Tuesday September 14 2017, Daily News Digest

Goldman Sachs

News Comments Today’s main news: Equifax CEO vows to make changes in USA Today op-ed. dv01 closes Series A with big name investors. SmartBiz Loans surpasses $500M in SBA loan funding. stREITwise rolls out first REIT, focused on institutional-quality office buildings. Klarna completes BillPay acquisition. Wish Finance intros SME lending on blockchain in Singapore. Today’s main analysis: What millennials would give […]

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United States

Equifax CEO: ‘We will make changes’ (USA Today), Rated: AAA

Last Thursday evening we announced a cybersecurity breach potentially impacting 143 million U.S. consumers. It was a painful announcement because of the concern and frustration this incident has created for so many consumers. We apologize to everyone affected. This is the most humbling moment in our 118-year history.

Equifax Security first discovered the intrusion on July 29. Understandably, many people are questioning why it took six weeks to report the incident to the public. Shortly after discovering the intrusion, we engaged a leading cybersecurity firm to conduct an investigation.

At the time, we thought the intrusion was limited. The team, working with Equifax Security personnel, devoted thousands of hours during the following weeks to investigate.

dv01 Closes $ 5.5M Series A Led by OCA Ventures (PR Newswire), Rated: AAA

dv01, the data management, reporting, and analytics platform that offers institutional investors transparency and insight into lending markets, today announced a $5.5M Series A round, led by OCA Ventures. Ribbit Capital, Illuminate Financial, and CreditEase Fintech Investment Fund also participated in the round, joining existing dv01 investors Leucadia National Corporation and Pivot Investment Partners.

OCA advisor Jack Lavin has joined dv01’s board, and will work alongside existing board members from Jefferies LLC, a subsidiary of Leucadia National Corporation, and Quantum Strategic Partners Ltd., a private investment vehicle managed by Soros Fund Management LLC.

SmartBiz Loans Surpasses $ 500 Million in Funded SBA Loans (BusinessWire), Rated: AAA

SmartBiz Loans, the first SBA loan marketplace and bank-enabling technology platform, today announced that it has surpassed half a billion dollars in funded SBA loans. This milestone comes on the back of other recent successes for SmartBiz, including the addition of a fifth bank to its software platform and ranking as the number one facilitator of traditional SBA 7(a) loans under $350,000 for the 2016 fiscal year, over Wells Fargo and other major banks according to SBA lending data released in November, reflecting its 2016 fiscal year.

The company’s first-of-its-kind software platform automates a bank’s underwriting to cut time and costs by up to 90 percent for processing SBA loans under $350,000. By automating the underwriting process, the platform helps banks get low-cost capital into the hands of small business owners in a matter of weeks instead of months. This is vitally important to any busy, small business owner who needs capital.

The $500 million in funded SBA loans reflects not only continued growth for SmartBiz, but also for the entire market of bank-originated, small-sized business loans. Post-2008, banks reduced the number of smaller business loans they made because they couldn’t process them efficiently enough to make a profit.

Survey Reveals What Millennials Would Rather Deal With Than Paying Student Loans (Credible), Rated: AAA

The number of people with student loan debt is staggering. According to the latest numbers from the U.S. Department of Education, 42.3 million Americans are paying back $1.33 trillion in federal student loan debt. Lenders are collecting payments on another $64 billion in private student loans. A survey of borrowers by the Federal Reserve puts the median student loan debt balance at $17,000, with monthly payments of $222. Student loan debt can be suffocating for those who are struggling to make payments each month.

  • A staggering 49.8% of all respondents said they would give up their right to vote in the next two presidential elections in order to have their debt forgiven
  • Ride-sharing services like Uber or Lyft don’t seem to matter to millennials quite as much as some of the other options in the survey. According to the results, 43.6% were willing to give up these services forever in exchange for debt forgiveness
  • Interestingly, 42.4% of respondents would also give up traveling outside of the country for 5 years, while only 27.0% said they would be willing to move in with their parents for 5 years
  • Millennials seem to value texting more than the other options – only 13.2% reported being willing to give up texting and any mobile messaging equivalent for the next year in exchange for having their debt forgiven
  • Only 8.2% of respondents chose to select none of the above and said they would rather keep paying off their student debt

Working to Expose Silicon Valley’s Dark Side (Again) (The New York Times), Rated: AAA

Even before the ink was dry on an article Nathaniel wrote last year about an online lending start-up, Social Finance, and its unusual success — headlined “SoFi, an Online Lender, Is Looking for a Relationship” — he began hearing from people who painted a very different picture of what life looked like inside the company.

But in the intervening months, tales of sexual harassment and wrongdoing in Silicon Valley took center stage, in part because of Katie’s own reporting, which exposed a dark side to an industry known for growth, wealth and fantastic employee perks. Companies like ZenefitsTheranos and Uber made it clear that many venture capitalists and the companies they funded were incentivized to focus on growth at any cost, with good governance and corporate culture getting short shrift.

We are already getting more emails and phone calls that point to where the story might go from here — both with SoFi and the issue of bad behavior in Silicon Valley more broadly. These issues aren’t going away anytime soon.

stREITwise Announces Regulation A+ Offering to Lead New Era of Real Estate Crowdfunding (PR Newswire), Rated: AAA

stREITwise is introducing a new way to invest in real estate online commission-free by allowing direct investment on its website. Today they announced a Regulation A+ initial public offering for their first Real Estate Investment Trust (REIT) – 1st stREIT Office – which seeks to provide a diversified portfolio of institutional-quality office buildings with a revolutionary low-cost structure. Because it’s filed as a Regulation A+ offering, 1st stREIT Office will allow accredited and non-accredited investors alike the opportunity to participate.

This announcement comes shortly after 1st stREIT Office successfully raised over $20 million in a private offering to acquire the Panera Bread HQ Property in St. Louis, MO. At 99% occupancy in three separate buildings, the Panera Bread HQ Property includes over 290,000 square feet of Class “A” office space that is leased to many large tenants, including Panera Bread (World HQ), New Balance (Regional HQ), Wells Fargo, Edward Jones, Nationwide Insurance, and others.

With the Panera Bread HQ Property acquisition, 1st stREIT Office has been able to make 10% annualized dividend distributions to its existing investors. The company seeks to acquire more high-quality, stabilized office buildings in undervalued markets across the United States.

While Non-Traded REITs typically charge upfront fees of 10-15%1, stREITwise caps its upfront fee at just 3% by cutting out the middleman, eliminating financial advisor commissions, and passing the savings on to investors.

Goldman Banks on Lending to Grow (WSJ), Rated: A

The New York firm said Tuesday that loans to wealthy clients, companies and consumers would contribute almost half the $5 billion in revenue growth it is projecting by 2020.

Harvey Schwartz, a top lieutenant to Goldman Chief Executive Lloyd Blankfein, on Tuesday said persistently low volatility in financial markets meant that the third quarter would be a “challenging” one in terms of trading. J.P. Morgan Chase JPM 0.29% & Co. CEO James Dimon and executives at Citigroup Inc. and Bank of America Corp. projected trading declines of between 15% and 20% for the quarter.

