Lenders Bet On Artificial Intelligence for Credit Scoring

Lenders Bet On Artificial Intelligence for Credit Scoring

Banks have to struggle with a lot of challenges – from issuing credit to operational risks, and technological troubles to good old fashion fraud. In addition to the risks of yesteryear, modern banks face falling long-term rates, growing fintech competition, and low profitability. In this challenging environment, savvy modern banks focus more of their attention […]

Lenders Bet On Artificial Intelligence for Credit Scoring

Banks have to struggle with a lot of challenges – from issuing credit to operational risks, and technological troubles to good old fashion fraud. In addition to the risks of yesteryear, modern banks face falling long-term rates, growing fintech competition, and low profitability. In this challenging environment, savvy modern banks focus more of their attention to mitigating risks.

Chief among these challenges are low-performing loan portfolios, which are a constant thorn in the side of lenders. For example, European non-performing loans stand above €1 trillion with more than one third of banks having NPL ratios above 10% (ECB, 2017).

This minefield of factors has driven lenders to seek out new ways to increase profits and cut funding costs in order to stay competitive.

Artificial Intelligence in Fintech: Will it take over?

AI is a powerful tool for banks, thanks to its ability to harness vast quantities of data to learn more about customer patterns and behaviors”, says Steve Ellis, head of the innovation group at Wells Fargo.

As powerful as artificial intelligence (AI) is, traditional banking is still heavily reliant on statistical methods that were developed over half a century ago. Lenders determine creditworthiness based on 20+ data points, which leave otherwise worthy customers behind.

Modern machine learning (ML) makes it possible to go much deeper when analyzing data, and allows lenders to extract valuable insights from available data patterns.

According to a McKinsey report, a number of European banks have already replaced the antiquated statistical-modeling approach with machine-learning techniques. The results speak for themselves: a 10% increase in the sale of new products, 20% savings in capital expenditures, and a 20% decline in churn.

Source: thefinancialbrand.com

The data doesn’t lie: Lenders are betting on AI. Evidence of this modern trend can be seen in numerous ‘banks and fintech collaborations’ and AI-based software releases:

  • JPMorgan Chase pioneered a Contract Intelligence platform designed to “analyze legal documents and extract important data points.”
  • American MobileBank deploys AI software to lend to thin-file millennials.
  • Canadian TD Bank uses Layer 6’s AI engine for scoring and cybersecurity.
  • Deutsche Bank came out with new AI-based equities to predict their pricing and volume more accurately.
  • Wells Fargo employs its own AI team to provide more personalized services and strengthen digital offerings.
  • Bank of America Merrill Lynch implements HighRadius’ AI solution to speed up receivables reconciliation for their large business clients.

Logistic regression is no longer the de facto standard

Nine times out of 10, logistic regression is used to build scoring models and solve classification issues. Before it can take over and provide predictive results, there’s an important step of preliminary analysis and data quality control that must be taken. If the dataset contains:

  • imperfect and missing values, outliers and unstructured data;
  • numerical and categorical values (age, income vs marital status, education);
  • raw data that doesn’t fit strict parameters(data with fractions or decimals, etc.)

data analysts will spend days (if not weeks) just to preprocess the data before it can be assessed. Cutting corners and ignoring such data may lead to the loss of valuable insight and incorrect predictions.

How modern AI/ML methods build better risk models

Today, lenders have the ability to collect more data than ever about their clients. In addition to traditional socio-demographic data, this may include transactional data, records from credit bureaus, social media, Google Analytics, as well as other non-traditional sources.

Processing and interpreting this data so that it can be used to issue loans to worthy credit seekers is where modern ML/AI methods give banks the edge they need.

Machine learning techniques like gradient boosting, random forest, or neural networks can better find hidden dependencies in a dataset, which helps to gain more accurate predictions. This assists banks in determining how collected parameters in a dataset should be weighed to predict whether borrowers will consistently repay their loans on time.

This is made possible by data signals, which define significant parameters that affect the power of a scoring model. Depending on the type of business, geography, target audience, and data authenticity, significant parameters may differ. Modern ML can determine which data points contain the desired signal.

Traditional data sources like credit bureaus still remain an important part of the process and provide the data that contain the above-mentioned signal. Unfortunately, they do not cover noteworthy market segments such as millennials, self-employed entrepreneurs, small business owners, immigrants, or the unbanked.

The team at GiniMachine carried out pilot projects to build accurate scoring models with minimal data points and without access to an applicant’s credit history. Some of the most promising and predictive parameters included the applicant’s industry and occupation, the size of their company, the total years they’d been in business, the size of their family, and data from social networks like their overall activity, as well as the quantity and quality of their connections.

The team at GiniMachine has proven that it is possible to capitalize on information about borrowers that is collected from alternative sources to accurately and efficiently assess borrower’s credibility and make effective lending decisions.

Modern ML methods can build more accurate risk models because of their capacity to:

  1. use built-in ‘raw’ data pre-processing tools
  2. find hidden dependencies of arbitrary complexity
  3. harness unstructured, big data, and data from alternative sources

The financial world, and lending businesses in particular, have seen major changes throughout the last few years. Using ML and AI in concert with traditional practices is the way forward for banks that want to remain competitive in the modern world. It’s clear that making good loans to the people of the future requires a futuristic helping hand.

Author:

Dmitry Dolgorukov is a CEO and co-founder of GiniMachine & HES, a technology entrepreneur, and an investor with over 15 years of executive experience in software development and fintech. In 2018, Dmitry was ranked as one of the top 200 Fintech leaders in Europe that contribute to the industry as influencers through action.

 

Wednesday November 8 2017, Daily News Digest

Lending Club originations

News Comments Today’s main news: LendingClub’s Q3 results, rise in originations of 34%. Lending Club achieves highest revenues in company history. November review of Funding Circle. JD Finance intros Fintech-as-a-Service. Revolut seeking EU banking license. ID Finance sees 50% loan approval rate after AI fraud scoring tech rollout. Today’s main analysis: Lending Club’s Q3 earnings. Today’s thought-provoking articles: Due diligence […]

Lending Club originations

News Comments

United States

United Kingdom

China

European Union

International

India

Asia

News Summary

United States

LendingClub originations rose 34% in Q3 (American Banker), Rated: AAA

Loan originations continued to climb for LendingClub in the third quarter, yet profitability remained out of reach even as the lender continued to recover from the scandal that forced out its former CEO.

LendingClub Q3 Results: Highest Revenue in the Company’s History of $ 154.0 million (Crowdfund Insider), Rated: AAA

LendingClub (NYSE:LC), the largest marketplace lending platform in the United States, has published Q3 2017 financial results. The company delivered the best revenue in LendingClub’s history generating $154 million in top line revenue, an increase of 34% versus year prior and 10% over Q2 2017.

LendingClub Q3 2017 Earnings – Close to a Return to Profitability (Lend Academy), Rated: AAA

Last quarter we reported that LendingClub had returned to origination growth. It was a relatively small amount, compared to historical growth, at just 10%, but it was a noticeable change from the several quarters of flat originations. Today, LendingClub announced their third quarter financial results which included $2.44 billion in originations, an increase of 14% from the prior quarter ($2.15 billion).

Source: Lend Academy

The company also delivered their highest revenue to date at $154 million, up 34% year-over-year. This was on the low range of guidance for the quarter ($154 – $159 million). The company had a GAAP net loss of $6.7 million, which was better than their third quarter guidance of losses between $12 million and $8 million. Adjusted EBITDA came in at $20.9 million which was in the middle of guidance between $18 and $22 million.

Source: Lend Academy

LendingClub forecasts fourth-quarter loss, shares plummet (Reuters), Rated: A

Online lender LendingClub Corp (LC.N) forecast a fourth-quarter loss and revenue below expectations, sending its shares down sharply after the bell on Tuesday.

For the fourth quarter, the company expects net loss of $3 million-$7 million and revenue in the range of $158 million-$163 million.

