The most common and pertinent issue facing an international student looking to study in the United States is securing credit for various needs like tuition, credit card, and buying a car. The stress of settling in a new country coupled with finding the best loan option can be a daunting task. Nomad Credit realized there […]
The most common and pertinent issue facing an international student looking to study in the United States is securing credit for various needs like tuition, credit card, and buying a car. The stress of settling in a new country coupled with finding the best loan option can be a daunting task. Nomad Credit realized there is a void with regards to helping international students and visa holders (H-1B, L1, etc.) find credible lenders, and vice-versa. Nomad Credit’s search engine provides comparable options for the credit seeker to compare and decide the best possible loan option for them. It functions as a pure marketplace.
International Student Analytics
The number of international students in the U.S. grew by 7.1% and crossed the 1 million mark in the 2015-16 academic year. China (328,547) is the biggest contributor followed by India (165,918), Saudi Arabia (61,287), South Korea (61,007) and Canada (26,973). In total, there are approximately 5 million international students around the world, and by 2025, the number is expected to reach 8 million.
Economic Benefit of International Students
As per the latest NAFSA’s analysis, 1,043,839 international students contributed $32.8 billion and supported more than 400,000 jobs in the U.S. economy during the 2015-16 academic year. That means for every seven international students enrolled, three U.S. jobs are created.
All of the above highlights the definitive impact international students have on the economy of the host nation. But the hurdles these students face in accessing credit is remarkable. Though they are a riskier credit bet as compared to local students, shutting down a multi-billion dollar market is just not feasible.
Introduction to Nomad’s Specialized Marketplace
Nomad Credit has its headquarters in Chicago and was launched in 2017. Founder and CEO Brian Hoffman initially launched a plain-vanilla education loan company, following SoFi’s footsteps. But soon the company’s focus changed from refinancing student loans to funding international students. It aims to find the right financial product for international students and/or visa holders currently or planning to live in the U.S. The main visa holders it serves are F1, J1, L1, and H-1B visas.
Prior to Nomad Credit, Hoffman worked as an analyst at Sagence, a management advisory firm. In the beginning of this year, the company managed to raise $125,000 in angel funding.
The underlying business matrix is similar to already established fintech loan marketplaces like Lending Tree or Credit Karma. Nomad gets paid from partner lending companies for providing leads or customers. Payment structure may vary as it also deals with lenders based out of the United States, but could include a percentage fee, fixed fee per customer, monthly fee, or fee per led. This flexibility in payment options is necessary for serving and partnering with multiple lenders in different parts of the world.
The company has invested its resources to help find international students find the right combination of lender, insurer, and other financial services depending on their needs. It uses a simple questionnaire focused on the school, degree, original location of the student, and other personal information.
Partners and Unique Selling Proposition
The young company has managed to stitch up multiple partnerships with 11 financial partners, 2 insurance companies, and one international payments company. Adding insurance to its list of services was a no-brainer as international students are simultaneously looking at travel, medical, and renter insurance.
Though there are established players in the overall education and marketplace segment, such as Credible and Lending Tree, what sets Nomad Credit apart from its competitors is its specialization on becoming the one-stop shop for international students. It is the only company that is directly dealing with the U.S. as well as Indian lenders and is in the process of onboarding Chinese lenders. Though there is little competition from traditional lenders in India, well-funded Indian tech startups like BankBazaar are also turning their attention to student loans.
Nomad Credit’s Ideal Customer
Though the company is only 4 months old, it has managed to generate a lot of interest among international students while website traffic has been increasing two- or three-fold every month. It uses various marketing tools in India like advertising through partnerships, using paid ads, and blogging, and will be adding a student forum soon.
Anyone from Asia or African country coming to the United States to get an advanced degree like MBA or M.Eng (Masters in Engineering) is a prospective customer. Lenders prefer students who are studying MBA or M.Eng because those are highly employable and lucrative degrees, and there is lesser chance of default.
Though the company is based out of the United States, it has consciously decided to serve the entire international student ecosystem and not just students looking to come to the U.S. It has originated a lot of loans for students from India going to Germany or Singapore for higher studies.
Future Headwinds and Goals
Sallie Mae funds almost 95% of the U.S. student loan market. This has stifled innovation and made it imperative that Nomad targets markets where government entities are not the biggest players in student loans. Massive markets like India fit the bill; there is a lot of potential as the majority of the market is still untapped. That is the reason why this young startup sees more value in going after Asian countries.
Once the company is able to establish a firm footing in India, it wants to further expand into China and Nigeria. It aims to form partnerships in more and more countries so that it is able to serve a wider range of the population. Moving forward, it wants to further improve its technology as well its products so that it can cater to people from different cultures with unique needs. Integrating multiple languages into the platform is an important step toward that vision.
There are roughly 5 million international students today. They have more than doubled since 2000 and represent a hundred billion dollar opportunity for the financial services industry, currently being overlooked due to the fragmented nature of the customer base. Nomad Credit has been able to envisage the power of uniting this global industry on one platform and with funding and proper execution can actually target one of the last few untapped pockets of the alt-lending industry.
Research paper for LendingCalc Date: September 19, 2017 Introduction Marketplace lending is blossoming in Asia, following the trend in China where over 2000 platforms are purportedly open for business. The majority of Asian platforms were founded in or after 2015, a few years after the Chinese boom, and are able to incorporate the lessons learned […]
Research paper for LendingCalc
Date: September 19, 2017
Marketplace lending is blossoming in Asia, following the trend in China where over 2000 platforms are purportedly open for business. The majority of Asian platforms were founded in or after 2015, a few years after the Chinese boom, and are able to incorporate the lessons learned from the Chinese market. This is also facilitated by the flow of Chinese capital into the region.
As domestic Chinese marketplace lending platforms are virtually closed to international investors by capital controls, this note will focus on South East Asia, where regulators welcome the participation of foreign institutional capital in marketplace lending, as in the United States or the United Kingdom. Nonetheless, marketplace lending assumes a different character than their Anglo-American counterparts due to divergence in regulatory regime and business environment.
The importance of regulatory regime
Platform is the putative strategy and business model of marketplace lending. Lately the word “platform” itself has taken on hallowed meaning in the fintech world, particularly since the Chief Executive Officer of Goldman Sachs proclaimed that “We’re a technology firm—we’re a platform” on Bloomberg Television.1 Unfortunately this newfound halo only obscures the reality that platforms are not equivalent across geographies, because it is their regulators and not the platform themselves that lay down the rules governing their structure.
To review the basics – A marketplace lending platform matches borrowers with lenders individually, hence also the term peer-to-peer (P2P) lending. Each loan may be matched to and funded by many lenders, hence the term crowdfunding; and each investor may match and fund many loans to diversify the investment. Exactly how the matching occurs is up to the regulator. The most relevant aspects are:
Whether balance sheet lending (and hence leverage) is allowed;
The responsibilities (and liabilities) to retail investors;
The restrictions regarding institutional investors.
In the United States, Prosper and Lending Club are governed by SEC rules, and for all practical purposes behave like broker dealers. They originate the loans and sell securities called notes backed by the loans they originate under a program prospectus. They are technically securitizations, but unlike the CDOs of old, the notes do not correspond to tranched portfolios to enhance the credit rating; and no complex derivative is involved.
As for the three aspects above, broker-dealer designation implies that (1) there is no restriction to lend with its own capital; (2) sale to retail investors is allowed but strict SEC regulation applies and (3) institutional (or accredited) investors may participate.
To illustrate the divergence in the other extreme, China does not allow platforms to lend using their own capital, forbids the participation of institutional investors in marketplace lending and forces platform accountability to retail investors not by securities regulation by through strict disclosure policies. Curiously, under Chinese regulation, marketplace lending platforms are not technically financial institutions but are designated as credit information platforms.
Divergences in regulation directly impact the sustainability of the business. While not entirely obvious, marketplace lenders do spawn credit portfolios in the process, notwithstanding that the majority of which is eventually sold. Credit portfolios come with their long tails in loss distribution. How investors cope with the long tail and how platforms share this risk matter a great deal. The economics of a lending business, after all, cannot escape the logic of risk-return and the cost of funding. Peer to peer or not, lending has been about matching loans to funds for centuries. An unstable platform structure, begotten by clumsy regulation or a clumsy reading of regulation, will vitiate the revenues of the entire business. Structural risk is in fact the single most important risk factor in Asian platforms, and sadly, often poorly understood.
Large structural issues aside, smaller nuances, in cumulative effect, also influence the behavior of platforms. Lending cap is an illustrative example. While Singapore and Malaysia do not impose lending caps, Indonesian regulators have set a cap of SGD 200,000 per borrower, at least for now. Hence Indonesian platforms that are able to acquire a large number of borrowers consistently will generate portfolios with far greater diversification benefits.
The emerging market business environment
Small businesses in Asia face significant financing gaps. Such small businesses range from sole proprietors hawking goods in street bazars to more conventional small and medium enterprises (SMEs) with national or even regional supply chains. Measuring this financing gap is no simple matter. According to a study by IFC2, some 92 million SMEs in East Asia remain unserved or underserved.
As for access to personal credit, a large segment of the population remains unbanked or under banked. Some 55% of the word’s unbanked and underbanked population resides in Asia Pacific region3. The rise of marketplace lending (and fintech in general) is often hailed as the digital age’s cure to these chronic ills. The market size is immense.
That technology shall deliver the bulk of humanity from financial penury appeals to fintech idealists, and has rallied countless entrepreneurs under the financial inclusion banner. Reality, on the other hand, remains ever so unfailingly sober. Imperfect rule of law, absence of data infrastructure and deeply entrenched business practice define the business environment of marketplace lending in Asia.
Successful platforms adapt to this reality and thrive. The characteristics of loans generated reflect these adaptations, the most significant of which are negative enforcement mechanisms and partnerships.