Goldman on Tuesday laid out a detailed plan to grow revenue, which has remained flat since the financial crisis. Its target of $5 billion in new revenue by 2020 hinges on businesses that have been footnotes for most of the firm’s 147-year history: lending, asset management and tending to the mundane needs of corporate clients and money managers.

Lending to wealthy clients, companies and consumers could add $2 billion of new revenue over the next three years, said Mr. Schwartz at a global financial-services conference hosted by Barclays PLC.

Source: The Wall Street Journal

Lenda to expand in more states, invest in software platform (Mortgage Professional America), Rated: A

Online lender Lenda has announced plans to expand its reach to more states along with increased investment in its software platform, which offers a complete refinancing or mortgage origination transaction online.

New Pave’s Decentralized Global Credit Profile (GCP) Unlocks Access to Credit for Millions of Americans (BusinessWire), Rated: A

Pave, Inc announces an initial coin offering (“ICO”), scheduled for mid-October to fund Pave’s Global Credit Profile project, which could provide a ground-breaking solution to the problems associated with credit reporting worldwide. Based on its deep knowledge of lending to individuals with limited credit history (“thin files”), Pave’s GCP will give consumers and credit institutions access to richer and more accurate personal financial data than traditional credit bureaus provide, while significantly improving data security. GCP has the potential to unlock access to credit for millions of people — such as millennials and immigrants — who are marginalized by the current financial system.

While the centralized systems of companies such as Experian, Equifax and TransUnion continue to perform a valuable service by acting as a reliable source of information for third parties, they are plagued with systemic problems including a lack of transparency and control over personal data, vulnerability to fraud and data theft and unnecessary administrative costs. Using blockchain and related technologies, Pave’s GCP will decentralize the storage and ownership of an individual’s financial data by placing the user in control. The GCP thereby removes the reliance on a singular record keeper making security breaches infinitely less likely.

DigiFi Announces Launch of Next-Generation Digital Loan Origination System (PR Newswire), Rated: A

DigiFi, an enterprise financial technology company, announced today the launch of its cloud-based digital loan origination system (“LOS”) for banks, credit unions and consumer finance companies.  DigiFi’s next-generation LOS enables the automated online delivery of multiple consumer lending products through a single platform, driving better customer experiences and lower operating costs.

DigiFi’s proprietary technology was built over three years to digitize the consumer lending process, offering consumers immediate feedback and funding from any device at any time.  The platform supports multiple products including Personal Loans, Credit Cards, Personal Line of Credit, and Student Loan Refinancing, and DigiFi is adding additional products, including Home Equity, Auto and Mortgages.

The platform is highly configurable, empowering banks, credit unions and consumer finance companies to utilize their own risk models, documents and procedures.

Meet two fintech innovators showcasing their work at Finovate (Biz Journals), Rated: A

Two entrepreneurs who jumped up on the stage Tuesday were Lisa Shields and Ellison Anne Williams.

Shields, a longtime purveyor of payment technology, is the founder and former CEO of Vancouver-based Hyperwallet Systems Inc. After handing the reigns of that company over to Brent Warrington in 2015, she went on to launch Fi.Span, a provider of cloud-based platforms for commercial banks.

In the second half of the podcast, data mining expert Ellison Anne Williams also addressed the predominantly male demographic of her field. The effect it has on her approach is next to none, she said.

As the CEO and founder of data securitization startup Enveil, Williams brings more than a decade of experience in large scale analytics, information security and privacy.

U.S. banking regulator not ready for fintech charter applications (Reuters), Rated: A

The U.S. banking regulator, the Acting Comptroller of the Currency, said on Wednesday that he is not ready to accept applications from financial technology companies seeking a special purpose federal charter.

His comments underscore the broader difficulties faced by regulators globally as they attempt to keep up with dramatic changes in banking industry brought about by the increasing use of digital technologies which threaten to undermine traditional financial services businesses.

Samsung is working with banks to roll out retail pop-ups (Tearsheet), Rated: A

Banks may soon be experimenting with a new way to engage with customers: retail pop-ups.

Samsung’s head of sales for financial services, Reginald Jones, told Tearsheet that the company is in talks with its financial services customers about rolling out retail pop-ups “sooner than in a year.”

Those could be in a variety of formats, he said: a bus promoting a certain bank that drives a number of customers to an NFL game; a university campus presence where banks look to attract customers as they become of banking age; a shopping center that normally just has ATMs where banks could roll up for a weekend service to attract these potential new customers. Samsung, the consumer electronics giant, provides the devices that change how bank employees conduct business — to better influence the customer outcome.

Samsung has been working with bank branches for the last five years, incorporating its display screens into retail spaces as they take old signage and posters and move them to digital platforms. In some branches, greeters and bankers are also using Samsung tablets, he said.

How Fintech Is Reshaping the Small Loan Market (GuruFocus), Rated: A

Fintech companies around the world have moved swiftly to fill the gap left by mainstream lending institutions due to constraints related to interest rates and profit margins. Big lenders in the market are under constant pressure to increase profit margins, which limits the size of their addressable market, especially when trying to woo small and medium-sized business borrowers. Their interest rates are often high as they seek to remain competitive in the larger spectrum of the financial services industry.

One of the largest beneficiaries is LendingClub Corp. (NYSE:LC), which has seen its revenue increase 1,278% in under five years, from just over $37 million to over $500 million as of June 30 on a trailing 12-month basis.

Brazilian-based fintech companies are paying investors about 22% returns per year while borrowers are charged interest rates from as low as 1.7% to as high as 6.3% per month based on their credit profiles.

Fintech entrepreneur launches digital advice platform for retirees (Smartbrief), Rated: B

Matt Fellowes has launched United Income, an automated retirement-planning tool for retirees.

Federal Reserve Bank Of Philadelphia To Hold Conference On Blockchain’s Impact On Regulatory Policy (ETHNews), Rated: B

The Federal Reserve Bank of Philadelphia announced that it will hold a FinTech seminar in conjunction with the Journal of Economics and Business on September 28-29, 2017, focused on consumers, banking, and regulatory policy.

Aptly named FinTech: The Impact on Consumers, Banking, and Regulatory Policy, the conference will feature keynote speeches and research from industry experts on consumer protection; roles of alternative information; FinTech lending; blockchain-based currencies; machine learning and artificial intelligence; the new FinTech landscape; and marketplace lending and crowdfunding. The conference will also focus on the disruptive factors of blockchain technology and to what measure they continue to shape regulatory policies.

Erik A. Falk Joins Star Mountain Capital as Senior Advisory Board Member (BusinessWire), Rated: B

Star Mountain Capital, LLC (“Star Mountain”), a specialized investment manager focused exclusively on the large and underserved U.S. lower middle-market, is pleased to announce that industry veteran Erik A. Falk has joined the firm as a strategic personal investor and Senior Advisor.

