Tuesday September 26 2017, Daily News Digest

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News Comments Today’s main news: SoFi’s CTO leaving the company. World Business Lenders buys BizFi assets. Zopa improves loan sale processing times. Fintech startups, banks face off on new European payments rules, data access. Klarna wins international ANDY award. Today’s main analysis: How MoneyTap is tackling the unbanked problem in India. Today’s thought-provoking articles: Fundrise, Wealthfront spar over real […]

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United States

United Kingdom

China

European Union

India

APAC

Africa

News Summary

United States

SoFi’s chief technology officer to step down (Daily Mail), Rated: AAA

June Ou, chief technology officer of online lender Social Finance Inc and wife of its former CEO Mike Cagney, plans to leave the company, according to a source familiar with the situation.

The exact date of her departure from SoFi, has yet to be decided, according to the source. Ou did not immediately respond to requests for comment.

Ou, who joined SoFi in 2012 and is also the company’s vice president of engineering, is the latest senior executive to depart the embattled financial technology firm.

A pair of investing startups are in a public spat about the future of real-estate investing (Business Insider), Rated: AAA

It all started when Andy Rachleff, the CEO of Wealthfront, a California-based roboadviser with nearly $8 billion under management, went after the business model of Fundrise, a Washington DC-based real-estate crowdfunding company. , Rachleff said professionals who run managed real-estate funds fare poorly compared with low-cost index-tracking ETFs, such as Vanguard REIT Index Fund.

Fundrise’s CEO Benjamin Miller says this is a misrepresentation of how Fundrise works. “Amateur investors” on the platform aren’t picking individual projects, but rather strategies managed by the company.

“We operate like a Blackstone, but we democratize it and lower costs,” Miller told Business Insider.

Miller points to the recent initial public offering of Invitation Homes (INVH) to illustrate how expensive the public markets can be. INVH priced 215% higher in the public markets than in the private markets, according to data from Google Finance.

Source: Business Insider

Bizfi Survives, Thanks to World Business Lenders Asset Purchase Deal (deBanked), Rated: AAA

The Bizfi marketplace is slated to live on, according to Stephen Sheinbaum who joined World Business Lenders (WBL) as a managing director in July. On Wednesday, WBL purchased several assets from Bizfi including the brand, the marketplace, the Next Level Funding renewal book, and other related pieces of the company, he says. Sheinbaum founded Bizfi (then Merchant Cash and Capital) in 2005.

WBL, a Jersey City-headquartered small business lender will also be a lender on the platform.

The Tech Revolution Has Arrived For Alternative Lending (Bisnow), Rated: A

The growth of alternative sources of capital has opened a door for online and marketplace lenders, combining the availability and flexibility of capital with speed and transparency.

“Upward of $100B in loans are coming due and there is a gap,” Money360 President Gary Bechtel said. “The banks, life insurance companies, agency lenders, can only provide so much capital, and this is the void that nonbank lenders like Money360 are filling. And many of these firms have a technology component to them.”

Marketplace lending has become a popular alternative for student loans, credit card and small-business debt, but the commercial real estate industry has yet to fully participate. For Bechtel, it is a missed opportunity.

Money360 lifts those constraints. Because it does not have the same balance sheet requirements and regulations as traditional lenders, borrowers seeking financing for any asset class can apply for a loan on the platform. The platform offers loans between $1M and $20M on both bridge and permanent loans, with competitive terms and features similar to traditional lenders. Bridge loans are interest-only, and like banks, permanent loans utilize 25- to 30-year amortization schedules.

Worthy Financial Announces the Closing of Its Seed Financing Round (BusinessWire), Rated: A

Worthy, a digital investment app that redefines how Americans access investment products, diversify their portfolios and save for retirement, announced the successful closing of its seed financing round. The funds will be used for the full-scale roll-out of the Worthy mobile app, and will enable Worthy to expand its growing user base as well as to broaden the array of investment product options it offers retail investors.

Although yield-starved sophisticated investors have been increasingly allocating more and more of their capital to alternative asset classes such as real estate and private company debt, most retail investors are still unaware that modern technology and a new regulatory regime allows them to access these products online in very small aggregates.

Acting Comptroller of the Currency Keith Noreika Addresses Online Lending & Fintech Innovation (Crowdfund Insider), Rated: A

Speaking at the Online Lending Policy Summit in Washington, DC, Acting Comptroller of the Currency Keith Noreika discussed the online lending industry and his perspective on responsible innovation. Noreika told the conference participants;

“I see the growth of online lending and marketplace lenders as the natural evolution of banking itself. Your industry demonstrates a certain entrepreneurial spirit to seize economic opportunity that begins with your new idea. The idea may be leveraging the lending power of groups or using new data to assess creditworthiness. Or, the idea may be a way to make decisions faster or to give consumers more control of their financial lives.”

Noting that US marketplace lenders have originated about $40 billion in consumer and small business loans in the past ten years, Noreika said that online lending represents a substantial portion of all consumer unsecured credit in the US.  Some prognosticators expect that online lending will top $1 trillion by 2020.

What’s Hot and What’s Not in U.S. Fintech (Finovate), Rated: A

Here are the rules– we shouted out a list of 20 fintech trends and our cocktail-fueled audience shouted their opinion on whether the trend is hot or not*.

The hottest

  • Regtech
    I was fairly surprised to hear the audience react so strongly to this trend, since the U.S. is lagging in regtech startups and adoption.

What’s hot

  • AI  As we close out 2017, players in the fintech sector seem to be in all out hype mode on the subject.
  • Open Banking  Though the U.S. doesn’t have any pending open banking regulation, folks still seemed quite optimistic about this trend.
  • Mobile account opening  Certainly a necessity for mobile-centric onboarding, mobile account opening has been around for awhile. It seems to have received new life with many enabling technology developments and IoT device launches throughout the years.
  • Challenger banks  With the lack of challenger bank launches in the U.S. (that is, compared to the U.K.), it was surprising to see the group cheer on challenger banks so vociferously. Perhaps a sign that more challenger banks are coming to the U.S.?
  • Insurtech – The audience seemed to heavily favor this trend over others, despite the relative lack of insurtechs in the U.S.

Not hot

  • Chatbots
  • Roboadvisory
  • ICO’s
  • Alternative credit scoring
  • Voice banking
  • Mobile wallets
  • Biometric authentication
  • Alternative lending

Payday lender operators forced to forgive $ 12M in loans (New York Post), Rated: A

New York on Monday announced a settlement with two payday lender operators — barring them from working in the state and forcing them to forgive roughly 20,000 loans worth roughly $12 million.

While payday lending is illegal in New York, state residents can fall prey to the predatory loans through out-of-state lenders trolling online.

Vullo called out E-Finance for making “unlawful misrepresentations” to New Yorkers when requesting payments and negotiating payment agreements.

TAR, headed by Jeremy Schaffer, and E-Finance, headed by Joshua Mitchem, according to court papers, will pay a $45,000 penalty plus as much as $15,000 to cover the cost of sending notices to consumers whose loans were forgiven.

After ending payday lending, group looks for alternatives (Argus Leader), Rated: A

South Dakotans for Responsible Lending will hold a meeting Thursday aimed at creating a nonprofit to help South Dakotans get small-dollar loans without taking on debt.

The effort comes months after South Dakota voters opted to cap interest rates on payday lenders, crippling the industry in the state.

The grant and donation-funded Minneapolis group helps participants pay back loans over a 12-month period with no fees or interest. Since 2015, the group has helped 131 loan participants refinance $90,072 and save $355,042 in interest.

Sara Nelson-Pallmeyer, the group’s executive director, said South Dakota voters have already taken a significant step in reducing payday loan debt by eliminating the industry. In its place, banks and credit unions should look to offer additional loans, she said.

The Great “Sexism in FinTech” Debate (FintekNews), Rated: A

Although I would never diminish it or deny its existence, I just don’t see sexism as an escalating problem in FinTech – or anywhere in the developed world for that matter. In fact, what I see trending is the exact opposite.

Extraordinary women in FinTech are all around us. I read about them every single day – not only in leading industry rags like FintekNews, Bankless Times and Crowdfund Insider, but also in long-established financial periodicals. In fact, FintekNews, which is published by Cindy Taylor, an accomplished FinTech visionary in her own right, devotes an entire section just to 

Breaking Banks: How men can support women in fintech (American Banker), Rated: A

Brett King is back on the show, talking about diversity in fintech with Anouska Streets, head of engineering at Finkit, a unit of digital banking software company Monitise, which was recently bought by Fiserv; and Colleen Wilson, founder and CEO of consulting firm Collaborate Chicago.


Women in Banking: The Most Powerful in 2017 (American Banker), Rated: B

The Most Powerful Women in Banking

1. Cathy Bessant, Bank of America
2. Marianne Lake, JPMorgan Chase
3. Ellen Alemany, CIT Group
4. Nandita Bakhshi, Bank of the West
5. Diane Reyes, HSBC

16. Hannah Grove, State Street

23. Teresa Tanner, Fifth Third Bancorp

The Women to Watch

1. Mary Mack, Wells Fargo
2. Thasunda Duckett, JPMorgan Chase
3. Heather Cox, USAA
4. Yolande Piazza, Citigroup
5. Ellen Patterson, TD Bank

19. Jane Russell, TD Bank

Andy Hinrichs of AutoGravity (Lend Academy), Rated: A

Our next guest on the Lend Academy Podcast is the CEO and co-founder of AutoGravity, Andy Hinrichs. After spending two decades in auto finance Andy decided he wanted to do something to finally bring the car buying experience into the 21st century. He started AutoGravity less than two years ago but they are already seeing great traction.

First Associates Broadens Service Offerings to Offer Additional Client Support (Benzinga), Rated: B

First Associates Loan Servicing announced a new lineup of loan support and lending solutions today to better serve the expanding needs of their industry–leading clients.

New solutions include:

Primary Loan Servicing

  • Reduced delinquencies & defaults
  • Low-risk, cost-effective
  • Omnichannel communication to maximize reach
  • Top-notch investor, credit bureau & regulatory reporting
  • Secure fund flow & control

Capital Markets Support
Backup servicing, Contract Verification, Borrowing Base Calculation or Validation, Custodial Services & Treasury Services (Collateral & Payment Agent)

Pre-Funding Support
To help ensure loans are properly originated and funded: Applications by Phone, Customer Service Call Support, Borrower Verification Calls & Document Verification

Post-Funding Support
Customer Service Call Support, Multi-channel Collections Support & Borrower Verification Calls

Futurist Jack Uldrich to Speak on the Future of Wealth Management and Banking in Four Cities in Four Days (Life Pulse Health), Rated: B

Starting tomorrow, acclaimed financial futurist and best-selling author Jack Uldrich will begin a series of four separate presentations on the future of finance in four consecutive days. His first presentation will be for leaders with Atlantic Trust in Denver, Colorado, followed by presentations in Chicago, Washington D.C., and ending in Toronto on Sept. 29th.

Uldrich is a prolific speaker on future trends in wealth management, finance, and banking, speaking to dozens of finance groups globally each year, including some of the biggest names in these industries.

United Kingdom

Zopa improves loan sale processing times (P2P Finance News), Rated: AAA

ZOPA investors are now able to sell their loans within a few days on the secondary market, after the peer-to-peer lender made improvements to speed up processing times.

Earlier this month, Zopa promised a “large change” to address investor concerns about the time it is taking to sell loans.

UK peer-to-peer lending is about to face its toughest test since the sector was born (Business Insider), Rated: AAA

GLI Finance, a listed investment company that backs fintech businesses, on Monday wrote down the value of its investments in eight peer-to-peer lending platforms by £12.6 million to £28.9 million, citing “concerns over the collectability of some platform loans.”

The disclosure came after concerns were raised above fast-growing peer-to-peer lender Lendy Finance over the weekend.

Meanwhile, Zopa, the UK’s oldest peer-to-peer lender, last month wrote to investors telling them to expect higher-than-forecast losses as a result of deteriorating credit conditions. And peer-to-peer platform Wellesley & Co. last year raised £2.5 million to “absorb impairment losses that would otherwise have been passed on to peer-to-peer investors.”

The backdrop to all these disclosures is a surge in unsecured consumer borrowing and rising inflation in 2017, factors which are combining to fuel fears people may be unable to pay back all they have borrowed. Unsecured consumer borrowing hit £202 billion in July, the highest level since 2008. Meanwhile, inflation is running at 2.9%, well above wage growth.

Can’t afford to buy a property? You can now borrow your deposit (The Sun), Rated: A

Property Pact aims to help those who are struggling to get together a deposit for their first home.

To apply for a loan with Property Pact, you must meet the following:

  • Have a good or excellent credit rating
  • An annual salary of £30,000 or more
  • No County Court Judgements (CCJs) against you
  • Have at at least one year of continuous employment with the same employer
  • Must be employed in a profession or managerial role or a key job leading to a professional qualification or managerial role.

To register your profile on the site, you’ll need to pay £150.

Investors can then browse your profile and decide if they want to lend the money to you.

If an investor then agrees to lend, you’ll pay a 5 per cent arrangement fee – on a loan of £30,000 that would be £1,500.

The loan will be repaid at a rate of 5.5 per cent above base rate – so currently 5.75 per cent.

Britain’s first Small Business Commissioner is needed now more than ever (SME Web), Rated: A

With this in mind, let’s look at the three main challenges that the Small Business Commissioner will need to address in the coming year:

  1. Late payments: Time and time again we are reminded of the late payments crisis damaging small businesses, who are owed a collective £26.3 billion. Research from the FSB shows that poor payment practices are on the rise, causing 50,000 business deaths each year.
  2. Funding: SMEs bring a combined turnover of £1.8 trillion to the UK economy and we must encourage people to follow their dream of running their own business. In addition, some will need educating about using alternative finance methods, such as P2P lending, invoice financing and crowd funding.
  3. Rising costs
China

A Missing Piece in China’s Economy: Consumer Credit Ratings (WSJ), Rated: AAA

The world’s second-largest economy doesn’t have a widely accepted system to gauge creditworthiness among a fast-expanding middle class with growing paychecks, a hunger for consumer products and little or no credit history.

Chinese household debt is growing rapidly, outpacing broad credit growth every year since 2013 and reaching 38 trillion yuan ($5.7 trillion) by the end of the second quarter of this year. But household debt remains relatively low by global standards, at about 44% of gross domestic product, and the absence of a widely used standard of creditworthiness is keeping consumer borrowing from growing even faster, hampering access to credit for some 500 million potential borrowers.

China’s central bank has sought for nearly three years to put in place an answer to the FICO credit-scoring system predominant in the U.S., created in 1989 by data firm Fair Isaac Corp.

Technology giants Ant Financial Services Group and Tencent Holdings Ltd., along with several smaller companies, are developing competing credit-rating systems. Tencent began testing its system in August, two years after Ant, an affiliate of e-commerce giant Alibaba Group Holding Ltd. , launched its Sesame Credit personal scores.

But none of these projects has emerged as a single standard that’s widely used and trusted by lenders nationwide.

Paving the way?

Regulators in March set up a new clearinghouse, Wanglian, to centralize the processing of online payments.

Meanwhile, Ant’s Sesame Credit has a head start on its competition. Launched in 2015, Sesame derives a person’s credit score—which the individual can view on Ant’s popular Alipay payment platform—by mining data on the consumer’s e-commerce activity and other online behavior. Higher ratings confer perks such as waived deposits at some hotels and faster security screening at Beijing’s airport.

