Digital Identity Verification for Alternative Lenders

Digital Identity Verification for Alternative Lenders

Trust is the root of all business transactions. For any financial institution to lend money or offer a banking service, being able to identify the counterparty is a must. And though anonymity is a blessing in a lot of situations, business cannot be conducted under the cloak of secrecy. Financial services are a particular focus […]

Digital Identity Verification for Alternative Lenders

Trust is the root of all business transactions. For any financial institution to lend money or offer a banking service, being able to identify the counterparty is a must. And though anonymity is a blessing in a lot of situations, business cannot be conducted under the cloak of secrecy.

Financial services are a particular focus area for the highest standards in identification, especially due to the strong regulatory push on money laundering, terrorism financing, and KYC (Know Your Customer). Also, according to the World Bank, around 1.1 billion people worldwide cannot prove their identity. They form a major chunk of the 2.5 billion people who don’t have access to financial services. This highlights that identity is a fundamental part of financial inclusion.

Mitek Systems, a global leader in mobile capture and identity verification software solutions, is in the forefront of this growing niche industry. We had an exclusive chat with the company CTO, Stephen Ritter. He gave his views on the opportunity and developments in the ID verification space and how it will be an underlying pillar for the growth of fintech lending and blockchain-led services.

Mitek’s Business Model and Technology

Mitek started as a software company and has evolved to become the leader in mobile banking and mobile deposit solutions. It enables bank customers to take picture of checks for depositing, rendering the physical deposit process redundant. It has entered the digital ID verification market and has developed artificial intelligence (AI) and machine learning-powered proprietary algorithms. It will verify the ID by having the user take a picture of  a government-issued ID and compare it with a selfie. This allows the software to cross verify the selfie face with the picture on the government-issued ID.

Mitek’s solutions specializes in accurately identifying the personal document, and can even recognize and evaluate IDs of multiple countries. It can also extract relevant information from the document. Its advanced forensic algorithms can detect signs of forgery or fake documents. Further, it can distinguish good and bad documents and provide a risk score to determine if the document can be trusted. Its algorithms can also determine if the human face is real or a spoof.

The company’s core competency is computer vision, a specific niche within machine learning. The company has been developing software in the field for the last 15 years and considers itself among the pioneers in the space. With the intense speed of development in the field, the company is actively working with partners for integrating third-party sophisticated technology into their own solutions.

The main solutions provided by Mitek include:

  • Mobile Fill – A solution which allows personal information to be pre-filled in the forms of the applicants, taking help of the Mobile ID capture solution provided by Mitek.
  • Mobile Verify – A combination of Mitek’s computer vision technology and auto capture experience, Mobile Verify validates the authenticity of identity documents thereby simplifying the KYC compliance processes.
  • Mobile Deposit – Mobile deposit is a solution that helps in saving time by allowing the person to deposit checks to the participating banks by uploading the image using the device’s camera.

Mitek’s Competition, and Its Impact on Lending

Mitek has an operating history of over two decades. With more than 6,100 banks and financial institutions as customers, the company has a wide moat compared to startups entering the field. Its direct competitors are few and usually early-stage companies. The more traditional players in the space would be the ones that follow the data bureau approach and are beginning to integrate mobile verify solutions for verification of IDs into their platforms.

Lending will receive a boost across the board as lenders, both traditional and alternative, will be able to onboard customers faster and more securely. Alternative lenders, in particular, should see higher approval rates for prospective borrowers with increased confidence they are not being defrauded. Mitek is currently processing over several million ID documents a month. Both MoneyGram and Kabbage use Mitek’s MobileVerify technology. The company is seeing major traction in the fintech lending industry as players are nimble and the first target for most fraudsters.

Financial Inclusion, Privacy, and Real Life Applications

Ritter believes governments need to step up their efforts in ensuring everyone has access to an identity proof. Financial inclusion is positioned prominently in the United Nation’s 2030 Sustainable Development Goals agenda, and the need for a digital identity goes far beyond the ability to participate in the formal economy. Its impact is multifold and helps to increase overall trade and access to healthcare and government services. Mitek is also focused on data privacy laws, with GDPR the hot topic in Europe. It has taken GDPR as its baseline for information security and is operating with GDPR recommended data security not only in Europe but across the globe.

Kabbage Case Study
Kabbage facilitates easy funding options to small and medium enterprises through its automated technology-backed data platform. With Mitek’s digital identity verification solutions integrated into the Kabbage platform, users are able to automatically populate the loan application form with pre-filled data in less than a second allowing customers to access funding quickly. Mitek’s solution applies advanced algorithms that automatically assess the authenticity of the driver’s license, providing assurance about the identity of the ID’s holder and reducing the likelihood of fraud during the loan application process.

