We’ve all been there: Wasting too much time navigating crowded malls and waiting on countless lines in search of that perfect gift. When online shopping became mainstream, many shoppers waved goodbye to the inconvenience associated with traditional brick-and-mortar retail, and elected to make purchases over the internet. Savvy shoppers found that they can buy the […]
We’ve all been there: Wasting too much time navigating crowded malls and waiting on countless lines in search of that perfect gift. When online shopping became mainstream, many shoppers waved goodbye to the inconvenience associated with traditional brick-and-mortar retail, and elected to make purchases over the internet. Savvy shoppers found that they can buy the items they want—usually at better prices—without ever leaving the comfort of their home.
The dynamics that make online shopping a much more convenient and pleasurable experience are also impacting the way consumers apply for loans. Technology-savvy customers would prefer to avoid the hassle of driving to the branch and completing mountains of paper work when all these processes can easily be performed through a laptop, smartphone or tablet. New technology has inspired a whole universe of online lenders that are successfully tapping into consumer trends by offering easy access to consumer loans at attractive rates—all without the overhead of maintaining branches. It’s a reality that only continues to gain momentum. For example, American Banker reports that online lending grew a staggering 700 percent over the past five years. And, Chase Auto Finance just reported that 20 percent of consumers have already secured an auto loan online, and 47 percent indicated they would do so if the technology was available.
The choice is that stark. Online lending is not a trend, it is mainstream. Banks, credit unions, and finance companies face a simple choice in dealing with this competitive threat: launch their own branded online lending solution to satisfy the changing demands of customers, or don’t, and watch their customer base evaporate.
Adding online lending capabilities—and creating an optimal experience for consumers—is a necessity for any traditional lender. Implementing a program is not complicated or expensive—if you chose the right solution. It shouldn’t detract from branch activities; in fact, online lending allows financial institutions to extend core value propositions into the digital marketplace. There are just three simple rules to follow: flexibility, convenience, and security. For lenders, flexibility is essential. The freedom to change lending programs and rules in short order gives the financial institution the opportunity to aggressively compete in a crowded marketplace. Consumers, for their part, want convenience. This means expediency, simplicity, and accessibility from any device and any location. In their mind, the application is the means to an end. So, creating an online experience that enables customers to complete the application quickly and securely helps them achieve their objectives. And, all parties in the lending ecosystem require strong authentication and security tools to verify online applicants and to keep their data safe.
Lenders looking to successfully implement online lending programs must evaluate several criteria to choose the loan origination system that works best for their needs. These attributes include:
A configurable platform that allows the lender to create, change and manage all lending forms, rules, decisioning parameters and workflows, without having to resort to time-delaying IT resources
Auto-decisioning capabilities that expedite loan approval
Robust authentication technology (ID) that utilizes advanced algorithms and big data
A responsive consumer portal that is optimized for mobile devices, and securely stores customer data
Auto-save features that securely store customer data so that customers can start an application on one device, save it, and complete it on another device when they’re ready
A single sign-on that is integrated with the lender’s database, enabling all pertinent personal information to automatically transfer directly into the loan application
The ability to cross sell ancillary loan products during the approval process
Enabling consumers to open new accounts, such as a checking, within the loan application process
Facilitating upload of documents, images and other loan stipulations from scanners and camera phones
All these features and capabilities represent the bare minimum that a robust LOS platform should deliver—anything short of these will put the institution at a distinct disadvantage. On top of that, the LOS vendor should have a strong support team that is experienced in helping lenders make the transition into online lending.
There’s no better time than now for traditional financial institutions to offer their own online lending programs. The market trends are obvious; it’s time to regain market share. Online lending is straightforward, profitable, and most importantly, what the market demands.
As co-founder and president of Teledata Communications, Inc., Bill Nass is responsible for the company’s sales, marketing, product development and strategic third-party relationships. Bill has over 25 years of experience in the lending sector, and is actively involved with several industry associations. In addition, Bill serves on the American Financial Services Association’s (AFSA) Associate Advisory and E-Commerce Committee. Bill holds a B.A. from the University of Maryland.
News Comments Today’s main news: Texas regulator sends cease & desist order to BitConnect. UK wins race for tech investment. Tencent licensed to sell mutual funds to WeChat users. Wishfin to raise $50M. FINTQ goes beyond lending. Today’s main analysis: Strategies banks, credit unions must implement this year (a must-read). Today’s thought-provoking articles: How the tech giants are going […]
Texas issues cease and desist order to BitConnect over ICO. AT: “This could set a nasty precedent with more states to follow. Is the U.S. heading for a China-like crackdown on ICOs? If so, it’s likely an effort to protect Wall Street traditional IPO issuers more than individual investors.”
How the tech giants are going after bank customers. AT: “The fact that this is published by American Banker and not Forbes, Business Insider, WSJ, or one of the other top-tier generic news sources makes this analysis worth a read. Bankers indeed feel threatened by Amazon, Google, Facebook, and Apple. This article makes it clear they are far more threatened by them that SoFi, Prosper, or OnDeck. Should online lenders feel threatened?”
The year of digital. AT: “This is an interesting read for investors, with some very interesting insights on everything from data to the blockchain.”
The Texas regulators say BitConnecthas placed 9.4 million of the coins into the online cryptocurrency marketplace, representing a market value of $4.1 billion as of Jan. 3 and expects to issue a maximum of 28 million coins.
Lost in all this was an inescapable fact: Big tech firms like Amazon don’t need a charter to disrupt the banking industry. Indeed, they are already changing it.
Amazon has done more than $1 billion in small-business lending since it first started offering loans. In 2017, it launched Amazon Cash, which effectively allows it to take cash deposits from customers via ubiquitous convenience stores like 7-Eleven and Sheetz. Other tech firms, including Apple and Samsung, offer their own payment apps.
If banks effectively end up as utilities to larger tech firms, they will lose out. McKinsey forecasts manufacturing will produce only 35% of profits in finance, a return on equity of 4.4%. Distribution, meanwhile, will produce 65% of profits, with a return on equity of 20%.
It’s not clear what tech giants have in store next, but they will likely push the limits of traditional finance. It’s not hard to imagine the Bank of Alexa, enabling customers to move money and pay bills just by shouting at the Amazon Echo in their living rooms.
With that, these are our top 10 market structure trends to watch in 2018:
MiFID II soft launches
You’re probably thinking, “It’s not a soft launch—MiFID II is the law of the land now!” That is technically true, of course. And for better or worse, even though the SEC has provided U.S. firms with “no-action relief” from some European rules, Europe’s regulators don’t have the no-action relief lever that U.S. regulators became so fond of using as they implemented Dodd-Frank. However, MiFID II is so wide-reaching and impactful, it is unreasonable to think European regulators can or will crack down on imperfect compliance as the year gets underway.
Active investing is still huge, but passive keeps growing
However, Greenwich Associates research in 2017 found that most portfolio managers see 40% of assets in passive as the limit, compared to today’s 22%—that is a huge opportunity for growth.
Alternative data becomes less alternative
Ninety percent of investors using alternative data today tell Greenwich Associates they’ve see a positive return on their investment.
And while the alpha to be captured via alternative data is set to grow, the sheer quantity of data available to drive investment decisions is growing exponentially faster.
Data matters more than trading
But even in these and other cases where some data is made public, individual market participants can only find real value when also examining trades that failed, RFQs that were lost and orders that never left the blotter. Even equity exchanges will need to up their game, as the Consolidated Audit Trail (CAT) reporting requirements finally become a reality and MiFID II makes the market more transparent than ever before. Selling data is great, but helping clients to understand what it really means to them is even better. Inject the growing focus on indices (following several notable acquisitions in 2017) as passive investing grows, and things really start to get interesting.
Wealth management comes out of retirement
Robo-advisors are an opportunity, not a threat.
The move to fee-based accounts couldn’t have come at a better time, with this never-ending bull market generating wealth for investors that, in turn, generate fees for their managers. However, if the market decides to correct, as baby boomers pull out more money than millennials put in, this party might not last forever.
Why did you enter the digital mortgage space?
That first year, we spent the entire year looking for a home to buy and it was an entirely painful and traumatic experience. Born out of that was the idea behind Roostify. That’s where we began building out the solution we have today.
Why are mortgages so hard to digitize?
The eligibility aspect is complex. Once eligibility is determined, the fulfillment process is equally complex — if not more. Those two things coupled with the fact that on a normal year over half the mortgages issued have a real estate transaction integrally tied to the mortgage transaction make it very complex.
Where are we in the evolution of the digital mortgage?
If this is a four quarter game, we’re still in the first quarter. The evolution has been, and will continue to be, driven by the consumer. Banks recognize that consumers are willing to do certain tasks themselves to drive this process. Companies are launching now that really understand the consumer pain points and they’re delivering to that as opposed to banks’ pain points.
Rather than cut a $20,000 check to access one opportunity, what if you could use that amount to diversify across 30 deals? Mr. Mehere asked himself that question back in 2014 when consumer P2Ps, small business financing platforms and real estate companies were gaining footholds online.
YieldStreet launched in April 2015 with 80 investments across various asset classes. The idea has proven attractive to retail investors, from whom they have raised $240 million.
They have returned more than 100,000 individual payments and in excess of $80 million in principal and interest to investors. 15 of the original 80 investments have fully matured without a loss.
Complaints lodged against the lender with the Consumer Financial Protection Bureau through Dec. 15 dropped 18 percent from the same period of 2016, the steepest decline among major banks, federal figures show. Still, it remained first among that group in total complaints.
Seven of the 10 biggest banks by U.S. deposits experienced a drop in CFPB complaints compared with the 2016 period, including Citigroup Inc., JPMorgan Chase & Co., and Bank of America Corp.
You might have a million questions running through your head. Luckily, we reached out to the experts at RocketLoans to answer these 10 frequently asked questions about personal loans.
What Is a Personal Loan?
Also known as an “unsecured loan,” a personal loan isn’t backed by collateral like a mortgage or car loan.
What Is a Personal Loan with Collateral?
If you don’t have a credit score that’s between the 600 and 700+ range that most personal lenders look for, some lenders might offer you a secured personal loan, also known as a collateral loan.
How Much Can I Borrow and How Long Can I Borrow?
Depending on the lender and your personal financial situation, personal loans can average between $5,000 and $15,000, with a maximum of $35,000 and terms between 24 and 60 months.
What Is an Origination Fee, and How Much Is It?
An origination fee can range from 1% to 6% depending on the lender and, like your interest rate, is based on your credit and length of the loan. Like the interest rate, the higher the credit score, the lower the origination fee.
Quicken Loans is the largest online mortgage lender and the second-largest retail mortgage lender in the United States, according to Inside Mortgage Finance.
Putting Agents at the Center of the Transaction
To make the mortgage process better for consumers, Quicken Loans executives turned their attention to working hand-in-hand with real estate agents, their most powerful ally, says Tom Dempsey, divisional vice president of Business Development with Quicken Loans.
The centerpiece of this effort: MyQL Agent Insight, a custom back-end platform that increases loan visibility by letting agents see exactly where their client stands in the loan approval process.
Service, Technology Part of a Broader Culture
What exactly makes Quicken Loans different from its competitors? It starts with the company’s culture of service and the many “ISMs,” or ideals, the company strives to work and live by, Dempsey says.
Some of the standout ISMs include “Do the right thing,” “Every second counts,” and “Simplicity is genius.”
A texting service that allows agents to receive text updates on the status of their clients’ loans, keeping agents up-to-date on each step in the process while they’re on-the-go.
Elevating the Consumer Experience
Quicken Loans has evolved in its 33-year history as a direct lender.
In its first full year of operation, Rocket Mortgage funded more than $7 billion of the record $96 billion in total closed loan volume in 2016 for Quicken Loans.