LendingClub comes up short as it cuts back full-year guidance (Financial Times), Rated: A

Shares in Lending Club crashed in after-hours trading on Tuesday, as the company pared its revenue and profit guidance for the full year.

The company’s stock fell as much as 22 per cent after the closing bell, having lost about 6.6 per cent during the day.

DUE DILIGENCE REQUIRES DEEP DIVES INTO DATA (All About Alpha), Rated: AAA

The data and analysis provider eVestment has issued a new white paper on “enhancing private equity manager selection with deeper data.”

The authors of this study cite a recent paper by Daniel R. Cavagnaro, Bart Sensoy, Yingdi Wang, and Michael Weisbach.  Cavagnaro et al found (in the eVestment paraphrase) that “an investor’s skill level in fund selection is a more important driver of their returns, than luck or access to managers,” and that indeed an increase in skill of one standard deviation accounts for a 3% increase in the annual IRR.

With reference specifically to buy-out funds, eVestment says that only 19% of the funds that (a) have raised money subsequent to 2001, and (b) were a successor to a top quartile performer (by the same GP) have then repeated that top quartile performance.

The numbers for these four periods are: 33%, 33%, 25%, and 22%.

Focusing more specifically on persistence within the top quartile, the numbers drop more dramatically. They are then: 31%, 28%, 13%, and 12%.

Download and read the eVestment white paper here.

Medical residency refis may be just what the doctor ordered (Asset Securitization Report), Rated: A

When the online lender Social Finance recently unveiled its latest refinancing product, it put a spotlight on a perhaps overlooked corner of the student loan market: medical residents.

SoFi launched an offering in October designed specifically for medical school graduates who practice in a residency program at a hospital or clinic. The company is following in the footsteps of established players like Darien Rowayton Bank and several upstarts.

SoFi Launches “Refi and Relax,” Aimed at Combating Widespread Student Loan Anxiety (PR Newswire), Rated: A

On the heels of the end of most new college graduates’ student loan repayment grace period, SoFi today announced its first-ever Refi and Relax campaign, which aims to educate graduates on their refinancing options as a way to relieve the overwhelming stress that comes with carrying student debt.

Student loan debt is a large source of anxiety and stress for many young Americans. According to a recent SoFi member survey of over 1,200 respondents, eighty three percent shared that they’ve felt like they couldn’t relax due to the burden of the debt. Fifty percent of people dealing with student loan debt reported feeling anxious and/or depressed, and fifteen percent of respondents went so far as to talk with a mental health professional about the stress of their student debt.

Over a third of respondents have reported losing sleep due to student loan debt. Seventy five percent of respondents shared that they would give up social media if it meant their student loans would disappear. Forty percent of respondents said they would stay at a job that they hate because of student loan debt. Another twenty percent are willing to take even more dramatic measures by sacrificing a finger or toe in exchange for erasing their student loans.

Americans currently owe over $1.34 trillion in student loan debt, about $319 billion more than total credit card debt, according to the Federal Reserve Bank of New York’s August 2017 report.

Refi and Relax will comprise of a robust social media advertising campaign (#RefiandRelax), in addition to a members-only launch party in New York exclusively for those who recently refinanced their loans. On November 7, to give SoFi members a night off to unwind, the event will be dedicated to utmost relaxation, with manicures from GlamSquad, playtime with Socials Tees puppies, premium giveaways, and more.

There’s a gender gap in college savings, too (Mashable), Rated: A

Two studies recently found that parents save less for their daughters’ college educations than they do for their sons’. As highlighted in a Wall Street Journal story, a study by T. Rowe Price examined families who had all boys and families who had all girls.

The families who only had boys saved more for college than the families who only had girls. Fifty percent of households with boys saved money for college, compared to only 39 percent of households with girls. And 83 percent of families with boys contributed to college savings monthly, while only 70 percent of families with girls did. This all stood up no matter how many children the families had.

LendKey Forms Partnership with Allied Solutions to Offer Digital Lending & Loan Participation Solutions for Financial Institutions (Crowdfund Insider), Rated: A

LendKey, a lending-as-a-service solution for banks and credit unions, announced on Monday it has formed a partnership with Allied Solutions to offer its digital lending solutions, including unique and innovative loan participation programs, to Allied’s more than 4,000 clients.

Catching Up With LendingPoint (deBanked), Rated: A

At Money2020, we sat down with Chief Executive Officer Tom Burnside and Chief Strategy Officer Juan Tavares, both of LendingPoint, an online consumer lender we examined in the July/August magazine issue.

An interesting initiative that they’re now just ramping up, Tavares says, is partnerships with hospitals that allow patients to determine their deductible expenses and obtain credit on the spot to pay for it.

Accounting software giant Intuit launches direct business loans (CNBC), Rated: A

Financial software firm Intuit is offering loans directly to businesses with a lending product called QuickBooks Capital.

The company, which makes tax-preparation and accounting software, said Tuesday it would enable firms to use its bookkeeping software to access up to $35,000 in credit, with a term between three and six months.

QuickBooks Capital uses machine learning to help small businesses demonstrate credit-worthiness.

According to a study by the Federal Reserve earlier this year, only 23 percent of businesses younger than five years get access to credit.

How banks can beat digital lenders at their own game (American Banker), Rated: A

Perhaps it’s time to start acknowledging that banks are no longer taking a back seat to pioneering online lending startups.

Many depositories have learned that if they fail to modernize their lending processes, they risk being left behind. At the same time, many startups have been stymied by certain intractable advantages held by the banking sector, the most notable being significantly lower funding costs.

Bank of America Merrill Lynch has signed on with a quant firm — and it shows where Wall Street is headed (Business Insider), Rated: A

Manoj Narang, founder of quant hedge fund MANA Partners, has launched a trading subsidiary that is developing market-testing products. One of his first clients: Bank of America Merrill Lynch.

MANA Tech is also marketing a product using similar data that allows investors to measure how much money their algorithmic strategies would have performed in past market conditions, and identifies how they could become more profitable.

“It’s much more beneficial to be a quant trading firm where technology is a profit center and not a cost center. It allows you to spend much more on your technology than you can with the traditional setup where technology is a tax on trading profits,” Narang added.

Can Cryptocurrencies Solve What Traditional Lenders Cannot? (TheStreet), Rated: A

Beyond general economic anxiety in a post-2008 world, numerous other factors contribute to small businesses’ difficulties securing credit. New companies don’t have track records showing years of rising revenue and profit. Some of the world’s most promising theaters for business growth, like Asia Pacific, are regions where many individuals typically don’t have access to banks. Women-owned businesses may be at a particular disadvantage, since women have been starting businesses at a high rate over the past decade, and therefore tend to constitute a higher proportion of young businesses.

Alternative Lenders

Immediately after 2008, most banks had their hands tied when it came to providing loans to small businesses-providing a window for alternative lenders, predominantly peer-to-peer lenders, to grow. P2P lending is still very much a nascent and emerging area – according to a recent Fundera survey, small businesses continue to look mainly to brick-and-mortar banks for financing, with only 11% of respondents opting to work through alternative lenders.
When a small business needs a loan, it shares its real transaction history from a POS terminal with the flip of a switch on WishFinance’s app.
The company’s cryptocurrency, WISH, offers an Ethereum-based tokens that investors need to build and manage loan portfolios on the platform. One token–at a cost of $1–manages one active loan, meaning a lender with 1,000 active loans would deposit 1,000 WISH tokens using one of the available cryptocurrency exchanges. Lenders can also “borrow” tokens from other lenders, sharing gains with the primary token owners. In theory, the platform takes a good first stab at making SME lending more profitable and less uncertain. If more lenders entertain using the blockchain to manage risk, we’ll see higher volumes of loans and, in turn, higher demand for tokens to manage them.

The financial services industry typically evolves at a glacial pace. The three trends outlined above – the rise in alternative lenders, crowdfunding and cryptocurrencies – represent evolution, not necessarily disruption.