Mr. Falk is a senior executive focused on strategic initiatives at Magnetar, a $13+ billion alternative asset management firm. Until early 2017, Mr. Falk oversaw the private funds as a Head of Private Credit within KKR’s (Kohlberg Kravis Roberts & Co.) $35 billion credit business and served on the Private Credit Investment Committee, the Leveraged Credit Investment Committee and the Portfolio Management Committee. He also oversaw KKR’s investment in Star Mountain. Before joining KKR in 2008, Mr. Falk spent eight years at Deutsche Bank where he held several roles including founding the Special Situations Group and Co-Heading the Global Securitized Products Group. Mr. Falk began his career in the Asset-Backed Securitizations group at Credit Suisse First Boston where he knew Star Mountain’s Chairman, Brian Finn, whose prior roles include Co-President of Credit Suisse First Boston and Head of Credit Suisse Alternatives (with approximately $100 billion in AUM at the time).

United Kingdom

UK Inflation Rate Jumps More Than Expected in August (Kirklin News), Rated: AAA

The UK’s annual inflation rate climbed to a higher-than-expected 2.9% in August, matching a four-year high reached in May, the Office for National Statistics (ONS) said on Tuesday, two days ahead of a key meeting by members of the Bank of England’s monetary policy committee.

The consumer prices Index (CPI) climbed from 2.6% in July, the ONS said on Tuesday. The August reading matched the highest since April 2012 and beat the 2.8% average forecast by economists polled by investing.com.

The annual core inflation rate, which strips out volatile food and fuel costs, also jumped to 2.7% from 2.4% in July, topping the 2.5% expectation by economists in an investing.com survey.

Chapters Financial to enter AI arena with chatbot technology (FT Adviser), Rated: A

Advisory firms need to do more to attract the next generation of clients or risk selling themselves short, financial adviser Keith Churchouse has said.

His firm Chapters Financial is developing a chatbot platform for its online advice business Saidso.

The chatbot will be aimed at the generation of clients who are more comfortable with changing and emerging technology. They are usually 45 years old or younger; the typical age group of customers who already use the Saidso website, which has been operational for the past two years.

UK regulator sounds alarm over initial coin offerings (Financial Times), Rated: A

The UK City watchdog has warned investors of the “high risk, speculative” nature of initial coin offerings as their popularity booms, becoming the latest global regulator to sound the alarm.

The Financial Conduct Authority warned that ICOs are mostly unregulated and potentially fraudulent, while investors may be provided with “unbalanced, incomplete or misleading” documents by the ICO issuer.

Even if an ICO is not fraudulent, the regulator said, investors still had “a good chance” of losing their entire investment.

10 Tips for New P2P Lending Investors – How to start (P2P-Banking), Rated: A

  1. Advantages of platforms with a track record  I prefer platforms that have a track record and have operated at least 1 or two years.
  2. Loan term and loan types – There are three main types: consumer loans, SME loans and property secured loans. SME loans has further subtypes like invoice financing. It can be a good idea to diversify over different loan types and different platforms.
  3. Diversification – Diversification can be achieved faster on platforms with very many comparable consumer loans, and will take longer on property platforms which launch only few large property loans.
  4. Autoinvest – Before you use the autoinvest I suggest to spend the first days/weeks making manual investments on the primary market to get a better understanding of the loans on offer.
  5. Secondary market – Before you use the secondary market, I suggest you first spend some time investing on the primary market to deepen your understanding of how the platform works.
  6. Cash drag – Investors only earn interest on money invested into loans. Cash deposited, but not (yet) invested will earn no interest.
  7. Unsecured vs. secured loans – Consumer loans listed on platforms are mostly unsecured (exception some car loans). SME loans offer no or or some type of asset as security and property loans typically offer a first or second charge on the property as security. Usually it is preferable to lend with some kind of security offered.
  8. Recovery process – A certain percentage of loans will default. This is normal in p2plending and nothing to worry about as long as this percentage stays in a healthy relationship to the interest offered for the risk.
  9. Tax – If the country you live in does not allow you to offset default losses against interest income earned, it may be a good idea to invest into loans with lower interest rates, but also lower default rates, to achieve higher returns after tax than with a more risky strategy.
  10. Final tip – Start slow. P2P lending has somewhat of a learning curve.
European Union

Klarna Announces Completion of Acquisition of BillPay (Klarna), Rated: AAA

Klarna Bank AB (publ) today announces that the acquisition of German online payments company BillPay has been completed. This will strengthen Klarna’s position as one of the leading e-commerce payment providers in Europe and further accelerate its growth in Germany, Austria, Switzerland and The Netherlands.

VISA reportedly owns almost one percent of Klarna (Business Insider), Rated: A

However, it wasn’t clear how much money had been invested. Now Swedish tech site Di Digital has revealed that Visa took part in Klarna’s $75 million euro acquisition of Billpay, a German competitor, in February.

Out of the $57 million euro share emission that went to financing the deal, Visa paid roughly a third, or $22 million.

Goldmint Is Unlocking Liquidity in Gold to Allow P2P Lending (Cointtelegraph), Rated: A

GoldMint is a comprehensive P2P solution that allows businesses like pawnshops to raise credit.

Recently, a Time article revealed that 28 percent of college educated millennials between the ages of 23-55 have accessed short-term lending from pawnshops and payday loan providers in the last five years.

Dmitry has had an eye on the pawnshop segment since 2015, when he noticed that while the pawnshop business was immensely profitable, it was void of technological progress. He worked with a team of four people in 2016 to address the four main issues that faced the pawnshop businesses:

  • realization of unclaimed pledges
  • wired payments
  • funding of pawnshops (lending)
  • the introduction of unified standards (consolidation)

GoldMint is holding an initial coin offering (ICO) in less than a week’s time starting Sept. 20, 2017. They have published a detailed whitepaper which lays the details of their crowdsale.

Interview with Stanislav Kulechov: 14 Facts About ETHLend (Coinspeaker), Rated: A

4. How did you start building ETHLend?

We started by developing the Smart Contract. It was ideal to begin with the token escrow contract, which allows the collateral to be held securely in the Smart Contract until the borrower repays the loan. If the borrower does not repay, the lender can claim the tokens and realize any losses. We made many interesting findings during the development and wrote the white paper after Alpha DApp. We believe this is a big advantage for us since practice does not always follow theory. Also, delivering an Alpha for the Ethereum main-net is important proof-of-concept wise.

7. Do you think the system will be more popular among individuals or companies?

Hard to tell since at the moment individuals are more keen on using cryptocurrencies. ETHLend has received a lot of interest from miners who want to expand their mining facilities or purchase more rigs. There are also growing tendencies for companies to use blockchain technology. We have received inquiries about pledging some of the ICO tokens for financing pre-sale marketing efforts. What I would like to see is that merchants who use cryptocurrencies would adopt ETHLend for financing and increasing their business.

8. What is the difference between the type of crediting ETHLend offers and the scheme “have sold the possessed currency-have bought ETH for raised money”.

Good point. Since our main financing instrument is pledging digital tokens, it provides opportunity to receive ETH when one does not want to sell digital tokens. Such might be the case when one has a token portfolio, investment funds like TaaS or ICONOMI. Funds or individuals could easily keep the possession of the token positions and still get more liquidity for growing their portfolio. On the other hand, a blockchain startup might keep more tokens at their possession when pledging the token before an ICO for a loan and repaying the loan after an ICO. A strategy like that leaves more tokens for the startup to recruit more talent.

