Thursday February 2 2017, Daily News Digest

Thursday February 2 2017, Daily News Digest

News Comments Today’s main news: SoFi acquires mobile banking startup Zenbanx.  LC class action suit to be arbitrated. Goldman CIO touts Marcus as FinTech startup. Prosper appoints Usama Ashraf as CFO. Today’s main analysis: P2P lending was a product of the financial crisis. Own SoFi through Renren. Today’s thought-provoking articles: Smaller P2P players likely to struggle.  How to […]

Thursday February 2 2017, Daily News Digest

News Comments

United States

United Kingdom

European Union

Israel

News Summary

United States

SoFi moves beyond lending with acquisition of mobile banking startup Zenbanx (Finextra), Rated: AAA

Online lender SoFi is stepping up its efforts to take on America’s banks by buying fellow fintech player Zenbanx, enabling it to offer checking accounts, credit cards and international money transfers. Financial terms were not disclosed.

Although terms have not been revealed, the deal is expected to be worth around $100 million when it closes later this month.

Founded in 2012 by former ING Direct CEO Arkadi Kuhlmann, Zenbanx offers a mobile banking account that lets people save, send and spend money in multiple currencies both domestically and internationally. The firm is not a bank, teaming up with FDIC member Wilmington Savings Fund Society, which issues accounts.

OUR ACQUISITION OF ZENBANX (SoFi), Rated: AAA

We have never been shy about SoFi’s ambitions to become the center of our member’s financial lives. Offering deposits, credit cards, and payment solutions is key to that ambition, and we think we can offer something better than incumbent players with the same kind of innovation we’ve brought to other areas of finance, like student loan refinancing, personal loans, and mortgages.

Today, we got a lot closer to being able to provide those products with the acquisition of Zenbanx, a Delaware-based company that offers a mobile banking account that lets people save, send and spend in multiple currencies.

With the addition of Zenbanx, SoFi is poised to make banking much more frictionless. We can’t wait to show you what’s in store.

Class Action Against Lending Club and WebBank Headed to Defeat (JDSupra), Rated: AAA

On Monday, a federal district court in the Southern District of New York granted a motion to compel arbitration in Bethune v. Lending Club Corporation, et al., a closely watched putative class action raising important issues for the fintech industry.

Under the Federal Arbitration Act, the court’s decision is potentially subject to immediate appeal to the Second Circuit under § 1292(b). The decision, especially if it is affirmed, may provide increased certainty and comfort for the marketplace lending industry and investors.

Own SoFi, Other Fintechs Through Renren (Lend Academy), Rated: AAA

There is one company called Renren that has allocated to numerous fintech firms and is currently publicly traded on the NYSE under symbol RENN.

Renren has participated in SoFi’s series B, D, E and F rounds for a total investment of over $242 million. According to the 2015 year end report, “The Company held 28.85% and 21.20% equity interest of SoFi as of December 31, 2014 and 2015, respectively.”

Renren also hold significant positions in Motif (10%, their CEO was the most recent guest on the Lend Academy Podcast, Lending Home (14.7%, which just crossed $1 bn in originations) and Fundrise (25.3%, which is in the process of raising money from the crowd, has originated over $210 mn in originations and touts 123k members).

Goldman CIO touts new consumer lending business as ‘fintech startup’ (SearchCIO), Rated: AAA

Goldman Sachs Group Inc., financial adviser to corporations, governments and the world’s one-percenters, is stepping out of its comfort zone. The global investment bank recently unveiled Marcus.com, an online lending platform for consumers. The platform not only represents a new customer focus — ordinary people who get into debt — but a new technology strategy at Goldman.

Fintech startups rely on technology to provide faster, more agile customer service than the traditional Wall Street behemoths. Marcus, which is built on APIs, was born out of the same thinking.

Indeed, Chavez said Goldman is not only exploiting APIs, but open source and cloud services as well — a trio he referred to as the most “profound drivers” of innovation in financial services he’s ever experienced.

Goldman is not alone. The use of APIs has skyrocketed in the last couple of years. In 2015, there was a 12-fold increase in API calls. A majority of the revenue at Salesforce, Expedia and eBay — between 50% and 90% — comes from APIs; for some companies such as Twilio, a cloud communications platform, 100% of its revenue comes from APIs, Chavez said.

