 4.7 Million in New Funding (Finovate) Rated: A

Xconomy is reporting that Austin, Texas-based Student Loan Genius has raised $4.7 million in funding. The news was seconded by Austin Business Journal, which added that 11 investors have participated in the round. Both reports – as well as a third from AmericanInno, are based at least in part on a SEC Form D filing, which suggests that the $4.7 million was part of a larger $5.8 million fundraising initiative. As reported, the new capital more than doubles Student Loan Genius’ total equity funding to more than $7 million.

Federal Court Dismisses “Speculative” And “Attenuated” Lawsuit By The Conference Of State Bank Supervisors Over Proposed OCC Fintech Charter (Mondaq) Rated: A

On Monday, a federal district court judge in the District of Columbia issued an order dismissing a lawsuit brought by the Conference of State Bank Supervisors (CSBS) regarding a proposal of the Office of the Comptroller of the Currency (OCC) to issue federal charters to certain Fintech firms. In dismissing the case, US District Court Judge Dabney L. Friedrich held the CSBS did not have standing to sue because the OCC had not yet officially decided to issue charters to Fintech companies. Judge Friedrich explained that the CSBS lacks standing to bring the suit because the harms it alleges are “contingent on whether the OCC charters” a Fintech company, and “[s]everal contingent and speculative events must occur before the OCC” issues such a charter.

Banks are using open source to collaborate, not compete (Tear Sheet) Rated: A

On the consumer side, product and marketing teams in banks in the Zelle network currently face new challenges as their partnership is crucial to their success. And on the backend, when banks began paying attention to blockchain technology (the original bitcoin blockchain was a breakthrough of open-source development), the largest companies including JPMorgan Chase and Wells Fargo joined industry consortia working on open-source blockchains.

Commercial loan slump chips away at bankers’ reluctance to automate (American Banker) Rated: A

Loan executives at the $5.1 billion-asset bank wanted commercial clients’ information in one place, where anyone within the organization could access it — especially from the road on their mobile phones.

In a report aptly titled “The Productivity Crisis in Commercial Lending,” David O’Connell, a senior analyst at Aite Group, found that at 78% of the banks he surveyed, lenders spent at least 30% of their time on noncore job responsibilities. At 46% of those institutions, lenders spent at least 40% of their time on those noncore functions.

 

Banks say they aren’t profitable enough for tech giants to bother with their business (Quartz) Rated: A

We’re-not-profitable-enough-to-bother-with is an unusual defense, which is why it caught my attention amid the usual distractions at these sorts of conferences (texts, emails, the snack table). The banker cited return on equity, which is a measure of profitability, as proof. FactSet calculates this measure by dividing net income by a trailing two fiscal-period average of total shareholder equity:

Source: Quartz

Granted, tax cuts and deregulation in the US will make banks there more profitable than before. But Amazon is making so much money selling cloud computing to the financial industry (charging them by the second) that taking deposits or writing mortgages wouldn’t seem worth the hassle by comparison.

United Kingdom

P2P lender joins Finsure and LoanKit panels (The Adviser) Rated: AAA

Peer-to-peer lender RateSetter has joined the panel of Finsure and LoanKit, giving accredited brokers access to its personal and green loan solutions.

As of this month (1 May), more than 1,400 brokers accredited with aggregators Finsure and LoanKit will be able to offer their clients personal loans and green loan products from the growing retail lender.

Financial inclusion in the rich world (The Enconomist) Rated: AAA

A report published in March 2017 by a House of Lords committee estimated that 1.7m adult British residents have no bank account; 40% of the working-age population have less than £100 ($140) in cash savings; and 31% show signs of financial distress.

In Britain such lenders include pawnbrokers, offering an APR of between 25% and 101% for a secured loan; doorstep lenders such as Provident, the biggest, which will charge an APR of 1,558% for a 13-week loan; “payday lenders” such as Wonga, which offer similar rates for a loan to be repaid after 1-35 days in one lump sum; and “rent-to-own” lenders, such as BrightHouse, which offer finance for purchases to be repaid in installments.

Are we seeing the beginning of the end for retail banking? (CL News) Rated: A

At the beginning of this week, the first waves splashed up on the shore as the Royal Bank of Scotland announced the closure of 162 branches throughout the UK, with the loss of 800 jobs. The full list is here if you would like to see if your town is affected.

The robot revolution gathers pace (Money Week) Rated: B

The first wave started a decade ago with the rise of online stockbroking platforms, which brought down dealing costs and sparked a wave of DIY investing. Then came the rise of robo-advisers – a rather daft term to describe what are in effect online wealth managers or advisers.

Now a second wave of new entrants has hit the market. Some big players have launched their own robo products, chief among them being private banks such as UBS and Investec – trusted brands with a great investment pedigree. They tend to focus on wealthier clients, however. Investec has a minimum investment of £10,000, while for UBS it’s £15,000. Another big player is IG and its Smart Portfolio, which has lower fees and a minimum investment of £500 per portfolio. Alongside these sit smaller companies such as Moneybox, Wealthify and Moola. The latest platform, Exo, launched just this week.

China

WeLab joins fintech race to become Hong Kong’s first licensed virtual bank (South China Morning Post) Rated: AAA

WeLab, Hong Kong’s home-grown fintech unicorn, is poised to be among the first batch of companies to apply for a virtual banking license from the Hong Kong Monetary Authority, according to its co-founders.

In the coming weeks, the HKMA is due to issue guidelines for virtual banking regulation based on a consultation in February.

CreditEase becomes Milken Institute’s first Asian Strategic Partner (PR Newswire) Rated: A

Tang Ning, founder and CEO of CreditEase, attended the 21st Milken Institute Global Conference in Los Angeles as both a strategic partner and a speaker, and said on the global capital market panel that driven by technology, the middle class and the high-net-worth individuals, a strong new economic growth can be seen in China these years, adding that China is now entering a new era.

European Union

Taaleri to buy Finnish robo-advisor wealth management firm Evervest (Banking Business Review) Rated: A

Taaleri Wealth Management has agreed to acquire Finnish robo-advisor wealth management firm, Evervest, for an undisclosed sum.

 

The acquisition will add Taaleri with functioning digital platform, which will help to extend service offering for customers.

Subject to approval by the Finnish Financial Supervisory Authority, the deal is expected to complete in the first half of this year.

Will ‘buy now, pay later’ change the in-store customer experience? (Econsultancy) Rated: A

I’m going to preface this by saying that this is something we as a business are working on at the moment at Klarna, so I may be biased. But we’re not the only ones experimenting with new bricks-and-mortar payment solutions – the industry is striving to align in-store with online.

International

The 27 fintech unicorns from around the world (Business Insider) Rated: AAA

CB Insights, which tracks the venture capital industry, recently provided a list of what it believes are all the fintech unicorns in the world — venture capital-backed, private businesses worth over $1 billion.

27. Funding Circle — $1 billion

Why it’s hot: Over £3 billion has been lent across the platform and the company is tipped for a blockbuster European float later this year.

27. Kabbage — $1 billion

Why it’s hot: The company has written over $4 billion-worth of loans and has partnered with Spanish bank Santander.

27. 51 Credit — $1 billion

Why it’s hot: 51 Credit provides risk management and credit advisory services to over 20 major banks working in China, including Citibank and Standard Chartered.

17. Tuandaiwang — $1.4 billion

Why it’s hot: The company has helped individuals and companies borrow $11.4 billion and helped lenders make $335 million in returns.

HQ: Dongguan.

14. Affirm — $1.8 billion

Why it’s hot: The company works with over 1,200 retailers in the US and its technology helps retailers increase average order sizes by 51%. Morgan Stanley and Singapore’s GIC are both investors.

13. NuBank — $1-2 billion

Why it’s hot: The bank has 3 million customers and has raised money from Sequoia Capital, Goldman Sachs, Tiger Global, and more.

HQ: Sao Paulo.

11. Avant — $1.9 billion

Why it’s hot: The company has lent over $1 billion and is backed by the likes of Tiger Global, KKR, and Jefferies.

8. Klarna — $2.5 billion

Why it’s hot: The company processes 800,000 transactions a day and has been used by 60 million people globally. Sequoia Capital, the Silicon Valley fund that backed PayPal, is an investor.

6. GreenSky — $3.6 billion

Why it’s hot: Steven McLaughlin, a former Goldman Sachs banker whose firm advised GreenSky on a funding deal, told Bloomberg in 2016 that GreenSky “is the single best fintech company created in the last 10 years, by far.”

4. SoFi — $4.5 billion

Why it’s hot: Like Zenefits, SoFi struggled with a slew of setbacks in 2017. Allegations of sexual misconduct and loan misstatements forced out founder Mike Cagney. Former Twitter CFO and ex-Goldman banker Anthony Noto is now leading a turnaround of the business.

1. Lu.com — $18.5 billion

Why it’s hot: Lu.com, also known as Lufax, is one of China’s largest online lenders and is tipped for an IPO this year.

WhizCoin ICO (WZC Token): Legit Crypto Lending Rewards? (Bitcoin Exchange Guide) Rated: A

Whizcoin is the latest entrant to the world of digital currencies. The project aims to create the biggest lending program in the world which offers exclusive bonuses as well as passive income on a daily basis for its holders. To realize this goal, Whizcoin has already established a token buyback mechanism that runs on a transparent profit distribution model, and thus enables members to increase the value of their digital coins. All transactions are secured by cryptographic encryption, a feature that also regulates the mining of new Whizcoin.

Unlike other digital currencies, Whizcoin does not require exceptional tech savvy from its users. To trade in Whizcoin, all an investor needs is a mobile or computer with a dependable internet connection.

 

 

 

Australia

Winners from banking Royal Commission (The Bull) Rated: A

The Royal Commission will surely slow the big banks down by adding extra compliance and costs, at a time when they need to be more nimble and aggressive to combat the fintech threat (and benefit from financial technology).
Peer-to-peer lending stocks could benefit if more borrowers look to bypass the banks, but most on ASX are too small and speculative for portfolio investors. Big fintech payment providers, such as Afterpay Touch Group, are a better bet but look fully valued after recent price gains.

Australian Banks Expected To Start Hiking Mortgage Lending Rates (Compare Dinkum) Rated: A

ME, the online lender has decided to raise the interest rate on its variable rate mortgages because it says funding costs have risen. ME is not the first bank to do this, nevertheless the lender hiked its standard variable rate for owner-occupier, principal and interest borrowers. Jamie McPhee CEO of the online lender said higher funding costs and increased regulatory compliance were the main reasons behind its decision to hike rates.

Funding costs are rising

Mr MchPee says over the last few months the bank has seen funding costs steadily rise in response to US interest rates that have been passed on to short term Australian interest rates. Simultaneously, regulatory requirements and industry reforms means that compliance costs are rising as well. ME’s decision follows on the heels of Suncorp which raised its rates in March and also cited higher funding costs as the reason behind its decision.

India

Money lending made easy (News Today) Rated: A

The online trading market has been booming at the moment and money lending has taken various forms. Monexo Fintech Pvt Ltd is one such online peer-to-peer lending company and News Today met up with its founder-CEO, Mukesh Bubna here for an exclusive chat.

Q) Being an online firm, technology must play a big part in your business. Do explain. 
A) Our system is 100 per cent online. A typical transaction has many stages. The normal way is cumbersome. There is the problem of being unserviced and second, you do not know how they will use your document. In our platform, your documents come from you to our system directly. There are no print-outs taken and even in our office, there is no printer. Everything is done instantly. With technology, privacy has gone up, speed will go up too.

Asia

Singapore Fintech CredoLab Secures $ 1 Million Investment from Global Venture Firm Walden International (Crowdfund Insider) Rated: AAA

CredoLab, a Singapore-based fintech provider of mobile-based alternative credit scoring solutions for banks, consumer finance companies, and retailers, announced on Thursday it secured a $1 million investment from established global venture capital firm Walden International. Established in 2016, CredoLab is headquartered in Singapore was previously backed by regional fintech venture capital firm Fintonia Group, and FORUM.

Beenext-backed Indonesian P2P lender Amartha targets to raise Series B round by June (Deal Street Asia) Rated: A

Indonesian peer-to-peer lending platform Amartha has revealed that it is currently in talks with investors to raise a series B round of funding which is expected to be closed in the second quarter of this year.

 

OJK Urges Sharia Finance to Optimize Fintech (Tempo) Rated: B

The Financial Service Authority (OJK) chief Wimboh Santoso encourages the sharia finance industry to continue expanding businesses using the latest technology. One way is by optimizing the utilization of financial technology or fintech.

Africa

Crypto-to-Cash Lending is Growing Quite Popular These Days (Nigeria Today) Rated: AAA

A new business model has formed recently called crypto-to-cash lending and this new financial sector is growing exponentially. The phenomenon follows the modern rise in recent years of peer-to-peer lending offered by financial giants like the Lending Club. Right now there are a few operations that are attempting to break the mold when it comes to this type of lending with projects such as Unchained Capital and Salt Lending taking the lead.

Then there is a new startup called Nexo that plans to provide crypto-infused instant credit to borrowers without the need for credit checks. VCs like the Techcrunch founder Michael Arrington, and others recently pumped $50Mn into Nexo and the company has a security partnership with Bitgo. Nexo believes it will be the first firm to provide instant crypto-backed loans as it states on its website.

Authors:

George Popescu
Allen Taylor

Tuesday November 19 2017, Daily News Digest

Moody's wage growth

News Comments Today’s main news: Clarity Services integrates with Experian. Octopus Choice passes 100M GBP AUM. Funding Circle hits 100M Euro in German lending. Younited Credit tops 100K loans. Square Peg invests $8M in Airwallex. Silver Bullion hits $50M in loans. Today’s main analysis: The deteriorating auto loan quality. Today’s thought-provoking articles: China’s startup investors are a bunch of “cashed-up […]

Moody's wage growth

News Comments

United States

United Kingdom

China

European Union

International

India

Asia

Canada

Africa

News Summary

United States

Integration of Clarity Services by Experian (Clarity Services Email), Rated: AAA

As a supplier to Clarity Services Inc, we are writing to formally notify you that as of October 6, 2017, Clarity Services Inc has been purchased by Experian Holdings, Inc.

Effective January 1, 2018, purchases and invoice payments will be processed by Experian’s centralized Procurement and Accounting departments.

Source: Clarity Services

PayPal Co-Founder Max Levchin Gave a Remarkably Honest Response to Accusations About His New Startup (Inc.), Rated: AAA

To its critics, though, Affirm, which recently raised $200 million in a growth round, is engaged in something sinister, luring people into a financial trap by enticing them to buy things they can’t afford. CEO Max Levchindoesn’t agree with that interpretation at all, but he does accept some of the blame for not creating a more accurate perception.

Here’s how Affirm works: You can borrow money to make a purchase at any store that integrates with Affirm (or any store at all if you use the mobile “virtual card”). If Affirm’s proprietary credit model judges that you’ll be able to pay back the sum, then you’re offered a loan. During the next several months — up to a year — you’re expected to make monthly payments, which include interest. The APRs range from 10 to 30 percent.

The key things that differentiate Affirm from other credit options are that you get all of the information up front, stated plainly, and the interest charged by the startup is simple rather than compounding. When you make the initial purchasing decision, you know exactly how much extra you will end up paying to buy the product right now, instead of saving up over several months. There are no additional fees.

Moodys Warns Of Deteriorating Auto Loan Quality (ValueWalk), Rated: AAA

The economy is expected to expand in 2018, with projections for stock market performance clocking in at 8% basis Goldman Sachs. But not all is well –  a Moody’s report notes that specific asset sectors are struggling, particularly when it comes to  car loan quality worsening.

ValueWalk

Moody’s anticipates that US GDP growth will strengthen slightly to 2.3% in 2018 from 2.2% in 2017, with unemployment also continuing to move lower to 4.0% from 4.4%.

Auto loan quality is worst, but pockets of “challenged” loans exist across the board

Auto loan ABS issuers will likely securitize pools with attributes broadly similar overall to those in the pools backing their 2017 securitizations, even as a further decline in US auto sales pressures lenders to loosen underwriting to support volumes. We project sales will slip another 0.6% after an estimated 3.6% drop in 2017, following eight consecutive years of annual increases.

Auto loans appear to be on the front-lines of credit issues. Household debt, for instance, has increased to $13 trillion, with a significant part of that increase in auto loans. Sub-prime auto loans, in particular, are showing signs of weakness.

When looking at investment in asset-backed securities, the originator makes a difference. ABS backed by loans from online lenders such as SoFi, Lending Club Corporation, Prosper Marketplace Inc. and Marlette Funding have correlated with “prime credit quality.” But that is not the case across the board.

Source: ValueWalk

Square to small banks: Don’t lump us in with Amazon and Facebook (American Banker), Rated: A

Square, the Silicon Valley payment processor that is at the center of the fight over the tech industry’s ambitions in banking, is firing back at its small-bank critics, while also taking steps to placate community activists.

Advocacy groups that once expressed concern about the adequacy of Square’s plan to satisfy its obligations to low- and middle-income customers are now sounding more supportive of the fintech’s bid to open a bank.

Levi King of Nav (Lend Academy), Rated: A

In this podcast you will learn:

  • Levi’s background that led to the founding of Nav.
  • The products that Nav offers today.
  • How their business model works.
  • How they get small business owners interested in finance.
  • How Nav saves their customers money.
  • Why Levi thinks that small business owners may not need to be educated on finances in the future.
  • Their approach to producing content on their site.
  • The marketing channels they use to attract small business owners.
  • Levi’s thoughts on the entry on Amazon, PayPal and Square into small business lending.
  • Why proprietary data sets are going to be so important going forward.
  • The story behind the Nav brand and why they rebranded a couple of years ago.
  • The big name equity investors they have and how they closed their funding rounds.
  • What the future holds for Nav.

Traditional FAs Shouldn’t Fear AI (Financial Advisor IQ), Rated: A

Traditional wealth managers are convinced the advent of robo-advisors and artificial intelligence threatens the jobs of financial services professionals, Wendy Spires writes on WealthBriefing. But the reality is that the high-touch business of financial advice stands to benefit from AI, as do its traditional practitioners, she writes.

For example, while 71% of wealth managers believe financial advice clients are prepared to accept advice from robo-advisors, the reality is different, she writes. Self-directed investing, for example, dropped from 45% in 2010 to 38% in 2016 — during a time when the number of robos and the services they offer expanded significantly, according to Spires.

 

Working in America’s gig economy (Multibriefs), Rated: A

“The gig economy … is now estimated to be about 34 percent of the workforce and is expected to be 43 percent by the year 2020,” notes Intuit CEO Brad Smith. “We think this points to a lot of growth as we look ahead.”

Based on the most recent demographic data available from the Bureau of Labor Statistics, it appears the gig workforce is fairly evenly distributed across the age spectrum, but the highest percentages are seen at opposite ends of the scale. Individuals 65 years and older had the highest level of self-employment at 24.1 percent, while those under 35 (the so-called millennial generation) made up 18 percent.

BLS data reveals a few more interesting statistics concerning the gig workforce:

  • Men are almost twice as likely as women to be self-employed.
  • More than 30 percent of gig workers possess professional or advanced degrees.
  • Whites and Asians are marginally more engaged in gig work than are other racial or ethic groups.

In fact, data crunched by online lender Earnest and reported by Priceonomics indicates that about 85 percent of gig workers make less than $500 per month.

Consumer board seeks $ 287 million in restitution over CashCall case (Northern California Record), Rated: A

A Nov. 20 hearing featured the Consumer Financial Protection Bureau calling CashCall a purveyor of “financial snake oil” and arguing the online lender should pay as much as $287 million because they deceived customers.

How To Build The Best B2B Customer Experience (Forbes), Rated: A

In order to build the best B2B customer experience, companies should focus their effort on four principles:

  1. Invest in digital systems. Financial technology start-up Kabbage leverages new technology to approve small business loans in just seven minutes—a huge improvement over the 20 days it takes a typical bank. By simplifying the loan application process for web and mobile, Kabbage allows customers to apply for loans within minutes from anywhere in the world, which relieves a huge pain point for small businesses.
  2. Leverage data.
  3. Customize the experience.
  4. Use omnichannel to see the big picture. In fact, the average B2B customer uses six different channels as they make a decision. Customer experience happens in many places, which means companies need to create a consistent omnichannel experience.

Interesting Investments: Peer-to-Peer Lending (Equities.com), Rated: A

Peer-to-peer (P2P) lending, also known as peer lending, crowdlending, or social lending, is essentially what it says on the tin: lending money to another in an unsecured loan.

Prosper, one of the bigger companies managing P2P lending, has seen a fairly consistent return of about 9 percent through 2014, with a dip to 6.6 percent in 2012. Lending Club has seen a rise from 4.9 percent in 2009 to about 8 percent in 2014. All told, not bad ROIs.

First, you must be at least 18 years old, with a Social Security number, and live in an eligible state to even consider investing. Then, some states require that you have a minimum $70,000 gross income ($85,000 for California), and a minimum net worth of $70,000. You may not be able to invest more than 10 percent of your net worth. However, if your net worth is at least $250,000, there is no minimum income requirement.

Prosper, for example, has an annual default rate 3 to 4 percent higher across all grades. Lending Club has a 6 to 7 percent default rate.

Boston Fintech Company Cayan Is Getting Acquired for $ 1.05B (Bostinno), Rated: B

Cayan, a payment processing company that has been around the Boston fintech scene for the last 19 years, is in the process of getting acquired by Total System Services in an all-cash transaction valued at approximately $1.05 billion. The transaction is expected to close in the first quarter of 2018.

United Kingdom

Octopus Choice passes £100m AUM (AltFi), Rated: AAA

Octopus Choice has passed £100m of assets under management, following on from the launch of its Innovative Finance ISA in the summer.

Assetz Capital Makes Changes to the Great British Business & Green Energy Accounts (Crowdfund Insider), Rated: A

On Monday, online lending platform Assetz Capital announced it is doing away with the Great British Business Account (GBBA) and the Green Energy Account (GEA).

Ranger Direct Lending makes further $ 9.1m provision for Argon Credit (AltFi), Rated: A

The £232m Ranger Direct Lending fund has made a further $9.1m provision against its indirect investment in the collapsed Argon Credit lending platform.

ThinCats Reveals New Branding, Launches Updated Website (Crowdfund Insider), Rated: B

SME peer to peer lender ThinCats has launched a new website and branding designed to position itself for its next phase of growth in 2018.

Goji – Empowering Direct Lending (LinkedIn), Rated: B

Paul McMahon, former group marketing director of Aegon and UK CEO of FNZ, and Vincent Bordes, Founding Partner of Vestigo, the credit risk consultancy, will comprise the advisory board. Elizabeth McCallum joins as Goji’s Head of Marketing,  David Beacham as our Head of Distribution, and Rehan Islam as Head of Investments.

China

China’s Wild Bunch: Startup Investors Are Cashed-Up Cowboys (WSJ), Rated: AAA

In the first 11 months of this year, 3,418 new venture-capital and private-equity funds in China raised 1.6 trillion yuan ($241.76 billion), more than double the amount of 2015 and more than 10 times that of 2006, according to consultancy Zero2IPO Group. It estimates about 12,000 investment firms manage 8.5 trillion yuan in capital, an increase from 8,000 firms managing 5 trillion yuan in 2015.

Out of 221 unicorns in the world, 59 are in China, according to CB Insights. While that may lag behind the 127 from the U.S., it’s ahead of the U.K.’s 12 and India’s nine. Many Chinese investors want to invest in Silicon Valley because they think the valuations there are more reasonable.

Government agencies and local governments have announced 1,040 venture funds since 2015 aiming to raise about 8 trillion yuan, according to Zero2IPO. Much of the money is used to lure businesses to set up local offices, to help boost employment and tax revenues. The Hubei Province’s 200 billion yuan fund is believed to the largest of its kind.

Source: The Wall Street Journal

Borrowing From Multiple Online Lenders Remains Prevalent (Caixin), Rated: AAA

In China, online lenders or peer-to-peer (P2P) platforms that only facilitate lending do not have full access to borrowers’ credit information as there is no such centralized platform that shares the data.