Rocket Mortgage clients have gone from application to closing in as little as eight days on refinance loans, and 16 days on the purchase side, according to internal data. In contrast, the industry’s average closing time on new purchase loans is about 45 days.
President of the Jason Mitchell Group at My Home Group Real Estate in Scottsdale, Ariz., Mitchell has closed more than 900 transactions and over $215 million in sales volume since 2012. More than 65 percent of that business came from clients who used Quicken Loans, Mitchell says.
FormFree today announced that asset reports generated by its AccountChek® automated asset verification service meet all underwriting guidelines established by the U.S. Department of Veterans Affairs (VA) for loans guaranteed by its Loan Guaranty Service. The announcement follows the VA’s December 29, 2017 release of Circular 26-17-43, which was issued in response to increasing lender interest in automated verification of borrower assets for VA loans.
AccountChek eliminates the burden of gathering asset documents for loans by letting consumers easily and securely transmit their online banking, retirement and investment account data for automated analysis. In just minutes, AccountChek delivers asset data to lenders in a standardized report along with a ReIssueKey that enables secure and streamlined sharing with the secondary market. The result is an easier, safer and more accurate process that closes loans up to 20 days faster, provides a better borrower experience and circumvents a host of common “hiccups” that plague manual asset verification.
One company I always suggest is Betterment. With Betterment, your money can be invested in ETFs and they don’t charge a fee for managing these for you. Plus, they actually pick the ETFs you invest in based on your appetite for risk, investing goals, and other factors.
Plus, there are a multitude of other “robo-advisors” to choose from.
#2: Peer-to-Peer Lending
A second place to stash some of your excess cash this year is in peer-to-peer lending platforms like Lending Club and Prosper. With these companies, you’re able to loan money to individuals in small increments as if you were the bank. The best part is, you get to earn a pretty decent rate of return – usually upward of 6% or more.
#3: Real Estate
One option I’m really excited about is a company called Fundrise. Fundriseoffers an investing scenario similar to the one above. They buy commercial properties and allow investors to invest small sums of money. Obviously, this is yet another hands-off investment. You may own part of a commercial real estate project, but you don’t even see or deal with the property itself.
Scott Tucker says he’s a pioneering self-made man who, without a college degree, founded successful businesses in a variety of fields and contributed billions of dollars to the U.S. economy. A judge says he’s an unrepentant fraud and sentenced him to almost 17 years in prison.
Jurors found the men guilty of collecting unlawful debts, using misleading contracts and falsely stating that the businesses were owned and operated by Native American tribes. That bogus claim helped them get around state laws that prohibited the business practices, the U.S. said. The scam ran from 1997 to 2013, Castel said.
From 2008 to 2012 alone, Tucker victimized 4.65 million people, according to prosecutors, collecting $1.3 billion in illegal interest payments as some people paid a total of almost $1,000 to settle a $300 loan.
Valorem Foundation, the community peer-to-peer platform for multi-party transactions, is launching soon. It is a new blockchain-based platform that allows users to exchange value via smart contracts. Once on the platform, users can borrow, lend, invest, transfer, and exchange money between each other, creating a trust-based platform that removes the need for 3rd-party services or external vendors.
One of Valorem’s products, the Microloan, has been quite successful because of the platform’s risk distribution system and foundation on smart contract-based functionality. Its feature of spreading loan default risk over multiple people forces people in the Valorem community to make smarter choices about buying products like cars, student loans, and insurance.
OnDeck (NYSE: ONDK), the leader in online lending to small business, today announced that digital agency Majestyk Apps, led by Marine Corps veteran Donald Coolidge, has been selected as the OnDeck Small Business of the Month for January 2018.
Venture capital funding in UK technology firms was nearly £3billion, more than double the amount invested in Germany and France combined.
London technology drew the most. Its £2.45billion was more than the other top 10 cities put together, according to funding database Pitchbook for London & Partners figures.
Fintech, or financial technology, attracted £1.34billion in venture capital funding, with TransferWise and Funding Circle investment, while artificial intelligence companies raised a record £488million, more than double 2016.
Below the surface there are reasons to be concerned, but the data so far looks positive. UK companies raised $7.7 billion last year, more than double that of 2016, according to Dealroom. Fintech companies raked in $2.9 billion, the biggest share. TransferWise raised £211 million ($286 million) while Funding Circle took in £81.9 million, according to lobby group London & Partners.
Attitudes across Europe are diverging. While the UK is the No. 1 destination for investment, entrepreneurs in France, Belgium, the Netherlands, and Luxembourg (Benelux) are substantially more positive about the future of Europe’s tech scene than their peers in Britain: 70% of the former are more optimistic than they were 12 months ago, compared with 42% in the UK and Ireland, according to a survey by venture capital firm Atomico.
Returns from investing directly in the biggest platforms, including Zopa, Ratesetter and Funding Circle, averaged 5.4% including losses from defaults, according to analytics firm AltFi Data.
For example, P2PGI moved from a premium of 15% to a discount of 15% – ie, the share price now trades at 15% below the net asset value (NAV) of the fund’s investments.
Funding Circle’s SME Income fund trades at a small premium (around 2%) to NAV, and has delivered returns equivalent to a 5.6% yield on the current share price.
As for bonds, Lendinvest – a property lending platform – issued the first listed retail bond from a P2P platform, raising £50m at a yield of 5.25%. This was well received and is now trading at a small premium of 2%.
The Shenzhen Bureau of the China Securities Regulatory Commission, the nation’s top securities watchdog, has given Tencent subsidiary Tengan Funds Sales (Shenzhen) the licence to sell funds directly.
Before gaining the licence, the tech giant was only able to act as a platform for fund houses and third-party fund sales companies to sell their products through qian.qq.com, its online wealth managing platform and its popular instant messaging tool, WeChat. Qian.qq.com is for users to access the service on PC, while a similar service on WeChat is for mobile users.
Also on Thursday, the tech giant launched the promotion of a new service that will allow users to pay their credit card bills via using the money-market funds available on Licaitong, or WeChat’s wealth management app.
Users will avoid having to pay a 0.1 per cent charge on a credit card payment of more than 5,000 yuan (US$770) monthly. Tencent is also offering users cash incentives, capped at 88.88 yuan, for those who use the promotal service until February.
On January 2, 2018, the Shenzhen Securities Regulatory Bureau issued this year’s first fund sales license to internet giant Tencent Holdings, or more specifically Teng An Information Technology (Shenzhen) Co., Ltd.
The Nansha District Government Affairs Service Center in Guangzhou introduced “WeChat Police Certified” face recognition technology and issued China’s first WeChat ID card on December 26, 2017.
According to Bloomberg News, insiders said some loans on HNA’s P2P platform Jbh.com have been faced with deferred payment since last November. Jbh.com offers products like fixed income, P2P lending, insurance and funds on its app.
Advanon is an online platform for invoice-financing SMEs. The platform enables SMEs to better manage their cash flows and focus on their core business. Founded in 2015 by Philip Kornmann, Phil Lojacono and Stijn Pieper, Advanon has raised $3.9m in funding so far, including a $3.5m Series A round from Btov Partners, VI Partners and Swisscom Ventures.
Circle is a P2P payments platform founded by Sean Neville and Jeremy Allaire. Using the technology – available as an app on iOS and Android devices or even through a Circle app for iMessage – users can send and receive P2P payments with native euro support. Circle also claims to be the first and only cross-border payments platform in the world to make it possible to beam cash from an app into a US bank account at no cost.
Founded by Marc Murphy, Fenergo offers solutions for client life-cycle management, anti-money laundering, regulatory compliance and client data management.
A fast-growing fintech company, ID Finance specialises in online lending in emerging and growing markets.
Regarded as one of Europe’s most valuable fintech firms, Klarnaprovides online payment services for e-commerce sites in order to eliminate the risk for buyer and seller.
Monzo has more than 20,000 current-account holders and the start-up bank has amassed something of a cult-like following in the UK, with almost 500,000 people using its distinctive hot coral cards and thousands more on the waiting list. It was founded in 2015 by Gary Dolman, Tom Blomfield, Jason Bates, Jonas Huckestein and Paul Rippon. Stripe, the payments company founded by Irish brothers Patrick and John Collison in San Francisco, joined Goodwater Capital and investor Michael Moritz (through his charitable investment vehicles) in a recent £71m investment round, joining existing investors Eileen Burbidge’s Passion Capital as well as Orange Digital Ventures and Joshua Kushner’s Thrive Capital in the round.
Founded in 2015 by Nikolay Storonsky and Vlad Yatsenko, Revolut is an app-based banking alternative with a multi-currency card.
TransferMate was founded in 2010 to reduce international payments costs for business customers and has since developed a wide regulatory footprint in Europe. So far, more than $10bn has been sent to more than 100 countries over the TransferMate platform.
TransferWise was founded in 2011 by Taavet Hinrikus and Kristo Käärmann, and provides international money transfer.
Wefox, also known as FinanceFox, is a next-generation insurance app built entirely on the Salesforce platform.
Younited Credit wants to build the biggest crowd-lending platform in continental Europe. Currently live in Spain, France and Italy, consumers can borrow between $1,200 and $48,000 without the need to talk to a bank. So far, it has managed more than $600m in loans. Founded by Charles Egly, Geoffroy Guigou and Thomas Beylot, Younited recently raised $47.8m in a Series F funding round led by Zencap Asset Management.
Break down the barriers within your organization that perpetuate data silos. Only after silos are eliminated can advanced analytics be the most effective.
Establish a data analytics function or partner with an outside organization to provide help in improving the actionability of your data.
Replace timed marketing ‘programs’ with ongoing marketing ‘processes,’ leveraging real-time data to take advantage of immediate opportunities.
Test the use of artificial intelligence (AI) and machine learning (ML) beyond risk and fraud analysis, including offer generation and bundling of services.
4. Embrace Open Banking
Review existing data privacy mandates and potential changes, determining the risk/benefit appetite for new marketplace opportunities.
Explore data-sharing possibility with fintech and non-financial services firms to be prepared for imminent changes.
Build an API strategy for both third-party data access and potential service offerings outside traditional banking ecosystem.
5. Build Fintech Partnerships
Foster a top-down culture of innovation, testing and understanding the digital consumer.
Investigate partnerships and/or collaboration with fintech firms for products and processes not currently possible within the banking organization.
Replace all or a portion of legacy systems, integrating new technologies while embracing an agile IT culture. This action step has been put on the back burner for years which is hurting many organizations.
Consider having an online lender power the organization’s online loan application, to using an online lender’s credit model to better underwrite and service bank loan applications.
Online marketplace for consumer loans and other financial products Wishfin will raise up to $50 million in its next round of funding as it looks to make acquisitions in niche segments, a top company official said.
The company claims to have 9 million customers and $3 billion worth of disbursals to date.
The quick returns that one gets through investments in cryptocurrencies have caught everyone’s attention.
Peer-to-peer (P2P) lending in India currently gives a net return of 18-22 percent to lenders.
People are becoming investors and expanding investment portfolio by investing small ticket size in different startups. Venture Catalysts, India’s first integrated incubator, emerging as largest investor of the year with closing 33 investment in this year.
FINTQ, the financial technology (fintech) arm of PLDT and Smart’s Voyager Innovations, disbursed more than P12 billion in new loans through its digital lending platform, Lendr, last year or nearly a third higher than the year-ago level.
With more than the P12 billion disbursed last year, total disbursement has reached about P27 billion since Lendr came to market in 2015, Villanueva said.
In an effort to promote fintech, the Pakistan Telecommunication Authority (PTA) – the telecom regulator – has decided to award Third Party Service Providers’ licences by June or July 2018, which will pave way for inter-operability between cellular mobile operators and ramp up financial inclusion all over the country.