Many Asian countries have just started constructing credit bureaus (e.g. Indonesia) or do not enable marketplace lending platforms to provide defaulting records to credit authorities (e.g. China). In some cases, the legal procedure to enforce default to prove financial fraud is too costly or burdensome to pursue. Hence negative enforcement mechanisms that seek to create negative consequences for unpaying borrowers supersede judicial options. These mechanisms need not be brutal or violent collection practices. For example, a notification to an SME borrower’s vendors, or the mere threat of one, could generally force the borrower into repayment or negotiation. Sharing a black list with other platforms or lending entities is also effective.
The use of partnerships is often motivated by negative enforcement, since partnerships generate a specific context where borrowers cannot default with impunity. For example, a partnership with an e-commerce platform that refers merchants as borrowers and freezes merchant accounts in case of defaults offers powerful negative enforcement. An agreement of program financing with a large manufacturer for its suppliers follows a similar logic. Some fintech practitioners coin the phrase “ecosystem play” to describe these mechanisms, but in essence such agreements rely on a partner’s ability to create and implement negative enforcement mechanisms and to bolster loan growth. Partnership loans therefore often feature prominently on Asian platforms, and well executed partnerships will provide platform investors with handsome risk-return.
At this point fintech enthusiasts may feel disenchanted that terms such as big data, machine learning or analytics have not found their way into the discussion. Such concern is partially warranted. The prevalence of data analytics in developed markets have reaped the benefits of data infrastructure efforts spanning decades by the private sector and the public sector. Lending Club could “easily” declare a credit score cutoff of 600 because Fair, Isaac and Company (now known as FICO) began building statistical credit scoring models in 1956, and because US public authorities have kept orderly records social security numbers to identify unique individuals, and because the US Postal Service began introducing the five-digit zip code system in 1963 which facilitated the construction of address databases. Most Asian marketplace lending platforms (with the possible exception of those in Singapore) must cope with lesser data infrastructure at the national level.
This does not mean that data analytics efforts in Asia will wither. The data landscape in Asia is actually more complex. In some areas such as credit bureaus, insufficient default histories simply take time to build up and will lag developed markets. In other areas such as the incorporation of social media driven payment data in anti-fraud modeling and supply chain logistics, Asia may leapfrog developed markets, as China has successfully demonstrated with payment infrastructure. As Asian countries fixate their attention on data infrastructure, marketplace lending platforms must navigate the data landscape as “work in progress”, but may also position themselves to contribute to the national data infrastructure through public and private sector partnerships.
For example, in Malaysia, private credit bureaus proactively solicit default data from marketplace lending platforms. In Singapore and Indonesia, more sophisticated private sector partnerships exist to share logistics, inventory and transaction data across regional supply chains between logistics companies, manufacturers and marketplace lending platforms to facilitate invoice financing. Data does exist in Asia, but who is willing to share what with whom is equally, if not more, important. Claiming technical superiority is inconsequential if the platform cannot sign agreements to unlock key data sources. The risk-return of loans generated by “automated” underwriting is not just about technical prowess.
Conclusion: What this means for investors
Marketplace lending in Asia offers investors fixed income exposures to a region of vibrant economic growth where conventional fixed income products are hard to come by, and without the volatility of marked to market instruments. The risk-return profile can meaningfully enhance any fixed income portfolio, but only for those who know to curate these platforms properly:
Avoid platforms with structural risk.
Seek out platforms well versed in regulation – and in dealing with regulators.
Beware of platforms that boast analytics without explaining how they source data.
Study how the platform implements negative enforcements.
Look at how the platform handles partnerships, and who negotiates them.
The list is not exhaustive, but hopefully points investors in the right direction. If it reminds us of the business acumen of old, that should be no surprise. Lending is an ancient business, where risk emanates not from numbers but from human capriciousness. Those who can blend the latest analytics in capturing and measuring risk with the prudence to manage the psychology behind it will likely survive.
1 Bloomberg TV interview, June 2015
2 Closing the Credit Gap for Formal and Informal Micro, Small, and Medium Enterprises, IFC, 2013, p.8
3 See PWC DeNovo Q2 2016 FinTech ReCap and Funding ReView and datatopics.worldbank.org/financialinclusion/home
Terry Tse is a LendingCalc advisor focusing on the company’s strategic direction and global partnerships. He currently oversees global expansion at the largest B2B payment company in China, LianLian Group and serves as an adviser for the Southeast Asian P2P firm, Funding Societies. Formerly, Terry was the Chief Risk Officer at Dianrong, where he executed a ten-fold increase in loan origination for the P2P platform. Terry holds a B.S. in Mathematical and Computational Science and a M.S. in Financial Mathematics from Stanford University.
News Comments Today’s main news: How to build a $100 billion company. Square launches in UK. Century-old Thai bank plans digital revamp. ClaimVantage raises funds to expand into Asia. Today’s main analysis: Tech will lead to new sub-prime crunch. Today’s thought-provoking articles: An unofficial chat with Ron Suber. How technology is changing online credit checks. Legal considerations of running a […]
Tech will lead to new sub-prime crunch. AT: “Sound premise, but it deserves some mulling over. There is definitely a technology paradigm shift underway and that has long-range economic and employment implications, to be sure. But can we narrow this down to one phenomenon?”
The tables below demonstrate cumulative changes in interest rates for Lending Club and Prosper. Although the rate for high-grade loans for Lending Club has slightly increased over time, while dropping a little for Prosper, the tendency for both companies is similar: They are widening the gap between low and high-grade borrowers.
Since 2013, the top 40 percent of earners have accounted for 84 percent of all new income and 34 percent of new debt, which led to a material reduction in aggregate leverage relative to income and provided for consistent growth of retail sales, as this cohort represents 65 percent of total consumption. According to the article, the recession will be a result of a material reduction in consumption from these top earners, who have historically followed the deterioration of lower and middle-income households.
With the penetration of technology, more and more labor-intensive work is shifted to computers or machines. People employed in manual labor, who mostly get an hourly wage, are in less demand on the market, which leads to the number of such jobs decreasing. Most jobs that were previously done manually are being substituted by machines, which, accordingly, increases competition among workers of respective industries.
The statement is easily supported by the last data available: A new study by Forrester forecasts that cognitive technologies such as robots, artificial intelligence, machine learning and automation will replace 7 percent of U.S. jobs by 2025 (with 16 percent of jobs replaced and the equivalent of 9 percent jobs created).
By the end of 2016 there were more than 4.1 million people who drove for a living, with more than 3.5 million doing it full time. The automatization of driving will lead to all of them being forced to change their jobs, and obviously turning to software and tech industries is not an easily affordable option for these people.
Employment in the tech industry is, on the other hand, quickly growing. According to the results of a Cyberstates 2016 report prepared by nonprofit IT trade association CompTIA, employment in tech hit its highest growth rate in more than a decade in 2015, reaching 6.7 million people for companies with formal payroll in place in the U.S., up about 200,000 from the year prior.
Summarizing the above, we can expect that for workers employed in labor-intensive industries, the wages are not going to rise as a result of increased competitiveness for jobs in these sectors. Stagnating wages will lead to credit of such workers suffering (which is, in fact, already happening), as their anticipated increase in income is not realized even when the economy is doing well in general.
Mike Cagney, the CEO of financial services startup SoFi, does not lack for confidence. But then again, confidence is what you need to raise billions of dollars and take on some of the largest and most powerful companies in the world — global financial giants like Chase, Citi, and Bank of America. To get there, Cagney’s got a pretty clever playbook: He’s partnering with those same banks, who buy the loans he originates and profit from SoFi’s unique skill at acquiring new customers.
If you circulate within fintech, pretty much anywhere on the planet, there is a high likelihood you’ve heard of Ron Suber. And in case you haven’t, he’s the president of Prosper Funding, the marketplace lending platform that has now funded over $8B in loans, and recently closed a deal with a group of institutional investors to purchase up to $5 billion worth of loans over the next 24 months.
I asked him how he deals with all the travel, plus the highs ($5B deal-yeah!) and lows (Lending Club-OMG!) of the job, and he jokingly responded “Funny – (with) a unique combination of Yin Yoga and Johnny Walker Black”. He also said he does “intention setting” before he gets out of bed every day, which he has found incredibly helpful.
The full deck for the Lendit 2017 presentation can be downloaded at this link: LendIt.FINAL
The last deck he shared with us from the AltFi Australasia Summit in Sydney. The event was attended primarily by Australians and New Zealanders, with some Asians in attendance as well and also had a slightly different angle.
The speech compared online lending to online trading, showed a 5 point overview of the industry since inception, and included a picture showing traditional banks already involved in marketplace lending.
Tech development is not cheap. Those hoping to raise angel or VC capital for a real estate crowdfunding platform have, in my humble opinion, missed the boat by a couple of years.
That said, if venture funding isn’t available, it doesn’t make sense to spend a lot of money on technology. Many of the RECF platforms out there today would like to command a tech multiple, but in reality, function more so as technology-enabled brokering or origination shops. For the vast majority of RECF platforms, their value is is not in their technology, but their ability to fund or originate deals.
Will this be a personal platform for your own deals, or will the platform raise funds for deals from other parties? If the latter, you may be brokering or dealing, and may need to obtain a license.
Will you be selling equity or debt securities? What type of debt will you be selling? What will it be secured by, if anything? What type of equity will you be selling?
What type of real estate will you be raising funds for? Will the properties be residential properties? Commercial? Rehab? New development? Is there a geographic scope involved? You should have a specific business plan in mind.
It’s great that RECF platforms are hot right now, but remember – you’re still selling a security, and securities laws really aren’t the type of laws one should take lightly.
RealtyShares, a leading online marketplace for real estate investing, today announced that its network of accredited investors has raised $3.5 million in equity capital for the $67.3 million acquisition and renovation of Avesta Biscayne in North Miami, Florida. This is the largest equity investment that RealtyShares has raised to date through its real estate investing marketplace.