CrowdStreet Gains Momentum as it Delivers on Vision of Expanding Access to Commercial Real Estate Investing (Marketwired), Rated: A

With its innovative integrated online investor marketplace and software as a service (SaaS)-based investment lifecycle management solution, CrowdStreet has increased investment dollars managed on its platform by 4x, reaching $4.2 billion in 2017, and doubled the number of investors year-over-year to more than 61,000. These results signify a major shift in confidence in online commercial real estate investing as this infographic illustrates.

In 2017, CrowdStreet’s technology platform has seen more than $745 million distributed back to investors, a 3x increase from $245 million last year. The marketplace investment run rate also grew by over 3x reaching $250 million of equity raised this year, compared to $76 million in 2016.

CrowdStreet Announces Leadership Team Expansion & Advisory Board Formation (Crowdfund Insider), Rated: B

The funding portal revealed Molly Moore, was appointed as its new Chief Marketing Officer while Rohit Colaco was named Vice President of Engineering. CrowdStreet appointed Thomas Byrne (CEO of Property Capsule Inc), Lewis G. Feldman ( CEO and Founder of Heritage Capital Ventures LLC), Christopher Keber (Currently Head of Investments and Strategy at McCourt Global), and John Witchel (President and COO of GitPrime) to its advisory board.

CrowdSeekr Takes Top Spot Among Real Estate Crowdfunding Resources (PR.com), Rated: A

CrowdSeekr is proud to announce that it is now the top data resource for real estate crowdfunding based on the number of investment opportunities in its database. CrowdSeekr is an aggregator and search engine for the real estate crowdfunding industry. The company was founded in 2015 and now features nearly 300 available real estate crowdfunding investments from dozens of platforms.

CrowdSeekr.com is a leading aggregator and search engine for real estate crowdfunding investment opportunities. It was founded in 2015 by e-commerce attorney Ashley Smith and commercial real estate professionals Tim Strange and Marylee Strange. CrowdSeekr currently lists offerings from over 30 real estate crowdfunding platforms. Over 7 billion dollars has been raised for real estate projects using crowdfunding since 2013.

The Next Frontier Of Real Estate Investor And Property Manager Technology (Forbes), Rated: A

Quietly working and collecting rent used to be the DIY real estate investor commonly known as the landlord. Then real estate investing boomed, and property management became a reported $77 billion business as real estate investors grew to an estimated 7 million people. Single and two- to four-unit buildings currently comprise an estimated 54% of the rental units available today — a market share that has turned the heads of software developers looking to service the independent DIY real estate investor market.

Over the last five to seven years, hoards of real estate investors embraced the efficiencies technology brought to the industry and to their bottom line. Owners accumulating between two and 500 units have started to look at technology solutions as a platform for controlling costs.

Most landlords are now set up in a software solution and can fill a calendar with the dates of the cycle specific to just the payment processing phase. We watched the benefits of the speed of the automatic payment options processed through electronic ACH banking unfold.

A New Horizon For Real Estate Tech

The next step is to use the information available from machine learning and AI to help landlords better manage the asset and identify consumer behavior while anticipating needs.

U.S. Fintech Investments Double (WealthManagement.com), Rated: A

Investments in U.S. fintech companies nearly doubled during the third quarter to $5 billion, up from $2.6 billion in the second quarter, according to KPMG’s recent Pulse of Fintech report. There were a total of 142 deals during the quarter, up from 125 deals in the prior year quarter and 147 deals last quarter. The automated advice platform technology was a big bet during the quarter, with hybrid models—those using a combination of humans and technology—gaining more traction over pure robo advisors, the report said.

One year after President Donald Trump defeated Hillary Clinton to become President of the United States, the stock market has risen 21.2 percent.

Source: WealthManagement.com

InvestCloud and Willis Towers Watson are partnering. The cloud-based financial services platform was selected to build a bespoke solution for the WTW Asset Management Exchange that will enable clients to better access and monitor roughly $2 billion, according to a statement.

Goldman Sachs Shuffles Leadership in Slumping Fixed-Income Unit (Bloomberg), Rated: A

Goldman Sachs Group Inc. has shaken up the leadership of its vaunted fixed income, currencies and commodities business after stumbles this year called its strategy into question.

The firm named Jim Esposito and Justin Gmelich, both 49, to newly created roles as co-chief operating officers of FICC, according to a memo Tuesday from securities division co-heads Isabelle Ealet, Pablo Salame and Ashok Varadhan. Gmelich gives up his title as global head of credit and mortgage trading, while Esposito relinquishes his role helping to run fixed-income sales, leaving John Willian with sole responsibility.

U.S. Consumer Financial Protection Bureau Sets Out Principles for Consumer-Authorized Data Sharing and Aggregation (Lexology), Rated: AAA

On October 18th, 2017 the U.S. Consumer Financial Protection Bureau (“CFPB”) outlined the principles to be followed (“Principles”) when consumers authorize third party companies to access their financial data to provide certain financial products and services.

The Principles line up quite closely with the ten Fair Information Principles that underlie Canadian federal privacy legislation (PIPEDA). Absent (or diluted) from the CFPB Principles are the Fair Informaiton Principles regarding “Limiting Use, Disclosure and Retention”, “Limiting Collection” and “Identifying Purpose”. The CFPB Principles also attempt to address many of the same issues that arise in the mandatory “Open Banking” regime in the EU and the UK, but in a much less fulsome manner.

The CFPB’s interest in consumer data (and specifically Open Banking) was telegraphed by the Director of the CFPB his remarks at the 2016 Money 20/20 conference when he stated that the CFPB was “gravely concerned” that financial institutions were limiting or shutting off access to financial data, rather than “exploring ways to make sure that such access…is safe and secure.”

The CFPB has now released its set of Consumer Protection Principles intended to reiterate the importance of consumer interests. They are, however, non-binding and not intended to alter, interpret, or otherwise provide guidance on existing statutes and regulations that apply.

  1. 1) Access
  2. 2) Data Scope and Usability
  3. 3) Control and Informed Consent
  4. 4) Authorizing Payments
  5. 5) Security
  6. 6) Access Transparency
  7. 7) Accuracy
  8. 8) Ability to Dispute and Resolve Unauthorized Access
  9. 9) Efficient and Effective Accountability Mechanisms

USATech buys Cantaloupe Systems for $ 85M (Philly.com), Rated: B

Shares of USA Technologies Inc., Malvern, hit a 10-year high of $6.75 in early trading Tuesday after the mobile- and cashless-payments company said it agreed to pay $85 million ($65 million cash, the rest in USAT shares) for a competitor, San Francisco-based Cantaloupe Systems Inc.

The 11 Most Valuable VC-Backed Fintech Companies In The US (Fintech News), Rated: B

United Kingdom

Your November Review – Insight and Analysis (Funding Circle), Rated: AAA

Last month was a global record month here at Funding Circle. In the UK alone, over £120 million was lent to businesses thanks to your continued support.

Source: Funding Circle

You’ve helped more than 8,900 small businesses access finance in the last 6 months…

Source: Funding Circle

Totalling over £630 million lent.

Assetz appoints LendInvest’s Damien Druce for intermediary expansion (P2P Finance News), Rated: A

ASSETZ Capital is looking to bolster its presence in the intermediary space as part of the next stage of its expansion.

The peer-to-peer business lender has appointed Damien Druce (pictured) to lead the move as head of intermediary sales.

He joins from LendInvest where he was northern business development manager, and has previously worked for Castle Trust and Crystal Specialist Finance.

China

JD Finance Announces JD Financial Cloud“Fintech as a Service” (Business Insider), Rated: AAA

JD Finance today announced the launch of JD Financial Cloud. The new platform uniquely combines advanced technology and big data to offer “Fintech as a Service,” a new approach that will help financial institutions solve problems and reduce costs while boosting their productivity and competitiveness.

