Tuesday October 30 2018, Daily News Digest

Synchrony Q3 Earnings

News Comments Today’s main news: SoFi caught with alleged misleading ads. The Motley Fool recommends LendingClub. Prosper performance update. Australia’s fintechs are beginning to make profits. Elevate Credit plunges from record low. Today’s main analysis: Loan growth at credit card issuers. Today’s thought-provoking articles: Down payment affordability by state. Crypto lending and the turbulent 2018 market. Do banks or fintechs do […]

Synchrony Q3 Earnings

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News Summary

United States

FTC puts student lenders on notice by citing misleading ads at SoFi (American Banker) Rated: AAA

SoFi has agreed to settle federal charges that it misled borrowers about how much they could save by refinancing their student loans. The charges were issued by the Federal Trade Commission, which warned other student lenders to steer clear of similar violations.

The commission voted 5-0 on Monday to issue the administrative complaint and accept the agreement with SoFi. The company, which agreed to stop exaggerating potential savings, was not required to pay a civil penalty.

According to the FTC, SoFi over the past two years has inflated — at times doubling — estimates of the average borrower’s savings from student loan refis. The San Francisco company, which in one ad claimed that SoFi customers save an average of $22,359, did so, in part, by excluding from its calculations borrowers who refinance their loans with longer terms and pay more over the lifetime of their loans, the agency said.

Online Student Loan Refinance Company SoFi Settles FTC Charges, Agrees to Stop Making False Claims About Loan Refinancing Savings (FTC) Rated: A

Online student loan refinancer SoFi has agreed to stop misrepresenting how much money student loan borrowers have saved or will save from refinancing their loans with the company, in order to settle Federal Trade Commission charges that it deceptively advertised inflated figures for more than two years.

According to the FTC, one online SoFi ad claimed, “Refinancing student loans saves $22,359 on average,” while another ad told readers to “Start saving on your student loans. Average monthly savings $292.”

6 Great Stocks Under $ 6 (The Motley Fool) Rated: AAA

LendingClub — $3.13

Peer-to-peer lending doesn’t get a lot of love on Wall Street, but it’s a win-win for folks looking to borrow money and risk-tolerant income investors willing to lend out their money in the chase for higher yields. LendingClub has had a rough first few years as a public company, and it wasn’t until just a few weeks ago that it settled up on Federal Trade Commission and SEC complaints stemming from company disclosures that ultimately cost its CEO his job.

The platform’s popularity continues to grow. Revenue rose 27% in LendingClub’s latest quarter, and loan originations rose 31% to hit a record $2.8 billion. Guidance wasn’t great. Profitability remains a challenge. The depressed stock has some serious upside as demand for peer-to-peer lending gains — pun intended — interest.

Prosper Performance Update: September 2018 (Prosper Blog) Rated: AAA

Highlights from the September report include:

  • In September, 61% of originations were rated AA-B as Prosper continues to reduce the risk profile of originations on the platform.
  • Dollar WA FICO for the month of September was 717, remaining flat month-over-month and increasing 10 points since Q3 2017.
  • Average loan size on the platform is approximately $13,300, approximately $280 lower since 2018H1. This decrease is driven by our continued focus on limiting loan amounts based on a borrower’s income and ability to pay.
  • WA Borrower Rate for September originations on the platform increased by 10 bps compared to August as the portion of originations rated AA-B decreased slightly.

Loan Growth at Credit Card Issuers (Peer IQ) Rated: AAA

American Express Q3 Earnings

Revenues at AXP grew by 9% YoY to $10.1 Bn to achieve record levels. Earnings grew by 22% YoY to $1.7 Bn. NII also grew 17% YoY to $2 Bn. AXP’s premium customer base saw record-low delinquency rates while the net charge-off rate increased slightly YoY to 1.7%.

Source: Peer IQ

Capital One Q3 Earnings

COF’s revenues were flat YoY at $7 Bn, but earnings grew by 36% YoY to $1.5 Bn. Growth in NII was modest at 2% YoY to $5.8 Bn. COF was the only issuer who saw a drop in the net charge-off rate by 20 bps YoY to 2.4%. COF also saw its provisions for loan losses decrease by 31% YoY driven by improving credit quality of the credit card and auto loan portfolios. This release in provisions consequently led to a 3% YoY drop in allowance for loan losses to $7.2 Bn on loan growth of 1% YoY.

Source: PeerIQ

Synchrony Q3 Earnings

SYF’s revenues grew by 9% YoY to $3.3 Bn. Earnings grew by 21% YoY to $0.7 Bn. NII grew by 9% YoY to $4.2 Bn. SYF had the highest net charge-off rate of 5% among all issuers, which stayed flat YoY. Loans grew by 14% YoY to $88 Bn. Provision for loan losses grew by 11% YoY and the total allowance for loan losses increased by 16% YoY to $2.9 Bn, slightly outpacing loan growth.

Source: PeerIQ

LendingTree Ranks Down Payment Affordability by State (Lending Tree) Rated: AAA

Key findings

  • Average down payment percentages for conventional 30-year, fixed-rate purchase mortgage offers stayed about the same from the second quarter to the third quarter, rising 0.03 percentage points (18.02% to 18.05%).
  • At the same time, average down payment amounts decreased nearly 10% in the third quarter, falling from $52,480 to $47,265.
  • The average loan amount offered to potential homebuyers fell around $28,000 from $285,903 in Q2 to $257,749 in Q3.
Source: Lending Tree

 

Source: Lending Tree

Average mortgage down payments drop in Q3 (Mortage Professional America) Rated: A

Average down payment amounts for conventional 30-year, fixed-rate purchase mortgage offers declined during the third quarter, while down payments as a percentage of the price stayed about the same, according to an analysis by LendingTree.

Average amounts fell by almost 10% during the third quarter, decreasing to $47,265 from $52,480. At the same time, average down payment percentages were steady from the second quarter, rising 0.03 percentage points to 18.05% from 18.02%.

The Credit Junction Secures $ 23 Million Equity Investment from Century Equity Partners (New York Business Journal) Rated: A

The Credit Junction, the first data-driven, asset-based lender for small and mid-sized businesses, has secured a $23 million growth equity investment from Century Equity Partners (“Century”). Century focuses on making investments in lower middle market companies that have demonstrated value propositions to the financial services industry. This investment provides The Credit Junction with growth capital to expand its ability to provide financing solutions to Supply Chain America, as well as commercialize its proprietary data and risk analytics platform.

This marks the second meaningful financing announcement for The Credit Junction in recent months, as the company secured a $150 million credit facility from MidCap Financial in March 2018.

Surge in Mobile Fraud and Phishing, Balancing Customer Friction and Fraud Prevention Are Biggest Challenges for Businesses (PR Newswire) Rated: A

IDology today released its Sixth Annual Fraud Report, confirming the growing importance of balancing customer friction and fraud prevention, cited by businesses this year as the number one challenge in fighting fraud. The report reveals a surge in mobile and phishing fraud schemes, a focus on artificial intelligence and machine learning as the growing trends in identity verification, and the strategic role identity verification plays in the quest to gain a competitive edge, retain and attract customers, and increase revenue.

Phishing and Mobile Fraud Surge

Credit card fraud and account takeovers remain the most widespread forms of fraud, but phishing schemes and mobile fraud have surged.

  • The prevalence of mobile fraud surged dramatically with an increase of 117% over the previous year (one of the highest year-over-year increases among the fraud vectors measured this year in the survey). The number of businesses that feel their industry is least prepared to detect and prevent mobile device attacks increased 167% compared to a year ago.
  • Businesses reported a 63% increase in mobile fraud. All types, including porting, spoofing, hacking and fraudulent change events, are on the rise. Caller ID spoofing increased by 74%, porting by 69% and SMS interception by 50% compared to 2017.
  • Phishing, which can be linked to 93% of last year’s security breaches and has steadily risen each year, increased in prevalence by 66%.
Source: IDology

ABS Professionals Demonstrate Enthusiasm Despite Rising Interest Rates, Survey Finds (ABL Advisor) Rated: A

Capital One survey conducted at ABS East 2018—a conference convening professionals from across the asset-backed securities (ABS) industry—found that most respondents (94 percent) expect buy-side interest in ABS to increase or remain the same in the coming year while only 6 percent expect it to decrease.

Of the challenges facing the industry, only 15 percent of ABS professionals elected increases in interest rates. For the majority of respondents, uncertainty around regulatory requirements (30 percent), increased credit risk (25 percent) and increased competition (24 percent) pose the greater challenges for their businesses over the next 12 months.

State Regulators File Second Lawsuit Opposing OCC Fintech Charter (National Law Review) Rated: A

The Conference of State Bank Supervisors (CSBS) has filed a second lawsuit in D.C. federal district court to stop the Office of the Comptroller of the Currency (OCC) from issuing special purpose national bank (SPNB) charters to fintech companies.  A similar lawsuit was filed last month in a New York federal district court by the New York Department of Financial Services.

Stephanie Klein of Braviant Holdings (Lend Academy) Rated: A

While the non-prime consumer lending space is less competitive than prime there are many companies doing interesting things. We heard the recent news of US Bank entering the space and just today I read that the CFPB intends to change the rules for payday lenders in the new year. It is certainly a dynamic space that will be going through lots of changes in the near future.

Our next guest on the Lend Academy Podcast is Stephanie Klein. She is the CEO of Braviant Holdings, a non-prime lender that has been around since 2014. Stephanie actually has quite a long history in the non-prime space going back more than a decade to her time with Al Goldstein’s (the CEO of Avant) first lending company, CashNetUSA.

Online subprime lender Elevate Credit plunges from record low after earnings (Market Watch) Rated: AAA

Elevate Credit Inc. ELVT, -32.13% closed at a record low Monday, then plunged more than 20% in after-hours trading following an earnings report that included lowered annual guidance and myriad concerns that cropped up in the quarter. Chief Executive Ken Rees called the quarter “unexpectedly challenging” in the announcement, and then ticked off the reasons for the performance.

Elevate, which offers loans online to subprime customers through different products, reported a third-quarter loss of $4.2 million, or 10 cents a share, on revenue of $201.5 million, after reporting a profit of a penny a share on sales of $172.9 million a year ago. Analysts on average expected earnings of 13 cents a share on sales of $200.2 million, according to FactSet.

The company chopped its annual forecast, which previously called for earnings of 55 cents to 90 cents a share on sales of $790 million to $810 million. Now, Elevate expects earnings of 23 cents to 32 cents a share on sales of $790 million to $795 million in 2018. After shares closed at an all-time low of $6.35 Monday, they fell to about $5 in after-hours trading.

Equifax launches real-time Open Banking ID checks (Peer2Peer Finance) Rated: A

CREDIT referencing agency Equifax has teamed up with Open Banking technology provider consents.online to allow it to match customer data and transactions in real time.

It will be used within Equifax’s bank account verifier system that lets lenders compare sort codes and account numbers to its own database.

Users will be able to match identity information such as the consumer’s name, address and date of birth with transaction data provided through Open Banking, helping them verify who someone is faster and help avoid fraud.

5 Ways Online Loan Lenders are Changing the Financial Landscape (The Libertarian Republic) Rated: A

Perhaps you didn’t know that about 80 percent of American households are in some form of financial debt.

  1. Fast Access to Credit

Traditional banks have a bad reputation for playing hardball with loan applicants. Borrowers have to fill out more than a couple of forms and wait for days, weeks even, to get an approval. Never mind a simpler clerical error can get your request turned down.

  1. Credit Process Automation

One of the reasons traditional lenders take ages to approve and disburse credit is that they have to manually verify borrowers’ details.

  1. Introduction of New Lending Models

You don’t just walk into any bank or credit union and apply for a loan.

  1. Bad Credit? No Problem

The only other thing that is certain besides death and taxes is a traditional lender turning down a borrower with poor credit.

  1. Millennials Are Having Their Way

Being a millennial is a full-time job – with no paid overtime. From having people label them needy and entitled to being the objects of hate for older generations, it’s tough being a millennial.

Money20/20 Las Vegas: Wealthfront’s Freemium Tool Shows How Robo-Advisors Can Capture Market Share from Incumbents (The Fintech Times) Rated: A

At Money 20/20 in Las Vegas, Wealthfront announced it is opening up its financial planning service to anyone for free. The freemium service is currently in beta and will be available by the end of this year.

Heike van den Hoevel, Senior Wealth Management Analyst at 

The U.S. Financial Industry Could Be More Innovative. But Should It? (Barrons) Rated: A

American banking is apparently just a bit too boring, the Federal Deposit Insurance Corp. has concluded. Its chairwoman, Jelena McWilliams, told the American Bankers Association conference that the agency will open an innovation office.

This is related to, but slightly different from, the tack taken in July’s report from the Treasury Department that laid out more than 80 recommendations to help nonbank financial firms. The idea then was that nonbank financial firms, which get called fintechs for marketing reasons, don’t get a fair shot because of the regulatory advantages enjoyed by regular old banks.

The message was that regulation was stifling innovation by not regulating nonbank financial firms. Companies like Square, for instance, should be able to get banking charters if they want. (Which they do.)

McWilliams seems to see the problem from the perspective of banks rather than from nonbanks and comes to what looks like a contradictory position: Nonbank fintechs are innovating like crazy and banks aren’t keeping up. But there’s nothing exactly contradictory about saying nonbanks could be doing more things under a more accommodating regulatory regime and that banks aren’t innovating as fast nonbanks.

Walker & Dunlop Selects SS&C to Support $ 78 Billion Loan Portfolio (SS&C) Rated: B

SS&C Technologies Holdings, Inc. (Nasdaq:SSNC), a global provider of financial services software and software-enabled services, today announced that Walker & Dunlop has selected SS&C as a technology and services partner to deliver a highly-automated solution for loan servicing, asset management, insurance compliance, document management and investor reporting. This partnership reinforces SS&C’s commitment to the agency/multifamily market.

SS&C will provide cloud-based software and outsourcing services including Precision LM for loan servicing, and AWD, an enterprise business process management system, which combines automation, workforce optimization and digital transformation for insurance compliance and renewals. SS&C’s integrated solution supports a broad range of commercial/multifamily loan programs, such as Freddie Mac (including Freddie K securitizations), Fannie Mae, HUD, Bridge, Life Company and more.

Commerce Bank Supports FinTech Startups through Partnership with SixThirty (Business Wire) Rated: B

Commerce Bank announced today a multi-year partnership with SixThirty, a St. Louis-based venture fund that invests in financial technology (FinTech) startup companies. SixThirty targets investments in late-seed stage startups that have a product and market traction and are starting to earn revenue. Its portfolio and pipeline represent some of the most innovative and promising FinTech ideas from around the world.

Through its strategic relationship with SixThirty, Commerce will provide hands-on training and mentoring to the companies selected to take part in SixThirty’s business development program. Commerce team members will also participate in networking opportunities with leading technology and financial services institutions and some of the brightest and most innovative minds in the country. Additionally, Commerce will have the ability to make direct investments in ideas that present strategic, long-term opportunity to the business and the needs of our customers.

The Schall Law Firm Announces the Filing of a Class Action Lawsuit Against Jianpu Technology Inc. (Business Wire) Rated: B

The Schall Law Firm, a national shareholder rights litigation firm, announces the filing of a class action lawsuit against Jianpu Technology Inc. (“Jianpu” or “the Company”) (NYSE: JT) for violations of §§10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by the U.S. Securities and Exchange Commission.

Investors who purchased the Company’s shares pursuant to and/or traceable to the Registration Statement and Prospectus issued in connection with Jianpu’s initial public offering on or about November 16, 2017, are encouraged to contact the firm before December 24, 2018.

United Kingdom

The House Crowd opens £15m property development project to investors (Development Finance) Rated: AAA

A£15m crowdfunding property development project in Altrincham from the House Crowd has opened for investment.
The property crowdfunding and P2P lending platform is scheduled to complete the land purchase in November and start the build in January.

The House Crowd gives retail investors the chance to make an investment – starting from £1,000 – in property developments and builds the properties itself.

The site is in Altrincham town centre and will result in a total of 40 units comprising 31 apartments, eight townhouses and one commercial unit (pictured above).

P2P sector queries data used to justify tabled investor restrictions (Peer2Peer Finance) Rated: A

The industry gathered at a Peer-to-Peer Finance Association (P2PFA) event held in London last Wednesday, to discuss the Financial Conduct Authority’s (FCA’s) review of the sector ahead of the 27 October deadline for feedback.

The most contentious element of the FCA review was its proposals to introduce categorisation and appropriateness tests for P2P investors. Under the proposed changes, platforms would be restricted to marketing to those who are certified as sophisticated or high-net-worth investors or those that certify that they will not invest more than 10 per cent of their net portfolio in P2P.

At the P2PFA event, which was held under Chatham House rules, stakeholders suggested that the FCA had misinterpreted the findings of a 2016 survey conducted by the Cambridge Centre for Alternative Finance, which collected responses from investors. It was suggested that the FCA had used these findings as justification for the proposed marketing restrictions.

nCino to Present at Upcoming Fintech Industry Conferences (PR Newswire) Rated: B

nCino, the worldwide leader in cloud banking, today announced that members of the company’s leadership and market development teams will speak at two upcoming fintech industry conferences.

Nathaniel Ward, nCino’s regional vice president of market development for EMEA, will be speaking at MoneyLive Nordic Banking 2018 in a session titled: New Models in Banking: The Impact of Digitalisation. This session will explore the benefits and opportunities of cloud banking, and how to enable a workforce through digital transformation. This session will take place on 8 November at 09.45 at the Copenhagen Marriot Hotel.

Later in November, nCino’s chief innovation officer, Nathan Snell, will participate in a fireside chat at LendIt FinTech Europe 2018. In a session titled: The Rapid Pace of Product Launches in the Digital Age, Snell will discuss AI’s potential impact on the future of banking.

International

Crypto Lending Platforms Navigate Turbulent 2018 Market (Forbes) Rated: AAA

The surge of cryptocurrencies and “hodling” investment strategies of 2017 precipitated a flood of crypto asset-backed lending platforms coming to market.

The idea is a simple – take the concepts and models of traditional asset-backed lending and implement them with new “crypto assets” like Bitcoin and Ether. So if cryptocurrency miners or hodlers need short term access to fiat currency to pay expenses but don’t want to liquidate their positions, they can take out loans against the value of their crypto assets.

As such, platforms like ETHLend, SALT Lending, Nuo Lend and a plethora of others provide an alternative vehicle for investors who want to simultaneously hold and use their cryptocurrency.

Nexo Shares Positive Testimonials From XRP Users One Week After Launching Lending Service (Blokt) Rated: A

Nexo writes that it has received a huge inflow of corporate as well as individual XRP users who sought Nexo loans by keeping their crypto holdings as collateral. The loans ranged between $1,000 to $2,000,000. The service provider goes on to suggest that it is humbled as well as thrilled by the recognition it has received from the XRP community. The firm went on to share some testimonials by clients.

Australia

Australia’s fintech startups are starting to make profits (Business Insider) Rated: AAA

Australian fintech revenues are up 2.25 times and more of the startups have hit profitability as the local sector matures, according to the latest EY Census released at the FinTech Australia Intersekt conference.

Almost one in five (19%) fintech companies are now profitable with those aged three years or older now making up 43% of the local industry, up from 31% last year and just 20% in 2016.

The 2018 EY FinTech Australia Census, now in its third year, paints a picture of a sector now established and coming into its own as an alternative within the financial services landscape.

Forget flower crowns, personal loans are the latest wedding trend, says RateSetter (Mozo) Rated: A

From eco friendly decor to cupcake tiers, there’s always a new wedding trend on the rise. But according to recent research by peer-to-peer lender (P2P), RateSetter, low rate personal loans are also becoming many couples’ wedding essential.

A big reason loved up couples are opting for personal loans to help pay for their big day is to minimise credit card debt – 40% of RateSetter customers admitted to have taken out a personal loan to avoid using their plastic.

Contrary to the popular belief that men are not as involved in wedding planning, the data revealed that men were 66% more likely to take out a personal loan, compared to women (34%).