Some borrowers take advantage of this information asymmetry to apply for loans from multiple lenders so they can roll over previous debts elsewhere, or to take out cheaper loans to repay the ones that charge higher interest rates and profit from the difference, or even become lenders on other P2P platforms themselves, according to a study by the Beijing Internet Finance Industry Association.

The association’s recent report found that among the 61 online lenders surveyed, 44% of their customers on average had borrowed from multiple sources.

The survey found that nearly 500,000 borrowers tried to profit from arbitrage by taking advantage of the different interest rates charged by different online lenders. On average, each of them borrowed from 2.36 online lenders, the survey said.

China’s war on risk hands US$ 121b loan market to big firms (The Malay Mail Online), Rated: AAA

China’s whac-a-mole approach to risk — hit it everywhere it pops up — is set to hand control of the surging US$121 billion technology-driven lending market to a small group of leaders such as Lufax Holding and the finance affiliate of Jack Ma’s Alibaba Group Holding Ltd.

Macquarie estimates credit extended by China’s fintech firms will jump more than seven-fold by 2022 to 6.2 trillion yuan (RM3.8 trillion) to pay for things like luxury and household goods or training and education. About half that market is micro-lending — typically small, short-term loans with high interest rates, Macquarie says.

China’s 10 biggest fintech companies account for 36 percent of all loans, said Dexter Hsu, a Taipeh-based Macquarie analyst. Tighter regulation could erode China’s more than 2,000 online micro-lenders and so-called P2P platforms, which directly match borrowers with investors, to less than 200, he said.

Chinese FinTech IPOs Don’t Dazzle Wall Street (PYMNTS), Rated: A

Newly listed Chinese FinTech companies in the U.S. are struggling on Wall Street, leaving investors with unexpected losses and posing as a setback to other Chinese firms hoping to go public.

“The quality of the businesses were either too early [to go public], untested or just poor,” said Anh Lu, an equities portfolio manager at T. Rowe Price in Hong Kong. “And they were asking for very high valuations on top of that.”

European Union

Funding Circle hits €100m lending milestone in Germany (P2P Finance News), Rated: AAA

FUNDING Circle has hit the €100m (£88.2m) loans milestone in Germany just two years after launch in the country.

The business lending platform says 3,000 investors have backed 1,100 German businesses and created more than 2,000 jobs since 2015.

The platform entered the European market following its acquisition of German platform Zencap in 2015. It now has operations in the UK, US, Germany and the Netherlands.

Earlier this month it said it had passed £3bn of lending in the UK and $5bn globally across all its platforms.

C’est Génial! Younited CREDIT Tops 100,000 Loans (Crowdfund Insider), Rated: AAA

Younited Credit has just surpassed 100,000 in loans since platform inception. The Paris based online lender (formerly named Pret d’Union) reported an accelerating rate of loan originations as the number has doubled since September 2016 when total loans stood at 50,000. The platform provides loans from €1000 to € 40,000. To date, Younited Credit has originated over € 650 million in loans.

BorsadelCredito.it Raises €1.6M in Funding (FinsSMEs), Rated: A

BorsadelCredito.it, a Milan, Italy-based fintech startup, raised €1.6m in funding.

The round was led by P101 Ventures, with participation from Azimut Enterprises Holding, GC Holding, Banca Popolare di Fondi and private investors.

DreamQuark wins the 2017 Fintech of the Year (Digital Journal), Rated: B

A startup company called DreamQuark, which produces Artificial Intelligence applications for financial services, has been awarded the Finance Innovation ‘Fintech of the Year’ prize.

National Personal Credit Platform Appoints Chairman (Caixin), Rated: B

The chairman of a wholly-owned central bank subsidiary, Zhu Huanqi, has been appointed chairman of a planned national personal credit-information platform, Caixin has learned from sources familiar with the matter.

International

Online Banking and Payments: Innovative Solutions on the Horizon (FinsSMEs), Rated: AAA

In the near future, online banking and payments will go through some fascinating changes beyond what has already happened over the past several years.

Advanced Mobile Payments

Today, there is increasing demand for biometric authentication apps. To ensure that consumers get what they want, MasterCard is going a step further by developing facial identification, voice recognition, and even cardiac rhythm programs. These innovative solutions will enhance the mobile payment experience for customers and retailers alike.

Growing Opportunities for Mobile Wallets

Back in 2014, Apple was the only real contender for mobile wallets. Within just one year, others followed their lead, including Samsung and Google. Then, in just a short amount of time, more big-name players joined in, such as Chase, Amazon, and Walmart. However, that was not the end. Even social media platforms started offering online payment options. With sites like Facebook that have mobile wallet solutions, people can send money and make payments.

Another prediction is that by 2025, 75 percent of all transactions will be made using mobile wallets rather than actual cash.

Greater Demand for Digital Remittances

For instance, a San Francisco-based company founded in 2001 called Xoom has experienced amazing growth because of digital remittances. In fact, it passed up MoneyGram, which speaks volumes.

Growth Potential with Peer-to-Peer Lending

For instance, having originated loans over $20 million since being founded, Lending Club ranks as one of the fiercest competitors in this arena.

How Banks Are Leveraging Chatbots for Customer Service (Crowdfund Insider), Rated: A

Bank of America: Erica

In October of 2016, Bank of America unveiled Erica, their new AI chatbot. Available in the bank’s mobile app, Erica can work with voice and text commands.

Erica uses machine learning and specially-designed algorithms to provide Bank of America services that were typically reserved for the bank’s top-tier customers. As an example, it could recommend a way to pay down more on your credit card debt to save on interest payments. Or if your checking account is close to being overdrawn, it could contact you to recommend a transfer from your savings account.

Swedbank: Nina

Customers can access Nina from the bank’s website, and it can understand a wide range of text requests using specially designed Natural Language Understanding technology.

In the first three months after Nina’s release, the software was handling an average of 30,000 customer interactions per month.  Of those early interactions, Nina was able to provide a resolution rate of 78%.

Capital One: Eno

Eno from Capital One is a chatbot program that works through SMS messaging.

You can use this AI chatbot to check the balance on your accounts, see your available credit, track recent transactions, pay bills, and more.

Wells Fargo

The Wells Fargo virtual assistant is a chatbot that the bank recently released for use with Facebook Messenger. Once a customer enrolls their account, they can then use Messenger to contact the virtual assistant for basic tasks like tracking recent transactions, balance inquiries, and finding the nearest ATM.

Digital investments: Modern ways to invest in the digital age (Bankless Times), Rated: A

The internet has brought about all kinds of new ways to invest one’s money.

  • Bitcoin
  • Peer-to-peer lending – You’re best off using a well-established site such as Ratesetter.
  • Micro-investment apps – Some apps round up all of your expenses to the nearest dollar and then put the leftover change into an account (for example, if a cup of coffee costs $3.14, this will be rounded up to $4 and the $0.86 extra change will be put into the account).
  • Social media shares
Australia/New Zealand

Australian Fintech Airwallex Secures $ 8 Million Investment From Square Peg (Crowdfund Insider), Rated: AAA

Less than one year after securing $13 million during its Series A funding round, Aussie fintech startup Airwallex announced it has received an $8 million investment from Paul Bassat’s Square Peg.

Testing a chatbot’s home loan advice gives a range of outcomes (Stuff), Rated: A

A mortgage broking firm is offering an AI chatbot to help first-home buyers understand some of the basics – but an experiment shows you shouldn’t put too much faith in any online calculators’ estimates of how much you might be able to borrow.

Squirrel has launched Alan, an online tool that answers questions like “how much deposit do I need”, “what’s an auction” and “how much can I borrow?”

Regulatory Pathway for Challenger Banks Just OK, Could be Improved (Crowdfund Insider), Rated: A

FinTech Australia has provided a comment onthe consultation paper published in August regarding authorising new entrants into the banking industry. The creation of digital challenger banks in Australia is a welcomed move but, according to FinTech Australia, needs some improvement.

India

5 Consumer Lending Trends To Look Forward To In 2018 (Inc42), Rated: AAA

This amendment to the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 is a step towards standardisation and providing a visible digital identity, thereby promoting transparency in financial transactions. Another factor that is pushing financial transparency is the rise of Fintech and the subsequent new-age companies that are offering digital avenues for finance such as payment platforms, blockchain companies, alternative financers like P2P lenders and so on.

Consumer Lending Trends To Look Forward To In 2018

Alternative Lending Boom

New service providers will serve the underserved and unserved, meeting the unmet demand. We will continue to see the rise of direct lending as well as P2P lending, marketplaces, crowdfunding platforms etc.

Ease Of Access To Credit

Credit will continue to grow, thanks to the alternative lending boom. One such burgeoning space is the Line of Credit. It has gained momentum in 2017 with the metros being early adopters and is expected to expand into tier 2 & tier 3 cities in 2018.

The Rise Of InsurTech

Investment In Emerging Technologies

Blockchain will expand in putting together smart contracts, and digital identification. Already, FinTech investments in Asia increased to $5.4 billion in 2016, up 12.5% from $4.8 billion in 2015, driven mainly by China and India.

Government And Regulatory Push For Fintech

Asia

Unique Secured P2P Lender Silver Bullion Reaches $ 50 Million in Loans (Crowdfund Insider), Rated: AAA

Silver Bullion, a peer to peer lending platform based in Singapore, has reached $50 million in loan originations. The unique platform that provides secured lending based off of bullion saw more than double the lending volume in 2017 versus year prior.

Amartha Powers Micro Peer to Peer Lending in Indonesia, Focuses on Women Entrepreneurs (Crowdfund Insider), Rated: A

Amartha Founder & CEO, Garuda Typhoon Andi Putra recently commented;

“Since its establishment, Amartha has been committed to connecting the unbanked micro entrepreneurs, and investors who want to add this asset investment in a sector that is more profitable and socially valuable. The uniqueness lies in the micro-entrepreneurs or Amartha Partners, all of which are women. Today, more than 72,000 women micro entrepreneurs throughout Indonesia have enjoyed our services, with a total fund distributed more than 200 billion rupiah (US $ 15 million). “

Affin Islamic Bank lists latest sponsored venture on IAP (New Straits Times), Rated: A

KUALA LUMPUR: Affin Bank Bhd’s wholly owned subsidiary, Affin Islamic Bank Bhd, has today listed its latest sponsored venture with Segi Seri Sdn Bhd on Investment Account Platform (IAP), a shariah-compliant platform similar to crowdfunding and peer-to-peer lending platforms.

Affin Islamic said the venture plans to raise RM3.3 million on IAP to part-finance contract awarded to them recently, which is related to preparation and serving of dietetic food to an established government hospital in Malaysia for a duration of three years.

 

Canada

Another challenge is the new technology. Instant Financial Inc., a Vancouver-based startup, released an app this year that lets workers paid by the hour get their day’s earnings after a shift. It’s free for employees. Employers pay a fee. The focus so far is the hospitality industry, and includes companies such as McDonald’s and Outback Steakhouse in the United States. Instant has about 175,000 people on the service in the United States and about 5,000 in Canada. Wal-Mart has a similar product, which it sourced from another company.

Africa

A mobile banking service is transforming how the poor transfer money — here’s how it works (Business Insider), Rated: AAA

In 11 countries around the world, some 30 million people use a mobile money service that is transforming how people handle their finances.

It’s called M-Pesa, and it has lifted hundreds of thousands of people out of poverty in Kenya.

Krispo, 40, is enrolled in GiveDirectly’s experiment in basic income, a system of wealth distribution in which people receive a standard salary just for being alive.

The money comes with no strings attached. Krispo and the other villagers have received $22 a month since October 2016, and they’ll continue getting it until October 2028.

Scattered around town are M-Pesa stands, outfitted with live agents who can dispense money — essentially an ATM with a human teller.

There is a small fee for each transaction. For the amount given to GiveDirectly recipients, this fee is 30 shillings. (GiveDirectly actually wires 2,280 shillings each month — 30 shillings above the 2,250 recipients can spend — to cover the cost.)

Authors:

George Popescu
Allen Taylor

Thursday November 16 2017, Daily News Digest

securitization

News Comments Today’s main news: Marcus surpasses 2017 goal. LendInvest gets into buy-to-let. Top 3 spots on KPMG Fintech 100 list are all Chinese. Lendix launches SME bridge loans in France, Spain, and Italy. Mauritia issues draft P2P lending rules. Marlette closes fourth securitization in a year. Today’s main analysis: Rising challenges unlikely to deter U.S. securitizations. Today’s thought-provoking articles: […]

securitization

News Comments

United States

United Kingdom

China

European Union

International

Australia/New Zealand

India

Asia

Africa

Canada

Russia

News Summary

United States

Marcus from Goldman Sachs Surpasses 2017 Goal (Bank Innovation), Rated: AAA

Martin Chavez, chief financial officer for Goldman Sachs, showed in a slideshow at a Bank of America Merrill Lynch event yesterday that Marcus had already surpassed $1.96 billion in originations as of Nov. 9.

What that means is that from Nov. 9 to Nov. 14, over a span of five days, Marcus originated more than $40 million in loans.

Rising challenges unlikely to deter U.S. securitization in 2018 (Asset Securitization Report), Rated: AAA

As a result, Fitch’s outlook for U.S. structured finance ratings is predominately stable for 2018. That said, given where we are in the credit cycle, Fitch is keeping a close watch on select asset types that could run into some issues over the next 12 months.

Entering 2018, Fitch has either Positive or Stable Outlook on over 90% of its rated securitized bonds.

Perhaps the most notable change that has manifested from risk retention is the shrinking universe of originators bringing new securitizations to market. This is particularly notable in the universe of CMBS originators, which has shrunk from a high of roughly 40 to now less than 20 due to a combination of risk retention and Reg A/B.

Competitive pressures, long in place for subprime autos, are escalating in a marketplace ABS environment that is struggling to find its footing by testing recent underwriting models, asset quality and, in some cases, business models. Delinquencies and chargeoffs of existing assets continue to increase as marginal borrowers increase their leverage. Not likely to help is the drive for growth among large marketplace lenders coupled with rising market pressure from competing banks like Goldman Sachs (Marcus), Discover, and Suntrust. And unless originators tighten their credit policies with discipline, the strain will intensify.

Source: Asset Securitization Report

Online lenders should heed criticism of their effect on borrowers (American Banker), Rated: AAA

The consumer lending industry is abuzz about the Federal Reserve Bank of Cleveland’s recent report on debt consolidation and online lending. This excellent piece of research concludes that, on average, online installment loan borrowers fall into more debt after taking out a loan, experience hits to their credit score and history as a result, and take out online loans despite having access to traditional banking and credit channels.

The first two conclusions are damning, especially as these loans are often marketed as a way to help consumers consolidate credit card debt and improve their finances. At the end of the day, a lender’s duty is not merely to avoid losses. Any loan must be suitable for the customer — which means it should be made only if the lender believes it is improving the customer’s financial health. A lender not guided by that principle should be prepared for severe criticism as well as elevated losses down the road.

But it would be nonsensical to discredit or ignore the study because it includes online lenders beyond well-known fintech names.

The Best of Both Worlds with Prosper for Borrowers and Lenders (DoughRoller), Rated: AAA

Founded in 2005, and generally recognized as the first peer-to-peer (P2P) lending platform in the US, Prosper has funded more than $10 billion in loans since.

While borrowers can get personal loans ranging in size between $2,000 and $35,000, investors can put as little as $25 toward funding those loans.

There is one exception, however. You cannot use loan proceeds for post-secondary educational expenses. That’s because some of the rules in federal law aren’t compatible with P2P lending. More specifically, with education loans, the borrower must have at least 30 days to accept or reject a loan offer.

Medical procedures available for financing under the PHL program include:

  • Cosmetic dentistry
  • Bariatric surgery
  • Cosmetic and plastic surgery
  • Fertility and reproductive procedures

All Prosper loans have a term of either three or five years.

The minimum requirements are:

  • A minimum FICO score of 640, based on a TransUnion FICO 08 score
  • Debt-to-Income (DTI) ratio below 50%
  • Stated income greater than $0 (you must have an income)
  • No bankruptcies filed within the previous 12 months
  • Fewer than seven credit bureau inquiries within the last six months
  • A minimum of three open trades reported on your credit report

Interest rates are between a minimum of 3.00% for the best AA rated borrowers to a maximum of 36.00% for the lowest rated HR borrower grades.

Source: DoughRoller

Prosper for Investors

Prosper advertises that the average rate of return by investors on the platform is 7.41% per year.

Loans rated HR have a much higher average return, at 11.73%.

You can open either a General Investment Account or an IRA. Available IRAs include traditional, Roth, SIMPLE, SEP and rollover IRAs (IRA accounts are held with Millennium Trust Company). At this time, Prosper has made only individual accounts available. You cannot hold an account jointly with someone else.

For regular investment accounts, the minimum is $25. For IRA accounts, the minimum is $5,000.

Similar to other P2P platforms, when you invest with Prosper, you don’t actually invest in whole loans. Instead, you invest in small slivers of those loans, referred to as “notes.” The notes are in denominations of $25. This means that you can spread an investment of $1,000 across as many as 40 different loans.

The servicing fee is 1% of the outstanding balance of a loan. That means that if the loan pays 8%, your net return will be 7%.

Source: DoughRoller

Marlette Funding Closes Fourth Personal Loan Securitization Within Past Year (LendEDU), Rated: A

Last week, marketplace lender Marlette Funding announced the closing of its fourth proprietary securitization. The transaction was worth an estimated $312 million, and it is the fourth securitization announcement since August of 2016 from Marlette Funding.

eOriginal Named as One of Fastest Growing Companies in North America on Deloitte’s 2017 Technology Fast 500 (eOriginal), Rated: A

eOriginal, Inc., today announced it has been named to Deloitte’s Technology Fast 500 list as one of North America’s fastest growing technology, media, telecommunications, life sciences, and energy companies. eOriginal earned the rank of 294 by more than doubling revenues during the evaluation period of FY 2013 through FY 2016.

Betterment, the investing startup with $ 11 billion in assets, is rolling out a new service to make charitable giving easier (Business Insider), Rated: A

Betterment, the New York-based roboadviser, announced Wednesday a charitable giving feature that’ll let users donate shares of their account to partnered charities.

The firm, which manages $11 billion for over 300,000 customers, partnered with 11 charities for Betterment Charitable Giving, including Big Brothers Big Sisters of NYC, UNICEF, and World Wildlife Fund, according to a news release. The new feature is set to go live November 28.

Subprime car loans souring faster at nonbank lenders (American Banker), Rated: A

Despite signs of trouble in subprime auto lending, U.S. banks and credit unions are well positioned to ride out any market turbulence, a new report from the Federal Reserve Bank of New York suggests.

More than $435 billion in auto loans to borrowers with credit scores below 660 were outstanding during the third quarter of this year, the report found. That total has been climbing steadily since bottoming out at $249 billion in early 2011. Delinquency rates have also been rising as it has become easier to qualify for an auto loan.

Fidelity latest financial firm to facilitate data sharing with fintechs (American Banker), Rated: A

Fidelity Investments is joining the ranks of financial firms sharing customer account data with others through an application programming interface.

The new service, called Fidelity Access, will give third parties access to Fidelity customers’ account data for use in apps and services like tax preparation, budgeting, financial planning, spending analysis and portfolio advice — provided the Fidelity customers give their OK. Customer data to be shared includes Fidelity account balances, securities holdings, and transactions.

These are the most valuable fintech companies in America (MarketWatch), Rated: A

Stripe Inc., whose software is used by businesses to accept and track digital payments, leads the way as the most valuable fintech startup in the U.S., with a $9.2 billion valuation.

And just to be clear, fintech startups are nowhere near close to catching up to the big banks. Wells Fargo & Co. has a market cap of more than $266 billion, and Bank of America Corp. has a market cap of more than $273 billion.

RealtyProfits Offers Accredited Investors an Innovative Platform to Invest in the Real Estate Sector (Digital Journal), Rated: A

RealtyProfits (www.RealtyProfits.com) announces today an exciting and innovative investment opportunity, RealtyProfits IV, with a Preferred Return of 12 percent per annum, available exclusively to accredited high net-worth individuals and institutional investors. The private preferred equity securities, available for purchase at www.RealtyProfits.com, are being offered through WealthForge Securities, LLC, a registered broker/dealer and member of FINRA/SIPC.

The geographically diversified portfolio includes properties in 700 cities coast to coast, with a current estimated value of $1.73 billion and more than $700 million of equity in more than 5,900 portfolio properties. The properties include primarily single-family homes and condominiums ranging in value from $100,000 to more than $2,500,000.

Accredited investors can start investing with as little as $20,000. RealtyProfits IV offers monthly cash distributions. Preferred equity investors receive all distributions made by RealtyProfits IV until fully repaid. The Preferred Return is 12 percent per annum, with initial monthly Base Preferred Return payments at 6 percent per annum anticipated depending on cash flow during each of the first 24 months.

Reality Shares Teams up with Nasdaq to Launch Blockchain Tech Index (BusinessWire), Rated: A

Reality Shares and Nasdaq announce the creation of the Reality Shares Nasdaq Blockchain Economy Index, a smart-beta index that tracks the growth and development of leading global companies creating and implementing blockchain solutions.

An ETF that will track the Index is already in the works, with Reality Shares filing for it on November 2, 2017.

Reality Shares and Nasdaq compiled the index by utilizing internal and external research and their proprietary Blockchain ScoreTM ranking system. The Index is comprised of global companies that seek to capitalize upon transformational blockchain technology that may potentially disrupt the markets in which they operate.

How to Choose Between a Peer-To-Peer Lending or Traditional Loan (Experian), Rated: A

Shopping for a loan at a P2P provider is a two-step process. First, based on a credit score (or credit scores) and your answers to a few basic questions—your full name, address, date of birth and annual income—the lender determines which loan offer(s) to extend to you. (It’s possible at this juncture that the lender will decide not to extend any loan offers; if they do, they’ll explain why.)

Once you choose the loan you want, the lender does a more detailed credit check and may ask you to verify your income and to provide additional background information.  Each P2P site has its own lending criteria, including minimum credit scores, and additional information requirements vary accordingly. Some P2P lenders want information on your educational background; others want work history or details about your financial assets. In most cases, you can submit the necessary documents electronically.

The first step in the P2P loan-approval process gets one or more of your credit scores by a method known as a soft inquiry—the same process you use when you check your own credit scores. Soft inquiries have no impact on your credit scores. However, the hard inquiries traditional lenders make when you apply for a credit cards or bank loans are reported to the national credit bureaus. They appear on your credit reports, and typically cause temporary credit-score drops of several points.

In the second step of P2P loan approval, the lender performs a hard inquiry to confirm your credit score and, likely, to review your full credit report.

Before you apply for a P2P loan

  • Take a look at the fine print on the bottom of each provider’s homepage, to get an overview of the loan amounts they offer and the rates and fees they charge.
  • Make sure the lender operates in your state.
  • Check your FICO Score and review your credit reports for any major negative entries. Accounts in collection, liens and civil judgments are among the items that could torpedo your loan application, even if you meet the credit-score requirements.
  • Determine the amount of money you need and watch out for tempting upsells.
  • Consider using the Experian loan-referral tool to explore offers from multiple P2P lenders (and possibly traditional lenders as well).

Resignation of CFPB head gives Trump opportunity to erase Elizabeth Warren’s legacy (Legal Insurrection), Rated: A

Richard Cordray, an Obama appointee and head of the Consumer Financial Protection Bureau (CFPB) announced to staff in an email Wednesday his plans to resign. While he’s yet to confirm his plans, there’s speculation Cordray will return home to run for Ohio’s governorship.

Seven Signs That the Bond Bull Market is Over (INTL FCStone), Rated: A

  • The bond bear market is already here: short and medium-term treasuries have lost value in the past 5 years
  • Buybacks have fallen to a five-year low, and big repurchasers have underperformed
  • Oil prices are at a 30-month high, and the futures curve is in backwardation
  • The long and the short ends of the yield curve are moving together again
  • The Chinese trade surplus has shrunk from 10% of GDP to almost zero in the past ten years
  • The U.S. deficit is growing again, an unprecedented phenomenon in times of expansion and peace
  • Small bubbles are popping out: Auckland houses, Ethereum crypto coins, and collectible cars
Source: Global Macro Report, INTL FCStone

Read the full report here.