Where precision marketing is concerned, JD Finance’s “Jingdong Laike,” analyzes a massive base of user tags based on online shopping and mobile usage patterns as well as payment history and credit risk to offer insights that can boost response rates by 25 percent while reducing customer acquisition costs by 20 percent.

Furthermore, leveraging AI and big data to recognize and analyze patterns in JD Finance’s comprehensive dataset that includes 30,000+ risk control variables, 300m+ user credit evaluations, 500+ models and 5,000 risk strategies can help institutions better evaluate credit risk.

China’s Raging Fintech Boom on Verge of Minting Two Billionaires (Bloomberg), Rated: AAA

Online consumer finance platform PPDAI Group Inc. is planning an initial public offering in the U.S. this month, giving co-founder Shaofeng Gu, who owns more than 25 percent of the business, a net worth of at least $1.3 billion, according to the Bloomberg Billionaires Index. Ning Tang owns 36 percent of U.S. listed peer-to-peer lending platform Yirendai Ltd., giving the founder and chief executive officer a net worth of about $930 million.

“In China, one billionaire is created every three weeks,” Qiong Zhang, head of wealth management for UBS Securities in China, said in an interview.

Source: Bloomberg

P2P platforms turn to US markets for funds (China.org.cn), Rated: A

Hexindai Inc became the first Chinese financial technology (fintech) company to list on the Nasdaq stock market last Friday. Priced at $10 per share, the IPO aims to raise $50 million. It was also the third Chinese fintech company that went public in the US this year.

According to the global consulting firm Oliver Wyman, the market size for consumer lending will expand to $620 billion by 2020 with a compound annual growth rate of 49 percent.

With such a rapid growth in demand, P2P lending platforms such as Hexindai have seized the growth opportunities. Credit loans accounted for 99 percent of its total loans in the second quarter of 2017, with Q2 profit soaring to 60 million yuan, far ahead of its annual profit in 2016.

According to the US Securities and Exchange Commission, Rong360 Inc, another online financial service provider, plans to raise $270 million through an initial public offering in New York.

Auto Financier Yixin Launches $ 900 Million IPO (Caixin), Rated: A

Yixin Group Ltd., an online car financing company backed by three of China’s top internet companies, is hurtling ahead with a Hong Kong IPO to raise up to nearly $900 million, as enthusiasm on a new generation of financial technology (fintech) companies starts to stall.

The company has set a price range of HK$6.60 ($0.85) to HK$7.60, with plans to issue nearly 880 million shares in Hong Kong, according to a source with direct knowledge of the deal, speaking on condition of anonymity because the matter is private. At that price range, the company would generate between $740 million and $870 million in proceeds.

Marketplace lending: where everybody wins (Enterprise Innovation), Rated: A

European Union

Revolut becomes latest UK fintech firm to seek banking license (Reuters), Rated: AAA

British financial technology firm Revolut said on Wednesday it has applied for a European banking license, as it bids to join a growing number of digital-only banks looking to win away customers from larger, traditional lenders.

Current accounts and credit will initially be available to users in Lithuania, before being rolled out to Estonia and Latvia and, as soon as possible, Britain. Next in line are France, Germany and Italy and eventually the rest of the European Union, the firm said.

Revolut to bring processing in-house (Banking Technology), Rated: A

Revolut is building its own in-house processor, following a string of outages caused by its current third party provider.

The latest issues were flagged on social media by Revolut’s users from around the world on 3 November, with their cards being declined and payments rejected.

International

AI-based fraud scoring boosts loan approval rate by 50 per cent for ID Finance (ID Finance Email), Rated: AAA

Reshaping Peer-to-peer Lending with Crypto Assets (Coinidol), Rated: A

The Bitbond, BTC Jam, and BTC POP platforms were pioneers in the market of crypto lending. From that time forward, it can be clearly seen that blockchain and crypto assets usage in p2p lending is stepping up. The congruence of the proven peer-to-peer lending business model and possibilities of blockchain seems to be a solid base for advanced financial services. What does it mean for investors and borrowers, how does it affect global economy, and how can crypto assets possibly reshape the existing peer-to-peer lending market?

Financial Inclusion

According to McKinsey research, there are still about 2 billion unbanked and underbanked people in the worldwide adult population. Blockchain-based lending services can offer microloans to a customer who has no previous credit history. While some banks in Asian countries require enormous amounts of paperwork to be done before approving a loan, cross-border lending platforms have unified rules for everyone. Not mentioning the fact that bank account penetration in developing countries hardly reaches 30%.

Globalization means equality 

It’s no secret that interest rates set by traditional banks may significantly vary by country. While the difference can be about 0.1% between loan interests in Germany and UK, interest rates in Thailand, Turkey or Latviamay be 10 times higher. Global platforms offer the same terms regardless of citizenship.

  • Lendoit is a decentralized P2P lending platform.
  • CoinLoan is a platform for lending secured with crypto-assets (cryptocurrency, tokens).
  • ETHLend offers fully decentralized P2P lending.
  • Inspeer is a P2P lending service that works with cryptocurrency and fiat.

Fintech funding round-up: 7 November 2017 (Banking Tech), Rated: A

Banking (not baking) challenger Douugh has partnered with community bank Choice Financial to launch an integrated checking account and debit card. Choice has also made an investment to “support Douugh’s roadmap”, bringing the company’s total seed funding to $2.5 million.

Mobile-only challenger bank Monzo has closed its latest fundraising round, raising £71 million from Goodwater Capital, Stripe and Michael Moritz.

Smartkarma, a provider of investment research, has closed a Series B round of financing led by Sequoia India, which brings the company’s total funding to $21 million.

9 Firms To IPO This Week (Benzinga), Rated: B

CBTX, Inc. (CBTX) will issue 2.4 million shares between $24 and $26 Wednesday on the Nasdaq. The Community Bank of Texas maintains nearly $2.94 billion in assets in 34 state branches, according to the Federal Deposit Insurance Corporation.

PPDAI Group Inc. (PPDF) will issue 17 million shares between $16 and $19 Friday on the New York Stock Exchange. The 10-year-old Shanghai company facilitates online peer-to-peer lending and reported $381 million in sales in the 12 months ending June 30.

India

The digital register is ringing loud and clear (The Hindu Business Line), Rated: AAA

According to government sources, digital transactions since demonetisation have grown manifold on a month-on-month basis. For instance, volume wise, transactions via NACH, IMPS, UPI+BHIM and Rupay have grown to ₹1,47,624 crore in September 2017, against ₹1,07,987 crore in October 2016. Similarly, transactions through debit cards, credit cards, NEFT, RTGS and mobile wallets have grown from ₹1,07,59,649 crore in October 2016 to ₹1,23,28,369 crore as of July this year.

Prime Minister Narendra Modi’s actions to digitise India has brought a momentum to the entire payment ecosystem and helped build a new framework for the digital economy.

As per reports, deposits up to ₹80 lakh were made in 10.9 million accounts in November-December last year, and over 1.48 lakh account holders deposited an average ₹3.3 lakh in their banks. The impact is seen in the number of tax filings for the period April-May 2017, which went up by 17 per cent to 27.5 lakh returns from a level of 23.5 lakh in the same period last year.

Asia

Kosdaq-listed SFC buys full stake in Korean P2P lending startup Villy (Pulse News), Rated: A

South Korea’s peer-to-peer (P2P) lending service startup Villy was acquired by Kosdaq-listed solar backsheet manufacturer SFC Co. for 11 billion won ($9.8 million), the company said Monday. It is the country’s first merger and acquisition (M&A) case for a P2P lending startup.

Founded in April 2015, Villy boasts 80.5 billion won worth cumulative loan, 36,000 cases of investment and 5,460 investors, 55.4 percent of whom are people in their 20s to 30s. Its reinvestment rate reaches 74.7 percent. Following the acquisition, Villy will be a subsidiary of SFC with its 100 percent stake owned by the latter.