Avesta Biscayne is a 402-unit apartment community near the Biscayne Bay shoreline, consisting of six mid-rise buildings and amenities including a clubhouse, two pools and a tennis court. The deal is sponsored by Avesta Communities, a vertically integrated multi-family owner-operator specializing in apartments serving the middle-income renter. Previously, Avesta raised $2.25 million through RealtyShares to recapitalize and renovate Avesta Bridgewater, a 344-unit apartment complex in Orlando, Fla.
In the U.S. mortgage market as a whole, shadow banks held a 38 percent share in 2015, compared with 14 percent in 2007.
In other markets, financial organizations that are not subject to bank regulation have flourished, too. According to the Financial Stability Board, the august body that makes recommendations to the global financial system from Basel, Switzerland, “other financial intermediaries” — the category that includes non-bank lenders but not insurance companies and pension funds — increased their assets to $80 trillion, or 23 percent of total financial assets, in 2014. Their average growth reached 5.6 percent in 2011 through 2014, while the global banking system’s assets stopped growing during that time.
The reason shadow banks have largely escaped public scorn, regulatory scrutiny and high capital requirements is that they often came in the guise of high-tech disruptors. Quicken Loans Inc., the third biggest mortgage lender in the U.S. in 2015, does business online and on the phone, and that somehow makes it less interesting to regulators than a bank that does the same through an old-style branch network. Lending Club and other “peer-to-peer” lending firms quickly became conduits for large investors, not “peers,” yet they avoided regulation as though they were innovative tech platforms.
By 2015, 85 percent of the mortgages they originated was sold to government-sponsored enterprises such as Fannie Mac, Ginnie Mae, Freddie Mac and Farmer Mac. They benefit from implicit and explicit government guarantees originally supplied to banks — without shouldering the same regulatory burden or facing the same stigma. In other words, they profit from regulatory arbitrage.
This report describes KBRA’s rating methodology for U.S. consumer loan asset-backed securities (“Consumer Loan ABS”). This includes transactions secured by collateral originated by traditional consumer loan companies, as well as, through online consumer loan marketplace lending platforms (“MPL Platform”).
Wells Fargo is betting that having access to a live financial advisor will convince clients to put up higher minimums and pay more for its robo-advice platform than for its competitors’ platforms, the Wall Street Journal writes.
The company’s Intuitive Investor automated advice service requires a $10,000 minimum investment and costs 0.5% of assets annually, according to the paper.
By contrast, Merrill Lynch’s Edge Guide Investing platform and Schwab Intelligent Portfolios only require a $5,000 minimum, while Wealthfront requires $500 and Betterment has no minimums, the paper writes. All of these platforms charge fees ranging from 0.25% to 0.45% of assets, except Wealthfront, which only starts charging 0.25% on accounts with more than $10,000, according to the Journal. Vanguard Personal Advisor Services, meanwhile, comes with a hefty $50,000 minimum but charges only 0.3%, the paper writes.
What’s more, Wells Fargo and other full brokerages aren’t necessarily competing with pure robo-advice pioneers such as Betterment and Wealthfront, William Trout, a senior analyst at research firm Celent, tells the Journal. Rather, they’re aiming to tap into their existing client base, he says. Wells Fargo is targeting its retail bank clients who currently don’t receive any form of advice, Lai tells the paper.
So the New York Financial Press, launched in April 2016 by Syosset-based Morey Publishing as an “alternative financial news journal” that would dive deeper than earnings statements and trading indexes (not to be confused with the Wall Street-based media company founded in 2005 by Pierre Alexandre) – is now feeding Mayava Capital Inc., a Syosset startup created to facilitate small-business lending.
The other five sites – each focused on lending in a particular vertical market, such as healthcare or transportation or IT – were created by Morey et al specifically to usher visitors directly into Mayava Capital’s arms.
FUTURE DIGITAL FINANCE AND PERFORMANCE HORIZON RELEASE NEW INDUSTRY BENCHMARKING REPORT (Future Digital Finance Email), Rated: A
Today, Future Digital Finance and Performance Horizon released their findings from their new report titled “Benchmarking Performance Marketing Adoption within Financial Services Strategies”. As the consumer revolution in retail banking continues, the whole financial services vertical has seen dramatic shifts towards electronic interactions across their consumer and business-to-business operations. This new study takes a look at the wider variety of marketing channels firms have begun to leverage, especially ones with clear measurement methodologies that contribute towards revenues.
Key statistics from the survey include:
– Performance marketing, including affiliate marketing, primarily drives customer retention for 21% of financial services companies.
– Almost a third of companies spend at least 20% of their overall media budget on performance-oriented programs, while 21% of companies spend at least 40% of their overall media budget on performance oriented programs.
– Finance companies are looking to grow performance-based marketing programs as 77% of companies prefer to pay new partners based on performance.
– 93% of companies expect mobile website sales will increase, and 92% expect mobile app sales will increase in 2017.
– 86% of companies agree that data and insights from their existing partner marketing programs enable them to make better business decisions.
cloudvirga℠, developer of the automated, cloud-based intelligent Mortgage Platform® (iMP), announced today it has raised $15 million in a series B funding round led by Incenter, a Blackstone Group portfolio company. The new funding will support cloudvirga as it scales its technology and expands its product offerings.
Cloudvirga’s flagship mortgage point-of-sale (POS) system, the iMP empowers consumers to take the helm of a completely re-engineered mortgage workflow that automates the entire initial disclosures process and delivers unmatched transaction speed and efficiency to both borrowers and lenders. Central to cloudvirga’s success is its ability to maintain strict regulatory compliance, reduce time to close and save lenders money by moving many traditional back-office tasks to the front of the loan process.
Within the constraints of its jurisdiction and mission, the OCC is clearly trying to do its part to address the regulatory issues raised by financial service providers in the technology sector. The agency is not simply pursuing a “bank-lite” charter.
The regulation of financial services in the U.S. is highly fragmented, and fintech is challenging every aspect of that structure. Federal and state agencies can stake claim over the regulation of fintech, yet both are ultimately limited by narrow lanes and tightly defined jurisdictional boxes prescribed to them by their respective charters. As a result, even the most well-intentioned efforts are only able to address the trees, but not the forest.
The goal of its proposal is to encourage the entry of fintech firms into federally regulated financial services. But if the actual pool of applicants ends up being extremely small, that’s going to be a real problem.
Random Forest Capital Raises $ 1.75 Million for Strategic Talent Acquisition (Random Forest Email), Rated: B
Random Forest Capital () completed its seed round in January 2017 with $1.75 million led by a very impressive group of angel investors. The money will be used to build out its full stack software and machine learning algorithms and acquire strategic talent for helping institutional investors find the right opportunities in consumer, residential, and commercial credit.
“There are 400+ platforms that originate many types of secured & unsecured debt,” said Kevin Farrelly, chief operating officer, general partner, and co-founder of Random Forest Capital. “We can analyze a massive amount of data from those platforms in seconds whereas a human analyst will take days to weeks.”
Random Forest Capital uses machine learning algorithms and third-party systems with APIs to source investment opportunities from eight platforms (and growing). Their custom algorithms then price the risk and can execute in microseconds.
“Loan originators make money originating loans – so it’s in their best interest to bucket all the loans together. Our goal is to preserve investor capital. These competing interests create a fundamental divide where alpha in marketplace lending is easily found,” said Austin Trombley, chief technology officer and co-founder of Random Forest Capital.
Random Forest Capital recently added two new members to its expert leadership team. Julie Choi, Ph.D. has been named the chief risk officer. Carl Siemon, Ph.D. has been named the principle data scientist for Random Forest Capital. Siemon is a Physics Ph.D. graduate from UT Austin where he was supported by the prestigious National Defense Science and Engineering Fellowship.
MoneyLion Wins Gold at PYMNTS Innovation Project Awards for Best Credit Innovation (MoneyLion Email), Rated: B
MoneyLion, the mobile personal finance platform that puts consumers in control of their financial lives with AI-driven tools and smarter credit products, has won the gold medal for Best Credit Innovation at the PYMNTS 2017 Innovation Project Awards. The award coincides with a major growth milestone for MoneyLion, which now has over a million users.
Mobile payments company Square launched for UK based businesses today. This launch is the fifth market for Square since launching in the US in 2010 and since expanding to Canada, Japan and Australia.
Square Point of Sale has actually been available in the UK, among other markets around the world, for a few years already, however the full features of the product that’s available in Square’s four main markets were not available.
In addition to three more courses for London & Southeast candidates this year, the Academy has expanded to:
Northern England: Manchester, 25 – 26 May
Scotland: Edinburgh, 22 – 23 June
Midlands: Birmingham, 7 – 8 September
Southwest England: Bristol, 9 – 10 November
All courses are carefully tailored to resonate with common issues facing developers in their respective regions. All modules are taught by industry specialists from the local area who will drawn on locally relevant case studies and anecdotal evidence.
Lendy, announced on Tuesday it is integrating its popular investor-facing platform, Saving Stream, under its Lendy brand as part of the platform’s continued growth. According to the company, it is merging Saving Stream, with its borrower-facing brand, Lendy Finance, in order to simplify its branding and to make accessing its loan-based crowdfunding platform easier and more accessible to clients.
Lendy revealed that the total amount loaned to property developers and investors through its peer-to-peer platform has now topped £285 million and its 15,000 registered users have received £20 million of interest from the loans they have written. The company also stated its user base has more than doubled from 5,600 at the start of 2016, with the platform’s popularity among lenders being driven by:
The security provided by property-backed loans
The additional security provided by Loan To Value (LTV) ratios on all Lendy loans being capped strictly at 70%
Returns of up to 12% on loans written through the Lendy service.
It generally takes nothing more than a simple click on the ‘yes’ button to authorise an online peer-to-peer (P2P) lender to go through an applicant’s credit history before approving a loan.
