- Today’s main news: New York looks to further regulate FinTech lenders. BofA testing employee-less digital bank branches.
- Today’s main analysis: PeerIQ’s interpretation for Marketplace Lending of Trump’s Trump’s Executive Order on Core Principles for Regulation the United States Financial System
- Today’s thought-provoking articles: Banks look to replace ATM cards with cellphones. When will Innovative Finance Isas actually be available?
- New York to increase regulation of FinTech lenders. GP:” New York state is usually pro-finance. I am surprised of this push. This push will probably hurt the consumer more than help by limiting the credit access. Secondary, this should be cannon fodder for a federal regulation. AT: “More and more, I’m seeing states take on FinTech regulation. It’s time to prepare for the upcoming battle between the states and the federal government over who is going to be the chief regulator.”
- BofA testing employee-less bank branches. GP:” I love seeing banks innovate, and this feels bold. Way to go.” AT: “Personally, I think this is a brilliant idea whose time has come.”
- PeerIQ’s interpretation for Marketplace Lending of Trump’s Trump’s Executive Order on Core Principles for Regulation the United States Financial System. GP:” I think it’s normal to have an oscillation from under regulation to over regulation and following adjustments. However, please raise your hand if you think all regulation is useless.” AT: “I like the final analysis that President Trump’s principles for regulating the financial system are consistent with the principles of Dodd-Frank. It remains to be seen whether his administration will improve upon what is in place. I hope so.”
- Interview with Ram Ahluwalia of Peer IQ. GP:” I am not surprised Peer IQ pitches securitization as the source of life, the universe, and everything. Joke aside, it is important and the securitization volume growth and ongoing growth has been a good sign. “
- Banks consider replacing ATM cards with cell phones. AT: “Another great idea, but this one comes attached with legitimate security concerns. Banks will have to figure out how to keep digital money safe.”
- 31 FinTech companies transforming institutional investments. AT: “This is quite a list, and there are plenty more.”
- SoFi keeps millennial customers by helping them find jobs. AT: “I’m all for anything that helps a company stay competitive. This is a unique value-centric service.”
- How investors can earn 7% returns in a 2.5% world.
- Avoiding loans in Oroville flood zone. GP:” A little late now, isn’t it? Perhaps real estate is not so secure after all? Or a lesson for diversification?”
- Monexo to rope in strategic partner. GP:” I personally don’t believe in news that state getting close to signing a partnership. I would recommend announcing it after it’s signed. There are so many ways for these partnerships not to happen.”
- United States
- NEW YORK LOOKS TO FURTHER REGULATE FINTECH LENDERS (Goodwin Law), Rated: AAA
- Bank of America is testing employee-less branches to serve digital-first customers (Tradestreaming), Rated: AAA
- Weekly Industry Update: February 12, 2017 (PeerIQ Email), Rated: AAA
- Ram Ahluwalia of PeerIQ Shares the Future of Online Lending (Crowdfund Insider), Rated: A
- Banks Look to Cellphones to Replace A.T.M. Cards (The New York Times), Rated: A
- 31 FinTech Companies Transforming Institutional Investments and Trading (Let’s Talk Payments), Rated: A
- A US online lender keeps its millennial customers by helping them find jobs (and friends and life partners) (Quartz), Rated: A
- How Investors Can Earn 7% Returns In A 2.5% World (Forbes), Rated: B
- Avoiding loans in Oroville flood zone (zip code 959xx) (LendingCalc), Rated: B
- United Kingdom
- When will Innovative Finance Isas actually be available? (BT), Rated: AAA
- Investors sneeze at P2P trust’s ‘seasoning’ (Citywire), Rated: A
- European Union
- Interview with Eduards Lapkovskis, CEO of VIAINVEST (P2P-Banking), Rated: A
- Equator Celebrates 2016 Successes Highlighted by New Products and Customers (Yahoo! Finance), Rated: B
- Peer-to-peer lender Monexo to rope in strategic partner to fund growth (BusinessLine), Rated: AAA
- BetaSmartz Automated Investment Launches in Asia (Yahoo! Finance), Rated: A
NEW YORK LOOKS TO FURTHER REGULATE FINTECH LENDERS (Goodwin Law), Rated: AAA
Tucked away in the Transportation, Economic Development and Environmental Conservation Bill portion of the New York State 2018 Executive Budget is a proposed amendment to New York’s Licensed Lender Law that would “[a]llow the Department of Financial Services . . . to better regulate the business practices of online lenders.”