There are small credit bureaus in major cities including Beijing and Shanghai, but they have never gained traction and often lack access to borrowers’ financial data. Such bureaus reach only a third of Chinese borrowers, compared with 90% of borrowers in the U.S. reached by credit bureaus there, according to consulting firm Oliver Wyman.

Source: The Wall Street Journal

Hong Kong ‘falling behind’ in race to build up automated financial adviser platforms (South China Morning Post), Rated: A

Operators of automated, algorithm-driven financial planning services, or so-called robo-advisers, in Hong Kong need to significantly step up their game if they are to compete with Chinese and US institutions, according to Freeman Tsang, head of China and Hong Kong for asset management firm Legg Mason.

Only a few securities brokerages have entered Hong Kong’s robo-advisory market, which unlike the one in the US, lacks an open, computer interface that allows access to investors’ portfolios across different companies to develop an overall view of their financial status.

Such a foundation is vital for robo-advisers to be able to offer more customisable financial advice and support transactions across different investment tools and firms.

European Union

Fintech startups and banks face off on new rules over European payments and data access (Tech.eu), Rated: AAA

A large group of over 70 European fintech companies are warning that new EU rules on payments processing could unfairly pit them against large banks and decimate the industry if they are passed into law.

The rules are part of the European Union’s Payment Services Directive (PSD) and would ban the practice of “screen scraping,” a common practice used by fintech companies to “scrape” display data from one application (like an online banking service) and display it on their own.

In their manifesto, the 71 fintech firms argue that the ban on scraping is unreasonable and a backdoor method for traditional banks to claw back control as the Fintech revolution threatens to upend their business models.

Revised payment services directive

The European Union’s Payment Services Directive (PSD), originally passed in 2007, built a single market for cashless payments in Europe, making cross-border payments as easy and efficient for European consumers and businesses as domestic transfers.

Most importantly, the revised PSD (also known as PSD2) mandated that banks loosen their grip over customer account data and allow third parties to be able to access it with customers’ permission.

Klarna “Smoooth” Ad Campaign Wins International ANDY Award from Ad Club of New York (PR Newswire), Rated: AAA

Klarna, a global payments provider, has been honored with an International ANDY Award by the ADVERTISING Club of New York for its 2016 “Smoooth” campaign that illustrates how ‘smoooth’ payments can be for consumers and online merchants using its platform.

The award was presented at the 14th annual “Stars of Madison Avenue” luncheon.

The AD Club’s International ANDY Awards jury chose this year’s six honorees for making an impact on marketing, commerce, culture and social responsibility through brave and creative advertising and marketing campaigns.

Klarna’s “Smoooth” campaign kicked off with a series of critically acclaimed ad spots. Samples of the campaign are available here and here.

Europe’s top venture capital investors by country (Banking Technology), Rated: A

 

At the top of the list, High-Tech Grunderfonds has made nearly 200 deals to 150+ German companies since 2012, making it the top investor in European tech VC by a long shot. Notable recent deals include a $3.4 million seed round to POSpulse (shopper intelligence platform) and participation in a $2 million seed round to MoBerries (HR and workforce management company). Since 2012, German tech companies have seen more than 1,600 deals worth over $10 billion.

The UK has seen the highest number of deals and total funding deployed to tech companies, at more than 3,200 deals worth nearly $20 billion since 2012, according to CB Insights.

Top investors in European tech by country (as of 30 August 2017), according to CB Insights:

  • Austria – SpeedInvest
  • Belgium – PMV
  • Cyprus – SingulariTeam
  • Czech Republic – Credo Ventures
  • Denmark – SEED Capital
  • Estonia – SmartCap
  • Finland – Lifeline Ventures
  • France – Alven Capital
  • Germany – High-Tech Grunderfonds
  • Greece – PJ Tech Catalyst
  • Iceland – Frumtak Ventures
  • Ireland – AIB Seed Capital Fund
  • Italy – LVenture Group
  • Latvia – Imprimatur Capital
  • Lithuania – Practica Capital
  • Luxembourg – Mangrove Capital Partners
  • Netherlands – Newion Investments
  • Norway – Investinor
  • Poland – SpeedUp Venture Capital Group
  • Portugal – Portugal Ventures
  • Romania – GECAD Group
  • Slovakia – Neulogy Ventures
  • Spain – Caixa Capital Risc
  • Sweden – Almi Invest
  • Switzerland – Swisscom Ventures
  • Turkey – Aslanoba Capital
  • UK – LocalGlobe

 

New10 open for business! (ABN-AMRO), Rated: B

Starting today, SMEs looking for a loan online can go to New10, an initiative of ABN AMRO. New10 lets them know within 15 minutes whether they qualify for a loan and under what terms and conditions. New10 meets the needs of this group of SMEs that want to take out a loan entirely online.

New10 provides loans ranging between EUR 20,000 and EUR 1 million.

India

Consumer Lending Startup MoneyTap Is Shooting For The Stars (Inc42), Rated: AAA

Ensnared by the allure of entrepreneurship, Bala ventured into the promising world of fintech with MoneyTap, a consumer lending startup that was launched last September.

Touted as India’s first app-based credit line, the fintech startup is working to democratise credit in a country where 19% of the total population is still unbanked.

“The reason we started MoneyTap was that we wanted to solve the problem of consumer credit. Clearly, India is very credit starved. Less than 1% of Indian consumers have access to any form of unsecured credit from a bank or any financial institution. Most people, whether it’s from middle class or lower middle class, need credit, but they have to use informal methods,” explains Bala.

Based on his interactions, he concluded that there are four main reasons behind this pervasive inadequacy of consumer credit in the country:

  1. Historical baggage/legacy
  2. Lack of data
  3. High overhead in small-ticket loans
  4. Finally, the emergence of a new class of demanding consumers

Between 2003 and 2007, a number of banks in India were issuing loans without doing any detailed checked. At the time, there was no credit bureaus or Aadhaar. Even PAN was not widely used. When the subprime crisis hit in 2008, all these banks got burned. In the period prior to that, around 24 Mn credit cards were sanctioned in India, of which nearly 10 Mn crashed.

In a country with a population of over 1.31 Bn, only 220 Mn people have PAN cards. Other forms of KYC (know your customer), including voter ID, Aadhaar and ration cards are not considered as the sole identity proof, especially when it comes to financial activities. Credit information companies (CIC) – such as TransUnion Credit Information Bureau Ltd. (CIBIL), Experian India and Equifax India – still do not have records of a large section of the country’s banked populace.

As per Bala Parthasarathy, the cost of evaluating and issuing a credit line/loan/credit card for a bank is extremely high and thus they prefer to give big-ticket loans to few people rather than small ticket loans for a large group of people. The average loan ticket size in this country is between $4,629 – $7,715 (INR 3 Lakh-INR 5 Lakh).

If you think of India as a pyramid in terms of the net worth of people, all these banks focus on only around 12 to 15 Mn customers at the top of the pyramid because they are capable of applying for a loan worth $4,629 to $7,715. The problem, according to him, arises when someone wants a $463 (INR 30,000) loan because the overhead, in this case, is too high for the bank to make any profit.

The consumer lending startup claims to currently cater to customers with monthly income ranging between $308-$1,080 (INR 20,000-INR 70,000).

On the MoneyTap platform, consumers can borrow anywhere between $46-$7,715 (INR 3,000 to INR 5 Lakh) with an option to choose the repayment duration from as little as two months up to three years.

At present, MoneyTap charges a one-time setup and origination fee of $7.7 (INR 499) plus tax.

Source: Inc42
APAC

Fintech experts to discuss the future of finance in Phnom Penh (Southeast Asia Globe), Rated: AAA

Inspire Asean is back on 29 September at Sofitel Phnom Penh Phokeethra for an afternoon of presentations, exchanges and networking. One of our larger events, this edition will have six engaging presentations from top Fintech startups, infrastructure providers and international banks to discuss digital wallets, big data, blockchain technology, cryptocurrencies and alternative lending models.

The speaker lineup includes:

  • Brad Jones, chief executive officer of Wave Money in Myanmar and previously CEO of Wing in Cambodia.
  • Hong Samarkkeenich, regional sales director at Lenddo, is responsible for bringing the company’s technology to new and underserved market segments in Indochina.
  • Sim Chankiriroth is the founder and CEO of BanhJi, a free and localized online accounting software, built for Asean MSMEs.
  • Vincent Ling, deputy general manager of UnionPay International SEA, is responsible for regional brand and communications as well as the Core Products portfolio.
  • Steve Miller is the founder of CryptoAsia, a growing Bitcoin startup based in Phnom Penh.
  • Tomas Pokorny is the CEO of PiPay, a Cambodia-based fintech company that combines payment and lifestyle (social) application solutions.

Big Data, a Key Factor in Decision-Making (FiNews), Rated: A

A survey conducted by Deloitte showed that the respondents feel that analytics will become more important to their organizations in the next three years and that its greatest benefit is a key factor in making better decisions, and Singaporean companies are picking up on this.

This trend is great news for the local data analytics sector. In Singapore, the industry is expected to contribute at least $1 billion to the economy this year alone according to the Economic Development Board.

However, being in the service industry, these firms often lack significant physical collateral and assets, leaving them unable to turn to banks and similar financial institutions for financing. This results in cash flow issues that could limit the growth of these companies, if not hamstring them completely.

How Can Data Analytics Persevere?

  • P2P Financing
  • Equity Crowdfunding
  • Receivables Financing

10 Fast Growing Fintechs in Philippines (Fintech News), Rated: A

Acudeen

 

Acudeen is an organization opens its business to small and medium enterprises (SMEs) looking to boost cash flows, thereby answering an unsolved business need.

Ayannah

Ayannah is a leading provider of digital financial services to the world’s emerging middle class, most of whom are migrants or unbanked coming from the base of the pyramid.

BloomSolutions

Bloom makes money smarter by combining modern technologies like cryptocurrency with traditional infrastructure such as SWIFT and SMS.

Lendr

Lendr is an end-to-end loans origination and loans management platform that you can access via your desktop or mobile device.

LoanSolutions.ph

Loansolutions provides loans via our network of partner banks and lending companies.

Mynt

Mynt is a leader in mobile financial services focused on accelerating financial inclusion through mobile money, micro-loans, and technology.

PawnHero

PawnHero now lets you pawn online, anytime and anywhere.

PayMaya

PayMaya Philippines, Inc. (formerly Smart eMoney, Inc.) is the pioneer in mobile money and payments, having established brands such as PayMaya, the first prepaid online payment app that enables the financially underserved to pay online without a credit card; PayMaya Business, the company’s system solutions provider that allows businesses to receive online and card payments anytime, anywhere; Smart Money, the world’s first e-wallet linked to a mobile phone; and Smart Padala, the leading remittance network in the Philippines with over 15,000 agents across the country.

Ripple Supports Singapore’s Fintech Hub Aspirations With New Office (Ripple), Rated: B

Singapore has publicly stated ambitions to be the world’s leading fintech and innovation hub. It is also one of the biggest and busiest global trade centers with many large, multinational companies basing their regional treasury offices in the country. For these reasons, and to support our rapidly-growing customer base across Asia-Pacific markets – including Standard Chartered, a Ripple investor, member of the RippleNet Advisory Board, and early adopter of blockchain technology to power payments – we are excited to announce we have opened a new office in Singapore.

Africa

Riby aims to transform the way over 20 million West Africans use co-operatives (Techpoint), Rated: AAA

Mr. Lanre used to be hesitant about loaning his colleagues at work money, having suffered from bad debts. Luckily for him, his organisation launched a co-operative scheme to manage employees’ finance. Among other things, the co-operative allows anyone with an urgent financial need to easily request and get assistance.

It is estimated that 63% of Kenyans derive their livelihoods from co-operatives, while in New Zealand, 22% of the gross domestic product (GDP) is generated by co-operative enterprise. And while 50% of sugar-cane planters are grouped into co-operatives in Mauritius, the co-operative movement in Columbia accounts for as much as 697,006 jobs in the country.

Nonetheless, as CEO of a financial management service platform, Salami Abolore reveals that over a million co-operative bodies exist in Nigeria.

He says this with confidence because his company, Riby, helps co-operatives and their members remotely control both their finance and financial operations.

Riby happens to provide the technology that helps Mr Lanre’s company to manage their (employee) co-operative scheme.

The Riby peer-to-peer lending module allows companies to run internal co-operatives within their fold. A case in point is a savings rotation mechanism that auto-debits employees and credits whoever is due to receive money for the month. For both modules, Riby charges a per-user fee of ₦200 upfront, amounting to ₦2000 per annum and ₦500 on a quarterly basis.

The agent management platform, Riby’s third module, is another exciting proposition that raises an innocent suspicion as to whether Riby is taking the competition to the commercial banks. This is apparent in their overall quest to include everyone in the system.

About 40% of Nigerians are yet to register with any financial institution in the country, according to the Central Bank of Nigeria. Statistics from the Nigeria Inter-Bank Settlement System (NIBSS) further show that there are only about 40 million registered bank accounts across the country. These accounts are enrolled by just 20.8 million customers, some having more than one account. It is therefore apparent that co-operatives can be used to reach the unbanked.

Fintech startup MaTontine wins Seedstars Senegal (Disrupt-Africa), Rated: A

Fintech startup MaTontine was named winner of the Senegal round of the global Seedstars World competition over the weekend, earning the chance to represent the country at the global final in Switzerland next year to compete for up to US$1 million in equity investment.

MaTontine emerged the overall winner for its solution that provides access to small loans and related financial services like microinsurance by digitising traditional savings circles.

Authors:

George Popescu
Allen Taylor

Thursday August 31 2017, Daily News Digest

European fintech

News Comments Today’s main news: SeedInvest to host live crowdfunding at LendIt Europe. Funding Circle says ‘good-bye’ to smaller brokers. DBRS upgrades SoFi Professional Loan Program Transactions. Credibly to manage BizFi’s portfolio. Fundrise re-opens Income eREIT. Laplanche to keynote at LendIt Europe. Today’s main analysis: France, Sweden scooping up bigger share of Europe’s fintech deals since Brexit. Today’s thought-provoking articles: France, […]

European fintech

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News Summary

United States

DBRS Upgrades and Confirms SoFi Professional Loan Program Transactions (DBRS), Rated: AAA

Of the 36 outstanding publicly rated classes reviewed, 24 were confirmed and 12 were upgraded.