But the assessment may in fact go far beyond the borrower’s imagination.
With vast amounts of data at their disposal, the powerful analytical programs behind the screen are often capable of picking up diverse fragments of an applicant’s life story and piecing together a complete picture. And it all happens in a matter of minutes.
Cloud Atlas, a risk management system developed by Finup, is one such example. After obtaining consumers’ consent to access their mobile contacts book and apps as well as information provided by third-party data agencies, the system is able to carry out a thorough analysis to figure out whether the applicant is eligible for loans on the particular P2P platform.
The pass rate of applicants for loans under the Cloud Atlas system is well below 10 per cent, as the three-year-old company uses strict criteria.
The seemingly relentless proliferation of China’s peer-to-peer (P2P) lending platforms has finally been contained by stringent measures introduced by the government in a bid to tackle a fraud epidemic that tarnished the industry’s reputation.
The sector, which ballooned to host thousands of firms of varying sizes and specialities, will eventually become limited to just a handful of mega participants, according to Zhang Shishi, a co-founder of the Chinese P2P platform Renrendai.
However, the heated competition that emerged as a wave of profit-hungry new players crowded in, all hunting aggressively for investors and money in the markets, led to a rise in illegal activity. Countless cases of P2P lenders promising high returns from non-existent projects and then running off with the proceeds made the headlines.
Siam Commercial Bank Pcl, Thailand’s oldest homegrown lender, plans to reinvent its mobile digital payment platform as a lifestyle app to help fend off competition from upstart financial technology providers.
The lender is working with companies including Accenture Plc, Microsoft Corp. and International Business Machines Corp. on the project, Chief Executive Officer Arthid Nanthawithaya said in an interview. The long-term goal is an app that allows customers to search and pay for entertainment options such as restaurants and cinemas, going beyond just day-to-day banking, he said.
Siam Commercial Bank’s shares gained 0.6 percent at 10:46 a.m. in Bangkok on Wednesday. The stock has climbed about 4 percent in the past three years, less than the 8 percent advance in the Stock Exchange of Thailand’s Banking Index.
IRISH-BASED FINTECH COMPANY ClaimVantage has secured €2 million in funding to bankroll its move into Asia.
The international firm, which has been headquartered in Dublin since it was founded in 2006, develops and provides cloud-based claim management software for some of the top insurance firms in the US and Canada.
The Monetary Authority of Singapore (MAS), Singapore’s central bank and financial authority has signed FinTech cooperation agreements with a pair of French regulators to boost FinTech ties between the two countries.
The cooperation agreement sees Singapore’s central bank partner the Autorité de Contrôle Prudentiel et de Résolution (ACPR), the authority monitoring banks & insurance companies in France and the Autorité des Marchés Financiers (AMF), France’s stock market regulator.
Under the agreement, the three authorities will adhere to a framework that fosters the sharing of information relating to FinTech trends and services. Joint innovation projects and regulatory hurdles will also be discussed between the two countries.
According to the World Bank’s Migration and Remittances Factbook 2016 report, migrants are sending earnings worth more than US$441 billion to families in developing countries, contributing to the 10% of GDP of some 25 developing countries. With KSA, UAE and Kuwait among the top ten high-income countries categorized as main sources of remittances in 2014, six GCC countries accounted for $98 billion in outward remittance flows in 2014. As the region’s expat population transfer money to respective home countries, there’s a prevalent reality that there is a struggle (especially among blue-collar workers) to access bank accounts- and this is what fintech startup NOW Money is trying to solve.
With a tagline of “empowering the unbanked,” founders Katharine Budd and Ian Dillon launched NOW Money to provide expat workers who don’t have access to banking and remittance services with direct access to a current account, debit card and remittance from their proprietary app and service center.
Compared to outbound remittances sent as cash (which is often hard to follow), the startup tracks “payments from salary, to remittance, to collection by overseas. This is an important step change in the progress the UAE is making towards combatting money laundering and criminal funding.” With respect to security and privacy, facial recognition tech is used to enable users to log in to the NOW Money app- a photo cannot be used to fake an entry, since movement is accounted for by this feature: the user has to blink to log in. It also records the way you hold your phone and type, so suspicious behavior will cause an alert notification. Although pin codes and passwords are still present as per the current compliance laws requirement, the team believes such a system is still susceptible to hackers, and thus Budd asserts the advantage of biometrics.
The authors estimate that approximately USD 475 million was made available in Africa and the Middle East via alternative financing methods between 2013 and 2015, with Israel accounting for USD 125 million of this total. The authors conclude that alternative finance as a whole grew more slowly in Africa and the Middle East than in other parts of the world as the development of the market was in its early stages.
As a large percentage of small businesses, online retail sales as a percentage of total retail sales have doubled in the past five years. Ecommerce sales overall in 2006 were just over 107 billion, representing 2.7 percent of total retail sales . There are over 100 million Ebay users in the US today, with an estimated 200 million new listings in 2Q, 2008 alone. There are an estimated 5 million power sellers transacting over 48 billion on Ebay and more than 8 million high-volume sellers representing over 70 billion across all marketplaces.
Rob Frohwein founded Kabbage to get small businesses capital quickly, an area in which banks have long struggled.
Kathryn Petralia has 12 years of experience in the consumer credit and payments space.
Amy Zimmerman has spent 15 years building tech companies by identifying and cultivating talent. Her focus at Kabbage is to foster the company’s inventive culture.
However the alternative method is for a startup to operate on its own steam by meeting the requirements to obtain the requisite licences although this method requires significant capital outlay. As such, FinTech startups that are seeking to exploit the significant market opportunities in Nigeria are bound to run into several regulatory compliance obligations.
The payment and processing segment of the FinTech sector for example — which has shown the most growth and success thus far — is primarily governed by the same general framework as are traditional financial institutions providing offline financial services (e.g. money/payment transfers, clearing, switching, settlement etc), in addition to regulations related specifically to that sub-sector.
Thus, the legal and regulatory framework that is generally applicable to financial institutions — such as the Central Bank of Nigeria (CBN) Act, 2007, the Banking and Other Financial Institutions Act (BOFIA) and all subsidiary instruments stemming from same — are all relevant to any non-bank led startups providing digital equivalents of offline financial services. This framework brings with it mandatory obligations such as KYC and AML requirements that must be strictly adhered to.
Commercial lending activities are regulated in Nigeria and as such require licensing by either the CBN (for banks and other financial institutions) or the Ministry of Home Affairs of the various states (non-financial institution lenders).
The Nigerian Insurance Act provides the overarching framework for operators of all types of insurance business in the country and the National Insurance Commission (NAICOM) is the industry regulator. Under the act, one must be duly registered with NAICOM before engaging in the business of insurance.
News Comments Today’s main news: U.S. justice dept. seeks to restructure CFPB. LC increases borrower rates on riskiest loans. Goldman building robo-advisor. Funding Circle closes funding round, valued at $1B. Today’s main analysis: Southeast Asia Fintech deals hit new record. Today’s thought-provoking articles: Happy 1st birthday, Zopa Plus. First Lithuanian P2P lender. WeiyengX Fintech Review. United States U.S. justice department […]
U.S. justice department seeks to restructure CFPB. AT: “I saw this one coming, but who didn’t? This is one of those cases where it seems like the right thing to do legally, but not quite so politically. Being structured the way it is takes politics out of the mix as the CFPB is not subject to presidential whim as other executive branches are. On the other hand, the Trump Administration has a good argument that there is no Constitutional provision for independent overseers. It will be interesting to see how the courts decide. Either way, there will continue to be a fight over regulatory oversight of the industry–whether it’s necessary and who has the authority.”
Lending Club increases borrower rates on riskiest loans. AT: “More evidence that the industry is changing. This isn’t really revolutionary as other platforms have gone this route. It’s evident, however, that the problem of defaults has to be addressed. On the other hand, doesn’t this move make online lenders more like traditional lenders?”
The Trump administration took aim at a consumer finance regulator created after the 2008 financial crisis, backing a legal effort to have the structure of the Obama-era agency declared unconstitutional.
The Justice Department, now under Trump administration leadership, filed court papers on Friday opposing the Consumer Financial Protection Bureau, an independent regulator, asking a federal appeals court to order the restructuring of the agency.
The CFPB is fighting to keep its current setup, which gives its director protection from political interference from the White House. The administration in February said that President Donald Trump believes the bureau as currently organized is unaccountable to the public.
The Justice Department said the CFPB’s structure creates separation-of-powers problems under the Constitution because the bureau director isn’t sufficiently answerable to the president.
LENDING Club has made its largest borrowing rate increases on its riskiest loans, with further hikes expected in line with the US Federal Reserve.
The US peer-to-peer lender – the world’s largest with over £20bn of funds channelled to date – has increased the cost of borrowing most significantly for loans in the E, F and G grades, following interest rate hikes by the central bank.
Rival platform Prosper has increased borrowing rates at a “mild” pace in comparison and more evenly across risk grades, according US alternative lending research firm PeerIQ’s latest quarterly performance monitor.
Goldman Sachs Group Inc (GS.N), known for advising the world’s richest and most powerful, is building a so-called robo-adviser geared to mass affluent customers, according to a job listing posted Monday on the bank’s website.
The robo platform would sit within the bank’s rapidly growing investment management division, according to the ad. The unit, which Goldman has been trying to build out in recent years to diversify its revenue, posted a record $1.38 trillion in assets under supervision at the end of 2016.
Goldman has for years grappled with how to tap into the mass affluent segment, broadly defined as those with less than $1 million in investable assets, without diluting the brand of its private wealth business which is considered a jewel within the bank, according to people familiar with the matter. Goldman’s U.S. private wealth business typically advises clients with an account size of around $50 million.
You’ve been at Citi almost 30 years and now you’re leading Citi FinTech. How has “fintech” evolved?