The Bill would make three significant changes to the Licensed Lender Law:
1. Licensing would be required for making consumer loans of $25,000 or less and business loans of $50,000 or less at any interest rate.
2. Potentially Implicate Licensing for Marketplace Lending Platforms Using a Bank Partnership Model. In a bank partnership model, platform companies may both solicit loans made by the bank partner and later purchase some of the platform loans.
3. Potentially Cover Merchant Cash Advances and Invoice Factoring. The Bill would also expand the meaning of “engaging in the business of making loans in New York” to a person that “solicits [covered] loans . . . and, in connection with such solicitation . . . purchases or . . . acquires . . . other forms of financing.”
If the bill is passed by the legislature and signed by the governor, these changes would take effect January 1, 2018.
Bank of America is testing employee-less branches to serve digital-first customers (Tradestreaming), Rated: AAA
Enter the stripped-down, employee-less branch with just an ATM and a meeting room for video conferences with bank employees. The yet-to-be-named mini-branches are part of a Bank of America pilot program, with two located in Denver and one in Minneapolis. After a senior executive mentioned the concept at an investor conference last week, rumors proliferated as to whether this was a sign that the bank branch may be going the route of the bricks-and-mortar bookstore, the CD shop or the mall. The Washington Post even suggested bank branches may become what it calls “robo-banks” – automated and impersonal.
To ensure everything goes smoothly, the bank deploys “digital ambassadors,” or customer service agents who answer customers’ questions about the technology. Pace said that the digital ambassador – a role that’s only been around for a year – is focused on making sure customers are comfortable with the technology and can use the mobile app.
Ram Ahluwalia of PeerIQ Shares the Future of Online Lending (Crowdfund Insider), Rated: A
As online lending has morphed from a novelty to the future of debt, PeerIQ has been there chronicling the growth with its deep dive analysis of securitization and portfolio monitoring.
Ram Ahluwalia: Last year highlighted that securing access to a diverse mix of low-cost capital is necessary to compete and win. Lenders that could tap many channels saw little to no slowdown in origination growth and maintained a healthy differentiation in funding cost and access to capital from their peers.
The effects we’ve seen has been tremendous. ABS issuances grew 60% in 2016 versus prior year, and virtually every major platform has established a securitization program and a bank partnership.
Ram Ahluwalia: The decline in originations is overstated and misunderstood. The third quarter saw some origination decline, particularly for a couple of originators who encountered funding crunches, but year over year originations are still up across the industry.
Ram Ahluwalia: We project securitization to continue to be a favored funding channel, with total ABS issuance volumes growing 50% in 2017.
Further, as consumer credit trends remain positive, there is a lot of demand for this ABS paper; the majority of deals remain oversubscribed.
Ram Ahluwalia: The OCC Charter is not a panacea. It does not address other financing and liquidity challenges for the industry. As a result, we believe partner funding banks such as WebBank and Cross River Bank will continue to have an important role to play.
Ram Ahluwalia: Scaling up origination operations that can compete with online lenders (who have established brands now) requires significant investment in marketing, technology, servicing, and risk management.
While there is a large opportunity here for traditional financiers (with their noted cost of capital advantages), on balance, we predict most banks will try to partner with nimble lending platforms, acquiring benefits from the partnerships, while minimizing risks associated with such a major strategic push.
Banks Look to Cellphones to Replace A.T.M. Cards (The New York Times), Rated: A
Customers who don’t want to fumble around in their wallet for their A.T.M. card — or who have misplaced it for the umpteenth time — will soon be able to unlock cash dispensers’ coffers by using their phone.
JPMorgan Chase, which has more A.T.M.s in the United States — 18,000 — than any other bank, has activated this technology on a few hundred machines in four test cities, including Miami and San Francisco. Six thousand more are already upgraded and ready to go.
For decades banks have battled “skimming,” in which criminals sabotage A.T.M.s to steal the information off a card and use it to clear out people’s accounts. The replacement of magnetic stripe cards with chip cards significantly reduced that problem, but mobile access brings in new worries.
One Chase customer recently had $2,900 stolen from her account through the bank’s new cardless system — which she had never used.
At Bank of America, customers with compatible phones and a digital wallet app can tap their phone on the cash machine’s wireless pad to authenticate their identity. From there, customers enter their personal identification numbers and carry out transactions in the usual way.
Some banks have gone further and let customers ditch even their phones. With biometrics, a unique body part is enough to unlock cash.