India

Banks or FinTechs – Who Does a Better Job for Business Loans? (Entrepreneur) Rated: AAA

Budding entrepreneurs with revolutionary business ideas (usually) need financing to keep their operations running. Banks have encouraged the growth of small-scale industries with access to credit, but the supply cannot keep up with the demand. Enter: Financial technology companies, aka FinTechs.

The global FinTech industry is maturing rapidly – with over $41.7bn invested in just the first half of 2018. Part of those deals was for FinTech lenders, who have supported the trend of industrialisation by granting business financing to those who were denied from traditional banks.

Asia

In brief: P2P lender PeopleFund raises $ 11m from Kakao, 500 Startups, more (Tech In Asia) Rated: AAA

PeopleFund, Korea’s fast-growing financial technology platform that connects borrowers and investors, has secured US$11M in series B funding.

The funding was led by KakaoPay, a subsidiary of Kakao that allows payments within Korea’s popular chatting app, KakaoTalk.

Returning investors included Dayli Financial Group, 500 Startups, and D3 Jubilee.

Authors:

George Popescu
Allen Taylor

Thursday October 18 2018, Daily News Digest

Major US Banks Active Mobile Banking Users

News Comments Today’s main news: Upgrade to debut ABS bond. KBRA assigns preliminary ratings to Upgrade Receivables Trust 2018-1. Funding Circle launches free iPad incentive. China’s P2P lending is in trouble. Today’s main analysis: State laws put installment loan borrowers at risk. (A MUST-READ) Today’s thought-provoking articles: SoFi’s data science head on machine learning and non-traditional lending. LendingClub’s Bill Walsh says […]

Major US Banks Active Mobile Banking Users

News Comments

United States

United Kingdom

International

Other

News Summary

United States

Online lender Upgrade prepares debut ABS bond  (International Financing Review) Rated: AAA

Upgrade, an online lending company started by former LendingClub founder Renaud Laplanche, is looking to sell a debut asset-backed bond deal, four people with knowledge of the deal told IFR on Wednesday.

KBRA Assigns Preliminary Ratings to Upgrade Receivables Trust 2018-1 (Business Wire) Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four classes of notes issued by Upgrade Receivables Trust 2018-1 (“UPGR 2018-1”). This is a $286.390 million consumer loan ABS transaction that is expected to close October 30, 2018.

This transaction represents the first ABS securitization collateralized by unsecured consumer loans originated through the online marketplace lending platform operated by Upgrade, Inc. (“Upgrade”) and the first from the Upgrade Receivables Trust (“UPGR”) shelf. Upgrade Receivables Trust 2018-1 (“UPGR 2018-1” or the “Issuer”) will issue four classes of notes totaling $286.390 million. The proceeds from the sale of the notes will be used to purchase the loans and related rights from Upgrade Receivables Depositor LLC (the “Depositor”), who purchased the loans from the unaffiliated transferors, to fund the reserve account and to pay transaction expenses. The Depositor will in turn sell the loans to the Issuer.

Preliminary Ratings Assigned: Upgrade Receivables Trust 2018-1

Class Preliminary Rating Expected Initial Class Principal
A A (sf) $187,308,000
B BBB (sf) $32,569,000
C BB (sf) $28,440,000
D B (sf) $38,073,000

SoFi’s data science head: Opening the funnel to non-traditional borrowers with machine learning (Thomson Reuters) Rated: AAA

ANSWERS: What are some of the issues in machine learning that you are working to solve for right now?

WU: I think where machine learning plays the biggest role is in datasets that have extremely high numbers of dimensions, very low signal ratios and very sparsely populated values. For example, people in lending use data from the bureau. There are millions and millions of rows, there are thousands and thousands of columns. Each specific field has very little to no signal and each person has very few things that are actually populated. Those are opportunities where machine learning, particularly deep learning, has an extremely high potential.

ANSWERS: How can machine learning assist with lending decisions, and how does one keep bias from creeping into that?

WU: When making a decision on creditworthiness, machine learning can help lenders look at metrics beyond FICO and income. Whether it’s adding more information to traditional metrics versus determining creditworthiness of applicants without a full credit history, machine learning can drive tighter risk management while assessing borrower’s creditworthiness where traditional models cannot.

LendingClub’s Bill Walsh: ‘At its core, marketing is a data problem’ (Tearsheet) Rated: AAA

Today’s marketer on the hot seat is Bill Walsh, LendingClub’s general manager and head of marketing for personal loans. Bill brings an engineer’s approach to marketing. The MIT grad began his tenure at Lending Club in an operations role, where rigorous problem solving was used to solve some of the biggest problems in the business. Now that he’s leading marketing on the consumer side, he brings a similar approach.

We talk about how LendingClub defines marketing and approaches channels. We pay particular attention to a recent TV campaign you might have seen over the summer of 2018. Measuring and responding to the signal is core to LendingClub’s approach and in the course of this four week broadcast campaign, Bill’s team iterated twice. This puts ad agencies on notice — this is the new data-driven fintech marketing world.

Mobile banking is reaching a saturation point in the US (Business Insider) Rated: AAA

JPMorgan Chase counted32.5 million active mobile banking customers in Q3 2018 — an 11% year-over-year (YoY) increase from 29.3 million in Q3 2017.

That’s up from the 31.7 million active mobile customers in Q2 2018, but is also a slight deceleration from the 12% YoY growth in Q3 2017— following several quarters of decelerating growth: Chase has been adding around 800,000 mobile users on a quarterly basis.

Wells Fargo counts 29 million total active digital customers — 22.5 million of which use mobile banking. This marks an 8% annual increase in mobile banking customers, but a 4% YoY increase in total digital customers, demonstrating that most of its new customers are coming from mobile channels.

Source: Business Insider

State Laws Put Installment Loan Borrowers at Risk (PEW) Rated: AAA

Pew’s analysis found that although these lenders’ prices are lower than those charged by payday lenders and the monthly payments are usually affordable, major weaknesses in state laws lead to practices that obscure the true cost of borrowing and put customers at financial risk. Among the key findings:

  • Monthly payments are usually affordable, with approximately 85 percent of loans having installments that consume 5 percent or less of borrowers’ monthly income.Previous research shows that monthly payments of this size that are amortized—that is, the amount owed is reduced—fit into typical borrowers’ budgets and create a pathway out of debt.
  • Prices are far lower than those for payday and auto title loans. For example, borrowing $500 for several months from a consumer finance company typically is three to four times less expensive than using credit from payday, auto title, or similar lenders.
  • Installment lending can enable both lenders and borrowers to benefit. If borrowers repay as scheduled, they can get out of debt within a manageable period and at a reasonable cost, and lenders can earn a profit. This differs dramatically from the payday and auto title loan markets, in which lender profitability hinges on unaffordable payments that drive frequent reborrowing. However, to realize this potential, states would need to address substantial weaknesses in laws that lead to problems in installment loan markets.
  • State laws allow two harmful practices in the installment lending market: the sale of ancillary products, particularly credit insurance but also some club memberships (see Key Terms below), and the charging of origination or acquisition fees. Some costs, such as nonrefundable origination fees, are paid every time consumers refinance loans, raising the cost of credit for customers who repay early or refinance.
    Source: PEW

Read the full report here.

Bank Of America’s Zelle Boosts P2P Transactions 138 Pct In Q3 (PYMNTS) Rated: A

Bank of America cut expenses and reduced its provision for credit losses as the financial institution also beat analysts’ revenue and earnings expectations. Bank of America, in reporting its latest financials on Monday, also said that Zelle P2P payment transactions increased 138 percent year over year.

Revenue increased about 4 percent year over year, hitting $22.8 billion, higher than analyst expectations of $22.67 billion. The financial institution reported earnings per share of 66 cents, which represents a 43 percent year-over-year increase and is above analyst expectationsof 62 cents. Net income grew 32 percent to $7.2 billion.

Bank of America said its provision for credit losses decreased $118 million during the third quarter of 2018, to $716 million. “The net reserve release was $216 million, driven by continued improvement in consumer real estate and energy portfolios,” the bank said in its Q3 financial report.

As digital banks proliferate, so do risks (American Banker) Rated: A

Facing intense deposit competition from online-only banks such as Ally Financial and Goldman Sachs’ Marcus, many traditional banks are looking to turbocharge their deposit gathering by launching — or considering launching — digital banks of their own.

PNC Financial Services Group is the latest big bank to join the fray, recently rolling out a digital-only bank in markets where it lacks a brick-and-mortar presence. Like JPMorgan Chase, Citizens Financial Group and a number of other regional and community banks, PNC is counting on its digital bank to attract low-cost deposits to fuel loan growth while also helping it reach new demographic groups.

Early results have been promising — PNC CEO William Demchak said Friday that he’s been “pleasantly surprised” by the response in the Kansas City, Mo., market — but with the space becoming so crowded, industry watchers are beginning to question if the U.S. marketplace can reasonably support so many new digital banks.

Source: American Banker

Outside Financial Launches to Help Consumers Save up to $ 3,000 on Auto Loan Packages (PR Newswire) Rated: A

Outside Financial, an independent auto loan marketplace, launched its consumer-first platform today to bring transparency to auto finance. The company is the first to offer full auto loan packages outside of the dealership, which can save customers $1,000 to $3,000, along with time and hassle. Outside Financial also arranges refinances for existing borrowers.

In 2017, Americans racked up $568.6 billion in auto loans1, yet 60 percent of buyers don’t know they can bring their own financing to the dealership. The company’s new Outside Financial (OF) Markup Index* reveals that, on average, new car buyers are charged $1,717 in hidden markups when arranging their loans through a dealer.

Individual Investors Can Now One-Click Invest in Commercial Real Estate with CrowdStreet’s “Blended Portfolio” Offering (Benzinga) Rated: A

CrowdStreet, which operates the largest and most diversified online marketplace for direct equity investment in U.S. commercial real estate, is now raising $25 million for the company’s first CrowdStreet Blended Portfolio investment offering. To provide individual investors and registered investment advisors another way to diversify their investments with commercial real estate, the company plans a series of diversified and specialty portfolio investment options that will collectively raise and invest up to $170 million.

The first CrowdStreet Blended Portfolio’s proceeds will be deployed across 30-50 pre-vetted projects on the CrowdStreet marketplace, representing a broad range of commercial and multifamily asset types, risk profiles and geographies.

Credible.com Unveils First Truly Consumer-Centric Mortgage Marketplace (Business Wire) Rated: A

Credible.com, the leading online loan marketplace, announces the launch of its first-of-its-kind mortgage marketplace. Credible.com is the only mortgage marketplace that provides actual rates from top lenders in 3 minutes (without affecting a borrower’s credit score), and a streamlined digital origination process. The platform is designed to save borrowers frustration, time and money.

The Credible.com mortgage marketplace builds on the success of the company’s marketplaces for student loans, student loan refinancing, and personal loans, which have facilitated more than $1.6 billion in loans to date. The first product offered through the mortgage marketplace is mortgage refinancing, which went live today in 20 states that collectively represent 65 percent of mortgage originations.

Talking Regulation at the Online Lending Policy Summit (Lend Academy) Rated: A

The big topic of the day was the OCC’s Special Purpose National Bank Charter also known as the Fintech Charter. The topic was laid out for the audience by the first keynote speaker, Grovetta Gardineer, the Senior Deputy Comptroller for Compliance and Community Affairs at the OCC. She talked about the history of the OCC going back to 1863, with the National Banking Act, when the dollar supplanted state currencies as the sole currency of the United States, a revolutionary idea back then. Ms. Gardineer reaffirmed the authority of the OCC to introduce a national fintech charter and talked about how companies should proceed if they are interested. While she would not comment on specifics she did say that the OCC is currently having preliminary conversations with fintech companies but no formal application has been received yet.

The new head of the CFPB’s Office of Innovation, Paul Watkins, talked about the importance of the regulatory sandbox concept. He was one of the architects of the Arizona fintech sandbox and he is bringing that knowledge with him to Washington. He talked about the two main tools to help facilitate innovation at the CFPB: their trial disclosure program and the no action letter.

How Dealstruck Arrived, “Disrupted,” and Died – A Cautionary Online Lending Tale (deBanked) Rated: A

A self-described member of the “lucky sperm club,” a not-even 30-years-old Senturia went on to successfully raise $30 million of investor capital to fund his business, enough to fuel his rise and price-shame his competitors for years. But it wouldn’t last, as he detailed in book, Unwound, about the behind-the-scenes chaos that ravaged Dealstruck until the company closed for good in late 2016.

AFR Wholesale announces partnership with Floify (Housingwire) Rated: B

AFR Wholesale and Floify shook hands on a partnership, and AFR will now use Floify’s point-of-sale technology.

AFR’s goal in partnering with Floify, a 2018 HW Tech100 winner, is to reduce origination time and increase broker productivity. According to the release, Floify’s POS platform can save up to 15 hours of processing time per loan.

This is only one of an ever-increasing number of companies partnering with software companies or developing their own tech solutions in hopes of increasing productivity and getting some breathing room in the margin department in this tough mortgage market.

iintoo Launches Principal-Protection Product for Retail Investors Supported by Insurance Provided by Everest (iintoo Email) Rated: B

Online Real Estate Investment Management Company iintoo Investments Ltd. (“iintoo”) launched Epiic (Equity Protection Investment Community), the first-of-its-kind real estate investment product that provides principal protection for private accredited investors. Supported by insurance provided by an affiliate of Everest Re Group, Ltd. (NYSE:RE), a leading international reinsurance and insurance organization with operations that span the globe, and a social community pool, Epiic offers two layers of protection for investors’ principal.

iintoo opens up access to real estate investments that were once exclusive to professional funders and high-net-worth individuals. Starting at $25,000, accredited investors can invest in ownership shares in projected high yield, premium real estate projects.  Each project undergoes a rigorous due-diligence and approval process provided by iintoo.  In order to assess the risk factors in real estate investing, iintoo also conducted a thorough analysis of the real estate market in the United States, taking into consideration all sectors in all 50 states over the past 30 years.

TRANSACT Tech San Francisco to Examine the Impact of Software Providers on the Payments Industry (PR Newswire) Rated: B

The Electronic Transactions Association (ETA) will bring together executives from leading banking, payments and FinTech companies on November 1, 2018 for TRANSACT Tech San Francisco at the Wells Fargo Connections Center. The event will explore how software services are changing the way key ecosystems players – processors, banks and hardware manufactures – serve merchants and channel partners.

The day-long conference will kick-off with a fireside chat with Secil Watson, Executive Vice President and Head of Digital Solutions for Business at Wells Fargo. “Customer expectations are changing rapidly, and pace of change in technology is accelerating.” said Watson. “Yet we still have cash and checks. What can we learn from today’s customer experiences to build a better payments ecosystem for tomorrow?

Finicity Partners with Freddie Mac to Provide Industry-Leading Automated Income and Asset Assessment Solution (Finicity Corp) Rated: B

Finicity, a leading provider of real-time financial data aggregation and insights, announced today it has been selected as a third-party service provider for the new Freddie MacLoan AdvisorSM automated income and asset assessment capabilities, which provide a faster, easier way for lenders to verify loan application data upfront. Finicity’s digital verification reports greatly improve efficiency and accuracy, while also providing a simpler, more pleasant borrower experience.

Freddie Mac announced its new income and asset assessment capabilities at the Mortgage Bankers Association Annual Convention & Expo earlier today. Finicity’s verification reports are integrated within Freddie Mac Loan Product Advisor®, the cornerstone of Loan Advisor Suite.  When the capability goes live later this quarter, asset verification will be generally available and income verification will be available as a limited release.

United Kingdom

Funding Circle launches ‘free iPad’ incentive (Peer2Peer Finance) Rated: AAA

LISTED peer-to-peer platform Funding Circle is enticing new investors by offering a free iPads. But there’s a catch – they have to add at least £30,000 to their Funding Circle accounts before 16 November.

The P2P platform is also offering a number of other cashback and ‘giftback’ incentives to lenders who invest lower amounts of money.

Investors who add £20,000 to their Funding Circle accounts will receive £200 in John Lewis vouchers, while those adding £15,000 will get an Amazon Echo.

LendInvest Update: Accelerates BTL Production Application Volume Thanks to Rate Reductions (Crowdfund Insider) Rated: A

UK-based online lender LendInvest announced last week it has reduced rates and product fees across its Buy-to-Let product range. According to LendInvest, the pay rate for its five year fixed rate product has dropped to 3.60%, with the ICR calculation at a pay rate of 3.60%. Meanwhile, product fees for all BTL mortgages on standard property and HMO cases have been reduced to 1%, with borrowers who prioritize leverage in mind.

The lending platform also reported that for a limited time, valuation fees have been reduced to £100 for all standard property cases. LendInvest will now cover the borrower’s legal fee scale costs for standard property, standard conveyance cases, where dual representation is selected.

You think it’s going to be easy challenging the big banks? Think again (The Times) Rated: A

here has never been a more opportune moment for the pack of digital upstarts looking to topple the institutions that dominate the financial industry. Rarely does a week go by when a big bank does not suffer an IT meltdown, spewing sensitive data into the ether or freezing customers out of their accounts.

A decade after the collapse of Lehman Brothers, public distaste for the high street banks remains at elevated levels. Two thirds of Britons do not trust big banks to act in the best interests of society, according to a recent YouGov poll. The advent of smartphones, meanwhile, has fundamentally altered consumers’ expectations of their relationship with service providers.

Amex brings SME financing to UK with ezbob (Banking Tech) Rated: A

American Express (Amex) has partnered with online financing platform ezbob to offer UK SMEs competitive access to finance.

Through this partnership, eligible Amex business clients will receive a referral to apply for up to £300,000 in finance from ezbob at a fixed annual interest rate from 3%.

Carlos Carriedo, senior vice-president of global commercial services at Amex, says: “We know agility is crucial for smaller businesses to help retain a competitive advantage but accessing the finance needed to react swiftly to changing customer demands, or seize an opportunity, can be a challenge.”

Amex customers taking out a loan with ezbob will also benefit from a 40,000 Membership Reward points offer, the company adds.

Connect for Intermediaries announces new panel (Mortage Strategy) Rated: A

Connect for Intermediaries has announced the launch of a new unsecured lending panel.

Comprising Funding Circle, iwoca, Whitoak and Fleximise, the panel will be open to all of Connect’s AR members, and Connect will be able to obtain terms on behalf of other brokers as referrals.

Loans from £5,000 to £250,000 for up to five years will be available from 1.5 per cent.

Connect sales director Kevin Thomson says: “We have seen an increased demand for unsecured loans for trading businesses, as increasingly, brokers are coming to us with business clients who are looking to ease cashflow or expand their businesses.

P2P Lending Investment Returns Outstrip Many Market Competitors (CL News) Rated: A

P2P lending arrived in the UK back in 2010 with the launch of Funding Circle. The idea was simple. In the wake of the financial crisis, banks were – and still are – paying abysmally low rates of interest to savers. P2P platforms allowed savers to collectively lend money to businesses and individuals, usually over relatively short periods of time. By cutting out the middleman (or to be more precise, banks and other traditional lenders), P2P lenders were able to offer competitive rates to borrowers and superior returns to investors.

The market has evolved over the years. AltFi – which provides specialist news for the alternative investment industry along with a range of analytics services – says the market is growing rapidly. For instance, in 2015, P2P lending platforms brokered around £1.1bn in loans. In the first half of 2018 alone, the figure was £3bn. Separate figures from the Peer to Peer Finance Association reveal that its members have, to date, originated loans to a value of £9bn.

11:FS Foundry’s launch brings digital to banks (Banking Tech) Rated: A

Consultancy firm 11:FS has launched 11:FS Foundry, an approach to delivering digital banking services through a modular core banking architecture. It kicks off with the partnership with DNB, Norway’s financial services group, which has also become an investment partner.

DNB has invested £3 million for a 5% stake in 11:FS Foundry. This investment represents the long-term commitment between 11:FS and DNB to change how banks deliver digital banking services, the two companies say.

