- Today’s main news: Prosper changes pricing. Revolut launches disposable virtual cards. OakNorth reports annual profit. Lufax delays IPO. eToro raises $100M for blockchain development.
- Today’s main analysis: Isas that pay up to 16%.
- Today’s thought-provoking articles: Is personal service getting lost in digital? What makes big data BIG? How quantum computing can change financial services. Can the blockchain prevent bank fraud?
- Prosper changes pricing. AT: “This is a reaction to the new Fed rates.”
- Is personal service getting lost in the digital mindset? AT: “This is worth thinking about. While technology allows alternative lenders to do what they do affordably, efficiently, and at scale, it’s the personal touch that gives companies in this space an edge over big financial institutions.”
- What makes big data BIG?
- 2017 Digital Lending Fraud Report.
- Court limits valid-when-made doctrine.
- Marlette Funding True Lender case sent back to state court.
- Consumer Financial Protection Bureau had over 84K debt collection complaints in 2017.
- Washington state’s new student education loan bill of rights.
- Upstate New York popular for millennial home buyers.
- Fresno small business environment among the best in the country.
- Even Financial expands partnership with Credit.com.
- Roostify hires new VP of business development.
- Citi restricts gun sales by retail clients.
- Revolut launches disposable virtual cards. AT: “Very interesting development.”
- OakNorth the first UK digital bank to report an annual profit. AT: “Congratulations. I look forward to the day when most digital banks are turning a profit.”
- Isas that pay up to 16%. AT: “A good run down.”
- Tide gets FCA approval.
- Will China snatch the fintech capital title from the UK?
- Will PSD2 open new B2B lending opportunities?
- Cerberus Capital Management appoints senior advisor in Europe.
- eToro raises $100M for blockchain development. AT: “It will be exciting to see how this turns out.”
- How quantum will change financial services. AT: “We are a long way from real use cases in quantum computing, but there is great potential here beyond the blockchain.”
- United States
- Prosper Announces Pricing Changes (Prosper), Rated: AAA
- Is Personal Service in Fintech Getting Lost Amid the Digital Mindset? (Lend Academy), Rated: AAA
- WHAT MAKES BIG DATA SO … BIG? (AllAboutAlpha), Rated: AAA
- 2017 Digital Lending Fraud Report (Mitek), Rated: A
- Foolishness Versus Fintech: Foolishness Wins Again (Lexology), Rated: A
- 2nd Colo. ‘True Lender’ Case Sent Back To State Court (Law360), Rated: A
- CFPB handled over 84K debt collection complaints last year: Report (American Banker) Rated: A
- United States: Taking Stock Of Washington State’s New Student Education Loan Bill Of Rights (Consumer Protection), Rated: A
- Upstate N.Y. popular for millennial home buyers, study says (Rochester Business Journal), Rated: B
- STUDY: FRESNO SMALL-BUSINESS ENVIRONMENT AMONG BEST IN NATION (The Business Journal), Rated: B
- Even Financial Announces Expanded Partnership With Credit.com; Will Power Personal Loan Marketplace (Benzinga), Rated: B
- Roostify Adds Mark McLaughlin as Vice President of Business Development (Business Wire), Rated: B
- Citi sets restrictions on gun sales by retail clients (KFGO), Rated: B
- United Kingdom
- Revolut launches disposable virtual cards (AltFiNews), Rated: AAA
- OakNorth becomes first UK digital bank to report annual profit (Financial Times), Rated: AAA
- These Isas pay up rates of up to 16%: what’s the catch? (Which? News), Rated: AAA
- Tide gets FCA-authorised, launches new card and integrations (AltFiNews), Rated: A
- China could snatch the crown of fintech capital, Britain is warned (The Times), Rated: B
- Lufax Delays IPO Amid Regulatory Crackdown (Financial Times), Rated: AAA
- Small Business Confidence in Mainland China Booms, Driven by Technology, E-commerce and Social Media (Markets Insider), Rated: A
- European Union
- Will PSD2 Open up New B2B Lending Opportunities? (Payments Journal), Rated: A
- Cerberus Capital Management Appoints Roberto Nicastro as Senior Advisor in Europe (PR Newswire), Rated: B
- eToro raises $ 100m Series E to fund blockchain effort (AltFiNews), Rated AAA
- How quantum will change everything (including banking, money and security) (The Financier), Rated: AAA
- Australia/New Zealand
- Cash, crypto and crowdlending: meet New Zealand’s rising FinTech future (The Spinoff), Rated: A
- Could blockchain tech help prevent bank fraud? (American Banker), Rated: AAA
- Now here’s a crypto bank you can grow with (The Economic Times), Rated: A
- Naspers To Sell $ 10bn Tencent Shares To Invest In Fintech (Forbes), Rated: AAA
- Royal Bank of Canada Launches API Developer Portal (Crowdfund Insider), Rated: AAA
Prosper Announces Pricing Changes (Prosper), Rated: AAA
Earlier this week in anticipation of the Fed Rate hike, we discussed Prosper’s approach to portfolio pricing in a rising rate environment. Our goal with rate-setting is to deliver value for both sides of the Prosper platform by providing a fair price for borrowers and a reasonable return for investors.