Issuer Debt Rated Rating Action Rating Trend Notes Published Issued
SoFi Professional Loan Program 2013-A LLC Post-Graduate Loan Asset-Backed Notes Upgraded AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2014-A LLC Post-Graduate Loan Asset-Backed Notes, Class A-1 Upgraded AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2014-A LLC Post-Graduate Loan Asset-Backed Notes, Class A-2 Upgraded AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2014-B LLC Post-Graduate Loan Asset-Backed Notes, Class A-1 Upgraded AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2014-B LLC Post-Graduate Loan Asset-Backed Notes, Class A-2 Upgraded AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2015-A LLC Post-Graduate Loan Asset-Backed Notes, Class A-1 Upgraded AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2015-A LLC Post-Graduate Loan Asset-Backed Notes, Class A-2 Upgraded AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2015-B LLC Post-Graduate Loan Asset-Backed Notes, Class A-1 Confirmed AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2015-B LLC Post-Graduate Loan Asset-Backed Notes, Class A-2 Confirmed AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2015-C LLC Post-Graduate Loan Asset-Backed Notes, Class A-1 Confirmed AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2015-C LLC Post-Graduate Loan Asset-Backed Notes, Class A-2 Confirmed AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2015-D LLC Post-Graduate Loan Asset-Backed Notes, Class A-1 Confirmed AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2015-D LLC Post-Graduate Loan Asset-Backed Notes, Class A-2 Confirmed AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2016-A LLC Post-Graduate Loan Asset-Backed Notes, Class A-1 Confirmed AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2016-A LLC Post-Graduate Loan Asset-Backed Notes, Class A-2 Confirmed AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2016-B LLC Post-Graduate Loan Asset-Backed Notes, Class A-1 Confirmed AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2016-B LLC Post-Graduate Loan Asset-Backed Notes, Class A-2A Confirmed AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2016-B LLC Post-Graduate Loan Asset-Backed Notes, Class A-2B Confirmed AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2016-C LLC Post-Graduate Loan Asset-Backed Notes, Class A-1 Confirmed AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2016-C LLC Post-Graduate Loan Asset-Backed Notes, Class A-2A Confirmed AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2016-C LLC Post-Graduate Loan Asset-Backed Notes, Class A-2B Confirmed AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2016-D LLC Post-Graduate Loan Asset-Backed Notes, Class A-1 Confirmed AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2016-D LLC Post-Graduate Loan Asset-Backed Notes, Class A-2A Confirmed AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2016-D LLC Post-Graduate Loan Asset-Backed Notes, Class A-2B Confirmed AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2016-E LLC Post-Graduate Loan Asset-Backed Notes, Class A-1 Confirmed AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2016-E LLC Post-Graduate Loan Asset-Backed Notes, Class A-2A Confirmed AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2016-E LLC Post-Graduate Loan Asset-Backed Notes, Class A-2B Confirmed AAA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2016-B LLC Post-Graduate Loan Asset-Backed Notes, Class B Upgraded AA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2016-C LLC Post-Graduate Loan Asset-Backed Notes, Class B Confirmed AA (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2016-D LLC Post-Graduate Loan Asset-Backed Notes, Class B Confirmed AA (low) (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2016-E LLC Post-Graduate Loan Asset-Backed Notes, Class B Confirmed AA (low) (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2015-B LLC Post-Graduate Loan Asset-Backed Notes, Class B Upgraded A (low) (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2015-C LLC Post-Graduate Loan Asset-Backed Notes, Class B Upgraded A (low) (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2015-D LLC Post-Graduate Loan Asset-Backed Notes, Class B Upgraded A (low) (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2016-A LLC Post-Graduate Loan Asset-Backed Notes, Class B Upgraded A (low) (sf) Aug 30, 2017 US
SoFi Professional Loan Program 2016-E LLC Post-Graduate Loan Asset-Backed Notes, Class C Confirmed A (low) (sf) Aug 30, 2017 US

CREDIBLY SELECTED TO SERVICE BIZFI’S $ 250M PORTFOLIO (Credibly Email), Rated: AAA

Credibly, a leading findata small and medium-sized business (SMB) lending platform, announced today that the company is now servicing BizFi’s $250 million portfolio and 5,200 merchants.  Since 2005, BizFi had been a leading capital provider to SMBs and in 2016 was one of nation’s top three largest originators of merchant cash advances.  Numerous SMB direct lenders vied for the BizFi portfolio. Credibly was chosen due to their proprietary data science driven portfolio management strategy.

Credibly also announced that it has crossed the $500 million milestone in capital deployed to tens of thousands of SMBs across the U.S.  This is separate from the $250M portfolio the company is now servicing from BizFi.

In addition to servicing the BizFi portfolio, Credibly is working with both sales partners and merchants to provide additional working capital to the businesses in BizFi’s portfolio. Credibly’s data science team has the ability to analyze BizFi’s twelve years of data and remittance history, which will allow Credibly to better service both the BizFi and Credibly portfolios. Further, BizFi’s data enhances Credibly’s risk management, scoring models, and portfolio management tools.

The Small Business Association (SBA) estimates that traditional banks still reject approximately 90 percent of SMB loan applications. Since 2010, Credibly has emerged as a proven platform that leverages data science and analytics to provide SMBs with a simple and intuitive way to access critical working capital.  The company addresses the fundamental capital needs of SMB owners across a broad credit spectrum and through every stage of a business’s life cycle.

Main Street SMBs across a wide variety of industries that include restaurants, retail stores, salons, spas, dry cleaners, auto body shops, and doctors’ offices, all rely on Credibly to secure the necessary capital they need to grow.

Fundrise Re-Opens Income eREIT (Crowdfund Insider), Rated: AAA

Fundrise, the very first real estate crowdfunding platform in the US, has re-opened its Income eREIT to investors.

According to Fundrise, the Income eREIT has performed quite well, so far. The Income eREIT has generated 10% or higher in annualized dividends since Q2 of 2016. As of Q3 2017, the fund has posted a 10.5% annualized dividend which compares favorably to the FTSE NARET Composite REIT Index at 4.2%.

Bills Being Introduced to “Fix” Decision in Madden v. Midland (Lend Academy), Rated: A

For a historical perspective you can read our coverage of the case at the below links:

An article in American Banker this week from Adam Levitin, professor of law at Georgetown University, provides his perspective on what the bills mean for the case.

Nat Hoopes, Executive Director of the Marketplace Lending Associationdisagreed with Levitin’s assessment. Here is what he had to say:

These bills are strongly pro-consumer. They will help ensure that consumers can continue to refinance their higher interest rate debts, saving consumers significant amounts of money through lower interest costs.  Furthermore, these bills clearly cannot facilitate predatory lending because they do not change the rate or terms on which any entity in this country (regulated at the state or federal level) can lawfully lend money.  The language of the bills simply reaffirms one of the fundamental principles of contract law — that valid loan contracts can be sold on the secondary market.

We have a situation created by the Second Circuit decision where responsible lending has been reduced in three states (NY, CT, VT). Demand has not been reduced in these states.

Trizic Drags Banks Into The Fintech Age With Automated Wealth Management (Benzinga), Rated: A

Trizic, the fintech company behind a B2B wealth management platform, has signed on as the technology provider to Fidelity National Information Servcs Inc FIS 0.21%, connecting the Bay Area startup with the banking sector.

Trizic Digital Advisor — an open-API platform for registered investment advisers, enterprise clients, banks and credit unions — is a product built from the ground-up, CEO Drew Sievers told Benzinga.

The platform’s features include trading, portfolio management, cash management, billing and compliance reporting

The 8 hottest housing markets in America (Business Insider), Rated: A

Sharestates, an online real-estate investing platform, has released its fall report on the hottest housing markets in the US.

Places on the list are ranked by three metrics:

  • Return on Investment (ROI): The rate of return to Sharestates loan investors.
  • ARV: The ratio of the total loan amount, including acquisition and rehab financing, compared with the After Repair Value.
  • Increase in demand from 2016 to 2017: Percent of 2017 Sharestates loans in the listed areas compared with 2016.

The top 3:

3. Sparrows Point, Maryland

ROI: 11.8%

ARV: 50%

2. Flatbush, Brooklyn, New York

ARV: 28%

Increase in demand: 400%

1. Fishtown, Philadelphia, Pennsylvania

ROI: 11.8%

ARV: 14%

Increase in demand: 650%

LendingTree, Inc. Announces Changes to its Executive Team (PR Newswire), Rated: A

LendingTree, Inc. (NASDAQ: TREE), operator of LendingTree.com, the nation’s leading online loan marketplace, has announced two key promotions within its leadership team. J.D. Moriarty, who joined LendingTree earlier this year as SVP of Corporate Development, has been promoted to Chief Financial Officer, and Gabe Dalporto, who previously served as the company’s Chief Financial Officer since 2015 and as LendingTree’s Chief Marketing Officer from March 2011 to June 2015, has been elected to the company’s board of directors.

DOL Rule Delay Highlights Industry Battle Lines (Financial Advisor IQ), Rated: A

Word that full implementation of the Department of Labor’s contentious fiduciary rule has been delayed for two years — until July 2019 — may not have shocked many observers but it’s still deeply significant, say industry experts on both sides of a debate that’s raged across two very different presidential administrations.

That’s if it ever even happens, grumbles Rostad, whose organization wants all financial advisors to be client-first fiduciaries as a matter of public service. He says the Trump administration and the brokerage industry despise two provisions of the DOL rule — the right for investors to sue advisors and firms for breaches of the rule, and the best interest contract exemption, which lets advisors continue receiving commissions if they agree in writing to continue acting in the client’s best interests and make a full disclosure of options other than commission-based business available. And the administration and brokerage industry will be working overtime between now and mid-2019 to get the provisions watered down or eliminated altogether, says Rostad.

Meanwhile, the Financial Services Institute, a Washington D.C.-based advocacy group for “a healthier, more business-friendly regulatory environment for our members” — mainly broker-dealers and their advisors — sees the delay as an opportunity for needed refinements.

Banks aren’t giving up on personal finance apps (American Banker), Rated: A

Don’t consign personal financial management apps to the ash heap of technology just yet.

Granted, on Thursday Prosper Marketplace is discontinuing Prosper Daily, an app formerly known as BillGuard that helped users monitor their finances and credit scores. And the next day Capital One Financial is set to close the money management app Level Money.

Will Blockchain Change The Way We Invest? (Forbes), Rated: A

Currently, the value of all the Bitcoin in the world is around $90 billion, much less than individual companies such as Amazon ($474.41 billion market cap), Google ($649.49 billion) and Apple ($815.39 billion). However, with the current trend, some investors predict cryptocurrencies to be worth $5 Trillion by 2022.

As cryptocurrencies are becoming more common, new blockchain powered platforms are emerging to change the way we invest. The success of these companies may create a scenario in which fintech companies like RobinhoodFundriseQuantopian and others – currently considered the most disruptive companies in the world – will become outdated in a few years.

Real.markets – Disrupting real estate crowdfunding

REAL is an Ethereum Smart-Contracts governed ecosystem that focuses on creating the best conditions for Real Estate investment eliminating costs due to unnecessary intermediaries, providing transparency and liquidity, alleviating tax inefficiencies and easing cross-border transactions under a unified crowdfunding platform.

NASDAQ LINQ – Trade private companies

Almost two years ago NASDAQ launched LINQ, a digital ledger technology that leverages a blockchain to facilitate the issuance, cataloging and recording of transfers of shares of privately-held companies on The NASDAQ Private Market in collaboration with Chain.

enigma – machine-based investing platform and infrastructure for crypto-assets

From 2009 to 2015 alone, the amount of assets under management (AUM) by quantitative hedge funds grew at a rate of 14% year-over-year, nearly double the 8% year-over-year growth of assets managed by traditional hedge funds.

Following the rising demand for crypto-currencies, enigmabelieves an interesting opportunity arises: algorithmic trading on crypto-assets. Many exchanges already offer the ability to place orders through RESTful APIs, permitting users to run their trading algorithms locally.

FinTech Can Help Increase Financial Literacy (Huffington Post), Rated: A

From mobile payments, app based investing platforms, to online banking solutions, financial technology (FinTech) has revolutionized not only how consumers receive financial services but also how they expect to receive such services.

recent studyshowed that 59 percent of senior financial services executives believe that we will see an increase in the use of digital solutions to improve operations, with 56 percent of executives citing technological disruption as a component of their business strategy. From an operational perspective, findings have shown that core financial institution activities including Deposits and Lending and Investment Management are expected to be radically reconfigured as a result of technological innovation. Consumers have also begun to shift their preferences towards FinTech, with statistics indicating that in 2016 a third of consumers reported regular use of financial technology services, with such use doubling from two years prior. Furthermore, more than 52 percent of consumers are expected to use FinTech services in “the near future.”

A recent study found that two-thirds of Americans cannot pass a basic financial literacy test, with the number of those who can pass such a test decreasing annually. Globally, the figures reflect similar trends; in 2015, only 35 percent of men and 30 percent of women were classified as financially literate.

Greenlight’s flagship product is a debit card for children that utilizes mobile app technology to provide parents with a customizable and monitorable solution to facilitate purchases.

TS: Greenlight is free for 30 days and then just $4.99/mo. for the whole family to use (all parents and up to 5 kids). Each child receives their own Greenlight Card with their name on it and a unique PIN. Parents use our app on either their iOS or Android smartphone, and can easily manage all of their kids’ cards from one place.

Parents can load and transfer money onto their kids cards instantly from anywhere with no additional fees. That money can be limited to specific stores or websites, or be spent anywhere depending on what parents decide. Greenlight provides real-time mobile alerts to tell parents where and when their kids are making a purchase and can even automate allowances.

Kids can also use the Greenlight app on their smartphone. They can visually see their balances, request money, and communicate what they’re purchasing with their parents. When a parent receives a funding request from one of their children, they can easily approve or decline the request in the app.

Bitcoin Exchange Sees Complaints Soar (Bloomberg), Rated: A

The U.S. Consumer Financial Protection Bureau has received at least 293 complaints about Coinbase Inc., according to data reviewed by Bloomberg.

More than a third of the grievances came from individuals who said they were unable to access their money when promised. Many people also complained about other transaction or service problems. Accusations of fraud represented less than 15 percent of the complaints.

LendingCalc Appoints Former Chief of Risk at Dianrong, Terry Tse as Adviser (Newson6.com), Rated: B

LendingCalc, Inc., a direct investment platform providing global access to digital specialty finance for institutional investors, announced the appointment of Terry Tse, the former Chief Risk Officer of the leading Chinese P2P platform, Dianrong, as strategic adviser for the firm. In his role, Terry will help build LendingCalc’s global investment gateway and platform due diligence framework.

United Kingdom

Marketplace lending platform Funding Circle cuts off smaller brokers (AltFi), Rated: AAA

Funding Circle will be refocusing its energies on its most highly engaged business finance brokers.

More changes in the ever-changing marketplace lending sector. A few weeks on from announcing sweeping changes to its investment process, leading business-focused platform Funding Circle is changing its approach to working with corporate finance brokers.

One such broker, who wished to remain anonymous, told AltFi that Funding Circle is cutting off 300 brokers. The platform works with approximately 1,000 active brokers at present.

P2P lender LendingCrowd extends cashback offering (AltFi), Rated: AAA

The Edinburgh-based platform is extending its cashback offering, giving clients £150 for investing £2,500 or more on the platform by 30 September.

REDWOOD BANK LAUNCHES FOUR MONTHS AFTER SECURING ITS INITIAL BANKING LICENCE (Global Banking and Finance), Rated: A

Redwood Bank, Britain’s newest business bank for SMEs (small and medium sized enterprises), has announced that just over four months after securing its initial banking licence, it has completed its “Mobilisation” phase and has now opened for business, offering secured SME mortgages for business owners, as well as for experienced commercial and residential property investors. It has also launched a competitive business deposit account.

Its speed to market is the result of a combination of factors, including having a very experienced and proven management team, and the fact that it’s the first business bank with 100% cloud- based infrastructure, which improves efficiency as well as security.

Trends among investment advisors mirror developments in P2P lending (AltFi), Rated: A

New research from Equifax Touchstone, an intermediary database provider, illustrates an enhanced focus among investment advisors on delivering consistent investment outcomes to customers.