Authors:

George Popescu
Allen Taylor

Monday August 28 2017, Daily News Digest

artificial intelligence

News Comments Today’s main news: Blend lands $100M investment. Funding Circle achieves ISA manager status. Hive raises over $8M. Innovate UK invests 700K GBP in Paybase. China Life, Baidu launch $1B internet fund. Klarna’s profits increase 138 percent. Today’s main analysis: Bank of America Merrill Lynch to implement AI. Today’s thought-provoking articles: Congresswoman asks FDIC to hold public hearing on […]

artificial intelligence

News Comments

United StatesFlipkart, Amazon pose new competition for fintech lenders.

United Kingdom

China

European Union

International

Australia/New Zealand

India

Asia

Canada

News Summary

United States

LendingClub Hit with Lawsuit (Crowdfund Insider), Rated: AAA

LendingClub (NYSE:LC) has been hit with a lawsuit that names former CEO Renaud Laplanche alongside current and former board members and former CFO Carrie Dolan. The complaint, filed in the Court of Chancery in Delaware, states;

“Throughout the period December 11, 2014 and continuing through May 9, 2016 (the “Relevant Period”), the Individual Defendants breached their fiduciary duties to LendingClub by failing to institute adequate internal controls regarding financial disclosures, related party transactions, and data integrity and security, all while causing LendingClub to represent in the Registration Statement and a series of subsequent filings that such controls were sufficient.”

The suit has been filed by two shareholders; Kelvin Farley and Jay Fink.

Waters Calls on FDIC to Hold Public Hearing on SoFi’s Application for Bank Charter (House.gov), Rated: AAA

Today, Congresswoman Maxine Waters (D-CA), Ranking Member of the Committee on Financial Services, sent a letter to Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg, calling for the FDIC to hold at least one public hearing on Social Financial, Inc.’s (SoFi) application to establish an Industrial Loan Company (ILC).

In the letter, Ranking Member Waters states that changes in the financial services industry and financial regulation necessitate a public hearing to examine the policy and legal implications of granting federal deposit insurance to ILCs generally, as well as to obtain greater input on the unique risks posed by granting it to a financial technology (fintech) company like SoFi.

I am writing to request that the Federal Deposit Insurance Corporation (“FDIC”) hold at least one public hearing on Social Finance, Incorporated’s (“SoFi”) application to establish an industrial loan company (“ILC”) to provide FDIC-insured Negotiable Order of Withdrawal (“NOW”) accounts and credit card products. As you know, because de novo ILC formations have been affected by regulatory and statutory moratoria for several years, the FDIC has not approved a deposit insurance application for a new ILC charter for some time. Since the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), changes in the financial regulatory regime and financial services industry justify a public hearing to examine the policy and legal implications of granting Federal deposit insurance to ILCs generally, as well as to obtain greater input on the unique risks posed by granting it to a financial technology (“fintech”) company like SoFi, a number of which I will discuss in more detail below.

Appropriate regulatory oversight of any ILC is an essential prerequisite to approving any application for deposit insurance backed by taxpayers. The FDIC has previously acknowledged the importance of strong oversight of any insured bank and its parent company when discussing oversight of ILCs.[1] In reaction to a number of concerns previously raised on the regulation of ILCs, the FDIC even went so far as imposing several moratoria on its ability to approve ILC applications for deposit insurance in 2006 and 2007 to, in the words of former FDIC Chairman Sheila Bair in testimony before the House Financial Services Committee, “allow the FDIC to carefully weigh the safety and soundness concerns that have been raised regarding commercially-owned ILCs. At the same time… the moratorium provides an opportunity for Congress to consider the important public policy issues regarding the ownership of ILCs by commercial companies.”[2]

While some experts have touted the possibility that fintech firms can help promote financial inclusion, others have underscored the challenges posed for our current regulatory regime to oversee these types of companies and have underscored the need for policymakers to carefully evaluate the consequences of allowing them access to deposit insurance and the Federal Reserve discount window.[11] Thus, Federal regulators have taken a varying degree of actions focused on fintech companies and services. For example, while the Office of the Comptroller of the Currency (“OCC”), under its “Responsible Innovation” initiative, has proposed a Special Purpose National Bank Charter for fintech companies (“fintech charter”)[12] questions have been raised about whether the benefits to consumers for this new charter will be widely and fairly shared, and whether there is adequate legal authority, let alone a clearly defined and modern regulatory framework, for such a fintech charter.[13] Indeed, a lawsuit has been filed by state banking regulators challenging the OCC’s authority.[14] As should be the case with the OCC and its proposal to use its authority to federally charter fintech companies, the FDIC should thoroughly consider the implications of offering access to the deposit insurance fund for ILCs that will result in expanding the type of institutions to it, like fintech firms. Fintech firms, whose operations cross state and international boundaries, and may exist entirely online, were undoubtedly beyond original congressional intent in permitting ILCs to access deposit insurance and it is appropriate for stakeholders to weigh in on whether it is appropriate for these firms to have this access without proper oversight of their parent companies.

The chartering of a fintech company as an ILC also raises a number of consumer protection concerns that the FDIC should consider. For example, the California Reinvestment Coalition (“CRC”) has opposed SoFi’s application on the basis of concerns with the institution’s Community Reinvestment Act (“CRA”) plan, as well as its intended approach to financial inclusion, fair lending, and consumer protection.[17] CRC notes that SoFi’s business model targets “students from elite universities that have strong earnings and wealth potential,” and offers products and services “designed to exclude working class households.” CRC also notes that SoFi’s CRA plan is grossly inadequate, considering that: (1) SoFi’s assessment area will be limited to areas in Utah, but the company will accept deposits and operate nationally; (2) SoFi’s current core products are not designed to serve the “convenience and needs” of low- and moderate-income (“LMI”) communities in which the bank would operate,[18] but rather are focused on serving SoFi’s members; and (3) SoFi’s CRA plan does not encompass measurable commitments to lending, investments, and services for LMI communities.

The full letter is here.

Bank of America Merrill Lynch has become the latest bank to implement AI (Business Insider), Rated: AAA

Bank of America Merrill Lynch (BAML) has 

Bo Brustkern and Emmanuel Marot (Lend Academy), Rated: A

On this episode of the Lend Academy Podcast I brought together both CEOs to talk about this merger; what it means for their respective customers as well as the industry as a whole.

In this podcast you will learn:

  • The original idea that led to the founding of both companies.
  • The strengths of both companies and why they are a complementary fit.
  • Why they decided to come together and merge companies now.
  • The scale and profitability of the combined company.
  • The unique aspects of the LendingRobot Series investment offering.
  • The platforms that the LendingRobot Series invests on.
  • The different funds that make up the Lending Robot Series.
  • The choices for non-accredited investors on the combined platform.
  • Their value proposition today for investors.
  • Who the target customer is today for the combined company.
  • How the two brands will operate going forward.
  • What the combined company will look like in 12 months time.
  • Where marketplace lending is going in the future.

LendKey, Earnest Alter Student Loan Refinancing Rates (LendEDU), Rated: A

Two student loan refinancing companies, LendKey and Earnest, have changed their student loan refinancing interest rates in recent weeks, according to LendEDU.

Effective August 10th, LendKey’s variable interest rate range for their student loan refinance product was altered slightly. LendKey, a leading lending partner of both banks and credit unions, now offers a variable rate range between 2.67 and 6.31 percent for student loan refinancing.

This new variable rates for LendKey mark an increase on both the low and high ends of the range. Previously, the online lending partner offered a variable interest rate range between 2.52 and 6.16 percent since June.

Online Mortgage Lender Blend Lands $ 100 Million Investment Led by Greylock (Crowdfund Insider), Rated: A

Blend has landed a significant funding round to the tune of $100 million. The funding was led by Greylock Partners with participation by Emergence Capital. Existing investors joined in the round as well.

Wells Fargo, U.S. Bancorp Turn to Startup to Speed Up Mortgage Applications (WSJ), Rated: A

Wells Fargo & Co. and U.S. Bancorp have signed deals with mortgage-software startup Blend Labs Inc. to move more of their loan applications online.