At present, Telenor’s Easypaisa, Jazz’s Mobicash and United Bank Limited’s Omni are providing mobile-based branchless banking services. However, their customers cannot transfer money from one service to another.
The new platform will help dismantle existing barriers that prevent digital wallets (branchless bank account-holders) from sending money to different bank accounts. Users will be able to make transactions from wallet to wallet or wallet to the bank account.
The chairman of Switzerland-based financial technology company Avaloq will focus on expanding business in China and Asia as well as preparing for a possible stock exchange listing, after handing over his chief executive duties.
News Comments Today’s main news: American Banker pushes back on SoFi acquisition of Zenbanx. Billionaire Dan Loeb prepares to bet on MPL. RateSetter updates lender terms ahead of provision fund changes Today’s main analysis: January International P2P lending volumes. Today’s thought-provoking articles: Rise in personal loans dominated by P2P lending. United States Where SoFi-Zenbanx deal falls […]
Where SoFi-Zenbanx deal falls short. AT: “While there are some good points made in this pushback, the big picture is that Zenbanx represents a bold first step into the banking arena for SoFi. There’s plenty of time for the company to hone its approach.”
Third Point prepares for MPL investments. AT: “I don’t know that we can attribute this to the election of Donald Trump. It his predecessor who signed the JOBS Act. However, a businessman in the top office may set the pace for future investments if he establishes the right policies, which have yet to be seen. The big picture here is that an influential hedge fund manager is looking to go deeper into marketplace lending, which could itself boost the industry’s mojo.”
2017 is the year for Americans to get out of debt. GP:” Yes and the year pigs will fly. More seriously, this is not a Disney cartoon with good and evil. Debt , if used for the right applications is a great instrument to have. Used in the wrong way it is a quick path to bankruptcy.” AT: “I’m often amused at consumer surveys. Americans are always concerned about getting out of debt and improving their credit scores, but knowing what to do and knowing how to do it are two different things. Another thing is, I’m not certain how scientific this survey is. Where did the survey respondents come from, for instance?”
FinTech startups want to preserve Dodd-Frank’s Section 1033. AT: “Banks don’t want FinTechs having access to their customer data, but if that data is related to customer financial situation, then the customer should have the right to decide who has access to it. If its bank proprietary information, then I agree with the banks.”
January P2P lending volumes. AT: “Funding Circle, in the lead, almost doubles against the same month last year. However, the most respectable growth since last month among originators with double digits in new loans comes from Assetz Capital (58%), LendInvest (51%), and Zopa (57%).”
The announcement that Social Finance is buying Zenbanx marks an important milestone in SoFi’s ongoing evolution from a one-product company exploiting a pricing anomaly in the government student loan market to the preferred private bank for millennial achievers.
But as positive as this partnership is, it won’t solve all of the challenges facing an alternative lender like SoFi, which still needs a more direct banking capability to deliver sustainable funding for its loan portfolio.
For the last couple of years, SoFi’s quest to become the central financial services hub for its approximately 230,000 HENRY (High Earner Not Rich Yet) customers has had mixed success. While 230,000 is a large number of customers for a fintech startup, it pales into comparison to a money-center bank like Wells Fargo, which has more than 300 times as many customers and is much fewer than the customer count at private bank competitors like First Republic. More importantly, the vast majority of SoFi’s customers have only a single-serve (and not very profitable) student loan relationship because SoFi lacked the transaction banking and deposits capabilities needed to make it the center of its customers’ financial lives.
Billionaire hedge fund manager Dan Loeb of Third Point believes the election of President Donald Trump has created new opportunities for active investors, who will have newfound ability to outperform passive indices as growth and inflation set in, and correlations between stocks and other asset classes fall.
Loeb isn’t just re-positioning his stock bets for the Trump economy. As Forbes has reported, the hedge fund is bringing so-called ‘quantamental’ experts into its ranks, and has made significant investments in fintech and biotechnology.
Third Point is cutting its exposure to U.S. RMBS and moving heavily into the marketplace lending sector, where firms firms like Prosper, SoFi and LendingClub have filled a lending void left by banks. Marketplace lenders are increasingly pooling unsecured loans made to consumers into trade-able securities and distributing them to institutional investors such as hedge funds, bond funds, and even high net worth family offices. Third Point likes the duration of these loans, which normally are repaid in under three years, and appears to be stepping into the market at an opportune time.
That Third Point is stepping into market, however, indicates the fund sees a way to navigate the uncertainty of this nascent lending business. It also signals the hedge fund has not lost its excitement about novel fintech platforms despite a year of turbulence. The hedge fund’s VC arm, Third Point Ventures, is an investor in SoFi, Upstart and Swift Capital.
In fact, 54 percent of users surveyed expect their financial situations to improve in 2017. When asked how, respondents identified getting out of debt (63%), improving credit scores (57%), and better managing expenses (38%) as among their top objectives for the year.
The survey also revealed that 66 percent of respondents are relying on higher income in 2017 to pay for their expenses, yet only 52 percent expect to earn more this year. Added to this, a quarter of those surveyed do not track their expenses with 75 percent of that group saying it’s because they don’t know where to start.
Section 1033 says that banks must “make available to a consumer, upon request…information relating to any transaction, series of transactions, or to the account” and “in an electronic form that can be used by computer applications.”
Fintech startups argue this language enshrines their right to pull data from customers’ bank accounts when the customers give them permission. Companies such as Betterment LLC, an online investment manager, say that accessing bank-account data helps them make it easier for consumers to use investing apps, borrow money or move dollars between accounts.
Banks, on the other hand, say that while they support customers’ right to share their account data, there should be certain restrictions as well. These are needed, they add, to protect consumers from third parties accessing more data than is authorized, or to track how data is used.
Already, Betterment and a group of well-funded fintech startups have created an industry group, called the Consumer Financial Data Rights group, in hope of protecting Section 1033 and pushing for broad implementation of it. The group, formed in January, said it would work with policy makers to promote “consumer choice and access.”
Other group members include Personal Capital Corp., Affirm Inc., Kabbage Inc., Varo Money Inc., and Hello Digit Inc.
Renovate America, a leading U.S. provider of home-improvement financing, announced today that it has completed a $100 million credit facility with Credit Suisse. The facility will enable Renovate America to expand Benji, the company’s unsecured consumer home-improvement lending product.
As Renovate America’s newest financing option, Benji is designed for well-qualified borrowers and is expected to rapidly expand to all 50 states. Benji can only be used to finance home improvements, from energy and efficiency upgrades to kitchen and bath projects. Benji offers consumer and small business protections which set it apart from other unsecured lending, including contractors agreeing to be paid only when homeowners have agreed that the project is complete, and post-funding dispute resolution support if needed.
Money360, the leading commercial real estate marketplace lending platform, announced today that it has provided a bridge loan to the owner of a retail center in Jacksonville, Illinois.
Money360’s $8.3 million loan allowed the borrower to pay off a maturing loan on the Lincoln Square center, a 206,257-square-foot anchored retail property that is currently 82 percent occupied by a combination of 29 national and regional tenants.
We are pleased to announce that IHT Realty Crowdfunding has an opportunity for accredited investors. Our Sponsor has acquired a beautiful, 2-home property to transition into a Residential Assisted Living Facility located in Jacksonville, FL.
The Sponsor is offering a 28% yield on the equity portion consisting of a 12% annualized yield and 16% deferred for 24 months. A majority of the equity is already pledged leaving a small tranche available for investment. The debt is already in place (crowdfunded by IHT in 24 hours) and the Sponsor has closed on the property and already started the rehab.
This investment will consist of repurposing 5.8 acres of land with two single-family homes. These homes are great examples of the all-brick construction of the 1950’s and 1960’s. The project starts with enlarging the homes’ heated areas from 1,488 sq. ft. to approximately 2,000 sq. ft. each by converting the oversized garages into 2 and 3 bedrooms with private full or half baths.
PayCommerce successfully conducted test payments between the US and India using its Federated Ledger, a blockchain-based technology. This is the first phase of testing before an expected roll-out to PayCommerce network members at the end of Q2 2017. Other regions, such as Mexico, the Gulf Cooperation Council region, and the UK, are planned in 2017. Introduction is planned for Singapore, Canada and the Philippines in 2018.
MARKETINVOICE and Funding Circle executives are among the industry experts selected for the Treasury-backed fintech delivery panel, which will aim to maintain the UK’s position as a global fintech hub.
Anil Stocker (pictured), chief executive of MarketInvoice and Martin Cook, general counsel at Funding Circle, are the only peer-to-peer lending professionals making part of the 24-strong panel, which will be run by Tech City UK.
Other fintech experts on the panel include: Michael Harte, group head of innovation at Barclays; Taavet Hinrikus, chief executive of TransferWise; Peter Smith, chief executive of Blockchain; and Jeff Lynn, chief executive of Seedrs.
The Innovative Finance ISA is a new breed of ISA, falling somewhere between a cash ISA and a stocks & shares ISA. It lets you loan your money out through peer-to-peer (P2P) lending and pay no tax on the interest.
The current ISA limit for 2016/17 is £15,240, split across all ISAs including cash, stocks & shares, Help-to-Buy, Lifetime ISA and Innovative Finance ISA. The total amount you pay into your ISAs each year can’t exceed £15,240 but if you want to, you can put the whole lot into one Innovative Finance ISA. From this April the ISA limit will rise to £20,000.
P2P platforms are required to have a provision fund to reimburse lenders for their potential losses. FCA regulation requires this fund to be at least £50,000 by April 2017, but the most reputable lenders have much larger funds totally millions of pounds.
Since its inception in 2005, the UK’s P2P lending market has grown significantly. In 2016 there were 80+ Direct Lending platforms facilitating £3.2bn of lending, across many different types of borrowers from buy-to-let mortgages, property developers, SMEs, and consumers.
Here’s a snapshot;
The UK Direct Lending market is big and growing with plenty of room for growth
The big four platforms dominate but there are an increasing number of other operators
Regulation is improving but shouldn’t be relied upon to protect lenders’ returns
Attractive returns compared to other investment opportunities
Managing risk is key through choosing the right platforms, level of diversification, borrower, and loan selection
Services such as autobid and listed funds are increasingly popular for investors
The flight to quality will lead to a few platforms disclosing significant defaults in 2017 who may exit or scale back operations significantly
Why Direct Lending is likely to form a key component of any investor’s portfolio
Online marketplace lenders dominated personal loan applications during December 2016 quarter. The recent Veda credit agency report shows that the personal loan application numbers for this period were about 12.4 percent more compared to December 2015 quarter. The figures were taken from the most recent Quarterly Consumer Credit Demand Index.
There was a considerable rise in personal loan applications growth all over Australia. The Northern Territory and NSW led with a rise of anout 14.5 percent. Queensland was 13.1 percent. Victoria enjoyed a 12.5 percent increase in the growth rate. An upside of 7.7 percent was observed in consumer credit applications. Mortgage applications went up by 6.6 percent and credit card by three percent.
Sunglass pay: Wearables that can make payments are popping up in all sorts of garments, from gloves to rings, as developers look for what makes consumers comfortable. In Australia, sunglasses are getting a test. Business Insider reports Visa is testing the technology at Laneway, an upcoming music festival in five Australian cities. People will be able to make payments by tapping their sunglasses at checkout.(they take their glasses off, instead of bending over). Inamo, a local startup, developed the supporting technology, while Oberthur will handle risk management and Heritage Bank will be the deposit-taking institution.
SlicePay, a fintech startup which provides buy-now-pay-later kind of service to its users, has today announced that it has acquired Trustio, a NewDelhi-based peer-to-peer lending company.