Watchdog warns payday lenders over customer complaints (Financial Times) Rated: A

The UK’s Financial Conduct Authority encouraged payday lenders to proactively compensate past customers; the industry has come under a lot of heat in recent months after a surge of complaints; companies say a lot of these complaints are bogus and a pushed by professional claims management companies (CMCs)

Wonga was forced to shut down a few months ago after they saw a significant rise in complaints, complaints now cost companies more than $725 per complaint after the first 25 complaints; the rise in complaints has come after new rules were put in place in 2015 where high cost lenders we ordered to drop fees and adhere to stricter standards; a new survey by Kantar TNS showed that 60 percent of payday loan customers still pay more than anticipated.

Fintech offers fresh ways to finance an MBA (Financial Times) Rated: A

According to David Simpson, admissions director at London Business School, MBA students spend just as much time trying to find funding as they do trying to find the right program; while struggling to find his own financing Prodigy Finance CEO Cameron Stevens though there had to be a better way so he started Prodigy with two former classmates.

The company is now growing fast by offering a service few others do, while also collecting credit records from across the globe; “You have talented people who have proved their potential in receiving offers to business school,” says Mr Stevens to the FT. “The only barrier for them is funding, because the banks are still incredibly localised, as they were in the 1500s.”

Arbuthnot Banking Group PLC Third Quarter Trading Update (Arbuthnot Group) Rated: A

Customer Lending balances are 28% higher than at the same time in the prior year and originations of new loans are 18% higher. However, as previously stated, the Group remains committed to maintaining its discipline in both credit underwriting decisions and return on capital when extending credit.

The newly launched Asset Based Lending division continues to develop ahead of the original business plan and has a strong pipeline of new opportunities. The Specialist Finance division has now completed the hiring of its core team of six employees and is currently setting up its operations based in Manchester. It is expected that it will write its first deals toward the end of the fourth quarter or early 2019.

OakNorth appoints form PRA director to board (Finextra) Rated: B

OakNorth – the bank for entrepreneurs, by entrepreneurs – today announces the appointment of Martin Stewart, the former Director of Banks, Building Societies & Credit Unions at the Bank of England, as an Independent Adviser on its advisory board.

Stewart joined the Bank of England in April 2013 and spent five and a half years there. In addition to supervising UK banks, building societies, credit unions and new entrants into UK banking, he was a Member of the PRA’s Executive Team responsible for PRA regulatory policy. His regulatory experience also includes spending three years at the FSA between 2010-2013, where he was a member of the leadership team that defined and implemented the UK’s post financial crisis prudential regulatory regime that now underpins the work of the Prudential Regulation Authority. In addition to this, he has almost two decades’ board-level experience having been Managing Director of a group of European subsidiary companies of the IFG Group PLC for almost four years, and as Chairman of the International Credit Union Regulators’ Network for the last six years.
China

China’s P2P Lending Sector Is in Serious Trouble (Money Makers) Rated: AAA

P2P lending has been lucrative in China with little constraining regulation. The industry is worth as much as $120 billion and has been high-risk, but high return.

Chinese regulators have been clamping down on debt and financial risk, the number of loan defaults is rising, capital investments are running out of the sector, and Chinese citizens are losing money. And getting pretty angry about it.

In July 2018, 114 P2P lending platforms in China were shut down or had funds suspended, without warning, by China’s regulators over liquidity concerns. Since June 2018, 243 online P2P lending platforms have gone bust.

Several Chinese Peer-to-Peer Lending Companies Have Submitted Self-Inspection Reports (Capital Watch) Rated: A

With hundreds of peer-to-peer (P2P) lending platforms having collapsed at the beginning of this year, different district-level financial bureaus recently rolled out a tougher reform on all P2P platforms’ risk compliance to ease a growing panic among investors.

This industry reform involves three major steps. First, all platforms have to complete a P2P Compliance Self-Inspection Report and submit it to the bureau by the end of October. Then, companies will be inspected by its local Internet Finance Industry Association, a non-state association. This will be followed by verification of inspection results by district-level Municipal Bureau of Financial Work with field inspection and a possible final check by higher-level government organizations.

New York-listed Hexindai Inc. (Nasdaq: HX) and PPDAI Group Inc. (NYSE: PPDF) both announced that they have completed and submitted the report.

European Union

A risky investment (Euro Weekly News) Rated: AAA

MANY UK nationals living part of the year in Spain, or visiting often, might spend months here but still retain tax residency in their home country.

This means those looking for investment opportunities can still take advantage of UK tax efficient products such as Finance ISAs – ones which use peer-to-peer lending to offer high rates of return. They may be nothing new but one legal justice firm has upped the ante offering returns of up to 8 per cent a year.

International

Advantages of P2B platforms in lending to SMEs (Lendit Conference Blog) Rated: AAA

In the EU and Australia, SMEs comprise 99.8% of all the firms and employ about 67% of the workforce. To tell the truth, SMEs might be rightfully called the economy, not just the backbone of it. A few other facts that follow are paradoxical. 2 years ago, International Finance Corporation (under World Bank) presented statistics that the gap for underfinanced SMEs around the world stood at 2.6 trillion $. One might expect, the situation got better in recent years with the global economy picking up and showing better and better numbers. On the contrary, most recent statistics from the same institution shows that the gap has widened to 5.2 trillion $.

P2P platforms make lending process global

P2B platforms can connect a business on one side of the world with an investor from another side of the world, and with a third party providing a service from yet another part of the world. All applications for loans can be made online, processed, assessed and the decision made within a matter of a few hours. Compare it to a similar process with the banks and the difference, that of speed and efficiency becomes clear. As an asset (loan) is put on the platform, investors can start investing within a matter of seconds. In such a way, a local business, somewhere in Eastern Europe can get funds from someone (or institutional investors) in UK or Germany and be able to use the collected amount for business operations within a couple of days.

4 developments that will shape the future of fintech (Business Matters) Rated: A

Within the past decade, we’ve seen the landscape of fintech move from a few disruptive start-ups to an industry that’s changing the landscape of business altogether. Consumers are becoming more and more accepting of technology as part of their day-to-day finance, a factor that has stretched the services sector and levelled the playing field with traditional institutions.

For instance, there has been a monumental shift in the way that consumers are managing their money. PwC’s Global Fintech Survey 2017 found that 84% of incumbent financial services providers believed their customers were already making payments with fintech companies, 68% thought customers were conducting fund transfers, and 60% said their clients were using fintech for their personal finances.

Quona Capital leads $ 5 million round for Brazilian small business lender BizCapital (Impact Alpha) Rated: A

Brazilian fintech firm BizCapital launched operations in January to help Brazil’s small business owners secure capital necessary for the day-to-day and growth needs of their businesses. Quona Capital, a financial tech investment firm that spun out of Accion, has led the company’s R$20 million ($5 million) investment round. Two existing investors, Monashees and Chromo Invest, both based in Brazil, also participated.

Roughly 70% of Brazil’s micro and small business owners are shut out of mainstream bank lending and instead resort to taking personal loans, which can carry interest rates as high as 200%. BizCapital offers short-term loans for up to R$150,000 ($40,000) at annual rates in the mid-double digits. The company hasn’t disclosed the size of its loan book but says it’s received more than 100,000 credit requests and serves customers in all 26 Brazilian states.

Australia

Global corporate lending platform, Trade Ledger has warned the Federal Government of substantial weaknesses in its proposed Open Banking implementation plan, when compared to the global best-practice model.

These primarily include the lack of an independent implementation and governance organisation, and limited consumer and small to medium-sized enterprise representation in the development of industry standards.

According to Trade Ledger, these omissions “risk a scaremongering campaign around data security that could stall progress and reduce the scope of the changes, leaving the door open for overseas financial markets to take over our local markets in the new era of Open Banking”.

India

UIDAI Asks Non-Banking Fintech Companies To Stop Aadhaar-Based Services (Inc 42) Rated: AAA

After getting telecom companies to submit their exit plans from Aadhaar-based services, the Unique Identification Authority of India (UIDAI), the Aadhaar regulatory body, has now asked digital payment companies to stop offering any sort of Aadhaar-based service on their platforms.

In a letter, the UIDAI also directed digital payment companies to submit confirmation of closure of Aadhaar-related authentication and their alternative plans to exit from the Aadhaar-based ecosystem.

According to reports, the UIDAI has sent the letter only to non-banking companies such as PayPoint, Eko India Financial Services, and Oxigen Services, among others.

Citing unnamed sources, an ET report stated that banks and payment companies such as Paytm, which have obtained banking licences, have not received the notice.

Africa

Kenya built a reputation as a pioneer of financial inclusion through its early adoption of a mobile money system that enables people to transfer cash and make payments on cellphones without a bank account.

Now, a proliferation of lenders are using the same technology to extend credit to the banked and unbanked alike, saddling borrowers with high interest rates and leaving regulators scrambling to keep up.

This week, the finance ministry published a draft bill on financial regulation which covers digital lenders for the first time. A key aim is to ensure that providers treat retail customers fairly, it said.

Authors:

George Popescu
Allen Taylor

Thursday June 22 2017, Daily News Digest

German real estate crowdfunding

News Comments Today’s main news: PayPal, Venmo rolling out instant bank transfers. Sindeo goes out of business. SoFi’s new filing. Wealthsimple expands into UK. PayPal advances 400M GBP to UK businesses. Today’s main analysis: A look at Lending Club’s competition. Today’s thought-provoking articles: Many P2P lenders attract investors by raising interest rates. German RECF booms. International expansion of alternative lending. United […]

German real estate crowdfunding

News Comments

United States

United Kingdom

China

European Union

International

  • Alternative lenders spread their wings internationally. AT: “International expansion could become the big story of 2017 and 2018.”
  • Amazon and the future of fintech, part 2. AT: “Interesting theory. I suppose technology can facilitate more diverse business assets for true technology companies like Amazon, Apple, Klarna, et.al. But I don’t see how this is a lot different than traditional holding companies that expand businesses into multiple sectors other than the fact that the companies themselves are predicted to be the holding companies. Isn’t this what Google’s rebranding into Alphabet was all about? Perhaps Amazon could do the same. That would actually make sense.”
  • Global mobility.

Australia

Canada

News Summary

United States

Instant bank transfers are coming to PayPal and Venmo (TechCrunch), Rated: AAA

PayPal announced this morning a plan to speed up money transfers between its service, Venmo and users’ bank accounts for those with supported MasterCard and Visa debit cards. This new “instant transfers” service will be available at a rate of $0.25 per transaction, and will deliver funds in a matter of minutes, instead of the day or so it typically takes when using PayPal or Venmo.

The company says the feature will be available to the vast majority of cardholders, save for a handful of very small institutions.

In most cases, the funds transferred between PayPal or Venmo and the end user’s bank account (via the supported debit card) will arrive in a matter of minutes. However, some banks may take up to 30 minutes, PayPal notes.

The instant transfer service is now launching into beta with select PayPal users, as a result of these deals, as well.

Lending Club: Take A Look At The Competition (Seeking Alpha), Rated: AAA

CreditKarma is a personal finance website. They provide a list of online personal loan options, given some basic information. I put in $10,000 as my desired loan amount and selected a credit score of 700-749. I got the following list of offers:

That’s eleven online, unsecured personal loan providers. The list does not include some others, like SoFi and Lightstream. Try it yourself here.

Lending Club vs. Marcus

Lending Club is an originate-to-distribute lender, while Marcus is a balance-sheet lender. Lending Club gives much of the profit of a loan to its investors, along with default risk and prepayment risk. Marcus keeps the risks and the profit. If we assume that Marcus’s loans look like Lending Club’s, with interest rates averaging 14% and defaults averaging 6%, then the income from each loan looks approximately like this:

LC: 5% origination fee + 1% servicing fee = 6% of loan principal

GS: 14% interest – 6% default – 1% cost of funds = 7% of loan principal

More importantly, it is a lot more painful for Lending Club to cut back on loan originations, for example in a downturn, and it doesn’t necessarily control the pace of lending. If Lending Club stops originating loans, the lion’s share of its income dries up immediately.

Sindeo closes shop (Sindeo), Rated: AAA

But, startups are hard and simplifying the highly regulated, complex business of mortgages is even harder. I believed we had overcome the biggest hurdles, but unfortunately, we didn’t. Today, we made the difficult decision to wind down Sindeo.

While Sindeo as a startup has failed, our people did not. As a matter of fact, we did what everyone said couldn’t be done.

  • We built a place where people could shop and apply for a mortgage from a robust marketplace of over 1000 loan programs, with one single application and one credit check.
  • We secured partnerships with some of the top real estate and consumer finance brands.
  • We helped our clients save millions of dollars on their home loans.
  • We built a people-centric brand, putting the needs of Sindeo’s clients first.

Sindeo’s Net Promoter Score (NPS) this year is 81, compared to an average of negative three from the top banks.

I am devastated for our employees, their families, our partners and our investors who believed in us, and worked so hard to build Sindeo. We have very talented people who need jobs today. Hire them.

Nick Stamos
CEO, Sindeo

SoFi Lending Corp. (Filer) (SEC), Rated: AAA

We (“us” or “PwC”) have performed the procedures enumerated below, which were agreed to by Social Finance, Inc., Deutsche Bank Securities, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Goldman, Sachs & Co., J.P. Morgan Securities LLC, and SoFi Securities, LLC, who are collectively referred to herein as the “Specified Parties”, solely to assist you in performing certain procedures relating to the accuracy of certain attributes of the private consumer loans with respect to the SoFi 2017-4 securitization transaction (the “Transaction”). Social Finance, Inc. (“SoFi” or “Company”) is responsible for the accuracy of certain attributes of the private consumer loans with respect to the Transaction (the “Responsible Party”). The sufficiency of these procedures is solely the responsibility of the Specified Parties. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose.

Where Major US Banks Have Invested in Fintech (CB Insights), Rated: A

Key takeaways

  • Since 2012, the top ten US banks by assets under management have participated in 72 rounds totaling $3.6B to 56 fintech companies.
  • Ranked by the number of unique portfolio companies, the cohort’s three most active investors are Citi, Goldman Sachs, and JP Morgan Chase — in that order. Citi (including Citi Ventures) participated in 29 rounds to 24 companies, Goldman Sachs in 30 rounds to 22 companies, and JP Morgan Chase in 14 rounds to 13 companies.
  • Goldman Sachs is focusing on payments, investing in six companies in the space.
  • All ten banks have blockchain investments.
  • Although the second largest bank by assets, Bank of America takes the sixth spot on this list, with only six fintech companies in its portfolio.
  • Kensho saw lots of overlapping interest, with six of the cohort investing in its $50M Series B, which valued the company at $500M.

Robos get the press, but adviser tech is getting the money (Financial-Planning), Rated: A

Take the $140 million in funding that Silicon Valley-based Addepar recently raised from sources including SpaceX backer Valor Equity Partners.

Addepar CEO Eric Poirier says the eight-year old performance reporting platform has seen the number of assets its clients hold grow from $300 billion last year to $700 billion.

That’s not to say that there isn’t money for robo advice platforms — blending impact investing and robo advice garnered OpenInvest $3.25 million in seed funding from high-profile VC firm Andreessen Horowitz in May.

LendingPoint founders share recipe for success (Bankless Times), Rated: A

During the financial crisis both said they worked with large balance sheets which helped them understand how to position themselves in the marketplace. That experience also taught them that marketplace lenders cannot simply be technology companies, they also need to apply the lessons learned working in different environments, geographies and at different points in the cycle.

What they saw was a space where near prime consumers, those with credit scores between 600 and 700, were in need of better credit products, with many resorting to payday lenders and their ilk.

When lenders place too much emphasis on arbitrary measure such as FICO scores, they miss so much underneath. In one case the employee of a partner company saw her credit score quickly drop after she paid off a loan early. Even though she had fewer debt obligations, by traditional underwriting methods she was deemed a higher risk.

Alternative data sources can play a role in telling those unique stories while protecting everyone from fraud, Mr. Tavares said. Something as simple as how long a phone number has been active can help validate an applicant’s identity.

LendingPoint also believes it is crucial for marketplace lenders to originate and hold assets on their balance sheets, Mr. Burnside said.

LendingPoint offers personal loans up to $20,000 that can be paid back in twice-monthly installments over 24 to 48 months.

American Express invests in insurance startup Next Insurance (Reuters), Rated: A

American Express Co has invested in Next Insurance, a Palo Alto-based technology startup that sells customized insurance for small businesses online, as Silicon Valley companies look to shake up the insurance sector.

Next Insurance will use the new cash injection, which brings the investment round to $35 million, to expand the products it offers and target new business sectors, the company said.

Office of the Comptroller of the Currency Issues Third-Party Relationship Frequently Asked Questions (Lexology), Rated: A

Focusing on bank-fintech relationships, which likely were a key driver for the FAQs, the OCC notes that when “a fintech company performs services or delivers products on behalf of a bank or banks, the relationship meets the definition of a third-party relationship” that should be subject to the bank’s third-party risk management process. Akin to any other third-party service provider, a fintech company arrangement may or may not be considered a critical activity in this regard.  In an important acknowledgement of the diligence challenges banks face from time to time in conducting diligence of third parties, the FAQs also specifically address situations where a bank does not receive sufficient information from a third-party service provider that supports a critical activity. In that situation, the OCC expects a bank board and management to:

  • develop appropriate alternative ways to analyze these critical third-party service providers;
  • establish risk-mitigating controls;
  • prepare to address delivery interruptions;
  • make risk-based decisions that despite the lacking information, these critical third-party service providers remain the best service providers available;
  • retain appropriate documentation of all efforts to obtain information and related decisions; and
  • ensure that contracts meet bank needs.

The FAQs also specifically address marketplace lending arrangements with nonbank entities and relationships to facilitate mobile payments. In the marketplace lending context, the FAQs assert that a bank board and its management should understand the relationships among the entities involved and the risks specific to marketplace lending relationships, including reputational, credit, concentration, compliance, market, liquidity and operational risks. Management must also ensure it has proper personnel, processes and systems to monitor and control these risks, including, for example, adequate loan underwriting guidelines and appropriate board-adopted policies that include concentration limits. The FAQs direct banks to work with mobile payment providers “to establish processes for authenticating enrollment of customers’ account information that the customers provide to the mobile payment providers” as mobile payment environments become more ubiquitous and as customer expectations dictate that transaction accounts as well as credit, debit or prepaid cards issued by banks are able to be used in mobile wallets.

How The Blockchain Can Create A True Peer-To-Peer Sharing Economy (NASDAQ), Rated: A

One of the blockchain’s most prominent features is that it can bestow trust in a network without the need for a central authority.

The sharing economy refers to a new socio-economic phenomenon in which individuals share products or services with other individuals on a peer-to-peer basis for a fee. However, even though the sharing economy is built on a peer-to-peer model, there are intermediaries who charge a fee for facilitating the transactions.

Enter Blockchain Technology

In a true peer-to-peer sharing economy, there should never be an intermediary who dictates the terms and conditions of a transaction or takes a cut of the payment.

Say you want to rent a car for a short trip from one side of town to the other. To do so, you could use a mobile app to identify vehicles that are available in your vicinity. Then, after verifying the digital identities of both yourself and the vehicle owner, you agree to terms and conditions, such as the fee and duration of the rental, and buy a micro-insurance policy  covering the ride, via an immutable smart contract. Once the terms and conditions are agreed upon and the smart contract is created and verified, you can open the car using your smartphone and the payment is directly deducted from your digital wallet and transferred to the vehicle owner upon completing your trip.

While the above example is purely theoretical at this stage, there are two startups aiming to leverage blockchain technology to create a fairer peer-to-peer economy in the rideshare sector. Austin, Texas-based Arcade City and Israel-based La ‘Zooz both aim to take the “Uber out of Uber” by offering ride sharing without a company acting as a fee-charging intermediary. Instead, drivers and riders deal directly with one another and payments are automatically conducted in cryptocurrency once the ride is completed.

FT 300: full 2017 list of top US registered investment advisers (Financial Times), Rated: A

The FT invited qualifying RIA companies — more than 2,000 — to complete a lengthy application that gave us more information about them. We added this to our own research into their practices, including data from regulatory filings. Some 725 RIA companies applied and 300 made the final list.

The formula the FT uses to grade advisers is based on six broad factors and calculates a numeric score for each adviser. Areas of consideration include adviser AUM, asset growth, the company’s age, industry certifications of key employees, SEC compliance record and online accessibility. The reasons these were chosen are as follows:

• AUM signals experience managing money and client trust.