Ethereum-Based Invoice Finance Platform Hive Raises Over US$ 8 Million (Coin Journal), Rated: A

The Hive Project, which intends to build the world’s first cryptocurrency-based invoice financing platform, has raised 2,087 BTC, or over US$8.9 million, from 2,234 investors through its initial coin offering (ICO).

Using invoice finance, the business “sells” its outstanding invoices at a small discount to a financier. The business immediately receives up to 85% of the value of the invoice instead of having to wait the usual 30 to 90 days to get paid by customers.

Hive uses the Ethereum blockchain and smart contracts to assign a unique fingerprint to every invoice issued. These invoices are then tokenized and published on a blockchain, and made available as a shared source of liquidity for factoring and invoice financing.

Debate on Regulatory Reform (PeerIQ), Rated: A

JP Morgan CEO Jamie Dimon in his annual letter would agree that the banking system is safer and stronger today. Nevertheless, Mr. Dimon believes that economic growth and lending is below potential. For instance, JPM estimates $1 Tn in loans could have been generated in recent years generating an additional 50 bps in annual GDP growth thru regulatory reform.

The specific regulatory reform areas Mr. Dimon identified include:

  • Simplification of the annual stress-testing process
  • Release or enable banks to deploy excess capital towards small business loans, lower middle market, and near-prime mortgages
  • Rationalization of supplementary leverage ratios and operational risk capital
  • National servicing standards for the mortgage servicing market
  • Federal Housing Administration (FHA) reform
  • Complete securitization standards to encourage private capital and reduce exposure to taxpayers

Role for 3rd party risk infrastructure to strengthen markets

Large banks are increasingly playing the role of financial intermediaries that connect non-banks to the capital markets. Banks are providing liquidity facilities (“lending to the lenders”) and capital-light securitization programs. Although Yellen is right that lending continues to grow, critically, the nexus of credit formation–including for a majority of personal loans, auto loans, student re-fi loans, and even mortgages–now takes place between a consumer and a non-bank.

Under this new landscape, the soft underbelly of the credit markets has shifted from bank wholesale funding to non-bank wholesale funding. And when investor confidence seizes, the transmission mechanism connecting policy to the real economy can break down. Spreads widen, funding costs increase, and markets freeze exactly when policymakers seek to ease financial conditions.

Q&A with Head of Alternative Lending at Fintech Marqeta (Crowdfund Insider), Rated: A

Recently, Crowdfund Insider published an article about Marqeta signing a partnership with Visa on payments and loans. The marriage is designed boost innovations in commercial and consumer payments and online lending. Visa also made a strategic investment in Marqeta at that time to the tune of $25 million. Total investments in Marqeta now stand at over $70 million.

Isn’t this just all about borrowers getting a better interest rate [and investors earning more]?

Candace: Lenders are looking to increase renewals (repeat borrowers are easier to sell than new borrowers), beat out the stackers (top of wallet, top of mind) and decrease risk (new data on spending reduces risk for future loans). On the heels of 2016, these have become as important as the interest rate for the lender.

For the borrower, speed to funds has become increasingly important, and distributing loan funds to a  card allows a way to immediately spend the funds without waiting for the funds to be deposited into the borrower’s bank account.

If Credit Cards drop their rates then they can become competitive. For Visa to partner with Marqeta – isn’t it just how the debt is carried? For the consumer / business, they are indifferent?

Candace: The rates apply to the underlying loan per the agreement between the lender and the borrower, not to a prepaid card that is used to assist with making purchases. The prepaid card bears no interest charge. The terms for the loan (from which the loan proceeds are distributed to the card) continues as agreed upon between the lender and the borrower. That debt does not change.

How Riskalyze Won The Hearts Of Financial Advisors And Upgraded The Advice Industry (Benzinga), Rated: A

Ahead of Riskalyze CEO Aaron Klein’s speaking engagement at the Benzinga Fintech Summit in San Francisco, Benzinga caught up with him to learn more about how the company is upgrading financial advice.

BZ: How did you go about identifying this need for financial advisors? What kind of research did you do?

What’s interesting is that we invented a new space. There was no risk-alignment platform that helped advisors do that. There were questionnaire products that answered half the question, there were a few portfolio analysis tools that would answer the other half, but we invented the concept of the risk number. We can help advisors pinpoint the client’s risk number and then we score portfolios using that number.

Klein: I’ll talk about the two different sides of the coin. A lot of the innovation was figuring out those sides of the coin and bridging the two together. On the one hand, we took some concepts that had really never made it out of academia and into everyday use. They’re centered around the economic framework called prospect theory, which won the Nobel Prize for economics in 2002. We took prospect theory and built a bunch of proprietary technology on top of it to understand how to move up and down a client’s personal financial spectrum to understand when they prefer risk and when they prefer certainty.

Once we do that, we built a mathematical formula behind the scenes that lets advisors turn that into the client’s risk number. That’s how the client-side works.

On the flip side, we need to match that up with a portfolio. So, the inputs for that piece of the technology are largely market data. We effectively take daily pricing data for nearly a quarter-million securities — every U.S. stock, ETF, mutual fund, variable-annuity sub accounts, SMA third-party money managers, proprietary non-traded strategies, all kinds of different products. We take all the data for those, we have new data streaming into our systems every night on those securities.

 

This Week In Retail: Funding, Finance And Tech (PYMNTS), Rated: A

This week in retail, we’ve seen news coming in from multiple sides, including that of Apple’s projected increase in smartwatch salesU.K. online lender Prodigy’s funding news for expansion into the U,S.,  Walmart’s two new partnership announcements, and the news that the CFPB is ordering American Express to pay out money to those hurt by unfair practices.

American Express is in the hot seat this week as the Consumer Financial Protection Bureau (CFPB) ordered the credit card company to pay out a very large amount to consumers in Puerto Rico and the U.S. Virgin Islands. It’s being confirmed that over a 10-year period, American Express  provided inferior card offerings to people in those territories than what was being offered in the U.S.

Here are the numbers:

  • $240 million | Amount Prodigy Finance raised in its venture capital equity funding round
  • $96 million | Amount CFPB ordered American Express to pay out to affected Puerto Rico and the U.S. Virgin Islands consumers
  • $200 | Starting point for potential Walmart installment loans

5 Trends That are Changing the Millennial Economy (Huffington Post), Rated: A

According to statistics from the U.S. census bureau, Millennials make up about 83 million of the nation’s current population. The unique experiences of the Millennials will shape the way we buy and sell, forcing companies and businesses to adjust their business strategy for decades to come.

For example, a growing number of Millennials are choosing to live with their parents. They have been reluctant to buy items such as cars, music, and luxury goods. Luxuries that used to be important for previous generations are not as important for Millennials. They are reshaping the real estate market and are responsible for the growth of the sharing economy.

A recent survey of Interns conducted by Goldman Sachs in 2013, found out that 30% of millennials do not intend to purchase a car in the future. 25% said they will only buy one if there is a need for it, otherwise they are indifferent. Another 25% said buying a car is important but not a big priority. 15% said purchasing a car is extremely important. And the last 5% do not feel strongly about it.

recent report shows that student loans have increased by 84% over ten years with an average student having a loan balance of $29,000.

How to choose and switch to a better bank for you (WPXI), Rated: B

Online banks are now offering much higher rates on savings accounts — significantly higher than the current rates at traditional, bigger banks. So with that in mind, why not just move your savings to take advantage of the bigger return?

To give you some context, online bank ally recently increased the rates on its savings accounts to 1.15% — while the rate on a regular savings account at Bank of America currently sits at only 0.01%.

United Kingdom

Funding Circle receives ISA manager status (P2P Finance News), Rated: AAA

FUNDING Circle has received ISA manager status from the HMRC, Peer2Peer Finance News can reveal.

Approval was granted in July, less than two months after the platform won full FCA authorisation.

