Tuesday December 27 2016, Daily News Digest

lending-times

News Comments Today’s main news: Landbay receives full FCA authorization. Bizfi hits $2B origination milestone. Today’s main analysis: The rise of proptech. Today’s thought-provoking articles: What we learned about alternative finance this year. What can P2P lending offer SMEs? What to expect in MPL in 2017. United States Bizfi originates $2B in small business loans. AT: “Lending Club […]

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News Summary

United States

Bizfi Hits $ 2B Origination Milestone; Providing Financing to More Than 35,000 U.S. Small Businesses (Yahoo! Finance), Rated: AAA

Today, Bizfi, the premier fintech company with a platform that combines aggregation, funding and a marketplace on a single platform for small businesses, announced that it has surpassed $2 billion in financing – through both growth and working capital – to more than 35,000 small businesses across America.

Lending Club Announces Bonus Incentive for New IRA Investments (Crowdfund Insider), Rated: A

Lending Club (NYSE:LC) recently announced it is now offering a bonus incentive for IRA investments. From now through April 30, 2017, investors that open an IRA investment will receive a bonus of up to 3% of their investment.

What to Expect for Marketplace Lending in 2017 (Crowdfund Insider), Rated: A

2017 will be a pivotal year for the marketplace lending (MPL) space as the market will seek stabilization in both confidence and venture funding, following a challenging 2016, but also as leading companies look to establish themselves as mainstay providers of consumer credit. According to PricewaterhouseCoopers’ DeNovo team, the main issues facing the MPL industry in 2017 include:

  1. ) an emphasis on improved transparency;
  2. ) next steps following regulatory changes;
  3. ) expansion to ancillary asset classes; and
  4. ) the potential impact from tax policy changes.

Transparency remains the single largest input affecting the overall health and sustainability of marketplace lenders.

Signs of market stabilization are evident with several recent wholesale bond sales and new credit facilities. Although originations have declined for three consecutive quarters, year-to-date (through September 2016) originations of $7.8 billion are nearly equivalent to the $8.2 billion for the first nine months of 2015, according to Orchard Platform.Further encouraging data is the growth in securitizations, with year-to-date issuance of $5.4 billion up from $3.0 billion for the equivalent period in 2015.

The two key takeaways from recent global regulatory announcements are 1) the lending industry has changed with validation of the MPL model; and 2) the uncertain regulatory path for MPLs is over. The onus is now on marketplace lenders to take the next steps which could play a critical role in becoming a mainstay provider of credit.

In addition to non-bank optionality in pursuing special purpose charters, 2017 could mark the transition of a major marketplace lender to a traditional banking structure. The benefits of lower cost deposit funding and the potential need to increase balance sheet lending options could entice an established MPL to pursue a traditional bank structure.

Fintech Payments: 5 Ways to Get Paid Without PayPal (Huffington Post), Rated: A

One of my favorite developments in the fintech payments space is Venmo. You can send money from bank account to bank account for free. I use Venmo to pay some of my own service providers.

Unlike PayPal, which will charge you to receive money, Google Wallet doesn’t take a fee when you receive money.

Beyond Bitcoin, there are other cryptocurrencies, all of which use blockchain technology to make sure you get paid as a freelancer.

You can use Due to send and receive global payments. Due offers a digital wallet, and we offer eCash solutions. It’s a new world out there, and you really don’t need to rely entirely on PayPal to get paid as a freelancer.

Insurtech european-style (Medium), Rated: A

There are numerous successful attempts to create an online accessible, paperless and flexible insurance. Companies like FinanceFox, Clark, Guevara, Friendsurance or Lemonade are not only offering a more suitable way to communicate, but also create new business opportunities themselves. That explains why FinanceFox received a total funding of $33.5m in 2 rounds from 9 investors, Friendsurance $15.3m in 3 rounds from 3 investors, or Lemonade $13m, just to name a few.

The first obvious approach to reach the market of Millennials is to build a bridge between them and established insurance companies.

With the intent to lower customer acquisition costs a different type of model emerged that may be classified as a B2B2C approach in the field of online insurance. Although the best model is still to be found out, so far it looks like this approach might be superior compared to the previously mentioned ones as it allows to significantly lower CAC through being included in already pre-existing channels and therefore scale faster.