There’s a common misconception that large banking organizations aren’t able to operate like a startup, that they don’t have that mentality, that they’re too big too change. The word fintech without a doubt applies to startups in the space but a lot of that is how you pull in these startup-type organizations with the big banks to create a set of financial services that are orientated to the customer.
What has that blend of different talent and experience done for your work culture?
We’ve spent a lot of time creating a nontraditional banking culture. We operate in a very agile manner with the product, development, design teams so they work together and are completely integrated. They do their work through stand-up meetings on a daily basis, we don’t have offices – I do not have an office, I sit on the floor. We celebrate failure – if someone makes a mistake they actually win prizes for sharing that, all they have to do is demonstrate they learned something from it – to really create an environment of creativity and ambition for the product and how we serve our product.
The Developer Hub also sort of brings those different talents together.
[The Developer Hub] actually covers 85 percent of the core services a customer performs. We wanted to expose many of our APIs to a much larger community, to be exposed to the services they’re working on and give them the opportunity to come to Citi to uncover and unveil where those hidden gems are, those additional opportunities.
OnDeck® (NYSE: ONDK), the leader in online lending for small business, announced today that it will be adding Jim Rosenthal, the former chief operating officer of Morgan Stanley, to its board of directors, effective April 3, 2017.
During his tenure at Morgan Stanley, Rosenthal served in a variety of roles, including as COO of the company from 2011 to 2016 and as chairman and chief executive officer of Morgan Stanley’s approximately $130 billion national bank. In his role as COO, Mr. Rosenthal was responsible for overseeing firm-wide technology and operations, Morgan Stanley’s wealth management digital business, corporate strategy, re-engineering and expense management, technology company relations, and cybersecurity. He remains a senior advisor to Morgan Stanley.
Rosenthal has more than two decades of experience across a wide spectrum of financial services. He joined Morgan Stanley in March 2008 from the global real estate company, Tishman Speyer, where he served as chief financial officer. Prior to that, he worked at Lehman Brothers, serving as head of corporate strategy and execution and as a member of the firm’s management committee. Rosenthal began his career with McKinsey & Company, where he was a senior partner, specializing in financial institutions.
Two developments, one in the US and one in the UK, signaled a potential shift in the banking world and Fintech.
Chris Skinner wrote about a new national bank charter in the US issued by the Office of the Comptroller of the Currency which opens the way for all kinds of organizations to try to set up banks, including big consumer brands like Walmart and Apple. Essentially they have just shown the way for these kinds of organizations (as well as payments companies like Square, WePay or Stripe) to apply for a banking license.
Investor interest in the peer-to-peer lending industry shows no sign of slowing; British site Funding Circle have just closed another round of funding, taking their total raise to $300 million.
Funding Circle recently closed another round of venture capital funding to the tune of $150 million, valuing the company at $1 billion. The new round was led by DST Global, BlackRock, and Temasek, a fund backed by the Singaporean government.
A year to the month after we launched Plus, our higher return and higher risk investment offering, investors have lent out more than £100 million. That’s nearly 9,000 people investing on average £12,000.
Plus is performing in line with expectations. Individual investors will have different individual experiences, however, 73% of investors invested for an average of at least 6 months, with no loan sales, have achieved actual returns of at least 6% to date.
AIM-listed IFA Frenkel Topping has completed a suitability review which has seen £253 million of client assets transferred to its own in-house discretionary fund management (DFM) offering.
In May last year the national advice firm received discretionary permission from the Financial Conduct Authority (FCA), meaning it could transfer clients to its new investment company which acts as a DFM.
This review has seen £253 million of clients assets transferred to its in-house offering. The firm had £745 million of assets under advice at the end of 2016.
It’s no secret that we aren’t building enough homes in this country.
There are a host of reasons for this, from an over reliance on large builders to a paucity of funding. The second-class status of property SMEs – compared to SMEs in other industries – is also a huge rod for housebuilders’ backs, and it’s an issue LendInvest has been keen to highlight.
But there is also a fundamental issue – often overlooked – which is serving to hamper efforts to deliver more homes. To quote Tony Blair: education, education, education.
That’s why last year LendInvest launched the Developer Academy, a two-day course for those with some property experience allowing them to hear from – and build contacts with – experts across everything from planning permission to marketing the finished properties. We have now held two separate academies in London, with further sessions planned this year: four in London and four across the regions. So far 50 prospective developers have benefitted from these courses.
With limited access to funding, small businesses in Lithuania have struggled to expand, limiting the growth of the economy. Recognising this, the Lithuanian government recently established the legislation needed to allow Peer to Peer Lenders to provide business finance loans and FinBee played an active role in its development.
Laimonas Noreika, CEO of FinBee, explained: “We were delighted to be the first P2P platform to receive our licence to help small businesses borrow to finance their growth. Our technology helped us to achieve this. When we first launched consumer lending, we chose Madiston’s software because it was ready to go with what we needed but also gave us the ability to add functionality as we grow. The first step in our expansion plan was to add business lending and the technology was there for us, Madiston has been a supportive partner throughout.”
It was announced today that Article 50 will be triggered on March 29th. I recently wrote about Berlin’s potential to become fintech capital of the world after Brexit, but with French officials in London scouting finance and technology companies, Paris could become the hotspot for startups.
Without passporting rights, many businesses may have to set up subsidiaries in other European countries, which is why last month, French senior lobbyists and politicians started to woo companies in the same way Nasrou is, according to Business Insider.
At the start of this year, French digital minister Axelle Lemaire did the same and in a recent interview with Business Insider, she highlighted how although British startup investment fell, investment in French technology has soared by 71% from January to September in 2016. “In the third quarter of 2016 alone, funding obtained by French startups reached €857 million ($921 million), double the amount invested in Germany and almost equaling the €919 million ($988 million) invested in the UK,” Lemaire said.
French fintech Lemon Way is going after Stripe in the e-commerce payments arena with the launch of the payments service across France, Germany, Spain, Italy and the Benelux region.
Real time electronic payments provider ACI Worldwide also announced at the end of last month that French company PSP would be targeting the SME market with the ACI PAY.ON Payments Gateway, with the goal of expanding internationally.
It is important to note how interesting all of this action is being taken so close to the time Brexit was in the process of being triggered.
Financial compliance education and training programmes provider, Mentor Education has entered into an alliance with Suitebox in order to help financial planners become more ‘tech savvy’.
Stage 3 would provide an education portal available to students, the financial planning community and educators to promote and engage the development of new initiatives in financial services education.
The central bank highly encourages and supports the development of Fintech. At the press conference, Governor Zhou Xiaochuan stressed that China has made great achievements on financial technology, and the central bank was actively working on digital currency and new technologies such as blockchain, which would promote the development of the whole finance market.
In particular, he emphasized that the development of technology would boost the payment industry by providing more payment channels.
UnionPay Launches Blockchain-Based Credit Integration and Sharing System
On March 8, China UnionPay Data Services and Gingkoo jointly launched a blockchain based credit integration and sharing system.
The system uses blockchain technology to improve inter-bank credit card points management, and it enables clients to redeem points across banks.
The system is built on Gingkoo’s Xingchain, which replaces the original credit card points management system.
CBRC to Regulate Micro-Credit Companies
China Banking Regulatory Commission (CBRC) is formulating new regulations to strengthen the supervision towards micro-credit companies.
NEXTDATA raises $10 million in Series A Funding from multiple investors
Big data company NEXTDATA has raised $10 million in Series A funding from Shunwei Capital, Crystal Stream Capital, Baidu Ventures. Previous investor 360.com also invested in this round.
The founder of NEXTDATA Tang Huijun said the fund would be used for product development, technological innovation, market development and talent introduction.
Auto Fintech Platform Daikuan Raises 20 Billion Yuan from Zhongtai Securities
On March 8, Auto Fintech platform Daikuan.com and Zhongtai Securities reached a strategic partnership. The two sides signed a strategic framework agreement involving 20 billion yuan, and they would jointly develop a batch of financing projects as asset securitization, bond issues, and structural financing.
Deals to venture-backed fintech companies in Southeast Asia — specifically Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam — rose 29% last year, from 55 in 2015 to 71 in 2016. Meanwhile, dollars fell 12%, from $177M in 2015 to $158M in 2016 as deal growth was largely driven by seed/angel stage investments.
In terms of funding dollars, 2016 averaged about $40M per quarter, down from $44M in 2015. The largest deal of 2016 went to Vietnam-based mobile payments platform MoMo, in a $28M Series B that included Goldman Sachs and Standard Chartered as investors. Other deals included a $17.5M investment to Thailand-based payments enabler Omise, a $2M investment to Singapore payments provide Coda Payments, and a $3M investment to Malaysia-based financial comparison startup Jirnexu.
Looking at deal share by country, over half of all Southeast Asian fintech deals went to Singapore-based companies, which is not especially surprising given the city-state’s position as a global financial hub.
Funding Societies, a P2P lending platform for small and medium enterprises, received one of the country’s larger 2016 rounds: a Q3’16 $7.5M Series A that included Sequoia Capital India and Alpha JWC Ventures as investors.
After Singapore, the Philippines took the next greatest share of deals at 14%.
Bank Negara Malaysia plans to engage the public to get their ideas or wish list on what aspects of the financial services that can be improved using technology.
The bank’s Financial Technology Enabler Group (FTEG) chairman Aznan Abdul Aziz said it was initiating a call for participation known as “Fintech Hacks”.
Last year, Bank Negara issued the Financial Technology Regulatory Sandbox Framework for financial institutions and fintech players to experiment with new solutions in a live, contained environment within specified parameters and timeframes. The framework came into effect on Oct 18, 2016.