Anonymous Payments Processor Case Study
Customers were facing a lengthy identity verification process, which forced them to leave the platform before completing the transaction. Driven by the need to comply with Anti Money Laundering (AML) and KYC regulations, a leading global payment processor selected Mitek’s Mobile Verify to provide the customers with more efficient ways to reduce the verification process from days to just minutes. Mitek was able to eliminate 92% of the temporary restrictions that the company previously had to place on customer accounts whenever they would reach a certain dollar threshold. By eliminating these temporary restrictions, the company has improved customer experience as well as increased profitability.

Mitek’s Collaboration with Nocks
Mitek’s digital verification identity has enabled blockchain payments platform Nocks to improve their customers’ onboarding by 98%. A cryptocurrency payments platform, Nocks also has to execute AML and KYC compliances. Nocks has now been able to verify the identity of applicants in real-time, dramatically improving new customer conversion rates due Mitek’s Mobile Verify interface.

MoneyGram Case Study
MoneyGram, the money transfer giant, is also using Mobile Verify to validate its customers’ ID. To complete the identity verification step in the money transfer process, MoneyGram customers simply take a picture of their passport or other identity document using their mobile device camera. Mobile Verify then uses advanced machine learning technology to instantly validate the authenticity of the ID.

Mitek is Experimenting With the Blockchain

Mitek is also developing technology to leverage blockchain infrastructure. The public ledger approach in general is interesting as it could allow for generating self-sovereign IDs which are owned and managed by the users themselves. When businesses need their information, people can control their data and allow only limited or conditional access. Moreover, even banking customers are exploring blockchain-based solutions, and Mitek is experimenting to integrate its ID verification systems on a distributed ledger.

Mitek’s Technology Leadership

Mitek was founded in 1985 and is listed on NASDAQ with a market cap of an estimated $250 million. Mitek’s innovative solutions are embedded into the apps of more than 6,100 organizations and used by more than 80 million consumers.

Stephen Ritter is the Chief Technology officer (CTO) of San Diego-based Mitek Systems. He helps in the technological development of the key processes of the company, along with overseeing Mitek Labs. He has more than 22 years of experience bringing new commercial software solutions to market. Ritter worked as tech lead with Emotient (acquired by Apple) before he joined Mitek.

With the increase in regulatory complexities and fraudulent practices, it is critical for businesses to make sure that they are on the right side of the law and yet are simultaneously making their customers’ life easier. Mitek helps them balance this fine line with its suite of sophisticated identification technologies.

Author:

Written by Heena Dhir.

Taking Trade Finance to SMEs

trade finance SMEs

The financial crisis of 2008 led to many developments in fintech generally and alternative lending specifically. We’ve heard many of those stories before. One of the problems the crisis revealed is the restriction of capital, particularly among international small- to medium-sized enterprises (SMEs). Another problem was the massive proliferation of mobile coupled with the “digital […]

trade finance SMEs

The financial crisis of 2008 led to many developments in fintech generally and alternative lending specifically. We’ve heard many of those stories before. One of the problems the crisis revealed is the restriction of capital, particularly among international small- to medium-sized enterprises (SMEs). Another problem was the massive proliferation of mobile coupled with the “digital self” that allowed lenders to identify the types of businesses people engaged with. Digital data became a game changer for a lot of companies employing new technologies. One company got the bright idea to solve both of these problems with a single solution aimed at SMEs making their first entrance into the online ecoystem.

Who Are Kountable, And Why Do They Count?

Kountable saw its genesis in 2013 with CEO and Co-founder Chris Hale getting together with co-founders Craig Allen and Kathy Numera.

“We looked at trade finance in a different way,” Hale said, adding that one of his co-founders spent 30 years doing trade financing at the institutional level. Typically being an instrument extended by banks, Kountable puts the emphasis on the finance rather than the trade part of the equation. The financial crisis, Basel III, and other regulations that followed handcuffed banks in their ability to extend capital to SMEs. Kountable stepped in to fill the void.

By using a cloud-based platform for the import and export of goods, Kountable gives SMEs access to trade. By outsourcing third-party logistics and bringing curated transactions so deals get institutional level treatment, the company helps SMEs sidestep problems they would typically have accessing top tier products.

Currency management is one area that requires Kountable’s due diligence. As they buy in one currency and deal in another, there are commercial terms, such as paying suppliers, during negotiations.

The company is successful when it simplifies the translation between big and small. Hale said, in most trade finance deals, you have big-to-big (that is, enterprise-level business trading with enterprise-level business). For example, Cisco might sell a network bridge to a multinational corporation. But when you have a small business involved (Cisco selling to a bank in East Africa, for instance), Kountable ensures that everyone gets the same retail treatment. By bringing users together in a mobile app on a cloud-based system, the company makes it seem institutional to both parties.

