The Alternative Credit Council (ACC) is hosting its inaugural flagship event for the private credit sector. This will take place on the morning of 22 May 2018 at Farmers’ & Fletchers’ Hall in the City. Date: 22 May 2018 Time: 8:30AM – 2:00PM Location: Farmers & Fletchers 3 Cloth Street London EC1A 7LD Discussions will look […]
The Alternative Credit Council (ACC) is hosting its inaugural flagship event for the private credit sector. This will take place on the morning of 22 May 2018 at Farmers’ & Fletchers’ Hall in the City.
Date: 22 May 2018 Time: 8:30AM – 2:00PM Location: Farmers & Fletchers
3 Cloth Street
Discussions will look at a range of themes including:
Building an asset class to last: market discipline in private credit
Responsible lending, investor protection and access to finance
Technology in private credit: enthusiastic adoption or reluctant acceptance
Standing out from the crowd
Confirmed speakers include:
Deborah Zurkow, Allianz GI
Iain Forrester, Aviva Investors
Steve Sabatier, Chenavari Credit Partners
Stuart Fiertz, Cheyne Capital
Chris Fowler, CVC Credit Partners
Max Mitchell, ICG
Ludo Bammens, KKR
Rod Lockhart, Lendinvest
Elissa Kluever, OMNI Partners
Christian Hinze, Stepstone
Maxime Laurent-Bellue, Tikehau Investment Management
News Comments Today’s main news: Banco BNI starts lending through Fellow Finance. eBay drops PayPal for Adyen. Aviva exec backs robos. OneConnect secures $650M funding. Stripe sets up engineering hub in Dublin. EBANX gets $30M in funding from FTV Capital. Today’s main analysis: FT Partners’ Alternative Lending Market Analysis for January, and an interview with Nav CEO. Today’s thought-provoking articles: […]
Open banking’s early adopters. AT: “BBVA Compass is one of only about five banks in the U.S. to adopt open banking so far. It will be interesting to see how it works for these banks as the rest of the industry will be watching.”
This month’s report features an exclusive interview with Levi King, Co-founder and CEO of Nav, which is a data aggregation platform and marketplace that bridges the gap between small businesses and financial institutions. In the interview, Levi discusses the motivation behind founding Nav and how the company solves the challenges small businesses face managing their credit and securing financing solutions, among other topics.
Only a few banks have embraced open banking and offer APIs to almost anyone. But they are betting on having a head start on competitors, as trends in the industry, such as increased bank-fintech partnership and evolving regulation, will push the banking-as-a-platform movement toward reality.
Operating as BBVA Compass in the U.S. in Birmingham, Ala., in 2016 it named a head of open APIs, and has engaged in several data-sharing agreements with fintechs. It is one of a handful of U.S. banks engaged in open banking — Capital One, Silicon Valley Bank, Citi and CBW Bank in Weir, Kan., also have such programs.
Last May, BBVA opened up its API Marketplace and made commercially available eight APIs so companies, startups and developers would be able to build new products and services by accessing and integrating customer’s banking data — with their permission — into their applications.
According to data gathered by FedFis.com, the top processor is Brookfield, Wis.-based Fiserv. With more than 37% of the market share, Fiserv is well ahead of its competitors. The second, Monett, Mo.-based Jack Henry & Associates, has just half Fiserv’s market share with 17.6%. Close behind JHA is Fidelity National Information Services Inc., better known as FIS.
Enova International (NYSE: ENVA), a financial technology company offering consumer and small business loans and financing, today announced financial results for the quarter and year ended December 31, 2017.
Fourth Quarter 2017 Summary
Total revenue of $243.7 million in the fourth quarter of 2017 increased 20.4% from $202.4 million in the fourth quarter of 2016.
Gross profit margin was 47.7% in the fourth quarter of 2017 compared to 51.8% in the fourth quarter of 2016, driven by growth in the installment loan and receivables purchase agreement segment as well as a higher mix of new customers, which requires higher loan loss provisions.
Net income was $6.9 million, or $0.20 per diluted share, in the fourth quarter of 2017 compared to net income of $8.7 million, or $0.26 per diluted share, in the fourth quarter of 2016.
Fourth quarter 2017 adjusted EBITDA of $38.1 million, a non-GAAP measure, increased from $35.1 million in the fourth quarter of 2016.
Adjusted net income of $8.9 million, or $0.26 per diluted share, a non-GAAP measure, in the fourth quarter of 2017 increased from adjusted net income of $8.5 million, or $0.25 per diluted share, in the fourth quarter of 2016.
Full Year 2017 Summary
Total revenue of $843.7 million in 2017 increased 13.2% from $745.6 million in 2016.
Gross profit margin was 53.0% in 2017 compared to 56.0% in 2016.
Net income was $29.2 million, or $0.86 per diluted share, in 2017 compared to net income of $34.6 million, or $1.03per diluted share, in 2016.
Full year 2017 adjusted EBITDA of $157.8 million, a non-GAAP measure, increased from $142.3 million in 2016.
Adjusted net income of $46.9 million, or $1.37 per diluted share, a non-GAAP measure, in 2017 increased from adjusted net income of $37.5 million, or $1.12 per diluted share in 2016.
Daniela Morales’s lender is demanding. Every Friday morning, at 9:45 sharp, she has to visit a small apartment in Woodside, Queens, to make her weekly payment—currently $293 plus $17 interest on a $6,900 balance.
Ms. Morales’s lender is Grameen America, a nonprofit microlender for women entrepreneurs. To get a Grameen loan, you don’t need any collateral or credit history, just the support of a small group of Grameen loan recipients who can vouch for you. It is, essentially, a reputation-based loan.
There are other nonprofit microlenders operating in the city, including Accion and BOC Capital Corp. But Grameen America, modeled on a Bangladeshi microlender, is unique in its peer support and loan-approval model.