Of 141 surveyed investment advisors, 82 per cent were found to have a centralised investment process, meaning that a consistent approach to allocation and monitoring exists for all clients.

However, 76 per cent use model portfolios, which are bespoke to a customer’s risk-reward preferences, and which are automatically rebalanced regularly to bring returns in line with expectation – even if the broader approach to investment management is the same for all clients. These model portfolios are comprised of a diversified pool of mutual funds that invest in a variety of assets, ranging from large and small stocks to REITs.

But in its shift to passive strategies, P2P is perhaps less closely aligned with investment advisors. Equifax Touchstone’s survey shows that advisors still very much value active investment vehicles. While passive investing plays a part for 82 per cent of advisors, the majority invest 25 per cent or less in passives, with11 per cent of advisors investing more than 50 per cent in them.

Crowdfunding your start-up: Learn the basics from Crowdcube (Startups.co.uk), Rated: A

If you’re looking to raise finance for your business, there are a few options you can explore including secured or unsecured debt, private equity, venture capital investment, peer-to-peer (P2P) lending and crowdfunding.

Some of the more popular crowdfunding models include reward-based, donation-based, micro-lending, P2P, peer-to-business and equity.

Equity crowdfunding as an industry, over its six-year lifetime, has raised about £600m in the UK, with close to half of that having been raised by Crowdcube. Equity crowdfunding facilitates investment into start-ups, early stage businesses and growth companies in return for a pro-rata equity stake in the business.

Investments can be made from as little as £10 with no maximum in place, which typically culminates in pro-rata ownership of the company via ordinary or B investment shares.

You may have also seen the likes of BrewDog, River Cottage and Grind raise money through bonds on Crowdcube. This is where a company launches a funding round starting from at least £250,000.

BrewDog raised £10m through a bond in December 2016, offering 8% interest to the investors. Over 2,700 people backed BrewDog in three weeks and should see interest payments for the next four years; the length of the bond term.

“Property Crowd Funding” – The Magic of Modern Day Investing (Huffington Post), Rated: A

Real estate has been booming around the world, particularly in the UK, with new housing, apartment and condo complexes being built at a phenomenal pace.

Abdullah Iqbal, Co-Founder of the Knightsbridge based start-up PropTech Crowd.

While there existed property crowdfunding companies already, Abdullah and his dad saw an obvious vacuum in the market. “None of the property crowdfunding platforms were Shariah compliant at the time, due to them being involved with interest. Our motivation was to take the banks out of the equation, enabling investors to have shares and democratising the property market for everyone, while conforming to the Islamic prohibition of interest”, emphasises Abdullah.

The company’s core mission is to revolutionise property investment through innovative crowdfunding technology, allowing everyday investors to access high-ROI opportunities that they may have been priced out of in the past.

I learned that Mufti Abdul Kader, a renowned Islamic scholar and expert in Islamic finance, is a Shariah Compliance Advisor at PropTech Crowd. His duties entail making sure that all elements of the business are Shariah compliant, visibly and consistently.

Giving developers direction on safety (Bridging and Commercial), Rated: A

At LendInvest we have been clear that the housing market will look a lot healthier when there is less emphasis on the major developers, when we instead have a market which encourages small- and medium-sized (SME) developers to build homes too. Our studies have found that SME developers are excluded from much of the government support that exists for SMEs from other industries, something which has to change.

Bumpy Brexit risk does not justify record low rates (Reuters), Rated: A

The Bank of England should not keep interest rates at their record low as an insurance policy against the risk of a “bumpy Brexit” and it needs to start raising borrowing costs now, BoE policymaker Michael Saunders said.

But at the same time the Brexit hit to sterling has pushed up inflation above the BoE’s 2 percent target, leading to the split among the central bank’s rate-setters.

Earlier this month, they voted 6-2 to keep rates at 0.25 percent and the BoE warned that Brexit was weighing on the economy.

China

What are the Implications of the Rapid Growth of Fintech in China? (Brink), Rated: A

We see five major key success factors for the future China fintech market:

  1. Data abundance and application – Business models in financial services will be increasingly data-driven, and data will be at the core of the value chain.
  2. Large customer base
  3. Availability of proprietary and comprehensive products
  4. Strong knowledge of financial services and risk management – A strong combined core of financial services expertise and risk management capabilities remains a prerequisite for success, allowing for more efficient identification of useful data and building of effective risk models.
  5. “Fin plus tech” organization and culture

Niche Fintech Players should expand and perhaps transform their business models. The first and most intuitive way is to grow organically beyond a niche. Qudian, for example, has expanded beyond its legacy focus on university borrowers to develop an e-commerce ecosystem driven by a consumer finance model.

European Union

SeedInvest to Host Live Crowdfunding at LendIt Europe in London (Crowdfund Insider), Rated: AAA

SeedInvest and LendIt, the roving Fintech conference, have partnered on live crowdfunding for the upcoming LendIt Europe event scheduled for this coming October. The live event is being billed as a European first. LendIt Europe participants will be able to invest directly in companies participating in the PitchIt portion of the event taking place in London.

SeedInvest previously powered several live investment crowdfunding events in Europe with noted success. SeedInvest’s partnership with Jason Calacanis, and his LAUNCH Festival, reportedly raised $7.5 million from 3900 individual investors. This will be the platform’s first foray beyond the US borders though and may be a sign of a strategic push for the company.

France and Sweden are scooping up a bigger share of Europe’s fintech deals since Brexit (Quartz), Rated: AAA

France and Sweden’s share of financial technology deals in Europe has grown since Britons voted to leave the EU in June last year, according to research firm CB Insights.

France’s share of venture capital transactions has increased by five percentage points since 2014, to 11% so far this year. Sweden’s take has risen three percentage points over that time, to 12%.

Download the CB Insights report on European fintech trends here.

LendIt Europe Announces Upgrade Co-founder and CEO Renaud Laplanche as Keynote Speaker (Fintech Finance), Rated: AAA

LendIt announced that Renaud Laplanche, the CEO of Upgrade and former CEO of Lending Club, will join the keynote speaker roster for LendIt Europe 2017.

He will be giving the opening keynote speech on the second day of LendIt Europe where he will be giving an update on Online Lending 2.0 and discussing the US fintech market, where the online lending industry is today and how it fits into the broader fintech sector trends going forward.

Peter Thiel is backing Berlin ‘InsurTech’ startup Coya in a million round (Business Insider), Rated: A

Silicon Valley investor Peter Thiel has led a $10 million seed funding round into Berlin-based “InsurTech” startup Coya.

Thiel’s fund Valar Ventures led the round, which also included funding from e.ventures, and La Famiglia, a European venture capital fund backed by entrepreneurs.

The investment is one of the biggest “seed funding” rounds in Germany.

International

Banking landscape shifts as Chinese groups globalise (Financial Times), Rated: AAA

Global cross-border capital flows have declined 65 per cent since 2007, and half of that is explained by a drop in cross-border lending flows. The largest global European banks, and some US ones too, are in retreat from foreign markets. But financial globalisation is far from finished — rather it is broadening and becoming more inclusive as developing economies, most notably China, step into the breach.

The eurozone has been at the forefront of the retreat from foreign markets among banks in advanced economies. The foreign claims of eurozone banks have fallen by $7.2tn, or 45 per cent, since 2007, and nearly half of that has been claims on other borrowers in the eurozone — particularly other banks, new MGI research finds. UK and Swiss banks have sharply reduced foreign assets since the crisis as well. US banks, which have always been less global than their European counterparts, have re-focused on growth at home.

In contrast, China’s four largest commercial banks have seen their foreign assets grow 12-fold since 2007 to more than $1tn. And that’s still only 9 per cent of their total assets. Foreign assets make up 20 per cent or more of the total assets in the largest banks in all advanced economies; if China’s largest banks follow that path, they could see tremendous growth in foreign lending ahead.

How Banks And Fintech Startups Redefine Finance (CoinTelegraph), Rated: A

But as financial technologies continue to expand, legacy players have come to accept the disruptive role of fintech startups and the need to work together. In recent years, the relation between banks and fintech startups has evolved from marginal investments to closely knit collaboration and integration.

Banks are now getting involved at different levels to help fintech companies get off the ground. This includes an increasing number of buyouts, mergers and partnerships.

An example is Goldman Sachs, a banking firm that has invested more than $570 mln in fintech companies since 2012. Last year, the banking giant acquired Honest Dollar, a digital retirement savings platform, in order to expand the startup’s brilliant solution to millions of its customers. Along with Standard Charter, Goldman also helped Momo, a Vietnam-based mobile wallet and payment app, raise $34 mln in two rounds of funding. Goldman also launched its own online lending service Marcus last year, a move that is inspired by the fintech culture. The service has so far doled out more than $1 bln in loans and expects to cross $2 bln by the end of this year.

On the other end, fintech startups are helping banks adopt new technology. Ezbob, for example, is a UK-based startup that provided online lending services to SMEs before white-labeling its technology and changing its business model to a Lending as a Service (LaaS) platform. The Royal Bank of Scotland has leveraged Ezbob’s technology to launch Esme, its automated lending platform which allows small and medium-sized businesses to obtain loans quickly, even outside working hours.

The future of robo-advice is human (Robo Advice News), Rated: A

When Betterment decided to offer its clients access to a human financial advisor, it marked a growing trend of robo-advice platforms adding a human touch element.

Automated wealth platforms or robo-advice is not likely to find its success by just digitalising its services, says Thomas Davenport, a professor of information technology and management at Babson College. The future lies in a hybrid model that uses the efficiency of big data with the softness of personalised human advice.

Around 60 per cent of consumers would rather have a live person in charge of their finances instead of relying on automated technology, according to a survey from Legg Mason Asset Management.

Reducing Investment Funds to SMEs from Financial Institutions to Drive Global Market for Peer-to-peer Lending (OpenPR), Rated: B

A recent report added to the portfolio of MarketResearchReports.biz presents a detailed analytical account of the global market for peer to peer lending. The report, titled “Global Peer-to-peer Lending Market Size, Status and Forecast 2022,” states that the market will exhibit growth at an exponential pace over the period between 2017 and 2022.

This report presents detailed insights into the market and its expansion across the globe from 2017 to 2022.

Get Sample Copy Of This Report @
www.marketresearchreports.biz/sample/sample/970169

Australia

Fintech’s feeding frenzy: why it’s time to stop, collaborate and listen (Finfeed), Rated: AAA

In 2016, KPMG suggested US$24.7 billion was invested in fintech companies globally. Data accumulated by Financial Technology Partners, an investment bank focused on fintech, cites $36 billion across over 1500 funding deals from over 1700 unique investors (not taking into account M&A deals) as a more accurate figure.

As it has done throughout history, the banking and lending industry is dominating the fintech landscape, with payments and e-commerce a formidable rival.

The financial services and technology sectors are set for changes as the budget proposed a series of measures to encourage innovation in the fintech industry. This includes new legislation which, if implemented, is likely to allow crowd-sourced equity funding, tax concessions for start-ups and angel investors and fewer barriers to licensing of finance firms. The traditional banking sector could see more digital disruption arising from these changes which could subsequently create demand for top finance and technology talent.

Credit insurance provider Atradius recently launched its new digital platform ‘Atrium’, which provides customers and distribution partners with real-time data to better understand buyers, credit limits and risk. The platform is designed to drastically improve the user experience, including time efficiency – operations that used to take 15 minutes now only take three.

Then there is Lenddo, an Asia-based fintech platform that uses non-traditional data to provide credit scoring and verification to economically empower the emerging middle class around the world.

Secure payments data platform, EFTsure, recently announced a new collaboration agreement with PricewaterhouseCoopers Australia. Under the agreement, PwC can advise certain clients of EFTsure’s innovative real-time payment verification technology and best practice payee management solution to help those clients to mitigate the risk of fraudulent or erroneous electronic business payments.

Other companies making inroads include UBank, one of Australia’s leading digital-only banks, which recently unveiled RoboChat, Australia’s first virtual assistant to help potential home buyers and refinancers complete their online home loan applications.

Source: Finfeed
India

Fintech Startups And Why They Need To Get An NBFC License (TechStory), Rated: A

FinTech, the abbreviated form of financial technology, is that segment of the start-up culture that deals with good old finance and banking business but through the more novel methods of crowdfunding, peer-to-peer models, mobile payments, loans and even asset management. They squarely fall under the definition of Non-Banking Financial Companies (NBFCs), and considered against the Indian banking scenario they do not meet the legal definition of a bank as is outlined in the Companies Act 2013 or even the Companies Act, 1956.

If a recent Accenture report is anything to go by, fintech that was in a near-nascent state back in 2008 globally shot up in value from $930 million to about $12 billion by the start of 2015.

The other advantages are:

  • Cheaper business setup and expansion costs;
  • Quick rolling of funding rather than the drawn out method of first talking to investors;
  • Cheaper cross-border transfer of money (a fine example is that of UK-based TransferWise);
  • Simple registration process backed by minimal documentation, sometimes not requiring any Net Worth or collateral information (as is the case with LendingKart);
  • Make alternative credit scoring possible for ineligible borrowers for various types of loans; and
  • Even foster efficient fraud and anti-money laundering management in real time across products, channels and customers (as IndusInd has been successfully pioneering since quite some time now).

Why FinTechs need NBFC licenses to operate?

Since NBFCs are principally in the business of providing loans and advances, insurance, acquisition of shares, debentures and stocks, leasing, hire-purchase and even receiving deposits under a set arrangement or scheme, they fulfil the popular 50-50 test and are required to obtain the ‘Commencement of Business’ certificate from RBI (as per section 45 l (a) of the RBI Act).

The 50-50 test that is the basis of the principal business conducted by an NBFC finds application when a company’s financial assets constitute more than 50 percent of the total assets and income from financial assets constitute more than 50 percent of the gross income.

Democratising real estate via blockchain (New Straits Times), Rated: A

At the same time, our commitment to offer alternative investment channels was reinforced when we saw how the global flow of funds and individual investors continued to cause disruptions in house prices in many major cities.

Crowdfunding and peer-to-peer lending have been touted as among potential alternative platforms that can give small developers access to funding. We saw a number of such platforms used in many countries and they helped solve some of the funding needs.

On June 18 2015, we were deeply encouraged by news that Wanda Group (one of the largest commercial developers in China or the world by now) announced that it had raised five billion yuan (RM3.4 billion) from investors online in just three days to fund the construction of three malls. Investors were able to take part in the projects by investing as little as 1,000 yuan. This is truly opening up access to real estate.

Firstly, digital tokens created on blockchains are technically very difficult to hack and all transactions and documents are transparent. Secondly, in transaction using digital tokens, especially those involving completed properties, a lot of middleman fees can be reduced. More importantly, such digital tokens can be traded much like shares are traded on stock exchanges. This makes real estate a liquid instrument.

A Loan to Fund Every Need (Outlook India), Rated: B

“Data analytics offer efficient ways of analysing credit history and behaviour of a prospective borrower to make lending fast and easy on the digital platform,” says Rishi Mehra, CEO, Wishfin.com. Smartphones have made digital transactions seamless and by including a lending option, the ‘right now’ generation has it going for them like never before.