“The asset is a trade receivable,” Hale said. For example, an alternative credit fund that extends a $150M line of credit. “We align ourselves with the success of the transaction by pricing our service like a margin-sharing arrangement.” The four-step process includes:

  1. Kountable collects directly from the end customer
  2. The bank buys new servers from Cisco
  3. The reseller negotiates the margin for the procurement process, importation, and installing services
  4. Kountable takes a portion of the margin for the trade services it provides.

The Three Components of the Technology

The technology includes three key components:

  1. Identity management—The small business reseller downloads a mobile app and shares his or her data with Kountable. That includes social media, business registration, and personal info about the owners and shareholders. Kountable builds a “robust profile” on the SME and runs Know Your Customer (KYC) and Anti-Money Laundering (AML) processes for validation. The company also looks at supply, and, if it’s a private business, customs. The company looks at trade as a network. The more transactions they do, the more the network effect creates a safe environment for more transactions.
  2. Cloud-Based Control Management System—This digitally manages assets on the operating side and the financial side of a trade transaction. Hale said it’s tricky because there’s not a lot of financial data inside the transaction. Most of the info is operational. That is, goods are paid for and shipped–in transit, through customs, etc. Traditional financial institutions aren’t set up for this. This system manages the operations and payment of this trade asset. The reason it’s important to have collaboration taking place between the reseller and the in-country partners (who help with the documentation of the banking relationships, clearing customs, and more) through the mobile app with the Kountable team in San Francisco is that they all plug in to make sure transactions go smoothly. These two elements combine to create a financial asset.
  3. Trade Accounting Service—The investor who extended the $150M line of credit (LOC) is consuming trade receivables as collateral. The trade accounting service will be able to report on the synthesis of the financial and operating information in order to report the portfolio value to the investor.

Not being a formal venture fund, Kountable is a “traditional single family office with a portfolio of private companies with double bottom lines.” The company has raised $15M, 85% of which came from the family office with capital added from other investors. These are for-profit companies, of course, but the business focus is on the “larger good.” The concessionary returns the company receives by leaving some of the money on the table to make a significant impact is a part of the reward.

Kountable Key Differentiator and KPIs

“Our committed focus is to the SME,” Hale said. This led the company to build a network of enterprise-level participants and a technology platform to cater to that user. “Most other trade platforms focus on digitization of a two-party trade,” but it’s all “enterprise to enterprise.” Kountable was created to help the global SME population. “That focus on the SME as the user has created an ecosystem unlike any other platform I’m aware of.”

Kountable has about 5,000 SMEs registered and moves $3 million per month in trade transactions. That’s in two countries–Kenya and Rwanda. Interest from 40 other countries has led to building a platform to address the market demand.

“We have a line of sight to profitability just by working within these two markets,” Hale said. “[We’re] building
global expansion to go outside of the family office this year.”

SMEs in Kountable’s two markets buy goods from the U.S. and work with U.S. supplies to sell to customers in East Africa products they wouldn’t have access to otherwise. In the year ahead, Kountable plans to work with U.S. SMEs on similar transactions.

Kountable’s Competition and the Future of Trade Finance

Kountable’s competition consists of large procurement companies, groups like Tradeshift, and financial relationship companies. On the other side, there are e-commerce platforms, like Amazon, that are more consumer focused.

“There really isn’t a competitor that fits together a solution targeting our market specifically,” Hale said. The competition is mostly peripheral.

Hale believes the future is going to see trade financing dramatically influenced by digitization across the board. “The players are focused on enterprise-level digitization, where invoicing becomes an Application Programming Interface (API) and customs brokerage becomes digitized. As that continues, the nature of trade financing will evolve toward a a focus on operations.” He sees this evolution ultimately leading to the incorporation of the blockchain. “The elements of smart contracts and the distributed ledger are very well suited to the network approach to trade facilitation.”

Kountable’s near-term plans are to continue demonstrating the universality of its solution. Hale said they have significant demands in many regions of the world, including the U.S., and the goal is to plant some flags in some specific markets. Along with the U.S., he mentioned Southeast Asia and Latin America as potential growth regions. “There are many elements of our transactions that are replicable across different verticals and different regions,” he said.

Conclusion

The company is looking to internalize its engineering team and build its other respective teams. They have a number of product launches in the next quarter and a half including a redesign of the mobile app. Beyond that, Kountable is focused on growth capital for market expansion, enterprise sales, and putting in place the legal and financial structures needed to move into Southeast Asia markets like Vietnam, Thailand, and Malaysia.