The loans, which start at $500 and command an interest rate of 18% on a declining balance, must be repaid in six months. The interest rate falls as the loan is repaid. Members who establish a good track record qualify for larger sums.
Morty is an online mortgage broker. Our mission is to empower homebuyers to make smarter home financing decisions. With a modern tech stack and a marketplace of lenders, we offer customers the most options, great rates, and a transparent process.
What surprised you the most in the fintech industry in 2017?
That there wasn’t more innovation in the mortgage space. It’s the only lending vertical that hasn’t moved online- credit cards, student loans, small business loans, personal loans- all have a big online presence. There is still so much to be done in mortgage, it’s exciting.
In an article penned for JD Supra by law firm Ogletree, Deakins, Nash, Smoak & Stewart, P.C., experts warned of a type of payroll scam that sees fraudsters diverting direct deposits from employee accounts to criminal accounts.
According to the firm, fraudsters use a phishing scam by sending an email from an address similar to a legitimate company account.
Ogletree Deakins warned that not only does this scam result in lost funds, but it is ultimately a data breach, with scammers gaining access to corporate systems and data. The report also noted that scammers are targeting all types of businesses using all types of payroll providers.
The fintech industry is the powerhouse behind the meteoric rise of the peer-to-peer lending market. After several platforms launched online payments, it was only a matter of time before new ones emerged offering lending services that are offered by and to registered members.
LendingClub Corp (NYSE:LC) has been one of the most notable players in this space and its popularity pushed it public in 2014. However, since then, the company has struggled to live up to expectations, reflecting the actual picture of the status of the peer-to-peer lending.
According to critics, while peer-to-peer lending is an attractive option for borrowers looking for alternative financing solutions, it appears to have growth limitations due to lack of funding for new products. Peer-to-peer lending platforms do not take deposits and this is a limiting factor, but analysts suggest that if they are to grow to the point of rivaling the mainstream lending market, then they may have to start taking customer deposits.
TD Ameritrade put the competitive pressures tied to robo-advisors and other technology left, right and center at its LINC 2018 RIA conference this week in Orlando. Industry leaders highlighted the power and threat of technology and how to address these trends in the advice business.
It’s impossible to look at the landscape of modern adviser technology without seeing Steve Lockshin’s footprints.
As an early investor in Betterment, Mr. Lockshin, 41, was instrumental in encouraging the robo-adviser to pivot from competing against advisers to partnering with them.
Brad Bernstein could see the role of advisers was changing.
What was once an industry of investment managers and salespeople was shifting to financial planning. Driving the change was technology — automating and commoditizing many of the ways advisers traditionally added value for clients. Mr. Bernstein, 51, managing partner at growth equity firm FTV Capital, believed there was a demand for products that helped advisers better articulate their value to clients.
That’s what attracted Brooks Gibbins, 45, to the industry when he founded FinTech Collective with his partner, Gareth Jones, in 2012. The venture capital firm has been one of the most active early-stage fintech investors over the past five years, seeding some of the biggest names on the adviser fintech scene.
Seeing the opportunity for adviser fintech startups to get acquired by, or partner with, financial institutions, Ian Sheridan decided to draw on his more than 25 years of experience in the financial services industry — working in wealth, retirement and investing in startups — to identify which technology would be part of the next wave of innovation.
Fidelity rocked the adviser fintech world in 2015 when it acquired eMoney, one of the most popular financial planning and client portal tools among independent advisers. The reported $250 million price tag proved there was money to be made in adviser fintech.
“Prior to that, there was good technology out there, but there wasn’t this stream of new business models, this new equity flowing in,” said Mike Durbin, 50, the president of Fidelity Institutional who spearheaded the deal. “The pace has clearly quickened.”
After a career that took him from E.F. Hutton to founding the Lockwood family of companies, Len Reinhart turned toward private investing in retirement.
The Florida legislature kicked off its legislative session by introducing Florida Senate Bill 894 and House Bill 935, legislation that could cover private mortgage lenders. The bills, introduced by Sen. Rene Garcia (R-Miami) and Rep. Jeanette Nunes (R-Miami), would eliminate a longstanding business purpose exemption for loans secured by a Dwelling.
On January 18, the bill passed the House Insurance and Banking Subcommittee with a 13-1 vote. On January 24, the House Commerce Committee passed the bill on a unanimous vote. The Senate similarly passed the bill on a unanimous vote in the Senate Banking and Insurance committee on January 23.
American Association of Private Lenders’ (AAPL) position is that the proposed regulation would harm Florida residents, business and the state’s economic growth by consolidating power to a few licensed parties. Private lenders provide much needed capital to a marketplace which is underserved by large financial institutions. Professional business parties need to be able to work with each other without significant regulatory intervention. The proposed regulation would result in less market competition, translating to higher interest rates, a higher cost of credit and would force business out of Florida and into neighboring states including Alabama, Georgia, Tennessee, North and South Carolina, all of which exempt business purpose loans from licensing requirements.
dv01, the data management, reporting, and analytics platform that provides institutional investors insight into lending markets, today announced the appointment of Amy Johnson as Chief Operating Officer. Johnson will report to dv01 founder and CEO, Perry Rahbar.
As COO, Johnson will be responsible for dv01’s finance, legal, and sales efforts, including helping execute the company’s vision and scale its operations.
Reston, Va.-based online lender StreetShares closed $23 million in equity funding on Jan. 24. The lender focuses on veteran-owned small businesses and relies on a peer-to-peer lending model. About $20 million of the new round is from Bethesda, Md.-based firm Rotunda Capital Partners. Previously, StreetShares had raised $8.3 million between three rounds.