In order to deliver on this objective, the borrower rates offered in our marketplace must react to rate changes in the economy at large. Today, the Federal Reserve announced a 25 basis point (bps) increase in the Fed Funds rate. In light of this development, the rates offered to borrowers through the Prosper platform are being modified.
Pricing Change Impact Simulation
The table below summarizes the simulated impact of the rate increase on the portfolio originated through the Prosper platform in March month-to-date (MTD) 2018. Overall borrower rates on the platform are increasing by 26 bps.
Is Personal Service in Fintech Getting Lost Amid the Digital Mindset? (Lend Academy), Rated: AAA
Profitability of digital-only businesses can be astounding because the model is so cost-efficient. Some just don’t want customers with “high maintenance” needs such as human customer support.
The best overall answer is to offer all options. Enable customers to interact solely in a digital way or with live support to guide through the process, answer questions and solve problems. Make it easy to use both, such as Amazon does. Online ordering is usually a breeze. But when a problem or concern arises, they have caring and competent live human beings to help.
Ways To Show That You’re Invested (Or Want To Be) In Human Caring
- Check in with your world.
- Beat your “human caring” drum.
- Extend human touch company-wide.
WHAT MAKES BIG DATA SO … BIG? (AllAboutAlpha), Rated: AAA
A Paper from Citi
A new paper by Citi Business Advisory Services throws a lot of light on where Big Data stands.
The paper argues that due to Big Data, “the innovation seen in systematic trading models over the past decade could accelerate” and (a closely related point) the “differences between what used to represent quantitative versus qualitative research” could disappear.
Not all Roses and Plush Toys, Though
The process by which the new data capabilities and principles get internalized by the swifter funds, those that want to be on the winning side of the arb plays, isn’t a painless one. There are “integration and cultural challenges” that have to be overcome. After all, the experts that an aspiring arbitrageur would hire come from “internet firms, gaming companies, the military” and consumer research. The world of asset management will be new to them, so everyone on the developing teams can “work effectively together.”
2017 Digital Lending Fraud Report (Mitek), Rated: A
The explosive adoption of the digital channel is changing the nature of lending. Consumers are coming to expect the kind of convenience and speed that a digital experience can deliver, and lenders are increasingly looking to oblige. Although many of the consumer benefits of digital lending are clear, certain complications related to fraud arise when lending goes digital. This is a function of the degree of separation and anonymity in the digital lending process. Building on these factors, today’s fraudsters are relying on a diversified playbook of schemes and techniques to commit loan fraud in digital channels, including the use of synthetic identities, volumetric attacks, and technology designed to disguise their digital footprint. In this report, Javelin explores how these issues have come to unfold and the steps that lenders must take if they want to effectively resist this growing epidemic of digital lending fraud.
Key questions discussed in this report:
- What effect has the use of digital channels had on the lending space?
- How has fraud changed as a result of lending going digital?
- What are the technology factors affecting the risk of lending fraud in digital channels?