News Comments Today’s main news: SoFi’s loan losses pile up as wealthy borrowers default. Charles Schwab launches hybrid human-robo financial advice. GDR adds Avant as verification network partner. Vista to acquire D+H to merge with Misys. Today’s main analysis: Household debt edges up as auto, credit card, and student debt climb. The regulation of MPL. Today’s thought-provoking articles: Everything […]
SoFi’s loan losses pile up as wealthy borrowers default. GP:”Over the last year approximatively we have seen higher than expected defaults at Lending Club, Prosper, Circle Back, OnDeck and approximatively 5 securitizations hit triggers in the space before today. To be honest I am a little surprised that the SoFi securitization is also hit triggers. I look forward to the analysis behind the reason why this is.” AT: “The article doesn’t discuss reasons for default.”
Household debt edges up as auto, credit card, and student debt climb. GP:” I expect this to be an indicator of a healthy full employment economy. Note that we haven’t quite overpassed the pre-2008 high. If the 2001-2008 cycle is a good indicator, at the present growth speed, we have another 3-4 years in this cycle. However the 2001-2008 cycle was probably fueled by the real estate equity growth which enabled consumers to get into higher debt. “
Charles Schwab launches hybrid human-robo financial advice. GP:” We often see a cycle where a market goes from one extreme, all human, to the other extreme, all robot, to finally understand the pros and cons of each approach and settle at a reasonable ratio. In currencies for example trades below $5mil are done on aggregators, and over by humans. I would expect something similar here.” AT: “If it takes a hybrid approach to get people familiar with robo-advice, so be it. Older Americans are going to need that to make the transition. Millennials are comfortable with technology, but they’d prefer Betterment over Charles Scwhab. It’s just the reverse for older Americans.”
Global Debt Registry adds Avant as verification network partner. GP:” Global Debt Registry verifies data and after the Lending Club crisis it seemed like a required product for the industry. It has taken a lot of time for the solution to finally be publicly endorsed and used by a significant lender. We wonder why it took 1 year. But we are glad the solution is here and it can only help build credibility to the space by confirming that the loan data is indeed correct the overwhelmingly large majority of the time. “
New conferences focuses on branded currency. AT: “This is an interesting concept. I didn’t realize branded currency was big enough to have its own conference. I do think this is a unique marketing opportunity for retail brands to build loyalty in the digital age, and it could give a boost to the cryptocurrency sector, as well.”
NACFB offers members ‘unrestricted’ insurance for P2P. GP: “Insurance has a cost vs risk. And it is usually calculated for the insurance company to make a profit. If the probability of a catastrophe is low and the catastrophe is extremely impactful, it may be worth it. Otherwise, it is probably better to just build an in-house fund.”
Social Finance Inc.’s online borrowers are defaulting at higher rates than underwriters for one of its bond deals had expected, the latest sign that an industry that hoped to upend banking is now getting tripped up by bad loans.
Losses on the company’s personal loans were high enough to breach key levels known as “triggers” last month on a bond deal issued in 2015 and backed by the loans, according to analysts at Morgan Stanley. If defaults keep rising, investors in bonds could end up missing out on expected interest payments.
Other online lenders have had similar trouble with defaults and triggers recently, which has broadly made it more expensive for the startups to fund their businesses. One pioneer in the business, CircleBack Lending Inc., stoppedmaking new loans as growing numbers of its borrowers defaulted.
Credit issues at Prosper Marketplace Inc. resulted in staff cuts at that company, and were largely the result of lending too much, too fast, and a “grow at all cost” attitude fueled by insatiable demand from investors, Prosper CEO David Kimball said at the New York conference last week.
Aggregate household debt balances grew in the fourth quarter of 2016. As of December 31, 2016, total household indebtedness was $12.58 trillion, a $226 billion (1.8%) increase from the third quarter of 2016. Overall household debt is now 0.8% below its 2008Q3 peak of $12.68 trillion, and is 12.8% above the 2013Q2 trough.
Mortgage balances, the largest component of household debt, which stood at $8.48 trillion as of December 31, saw a $130 billion uptick from the third quarter of 2016.
Balances on home equity lines of credit (HELOC) were roughly flat, rising $1 billion to $473 billion.
Non-housing debt balances rose in the fourth quarter; with increases of $22 billion in auto loans, 32 billion in credit cards, and 31 billion in student loans.
Brokerage Charles Schwab Corp on Tuesday launched a service that combines its automated investment management technology with human advisors, as financial institutions race to offer digital financial advice.
The service, called Schwab Intelligent Advisory, provides clients with a financial and investment plan, unlimited access to a human advisor via phone or video conference, and an investment portfolio of exchange-traded funds managed by computer algorithms.
The service, for clients with at least $25,000 to invest, includes an online platform that keeps track of financial goals and retirement plans, the San Francisco-based company said in a statement. It will charge a 0.28 percent fee on assets, with a quarterly maximum of $900.
At the outset, it may be helpful for us to briefly discuss the scope of this paper and some of the terminology we use. There is no single or universally accepted definition of “marketplace lending.” In general, though, marketplace lenders can be viewed as companies engaged in an Internet-based lending business (other than payday lending) which are not banks or savings associations or otherwise regulated as financial institutions. They may offer a wide variety of financial products, including student loans, small business loans, and real estate loans, in addition to the unsecured installment consumer loans on which the industry initially focused. However, “marketplace lenders” may or may not actually be lenders. This term is a generic term to identify participants in marketing, originating, selling, and servicing loans. They also may fund their loans through a variety of means, including equity capital, commercial lines of credit, sales of whole loans to institutional investors, securitizations, and/or pass-through note programs. In this paper we focus on the consumer lenders since they are the most heavily regulated and have the highest loan volumes. However, much of the discussion herein—outside of matters pertaining directly to consumer lending regulation—will also apply to nonconsumer lenders.
Download “The Regulation of Marketplace Lending: A Summary of the Principal Issues” here.
Global Debt Registry (GDR), the asset certainty company known for its loan data validation expertise, today announced it has added leading online lending platform Avant to its verification network.
Investors in loans through Avant now have turnkey access to enhanced loan due diligence services and can easily add new data insights onto portfolios of loans without having to touch sensitive personally identifiable information (PII) about borrowers.
GDR’s eValidationSM and eVerifySM asset certainty tools require no technology investment, using existing data structures and processes to streamline the flow of information from the lender to the investor. In addition to digital scanning for traditional document verification and data integrity, GDR securely analyzes the Personally Identifiable Information (PII) to ensure borrower data can be independently confirmed in compliance with the investors representations and warranties.
Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Marlette Funding Trust 2017-1 (MFT 2017-1). This is a $257.44 million consumer loan ABS transaction that is expected to close on March 23, 2017. This transaction represents the third securitization collateralized by unsecured consumer loans originated by Cross River Bank, under the Marlette Best Egg Platform and sold to Marlette Funding, LLC (“Marlette”) or its affiliate.
Approximately $250 – $325 million of loans are originated through the Platform per quarter. Since March 2015, over $3 billion of loans have been originated though the Platform, and as of February 2017, Marlette has over $100 million of loans on its balance sheet.
The transaction has initial credit enhancement levels of 27.45% for the Class A Notes, 17.95% for the Class B Notes, and 9.10% for the Class C Notes. Credit enhancement consists of overcollateralization, subordination (in the case of the Class A and Class B Notes) and a reserve account funded at closing.
Several developments are creating a “perfect storm” that will revolutionize the financial advice industry and leave many advisors behind, John Lohr writes in Seeking Alpha.
First Ascent still uses real humans on its investment committee, while an independent advisor serves the client, Lohr writes. That model isn’t likely going away: even robo-advice pioneers such as Betterment now offer upgraded services that give investors unlimited interaction with a licensed advisor, he writes.
But Betterment’s annual fee for unlimited calls with an advisor is just .50%, according to Lohr. That means high-fee advisors are on the way out, he writes.
Clarity Money, a revolutionary personal finance app that acts as the “Champion of your Money,” has reached 100,000 customers since its launch in January 2017. The app has been a “featured” personal finance app on the Apple App Store since its launch. Clarity Money was created by venture capitalist and serial entrepreneur Adam Dell.
To keep up with this growing demand, Clarity Money is pleased to announce three new additions to its team – Melissa Manne, Vice President of Product Management; Colin Kennedy, Chief Revenue Officer; and Marc Atiyeh, Chief Strategy Officer. The Clarity Money team already includes financial and technology veterans from Betterment, Google and IBM, as well as advisory board members Niall Ferguson, economic historian, and Dan Ariely, behavioral economist.
Clarity Money works by using data science and machine learning to provide personalized insights for customers. By utilizing a combination of techniques such as natural language processing, anomaly detection and spectral analysis, customers are able to take advantage of features such as: bill lowering, subscription cancellation, creating a savings accounts and providing tailored suggestions on things such as credit cards.
With the potential impact of financial deregulation and the weakening of the Consumer Financial Protection Bureau, consumers need a financial advocate now more than ever. Banks and financial institutions already have powerful tools designed to sell, market and retain customers, but consumers don’t have an equally powerful tool to level the playing field and protect against hidden fees and recurring charges. Clarity Money empowers consumers to take control of their finances, providing them with transparency, organization and actionable insights.
PeerStreet, a marketplace for investing in real estate backed loans, is pleased to announce that it has been named the Top Emerging Real Estate Platform in the LendIt 2017 Awards. PeerStreet is an Andreessen Horowitz-backed platform, focused on democratizing access to investments in real estate debt.
The Top Emerging Real Estate Platform category focused on younger companies that have demonstrated the greatest potential to impact the future of real estate investing. PeerStreet stood out as the top platform with its unique model, as it is not a direct lender and brings an innovative offering to investors.
RealtyMogul.com CEO Jilliene Helman was named Fintech Woman of the Year at the first annual LendIt Industry Awards. Helman was honored for her “outstanding leadership, integrity, performance, and team-building support within RealtyMogul, as well as her contributions to the advancement of the industry.”