What We Learned About Alternative Finance In 2016 (PYMNTS.com), Rated: A

A year ago today, you had never heard the word “Brexit,” never seriously said the words “President Trump” and never once considered that you would have to make sense of a world where Brad and Angelina had fallen out of love. Wells Fargo was just a bank that was really good at getting its customers to sign up for credit cards, and Lending Club and its P2P counterparts were coming to eat mainstream banking’s lunch.

The CFPB has had a busy year every year since it was created in 2011. Still, the breadth of topics the Dodd-Frank consumer protection watchdog took on in 2016 was fairly impressive — even by the CFPB’s aggressive internal standards.

Last year saw the agency offer up major revisions to regulation governing payday (and short-term) lending, arbitration in consumer contracts, car loans, marketplace lenders and prepaid cards. The agency also handed down the largest fine to a bank in its history — $100 million to Wells Fargo for creating an incentive system that pushed its employees to set up a series of consumer accounts without actually getting consumer permission. Wells was additionally hit with $85 million in fines from the Office of the Comptroller of Currency and the L.A. DA’s office.

Two things to watch this year. One, where do those default rates go, because a lending platform that can’t get people to pay back their loans isn’t a lending platform at all — it’s a charity. Two, which players survive and how they do it. Will they partner with the banks they were once primed to destroy, or will they find a way to keep on going it alone (mostly)? And those default rates, we should note, won’t just be important to watch in P2P lending.

Two things to watch this year. One, where do those default rates go, because a lending platform that can’t get people to pay back their loans isn’t a lending platform at all — it’s a charity. Two, which players survive and how they do it. Will they partner with the banks they were once primed to destroy, or will they find a way to keep on going it alone (mostly)? And those default rates, we should note, won’t just be important to watch in P2P lending.

Though much changes in the credit marketplace, one thing remains the same: Consumers have to pay their loans, and those that lend to consumers have to either be pretty sure the repayment is coming or price the loan to account for the risk. Whether regulation and the loan products next year reflect that unchanging reality remains to be seen.

5 Fintech Startups to Watch in 2017 (Fast Company), Rated: A

After flying under the radar for its first four years of operations, San Francisco-based Metromile dropped a bombshell in September: It had quietly raised nearly $200 million in a series of unannounced investment rounds, while at the same time positioning itself to grow nationwide as an independent auto insurer. Pay-per-mile auto insurance, the company’s core offering, is now poised to go mainstream.

Real estate technology moved into the spotlight in 2016, with blockbuster rounds going to Compass ($75 million) and OpenDoor ($210 million). In parallel, crowdfunding real estate platforms have been proving their mettle—bootstrapped Sharestates, for example, recently passed $230 million in funded projects.

Cadre, as its name implies, is less interested in crowdfunding and more interested in capturing the large pools of capital required to fund major commercial deals.

Whether the company’s high engagement leads to equivalent growth in assets under management remains to be seen. Stash’s strength lies in its “start small, think big” ethos; users can invest as little as $5, allocated according to their beliefs and values. The catchy, curated portfolio options include “Roll With Buffett” and “Social Media Mania.” At the end of the day, Stash is Blackrock ETFs, rebranded for nest egg newbies. But there might just be a business in that.

Is Venmo ripe for disruption, too? That is the thinking behind Tilt, which bills itself as a “social network built around money” and claims to be the fastest-growing app on college campuses. From Friday night pizza with roommates to a sorority-sponsored fundraiser, Tilt brings the functionality of peer-to-peer payments, crowdfunding, and Eventbrite under one roof.

Cross River Bank made headlines (and induced some head scratching) when it announced $28 million in venture capital funding last fall.

But fintech regulations are due for big changes in 2017, and Cross River may find itself at a sudden disadvantage. The Office of the Comptroller of the Currency (OCC), the nation’s top bank regulator, announced plans for a new type of license on December 2. Under the special charter, fintech startups would be able to grow more quickly nationwide by sidestepping the arduous process of navigating state licenses and rules. They would also subject themselves to greater scrutiny on the part of the OCC with regard to consumer protections, capital controls, and more.

More Americans Resolve to Seek Financial Advice in 2017: Allianz (Credit Union Times), Rated: B

Much uncertainty exists about what lies ahead in the coming year, but many Americans are optimistic about their personal finances, Allianz Life reported this week.

Allianz Life’s annual New Year’s Resolution Survey found that consumers’ positive financial outlook is prompting them to get their finances in order, either with professional advice or on their own.