The Marcus online lending offering is an example of a plug-and-play API strategy; Chavez and his team built and launched the platform in 12 months.

How to earn Bitcoin through p2p lending (CryptoCompare), Rated: AAA

That is why we want to introduce you to BTCjam, a peer-to-peer lending website that connects lenders and borrowers directly. BTCjam was founded in 2012 and has already facilitated over $10 million dollars worth of Bitcoin in loans.

  1. Step 1: On the top right corner, click the “Invest” button
  2. Step 2: You will be taken to the loan listings. We want you to check out the filter below. These are: Term (time period of the loan), BTCjam score (the rating given to the borrower according to his profile information and to the loan requested. Basically a credit score), type (this dictate the currency value in which the investment will be returned) and advanced
  3. Step 3: Now once you find a listing that you like, click on its name
  4. Step 4: This next step is probably the most important one. We want you to take a good look at all of these fields below. Number 1 shows how many BTC is missing for the loan to be fully funded. Number 2 shows the Listing rating and the verified profiles of the user. The more profiles linked, the most likely it is the person to be the owner of these profiles. Number 3 is the description of the business plan or motive for the loan. Make sure the plan proposed is sound and that the borrower has a backup plan to repay the funds Lastly, number is the borrower reputation, which he can acquire from previous loan
  5. Step 5: Once you have analysed all of these fields and are ready to invest in this loan, click “Invest
  6. Step 6: Enter the amount of BTC you want to invest and click “Invest” once more

Prosper Marketplace Appoints Usama Ashraf Chief Financial Officer (Yahoo! Finance), Rated: A

Prosper Marketplace announced today it has appointed Usama Ashraf as Chief Financial Officer. As CFO, Ashraf will oversee the company’s capital markets function, as well as all of the company’s finance activities. As head of the Capital Markets team, he will be responsible for expanding the company’s funding sources by bringing new investors onto the Prosper lending platform.

What to Expect From Real Estate Crowdfunding in 2017 (Equities.com), Rated: A

While growth slowed somewhat in 2016 (likely in response to top-of-market trepidation) the 40% figure is still robust, and the US accounted for a large share of the $1bn of overall industry growth this year. In 2015, the $1.5bn in volume for US real estate crowdfunding represented only 0.3% of total real estate finance transactions in the US, indicating that the sub-industry still has enormous room to grow, even while remaining modest as a share of overall commercial real estate activity in the economy.

The trend of division and specialization among real estate crowdfunding platforms is likely to continue, with the potential for consolidation in the advent of a dip in the market.

The transition of the executive branch will likely have a major impact on commercial real estate capital markets, and therefore on the prospects for the young real estate crowdfunding industry. The trouble is, no one can credibly claim to know what that impact will be.

The Colleges That Offer The Most Bang For Your Student Loan Buck (Lifehacker), Rated: A

Online student loan marketplace LendEDU did an analysis of 752 public and private 4-year colleges. The site looked at two main factors: average student loan debt per graduate and the average early career pay for graduates. They used these two criteria as the risk and reward for attending college to determine which schools give you the biggest upside for the amount of money you have to spend.

Unsurprisingly, schools like Princeton, Yale, and Harvard trend towards the top of the list, but those are also among the hardest to get into.

The Battle to Control Trillion in Investment Direction (Dara Albright Media), Rated: A

In the Fall of 2016, I penned an article entitled, “Modernizing the Self-direct IRA – The Trillion Dollar FinTech Opportunity” – the first in a new series of articles that focuses on next-generation retirement planning. The piece underscored how FinTech will mend America’s flawed retirement system and foster the growth of “digital” investing.

Perhaps the majority of America’s retail investors are too busy reluctantly allocating their retirement dollars to sanctioned bond funds – many of which yield more clout than performance – to even notice the race to create a next-generation retail retirement product that will economically custody coveted micro-sized alternative investment products and, in doing so, ensure that a greater number of Americans maintain more properly diversified retirement portfolios.