A P2P lending portal works in a way wherein lenders can make offers to fund borrower’s requirements which are accepted on first come, first served basis. Borrowers can seek to raise money from multiple lenders. A formal contract is signed by the lender and the borrower once they reach an agreement. The good news is that RBI has finalised P2P lending norms, which means there is nothing illegal or fishy about these loans. This format of lending is fast catching up, especially among the youth because many of them don’t have a credit score that will make them eligible for borrowing as soon as they start earning.

Asia

Financial authority to regulate peer-to-peer lending (The Jakarta Post), Rated: AAA

The Financial Service Authority (OJK) will soon regulate peer-to-peer (P2P) lending to minimize the risk of bad debt in the virtual financing business.

“The procedures for borrowing will be regulated in detail, such as how contract agreements anticipate the risk of bad debt,” Hendrikus said as reported by kompas.com on Wednesday.

He said his institution would also regulate the mechanism of “know your costumer” (KYC) through the existing technology.

Geisha loan application: Accepted (Nikkei Asian Review), Rated: A

Some new loan-makers are dabbling in tech to help them gauge a potential borrower’s creditworthiness.

For potential borrowers it finds here, the lender will set artificial intelligence loose on the trove of data that the booking website serves up, like how busy the applicants’ inns are.

Japan Net Bank, an online lender, also uses technology to sift through big data when screening potential borrowers. Partnering with freee, a Tokyo-based online accounting software provider, the bank recently began using AI to quickly pick up and analyze data concerning potential borrowers’ financial situations as well as how well their businesses are doing.

Middle East

Bahrain: The latest nation to lay claim to “fintech hub” status (AltFi), Rated: A

Where isn’t a global fintech hub these days? Count Bahrain among the multitude of claimants. The Central Bank of Bahrain (CBB) has announced the first members of its new regulatory sandbox: NOW Money and Tramonex.

Dubai-based NOW Money claims to be the first company in the Gulf region to offer a mobile banking solution to users, including accounts and a range of low-cost global money transfer options for low-income workers.

Tramonex is a business-facing solution, helping companies to process and transfer funds online. Its focus is on facilitating conversion and settlement services to automate cross-border transactions.

Micropayments FinTech Innovation in Dubai (Simmons&Simmons), Rated: B

International law firm Simmons & Simmons continues to advise on cutting edge payment platform projects and the emerging regulation of payments. The Middle East TMT team, led by partner Raza Rizvi and senior associate Neil Westwood, advised Mercury Payments Services LLC (Mercury) on the phased roll out of an innovative payment service through cards issued by the Roads and Transport Authority of Dubai (RTA).

Africa

SA fintech adoption beats global average, expected to surge (Moneyweb), Rated: AAA

South Africa ranks among the highest in fintech users globally and reports one of the highest incidences of intended use, a new study finds.

At 35%, fintech adoption in South Africa beats the global average of 33% and is mostly in line with its emerging market peers, who boast large tech savvy but financially underserved populations. Domestically, 6% of fintech users use five or more services and are classified as super users.

At 41%, adoption among consumers aged 25 to 34 is highest, closely followed by those aged 35 to 44 at 40%. The largely digital native 18 to 24 year-old category lags behind at 36%, mostly due to them having less sophisticated financial needs. Adoption gradually declines from age 45 upwards.

EY found that fintech adoption is highest among South Africans who earn $50 000 to $80 000 per annum at 51%, with usage at 50% among those who earn more than $150 000 annually. Adoption of all five services – money transfer and payments, financial planning, savings and investments, borrowing and insurance – is highest among the former income bracket. Surprisingly, those that earn more than $150 000 are the highest users of borrowing services, possibly due to their ability to leverage off their earnings.

Source: Moneyweb
South America

Brazil proposes new rules for fintechs, peer-to-peer lending (NASDAQ), Rated: A

Brazil’s central bank has proposed allowing financial technology companies to lend money, without taking deposits as commercial banks do, as part of new rules for the fast-growing fintech industry in Latin America’s largest economy.

The rules,which will be assessed in public hearings over the next 2-1/2 months, should not require congressional approval, central bank director Otávio Damaso said on Wednesday. Commercial banks will be allowed to create their own fintechs once the rules are in place, he said.

CARICOM

Global Domination Capital (Newsday), Rated: A

Global Domination Capital is set to be the region’s first fintech startup company, offering equity crowdfunding and peer-to-peer lending solutions to the OECS countries and the CARICOM member states.

This includes Barbados, Jamaica, The Bahamas, Trinidad and Tobago and The Turks and Caicos Islands.

Authors:

George Popescu
Allen Taylor

Thursday July 6 2017, Daily News Digest

most active angel investors

News Comments Today’s main news: CAN Capital begins funding small businesses after funding from Varadero Capital. What happened to BizFi?. Zhong An applies for Hong Kong IPO. P2P lending hits 1T won in South Korea. Funding Societies named to Fintech 250. Today’s main analysis: Key trends in modern finance. Angel investors total nearly one third of active fintech investors. […]

most active angel investors

News Comments

United States

United Kingdom

China

European Union

International

Asia

Africa

News Summary

United States

CAN Capital is Back in Business as it Receives Funding from Varadero Capital (Crowdfund Insider), Rated: AAA

CAN Capital, an online lender in the SME lending space, is back in business following a recapitalization by Varadero Capital, an alternative asset manager in New York City and currently manages about $1.3 billion. The specific deal terms were not disclosed.

CAN Capital announced it will immediately begin funding existing small business customers that are eligible for a renewal and will start funding new customers by working with select sales partners.

CAN Capital said it will start with two products available in all 50 states, term loans and merchant cash advances with funding amounts from $2,500 to $150,000.

This tiny Florida bank says APIs could make it a national player (American Banker), Rated: AAA

Surety Bank in DeLand, Fla., is making what many would consider a risky move. It’s ditching its legacy core vendor for a cloud-based startup core provider with just a handful of clients.

The bank has signed with Nymbus, a startup in Miami, to replace its core system early next year. James said he was attracted to the open platform that relies on application programming interfaces to connect with a variety of providers.

By embracing APIs, Surety will not be beholden to any one vendor and can partner with fintechs and other third-party providers in a quick and efficient manner.

FTC shuts down Blue Global for sharing consumers’ loan-application data (VentureBeat), Rated: A

The Federal Trade Commission said it halted the operations of Blue Global Media after the company earned millions of dollars by falsely promising to match them with low-rate loans.

The FTC’s complaint alleged that, starting in 2009, Blue Global set up sites such as cashmojo.com, clickloans.net, and 100dayloans.com, which promised to connect consumers with more than 100 “trusted lending partners” and find the one offering them the best loan terms.

The complaint alleged that complete applications were sold, without consumer consent, “to any potential buyer without conditions and with little regard to how it would be used.”

In a settlement, Blue Global faced a judgment of $104 million. Both Blue Global and Kay filed for Chapter 7 bankruptcy, listing the FTC as a creditor.

Just One Third of OnDeck Borrowers Need Human Intervention (Bank Innovation), Rated: A

At the initial stages of a loan application, “100% of our applicants get algorithmic decisions,” Katzenberg explained. The algorithm then “spits out” one of the three decisions: the applicant is either declined; approved and can move on to the booking stage; or pending and needs further investigation. “In this case, the algorithm picks up on something, or the loan value is larger than our average, or maybe it’s a random test of the model,” he said.

Currently, about one third of OnDeck’s loans experience a manual intervention.

NASB Financial, Inc. Announces North American Savings Bank Named Top VA Mortgage Lender (Cision), Rated: A

NASB Financial, Inc. (OTCQX: NASB) announced today that its subsidiary institution, North American Savings Bank, F.S.B. (“NASB”), was recently named a Top VA Lender by LendingTree, a leading online loan marketplace.  Criteria for the award included loan volume, quality, and customer service.  LendingTree noted that “NASB customers benefit from fast and easy processing, low rates, and excellent customer service.  The company is also well known for their professionalism, and their ability to get the job done, even in unusual or stressful circumstances.”

What Happened to Bizfi? (deBanked), Rated: A

This past week, Bizfi gave their remaining employees a 90-day warning notice, according to sources familiar with the matter. Some of those riding out their potentially last 90 days are anxiously awaiting the outcome of nonpublic negotiations to salvage parts of the company’s legacy, if it can be done at all.

Everything You Would Want to know About Crowdvouching (Live Bitcoin News), Rated: A

The decision to lend money is made on the basis of a form outlining the borrower’s financial history. Users share the risks, and depending on whether the individual returns the money or not, they can lose or earn from $1 to $10.

The default rate also decreases with an increase in accountability. As noted by Eugene Lobachev, Suretly’s founder, the default rate on Suretly is 2-3 percent lower than the market average.

Suretly primarily targets short term loans of up to one month, and has been designed to cater all borrowers, including the ones with poor credit rating.

LendingClub Appoints Ken Denman to its Board of Directors (Cision), Rated: A

LendingClub (NYSE: LC), America’s largest online marketplace connecting borrowers and investors, today announces Kenneth Denman as the newest member of its Board of Directors. Effective June 28, 2017, Denman joins as a Class One director and will serve on the Audit and Compensation Committees.

Denman, a venture partner at Sway Ventures, has served as a CEO for over fifteen years leading corporate transformations for the likes of Emotient, Inc. (acquired by Apple in January 2016), Openwave Systems, Inc. (now Unwired Planet), and iPass, Inc. He has held executive roles at MediaOne Group, Inc., US WEST Communications Group and the Battelle Memorial Institute Laboratory.

Will Everything Eventually Be On the Blockchain? (YouTube), Rated: A

Dan Larimer of EOS thinks so.

Summer Fintech Reading Ideas (Lend Academy), Rated: B

  1. Blockchain Revolution by Don and Alex Tapscott
  2. Augmented: Life in the Smart Lane by Brett King
  3. The FINTECH Book: The Financial Technology Handbook for Investors, Entrepreneurs and Visionaries by Susanne Chishti and Janos Barberis
  4. Platform Revolution by Geoffrey G. Parker, Marshall W. Van Alstyne and Sangeet Paul Choudary
  5. The Unbanking of America: How the New Middle Class Survives by Lisa Servon – Lisa Servon is a University of Pennsylvania professor who has spent time working behind the counter at a check cashing store and a payday lender. She provides profiles of the kinds of people who use these services and why they choose to access credit outside the traditional banking system. She also shares some of the work that innovative companies are doing to address the unique challenges of the underbanked.
United Kingdom

Two thirds of Brits have no idea what their credit score is, according to research (The Sun), Rated: AAA

A poll of 2,000 adults in the UK found that more than four in 10 have never tried to find out their credit score, and it’s been longer than a year since checking for nearly 20 per cent.

The survey revealed that the most common use for credit cards was to buy expensive one-off items, although an incredible four in 10 use it to buy anything, as if it was just a debit card of containing free money.

One in 20 have had their applications for a mortgage rejected – and even been denied a mobile phone contract, due to their poor credit history.

More than half of the country doesn’t know exactly how much they owe on credit cards and loans, although estimates suggest that, on average, each Brit has £1,780 worth of credit card debt.

RateSetter to launch hire purchase loans (P2P Finance News), Rated: AAA

RATESETTER has announced plans to start offering Hire-Purchase (HP) products for commercial and individual borrowers later this month.

While details on the interest rates and underwriting criteria are yet to be released, the company has confirmed that the HP loans will pay into its Provision Fund, just like every other loan on its platform.

The loans will be financed from RateSetter’s existing investment markets, so all new and existing lenders can take advantage of the hire purchase agreements.

The funding gap: why tech SMEs need alternative finance (Business Matters), Rated: AAA

UK tech start-ups are receiving a lot of attention in the press. They’re something we’re rightly proud of – the UK is a centre of innovation. Tech investment in the UK was £6.8bn last year, which is more than double that found in any other country in Europe. France, in second place, only secured £2.4bn.

But there are a lot of tech companies in the mid-market who find it much harder to get access to the finance they need. Once a business graduates from sexy start-up full of promise and astronomical growth models into a steady going concern, it often becomes more difficult to attract the interest of investors.

In short, many mid-market tech companies are ignored by VC because they’re not edgy enough and declined by the banks because they’re not secure enough. But these mid-sized companies are the backbone of the UK’s tech scene, the crop of successful brands which made it out of the initial scrum and built a steady income and a route to profitability. Real success for the UK tech sector means helping these companies keep going on that route – so how do they find the money to grow?

By going down the peer-to-peer lending route, mid-market companies can get access to funding much faster, with a far greater level of flexibility and a much lower minimum threshold for borrowing.

MORTGAGEGYM APPOINTS FORMER DEUTSCHE BANK COO (Business Cloud), Rated: A

Mortgage robo-adviser MortgageGym.com has appointed a former COO of Deutsche Bank as an adviser after he invested in the company.

Henry Ritchotte, who was also a member of the management board of Deutsche Bank AG, has joined with immediate effect after putting in £500,000.

Vantiv Offers $ 10 Billion Towards Acquisition of London Fintech Firm Worldpay (Crowdfund Insider), Rated: A

Worldpay Group, a British payment processing firm, announced on Wednesday that Vantiv has offered $10 billion towards the fintech company’s acquisition.

UK remains European leader for tech investment in year since Brexit (PCR), Rated: A

In total, some £2.4 billion worth of venture capital funding has been pushed into Britain’s technology companies since the vote, according to research from London & Partners, a branch of the London Mayor’s office. This was more than double the investment made in Germany and three times the amount poured into France. London in particular is securely established as the tech-centre of Europe, with 554 deals totalling £1.8 billion being made in the last 12 months. In comparison, Berlin has tied up £775 million worth of deals and Paris has secured £557 million in venture investment.

The research found that the first half of 2017 had seen a record £1.1bn of venture capital funding into London start-ups. For the UK as a whole it was £1.4bn, the third biggest on record.

Online lending platform works for Galway SMEs (Galway Advertiser), Rated: A

Thirty-nine Galway businesses have raised funds through Linked Finance’s online lending platform.

Linked Finance, a peer-to-peer lending company, says it has raised €1m for Galway-based businesses, including Revive Active, Walsh’s Bakery and Schoolbooks.ie, aimed at facilitating growth.

At Auto Trader, Coe steps up as Glithero steps down (Aim Group), Rated: B

Sean Glithero, chief financial officer (CFO) of Auto Trader Group PLC, will step down from his position later this year, and a successor has already been lined up.

Auto Trader nominated chief operating officer Nathan Coe as the successor of Glithero. 

The pros and cons of crowdfunding (City A.M.), Rated: B

For investors

Crowdfunding platform Seedrs has produced an annual return between 14.4 per cent and 49.1 per cent, once tax relief is taken into account.

  • Unlinked to markets  The other thing to bear in mind is these types of investments aren’t listed on a stock exchange, meaning they are not correlated to the markets. This can be good from a diversification point of view, because crowdfunding investments are not exposed to the same market wobbles.
  • Different platforms, different risks

For businesses

  • Range of requirements
  • Life after the fundraise – “Without a proper structure in place, and a platform that provides support post-fundraising, the complexity and administrative burden of managing a crowd of investors can be a very real drain on time, money and resource for companies.”
China

Lessons from China’s Peer-to-Peer Lending Boom (Federal Reserve Bank of SF), Rated: AAA

In this episode of our series on financial technology, we sat down with Ning Tang, founder and CEO of CreditEase.

Nicholas Borst: Ning, thank you so much for joining us today. China appears to be at the forefront of the global fintech revolution. What are the main factors why fintech is developing so quickly in China?