United Kingdom

Landbay wins full FCA authorisation (P2P Finance News), Rated: AAA

LANDBAY has been given an early Christmas present from the Financial Conduct Authority (FCA) with the news that it has been granted full regulatory authorisation.

The peer-to-peer lender now plans to apply to HMRC for approval to offer the Innovative Finance ISA (IFISA) early next year.

Landbay specialises in buy-to-let property investments, and recently partnered with Zoopla to offer investors the chance to access buy-to-let mortgages via the property website for as little as £100.

Fintech Lending Platform BillFront Secures $ 35M During Series A Funding Round (Crowdfund Insider), Rated: AAA

Fintech platform for digital media companies, BillFront, recently announced it raised $35 million during a Series A Funding round. Investors who participated in the funding round included 4Finance, NIBC Bank, and FinLeap.

It offers financing solution for digital media companies by providing access to revenues and enables customer growth potential.

Funding Circle Takes a Look Back at 2016 Memorable Moments (Crowdfund Insider), Rated: A

With less than two weeks until 2016 comes to an end, Funding Circle took a look back at its marketplace lending platform’s memorable moments of the year.

London fintech firm Nutmeg adds £12 million to Series D, bringing total to £42 million (Tech.eu), Rated: A

UK fintech firm Nutmeg has raised £12 million in a Series D funding round led by Taipei Fubon Bank, Taiwan’s second largest financial services firm. The company announced the round last month, which at the time brought in £30 million, in a round led by Convoy, Hong Kong’s largest listed independent financial advice firm. Now the total is £42 million.

The Practitioner: Financing landscape gloomy for small businesses (AccountancyAge), Rated: A

It’s interesting to sit in with the banks and hear about how they are restructuring again, and still open for business. However, when push comes to shove, the best bit of advice they can give the client is to consider other sources of funding, such as Funding Circle.

They also said that banks are no longer interested in offering the traditional overdraft. This much I do believe. From our client bank, I would say less than 5% have a bank overdraft. Over 25% have or have had an EFG loan a bank loan, 20% have asset or invoice finance, and about 10% have used a crowdfunding, Funding Circle, option.

I tend to agree with the finance house, who stated that companies such as Funding Circle may not be around forever: while they make it so easy to get money, there are going to be business owners who take advantage of it. Whether they end up growing their business as a result, well, the loan company won’t find out until it’s too late.

The rise of ‘proptech’: how the fall of the traditional estate agent has opened the door to upstarts (The Telegraph), Rated: AAA

Traditional property companies are under attack from many fronts: transactions in November were 7.3pc lower than a year ago.

This old-fashioned industry is in the throes of being upended by new technology start-ups, given the moniker ‘proptech’. It’s a diverse field, from data analysis to lending and investment, and from software providers to property management, conveyancing and online agents.

One upstart that emerged this year, becoming a serious thorn in the side of traditional companies, was the online estate agency Purplebricks. As a hybrid agency, it dispenses with expensive physical offices, and employs freelance ‘local property experts’ to advise sellers.

But there are limits to how far some companies can scale, according to Wilson. There are a few market leaders in the peer-to-peer lending sector, such as Lendinvest, which caters to buy-to-let investors. In this area, there is a ceiling, and the market is saturated: “the savings ratio is low, and who has money to put into crowdfunding in property?” he asks.

Other big property companies are looking to proptech start-ups to help them diversify and take on upcoming challenges for the sector, such as Savills which in June invested in online estate agent Yopa, and Connells, which bought a similar company, Hatched, in 2015.

VPC Sells P2P Loans Originated on Funding Circle as it Re-Focuses on Balance Sheet Investments (Crowdfund Insider), Rated: A

VPC Specialty Lending Investments has sold its portfolio of peer to peer loans that were originated on Funding Circle UK.  VPC stated it was seeking “less volatile returns” in selling the P2P assets.

Peer-to-peer lending: what can it offer SMEs? (The Telegraph), Rated: A

After eight months of searching, Mr Adams and Ms Bloomfield eventually obtained a loan to buy the building from peer-to-peer lender, Folk2Folk, which specialises in rural business projects local to the South West. The interest-only loan works like a mortgage and has a rate of 6.5pc, with repayments made monthly. It’s secured against the property, so will be repaid if and when it is sold. The lender adopts a relatively cautious attitude and will only lend up to 60pc of the property’s forced-sale value.