By focusing on the double-bottom line, Kountable not only has a bright future in the spaces of trade and trade financing, but the company is also doing its part to improve the quality of life in areas of the world where goods, services, and technology would be otherwise less accessible. And while it isn’t evident if the company will ultimately succeed, it’s certainly evident that it should.

Authors:

Written with Paul Keenan.

Allen Taylor

Wednesday February 7 2018, Daily News Digest

MONEY-LAUNDERING-BY-ACTIVITY

News Comments Today’s main news: SoFi named official sponsor of Big Ten. Equifax supports SME lending with new data sharing solution. UK fintech venture investment rises 150%. Klarna partners with London College of Fashion. Revolut ditches Wirecard, takes card issuances in-house. Today’s main analysis: The most wanted for anti-money laundering cases in Asia. Today’s thought-provoking articles: Banks close 1,700 […]

MONEY-LAUNDERING-BY-ACTIVITY

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International

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News Summary

United States

SoFi Named Official Presenting Sponsor of the Big Ten Men’s Basketball Tournament (BigTen.org), Rated: AAA

The Big Ten Conference and Big Ten Network announced a multi-year agreement naming SoFi as the presenting sponsor of the Big Ten Men’s Basketball Tournament. SoFi, a modern finance company taking an unprecedented approach to lending and wealth management, will not only be the on-site tournament sponsor, but also present the on-air coverage of all 10 tournament games televised on BTN.

Equifax launches data sharing solution to support SME lending (AltFi), Rated: AAA

Information solutions company Equifax has launched a new solution that provides back up for the government’s Commercial Credit Data Sharing (CCDS) initiative, which is seeking to boost the economy by encouraging new entrants into the SME lending sector.

According to the platform, the new solution “gives lenders a comprehensive picture of a business’ financial health to facilitate faster and more informed lending decisions”.

Equifax was designated as a credit reference agency under the CCDS initiative, giving it access to new data sets from leading business banks, including cash flow activity and debit and credit turnover. The data will be provided to lenders through Equifax Business Insights.

Banks Shutter 1,700 Branches in Fastest Decline on Record (WSJ), Rated: AAA

The number of branches in the U.S. shrank by more than 1,700 in the 12 months ended in June 2017, the biggest decline on record, according to a Wall Street Journal analysis of federal data.

Source: The Wall Street Journal

Branch numbers fell again in the second half of 2017, according to related data submitted to bank regulators and reviewed by the Journal. That would add to the thousands of locations closed following the financial crisis, and is the longest stretch of closures since the Great Depression.

Many of the closings were in big cities and surrounding suburbs, where branches were consolidated largely because of falling foot traffic. Others were in rural areas, where some large regional lenders are leaving town altogether.

From mid-2012 to mid-2017, Capital One Financial Corp. cut 32% of its branches, SunTrust Banks Inc. 22% and Regions Financial Corp. 12%.

Source: The Wall Street Journal

What a scrappy Oklahoma bank can teach the industry about branch strategy (Tearsheet), Rated: A

Citizens Bank of Edmond is trying to get closer to small business customers by providing space, guidance and almost anything else they might need — besides, of course, a loan.

The one-branch community bank in Edmond, Oklahoma once had another branch, 12,000 square feet located one block away from the main space, with a drive-thru window and some executive offices. But recently the bank decided to consolidate it into a single location and has now turned it into a “business social” co-working environment, called Vault 405, for its small business customers that includes wireless charging stations, conference rooms and a podcast studio.

Ideally, by creating an environment that would bring customer and community relationship returns, as well as grow deposits and loan volume. Citizens currently charges monthly rates between $400 and $1,000 for offices and $175 to $275 for desks and shared spaces. It also offers day passes.

Citizens is also addressing cash pickups for small business customers, one of the most compelling cases for banks thinking of repurposing their branches, using as much readily available technology as possible.

Why Digit is over chatbots (American Banker), Rated: A

Now, Ethan Bloch, founder and CEO of the San Francisco startup, believes his company has been offering the wrong primary user interface. “We think [chatbots] haven’t lived up to their promise,” he said. “So we are done believing they will.”

While the premise of Digit is still the same — use the service to automatically transfer funds from checking to savings every few days in amounts its algorithms believe a person can afford — Bloch believed the chatbot model is terribly flawed in its inefficiency to find out information.

Lendio Franchise Announced in Seacoast Region (Lendio Email), Rated: B

6th Avenue Capital adds trio to executive ranks (Bankless Times), Rated: B

6th Avenue Capital, a provider of small business financing solutions, announced the appointment of three senior members to their business development team. Mitchell (Mitch) Levy, Marc Seidel and Gary Lockwood were named to lead the sales teams. The new hires follow last year’s appointments of Christine Chang as CEO and Darren Schulman as COO and a $60 million commitment in capital from a large institutional investor.