11. How much time do you think you need to launch the project in case you obtain sufficient financing?

ETHLend has an extensive roadmap that stretches to the late 2019. At the moment we are still developing the ETHLend DApp. However, we need further resources to comply with the features set in the roadmap. We are also looking to add more developers and financial experts to the team. The basic collateral based lending is available on ETHLend but there are lot of functions that require more time to develop, such as being able to borrow Bitcoin or to use the price feed for the collateral value. We aim to  have a fully sophisticated DApp by the end of 2019.

14. The last tricky question: is lending good or bad?

Lending is an instrument that should be used in the correct circumstances and for the correct funding goals. Lending could be compared to other products – when consumed wrongly, they might be bad and vice versa.

A new Form of Real Estate Investment for Estonia: Crowdfunding (PropertyShowrooms), Rated: A

Igors Puntuss, co-founder of Bulkestate.com, explained that as wages rose rapidly and with it “population welfare”, meaning disposable income and savings, people living in Baltic countries began to look for safe and profitable ways to invest their spare cash. But banks are not able to provide smaller investors with attractive interest rates on deposits and, as the market of real estate crowdfunding is far from maturing, there are opportunities to be had.

He added that high reliability does not equate to low profit, when it comes to real estate crowdfunding. The website offers an annual interest rate of 14% at a low threshold for those who are risk adverse, and the minimum investment required is just 50.00 euros at Bulkestate.com.

Starling and Zopa CEOs to speak at LendIt Europe (Specialist Banking), Rated: B

Anne Boden of Starling Bank and Zopa’s Jaidev Janardana will be speaking at LendIt Europe, which brings together fintech experts from across the continent.

The conference takes place on 9-10th October at the InterContinental London – the O2, where more than 120 speakers will take to the stage with experts from banking, lending, technology and regulation.

Anne will be speaking on LendIt’s keynote panel, which will look at the digitalisation of finance and how customer expectations are changing.

International

How Banks Are Driving API-First Strategies (PYMNTS), Rated: A

The latest edition of the PYMNTS.com B2B API Tracker™, a FI.SPAN collaboration, examines how APIs are helping both banks and smaller businesses address their fears and embark on new ventures in new markets.

Recent research indicates merchant anxiety over non-payments is widespread. According to a study by Payoneer, 75 percent of small- and medium-sized businesses (SMBs) have backed away from global trade over concerns of not getting paid for their services.

India

OpenTap aims to lend ₹100 cr. by Dec. 2018 (The Hindu), Rated: A

OpenTap, a fintech firm that enables peer-to-peer lending for middle and low income borrowers, aims to facilitate ₹100 crore in short term loans by the end of 2018.

The Chennai-based fintech firm provides alternate financial services to blue-collared workers, which is two times of net salary. As on date, it has provided credit worth ₹3 crore to 1,200 borrowers.

Asia

Wish Finance Introduces Blockchain-Based Lending for SMEs, Schedules ICO (Crowdfunding), Rated: AAA

Wish Finance, based in Singapore, has announced the launch of its blockchain-based lending platform for small and medium businesses. The company has reportedly issued 100+ loans in 2017 during a soft launch with every loan successfully repaid and 0% default rate. Wish Finance plans to keep its entire portfolio on the public blockchain, anonymized, so investors can audit its performance at any given time.

Wish Finance is offering merchant cash advances and business loans with interest rates based on the company’s real cash flow, not assets. Wish Finance said it has direct access to POS terminals infrastructure to see real time financial transactions, which it combines with the local market data for scoring. Wish says it issues a loan in 24 hours, and then deducts a few percents of the merchant customer’s’ payments to automatically repay the loan. In this way, repayments are made seamless and effortless for SMEs. Each loan is said to be insured from customer’s bankruptcy.

Trade finance gap narrows amid minimal fintech impact (Global Trade Review), Rated: A

The global trade finance gap has fallen from US$1.6tn to US$1.5tn, but the impact of fintech has been minimal to date.

But despite the industry’s zeal for digitisation, just 20% of firms reporting have used digital finance platforms. In line with global trends, peer-to-peer lending is the most-used fintech model (23%).

74% of rejected trade finance transactions are for SME and midcap applicants, with 29% of these being rejected over KYC concerns. Last year’s survey showed that 56% of SME trade finance proposals are rejected, compared with 10% of multinationals.

Fintech firm SixCap responds to complaints about its investing strategy game (CNBC), Rated: A

Singapore-based financial technology company Six Capital Groupresponded Thursday to complaints from users who say they’re unable to cash out from the firm’s web-based strategy game.

The game, called Tagg Switch, works similarly to how trading currencies works: Players purchase one of six types of so-called “Nodes” that represent a different currency — either the U.S. dollar, Singapore dollar, British pound, euro, yen or the Australian dollar.

But a report from Singapore’s The Straits Times last week said users have complained online about facing problems cashing out of the game. However, the report added that there weren’t yet any complaints registered with the Consumers Association of Singapore, a consumer protection group.

Authors:

George Popescu
Allen Taylor

Monday February 6 2017, Daily News Digest

Germany crowdinvesting

News Comments Today’s main news: Fundrise IPO is over-subscribed. P2P lenders prevented from offering wholesale finance. Today’s main analysis: Online lending student loans favor the rich. Today’s thought-provoking articles: Dodd-Frank Retention Rule. Orchard’s online lending snapshot. Lend Academy interview with SoFi’s Mike Cagney. Seniors’ income boosted by sharing economy. United States Fundrise IPO over-subscribed. GP:” […]

Germany crowdinvesting

News Comments

United States

United Kingdom

European Union

Australia

China

United States

Fundrise IPO Over-Subscribed, Increases Max Share Offer Under Reg A+ (Crowdfund Insider), Rated: A

In a solid indication of confidence of the young real estate crowdfunding platform, Fundrise has received solid investor interest in its self-crowdfunding IPO under Reg A+. Demand was sufficient to compel management to increase the maximum funding round from 2 million shares to 3 million shares of Class B Common Stock. At a price per share of $5.00, this means Fundrise may now raise up to $15 million.

The offer was only made available to individuals that had previously invested via the Fundrise platform. As of today, the platform indicates  the “offering is paused due to high demand.”

Even Good-Guy Student Loan Startups Still Favor the Rich (BuzzFeed), Rated: AAA

Last February, the online lending company SoFi paid $5 million for a 30-second ad during the Super Bowl.

That wasn’t where it always landed. The original version of the ad included three more words: “You’re probably not.” But at the last minute, SoFi cut them. The message, a spokesperson told Adweek, wasn’t “authentic” to the company’s image.

The line may have sounded too crude for national TV, but it was actually a perfect encapsulation of SoFi’s brand. Most people aren’t in great financial shape, and SoFi was built around identifying the best and rejecting the rest.