Spring Framework Creator Launches Atomist for Development Automation With $ 22 Million in Series A Funding (Marketwired), Rated: A

Today on stage at Structure 2017, Atomist is formally launching and unveiling its Development Automation Platform with an Open Source client and API. As part of today’s launch, Atomist is announcing $22 million in Series A funding from Accel and Matrix Partners.

Bestow Gives Texas Residents First Access to On-Demand Life Insurance (PRWeb), Rated: A

Bestow Inc., the company behind a revolutionary new approach to life insurance, today announced the early access roll out of its comprehensive, full-stack, digital life insurance solution in Texas. For the first time Bestow’s solution is available to the public, giving Texas residents primary access to apply for the only on-demand life insurance solution, instantly and without a medical exam.

Leveraging applied intelligence and algorithmic underwriting, Bestow redefines the way consumers research, buy and manage life insurance. Using data to calculate risk, Bestow removes the need for a medical exam and streamlines the entire process into a matter of minutes. The Texas launch gives consumers access to choice term life insurance plans, including a unique two year term policy never before available for life insurance. Additionally, customers can choose between ten or twenty year term life insurance.

The Zebra Raises $ 40 Million, Taps New CEO To Expand Beyond Car Insurance (Forbes), Rated: A

The Zebra, which has always described itself as the Kayak of car insurance, has hired a longtime Kayak executive as its new CEO.

The Austin-based company, which allows drivers to compare prices for car insurance online, said on Tuesday that it has tapped Kayak’s former president Keith Melnick to run the company.

The Zebra also said it has raised $40 million in a Series B funding round, led by Accel Partners. That brings its total funding to $61.5 million.

MarketScout in Dallas Creates $ 25M Insurtech Venture Fund (Insurance Journal), Rated: B

Dallas-based insurance exchange and MGA MarketScout announced it has launched MarketScout InsurTech (MIT), which will make investments in tech-enabled insurance distribution. The initial funding of $25 million will come exclusively from MarketScout Corp., parent of MIT, according to the firm.

House Financial Services Committee Approves Legislation to Help Keep Lending Partnerships Between Banks and Online Lenders (Crowdfund Insider), Rated: A

The House Financial Services Committee has approved HR 3299 or the “Protecting Consumers’ Access to Credit Act of 2017.” The bill “restores consistency” in lending laws across state boundaries. HR 3299 impacts the case of Midland Funding, LLC v. Madden – an ongoing law suit that has the potential to undermine online lenders. Sponsored by Congressman Patrick McHenry, includes an important statement that clarifies allowable interest rates on loans potentially ending the issue associated with the law suit.

How Do You Beat a Robo-Advisor? Trust (Think Advisor), Rated: A

“Technology by itself cannot create trust,” Robert C. Merton, a Nobel laureate in economics now teaching at MIT, recently told ThinkAdvisor. “The successful advisor must have the trust of their clients.”

Given the importance of trust in the advisor-client relationship, Merton recommends financial advisors (the breathing kind) should:

  • Check what they are doing to retain and enhance trust with their clients.
  • Make sure the business model being used supports the creation of trust.
  • Take advantage of technology to improve/enhance what the advisor does.
  • Do not view technology as a “competitor or substitute” for the advisor.
  • Understand and assess the financial technology they employ to certify trusting its use in client solutions.

HFLA launches initiative to help underserved reach financial stability (Cleveland Jewish News), Rated: A

The Hebrew Free Loan Association has launched its Looking to the Future Initiative with support from the St. Luke’s Foundation and the PNC Foundation. The initiative accounts for $73,000.

The initiative enables HFLA to increase its lending of interest-free loans to Cleveland’s underserved neighborhoods and grows the organization by expanding its reach, according to a news release. HFLA received a $63,000 grant from the St. Luke’s Foundation and a $10,000 grant from the PNC Foundation to launch the effort.

Fundation Purchases Select Assets from Able Lending to Enhance Partnership Strategy (BusinessWire), Rated: B

Fundation Group LLC, a digitally-enabled lender and credit solutions provider, today announced that it has acquired a variety of assets from online small business lender, Able Lending of Austin, Texas.

Former Capital One Executive Troy Jamison Joins Victory Park Capital as Chief Risk Officer (BusinessWire), Rated: B

Victory Park Capital (VPC), an investment firm focused on middle-market debt and equity investments, announced today that Troy Jamison joins as chief risk officer for the firm’s nonbank financial services portfolio. Jamison is based in Chicago and reports directly to CEO and Co-Founder Richard Levy.

CFPB updates website to officially address end of arbitration rule (Housingwire), Rated: B

The Consumer Financial Protection Bureau finally updated its website to acknowledge President Donald Trump revoking the controversial arbitration rule.

blog post from Ballard Spahr previously stressed the importance of the CFPB updating its website to note the rule’s override since the rule was killed nearly two weeks ago.

The webpage for “Arbitration agreements” now has an update on the top that states:

On Nov. 1, 2017, the President signed a joint resolution passed by Congress disapproving the Arbitration Agreements Rule under the Congressional Review Act (CRA). Pursuant to the joint resolution, the Arbitration Agreements Rule has no force or effect. The materials relating to the Arbitration Agreements Rule on the Bureau’s website are for reference only.

HOUSE FINANCIAL SERVICES COMMITTEE PASSES SMALL BUSINESS CREDIT ACT (Coalition for Small Business Growth Email), Rated: B

The 

United Kingdom

LendInvest launches into buy-to-let (Mortgage Strategy), Rated: AAA

LendInvest is launching a range of buy-to-let loans aimed at professional landlords and investors.

Rates start at 3.69 per cent for a two-year fix at 60 per cent LTV.

The firm will offer loans of between £50,000 and £5m, up to a maximum LTV of 80 per cent.

Citigroup joins the AI bandwagon (Business Insider), Rated: A

Citigroup 

Source: Business Insider

SyndicateRoom Alum Squirrel Launches Crowdcube Funding Round (Crowdfund Insider), Rated: A

Squirrel, a personal finance app designed to help users have more control over their money, has launched an equity crowdfunding round on Crowdcube. This initiative debut comes less than one year after the company completed its SyndicateRoom funding round with £585,000 in funds. Squrriel is now seeking £400,000.

Government unveils financial package to support tech (P2P Finance News), Rated: A

THE GOVERNMENT has given a £21m boost to a technology programme that has supported firms such as Zopa and Funding Circle as part of a range of measures to boost the tech sector.

The funding will make Tech City UK and Tech North one national organisation called Tech Nation and help grow government-backed startup support programmes such as Founders Network, Northern Stars, Future Fifty and Upscale.

Cash Converters International Ltd reports security breach and ransom demand (The Motley Fool), Rated: A

Payday lending and pawnbroking business Cash Converters International Ltd (ASX:CCV) announced a cybersecurity breach in its UK operations last night.

Sadly, computer system integrity is becoming an increasingly relevant – and often overlooked – concern for investors, with a vast majority of companies relying in one way or another on computer systems.

Valorem Foundation Launches All-New Cryptocurrency Platform (PR Newswire), Rated: A

Valorem Foundation, a Blockchain startup specializing in stabilized value-based exchange and transactions, has announced the launch of its new cryptocurrency platform. The company has developed a multi-layered platform to disrupt and expand the following services globally: microloans, car loans, student loans, rent payment, P2P networks, buying and selling of goods & services, business investing, real estate crowdfunding, and insurance.

Empowering the world: How you can make money through improving lives (City A.M.), Rated: A

This sea change should explain why investment firm Ethex has managed to scoop up so much support in its short history – raising more than £50m since 2013.

Its business model has a peer-to-peer lending feel – that is, it uses a digital platform to allow retail investors to lend to individuals and entrepreneurs.

But it comes with a twist, because Ethex is a not-for-profit organisation which lets you invest in companies that have a positive impact – socially and environmentally.

If you want to get involved, the platform has a minimum investment of £50, which arguably makes it more accessible to younger generations.

Trussle hires VP engineering from Funding Circle (Mortgage Introducer), Rated: B

Trussle has appointed Matthew Gretton as vice president of engineering from peer-to-peer lending platform Funding Circle.

China

Alibaba affiliates sweep top 3 spots in global fintech ranking (Asian Review), Rated: AAA

Financial technology companies linked to China’s Alibaba Group Holding took over the podium in KPMG’s latest Fintech 100 list, announced on Wednesday.

Ant Financial, which runs Alibaba’s massive Alipay e-payments network, took the No. 1 spot on the list, which was compiled with fintech accelerator H2 Ventures. Online property insurer ZhongAn Insurance and microloan provider Qudian placed second and third; both have received investments from Ant.

See the full list here.

One of China’s hottest companies rebuffs criticism about transparency (CNBC), Rated: A

Despite public criticism about a lack of transparency in some practices, Ant Financial is doing things the right way, a senior executive at the company said Wednesday.

“The demand for these securities is very healthy and continuing to expand,” Douglas Feagin, senior vice president and head of global business at Ant Financial, told CNBC’s “Street Signs.” “That, at the end of the day, is the ultimate barometer of whether you’re giving enough information to investors to invest.”

Ant Financial will use local partners in Southeast Asia: executive from CNBC.

Earnings at Some U.S.-Listed Chinese Microlenders Taper (Caixin), Rated: A

In the three months ending Sept. 30, Yirendai’s net income was down 12% to 303 million yuan ($45.7 million) from 344.3 million yuan a year ago, the company said Wednesday. Another Chinese microlender, China Rapid Finance Ltd., earlier reported a wider net loss of $4.4 million in the third quarter. Although Qudian Inc., a larger player that listed in New York last month, recently posted a four-fold increase in its third-quarter net profit from a year ago, citing better operational efficiency and its growing borrower base.

Cinda International Leads Massive Round In Chinese Fintech Company 9f Group (China Money Network), Rated: A

Beijing-based fintech company 9f Group has raised a massive new funding round from Cinda International Holding Ltd, a subsidiary of state-owned China Cinda Asset Management Co., Ltd., Focus Media Information Technology’s Chairman Jiang Nanchun, video game developer Youzu Interactive’s chairman Lin Qi and an unnamed Chinese industry fund.

The company did not disclose financial details except to say that it raised “hundreds of millions of U.S. dollars” in the latest financing deal, according to a company announcement. It is also unclear how the company is valued in the round, but 9f Group is listed on China Money Network’s China Unicorn List with a US$1 billion valuation when it last raised a US$110 million series B round in 2015.

European Union

For Spain’s banks, survival means digital (Financial Times), Rated: AAA

Santander’s Openbank has changed a great deal since it was founded as Spain’s first telephone banking service in 1995. Now a fully digital operation, its mobile app allows users to temporarily disarm a lost credit card, as well as to check whether fellow Openbank customers are buying or selling a given stock at any moment. Currently, it has some 1.2m customers in Spain and more than €8bn ($9.3bn) in assets under management.

In recent years, Spain’s two biggest banks — Santander and BBVA — have increased their financial and managerial investment in fintech, digital banking and big data. Like their peers, they are convinced that the days of branch-based lending are drawing to a close.

Spanish banks average about €15m assets under management per employee, says Daragh Quinn, banks analyst at investment bank Keefe, Bruyette & Woods. At a digital operator like Openbank, that number is close to €60m.

The digital push is on two fronts: first, a mobile app that allows customers to access almost all of the bank’s products without going into a branch. Second, a venture capital approach whereby banks invest in or partner with fintech start-ups to add products.

Online Lender Lendix Launches Flexible SME Bridge Loans in France, Spain & Italy (Crowdfund Insider), Rated: AAA

Lendix, online lender for SMEs in continental Europe, has announced the launch of a new financing product: the Flexible Bridge Loan. This product is designed to will allow a greater number of French, Spanish and Italian SMEs to benefit from the speed of execution of Lendix’s lending platform while leaving them the possibility of setting up an overall refinancing solution with other financial institutions.

The Lendix Flexible Bridge Loan is a 5-year amortizable loan with a standard commitment for the first 9 months and the possibility of early repayment at no cost for the remainder of the loan term, even in the event of refinancing by other financial institutions.

Swedish $ 370 Billion Home-Loan Market Gets New Mortgage Fund (Bloomberg Quint), Rated: A

As investors wonder whether Sweden’s housing market is headed for a correction, the country’s first mortgage fund is about to enter the $370 billion Swedish home-loan industry.

Stabelo plans to pool capital from Swedish institutional investors in exchange for fixed-income securities. That money will then be lent to home buyers. The fund starts offering its products this week and will work with Avanza Bank AB, Sweden’s largest online lender. Avanza, which owns just below 20 percent of Stabelo, will handle distribution and marketing.

International

Has P2P marketplace lending become B2P? (Cuffelinks), Rated: AAA

Due to this issue, the original incarnation of peer-to-peer lending has not lasted. As the CEO of Zopa, a UK-based P2P lender said,

“As bad debts soared, the approach was abandoned and Zopa was moulded into a ‘big sausage machine’. Its technology now links lenders with a pool of borrowers without any direct contact or the need for investors to make credit decisions.”

Australia’s major peer-to-peer lender is SocietyOne. It currently has $350 million borrowed through its platform, and is growing rapidly. In fact, loan volumes in the first three quarters of this year have totalled $141 million so far, surpassing the $139 million in loans facilitated over the entire course of 2016, as shown below.

Source: Cuffelinks
Australia/New Zealand

Exemption for personalised digital (robo) advice (Scoop), Rated: A

Following the FMA’s release of its second consultation paper on personalised robo-advice (now called digital advice), the leading law firm has published its tips for providers looking to develop digital advice platforms.

Head of Russell McVeagh’s Corporate Advisory group, Dan Jones, says the exemption is a necessary first step in putting the New Zealand financial advice regime on equal footing with overseas regimes, and may provide particular assistance to New Zealanders in KiwiSaver.

India

How P2P lending can be a route to creating financial inclusion (Daily News & Analysis), Rated: A

For years, banks have had a monopoly in lending money to businesses and individuals. However, the 2007-08 financial crisis created a havoc, rapidly-expanding the funding gap. This led to the advent of a niche fintech vertical, peer-to-peer (P2P) lending.

The geographical reach of a P2P lending platform is far superior, with the major differentiator being its online interface. Such digital financial services play an important role in supporting the objective of financial inclusion. Anybody, from the remotest areas, having access to internet, can be eligible to get/give a loan.

In the age of digitisation where almost everyone has access to internet, such platforms have the potential to change the financial graph of a country.

Are P2P platforms safe for lending and borrowing? (India Times), Rated: B

While banks and non-banking finance companies (NBFC) are the readily available sources for loans, who does the P2P platform cater to? “Unfortunately, banks in India follow mediocre credit assessment policies which are suited only for borrowers who can offer collateral or have an impeccable credit history. In practice, majority of the borrowers lie in between these extremes. Therefore, majority of Indians can borrow on P2P platforms,” says Raghavendra Pratap Singh, co-founder, i2ifunding, an online P2P lending marketplace.

RBI has put a cap on the amount that can be borrowed and lent. The aggregate exposure of a lender or the maximum that one may borrow at any point of time, across all P2Ps, shall be capped at Rs 10 lakh. Even the exposure of a single lender to the same borrower, across all P2Ps, shall not exceed Rs 50,000 and the maturity of the loans shall not exceed 36 months. “More clarity from RBI is expected on how the regulator intends to monitor the compliance of this aspect and how it will fix the responsibility,” says Singh.

Risks for a lender
Since this is an unsecured loan where there is no face-to-face interaction, a P2P lender needs to be aware of the risks involved. Bubna says, “All investments involve risk. However, in comparison to equity or commodity market investments or real estate, P2P lending has lower risk as it is addressed by on-boarding high quality borrowers. Further, lenders are suggested to create a diversified portfolio of loans.”

Asia

Introducing ACE, Crowdo’s New Artificial Intelligence Due Diligence System (Crowdfund Insider), Rated: A

Crowdo, a South East Asian online marketplace for P2P lending and crowdfunding unveiled today its proprietary Artificial Intelligence driven due diligence system, Crowdo ACE, aimed at benefiting both their borrowers and investors. Crowdo ACE takes into account a few thousand unconventional and alternative attributes and represents a new way to perform due diligence versus traditional means used by conventional financial institutions. It has already been applied to process more than 3,000 loans.

In a largely-unbanked Indonesia, Amartha uplifts women micro-entrepreneurs (YourStory), Rated: A

Twenty-six people, four nationalities, 10 days. Travelling across Southeast Asia as a Startup AsiaBerlin Roadshow delegate to explore startup ecosystems was an experience unto itself.

Amartha has so far disbursed over $13 million to 60,000 women micro-entrepreneurs and aims to improve their income, and ultimately quality of life.

Aria: Amartha is an Indonesian financial technology startup that focuses on providing affordable financial access, and mentorship to the unbanked population living below the poverty line. Amartha operates much like a peer-to-peer lending platform, and so far, has disbursed more than $13 million to 60,000 borrowers. The borrowers are mostly women micro-entrepreneurs and Amartha aims to improve their income, and ultimately alleviate their status through financial inclusion.

Aria: When we started operations in April 2016, we disbursed $40,000 a month. By the end of 2016, we were disbursing $800,000. Today, on average, we disburse $2.5 million per month. So far, we have disbursed more than $13 million, across more than 60,000 borrowers. The average ticket size of a loan now is around $300.

We charge a fee based on the profit sharing principle. Of the 22-30 percent annual interest rate paid by borrowers, we collect 11-13 percent for our revenue.

Africa

The Mauritian Financial Services Commission Issues Draft Peer-To-Peer lending Rules (Mondaq), Rated: AAA

Following the announcement of the Government on peer-to-peer lending and funding in the 2017-2018 Budget, the Mauritian Financial Services Commission (“Commission”) has issued draft rules on 10 November 2017 to regulate the peer-to-peer lending sector – as sector which has grown rapidly in other countries.

In the region, Kenya and Africa are leading in the peer-to-peer business lending market. According to a study conducted by the University of Cambridge, within Africa, South Africa had the largest number online alternative finance platforms, with $15 million raised in 2015 (The Africa and Middle East Alternative Finance Benchmarking Report, February, 2017).

Borrower and lender – a borrower must be a resident in Mauritius; however, there is no residency requirement for the lender.

Restrictions on amounts  Hence, a lender, who is a legal person, cannot lend more than MUR 500,000 (approx. GBP 11,000) in any 12 months’ period. A lender, who is a natural person, cannot lend an amount in excess of 10 per cent of his income or a maximum of MUR 300,000 (approx. GBP 6,600), whichever is lower, in any 12 months’ period.

Obligations of a P2P operator – the Peer-to-Peer operator must publish the following information on its website:

  • details of how the P2P lending will operate
  • measures to prevent money laundering and combatting terrorist financing
  • security measures to ensure data protection
  • dispute resolution mechanism.
Canada

Borrowell wins Deloitte Fast50 award (Borrowell Email), Rated: A

Borrowell has won a Companies to Watch award as part of the Deloitte Fast50 program. We are one of only eleven companies across Canada to win that award this year, and the only company from Toronto. Fast50 winners in the category for established companies include well-known names like Shopify, SkipTheDishes, Wave and Influitive. The list was announced an hour ago. 

Russia

Moscow Is On Its Way To Becoming A Smart City And Fintech Powerhouse (Forbes), Rated: A

Its citizens and businesses are also quick to adopt the latest disruptive technologies such as fintech and cryptocurrencies. Moscow has a 35 percent fintech adoption rate, higher than New York’s 33.1 percent.

Authors:

George Popescu
Allen Taylor

Wednesday September 6 2017, Daily News Digest

fintech bank investment map

News Comments Today’s main news: Upgrade appoints Western Union exec at general counsel. Assetz Capital now claims to be second largest P2P lender in the UK. Perseus has the solution for EU cyber threats. Amartha partners with Jamkrindo in Indonesia. Today’s main analysis: How banks are investing in fintech. Today’s thought-provoking articles: LendingClub CEO Scott Sanborn interviews with […]

fintech bank investment map

News Comments

United States

United Kingdom

China

European Union

Australia

India

Asia

News Summary

United States

Upgrade, Inc. Appoints Western Union Executive as General Counsel (Upgrade Email), Rated: AAA

Upgrade, Inc. (), the new consumer credit platform launched by LendingClub founder Renaud Laplanche earlier this year, today announced the appointment of John Dye as General Counsel. Prior to joining Upgrade, John was Executive Vice President, General Counsel and Secretary of The Western Union Company. He was also Chairman of the Board of Directors of the Western Union Foundation.

Before joining Western Union in November 2011, John was Senior Vice President, Interim General Counsel and Corporate Secretary of Freddie Mac from July 2011. From 2007 to July 2011, John served as Senior Vice President, Principal Deputy General Counsel, Corporate Affairs of Freddie Mac, where he worked on corporate transactions and managed attorneys in the areas of corporate disclosure, securities, intellectual property, contracts and human resources.

Prior to joining Freddie Mac, John spent 13 years at Citigroup Inc. in New York City, where he held senior leadership positions, and served as Senior Vice President and Senior Counsel at Salomon Smith Barney.

Upgrade also hired Louis Shansky, a partner on the securitization team at the law firm of Mayer Brown, as Deputy General Counsel.

Back and Better Positioned than Ever—CEO Scott Sanborn Interviews with Bloomberg (LendingClub), Rated: AAA

  • The macroeconomic backdrop: While macro trends are generally positive—low unemployment, low interest rates, low inflation and low oil prices with an increase in consumer confidence—credit card debt levels are near all-time highs. Today, there is more than $1 trillion in outstanding credit card debt in the U.S.
  • Borrowers are not alone: LendingClub borrowers are not alone in seeking a lower interest rate solution: credit card debt in the U.S. is at an all-time high1 and credit cards tend to carry high interest rates. Sixty to 70% of our customers are currently taking advantage of our personal loans to pay off credit cards which helps them to get on the path to financial success.
  • LendingClub is enabling more new investors access to an old asset: Fifteen percent of our investor base still invests directly through the retail website, with the balance accessing the asset through other means.
  • Institutions want more: In Q2 2017, we had record high subscription from more than 100 institutional investors participating on the platform. Banks were 44% of our overall investor mix last quarter, attributed to LendingClub’s assets offering solid returns with a short duration.
  • Reaching new investors through securitization: More than 20 new investors engaged with LendingClub via the first deal, which demonstrated high demand for the asset.

The Top Fintech Trends Driving the Next Decade (ABA Banking Journal), Rated: AAA

Here is a glimpse at the technologies driving bank innovation today—as well as a look ahead to the technologies coming down the pipeline that will change the way banking is done over the next 10 years.

  1. Digital Lending (here and now) – Unsecured consumer lending is the first market where digital lending has made an impact and is by far the most mature. Today, the two leading consumer lending platforms (Lending Club and Prosper) originate roughly $2.5 billion in loans quarterly. Small business lending has quickly followed and is rapidly digitizing. ABA has endorsed the digital commercial lending solutions offered by Akouba, providing banks of all sizes the use of these platforms to enhance customer service and significantly reduce underwriting costs.
  2. Biometrics (1-2 years) – Passwords are only secure to the extent that they are kept private and cannot be guessed by a keen observer. The problem is that these passwords often rely on observable pieces of our life like our birth date, our children’s names, or our pets (my personal favorite), which are all readily available to criminals using social media and public databases. A 2015 study by TeleSign indicated that one in five people use passwords that are over 10 years old, with 73 percent of accounts being secured by the same password. Compounding this problem is the fact that we now have so many accounts that require a password, that it is impossible to keep them straight.
  3. Customer Data (1-3 years) – Today, customer data at banks is often unstructured—housed in systems that are inconsistent and may not talk to each other. A single customer may have multiple accounts with a bank that are all housed in different systems, with inconsistent identifiers. A number of banks, as well as core processors, are working to reconcile these systems. Some are working to build additional data warehouses that aggregate disparate customer data to create a unified view of customers.
  4. Regtech (3-5 years) – Regulatory reporting is one area that seems ripe for digital disruption. Today, filing call reports is a quarterly activity that requires significant time. It would not be hard to imagine a software solution that was tied into a bank’s back-end systems and prepopulated all of the key reporting fields. Moreover, it would be possible for regulators to receive a steady feed of data from a bank that would give them an ongoing view into the bank and may reduce the frequency with which exams are necessary.
  5. Artificial Intelligence (5-10 years) – One way this could help bankers is by improving fraud detection. Traditional fraud monitoring systems rely on specific non-personal rules (like geography) to detect fraudulent transactions. Machine learning could be applied to analyze the transactions of each customer, flagging transactions that are out of their normal habits.
  6. Internet of Things (8-10 years) – For example, banks may be able to use internet-connected devices to make better loans and monitor collateral. Inventory or livestock for a small business can be monitored in real time. This would allow a bank to monitor a customer’s balance sheet on an ongoing basis, giving it the tools to make better decisions about lending or adjusting credit lines in real time.