The awards, which showcased leaders from across the fintech industry, were part of the annual LendIt USA Conference held in New York City March 6 and 7th. Helman was selected by a panel of 30 industry expert judges from among a field of six leading fintech pioneers.
Flourish: The Growth of Branded Currency is a fintech conference launching in Omaha this April 10 -12. The conference is focused on branded currency, and is targeting a range of retailers from those with a national presence to smaller Midwest retailers and their technology service providers.
K+H Connection is the company hosting the event. K+H is a fintech consulting firm based in Chicago, IL that focuses specifically on helping fintech companies integrate with merchants.
HG: Branded currency is actually a relatively new term. In short, it is any sort of tender that is branded and used for a specific purpose or at a specific merchant or location. It could be a gift card, promotional value you earn through a referral or loyalty program, points earned through a credit card program, prepaid mall-branded gift cards, etc. These types of products are more than just a form of tender, they incentivize spend and behavior.
We’re also focusing heavily on fraud within branded currency. Fraud has been the number one thing that people have asked us to discuss, so we are going to have a huge session on it.
On Thursday, the FCA and JFSA agreed a mutual referral system which will see the regulators provide assistance to fintech businesses that wish to expand UK operations into Japan, or vice versa.
The collaboration, which was confirmed by an exchange of letters, will also facilitate information sharing between the regulators on emerging market trends and regulatory issues pertaining to fintech, as well as information concerning referrals.
CSI globalVCard, a leading B2B payments company specializing in secure and rewarding payments, today announced that it has expanded services to Europe and has opened a London office, its first move in a planned worldwide expansion. The company plans to roll out its services across additional continents by year’s end. CSI will use the payment issuance capacity of PrePay Solutions (PPS), a subsidiary of Edenred (70% owned by Edenred and 30% by MasterCard), worldwide leader in prepaid corporate services. PPS will bring CSI its unique payment technology to issue and process all CSI virtual cards and wire transfers in Europe.
Expansion outside of North America was sparked by CSI globalVCard’s growing demand from multi-national clients, their increased need for native currency payments, as well as customer service support across local time zones. The global payments market is estimated at $1.2 trillion, of which B2B payments account for $550 billion. Ten percent of organizations make between 20 and 50 percent of their payments to foreign suppliers, and organizations earning over $2 billion in revenue pay the largest percent of their payments to foreign suppliers.1
Private equity firm Vista Equity Partners has struck a deal to acquire D+H, a Canadian financial technology provider, with an eye to merging it with UK-based Misys to create a financial software company with $2.2 billion in revenues.
US-based Vista said in a statement today that it will pay C$25.50 per share in cash for D+H, including the assumption of debt, in a deal that values the Toronto-listed firm at 4.8 billion Canadian dollars.
Misys chief executive Nadeem Syed said the combination of the two companies gives them the opportunity to create a “global fintech powerhouse”.
That powerhouse would have about 10,000 employees and 9,000 customers, including 48 of the top 50 banks, the statement said.
Over the last 5-10 years, China, India, and Southeast Asia have leapfrogged from a cash-based society to one where mobile payments are common currency, skipping adoption of credit cards, savings accounts and other consumer financial products common in Western countries. The result: a population that’s smartphone-savvy but still largely unbanked, without the credit histories necessary to access traditional small business or personal loans. It’s a prime market for alternative lenders, who usually use alternative means to assess creditworthiness, foregoing traditional credit scores altogether.
Here is a brief taxonomy of the many types of alternative lenders currently operating in both Asia and the West.
Chinese tech giants have aggressively pursued synergies between different divisions of their sprawling businesses. For instance, Sesame Credit, Alibaba’s alternative credit scoring program, looks at the frequency and cost of a customer’s purchases on Alibaba’s mobile payments platform Alipay in order to determine creditworthiness.
Meanwhile, India’s alternative lending market is in a much earlier stage. Giant tech companies don’t yet dominate the scene, and so the balance-sheet lending landscape includes a large number of small specialists like EarlySalary (payday loans), ZestMoney (point of sale), and Buddy (targeted at students). There are only about 30 P2P lenders in the country, which is surprising for a country where nearly 40% of the population is unbanked, and therefore without access to traditional loans.
In Singapore, the financial center of the region, the major alternative finance players in Singapore are peer-to-company (P2C) lenders: specialized P2P lenders that only provide loans for SMEs. Market leader Capital Match was founded in 2014, but says it has already paid out more than S$32m (US$22.5m) in loans.
The financial services subsidiary of the Bertelsmann Group, Arvato Financial Solutions, and the Japanese investor SBI Group will invest in solarisBank in a partnership that promises significant cooperation potential across international markets. In total, the Berlin-based bank raises EUR 26.3 million in the series A financing, meanwhile seed investors FinLeap, Hegus and yabeo Capital participate as well.
As the young bank steps up its internationalisation efforts, new executives are being added to its leadership team: Roland Folz will join the Management Board as CEO, while Gerrit Seidel will take over as Supervisory Board Chairman from HitFox Group and FinLeap founder Jan Beckers.
solarisBank intends to expand its activities in European and Asian countries over the coming years, and will establish joint venture companies with the SBI Group in order to develop businesses in Asia.
As key professional in the Qatar real estate industry gather for the annual Cityscape exhibition in Doha, MercyCrowd, a brand new type of property crowdfunding platform, will offer for the first time to people in Qatar international real estate purchases through crowdfunding.
MercyCrowd is part of the Elite International Asset Group, an established international company promoting real estate investment in Europe with a specialty in the French and UK market. However, what makes MercyCrowd uniquely different is the company’s core belief that sustainable growth can only stem from real assets that generate real increments and tangible benefits to a society.
News Comments Today’s main news: Defaults Slash Returns for Online Loan Investors Colchis and P2P GI. Banks warm to alt finance providers. Anaxago opens up French RECF to institutional investors. Alibaba to invest $200mil in Korea’s Kakao Pay. Today’s main analysis: OFF3R Index: Strong P2P lending growth continues. Today’s thought-provoking articles: Midsized companies turn to MPL. Consumer confidence at 10-year high. P2P […]
PeerIQ’s weekly industry update. GP: “Lending Club is showing stronger interest in balance-sheet risk throught building securitization shelf in-house. Other platforms may want to take note. And a very interesting reminder that all debt indicators are in the green.” AT: “With consumer confidence high, wage growth strong, and other economic indicators improving, we should see a rise in consumer loans. The outlook for MPL has never been better.”
LendingClub unit, Colchis Capital record lowest returns in their main funds since each launched in 2011.
At LC Advisors, the Broad Based Consumer Credit (Q) Fund returned 1.83% in 2016, down from 5.76% in 2015 and 8.02% in 2014, according to the investor documents. That was worse than the 2.65% return of the Bloomberg Barclays U.S. Aggregate Index, a broad measure of performance of various fixed-income securities that LC Advisors uses as a benchmark.
LendingClub said in a securities filing in January that it was seeing signs of a stabilization in delinquencies after it raised rates on borrowers by a weighted average of 1.18 percentage points over the course of several months. And the Broad Based Consumer Credit (Q) Fund has outperformed its benchmark by more than 2 percentage points over the past three years. “The holistic performance of the Fund tells an important story,” LC Advisors said in a letter to investors.
Colchis’s P2P Income Funds, which have $1.3 billion in assets under management, posted a 2016 return of 6.2%, according to investor documents.
Colchis’s returns exceeded 9% in each of the preceding four years but were weighed down in 2016 in part because of weak debt-collection efforts at LendingClub and Prosper and a new accounting regime introduced earlier in the year, according to the documents.
Meanwhile, P2P Global Investments, which is managed by a unit of U.K. hedge-fund firm Marshall Wace LLP and listed on the London Stock Exchange, returned 4.1% in 2016, down from 6.6% the year prior.
At the end of the year, the fund’s shares traded at a roughly 20% discount to its net asset value.
Investors in the peer to peer (P2P) lending sector have seen their returns suffer due to a high rate of borrower defaults among start-ups, reports the Wall Street Journal (WSJ).
Shares in a number of P2P lending platforms have dropped as high profile players like US-based LendingClub and On Deck Capital have faced numerous difficulties. Investors previously attracted to the sector are now rethinking their approach, reports the WSJ.
The lending platforms are finding it difficult to bring down the default rates of their borrowers – insisting on more stringent credit standards and a more thorough application process would make the challenger lenders less attractive in comparison to the incumbent, traditinal lenders.
At the onset of the marketplace lending market, lending to businesses was equated with lending to small and very small businesses: businesses at the low end of the small and medium-size enterprise (SME) market who were borrowing on average under €100,000. However, as the alternative lending market matures, it seems to attract larger SMEs borrowing bigger tickets, north of €400,000.
Olivier Goy is the founder and CEO of Lendix, an international business lending marketplace launched 2 years ago in France which has since then expanded into Spain and Italy. Tim Thabe is the co-founder and Managing Director of creditshelf, a German B2B lending marketplace for SME corporate borrowers and professional investors which launched in 2015.
Olivier Goy: At the onset, we did not plan to serve bigger tickets.
To give you an idea: the average loan size projected in our business plan was €50,000. The actual loan size in our first year of operation was €200,000. Now it is €400,000.
Of course, our funding mix, the fact that 80% of our funding comes from institutional investors was key to achieving this.
Tim Thabe: Indeed, we have deliberately targeted larger tickets. Our motivation was twofold. Firstly, we believed that we needed larger tickets to justify the expense of in-depth credit risk analysis. Secondly, the larger SMEs have more history and substance, and therefore more material to which we can apply this risk analysis in a meaningful way.
Currently, our average loan size is between €500,000 and €600,000. We expect it to grow towards between €800,000 and €1 million.
Olivier Goy: Bigger tickets are less expensive to recruit than small SME borrowers. However, the structure of larger SMEs is more complex, therefore is takes more time to analyze them and assess their credit risk. So far, we have not noticed a major difference in default rate, even though we know for a fact that there is a negative correlation between company size and credit default rate.