Ning Tang: I think several key drivers. One is that compared with the US market, which is more mature, China is still developing. I mean China’s financial system, our credit system. So, the demand is bigger in China, like from small business owners, from micro-entrepreneurs, from consumers, and rural people. So, that’s one.

Secondly, China has adopted technologies such as mobile internet much earlier than the US.

Also, the regulators have played a very important and positive role in promoting market development in a healthy, stable way.

Nicholas Borst: Ning, could you tell us a little bit about how the alternative lending sector in China has developed?

Ning Tang: I think in China, traditionally, banks looked at collateral, a physical good as collateral. Many small entrepreneurs, small businesses don’t have such physical goods. They have intangible value in their data, electronic data. For instance, we have a partnership with eBay, helping Chinese merchants who actually sell goods to US consumers, this segment access financing. They have no physical goods, assets, as collateral, but their data is very valuable. So, we work with eBay and their merchants. Whenever they have a financing need, yet they can provide their data to us, and our credit evaluation engine can real-time assess a credit quality, and match that need with investor money. This is very cool. Many such needs are time-sensitive. It cannot wait for several weeks to allow the borrower to go to a branch office and submit tons of documentation, wait for several weeks. No, that’s not possible.

Nicholas Borst: Are a lot of fintech companies in China sharing information?

Ning Tang: Yes. After we took the first step, some tried first by just using our data first. Then they realized that this is indeed a great system. More and more joined, and now we have over 500 industry players. All kinds of players, like banks, insurance companies, also P2P marketplace lenders, alternative lenders, and all exchange data in this system. At the same time, I expect that the Chinese regulators will step up their effort to create this more comprehensive national credit bureau system, and grant credit bureau licenses to credit bureaus in coming years.

Sean Creehan: Could you talk a little bit about the role of regulators, and the evolution of alternative lending in China?

Ning Tang: A key driver is that the regulators have played a very positive, conducive role in making that happen. They understand that there are a lot of unfulfilled needs in China’s financial system. They also understand that technology and business model innovations can help China do a better catch-up job, potentially doing some leap frog to make financial services more accessible, more cost efficient, more friendly.

For example, in marketplace lending, the regulators made it very clear early on, it’s actually a peer-to-peer like relationship. It’s not like a banking relationship where people make deposits.

About one year ago, we started to have more official regulations on marketplace lending, on payment, and also other sectors of fintech. But more for marketplace lending and payment. These two more mature sectors. I expect that other sectors, like crowdfunding, robo-advisor, insurance tech, and so on, will go through a similar path in coming years. Meaning like the industry will work very well with the regulators creating a healthy and robust industry landscape.

Listen to the full podcast.

Online insurer Zhong An applies for US$ 1.5bn Hong Kong IPO  (SCMP), Rated: AAA

Zhong An Online Property and Casualty Insurance, China’s first online-only insurer, which counts Alibaba and Tencent among its investors, is seeking to raise US$1.5 billion by listing in Hong Kong.

If the deal goes through, Zhong An will be the first financial technology company to be listed in Hong Kong.

European Union

Robo.Cash & Latvian Alternative Financial Services Association to Jointly Develop P2P Tech (Crowdfund Insider), Rated: A

ROBO.CASH and Latvian Alternative Financial Services Association have announced their intent to develop peer-to-peer technologies in Latvia.

The group, founded by Sergey Sedov, specializes in PDL-loans (Pay day) and Installment-loans. The company reports that more than 1.2 million loans have been issued since inception.

International

Key Trends in the World of Modern Finance (AltFi), Rated: AAA

Key Trend #1: Mobile payment remains in play

Key Trend #2:  Prioritizing Cyber Security

The recently published survey by American Express revealed that 37% of consumers who tried mobile wallets have stopped using them over security concerns, while 73% of retailers reported persistent or increasing levels of fraudulent online sales.

Key Trend #3:  Partnerships

Apple Pay:  Gaining momentum

Apple Pay is now supported by 1,938 banks and credit unions across the US, although most of them are regional in scope. In Europe, UK is leading the way with 24 banks (including Danske Bank), while Japan (133) and China (73) show the greatest integration in Asia-Pacific.

Alipay:  Going global 

Alipay users will now have an access to four million retailers across the US. First Data is the largest provider of payment solutions worldwide, processing 45% of all US credit and debit card transactions with 80% market share in gas and groceries.

Key Trend #6:  Move towards balance sheet lending model

Consumer lending remained a dominant, accounting for 61% market share, although it appears to be slowing down.

Angel investors make up nearly a third of the total number of active FinTech investors since 2014 (Fintech Global), Rated: AAA

There were 1,666 active angel investors in FinTech since the start of 2014. This translated to 32.3% of the total number of unique investors in the sector during that period. The remaining 67.7% comprised of VCs, investment banks and other financial institutions. The group of angel investors backed 1,010 deals, 16.6% of all deals in the FinTech sector since 2014. 521 of the total number of angel backed deals contained more than one individual investor, while 16.3% of all deals had four or more angels participating as co-investors, showing that most angels prefer to share the investment risk.

 

Abu Dhabi Shakes on FinTech Investment Pact with China (Cryptocoins News), Rated: B

The UAE’s second largest financial free zone has entered a partnership with a Chinese counterpart to enable fintech development and investment opportunities in both countries.

The two authorities will collaborate over investment opportunities together and a notable objective includes the strengthening of FinTech ecosystems in both markets in an era of digitization.

Asia

P2P lending hits record 1 tln won (Yonhap News), Rated: AAA

Peer-to-peer lending in South Korea surpassed 1 trillion won (US$870 million) last month, marking a rapid growth as yield-hungry investors funneled more money in the alternative lending scheme, industry data showed Thursday.

According to data compiled by the Korea P2P Financial Association, lending between peers was tallied at 1.16 trillion won at the end of last month.

The average interest rate of such loans stood at 14.68 percent.

Funding Societies Named to the 2017 Fintech 250 (Funding Societies Email), Rated: AAA

CB Insights named Funding Societies to the prestigious Fintech 250, a select group of emerging private companies working on groundbreaking financial technology. CB Insights CEO and co-founder, Anand Sanwal, revealed the Fintech 250 companies during The Future of Fintech, a gathering of the world’s largest financial institutions, best fintech startups, and most active venture investors.

“We are humbled to be named amongst the Fintech 250 globally and be the only digital lender on the list from Southeast Asia.” said Funding Societies co-founder Kelvin Teo. “Funding Societies currently serves Singapore, Malaysia and Indonesia, where it is known as Modalku, or My Capital in Bahasa. While each country is vastly different and requires us to rethink from scratch, it is a region we’re passionate in. We believe technology advancement in financial services can truly benefit societies here.”

Fintech startup Omise raises $ 25M in ICO that bucks ‘money grabbing’ trend (TechCrunch), Rated: A

Omise, a fintech startup based in Thailand, has closed $25 million in new financing via a token sale, more commonly know as ICO, that closed today. In doing so, it become the most established tech company to date to take this financing route.

The company, which has raised over $20 million to date from traditional VC investors, held the token sale to raise capital to develop a decentralized payment platform — Omise Go — that it hopes will disrupt the current banking system. The idea is to enable any Omise Go user to share funds through the network without the need for a bank account and without incurring fees or incurring cross-border costs. Beyond peer-to-peer payments, the company plans to sign up retail partners to extend its utility into purchases, and open the system up to other payment players, too.

Omise’s core business is enabling online payments, much like Stripe, in Thailand, Japan and Indonesia, but it became interested in the blockchain a few years ago, CEO Jun Hasegawa told TechCrunch in an interview.

The company has sold an initial 65.1 percent of the total float of OMG via this ICO, with a further five percent of the tokens will automatically be given to anyone who owns Ethereum in what is known as an ‘airdrop.’

Omise capped its token sale at $25 million, eschewing the ‘gold rush’ mentality which has seen other companies raise tens of millions of U.S. dollars more as ICOs have gained a reputation for giving backers huge financial gains quickly.

Africa

Crowdfunding the delivery of 17M mass housing units in Nigeria (Business Day Online), Rated: AAA

Over time, investors responded to this new opportunity, and more than five decades after their creation the U.S. stock exchange REITs industry has grown to a $1 trillion equity market capitalization (Nigeria $224M as at 2014 according to the NSE) and nearly $2 trillion in real estate assets.REITs in the U.S. and increasingly around the world now regularly provide investors with the opportunity for meaningful dividends, portfolio diversification, valuable liquidity, enviable transparency and competitive performance.

REIT was established in Nigeria following the enactment of the Investment and Securities Act (ISA) of 2007.

However, in a 2015 comparative (academic) study, Olarenle and others found when they compared REIT dividend payouts in Nigeria to global rates, that Nigeria REIT (N-REIT) underperforms, usingMalaysia REIT (M-REIT) asa benchmark both in terms of average return 4.8% and risk adjusted return -6.77% per annum against the Malaysia REIT 7.5% and 2.47% respectively. They recommended increased capitalization, market transparency and external management as options for N-REITs performance enhancement, all of which can perhaps be correlated to the maturity of the Nigerian REIT market.

Authors:

George Popescu
Allen Taylor

Tuesday March 14 2017, Daily News Digest

total debt balance

News Comments Today’s main news: SoFi’s loan losses pile up as wealthy borrowers default. Charles Schwab launches hybrid human-robo financial advice. GDR adds Avant as verification network partner. Vista to acquire D+H to merge with Misys.  Today’s main analysis: Household debt edges up as auto, credit card, and student debt climb. The regulation of MPL. Today’s thought-provoking articles: Everything […]

total debt balance

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United States

United Kingdom

European Union

Canada

Asia

Middle East

News Summary

United States

SoFi’s Loan Losses Pile Up as Even Wealthy Borrowers Default (Bloomberg), Rated: AAA

Social Finance Inc.’s online borrowers are defaulting at higher rates than underwriters for one of its bond deals had expected, the latest sign that an industry that hoped to upend banking is now getting tripped up by bad loans.

Losses on the company’s personal loans were high enough to breach key levels known as “triggers” last month on a bond deal issued in 2015 and backed by the loans, according to analysts at Morgan Stanley. If defaults keep rising, investors in bonds could end up missing out on expected interest payments.

Other online lenders have had similar trouble with defaults and triggers recently, which has broadly made it more expensive for the startups to fund their businesses. One pioneer in the business, CircleBack Lending Inc., stoppedmaking new loans as growing numbers of its borrowers defaulted.

Credit issues at Prosper Marketplace Inc. resulted in staff cuts at that company, and were largely the result of lending too much, too fast, and a “grow at all cost” attitude fueled by insatiable demand from investors, Prosper CEO David Kimball said at the New York conference last week.

Household Debt Edges Up as Auto, Credit Card, and Student Debt Climb (New York Fed), Rated: AAA

Aggregate household debt balances grew in the fourth quarter of 2016. As of December 31, 2016, total household indebtedness was $12.58 trillion, a $226 billion (1.8%) increase from the third quarter of 2016. Overall household debt is now 0.8% below its 2008Q3 peak of $12.68 trillion, and is 12.8% above the 2013Q2 trough.

Mortgage balances, the largest component of household debt, which stood at $8.48 trillion as of December 31, saw a $130 billion uptick from the third quarter of 2016.

Balances on home equity lines of credit (HELOC) were roughly flat, rising $1 billion to $473 billion.

Non-housing debt balances rose in the fourth quarter; with increases of $22 billion in auto loans, 32 billion in credit cards, and 31 billion in student loans.

Charles Schwab launches hybrid human-robo financial advice (WHTC), Rated: AAA

Brokerage Charles Schwab Corp on Tuesday launched a service that combines its automated investment management technology with human advisors, as financial institutions race to offer digital financial advice.

The service, called Schwab Intelligent Advisory, provides clients with a financial and investment plan, unlimited access to a human advisor via phone or video conference, and an investment portfolio of exchange-traded funds managed by computer algorithms.

The service, for clients with at least $25,000 to invest, includes an online platform that keeps track of financial goals and retirement plans, the San Francisco-based company said in a statement. It will charge a 0.28 percent fee on assets, with a quarterly maximum of $900.

The Regulation of Marketplace Lending: A Summary of the Principal Issues (Chapman and Cutler LLP), Rated: AAA

At the outset, it may be helpful for us to briefly discuss the scope of this paper and some of the terminology we use. There is no single or universally accepted definition of “marketplace lending.” In general, though, marketplace lenders can be viewed as companies engaged in an Internet-based lending business (other than payday lending) which are not banks or savings associations or otherwise regulated as financial institutions. They may offer a wide variety of financial products, including student loans, small business loans, and real estate loans, in addition to the unsecured installment consumer loans on which the industry initially focused. However, “marketplace lenders” may or may not actually be lenders. This term is a generic term to identify participants in marketing, originating, selling, and servicing loans. They also may fund their loans through a variety of means, including equity capital, commercial lines of credit, sales of whole loans to institutional investors, securitizations, and/or pass-through note programs. In this paper we focus on the consumer lenders since they are the most heavily regulated and have the highest loan volumes. However, much of the discussion herein—outside of matters pertaining directly to consumer lending regulation—will also apply to nonconsumer lenders.

Download “The Regulation of Marketplace Lending: A Summary of the Principal Issues” here.

Global Debt Registry Adds Avant as Verification Network Partner (Yahoo! Finance), Rated: AAA

Global Debt Registry (GDR), the asset certainty company known for its loan data validation expertise, today announced it has added leading online lending platform Avant to its verification network.

Investors in loans through Avant now have turnkey access to enhanced loan due diligence services and can easily add new data insights onto portfolios of loans without having to touch sensitive personally identifiable information (PII) about borrowers.

GDR’s eValidationSM and eVerifySM asset certainty tools require no technology investment, using existing data structures and processes to streamline the flow of information from the lender to the investor. In addition to digital scanning for traditional document verification and data integrity, GDR securely analyzes the Personally Identifiable Information (PII) to ensure borrower data can be independently confirmed in compliance with the investors representations and warranties.

Kroll Bond Rating Agency Assigns Preliminary Ratings to Marlette Funding Trust 2017-1 (BusinessWire), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Marlette Funding Trust 2017-1 (MFT 2017-1). This is a $257.44 million consumer loan ABS transaction that is expected to close on March 23, 2017. This transaction represents the third securitization collateralized by unsecured consumer loans originated by Cross River Bank, under the Marlette Best Egg Platform and sold to Marlette Funding, LLC (“Marlette”) or its affiliate.

Approximately $250 – $325 million of loans are originated through the Platform per quarter. Since March 2015, over $3 billion of loans have been originated though the Platform, and as of February 2017, Marlette has over $100 million of loans on its balance sheet.

The transaction has initial credit enhancement levels of 27.45% for the Class A Notes, 17.95% for the Class B Notes, and 9.10% for the Class C Notes. Credit enhancement consists of overcollateralization, subordination (in the case of the Class A and Class B Notes) and a reserve account funded at closing.

Traditional Advisor Business Model Will Not Last (Financial Advisor IQ), Rated: A

Several developments are creating a “perfect storm” that will revolutionize the financial advice industry and leave many advisors behind, John Lohr writes in Seeking Alpha.

First Ascent still uses real humans on its investment committee, while an independent advisor serves the client, Lohr writes. That model isn’t likely going away: even robo-advice pioneers such as Betterment now offer upgraded services that give investors unlimited interaction with a licensed advisor, he writes.