- What are the fraud risks specific to each type of loan product?
- How are different segments of consumers affected by digital lending fraud?
- What are the steps that FIs and other lenders can take to effectively prevent new account fraud?
Foolishness Versus Fintech: Foolishness Wins Again (Lexology), Rated: A
A recent decision from a federal district court in Colorado, Colorado ex rel. Meade v. Avant, strikes another blow against many of the financial technology firms that are revolutionizing the way consumers and businesses access credit. Joining what is now a line of decisions, the court limited the valid-when-made doctrine, which provides that a loan that is valid when it is made does not become invalid (i.e., usurious) when it is sold or assigned to a third party.
2nd Colo. ‘True Lender’ Case Sent Back To State Court (Law360), Rated: A
A Colorado federal judge ruled Wednesday that the Federal Deposit Insurance Act doesn’t so completely preempt a state financial regulator’s claims against nonbank lender Marlette Funding LLC that they have to be heard in federal court.
U.S. District Judge Philip A. Brimmer remanded the case from Julie Ann Meade, the administrator of Colorado’s Uniform Consumer Credit Code, making it the second such “true lender” action to get kicked back to Denver state court this month.
CFPB handled over 84K debt collection complaints last year: Report (American Banker) Rated: A
In a joint annual report to Congress released Tuesday with the Federal Trade Commission about debt collection practices, the CFPB said it had initiated four enforcement actions last year, had resolved one case and has five others pending related to unlawful debt collection practices.
Acting CFPB Director Mick Mulvaney has indicated that debt collection will be a top priority for the agency. About 26% of consumers with a credit file have debt that is being collected by a third party, the CFPB said.
The CFPB recovered $577,000 in consumer relief from its enforcement actions while $78,800 was paid into the civil penalty fund, which is used to provide relief to eligible consumers who otherwise would not be compensated.
United States: Taking Stock Of Washington State’s New Student Education Loan Bill Of Rights (Consumer Protection), Rated: A
On March 14, Governor Jay Inslee of Washington signed the Washington Student Education Loan Bill of Rights. This law had been in the works since 2017 when a report, released by Attorney General Bob Ferguson in December, documented significant disparities across gender, income, age, and race in student loan borrowing and highlighted a handful of the hundreds of complaints the office received from student loan borrowers about their student loan servicers. Providing strong protections for Washington’s more than 730,000 student loan borrowers, whose debt now totals $22.9 billion, the law changes Washington’s regulatory schematic for lenders and servicers operating in the student loan marketplace in the following ways:
- It creates the position of “Advocate” within the Washington Student Achievement Council to assist student education loan borrowers with student loans, akin to the position off “ombudsman” under proposed and enacted servicing bills in other states.
- It requires servicers to obtain a license from the DFI.
- Per this law, all student loan servicers, except those entirely exempt from the statute, are made newly subject to sundry statutory duties.
- It imposes several requirements on third-parties providing student education and loan modification services.
- It compels institutions of higher education to send borrower notices regarding financial aid.
- It calls for the establishment, by rule, of fees sufficient to cover the costs of administering the program that it itself creates.
- Lastly, the statute provides for a complete exemption for “any person doing business under, and as permitted by, any law of this state or of the United States relating to banks, savings banks, trust companies, savings and loan or building and loan associations, or credit unions.”
Upstate N.Y. popular for millennial home buyers, study says (Rochester Business Journal), Rated: B
Upstate New York is a popular place for millennials to buy houses, according to a national survey by online lender Lending Tree. For home buyers 35 and under, Rochester ranks 16th among the nation’s 100 largest cities for home mortgage requests and offers from borrowers between Feb. 1, 2017, and Feb. 1, 2018.
STUDY: FRESNO SMALL-BUSINESS ENVIRONMENT AMONG BEST IN NATION (The Business Journal), Rated: B
LendingTree, an online lending exchange company, released a study listing the best and worst cities for a new small business, and Fresno ranked ninth for best cities to start a new small business.
Ranking at first is Sacramento.
To conduct the study, LendingTree used data from over 80,000 queries submitted by new small-business owners seeking loan offers through their small business loan marketplace to find out where businesses tend to perform the best.