However, the platform has no immediate plans to launch its IFISA product, telling customers earlier this week that it intended to roll out the tax-free investment wrapper “before the end of the tax year.”

How Funding Circle is helping small businesses face the challenges of Brexit (Prospect Magazine), Rated: A

Fast forward to today, we’ve originated over £3.2 billion worth of loans through the platform. In the UK, that lending has helped create about 60 thousand jobs, and the £2.5 billion of loans has created about £5 billion of GDP or gross economic value added, according to an independent survey by the Centre for Economics Business Research.

In fact, we think we make up about 2 per cent of the total money that’s going to gross-lending small businesses. And if you actually look at the money going into the economy, we make up about a third of net new lending— which is the preferred Bank of England measure. We did about 300 million versus 600 million in the entire banking system in the first half of this year.

Say a small business decides to come to you: what is it they’re getting that they don’t get with a bank?

We turn around loan applications specifically within 24 hours. We are better in that we give better service; everyone can find an account manager.

We’re cheaper, in that our prices are very, very competitive, and often we’re often providing cheaper loans than businesses would be able to get at the bank. We also don’t have the overheads that banks have.

We all know that Brexit is going to shake up the financial sector. What can Funding Circle do to help businesses rise to the challenge?

Net lending by banks fell by 220 million in Q4 last year. Ours actually rose to 167 million.

On top of that, we’ve also had large insurance companies like Aegon, which is a big Dutch insurer, commit to fund £160 million in year one, but actually committed over a four-year period to purchase our loans. The fact a large foreign insurer would want to do that shows that actually, despite Brexit, there’s a vote of confidence in the UK economy, particularly in small business.

FinTech startup Paybase gets £700,000 from Innovate UK (UK Tech), Rated: AAA

London-based FinTech startup Paybase has received a grant of almost £700,000 from innovation agency Innovate UK.

Expected to launch later this year, Paybase has developed an ‘end-to-end solution for payments, compliance and risk’, which can be accessed through a unified API.

Why P2P is still the crowd despite passive lending (AltFi), Rated: A

There’s been much collective gnashing of teeth over the last few months at the evolution of peer to peer lending, as practised by ZopaRatesetter and most latterly Funding Circle. The big bone of contention has been a shift amongst all three – with FC falling into line just a matter of days ago – to a passive lending model. This means that lenders on said platforms now lend passively to a full slice of borrowers rather than picking their borrowers individually. To the critics this implies that the traditional peer to peer (P2P) model is slowly dying out. If you’re not lending to your peers, don’t you just sound like any other finance business such as a bank?

I’m not convinced by this criticism. Collectively a crowd – many peers – are still lending to another crowd, but just in a format that looks closer to a passive, collective fund basis rather than one on one. There is no bank balance sheet lurking around and the ‘crowd’ still sets the rate at which it’s happy to lend. Credit scoring has always been a feature of all the platforms, whether they be ‘pure’ P2P or passive P2P. Someone, somewhere at the centre of the online marketplace needs to set the lending criteria and make decisions about who to lend to.

What about peer to peer? (Library of Things), Rated: A

In this week’s bonus episode co-founder Emma looks at the sharing economy, peer to peer lending, and explains why Library of Things have chosen to operate from a physical space.

Listen to the podcast here.

How Risky Is Borrowing Money Online Through Peer-to-peer Lending (FX Daily Report), Rated: B

It is almost true that borrowing money from traditional financial institutions is a thing of the past.

It has been observed that P2P online lending platforms are not the source of the problem or the risk. However, it seems to be the ease with which loans are available that causes the problems.

Online P2P lenders also offer student loans. It is very important to realize that student loans these days are available everywhere. But what is ultimately the truth is that the loans are burdensome. Any student that avails of such a P2Ponline student loan emerges as a graduate burdened with a heavy debt.

If an individual wants to apply for a P2P online loan, it is best to start with checking credit reports. It is a good idea to fix any errors that may be found on these reports. Otherwise, the interest rates may be hiked up. It is also a good idea to do some research prior to applying for the loan. It is worthwhile to find out as to which lender offers a lower rate of interest even if they fall outside the ring of online P2P lenders. Never decide on which loan to pick up by looking at the monthly amount to be paid. The total amount that you are going to repay and the time period of the repayment are the more important factors to be considered. This gives the total cost of the loan.

China

Big banks strike partnerships with technology companies as part of fintech wave (South China Morning Post), Rated: AAA

Bank of Communications, the nation’s fifth biggest lender, joined with Suning Holdings and its financial affiliate Suning Finance as strategic partners last week, the latest of the big five banks to ally with internet firms.

So far, all big-five banks, accounting for more than one-third of China’s banking assets, have allied with technology giants.

Industrial and Commercial Bank of China allied with e-commerce major JD.com for cooperation in sectors including fintech, retail financing, corporate credit and asset management. Agricultural Bank of China agreed to work together with dominant search engine operator Baidu. Bank of China and Tencent Holdings jointly set up a fintech lab, focusing on cloud computing, big data, block chain and artificial intelligence.

Earlier this month, mid-sized Industrial Bank and JD.com’s financial affiliate JD Finance launched a debit card in Beijing and most cities in affluent Zhejiang province.

China Life and Baidu to launch $ 1 billion internet fund (Reuters), Rated: AAA

China Life Insurance Group Co and Baidu Inc will form a 7 billion yuan ($1 billion) private equity fund, targeting internet and other technology investments, China Life’s listed arm said on Thursday.

The Baidu Fund Partnership will be capitalized by China Life through a special partnership, which will contribute up to 5.6 billion yuan, China Life Insurance Co Ltd said in a Hong Kong Stock Exchange statement.

Baidu, the Chinese language internet search provider, will contribute as much as 1.4 billion yuan.

Ant Financial’s “TechFin” vs JD Finance’s “FinTech” (ASEAN Today), Rated: A

Alibaba’s Ant Financial Services Group and JD Finance are at loggerheads in the Chinese, and increasingly, global e-commerce scene. In 2015, JD Finance recommended the use of “FinTech.” In December 2016, Ma Yun coined the ”TechFin” as a rebuttal, and as a show of thought leadership.

Ant Financial’s unveiling of “TechFin” shows the firm’s focus on building technology rather than financial products.

Critics believe there is not much difference between TechFin and FinTech. Critics believe Ant Financial coined TechFin to gain a foothold from the conceptual standpoint; a counteroffensive to JD Finance’s aggressive marketing of FinTech. This is inevitable considering “FinTech” as a term already achieved credibility within the finance and other related industries.

Ant Financial and JD Finance are more complementary than competitive

Onlookers see Ant Financial and JD Finance as longstanding rivals. JD.com’s recent sale of JD Finance for US$2.1 billion in cash was seen part of a deal to spin off its burgeoning finance arm and raise its game against Ant Financial.

Ant Financial focuses on the traditional model of the Internet while JD Finance focuses on product innovation, for a start. Each business model has its advantages.

Ant Financial also seeks to leverage on Ant Check Later (花呗), a virtual credit card, to open up a whole new road map for credit distribution in Internet finance. In contrast, JD Finance aims to boost user’s consumption through its products. Its Jingxiaodai (京小贷) appeals to merchants who need fuss-free and almost instant access to credit.

European Union

Klarna just posted some impressive half-year figures — profits soar by 138 percent (Business Insider), Rated: AAA

The Swedish e-invoicing giant posted 2,05 billion Swedish crowns ($254,2m) in revenue for the first two quarters of 2017. Meanwhile, operating profits jumped to 228 million ($28m) from last year’s 96 million ($11,9m), reports tech site Di Digital.

Yesterday, Breakit reported that the company is teaming up with Stripeto boost growth in the U.S.

Credit Suisse Eyes 2018 Launch for Blockchain Loans Platform (Coindesk), Rated: AAA

A group of banks led by Credit Suisse is eyeing the launch of a commercial platform for blockchain-based syndicated loans, according to reports.