The company has also recently tied up with a systemically important large NBFC which has a 2500+ crore loan book and are in the final stages of discussions with a publically traded NBFC that has 10,000+ cr book.
Leading Indian NBFC, Mahindra Finance, is delighted to announce three winning solutions from their recent Global Fintech Challenge. All three solution providers will continue with Proof-of-Concept projects within Mahindra Finance with a view to roll out and implement their technologies.
Category 1 Theme: Real Time Credit Risk Assessment
Winner: EFL Global (USA)
Category 2 Theme: SME Risk Monitoring
Category 3 Theme: SME Cash Flow Management
Winner: Finansync (UK)
Malaysia in 2015 looked to revamp its bill payment system by introducing its JomPAY service. Operated by MyClear, a subsidiary of Bank Negara Malaysia the service looks to develop an open electronic bills payment platform for consumers, banks and billers. Currently the platform has 42 banks and over a 1000 businesses registered on the system.
The Vietnamese Ministry of Finance in 2015 instructed commercial banks to stop over-the-counter tax payments and work with tax agencies to create online portals to execute e-tax payments. Similarly the Indonesian Ministry of Finance last year launched its MPNG2 system, an automated tax management that aims to give taxpayers flexibility in payments and simplify the overall filing process.
India also last year saw the RBI (Reserve Bank of India) introduce its Unified Payments Interface (UPI) system, a tool that allows a user with multiple bank accounts to make payments via a single application. Currently the app is compatible with 29 banks including the likes of Axis Bank and ICICI Bank.
In 2015, as a share of global fintech capital investment, 56% was made in the US, with only 19% in China. However, as of September-end 2016, that number had dropped to 41% in the US, and more than doubled to 46% in China.
In the US, lending received 20% of VC investment in 2016, dropping down from 58% in 2015. Whereas VC investment in payments rose from 11% in 2015 to 14% in 2016; in blockchain 3% to 8%; in insurance 0% to 34%; and in wealth management, 0% to 7%.
Investment is shifting towards business-to-business based business models in the US, while China continues to focus on business-to-consumer based business models, as vast opportunities in consumer finance remain untapped by banks.
News Comments Today’s main news: Korean company Hanwha Life Insurance acquires 4% stake in Lending Club. American Bankers Association partners with Accenture to publish a playbook for banks who want to partner with FinTech companies. Today’s main analysis : Insurance technology is the next FinTech frontier. The African financial services industry is making great strides in changing […]
InsurTech is the next frontier in the FinTech sector. TechCrunch offers some pointers on how to win in the risky venture of this competitive niche. AT: “For all it’s worth, TechCrunch is a has-been in the space of technology news, but I wouldn’t ignore this read. You’ll find some nuggets of wisdom there. And I do agree with the premise: Insurance technology is going to be a big playing field for both disruption and innovation.”
How are Australians using P2P lending? To consolidate date. AT: “The question here is going to be, What will be the long-term market consequences of this consolidation? What will be the fallout, if any? Will market players lose, consolidate their businesses in response, or will debt consolidation help the markets to grow?”
Africa is undergoing some interesting FinTech changes. In fact, technology is revolutionizing how money is handled and business is conducted in one of the most unexpected places of the world. AT: “It will interesting to see how FinTech transforms banking in Africa and whether it could lead to an increase in power and posture for a part of the world that has long been on the underside of the global power structure. This analysis is a must-read.”
As banks continue to grapple with a rapidly evolving technological environment and the massive growth of fintech startups — and with billions of dollars in revenues at stake — the American Bankers Association and Accenture today released a members-only Fintech Playbook to help banks understand how and when they can most profitably partner with fintech companies. ABA also launched ABA Fintech as an online hub for all the association’s resources on fintech.
According to Accenture, banks that invest in fintech stand to gain up to $20 billion collectively in operating income by 2020, while those that don’t could lose as much as $15 billion in revenues during the same period.
The playbook offers a four-phase approach — establish a baseline, close gaps, focus on the customer and drive transformational change — that addresses channels, lines of business and bank platforms and processes. It also includes sample worksheets to help identify strategic priorities, identify top IT investment priorities and select potential fintech partners.
Insurance technology is getting very popular among founders and investors, yet, as a category, is little understood.
Insurance is one of the most difficult businesses to start, because, well, the regulators don’t actually want new players in the market. The reason for this is risk — insurance is all about having a strong system and balance sheet to manage risk. However, as a result of its difficulty, insurance is now behind the times in terms of technology. This leads to a perfect storm to disrupt the industry.
Oftentimes product development cycles can be 3-5 years. In startup world, that’s an eternity and back. Meanwhile, there is $1.2 trillion in insurance premium written every year in the U.S.
The key to unlocking the insurance industry is understanding behavioral economics. Behavioral economics is the study of behavior and how it impacts purchasing.
Given the size of the market you clearly can create a win-win situation. For example, in auto insurance, even out of those who shop for carriers, more than 71 percent of people stayed with their carrier in 2015.
The most successful players in insurance tech will win by rounding the edges on existing products.
Hanwha Life Insurance has acquired 4.1 percent stake in Lending Club, a US peer-to-peer lending company for 75 billion won (US$66.24 million), it reported on Oct. 17.
The insurance arm of Hanwha Group has a strategic partnership with Lending Club and “thought that its stocks were undervalued after its stock price was slashed due to the recent scandal involving its CEO, and purchased the stake,” said an official.
A real estate investor, if fortunate comes to a point where they want to sell a property at a profit. Many investors know they may be able to utilize Internal Revenue Code Section 1031 and exchange their property for a replacement property, in turn deferring the capital gains. This has been one of the cornerstones of real estate investing because the deductions taken to make income tax deferred while owning a property also reduces cost basis. Distinct advantage of utilizing section 1031:As long as the rules are followed each time an investor sells and subsequently buys a property, the taxes can potentially be deferred indefinitely. At the time of death, your heirs will generally receive a stepped up cost basis to the current market value of owned property, regardless of how many exchanges the investor may have done in the past (depending on the total market value of the estate).
Now, while most real estate investors know how to take advantage of a 1031 exchange in the traditional sense, there is an option to invest in an alternative structure and still defer the gains. This is called the Delaware Statutory Trust or (DST). A DST gives investors another avenue to take advantage of the tax code while still staying within the parameters of the 1031 requirements.
The underlying real estate in a DST may be any asset class including, multifamily, office, retail, self-storage or industrial properties.
The half-day forum will feature two panel discussions. The first panel will explore peer-to-peer payment systems, the online services – often mobile apps – that allow consumers to exchange money electronically. The second panel will examine crowdfunding, the use of online platforms to fund a project or venture by raising money from a large number of people. Both panels will discuss the important trends in these industries, as well as their benefits and potential risks for consumers.
In addition to these panel discussions, the FTC’s Office of Technology Research and Investigation will give a presentation examining crowdfunding practices and the types of information available to consumers about crowdfunding campaigns.
With Fintechs growing stronger every day by taking a bigger part of the financial market, banks have become more open to collaborations with these young companies. Those collaborations present a great opportunity for banks not only resulting in increase of revenue, but most importantly innovation.
Studies show that many banks have already established partnerships with Fintechs. According to the UBS bank management survey of 61 big banks, 38% have a partnership already – a number that’s only going to rise in the upcoming year.
Not only do Fintechs gain benefits from collaboration, but also banks. The first benefit is simple: revenue.
Collaborations between banks and Fintechs can be very beneficial, but they are also very challenging as the organizational cultures between the two differ greatly. This means that culturally, banks and fintechs will have to adapt to each other while trying to avoid unnecessary dependence.
Ryan Williams surveys the room: how many people could put a price tag on this building?
His question, it turns out, is a bit of trick. This building is Boston’s historic Faneuil Hall, which will never come up for sale.
On Monday, the market building constructed in 1742 was host to the Forbes’ Under 30 Summit where Williams spoke on a panel about how financial technology is shaking up stodgy industries. Williams’ co-panelists hail from different segments of fintech, but each touched on variations of his broader point: technology is expanding access to financial information and in turn broadening financial opportunity.
Vlad Tenev argues that Robinhood, the free mobile stock trading app he co-founded, exists to get people investing as young as high school. This way they won’t be so clueless when it comes time to invest for retirement. Daniel Aisen, head of quantitative strategy at stock exchange IEX Group, notes that his company is pushing institutional investors to look closer at what is happening behind the scenes of their trades with the ultimate goal of making buying and selling stocks fairer for everyone. And SoFi, where Michael Tannenbaum is senior vice president of mortgages, is part of a group of new lenders using expanded data sets to broaden who they can give money to.
While financial technology has gained clients, accolades and venture capital dollars in recent years, high stakes separate these young financial leaders from many other young technology stars. If they get it wrong real peoples’ livelihoods, retirements and homes could be at stake. This is why all four panelists agreed that gaining domain expertise is key before starting a fintech business. They also largely agree that the evolution of finance will not come from throwing out everything that came before.
Some of the best-known names working on finance’s new frontiers come together this Monday in one of technology’s most important cities for the second edition of Fintech University.
The one-day gathering at San Francisco’s Bently Reserve is hosted by BBVA’s Open Innovation team, and features fintech entrepreneurs from around the globe.
Some of the hottest topics in fintech will be discussed at the second edition of Fintech University, including payments, lending, Know Your Customer (KYC) and authentication, and regulation. Fintech luminaries such as Socure’s Johnny Ayers, Prosper’s Ron Suber and Coinbase’s Fred Ehrsam will be leading and participating in the discussions.
While Fintech University has sold out, interested parties can follow along by checking out #FintechUniversity on Twitter.
Amazon Echo is a hands-free speaker you control with your voice. In case you missed the news, having been available in the US for two years, its long anticipated UK launch took place at the end of last month to much fanfare and excitement.
So what does a speaker have to do with financial advice?
Today, an adviser business may need to enter the same data 21 times into 21 different systems. This sounds mad but, worryingly, it is not that unusual.
In drawing together multiple systems and tools, Echo demonstrates the potential of a connected advisory world. A single system, for example, that links to multiple investment platforms, keeps you informed about tasks and diary events, provides client information, manages business finances – and all though a single interface.
Can we expect a financial adviser version of Echo any time soon? The concept of integrated technology is available in the adviser world already.
Peer to pear lending platform Landbay which specialises in buy to let mortgages has launched a new range of limited edition lending products aimed primarily at professional landlords.
The new tracker products have a competitive rate, no Early Redemption Charges (ERCs) and will be available exclusively via Landbay’s approved broker partners, in addition to the existing suite of both Fixed and Tracker rate products.
Landbay champions a bespoke, flexible and fast lending process, which it believes benefits borrowers in its speed of service and its competitive pricing. To date, Landbay has lent over £42 million since 2014, over 241 loans with 0% facing repayment difficulties.
Established in 2013, Landbay was the fastest growing online peer to peer lending platform in 2015.
The financial services sector is broken. However, it is not broke. It still generates enormous revenue, but it does so within a system that is quickly becoming unsustainable.
From Santander referring businesses to peer-to-peer lending platforms, to Zurich’s creation of a digital workplace – established players are looking to create new efficiencies, and provide greater convenience, customisation and reduced costs.
For something to become truly, disruptively innovative, it must be embraced by the mass market. And although fintech is booming, I’d argue that it still remains the province of early adopters. Many promising fintech startups have already failed due to the big gap between those early adopters and the mainstream market, and the gulf in behaviours between the two.
How come? Well, in financial services, probably more than in any other sector, it’s especially difficult to overcome the forces of inertia and trust. After all, there are few things in life more serious than money – and if someone’s going to place their savings or investments in the hands of a company, they’ll want to have confidence that the company they choose has the scale and longevity to keep their hard-earned cash safe.