The problem these startups purport to solve is, inarguably, a huge one. Forty-four million Americans currently owe more than $1.4 trillion in student debt. That’s $1.4 trillion dollars hanging over 44 million heads, and, for those who can’t repay their loans, it’s a lifetime of ruined credit scores and dodging collections agencies.

But although the marketing has changed, the demographics have not. Ratings reports from the past four months show that the average Earnest borrower is a 32-year-old with an annual income of $143,447 and monthly free cash flow after expenses of $4,524. CommonBond’s average borrower is 33 years old with an annual income of $159,028 and $5,996 in monthly free cash flow. SoFi’s average borrower, in the new bond with the AAA rating from S&P, is 34 years old, with an annual income of $170,260 and free cash flow of $7,088. (Most graduates saddled with student loan debt don’t fit that description, which is why applicants for private refinancing often need their creditworthyparents to cosign, a caveat that doesn’t get mentioned in the ads.)

Kevin Reed, chief operating officer at Peer IQ, a risk analysis firm focused on online lending, said the emphasis on new metrics is aimed at venture capital investors, not institutional investors. “When you’re pitching Silicon Valley, you need an angle, some competitive differentiation,” he said.

In fact, one of the strongest signals that these online lenders are focusing on elite borrowers is the fact that banks like Citizens, which jumped in to compete in the refinancing ring, have a similar customer base but don’t use cutting-edge technology to find them.

In marketing documents obtained by the Financial Times, the company told investors that refinancing is “how they find the best and brightest and prevent them from attaching to a bank or broker.” In the same documents, SoFi also stressed it has the regulatory freedom to zero in on niche markets such as “the ‘next five percent.’” (That’s a term for the wealth bracket just a couple of rungs below the “1%.”) The company has already become a “one-stop shop for high earners,” focused on offering HENRYs more products, like mortgages, and personal loans.

High ratings have driven the refinancing boom. But Jon Riber, senior vice president at the ratings agency DBRS, told BuzzFeed News that the new metrics are unproven and haven’t been through a full credit cycle, so DBRS determines ratings looking at traditional data like FICO scores: “When it comes to free cash flow and income, we consider that but it doesn’t go into our model for forecasting defaults,” he said.

When you drill down into the ratings reports, there are some signs that the type of borrower is changing. For example, although 65% of the borrowers in Earnest’s latest securitization are making more than $100,000, the largest category is $50,000 to $99,000, which represents 32% of the securitization.

Dan Macklin, the SoFi co-founder, also said he didn’t think it was fair to describe SoFi clients as rich. Although SoFi borrowers earn salaries above the national average, many of them live in expensive cities, so they are not as well off as they seem.

DeGisi from CommonBond acknowledged that the average new borrower looks similar to the average old one, but claimed that CommonBond has been able to substantially broaden its customer base.

Dodd-Frank Risk Retention (RR) Rule Effective Now (PeerIQ), Rated: AAA

President Trump signed a memorandum to review Dodd-Frank Act on Friday. Loosening bank regulation, as noted by WSJ, would return

  • a 5% interest in each class of the securitization (an “eligible vertical interest,” or “EVI”);
  • a 5% of the fair value of the securitization in a first loss, subordinate tranche (an “eligible horizontal residual interest,” or “EHRI”);
  • any combination of an EVI and an EHRI such that the sum of the fair value of the EHRI and the percentage of the EVI are equal to at least 5 percent of the securitization (a “L-shaped” retention interest).
  • The transfer and hedging restrictions for RMBS are different from those of non-RMBS securitization. For RMBS, they expire on or after the date that is (1) the latest of (a) five years after the date of the closing of the securitization or (b) the date on which the total unpaid principal balance (UPB) of the securitized assets is reduced to 25 percent of the original UPB of the transaction, but (2) in any event no later than seven years after the date of the closing of the securitization.

    For all ABS deals other than RMBS, the transfer and hedging restrictions expire on or after the date that is the latest of (1) the date on which the total UPB of the securitized assets that collateralize the securitization is reduced to 33 percent of the original UPB at deal close, (2) the date on which the total UPB under the ABS interests issued in the securitization is reduced to 33 percent of the original UPB at deal closing, or (3) two years after the date of the closing of the securitization transaction.

    The risk retention rule also contains an exemption for securitizations that consist solely of qualifying high-quality loans that satisfied specific underwriting criteria.

    We highlight two important benefits from issuer’s perspective for QM designation. Issuers are 1) insulated from claims and defenses by borrowers due to safe harbor, and 2) are not required to retain 5% of capital structure per the credit risk retention rule. For example, all loans in Majority owned affiliate (MOA) – CLO managers raise equity capital from 3rd party investors through the creation of MOA to finance the purchase of risk retention securities. MOA holds the retention interest, but the securitizers control the major economic decisions of the MOA in relation to the retention interest and any other assets owned by the MOA. Control is measured by ownership of 50% or more of the equity of an entity or ownership of any other controlling financial interest under GAAP.

    Capitalized Majority owned affiliate (C-MOV) – The C-MOA can function as an originator and comply with both US and European retention requirements. The C-MOA has an option to act as the asset manager. As the asset manager, it can originate a small proportion of the assets owned by the CLO and still earn a management fee. The first CLO of the year, Venture XXVI, employs C-MOA.

    Capitalized Manager Vehicle (CMV) – In this solution, instead of CLO Managers serving as asset managers, the CMV is the primary asset manager. The CMV then hires CLO Managers as sub‐advisors. The CMV receives management fees on retained interest. The key accounting consideration is ensuring the CMV is not consolidated by the CLO Manager. 

     

    Weekly Online Lending Snapshot – February 03, 2017 (Orchard), Rated: AAA

    Interest in the space has been accelerating since the first of the year. Late last week it was reported that the American Banker’s Association is looking for an online lending platform to help its members expand their digital lending offerings, and it was reported that Citigroup Inc., has launched its own online lending offering which will make loans of up to $1 million available to small businesses. Also, in small business lending news, Credibility Capital announced this week that it successfully sold a pool of whole loans using Orchard’s software to share and affirm the data of a seasoned loan portfolio with its regional bank client.

     

    Podcast 89: Mike Cagney of SoFi (Lend Academy), Rated: AAA

    In many ways SoFi has become the leading company in all of fintech at least in this country. They raised $1 billion in Q3 of 2015, the largest equity round ever in our industry by a considerable margin. Since then they have continued to add new products, break records and execute flawlessly.

    • How Mike explains what SoFi does today.
    • The part of the business that Mike is most excited about.
    • Where they are at in their student loan business today.
    • Why their unsecured consumer loan product is very different to others in the market.
    • The killer product they have in the real estate market.
    • How SoFi views their wealth management product.
    • Why they decided to move into life insurance.
    • How Mike feels about the Superbowl ad they did in 2016.
    • How they have been raising money recently.
    • What is it about SoFi that makes their securitizations so successful.
    • How they would handle a shutdown in the securitization market.
    • Where SoFi is focusing their resources when it comes to tech.
    • What SoFi customers have in common.
    • The international plans for SoFi and their expansion to Australia.
    • The future vision for SoFi and their place in financial services.