The group involved finished the second phase of their testing in March.

Using smart contracts to reduce those turnaround times could increase the market’s appeal to potential lenders and investors, according to Aidoo.

Worldcore Payment Institution Announces ICO (Coin Idol), Rated: A

Worldcore announces an Initial Coin Offering (ICO), as part of their wider expansion plans.

The company envisions to become a worldwide reference for the financial tomorrow, by integrating its successful payment solution into the blockchain sector of economy.

Worldcore ICO starts on October 14 of 2017. In total, a maximum supply of one billion WRC tokens at $0.10 USD each, will be available for purchase.

Corlytics named by Allen & Overy in its regtech programme (Finextra), Rated: B

Magic Circle law firm, Allen & Overy, has named Corlytics as one of the eight companies selected to move into its Fuse programme. Fuse is a newly launched innovation space where its lawyers and technology firms team up to develop legal, regulatory and deal-related improvements.

International

Ten Fintech Conferences to Attend This Fall (Lend Academy), Rated: AAA

FinovateFall

When: Sept 11-14, 2017
Where: New York City Hilton Midtown
Link:  /> Discount code: F17FALLLAT

LendIt Europe 2017

When: Oct 9-10, 2017
Where: London
Link:  /> Discount code: LENDACADEMYVIP

American Banker’s Digital Lending & Investing

When: November 2-3, 2017
Where: New York, NY
Link: 

AltFi Global Summit

When: November 7, 2017
Where: Amsterdam
Link: 

Marketplace Lending & Alternative Financing Summit 2017

When: December 3-5, 2017
Where: Dana Point, CA
Link: 

This event is put on by the Opal Group and is the only west coast event this fall. This is its second year and while I did not attend last year I heard it was a good event with a focus on the investor side of marketplace lending.

Digital Banking – Old Wine in New Bottle? (Fintech Weekly), Rated: A

There was a time when digital banking was perceived as synonymous with online banking and mobile banking. Financial services industry, along with other sectors, is experiencing an explosion of digitization thanks to smartphones, tablets and access to affordable high-speed internet. The number of smart phone users is expected to equal the number of bank accounts in near future as all mobile users link their bank accounts to their smart phone and get onboard with mobile-based digital wallets and savings platform.

Given this, it is imperative to take a fresh look at whether digital banking means the same as it did a decade ago – both for banks as well as customers – especially since there does not seem to be a consensus on the definition of ‘digital banking’.

Customers today do not have the patience to navigate through multiple screens. They do not want to fill the same KYC details over and over for each product. Presenting paperwork at the branch to support an online application is a big no-no. They expect to resume the application they started on Smart phone on their home computer and may want to talk to the customer care executive on phone while doing that. They do not want to be bothered with cold calls and random sales pitches; they prefer to see only personalized and contextual cross-sell offers with direct purchase links. In short, digital customer today wants one-touch, one-click, personalized and integrated user experience across channels.

On the flip side, while customers enjoy the convenience of digital banking for routine tasks, they also want to continue using the branch when they need some face time with a seamless switch between digital and personal interaction. They do not want to forego the privilege of walking into the local branch despite being able to do all their banking via the web or smartphone.

Australia/New Zealand

Fintech startup shares $ 7m of investment (NZ Adviser), Rated: AAA

Since its launch in June, fintech startup Ilumony has reported more than $7 million in financial investments. Of the $7 million, it has charged no fees for advice on $1 million worth of customer KiwiSaver money.

India

Fintech lenders have new competition: Flipkart and Amazon (The-Ken), Rated: AAA

Though Flipkart launched in 2007, it was only in 2013 that e-commerce really took off in India. That was the year Amazon entered India through a marketplace model, and Flipkart too launched its own marketplace model.

From selling smartphones, books, and apparel to customers, the two of them now started offering warehouses, packaging, and logistics to sellers.

No Flipkart or Amazon for EzCred; this startup wants to pursue offline shoppers (India Times), Rated: A

When ecommerce companies like Flipkart and Amazon wanted to expand to the nooks and corners of the country, they borrowed the idea and recently started offering “No cost EMI” option on selected products. Taking a step further, you now have many fintech companies that have lined up on ecommerce platforms to offer loans to consumers.

Launched in January 2017, EzCred is an alternate lending startup which offers loans to consumers who walk into shop at offline stores.

“Offline is a much larger play than online. A majority of transactions are still done offline,” says Maheshwari.

The startup now has plans to roll out an app for customers to enable them to apply for loans directly. The platform has a credit assessment system which enables the startup to assess the borrowers’ repayment capabilities. This involves various data sources like the borrowers’ CIBIL score, bank statements, information provided by customers, which are then matched with the credit policy of EzCred.

India’s draft data protection law to hinge on user consent; will be ready only next year (Factor Daily), Rated: A

A draft data protection law, which is at the core of the Indian government’s stance that Aadhaar does not violate citizen privacy, will have user consent as its mainstay with a few exceptions.

The draft legislation is expected to be ready in about a year.

This was revealed in interviews with a member of the committee set up by the government to come up with the draft framework — B N Srikrishna, a former Supreme Court judge who is heading it, and a second person with knowledge of the committee’s thinking.

P2P lenders may be allowed to operate offline (The Hindu BusinessLine), Rated: A

In a bid to impart vibrancy to the fledgling peer-to-peer (P2P) lending space and also further the cause of financial inclusion, the Reserve Bank of India is believed to be looking at allowing players in the sector to have an offline presence besides an online one.

On-the-ground presence may help the platforms reach out to those who are currently not being served by banks/non-banking finance companies and also help break the vice-like grip of money lenders on local lending, especially in rural areas and small towns.

Asia

Why e-commerce firms could replace banks as the region’s leading lenders (Southeast Asia Globe), Rated: A

Peer to peer lending (P2P lending) first entered the wider public’s consciousness when it rose from the ashes of the global financial crisis in 2007. By cutting out traditional intermediaries, such as banks, the lending platforms, were able to offer borrowers lower interest rates and lenders higher returns. They were populist alternatives to the casino capitalism that had brought Wall Street to its knees.

According to a 2015 report by Deloitte, in Indonesia, Malaysia, the Philippines, Singapore and Thailand there exists “a clear disparity between what SMEs want and expect from banks and what the banks can deliver”. In Indonesia, the report found as few as 6% of SMEs were able to access bank loans.

Recent statistics from the Asian Development Bank show that the situation is similar in Myanmar, which the bank says suffers from a $2 billion shortage in available credit, a shortfall that Brad Jones, CEO of Wave Money, attributes to the country’s excessively cautious banking regulations.

According to data from Singapore-based venture capital fund Dymon Asia Ventures, less than 0.1% of loans in the region currently originate from P2P lending sources, compared with 10% in China and 2-3% in the UK and US. There is, therefore, sufficient growth potential for the Southeast Asian P2P lending market.

Peer-to-peer lending bears risk of bad debt (The Jakarta Post), Rated: A

Despite the rising trend of peer-to-peer (P2P) lending in Indonesia, an economist believes that online-based businesses have increased risk of bad debt if the lenders ignore the importance of supervision.

The credit application mechanism in P2P lending is risky. There is no integrated costumer blacklist data-base like in the banking industry, said Samuel Aset Manajemen economist Lana Soelistianingsih said in Jakarta on Friday.

Moreover, she said P2P lending offered annual interest rates of up to 18.5 percent to investors, adding that such aggressive offers could increase the risk of business failure.

Canada

FLINKS PARTNERS WITH MERCHANT ADVANCE CAPITAL (Betakit), Rated: B

Flinks, a financial API for banks and credit unions, announced a partnership with Merchant Advance Capital, an online lender for small and medium-sized businesses.

Merchant Advance Capital partnered with Flinks to reduce loan approval time for its customers. Flinks will allow Merchant Advance Capital to connect its app directly with customers’ banks, allowing the company to validate account ownership, account balances, and transaction histories.

Authors:

George Popescu
Allen Taylor