The Treasury committee has launched an inquiry into SME finance to look at the state of the market and the lessons to be learned from RBS’s Global Restructuring Group (GRG).
The Treasury’s inquiry will look at the extent of competition in the market, the various sources of funding available to SMEs – including P2P lending and crowdfunding – and whether the current regulatory framework provides enough protection to SMEs when they borrow money.
The committee will also consider the regulation of SME lending and whether banks should be bound by a broader set of duties when dealing with SMEs.
An Innovative Finance ISA (IFISA) is a peer-to-peer lending or crowdfunding product. In some instances, you can generate returns of around 8 – 9% by lending to private borrowers or by taking stakes in ‘crowdfunded’ investments. The IFISA is also subject to the same £20,000 annual ISA allowance so you can split your money between this ISA, as well as cash and stocks and shares.
While this is regulated by the FCA, peer-to-peer lending is not covered by the FSCS meaning your capital is at risk.
Easily available debt from banks, financial institutions, peer-to-peer lending and even crowdfunding, together with forecasts of revpar growth of 2.4% in London and 2.3% in the regions, will help drive investments. Strong leisure business enjoyed by hotels last year – up 20% – is expected to continue to grow, depending on a continued weak pound.
A UK start-up that is aiming to end the culture of late payment that plagues British business has recruited two FTSE 100 chairmen as investors and advisers.
David Tyler, chairman of supermarket chain J Sainsbury, and John Gildersleeve, chairman of property group British Land, have joined the advisory board of Previse.
The London-based business pays supplier invoices instantly and collects the money from customers later. By analysing years of payment data it uses artificial intelligence to calculate the likelihood it can collect from the big customer. It has pilots running with two large corporations and is in talks with dozens more, Mr Gildersleeve told the Financial Times.
OneConnect is the only one-stop FinTech-empowered solutions provider in China. Financing of the three subsidiaries received positive responses, particularly from international institutional investors, including the SoftBank Vision Fund (which invested in Ping An Good Doctor and Ping An Healthcare Technology), International Digital Group (IDG) and SBI Group etc., proving that the capital market fully recognizes Ping An’s technological innovation, the business model for its technology as well as the growth potential and business value of the Group.
Today Banco BNI Europe announced it will start lending on Fellow Finance.
‘Investing via Fellow Finance in consumer and SME loans offers us a great opportunity to easily expand our operations and we are very satisfied with the analytical and professional approach of Fellow Finance in credit intermediation’ echoes Pedro Pinto Coelho, Executive Chairman of Banco BNI Europa.
U.S. payments firm Stripe said on Monday it would place its first engineering center outside its home market in the Irish capital Dublin, attracted by the city’s growing technology workforce and global outlook.
Estimates differ, but according to TechFluence, a technology research firm with offices in Frankfurt and London, the European market had assets under management of about $3.5 billion at the end of 2017. That compares with an estimated $200 billion to $250 billion in the U.S., according to Burnmark, a fintech research firm. Estimates of the number of services range from 98 to 126 in Europe, compared with about 200 in the U.S.
The cost of entry is also much lower: generally €5,000 to €10,000 (about $6,200 to $12,400), versus hundreds of thousands at least for a discretionary service through a bank, says Timo Pfeiffer, head of research and business development at Solactive AG, an index provider that has researched the growth of robo advisers in Europe.
Popular with banks
This has led to a number of banking groups preparing robo-adviser offerings, Mr. Mellinghoff says. One example is Comdirect, a subsidiary of Commerzbank,CRZBY -3.17% which launched a robo-advisory platform in May. This service, called Cominvest, had gained assets of more than €200 million as of end of December and is expected to grow rapidly in the coming years, says Sabine Schoon, head of corporate strategy and consulting at Comdirect.
The European market has also attracted interest from major U.S. providers; BlackRockInc.BLK -2.98% announced in June 2017 that it was taking a minority stake in Scalable Capital, a robo-adviser specialist that operates mainly in the German and British markets.
Spanish bank BBVA’s dash to get customers to buy products digitally rather than in branches helped it report a 20 per cent rise in underlying full-year profits, with results boosted by lower costs as well as higher revenues.
Top P2P cryptocurrency startup Etherecash has announced that its ECH token will be listed on popular cryptocurrency exchange QRYPTOS on 6th of February 2018, following a successful crowdsale in which the company raised over 40 million USD. This news comes as The Estonian-based lending startup saw a very successful Q4 to 2017 as it gears up for its token distribution in early 2018.
GN Compass is the first peer-to- peer lending platform for Cryptocurrency-Backed Loans.
All transactions are verified and distributed on the Ethereum Blockchain. GN Compass is joining an expanding group of pioneering projects integrating the Bancor Protocol to maximize the trading liquidity of GN Compass tokens.
New business inflows almost doubled for Europe’s exchange traded fund industry in 2017, in the run-up to the EU’s introduction of rules designed to improve market transparency and strengthen investor protection.
Net inflows into European-listed ETFs reached a record $108bn last year, up from $55.7bn in 2016, according to ETFGI, a London-based consultancy.
IdentityMind Global, Digital Identities You Can Trust, an SaaS platform that builds, maintains and analyzes digital identities worldwide, allowing companies to perform identity proofing, risk-based authentication, regulatory identification, and to detect and prevent identity fraud, announced the immediate availability of its KYC Plug-in for ICOs which provides a turnkey solution for customer onboarding functionality and user experience to walk ICO participants through the know your customer (KYC) process to meet regulations worldwide.
Bahrain FinTech Bay (BFB) and the Fintech Consortium (FTC) have announced a strategic partnership with OffrBox, a New York City-based Fintech start-up that has developed an end-to-end real estate transaction platform on which one can buy and sell residential properties online.