US states team up to streamline fintech licensing (Finextra), Rated: A

Currently, firms offering services such as money transfers and cryptocurrency trading have to apply individually to operate in each of the 50 US states.

Under the new compact, if one of Georgia, Illinois, Kansas, Massachusetts, Tennessee, Texas and Washington reviews key elements of licensing – IT, cybersecurity, business plan, background check and Bank Secrecy Act compliance – the other six will accept the findings.

Wela Partners with In-Fi to Bring AI-Powered Bot to Insurance Agency Platform Website (GlobeNewswire), Rated: A

Wela, a fintech company that blends artificial intelligence (AI) with human advisors, today announces a partnership with In-Fi, an insurance agency management company specifically for financial institutions. Wela’s AI-powered chatbot, personified as Benjamin, is now fully integrated into In-Fi’s website, with the function of creating a more cohesive and engaging experience for their customers. Integration into In-Fi’s website is a pivotal step for Wela, which aims to place Benjamin at the center of financial decisions for families by integrating across a variety of financial service providers.

How the payday lending industry shapes academic research (American Banker), Rated: A

The hotly contested question of how to regulate payday lending is partly about ideology. How far should the government go to save repeat borrowers from their own worst habits? Your answer will depend on your political beliefs.

But this debate, like a lot of fights involving financial regulation, is also about facts. Do payday customers indeed suffer economic harm when they get into a cycle of repeat borrowing? That is an empirical question that unbiased researchers should be able to answer.

Inside Aspiration’s ‘values-based’ marketing strategy (Tearsheet), Rated: A

SoFi, whose earliest ads told people, “Don’t Bank. SoFi” has softened its marketing efforts, realizing the smart thing is for it to become a bank itself. Transferwise once ran provocative anti-bank ads but now advertises its own borderless account. But Aspiration isn’t shy about ruffling the feathers of the big banks. When Bank of America yanked its “free” checking accounts last month, moving them to its core checking account product that comes with a monthly $12 fee, Aspiration used it as a rallying point to get customers to bring their business to Aspiration, offering a $12 credit if they did. It claims its marketing has influenced “tens of thousands” of customers to leave B of A for Aspiration. Bank of America declined to comment for this story.

A fruitful journey from the attic to an angel investor (domain-b.com), Rated: A

Pear venture capital has helped some aspiring entrepreneurs build their foundations from scratch. How did the idea behind Pear fructify and what is the significance behind its name?
We actually started out as an angel investor. Around 2009-2010, I felt that there was no institution to help founders from ground zero. Given my background and network, I thought I could build an institution, which would help founders in their early stages to work on their ideas, which would stay in the business for generations.

Today Pear is an early stage seed fund and we invest in founders who are building category defined companies and that which focus on solving a big problem in the market.

As a venture capitalist, how do you identify potential entrepreneurs before signing them a cheque? What sectors and businesses do you look at? Considering the humongous number of aspirants, how do you identify a viable idea and that which is worth your support and funding?
If I look back at the last 18 years, there are some traits which are quite common among exceptional founders. We like those individuals who are looking to solve big problems in the market. They should either be close to the problem that they are trying to solve or they should have lived through their problem.

We also like those who have ability to track talents, are paranoid in a healthy way, have a vision and tend to question themselves every day. I also like CEOs who are captains of the ship,. the ones who usually stay till the end when the ship is sinking. Overall, we also look at size of the market. It’s fine if things don’t work out today as long as it’s going to be massive when it works. If you look at our portfolio companies, some of them have started in the unconventional space. As VCs, you live for those moments where you want to break the rule and partner with outliers.

LendingTree Releases Monthly Mortgage Offer Report for January (Guru Focus), Rated: A

LendingTree, the nation’s leading online loan marketplace, today released its monthly Mortgage Offers Report which analyzes data from actual loan terms offered to borrowers on LendingTree.com by lenders on LendingTree’s network. The purpose of the report is to empower consumers by providing additional information on how their credit profile affects their loan prospects.

Purchase Mortgage Offers by Credit Score

Purchase

FICO Range

Average APR

Average Down Payment

Average Loan Amount

Average LTV

Lifetime Interest Paid*

All Loans

4.55%

$63,411

$238,518

82%

$199,109

760+

4.41%

$84,354

$262,661

79%

$191,975

720-759

4.45%

$59,193

$239,111

83%

$194,007

680-719

4.70%

$39,883

$217,590

86%

$206,818

640-679

5.04%

$63,301

$203,176

76%

$224,533

620-639

5.12%

$57,566

$191,642

76%

$228,749

*To enable comparison, lifetime interest is calculated for the average loan amount for all loans using the rates for each credit score bucket.