Even Financial Announces Expanded Partnership With Credit.com; Will Power Personal Loan Marketplace (Benzinga), Rated: B
The change will allow Credit.com users to get matched with personal loan offerings that can be pre-approved in real-time without leaving the site thanks to Even’s technology. Previously, users looking for personal loans on the site were referred to individual lender websites.
Roostify Adds Mark McLaughlin as Vice President of Business Development (Business Wire), Rated: B
Roostify today announced the addition of Mark McLaughlin as the company’s Senior Vice President of Business Development. McLaughlin will be responsible for formulating the company’s overall partner strategy, creating a scalable operational model, and further developing an ecosystem of technology partners and strategic alliances.
Citi sets restrictions on gun sales by retail clients (KFGO), Rated: B
Citigroup Inc added restrictions on firearms sales for new retail-sector clients, the Wall Street bank said on Thursday, the strongest move to date by a major U.S. lender following last month’s high school shooting in Florida.
In an emailed statement Citi said it will require those clients only sell firearms to customers who have passed a background check, restrict firearms sales for buyers under 21, and not sell so-called “bump stocks” or high-capacity magazines.
Revolut launches disposable virtual cards (AltFiNews), Rated: AAA
In an effort to stay one step ahead of the game at all times, digital banking app Revolut is set to launch disposable virtual cards next week to help users of its Premium service protect themselves against online card fraud.
Revolut users will be able to create disposable virtual cards for online purchases in seconds, with card details that automatically regenerate after each transaction. This will also protect users from inconveniences like chargebacks from sites on one-off purchases, as well as preventing fraudsters from tracking bank account information.
The virtual cards will work alongside existing Revolut security features, such as location-based transaction security, the familiar “freeze/unfreeze” physical card ability, as well as being able to disable swipe and contactless payments.
OakNorth becomes first UK digital bank to report annual profit (Financial Times), Rated: AAA
UK based digital bank OakNorth reported an annual profit of $149mn, becoming the first digital bank to do so; in their second year of full operations the bank has seen their loan book triple in size and deposits double in size; Rishi Khosla, OakNorth chief executive, told the Financial Times, “we build them for profit and on strong foundations so as you grow you’re scaling a real business rather than what happens to a lot of fintech where you just keep building for top-line or number of customers, but don’t necessarily have the strongest business model.”
These Isas pay up rates of up to 16%: what’s the catch? (Which? News), Rated: AAA
See the table below to see what Ifisas are on the market, what industry they invest into, the minimum investment amount and what kind of returns you can expect.
Among the highest rates, FundingSecure offers up to 16% on investments from £25. However, as a peer-to-peer ‘pawnbroking platform’ borrowers are looking for urgent loans to be given within 24 hours, which are secured against their assets. Borrowers are not required to pass any credit checks. Ablrate offers variable rates up to 16%, but they’re set by the borrower and you have to decide if the return is worth the risk. Past funded loans include units for a film studio, a waste management company and a modular building company.
Where else can I find high interest rates? They may not offer 16% interest, but there are a number of current accounts that pay up to 5% – and they don’t come with the associated risks of a Ifisa.
- Nationwide’s FlexDirect account offers 5% AER on balances up to £2,500 when you pay in at least £1,000 a month. This is only for the first 12 months, however.
- The TSB Plus account offers 3% AER on funds up to £1,500 as long as £500 is paid in each month and you register for online and paperless banking. There’s also the opportunity to earn up to £10 cashback a month, for a limited time.
- The Tesco Bank current account also offers 3% AER on balances up to £3,000. You need to pay in £750 a month and set up at least three direct debits.
Tide gets FCA-authorised, launches new card and integrations (AltFiNews), Rated: A
From today, digital business bank Tide has been authorised by the Financial Conduct Authority (FCA) as an electronic money institution (EMI), which according to Bevis will give Tide “the option to access the same banking infrastructure as older banks”. Since the bank launched last January, 1 in 12 of all business accounts opened in the UK has been with Tide.