    OnDeck Capital COO James Hobson to step down (Reuters), Rated: A

    James Hobson, the chief operating officer of marketplace lender OnDeck Capital Inc, will resign from his role on March 15 to become chief executive of online insurance startup Attune, according to an OnDeck statement.

    Jason Altieri, Former GC at Lending Club, Lands at Roofstock (Crowdfund Insider), Rated: A

    Roofstock, an online marketplace that facilitates direct purchases of rental property, has announced the appointment of Jason Altieri as Chief Legal and Compliance Officer. Altieri was previously General Counsel at publicly traded marketplace lending platform Lending Club (NYSE:LC).

    Altieri left Lending Club last October where, according to his LinkedIn profile, he remains an advisor.

    Orchard Platform Predicts Super Bowl Outcome (Crowdfund Insider), Rated: B

    The population of New England, at approximately 14.7 million is 1.45 times the population of Georgia, approximately 10.1 million.  New total loan volume in the New England region has been proportionally somewhat higher since 2010; In 2016 through September, New England had 1.58 times the loan volume that Georgia does.

    Winner: Patriots

    Parteger says that during 2016 borrowers from New England had higher incomes and FICO scores, with lower debt-to-income ratios. Borrowers in Georgia had one percent lower revolving credit utilization.

    A larger percentage of borrowers in New England rent their home, a lower percentage have mortgages.

    Winner: Patriots

    During 2016, both regions experienced similar sized loans. Interest rates were slightly higher in Georgia. Loans in New England were graded slightly higher but loans in Georgia had lower risk grades.

    Winner: Tie

    Using 2014 vintage loans, Pargeter says the Georgia has a slightly higher charge-off rate and a big higher average interest rate so overall returns are a bit better in Georgia.  Falcons get the edge on this one.

    Winner: Falcons

    Orchard says the Falcons will win!

    United Kingdom

    Peer-to-peer lenders prevented from offering wholesale finance (This is Money), Rated: AAA

    Peer-to-peer lenders are to be prevented from offering wholesale finance because it is considered too risky for private individuals.

    But the City watchdog, the Financial Conduct Authority, is thought to fear this would mimic banking – but without the same protection for individuals or regulations for the firms involved.

    LendInvest Responds to the UK Government’s Modern Industrial Strategy (Crowdfund Insider), Rated: A

    Last week, UK Prime Minister Theresa May unveiled a modern Industrial Strategy proposal to help build on the country’s strengths and take on its weaknesses.

    LendInvest’s team noted they plan to get behind four pillars to help kickstart the country’s productivity:

    • Technology and innovation: LendInvest noted that the strategy makes a significant investment in research and development for nascent UK sectors, which includes an Industrial Strategy Challenge Fund.
    • Infrastructure: The online lender shared that there were some commitments, including investments towards road, rail and digital infrastructure to enhance mobility and connectivity for citizens and businesses across the country. 
    • Developing skills: LendInvest stated it encouraged the government to invest in skills initiatives for small and medium enterprises (SMEs) property professionals to ensure that would-be property entrepreneurs are equipped with the tools to get projects off the ground.
    • Supporting businesses to start and grow: The website that while the government has already established the Patient Capital Review, it also welcomes further funding from the British Business Bank and a commitment to helping the BBB in providing finance businesses outside of London and the South East. It also encourages the government to use the review into entrepreneur to better understand how to support property developers to grow their businesses.
    European Union

    Germany: Investment Crowdfunding Grew by 39% in 2016 (Crowdfund Insider), Rated: AAA

    In a publication created by Crowdfunding.de, the report, entitled “Marktreport 2016: Crowdinvesting in Deutschland,” states that investment crowdfunding grew by 39% during 2016 reaching €63.8 million.

    The sector was largely powered by a sharp increase in real estate crowdfunding that captured €40.3 million growing by 92.5% during the year. Platforms like Exporo, Zinsland, Zinsbuastein, Bergfürst and IFunded closed 48 real estate crowdfunding rounds in 2016. Exporo led the group with €21.4 million in funding.

    Funding for SMEs and start-ups hit €18.8 million which is approximately at the same level of 2015.  Companisto led this sector with just over 50% of funding or €9.4 million in total.

    Wonga strikes £60m deal to sell European unit to Swedish suitor (Sky News), Rated: A

    Sky News has learnt that Wonga will confirm that it has decided to offload BillPay, one of its most valuable units, to Klarna, a Swedish provider of e-commerce solutions.

    Talks between Wonga and Klarna have been taking place for several months, although they had appeared to falter several weeks ago owing to a number of domestic issues faced by the Swedish purchaser.

    The sale of BillPay will be the most significant international disposal undertaken by Wonga, which is striving to rebuild its business in the wake of a string of scandals and a regulatory crackdown in the UK.

    Wonga’s losses have totalled nearly £120m in the last two years following a string of scandals and costs associated with cutting hundreds of jobs.

    Australia

    Seniors enjoy significant income boost from the sharing economy (News.com.au), Rated: AAA

    New research by peer-to-peer lender RateSetter has found that 44 per cent of over-55s earn money through sharing economy services such as online marketplaces, ride sharing, renting out rooms to travellers and lending money via online platforms.

    RateSetter’s research found that over-65s are the fastest growing group of spenders in the sharing economy, paying an average $82 a month, but younger generations aged below 44 remain the biggest spenders at more than $110 a month.

    Online marketplaces such as eBay and Gumtree remain the most popular part of the sharing economy, with 54 per cent of people using them.

    China

    Company Slammed by Short Seller Over Deals Says More Coming (Bloomberg Markets), Rated: AAA

    Credit China FinTech Holdings Ltd. is planning more investments as it aggressively expands beyond its original loans and lease-financing businesses into online payments and peer-to-peer lending.

    The company, part of a consortium that offered to buy a stake in Ping An Securities Group Holdings Ltd. last month, is currently in talks with “multiple” financial-services companies based in Asia outside China, Chief Executive Officer Phang Yew Kiat said in an interview in Hong Kong on Wednesday.

    The firm’s acquisition strategy — which is now focused outside China — has been driven by HK$4.3 billion ($554 million) of funds that it raised over the past three years, Phang said.

    The acquisitions put Credit China onto the radar of short seller Anonymous Analytics, which expressed doubts over some of the investments in December, as it rated the company a “strong sell.” In a report, Anonymous alleged Credit China had engaged in “a number of questionable” investments, including the purchase of a stake in payment provider Shanghai Jifu, which the short seller said was linked to a “key individual” within Credit China.

    About 480,000 investors involved with problematic P2P lenders by Jan (Global Times), Rated: A

    Over the last three years, a growing number of investors have got involved with problematic P2P lending platforms, according to the report. The figure reached 478,000 by the end of January, accounting for 4.5 percent of P2P investors in China.

    About 64 platforms reported problems or suspended their business in January, including three lenders whose managers disappeared, the report said.