The first ’round of funding’ Abhishek Latthe got when he was setting up his wearable device startup SenseGiz in 2013 was from his family and friends. The next year, he set up a crowdfunding page on Kickstarter and raised $47,000. Late in 2014, he took out a bank loan. It was only two years later in 2015, that he could convince Karnataka Semiconductor Venture Capital Fund to back him with Rs 3 crore.
Banks do not back companies without collateral and since the business model is unproven, other investors too hesitate. So, funding options include getting help from friends and family, crowdfunding, or dipping into one’s savings, but how do founders decide on the path to take?
Gadkari says peer-to-peer lending and bridge funding, which fulfil a company’s short-term working capital needs, have also become popular. Choosing the best funding option depends on the company’s need. The next step for an entrepreneur is to negotiate the company’s valuation.
Lending is one of the oldest professions in the world and is one of the pivotal reasons for the banking system to take shape.
There is evidence of lending activities dating back to 2,000 BC between merchants, farmers and traders.
However, up till now, lending as an activity has been largely limited to financial institutes such as banks and Non-banking Financial Companies (NBFCs).
For instance, lenders on Faircent.com usually avail average gross returns of 18% to 26% per annum. This makes online P2P loans a lucrative alternative investment avenue for them.
What makes online P2P lending even more lucrative as an asset class for potential investors is the fact that it offers lenders the opportunity to diversify their investments across multiple risk buckets and loan requirements.
Sapan Gupta a Practice-Head at Shardul Amarchand Mangaldas said, “capitalising on the blockchain technology could open new ways of securing peer-to-peer lending transactions, boosting trade finance, fintech and information repository sectors”.
Decentralized p2p lending platform Karma has just announced trading as well as access to its platform and blockchain solutions. The project has now been backed by Danish fintech startup OpenLedger. Karma’s p2p lending platform can be used on the OpenLedger DEX platform and the Korean exchange CoinLink.
According to a report released earlier this month by EY, 21 percent of people in the world — about 1.6 billion people — are underbanked. More than 200 million micro and SMBs fall into the underbanked category, too, with access to finance the largest hurdle for many of these firms.
EY pinpointed the APAC region as a particularly wide opportunity for financial services players to address this gap: Bank revenue in this market, researchers said, could reach $88 billion by 2020. If traditional banks don’t step in, alternative financial services firms will.
“A lot of smaller, private small businesses are under-funded,” Tran noted. “It’s not like here [in the U.S.], where we have an established financial and banking system. If you implement something like a decentralized blockchain, a P2P lending system, that would enable [SMBs] to get funded a lot easier than going through the normal banking system. With blockchain technology, you can put a platform together that is smart contract-based, allowing individual investors to participate in a growing economy. On the other hand, you allow [SMBs] to get funded very quickly.”
Innovation platform startAD will host a ten-day entrepreneurship programme, Venture Launchpad, at New York University Abu Dhabi (NYUAD), from February 18-27.
It will see ten fintech startups pitch their business ideas to investors. UAE-based early-stage startups are encouraged to apply by February 12, 2018, the application deadline.
The programme will equip them with the tools and knowledge to develop a scalable and capital efficient scheme. These include insights into crowdfunding, peer-to-peer lending, blockchain, algorithmic trading, credit scoring, cryptocurrency, payments, insurance tech and money transferrals.
Brazilian fintech EBANX announced on Wednesday it has secured a $30 million investment from FTV Capital.
EBANX also processes payments for major merchants from 50 different countries, including the U.S. and China. The company reported that just last year it processed $1.2 billion in cross-border transactions and achieved the milestone of helping more than 30 million users from the region gain full access to major international e-commerce merchants.
News Comments United States According to the bond market yield-curve there is 60% chance of recession. However, the equity market doesn’t agree. Interesting times. A short survey on the different US regulators’ interaction with the marketplace lending space. New Capital Rules likely to be imposed on wall street will likely push bank-dealers to shut down […]
According to the bond market yield-curve there is 60% chance of recession. However, the equity market doesn’t agree. Interesting times.
A short survey on the different US regulators’ interaction with the marketplace lending space.
New Capital Rules likely to be imposed on wall street will likely push bank-dealers to shut down trading units in debt-securitization due to insufficient return on equity. This change could have a huge impact on marketplace asset backed securitization.
Wells Fargo continues to push FastFlex, their own quick SME financing product competing with OnDeck, Kabbage, CAN Capital and all other SME marketplace lenders.
Morgan Stanley is pointing out all the positive data coming out of Lending Club: higher origination than predicted in Q2 2016 and much more.
Lending Club’s CIO unvailing the future plans for Lending Club : Point-of-Sales, offline and a cloud-base micro-services platform.
CFPB’s monthly report points out the most-complained-about companies in consumer loans. It would be interesting to plot company size vs number of complaints.
Square analysts believe that more regulation in marketplace lending will favor Square vs its competitors.
Last week news, worth a reminder after the long weekend: Avant is downsizing, again.
Boston, feeling left behind in fintech, is launching a fintech hub initiative supported by Fidelity, Putnam, Santander Bank, U.S. Bank and Boston Private Financial.
An interesting way to leverage your p2p investments: buying discounted P2P public fund shares at the present 20% discount, and relying on stock buy-backs to bet on up side in yield + equity appreciation.
Brexit: in short, fintech firms fear for staff shortages and lost EU customer access.
Insurer Aviva France, in partnership with Eiffel Investment Group and AG2R La Mondiale launching a €100 million fund to invest in “crowdlending SME debt” in France and elsewhere.
A list, without any transparency on the inclusion criteria, of the top 11 p2p lending platforms in Europe, (Pre-Brexit), per Fintechnews.ch. And a very interesting map of relative p2p lending market size in European countries.
Public p2p lender DirectMoney preparing a new share issuance to finance loans as loan demand outstrips funding.”DirectMoney chief Peter Beaumont yesterday defended the fintech company’s stockmarket listing and expressed disappointment over losses worn by shareholders.”