At Banco Bradesco, one of Brazil’s largest banks, customers can gain access to an A.T.M. by tapping their palm on a scanner, which reads the pattern of their veins. (The system handled more than 700 million transactions without any reported fraud, according to Fujitsu, which built the technology.) Banks in Japan, India and elsewhere have used fingerprints for authentication.
A compromised bank card can be reissued. If a hacker figures out how to imitate someone’s eyeball — which has been done in laboratory settings — it can’t be replaced.
About 2.5 percent of the 425,000 A.T.M.s in the country are currently set up for cardless access, according to an estimate from Crone Consulting, which researches the payments industry. By the fall, it expects that number to rise to 25 percent.
Venmo, the digital payment system of choice for many millennials, is owned by PayPal. Giving PayPal and Venmo customers direct access to their money through A.T.M.s is not currently in the works, but it “isn’t something I would rule out,” said Chris Gardner, the product head for PayPal’s mobile wallet software.
31 FinTech Companies Transforming Institutional Investments and Trading (Let’s Talk Payments), Rated: A
DarcMatter is an online investment platform that provides transparent institutional-level access to private investment opportunities such as venture capital, private equity, hedge funds and commercial debt products.
DealMarket is a global online platform enabling Private Equity buyers, sellers, and advisors to maximize opportunities around the world – a one‐stop-shop for Private Equity professionals. DealMarket counts more than 15,000 users, over 3,000 deals and service providers listed on the platform.
EquityZen is a marketplace for private secondary investments in companies worth more than $50 million.
ForwardLane is a cloud-based investment advisory platform that enables investors to invest in particular hedge funds using machine intelligence software.
Orchard provides products and services for institutional investors to understand, execute and manage marketplace lending investments.
PeerIQ provides a credit risk analytics platform that helps institutional investors analyze, access and manage consumer credit risk. It aggregates P2P lending marketplace players and provides high-end analytical analysis of the player’s loan portfolio.
Quantopian is a crowdsourced hedge
RealtyShares describes itself as the Lending Club for real estate. They have created a marketplace for real estate investing through which individual and institutional investors can purchase shares in pre-vetted residential and commercial real estate properties for as little as $5,000 from the convenience of a laptop or tablet. fund that provides the world’s first browser-based algorithmic trading platform.
Venovate Marketplace is an online platform that matches investment advisors, qualified purchasers, accredited investors, institutions and investing companies with a curated selection of alternative assets.
A US online lender keeps its millennial customers by helping them find jobs (and friends and life partners) (Quartz), Rated: A
When Joanna Mathews was laid off from her job as an advertising strategist in Dallas, Texas, she called her online lender to get forbearance on her credit consolidation loan. The lender agreed, but only one condition: It would have to let it help her find a new job.
Mathews, 31, and the counselor provided by SoFi, a US online finance company, spoke at least once a week as she looked for work. She also took advantage of SoFi webinars on how to write resumes and interview. Her conversations with her coach focused on job-search strategies and, eventually, salary negotiation. With her coach’s help, she landed 15 interviews. After three months of searching, she found a position at another firm in Seattle, a city where she once lived and where was eager to return.
How Investors Can Earn 7% Returns In A 2.5% World (Forbes), Rated: B
A new asset class that offers investors market-beating returns is Peer-to-Peer (P2P) Lending. The P2P sector has grown rapidly in recent years and is an excellent new source of fixed income.
In 2016, P2P investors earned net annualized returns north of 7%. Even those who took the most conservative approach saw returns of 5%. That’s more than double the average S&P 500 yield.
Although the industry started out as peer-to-peer, the likes of Citibank and Morgan Stanley now fund around two-thirds of P2P loans.
Avoiding loans in Oroville flood zone (zip code 959xx) (LendingCalc), Rated: B
On Sunday evening, February 12, authorities issued evacuation orders below Oroville Dam because of a hazardous situation involving the northern California dam’s emergency spillway.
In the meantime, we would obviously avoid exposure to any loans in zip codes starting with 959. Investors without access to personal identifiable information (PII) typically view only the first 3-digits of borrowers’ zip code. Drilling down further, the 5-digit zip codes are: 95965, 95966, 95917, 95948.
When will Innovative Finance Isas actually be available? (BT), Rated: AAA
Recently published figures from the Peer-to-Peer Finance Association (P2PFA) show that its eight members, including the UK’s three biggest providers, collectively lent £843.9 million in the final quarter of last year, with a total of almost £3 billion lent across the whole of 2016.
We spoke to Neil Faulkner, managing director of 4thWay, a comparison and information site devoted to peer-to-peer.