The biggest long-term impact that IoT is likely to have is in payments. Connected devices are already able to talk to each other, but will also require the ability to make payments back and forth. Today, this may be as simple as using your smart watch to settle a bill, but could evolve to the point at which your refrigerator pays for groceries that are running low. A number of auto makers are experimenting with enabling cars to make payments.

Scott Zoldi of FICO (Lend Academy), Rated: A

The Chief Analytics Officer at FICO talks about their use of artificial intelligence in credit models, fraud, alternative data, financial inclusion and more.

In this podcast you will learn:

  • Why his background in theoretical physics was perfect for studying fraud and credit risk.
  • What the company FICO actually does and how it interacts with the credit bureaus.
  • What his role as Chief Analytics Officer entails.
  • Some examples of the 130+ patents that FICO has been granted.
  • The importance of being able to explain how a credit model works.
  • How their advanced machine learning models can be explained to regulators.
  • How FICO has been using artificial intelligence for decades.
  • What Scott thinks about the sudden embrace of artificial intelligence in the last couple of years.
  • What he worries about with so many new companies coming into the AI fray.
  • How Scott views alternative data and using new data sources.
  • His thoughts on disparate impact and the use of alternative data.
  • How the FICO XD score helps expand access to credit.
  • How FICO’s fraud product called Falcon became the industry standard for banks.
  • Scott’s views on how a 700 FICO score today compares with the same score 10 years ago.
  • What Scott is most excited about today in his work at FICO.

Citizens Financial Starts Robo-Adviser With SigFig Partnership (Bloomberg), Rated: A

Citizens Financial Group Inc. is the latest bank to start a robo-advisory product as part of its larger push into wealth management.

Citizens, a regional bank based in Providence, Rhode Island, is providing the technology to customers beginning Wednesday through a previously announced partnership with SigFig Wealth Management LLC, which uses algorithms to provide financial advice at lower fees than traditional human advisers.

The minimum initial investment in the Citizens offering will be $5,000, according to the firm. The annual asset-management fee is 50 basis points, or about half the typical cost of a traditionally advised account.

Real Estate Crowdfunding Shows Signs of Maturation (Real Estate Tech News), Rated: A

Last month, crowdfunding giant RealtyShares bought smaller rival Acquire Real Estate. This news was a significant in the multibillion-dollar sector, which is not even five years old. It begged the question as to whether this deal was a product of synergies between two platforms or a case of a larger player protecting its turf by taking a smaller rival off the board?

Whatever the answer, one thing is clear: We are likely looking at the start of a push toward consolidation in real estate crowdfunding. While there are hundreds of platforms now vying for a capital pool that is almost halfway to 12 figures, some clear-cut market leaders have emerged, and a movement toward economies of scale would signal continued maturation. Over the next year or so, it would not be surprising to see companies like FundriseCrowdStreet and Patch of Land join the market for acquisitions, especially as the space continues to establish mainstream legitimacy.

MPL Market Shows Growing Origination Volume, With Tightening Credit Stance (dv01 Digest/LendIt), Rated: A

Looking at origination characteristics for the four largest MPL originators, we see origination volume continue to rise: 21% for 2Q17 over 1Q17, and up 52% over 2Q16. Loan coupons have risen from a 14.20% GWAC for the 2Q16 vintage to a 14.31% GWAC for the 2Q17 vintage, while the two year treasury has rallied approximately 50bps over the course of the year. PTI is relatively unchanged, coming in at 9.05% for 2Q17 versus 8.99% for the 2Q16 vintage.

Average FICO has increased significantly: 703 for the 2Q16 vintage to 711 in 2Q17.

Prosper closed its second $500MM Consortium securitization, PMIT 2017-2, on which dv01 was loan data agent. Data from PMIT 2017-2 is available for accredited investors through dv01’s Securitization Explorer, and is updated monthly.

Download and read the full report (with charts) here.

Debit cards, a trillion in debt, and millennials: What could go wrong? (American Banker), Rated: A

Fifth Third Bancorp is borrowing inspiration from the fintech world as part of its effort to woo millennial customers and compete with megabanks for consumer deposits.

The Cincinnati bank on Tuesday is scheduled to roll out a stand-alone app designed to help its customers pay student loan debt. The app, called Momentum, lets customers link Fifth Third debit cards to student loan accounts held by more than 30 servicers. Customers can have their debit card purchases rounded up to the next dollar, or have a dollar added to every purchase; the money is applied weekly to the balances on designated loans once a minimum of $5 is contributed.

“I see Momentum as being complementary” to apps such as Acorns and Digit, she said. “This [millennial] generation is sitting on $1.3 trillion of [student loan] debt. We wanted to take a relatively simple concept and offer something to help them in their day-to-day life.”

Op-Ed: Regulatory Sandboxes Can Help States Advance Fintech (American Banker), Rated: A

The U.S. captured 54% of the $127 billionin global venture capital invested in 2016. This access to capital has allowed some American fintech startups to succeed despite the regulatory burdens. Yet, the U.S. underperforms in fintech venture capital compared to our share of overall venture capital. In 2016, the U.S. obtained only 33% of the $13.6 billion in worldwide fintech venture capital investment.

I am working with Arizona policymakers to introduce a sandbox in Arizona that would reduce entrepreneurs’ barriers to entry without sacrificing core consumer safeguards. This would be the first state sandbox in the United States.

Op-Ed: Regulatory Sandboxes Can Help States Advance Fintech (Arizona Attorney General), Rated: B

Attorney General Mark Brnovich is calling for Arizona to become the first state in the country to adopt a “sandbox” like regulatory environment that would reduce fintech entrepreneurs’ barriers to entry into local markets in a new op-ed penned for American Banker magazine. Key to creating sandbox regulatory systems is ensuring core consumer safeguards are not sacrificed. Sandboxes have already been implemented in countries such as the United Kingdom, Singapore, UAE, Malaysia, and Australia.

‘Fintech’ Loans: A Sometimes Costly Lifeline for Small Business (KQED News), Rated: A

Che Al-Barri remembers feeling like he was drowning in debt last year. He had taken out a $70,000 loan for his small cleaning company, but was struggling to repay it.

The lender, a financial technology — or fintech — company, automatically collected $331 from his bank account daily, Monday through Friday. The frequent hits depleted his income and took a toll on his business, he said.

For Al-Barri, taking a big loan seemed like a great opportunity at first. Large clients were taking months to pay him, he said, and he wanted to buy equipment and hire employees to expand. But he underestimated how much he would earn, making it very difficult to repay the loan plus the $30,000 in interest he owed.

Stanford study examining Airbnb users and data suggests that reputation can offset social bias (Stanford.edu), Rated: A

new Stanford study analyzing Airbnb users and data suggests measures that enhance a user’s reputation, like stars or reviews, can counteract these harmful prejudices. The results, the researchers said, indicate sites that use reputational tools create a fairer and more diverse online marketplace.

The share economy, also referred to as “collaborative consumption” and “peer-to-peer lending,” has allowed everyday citizens to turn into entrepreneurs, taking advantage of an industry that’s projected to grow to $335 billion by 2025, according to the Brookings Institution.

The researchers in this study focused on a certain type of bias called homophily, a natural tendency to develop trustful relationships with people similar to themselves, and how best to counteract it. The study is part of a broader research project analyzing trust and technology at Stanford.

The 36k-population neighborhood that’s hot for real estate investors (Mortgage Professional America), Rated: A

Data from real estate crowdfunding firm Sharestates says there has been a 650% increase in demand from investors wanting to put their cash into property in Fishtown.

That’s because of an attractive 11.8% return on investment and the ratio of the total loan amount compared with after repair value is 14%.

Cordray Remains Mum About Political Plans in Ohio Speech (Credit Union Times), Rated: B

Speaking at an AFL-CIO Labor Day picnic in Cincinnati, Cordray did not address one of the most—if not the most—crucial issue facing the agency—whether Cordray will resign to run for the Democratic nomination for governor in the Buckeye State.

And when questioned afterward, he declined to comment on his intentions.

The CFPB is working on its most high profile set of rules—those governing the payday lending industry. The bureau is believed to be planning to release those final rules this month.

LendingTree Partners With Benzinga to Award $ 10,000 to Winner Of Fintech Innovation Challenge At The Benzinga Fintech Summit (Baystreet), Rated: B

Benzinga, a leading financial media and events company, announced Thursday that it will team up with the nation’s leading online loan marketplace LendingTree to award $10,000 to the winner of an on-site fintech demo competition at the inaugural Benzinga Fintech Summit in San Francisco September 28.

The Fintech Innovation Challenge Presented by LendingTree will award $10,000 to the company whose product best demonstrates scalable, material innovation to the Summit’s audience.

United Kingdom

Assetz Capital Now Second Largest UK P2P Lender (Crowdfund Insider), Rated: AAA

Assetz Capital, one of the largest peer-to-peer lending platforms in the UK, has announced it has received full authorization from the Financial Conduct Authority (FCA).  Additionally, Assetz Capital has claimed second place in the ranking of UK’s largest P2P lenders as it reports lending in excess of £25 million per month on average to SMEs throughout the UK.

To date, Assetz Capital has lent over £316 million to businesses across the UK.

£17m invested into Innovative Finance Isas (Bridging&Commercial), Rated: AAA

HMRC has revealed that 2,000 Innovative Finance individual savings accounts (IFIsas) were opened during the last tax year.
The average investment into IFIsas during 2016/17 was £8,500 which meant £17m was invested collectively.

HMRC also reported that the amount invested in cash Isas had fallen from £58.7bn in 2015/16 to £39.2bn in 2016/17, while investment in stocks and shares Isas edged up from £21.1bn to £22.3bn.

Peer-to-peer Isas failed to gain much popularity in their first year, with just 2,000 Innovative Finance Isa (IF Isas) accounts opened in the tax year 2016/2017, according to the latest statistics from HMRC.

The biggest problem is that many peer-to-peer platforms have struggled to gain approval from regulators to become IF Isa providers. There are currently around 60 firms that have received approval from financial regulators, with most of these only starting to operate within the past few months.

Across the 2,000 IF Isa accounts opened, £17 million worth was subscribed. The average subscription per account was £8,500 – about the same as the average stocks and shares Isa account subscription.

Peer-to-peer platform Abundance claims it sold the majority of IF Isas in the last tax year. It says 1,436 Abundance IF Isas were opened, representing 72% of all IF Isa products opened last year.

Overall, the amount held in Isas in 2016/17 fell to £61.5 billion, compared with £80 billion the previous tax year. This decline was largely driven by a steep fall in the amount held in Cash Isas. In 2015/16, a total of £58.7 billion was held in Cash Isas; in the latest tax year this fell by a third to £39 billion.

Lucky Generals bangs out a new tune for Funding Circle (More About Advertising), Rated: A


The theme of the campaign seems to be “for those made to do more.” Here’s another in the campaign, not quite so striking.

If peer-to-peer lenders lack anything, it is not ambition (The Times), Rated: A

Samir Desai, co-founder and chief executive of Funding Circle, Britain’s largest peer-to-peer lender, says that his business, which has arranged $2.7 billion of loans to small companies, could be lending at least $100 billion within a decade.

Peter Behrens, co-founder of Ratesetter, one of Funding Circle’s main rivals, believes that his platform could double its annual loans within the next two years to £4 billion.

China

China’s fintech firms eye overseas IPOs to fund growth as regulations tighten at home (South China Morning Post), Rated: AAA

The A-share market, due to its profitability requirements, remains off-limits to most Chinese fintech firms, particularly peer-to-peer (P2P) lending platforms that were once regarded as an important part of the mainland’s reform of the banking system.

The increasing demand for financing has prompted a clutch of fintech firms to kick off their overseas IPO processes, most of which plan to complete fundraising in the next 12 months.

Zhong An Online Property and Casualty Insurance, China’s first online-only insurer, is seeking to raise as much as US$1.5 billion via a Hong Kong IPO.

After five years in business, Zhong An has developed a customer base of about 500 million people.

Views on China’s coin fundraising ban: someone still have an illusion (Xing Ping She), Rated: A

The Chinese regulators’ ban on ICO has heightened, and the financing of various tokens of the virtual currency has been put to death. In a consequence, the ICO asset value has evaporated nearly $20 billion, and more than 100,000 investors may be affected.

However, some ICO initiators still don’t want to stop. ”I don’t think the central bank’s oversight of ICO is going to be that severe,” a charger of the Digital Currency Asset Exchange said, ”and we would wait and see the specific notice of the local financial office and then decide what to do with it.” But in some communities of the ICO, we can see initiators start to announce the withdrawal of investors’ assets.

European Union

Perseus start-up seeks to shield German SMEs from cyber threats (Banking Technology), Rated: AAA

According to fintech incubator FinLeap, which is behind the venture, more than 70% of German companies were affected by cybercrime activities within the last two years, but only one out of ten SMEs holds an insurance policy that covers the resulting damages. Because Perseus offers a platform, it can connect services and offer “best-of-fit” tech solutions.

There is no specific date yet, but it also plans to add an industry-specific cyber insurance proposition to its portfolio of services.

Irish P2P lender GRID Finance rules out UK as part of growth plans (P2P Finance News), Rated: A

IRISH peer-to-peer lending platform GRID Finance has ruled out the UK as part of its current expansion plans.

The business lender announced it had received €3m (£2.7m) of finance yesterday that will help to fund expansion into new markets, but chief executive Derek Butler says the UK market is already very competitive.

He said he was focusing on scaling the business in Ireland first and competing with the country’s two main banks, Allied Irish Bank and Bank of Ireland.

Fintech Pushes EU to Explore Changes to Bank Software Rules (The New York Times), Rated: A

EU banking rules treat software as a cost rather than an investment, forcing lenders to cover expenditure on digital applications with an equal amount of capital.

If expenditure on software, which amounts to roughly half of banks’ total digital investment, were treated in the EU as it is in the U.S. it could free up more than 20 billion euros ($24 billion)in capital this year alone, one banking lobbyist said.

Many European banks have been slow to invest in adapting to rapid changes in the way consumers use technology for finance, with so-called fintech firms starting to steal market share in a variety of sectors from payments to lending.

Timing problem with Klarna and possibly other payment providers (Our Umbraco), Rated: A

There are cases when the authorization callback from Klarna doesn’t get processed until after the user arrives at the confirmation page. The reason is that the callback and the redirect are made almost simultaneously by Klarna, so it’s a bit random which wins.

Workaround: If currentOrder is null, sleep for 500 ms and try again (GetCurrentFinalizedOrder). Repeat for 10 seconds.

CrowdExplorer Wins Fintech Award at Digitale Innovations Competition (Crowdfund Insider), Rated: B

CrowdExplorer, a marketplace for “Crowd-investing”, has won the special prize for “Fintech” at this year’s “Digitale Innovations” competition.

CrowdExplorer is designed to provide investors with a platform to compare access to the international Crowd Investments. CrowdExplorer has launched with the following four categories: Equity, Real Estate, Loans and P2P lending.

Index Ventures is coming in force to TechCrunch Disrupt Berlin this December (TechCrunch), Rated: B

Index Ventures started as a European firm in 1996, but 20 years on, it has a strong presence on both sides of the Atlantic and has backed startups in 39 cities in 24 countries.

Among well-known Index-backed companies are Dropbox, Slack, Farfetch, Funding Circle, Adyen, Squarespace, Deliveroo, Just Eat, King and Supercell.

Australia

Spotcap launches $ 10,000 Fintech Scholarship program (Finder), Rated: AAA

Online lender Spotcap has this week announced the launch of a Fintech Scholarship program, with $10,000 being awarded to an Australian student attending university in a fintech-related field. The lender launched the program with the aim of supporting local fintech talent and ensuring the longevity of financial innovation in Australia.

Spotcap is also offering one paid internship placement at its offices in Sydney alongside the program.

Tech-tock, the tech clock is ticking (Bluenotes), Rated: AAA

The Bank for International Settlements – known as the ‘central banks’ central bank’ – says the rapid adoption of financial technology or ‘fintech’ and the emergence of new business models pose an increasing challenge to incumbent banks “in almost all the scenarios considered”.

According to the venture capital analysis group CB Insights non-technology companies now invest more in technology than tech companies.

In the firm’s recent report into fintech investments by major US banks, six – Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo — have made strategic investments in 30 fintech companies since 2009.

The key sectors banks are investing in – and this is true across the globe, to differing degrees – are payments, data analytics, personal technology, distributed ledgers and/or digital currencies and peer-to-peer lending.

India

Here’s why smart Investors in India should opt for P2P lending (Money Control), Rated: A

Peer-to-peer loans are the perfect alternative investment instrument for income-seeking investors. It enables you to offer personal loans to borrowers for an array of purposes while eliminating intermediaries such as banks, NBFCs, and unorganised lenders.

Furthermore, a good P2P lending platform can make available all the relevant information on borrowers to lenders, assisting them in assessing the credit profile of a borrower in an efficient manner. It can provide each lender with a customized dashboard with relevant informatics and data to help make an informed decision.

As per our research, lenders on our platform can earn gross returns to the tune of 18 to 24 percent p.a on an average by building a diversified borrower portfolio. These returns are not merely comparable, but often preferable to returns from other investment instruments such as mutual funds, stocks, real estate, bank deposits, and gold. Income-seeking investors who specifically want to diversify their investments get good returns at the end of the day. As a rule of thumb, at least 20 percent of total investments should be in alternative investments like art, commodity, P2P lending etc.

Asia

Peer to Peer Lender Amartha Partners with Largest State Owned Micro-credit Company in Indonesia (Crowdfund Insider), Rated: AAA

Peer to peer lender Amartha has formed a partnership with the largest state-owned micro credit guarantee company in Indonesia, Perum Jamkrindo. This follows a similar partnership with Bank Mandiri. Amartha is an online lender designed to connect Micro Businesses and SMEs that seek affordable working capital with investors who want to fund their business based on credit risk and expected return. This is a significant agreement for Amartha. Indonesia is the fourth most populous country in the world and support of small business is vital to the economy.

Jamkrindo is a state-owned enterprise that has been given a special mandate by the Government to guarantee credit and financing, as well as financial transactions particularly in the SME and micro segments. Jamkrindo is the largest credit guarantee company in Indonesia with total guarantee value of more than Rp 270 Trillion and 8 Million credit.

Regulatory ‘Sandboxes’ in Asia Can Foster Fintech Innovation (Brink), Rated: AAA

Two years ago the Financial Conduct Authority (FCA) in the UK launched the first formal global regulatory sandbox.

There are a few technologies in fintech that haven’t launched but are being tested around the world—these include using bitcoin as a remittance channel, using electronic health records for life insurance underwriting and a financial robo-adviser/wallet that has a holistic view of an individual’s finances.

Things are altogether different in Asia’s developing economies. First, in these countries, the infrastructure is developing. Apart from India, the concept of digital identity is only evolving in countries such as the Philippines and Indonesia. Moreover, in these countries, bureaucracy is generally a bottleneck since multiple government agencies work in silos with differing incentives.

Developing Asian countries need to prioritize different issues depending on their economies. For example, remittances are of utmost importance in the Philippines and Bangladesh.

For example, robo-advisers are a great way to enable the burgeoning middle class to put their savings into equities with a view toward investing and long-term retirement preparation; Thailand has none of those at the moment. There are international brokerages such as interactive brokers that enable robo-advisers to operate in other parts of the world and are licensed in Thailand. However, there are no traditional Thai banks/ brokerages that provide these new services to their consumers. Elsewhere in Asia, Indonesia is a great example of where the regulators have worked with new businesses to create regulations around peer-to-peer (P2P) lending.

Source: Brink

Senturia Capital Announces Partnership With Funding Societies to Expand Alternative Financing Access to Malaysian Businesses (Crowdfund Insider), Rated: A

Private equity fund manager Senturia Capital has reportedly announced a partnership with peer-to-peer financing platform Funding Societies to expand alternative financing access and capital solutions for Malaysian businesses.

MUFG plans ‘fintech’ unit to focus on cashless settlements, automation (Japan Times), Rated: A

Mitsubishi UFJ Financial Group Inc. will launch a financial technologies unit Oct. 1 in collaboration with 32 regional banks nationwide.

MUFG will put up ¥3 billion in capital to start Japan Digital Design Inc., which is expected to develop new services including those for cashless settlements using smartphones at small shops. It will also promote the automation of operations through artificial intelligence.

Authors:

George Popescu
Allen Taylor

Wednesday August 9 2017, Daily News Digest

SoFi mortgages

News Comments Today’s main news: U.S. credit-card debt hits new record. LendingClub raises its outlook. OnDeck shares rise 17%. Zopa’s disappearing capital from IFISA. Ping An to invest in AI. Blackstone assumes majority stake in Banco Popular’s real estate portfolio. Securities and Exchange Board of India to study impact of fintech on financial markets. Today’s main analysis: SoFi bank charter could […]

SoFi mortgages

News Comments

United States

United Kingdom

China

European Union

International

Australia/New Zealand

India

Asia

CARICOM

News Summary

United States

U.S. Credit-Card Debt Surpasses Record Set at Brink of Crisis (Bloomberg), Rated: AAA

U.S. consumer credit-card debt just passed an ominous milestone, beating a record set just before the global financial system almost collapsed in 2008.

Outstanding card loans reached $1.02 trillion in June, data from the Federal Reserve show, as lenders including Citigroup Inc. and JPMorgan Chase & Co. compete to sign up cardholders who may carry balances — a relatively lucrative business in a prolonged period of low interest rates.

 

The tide may be turning for LendingClub (LC) (Markets Insider), Rated: AAA

LendingClub on Monday posted its second highest quarterly revenues in its history. And Wall Street has responded.

Net revenue spiked 35% to $139.6 million in the second quarter, beating Wall Street’s average estimate of $136.4 million, according to Thomson Reuters.

Loan originations were up 10%.

Credit Suisse sent out a note to clients Tuesday morning outlining its case for a 25% boost in LendingClub’s stock price.

Lending Club Beats The Street And Raises Its Outlook (PYMNTS), Rated: AAA

By the numbers, the performance was also in line with what investors wanted to see — revenue was up 35 percent to $139.6 million during Q2, a solid beat on the analysts’ consensus estimate of $136.4 million. Originations returned to growth in the second quarter, up 10 percent to $2.15 billion. Meanwhile, operating expenses fell by 12.5 percent to $165.1 million in the quarter.

Revenue for the year — on the strength of that big performance — got an upward revision to the range of $585 million to $600 million, a reasonable pick-up on the previous forecast of $575 million to $595 million.

Has Lending Club Reached A Turning Point? (Benzinga), Rated: AAA

Following a beat-and-raise quarter from LendingClub Corp LC, analysts surmised the company may have reached an inflection point.

Credit Suisse analysts Stephen Ju and Christopher Ford noted this is the first quarter in about a year in which the company reported year-over-year growth in loan originations. The analysts expect ongoing acceleration throughout the next four quarters, as the company continues to recover.

Canaccord Genuity expects originations to grow sequentially in the third quarter or fourth quarter, aiding revenue growth acceleration in the second half of 2017 and notable sequential margin expansion.

The firm maintains its 2017 earnings per share estimate at 3 cents but nudged up its 2018 earnings per share estimate from 19 cents to 20 cents.