OnDeck Australia and Commonwealth Bank (CBA) receiving the Fintech-Bank Collaboration of the Year Award.
P2P players are moving towards institutional capital for growth. Following in the footsteps of their US cousins, we hope the Indian p2p lenders have learned their lessons from Prosper, Lendnig Club and Avant’s experiences with institutional capital.
P2P lenders exiting office space in Shanghai have brought office space vacancies supply to a 10-year-high level.
Interesting data and information on one of the 1st Korean p2p lending companies we learn about.
There’s a big disagreement brewing in global markets.
There’s 60 percent chance of recession, according to a Deutsche Bank model.
While risky assets including equities have surged following the U.K. electorate’s historic vote to leave the European Union, government bonds have also rallied; two things that ought to suggest different outlooks for economic growth. Soaring bond prices have sent yields on the perceived safe havens of government debt plumbing fresh lows, even while expectations of looser monetary policy produce a burst of animal spirits in stock markets.
The flight to safety has prompted some analysts to question the durability of the rally in equities, where the S&P 500 was up 3.5 percent last week and the FTSE 100 has erased its post-referendum dip — at least, in local-currency terms. Still others say that money is pouring into stocks as lower bond yields force investors to search for returns in alternative asset classes.
The spread between the yield on 10-year and two-year U.S. Treasury notes narrowed in the immediate aftermath of the June 23rd referendum, widened briefly, and is now shrinking again as investors continue to flock to the perceived safety of U.S. government debt. A model maintained by Deutsche Bank AG’s Steven Zeng, who adjusts the spread for historically low short-term interest rates, suggests the yield curve is now signaling a 60 percent chance of a U.S. recession in the next 12 months — up from a 55 percent probability as of mid-June, and the highest implied odds since August 2008.
“This relentless flattening of the curve is worrisome,” Deutsche analysts led by Dominic Konstam said in their note on the model. “Given the historical tendency of a very flat or inverted yield curve to precede a U.S. recession, the odds of the next economic downturn are rising.”
The 10-year yield is currently at 1.44 percent, making a recession just about 40 basis points away according to this particular interpretation of the bond market’s moves.
The Treasury first publicly showed interest in marketplace lending with a request for information(RFI) back in July 2015. Over 100 companies responded to the RFI and the Treasury reported on their findings in May 2016 where they shared their response in the form of a white paper. It did not provide any recommendations for new regulations and was generally quite positive on the industry.
The FDIC first addressed marketplace lending in a paper titled Supervisory Insights. They are concerned about the impact on banks as well as the general risk to financial services.
Consumer Financial Protection Bureau (CFPB)
Early this year, the CFPB made two announcements impacting marketplace lending. They said that they would begin accepting complaints directly from consumers about marketplace lending companies. Around the same time they issued a new No-Action letter policy that was designed to encourage innovation in financial services.
According to the Wall Street Journal the CFPB is planning to supervise marketplace lenders and will release a proposal some time in the fall. The CFPB has not commented publicly on this news so right now it is just a possibility but it makes sense.
Securities and Exchange Commission (SEC)
SEC involvement in marketplace lending goes back to the early days of Lending Club and Prosper. In 2008 the SEC decided that the notes issued by these companies were securities and should be registered as such. The result was Lending Club and Prosper filing a S-1 registration and becoming quasi public companies with quarterly financials being filed with the SEC.
Now that Lending Club is a public company it is has more responsibilities to both equity and debt investors both of which come under the purview of the SEC. The reality is while the SEC keeps a close eye on marketplace lending it is unlikely there will be much in the way of new developments here.
Federal Trade Commission (FTC)
The FTC recently hosted a financial technology forum on marketplace lending. The forum sought to look at consumer protections in marketplace lending and fintech more broadly. According to Jessica Rich, director of the FTC’s consumer-protection bureau marketplace lenders haven’t done enough in borrower protection.
United States Congress
In May 2015, the House Small Business Committee held a hearing on Capital Hill.
In January, in the wake of the San Bernardino shooting tragedy, the House Financial Services Committee held a hearing on terrorism financing that included a discussion of marketplace lending. But no new initiatives have come yet from these hearings.
Financial Stability Oversight Council (FSOC)
The FSOC most recently included their thoughts on marketplace lending in their annual report. Although the report highlights the lower cost and efficiencies of marketplace lenders they also discuss risks and concerns. One of the main concerns listed are the new and untested underwriting models used by platforms.
This list is only a start of the involvement we are likely to see from regulators as it pertains to marketplace lending. Due to the attention, we’ve seen many industry associations created to ensure a productive dialogue is being undertaken in Washington with all the organizations discussed here. We sincerely hope that any new regulation to come is thoughtful and comes from a well informed view of the industry.
New layers of regulatory capital expected to be imposed on Wall Street are likely to further pressure banks to exit trading of securitized-debt, JPMorgan analysts John Sim, Kaustub Samant, Carol Zhang wrote in client note Friday.