• AUM growth rate can be a proxy for performance, as well as for asset retention and the ability to generate new business. We assessed companies on one- and two-year growth rates.

• Companies’ years in existence indicates reliability and experience of managing assets through different market environments.

• Compliance record provides evidence of past client disputes; a string of complaints can signal potential problems.

• Industry certifications (CFA, CFP, etc) shows the company’s staff has technical and industry knowledge, and signals a professional commitment to investment skills.

• Online accessibility demonstrates a desire to provide easy access and transparent contact information.

 

An AboveLoans.com Review: A Simple Way to Borrow (Saving Advice), Rated: B

Compared to other online lender-matching agencies, AboveLoans doesn’t really stand out among other online lenders. The only part that may seem a bit different is the simplicity aspect. Because AboveLoans only gives out smaller amounts ($35K and less) getting a loan can be a pretty swift process but there is more to getting a loan than how quick it happens.

Loans can range from $500 to $35K and you’ll have anywhere from six to 72 months for repayment.

Applying from anywhere sounds great but how secure is AboveLoans.com? AboveLoans isn’t a lender. It is a lender matching site. The entire process is secure but if you’d prefer a group of lenders not have your information you may want to consider using another site. Once you’ve accepted the lender’s terms, etc. funds will be deposited directly into your bank account.

You can apply for each of the following loans through AboveLoans:

  • Debt Consolidation Loans
  • Emergency Loans
  • Auto Repair Loans
  • Auto Purchase Loans
  • Moving Loans
  • Home Improvement Loans
  • Medical Loans
  • Business  Loans
  • Vacation Loans
  • Tax Loans
  • Rent/Mortgage Loans
  • Wedding Loans
  • Major Purchase Loans
  • General Personal Loans
United Kingdom

WEALTHSIMPLE TAKES SERVICE TO ANOTHER FINTECH HUB WITH UK EXPANSION (Betakit.com), Rated: AAA

Wealthsimple is officially expanding its service to the UK with an invitation-only beta.

The UK expansion comes just four months after Wealthsimple announced its US expansion. The company had been working on its US expansion over the past year.

“Ultimately, our ambition is to be a global financial services company. The UK has a lot of similarities to Canada — similar language and culture, the financial services industry is in a similar place — so it felt like the next logical step,” says Mike Katchen, CEO of Wealthsimple.

Toby Triebel, who previously co-founded online lending platform Spotcap, will lead Wealthsimple’s UK business.

PayPal hits £400m mark in advances to UK businesses (AltFi), Rated: AAA

PayPal Working Capital, PayPal’s small business lending arm in the UK, has hit £400m in cumulative cash advances made to British businesses. Over 22,000 business owners have now taken out an advance from PayPal Working Capital since it launched in 2014. The £400m milestone comes after a 116 per cent increase in total cash advances made by the firm over the past year.

PayPal’s small business lending activities are considerably further advanced in the US, where it topped $2bn in cash advances in the summer of 2016.

The high-yielding trusts more popular than ever (interactive investor), Rated: A

Trust purchases by advisers and wealth managers hit an all-time high over the 12 months to the end of March at £777 million. That’s up 11% on calendar year 2015, when £698 million was piled into closed-ended vehicles.

In addition, Q1 2017 was the second-highest quarterly period for purchases of trusts at £246 million. That’s a year-on-year increase of 85% and 25% more than the previous quarter.

Specialist debt was the most popular sector with advisers and wealth managers in first-quarter 2017. It’s the first time it’s topped the list, accounting for 14% of all investment trust purchases during the period.

He continues that, with the likes of peer-to-peer lending relatively new innovations, another potential risk is that trusts investing in it, which tend to be even newer concepts, are unproven over different economic and investment environments.

The sector average payout is above 6%, with some of the highest-yielding, including Carador Income (CIFU), Ranger Direct Lending (RDL) and Fair Oaks Income, paying over 10%.

SafeCharge reveals research urging fintech innovation for marketplace payments (SafeCharge), Rated: A

According to a study from the Ecommerce Foundation, almost 40% of the world’s online retail market will be controlled by marketplaces by 2020.

This difference creates complex challenges:

  • Regulation – The impending Payment Services Directive 2 regulation requires certain marketplaces which retain funds between a seller and a buyer to hold a payment institution license.
  • Seller Onboarding – Manual processes and Know Your Customer regulatory requirements create friction, which discourages sellers from registering with marketplaces.
  • Payment Checkout – A critical component for any business. Localisation, buyer experience, payment method offering, all must be optimised for conversion.
  • Split Payments – Marketplaces need to split transactions between multiple parties, both for marketplace commission and where a single checkout experience involves multiple sellers.
  • Seller Settlement – Marketplaces are in competition for sellers. Sellers demand frequent settlement of funds, often daily, in their local currency, and using a local payment method.
  • Unique Fraud – Marketplaces face new forms of fraud unique to the sector such as ‘collusion fraud’ where fake buyers and sellers facilitate the sale of non-existent goods with stolen payment cards.

The pros and cons of P2P lending (Bridging & Commercial), Rated: B

Peer-to-peer platforms have revolutionised lending, allowing retail investors to benefit from what was once the preserve of financial institutions and high-net-worth investors.

Pros

1.    Potential returns are excellent, and much higher than can be achieved with dividend yields.
2.    Returns are fixed, and don’t fluctuate like returns from equity investments or the stock market.
3.    Lenders are not charged fees, so the amount stated is the net amount investors receive.
4.    Platforms no longer have to deduct tax at source, so investors will be paid gross and account for their own tax.
5.    Investment terms are typically under 12 months.
6.    Legal charge holders will be paid out as a priority before any owners/equity shareholders.
7.    It is FCA regulated, so platforms must be transparent and are legally obliged to be upfront about risks. Platforms must have contingency plans in place, such as a significant financial buffer.
8.    The launch of the Innovative Finance Isa means peer-to-peer loans can be held within an Isa, so returns are tax free.

Cons

1.    While regulated by the FCA, peer-to-peer lending is not covered by the Financial Services Compensation Scheme, so losses are not underwritten by the government.
2.    Peer-to-peer loans are likely to be tied-in until the borrower has repaid, unless the platform can find a buyer.
3.    Loan periods are short, but investors may have to wait for the loan to complete before they start earning interest. One alternative is for investors to lend money to the finance company and get a fixed return for a fixed period. The rate will be less, but interest will be continuous, so investors can end up with approximately the same return, without having to select individual loans to invest in.
4.    If the borrower does not repay on time, investors need to wait until they have repaid – although they should continue to earn interest in the meantime.
5.    If the borrower defaults, the property will have to be repossessed. If that’s the case, there could be delays of at least several months. The property may not achieve a sale price that allows lenders to be repaid all their capital and/or the interest owed.
6.    While investors will receive a fixed rate of interest that may be higher than average dividends, they will not benefit from capital growth.

China

Many P2P Lending platforms attract investors by increasing interest rate  (Xing Ping She Email), Rated: AAA

Recently, in the background of surging market capital interest rates, the yield of money fund and bank financial products both rose markedly. P2P lending institutions no longer have the advantages in interest rates. In order to attract investors, there comes a new wave of raising interest rates in P2P lending industry.

On June 21st, Tuandai launched a notice of welfare activity, raising the interest rate of product “Futoubao 36”by 0.5%-1.4%.

Recently, Yirendai issued several promotion activities of raising rates, such as rebating 4% for inviting a new user.

On June 17th, JiMu Box announced from that day to June 23rd, if a customer successfully invited new user to invest in the platform, the inviter would receive a coupon of 6% growth in interest rates, in addition to the regular cash coupon and interest rate hikes.

Besides, Ma Tianshuai, the founder & CEO of JieYue United, said they also operated a welfare feedback activity of raising interest rates during the company’s 4th anniversary on June 18th.

Cash and carry (Breaking Views), Rated: A

A Hong Kong Monetary Authority study shows the former British colony is oddly cash-intense. The average person held nearly $6,000 in 2014 – second only to Switzerland.

The first licenses for mobile-wallet apps were granted to Apple, Android Pay, Tencent and others in 2016. Alibaba’s Alipay launched its localised app in May, more than a decade after starting on the mainland. Twenty years after Hong Kong’s reunification with the mainland, in consumer-facing fintech at least, the city looks a decade behind.

European Union

German Real Estate Crowdfunding Market Booms (Crowdfund Insider), Rated: AAA

The road ahead for the German real estate crowdfunding market has been cleared. The threat of being excluded from the scope of application of the crowdfunding regulation, the Kleinanlegerschutzgesetzt (KASG), was taken off the table last month. The crowdfunding market can move ahead on its exponential growth path.

Michel Harms tracks the overall crowdinvesting industry through his crowdfunding barometer and his aggregation site crowdinvest.de which lists all crowdinvesting projects available in Germany. According to his reports, real estate accounts for 80% of the crowdinvesting market. In 2016, the market doubled in size to reach €40 million. In the first five months of 2017 alone, 51 real estate projects raised €52 million. One can reasonably expect the market to triple in size by the end of 2017.

Michel Harms tracks the overall crowdinvesting industry through his crowdfunding barometer and his aggregation site crowdinvest.de which lists all crowdinvesting projects available in Germany. According to his reports, real estate accounts for 80% of the crowdinvesting market. In 2016, the market doubled in size to reach €40 million. In the first five months of 2017 alone, 51 real estate projects raised €52 million. One can reasonably expect the market to triple in size by the end of 2017.

Exporo was incorporated in 2013 by Simon Brunke, CEO, Björn Maronde, Julian Oertzen and Tim Bütecke.

Zinsland was founded in 2014 by Carl-Friedrich von Stechow, CEO, Dr. Stefan Wiskemann and Moritz Eversmann.

Bergfürst was started much earlier than its competitors, in 2011, as an equity crowdfunding platform launched by Dr. Guido Sandler, CEO, and Dennis Bemmann.

Next to the three leaders, around ten new entrants try to carve a market for themselves:

  • Zinsbaustein, launched in 2016, is the number 4 with 8 projects financed to the tune of €9 million.

Others have only financed a few projects so far:

  • iFunded started in 2015 and open for business in 2016, iFunded intends to attract German and international investors who want to invest in Berlin. Its average size of projects is €800K.
  • Home Rocket, started in 2015, Home Rocket operates from Austria but addresses both the German and Austrian investors and developers.
  • immofunding started in 2015, also operates from Austria.
  • Renditefokus started in 2015.
  • ReaCapital started in 2017.

LendIt Partners with Startupbootcamp FinTech For Its PitchIt Europe 2017 Competition (PR Newswire), Rated: A

LendIt, Europe’s largest global show in lending and fintech, today announced its Pitchit @ LendIt contest partnership with Startupbootcamp FinTech for PitchIt @ LendIt Europe 2017, a leading platform for fintech startups who can earn mentorship, endorsement and exposure to leading institutions, investors & press. Online applications also officially opened to qualifying fintech startups.

This year’s competition is slated to see hundreds of applicants all vying for a prestigious spot in the finals, and a chance to present on the keynote stage in front of over 1,000 members and high ranking executives from the global fintech industry at LendIt Europe (9-10 October, Intercontinental O2 Hotel, London.)

This year’s exclusive PitchIt Contest Partner will be Startupbootcamp FinTech, the leading global FinTech accelerator focused on innovation for the financial services industry. The finalists will present to a panel of influential VC judges and mentors, including those from Balderton Capital, Commerz Ventures, Thiel Capital, Index Ventures and Target Global VCs,and other high profile investors in the fintech capital of the world, London.

To apply to PitchIt @ LendIt Europe competition, firms must meet the following criteria:

  • Must be a fintech company
  • Two or more full-time co-founders/employees
  • 2-10 full-time employees
  • Less than 3 years in business (companies founded before 2014 not eligible)
  • Raised less than 4 million GBP since launch date
  • Must have a professional business website
  • Everyone registering on behalf of a specific company must have an email with that company’s domain
  • Past PitchIt Europe finalists are ineligible
International

Alternative Lenders Spread Their Wings Internationally (deBanked), Rated: AAA

As alternative lending gains global traction, a growing number of U.S-based alternative lenders are exploring international growth, with large companies like OnDeck, Kabbage and SoFi leading the way.

To be sure, international expansion requires extensive time, money and regulatory know-how, and some U.S. alternative lenders may never reach the critical scale to be able to compete effectively. Nonetheless, as globalization proliferates, industry observers expect that additional forward-thinking companies will push beyond the limits of their current geographical borders.

Affirm—which works with more than 900 retailers and recently announced that it had processed its 1 millionth consumer installment loan—has focused on domestic growth so far, but the company is now considering a number of options for international expansion, Metcalf says.

Europe, for instance, has seen substantial growth over the past few years, with the U.K. leading the way in alternative finance. It has four times higher volumes in aggregate than the rest of Continental Europe, according to a 2016 report from KPMG and TWINO, one of the largest marketplace lending platforms in Europe. (P2P consumer lending is the largest component of alternative online lending in Europe, capturing 72 percent of the total in the first through third quarters of 2016, according to the report.)

After the U.K., France, Germany and the Netherlands are the top three countries for online alternative finance by market volume in Europe, according to a September 2016 report by the Cambridge Centre for Alternative Finance.

Asian markets, meanwhile, show significant promise for alternative finance players to make their mark due to the sizeable population of digitally savvy consumers who are still largely underbanked. China is by far the largest market for alternative lending in Asia. It’s also the world’s largest online alternative finance market by transaction volume, registering $101.7 billion in 2015, according to the March 2016 Cambridge Centre for Alternative Finance report.

Although there are many possible international markets to explore, U.S. lenders have to tread carefully before planting roots elsewhere, observers say. Some smaller U.S. lenders may find domestic expansion easier and more cost-effective because of the time, regulatory and financial commitment that goes along with exploring international markets.

What’s more, foreign banks looking for alternative lending partners typically prefer to work with larger, more established players.

Within the past several years, OnDeck has begun offering small business loans to customers in Canada and Australia. Frequently Canada is a first step for U.S. companies that want to expand internationally because of the shared language and similarities between the economies, Young explains.

After the Canadian operation was successfully underway, the opportunity arose for the online lender to expand to Australia—which shares several similarities with the Canadian market.

U.S.-based alternative lenders also need to be careful to create products that fit the culture and needs of a particular market.

Take Kabbage, for example. The small business lender expanded into the U.K. in 2013, two years after its U.S. debut. But the company found that having its own small business lending business in the U.K. was too challenging for regulatory and capital reasons. It no longer offers new loans from this platform.

Instead, the funding company decided that a better global strategy was to license its technology to financial institutions in international markets a less capital-intensive, yet economically sound way of doing business.

Kabbage—which recently announced the establishment of its European headquarters in Ireland—has licensing arrangements with Santander in the U.K., Kikka Capital in Australia, Scotiabank in Canada and Mexico and ING in Spain.

For its part, SoFi has announced plans to expand to Australia and Canada this year. The company’s chief executive has also talked about European and Asian expansion in the future.

LendingClub, meanwhile, last November announced a significant partnership with National Bank of Canada and its U.S. subsidiary Credigy.

Amazon And The Future Of FinTech: Part II (Seeking Alpha), Rated: A

The model of the new information age is connectivity and this connectivity comes from building platforms that transcend industries.

But, let’s get back to the FinTech issue. In my previous post, I argued that Amazon, as well as Apple (NASDAQ:AAPL) and PayPal (NASDAQ:PYPL), has entered into the “payments” space and that this is their inroad into the banking field. And the payments space is definitely a “platform market.”

Now, we learn that a major European player in the payments space has actually received its banking license. Klarna is one of Europe’s largest financial technology groups, valued in 2015 at $2.25 billion.

And, now they have a banking license. But don’t expect mortgages from them right away. Expect “payment cards and accounts.”

In other words, they are building a platform that will transform banking, one that works through many different companies and industries. Is that what Mr. Bezos and Amazon are working on?

Global mobility: supporting your business (Relocate Magazine), Rated: A

Transferwise has become one of the world’s biggest fintech companies, valued at $1 billion with 700 employees.

Nilan offered a number of benchmarks for his company’s success since it was established in 2011 – its expansion from two to 200 markets, its ever-growing list of international HQs, its boom from 60 employees to 700 – but the one that’s made headlines most recently is the announcement that customers are now sending $1 billion per month using the service.

The threat of Brexit looms, however, and Transferwise is concerned about the impact it will have on the company’s ability to access talent.

Australia

Need a loan? Then ask a peer (Yahoo! Finance), Rated: A

Interestingly, a finder.com.au survey revealed that the majority of Australians think that a good credit score should come with perks. That is, 67% of people believe that a good financial history should mean better interest rates on products like loans.

Here are four things you need to know about P2P loans: 

When reviewing your options, keep a close eye on the fees involved to ensure that you’re not paying more than you can afford.

As P2P lending isn’t backed by a large corporation, do your due diligence by researching the reputation of the platform you’re thinking of signing up with. A quick way to do this is to check for a credit license.

P2P platforms typically offer lower loan amounts, so you may only be able to borrow up to $50,000 for a personal loan. This could be restrictive, depending on your loan purpose and the amount you need to borrow.

Once you’ve wrapped your head around the ins and outs of P2P lending, decide whether this is the right type of finance for you.

Canada

Alternative investing requires more transparency: survey (Benefits Canada), Rated: B

The survey, which polled 200 institutional investors and asset managers, found respondents cited transparency as the leading investment consideration, for both alternative investments (62 per cent) and traditional investments (62 per cent).

According to the survey, risk management is the most important driver for transparency in both traditional and alternative investments. Nearly three-quarters (73 per cent) of respondents said portfolio risk management was the most important element, while about half said regulatory requirements (53 per cent) and competitive considerations (43 per cent) were the most important elements.

Authors:

George Popescu
Allen Taylor

Monday March 13 2017, Daily News Digest

personal loan ABS pricing spreads

News Comments Today’s main news: AmEx lending pushes beyond credit cards. RateSetter releases performance statistic update. Yirendai presents new open tech platform. Today’s main analysis: Securitization spread analysis from PeerIQ Today’s thought-provoking articles: SoFi looks at pharmacy schools. P2P lending landscape in China. P2P lending takes hold in Africa. United States AmEx lending push goes beyond credit cards. GP:” […]

personal loan ABS pricing spreads

News Comments

United States

United Kingdom

China

Asia

Africa

News Summary

United States

AmEx’s Lending Push Goes Beyond Cards (WSJ), Rated: AAA

American Express Co. is pushing into the booming personal-loan business despite investor worries that an expanding roster of lenders may be getting into the game at too late a stage.

Such fears put AmEx executives on the defensive Wednesday at their annual investor day conference. Chief Executive Ken Chenault acknowledged the company has received questions about the timing of recent efforts to expand lending. These include through credit cards and expanding last year into personal loans—the first time the iconic card company has engaged in such lending.

But he said that AmEx is “very comfortable” because the initiative involves lending more to its existing card customers.

 

Online lenders have been using these loans to appeal to mostly creditworthy consumers who want to consolidate high-interest credit-card debt. Around three out of every five loans LendingClub has made since it began lending in 2007, for instance, went toward paying off higher-cost debt, according to data from the San Francisco-based company.

And there are plenty of credit-card customers to target. Total credit-card balances have grown to be just shy of $1 trillion, climbing steadily toward crisis-era levels. The Federal Reserve reported this week that balances in January were $995 billion.

SoFi takes a look at best-value pharmacy schools (Drug Store News), Rated: AAA

Lender and student loan refinancing company SoFi this week conducted a rundown of which pharmacy schools provide students the best bang for their buck by comparing which schools have the highest average salaries relative to their student debt, on average. It also looked at the pharmacy schools’ graduates have the highest average salaries and schools whose graduates have the highest amount of debt relative to their income.

The pharmacy school with the highest average salary was the University of California, San Francisco, which had an average salary of $145,297, which was 1.3 times the average $109,394 in debt students depart with. The University of the Pacific’s pharmacy school came in second, with an average salary of $137,639 and salary-debt ratio of 0.8. It was followed by Midwestern University – Glendale, whose graduates earn $133,867 on average; University of Southern California, with its average graduate salary of $133,328; and Harding University, with its average salary of $132,748. However, all four schools that followed the top slot had students with debt higher than their average salary, and three were below the average of all pharmacy schools.