OnDeck shares rise on sunny outlook for loan growth, profitability (Reuters), Rated: AAA

Shares of OnDeck Capital Inc (ONDK.N) rose as much as 17 percent on Monday after the online lender said it had made progress on a plan to cut costs and improve the credit profile of its borrowers, and expects to reach double-digit loan growth again by next year.

SoFi Bank charter could test CRA status quo (Market Intelligence), Rated: AAA

Social Finance Inc., or SoFi, on June 6 applied for a bank charter with the Federal Deposit Insurance Corp.

S&P Global Market Intelligence research shows SoFi originated 1,160 mortgages in 2016, with only two of those mortgages, or 0.2%, made in distressed or underserved tracts, a CRA measure. Across the U.S., 2.0% of all mortgages were in underserved areas that year.

Of the $8 billion in total loans that SoFi said it originated in 2016, about $810 million were property loans, according to S&P Global Market Intelligence data. None of the mortgages issued by the parent company were in SoFi Bank’s proposed CRA assessment area of Salt Lake City and nearby areas.

Fewer than 1.00% of SoFi’s consumer loans are made to borrowers in Utah, according to reports for the company’s asset-backed securities issued in 2015, 2016 and 2017. The securitization documents cover $4.6 billion in principal loan balances.

SoFi’s CRA strategy will revolve around financial literacy, education and scholarships, according to its application. SoFi stated it will measure the success of its CRA plan in terms of employee hours devoted to community service, the number of scholarships awarded and the percent of its investment pool that goes into Utah Housing Bonds.

The 10 Biggest Fintech Companies In America (Forbes), Rated: AAA

Financial technology companies in the U.S. raised $3.5 billion in the first half of 2017, according to KPMG, as investors rushed to place bets in buzzy sectors like insurance and digital currencies.

The U.S. is now home to 13 fintech unicorns who have scored valuations of at least $1 billion.

  1. Stripe – Value: $9.2 billion
  2. SoFi – Value: $4.3 billion
  3. GreenSky  Value: $3.6 billion
  4. Credit Karma  Value: $3.5 billion
  5. Oscar  Value: $2.7 billion
  6. Avant  Value: $2 billion
  7. Zenefits Value: $2 billion
  8. Prosper  Value: $1.9 billion
  9. AvidXchange  Value: $1.4 billion
  10. Robinhood  Value: $1.3 billion

Betterment Introduces New Features And Pricing Plans (Forbes), Rated: A

Betterment’s three new features went live in late July. The features are:

  • Financial Advice Via App: Through Betterment’s mobile app, clients can now message a licensed financial expert. Experts can answer questions like how to set goals, which tax features to use, and how much risk to take in investing.
  • Socially Responsible Investing (SRI) Portfolio Options: These options give customers a way to invest in a globally diversified portfolio of companies considered socially responsible.
  • Combining Plus and Premium Plans: Betterment is now combining its Plus and Premium plans, which allow customers to now make unlimited phone calls to certified financial professionals. The new, combined plan charges a .4% annual fee.

The first feature, the ability to get financial advice through an app, attempts to address a big issue with robo advisors. Many investors want a human touch. They want to talk to an advisor from time to time. This will no doubt be true during the next bear market. Betterment’s new feature attempts to address this need.

The new pricing plan will benefit investors who were already using the higher-level Betterment plans. Those who were Plus customers can now get more personalized advice for the same fee and those who were Premium customers are paying less for the same service–always a good thing.

The Premium plan now gives customers access to more holistic investing advice. This advice can run the full scope of your investments, from your 401(k) to real estate to individual stocks to your Betterment portfolio.

Fed study finds expanded credit access resulting from fintech lending (Ballard Spahr), Rated: A

The study’s key findings include:

  • The fintech lender’s consumer lending activities penetrated into areas that could benefit from additional credit supply, such as areas that have lost a disproportionate number of bank branches and highly concentrated banking markets.
  • Consumers presenting the same credit risk could obtain credit at lower rates through the fintech lender than through traditional credit cards offered by banks.
  • The lender’s use of alternative credit data allowed consumers with few or inaccurate credit records (based on FICO scores) to access credit at lower prices, thereby resulting in enhanced financial inclusion.

SMARTPHONES MAY BECOME SMART ATM’S WITH NEAR FIELD COMMUNICATION (Fintech Today), Rated: A

You may no longer need to worry about carrying your ATM card with you everywhere as long as your bank’s ATM and smartphone are equipped with near field communication technology (NFC). NFC, a method of wireless data transfer that detects and enables technology to communicate, is reportedly being rolled out at banks across the country. Financial institutions believe that cardless or “Smart ATM’s” are the wave of the future and they are enabled as long as ATM’s and customers have a smartphone or mobile device equipped with NFC.

It’s been estimated that 2.2 billion smartphones will be equipped with NFC by 2020.

Robos, digital platforms and human financial advice: What investors really want (Investment News), Rated: A

The emergence of robo-advice and robo-investing platforms in recent years has led many traditional advisory firms to place a greater emphasis on their digital footprints. A growing number, in fact, are moving to offer digital versions of their “human” services. The 2017 InvestmentNews Adviser Technology Study, for example, showed that 7% of independent advisory firms offered a robo-advice option at the end of 2016, compared with just 3% two years earlier. At the same time, 19% of the firms that do not offer a robo-advice option intend to introduce one in 2017—nearly double the number that indicated that intention in 2015.

Only about 4% of the mass affluent and high-net-worth individuals in our survey reported that they use an automated investing or robo-advice tool.

Source: Investment News

For context, some 49% of individuals in our study currently use a financial adviser; the balance are self-directed investors.

Online Lender Better Mortgage Now Available in 13 States as it Expands into Florida (Crowdfund Insider), Rated: A

Better Mortgage is now available in 13 different states as it has received a license to lend to house hunters in Florida.  The Sunshine state is an important addition to the online lenders services as Florida is a popular vacation home state.

Better Mortgage says it is continuing to expand its footprint in the US. The lender is now available and improving access to homeownership in 13 markets including; Arizona, California, Colorado, Connecticut, Washington, DC, Florida, Georgia, Illinois, New Jersey, North Carolina, Oregon, Pennsylvania and Washington. Better Mortgage says that it is seeing particularly strong uptake in Seattle, Washington, San Francisco, California, and Washington, D.C.

Real Estate Crowdfunding Platforms: What to Look For (Equities.com), Rated: A

While each offers a unique focus and value proposition to investors, platforms have now consolidated into several main categories of business model:

  • eREITs: Fundrise and RealtyMogul, two of the original players the real estate crowdfunding space, have pivoted to offering semi-blind funds that aggregate properties throughout the country.
  • Commercial equity investing: probably the closest to the original ideal of real estate crowdfunding, these platforms offer CRE equity opportunities to accredited investors, allowing them to participate in high-upside, larger commercial projects. While the return potential is often great, these tend to be the longer term and riskier than other RECF investments.
  • Debt investing: Some platforms take some or all of an existing real estate loan, secured by a deed on the underlying property, and syndicate it out to a network of individual investors at a fixed rate of return.

Some platforms (like EquityMultiple, see below) perform their own diligence on investments, which should give you some comfort as an investor. Even so, you’ll want to understand some key components of any deal you consider, and be sure it aligns with your investing objectives before pulling the trigger. Here are some of the main things to consider:

  • Risk Factors – Examples of risk factors are tight construction timelines, a precarious labor market in the area, an unsubstantial track record or aggressive leverage on the part of the Sponsor who originated the deal.
  • Payout Structure – Be sure to understand where your investments fits in the capital stack, and what order you will be repaid principal and profits relative to the Sponsor and other LP investors.
  • Cash Flow and Liquidity – Simply looking at how many dollars you’re expected to receive over the lifetime of a deal (the simple return) or even a time-weighted return (IRR – internal rate of return), won’t give a complete picture of the timing and magnitude of returns.

Developer of Vacant Lots in New Orleans Has Crowdfunding Success (Next City), Rated: A

Small Change, a real estate crowdfunding portal, recently completed the sale of its first-ever offering open to all investors — and raised $95,000. Thirty-nine investors put in an average of $2,435. The minimum investment was $500. The money will help OJT (Office of Jonathan Tate), a New Orleans-based developer, finance the construction of two affordable single-family homes, on vacant lots.

The homes will be in New Orleans’ Milan neighborhood, which is two-thirds black and one-third white, and has a median income around $33,000.

Mixing technology and old fashioned salesmanship, Voya expands (Financial-Planning.com), Rated: A

So it has to move beyond the perception that it is a singular service provider, says Voya Financial Advisors’s Tom Halloran, president of its broker-dealer. One way the firm is doing that is by tying together its institutional businesses with retail, mixing technological innovation with old fashioned salesmanship, even considering the deployment of a robo advice platform.

A former Microsoft and Yahoo exec explains how treating your job like a report card can help you get a raise (Business Insider), Rated: B

In fact, it’s up to you to track your performance and ensure that your compensation reflects it, said Joanne Bradford, chief marketing officer of online lender SoFi, on a recent episode of the “So Money” podcast.

Clark County Common Pleas Court cases (Springfield News-Sun), Rated: B

Velocity Investments, LLC, assignee of Lending Club Corp., v. Joshua R. Hawk, judgment for $17,947.

United Kingdom

Investors remark on “disappearing capital” from Zopa IFISA due to IT glitch (P2P Finance News), Rated: AAA

SEVERAL lenders who invested through Zopa’s Innovative Finance ISA (IFISA) have complained that small amounts of money were disappearing from their account.

The issue occurred when funds were invested in the ISA Plus product and appeared to be missing capital rather than negative interest, investors on the P2P Independent Forum said.

Zopa is understood to be rectifying the technical issue.

Report proposes new ways to get people investing (AltFi), Rated: AAA

A new report on savings and investment suggests that savers are missing out on billions of pounds by spurning investment opportunities, including peer-to-peer lending. The report is supported by RateSetter, one of the UK’s largest P2P operators, and was produced by the Social Market Foundation think tank.

The report found that savers are holding more than £200bn in cash above and beyond what is referred to as the “rainy day” level. “Rainy day” funds – which are held in cash in case of emergency – are defined by the report as three months’ worth of income. The Social Market Foundation says that this idle pot of £200bn could have generated returns of £94bn over the past five years, had it been invested in the FTSE 100, or £40bn, if invested via P2P lending.

Ranger Direct Lending fund’s woes continue (AltFi), Rated: A

The £240m Ranger Direct Lending fund was announced its latest dividend of 24.26 pence per ordinary share for the 3-month period to 30 June 2017, its lowest in more than a year.

Its latest numbers show returns were again comparable to the last few months. This was due to a combination of expenses such as legal fees and higher than expected cash levels. In 2017, excluding the estimated dividend mentioned above, a total of 55.44 pence per share has been paid in dividends to ordinary shareholders. In 2016, a total of 89.61 pence per share was paid in dividends to ordinary shareholders.

 

Octopus the latest firm to offer the peer-to-peer Innovative Finance Isa, promises investors interest before Octopus (City A.M.), Rated: A

Investment firm Octopus seems to have its tentacles in all the pies, as it has today become the latest business to offer an Innovative Finance Isa.

Octopus is also aiming to dismiss the risks associated with peer-to-peer lending by contributing five per cent of every loan from its own pocket. Any losses suffered will come out of this sum first, meaning investors can get their initial investment back plus any interest due to them before Octopus earns anything.

Investors will be able to put as little as £10 in the tax-free product, and up to their annual Isa allowance which currently stands at £20,000.

ThinCats Receives Full Authorization By the Financial Conduct Authority (Crowdfund Insider), Rated: A

ThinCats, an alternative lending industry leader, announced on Tuesday it has received full authorization by the Financial Conduct Authority (FCA). According to the online lender, the approval highlights its commitment to protecting consumers and also developing the alternative finance industry as a vital source of capital for businesses and income for investors.

China

With $ 1b war chest, Ping An set to become AI innovation giant (China Daily), Rated: AAA

Chinese financial giant Ping An Insurance (Group) Co will spend more than 7.77 billion yuan ($1.16 billion) on technology research and development this year, and artificial intelligence will be the focus of that R&D, according to a senior executive of the company.

Established in 2008, Ping An Technology has about 4,000 technology workers and has paid attention to R&D in cognition, robot advisory and cloud businesses. Their applications are mainly used in finance and healthcare industries; up to now, there have been more than 200 application scenarios.

Micro-bank micro-credit balance of over 100 billion, has launched the enterprise loan products “micro-credit” (01Caijing), Rated: A

On the evening of August 7, the public bankers issued a friend said that the balance of micro-loan loans over 100 billion. According to the public bank in 2016 annual report, the balance of micro-loan loans 7 months increase of nearly 300%.

In addition, July 16, the public bank retail credit director Fang Zhenyu Lundi summit speech revealed that the balance of microfinance loans 76 billion yuan, which means that the balance of 72 days of microfluice increased by 24 billion yuan. At the same time, he also revealed that the daily loan loans to 150,000 pen, up to 20 to 300,000 pen, the daily repayment of the number of 200,000 pen, a single loan approval time is 0.3 seconds, almost real-time approval. In the allocation of talent, the public bank IT department staff accounted for 57%, background managers accounted for 6%, business and support staff accounted for 37%.

LangDi FinTech Conference in Shanghai. The Biggest Fintech Meetup In The World! (Crowdfund Insider), Rated: A

Last year, the conference had a massive showing of over 1,300 attendees. This year, the conference nearly doubled to 2,400 attendees. There was hardly any place to stand when Soul Htite of DianRong and Renaud Laplache of Upgrade took the main stage to talk about Fintech entrepreneurship.

Gopher Asset Management had investment associates in just about every session at the conference looking for the next investment opportunity. Gopher is a subsidiary of Noah Holding Limited (NOAH:NYSE), one of the biggest wealth management companies in China with a current market cap of USD $1.7 billion.

Galaxy Internet, another Chinese venture capital firm is actively seeking investment opportunities in the area of finance, ecommerce, payments and big data. 

Borrowell is owning the Canadian market in a big way. They just raised a $12 million round. Borrowell is helping Canadian’s to build credit starting with affordable loans. In a short amount of time, Borrowell has amassed over 300,000 borrowers and is looking to expand into other markets.

Jack Quigley, Founder and CEO of CrowdFundUp. He’s probably the hardest working man in Fintech. He’s constantly making deals and connecting dots. He’s 100% committed to China and recently moved to Shanghai and I think he’s not leaving until he brings home the trophy. I visited his office in Shanghai, overlooking a bustling city. CrowdFundUp will be China’s gateway into commercial real estate in Australia.

European Union

Blackstone to take majority stake in Banco Popular’s real estate portfolio (PE Hub Network), Rated: AAA

Banco Popular S.A. (‘Popular’) has today approved the sale of a majority stake in its real estate portfolio to Blackstone Real Estate Partners Europe V (‘Blackstone’). The agreement has been reached following a competitive process in which three international companies with long track records in the management of real estate assets presented offers. Blackstone was selected as the successful bidder after submitting the best offer in terms of both its value and management plan.

The agreement was confirmed after the European Union Directorate General for Competition today approved the acquisition of Popular by Banco Santander S.A. (‘Santander’) with no restrictions.

The transaction will involve the creation of a company to which Banco Popular will transfer assets with an aggregate gross book value of approximately €30 billion, as well as 100% of the share capital of Banco Popular’s real estate management company, Aliseda.

The valuation attributed to the Spanish assets of the business (e.g. properties, loans and tax assets, not including Aliseda) is approximately €10 billion. This is consistent with the valuation and provisions made by Santander during the acquisition of Popular and does not, therefore, result in any material capital gain or loss for Santander or Popular. The final valuation is subject to change depending on the assets remaining within the business at closure and following the integration of Aliseda.

Blackstone will own a majority 51% stake in the new company while also assuming management responsibilities, while Banco Popular will own the remaining 49% stake. As a result, the aforementioned assets will no longer be consolidated on Banco Popular’s balance sheet.

VC’s behind Zopa, Revolut, Transferwise & Clear Score confirmed for judging panel for PitchIt event (London Loves Business), Rated: A

Representatives from Venture Capitalists: Seedcamp, Blenheim Chalcot, CommerzVentures, and Balderton Capital will form the judging panel of experienced VCs from and around Europe.

Collectively, these four firms are some of the most active investors in the European fintech category and have played key roles in the success of several of the largest fintech successes in Europe.

Lithuania Seeks to Become Fintech Center as Bank of Lithuania Looks to Launch Regulatory Sandbox (Crowdfund Insider), Rated: B

Lithuania is the latest country joining the Fintech revolution by recognizing the importance of fostering a regulatory environment that is conducive to change and challenges established norms. The Bank of Lithuania is out with a statement regarding the launch of a sponsored Fintech Sandbox.

The following measures are will apply:

  • Relatively easy and low-cost authorization process: following submission of all necessary documents, it takes only 3 months for the Bank of Lithuania to take a decision on the issuance of an electronic money or payment institution license. In other EU countries, the process may take 12 months and more.
  • Access to the Bank of Lithuania payment infrastructure for non-banking sector companies planning to provide payment services, thus avoiding a middleman.
  • Newcomer program. The Bank of Lithuania applies a one-stop shop principle for meetings and consultations with potential financial market participants.
  • Specialized banking license. In order to establish a bank in Lithuania that would provide usual banking services, the lowest initial capital requirement in the entire euro area – EUR 1 million – is applied. This is five times less than the requirement applied to banks that provide the full range of services, including investment ones.
International

The Russian Connection (To Alt Lending Globally) (PYMNTS), Rated: AAA

ID Finance Co-Founders Boris Batine and Alexander Dunaev were far from newcomers to the world of finance when they started up their business in 2012. Long before founding a data science, credit scoring and digital finance company, the Russian-born and U.K.-educated entrepreneurs met while working abroad at Renaissance Capital and Deutsche Bank.

And so, in 2012, with only a few hundred thousand of their own dollars to get up and running, ID Finance launched in one of those underserved markets — their home market of Russia.

By 2015, the firm was profitable, and in 2016, it officially relocated it headquarters to Barcelona, Spain, one of three nations outside Russia ID Finance has expanded its efforts into — Belarus and Brazil being the other two.

These days, the firm originates 50,000 new loans a month — loans that it mostly finances off its own balance sheet, as opposed to selling them off on a marketplace. As of February of this year, the firm raised $50 million in debt from a consortium of banks to fund further expansion in South America.

A New $200 Million Fund

As ID Finance has expanded around the world — and partnered with various FIs — its founders realized that there are a host of small businesses that are simply being underdeveloped because they are almost invisible to investors.

Working with Elbrus Capital Fund Manager Yury Popov and asset management company Da Vinci Capital, the FinTech Credit Fund is being jointly offered as a $200 million debt finance fund aimed at FinTech companies focused on alt lending innovation. The funding from the credit fund, according to Batine, is aimed at helping up-and-coming FinTech lenders fund their own loans — and finance their loan portfolios.

“The alternative lending market is worth a potential $2 trillion, and we see a huge opportunity to back the billion dollar companies of tomorrow focused on digital lending,” Dunaev said.

How this social entrepreneur is bringing banks to the fingertips of the unbanked (Huffington Post), Rated: A

Humaniq was launched in 2016 with a vision to build a world where the unbanked and underbanked around the world also have access to the banking and financial transactions. An estimated 2 billion people can be brought under the umbrella of financial inclusion with Humaniq’s services.

Tell us more about Humaniq and the problem you solve?

Humaniq is on a mission to bring new mobile digital services and financial inclusion solutions to the 3.5 billion unbanked / under banked globally who have no access to the digital economy.

How does Humaniq work, especially with respect to privacy and security?

Humaniq offers a biometric blockchain app that can be used in any simple smartphone device.

The Humaniq LITE app is part of a broader humanitarian capitalism venture. Humaniq has a digital currency tied to it, known as HMQ.

Who’s your target audience and how exactly do you help?

We are working with emergent economies – where people live on USD$2.50 a day. Many of them do not have documentation and have had little or no education.

Our first big pilot will be in Ghana with local and international organisations, targeting 18 to 40-year-old low-income smartphone users and merchants in suburban areas including the capital city of Accra.

How did you acquire your first customer and how long did that take?

We did various test in India and Africa with previous test versions of our app. We are also working with Brazilian organizations.

With regards to funding, how did you fund your business? How hard was it and how much time did it take to acquire those funds?

Our business model has thrived on the P2P innovation and blockchain driven crypto economics. We built our model on the back of a crypto, Ethereum driven smart contract Initial Coin Offering(ICO).

Australia/New Zealand

New Zealand advice industry to be overhauled (Financial Standard), Rated: AAA

The New Zealand government is looking to remove the distinction between class and personal advice, as well as allow the provision of digital advice as it seeks to overhaul the country’s regulatory regime for financial advisers.

Unlike the FA Act, the new Bill enables the provision of more types of advice by being technology-neutral, lifting the existing restrictions around advice needing to be provided by a human adviser.

In turn, this allows for the provision of robo-advice and works to future-proof the legislation for technological developments. It also serves to increase the New Zealand population’s access to quality financial advice.

‘Non-bank’ status drives IOOF results (IFA.com.au), Rated: A

IOOF has credited the structure of its “non-bank-aligned” dealer groups and “open architecture” culture with a dramatic increase in revenue inflows from its financial advice business.

The results reflect a 131 per cent year-on-year increase in advice net inflows, according to a statement from IOOF, with $3.0 billion in total advice net inflows for the 2017 year.

India

SEBI Constitutes CFRT Committee To Study Impact Of Fintech On Financial Markets (Inc42), Rated: AAA

The Securities and Exchange Board of India (SEBI) has formed a Committee on Financial and Regulatory Technologies (CFRT) to examine ongoing and medium-term trends related to fintech in the securities and financial markets worldwide.

Thus, regulators are faced with the challenges as well as opportunities to evolve their functioning more effectively through the adoption of new technology solutions. It is in this context that the CFRT committee will help the SEBI deal with relevant risks and challenges.

The Committee would examine, deliberate and advise the SEBI on an ongoing basis on the following issues:

  • Recent and medium term trends (within next 5 years) in fintech developments in securities market worldwide.
  • Opportunities and challenges from new fintech solutions and its impact on Indian Securities Market.
  • Fintech solutions for further widening and deepening of Indian securities market.
  • Approach and framework for the regulatory sandbox in Indian market conditions to facilitate the adoption of fintech and promote financial innovations.
  • Preparing the Indian securities market and regulatory framework to adapt to new fintech solutions while promoting market integrity, market development, consumer protection and managing change, business models and market disruptions.
  • Assessing technological solutions for SEBI regulatory functions viz. information management and data mining, risk management including cyber security, intermediary supervision, consumer protection, etc., through the application of new technological solutions like applying distributed ledger technology, Big Data, data analytics, Artificial Intelligence, machine learning etc.
  • Technology capacity building by Indian securities market in general and SEBI in particular.

Start-up funding may come under SEBI lens (The Hindu), Rated: A

The Committee on Financial and Regulatory Technologies will, among other things, deliberate on financial technology solutions for “further widening and deepening of the Indian securities market” through traditional and alternative platforms, including peer to peer lending and equity crowd-funding.

While questioning the manner in which these entities help start-ups raise funds, the regulator has said that any violation would be “construed as organising an unrecognised stock exchange” and that SEBI would be “constrained to initiate action.”

Under the current legal framework, issue of shares to more than 200 persons constitutes a public issue and needs SEBI approval.

Rubique Appoints Vodafone Ex- M-Pesa CEO Suresh Sethi & Alexia Yannopoulos of Apis Partners as Directors (PR Newswire), Rated: A

Rubique, the one-stop online marketplace providing technology-enabled end-to-end solutions to financing needs of individuals & SMEs has announced the appointment of two directors- Suresh Sethi, EX-CEO & Managing Director of Vodafone M-Pesa and Alexia Yannopoulos Director at Apis Partners LLP.

Asia

CFTE is Helping MAS Assist ASEAN Finance Professionals Gain FinTech Skills (Cryptocoins News), Rated: AAA

The Centre for Finance, Technology and Entrepreneurship (CFTE) has revealed that it is setting up an international hub in Singapore designed to aid finance professionals gain the necessary skills in FinTech.