Refinance Mortgage Offers by Credit Score

Refinance

FICO Range

Average APR

Average Down Payment

Average Loan Amount

Average LTV

Lifetime Interest Paid*

All Loans

4.46%

$2,739

$244,540

62%

$199,427

760+

4.33%

$4,014

$250,651

59%

$192,669

720-759

4.38%

$3,073

$249,678

64%

$195,262

680-719

4.58%

$1,294

$238,579

64%

$205,712

640-679

4.79%

$907

$223,812

60%

$216,814

620-639

4.89%

$212,813

59%

$222,147

*To enable comparison, lifetime interest is calculated for the average loan amount for all loans using the rates for each credit score bucket.

The hottest cities where it’s good to be a home seller but not so much a buyer (The Washington Post), Rated: A

LendingTree, an online loan marketplace, recently analyzed 1.5 million purchase mortgage loan requests that came in through its system from the 100 largest cities in 2017. The study identifies the locations where buyer competition is the toughest based on three criteria:

The top 10 cities with the most competitive buyers based on those criteria include:

  • San Francisco
  • San Jose
  • Denver
  • San Diego
  • Ventura, Calif.
  • Los Angeles
  • Seattle
  • Honolulu
  • Portland, Oregon
  • Sacramento

The three cities on the bottom of the list, where homes are more accessible to buyers and competition is less aggressive, are Youngstown, Ohio; McAllen, Tex.; and Scranton, Pa.

For the full report, click here.

CBC National Bank Among LendingTree’s Top 10 Highest Customer-Rated Mortgage Lenders in Fourth Quarter (PR Newswire), Rated: B

CBC National Bank, headquartered in Fernandina Beach and with branches in Fernandina BeachOcala and The Villages, Fla., and Beaufort and Port Royal, S.C., today announced that it has been named by LendingTree as among the Top 10 highest customer-rated mortgage lenders in the fourth quarter of 2017. It also achieved this prestigious designation in the first quarter of 2017.

rateGenius Awarded Top 3 in Auto Customer Satisfaction by LendingTree for 7th Consecutive Quarter (PR Newswire), Rated: B

rateGenius is pleased to announce that it has once again been named Top 3 in Auto Customer Satisfaction by LendingTree.

M Financial Group Partners with Plug and Play Insurtech to Enhance Client Experience in Life Insurance Space (PR Newswire), Rated: B

Plug and Play Insurtech welcomes M Financial as its 55th partner. Headquartered in Portland, Oregon and comprised of 155 Member Firms across the U.S., as well as the U.K. and U.A.E., M Financial is searching for startups to transform the life insurance industry for the clients they serve. Startups accepted into Plug and Play’s platform will have the opportunity to pilot their technology with M Financial and the other partners in the program. M Financial is the first Plug and Play partner that is both a distributor and reinsurer of life insurance products.

5 Passive Income Ideas That Still Work In 2018 (SavingAdvice), Rated: B

Peer to peer lending: The demand for credit is sure to continue for centuries to come. There is always someone in need of some quick business loan or a personal loan and this gives a quick opportunity if there is another person with the capital and risk appetite to back it up. With the current boom in crypto currency usage, you can take advantage and set up a peer-to-peer lending service. Alternative funding can very well give traditional banking a run for the money because some people need quick loans but cannot have the convenience of applying through the mainstream banking system. Peer-to-peer lending offers the keys to unlock instant liquidity to a wide online community and offers attractive rewards to those who supply the capital.

A great advantage to the lender is that once a peer to peer lending platform has been selected, the popularity of the wallet will ensure that there is exposure to a wider target of borrowers. Most banks often get restricted to lending to people within a certain country or state. Since peer-to-peer lending is blockchain-backed, anyone around the globe with access to the platform can lend money to another peer and start earning money over the duration of the loan contract.

United Kingdom

LendInvest completes £16m development deal in three weeks (Mortgage Introducer), Rated: AAA

Property finance lender LendInvest has completed a £16m financing deal with established development finance borrower, Yogo Group, in just three weeks.

Taking a Deeper Look into the Moving Average For Funding Circle Sme Income Fund Limited (Stock Press Daily), Rated: AAA

Funding Circle Sme Income Fund Limited (FCIF.L) are in focus today as the charts are revealing that the Mesa Adaptive Moving Average (MAMA) is holding steady above the FAMA, or Fractional Moving Average.  This environment typically indicates that there might be a buying opportunity aligning in technicals.  When there are crossovers between the FAMA and MAMA, the shares are often widely traded.  When the MAMA crosses above the FAMA, it means that the shares are likely to move higher.  Conversely the opposite occurs when the MAMA crosses below the FAMA.  The Mesa Moving Average was first mentioned by John Ehlers in a paper published in a 2001 edition of Technical Analysis of Stocks and Commodities Magazine.