NOTE: Reports of dealers paring or shutting down trading units have grown; banks include Barclays, DB, MS, SocGen, Jefferies, RBS, Nomura, CS
There’s “no path to profitability” under current and recently released capital rules
JPM analysts calculated ROE (return on equity) for hypothetical RMBS portfolio based on impact from Basel’s Fundamental Review of the Trading Book
Concluded ROE of ~4%, “clearly not attractive enough to entice dealers to enter the space and make markets”
Adjusted model to various hypotheticals, such as reallocation, bid-ask, turnover rates
Concluded the “cumulative effect of all of these realistic and unrealistic changes would only increase the return to 7%, which is far short of our 10% to 15% ROE threshold”
“Running ROEs for hypothetical ABS and CMBS businesses would not result in markedly different results”
Primary market and business of underwriting new-issue securitizations can still be attractive, however, contingent underwriting volumes
Revenue derived from underwriting fees without consuming much capital; when balanced with secondary trading, ROEs for the business can become attractive, depending on volumes
Liquidity will continue to be constrained for non-agency RMBS, particularly in legacy space where dealers have no commensurate underwriting
CRT deals will also suffer from limited trading activity relative to market size; expect limited liquidity for Jumbo RMBS and SFR deals
Known as FastFlex, the San Francisco-based bank’s product offers customers with a business checking account a one-year loan of up to $100,000. Wells Fargo is considering expanding the availability of the loan next year, Lisa Stevens, the company’s head of small business, said in an interview.
FastFlex is designed for businesses with under $5 million a year in revenue who have “quick short-term needs to do some type of expansion or cash management,” Stevens said.
Some 67% of millennials are willing to take some financial risks to grow their businesses, compared with just 54% of older owners.
The FastFlex loan is one effort to meet that demand, he said, by providing a digital service with a rapid turnaround, two of the qualities that millennials have said they value most highly in financial services products. “We wanted to design our own product that would compete well in the marketplace-lending environment,” Case said.
2Q16 originations down ⅓ from 1Q equates to ~$1.8bn in originations or -4.4% YoY,vs. our $1.4bn (-25% YoY) estimate.Assuming volumes for the first five weeks in the quarter (prior to
Assuming volumes for the first five weeks in the quarter (prior to announcement of irregularities and CEO resignation) were consistent with the 1Q run rate, this suggests volumes over the remaining 8 weeks were down ~50% sequentially and 37% YoY.
LC has had dialog with hundreds of investors,and none have outrightly refused to come back as an investor on the platform. Most investors need to go through a due diligence process and LC appears confident in its ability to bring them back to prior levels of investment over the long term.
While investors from every category have returned to the platform, banks and large investors are taking longer with their audits, which is in-line with our expectations.It is unclear if 2Q represents the trough in terms of origination volumes, but management commentary on investor appetiteand conservativeapproach on origination expectations suggests 3Q and
It is unclear if 2Q represents the trough in terms of origination volumes, but management commentary on investor appetiteand conservativeapproach on origination expectations suggests 3Q and
4Q volumes should be similar to 2Q with potential for upward bias.
LC expects to incur $9mn of investor incentives (to be booked as contra-revenues) in 2Q , which are likely to continue in 3Q with a plan to eliminate these by 4Q.
LC expects to “resume revenue and EBITDA growth in 1H17” though it remains unclear to us if this comment suggests sequential or YoY growth.We expect LC to return to origination, revenue,and adjusted EBITDA growth by 2Q17, though we expect 1H17 to remain below 1H16 given tough comps on 1Q17e.
How do you predict your company will be different in two years, and how do you see yourself shaping that change?
We’ll also have a wider set of financing products that will be accessible online, offline, and at point of sale, while expanding our partnerships with banks and other non-financial institutions. We’re enabling that change by building our cloud-based micro-services platform, which simplifies integration of our solution for our partners and allow us to quickly and efficiently scale our core business and expand our product set.
What do you feel has been your biggest impact/success at this company? My biggest impact on LendingClub has been building a world-class team of engineers, scaling our technology platform to support the company’s incredible growth (compound annual growth rate of 124 percent Q4 2009 to Q4 2015 and well over $16 billion in loan originations to date), and setting a clear vision for a technology platform that is flexible and adaptable enough to handle future loan origination growth, partnership integration, and regulatory compliance updates.
What are your top three priorities for 2016-2017?
Transform our current technology platform into a suite of cloud-based micro-services;
Move our platform hosting environments to AWS (Amazon Web Services);
Double the size of our world-class technology team.
The CFPB has issued its June 2016 complaint report which highlights complaints about consumer loans and complaints from consumers in Arkansas and the Little Rock metro area.
The report does not specifically identify any complaints as involving marketplace lending. Unlike prior monthly complaint reports, the June 2016 report includes a “Sub Product spotlight” section that highlights auto lending.
The most-complained-about issue involved managing the loan, lease or line of credit. Other complaint issues included problems arising when the consumer was unable to pay, such as issues relating to debt collection, bankruptcy, and default.
General findings include the following:
Complaints about student loans showed the greatest percentage increase based on a three-month average, increasing about 61 percent from the same time last year (March to May 2015 compared with March to May 2016). As we noted in our blog posts about the April and May2016 complaint reports, rather than reflecting an increase in the number of borrowers making student loan complaints, the increase most likely reflects that in March 2016, the CFPB began accepting complaints about federal student loans. Previously, such complaints were directed to the Department of Education.
Payday loan complaints showed the greatest percentage decrease based on a three-month average, decreasing about 15 percent from the same time last year (March to May 2015 compared with March to May 2016). Complaints during those periods decreased from 479 complaints in 2015 to 405 complaints in 2016. In the March, April, and May 2016 complaint reports, payday loan complaints also showed the greatest percentage decrease based on a three-month average.
Helmed by Twitter CEO, Jack Dorsey, the Square’s lending business encountered a substantial obstacle in May, in the form of new and strict scrutiny from regulatory authorities. In a comprehensive study, the US Department of Treasury along with several other government agencies put forward recommendations, to safeguard the access and growth to credit through the continued developments of online marketplace lending.
Wedbush analysts believe that regulatory scrutiny is likely to increase the company’s lending business.
For the 2Q, Square projects revenue to fall between $151–156 million. Wedbush expects the company to surpass its own expectations — reporting closer to the sell-side firm’s own $168 million estimates — but foresees considerable downside to the financial services company’s shares, if it reports within its given guidance range.