Olivier Goy:European alternative investment funds (ELTIFs) now make it easier to invest in larger tickets. We are voluntarily limiting ourselves to €2.5 – €3 million because don’t want to be exposed to a few big tickets.
Tim Thabe: At creditshelf, we don’t have a regulatory loan size limit because we use a fronting bank and because we raise funds for each project from a small number of accredited investors; 20 or fewer.
The main issue with regulation is that it is not consistent throughout Europe.
Tim Thabe: We believe that there is a gap in the private debt market reaching from very small tickets all the way up to ticket sizes of €10 million or €15 million where private debt funds are starting to operate and traditional private placements can be arranged economically.
OFF3R, an online marketplace for alternative investments, published a report on P2P lending and crowdfunding last week. OFF3R said that while equity crowdfunding sagged in January – dropping 65% from December – P2P lending remained strong.
Regarding P2P lending, OFF3R covers nine UK platforms in their Index. According to their numbers, these nine platforms lent a total of £294 million in January 2017, an increase of 6% versus December 2016.
OFF3R stated that historically low-interest rates are helping to drive investor interest in P2P lending assets as their risk-adjusted returns are appealing. OFF3R said this is highlighted by the fact that the Index platforms lent 50% more money in January 2017 compared to the same month in 2016.
Speaking at Fintech Fortnight on 16th February, Angus Dent, CEO of P2P business lender ArchOver, revealed that some banks were now directing borrowers they cannot serve to alternative finance providers rather than rejecting them outright.
Angus suggested that by recommending borrowers to platforms such as ArchOver or RateSetter, banks could maintain a relationship with the client rather than risk losing them to a competitor in future.
A couple of years ago, a little-known civil engineering company called Elimco UK got into trouble.
Pressed for money, the company did what a small but growing number of businesses are doing today. It turned to the “peer-to-peer” lending sector. In June 2015, Elimco began using MarketInvoice, a startup backed by the government-owned British Business Bank. Cash flowed again, but not for long. Eight months later, Elimco was in administration and MarketInvoice’s investors were looking at losses of almost £800,000.
When MarketInvoice first took on Elimco as a customer in June 2015, the firm was assigned a high risk rating, seven out of 10, even though it had a guarantee from its Spanish parent company. But Elimco’s risk rating soon improved dramatically. By August, just two months later, it was selling invoices with a risk rating of two out of 10, in part because it had made payments on time.
To-date, MarketInvoice has financed around £1bn in invoices and plans to double that number this year alone. The construction sector accounts for about 16 per cent of invoices* sold through the seven-year old startup.
One of the factors investors are unable to filter by with MarketInvoice’s autobid function, however, is sector. An investor can’t decide to avoid construction companies, for example. Last year, in an email to an investor seen by FT Alphaville, a MarketInvoice employee said this was because it would be harder for businesses to get financing if investors could engage in sector by sector “cherry picking”.
In construction, you have ‘set off’ rights, which give a customer the right to withhold payments due on one contract in order to compensate for costs incurred on another contract. It’s basically a form of security for the customer.
Set off rights proved to be an issue in the case of Elimco. When it went into administration, it was owed £1.4m by Scottish Power, which in turn claimed around £2m for costs it would have to incur to complete other work Elimco was contracted to do. Elimco UK had little in the way of assets, so the only money available to be distributed to MarketInvoice was the money owed by Scottish Power, which had effectively said it wouldn’t pay because of its ‘set off’ rights.
Last week, NatWest – part of the Royal Bank of Scotland (RBS) – announced a new online platform designed to simplify the loan making process for UK SMEs.
Stephen Findlay, CEO of BondMason – Robo-Advisor for investors in P2P loans, shared his thoughts on RBS’s strategic move challenging peer to peer lending.
“… we don’t view this as negative competition to the P2P platforms already in this space, or vice versa. Rather, we think these different offerings will complement the industry and encourage improved standards and better self-regulation as more participants enter the market – a ‘flight to quality’ which we certainly welcome. The move by the banks also supports the growth of what is becoming a mainstream asset class, demonstrating that P2P lending is now recognized and being embraced by the traditional banking and finance sector.”
Anaxago Immobilier, the real estate arm of leading French equity crowdfunding platform announced last Saturday that it has secured € 10 million of funding pledged by a group of French institutional investors, qualified investors, and family offices to finance real estate development projects alongside retail investors. With this move, the firm departs from its 100% retail investor-funded model.
The French real estate crowdfunding market emerged only in 2015. It is almost entirely dedicated to the short-term (average 17 months) debt-funding of real estate development, as opposed to funding buy-to-let.
The mission of Creamfinance is to become the first one-click consumer loan provider in the world; making money available anytime, anywhere. The startup has raised over $7.3 million in funding to date, and has grown to over 200 employees expanding across 7 countries. In 2014, the data-driven consumer lending company raised 5 million Euros from the leading international venture capital fund, Flint Capital, which invests across the U.S., Israel and Europe.
Creamfinance currently offers consumers rapid credit solutions in several global markets, including Poland, Latvia, Czech Republic, Georgia, Denmark, and Mexico.
Matiss Ansviesulis: We focus on Smart Data scoring, otherwise known as behavioral pattern recognitions tools focusing on relevant, value-adding data.
We all know that big data is defined around four core aspects – data volume, velocity, veracity, and value. Whereas volume and velocity aspects refer to data generation and storage process, veracity and value deal with the usefulness of the data. In Big Data, due to the large number of data points, a lot of noise is being created, which challenges the value of data. Instead, we focus on smart data — well-defined, meaningful information that can expedite information processing and offer more privacy, stability. This is way more economical and creates less noise.
In 3-5 years, I hope to have initiated more discussion and action towards FinTech and banks cooperation. Also, in 3-5 years, I expect other companies to put emphasis on smart data scoring that leads to quicker decision making, and therefore more speedy loans for the customer.
Federal Treasurer Scott Morrison recently told a G20 conference in Germany of his plans to encourage more robo-adviser start-ups to launch in Australia.
But his comments highlight a general lack of understanding of the differences between “robo-advisers” and the digital advice needs of the majority of Australians.
However this leads to a common misunderstanding that pure B2C robo-advice start-ups address the everyday person, they don’t. In fact, we estimate they will only represent 5 per cent of the market.
It is broadly accepted that 15 per cent of the Australian population utilises traditional financial advisers (about 2.4 million people currently see planners according to Investment Trends— and typically that is the wealthiest 15 per cent of the population seeking to enhance investment opportunities.
The fact is robo-advisers are geared towards people making non-super investments. Ordinary working Australians – the other 85 per cent of the market – are accumulating wealth into superannuation and their homes.
Advising the remaining 80 per cent of the population is what the banks and super funds are striving for.
China’s Ant Financial, the financial investment arm of Alibaba Group and the world’s most valuable Fintech company, will invest $200 million in the mobile payment subsidiary of Kakao Corp, a major South Korean messaging platform.
Ant Financial announced the investment to be a part of a ‘larger strategic partnership agreement’ which will see Kakao Pay gain access to Ant Financial’s tremendously popular Alipay platform, allowing subscribers of both platforms to use each other’s services. Fundamentally, the move is to bridge Ant’s 450 million global users with Kakao Pay, which has over 14 million members in South Korea.
Further, the new partnership will benefit some 7.5 annual Chinese tourists visiting South Korea. Alipay users will be able to use their payments app with Kakao’s network of 34,000 South Korean merchants, both online and offline.
Frustrated by limited funding options for small businesses, Chansamrach Lem launched the country’s first online peer-to-peer lending platform
Securing funding is a significant challenge for small- and medium-sized enterprises (SMEs) everywhere, but it is an even bigger obstacle in Cambodia, where banks, by and large, only accept real estate as loan collateral and few alternative financing solutions exist beyond friends and family.
While other P2P lending platforms are already in use in Cambodia, Komchey is the first such software to be designed and owned by a Cambodian company.
The RBI deputy governor has said that in view of the competition from fintech companies, banks should reorient their business model and look at collaborating with more efficient players after assessing the likely impact of disruption.
The deputy governor said that SME lending, being a hugely underserved market, is a major opportunity for fintech startups to build and scale up sustainable businesses by offering services such as credit underwriting, and marketplace lending.
With around 51 million units throughout the geographical expanse of the country, MSMEs contribute around 8% of GDP, 40% of the total exports and around 45% of the manufacturing output.
Bruno Sayão: Our inspirations are Funding Circle (Europe) and Prosper (USA) and like them, we are passionate about micro and small companies, so we want to revolutionize the way they access financing. For this, we want to build a marketplace and make financing fair, simple and fast.
Bruno Sayão: IOUU charges only a credit origination fee after the company is able to capture the desired loan amount.
Bruno Sayão: In IOUU we try within 48 hours to inform if the company is going to be able to take loan with us, we created an extremely efficient process, whereas in the banks these processes are inefficient.
In addition, the interest rates charged are much lower than the banks, since our spread is extremely low because the whole process is done 100% online and we do not hide tariffs, the borrower knows exactly how much to pay in interest, IOF and Rate.
Bruno Sayão : Currently our biggest challenge is to get a partner financial institution interested in backing our operations, because in Brazil we can only operate being within the norms of the Central Bank of Brazil, since we act as banking correspondent;
Bruno Sayão : For the Brazilian to invest is still difficult and complex. People can not really understand the types of investments that are available and how they can do them. Estimates indicate that 55 million people over the age of 18 do not have a bank account and that 40% of micro and small enterprises in Brazil are debtors.
Bruno Sayão : Peer to peer lending is a risky investment made to diversify the investor’s portfolio. To mitigate risk to the maximum for the investor, our technology can verify in more than 500 public and private databases the credit history of the companies that will be published for capture in the platform. In addition, we recommend never investing the entire value in a single company, but rather diversify the investment into a pool of companies.