Recent studies have shown that the Alternative Finance industry is providing SME’s with more flexible funding opportunities and much better terms for businesses. Back in 2015 Nesta revealed that the market had grown by £3.2 billion, highlighting its rapid expansion, and things look set to continue in a similar fashion.
A lot of SME’s struggle with having their invoices tied up for up to 90 days. This can create a problematic cash flow gap which can hinder businesses on a day-to-day basis. Market Invoice is becoming one of the main providers enabling businesses to release up to 90% of their invoices before the typical 90-day period.
The UK government has invested in a variety of different recent schemes and programmes to support SMEs financially. There are now a variety of different options available, from loans to investment schemes and development programmes, which businesses can take advantage of to help them out.
Short term business loans offer a much more flexible alternative for businesses, giving SME’s the opportunity to draw the funds as and when needed as opposed to taking a lump sum in one go. This proves to be a handy resource and quick fix for SME’s experiencing unexpected cash flow problems.
Crowdfunding platforms are more popular than ever before. With so many different online platforms available for donation crowdfunding SME’s can reach out to people around them and other via the power of social media to ask for any donations towards their cause.
With interest rates set to stay low and so many different types of alternative finance now available, there is a huge potential for new businesses to establish themselves in 2016.
Conrad Holmboe left his position at U.K. investment consultant Redington over the summer, where he was a director in the investment consulting business, to work on Oinky, a digital piggy bank. Oinky connects to an existing bank account, determines how much a user can safely afford to save every week, and automatically transfers those savings to the piggy bank.
Mr. Holmboe is chief operating officer, chief financial officer and co-founder of Oinky alongside Ivan Soto-Wright, who also is CEO. Mr. Soto-Wright left Redington last year, where he was an investment consultant.
Oinky also has a “discover” feature, which lets savers explore peer-to-peer lending opportunities, investment platforms and other savings products.
The big four banks and AMP will contribute nearly $16 million to fund the creation of the federal government’s professional standards body for financial advisers, part of reforms unveiled yesterday by Financial Services Minister Kelly O’Dwyer.
The $15.6m bill to cover the first four years of the program has already faced resistance from the banking industry, which constitutes only 25 per cent of the financial advice market.
AMP, which represents Australia’s largest network of financial advisers, is also pushing to expand the financial burden of the standards body to be shared by the rest of the industry.
An independent standards body will be established as a commonwealth company and a nine-member board will seat three consumer advocates, three industry members, an ethicist, an education specialist and a chair. The professional associations, such as the Financial Planners Association, will compete to run the body, which will oversee the country’s 22,500 advisers.
FPA head of policy Ben Marshan said the reforms provided financial planners with an appropriate amount of time to adjust to the new system. The education and professional standards regime will come into force at the start of 2019.
Peer-to-peer (P2P) lending, while having first been introduced in 2012, is still a new concept to many Australians. However, the idea seems to be catching on. The P2P lending space is becoming more competitive, with new lenders being announced all the time, and more Australians are starting to take advantage of the competitive rates on offer. According to new data, these rates are being utilised by borrowers looking to reduce the interest they’re paying on current debts.
RateSetter customers that are using their loans to consolidate debt:
$20,666 – Average loan amount for debt consolidation
8.23% – Average annual rate for debt consolidation loans
725 – The number of people earning between $50,000 and $100,000 that held debt consolidation loans
64.5% – Percentage of males applying for debt consolidation loans
The SMSF Association strongly endorses the Federal Government’s decision to legislate to improve the professional standards of financial advisors.
Association Head of Policy Jordan George says improving the educational and ethical standards of financial advisors has been a long-term policy of the organisation, especially as it relates to the $622 billion self-managed super fund (SMSF) sector.
Last November the Clearing and Settlement Systems Ordinance was amended and renamed as the Payment Systems and Stored Value Facilities (SFV) Ordinance (“Ordinance”). The Ordinance sees the implementation of a mandatory licensing system for stored value facilities, and was subject to a one year transition period. This grace period will end on 13th November 2016, after which any stored value operator not holding a licence will have to exit the market or face heavy penalties.
In general, a SFV involves the pre-payment to or storage of the value of money (or money’s worth) on a payment facility, which may be used for paying for goods or services or to another party. This includes smartcards, such as gift cards or top-up cards, through to wearable technology such as watches to non-device based SVFs that store the value of money on mobile and internet based accounts, such as e-wallets.
The Ordinance requires all multi-purpose SVFs to be licensed. Single-purpose SVFs do not have to adhere to the Ordinance, so you may rest assured your pre-paid coffee card will still work after 13th November.
The implementation of the Ordinance sees a significant shift in Hong Kong’s payment’s landscape.
More than 20 companies have applied to the HKMA for SVF licenses with 50% Hong Kong-domiciled companies and 68% engaged in the prepaid card business. Howard Lee, senior executive director at the HKMA, advised that the decision to include only five operators at this point did not mean the remaining applicants had been rejected. We expect to see more licences granted before or after 13th November.
SuperCharger FinTech Accelerator was launched in January 2016 with big success seeing a USD $71 million capital investment in accelerator participant MicroCred secured for its expansion in China and the development of their internet finance strategy.
Applications for SuperCharger FinTech Accelerator 2.0 are open until 20 October 2016 both early stage and later stage Fintech firms may apply.
Rise Accelerator, a FinTech- focussed accelerator programme started by Barclays announced its first cohort today, comprising 10 FinTech startups.
The fintech accelerator will provide the selected startups with access to the bank’s technology, insight and expertise via onsite mentors and advisors. It will also enable them to access the international markets.
The 10 shortlisted startups included 4 from Bangalore, 2 each from Mumbai and Delhi and 1 each from Chennai and Hyderabad. The startups focussed on a host of areas like Artificial Intelligence, Data Integration, Predictive Lending etc to solve real time problems associated with the banking and financial sectors.
The London headquartered lender is also planning to support these nascent financial technology companies as an early stage investment which can reap them big returns if they go on to make it big in the emerging fintech space both in India as well as globally.
Putting an end to redundant lending processes in India, Rupaiya Exchange, a leading online peer-to-peer lending platform, is changing the face of the money lending industry. With its pan-India presence, Rupaiya Exchange serves as a marketplace for a wide range of peer to peer (P2P) lending activity including Consumer-to-Consumer loans, Business-to-Consumer loans, and Business-to-Business loans. The service portfolio of the company includes short-term as well as long-term loan instruments which can be either be secured or collateral-free, as per the user requirement.
The platform also holds the distinction of being the first company to introduce a lender’s protection scheme in India.
Investing in a mutual fund is considered a smart option, especially for first-time investors, and several fintech startups are looking to make the process simpler and attractive for individuals.
BankBazaar, which has a Sebi-registered investment-adviser licence, is set to use robo-advisory technology, which entails minimal human intervention in financial advice, to help customers invest in the right mutual funds. The feature will be live internally on October 30 and can be used by the public from November 17, CEO Adhil Shetty told ET.
Digital payments startup Trupay will launch a feature this month for real-time investment in mutual funds using its UPI integration.
Zerodha offers a choice of the bestperforming mutual funds, which Nithin Kamath, CEO of Zerodha, said the company is allowed to do using its stockbroker licence, and also uses a simulated systematic investment plan (SIP) to let users customise their investments based on markets instead of fixed periodical investments.
Fintech startup Lendingkart Group has acqui-hired KountMoney, an online lending marketplace for personal loans, to boost its technology and data analytics capabilities.
Acqui-hire refers to the buyout of a company primarily for the skills and expertise of its staff, rather than for its products or services.
KountMoney connects borrowers and lenders, besides vetting loan applications through an algorithm. It forwards the vetted loan applications to suitable lenders in its network, who take the final call. It also helps borrowers in choosing lenders and submission of documents.
Abstract – African financial services industry is in the midst of extraordinary change more and more of the population is becoming part of the formal financial system with mobile technology driven inclusion but still large portion of the market still remains untapped. The race/efforts by nonbank organization’s are still on to find innovative ways to get excluded customers on board. Included consumers are looking for everyday convenience, while businesses are looking for a competitive edge thus resulting in a new breed of products and next-generation payment options. At the same time many consumers still needs to answer for their questions like what do I do on Internet banking, with NFC sticker on back of my $10 mobile phone, with easy solution, open and integrated design technologies?
Introduction- With NFC any device can be a payment device.
NFC or any similar technologies are neither new nor a revolutionary innovation its in existence on this planet since decades, but not all of us are aware to make use of this for payments (Ok I agree most of us are). Mobile payment using NFC has been around for a long time but banks and retailers are hesitant to participate due to fear of low adoption rate.
Main Story – Using combination of technologies like mobile device, bitcoin, blockchain, fintech companies are building Internet of value. The question then is what does this means for financial institutions, governments and citizens.
The challenge to NFC is the cost of devices (Handsets & Receiving devices). Some brands do not take time to invest fully as Apple does.
Security is an integral component of all payments, as sensitive data need to be protected from any fraudulent parties. The card associations have created a set of rules and security standards, which must be followed by anyone with access to card information including gateways. This set of rules and security standards is called the Payment Card Industry Data Security Standard. To add security for both subscriber and merchant (Yes at business cost), as in any financial transaction that’s the golden Key.
Banks will certainly have to judge whether the massive investment they could make, in order to challenge the spreading popularity of payment systems such as PayPal, will be worthwhile, given that PayPal has gained ‘first mover’ advantage and that as highly-regulated financial service companies with duties to both national and continental authorities, they have to abide by stricter rules and security protocols. They must also judge whether their customers will move with them into a new more agile, flexible and electronic future, or whether a majority of people actively prefer the new, low cost (or free) services that have sprung up as part of the digital revolution.
Conclusions- Although we have made great strides to expand access to financial services through new technologies and innovative business models, the gender divide stubbornly persists in most emerging markets.
Time has now come for banks and other entities with an interest in financial service provision, to step up as one single team, exploit technology and leverage on existing MNO infrastructure to acquire customers, enrich use cases, lower costs and increase revenue especially in markets where regulators (such as reserve banks) play a dominant role.
American Banker, in partnership with Lending Times, is bringing you the largest p2p and marketplace lending event in New York in 2016. Among other keynote speakers meet Scott Sanborn, the new Lending Club CEO. Location: Mariott Marquis , Times Square, New York, NY. The code LTIMES will save you $250 off the signup ticket. Please RSVP here. […]
American Banker, in partnership with Lending Times, is bringing you the largest p2p and marketplace lending event in New York in 2016.
Among other keynote speakers meet Scott Sanborn, the new Lending Club CEO.
Location: Mariott Marquis , Times Square, New York, NY.
The code LTIMES will save you $250 off the signup ticket.
News Comments Today’s most interesting news: Lufax is eyeing a 2017 IPO. Interesting numbers: Lufax volume is about 120x larger than Lending Club’s. Even with Lending Club’s valuation at $2bil, Lufax’s valuation should be $140 bil, 7x the $18.5bil valuation received in the last round. The math is intriguing anyway you put it. Other news […]
SME Lender incorporates as B-corp which leads to “We’ve made a concerted effort to disclose our finances with our employees”. In my personal experience transparency is good. Too much transparency, however, is bad. When the company has a good month or quarter all employees will ask for a raise. When it has a bad quarter, nobody will ask for salaries to be reduced. This company will never make a profit.
A good article on the 5 things needed to build p2p in India. A few obvious things ( anonymity of borrowers and investors, regulation, coming together as p2p industry). One wishful thinking: better tax treatment and tax incentives. I am not sure why would India favor one financial market over other ones. And a really good suggestion: mandatory report of all loans to Credit Bureaus. That will lower the barriers of entry and will create more innovation as established companies will have a smaller underwriting edge over new entrants.