Unlike previous corporate clashes, the winning IRA model is easy to predict. The frontrunner will be the one possessing the most optimum technological and regulatory framework to accommodate the needs of the modern retail investor. Today’s retail investor is not looking for another mutual fund. He is not begging for ETFs. Nor is he interested in day-trading stocks. Instead, he is craving yield, and he is demanding access to the same level of returns that institutions have been enjoying for years through alternative asset diversification.

Yes, you read that correctly. Retail brokerages would prefer to limit access to investment products or exit the retail retirement business altogether than to deal with the regulatory headaches of helping small investors prepare for retirement.

3 Years Later, the Jobs Act Continues to Drive Growth in CRE (Commercial Property Executive), Rated: A

The combined effects of the Jobs Act, digital advertising, and online investing platforms are currently driving rapid growth in CRE investments.

Investors enjoy greater autonomy on digital platforms because they’re able to build their own high-performing portfolios. Rather than putting money into pooled investments, they can pick and choose specific opportunities that appeal to them. Some sites even list institutional quality offerings to private investors and allow them to participate alongside institutional capital.

Global crowdfunding investments in real estate are expected to hit $250 billion by 2020.

Here are three key reasons the industry will show continued growth:

  1. Evolved functionality and flexibility.
  2. Enhanced community building.
  3. Maturing Millennials. In fact, 23 percent of the world’s millionaires are Millennials.

DealIndex study indicated that young investors are 10 times more likely than Baby Boomers to use online investing platforms, even though investing is growing among the 50-years-and-older crowd. Naturally, as Millennials’ influence increases, online investing platforms will mature as well.

Video: Accessing Peer-To-Peer Loans For Alternative Income (RIA Channel), Rated: A

Allen Webb, Senior Portfolio Specialist at RiverNorth Capital Management talks with Julie Cooling, Founder and CEO at RIA Channel about their new marketplace lending strategy, specifically, RMPLX.

Watch the interview here.

How You Can Leverage A Business Competition Win (Forbes), Rated: A

Women may think it’s not ladylike to brag. The truth is, if you want to get ahead in the world, even if you’re a nice girl, you’ve got to brag a little. When done right, it can be an effective way to get attention for your product or service and grow your business.

So how do female founders brag without sounding boastful? By winning a competition, such as OnDeck’s Seal of Approval Contest.

Applying for money from an online lender is less intimidating, commented Corcoran. It’s fast — unlike the 33 hours it may take with a bank — and easy, she said. It’s leveling the playing field for women entrepreneurs who are seeking capital.

Employing crowdfunding to start or expand your business (SlideShare), Rated: A

United Kingdom

P2P Lending Platform Flender Selects Equifax to Support Underwriting for UK SME Loans (Crowdfund Insider), Rated: AAA

Following the closing of its Seedrs equity crowdfunding campaign, peer-to-peer lender Flender has selected Equifax Limited to support the underwriting for UK small and medium enterprises (SME) loans.

According to Finextra, Equifax will be supplying real-time consumer and commercial to help make the underwriting process automated and optimized. This data, which will be provided by Equifax Business Insight’s solution, will give a comprehensive view of SME loan applicants.

Smaller P2P players likely to struggle, says alternative lender (Bridging&Commercial), Rated: AAA

With the many political, regulatory and economic twists and turns of 2016, 2017 is set up to be a strange year in the world of alternative finance.

With the larger platforms announcing record second-half results in the six-month period after the Brexit vote, they are also attracting increasing amounts of capital in the form of equity.

Smaller P2P players, however, will likely struggle to lure the necessary lending or growth capital to survive independently, so we expect a degree of consolidation and some to drop out of the market altogether.

We predict that this will attract a huge amount of capital on to the main platforms and represent as much as 30% of all capital inflows to P2P platforms this year, assuming all large P2P lenders such as Assetz Capital get approved before the end of March 2017, and perhaps as much as 50% in 2018.

RateSetter’s former chief risk officer joins The Money Platform (P2P Finance News), Rated: AAA

THE MONEY Platform has hired RateSetter’s first-ever chief risk officer Kevin Allen (pictured) to head up its credit decision processes and grow its borrower base.

Allen joined the recently-launched peer-to-peer payday lender on Monday 23 January, after three-and-a-half years at RateSetter.