Working closely with the Monetary Authority of Singapore (MAS), CFTE has been formalizing plans to expand its education platform to the Association of Southeast Asian Nations (ASEAN), according to a report from FinTech Finance.

CFTE is to deliver courses that cover a range of areas in the finance industry. These include artificial intelligence, application programming interfaces (APIs), coding, blockchain, and RegTech. They will either be delivered online or via in-class training.

P2P lending growth slows in July (Yonhap News), Rated: AAA

South Korea’s peer-to-peer lending growth slowed in July after financial regulators asked lenders to tighten guidelines for individual investors, industry data showed Tuesday.

According to data compiled by the Korea P2P Financial Association, lending between peers grew by 104.7 billion won (US$93.1 million) in July to a cumulative 1.2 trillion won.

In comparison, P2P lending grew by 172.8 billion won in June.

P2P financing industry to absorb investors’ demands (Korea Herald), Rated: A

It is especially likely to absorb the investor cluster who, under the government’s new restrictive measures on real estate transactions, are swiftly turning away from banks and seeking for an alternative source of investment income, according to industry watchers.

In late May, the association enforced a set of guidelines, setting a 10 million won ceiling on the investment per business unit, responding to the government’s gesture to protect investors from potential dangers of the new investment platform.

INDONESIAN peer-to-peer (P2P) lending marketplace PT Amartha Mikro Fintek (Amartha) encourages and targets “millenials” to invest in micro-businesses and SMEs through the Amartha Short Movie Festival.

The Amartha Short Movie Festival is a competition divided into two categories which are short documentaries with the theme empowering micro-businesses and short fiction movies with online peer-to-peer lending as the theme. Applications are open from August 8 to October 9, 2017.

CARICOM

Vincentian Set to Launch the Region’s First Equity Crowdfuning Startup Company (St. Lucia Times), Rated: AAA

Global Domination Capital is set to be the regions’ first fintech startup company, offering equity crowdfunding and peer-to-peer lending solutions to the OECS countries and  the CARICOM member states. This includes Barbados, Jamaica, The Bahamas, Trinidad and Tobago and The Turks and Caicos Islands.

Global Domination Capital is expected go live and accept both new investors and borrowers to the platform by late September.

Authors:

George Popescu
Allen Taylor

Monday June 5 2017, Daily News Digest

ratesetter alfi

In the June 1 issue of Lending-Times, we highlighted a TransUnion report on how to identify and fight online fraud. A typo suggested we didn’t recommend report, however, we highly recommend it and you can download it here. News Comments Today’s main news: After buying George Banco RateSetter will not lend to its customers. Amartha receives regulatory […]

ratesetter alfi

In the June 1 issue of Lending-Times, we highlighted a TransUnion report on how to identify and fight online fraud. A typo suggested we didn’t recommend report, however, we highly recommend it and you can download it here.

News Comments

United States

United Kingdom

China

European Union

International

Australia

India

Asia

Africa

News Summary

United States

Latest PeerIQ Loan Performance Monitor (PeerIQ), Rated: AAA

The US economy generated a seasonally adjusted 138 K jobs last month (vs. expectation of 185K) bringing the jobless rate to 4.2% and another step closer to full employment. As inflation risks emerge, the Fed is widely expected to increase rates another 25 bps at the upcoming FOMC meeting on June 14th.

On the regulatory front, the US House will vote on a bill sponsored by Jeb Hensarling (R-TX) to reform and repeal portions of the landmark Dodd-Frank financial reform bill.

On the securitization front, student lending originator CommonBond priced its $232 Mn private student loan ABS. Goldman Sachs was the structuring lead, and co-leads include Barclays and Citi. Also, AB Alert reports that Lending Club is preparing a multi-seller deal which includes collateral from multiple originators including potentially loans from Lending Club’s own balance sheet. As PeerIQ noted in the summer of last year, we believe marketplace lenders that can offer whole loan investors a reliable path to liquidity and low-cost permanent financing can generate a competitive advantage.

PeerIQ is pleased to present the PeerIQ Loan Performance Monitor. The monitor tracks interest rates, delinquency, and charge-off rates for both platforms across vintages and grades.

Source: PeerIQ MPL Loan Performance Monitor June 2017

Global Debt Registry Appoints Charlie Moore as President (PR.com), Rated: A

Global Debt Registry (GDR), the asset certainty company known for its loan validation expertise, today announced Charlie Moore, the firm’s Chief Commercial Officer, has been named President as former Chairman and CEO Mark Parsells returns to his FinTech consultancy practice.

As President, Moore will be focused on the continued delivery of loan level diligence services to the investment community, leading the daily operations of the company. Moore previously led the firm’s commercial operations including business development, partnerships and marketing and has over 20 years of experience building financial services technology businesses in the U.S. and Europe.

Investing in Real Estate: Single Family Homes or Multi-Family? (Crowdfund Insider), Rated: A

“Institutional multifamily” typically means dozens, if not hundreds, of distinct units within a single property, managed by a seasoned professional management firm. These properties have many different tenants, with a diversity of employment situations and lease structures. If one tenant leaves abruptly, many others will remain in place, and overall rental income will suffer only marginally. Multifamily managers can further mitigate vacancy risk by structuring leases to end on a rolling basis. Single family investments don’t carry the same benefit – a tenant living in a single-family home constitutes 100% economic loss for as long as the property remains vacant.

Investing through online crowdfunding platforms gives individual investors the opportunity to invest in a small piece of large multifamily projects that are institutional grade and have passed the underwriting of well-established lenders and co-investors who often have decades and billions of dollars of investing under their belt. The same can’t be said of most single-family investments.

While these benefits are most apparent for direct owners of (investors in) property, this benefit of multifamily investing should be passed along to individuals who co-invest via an online (crowdfunding) platform.

GTCR Announces Acquisition of Sage Payment Solutions (Guru Focus), Rated: A

GTCR, a leading private equity firm, announced today that it has entered into a definitive agreement to acquire Sage Payment Solutions, Inc. (“SPS” or the “Company”) for $260 million. SPS, headquartered in Reston, Virginia, is a leading provider of payment processing and merchant acquiring solutions in North America. GTCR is acquiring SPS from The Sage Group plc (LSE: SGE) (“Sage”), a global provider of integrated accounting, payroll and payment solutions headquartered in the UK. GTCR is partnering with SPS management to pursue organic growth initiatives and fund future acquisitions in the payment processing industry. To support this strategy, GTCR has committed up to $350 million of equity capital to the platform. The transaction is expected to close in the third quarter following receipt of regulatory approvals and other consents.

SPS provides credit card, ACH, check, gift and loyalty card processing services to small and medium-sized businesses (“SMBs”) in the United States and Canada.

Where Incumbents Are Making Investments In Wealth Tech (CB Insights), Rated: A

Deals to wealth tech startups hit a record of 30 investments in Q1’17 amid a number of new early-stage entrants globally. In particular, robo-advisors have been gaining prominence and taking on incumbents in nearly 20 countries around the world.

Key takeaways:

  • Since 2012, several banks and wealth management firms have made co-invests in wealth tech. For instance, Goldman Sachs and JP Morgan Chase are co-investors in Motif, Northwestern Mutual and Citi Ventures are co-invested in Betterment, and UBS and Santander InnoVentures are co-investors in SigFig.
  • Incumbents have made the most investments to companies that fall into our robo-advisors category, including BettermentMotifPersonal CapitalWealthNaviFolioForwardLane, and SigFig
  • Blackrock invested in Personal Capital, the second most well-funded wealth tech company with approximately $207M in funding.
  • LearnVest is the only featured company on our map to have exited.

AUTOGRAVITY CAR FINANCING APP NOW AVAILABLE ACROSS NEW JERSEY (AutoGravity), Rated: A

AutoGravity, a FinTech pioneer revolutionizing car shopping and financing with the power of the smartphone, has unveiled an innovative mobile application to help car buyers in the Garden State finance any new or used car in minutes in just four easy steps.

With its unique platform, the AutoGravity app guides car buyers through an intuitive four-step process:

  1. Choose a car – Select any make, model and trim of any new or used car.
  2. Find a dealer – Choose from AutoGravity’s proprietary national dealership database; geolocation helps quickly identify nearby dealers that sell the car the selected.
  3. Search for financing – Car buyers can scan their driver’s license and connect to social media to quickly pre-fill the finance application.
  4. Select a lender – Receive up to four binding finance offers in minutes, then select a loan or lease offer and head to the dealership to complete the purchase.

FRB Governor: Data Aggregators Impact Bank Safety, Soundness as Part of the “Fintech Stack” (JD Supra), Rated: A

In a recent speech at the Northwestern Kellogg Public-Private Interface Conference, Federal Reserve Board Governor Lael Brainard indicated that the relationships between banks and data aggregators within the “fintech stack” may present safety and soundness concerns that warrant oversight by the FRB (and perhaps other prudential regulators).

Governor Brainard indicated that banks will need to apply significant resources to update their data infrastructure to allow access to real-time data for third-party developers.

Governor Brainard explained that because banks are more tightly regulated than the average fintech company, consumer protection and safety and soundness considerations should supersede experimental innovation.

While some banks may elect to give access to data aggregators, Governor Brainard observed that other banks may be unwilling or unable to provide permissioned access to third parties due to fears about compliance with laws and regulations and the ability to monitor and control the use and access to data. She then noted that the Fed’s supervisory role should focus on ensuring that financial institutions subject to its supervision operate safely and follow applicable law. At the same time, she stated that the Fed has “a strong interest in permitting socially beneficial innovations to flourish, while ensuring the risks that they may present are appropriately managed, consistent with the legal requirements.”

PeerStreet’s Jessica Murray Named One of HousingWire’s 2017 Rising Stars (BusinessWire), Rated: B

PeerStreet, a marketplace for investing in real estate backed loans, is honored to announce that its VP of Strategy, Jessica Murray, has been named to HousingWire’s 2017 Rising Stars list of young leaders to watch in the housing industry. HousingWire’s 2017 Rising Stars list recognizes talent that demonstrate leadership and innovation, inspiring not only those within their company, but also their communities and the industry at large.

In her time at PeerStreet, Murray established the company voice through social media, content marketing, customer communications and placed media while serving as the Head of Communications. In her current role, Murray maintains many strategic and operational responsibilities, which also include managing PeerStreet’s capital markets and hiring.

Roostify Names Sandeep Aji as Vice President of Products (BusinessWire), Rated: B

Roostify, a provider of automated mortgage transaction technology, today announced it has named Sandeep Aji as Vice President of Products. Aji will be responsible for overseeing the continued development of Roostify’s mortgage technology platform – from enabling more API-driven capabilities to improving user experience for lenders and consumers.

Prior to Roostify, Aji was Co-Founder and CEO of Impartus, a cloud-based, SaaS platform for higher education.

How To Get A Second Chance With Your Bank (NASDAQ), Rated: B

Despite a higher cost of capital, an online loan may be necessary for a small business. The reason: There has been a continued downtrend in lending from banks to small businesses. “Together, 10 of the largest banks issuing small loans to business lent $44.7 billion in 2014, down 38% from a peak of $72.5 billion in 2006,” reports The Wall Street Journal. Meanwhile, nonbank lenders have seized the opportunity and captured 26% market share up from 10%.

United Kingdom

RateSetter decides not to lend to George Banco’s customers (P2P Finance News), Rated: AAA

RATESETTER has announced that it has decided not to lend directly to George Banco’s customers as there are “better uses of our development resources”.

The ‘big three’ peer-to-peer lender bought a stake in the guarantor loan provider, which was a former wholesale lending partner, last month. It had also agreed to lend directly to its 10,000 customers, with George Banco acting as introducer.

The business and consumer lender will keep its equity stake in the firm and its co-founder Peter Behrens will remain as a non-executive director on George Banco’s board.

P2P platforms facing hybrid dilemma (P2P Finance News), Rated: A

THE PEER-TO-PEER finance industry could be on its way to becoming a polarised market, where the biggest firms stick to their core P2P lending activities and the rest are forced to evolve into hybrid models.

A wide range of industry onlookers have told Peer2Peer Finance News that it will be impossible for smaller firms to achieve profitability without either expanding into balance sheet lending, merging with direct lenders or morphing into a business model closer to that of a collective investment scheme.

“It’s incredibly difficult to build a straightforward P2P business to the size where it becomes profitable,” said Andy Davis, author of a report that pointed to hybrid models as an inevitable evolution in the sector.

“It’s intrinsically more profitable to arrange and lend rather than only arrange. We’re going to start seeing hybrid loans emerge.”

P2P is ultimately just a subset of direct non-bank lending, he argued, but with different technology in place and different market access. When a direct lender sets up a P2P platform, its return on capital goes up exponentially and it can immediately recycle those returns to originate more lending.

“Hybrid lending from some providers will increasingly be the chosen solution. This is not an issue or a problem for investors in and of itself, ” added 4th Way analyst Neil Faulkner.

Safety in banking (SilverSeek), Rated: A

It was probably with sound money and sound banking in mind that Goldmoney recently announced a tie-up with a British-based and regulated peer-to-peer lender, which enables owners of gold and silver bullion to use it as collateral to raise funds.ii The purpose of this article is to explain how honest banking worked before fractional reserve banking was devised. This is the logic behind the recently announced collaboration between Goldmoney and Lend & Borrow Trust Company Ltd.

On 23rd May, Goldmoney announced an investment and collaboration in and with the UK-based peer-to-peer lending platform, Lend & Borrow Trust Company Ltd. LBT is unique, being the only peer-to-peer facility in Western financial markets that allows businesses and individuals to use their investment-grade physical bullion as collateral against loans, without the loan obligations and collateral being comingled with other customer business.

At no time is LBT a principal in the transaction, so lenders and borrowers can agree an interest rate without having to take LBT’s creditworthiness into account, based solely on physical gold or silver as collateral.

The logic of a collaboration between Goldmoney and LBT is obvious, in that it enables customers to raise finance using bullion. But there is an underlying sound-money logic as well. Between them, Goldmoney and LBT are the template for sound-money banking as it existed before fractional reserve banking became the standard banking model, after Britain’s Bank Charter Act of 1844.

Peer-to-peer lending promised 6%, but I’ve been left red-faced and in the red (The Guardian), Rated: A

When James Patterson invested £1,000 in the peer-to-peer (P2P) lender Funding Circle back in 2015, his hope was that his money would grow a bit faster than the pitiful rates of interest offered by his bank. At the time, the relatively new lender was promising returns of 5-6% a year – 10 times more than his bank.

However, almost a year and a half on, his investment is now worth just £988 – a loss of £12. It’s because one of the firms that 10% of his money was lent to defaulted, leaving his account £128 in the red – a sum that his other investments at the platform have struggled to make up.

It has delivered some impressive returns to savers in recent years but, Patterson says, after his experience, he will not be investing anymore.

James Meekings, co-founder and managing director of Funding Circle, says Patterson will be back in the black in the next couple of months as the firm expects to recover some of his losses which, in turn, will be passed on to him.

Assetz Capital Review – 30 Days Access Account with 4.75% Target Rate (P2P-Banking), Rated: A

Recently I opened an account at p2p lending marketplace Assetz Capital to gain some first hand experiences. Assetz Capital offers secured business loans to small and medium British SMEs. I decided to start with the 30 days access account as it is mostly hands off and deposited a tiny amount, which was credited within an hour.

Assetz Capital has a minimum investment amount of 1 GBP. Assetz is open to international investors, but a UK bank account is required.

Assetz also offers a quick access account with 3.75% target rate, designed to provide immediate access to cash, in normal market conditions, for investors. Currently 19 million GBP are invested in this account. Further account types are the ‘Great British Business Account’ (GBBA) with 7% target rate, the ‘Green Energy Income Account’ (GEIA) with 7% target rate and the ‘Manual Loan Investment Account’ (MLIA) with 5.5% to 18% gross rate. See comparison of Assetz accounts. Assetz also features a secondary market without fees providing liquidity.

Assetz Capital adds ex-bank specialist to regional director team (P2P Finance News), Rated: B

ASSETZ CAPITAL has hired former bank finance specialist Samantha Williamson to boost its team of regional relationship directors.

Williamson will supervise the peer-to-peer lending platform’s activities in the South Manchester region.

She previously worked as business development manager at financial independent broker Positive Commercial Finance, helping firms grow through non-traditional finance avenues.

Prior to that, she served as senior real estate manager at Barclays and commercial lending manager at Santander, both posts located in the Manchester area.

From beach to boardroom: Iced coffee king surfing to success (London Loves Business), Rated: B

Who’s bankrolling you? 

We are. And so is Funding Circle. The banks have been completely useless.

What advice would you give other entrepreneurs trying to secure that kind of finance?

It depends on how much you’re looking for and how long you’ve been trading, but if you need money, I’d go crowd funding, 100 per cent. If you are well under the table with trading, I’d take a look at funding circle.

China

WeiyangX Fintech Review (Crowdfund Insider), Rated: AAA

Search engine giant Baidu Inc. is to quit crowdfunding market and pay more attention on artificial intelligence”]. Users will not see the “Baidu Crowdfunding” channel when they log in their Baidu Finance account, but will still be able to check the crowdfunding history.

On May 25, China Rapid Finance Limited, a leading online consumer lending marketplace in China, reported its unaudited financial results for the quarter ended March 31, 2017.

2017

2016

Growth rate

Transaction and service fees

USD16.8 million

USD14.8 million

13.1%

Consumption loans

USD6.7 million

USD1.5 million

336.8%

Maintenance loans

USD10.1 million

USD13.3 million

24.4%

Operating aspect:

  1. Number of new borrowers added in the first quarter of 2017 was approximately 545,000. As of March 31, 2017, the Company had reached approximately 2 million unique borrowers on its marketplace since inception, and the total number of loans facilitated on the Company’s platform grew to approximately 15 million.
  2. Total loan volume facilitated on the Company’s marketplace in the first quarter of 2017 increased to USD485 million, primarily driven by the rapid expansion of consumption loans, which accounted for USD405 million of the total loan volume.
  3. Total number of consumption loans facilitated in the first quarter of 2017 was 4 million, while total number of maintenance loans facilitated was 6,000.

Ant Financial, the financial arm of Chinese e-commerce giant Alibaba, became the latest player in Hong Kong’s competitive mobile payments market after it announced the launch of its mobile wallet for Hong Kong users on May 24.

On May 25, Ant Financial announced to launch the car insurance rating mechanism for the insurance industry to improve the risk management capability.

Three primary reasons for the boosting Cash Loan in China (Xing Ping She Email), Rated: AAA

By Dr. Yang Li

From 2017, the number of cash loan companies have increased tremendously in China. Various kinds of cash loan firms have mushroomed, including CashBus, MagicCash, GoldBar of JingDong, Ants Borrow of Alibaba, WeiliDai of Tencent, etc. So far, there are already thousands of small cash loan platforms exists in China, and many of them have received fund financing from top VC investors such as Sequoia Capital, Innovation Works, and ZhenFund.

Why cash loan growth explosively in a short period? The following three reasons may explain.

Reason 1: The lower threshold of credit system by Big data method.
In the past, credit system was mainly referred to Central bank credit system, however, it could not cover most people. The information of vast majority of low-income, unregistered social groups have not been collected in the credit system, but they have extensive borrowing needs.

As big data technology developing fast these years, many data companies are growing rapidly, and they acquired data for business use. Owing to the big data credit system, cash loan platforms are able to evaluate the borrower’s credit situation from multi-dimensions: traits of character, consumption habits, loan demand, repayment willingness, etc. In this way, the problem of information asymmetry between the investors and borrowers is eliminated, making the cash loan business prosper in the broadest social group.

Reason 2: Vertical specialization of cash loan industry provides more business opportunities
The division of the cash loan industry is now divided into receipt, audit, lending and collection, each process are served by independent and professional companies or teams. With the booming of cash loans, an ecological chain around the industry has been derived, including data processing companies, business consulting companies, law office specialized in collection, etc.

The vertical specialization of the industry made cash loan platforms extremely convenient in obtaining customers, audit management and collection, so that the platforms can save more costs and gain more business opportunities.

Reason 3: Changing of the public consumption concept stimulated loan demands
With the improvement of people’s living standards and the popularization of deficit spending concept, the public consumption concept has been changing a lot.

Consumer demand is beginning to diversify. There are not only the need for food and clothing, but also spiritual needs of learning, fitness and travel, etc. And the consumers’ attitudes are gradually transforming from rational consumption to perceptual advanced consumption. Spending “future money” at “the present” is becoming a common social spending habit, for example, more and more people choose to purchase cars, houses and 3C electronic products on installment. The growing advanced consumption has stimulated the loan demand across society.

European Union

Fintech is King of Lithuania’s Tech Revolution (Red Herring), Rated: A

Under Soviet rule Lithuania became known as a center for laser technology and bioscience, the latter of which now accounts for 1% of GDP and is growing at almost 25% annually. Last year businessmen, scientists and the government signed an agreement to make Lithuania the European hub for health and biotech innovation by 2020.

But it is fintech that has taken the strongest grip on the country’s tech scene. TransferGo, WoraPay, Blender, Simplex and IBS are just a few of a small but growing clique of firms taking advantage of strong local talent, low wages and public pledges.

Lithuania is the only jurisdiction in the EU to have a special-purpose banking license, allowing the foundation of a bank with registered capital of just €1m ($1.1m).

Vaidas Adomauskas first imagined WoraPay, a payment platform, while waiting to pay for food at a restaurant. Now it is backed with almost $1m in funding and is headquartered in London–which many believe to be Europe’s fintech capital.

Capitalizing on the Lithuanian fintech craze, Rise, the Barclays-backed Rise coworking franchise, opened a location in capital city Vilnius last year. It has 50 working spaces, an auditorium and conferencing facilities for entrepreneurs trying to get a foothold in financial tech.

International

Marketplace Lending News Roundup – June 3 (Lend Academy), Rated: AAA

Behind the Scenes at Orchard Platform, a Struggle to Innovate from The New York Times – The long and winding road of Orchard’s plans for a secondary loan market.

Peer-to-peer lender RateSetter raises £13m, Woodford and Artemis lead from AltFi – In the UK RateSetter has closed another £13M equity round as they get closer to full FCA approval.

SoFi and JetBlue Help Customers Managing Student Loans Earn Reward Travel from PR Newswire – This week SoFi announced that you can earn up to 50,000 JetBlue reward points by refinancing a student loan.

Did someone cancel the fintech revolution? from Finextra – The promise of fintech has not yet been released says Accenture in a new report.

Kind of Blue from FinTech Junkie – The latest from Frank Rotman comparing startups to jazz and what to do when you hit a wrong note.

Are Small Business Borrowers Bank-Loyal to a Fault? from deBanked – Despite low approval rates banks are still the top choice for entrepreneurs looking for a loan.

The impact of the latest adjustments in peer-to-peer/marketplace lending from AltFi – Good summary of the latest developments at the big four marketplace lenders in the UK.

The impact of the latest adjustments in peer-to-peer/marketplace lending (AltFi), Rated: AAA

Funding Circle ditches property

Leading small business loans marketplace Funding Circle announced that it would be winding up its property-secured lending in April, with a view to stopping entirely by mid-2018.

AltFi Data’s analytics engine shows that only one quarterly cohort of Funding Circle’s property-backed lending resulted in any bad debt. This came in the third quarter of 2015. Bad debts for this cohort have reached 4.67 per cent – but it’s important to note that recoveries may still be made, and that this is just one of 17 quarterly cohorts. The size of this cohort is about £34m.

RateSetter stops wholesale lending

AltFi Data told us in March that RateSetter had originated £273m loans to lending businesses, equating to 15.6 per cent of its £1.748bn cumulative lending total at the time.

The firm has now lent a little over £1.9bn in loans, of which 15.4 per cent are wholesale. As can be seen in the chart below, the overall trend is down.

More capacity at MarketInvoice?

MarketInvoice announced the launch of a new longer-term product (MarketInvoice Pro) in February. This allows businesses to draw an open funding line, secured against their outstanding invoices.

Well, since unveiling the new product in February, MarketInvoice has posted back-to-back monthly origination records (versus all previous months in its existence), with £42m in March and £35m in April.