ARCT 2017-1 as a “Cross-Over” Product between Near-Prime and Super-Prime Personal Loan ABS (PeerIQ), Rated: AAA

On the weighted-average adjusted basis, we observed flattening in the credit curve: the A tranche is 60 basis points tighter and the B tranche is 130 basis points wider than the corresponding tranches in non-prime deals (Exhibit 3). This flattening behavior is expected as the subordinate tranches on near-prime collaterals have heavier expected losses than that of prime collaterals. Comparing to the SCLP shelf, ARCT 2017-1 is priced about 40 basis points wider on the A tranche and 280 basis points wider on the B tranche. We believe that the “first-dollar” loss risk is relatively low for ARCT 2017-1 A class investors with a 0.83yr WAL.

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

REMAND DECISION IN MADDEN V. MIDLAND FUNDING RAISES QUESTIONS REGARDING CHOICE OF LAW CLAUSES IN CONSUMER LOAN AGREEMENTS (Pepper Hamilton LLP), Rated: A

On February 27, the U.S. District Court for the Southern District of New York issued a highly anticipated decision in Madden v. Midland Funding1 on remand from the U.S. Court of Appeals for the Second Circuit. The decision dashes industry hopes for a favorable ruling on the case’s choice of law issues that would blunt the impact of the Second Circuit’s 2015 conclusion that the National Bank Act (NBA) did not preempt plaintiff Madden’s state law usury claim. Just as importantly, however, the decision turns a spotlight on lenders’ ability to override state usury laws by relying on choice of law clauses in their loan agreements with consumers in certain states like New York.

In finding that New York’s criminal usury law constitutes a “fundamental public policy” of the state, the court cited the Eighth Circuit Court of Appeals’ decision in Electrical & Magneto Service Co. v. AMBAC International Corp. for the position that the “existence of a criminal provision ‘is significant because the legislature would not allow a criminal law to be bypassed by the mere existence a choice of law provision contained in a contract.’”

Pepper Points

  • The district court’s opinion should raise concern for all non-bank lenders because choice of law clauses are often relied upon in the industry as a means of overcoming more rigorous state usury restrictions.
  • As noted throughout the opinion, interpretations of state law by federal courts carry little weight as precedent.14 A future court would be free to disregard the district court’s interpretations of New York law and might arrive at a different conclusion regarding the applicability of the criminal usury cap to defaulted debt.
  • If NBA federal preemption had applied based on the assignment of plaintiff Madden’s loan to the defendants from a national bank, the choice of law issue would have been moot.
  • A future case involving bank model lending would likely have a different outcome, even within the Second Circuit, because the arguments in favor of federal preemption would be stronger than what exists in a case involving the purchase and assignment of defaulted debt due to the bank’s greater degree of ongoing involvement.

Increasing Small Business Units to Act as Building Blocks for Peer-to-Peer Lending Market (Digital Journal), Rated: A

The key trend likely to be adopted by leading players in the global peer-to-peer (P2P) lending market is to build strategic alliances to expand its small business loan divisions. For instance, Prosper Marketplace, Inc. joined hands with OnDeck and bought American Healthcare to improve its product portfolio. Similarly, LendingClub Corporation is also targeting startups by collaborating with trustworthy investors in the market.

Simplification of modes used for peer-to-peer lending such as improved online interfaces has augmented the peer-to-peer lending market in the recent years.

JPMorgan Chase to Acquire MCX ?FinTech Payments Technology for Chase Pay (IT Business Net), Rated: A

JPMorgan Chase (NYSE:JPM) has agreed to acquire MCXs payments technology to help expand Chase Pay, the mobile and digital wallet for Chase customers. MCX, a network of Americas largest merchants, was the premier launch partner for Chase Pay in October 2015. The transaction is expected to close in the coming weeks.

Participate in The 2017 Americas Alternative Finance Industry Survey (Orchard Platform), Rated: A

There’s still time to participate in The 2017 Americas Alternative Finance Industry Survey. The deadline is March, 15. Orchard believes that by participating in this high-profile and high-impact research, originators can help broaden and deepen coverage of our fast-changing industry and is supporting the survey as a key research partner for the second year.

Your platform will be prominently acknowledged and thanked in the report with logo displayed. Your data will only be analyzed and presented in aggregate format by country and model. No individual platform’s data is therefore divulged. After the survey is completed, data that you submit will be encrypted and stored safely to ensure continued anonymity and confidentiality.

The 2 Best P2P Lending Automation Tools For Investors (Forbes), Rated: A

What started as peer-to-peer has grown into a marketplace. The likes of JP Morgan and Citibank now account for over 65% of new capital.

Institutional involvement in the sector has made P2P investing highly competitive. Institutions use algorithms to select the best quality loans, snapping them up only seconds after being listed.

NSR Invest is a registered investment advisor that offers managed and self-directed accounts to P2P investors.

Investors can link their Lending Club, Prosper, and Funding Circle accounts to the website and have NSR invest for them. Depending on the NSR strategy chosen, users outperform the market by as much as 2.6% (average is 1.5%).

LendingRobot (LR) is another registered investment advisor offering fully automated P2P investing. Investors can link their Lending Club, Prosper, and Funding Circle accounts to LR. Like NSR, LR offers managed and self-directed accounts.

For managed accounts, investors can select their desired return levels that range from conservative to aggressive. Based on your selection, LR “cherry picks” suitable loans.

On average, LR users outperformed the market by 1.45% over the course of 2015–2016.

For self-directed accounts, users select loans based on criteria such as monthly income and loan purpose.

IHT Realty Seeks Crowdfunding for Jacksonville Multi-Family Deal (Globe Newswire), Rated: B

IHT Realty Crowdfunding announced on Thursday a new program that will offer investors a guaranteed six-month return regardless of how early the property sells.

Lenger Financial is offering a strong debt coverage ratio of 1.28 with an excellent after repair value (ARV) of 74 percent. The sponsor is projecting a gross annual income of $15,590 and a projected net operating income of $10,443.

Real estate crowdfunding exec is top HUD adviser (The Real Deal), Rated: B

Earlier this week, ProPublica published a list of more than 400 Trump administration officials working across the federal government’s major departments. The list includes a number of officials at the Department of Housing and Urban Development, such as its “Senior White House Advisor,” Maren Kasper. Kasper most recently served as a director at Roofstock, an Oakland-based investment platform for single-family rental homes.

Is a Bitcoin ETF a Good Investment? (Kiplinger), Rated: B

The Securities and Exchange Commission denied approval of the Winklevoss Bitcoin Trust ETF, an exchange-traded fund that would track the value of digital currency bitcoin. Friday’s highly anticipated decision came nearly four years – and a dozen amendments – after the fund was first proposed and delayed indefinitely making gaining access to the currency as easy as logging into your online brokerage account.

LendingTree Appoints J.D. Moriarty as Senior Vice President, Corporate Development (PR Newswire), Rated: B

LendingTree® (NASDAQ: TREE), the nation’s leading online loan marketplace, today announced that J.D. Moriarty will be joining the company as its Senior Vice President, Corporate Development, effective April, 2017.

In his new role, Moriarty will be responsible for business development and strategic acquisitions as the company continues to expand its footprint in the lending and financial technology industry.

United Kingdom

RateSetter Releases Performance Statistic Update (Crowdfund Insider), Rated: AAA

P2P lender RateSetter announced on Friday it has updated its performance statistics. According to the lending platform, a new set of fields on the Performance by year means investors may now view the amount lent by year, which is broken down by lending type.

PwC and Startupbootcamp chart fintech maturity (Finextra), Rated: A

In a new report, ‘The start-up view: a year in FinTech’, Startupbootcamp and PwC analyse application data from Startupbootcamp’s FinTech accelerator programme as well as the volume of deals in the UK FinTech market in 2016.

Startups are putting more emphasis on solving real customer problems using AI and machine learning.

There remains, however, a disconnect in the interest shown in this area by startups and investors, with the report showing that for many investors it is still too soon to invest in smarter faster machines. There remains, however, a disconnect in the interest shown in this area by startups and investors, with the report showing that for many investors it is still too soon to invest in smarter faster machines.

Despite Brexit, the UK should remain a global FinTech centre
UK based startups made up 34% of all applications to Startupbootcamp in 2016, up from 22% the year before, demonstrating the constant growth of innovation and wealth of talent in the UK.

Currencycloud lands M Series D (Bankless Times), Rated: A

Cross border payments platform Currencycloud has completed a £20 million ($25M) Series D round. New investor GV (née Google Ventures) joined existing investors Notion Capital, Sapphire Ventures, Rakuten FinTech Fund and Anthemis. The money will fund a global expansion.

British P2P startup lender secures 0 million worth of funds (The Technews), Rated: A

A peer-to-peer (P2P) startup based in the UK called the Fund Circle has successfully raised a capital of $100 million.

Funding Circle has successfully managed to lend over 2.5 billion pounds ($3.07mil) internationally in 2016. Currently, the company has offices located in San Francisco, Berlin, and the Netherlands. Moreover, the company has its largest market in the UK worth of $981mil.

Former bank CEO joins P2P lender (TheAdviser), Rated: A

Peer-to-peer lender RateSetter has appointed former ING Direct chief executive Vaughn Richtor to its Australian board of directors.

Mr Richtor has a wealth of experience in the banking sector, having served as the chief executive of ING Retail Banking Asia prior to becoming CEO of ING Direct.

UK PropTech Association discusses rise of technology (Development Finance Today), Rated: B

There is no ignoring the record number of proptech M&As and fundraising events seen in 2016 and this looks set to continue in 2017. Already, proptech funding activity in the UK alone has been astounding this year, with Purplebricks’ £50m raise to drive their international expansion the latest example. This comes on the back of three strong fundraises by proptech finance companies: LendInvest, Habito and Trussle.

In order to support this burgeoning sector, we launched the UK PropTech Association (UKPA) this month.

China

Yirendai Presents New Open Technology Platform at 2017 LendIt USA Conference (Crowdfund Insider), Rated: AAA

Yirendai (

Yirendai CEO on Peer-to-Peer Lending Landscape in China (Bloomberg), Rated: AAA

 

A brief look at the current state of the Chinese P2P lending industry (e27), Rated: A

Since 2007, peer-to-peer platforms (P2P) lending has mushroomed in China as a new source of fixed income for retail investors. Peer-to-peer lending is a new method of debt financing that allows people to borrow and lend money without a financial institution. Harnessing technology and big data, P2P platforms connect borrowers to investors faster and cheaper than any bank.

Last year, the country’s US$60 billion peer-to-peer lending sector was dogged by scandals and fraud due to loose oversight. This resulted in China’s authorities’ imposing new rules due to concerns about defaults and fraud among the nation’s 2,349 online lenders.

Right now, China is facing two extremes of P2P platforms going up and down: record-breaking funding rounds (Lufax US$10 billion) and record-breaking Ponzi schemes (Ezubao, US$7.6 billion).

Yirendai

The New York-listed firm, unlike its peers, has not only been expanding its business rapidly but also set its sights on disbursing loans worth 100 billion yuan (HK$ 112.8 billion) a year by 2020.

Dianrong

Just a few days ago, Dianrong made an official announcement that it is launching China’s first-ever blockchain platform, named ‘Chained Finance’ by joining efforts with FnConn, a subsidiary of Foxconn Technology Group.

Lufax

Lufax (陆金所) is the largest player in China and the third largest in the world. It is important to note that Lufax, formally known as Shanghai Lujiazui International Financial Asset Exchange, is 44% owned by financial conglomerate Ping An Insurance Group.

 

Asia

Investree on a Push to Expand Peer-to-Peer Lending Network (Jakarta Globe), Rated: A

Investree Radhika Jaya, a local startup providing a peer-to-peer lending marketplace, is looking to open representative offices in major Indonesian cities this year as part of a push to expand its lending by more than sixfold this year.

The company, which matches individual lenders with borrowers, expects to mediate Rp 400 billion ($30 million) in loans from lenders to borrowers this year, up from Rp 65 billion last year, Adrian A. Gunadi, Investree co-founder and chairman told the Jakarta Globe on Thursday (09/03).

One is a loan whose terms are custom fit for employees, who will pay it back using automatic deduction from their salary.

The other is for small and medium businesses, which supply listed companies, multinational firms, state-owned enterprises or government offices. This loan is given against these SMEs’ invoices to their clients, reducing risk revenue mismatch that could hamper the debt payment. “These way we do not directly compete with banks. We complement them,” he said.

As of Friday, Investree has processed Rp 86.7 billion in loans for 395 borrowers, most of them SMEs.

This fintech startup is disrupting Korea’s banking sector, rewriting regulation (Geektime), Rated: A

Korean financial services app developer Viva Republic announced last week the close of their Series C funding round, bringing home $48 million in new capital.

Launched in February 2015, the company’s app Toss now claims 6 million users in their native market, providing P2P transfers between friends and family. They have since added services such as loans, a financial dashboard that shows all of the user’s accounts (an important feature as Koreans have 5.4 accounts per person on average), and a credit monitoring service.

Viva Republica’s decision to look abroad for new backers should be taken as a sign that they understand that if they will want to continue to scale, they will need investors with a wider viewpoint on the potential of powerful fintech solutions than what is available to them in their home ecosystem.

Africa

P2P lending takes hold in Africa (Gadget), Rated: AAA

Africa has caught the attention of those in the ever-evolving peer-to-peer (P2P) lending sector. A recent report published by the University of Cambridge Judge Business School analyses the current position of Africa on the world’s alternative finance stage.

The report explains that crowdfunding in Africa is just beginning to gain publicity and garner attention. As detailed in the document, the third-largest model in Africa is P2P business lending, which totalled $16 million in volume over a two-year period between 2014 and 2015.

Kenya and South Africa are the market leaders, raising $16.7 million and $15 million respectively from online channels in 2015. P2P business lending had a lower average deal size, of $41,000, with an average of 24 lenders each.

The make-up of the South African market differs markedly from the rest of Africa. In 2015, the vast majority of market activity – $13.8 million – came from P2P consumer and business lending, with the remaining $1.2 million spread across microfinance, donation-based and reward-based crowdfunding.

Crowdfunding’s growing impetus in Africa (Biz Community), Rated: A

Peer-to-peer business lending is the third-largest finance model in Africa, totalling $16m in volume in 2014 and 2015, and it’s growing in popularity.

The Africa and Middle East Alternative Finance Benchmarking Report, published in February, is the first comprehensive study of the size and growth of crowdfunding and P2P lending markets in Africa and the Middle East. It includes additional chapters on the regulatory landscapes in Africa.

Need for SME finance sees arrival of FinTech lenders (Moneyweb), Rated: A

The lending landscape in South Africa is transitioning. Taking the lead from their global counterparts, there are a host of smaller FinTech lenders entering the market, bringing with them an opportunity for SMEs looking for growth funding. However, by year-end we could see yet another shift.

Back home, the growth in the alternative lending space has largely been in response to the increased demand from SMEs looking for smaller and more short-term loans. These smaller deals generally attract more interest and are often unattractive to the bigger, traditional lenders.

International uncertainty, especially around shifts in regulations under the Trump administration, could see shifts in how banks are able to lend. However, the South African Reserve Bank has traditionally erred on the side of caution and we can expect a steady hand in our regulatory outlook. Similarly, if the US interest rates tick upwards, additional risk will enter the market and lending will be affected.

Authors:

George Popescu
Allen Taylor

July 29th 2016, Daily News Digest

July 29th 2016, Daily News Digest

News Comments Today we have a lot of articles about banks and how banks are surfing successfully on the FinTech wave. The bank articles are mostly in the US section but the Australia section has an interesting article as well. Note the 1st article from Bloomberg and the 7th and 8th articles.  In the India […]

July 29th 2016, Daily News Digest

News Comments

  • Today we have a lot of articles about banks and how banks are surfing successfully on the FinTech wave. The bank articles are mostly in the US section but the Australia section has an interesting article as well. Note the 1st article from Bloomberg and the 7th and 8th articles.
  •  In the India section, you will find an article of quotes from P2P lenders in India which are worth a quick read. And in the UK section a very interesting article, the 1st one, just talking about the profitability of Zopa and Funding Circle, but the real interesting piece are the profitability of LendInvest and RateSetter which are not in the title. And a 2nd article that is also very clear and well thought out.

United States

United Kingdom

European Union

India

Australia

 

United States

Big Banks Turn Silicon Valley Competition Into Profit, (Bloomberg), Rated: AAA

It’s not that the upstarts — often called fintech — are failing to gain traction. Internet ventures pitching loans to cash-strapped consumers, small businesses and home buyers, for instance, have posted spectacular growth in recent years. It’s just that banks have a huge lead in lending and are watching the startups closely. As borrowers embrace new services, traditional firms are riding along.

Here are five examples:

LendingClub’s Backers

In May, LendingClub broke out its sales to banks: Community banks and other old fashioned lenders snapped up about 34 percent of the $2.8 billion of loans it arranged in the first quarter, up from an average of about 25 percent during 2015.

Some of LendingClub’s biggest loan buyers have bolstered their war chests or operations with financing from banks. Colchis Income Advisors entered into a credit agreement with Bawag PSK of Austria, according to regulatory filings. Arcadia Funds arranged for two of its Cirrix partnerships to borrow from Silicon Valley Bank. And MW Eaglewood lined up financing for its main LendingClub fund from Capital One Financial Corp. in 2012. Spokesmen for the funds and banks declined to comment or didn’t respond to messages.

Chasing Entrepreneurs

Small businesses can thank internet ventures for simplifying loan applications, speeding decisions and providing much-needed credit when many traditional banks were pulling back in the wake of 2008’s financial crisis. Nonbanks now provide about one-quarter of the $800 billion in loans outstanding to the sector, according to research by QED Investors and Oliver Wyman. But the interest rates aren’t always low.

For a time, banks were content backing the loans. Goldman Sachs was among firms that entrusted more than $300 million years ago to fund lending by On Deck Capital Inc., one of the largest providers of small business loans over the internet.

Now, established lenders are taking a more active role. JPMorgan announced a deal in December, letting it access On Deck’s proprietary credit-scoring system to quickly evaluate applicants before using its own balance sheet to make loans. On Deck, in turn, gets a foothold in the burgeoning “fintech as a service” market. But the arrangement has done little to stop a 49 percent slide in the company’s stock this year.

More recently, established lenders have announced their own online lending portals for entrepreneurs.

Wells Fargo & Co. said in May that its new “fast decision” platform will help it reach a goal of providing $100 billion in new loans to small businesses by 2019. AmEx, which already provides more than $200 billion of funding to entrepreneurs for business purchases on their credit cards, expects a new online-loan portal will let it handle even more of their spending.

Mortgage Apps

Fintech ventures starred in Super Bowl ads this year, with Quicken Loans toutingRocket Mortgage, a platform letting users apply for home loans on smartphones.

The tidal wave is benefiting banks, too. Behind the scenes, many of the upstarts get support from traditional banks. Detroit-based Quicken, for example, raised $1.25 billion for itself and its parent company last year in a bond sale underwritten by JPMorgan and Credit Suisse Group AG. It also used lines of credit from banks to help close $80 billion in home loans that year.

[Comment: 4th was Blockchain, not very relevant to our readers here]

Robo-Advisers

Top Wall Street firms, seeking stable fee income, are now developing their own robotic arms. Bank of America Corp. will unveil an automated investment prototype this year after assigning dozens of employees to the project in November, people familiar with the matter told Bloomberg at the time. Morgan Stanley and Wells Fargo also have said they would build or buy a robo-adviser.

US consumer agency seeks to overhaul debt collection industry, (CNBC), Rated: AAA

“Today we are considering proposals that would drastically overhaul the debt collection market,” said Consumer Financial Protection Bureau Director Richard Cordray in a statement. “This is about bringing better accuracy and accountability to a market that desperately needs it.”

According to a summary, the proposal would make sure collectors “substantiate the debt before contacting consumers,” by confirming their identities and the amount owed, as well as checking for any payments made after a default. Consumers frequently file complaints at the agency about receiving calls for debts that do not exist.