“They’re coming, they really are,” he says. “There are currently four platforms offering them: Abundance, Crowd2Fund, Crowdstacker and LandlordInvest; and there are two more coming very soon, both Lending Works and Landbay have their approval.”
Neil predicts that over the next year or so we’re likely to see a new platform a month announcing it is ready to offer Innovative Finance Isas.
Interestingly, Neil hypothesises that the reason none of the ‘big three’ P2P platforms – Zopa, RateSetter and Funding Circle – have yet been approved is that the regulator will wait until they are all ready for approval so as not to give one a competitive advantage.
Investors sneeze at P2P trust’s ‘seasoning’ (Citywire), Rated: A
P2P Global Investments (P2P +) has pinned some of the blame for its poor performance on the maturing or ‘seasoning’ of its £840 million loan portfolio.
P2P, the largest of the alternative lending investment trusts on the London Stock Exchange, saw its share price plunge 20.7% last year. This was bad news for shareholders, including star fund managers Mark Barnett and Neil Woodford, who in the previous two years pumped over £700 million into the fund, which invests in loans from peer-to-peer lending platforms.
Even including its quarterly dividends the total loss to P2P shareholders in 2016 was just over 16%.
The performance of the underlying portfolio was much better, but with a total return of just 4.1% from its assets falling short of its 6-8% dividend target, investors grew disillusioned and de-rated the shares, which now trade at a 20% discount below net asset value.
P2P’s run of sub-par monthly returns saw it make a return of only 0.67% in the last quarter of 2017.
The increase in defaults in the last three months of 2016 was largely in US consumer loans, which makes up 56% of the portfolio.
Interview with Eduards Lapkovskis, CEO of VIAINVEST (P2P-Banking), Rated: A
What are the three main advantages for investors?
VIAINVEST is a truly customer-oriented company, and we strive to provide the most satisfying investing experience possible. Great deal of investors’ concerns are related to investment safety, so all loans listed on VIAINVEST are secured with a Buyback Guarantee. Also, to guarantee that one investor will never be 100% committed to particular loan, originators keep 5% “skin in the game” for each loan.
What ROI can investors expect?
Currently investors can choose to invest in loans originated in the Czech Republic with 12% annual ROI and Spain – up to 12,2% annual ROI depending on the loan.
VIA SMS Group is active in more countries than in Spain and the Czech Republic. Will loans from other countries be listed on the VIAINVEST marketplace soon?
This is actually the next update planned for VIAINVEST – in following weeks we will publish loans originated in Poland and Latvia, Sweden will also follow in the nearest future.
Is VIAINVEST open to international investors?
VIAINVEST is open to any investors holding a bank account within the European Union or other country to which the requirements arising from European Union legislation on the prevention of money laundering and terrorism financing apply. Currently there is no legislation in Latvia regulating operations of peer-to-peer lending platforms, but it may be developed in 2017, so VIAINVEST is already implementing existing regulations.
Equator Celebrates 2016 Successes Highlighted by New Products and Customers (Yahoo! Finance), Rated: B
Equator, a leading provider of default software solutions for many of the country’s top servicers (including four of the top five largest servicers and a leading GSE), real estate agents and vendors, today released its end-of-year performance metrics. Equator’s REO, short sale and loss mitigation modules have now processed transactions totaling more than $315 billion since its inception with more than 2.2 million distressed properties sold to date.
Peer-to-peer lender Monexo to rope in strategic partner to fund growth (BusinessLine), Rated: AAA
Monexo — an online peer-to-peer lending marketplace — is close to roping in a “local strategic partner” to fund its growth in the Indian market, Mukesh Bubna, its Founder-CEO, has said.
In its journey so far, Monexo India has, through its high-end digital platform, processed loans worth ₹24 crore with most of the applicants being salaried 25-30-year-olds.
Going forward, the Chennai-headquartered Monexo plans to start offering small and medium enterprise (SME) loans from the third quarter (July-September).
Bubna said Monexo was not looking at foreign venture capital or a foreign private equity fund, but was closing a conversation with a domestic investor.
BetaSmartz Automated Investment Launches in Asia (Yahoo! Finance), Rated: A
BetaSmartz, the B2B automated investment platform for all sizes of investors, from institutional to retail, today announced it had opened offices in Hong Kong.
BetaSmartz offers ‘hybrid ‘ digital investment or ‘robo’ advice that combines automated and face-to-face financial advice. Newly appointed Managing Director Asia, Zak Allom, said this model had been well received since its launch in 2015, with several clients now live including two in the U.S.
BetaSmartz will run sales and service from the Hong Kong office, complementing its headquarters in Singapore.