But Betterment’s annual fee for unlimited calls with an advisor is just .50%, according to Lohr. That means high-fee advisors are on the way out, he writes.

Clarity Money Marks Continued Growth with 100,000 Customers and Senior Hires (BusinessWire), Rated: B

Clarity Money, a revolutionary personal finance app that acts as the “Champion of your Money,” has reached 100,000 customers since its launch in January 2017. The app has been a “featured” personal finance app on the Apple App Store since its launch. Clarity Money was created by venture capitalist and serial entrepreneur Adam Dell.

To keep up with this growing demand, Clarity Money is pleased to announce three new additions to its team – Melissa Manne, Vice President of Product Management; Colin Kennedy, Chief Revenue Officer; and Marc Atiyeh, Chief Strategy Officer. The Clarity Money team already includes financial and technology veterans from Betterment, Google and IBM, as well as advisory board members Niall Ferguson, economic historian, and Dan Ariely, behavioral economist.

Clarity Money works by using data science and machine learning to provide personalized insights for customers. By utilizing a combination of techniques such as natural language processing, anomaly detection and spectral analysis, customers are able to take advantage of features such as: bill lowering, subscription cancellation, creating a savings accounts and providing tailored suggestions on things such as credit cards.

With the potential impact of financial deregulation and the weakening of the Consumer Financial Protection Bureau, consumers need a financial advocate now more than ever. Banks and financial institutions already have powerful tools designed to sell, market and retain customers, but consumers don’t have an equally powerful tool to level the playing field and protect against hidden fees and recurring charges. Clarity Money empowers consumers to take control of their finances, providing them with transparency, organization and actionable insights.

PeerStreet Awarded ‘Top Emerging Real Estate Platform’ by LendIt (Yahoo! Finance), Rated: A

PeerStreet, a marketplace for investing in real estate backed loans, is pleased to announce that it has been named the Top Emerging Real Estate Platform in the LendIt 2017 Awards. PeerStreet is an Andreessen Horowitz-backed platform, focused on democratizing access to investments in real estate debt.

The Top Emerging Real Estate Platform category focused on younger companies that have demonstrated the greatest potential to impact the future of real estate investing. PeerStreet stood out as the top platform with its unique model, as it is not a direct lender and brings an innovative offering to investors.

RealtyMogul.com CEO Jilliene Helman Named Fintech Woman of the Year (Yahoo! Finance), Rated: A

RealtyMogul.com CEO Jilliene Helman was named Fintech Woman of the Year at the first annual LendIt Industry Awards. Helman was honored for her “outstanding leadership, integrity, performance, and team-building support within RealtyMogul, as well as her contributions to the advancement of the industry.”

The awards, which showcased leaders from across the fintech industry, were part of the annual LendIt USA Conference held in New York City March 6 and 7th. Helman was selected by a panel of 30 industry expert judges from among a field of six leading fintech pioneers.

New fintech conference focused on branded currency comes to Omaha (siliconprairienews), Rated: A

Flourish: The Growth of Branded Currency is a fintech conference launching in Omaha this April 10 -12. The conference is focused on branded currency, and is targeting a range of retailers from those with a national presence to smaller Midwest retailers and their technology service providers.

K+H Connection is the company hosting the event. K+H is a fintech consulting firm based in Chicago, IL that focuses specifically on helping fintech companies integrate with merchants.

HG: Branded currency is actually a relatively new term. In short, it is any sort of tender that is branded and used for a specific purpose or at a specific merchant or location. It could be a gift card, promotional value you earn through a referral or loyalty program, points earned through a credit card program, prepaid mall-branded gift cards, etc. These types of products are more than just a form of tender, they incentivize spend and behavior.

We’re also focusing heavily on fraud within branded currency. Fraud has been the number one thing that people have asked us to discuss, so we are going to have a huge session on it.

Podcast 93: John Donovan of Bizfi (Lend Academy), Rated: A

Industry pioneer John Donovan talks about why he is excited to be at the helm of one of the leaders in small business lending.

LendIt USA 2017: Sessions You May Have Missed (LendIt), Rated: B

Thanks to everyone who joined us at LendIt USA 2017. Our growth surpassed our expectations and we had close to 5,900 attendees at the two-day conference.

United Kingdom

NACFB offers members ‘unrestricted’ insurance cover for peer-to-peer (Bridging&Commercial), Rated: AAA

The National Association of Commercial Finance Brokers (NACFB) has announced it will now offer members unrestricted insurance cover for peer-to-peer (P2P) lending.

Under the terms of NACFB membership, brokers must have professional indemnity insurance covering them against mis-selling claims from clients.

UK and Japanese regulators agree to cooperate on fintech (Out-Law.com), Rated: A

On Thursday, the FCA and JFSA agreed a mutual referral system which will see the regulators provide assistance to fintech businesses that wish to expand UK operations into Japan, or vice versa.

The collaboration, which was confirmed by an exchange of letters, will also facilitate information sharing between the regulators on emerging market trends and regulatory issues pertaining to fintech, as well as information concerning referrals.

European Union

CSI globalVCard Expands Globally (PR Newswire), Rated: AAA

CSI globalVCard, a leading B2B payments company specializing in secure and rewarding payments, today announced that it has expanded services to Europe and has opened a London office, its first move in a planned worldwide expansion. The company plans to roll out its services across additional continents by year’s end. CSI will use the payment issuance capacity of PrePay Solutions (PPS), a subsidiary of Edenred (70% owned by Edenred and 30% by MasterCard), worldwide leader in prepaid corporate services. PPS will bring CSI its unique payment technology to issue and process all  CSI virtual cards and wire transfers in Europe.

Expansion outside of North America was sparked by CSI globalVCard’s growing demand from multi-national clients, their increased need for native currency payments, as well as customer service support across local time zones. The global payments market is estimated at $1.2 trillion, of which B2B payments account for $550 billion. Ten percent of organizations make between 20 and 50 percent of their payments to foreign suppliers, and organizations earning over $2 billion in revenue pay the largest percent of their payments to foreign suppliers.1

Canada

Vista to acquire D+H for fintech merger with Misys (Financial News), Rated: AAA

Private equity firm Vista Equity Partners has struck a deal to acquire D+H, a Canadian financial technology provider, with an eye to merging it with UK-based Misys to create a financial software company with $2.2 billion in revenues.

US-based Vista said in a statement today that it will pay C$25.50 per share in cash for D+H, including the assumption of debt, in a deal that values the Toronto-listed firm at 4.8 billion Canadian dollars.

Misys chief executive Nadeem Syed said the combination of the two companies gives them the opportunity to create a “global fintech powerhouse”.

That powerhouse would have about 10,000 employees and 9,000 customers, including 48 of the top 50 banks, the statement said.

Asia

Here’s Everything You Should Know About Alternative Lending In Asia (Forbes), Rated: AAA

Over the last 5-10 years, China, India, and Southeast Asia have leapfrogged from a cash-based society to one where mobile payments are common currency, skipping adoption of credit cards, savings accounts and other consumer financial products common in Western countries. The result: a population that’s smartphone-savvy but still largely unbanked, without the credit histories necessary to access traditional small business or personal loans. It’s a prime market for alternative lenders, who usually use alternative means to assess creditworthiness, foregoing traditional credit scores altogether.

Here is a brief taxonomy of the many types of alternative lenders currently operating in both Asia and the West.

According to Bloomberg, China has 2,200 P2P lenders alone, and its P2P lending market is valued at an estimated $100 billion.

Chinese tech giants have aggressively pursued synergies between different divisions of their sprawling businesses. For instance, Sesame Credit, Alibaba’s alternative credit scoring program, looks at the frequency and cost of a customer’s purchases on Alibaba’s mobile payments platform Alipay in order to determine creditworthiness.

Meanwhile, India’s alternative lending market is in a much earlier stage. Giant tech companies don’t yet dominate the scene, and so the balance-sheet lending landscape includes a large number of small specialists like EarlySalary (payday loans), ZestMoney (point of sale), and Buddy (targeted at students). There are only about 30 P2P lenders in the country, which is surprising for a country where nearly 40% of the population is unbanked, and therefore without access to traditional loans.

Southeast Asia has one of the fastest growing economies in the world, but the small- and medium-sized businesses (SMEs) that make it up have more limited access to financial credit than the global average.

In Singapore, the financial center of the region, the major alternative finance players in Singapore are peer-to-company (P2C) lenders: specialized P2P lenders that only provide loans for SMEs. Market leader Capital Match was founded in 2014, but says it has already paid out more than S$32m (US$22.5m) in loans.

Malaysia is doing its part to meet P2P companies like Funding Societies in the middle, having recently updated its financial guidelines to include P2P lending. Thailand has done the same, issuing a consultation paper on regulations for P2P lending last fall.

German Challenger Bank SolarisBank Goes to Asia (Fintech News), Rated: AAA

The financial services subsidiary of the Bertelsmann Group, Arvato Financial Solutions, and the Japanese investor SBI Group will invest in solarisBank in a partnership that promises significant cooperation potential across international markets. In total, the Berlin-based bank raises EUR 26.3 million in the series A financing, meanwhile seed investors FinLeap, Hegus and yabeo Capital participate as well.

As the young bank steps up its internationalisation efforts, new executives are being added to its leadership team: Roland Folz will join the Management Board as CEO, while Gerrit Seidel will take over as Supervisory Board Chairman from HitFox Group and FinLeap founder Jan Beckers.

solarisBank intends to expand its activities in European and Asian countries over the coming years, and will establish joint venture companies with the SBI Group in order to develop businesses in Asia.

Middle East

The real estate property crowdfunder with an ethical conscience (Zawya), Rated: A

As key professional in the Qatar real estate industry gather for the annual Cityscape exhibition in Doha,  MercyCrowd, a brand new type of property crowdfunding platform, will offer for the first time to people in Qatar international real estate purchases through crowdfunding.

MercyCrowd  is part of the Elite International Asset Group, an established international company promoting real estate investment in Europe with a specialty in the French and UK market.  However, what makes MercyCrowd uniquely different is the company’s core belief that sustainable growth can only stem from real assets that generate real increments and tangible benefits to a society.

Authors:

George Popescu
Allen Taylor

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 […]

lending-times

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United States

United Kingdom

China

India

Asia

Middle East

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

Monday December 19th 2016, Daily News Digest

Monday December 19th 2016, Daily News Digest

News Comments Today’s main news: Lending Club CTO resigns. Higher financing cost expected to be pushed to the borrower. Zopa lifts investment limits. Nigeria fintech startup Paystack raises $1.3M in seed money. Today’s main analysis: Novel underwriting criteria by SoFi in RMBS leads to a strong rating. Statistics of lending between friends and in families. Today’s thought-provoking articles: The rise […]

Monday December 19th 2016, Daily News Digest

News Comments

United States

United Kingdom

  • Zopa lifts investment limits. GP:” I didn’t expect this to last long. It did get Zopa some nice press. And I am glad it didnt’ last long. If it had lasted too long it would have been a bad sign.”AT: “That didn’t last long.”
  • Growth Street’s Sherwin-Smith says 34M GBP has been originated to date.
  • 25% fall out with friends over loans. GP:” Very interesting statistic : 1/4 or so of friends have a fall out over money.  And 3/4 of UK people polled lent money in the last 12 months and 4% lent more then 5,000 GBP. Inside friends and family loans estimated to 2.9bil GBP per year.”

European Union

Australia

India

Asia

Africa

  • Paystack raises $1.3M. GP:” We are pleased to cover the whole world and to see p2p lending and fintech growing everywhere.”

International

News Summary

 

United States

PeerIQ Weekly Industry Update (PeerIQ Email), Rated: AAA

In a widely expected move, FOMC officials increased the Fed Funds rate by 25 bps to a target range of between 50 and 75 bps. Higher financing costs on warehouse lines will reduce net interest margins for whole loan investors unless there is a commensurate rate increase for borrowers. Platforms are expected to pass on some or all of the increase in borrowing costs to consumers to demonstrate the resiliency of the business model to small changes in interest rates.

Much like the beginning of 2016, Fed officials expect several rate increases in the new year as the economy approaches full employment. However, we note that over the life of the current expansion officials have consistently over-estimated the pace of GDP growth and inflation and therefore the pace of rate increases has been slower than expectations.

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. Nevertheless, SoFi intends to retain risk in the transaction.

Collateral Quality of SFPMT 2016-1 is One of the Strongest in 2016

Unlike traditional RMBS underwriters, SoFi incorporates additional criteria such as Free Cash Flow (FCF) and Real Excess Cash Flow (REC) into its underwriting process. REC measures a minimum residual income after payment of housing expenses, taxes, debt obligations, and estimated discretionary and cost of living expenses based on the borrower’s location. SoFi assesses the borrowers’ liquidity position to ensure that they have consistent cash excess including their mortgage payments.

Besides this novel underwriting criteria, SFPMT 2016-1 also has a number of strong collateral characteristics that mitigates potential credit risk. For instance, its collateral pool has one of the lowest weighted average loan-to-value (LTV) and debt-to-income (DTI) ratios amongst recent prime jumbo deals.

Fed Fund Rate Hike led to Wider Pricing for SFPMT 2016-1

The Federal Reserve on Wednesday sent its key short-term interest rate up by a quarter of a percentage point. FNMA 30yr conventional loan pool with 3.0% coupon trades around at 3.3% yield today vs 2.6% yield a month ago. Due to the recent interest rate hike and other factors, SFPMT 2016-1 was priced wider than other recent comparable transactions. For instance, the Sequoia deal SEMT 2016-3 was priced over 100 basis points tighter over a month ago due to changes in the rate environment and other factors.

Orchard Weekly Online Lending Snapshot (Orchard Platform), Rated: AAA

Many banks were quick to announce an increase in their prime lending rates, and while we expect that some online lenders will follow suit, as of this writing we have not seen similar announcements. While 2016 has been a turbulent yearfor some online lenders, we expect the acceleration in positive deals and increased interest from traditional lenders looking to participate in the space will continue into 2017.

Why Lenders Should Embrace Alternative Credit Scores (National Mortgage News), Rated: AAA

It may take time and regulatory easing for depositories to emulate organizations like SoFi in transitioning to a “FICO-free” credit scoring model, but there is definite merit in leveraging alternative models to tap into a significantly underserved (yet creditworthy) segment of the population. Developing an alternative credit score or leveraging existing models enables a lender to penetrate this overlooked market and gain new consumers at a time of increased competition and reduced profit margins.

An Experian study estimated that 64 million consumers in the United States do not have a FICO credit score. Further, Vantagescore assessed 10 million of these so-called “unscoreable” consumers as prime or near-prime consumers, while another significant percentage have steady jobs and/or low liability levels. Clearly, there is a need to determine creditworthiness outside of the traditional models.

The traditional underwriting process can also be enhanced by leveraging nonconventional variables such as credit card transactions, social media presence and utility bills. This can potentially reduce credit risk through expanded risk modeling and monitoring. Lenders should consider back testing alternative scoring models as a challenger to compare against the FICO model in a champion-challenger sandbox environment.

Alternative credit scoring presents tremendous opportunities, but it is not without risks and challenges.

THE RISE OF INSURTECH IN THE AGE OF ALGORITHMS (Data Economy), Rated: AAA

As in banking, peer-to-peer is hot in insurance with older players like Friendsurance and also newcomers such as Lemonade, InsPeer, InSured, and Teambrella. Each promises insurance that is more transparent and social with shared costs – things that have wide appeal in today’s market where customization is king.