Interestingly enough, in a research note published yesterday, Morgan Stanley lowered its prices target on Square stock from $12 to $10, following a meeting with the company. The sell-side firm also raised its Stock-Based Comp estimates, in light of the company’s transition from private to a public entity and higher comp to select personnel vs. prior expectations.
After also deciding to pull back in May from new verticals such as auto loans to concentrate on its core personal loans business, Avant is now cutting its lending target for that unit by 50% to about $100 million per month, Bloomberg reported.
Avant’s problem, like much of the so-called peer-to-peer lending market, isn’t a lack of demand from potential borrowers. Instead, the company and other online lenders are having increasing difficulty raising money to lend out as hedge funds and other investors outside the usual banking circles that backed the industry have grown wary.
The company had grown quickly for the past few years, reaching $3.5 billion in total loan volume. But with less access to capital, business has slowed recently, and loan volume declined 27% in the first quarter from the fourth quarter—the first such quarter-to-quarter drop since Avant started in 2012.
An $800 million LendingClub Corp (NYSE: LC) fund that invests in the company’s online consumer loans is expected to report its first monthly loss in the past 64 months in June. According to a letter to investors from LendingClub CEO Scott Sanborn, LendingClub’s Broad Based Consumer Credit (Q) Fund’s June return “is likely to be negative.”
The fund is LendingCub’s largest and has regularly returned around 0.5 percent per month throughout its five-year history. However, default rates on the fund’s loans have begun to rise in recent months and returns have dropped, prompting a number of investor redemption requests
The Wall Street Journal’s Peter Rudegeair reported that as of June 17, LendingClub had received $442 million in redemption requests representing about 58 percent of the value of the fund. In response to the large number of redemption requests, LendingClub announced it was placing restrictions on withdrawals and would be considering winding down the fund entirely.
The Boston Financial Services Leadership Council and the business consulting group Mass Insight have created Financial Technology Boston, under which they will host networking events and possibly job fairs involving fintech professionals from the corporate, startup, government and higher-education worlds.
In addition to State Street (NYSE: STT), Fidelity and Putnam, the BFSLC includes Santander Bank, U.S. Bank and Boston Private Financial (Nasdaq: BPFH).
Boston is already home to fintech-focused incubators FinTech Sandbox and the DCU Center of Excellence in Financial Services, as well as a monthly meetup for fintech professionals.
Analysis by AltFi Data shows loan origination has more or less been static across the UK P2P lending industry in 2016. This somewhat contrasts with the rapid growth seen in 2015 and 2014. Any number of explanations are given for this including a broad risk-off attitude from markets as well as the ongoing fiasco at the major US platform Lending Club.
However, for professional and private investors alike who are not dissuaded from the adverse headlines, and attracted by the high yields on offer from investing in the market, there is a clear argument to avoid investing directly on platforms. While this is the normal route for many, buying shares in the investment trusts offering exposure to loans originated from the platforms that are heavily discounted at present arguably makes more sense.
Over time in addition to the 7.4 per cent yield on offer, a narrowing of this discount or perhaps even a move to a premium could significantly bolster returns.
The table below shows what will happen to the share price following a 20 per cent return in net asset value alongside changes in the discount/premium. It clearly shows that buying at a premium massively adds to the total return.
Of course there is always the risk that the discount moves out further. This could be caused by investors going off the trusts even more. Or it could be broader negative sentiment towards equity markets that sees index level selling of the FTSE 250 – in the case of P2P GI – or FTSE All Share selling in the case of VPC Specialty Lending. This would add to weakness in both trusts’ share prices, and potentially widen the discount.
However, as AltFi reported last week P2P GI has started to defend its discount by buying up its shares using spare cash. Last week it bought £2m of its shares at an average price of 827p, says Monica Tepes, analyst at Cantor Fitzgerald.
This did temporarily lower P2P GI’s discount to 17.5 per cent although it has since moved back to over 20 per cent.
That status won’t necessarily change after Britain leaves the EU but FinTech firms have said it will complicate the picture, particularly when it comes to their ability to sell services to Europe and attract new talent.
Access to the single market allows goods and finance to be moved between EU countries without tariffs. However, full access also requires free movement of workers between European countries, something many Leave voters oppose.
Nevertheless, for peer-to-peer (P2P) lending platform MarketInvoice, as for many other London-based FinTech firms, free movement of European labor is essential to meet its demands for skills.
“Here at MarketInvoice we have a super-diverse team from all corners of the globe. Most notably within our software-engineering and data-science teams. Many FinTech founders themselves come from outside the UK,” said Anil Stocker, CEO of MarketInvoice.
Aviva France, together with two partners, alternative asset management firm Eiffel Investment Group and insurer AG2R La Mondiale, is launching an investment fund called “Prêtons Ensemble” (Lending together) dedicated to financing loans to small and medium-size enterprises (SMEs) provided through crowdlending platforms.
Starting with an initial endowment of €50 million from Aviva France and €20 million from AG2R La Mondiale, the fund is expected to quickly grow to €100 million by rallying other institutional investors around the project.
The goal is to invest in the French real economy by financing SME loans granted through regulated crowdfunding platforms. Eiffel Investment Group is a specialist with more than eight years of experience in investing on crowdlending platforms, notably in the more advanced UK and US markets. Eiffel Investment will be in charge of the due diligence on the platforms and their loan portfolios. Currently, they have identified around 100 platforms and have made contact with 50 of them. Eventually, in five years from now, the fund should be invested to 70% in lending to SMEs and minimum to 50% in France. At the onset, we’re starting with a dozen platforms, mostly, but not only from France as the market is still emerging here. The (soon-to-be published) list includes names such as Younited Credit, Finexkap and Lendix.