Venture investment in UK fintech more than doubles (Financial Times), Rated: AAA

Fintech companies, such as TransferWise and OakNorth, raised $1.8bn of venture capital investment last year, up more than 150 per cent from $704m in 2016, the year of the UK’s vote to leave the EU, the data show.

The surge in UK funding contrasted with an 18 per cent drop in global fintech investments to $14.4bn, according to the report by Innovate Finance, the British fintech trade body.

The UK industry was boosted by handful of large fundraisings of more than $90m. The biggest was by TransferWise, a cross-border payments provider, which raised $280m. OakNorth, a digital lender to small businesses, raised $203m.

Banks divided on cryptocurrencies card purchases (Financial Times), Rated: AAA

British banks are debating whether to ban their customers from buying cryptocurrencies using their credit cards after Lloyds Banking Group and Virgin Money said they had imposed such a ban.

Barclays, the UK’s leading credit card issuer through its Barclaycard business, said it was “keeping this matter under close review” after holding a meeting to discuss whether to follow the lead of Lloyds on Monday.

Last week MasterCard said that cross-border volumes on its network were up 22 per cent, driven in part by customers using their credit cards to buy cryptocurrencies.

British banks are also shunning companies that handle cryptocurrencies by refusing to let them open bank accounts or closing their accounts, which has forced many of them to open accounts in Gibraltar, Poland and Bulgaria.

Lloyds Bank cutting 930 jobs (Fintech Futures), Rated: B

Lloyds is axing 930 jobs within its commercial banking, chief information office, community banking, insurance, and wealth and risk management.

Looking beyond traditional banks (Specialist Banking), Rated: A

I recently came across an article headlined: “8 in 10 SMEs still prefer traditional bank loans over alternative finance.”

It noted that 83% of financial directors preferred to go to their bank as their first port of call when seeking a loan, rather than finding an alternative, such as P2P lending or equity crowdfunding.

It claimed that a lack of understanding could be the reason for this, but pointed out that almost three-quarters of finance directors (74%) believed their knowledge of alternative finance was either “average or above average”.

Challenger Bank Tandem Partners with Cognitive Banking Company Personetics (Crowdfund Insider), Rated: A

UK Challenger bank Tandem has announced a partnership with cognitive banking company Personetics to provide users personalised insights on their spending across all of their bank accounts in one place, as well as warning people about unexpected fees and unusual activity on their accounts.

Are you holding too much cash in your ISA? (WhatInvestmen), Rated: A

In a survey of financial advisers by Octopus Investments, three-quarters of respondents said they believe their clients hold too much in their cash ISA relative to the rest of their portfolio.

The majority (83 per cent) feel their clients are put off investing in stock and shares due to the risk of losing money, followed by concerns of an overstretched (49 per cent) and volatile (46 per cent) market.

The Differences Between Short Term Loans and Payday Loans (SWNS.com), Rated: A

If you need to borrow money, a variety of options are available. Two of the most common short term borrowing options are payday loans and short-term personal loans, both of which provide immediate access to cash to help you pay bills, purchase items and run your financial life.

One of these borrowing options — payday lending — has been in the news a lot over the last few years, as new regulations make the industry more borrower friendly.

Short-Term Personal Loans

Most people use short-term loans for purchasing certain items or covering other major expenses.

From a borrower’s perspective, the advantages of short-term loans include lower overall costs than payday loans. However, the credit check process and approval period mean that loans of this type often aren’t instant enough to help borrowers deal with urgent financial needs.

Payday Loans

Most payday loans are for relatively small amounts of money, such as £200 to £500, and are aimed at providing cash until you get paid again.

Payday loans form a major part of the UK lending industry, with an estimated market value of approximately £2 billion.

Folk2Folk appoints chapter development manager (Bridging&Commercial), Rated: B

P2P lending platform Folk2Folk has appointed Claire Thayers as its chapter development manager.

In the newly created role, Claire will be responsible for raising Folk2Folk’s profile across the South West and Three Counties regions and improving awareness of its products to both borrowers and brokers.

China

The key to surviving in China’s P2P marketplace? Understanding regulations (Nikkei Asian Review), Rated: AAA

China’s increasingly competitive peer-to-peer marketplace requires players to understand government regulations and align their strategies accordingly, said Kevin Guo, co-founder and co-chairman of Dianrong, which specializes in making small loans over the internet.

European Union

Klarna partners with London College of Fashion (LeapRate), Rated: AAA

European payments provider, Klarna, has announced a UK partnership with London College of Fashion, UAL, in an exciting initiative to support the next generation of talent at the intersection of fashion and technology.

Fashion is now the UK’s largest online retail market segment, worth around £10.1bn, and this growth is only set to continue. By 2020, fashion will represent 28.8% of UK online spend.