In an attempt to “limit excessive contact,” the proposal would cap agencies’ calls to debtors to six attempts each week. It would also create a 30-day waiting period after a person dies for contacting survivors.

Agencies would have to communicate specific information to consumers, such as when outstanding debt is too old for a lawsuit. They would also have to make it easier to both dispute or pay a debt through tear-off coupons on the bottoms of collection notices.

Roughly 13 percent of consumers have a debt currently in third-party collection, with an average amount of $1,300, data from the Federal Reserve Bank of New York shows.

In a survey released alongside its proposal, the CFPB found more than three-quarters of the country’s 3,994 debt collection firms are small, with less than 100 employees. Larger firms pull in about two-thirds of the industry’s $12.18 billion total revenue.

The agency also found credit card, student loan and automobile debts in collection typically have balances of $2,000 or more.

Cloudvirga Raises $ 7.5 M to Automate the Entire Mortgage Process, (PR Newswire), Rated: A

Cloudvirga, the company developing the cloud-based intelligent Mortgage Platform® (iMP) designed to streamline the mortgage process, today announced it has raised $7.5M in its series A funding sponsored by Dallas Capital with participation from Upfront Ventures and Tribeca Angels.

“Increased regulations stemming from the subprime mortgage crisis have made the entire process more labor intensive and time consuming than ever, and those are the pain points we’re alleviating with iMP,”

Come Together – Finding Common Ground in Small Business Lending Associations, (Lend Academy), Rated: AAA

So where do we go from here? Advancing the marketplace lending industry’s efforts to create a more transparent and efficient financial system is critical as the industry matures.

The good news is that small businesses today – even those with lackluster or thin credit history – can choose from a dynamic set of loan products including term loans (both traditional and short-term), business lines of credit, loans for startup companies, equipment purpose loans, various SBA loans, accounts receivable financing, merchant cash advances, and peer-to-peer loans. This is a far cry from where we were in 2008-2010, when (according to the Huffington Post) more than 170,000 small businesses shut down.

At Lendio, we’re convinced that there needs to be a single, industry unifier – and we feel the SMART Box is headed in that direction. Lendio will now participate in the 90-day engagement period and I’m asking all those who offer loan products throughout the Lendio platform to consider doing so as well.

How Much Lower Will Your Student Loan Rate Be With a Cosigner?, (Wall Street Journal), Rated: AAA

Undergraduates who qualified for private student loans with a cosigner–often a parent–were offered average interest rates of 5.37% versus 7.46% without a cosigner, according to Credible.com, a student-loan marketplace. Rates for graduate students were also discounted to 4.59% on average with a cosigner compared to 6.22% without one.

The figures from Credible.com are based on five lenders’ responses and offers—which included a mix of fixed and variable interest rates—to nearly 8,000 applicants who shopped for student loans on the site over a 12-month period through early June. The lenders include Citizens Financial Group—which is quickly gaining market share in the private student loan market—as well as online lenders CommonBond and College Ave Student Loans.

Approval rates fall dramatically without cosigners. Fifty-one percent of undergraduates shopping for loans on Credible.com received offers compared with 20% of those without a cosigner. Similarly, 56% of graduate students–who lenders have historically viewed as relatively safer borrowers–received offers with a cosigner versus 45% without.

In some cases, it can be cheaper for parents to join their children on a private student loan as opposed to signing up for a parent-only loan from the federal government. The 5.37% average rate undergraduates received with a cosigner on private student loans is nearly one percentage point cheaper than the interest rate on the federal Plus loan for parents that charges 6.31% for the upcoming academic year. Private lenders also don’t charge origination fees, while the Plus loan currently has a roughly 4.3% upfront charge.

Think twice before you co-sign on a student loan, (CNBC), Rated: AAA

But co-signing is risky. It ties you to that debt, meaning you could be responsible for the entire amount outstanding if the primary borrowercan’t — or won’t — pay up. Nearly 40 percent of co-signers found themselves on the hook for at least part of the bill, according to a June survey from CreditCards.com, and 28 percent saw a drop in their credit score from the primary borrower’s bad credit habits.

How Ayasdi’s machine learning is giving banks an analytical advantage, (Tradestreaming), Rated: AAA

“The future is already here — it’s just not very evenly distributed.” Banks are increasingly using machine learning to power part of their operations, but the adoption of these new technologies is not uniform.

Top data scientists are employed by financial institutions and working with programming tools like SPCC and R, they filter and analyze huge data sets in order to perform analytical tasks. “No human being can wrap his head around that amount of data,” said Daniel Druker, CMO of Ayasdi, a machine learning company that partners with financial institutions, like Citi and Credit Suisse. Instead, using machine learning algorithms, a computer can surface insights and recommendations from those data sets, while the quants examine and take actions based on those learnings.

According to McKinsey’s 2015 Global Banking Report, banks that have replaced older statistical-modeling approaches to credit risk with machine learning techniques have experienced up to 20 percent increases in cash collections from outstanding loans.

Out of over 20 banks that work with Ayasdi, Drucker said, 100% are either already operating in this stage or actively exploring implementing such technology.

The highest level of machine learning application is the fully automating business processes. Take a life insurer, for example. When a customer applies for a policy, he might be asked to fill out a 40-page long form and get a physical examination. That information is then sent back to the company for approval. The entire process can take over a month to complete.

According to McKinsey, some European banks using these techniques report 10 percent increases in sales of new products, 20 percent savings in capital expenditures, and 20 percent declines in customer churn.

CB Insights has identified 41 companies providing machine learning solutions in the financial industry. Together with the explosion of general applications of  AI, deals and investments in AI companies reached record levels in 2016. Since the beginning of 2016, over 15 fintech AI companies have closed investment rounds.

How Digital Investments Are Changing the Face of Banking, (The financial Brand), Rated: AAA

Investment in digital banking is driving increased customer acquisition, cross-selling and satisfaction while decreasing branch traffic and related costs.

This is confirmed by the J.D. Power research that showed that there is an immediate lift in overall satisfaction when customers use mobile banking (+27 points on a 1,000-point scale), and this impact increases even more when banks provide their mobile banking customers with a highly satisfying experience (+82). According to J.D. Power, “The outlook for Big Banks remains positive, driven by their (big banks) ability to invest in customer-centric innovations (e.g., digital channels, analytics, and branch transformation), as well as their success in growing customer segments.”

Recent disclosures of mobile banking use by the big banks provides a glimpse of the impact of digital investment on mobile use. Of the three largest U.S. banks, JPMorgan Chase leads the way with nearly 25 million active mobile customers as of the second quarter. That was up 18% compared with the same period last year. Bank of America had the second most active mobile users, with 20.2 million monthly active app users, with Wells Fargo reporting 18 million active users.

 

United Kingdom

Britain’s 2 biggest peer-to-peer lenders lost £50 million in the last decade

The two platforms have facilitated almost £3 billion of loans between them but Funding Circle, founded in 2010, has never made a profit, while Zopa, founded in 2005, made a small profit 2 years running, totalling less than £60,000.

Here’s the breakdown of Zopa and Funding Circle’s financial performance, as per accounts filed with Companies House:

  • Zopa: losses between 2005 and 2014 total £21.79 million, according to accounts filed with Companies House, on cumulative revenues of £25.84 million. The platform made a small profit in in 2011 and 2012, totalling £58,648.
  • Funding Circle: cumulative net loss of £28.71 million on total revenues of £20.89 million, according to accounts covering 2010 to 2014. The company has yet to make a profit.

These losses have been funded by investment from venture capitalists: $273 million (£208.1 million) for Funding Circle and at least $56.6 million (£43 million) for Zopa, according to Crunchbase.

Funding Circle, which offers loans to small businesses, declined to comment on its losses when contacted by BI but pointed to comments CEO Samir Desai made to BI last year when we reported the company’s latest financial results. Desai said at the time:

“If you actually look at the core business of doing loans in the UK — strip away the technology investment and all the other extra stuff we’re doing — the business is already profitable in the UK and is moving that way in the US as well. A lot of the investment we’re doing is investing in creating a global business.”

Zopa’s CEO Jaidev Janardana told BI in an emailed statement:

“We have demonstrated that our business model is profitable with two consecutive profitable years in 2011 and 2012. Since then our investors and the business have placed more value on investing in our growth. In doing so we have been able to double our loan volumes last year, deliver positive returns for our customers at the same time investing in talent, technology, and our office.

“This all means we are in the best position to deliver on our strategic plan for continued growth and profitability long-term. Looking forward, I’m glad to say that we expect to be EBIDTA positive in Q4 2016 and profitable in 2017.”

Christian Faes, CEO of the UK’s fourth largest marketplace lender LendInvest, told BI he thinks that loss-making platforms will face increased pressure to turn a profit to “prove that they can.” Remember, the growth that Zopa and Funding Circle are chasing could be disappearing.

LendInvest, which lets investors put money into short-term mortgages for people looking to renovate then sell properties, made a pre-tax profit of £3.1 million in 2015 and £1.1 million in 2014.

A spokesperson for RateSetter told BI: “We have recorded a profit for two consecutive financial years, proving that our model works and is sustainable. We are now investing to scale up, broaden, and deepen our market while continuing to deliver maximum value for investors.”

Is the dream of peer-to-peer lending beginning to fade?, (Thersa), Rated: AAA

Why is this a problem? Because unlike banks, which can make money on captive and repeat business in current accounts, credit cards and remortgages, P2P lenders need to continuously find and process new borrowers in order to earn commission. Should the sluggish times continue, the danger is that P2P lenders may soon be tempted to shoot for riskier borrowers in order to maintain their rate of growth. Remember that these platforms have investors of their own to placate and appease, many of whom will be pushing for decisive action to keep transaction volumes on an upward trajectory.

Finally, there is the question of where the money flows to on these platforms. Nesta and Cambridge University’s research is unequivocal: peer-to-peer lending has helped many thousands of people and businesses access loans in the face of rejection from high street banks. Yet only 20 percent of borrowers using P2P consumer lending platforms are women, and only a quarter earn less than £25k (note that the median wage of workers in the UK is  £27.5k). Although the makeup of borrowers using P2P platforms may simply reflect lending patterns across the financial industry, it challenges the theory that fintech innovations are inherently more inclusive.

The point of raising these red flags is not to pour cold water on the P2P lending phenomenon. Many of these platforms promise users a brilliant customer experience, faster decision making, more choice and – for some – better rates on loans than they can find elsewhere. Indeed, one of the greatest impacts P2P lenders have had is in changing the practices of long-standing incumbents. Take Wells Fargo, which recently launched a rapid turnaround system for small business loans, partly to match the responsiveness of P2P startups. These innovations should linger on even if P2P platforms fade away, and suggests the sector could catalyse positive transformation in financial services without needing to achieve a dominant position in the loans market.

No, this is not to dismiss the real achievements of P2P platforms. Rather, it is a plea to be pragmatic and realistic about what P2P lending – and all forms of fintech for that matter – can ultimately achieve without a more significant structural change in the nature of the financial industry. John Kay, in his brilliantly detailed new book Other People’s Money, rightly reminds us of the fundamental functions of finance: to enable people to save for the future, receive and send money, manage everyday risks, and borrow to invest in a real economy that truly creates value for others.

Ablrate & Access Commercial Finance Tout Origination Partnership, (Crowdfund Insider), Rated: A

Asset-backed peer to peer lender Ablrate has released information on an origination partnership with Access Commercial Finance based in Leeds. The arrangement is said to have generated over £2.5 million of loans so far this year. Ablrate launched as a niche P2P lender focusing on aircraft finance but has since branched out into capital equipment and property. Ablrate’s arrangement with Access is thus driving platform growth. Ablrate also offers a secondary market for investors in their loans.

The origination partnership is said to have resulted in sizeable deals for a range of sectors, including an £800,000 funding boost for a previously mothballed Eco Park, near Newcastle. The deal is expected to grow by £1.4 million. The waste management plant in Blaydon suffered following the collapse of Lehman Bros in 2013. The £800,000 in finance  raised through Ablrate and Access is expected to get the plant fully operational by October creating at least 30 jobs.

European Union

BBVA Plans New Management Revamp as Chairman Pushes Digital Bank, (Bloomberg), Rated: AAA

Banco Bilbao Vizcaya Argentaria SA is preparing its second management reorganization in 14 months as Chairman Francisco Gonzalez streamlines Spain’s second-biggest lender and accelerates its push into digital banking.

BBVA is pushing to offer more products and services online and via mobile phones as Gonzalez predicts few banks will survive competition from technology companies such as Google Inc. or Facebook Inc.

Vicente Rodero, current head of Country Networks, a unit created last year to boost the results of the group’s lenders in various countries, is set to leave his post. Chief Financial Officer Jaime Saenz de Tejada and Javier Rodriguez Soler, head of strategy and M&A, will be given additional responsibilities.

India

Fintech firms to take profit-first approach, say panellists at VCCircle summit

India’s fintech startups will also learn more from China, owing to similar demographic opportunities and challenges, unlike other industries that primarily learnt from the US, the panellists said. While there are no successful models yet, companies are experimenting with different models that include marketplace, bidding process and intermediary, they added.

Adhil Shetty, founder and CEO of Bankbazaar, said the popularity of the company is that its website received 90 lakh visitors in the month of March alone. Hence, it won’t be an extended arm as the platform offers products from partnering financial services companies as well standalone products.

Gaurav Hinduja, co-founder of Capital Float, which operates a hybrid model by lending online through its non-banking finance company, said these data sets will reduce the time taken from application to disbursal to 10 minutes. He added that social data can be used for verification as well as help in recoveries.

Rajat Gandhi of Gurgaon-based Faircent, which operates a peer-to-peer (P2P) lending platform facilitating borrowers and lenders through a bidding process, said that credit score would continue to be main criteria for disbursal of loans while data from social media can only be a value-add.

Vaddadi also said that fintech companies are increasing focus on customer acquisition, but added that this will not be done by burning cash.

The panellists also said that chances of default by borrowers are lower for fintech companies as these firms monitor the business performance of the borrower through analytics that can give out an early warning. Vaddadi said his firm has a 0.16% default rate.  [Comment: I do not believe this is true unless the fintechs really download the business’s information regularly and reliably. I am not aware of any company who really does this well. ]

Australia

Global banks: Is fintech a threat or an opportunity?, (Financial Review), Rated: AAA

UBS banking analysts surveyed 27,914 customers of more than 210 banks in 24 countries, along with 61 management teams from banks around the world. Local UBS banking analyst Jonathan Mott along with analysts in London, New York and Tokyo.

The survey found that a growing number of Australians are considering trying fintech services in the next 12 months: 15 per cent of Australian respondents said they will use a fintech money transfer business; 14 per cent said they will use a mobile payment fintech; 9 per cent will use peer-to-peer lending; and 9 per cent said they are likely to use a “robo adviser” for digital financial advice.

According to the management survey, 38 per cent of banks have a fintech partnership and this is expected to rise to 51 per cent over the next 12 months. The report said that in developed markets, bank returns on equity could be lifted from an average of 9.8 per cent to 10.2 per cent, as global cost to income ratios fall.

The survey found a high level of satisfaction from customers in the US and Britain using P2P lending which pointed to the threat to banks being real.
Australia’s largest P2P lender, SocietyOne, said this week it had appointed DDB Group to lift brand awareness through a TV, online, radio and print advertising campaign after the company, which is being led by former Westpac senior executive Jason Yetton, raised a further $25 million in equity in May.

UBS also predicted “the use of robo-advisers looks likely to grow exponentially” by between 70 and 150 per cent over the next year.

Cyber security is an area of concern, with 35 per cent of the customer respondents indicating a lack of trust in security as an explanation for not using fintech mobile payment services.

Author:

George Popescu

July 29th 2016, Daily News Digest

July 29th 2016, Daily News Digest

News Comments Today we have a lot of articles about banks and how banks are surfing successfully on the FinTech wave. The bank articles are mostly in the US section but the Australia section has an interesting article as well. Note the 1st article from Bloomberg and the 7th and 8th articles.  In the India […]

July 29th 2016, Daily News Digest

News Comments

  • Today we have a lot of articles about banks and how banks are surfing successfully on the FinTech wave. The bank articles are mostly in the US section but the Australia section has an interesting article as well. Note the 1st article from Bloomberg and the 7th and 8th articles.
  •  In the India section, you will find an article of quotes from P2P lenders in India which are worth a quick read. And in the UK section a very interesting article, the 1st one, just talking about the profitability of Zopa and Funding Circle, but the real interesting piece are the profitability of LendInvest and RateSetter which are not in the title. And a 2nd article that is also very clear and well thought out.

United States

United Kingdom

European Union

India

Australia

 

United States

Big Banks Turn Silicon Valley Competition Into Profit, (Bloomberg), Rated: AAA

It’s not that the upstarts — often called fintech — are failing to gain traction. Internet ventures pitching loans to cash-strapped consumers, small businesses and home buyers, for instance, have posted spectacular growth in recent years. It’s just that banks have a huge lead in lending and are watching the startups closely. As borrowers embrace new services, traditional firms are riding along.

Here are five examples:

LendingClub’s Backers

In May, LendingClub broke out its sales to banks: Community banks and other old fashioned lenders snapped up about 34 percent of the $2.8 billion of loans it arranged in the first quarter, up from an average of about 25 percent during 2015.

Some of LendingClub’s biggest loan buyers have bolstered their war chests or operations with financing from banks. Colchis Income Advisors entered into a credit agreement with Bawag PSK of Austria, according to regulatory filings. Arcadia Funds arranged for two of its Cirrix partnerships to borrow from Silicon Valley Bank. And MW Eaglewood lined up financing for its main LendingClub fund from Capital One Financial Corp. in 2012. Spokesmen for the funds and banks declined to comment or didn’t respond to messages.

Chasing Entrepreneurs

Small businesses can thank internet ventures for simplifying loan applications, speeding decisions and providing much-needed credit when many traditional banks were pulling back in the wake of 2008’s financial crisis. Nonbanks now provide about one-quarter of the $800 billion in loans outstanding to the sector, according to research by QED Investors and Oliver Wyman. But the interest rates aren’t always low.

For a time, banks were content backing the loans. Goldman Sachs was among firms that entrusted more than $300 million years ago to fund lending by On Deck Capital Inc., one of the largest providers of small business loans over the internet.

Now, established lenders are taking a more active role. JPMorgan announced a deal in December, letting it access On Deck’s proprietary credit-scoring system to quickly evaluate applicants before using its own balance sheet to make loans. On Deck, in turn, gets a foothold in the burgeoning “fintech as a service” market. But the arrangement has done little to stop a 49 percent slide in the company’s stock this year.

More recently, established lenders have announced their own online lending portals for entrepreneurs.

Wells Fargo & Co. said in May that its new “fast decision” platform will help it reach a goal of providing $100 billion in new loans to small businesses by 2019. AmEx, which already provides more than $200 billion of funding to entrepreneurs for business purchases on their credit cards, expects a new online-loan portal will let it handle even more of their spending.

Mortgage Apps

Fintech ventures starred in Super Bowl ads this year, with Quicken Loans toutingRocket Mortgage, a platform letting users apply for home loans on smartphones.

The tidal wave is benefiting banks, too. Behind the scenes, many of the upstarts get support from traditional banks. Detroit-based Quicken, for example, raised $1.25 billion for itself and its parent company last year in a bond sale underwritten by JPMorgan and Credit Suisse Group AG. It also used lines of credit from banks to help close $80 billion in home loans that year.

[Comment: 4th was Blockchain, not very relevant to our readers here]

Robo-Advisers

Top Wall Street firms, seeking stable fee income, are now developing their own robotic arms. Bank of America Corp. will unveil an automated investment prototype this year after assigning dozens of employees to the project in November, people familiar with the matter told Bloomberg at the time. Morgan Stanley and Wells Fargo also have said they would build or buy a robo-adviser.

US consumer agency seeks to overhaul debt collection industry, (CNBC), Rated: AAA

“Today we are considering proposals that would drastically overhaul the debt collection market,” said Consumer Financial Protection Bureau Director Richard Cordray in a statement. “This is about bringing better accuracy and accountability to a market that desperately needs it.”