Bradford said they were not really that worried. The market is huge. SoFi is more focused on marketing execution and providing high-value services to their customers. What was cut from the video clip (embedded below) was that Bradford stated they were doing just fine regarding loans. In fact, they had just had one of their best days ever.
“For example, should regulators (or the lenders themselves) today take a closer look at risk models in China where delinquency rates are near 25 percent in the P2P lending market? By comparison, delinquencies on credit cards in China are in the 3-5 percent range. At the very least, this indicates a possible need for new risk tools to guide underwriting policies in P2P lending.”
For example, transparency is important in credit markets because it helps ensure greater fairness and accessibility. If a consumer receives a low FICO® Score, a reason code like “balances too high” is clear and actionable. “But if, for example, a score uses data on a person’s educational background, what can be done when the score is low?” Jennings wrote. “Tell that person that should have attended a better college or read a different subject or attained a higher grade?”
“Such data is often predictive but would be problematic on many of the key requirements of a best-in-class risk model. Designers of alternative credit-risk scores may not intend to illegally harm anyone, but the unintended dangers of their models may result in unreliable lending decisions and/or widespread bias against certain groups of people.”
Founded in 1956 and based in Silicon Valley, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 165 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in more than 100 countries do everything from protecting 2.6 billion payment cards from fraud, to helping people get credit, to ensuring that millions of airplanes and rental cars are in the right place at the right time. Learn more at
ADRs of Yirendai (NYSE:YRD), which is engaged in online consumer finance marketplace business in China, plummeted 18% in heavy volume after a Bloomberg report said the Asian nation imposed limits on lending by peer-to-peer platforms to individuals and companies.
An individual can borrow as much as 1 million yuan ($150,000) from P2P sites, including a maximum of 200,000 yuan from any one site, the China Banking Regulatory Commission was cited as saying in Beijing on Wednesday.
Corporate borrowers are capped at five times those levels, according to the report. Meanwhile, an affiliated person Zhenao Asset Management (Shanghai) Ltd said late Tuesday it filed Form 144 with the Securities and Exchange Commission to sell 17.8 million shares of the company. The volume of intraday trading stood at about 4.5 million shares compared with the stock’s three-month daily average of almost 944,000.
Lundin Law PC ( announces that it is investigating claims against Yirendai Ltd. (“Yirendai” or the “Company”) (NYSE: YRD) concerning possible violations of federal securities laws.
On August 24, 2016, Bloomberg reported that China imposed limits on peer-to-peer lending and placed a new regulations cap on individual borrowing at 1 million yuan. When this news was announced, shares of Yirendai fell in value.
Baker states, “it should be obvious now that marketplace lending is unsustainable.” A pretty strong statement for a sector of alternative finance that has, until recently, experienced dramatic growth.
If you look at Lending Club, their origination fee is between 1% to 6%. In Q2 the average per loan stood at 5.13%. If you would like to learn more, Lending Club explains it all here. But this is not sufficient to support Lending Club and its brethren, according to Baker, and thus marketplace lending is doomed. Even while online lending is booming around the globe apparently there is no hope for these Fintech firms.
A senior marketplace lending industry executive shared their perspective with Crowdfund Insider;
“There will continue to be people who have never operated businesses who will continue to write stories for click bate that will be proven wrong over the quality and performance of MPL over time. The search for yield continues around the world and the investors coming to MPL today are never stronger given our ability to meet their requirements for performance, risk and sustainability going forward.”
During the past year, Baker has been a regular contributor to American Banker. His topic of choice? Why alternative lending is not going to work out and why banks are superior.
He is a self-described as an “old, stodgy banker”. Baker is Managing Principal of Broadmoor Consulting. He is also a Senior Fellow at Harvard’s John F. Kennedy School of Government. Before Broadmoor, Baker spent many years working for traditional finance firms like Union Bank and TD Bank. At Broadmore he consults for, you guessed it, really big banks. Baker advises marketplace lenders to shift to something more sustainable – like becoming a bank or a balance sheet lender. Let’s revisit this one in a few quarters.
Clearinghouse CDFI’s status as a B Corp means the company has a higher level of transparency in its operations than some other players. “We’ve made a concerted effort to disclose our finances with our employees,” he said. “We share our revenue numbers, spending decisions and where we anticipate our finances will be in the next three years.”
But Clearinghouse CDFI is a part of a program by the U.S. Treasury Department that certifies CDFIs to serve underserved parts of the community.
That lack of transparency, he added, “needs to change.”
Focusing on the western states of California, Nevada, Arizona and New Mexico, Clearinghouse CDFI’s Bystry says small businesses in this region have a particular agenda when it comes to their working capital needs.
“We’ve seen a higher level of interest expressed for real estate and construction loans,” he said of the trends he’s witnessed among SME borrowers in the western U.S. “Because real estate in California tends to be expensive and cost-prohibitive, many small businesses do not own real estate. So, there is a real need, and we see this trend line growing.”
Over 400 new rules were created as part of DFA, including the creation of a new regulator, the Consumer Financial Protection Bureau.
Dale Wilson, CEO of First State Bank in San Diego, Texas, explained this vividly in his testimony to the Financial Services Committee on Dodd-Frank. “During the last decade, the regulatory burden for community banks has multiplied tenfold,” he said. “Since the passage of Dodd-Frank there are 80 fewer Texas banks. These banks didn’t fail…. [they] could not maintain profitability with regulatory cost increasing between 50-200 percent.”
Major ongoing regulatory concerns for banks include Anti-Money Laundering investigations, or Know Your Customer rules, which require banks to gather and infer more information about customers, to determine the risk in onboarding new clients. Banks are also subject to regular compliance reporting and periodic stress tests that check their ability to sustain a crisis.
By automating the process, banks can achieve an order of magnitude change in spending, said Michael Henry, general manager for KPMG’s global automated platform business for compliance and regulatory reporting.
Though it might be too late for some smaller banks that were forced to shut down by the burden of compliance costs, big banks with shrinking margins will certainly benefit from new technology.
AlphaFlow Diversification Fund 3 is Now Live for Investment, (Email), Rated: AAA
AlphaFlow Fund 1 (See here) ultimately invested across five real estate crowdfunding platforms after reviewing potential investments across eight different platforms. AlphaFlow may choose to work with additional platforms in the future, but at this point we found these five platforms to have the combination of underwriting processes, risk-adjusted returns, and procedures / performance in handling delinquencies / defaults that best fits our desired investment profile.
Platforms in AlphaFlow Fund 1:
Fund That Flip
Patch of Land
We are pleased to let you know that AlphaFlow Fund 1, LP ( “Fund 1”) is now fully invested and earning returns. The Fund 1 portfolio now contains 77 loans with a weighted average return of
10.0% (net of AlphaFlow’s 1% AUM fee) and a weighted average LTV of 68.6%, with all loans secured by first liens on the underlying properties. The Fund 1 portfolio is invested across 5 different platforms, with investments in 20 states across the country. As such, the Fund 1 portfolio is currently more diversified than 98.5% of AlphaFlow portfolios of users invested in the real estate crowdfunding industry.
Given the proliferation of platforms in the space, it’s not surprising that better borrowers who last year may have paid 11% or 12% interest for their loans are now paying 8% or 9%.
Despite 53% of UK* consumers being aware of marketplace lenders (MPLs), just 4% of this group have borrowed from one and only 5% have lent, according to Deloitte’s UK research,Marketplace lending: A temporary phenomenon.
Tomlinson continued: “Despite the challenges, MPLs do have an opportunity to carve out a niche market and can do so by exploiting their market-leading user experience and boosting word-of-mouth recommendations. These benefits could decrease customer acquisition costs, making MPLs a more viable option. As more MPLs become fully authorised by the FCA, issues surrounding trust and security could lessen. In turn, we may well see banks become more open to partnering with them to enhance their overall customer proposition.”
Lending Works noted the Brexit’s positives included borrowing getting cheaper (thanks to Bank of England’s rates being cut), the stock market is continuing to hold, UK consumer spending also increased last month and the property market has yet to experience a significant change.
Last month, Lending Works an internal poll of 1600 investors and the results indicate that a majority of investors intend on maintaining or increasing their P2P investments.
The numbers were:
62% plan to maintain current investment levels in P2P in the short-term, while one in five plan to increase them as a direct result of Brexit
To date, there have been no high-profile P2P failures in the UK, but a few hundred investors were burned by niche lender Quakle in 2012, caused by the company lending too much to poor quality borrowers.
Further afield, Swedish P2P lender TrustBuddy collapsed in October 2015. TrustBuddy sat at the riskier end of the market, offering 12% interest via high-risk unsecured personal loans. It emerged the company had adopted Ponzi-style practices, using money from new investors to service existing bad debts, according to the firm’s statement “in violation of [lenders’] instructions or without their permission”.
Investors in TrustBuddy faced losing at least 25% of the money recovered in liquidation, to say nothing of the millions that weren’t recovered.This story reminds everyone of the golden rule of investment: if something sounds too good to be true, it probably is.
Zopa, Since 2005 when the website was launched, about 150,000 people have received £1.62 billion in personal loans. The website uses a peer-to-peer (P2P) lending model. The average loan size is £7,300,but loans could be as low as £10 or as high as £1 million.
Funding Circle : Funding Circle is a loan-based crowdfunding website. It has helped businesses borrow from lenders about £1.5 billion in total. Loans range from £5,000 to £1.0 million. The website has 51,495 registered lenders and 15,000 businesses that borrow.
RateSetter : ateSetter is a brand operated by Retail Money Market Ltd. Since its launch in September 2010, some £1.4 billion has been raised through the platform. Both personal and business loans can be obtained through RateSetter. Investors can earn a return of up to 4.8% and borrowers can borrow at 7.6% representative annual percentage rate. The platform offers prospective clients to invest a combined minimum £1,000 for a period of one year and get a £100 bonus in the rolling market.
ThinCats: ThinCats is an online peer to peer lending platform for secured business loans. It is a brand of Business Loan Network Ltd. The platform claims to ensure an average of 9% interest rate. Investors make bids with a minimum amount of £1,000. More than £188.5 million have changed hands within the ThinCats community.
BridgeCrowd: This is a platform created for the purpose of directly connecting businesses that want to borrow and lend money between each other without the assistance of banks. The only requirement is that borrowers need to mortgage a property they own (the maximum loan to value is 70% of the property’s value). Borrowers pay a monthly interest of up to 1.5% on the loan they receive, most of which goes to the lenders and a small portion of it goes to the platform developer. BridgeCrowd has facilitated the lending and borrowing of more than £68.5 million in total.
LandBay: LandBay provides P2P lending on buy‐to‐let mortgages. It is among UK’s fastest growing P2P lending platforms. LandBay has facilitating the lending of nearly £43 million so far. Retail and institutional investors can build a portfolio and start with as little as £100 and earn up to 3.99%.
LendingCrowd: Launched in late 2014, the platform has more than 1,700 investor signed up. By January 2016, there were more than £4.5 million loaned through the platform.
Buzzbnk : Buzzbnk presents itself as the UK’s first crowdfunding and peer-to-peer lending platform for social enterprises and charities. Buzzbnk merged with Trillion Fund Ltd November 1, 2014. Buzzbnk.org continues after the merger on its mission to help social enterprises and charities raise the funding and support they need. More than 141 projects have received funding through Buzzbnk of a combined nearly £1.1 million.
ReBuilding Society: Although launched in September 2012, the platform funded its first deal in January 2013. Some £10.4 million in loans have been secured through the platform out of £28 million pledged. Loans have a default rate of 9.6% and an average gross yield of 16.9%. Loan range in sizes from £25,000 to £2 million.