But this isn’t yet feeding through in terms of outstanding principal per month, which is hovering at around £25m per month, versus an all-time high of £35m.

Investors are falling over themselves for Zopa loans, but should they be?

The net returns delivered to Zopa investors has been fairly consistent at between 4.5 and 5.0 per cent for the past two and a half years. But the rate being paid by its borrowers is climbing.

Zopa’s average gross interest rate has steadily increased from 5.3 per cent at the outset of 2015 to 8.4 per cent in April 2017. The reason for this is simply that a higher proportion of Zopa’s loans are now being made to “riskier” borrowers. But the returns being offered by the platform haven’t yet adjusted to reflect this.

Crowdfunding, millennial buyers and higher mortgage rule real estate in 2017 (International Business Times), Rated: A

Interestingly, real estate crowdfunding is not limited to the US market. It is actually one of the hottest trends in the overall global realty market today. Realty crowdfunding platforms are continuously being launched in the UAE, Asia and even Egypt. In fact, a leading Singapore-based realty crowdfunding platform recently raised around S$1 million (AU$0.98 million) in the first funding round for a company.

If crowdfunding is the signature trend of real estate in 2017, the rise of millennial home buyers is a close second. The oldest millennials are now in their mid-30s and are planning to have their own houses. Marriage is on the cards for most of them, further creating the urgency for a new home. Most jobs have been designed for the 25 to 34 age bracket, with wages happily rising. Overall, it is a highly favourable situation for millennials to think of a new house this year.

On the other hand, the recent Brexit fallout has had a major impact in the contemporary real estate scene. With UK realty currently going through an uncertain phase, the US real estate scene is fast hogging the limelight in the global property market. The Chinese market, too, is currently moving along a slow tide, which presents an advantage for US developers. The American commercial real estate is to benefit in particular, and speculations are on the rise about steady foreign investments in the country.

Crowdsurfer adds Zopa data (Finextra), Rated: A

Zopa, the world’s first and one of the largest peer-to-peer (P2P) lenders, has lent in excess of £2.3 billion to customers in the UK, and the addition of its data set will deepen Crowdsurfer’s insight into the global alternative finance market.

Cambridge-based Crowdsurfer analyses data from more than 900 different alternative finance platforms, including equity, bonds, SME debt, P2P and more, and has mapped more than ten million transactions to provide the most in-depth take on global trends and patterns in alternative finance.

How robo advice fees compare to multi-asset funds (AltFi), Rated: A

Will robo advice spark a price war? We crunched the numbers looking at how much platforms charge compared to a typical multi asset fund.

Vanguard, a U.S. based passive fund manager, is planning to sell its index funds directly to UK consumers, charging just 0.23 per cent annually. Previously, individuals had to invest in funds through an intermediary or, more recently, via robo advisor to get access to the company’s funds.

Taking a look at the top UK robo advice platforms, we found that an investment of £10,000 would cost an average of £6.79 a month in both management, platform, and fund fees.

A £10,000 investment in 2015 held in the average fund in the IA’s 20-60% Shares sector would have cost an average £9.83 per month for a mixed fund, while the average fund in the IA’s 40-85% Shares sector would cost £10.25, according to data on the average ongoing charges figure from the Investment Association.

Putting this all together, for the average robo advice platform a £10,000 portfolio amounts to approximately 0.81 per cent fees, or £81 over a year. In comparison, the average multi-asset fund charges between 1.18 per cent and 1.23 per cent over the course of the year, with IA’s 40-85% Shares sector the higher of the two. This amounts to £118-£123 on £10,000, or approximately £40 more than the average robo advice portfolio.

Pre-RDR fees would have cost £15.42 and £14.92 on a £10,000 investment.

Moneyfarm, a robo advisor based in the UK and Italy, stands out because it doesn’t charge a management fee for any investments under £10,000, just the fund fee. Investments over £10,000 are charged 0.6 per cent.

Insurtech App Trov Connects with AXA Insurance & Celebrates UK Launch (Crowdfund Insider), Rated: A

Trov has launched its on­-demand insurance platform in the UK, in partnership with AXA Insurance. Users are provided with a personalized quote and can quickly turn insurance on (or off) for an item without the need for any interaction with a traditional insurance agent.

Australia

FinTech Australia Announces New Board of Directors (Crowdfund Insider), Rated: A

FinTech Australia has announced the election of its new Board of Directors. The new Board is said to align with constitutional changes regarding gender diversity and representation from a broad number of states.

The new board members are:

  • David Ball – CEO and co-founder of HyperBank (Queensland representative)
  • Natalie Dinsdale – Director of Marketing at Tyro (NSW representative)
  • Luke Howes – Co-founder and CEO of Proviso (South Australian representative)
  • Lucy Liu – Chief Operating Officer of Airwallex (Victorian representative)
  • Alan Tsen – CEO of The Week in Bitcoin (Victorian representative)
  • Emma Weston – Co-founder and CEO of AgriDigital (NSW representative)

India

Monexo: Trying to fill the void (Free Press Journal), Rated: A

Our business structure focuses on P2P lending to three segments of borrowers – salaried individuals, practising professionals, and small and medium enterprise (SME). Right now, however, we focus only on the salaried individual segment.

Our typical borrower profile is salaried, aged 25-30 years, with an average salary of Rs 25, 000 for which the average borrowing works out upto Rs 1.50 lakh. Such a working population today is much more independent and amenable to migration. This in turn brings a lot of minor expenses and there such loans are very useful. Such borrowers are often under the under the banks’ lending radar who offer them Rs 8-10 lakh loans to start with but we create options for them (based on the amount requirement). The borrowers that we target are usually digitally savvy and appreciates the benefits that we bring to the table.

What are the benefits offered to borrowers?

First and foremost is time-saving. The borrower is made known in a minute if the loan is available or not.

Another benefit of Monexo is that it is active in the entire activity chain of P2P lending – origination, screening, profile-grading, pricing of each application, disbursement, client servicing and lastly debt collection. This is right now a key differentiator among our contemporaries.

Describe the business structure and how it would attract lenders?

Our fees are taken out of repayments made to lender (2.5 per cent) based on their actual EMI receipts.

Borrowers are graded in categories from M1 down to M8. They get an automatic upgrade when they create a repayment track record. One key criteria is that debt should not be more than 60 per cent of the borrowers’ income.

Our typical business process is approval of only 25 per cent of the applications submitted. This is because most of the 75 per cent are already defaulters somewhere.

Fintech Firm Pinjam Gears Up for Growth Spurt This Year (Jakarta Globe), Rated: A

Fintech company Gadai Pinjam Indonesia is gearing up for a growth spurt this year in a mission to expand the reach of financial services to unbanked small and medium enterprises.

The company, which provides pawnshop services and micro-loans through its online platform Pinjam.co.id, eyes to disburse between Rp 100 billion ($7.52 million) and Rp 200 billion this year, increasing up to 10 times its loan outstanding.

Pinjam will cooperate with state-owned post Pos Indonesia as well as some gold shops, to increase the number of outlets where their customers can pawn their goods. It plans to have more than 100 points in Jakarta by the end of this year.

Asia

P2P Lender Amartha Receives Regulatory Approval from Indonesian Financial Services Authority (Crowdfund Insider), Rated: AAA

Jakarta based Amartha (PT Amartha Micro Fintek) a peer to peer lending platform launched in 2010, is now officially registered with the Directorate of Institutional and Product IKNB (Financial Industry Non Bank) Financial Services Authority ( FSA).

Amartha said the approval by the financial regulators will boost public confidence in the platform and investing. Currently Amartha claims to have successfully financed over 34,000 micro businesses in parts of Indonesia to more than 10,000 registered investors, with total funds distributed to 87 billion rupiah (USD $6.5M).

Why Your Financial Planner Should Be a Robot (Knowledge.insead.edu), Rated: A

In 2015 the Singapore-based bank, DBS, surveyed 600 local mothers in their 30s about retirement. The results were revealing. Three-quarters had not started planning for their retirement. Only 25 percent thought they would have sufficient funds to retire on. The average Singaporean household, headed by a 45-year-old, spends US$3,800 per month. However, 69 per cent believe they would be able to retire on less than US$2,200 a month, while 38 per cent believe it would be less than US$1,500.

According to a 2015 Nielsen survey, six out of 10 Singaporeans only start saving for their retirement once they reach 45. They believe they will just need to double their current savings to retire comfortably with peace of mind.

In China, the social pension is the primary source of retirement income. However, 43 percent of respondents in a survey conducted by the Society of Actuaries in 2016 believe the government or their company will cut their benefits in the future. With an estimated 329 million Chinese turning 65 by 2050, it is projected there will be a US$118 trillion pension deficit.

At 55, the average male has US$98,000 and female has US$85,000, bringing the total household retirement assets at around US$183,000. However the couple now has only 12 years until retirement.

In Singapore, fintech boom is missing the ‘tech’ (Southeast Asia Globe), Rated: B

Big banks are putting a lot of effort in to improve their customer experience. WeChat Pay might not be big right now, but Alibaba bought Lazada, so Alipay’s coming. That’s going to change a lot of things. Banks are trying hard to capture their customers’ attention and build strong ties. Small-to-medium enterprise lending and security is big, particularly in Singapore. How do you protect your data? Singapore is a very strong private banking hub: a lot of money is parked here from very strange people. You don’t want to have this information leaked, so the regulation techspace is being upgraded.

Africa

Some options if you want advice from a robot (IOL), Rated: A

Jaco van Tonder, the director of advisory services at Investec Asset Management, says robo-advisers are useful to clients who cannot afford to pay for face-to-face professional financial advice.

Personal Finance looks at three offerings in the South African market:

1. Sygnia RoboAdvisor. The service was launched last year by listed asset manager Sygnia. Depending on your investment requirement and risk appetite, RoboAdvisor will expose you to unit trusts, exchange traded funds (ETFs), money market funds or cash.

• Minimum investment amounts: lump sum of R10 000 or a monthly debit order of R500.

• Management fees: 0.5% a year including VAT.

2. iTransactGo. This service is operated by Johannesburg-based exchange traded product investment platform iTransact. The company was established in 2010, and it launched its robo-adviser service last month.

• Minimum investment: lump sum of R5 000 or a minimum monthly contribution of R300.

• Investment term: there is a minimum term of one year.

• Management fees: not more than 1.14% a year including VAT, depending on the size of the investment.

3. Bizank. The company is independently owned and has appointed Anchor Capital as the asset manager of its robo-adviser. The robo-adviser, which was launched last year, creates a portfolio to meet your investment goal (for example, retirement or buying a house) based on your responses to its questions.

• Minimum investment: a lump sum of R10 000 or a monthly debit order of R1 000.

• Management fees: between 1% and 1.5% excluding VAT.

Authors:

George Popescu
Allen Taylor

Wednesday March 8 2017, Daily News Digest

Wednesday March 8 2017, Daily News Digest

News Comments Today’s main news: Ron Suber offers 5 ways alt lenders can work with banks to prosper. OCC comptroller fires back at FinTech charter critics. Zopa has record lending month. RateSetter returns fall due to high demand. Today’s main analysis: Corporate credit spread tightens following Trump’s address to Congress. Today’s thought-provoking articles: China consumer finance needs high tech solution. […]

Wednesday March 8 2017, Daily News Digest

News Comments

United States

United Kingdom

China

MENA

Asia

News Summary

 

United States

Prosper CEO’s Ron Suber’s Keynote Address at LendIt (YouTube), Rated: AAA

 

 

Corporate credit spreads tighten following Trump’s address to Congress (Morningstar), Rated: AAA

While the markets pulled back slightly in the latter half of the week, risk assets remained near their highs after a significant boost Wednesday following President Donald Trump’s address to Congress. The average spread of the Morningstar Corporate Bond Index, our proxy for the investment-grade bond market, tightened 5 basis points to +118 last week. In the high-yield market, the credit spread of the Bank of America Merrill Lynch High Yield Master Index tightened 24 basis points to +360.

Comptroller Curry hits back at critics of fintech charter plans (Finextra), Rated: AAA

In a speech to the LendIT conference in New York, Curry offered a stout defence to charges laid by banking trade bodies and state regulators over its plans.

“To be clear, the National Bank Act does give the OCC the legal authority to grant national bank charters to companies engaged in the business of banking,” Curry told the conference. “That authority includes granting charters to companies that limit their business models to certain aspects of banking, and it is not circumscribed just because a company delivers banking services in new ways with innovative technology.”

Kabbage nabs $ 500M for small business loans (TechCrunch), Rated: A

Kabbage, a billion-dollar startup that combines machine learning algorithms, data from public profiles on the internet and other factors to rate and then loan people money for their small businesses, is today announcing another big step up in its ambitions. The company has secured over $500 million in fixed-rate, asset-backed notes, money that it will use to expand the amount, payback terms and size of loans it makes to SMBs over the next three years. To date, Kabbage has loaned over $2.7 billion to SMBs since being founded in 2009.

Kabbage said the securitization was oversubscribed.

As part of this closing, Kabbage is forming a new subsidiary,Kabbage Asset Securitization, to issue the notes in four classes. Kabbage said that the senior class of notes is “anticipated to be rated ‘A(sf)’ on the closing date by Kroll Bond Rating Agency (KBRA).”

Kabbage notes that this is an upgrade on its previous rating.

Lantern Credit boosts machine learning engine through ARC library acquisition (Finextra), Rated: A

Lantern Credit, a financial technology company working to solve systematic inefficiencies in the consumer credit industry, is enhancing its proprietary machine learning engine, Beam AI, with the acquisition of the Abstract Regression-Classification (ARC) Machine Learning Library.

The machine learning library enables Lantern Credit to use a human-machine hybrid learning approach that incorporates human guidance in the machine learning training process to produce more reliable outputs.

Lantern Credit’s Beam AI will use the symbolic regression technology to ensure that credit offers presented to consumers are actionable and timely.

RealtyShares Raises $ 32.9M for Midwest Real Estate Projects Through Crowdfunding (BusinessWire), Rated: A

RealtyShares, a leading online marketplace for real estate investing, has released new data showing the extent of crowdfunded investments in several Midwest real estate markets.

Developers, sponsors and borrowers in Ohio, Wisconsin, Michigan, Indiana and Illinois have raised $32.9 million to date from RealtyShares’ network of investors, offering a source of financing for real estate projects by leveraging technology to connect potential investors with expertly vetted real estate deals.

Thus far 114 deals have been funded in the region through RealtyShares, with an average deal price of $288,000. Deals of up to $1.5 million have been financed in both Columbus, Ohio, and Chicago, Ill. Anchoring RealtyShares’ position in the region, $14 million has been raised for 53 deals in Illinois, with several investors targeting properties in and around Chicago. Buckeyes are also showing a significant level of activity, with $12.25 million raised for 30 deals in Ohio, concentrating around the Cincinnati and Cleveland areas.

Patch of Land Hires Chief Investment Product Officer (PR Newswire), Rated: A

Patch of Land, a leading online real estate marketplace lender and crowdfunding platform, announces the addition of Matthew Zall as Chief Investment Product Officer as the firm prepares to expand into the single-family rental market with longer term, permanent financing products. The number of non-owner occupied single-family properties in the U.S. including townhomes, condos, and 2-4 unit properties grew to almost 24 million units valued at over $6 trillion in 2016, according to ATTOM Data Solutions.

Zall brings to Patch of Land more than 12 years of real estate and mortgage experience, as well as expertise in financing and product development. He pioneered three of the industry’s first-ever multi-borrower single-family rental securitizations, helping to build Blackstone Group subsidiary, B2R Finance, (now known as Finance of America Holdings, LLC) from start up to a multibillion dollar lender in only a few years. Prior to joining B2R, Matt was a Commercial Real Estate (CRE) trader at J.P. Morgan and Bear Stearns. At Patch of Land, Zall will execute strategies to enable the expansion of the firm’s position as a marketplace lender by offering both accredited and institutional investors additional opportunities to invest in this asset class.

Fintech Startup Current Announces $ 3.6 mil Raise With Eye on Injecting “Cs” Into Payments and Banking Space (Huffington Post), Rated: A

Today “stagnating banking industry,” announced a seed round venture capital raise of some $3.6 million backed by

THE FINTECH PARADOX IN ONLINE BUSINESS LENDING – March 2017 (IOU Financial), Rated: A

However, not all Fintech business models have yet matured into profitability, key to the definition of success. A structural element of future success for new entrants resides in their ability to access cheaper funding and quality customers. Who can offer these things?  With that in mind, Banks, especially small ones, should feel confident they can monetize their position to bring down their cost of innovation.  By working with innovative companies in financial technology, they can quickly benefit from new and very cost efficient ways to grow revenues. Online lending could be the first expertise to explore in order to welcome small business back and help them grow.

It is true that technology has enabled new entrants to offer innovative services not available at banks, either as a product offering or at a more competitive price.  It is also true that banks have been slow at embracing technology as a growth engine, mostly due to lack of capital to fund innovation. This is especially the case for smaller banks who tend to lack financial and human capital to invest heavily in R&D and innovate. Large banks with deep pockets have found ways to either build or partner and grow their presence in areas where technology offer a clear competitive edge. Large banks have in fact recognized the win-win rationale for partnering with Fintech, an opportunity also open to small banks. Large banks love Fintech because they can afford it. Small banks can as well.

How will the paradox divide disappear between banks and Fintech Alternative Lenders?  It will dissipate with the online lender taking time to educate banks about their efficient loan platforms and how they can help banks reach new customers, develop new funding sources and grow revenues, especially non-recourse fee income.  Banks should also be curious and consult with online lenders to better define how they can benefit from their technology and expertise in lending small.

StackSource Announces Lending Marketplace at LendIt Conference (CRE.Tech), Rated: B

Today was a big day for Tim Milazzo, his company StackSource and possibly commercial real estate lending as whole. Tim had been selected as a pitch finalist for the LendIt conference in New York.

But, Tim had an extra surprise in store for this big day. His company StackSource has been a tool for property lenders to centralize workflow. While they are a new company, emerging from the TechStars accelerator program late last year, they have already helped property owners process over $1B of loan offers on the platform. But, this was never the end game for Tim and his co-founder Nathan. They started the company with the idea of creating a marketplace for commercial real estate borrowers. Today, they not only pitched at LendIt, they also went live with the marketplace that they originally envisioned.

United Kingdom

Zopa reports record month of lending (Bridging&Commercial), Rated: AAA

Zopa has recorded its second consecutive month of record lending.

The peer-to-peer platform revealed that it lent more than £81m during February 2017 as it approved nearly 12,000 borrowers.

This was £24m more than for the same period last year.

The platform celebrated a record year of lending during 2016 as it passed the £2bn milestone and back in November it announced plans to launch a bank.

P2P Lender RateSetter Partners with Mortgage Aggregator Connective (Crowdfund Insider), Rated: AAA

P2P lender RateSetter announced a partnership with national mortgage aggregator Connective which aims to give accredited brokers access to their personal loan products.

The move is part of RateSetter’s ongoing focus on the broker channel to continue its growth in consumer and business lending. By joining Connective’s lending panel, RateSetter plans to help brokers improve client’s financial wellbeing in areas outside of the traditional mortgage offerings.

RateSetter returns fall as market demand rises (P2P Finance News), Rated: AAA

RETURNS on RateSetter’s shorter-term accounts have fallen slightly due to changes in market demand.

The platform’s rolling market product was at 3.3 per cent last week and is now offering three per cent, its one year fix is now 2.9 per cent, down from three per cent, while its five year fix has actually increased slightly from 4.8 per cent to 4.9 per cent.

The rates are set by market demand on the RateSetter platform, but as of the end of March 2016 they were at 3.4 per cent for one month, 3.7 per cent for one year, 4.8 per cent for three years and 6.1 per cent for five years.

BondMason to increase bridging funding appetite (Bridging&Commercial), Rated: A

Peer-to-peer (P2P) service provider BondMason aims to expand its lending through bridging lenders in 2017, with over half of investment expected to be through non-P2P platforms.
The news follows a surge in demand for bridging finance in the final quarter of 2016, with the total lending figure for the year standing at £2.83bn.
Stephen added that while the bridging market has seen more competition from P2P lenders, it was mostly “around the edges”.

Misys backs gamification to educate next generation on money management (Zawya), Rated: A

Misys is making gamification an integral part of its Misys FusionBanking Essence Digital platform to help banks educate the next generation on better money management. Integrating Moroku’s GameSystem directly into the Essence Digital architecture enables banks to inject some fun into personal financial management (PFM) and help consumers achieve their savings goals.

With research research forecasting the mobile gaming market in MENA to be worth up to US$400m by 2021, the case for gamification in helping banks to attract, engage and retain customers is compelling. Banks stand to benefit from building greater trust with consumers and capturing market share. Gamification can also deliver a significant boost to customer experience. FusionBanking Essence Digital brings points, leaderboards and rewards to standard banking activity, to educate and also support savings and spend management.

China

China Consumer Finance Challenge Needs High-Tech Solution, China Rapid Finance CEO Tells LendIt (Broadway World), Rated: AAA

The challenge of expanding consumer finance to China’s vast population can only be effectively tackled with a high-tech solution that enables low-cost customer acquisition, Dr. Zhengyu (Zane) Wang, founder, chairman and chief executive officer of China Rapid Finance Limited (“CRF” or “the company”), told the LendIt USA 2017 conference.

Over the past two decades, China has emerged from being a market that in 2000 featured essentially no credit bureau, decision science, or consumer finance, Dr. Wang said in a March 7 keynote address at LendIt USA 2017, which was held at the Jacob Javits Center in New York City. China’s consumer finance market today boasts many of the same elements as the U.S. China now has a central bureau for credit reporting that covers 800 million people, while credit cards serve about 300 million people, he said.

Still, China’s consumer finance market has a long way to go, in a nation where non-mortgage credit is only 2 percent of GDP, Dr. Wang told the LendIt audience. Only about 16 percent of Chinese consumers have credit cards, compared with about 60 percent in the U.S.

MENA

Iran Launches a FinTech Association to Push for Development (Crypocoins News), Rated: AAA

Iranian financial technology companies have banded together to create Iran’s FinTech Association, several months after the Central Bank of Iran (CBI) suggested the idea, reports the Financial Tribune.

Known as FinTech A, the Iran FinTech Association is designed to bring industry players under a single area so that solutions can be found to their problems and improvements can be made between innovators and regulatory bodies.

Nasser Hakimi, director of CBI’s IT Department, said to the Financial Tribune, that he had proposed that FinTech companies develop a forum to figure out the challenges involved, identity key questions, as well as reach out to the regulator for solutions.

Last February, it was reported that while economic sanctions had been lifted against Iran, screening rules were still in place when trading with Iran, putting barriers in place for those within the U.S. and the EU who wanted to conduct bitcoin transactions within the country.

Asia

Indonesian P2P lending platform Amartha raises Series A, aims to disburse US $ 30M by end of year (e27), Rated: AAA

Indonesian P2P lending platform for unbankable society Amartha today announced that it has raised “seven digit” US Dollar in Series A round led by Mandiri Capital Indonesia (MCI).

Amartha plans to use the new funding to expand their coverage by creating mini-branch across Java and Bali, which they aim to complete by end of 2017.

Having had disbursed “more than” IDR68 billion (US$5 million) to 30,000 women who owns small businesses, the startup aims to disburse US$30 million to 100,000 borrowers by end of the year, with 10,000 active lenders on board.

Authors:

George Popescu
Allen Taylor

July 18th 2016, Daily News Digest

July 18th 2016, Daily News Digest

News Comments United States Moody’s decides against downgrading Prosper’s previous securitizations. Our readers may remember that back in February the news that Moody’s may downgrade a Prosper/Citi securitization bond started the whole p2p loan quality uncertainty media blitz. While that was just the spark, it is nice to see that Moody’s has reconsidered and feels […]

July 18th 2016, Daily News Digest

News Comments

United States

United Kingdom

Indonesia

Sweden

News Summary

 

United States

Moody’s Decides Against Downgrade for Prosper Marketplace Loan Deal, (Wall Street Journal), Rated: AAA

The ratings firm said in February that it was watching a Citigroup Inc. securitization of Prosper loans for the possibility that the loans might go bad at rates higher than initially expected, which could force it to lower its rating on some of the notes. It raised its forecast of future losses to around 12% from as low as 8% of the money lent.