    Authors:

    George Popescu
    Allen Taylor

    Friday November 18 2016, Daily News Digest

    p2p china

    News Comments Today’s main news: PeerStreet announces $ 15M funding round led by Andreessen Horowitz. Online lenders and non-profits team up on small business loans. Wonga may sell BillPay to Klarna. Today’s main analysis: China leading as new guard takes over FinTech. Today’s thought-provoking articles: Korean government to regulate Bitcoin. Why President-elect Donald Trump should and should not […]

    p2p china

    News Comments

    United States

    • Andreesen Horowitz leads PeerStreet’s $ 15M funding round. GP: “PeerStreet has a particularly strong team, with Google high level alumni, and I believe this is the main reason why Andreesen decided to invest in PeerStreet vs all their 30+ competitors.”
    • Online lenders team up with non-profits to offer more small business loan options. AT: “Online lenders continue to get innovative. Partnering with non-profits to deliver more loans to small businesses, who are typically underserved by traditional banks, expands the opportunities for all parties.”
    • Marketplace lending grows while Payday lending shrinks . “At 210% growth, personal Marketplace loans were the fastest-growing segment while online and storefront payday loans together fell the sharpest, reflecting 23% less spending by consumers.”
    • Maples Fund Services launches MPL solution. AT: “Here’s another interesting development in MPL that solidifies the sector as legitimate. I expect to see more tech solution providers move into the online lending space.”
    • CoverWallet acquires $ 7.8M in funding. GP: ” This is not that relevant for our focus except it is yet another example of insure-tech which could be connected well with lending, SMB lending in this case.”
    • MPL reasons to kill and not kill Dodd-Frank. AT: “In the mainstream press, you don’t often hear arguments opposed or in favor of Dodd-Frank as it impacts alternative lending. This article gives both sides of the argument as it pertains to marketplace lending. I always favor legislation that encourages innovation rather than protection, but I’m not the president.”

    United Kingdom

    European Union

    China

    Korea

    United States

    PeerStreet Announces $ 15 Million Series A Funding Round Led by Andreessen Horowitz (BusinessWire), Rated: AAA

    PeerStreet, the leading marketplace for investing in real estate backed loans, today announced a Series A funding round led by Silicon Valley venture capital firm Andreessen Horowitz.

    This investment round comes on the heels of a significant first year for PeerStreet. To date, the firm has onboarded thousands of investors, funded over $165 million in loan investments and returned more than $50 million to investors; all with zero losses. Additionally, PeerStreet has significantly expanded its national footprint, working with more than 50 lenders and offering investments across half the country.

    Nonprofit, Online Lenders Team Up to Offer More Small-Business Loans (Palm Beach Post), Rated: AAA

    A wave of new partnerships between online lenders and nonprofits that offer microloans means more small-business owners can get fast, convenient and sometimes less expensive small-business loans.

    The details of the specific partnerships vary, but they all combine what makes online lenders successful – intuitive, sophisticated technology – with what nonprofit lenders bring to the table – lower-cost capital and relationship-driven support.

    Lending Club and Opportunity Fund

    Opportunity Fund focuses on underserved California business owners. It offers small-business loans from $2,600 to $100,000 with one- to five-year terms and APRs ranging from 10.6% to 23%, depending on the term. Through the partnership, California borrowers with bad credit who apply for a Lending Club loan and don’t qualify will be seamlessly directed to Opportunity Fund, which will underwrite and service the loan.

    OnDeck and the Association for Enterprise Opportunity

    The Association for Enterprise Opportunity’s Tilt Forward initiative uses OnDeck’s technology to help participating CDFIs underwrite borrowers more efficiently. Four CDFIs currently use the Tilt  platform: Georgia-based Access to Capital for Entrepreneurs, New Jersey-based The Intersect Fund, Missouri-based Justine Petersen and New York-based Business Center for New Americans. When small-business owners apply for a loan with these nonprofits, they’ll have the same fast and convenient experience that OnDeck offers, but they’ll be matched with a lower-cost loan.

    VEDC

    VEDC offers small-business loans with lower APRs – 8% to 15% – and terms up to 10 years, but it doesn’t have a line-of-credit product. It can offer borrowers a wider range of financing products.

    CFSI Study: Payday Shrinks While Underserved Consumers Pay More for Auto Insurance (3bl Media), Rated: AAA

    Today, the Center for Financial Services Innovation (CFSI) and Core Innovation Capital (Core) released their sixth annual Financially Underserved Market Size Study. The report, which benefited from the financial support and strategic input of Morgan Stanley and with additional financial support from CFSI’S Founding Partner the Ford Foundation, reveals that underserved American consumers spent $141 billion in fees and interest in 2015, generated from a volume of $1.6 trillion in financial activity. More information and visual assets are available at www.cfsinnovation.com.

    The Market Size Study found that the overall volume of financial activity grew from $1.5 trillion in 2014 to $1.6 trillion in 2015, a rate of 4.3%, while spending on fees and interest increased by nearly six percent.

    • Marketplace Outpaces Payday: At 210% growth, personal Marketplace loans were the fastest-growing segment while online and storefront payday loans together fell the sharpest, reflecting 23% less spending by consumers. This fluctuation could be attributed to a shift in available loan alternatives for consumers to installment loans or subprime credit cards as a result of regulatory and marketplace pressures.
    • Driving For Broke: Perhaps most startling was the high cost of auto insurance for underserved consumers, a category tracked for the first time in 2015. Underserved consumers spent more on auto insurance premiums in 2015 ($36.5 billion) than they did for interest and fees on subprime auto loans ($24 billion). On average, underserved consumers paid 26.5% more in premiums than their fully served counterparts to insure vehicles of comparable value.
    • Going Long: Consumers continued to spend the largest share of interest and fees on  long-term credit by a nearly 2-to-1 margin. At $55.2 billion in spending, long-term credit is the single largest percentage of fees and interest paid by consumers, with subprime auto and student loans making up the majority of these loans. Short-term credit products such as subprime credit cards and marketplace loans account for $26.2 billion in spending and continue to grow at a faster rate than single payment products like payday or overdraft.

    Maples Fund Services Launches Marketplace Lending Solution (Fin Alternatives), Rated: AAA

    Fund administrator Maples Fund Services has extended its product offerings to include the rapidly growing peer-to-peer lending sector.

    The company’s customized solutions for marketplace lending funds introduce a level of independence in asset verification and valuation and ensure data integrity. By assuming certain administrative tasks – such as platform and custodian reconciliations, interest accruals, principal repayments, default monitoring and accounting for late payment penalties – Maples Fund Services streamlines the internal operations of marketplace lending fund managers so they can focus on investment decision making.

    Small Business Insurance Site CoverWallet Pulls In $ 7.8 Million in Funding (Insurance Journal), Rated: A

    Online commercial insurance agency CoverWallet announced it has received $7.8 million in funding in a Series A round led by Union Square Ventures, bringing its total raised to date to $9.5 million.

    CoverWallet announced seed funding of $2 million in March.

    Launched in early 2016, CoverWallet provides a concierge-like service for small businesses, giving them access to quotes, advice and policy management tools online or over the phone. It offers general liability, commercial property, workers’ compensation, directors and officers, professional liability, errors and omissions, and cyber liability coverages.