Money&Co. : This is a lending website for businesses that offers crowdfunding, business loans, P2B and P2P lending. Businesses can finance growth with flexible loans of up to £3 million and lenders earn typical annual returns of between 6%-10%. The platform is operated by Denmark Square Ltd.
India has a lot of informal lending within families, friends, businesses as well as semi-organized in the form of “Chit-Funds”. Peer-to-Peer lending done online to complete strangers is at the same stage as e-commerce was in year 2000.
1. From Consultation to Guidelines: Mr. Rajan, ex-Governor of RBI and his team must be applauded for their pro-active approach to craft a consultation paper with clear articulation upcoming guidelines.
2. Anonymity of Borrowers and Lenders: Lenders make their decision based on key parameters of borrowers without knowing the borrower’s name.
3. Making Peer-to-Peer Lending interest earning – Income Tax free: Recently, the government has published that MSMEs have a credit gap of Rs. 15 lakh crores . With the GOI initiative for “Make in India” – these gaps will increase as traditional lenders (banks, NBFCs) have stayed away from lending to MSMEs without collateral. This will require an incentive – similar to what we have seen in the past for insurance, mutual fund investments as well as donations. Today, all interest income is taxed in the hands of the individuals. It will be a great incentive and allow for rapid adoption if along with the RBI guidelines, we can have Income Tax Department looking at making income from P2P lending tax free in the hands of the individuals.
TDS deduction by non-individual on interest payment: Currently businesses are required to deduct Tax at Source for interest payment to allow them to claim the interest paid as an expense for tax calculations.
4. Mandatory to report loans to all the Credit Bureaus
5. Coming together of Peer-to-Peer Lending platforms for minimum standards beyond guideline
Chinese online lender Lufax is gearing up for an initial public offering in Hong Kong potentially before the end of 2017, its chief financial officer said, in a major test of investor appetite for China’s burgeoning fintech industry. Lufax recorded 3.2 trillion yuan ($482 billion) in total transactions in the first half of this year, with more than 23 million registered users, its parent Ping An Group said in its interim earnings report last week.
Lufax—valued at $18.5 billion in its latest funding round—was earlier considering a listing on a proposed new technology-focused board in Shanghai, but a plan to set up the so-called Strategic Emerging Industries Board wasn’t included in a five-year plan issued by China’s cabinet in March.
Lufax isn’t planning to have another funding round before the IPO, he added.
Ant Financial Services Group, valued at $60 billion after an April funding round, has said it plans to go public eventually, but doesn’t have a timetable for the listing.
Lufax and other Chinese online lenders have modeled themselves after U.S. peer-to-peer lenders such as LendingClub Inc. LendingClub has a market capitalization of only $2 billion, less than half of its $5.4 billion valuation at its IPO. The share price of smaller Chinese online lender Yirendai Ltd., however, has tripled since the company went public on the New York Stock Exchange in December.
News Comments Today’s interesting articles are the thought provoking piece in American Banker; the fact that German fintech raised 80% more money than British ones in Q2; and a great article on banks key numbers, a must read. Also OnDeck’s marketing is on fire : new site, new smart marketing campaign and , less for […]
Sasha Orloff, CEO of Lendup corrected Lending Times as follows
” I wanted to thank you for featuring us today in Lending Times. You are becoming the de-facto news source for lending, and love your emails. I regularly forward them to our board and our team.
But can you please change the article line about us being anti-bank? We are very pro-bank actually! Our entire mission is to provide anyone with a path to a better financial future. We do this for the 56% of the country who banks are unable to approve, and through our product, education and gamification help them build their credit score and move into asset building credit that is offered by banks – new homes, new cars, student loans. We do this because the average person will pay $250,000 more over the course of their life due to a low credit score.
But I worked at a bank for a long time, as did many of our employees. We just feel between outsourcing technology, increased regulation, and the changing demographics in our communities, banks have some challenges in developing products for the thin-file, no-file and low credit-score populations. So we are building solutions to help our customers actually graduate into banks, and we partner with banks for many of our products.
While I believe our system could be better, I think the banking system is the best system we have. There are plenty of opportunities, but disrupting FICO, our regulatory system, and system seem hard to do. So instead, we think our technological and product expertise can complement the banks nicely.
Plus well, we need banks to operate. And they have been a great help.
Can you please update the “anti-bank rhetoric” part? That is not true.”
Cormac Leech departs Liberum investment bank to serve as principal at Victory Park. An interesting move as Liberum seemed a very successful niche investment bank with Cormac. I would love to understand the real reasons for this move. It could be a good trend indicator.
Comment: We would like to remind out readers that plenty of companies in marketplace lending have been profitable or are profitable.
The title is of course attention grabbing through its provocative message. Beyond the title, I think we need to really to company marketplace lending to the average startup which doesn’t make money.
Facebook was not profitable for a very long time. Tesla is not. ZipCars was never profitable. Uber still isn’t profitable. Not being profitable is not the only indicator of a company’s success for a given period of time.
Of course, never being able to be profitable is a reasonable indicator that a company is nonsustainable. But as I mentioned at first: Zopa, Lending Club, Lend Invest and other companies have been profitable at times and they made the conscient choice to trade profitability for growth.
The company I’m pitching to you has revenues that rise and fall as much as 50% or more on a quarter-to-quarter basis. Its quarterly earnings and losses are equally volatile. Almost all its revenue comes from new product sales — it has very little continuing revenue. Operating expenses generally increase a little more slowly than revenue when sales are rising, but when sales fall, expenses keep increasing anyway because of accounting charges for layoffs and office closures when management downsizes.
Management can’t plan ahead because the company sells most of its products to a few large customers. Those customers dictate sales volume and product pricing and their purchases determine whether the company makes or loses money in any given period.
Management’s only lever for controlling the company’s earnings volatility is to try to guess how much and at what price those customers may buy in the future. The company increases or decreases personnel and marketing expenses based on that guess.
The company also has a large ongoing technology investment program that it can’t afford to cut much if it wants to compete. Oh, and the company isn’t growing — sales in the most recent quarter were flat compared to the same quarter two years earlier — and it is only marginally profitable even when things are going well. [Comment: The author is stating, to my knowledge true facts. However, the author is citing a single company out of 507 companies Lending Times keeps track of in this market.
The company I just described is Prosper Marketplace, a fintech “unicorn” with a billion-plus private market valuation and the granddaddy of the marketplace lenders. [Comment:As an industry insider I believe that what we need to read here is “this is a lesson we all need to learn from”. I am not convinced that once can’t do P2P lending without avoiding these problems. All the problems described here are not must haves in order to enable P2P lending. ]
Companies like Prosper and Lending Club have done a fantastic job revolutionizing the front end of the consumer lending experience — and in doing so have created real value for some borrowers — but their vision of a “disintermediated” loan marketplace is proving itself unable to handle even minor financial market bumps without running off the road.
There is another view on the viability of MPLs. Lending Club’s $2 billion-plus market capitalization shows that many people still believe that the sector’s recent problems are temporary and that the MPL model can work to create shareholder value.
Lending Club has lost a cumulative $115 million over the last four and a half years [Comment: Of which it lost $81m due to corporate procedures and not due to their business model. Losing $34m while growing at the pace they did over the last 4.5 years is in-fact outstanding results.]. (Prosper has lost a cumulative $125 million over the same period) and nothing suggests that will change anytime soon.
The path ahead is clear if boards, venture investors and management want to salvage something before the string runs out. Stable funding is everything for a lender,[Comment: entirely agreed]. and the best place to find that is to fund lending directly with bank deposits. [Comment: there are other sources of capital that behave like a depositor capital, like 401k, self-directed IRA, etc. ] .
While this won’t result in the type of equity valuation dreamed of by the MPLs’ tech boosters, it will provide something real for the venture and institutional investors who put up the equity to fund companies like Prosper. [Comment: the valuations indeed may have been a little unrealistic. But valuations are made by offer and demand. It takes 2 to make a valuation, the buyer and the seller. ]
[Final Comment: I find this article extremely helpful in sorting out what are real problems for the space and what is not. I also find the last 6 months are the best possible lesson on what works and what doesn’t work. That is an amazing amount of useful information. We now know what in which direction to build. And the fact that despite all its problems Lending Club still originated $2bil in volume approximatively means there is a real business, there is real demand. ]
Comment: one of the most interesting articles I’ve read this month.
Who would want to be a bank these days? Quite a few technology startups, it seems.
Mondo received a commercial banking license in the U.K. this month and plans to offer checking accounts next year. Atom Bank, backed by Spain’s BBVA, and Starling now have U.K. licenses. Germany’s Number26, received its own permit last month.
The apparent rush to enter a business that has destroyed shareholder capital and jobs over the past decade reflects a certain confidence that incumbent lenders are stuck in a rut.
It also reflects a desire to fully control the back-end plumbing of their offerings rather than just the funky user interface.
But that comes at a price: Mondo will need to raise as much as 20 million pounds ($26 million) of additional funding to make the transition to a full-fledged bank. That may sound like small beer for a startup that once crowd-funded 1 million pounds in 96 seconds. But the long-term picture is more troubling: with a license, these firms will have a larger cost base and a higher barrier to profit.
Lending is an expensive trade with high capital costs. For every 100 pounds of mortgage lending in the U.K., a new bank would have to have about 2.80 pounds of capital, according to regulators.
Present an entrepreneur with these realities and you’ll likely be told that their new banking model will involve less balance sheet and more data.
E-invoicing specialist Tungsten failed to deliver on its banking bet and agreed to sell its license in 2015.Tungsten, a U.K. electronic-invoicing specialist, sold its banking arm last year, saying regulatory approval was “incompatible with profitable growth”. Japanese network operator NTTDoCoMo sold its stake in a German private bank back in May.
Doubtless, a startup somewhere will find a way to profit from its banking license — but in the absence of a proven business model this will look less like a one-way street and more like a revolving door.
Fundation Group LLC, which makes online business loans, this week completed a $100 million credit facility with Goldman Sachs Group Inc., according to the lender’s chief executive.
The new credit line will help the firm expand its recent partnerships, including those with traditional banks, such as Regions Financial Corp. and a network of community banks, to extend loans to the banks’ business customers.
Through its partners, Fundation offers term loans of up to $500,000 with annual rates under 30%.
In addition to banks, and a small amount via its own website, Fundation partners with business-service providers such as Wolters Kluwer N.V. to make loans. It also recently began working with the U.S. Department of Commerce’s Minority Business Development Agency to facilitate lending.
Fundation is majority owned by Garrison Investment Group, a credit investment firm.
Comment: I am not certain if this is a new structure OnDeck is setting up or a routine structure they have been using all along. More research is necessary.
On August 19, 2016, OnDeck Asset Funding I, LLC (“ODAF I”), a wholly-owned subsidiary of On Deck Capital, Inc. (the “Company”), established a new asset-backed revolving debt facility (the “ODAF I Facility”). On that date, ODAF I entered into that certain Credit Agreement (the “ODAF I Credit Agreement”) by and among ODAF I, as Borrower, the Lenders party thereto from time to time, Ares Agent Services, L.P., as Administrative Agent for the Lenders and Collateral Agent for the Secured Parties, and Wells Fargo Bank, N.A., as Paying Agent.
The Company may now obtain funding (subject to customary borrowing conditions) through the ODAF I Facility, including to finance certain of the Company’s loans not currently financeable by the Company’s other funding sources due to concentration limitations and to finance the Company’s larger term loans with a maximum original principal amount of up to $400,000.
The following table summarizes certain aspects of the ODAF I Facility:
Borrowing Base Advance Rate
Up to 80%
LIBOR (minimum of 0.0%) + 7.25%
Commitment Termination Date
August 19, 2018
Under the ODAF I Facility, the Lenders party thereto commit to make loans to ODAF I, the proceeds of which are used to finance ODAF I’s purchase of small business loans from the Company.