According to a summary, the proposal would make sure collectors “substantiate the debt before contacting consumers,” by confirming their identities and the amount owed, as well as checking for any payments made after a default. Consumers frequently file complaints at the agency about receiving calls for debts that do not exist.

In an attempt to “limit excessive contact,” the proposal would cap agencies’ calls to debtors to six attempts each week. It would also create a 30-day waiting period after a person dies for contacting survivors.

Agencies would have to communicate specific information to consumers, such as when outstanding debt is too old for a lawsuit. They would also have to make it easier to both dispute or pay a debt through tear-off coupons on the bottoms of collection notices.

Roughly 13 percent of consumers have a debt currently in third-party collection, with an average amount of $1,300, data from the Federal Reserve Bank of New York shows.

In a survey released alongside its proposal, the CFPB found more than three-quarters of the country’s 3,994 debt collection firms are small, with less than 100 employees. Larger firms pull in about two-thirds of the industry’s $12.18 billion total revenue.

The agency also found credit card, student loan and automobile debts in collection typically have balances of $2,000 or more.

Cloudvirga Raises $ 7.5 M to Automate the Entire Mortgage Process, (PR Newswire), Rated: A

Cloudvirga, the company developing the cloud-based intelligent Mortgage Platform® (iMP) designed to streamline the mortgage process, today announced it has raised $7.5M in its series A funding sponsored by Dallas Capital with participation from Upfront Ventures and Tribeca Angels.

“Increased regulations stemming from the subprime mortgage crisis have made the entire process more labor intensive and time consuming than ever, and those are the pain points we’re alleviating with iMP,”

Come Together – Finding Common Ground in Small Business Lending Associations, (Lend Academy), Rated: AAA

So where do we go from here? Advancing the marketplace lending industry’s efforts to create a more transparent and efficient financial system is critical as the industry matures.

The good news is that small businesses today – even those with lackluster or thin credit history – can choose from a dynamic set of loan products including term loans (both traditional and short-term), business lines of credit, loans for startup companies, equipment purpose loans, various SBA loans, accounts receivable financing, merchant cash advances, and peer-to-peer loans. This is a far cry from where we were in 2008-2010, when (according to the Huffington Post) more than 170,000 small businesses shut down.

At Lendio, we’re convinced that there needs to be a single, industry unifier – and we feel the SMART Box is headed in that direction. Lendio will now participate in the 90-day engagement period and I’m asking all those who offer loan products throughout the Lendio platform to consider doing so as well.

How Much Lower Will Your Student Loan Rate Be With a Cosigner?, (Wall Street Journal), Rated: AAA

Undergraduates who qualified for private student loans with a cosigner–often a parent–were offered average interest rates of 5.37% versus 7.46% without a cosigner, according to Credible.com, a student-loan marketplace. Rates for graduate students were also discounted to 4.59% on average with a cosigner compared to 6.22% without one.

The figures from Credible.com are based on five lenders’ responses and offers—which included a mix of fixed and variable interest rates—to nearly 8,000 applicants who shopped for student loans on the site over a 12-month period through early June. The lenders include Citizens Financial Group—which is quickly gaining market share in the private student loan market—as well as online lenders CommonBond and College Ave Student Loans.

Approval rates fall dramatically without cosigners. Fifty-one percent of undergraduates shopping for loans on Credible.com received offers compared with 20% of those without a cosigner. Similarly, 56% of graduate students–who lenders have historically viewed as relatively safer borrowers–received offers with a cosigner versus 45% without.

In some cases, it can be cheaper for parents to join their children on a private student loan as opposed to signing up for a parent-only loan from the federal government. The 5.37% average rate undergraduates received with a cosigner on private student loans is nearly one percentage point cheaper than the interest rate on the federal Plus loan for parents that charges 6.31% for the upcoming academic year. Private lenders also don’t charge origination fees, while the Plus loan currently has a roughly 4.3% upfront charge.

Think twice before you co-sign on a student loan, (CNBC), Rated: AAA

But co-signing is risky. It ties you to that debt, meaning you could be responsible for the entire amount outstanding if the primary borrowercan’t — or won’t — pay up. Nearly 40 percent of co-signers found themselves on the hook for at least part of the bill, according to a June survey from CreditCards.com, and 28 percent saw a drop in their credit score from the primary borrower’s bad credit habits.

How Ayasdi’s machine learning is giving banks an analytical advantage, (Tradestreaming), Rated: AAA

“The future is already here — it’s just not very evenly distributed.” Banks are increasingly using machine learning to power part of their operations, but the adoption of these new technologies is not uniform.

Top data scientists are employed by financial institutions and working with programming tools like SPCC and R, they filter and analyze huge data sets in order to perform analytical tasks. “No human being can wrap his head around that amount of data,” said Daniel Druker, CMO of Ayasdi, a machine learning company that partners with financial institutions, like Citi and Credit Suisse. Instead, using machine learning algorithms, a computer can surface insights and recommendations from those data sets, while the quants examine and take actions based on those learnings.

According to McKinsey’s 2015 Global Banking Report, banks that have replaced older statistical-modeling approaches to credit risk with machine learning techniques have experienced up to 20 percent increases in cash collections from outstanding loans.

Out of over 20 banks that work with Ayasdi, Drucker said, 100% are either already operating in this stage or actively exploring implementing such technology.

The highest level of machine learning application is the fully automating business processes. Take a life insurer, for example. When a customer applies for a policy, he might be asked to fill out a 40-page long form and get a physical examination. That information is then sent back to the company for approval. The entire process can take over a month to complete.

According to McKinsey, some European banks using these techniques report 10 percent increases in sales of new products, 20 percent savings in capital expenditures, and 20 percent declines in customer churn.

CB Insights has identified 41 companies providing machine learning solutions in the financial industry. Together with the explosion of general applications of  AI, deals and investments in AI companies reached record levels in 2016. Since the beginning of 2016, over 15 fintech AI companies have closed investment rounds.

How Digital Investments Are Changing the Face of Banking, (The financial Brand), Rated: AAA

Investment in digital banking is driving increased customer acquisition, cross-selling and satisfaction while decreasing branch traffic and related costs.

This is confirmed by the J.D. Power research that showed that there is an immediate lift in overall satisfaction when customers use mobile banking (+27 points on a 1,000-point scale), and this impact increases even more when banks provide their mobile banking customers with a highly satisfying experience (+82). According to J.D. Power, “The outlook for Big Banks remains positive, driven by their (big banks) ability to invest in customer-centric innovations (e.g., digital channels, analytics, and branch transformation), as well as their success in growing customer segments.”

Recent disclosures of mobile banking use by the big banks provides a glimpse of the impact of digital investment on mobile use. Of the three largest U.S. banks, JPMorgan Chase leads the way with nearly 25 million active mobile customers as of the second quarter. That was up 18% compared with the same period last year. Bank of America had the second most active mobile users, with 20.2 million monthly active app users, with Wells Fargo reporting 18 million active users.

 

United Kingdom

Britain’s 2 biggest peer-to-peer lenders lost £50 million in the last decade

The two platforms have facilitated almost £3 billion of loans between them but Funding Circle, founded in 2010, has never made a profit, while Zopa, founded in 2005, made a small profit 2 years running, totalling less than £60,000.

Here’s the breakdown of Zopa and Funding Circle’s financial performance, as per accounts filed with Companies House:

  • Zopa: losses between 2005 and 2014 total £21.79 million, according to accounts filed with Companies House, on cumulative revenues of £25.84 million. The platform made a small profit in in 2011 and 2012, totalling £58,648.
  • Funding Circle: cumulative net loss of £28.71 million on total revenues of £20.89 million, according to accounts covering 2010 to 2014. The company has yet to make a profit.

These losses have been funded by investment from venture capitalists: $273 million (£208.1 million) for Funding Circle and at least $56.6 million (£43 million) for Zopa, according to Crunchbase.

Funding Circle, which offers loans to small businesses, declined to comment on its losses when contacted by BI but pointed to comments CEO Samir Desai made to BI last year when we reported the company’s latest financial results. Desai said at the time:

“If you actually look at the core business of doing loans in the UK — strip away the technology investment and all the other extra stuff we’re doing — the business is already profitable in the UK and is moving that way in the US as well. A lot of the investment we’re doing is investing in creating a global business.”

Zopa’s CEO Jaidev Janardana told BI in an emailed statement:

“We have demonstrated that our business model is profitable with two consecutive profitable years in 2011 and 2012. Since then our investors and the business have placed more value on investing in our growth. In doing so we have been able to double our loan volumes last year, deliver positive returns for our customers at the same time investing in talent, technology, and our office.

“This all means we are in the best position to deliver on our strategic plan for continued growth and profitability long-term. Looking forward, I’m glad to say that we expect to be EBIDTA positive in Q4 2016 and profitable in 2017.”

Christian Faes, CEO of the UK’s fourth largest marketplace lender LendInvest, told BI he thinks that loss-making platforms will face increased pressure to turn a profit to “prove that they can.” Remember, the growth that Zopa and Funding Circle are chasing could be disappearing.

LendInvest, which lets investors put money into short-term mortgages for people looking to renovate then sell properties, made a pre-tax profit of £3.1 million in 2015 and £1.1 million in 2014.

A spokesperson for RateSetter told BI: “We have recorded a profit for two consecutive financial years, proving that our model works and is sustainable. We are now investing to scale up, broaden, and deepen our market while continuing to deliver maximum value for investors.”

Is the dream of peer-to-peer lending beginning to fade?, (Thersa), Rated: AAA

Why is this a problem? Because unlike banks, which can make money on captive and repeat business in current accounts, credit cards and remortgages, P2P lenders need to continuously find and process new borrowers in order to earn commission. Should the sluggish times continue, the danger is that P2P lenders may soon be tempted to shoot for riskier borrowers in order to maintain their rate of growth. Remember that these platforms have investors of their own to placate and appease, many of whom will be pushing for decisive action to keep transaction volumes on an upward trajectory.

Finally, there is the question of where the money flows to on these platforms. Nesta and Cambridge University’s research is unequivocal: peer-to-peer lending has helped many thousands of people and businesses access loans in the face of rejection from high street banks. Yet only 20 percent of borrowers using P2P consumer lending platforms are women, and only a quarter earn less than £25k (note that the median wage of workers in the UK is  £27.5k). Although the makeup of borrowers using P2P platforms may simply reflect lending patterns across the financial industry, it challenges the theory that fintech innovations are inherently more inclusive.

The point of raising these red flags is not to pour cold water on the P2P lending phenomenon. Many of these platforms promise users a brilliant customer experience, faster decision making, more choice and – for some – better rates on loans than they can find elsewhere. Indeed, one of the greatest impacts P2P lenders have had is in changing the practices of long-standing incumbents. Take Wells Fargo, which recently launched a rapid turnaround system for small business loans, partly to match the responsiveness of P2P startups. These innovations should linger on even if P2P platforms fade away, and suggests the sector could catalyse positive transformation in financial services without needing to achieve a dominant position in the loans market.

No, this is not to dismiss the real achievements of P2P platforms. Rather, it is a plea to be pragmatic and realistic about what P2P lending – and all forms of fintech for that matter – can ultimately achieve without a more significant structural change in the nature of the financial industry. John Kay, in his brilliantly detailed new book Other People’s Money, rightly reminds us of the fundamental functions of finance: to enable people to save for the future, receive and send money, manage everyday risks, and borrow to invest in a real economy that truly creates value for others.

Ablrate & Access Commercial Finance Tout Origination Partnership, (Crowdfund Insider), Rated: A

Asset-backed peer to peer lender Ablrate has released information on an origination partnership with Access Commercial Finance based in Leeds. The arrangement is said to have generated over £2.5 million of loans so far this year. Ablrate launched as a niche P2P lender focusing on aircraft finance but has since branched out into capital equipment and property. Ablrate’s arrangement with Access is thus driving platform growth. Ablrate also offers a secondary market for investors in their loans.

The origination partnership is said to have resulted in sizeable deals for a range of sectors, including an £800,000 funding boost for a previously mothballed Eco Park, near Newcastle. The deal is expected to grow by £1.4 million. The waste management plant in Blaydon suffered following the collapse of Lehman Bros in 2013. The £800,000 in finance  raised through Ablrate and Access is expected to get the plant fully operational by October creating at least 30 jobs.

European Union

BBVA Plans New Management Revamp as Chairman Pushes Digital Bank, (Bloomberg), Rated: AAA

Banco Bilbao Vizcaya Argentaria SA is preparing its second management reorganization in 14 months as Chairman Francisco Gonzalez streamlines Spain’s second-biggest lender and accelerates its push into digital banking.

BBVA is pushing to offer more products and services online and via mobile phones as Gonzalez predicts few banks will survive competition from technology companies such as Google Inc. or Facebook Inc.

Vicente Rodero, current head of Country Networks, a unit created last year to boost the results of the group’s lenders in various countries, is set to leave his post. Chief Financial Officer Jaime Saenz de Tejada and Javier Rodriguez Soler, head of strategy and M&A, will be given additional responsibilities.

India

Fintech firms to take profit-first approach, say panellists at VCCircle summit

India’s fintech startups will also learn more from China, owing to similar demographic opportunities and challenges, unlike other industries that primarily learnt from the US, the panellists said. While there are no successful models yet, companies are experimenting with different models that include marketplace, bidding process and intermediary, they added.

Adhil Shetty, founder and CEO of Bankbazaar, said the popularity of the company is that its website received 90 lakh visitors in the month of March alone. Hence, it won’t be an extended arm as the platform offers products from partnering financial services companies as well standalone products.

Gaurav Hinduja, co-founder of Capital Float, which operates a hybrid model by lending online through its non-banking finance company, said these data sets will reduce the time taken from application to disbursal to 10 minutes. He added that social data can be used for verification as well as help in recoveries.

Rajat Gandhi of Gurgaon-based Faircent, which operates a peer-to-peer (P2P) lending platform facilitating borrowers and lenders through a bidding process, said that credit score would continue to be main criteria for disbursal of loans while data from social media can only be a value-add.

Vaddadi also said that fintech companies are increasing focus on customer acquisition, but added that this will not be done by burning cash.

The panellists also said that chances of default by borrowers are lower for fintech companies as these firms monitor the business performance of the borrower through analytics that can give out an early warning. Vaddadi said his firm has a 0.16% default rate.  [Comment: I do not believe this is true unless the fintechs really download the business’s information regularly and reliably. I am not aware of any company who really does this well. ]

Australia

Global banks: Is fintech a threat or an opportunity?, (Financial Review), Rated: AAA

UBS banking analysts surveyed 27,914 customers of more than 210 banks in 24 countries, along with 61 management teams from banks around the world. Local UBS banking analyst Jonathan Mott along with analysts in London, New York and Tokyo.

The survey found that a growing number of Australians are considering trying fintech services in the next 12 months: 15 per cent of Australian respondents said they will use a fintech money transfer business; 14 per cent said they will use a mobile payment fintech; 9 per cent will use peer-to-peer lending; and 9 per cent said they are likely to use a “robo adviser” for digital financial advice.

According to the management survey, 38 per cent of banks have a fintech partnership and this is expected to rise to 51 per cent over the next 12 months. The report said that in developed markets, bank returns on equity could be lifted from an average of 9.8 per cent to 10.2 per cent, as global cost to income ratios fall.

The survey found a high level of satisfaction from customers in the US and Britain using P2P lending which pointed to the threat to banks being real.
Australia’s largest P2P lender, SocietyOne, said this week it had appointed DDB Group to lift brand awareness through a TV, online, radio and print advertising campaign after the company, which is being led by former Westpac senior executive Jason Yetton, raised a further $25 million in equity in May.

UBS also predicted “the use of robo-advisers looks likely to grow exponentially” by between 70 and 150 per cent over the next year.

Cyber security is an area of concern, with 35 per cent of the customer respondents indicating a lack of trust in security as an explanation for not using fintech mobile payment services.

Author:

George Popescu

Amex and the 4 types of large-company-approach to SMB lending

This year  retail giant Costco ended a 16-year partnership with Amex. Co-branded cards with Costco accounted for 8 percent of worldwide annual spending and 10% of total cards in circulation for Amex in 2014. Simultaneously, joining companies like JP Morgan, Wells Fargo, and others, Amex has announced a deeper entrance into the SMB credit space […]

This year  retail giant Costco ended a 16-year partnership with Amex. Co-branded cards with Costco accounted for 8 percent of worldwide annual spending and 10% of total cards in circulation for Amex in 2014. Simultaneously, joining companies like JP Morgan, Wells Fargo, and others, Amex has announced a deeper entrance into the SMB credit space with their own in-house venture , poorly named in my opinion, “Working Capital Terms” (WCT).

The 4 approaches to Marketplace Lending for SMBs

One route into the SMB credit space is the partnership approach taken by JP Morgan, Scotia Bank, and Santander. The second route, taken by Wells Fargo is controlling all pieces of technology and client experience under its own house. The 3rd route, as you will read below, and taken by Amex, is to participate into aggregators like Lendio and Fundera under its own brand. And the 4th route, favored by Citi Bank, Deutsche Bank, and Morgan Stanley, is to participate in the space indirectly from the arrears by providing lending capital or securitization services. Which approach will succeed ? If the space is as large as people believe it is most likely all 4 approaches will succeed. Which approach is the most profitable ? One should not jump to conclusion by looking at short term profitability. Real profitability, as companies like AIG demonstrated in 2008, is measured across an entire credit cycle.

Amex’s 3 prong approach, with WTC in addition to their participation in Fundera and Lendio, is in fact quite unique and has the advantage of flexibility, low fixed cost and visibility into the market.

Amex: from Costco to Lendio and Fundera

Ken Chenault, the long-term CEO must have been under tremendous pressure to replace the outgoing business.  It is not that the company had not tested the waters of online lending. It had partnered with Lendio in April, an online small business credit marketplace aggregator. The partnership probably served three objectives:  to expand its merchant financing portfolio, to perhaps to test the waters for Amex’s own plans in the space and to replace the Costco partnership which had a 20% pie in the total Amex loan portfolio.

The Lendio partnership catered to merchants with at least 2 years of operational history and minimum $50,000 in revenue. The loans range from $5000 to $ 2 mil and up to a maximum tenure of 2 years.

The Lendio partnership was preceded by a different kind of association with Fundera. For customers who want to compare its business charge cards with traditional loans, American Express has featured its charge cards on online marketplace Fundera since February 2016. The charge cards offered by American Express available on Fundera are known as Open cards; they are specifically introduced for companies that need to fund large spot purchases of inventory or raw materials, and each month they can pay off the balance in full. Open cards do not have any interest but there is fixed annual fees. Spending limits adjust with usage and payment history.

Amex’s venture named “Working Capital Terms”

On July 5th, 2015 Bloomberg announced Amex’s new initiative, called “Working Capital Terms”. This new venture is targeted at existing small-business cardholders and will be primarily used by merchants to pay their vendors especially those who do not accept credit cards. Thus Amex is muscling in to capture a bigger pie of the business of the existing clients. This is a smart move as it will ensure that cost of acquisition of customers is almost negligible and the existing relationship is enhanced by offering an additional feature. The loan amount will range from $1000 to $750,000 and the payment will be directly made by Amex to the vendor. Charges will be 0.5% for a 30-day loan and 1.5% for a 90-day loan. The pricing is extremely aggressive especially considering the other online lenders.

In 2014, Amex cards for small businesses funded $190 billion in purchases, up from $122 billion in 2010. American Express is focussing on small-business loans where they already have a strong grip to make up for the revenue they have lost. They think small- business cards have room to grow in near future, unlike consumer spending. It considers cards have immense potential in small-business funding space because small businesses tend to traditionally rely more heavily on cash and traditional loans.

Amex vs Square and OnDeck

It plans to begin the online platform for its small business clients, aiming for the market share occupied by start-ups like Square Inc. and On Deck Capital Inc. The company can leverage its existing clientele and low cost of funds to offer sweeter deals. To grow its presence in small businesses, American Express has made some other moves, like the improvement of its OptBlue program that simplifies the acceptance of Amex cards at small business locations. By 2019, American Express wants to reach its goal of parity coverage to other card networks. They have also teamed up with Mexican mobile point-of-sale (mPOS) provider Clip and German mPOS vendor Payleven. American Express’s entry into the small business lending world is proof that Wall Street believes that online lending is here to stay.