With Klarna research showing 94% of retailers are investing in new technology to meet the needs of younger customers, opportunity for innovation in the sector has never been greater.

German digital business bank Penta raises €2.2m in seed funding (AltFi), Rated: A

Penta, a German digital bank for start-ups and small businesses, has secured €2.2m in seed funding, led by the UK-based and fintech-focused Inception Venture Capital .

Founded in May last year, Penta moved out of its private beta in December to a waitlist of over 3,000 local businesses. The platform has now opened its waitlist up to new users, and hopes to reach 10,000 businesses by the end of 2018.

P2P investors risk losses by lending to just one borrower (P2P Finance News), Rated: A

PEER-TO-PEER analysis firm 4th Way is urging investors to diversify after stress testing revealed the odds of losing money in a severe recession can be 10 times higher in some cases when lending to just one borrower on a P2P platform.

The research, released on Tuesday, applied international banking stress tests to P2P platforms it assesses such as Zopa, Funding Circle and RateSetter, and found when lending to 100 borrowers, investors have just a 0.1 per cent chance of losing 20 per cent or more of their original money.

Acquisition of 85% of Telenor Banka fails to win Serbia’s c-bank approval (SeeNews), Rated: A

Serbian online lender Telenor Banka said on Tuesday that Bulgaria-based investment fund River Styxx Capital has not received the consent of Serbia’s central bank for the acquisition of 85% of its share capital from Norwegian telecommunications group Telenor.

Telenor will support any further step that will contribute to the positive closure of the transaction, Ingeborg Ofsthus, CEO of Telenor Serbia and chair of the Telenor Banka board of directors said in a statement issued by Telenor Banka.

International

Revolut ditches Wirecard for in-house card issuing (Fintech Futures), Rated: AAA

Revolut will no longer be relying on Wirecard for card issuing as it has now brought this function in-house.

Asia Most Wanted Top Ten AML Cases (Fintech News), Rated: AAA

Over the last decade, the quantity of money laundered has been steadily increasing. According to The United Nations Office on Drugs and Crime, it is estimated that approximately USD $1.6 trillion or 2.7 percent of global GDP was laundered in 2009.

Even worse, less than 1 percent of this global illicit financial flow is ever seized and frozen, meaning that the criminals are winning.

Effective anti-money laundering (AML) regulations and processes are essential to countering such criminal activity. Yet due to tighter anti-money laundering regulations in the US and Europe, money laundering activity is moving into the Asia Pacific as a way to avoid detection.

Source: Fintech News

In December 2012, Standard Chartered was ordered to pay USD $330m to settle claims by United States government agencies that it had moved hundreds of billions of dollars on behalf of Iran. It was suggested that this practice exposed the international financial system to exploitation by to “terrorists” and “drug kingpins”.

Open banking role models: Fidor, Rabobank and BBVA (American Banker), Rated: A


Google accelerator focuses on emerging markets (IT Web), Rated: A

In its fifth year, Google Launchpad Accelerator is taking place in San Francisco this week. It focuses on start-ups that already have a product, with a good market fit, and are ready to scale.

OneFi has created Paylater, an online provider of digital financial services for the underbanked in West Africa.

Nubank is a financial technology company offering a fully digital and branchless experience, and Viva Real is an online real estate marketplace that connects buyers, sellers and renters with properties in Brazil. There is one other Brazilian start-up, Loggi, which creates new-wave logistics.

Kubo.financiero, a P2P lending platform, from Mexico.

Ayannah from the Philippines enables affordable and accessible digital financial services to be delivered to the world’s emerging middle-class.

Australia

Banks are exploiting loyal customers, warns Productivity Commission (The Guardian), Rated: AAA

The Australian financial system is uncompetitive, allowing banks and insurers to boost profits by exploiting loyal customers and adding up to $87 a month to the average mortgage repayment.

That is the conclusion of the Productivity Commission’s highly critical draft report into the sector, which finds it is “unquestionably strong” but calls for greater transparency to compare financial products and for regulators to gain powers to promote competition.

Australia gives regulator sweeping powers over bank bosses’ pay (Reuters), Rated: A

Australia has given its financial regulator sweeping powers to cap bank bosses’ pays, delay their bonuses and even ban them from the industry if found guilty of non-compliance, as it scrambles to restore trust in the scandal-hit sector.

MENA

ADGM is region’s 1st Fintech regulator, says Al Sayegh (WAM.ae), Rated: AAA

In the future, Fintech will be the most important aspect of financial services in the world, according to Ahmed Ali Al Sayegh, the Chairman of Abu Dhabi Global Market, ADGM.

Authors:

George Popescu
Allen Taylor