Experts say the downside of peer-to-peer loans is that they often carry higher rates than an equivalent bank loan. Without the protection of the Financial Services Compensation Scheme, investors are putting their money at greater risk than depositors in a bank, and rates are higher as a result.

Questions have been raised over the quality of some of the loans on some platforms’ books – and the risk to lenders if they default. There are concerns that the industry could not survive a downturn, which could cause large numbers of borrowers to default at around the same time. If you can get a bank loan, it’s probably still a better idea.

Ms Jones recommends that businesses try specialist lenders such as Folk2Folk once they have decided to go down the peer-to-peer or crowdfunding route.Different firms have different specialisms. For example, SpaceHive, a crowdfunding company, gives out loans for community projects and regeneration.

Equally, the stage the business is at is crucial. Many peer-to-peer lending companies, such as Funding Circle, require two years of trading accounts, so they aren’t appropriate for brand new start-ups.

For a totally new business, Ms Jones recommends starting with reward-based crowdfunding through a website such as Kickstarter or Indiegogo, so owners can avoid giving away equity in the business at an early stage.

Once the initial funding is complete, a business could consider equity-based crowdfunding, where a portion of the business is given away in exchange for funds.

Unicorn and Maven announce VCT top-ups (Professional Advisor), Rated: B

Unicorn Asset Management announced it would launch a £15m offer for its popular AIM VCT early in the new year.

Also seeking a new subscription is Maven VCT 6, which hopes to raise £6m in top-up funds. It will be the only one of Maven’s funds to raise money in this fund-raising season.

Maven has also revealed its VCT funds have invested £1.1m in Growth Capital Ventures (GCV), which is developing a peer-to-peer lending platform that will provide access to pre-vetted investment opportunities.

Let Your Clients Buy the Farm and Manage the Risk (Financial Advisor IQ), Rated: B

According to the survey, clients were interested in parking their finances in other alternative spaces as well. Private equity received high marks with 26% saying they would look to invest there. Notes and peer-to-peer lending rounded out the top spots.

China

Chinese billionaire with ambitions to reshape investment models (Financial Times), Rate: A

Chinese retail investors may be able to dream of Picasso while hanging share certificates on their walls.

A Singapore-based Chinese billionaire investor, who this year acquired stakes in peer-to-peer group Lending Club, the fund manager Legg Mason and Sotheby’s, has proposed “securitising” the artist’s work to create fractional ownership and tap a wider market in Asia.

The investors would profit if the artwork rose in value, Mr Chen adds.

Beijing court accepts P2P fraud case (China Daily), Rated: B

Beijing First Intermediate People’s Court announced Thursday that it is hearing a high-profile peer-to-peer (P2P) fraud case involving tens of billions of yuan.

India

10% interest rates: Money lenders make a comeback due to currency shortage (Business Standard), Rated: A

While one of the objectives of was supposed to create a transparent economy by obliterating black money, it has created a parallel one led by informal money lenders, say bankers.

Even in urban areas, cash crunch is forcing people to look at non-bank financial avenues for short-term loans. As a result, several individuals or small and micro enterprises are now turning to online portals working in the space of peer-to-peer lending. Under this, one individual can lend money to another without assistance from any financial intermediary.

Asia

As banks retreat, fintech muscles into SME financing (The Asset), Rated: AAA

Considered the backbone for most economies within Asia, SMEs (small to medium enterprises) have been for the longest time neglected by the financial system.

Funding Societies based in Singapore is just one of the many P2P (peer-to-peer) providers in the region that aim to connect investors looking for additional yield to SMEs searching for funding. Moreover, Fundnel another Singapore based firm is aiming to help institutional investors discover private companies with promising growth potential. Currently Fundnel was able to raise US$49 million for approved companies on its platform.

Middle East

Central Bank of Iran Set to Launch Regulatory Fintech Body (Crowfund Insider), Rated: AAA

Central Bank of Iran (also known as CBI) announced earlier this week that it is planning to launch its very own fintech regulatory body. According to the director of CBI’s Office for Innovative Technologies, Ali Kermanshah, the organization has been working on fintech regulations since 2012, and it is planning to develop an ecosystem to authorize financial startups and fintech firm operations.

According to the Financial Tribute, unofficial reports now show that over 50 fintech firms are currently operating in Iran, most of which were developed in the past three years.

Authors:

George Popescu
Allen Taylor