Amex’s future plans ?

In a recent interview with Lendio’s CEO, Brock Blake, Lending Times has inquired about Amex’s revealed plans with the Lendio partnership given Amex’s WTC announcement. Brock has clarified that in his view Amex has no expressed any intention to canceling their partnership with Lendio.

Amex is de factor offering 3 different products, through 3 different venues, Lendio , Fundera and their own in-house WTC. Each of these directions is probably complementary, independent, and do not have large fixed costs. I would, therefore, expect for Amex to use these initiatives as an opportunity to test different products and markets. As time goes we shouldn’t be surprised if any or all 3 of these initiatives that demonstrate traction will receive increase resources and in fact ramp up. In an ideal scenario, having a diversified portfolio of  3 profitable products for the SMB credit space can only help the company.

Wells Fargo’s Transplex

As mentioned at the beginning American Express is not the only big lender that is trying to enter small business lending. In May, Wells Fargo &Co, the third-biggest U.S. bank by assets, introduced their small online loan arm known as Transplex. Other major rivals like JP Morgan Chase & Co., Scotia bank, and Santander are collaborating with On Deck, Kabbage etc to speed up the process of providing loans to the same space. These entrances validate the space, the market, and the approach. One route is the partnership approach, where traditional bank partners with an online lender to grow its books. The second route, taken by Wells Fargo is controlling all pieces of technology and client experience under its own house. Though partnership helps in a faster entry, managing a relationship is fraught with complexities in the long run. On the other side, when you own the entire chain, the bank can decide on how to structure every move. But the question is whether the bank has the tech chops and the start-up spirit to compete with the free-wheeling world of fintechs.

The partnership approach, where traditional bank partners with an online lender to grow its books, is a known tech-vendor/bank relationship which is very standard. It is expensive, involving, extensive and with high risks. It has the advantages of leaving the bank in full financial control and having hardly any regulatory risk.

The second route, taken by Wells Fargo is controlling all pieces of technology and client experience under its own house. It has the full control, confidentiality, and probably the best profit margin advantage. If this approach was easy large companies will never buy startups. It is very difficult for large companies to build news businesses and this is probably the hardest, most expensive and riskiest approach with the most benefits if successful.

The partnership approach is the fastest, cheapest and lowest risk approach and probably the least financially profitable one. Managing a relationship is fraught with complexities in the long run. As an entrepreneur, I strongly believe that it is the people managing these initiatives, and not the approach, who will decide which will succeed and which will fail.

 

Author:

George Popescu
George Popescu

July 6th 2016, Daily News Digest

July 6th 2016, Daily News Digest

News Comments We believe that today we finally fixed the hyperlinks for the pictures in the analysis and events section of the daily newsletter. We apologize it took us so long to fix them. We also believe the hyperlinks to the articles in the “News Summar” section of the newsletter are also working. We have […]

July 6th 2016, Daily News Digest

News Comments

  • We believe that today we finally fixed the hyperlinks for the pictures in the analysis and events section of the daily newsletter. We apologize it took us so long to fix them.
  • We also believe the hyperlinks to the articles in the “News Summar” section of the newsletter are also working. We have tested on all our devices, OSs and email clients we own but our tests are still limited. We would like to kindly ask our readers to report if you have any particular problems reading Lending Times in your favorite environment and we will continue improving in all ways possible. 

United States

  • Debt-to-EBITDA multiples for private equity deals with U.S. targets in 2016 has hit a whopping 6.8x. Are US companies over-leveraged ?
  • After testing the waters with Lendio,(as seen in our article here), AmEx is jumping both feet in with the poorly named “Working Capital Terms” venture. Why not name it AmEx Small Business Loans? In all cases, the SME lending space is heating up with a gorilla-size new entrant.
  • As our readers build origination platforms or lend on p2p platforms, perhaps a scenario they are not setup to handle yet is how to face low-probability-events. Such an example is “what happens in case of death of a lender”. An article surveying a few answers from different platforms.
  • Avant, while downsizing, does offer a buyout to all employees. Readers may want to understand this offer through the example of Zenefit’s down round at $2bil valuation and implications for Zenefits employees.
  • Blackmoon, helping balance sheet lenders to sell whole loans, is entering the US market with a New York office. Our previous article on the company can be found here.

United Kingdom

  • UK Banks expected to lend £150bn , freed by Bank of England’s capital buffer rules relaxation. Since 2008 we have seen that making cheap capital available to banks has not correlated with higher bank loan origination volumes. Is, this time, different ?
  • Interesting discussion of different choices fund managers can make in the search for yield and the advantages of p2p fund’s yields.

Hong Kong

  • LendIt rebrands  “largest conference series dedicated to connecting the global fintech community” from ” largest online lending conference”.

France

  • A great survey of the French p2p market with company names and differences (“prets participatifs” in French).

China

  • Cai Jincong, the founder of Zhejiang Yinfang Investment, was sentenced to life behind bars for running a fake peer-to-peer lending scheme that conned over 88 million yuan (about 13 million U.S. dollars) from 1,200 investors.

 

United States

Pitchbook reports that debt-to-EBITDA multiples for private equity deals with U.S. targets in 2016 has hit a whopping 6.8x, (Term Sheet), Rated: AAA

S&P LDC reports a global average of 5.36x for Q1 2016,  although the figure did top 6x in the third quarters of both 2015 and 2014. Moreover, S&P LDC data shows that large-market deals typically have higher leverage ratios than do mid-market deals, with the Q1 16 large-market figure hitting 5.6x (and, remember, that’s a mean, not a median).

It has been more than three years since the Federal Reserve and FDIC issued leveraged loan guidance to banks, suggesting that any debt-to-EBITDA ratios in excess of 6x (for most industries) is too high. Or, put another way, both lenders and private equity firms are regularly ignoring the Fed’s guidance — and appear to be easily getting away with it (likely because no individual deal is likely to present a systemic risk, and loan syndication makes the “baskets” more like a sieve).

AmEx Challenges Square, On Deck With Online Loan Marketplace, (Bloomberg), Rated: AAA

AmEx’s venture, Working Capital Terms, will approve loans in minutes for existing small-business cardholders, who can use the money to pay vendors. Debts may range from $1,000 to $750,000 with fees of 0.5 percent for a 30-day loan to 1.5 percent for a 90-day loan. AmEx will deposit funds directly into vendors’ accounts in as soon as two days.

AmEx has been looking for new streams of revenue to rejuvenate earnings after deciding last year to part ways with its biggest co-brand partner, Costco Wholesale Corp. In addition to its new in-house loan product, the card issuer offers longer-term small-business loans — ranging from $35,000 to $2 million — through its partnership with Lendio, another online marketplace.

“AmEx can do this because they have good credit knowledge,” said Karen Mills, former head of the Small Business Administration, who’s now a paid adviser for Working Capital Terms. “This will challenge the online competitors, whether or not they respond.” Amex declined to disclose their target for Working Capital Terms’ loan volume.

Working Capital Terms represents “a new type of product for American Express that could eliminate the need for the very expensive, unsustainable products from Square and other online lenders,” said Gil Luria, an analyst at Wedbush Securities Inc.

AmEx isn’t the only big lender pushing into the fray. Wells Fargo & Co., the third-biggest U.S. bank by assets, said in May it was starting a program to offer small businesses online loans in as soon as one day. Larger rival JPMorgan Chase & Co. is collaboratingwith On Deck to speed up the process of providing loans to some of the bank’s 4 million small-business customers.

AmEx shares fell 2.7 percent to $59.08 at 2:46 p.m. in New York. On Deck tumbled 6.9 percent to $4.89, while Square declined 3.6 percent to $8.94. Representatives from On Deck and Square declined to comment.

In the Case of Death, (p2p-banking.com), Rated: AAA

‘What happens when I die’ is a concern occasionaly voiced by investors. Investments in p2p lending will be inherited like any other assets.

Luke O’Mahoney of Ratesetter explained: ‘If an investor dies, we work with the next of kin to establish how they would like the account to be dealt with. Generally they would either use our Sellout function (effectively liquidating their investment) or they would allow the account to run down over time – of course we assist the next of kin or executor with this process’.

Only Assetz Capital mentioned that they have a process to do regular checks on dormant accounts that are in funds to ensure that lenders are aware of those funds.

Personally I wonder, if it would be good practise for marketplaces to contact those investors that have not logged in for a very long period (2 years?) and ask them to update/verifying their data. Failure to do so could then trigger a letter with the same request via postal mail.

Sign of the Times: Avant Offers Buyouts to All Employees, (Crowdfund Insider), Rated: A

Avant, an online lender, has offered the option for buyouts to all 760 of the company’s employees. It was not clear how many Avant employees would accept the offer. The news is a painful reminder that online lending is still struggling to regain its footing following indications of a slowing economy and the unexpected departure of former Lending Club CEO Renaud Laplanche – a now tarnished industry icon.

Russian Lending Marketplace Expands to U.S. in Search of Growth, ( Bloomberg), Rated: A

Blackmoon, a Russian financial technology startup that screens and prices loans issued by others to sell on to investors in a marketplace, is opening a U.S. office to expand in the world’s biggest market for non-bank lending.

Blackmoon is partly counting on an expansion into the U.S. from its new New York base to reach a goal of $1 billion in cumulative loans by the end of next year.

To achieve that, the company will target all kinds of unsecured credit in the largest market for alternative lending: consumer, small-business, student and car loans. Blackmoon currently works with several dozen European online lenders, from Finland to the Czech Republic.

Blackmoon functions as an intermediary between institutional debt investors and lenders — both alternative providers and traditional banks — allowing them to scale their business without additional leverage, while mitigating the risks of default.

Moscow-based Target Asset Management agreed in February to form a $100 millionfund to invest in Blackmoon’s loans.

 

United Kingdom

Carney frees up £150bn in bank lending, (Alt Fi News), Rated: AAA

Mark Carney, Governor of the Bank of England, yesterday took steps to reduce capital buffers for UK banks. The Financial Policy Committee (FPC) has reduced the UK countercyclical buffer rate from 0.5% of the banks’ UK exposures to 0%, with immediate effect. The FPC began to supplement regulatory capital buffers with the UK countercyclical buffer in March of this year, and had intended to increase the buffer to 1% in due course. But now the countercyclical buffer is expected to remain at 0% until at least June 2017.

This reduction is expected to free up £5.7bn in bank lending. The banking sector, in aggregate, targets a leverage ratio of 4%. This means that the £5.7bn in spare capital will allow the banks up to an extra £150bn in lending to UK households and businesses.

While the FPC’s actions would appear to be good news for UK borrowers, they may well herald a more competitive stretch for alternative lending platforms.

Peer-to-peer investing website holding cash of 900 savers goes bust, (This is Money), Rated: A

Comment: this is old news, but a good reminder for people who did not read last week’s Lending Times.

Savers were lured into Funding Knight with promises of returns of up to 8 per cent for lending their cash to small businesses. Last week, the peer-to-peer firm was rescued by investment firm GLI Finance, whose bosses said customers’ money was safe and that they could withdraw it whenever they liked.

Will Neil Woodford’s new higher income fund hold P2P to boost its dividends?, (Alt Fi News), Rated: A

Star fund-manager Neil Woodford is mulling the launch of a new equity income fund that will aim to deliver a higher yield than is currently offered by his hugely popular £8.6bn CF Woodford Equity Income fund.  A 4.5 per cent target yield has been widely reported. Higher yielding equity income portfolios offering an ‘enhanced income’ mostly use call options alongside normal income stocks to boost income pay-outs.

Woodford is bullish on P2P/marketplace lending and has invested in the two specialist investment trusts P2P Global Investments and VPC Speciality Lending – which offer attractive yields of 6 per cent and over for his income fund. He also owns an unquoted positon in P2P platform RateSetter.

The manager currently has 0.96 per cent of his fund’s assets in the P2P Global Investments trust and 0.64 per cent in VPC Speciality Lending trust. These are, respectively, his 28th and 39th largest holdings.  In total he has 109 holdings.

His existing fund is currently hitting a yield of 3.7 per cent. P2P GI and VPC Speciality Lending’s yields are currently a whopping 7.4 per cent and 9.7 per cent, respectively. However, that is partly a function of thier near 20 per cent discounts at present.

LendInvest boosts tech offering with VP of Engineering, (Financial Reporter), Rated: A

Comment: I find surprising that a company of the size and volume of Lend Invest did not, apparently, have a person in charge of technology, until now.

LendInvest has recruited its first VP of Engineering as it continues to drive its technology strategy.

Mike Nuttall joins LendInvest with over 15 years’ senior management experience and has led technology development for companies in sectors such as e-commerce, payments and gaming.

At LendInvest, Mike will be responsible for managing the direction, goals and efficiency of the technology team which now represents over 40% of LendInvest’s workforce.

Free tool launched to help low-carbon businesses source funding, (Startups), Rated: B

Business in the low-carbon, clean technology (cleantech), and sustainability sectors looking for finance can take advantage of a new digital tool launched this week.

Created by Shell Springboard, the Access to Finance Navigator is an interactive database where eco-friendly entrepreneurs can search for funding opportunities and filter funding sources by their location, stage of development, financial requirements, and the user’s business sector.

So far, the database features 84 low-carbon funding sources – said to represent a total value of £157m – from government organisations, angel investors and syndicates, crowdfunding platforms and venture capital (VC) funds.

Sources listed include Funding Circle (crowdfunding), Advantage Business Circle (angel), EcoMachines Ventures (VC), Horizon 2020 (government grants), and funding competitions ran by Innovate UK.

 

Hong Kong

LendIt and AMTD Group Co-Host the First Global Fintech Investment Summit in Hong Kong, (Press Release), Rated: B

AMTD Group Company Limited (“AMTD Group”, “the Group”) is a non-bank financial services group based in Hong Kong offering a wide spectrum of capital markets, asset management, insurance brokerage and risk management solutions to clients across Asia.

LendIt is the largest conference series dedicated to connecting the global fintech community.

LendIt China and AMTD Group will co-host the first Global Fintech Investment Summit in Hong Kong (“Global Fintech HK Summit” or the “summit”) on July 13.

More than 80 leading Asian investors and over 35 international fintech companies are expected to attend the ground-breaking summit.

 

France

The Vibrant Marketplace Lending Industry in France, (Lend Academy), Rated: AAA

The French marketplace lending industry is still in its infancy. Due to a very strict regulatory structure there is only one online consumer lender operating in France, Younited Credit (formerly Pret d’Union) and small business lending platforms have only begun operating in the last 18 months. In late 2014 the French government made it legal to make loans to small businesses without a banking license. This has led to a large number of new platforms, they say the count is around 50, to launch since then.

The French government is also actively involved in the industry through an entity called BPI – setup with similar goals to the British Business Bank. It wants to stimulate lending to small businesses. BPI will take small equity positions in fintech companies, it will invest on platforms and it will make interest free loans to qualifying companies.

Younited is still relatively small compared to the US or UK platforms – they are currently issuing around €17 million in new loans every month in France. With 130 employees they are easily the largest platform in France and one of the largest in Continental Europe.

Earlier this year Younited opened an office in Rome in their first international expansion. One of the great benefits of being part of the European Union is that they can “passport” their banking license to other countries which is what they have done in Italy.

Younited is focused on prime borrowers in both France and Italy offering competitive interest rates to banks. They offer four funds for investors with historical returns ranging from 2.2% for their lowest risk borrowers up to 5.1% for the highest risk fund.

The first online small business lender to launch in France was Unilend – they issued their first loan in November of 2013 a full year before the regulation changed to allow small business lending. The reason is that their loans are setup differently – as a direct contract between the borrower and the investors. They are actually an IOU instead of an actual loan.

Unilend has issued €20 million in loans to date and are currently issuing around €1 million a month. Loan terms range from 3 months to 60 months with interest rates of 4% to 10%. They run a Dutch auction, which allows investors to bid down the rates to a minimum set by Unilend. They have a large investor base of over 10,000 active investors with an average return of 5.25%. They average 700 investors per loan.

BPI has invested in Unilend as an equity holder – they do not own loans. Like every small business platform we met with the loans issued by Unilend are unsecured with no personal guarantees in place. The average loan size is €75,000 with the typical small business doing revenue below €2 million.

One of the curious things about France is that many of these loans are done in partnerships with banks. The small business might be seeking €500,000 in funding but the bank will only issue €400,000. So, they will seek the other €100,000 from a platform like Unilend.

Lendix is a relatively new small business platform, having issued their first loan in April 2015 but they are already one of the leading platforms in France. They currently originate €4 million a month, making them the largest small business lender.

The co-founders of Lendix have all invested their own personal money in the fund which has grown to €29 million in size and is currently yielding 6.5%. They are about to launch a second fund which will be in the €50-70 million range.

As for the loans the average size is €200,000 with a maximum amount of €2 million. The loan terms range from 18 months to 5 years although they have just added short term loan options down to 3 months. They currently have zero defaults although there was one case of fraud where they were able to get the money back.

Finexkap has taken a completely different approach to financing French small businesses. They are providing working capital via receivables financing. But the regulators do not allow invoice financing outside of banks unless it is done in a securitization.

They did €15 million in originations in 2015 and are on track to do €100 million in 2016. Because this is invoice finance the loans are very short in duration. So, even though they have only been issuing loans for a couple of years they have already had 9 turns of their loan book. Of the more than 5,000 transactions they have done they have only had losses on one transaction. So they are developing a solid track record.

The company with the most memorable domain name is Credit.fr. They are part of the new breed of platforms focused on small business loans. They are growing fast and have just crossed €1 million in loans per month issued.

They are open to individual and institutional investors and they have 5,000 registered investors on their platform today. Like Lendix they are also creating a debt fund that they expect to launch in September and that should help them reach scale much faster. The target return for this fund will be around 5% after fees.

Credit.fr has a solid borrower funnel with leads coming from digital, partnerships with companies like Younited and others and also business brokers. The average loan size is €60,000. They feel that their competitive advantage is their risk management where they have an experienced team in place.

Lendopolis is one of the more unique platforms in France. It is actually part of theKissKissBankBank (yes, that is the official name) group of companies that consists of three divisions:

  1. KissKissBankBank – a donation-based crowdfunding site created in a similar vein to Kickstarter focused on primarily cultural and artistic projects. They have financed 15,000 projects since being founded in 2009.
  2. Hellomerci.com – based on the Kiva model of microfinance. These are small loans (less than €10,000) at 0% interest rates loaned out to very small companies.
  3. Lendopolis – launched in 2014 as a more typical p2p small business lender. They have loaned €7 million over 100 loans in their first 18 months.

Like many platforms here Lendosphere also launched soon after the regulations came into effect in late 2014. They are the first platform to be 100% focused on sustainable development projects.

To date they have loaned €6.7 million across 33 projects – either wind turbines or solar panels. The loans are typically 2-5 years at interest rates of 4-8%. They have 3,500 registered investors funding these projects. While it is still a young loan book Lendosphere has had zero defaults and delinquencies.

Most platforms are focused on small business where there has been a lot of entrepreneurial activity in the last 18 months. The French government recognizes that small businesses need more choices when it comes to access to capital so they have helped to create a regulatory environment that enables new approaches to this challenge.

 

China

Lending scheme fraudster jailed for life, (CRI English), Rated: A

A court in east China’s Zhejiang Province has sentenced a man to life behind bars for running a fake peer-to-peer lending scheme that conned over 88 million yuan (about 13 million U.S. dollars) from 1,200 investors.

Cai Jincong illegally raised more than 200 million yuan through Zhejiang Yinfang Investment and Management Co., where Cai fabricated investment products promising over 20 percent in annualized returns, the court said on Tuesday.

Cai, who was under a lot of debt, founded the P2P lending platform in October 2013. It offered returns on investment of up to 50 percent.

The funds were used to service Cai’s own debt and fund the operation of the P2P platform. Cai turned himself to police on January 20, 2015.

Author:

George Popescu