The fund will be diversified in terms of the platforms’ business model and of the type of credit provided to SMEs. This means that it will include both unsecured and secured loans, short-term invoice financing as well as mid-term loans. On average, the loans are expected to have a maturity of 2.5 years.
Our decision was made long before the Lending Club problems surfaced. Upon hearing about them, we conducted a thorough analysis of their actual causes and impact. We were quite reassured to find out that the scale of the financial issue was small, that it had been fixed, and that a subsequent audit did not uncover any other impropriety.
Comment: As author chose to label the article Europe’s top 11, and includes UK companies, we chose to do the same.
In Europe today, although the vast majority of the P2P lending activity is concentrated in the UK – which accounts for over 84% of the whole European market –, Germany, France and Nordic countries are experiencing strong growth and development in the P2P lending space with a number of homegrown startups starting to emerge as regional leaders.
DirectMoney, which writes personal loans, slid to 4.5c a share after coming to market last year at 20c via a backdoor listing. On Friday, the company unveiled a $5.7m non-renounceable capital raising at 4.2c a share on a one-new-share-for-every-two-held basis.
The raising, underwritten by Bell Potter, opens on July 11.
It follows a mixed ride for investors, with the stock exchange in February querying its financial position and DirectMoney subsequently unveiling a deal with Macquarie, which bought $5m of the company’s personal loans and took shares in the company in exchange for advisory services.
In May, DirectMoney revealed loan demand was outstripping funding as the company slowly gained traction for its personal loan fund for retail investors. In the interim, the company turned to two “large financial institutions” for funding facilities, signing a non-binding term sheet with one for $20m.
Part of the cash from the $5.7m raising will be used as upfront collateral for the funding facilities. “We’ve proven our ability to originate loans; that is difficult for some organisations and what we are now doing is establishing committed funding programs of sufficient size so we can leverage the assets we’ve built,” Mr Beaumont said.
DirectMoney has written $17.6m of unsecured personal loans up to $35,000 for three to five years. Revenue in the financial year to the end of May was $1.19m, compared to $435,513 in the six months to December 31.
DirectMoney chief Peter Beaumont yesterday defended the fintech company’s stockmarket listing and expressed disappointment over losses worn by shareholders, arguing there were many benefits and the sector globally had suffered a de-rating.
“We’re disappointed there were investors that came in at higher prices and have had capital losses at this point, but marketplace lending globally has experienced a resetting of valuations, whether it’s LendingClub in the US or others, since last year,” he said.
The inaugural Australian Fintech Awards regonised innovation in the finance industry, with OnDeck Australia and Commonwealth Bank (CBA) receiving the Fintech-Bank Collaboration of the Year Award. OnDeck entered the Australian market last year with CBA and online accounting software provider, MYOB, as distribution partners.
I-lend has stitched a partnership with Hyderabad-based non-banking finance company Star Finserve, becoming the first peer-topeer online lending platform to join hands with an institutional lender while several other players including MicroGraam, Faircent and LenDenClub are in talks for similar pacts.
“The cost of loan origination is going up steadily for NBFCs and banks, the number of successful applications is declining and through these partnerships the institutional lenders can cut down on incurring origination of loan and administration costs,” said VVSB Shankar, founder of i-lend.
Shankar said the decline in the number of applications could be attributed to several factors such as competition among institutional lenders, quality of borrowers or involvement of non-performing assets. The company’s loan book size is about `1.5 crore and lenders on the platform can opt for borrowers who pay 18-21% interest.
Peer-to-peer platforms have reported an increase in the number of high net worth individuals or HNIs they have attracted over the past six months. “HNIs and family offices are showing interest in the peer-to-peer space. Since there is a criterion for lenders to have an income of over `10 lakh, this is bound to happen. Our top lenders have invested more than `40-50 lakh each, with the highest being around Rs 60 lakh,” said Rajat Gandhi, founder of Faircent, which has a loan book size of Rs 6.5 crore.
Smaller players including LenDen-Club said they have also seen increasing interest from HNIs, specifically from Maharashtra and Gujarat, spending about Rs 15 lakh individually. Since retail investors are central to how such platforms function, the companies aim to firm up a select few partnerships with institutional lenders over the next one year.
The recent collapse and exodus of numerous peer-to-peer lending (P2P) companies in China after a government crackdown on fraud has rattled the Shanghai CBD office market and may “pose a challenge for landlords”, experts say.
In the second quarter of the year, supply spiked to a 10-year high, according to real estate firm Colliers International, as overall vacancy rates in the area increased 3.2 per cent quarter on quarter to 7.2 per cent.
8PERCENT, a P2P (peer-to-peer) lending company, revealed on July 4 that 30-something men who live in metropolitan areas are their primary investors.
As of June 30, top P2P lending company 8PERCENT’s total accrued loans summed up to 26.6 billion won ($23 million), with a total of 8,283 investors investing 3.21 million won ($2800) on average per person.
The average age of the investors was 34.3, and more than 90 percent of the investors were between the ages of 20 and 40. 8PERCENT also revealed that 77 percent of the investors lived in metropolitan areas, and that 67.5 percent were male and 32.5 percent, female.
The largest investment made so far was 453 million won ($395,000) diversified into 1,115 different bonds.
“Until last year, 90 percent of investors were from metropolitan areas, but the portion from non-metropolitan areas increased to 23 percent this year. Investment from women also increased from the low 20s to 30 percent, and we’re seeing growth in the number of investors in their 50s as well,” said Kang Seok-hwan, chief marking officer of 8PERCENT.
Small credit loans of 24.2 billion won ($21 million) comprise more than 90 percent of the total investments. Out of the total amount, 13.4 billion won ($11 million) was loaned to individuals, and 10.8 billion won ($9.4 million) to corporations.
Besides credit loans, borrowers also obtained real estate mortgage loans of 2.4 million won ($2 million).