The revolving pool of small business loans purchased by ODAF I serves as collateral for the loans made to ODAF I under the ODAF I Facility. ODAF I is required to repay the borrowings from collections received on the loans.
At the center of the bank are the core banking systems. This is the big book in which the bank writes who withdraws or deposits money. These systems, many of which were built when the 8-track tape was still around, is updated only once a day.
When you see a withdrawal instantly on your mobile phone, it’s done by a slew of mirror sites, or backend reconciliation to fake the system out. There is no such thing as real time banking. Sometimes, the system lags.
“Are you really going to build a Tesla from a Model T foundation?” asked Peter Olynick, senior practice lead for retail banking at NTT DATA, a business and IT services provider. Banks have done a good job in pimping out their Model T with ‘wrap around’ solutions, but this approach has limits.
Replacing the core system isn’t just costly, it’s also risky. A migration mistake might affect every service the bank provides.
Only 15 percent of bankers expect to build a new core deposit system in the next three years.
Banks find it increasingly difficult to launch advance products on top of aging core systems.
Yantra Financial Technologies, a financial technology firm specializing in designing, developing and managing electronic payment systems, has enabled lenders to deliver funds in real time with BlastPay, an FDIC insured business bank account that gives users complete control over disbursements.
Founded in 2012, Topeka, Kan.–based Yantra Financial Technologies is a financial technology firm specializing in designing, developing and managing electronic payment systems, and focuses on creating secure contextual and conditional ways of moving money.
The new site – www.ondeck.com – marks an inflection point for the rapidly growing online lending industry as pioneers like OnDeck shift their brand voice to reflect the maturing industry and the fact that the company is no longer a start-up, but is now the largest online lender to small businesses, with almost a decade of experience and expertise in providing billions of dollars in capital that helps small businesses grow.
MoneyLion, the mobile-first personal finance platform, is helping consumers gain a clearer picture of their credit health with free credit monitoring tools provided by credit bureau, TransUnion®. Data collected by MoneyLion since Q1 2016 has shown that loan takers that use their credit monitoring tools are 28 percent less likely to default.
MoneyLion’s credit monitoring tools allow users to:
View their individual credit report
Use a credit simulator to forecast the impact of financial decisions on their credit score
Set up real-time alerts informing users of critical changes to their credit report
Founded in 2013 by a team of leading technologists and financiers, MoneyLion uses superior analytics and machine learning-based risk technology to gain a 360-degree view of its users’ personal finances, enabling better underwriting and the development of tailored financial product offers.
LendIt Announces Partnership with Capital One to Co-Host their Annual Fintech Start-up Competition, (Press Release), Rated: A
LendIt, the largest conference series dedicated to connecting the global online lending community, today announced a partnership with information based lending company Capital One to co-host PitchIt @ LendIt, a competition to find a future star of the fintech world.
he competition is aimed at firms innovating within the online lending and fintech space. It provides a showcase for eight high growth fintech firms to pitch their business case to a panel of expert judges as well as some of the technology industry’s leading figures attending the forthcoming LendIt Europe 2016 conference in London. (
Half of the survey respondents agreed that: “As a business owner, work/life balance is an illusion,” with even more – 61 percent – saying that “they constantly feel like they are racing against the clock.” When asked, “How many hours per week would you need to successfully run your business?” those surveyed felt they would need 69 hours on average.
“Our research shows that small business owners are pressed for time and need to find ways to free up more time in their day,”
According to a study from the Federal Reserve Bank of New York, small business owners spend an average of 33 hours searching and applying for a traditional bank loan.
OnDeck will provide time management tips to streamline common time-intensive areas of running a business, including marketing, customer service and people operations. The advice, which also includes work/life balance best practices, comes from OnDeck executives, SCORE President David Bobbitt, small business owners and other small business experts. SCORE is a non-profit organization comprised of 11,000+ volunteer mentors who provide free and confidential small business mentoring and advice :
Facebook Live Chat: 7 Ways Small Business Owners Can Be More Efficient Marketers
Quickbooks Online Essentials Contest: Streamline Your Accounting
Before founding Kabbage,Rob Frohweinestablished, led and advised a number of successful businesses, including LAVA Group, U.S. Micro Corporation and Surgical Biologics. Additionally, he served in business development and legal capacities for ZapMedia and Security First Network Bank. The Villanova law and undergrad alum practiced law with Troutman Sanders LLP, co-authoredthree books on intellectual property including and co-hosted a career-centered radio program sponsored byUSA TODAY.
Kabbage is funded and backed by leading investors including Reverence Capital Partners, SoftBank Capital, Thomvest Ventures, Mohr Davidow Ventures, BlueRun Ventures, the UPS Strategic Enterprise Fund, ING, Santander InnoVentures, Scotiabank, and TCW/Craton. All Kabbage U.S.-based loans are issued by Celtic Bank, a Utah-Chartered Industrial Bank, Member FDIC. When did Kabbage gain traction and make good on its name?
The idea for Kabbage first came about when we recognized that many companies were offering automated access to data via APIs like eBay’s. There was a lot of rich transaction-level data that could be extremely useful for decision-making on underwriting.
In fact, we now work with some of the world’s largest banking institutions. ING in Spain, Santander in the U.K., Scotiabank in Canada and Mexico now leverage the Kabbage Platform to better serve their SMB customer base.
Kabbage is to FinTech what Amazon is to e-commerce. Just as Amazon powers e-commerce for thousands of merchants, Kabbage is the first fully-automated, data-driven platform that is scalable and easily adopted.
There are several difference between Kabbage and Marketplace Lenders. Kabbage partners with a federally insured, industrial bank to provide a line of credit to businesses. Unlike a marketplace platform, Kabbage and this bank retain all of the credit risk.
I would say that banks simply haven’t been equipped to serve businesses seeking smaller loan sizes under $250,000, even though they likely want to.
So far, only a handful of platforms have received authorization from the Financial Conduct Authority (FCA) to offer the Innovative Finance Savings Account (IFISA), due to regulatory holdups. But for those that have a live product, it has resulted in a significant uptick in business. We spoke to two P2P lenders that offer IFISAs about the impact it’s had on their businesses: Crowd2Fund and Crowdstacker.
Here are some of the key takeaways:
Property lending will make up the largest share of P2P activity in the UK in 2020, followed by business lending and consumer loans.
Traditional lenders will reclaim some P2P lending volume by building or acquiring the technologies that are proving successful.
While the general concept of P2P lending is the same, there are major differences between the UK and US P2P lending markets.
Victory Park Capital Advisors, LLC, (“VPC”), the investment manager to the Company, has appointed Cormac Leech as Principal to the firm. Cormac will be based in London and act as the European representative for VPC and will be working across all aspects of its business including the London listed VPC Specialty Lending Investments PLC. He will start his role in September.
Cormac was previously a Director and Co-Founder of Alternative Finance at Liberum, the London based investment bank.
LendInvest has appointed Erin Stewart to lead the company’s growing HR department. Stewart was most recently head of HR for EMEA and APAC at Essence, the global digital agency and the world’s largest independent buyer of digital media. During four years at Essence, Erin oversaw the launch of several of the agency’s Asian offices in cities including Singapore, Tokyo. In each location she established the HR functions to support the business’ fast expansion.
ErinStewart joins a growing team at LendInvest in the company’s central London headquarters. Since spring 2015, the LendInvest team has increased threefold from 30 employees to 105 full time members of staff. Other senior hires made in the past year have included specialists from OneSavings Bank, RBS, IG Group and CBRE. Today, 40% of the team works on technology and product development, with 30% committed to originating, underwriting and servicing property finance loans.
A common model when it comes to technology investment is the “accelerator investment” model, which works with other strategies to help bring startup investment in technology to the mainstream. Organizations like Barclays have been said to use similar methods for some time now.
Octopus’ methods, meanwhile, are a little different, launching what’s known as Octopus Labs to help drive development, and not just investment.
One big example of this is the Octopus Choice system, a peer-to-peer (P2P) lending system that fills in the gap in P2P lending.
The peer-to-peer (P2P) market offers some excellent investment opportunities but before diving in, says Jane Dumeresque, advisers need to do thorough research and ensure they and their clients pick a quality provider.
Once the decision to invest in P2P has been taken, there are a whole host of criteria lenders and advisers should look for to evaluate which P2P provider to use. For starters, it is important to know who owns the business and whether they are looking to build a sustainable business or to quickly build market share and then exit before the loan book has gone through an economic cycle.
Does the business have the financial expertise to assess the loan risk and is this done by people or using algorithms?
These are the types of questions that should be answered before your client makes the decision to invest in a platform and some companies will be better equipped to answer them than others.
For years now we have all known there is no such thing as a free lunch and, not surprisingly, there is a correlation between risk and reward – invariably, if it looks too good to be true, then it probably is.
It is important for an investor to understand how long their money will be tied up, what return they are getting, when they are getting it and what security they have in the event the borrower is unable to pay? What processes are in place?
For those prepared to invest the time, there are some excellent investment opportunities in the peer-to-peer market, where investors can not only earn an attractive return with good security but can also help businesses gain access to capital they would otherwise not have.
Germany overtook Britain as the fintech funding capital of Europe in the second quarter of the year, with German startups pulling in $186 million (£142 million) compared to $103 million for British businesses.
The three largest fintech funding deals in Europe in the second quarter were all in Germany: marketplace lender Finanzcheck raised $46 million; digital-only bank N26 raised $40 million; and payment provider AEVI raised $34 million.
But the report adds: “Regardless of Brexit, the UK will not give up its role as Europe’s fintech leader easily, demonstrated by the country’s regulatory sandbox and its recent announcement of a fintech bridge with Singapore aimed at making it easier for UK-based fintech companies to operate in that country and vice versa.
Globally, KPMG and CB Insight’s “Pulse of Fintech, Q2 2016” report found fintech funding hit $9.4 billion, boosted by Ant Financial’s bumper $4.5 billion injection in China. Funding to VC-backed fintech firms fell by 49%.
Funding for fintech companies in North America saw the biggest drop off globally, declining 28% on the first quarter of the year.
The report also found a big increase in the number of corporate venture capital funds — mainly off-shoots of banks — getting involved in funding, while the number of VCs putting money on the table is in decline. A third of fintech funding deals globally involved some sort of corporate investment.
Chinese regulators are considering new rules to cap P2P (peer-to-peer) lending ito control risk and protect investors, eight months after it initiated a campaign to “clean up” faulty P2P lenders, according to Chinese media reports.
An individual lender can provide loans of no more than RMB200,000 (US$29,976) on one P2P platform, and can lend no more than RMB1 million (US$150,000) in aggregate across different P2P channels.
For other non-individual legal entities, the cap is RMB1 million on a single platform and RMB5 million across all P2P channels, according to Chinese media reports citing an insider.
A total of 515 P2P lenders in China have closed doors or exited the sector during the first half of the year. There are 2,349 P2P lenders currently in operation in China, compared to over 4,000 P2P lenders that have been in existence, cumulatively.
In a trading update this week DirectMoney announced that Mr Nantes, a current director, replaces Stephen Porges who has stepped down from the chairman role and will remain as a non-executive director of the company.
DirectMoney has recently completed a $5.7 million capital raising which will fund further development of the company’s technology platform, the marketing of the DirectMoney Personal Loan Fund and underpin new institutional funding initiatives, which are currently in due diligence.
Mr Nantes has over 20 years of experience in financial services. Prior to being the CEO of Adcock Private Equity, he was group head of financial Services at Crowe Horwath, which held over $10 billion in funds under management and was Australia’s largest SMSF provider with over 10,000 funds.