But on Thursday, Moody’s said “the absence of substantial deterioration” of the loans was a major reason it decided not to downgrade the notes. It said this “reduces the likelihood of extreme underperformance.” The notes in question will keep their initial rating of Ba3, or three levels below investment grade. Higher-grade parts of the deal weren’t on review for downgrade.

In recent weeks, however, there have been signs of a thaw in the market’s reticence. Social Finance Inc., known as SoFi, completed its first rated sale of bonds tied to personal loans. Marlette Funding LLC this week launched its own sale of bonds tied to loans, the first for the platform since the winter.

An analysis of the online-lending bonds by PeerIQ, which tracks the industry, shows the prices of bonds tied to Prosper loans have risen in recent weeks. Investors had been demanding yields on some Prosper-linked bonds in April of nearly 10 percentage points above benchmark bonds. That spread fell to just roughly 4 percentage points as of the most recent trades in July, PeerIQ data show.

Installment Lender Using Bank Partner Model Needs Maryland License, Court of Appeals Rules, (JD Supra Business Advisor), Rated: AAA

Comment: This could be a really big deal for all the alt lenders who are originating through banks.

The Maryland Court of Appeals, the state’s highest court, in CashCall, Inc. et al. v. Maryland Commissioner of Financial Regulation, recently affirmed the judgment of the Court of Special Appeals (MCSA) directing CashCall to cease doing business in Maryland without a Credit Services Business Act (MCSBA) license and to pay $5.6 million in penalties in connection with loans already made.

While much attention has been focused on the risks created by Madden v. Midland Funding, LLC and the so-called “true lender” issue, the CashCall decision illustrates how the bank partner structure used by many lenders can be threatened by state licensing statutes as well.

The case arose out of CashCall advertising on its website to consumers and offering them a method to apply for loans online. The loans were made by out-of-state, state-chartered banks at interest rates significantly in excess of the maximum rate permitted by Maryland law, and the banks also charged loan origination fees. Shortly after origination, the banks sold the loans to CashCall, which collected all payments on the loans.

The Commissioner contended that CashCall was a “credit services business” as defined by state law, because it assisted consumers in obtaining an extension of credit “in return for the payment of money or other valuable consideration.” CashCall argued that, in the absence of a direct payment to it from the consumer, it could not be properly classified as a credit services business.

According to the court, CashCall was a “credit services business” because it received compensation “in return for” assisting consumers in obtaining loans.

The Court of Appeals reached an ominous conclusion regarding the impact of federal preemption on the CashCall program. As the court noted, the MCSBA prohibits a credit services business from assisting a consumer in obtaining a loan at an interest rate that exceeds the maximum rate permitted by Maryland law “except for federal preemption of State law.” However, according to the court, “[a]lthough federal law allows federally insured banks to charge out-of-state consumers the same interest rate permitted by the bank’s home state, regardless of the interest rate caps imposed by the law of the consumer’s resident state,” the MCSBA does not permit a credit services business to “assist a consumer in obtaining a loan from any in-state or out-of-state bank, at an interest rate prohibited by Maryland law.”

Under the court’s reading, the MCBSA would effectively prohibit CashCall from assisting a bank in the origination of loans at rates expressly authorized by federal law.

Why online lenders should become banks, (Financial Times), Rated: AAA

Comment: In my personal view they shouldn’t become banks as that equals having 1 hand tied behind your back. Instead they should find a depositer-like source of capital, maybe in partnership with banks.

Even last year, online lenders more than doubled the size of their loan books on average — wildly outpacing even the raciest bank — and many were still valued on three-digit earnings multiples. But much has since changed in the sector and — believe me — they aren’t jeering now.

If lenders want the sector to be more than a specialist backwater, or a technologically-enabled version of the old finance company model (think Household or GE Capital), platforms need to rethink how they do business. One way off the hamster wheel might be to put more of their loans on their own balance sheets. While that would expose them directly to losses, with consequences for capital requirements and regulatory oversight, it would also provide a more stable income base, making it easier to survive lending downturns. The snag is that it would not get round the problem of having to rely on fickle market funding for support.

Solving that requires online lenders to take a step that many a year ago would have scorned: joining the banking deadbeats to tap regular deposit funding.

Many platforms have been considering whether or not this might be in their interest. But the US regulators aren’t that keen on issuing bank charters to young and flighty marketplace firms.

Which leaves takeovers. Valuations no longer make it totally impossible for an established bank to consider snapping up a marketplace platform. Lending Club is valued at around two times its book, and OnDeck Capital, the other listed platform, at about one times.

LendingClub Names BlackRock’s Dunne Chief Capital Officer, (Bloomberg),Rated: A

Dunne, who previously led BlackRock Inc.’s San Francisco office, will work with LendingClub investors and retail distribution partners, the company said Monday in a statement. “Patrick’s wealth of experience and diverse background across capital markets, strategy, portfolio management, product development and client service will help us drive the next phase of Lending Club’s growth,” Sanborn said in the statement. “Patrick will play a key role in reaffirming our continued commitment to our investors.”

Jefferies Group is again considering selling bonds tied to LendingClub consumer loans after scuttling an effort amid the shakeup there. Many investors are conducting due-diligence checks and have said they may purchase more loans, although maybe initially at muted levels, the CEO said in June.

Dunne’s plan to depart from BlackRock was announced earlier this year. He had worked for Barclays Global Investors before BlackRock acquired it. Dunne has a bachelor’s degree from the University of California at Berkeley and a master’s in management from the Stanford Graduate School of Business, according to the statement from the San Francisco-based company.

LendingClub advanced 3.6 percent to $4.65 in early trading at 8:21 a.m. in New York.

Should investors look at investing in P2P lending?, (CNBC Video), Rated: A

Comment: Ron Suber on CNBC explaining what Prosper does and how they do it. Video covering the basics of Prosper which will not be news for our readers. However worth a watch as it’s well articulated and well presented.

Delinquencies numbers shared: Blended average advertised at 7.4% blended net return. A great yield for fixed income for sure.

Millennials are ditching financial advisors for apps, (New York Post), Rated: AAA

It’s time for many technophobic 50-something financial pros to look for another job. That’s because millennials, many of whom are about to inherit considerable assets, are not looking for a sit-down meeting in a downtown office to discuss investment options.

“Before, change was happening, but it was generational. You could adjust to it. And a business model was, in essence, immortal,” says Bill Hortz, founder of the Institute for
Innovation Development. In the 1950s, he noted, the average company stayed in the S&P 500 for 75 years.

“Today it is 14 years and dropping rapidly,” he says. Change is feeding on itself, and the effects of analytics and artificial intelligence will be expanding. They will dramatically change “client experiences and client interfaces,” Hortz says.

The new client has expectations of “24/7 access to information that is readily available via a smartphone, tablet or computer. Financial issues and questions that once required the advice of a certified professional can now be answered with a click on any digitally enabled device,” according to “The Advisor of the Future,” a 2015 report by Hearsay Social, a company that advises financial firms.

This represents “a potential sales opportunity of almost $2 trillion,” the report said. “In addition, customers will soon be able to search for products via additional technologies, including voice and gesture commands.”

“What’s more important isn’t the initial amount, but that someone makes a commitment to invest on a regular basis.”

“They need an easy way to communicate with advisers, be it on the computer or text messaging,” Raznick says. “They need to see visuals on how investing is more lucrative with an adviser as opposed to an automated solution.”

The top honchos at Andreessen Horowitz sat down for a podcast after raising .5bil ( The financial revolutionist), Rated: AAA

They asserted that with $10 trillion of debt trading with a negative yield throughout the world (now $13 trillion, actually), there’s a limitless abundance of capital sitting on the sidelines just waiting to finance innovation.

Someone should buy Lending Club.

These days, Lending Club’s prestigious board is probably sick of seeing critical articles like this one in The Wall Street Journal. And while Scott Sanborn is doing about as good a job as possible in trying to clean up the mess, he’s constrained by the realities of having to please his badly burned shareholders. Adding to his headaches is the fact that charge-off rates are now rising fast (a bad sign no matter how it’s spun). The article didn’t even mention the industry’s ongoing problem with “loan stacking,” whereby a borrower takes out multiple loans before the loans can be reported to the credit bureaus. That could be the next shoe to drop. Some fund or some company with vision, patience and an appreciation of credit cycles should buy Lending Club and fix it before time runs out.

“Fintech is the new normal,” says Nicols. He also adds that fintech is moving from its “pie-in-the-sky” phase to the application phase where “real companies are learning real lessons.” We couldn’t have said it better. See more here.

Morgan Stanley states the obvious regarding roboadvisors. “Roboadvisers aren’t going away any time soon, and the wealth management industry needs to make some changes if it wants to beat them and a host of other threats it is facing.”

Deloitte backs uber cool microinsurance initiative. The accounting and consulting giant has partnered with two start-ups (Statumn and Lemonway) to launch a proof of concept project named LenderBot. Billed as the first microinsurance solution for the sharing economy, the product aims to allow people to use Facebook’s messenger platform to create a peer-to-peer microinsurance contract for borrowed goods.

Twitter and Bloomberg deepen link.  As Bloomberg continues to fend off a challenge by Blackrock and Goldman-sponsored competitor Symphony, it’s turning to Twitter as a new distribution partner for selected live markets coverage and three of its regular shows.

Paypal gets even more P2P company. Early Warning is not a home alarm company. It’s a P2P solutions provider for banks that recently announced (see its press release) that Chase, Capital One and Wells Fargo are now using its pipes to facilitate P2P money transfers.

Big banks prepare to crush p2p startups with clearXchange, (TradeStreaming), Rated: A

Quietly over the past few months, some of the largest US banks have rolled out P2P payment functionality in their banking apps. Now, 5 of the largest US banking institutions, including Chase and Bank America, enable their customers to send money to one another and eventually, to friends and family who hold accounts at other banks.

Instead of building their own solutions, participating banks have signed up to the clearXchange network, a white label P2P payment platform for financial institutions. After inking deals with leading banks, P2P payments on the clearXchange network are now available to more than 100 million online banking and 70 million mobile banking users in the U.S.

In the first quarter of 2016, customers at banks in the clearXchange network completed more than 46 million P2P transfers, accounting for over $16 billion in combined transaction volume. That number is expected to grow as banks already on the network ramp their marketing of p2p capabilities, and more banks sign up for the service.

Before clearXchange, it wasn’t easy to send payments across banks. A whole industry of P2P payment players has sprung up to help bridge this gap by putting a transaction layer on top of existing banking infrastructure. As a workaround to directly moving money between bank accounts, technologies like PayPal and its faster growing service, Venmo move money between stored value accounts. So, while payments may be instantaneous, it can take days for the receiving party to be able to access that cash directly from her bank account, as money moves from the P2P platforms into the banking system.

clearXchange changes all that. Banks on the network are active participants this time, enabling payments to move freely between banks at the account level. clearXchange’s parent, Early Warning, is owned in part by seven of the largest banks in the U.S. Early Warning has been around for 25 years, providing thousands of banks and credit unions across the country with risk, fraud prevention, and authentication solutions.

clearXchange is a network and joining the network becomes more valuable when they’re more banks on the network.

Consortium efforts can pay off massively, but they’re hard to pull off. Just look at the Merchant Customer Exchange, or MCX, a retail industry consortium that wanted to do an end-around of the credit card networks. Tired of paying interchange fees, companies like Walmart and Target worked for years to roll out a mobile payments solution, dubbed CurrentC. Walmart ended up launching its own payments, Walmart Pay. MCX announced layoffs in May and its future is uncertain.

Why Brexit and Other World Events Have Not Seriously Hurt U.S. Small Business Lending, (Forbes), Rated:A

Loan approval rates at banks increased slightly in June 2016, according to the most recent Biz2Credit Small Business Lending Index, the monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com. The research shows that loan approval rates at big banks ($10 billion+ in assets) hit 23.3%, a post-recession high, last month. Regional banks are granting nearly half (48.8%) of the funding requests they get. Additionally, institutional lenders continue to grow in force and are approving more than six-in-ten funding requests from small businesses.

So far, the Brexit has not seriously threatened the American economy, nor has it tightened U.S. small business lending. In fact, in some ways, the uncertainty will benefit U.S. small business borrowers:

  1. Foreign money is being invested in the U.S. as the dollar has gotten stronger while the British pound dropped substantially.
  2. Institutional investors from overseas will look to the small business credit markets for yields.
  3. The stability of the U.S. economy eases the minds of bankers, who are traditionally risk averse.
  4. The Federal Reserve has delayed further its long anticipated interest rate hike, which is now unlikely to happen anytime soon.

Following the shakeup of the European Union, the terror attack in Nice, France, and political turmoil in Turkey, more money is likely to flow into the small business lending marketplace from foreign investors.

Orchard is Getting Bigger, (Crowdfund Insider), Rated: B

Orchard Platform is growing. So much so they have leased a lot more Manhattan space. Announced this week, Orchard is upgrading from the 7,000 square foot office space at 101 Fifth Avenue, to a 26,242 square foot space by taking over two floors of 386 Park Avenue South.

“At Orchard over the past 6 months, we have seen an uptick in demand from international investors for U.S. credit, including from clients in China, the U.K., continental Europe, Israel, Argentina, and Canada.”

United Kingdom

BoE holds rates, P2P “not linked”?, (Alt Fi News), Rated: AAA

The Bank of England yesterday announced that the base rate would be held at 0.5%, despite widespread claims to the contrary. The markets had priced in an 80% chance of the Bank cutting rates, but the Monetary Policy Committee ended up voting 8-1 against the move.

The effect of movements in the base rate on alternative lenders has been the subject of much discussion over the lifetime of the industry.

Giles Andrews, Executive Chairman of Zopa, responded at the time by arguing that a rise in the base rate would only serve to widen bank spreads, which would be paid for by consumers – making the peer-to-peer lending proposition “even more compelling”.

The Bank of England said yesterday that “most members of the committee expect monetary policy to be loosened in August”. One option could be to cut rates, possibly to 0.25%, which would be a record low.

If rates were indeed cut, then there may be some adjustment to the rates charged by peer-to-peer lending platforms. A number of the big US marketplace lenders have raised rates over the past few months. Prosper raised rates for the second time this year in late May, by an average of 0.29% across its loanbook. The platform’s chief risk officer Brad Pennington said that the rate hike came “in anticipation of action by the Fed to raise rates”.

But Pete Behrens, co-founder and chief commercial officer at RateSetter, says that the cost of funding for his platform is not linked to the Bank of England, and that it finds its own equilibrium.

Zopa’s head of risk Sharvan Selvam posted a column this morning on the potential impact of a shift in interest rates. Selvam first highlights the stable returns that were delivered by Zopa during the last recession, using the graph below.

Selvam also points to the predictability of the platform’s returns over the past decade. As can be seen from the graphic below, 2008 is the only year on record in which Zopa’s actual returns dropped below its expected returns.

UK P2P lender raises £7.2m, (Finextra), Rated: A

MarketInvoice, a UK-based P2P lender has secured more than £7m in its latest round of fundraising, defying the economic uncertainty around startups following the UK’s controversial vote to leave the European Union.

The funding was led by Polish private equity group MCI Capital which has also invested in Azimo, an online money transfer startup. Other investors included existing backer Northzone.

“Recent intervention by the Bank of England suggests we might see a significant reductions in bank lending. As in the aftermath of 2008, P2P lenders can once again step in to provide that funding.”

Lenders to maintain or increase P2P investments post-Referendum, (Financial Reporeter), Rated: A

Lending Works asked around 1,600 active lenders how the Brexit vote and subsequent economic volatility would affect their levels of investment in P2P lending as a relative share of their investment portfolios.

Just over 62% confirmed that they would be leaving it unchanged in the short-term, while 19% said they would be looking to increase their portfolio allocation to P2P.

‘Do investors understand alternative finance risks?’, (Financial Times), Rated: A

The Financial Conduct Authority launched a review of both peer-to-peer lending and equity crowdfunding, two different kinds of investments that are together labelled “alternative finance”.

The FCA review has not come as a surprise to the industry — it had been planned since 2014 — and it was broadly welcomed by all of the lenders and funders.

Cormac Leech, a peer-to-peer analyst at investment bank Liberum, said part of the reason for P2P’s popularity was the perceived “safety” of debt investments compared to volatility in the equities market. Mr Leech said that lumping the different sectors together may lead to confusion. “There’s a huge risk that P2P gets tarred with the same brush [as equity crowdfunding],” he said, believing the latter to have much higher levels of risk.

While the major peer-to-peer lenders have agreed on common definitions and standards, allowing investment returns to be meaningfully calculated and compared with each other, AltFi says the crowdfunding platforms have not.

The government’s Innovative Finance Isa, designed to hold alternative investments in a tax-efficient wrapper, was introduced in April but so far none of the major companies have been given full regulatory permission to launch one.

Although there have only been a handful of successful investor exits over 1,200 crowdfunded deals Mr Zheng has tracked between 2012 and 2015, he said it was too early to make any assumptions.

Asset managers run risks in the rush into peer-to-peer loans, (Financial Times), Rated: A

Asset managers such as Invesco Perpetual, Woodford Investment Management, BNY Mellon, Vanguard, Baillie Gifford and Schroders have been early adopters — but in doing so they are investing in a fledgling and divisive industry.

Cormac Leech, alternative finance analyst at Liberum, says he still considers “fraud risk” the biggest threat to the sector’s growth.

Aside from these incidents, analysts of peer-to-peer lending platforms are quick to point out that their loan books have not come under any significant pressure, and that the asset class remains untested through the credit cycle.[ Comment: everybody always forgets of Zopa and Prosper which were around in 2008 in fact ].

The effects of the UK’s decision to leave the EU may also test the platforms’ robustness. Data provider AltFi has said it will add to a “list of headwinds” for the UK’s alternative finance industry.

Doubts over P2P loans’ credit quality are most keenly expressed in the depressed share prices of the handful of investment trusts specialising in buying them. For the most part, it is through these trusts that mainstream asset managers have looked to gain their P2P exposure, rather than buying loans directly from the platforms as a retail investor would.

Two of the biggest of these funds — VPC Speciality Lending and P2P Global Investments, from US hedge funds Victory Park Capital and Eaglewood Capital respectively — have both proved popular.

Invesco Perpetual, the UK arm of the $790bn US manager, owns a third of both trusts, holding the shares within its retail funds. It also owns half of another trust — UK P2P lender Funding Circle’s SME Income fund, which invests solely in Funding Circle loans to small and medium-sized UK businesses. Woodford Investment Management, run by renowned fund manager Neil Woodford, is the second-largest holder of both the VPC and P2P trusts.

BlackRock, the world’s largest asset manager, owns an undisclosed part of an £150m stake in Funding Circle, while Vanguard holds a 5 per cent stake in Lending Club, a company that Baillie Gifford also had a 9 per cent stake in until May this year.

Peer-to-peer’s popularity was in part down to the sector’s ability to “weave a beautiful story”. “We think [the lenders] will come into trouble,” he says. “We like to own the loans, not the equity. We think we’re being better paid here than in many parts of the equity and bond markets.

But doubts over how robust their credit-checking models are remain.

“There’s a complete spectrum — it goes from people who ostensibly use an absolutely classic bank credit model [and] there are others who say they scour the internet and pick up different points [to the banks],” Mr Foottit says.

“We genuinely don’t know. We’ve all got to wait and see, and make a valid judgment.”

Can London remain a fintech hub post-Brexit?, (Growth Business), Rated: A

Given the uncertainty over whether the UK will keep its passporting rights despite Brexit, many tech giants have vocalised their interest in relocating their European headquarters from our capital. Earlier this week, London-based online money transfer firm Azimo told Reuters it was considering moving its HQ to the continent, fearing Brexit would knock London off its pedestal as a fintech capital.

“It is perfectly possible that financial stress in the short term funding markets could cause the banks to slow down or delay lending to SMEs – a repeat of what we witnessed following the financial crisis in 2008,” he tells GrowthBusiness.

Davies believes this post-Brexit uncertainty presents a two-way challenge. “Alternative lenders, like ourselves, have to make businesses more aware of what they have to offer, and SMEs have to be prepared to look at other (non-bank) options,” he says. A recent survey of UK SMEs carried out by his firm revealed that almost one in three entrepreneurs would shelve investment plans if their traditional bank turned them down for finance, which may be indicative of a slow-to-change bank-first mindset.

The post-Brexit environment may also help thin the herd, according to Nucleus Commercial Finance CEO Chirag Shah. “Any AltFi company struggling for lending volumes will be affected by the EU referendum– they were suffering pre-Brexit; Funding Knight’s near collapse is a clear example of this. Post-Brexit, these platforms will struggle even more to attract capital,” he says.

“Post-Brexit, there is the definite potential for losses to increase for funding platforms with lax underwriting standards.  However, there are also lots of opportunities: indeed a medium term lower interest rate environment will entice more investors to platforms. I believe businesses specialising in crowdfunding and property lending will have opportunities for growth.”

Peer-to-peer platforms will be paying much more attention to default risks in certain sectors if our economy does slide into recession, MarketInvoice’s Stocker warns.

While preparing for economic uncertainty may be wise in general, sounding the doom-and-gloom horn post-Brexit may be premature., says Stephen Archer, business analyst and director of Spring Partnerships.

Veteran tech entrepreneur Rupert Lee-Browne is no stranger to uncertain macroeconomic conditions, having braved the Dot.com bubble of the early noughties and the volatility of the 2008 recession at the helm of CaxtonFX. “Secure your funding,” he advises. “The chances of investors backing early or mid-stage British tech business from here on in is slim.”

Indonesia

Indonesian P2P lending KoinWorks seeks new funding round, (Deal Street Asia), Rated: B

Peer-to-peer (P2P) lending platform KoinWorks is looking for a new investment round that will be used for activities expansion. KoinWorks connects lenders and small to medium-sized business owners. According to the company’s website, KoinWorks aims to democratize finance in Indonesia by reducing costs and making it easier for everyone to access capital.

P2P lending platforms – namely Modalku, Investree, UangTeman, GandengTangan, Amartha, and many others – are enjoying a steady increase of popularity in Indonesia, despite only 25 per cent of the population (60 million people) to have bank accounts.

Currently, fintech startups do not clearly fall under the purview of any single authority. While technology startups are regulated by the communication ministry, those engaged in financial services are governed by the Indonesian Financial Services Authority (OJK).

Sweden

How having zero experience in finance helped this founder build a .25 billion payments company, (Business Insider), Rated: A

Swedish payments startup Klarna is now a $2.25 billion company, but when CEO Sebastian Siemiatkowski cofounded the company a decade ago, none of the three founders had any experience in finance whatsoever.

That was, he tells Business Insider, actually a blessing.

The cofounders were naive 23-year-olds, who didn’t think the same way that traditional bank and finance executives did, and that gave them an advantage.

One of Klarna’s earliest ideas was to try and separate “buying” and “paying” for online purchases. Everyone knows how annoying it is to input card information when you are trying to check out. The Klarna dream was to have you just input an email address, one click, and then pay later. Klarna would guarantee the payment, and customers would have a week or two to pay up.

The problem was Klarna didn’t have any money to speak of, beyond some seed capital, which was certainly not enough to cover the money during the in-between period. How were they going to get the money to pay the merchants while they waited for customers to make a payment?

Klarna’s solution was to just ask the merchants if they would be ok with waiting to get their money. “Banks would never have dreamed of asking that,” Siemiatkowski laughs. It simply wouldn’t have occurred to them that any merchants would ever agree to that. But the merchants Klarna talked with wanted to grow their online sales, badly, and were willing to experiment.

A decade later “pay after delivery” has become a cornerstone of Klarna. Klarna’s technology instantly assesses whether an online shopper is trustworthy for a particular transaction, taking up to 140 factors into account, and then assumes the risk. The customer puts in his or her email and zip code, and then gets to examine the product before paying 14 days later.

Klarna had $330 million in revenue in 2015, and is profitable, according to Siemiatkowski. It’s also in the midst of a big US push, and has been integrated with retailers like Shoes.com andOverstock.com.

Author:

George Popescu