Allen joined RateSetter – which is one of the ‘big three’ P2P lenders – as CRO in July 2013 and went on to become head of retail lending. He helped to increase lending from £3m to £60m per month and was instrumental in growing the provision fund from under £1m to £23m, according to his LinkedIn profile.

The firm is looking to shake up what it calls the “morally bankrupt” payday loan market, by offering a more ethical alternative. With a representative APR of 165 per cent, it is much less expensive than some of the big-name payday lenders in the market.

The Association of Alternative Business Finance Launched Today (Fintech Finance), Rated: A

The Association of Alternative Business Finance (AABF) launched today (1 February) with the major ambition of championing and promoting the best standards of industry practice.

The seven founding members, Capify UK, Catalyst Finance, Credit4, Fleximize, Liberis, The Just Loans Group and YesGrowth have clearly defined four operating principles that members will be required to adhere to:

  • Transparency
  • Responsibility
  • Fairness
  • Security

A key early initiative for the AABF is for members to create and subscribe to a centralised database for Personal Guarantees that will prevent borrowers over committing themselves and help identify potential fraudulent activity.

Behind the scenes: How the Funding Circle process works (Funding Circle), Rated: A

To recap, once you’ve submitted an application online:

  • Your Account Manager will need 3 months business bank statements, the last set of full, filed accounts at Companies House and if these are over 16 months old we’ll need P&L and balance sheet information for the last financial year end.
  • Then, an Underwriting Assistant will carry out some initial credit checks and searches on the financial documents you’ve submitted.
  • Our Credit Assessment team will then look at whether the loan is affordable, if it makes sense and whether it fits our credit criteria.
  • Once the loan is approved, you’ll receive an email with the offer conditions and loan contract. Once the contract has been signed by a company director, scan it back to us along with:
    • A direct debit mandate
    • I.D. and proof of address documents for all guarantors
    • If it’s a Limited company, a personal guarantee
  • The team will then carry out a few final fraud checks, and once complete the loan will be listed at random either as a whole loan, where an institutional investor buys the entire loan, or as a partial loan where thousands of investors lend to your client. The funding process typically takes one to five working days.
  • Once the process is complete, your client will receive the funds within 24 hours.

ThinCats founder: Peer-to-peer lending was a product of the financial crisis (BusinessZone), Rated: B

It was a remarkable change in the way things were done. The key thing now is; can we get a sufficient foothold, so that if the economy improves and the banks come back into the market in a big way we’ll be able to withstand that? I think it will be five years before the banks even consider that. Things may have changed forever.

We made £2m loans in our first year, most of which came from founders and shareholders. I think we did about £5m in the second year, then it doubled each year after that.

We basically hung on their shirt tails – let them do the marketing.

European Union

French Finance Regulators Embrace Fintech (Crowdfund Insider), Rated: AAA

The old Paris Stock Exchange, the Palais Brongniart was buzzing again as international Fintech startups, bankers, insurers, and investors gathered there for two days of panel discussions, Fintech startup pitches and networking at the second edition of the Paris Fintech Forum last week.

While “stable” and “agile” may sound like a contradiction in terms, Francois Villeroy de Calhau insisted that they are not. Regulation is a positive asset for Fintechs as it strives to limit potential risks for customer protection and financial stability.

The French authorities see the Brexit as an opportunity for France to regain a stature as a financial center.

The danger for the Continent is now that the post-Brexit UK, freed from the yoke of EU directives, could decide to compete with the Continent through large scale financial and fiscal deregulation. The UK, which already enjoys an 80% share of the European alternative finance sector, could then maintain or even widen the gap.

Strengthening the communication with fintech firms, implementing their own digital transformation and developing Regtech are key elements of the regulators’ strategy.

Israel

Not Just Hi-Tech: Israel Competes in Global Asset Management (PR Newswire), Rated: AAA

Clarity has launched its own multi-manager fund which allows its clients to invest in a globally-diversified portfolio of high-yielding private debt strategies, such as real-estate-backed debt, senior corporate lending and peer-to-peer lending. Clarity clients benefit from the firm’s access to top-tier debt investment managers globally and from its due diligence and investment selection capabilities. Since the fund’s launch in late September, it has accumulated tens of millions of dollars in assets under management. The fund targets Eligible/Accredited Investors.

Authors:

George Popescu
Allen Taylor