    Reasons Why Donald Trump Should and Shouldn’t Dismantle Dodd-Frank (Forbes), Rated: A

    The Center for Financial Services Innovation(CFSI) recently released its latest Underserved Market Size report, highlighting just how expensive financial services are for subprime consumers. The report revealed that underserved Americans paid $141B in fees and interest last year for access to some financial services , including lending – an increase of $3B since 2014. The growth in marketplace lending has been particularly relevant in light of Dodd-Frank criticism. According to CFSI, marketplace lending for personal loans grew by a staggering 210%, and small business loans in this sector grew by 64%.

    Some analysts have argued that the major impetus for this growth has been the funding gap that was indirectly created by the Dodd-Frank Act.

    The CFSI report found that “Microloans to small businesses in low-to-moderate income communities, and Marketplace Loans for small businesses, represented $1.7 billion in spending on fees and interest.”

    Alternative lending can get very expensive for some small business owners. The average annual interest rate for large national banks varies between 1.31% and 4.31%. For online and alternative lenders, these rates can climb, on average, to as much as 66.57%.

    Given the prevailing attitudes in both the Legislative and the Executive Branch, it is unlikely the law will survive in its current state for the next four years.

    United Kingdom

    Wonga weighs sale of German arm BillPay after Klarna approach (Sky News), Rated: AAA

    The new approach for BillPay, which Wonga only acquired in 2013, is understood to have  come from Klarna, a Swedish-based provider of e-commerce payment solutions.

    A source close to the situation said Wonga was examining the approach as part of a broader effort to raise additional financing capacity over the coming months.

    The discussions follow a shake-up of the payday lender’s management team, with Tara Kneafsey taking over as group chief executive, and Tommy Jordan replacing her at the helm of its UK operations.

    Wonga has sought to focus on the expansion of a flexible loan product as it seeks to diversify away from the short-term lending activity that sparked political and public controversy.

    Wonga’s losses have totalled nearly £120m in the last two years following a string of scandals and costs associated with cutting hundreds of jobs.

    Wonga executives will also have to continue rebuilding its public image amid continuing disdain for the payday lending industry.

    Increase in Defaults in Online Loans Has Industry Concerned (Investopedia), Rated: A

    When online and peer-to-peer (P2P) lending became trendy, it was hailed by some as a revolution to consumer loans, offering a viable alternative to standard bank loan proceedings. However, it seems that things are not entirely as they should be in that industry, as a surge in defaults has sent analysts into a panic about the future of the burgeoning area. There have been signs that trouble was on the horizon for several months, starting with concerns throughout the industry about LendingClub, a leader in the P2P lending area.

    At this rate, lenders and underwriters may be forced to begin paying down bonds too early. In spite of efforts by LendingClub and some of its competitors to tighten lending standards and raise interest rates, it may be too late to counter the trend of defaults and the longer term repercussions this had.

    P2P Lender ThinCats Becomes NACFB Patron (Crowdfund Insider), Rated: B

    P2P lending platform ThinCats, which recently passed £200m milestone in loans issued to UK SMEs, has joined become an NACFB patron seeking to provide a direct link with member brokers who demonstrate similar working methods to the ThinCats model.

    European Union

    Growth in FinTech is Shaping the Future of Invisible Finance & Virtual Banking (BusinessWire), Rated: A

    Research and Markets has announced the addition of the “Future of Financial Services”report to their offering.

    This study will address implications to the labor force employed in the financial services market, as a lot of the responsibilities currently held by individuals will be susceptible to automation. Another consequence to automation might be the role of institutions in the industry moving to advisory rather than transaction processing.

    Key Topics Covered:

    1. Executive Summary
    2. Research Scope, Objectives, and Background
    3. Overview and Introduction
    4. Key Disruptions in Segments
    5. Funding of Fintech
    6. Trends in Financial Services
    7. Profiles of Fintech Disruptors
    8. Conclusion
    China

    China’s central bank recruits blockchain experts (The Asset), Rated: AAA

    China’s central bank is recruiting cryptocurrency and blockchain experts to explore the potential of distributed ledger technology in the financial sector.

    With digitization becoming an integral part of China’s financial system, Chinese authorities are exploring uses for blockchain technology in improving its financial system. China is also planning to launch its own cryptocurrency.

    The People’s Bank of China (PBoC), China’s central bank, has set up an R&D department for digital currency this year.

    In the private sector, e-commerce giant Alibaba Group’s affiliate Ant Financial is leading the charge to develop blockchain.

    P2P lending sees growing scrutiny (China Daily), Rated: AAA

    As China advances its supply-side structural reform, a large number of struggling financial companies will be eliminated, thus exposing once-concealed online financial risks.

    Peer-to-peer, or P2P online lending platforms, reflect the explosion of online financial risks. Statistics provided by independent P2P portal wdzj.com shows that there were 3,858 P2P in operation at the end of last year, and 1,263 of them had operation problems. Most of these platforms promised an extremely high return rate, as much as 10 percent annually. Meanwhile, they illegally established capital pools.

    Platforms which have been reported with problems have mostly crossed the red line of illegal fund-raising.

    But Wang says such simple reasons cannot sustain P2P companies’ much higher return rate compared to banks. Most P2P companies cannot find small and micro-sized enterprises that are willing and able to return the loans. Therefore, P2P companies give these loans to big company clients.

    China is leading the way as a new guard takes over the fintech charge (Business Insider), Rated: AAA

    China’s fintech scene is being boosted by huge private funding rounds, while the UK is suffering, and Germany is benefitting, from Brexit related uncertainty.

    This means the dynamics of the global fintech ecosystem are changing as funding and focus shifts away from the original fintech hubs. The US and UK can no longer be complacent when it comes to potential threats to their fintech crowns.

    Marketplace lending, for example, is the largest segment of the alternative finance market across Europe and the US, but it’s now taking off in a big way in China.

    Robo-advisers help investors instead of wealth managers (China Daily), Rated: A

    Leading Chinese peer-to-peer lending and wealth management company CreditEase Corp is developing a robo-adviser product to serve small and medium domestic investors.

    Tang said they have about 1 million small and medium investors at their platform.

    Launched in June, ToumiRA is a robo-adviser mobile application that can create asset allocation solutions for investors based on their investment goals and risk preferences. The threshold to be an investor is $500.

    Korea

    Government to introduce regulations for Bitcoin (Korea JoongAng Daily), Rated: AAA

    In response to the growing popularity of Bitcoin and other digital currencies traded online, the country’s financial regulator said Thursday that it would introduce regulatory guidelines for digital currency exchanges by the first quarter of next year.

    The Financial Services Commission has launched a task force that will meet regularly to discuss the regulatory status of digital currency and create licensing rules for exchanges as well as devise measures to prevent money laundering and fraud in transactions.

    The top three Bitcoin exchanges in the country processed around 1.5 trillion won ($1.3 billion) between January 2015 and October 2016, according to data from the regulatory commission. The Financial Services Commission said average monthly transactions in 2016 increased by 6 percent compared to last year.

    Besides Bitcoin, there are over 700 digital currencies circulating around the world.

    Authors:

    George Popescu
    Allen Taylor