Now managing the accounts of over 30,000 businesses, Tide has today also launched a new vertical card and updated app design, and an integration with online accounting provider FreeAgent, which will automatically upload Tide transaction data into the software for easy expenses tracking.
Tide’s recent partnership with iwoca for business lending is also proving fruitful, with the fastest rate of service from first click to credit in the user’s account sitting at 6 minutes and 1 second.
China could snatch the crown of fintech capital, Britain is warned (The Times), Rated: B
Mark Tucker, chairman of HSBC, Britain’s largest bank, and Nigel Wilson, chief executive of Legal & General, the insurer, said that there was no room for complacency in Britain’s so-called fintech industry.
Philip Hammond, the chancellor, told an industry conference yesterday that the UK was the “global capital of fintech” and that the emerging industry contributes £7 billion to the economy.
Lufax Delays IPO Amid Regulatory Crackdown (Financial Times), Rated: AAA
One of China’s largest online lenders has shelved their IPO because of the regulatory crackdown on online lending; the FT reports that Lufax is waiting until the China Banking Regulatory Commission (CBRC) required online lenders to apply for a license; the current thinking is the government will approve licenses in April, though the time frame could be a bit longer; Lufax wants to ensure they get it right instead of rushing to be first.
Small Business Confidence in Mainland China Booms, Driven by Technology, E-commerce and Social Media (Markets Insider), Rated: A
Seventy-eight per cent of small businesses in Mainland China expect to grow in 2018 and 97.5 per cent of small business are confident that the local economy will remain the same or improve in the next 12 months. These are the best survey results for MainlandChina since 2014.
“The high rates of technology use among Mainland China’s small businesses is one of the key drivers of growth, with over 80 per cent of businesses in Mainland China earning more than 10 per cent of revenue from online sales — ranking MainlandChina at the top of the surveyed markets.
Will PSD2 Open up New B2B Lending Opportunities? (Payments Journal), Rated: A
This referenced posted blog is a good question and likely the answer is ‘yes’, but also we need to wait and see how effective. Since PSD2 is a legal imperative, one key question posed by the author is whether or not end user companies (the client buying or using a particular financial services product) wishes to share actual bank or account data with the 3rd party vendors for which API-based sharing was designed to assist.
‘When it comes to new services around B2B and working capital, I believe like any good market hypotheses to test, we need to understand a basic question when it comes to corporates – will they provide third party vendors this access? I don’t know the answer to that question, but I do know it comes down to trust and value proposition. Certainly making sure vendors have the security around your bank data will be important in this age of constant hacking threats’.
Cerberus Capital Management Appoints Roberto Nicastro as Senior Advisor in Europe (PR Newswire), Rated: B
Cerberus Capital Management, L.P. and its affiliates (“Cerberus”), a global leader in alternative investing, announced today that Roberto Nicastro has become a Senior Advisor to the firm. In this role, Mr. Nicastro will consult with Cerberus as it continues its focus on investment opportunities and strategic partnerships in the European financial services sector.
eToro raises $ 100m Series E to fund blockchain effort (AltFiNews), Rated AAA
The raise is set to support eToro’s expansion as it heads into new markets, and continued research and development of blockchain technology and digital assets. The round brings the platform’s total capital raised to $162m, following a signficant period of growth for the business driven in part by its foray into cryptocurrency investments.
eToro added Stellar as its eighth cryptocurrency asset listed on its Crypto Copyfund in February, joining fellow cryptos Bitcoin, Bitcoin Cash, Litecoin, Ethereuem and Ripple amongst others. The trader launched its Crypto Copyfund in July 2017, which uses CFDs to enable investors to diversify across all available cryptocurrencies (weighted by market cap) with just one click.
How quantum will change everything (including banking, money and security) (The Financier), Rated: AAA
Basically, a quantum computer doesn’t work with bits but with qubits using particles that can be in superposition (two or more quantum states added together to create another state). This is why particles can take on the value 0, or 1, or both simultaneously. The reason that this is important is that it will allow computers to process and store far more information with far less energy and far more speed than current state computers. For example, in 2016, a team of Google and Nasa scientists found a quantum computer was 100 million times faster than a conventional computer. Elsewhere, in a step towards quantum computing, researchers have guided electrons through semiconductors using incredibly short pulses of light. These extremely short, configurable pulses of light could lead to computers that operate 100,000 times faster than they do today.
This is important in banking because it could displace blockchain, ledger and digital identity developments within a decade. This is because the quantum internet would excel at sending information securely through what is known as quantum encryption. This technology enables banks and businesses to be able to send “unhackable” data over a quantum network. This is because quantum cryptography uses a mechanic called quantum key distribution (QKD), which means an encrypted message and its keys are sent separately. Tampering with such a message causes it to be automatically destroyed, with both the sender and the receiver notified of the situation.
Cash, crypto and crowdlending: meet New Zealand’s rising FinTech future (The Spinoff), Rated: A
It’s this hassle that Hnry (pronounced ‘Henry’) wants to help resolve, doing away with the need for spreadsheets, software and even costly accountants. Whether it’s income tax, GST, ACC or student loan repayments, Hnry will calculate and pay all of these for you. Same goes for your tax returns, which Hnry will complete on your behalf. It’ll also handle all your invoices, regardless of whether you work for a single client or multiple clients at the same time.
Born from a desire to change how enterprise companies and individuals interact with one another, Jrny uses AI and conversational interfaces to create more relevant, two-way channels of communication. Jrny allows businesses to handle thousands of messages instantly in an effort to build a closer relationship between company and customer.
Could blockchain tech help prevent bank fraud? (American Banker), Rated: AAA
A massive fraud that cost India’s second-largest bank at least $2 billion is highlighting concerns about vulnerabilities in institutions’ internal controls and spurring some to claim that blockchain could have prevented the crime.
In a recent incident at Punjab National Bank, a deputy branch manager and his subordinate allegedly falsified 150 letters of undertaking directing other banks to give loans to a group of jewelry companies, with PNB providing surety for those letters. Virtually all of them defaulted, causing PNB to be on the hook.
What made the fraud so difficult to detect was that, as far as its internal systems were concerned, the transactions didn’t exist. The letters of undertaking were sent using the Swift network, but none were recorded on PNB’s internal record-keeping software, which wasn’t linked to the Swift system.
That’s why some are arguing that bockchain, or distributed ledger technology, could have prevented the fraud. Because immutable records are kept on a decentralized database that multiple parties can view, it’s possible that the fraud either wouldn’t have happened or could have been detected sooner.
Now here’s a crypto bank you can grow with (The Economic Times), Rated: A
In this virtual bank, your savings are stored in crypto format on a blockchain, and instead of interest on your savings, you get a virtual share in the revenue of the bank.
This is an unconventional concept developed by Mumbai-based entrepreneurs Varun Deshpande, Ratnesh Ray and Siddharth Verma, whose product Nuo Bank went live this week.
Naspers To Sell $ 10bn Tencent Shares To Invest In Fintech (Forbes), Rated: AAA
Naspers, the most valuable listed company in Africa, will be selling $10-billion of its shares of Chinese messaging giant Tencent to invest in fintech, classified and online food delivery businesses.
Naspers announced it will sell up to 190-million Tencent Holdings Limited shares, or 2% of Tencent’s total issued share capital. Naspers is reducing its stake in the maker of WeChat and QQ – which is worth an estimated $545-billion – from 33,2% to 31,2%.
Royal Bank of Canada Launches API Developer Portal (Crowdfund Insider), Rated: AAA
On Tuesday, the Royal Bank of Canada (RBC) announced it has opened its very own API developer platform. According to the bank, the RBC Developers platform will allow eligible external software developers, industry “innovators,” and clients to access select RBC APIs. While sharing more details about the platform, Sumit Oberai, Senior Vice President of Digital Technology at RBC, stated: “Across other industries we’ve seen the transformational effects of APIs. By providing external developers, industry innovators, and clients with access to select RBC APIs, we have the opportunity to increase connectivity, create new tools and experience for clients, and enable open and innovative collaboration to improve the future of banking.”