Another interesting area in insurtech is item-specific, event-specific, and on-demand coverage – “smart insurance.” Startups in this space collect data about a customer’s possessions and provide machine-learning enhanced risk pricing for single-item coverage of any duration. This model allows premium levels to scale down to pennies with durations down to the second for completely customized coverage.

Of course, even when insurance companies partner with IoT manufacturers, the question still remains: who owns the customer relationship? For complete control of the customer experience and customer proximity, it’s essential that today’s insurance companies embrace the age of algorithms and better leverage IoT technology and big data to drive innovation.

Insurance can’t continue to simply partner with IoT manufacturers for long – they have to lead the movement. This means appropriating the very tools giving their new competitors an advantage in both IoT and non-IoT spheres: big data and algorithms. By leveraging IoT technology to gather more data about customers’ homes, cars, and even the people themselves, insurance companies can then better use real-time data, predictive modeling, and machine learning to create new business models and new offerings for clients.

Current startups in the space are proving that the age of algorithms is a positive development for the insurance business itself and for its customers, who are looking for more options, flexibility, and transparency, all of which IoT and big data analysis can offer.

Fitch Expects to Rate SoFi Inaugural Residential Mortgage Backed Securities (Crowdfund Insider), Rated: A

Fitch shared last week its intent to rate SoFi’s RMBS transaction that included 270 loans with a total balance of approximately $168.79 million. The group of loans consists of prime fixed-rate mortgages originated on the SoFi online lending platform.

Fidelity gives BlackRock an early leg up in robo advice brawl (Reuters), Rated: A

Fidelity Investments unintentionally boosted BlackRock Inc’s prospects as a robo adviser with a small investment in a start-up company that BlackRock bought last year for an estimated $150 million.

BlackRock and Fidelity are only in the early stages of what is shaping up as a battle royale to become the go-to provider of cheap automated financial advice over the Internet.

Although rivals currently dominate the robo advising space, investment behemoths Fidelity and BlackRock are expected to grow quickly. BlackRock’s FutureAdvisor now has more than $1 billion in assets under management, while Boston-based Fidelity’s digital wealth manager, Fidelity Go, is still getting off the ground, with only a nominal amount of assets. Fidelity has yet to launch a full marketing campaign.

Still, Fidelity could overtake BlackRock next year because it has a built-in advantage that many rivals, including BlackRock, do not have: an online brokerage with 17.4 million retail accounts. Some 96 percent of those accounts don’t currently have any sort of management and Fidelity is ideally placed to woo them over to Fidelity Go.

Meanwhile, the U.S. robo industry’s early leader is Vanguard Group. Its robo business has 60-percent market share with $41 billion in assets. Charles Schwab Corp, which has 7 million fewer brokerage accounts than Fidelity, is No. 2 with $10.2 billion in assets after only 19 months since launching its robo product. Click here for a list of the top U.S. robo advisers: (tmsnrt.rs/2hy0z4S).

Lending Club CTO Resigns (Crowdfund Insider), Rated: A

Lending Club (NYSE:LC) filed an 8K yesterday indicating that Chief Technology Officer John MacIlwaine had submitted his resignation on December 15th. MacIlwaine decided to depart from Lending Club to pursue another opportunity.  Lending Club stated that Richard Southwick, Senior Vice President for Technology, will oversee the Company’s technology development and operations while they conduct a search for a new Chief Technology Officer.

Fast-cash loans are wild west for small business (App.com), Rated: A

As a result, these new lenders can – and often do – charge sky-high interest rates and pile on fees, often hidden from the borrower. A short-term loan can turn into a long-term nightmare.Some problems identified in the Harvard Business School report:

  • High costs. Lenders commonly charge APRs (annual percentage rates) above 50 percent and can easily reach over 300 percent.
  • Double dipping. Repeat borrowers incur additional fees each time they renew their loans.
  • Hidden prepayment charges. Unlike traditional loans, many alternative lenders require payment of the full interest even when loans are repaid early.
  • Misaligned broker incentives. Small-business loan brokers often recommend the most expensive loans because they earn the highest fees on those.
  • Stacking. Multiple lenders provide loans to the same borrower, resulting in additional and hidden fees.

What the Harvard Business School Report recommends:

  • Mandatory disclosure of APRs, fees, default rates and borrower satisfaction.
  • A national regulation option – rather than state-by-state.
  • Increased borrower protections for small-business owners.
  • Rules/guidance on partnerships between banks and new lenders.
  • Brokers/platforms to have a “fiduciary” duty toward borrowers, meaning they must act in the borrowers’ best interests and disclose conflicts of interest.

Bizfi Joins Forces With LendingTree For Small Business Grant Contest (Crowdfund Insider), Rated: A

Less than a week after LendingTree launched its $50,000 small business grant contest; Bizfi announced it has teamed up with the online lender for the contest. According to Bizfi, LendingTree is one of the 45 funding partners of its marketplace for small business finance.

Peer-to-Peer Lending Market – Top Vendors (SAT PR News), Rated: A

The research report published by Transparency Market Research states that the opportunity in the global P2P lending market was worth US$26.16 bn in 2015. Analysts predict that the market valuation will reach US$897.85 bn by 2024, as it expands at a significant CAGR of 48.2% from 2016 to 2024.

The reducing interest in conventional banking, increasing dependency on online platforms, and recent history of financial crisis in this region has prompted P2P lending market to take lead cater to the unmet financial demands of the population. Meanwhile, the P2P lending market is estimated to show rapid progress in Asia Pacific. The emerging economies of China, India, Japan, and Australia will make a significant contribution to the rise of this market in Asia Pacific. The primary growth driver for this region will also be small businesses that will seek financial alternatives to fund their projects.

Even Financial’s Phill Rosen on P2P Lending Industry’s Future: I Think We Will See Some Consolidation in the Space (Crowdfund Insider), Rated: A

Earlier this week, fintech firm Even Financial announced it increased loan originations by 205% quarter over quarter since the beginning of 2016 and surpassed $1.5 billion in loan requests. The company has experienced solid growth since it was founded in 2014.

Crowdfund Insider: What borrower categories are you seeing the most interest on EVEN?

Rosen: Aside from debt consolidation which is the top purpose across the industry, we see high demand in weddings, auto and home improvement

Crowdfund Insider: What is the average size loan requested?

Rosen: Across all purposes, $10,551.00

How to earn interest on your Bitcoin – P2P Lending with Bitbond (Deep Dot Web), Rated: A

Before we start, a few guidelines would be to stay away from any model that offers ridiculous interest rates like 1% per day or 10% per month. The same can be said for any model that is not transparent on how they get this interest or that simply state that profits comes from trading. Finally, do your research. A simple google search can make the difference.

Bibond is a peer-to-peer lending website that allows you to lend both Bitcoin and national currencies for an interest. The major difference between the two former websites (Poloniex and Magnr) and Bibond is that with Bibond you’ll be lending your funds directly to other users. There is no failsafe mechanism for stopping users from taking your money and leaving. Forever.

However, this isn’t the norm as users are required to reveal their personal information and to back it up with the ownership of social media accounts, ebay, and so on. The borrowers are ranked from A to F according to risk. The lower the risk, the lower the interest you’ll receive and vice-versa.

In the case of an unpaid loan, Bibond will provide you with all the necessary information to take legal action agains the borrower or Bibond will sell the claim for the loan to a debt collection agency. The latter is usually better for lenders but it requires the amount to be above a certain threshold which varies according to the location of the borrower (usually 1.0 BTC or more in the developed world and 0.5 BTC or more in emerging markets).

Social impact investing is an alternative way to do good (MarketWatch), Rated: A

In most cases, the investments are still limited to the wealthy or accredited investors, but that is changing, and crowdfunding is expected to alter the playing field even further. Calvert Investments, for example, offers a high social impact investments program in which investors can put as little as $20 into local projects.

For non-accredited investors looking for other options to invest for social impact, Hoyt mentions Kiva.org, which offers peer-to-peer lending through zero-interest notes and CuttingEdgeX, a clearinghouse listing direct public offerings for social enterprises needing to raise capital.

United Kingdom

Zopa’s investment limit lifts (altfi), Rated: AAA

Zopa, the original peer-to-peer lending platform, has lifted its recently enforced platform limit. The firm is once again accepting new money transfers, with £4.2m in capacity.

Although the investment limit has been temporarily lifted, Zopa’s usual run-rate would suggest that the £4.2m of space will be filled within a few short days. Zopa has lent out £56.9m during the past four weeks.

Growth Street’s James Sherwin-Smith: Over £34M Has Been Matched on Platform to Date (Crowdfund Insider), Rated: A

Growth Street announced last week it would not accept individual retail investors on its peer to peer lending platform. They may do this now as they are an FCA registered Appointed Representative pursuant to a partnership with another firm. 

Crowdfund Insider: What makes Growth Street stand out from other peer-to-peer lending platforms?  

Sherwin-Smith: Growth Street is the only P2P platform offering revolving credit, which we provide in the form of secured business overdrafts. Borrowers share their performance data with Growth Street on an ongoing basis.

Loan Danger: 25% Fall Out With Friends Over Money (Voice-Online), Rated: A

ALMOST ONE in four of us have fallen out with friends over money issues and 42% have lent money to a friend only for it never to be returned, according to new research out today.

The study found that 74% of us have lent money over the past 12 months, with half of us lending up to £500 and nearly one in 20 (4%) having lent over £5,000.

The UK social lending industry – loans between friends & family – is estimated to be worth over £2.9 billion a year.

Most (95%) of us have never charged interest to anyone we know, but half would consider doing so and feel it is acceptable to charge interest to those that we personally know (47%).

European Union

Popular Fintech Companies in France (TechBullion), Rated: B

Younited Credit is one of the biggest fintech start-ups in France, operating peer-to-peer lending platform recognized by the French central bank.

Lendix is an online marketplace for business loans, allowing investors to advance money directly to SMEs.
Ulule is a leading crowdfunding site created by Thomas Boucherot and Alexander in 2010. Since its launch, the company has funded thousands of projects in many fields, from music creation to audiovisual.

Founded by Ombline Lasseur, Adrien Aumont and Vincent Ricordeau in 2009, Kisskissbankbank provides a crowdfunding platform for athletes, humanists, and creatives to raise funds for their projects.

Created in 2012, SmartAngels is a crowdfunding platform that allows retail investors and professionals to fund start-ups and SMEs.

Founded in 2007, MyMajorCompany allows music fans and internet users to invest in their preferred artists’ projects.

Ledger is a start-up that combines its strong expertise in smart card, cryptography, security,  and embedded hardware. The launch of a hardware wallet, Ledger Nano, in over  80 countries established the company as a reference in the global bitcoin ecosystem.

Founded in 2011, Paymium is a European web-based exchange that allows all bitcoin transactions between traders and consumers.

Founded in 2012 by Camille Tyan and Antoine Grimaud, PayPlug is  the first service in France to allow small merchants and professionals to accept credit card payments with simple tools, no monthly costs, and signup fee.

Fundovino is the first crowdfunding platform devoted to the world of wine.

Weeleo is a P2P platform that enables the exchange of cash currencies.

Australia

REST’s industry-first online super advice product gives members ‘mobile first’ access to personalised financial advice (Professional Planner), Rated: AAA

REST Industry Super today became the first Australian super fund to provide its 1.9 million members with ‘mobile first’ access to personalised financial advice with the launch of the REST Advice Online platform.

REST Advice Online is delivered on Midwinter’s next generation Advice Operating System (AdviceOS) and provides REST members with the ability to receive instant financial advice and make immediate changes to their super account from any mobile device.

The digital advice offering leverages Midwinter’s Digital Advice technology which means that regardless of which method REST members choose to receive advice (phone based, web chat or self-service), it is delivered, recorded and processed from the same integrated advice system.

Hayden steps into new COO role (Australian Broker), Rated: B

Digital home loan marketplace HashChing has appointed Siobhan Hayden, former CEO of the Mortgage & Finance Association of Australia (MFAA), as its new COO.

India

Uberisation disrupts multiple sectors (Times of India), Rated: B

The financial services industry is also undergoing transformation with digital. Crowdfunding startups like Ketto and Wishberry and peer-to-peer lending platforms like Faircent, Lendbox and i2ifunding are offering platforms to connect people who have a cause or a financial need with those who have excess funds to lend.

Asia

Vietnam: P2P lending startup Tima gets funding from Singapore investor (Deal Street Asia), Rated: AAA

Vietnamese P2P lending startup Tima has closed a US dollar 7-figure series A funding from a Singapore fund to accelerate service growth in the local market, a senior executive of the company told this portal.

Launched in 2015, the platform has seen cumulative money from its lender partners reach over VND2.5 trillion ($115.45 million).

About 80 per cent of loan seekers based in Vietnam do not have prompt access to financial services, says a World Bank report. P2P lending, still a fledging business in the country, is said to be a solution in addressing this gap.

In Vietnam, fintech has started to emerge as one of the most favourite verticals for startups and investors, fueled by the increasing mobility yet unbanked population in the country.

Africa

Nigerian Fintech Startup Paystack Raises .3 Million (Forbes),Rated: A

Paystack, one of Nigeria’s most hotly anticipated tech start-ups, has just secured $1.3M Seed investment from both international and homegrown investors. The company, founded by Shola Akinlade and Ezra Olubi, initially caught the eye of industry commentators as it was one the first Nigerian tech company to be accepted into the world-famous Y Combinator progam, based in Silicon Valley. Since then, having taken Paystack through Private beta, and securing $120,000 early-stage investment from Y Combinator, Akinlade [CEO] and Olubi [CTO] have quietly been building the company, working to secure this Seed investment round, whilst also building a network of partner merchants in Nigeria, over 1,500, who are now using the platform to accept online payments.

International

6 Fintech Players Changing the Face of Global Payments (Business2Community), Rated: A

A leading mobile payments company, iZettle offers small businesses portable point-of-sale solutions as well as free sales overview tools. This allows any individual or merchant to take card payments anywhere, anytime.

Another player in this space is Klarna, a Swedish e-commerce company that supplies payment services for online storefronts. The Klarna system eliminates the risks for buyers and sellers by taking over stores’ payment claims and by managing customer payments.

Consumer to business payment fintech is increasingly well established. But some fintech firms are looking to facilitate business to employee payment services.

Doreming, for instance, focuses on financial inclusion for workers, an emerging theme for fintech firms, with the World Bank estimating that 2.5 billion adults worldwide are excluded from traditional banking services.

Adyen is a multichannel payment company outsourcing financial transfer services to international merchants giving them a single solution to accept payments anywhere in the world.

Azimo is also an international money transfer service harbouring a large digital network that allows customers to send money to over 190 countries, from any internet-connected device.

Microfinance fintechs are riding a wave of popularity with their social media partners and increasingly facilitating the online sharing community. For example, Flattr, a fintech founded in 2010, enables users to ‘flattr’ creators for their digital content by clicking the Flattr-button next to their content. Each month, you add money to your account and at the end of the month your monthly budget is divided between all the things you flattered and sent to the creators.

Authors:

George Popescu
Allen Taylor

Thursday December 15 2016, Daily News Digest

consumer confidence index

News Comments Today’s main news: Fitch says OCC charter could harm innovative firms. UK’s Govt. bank funds almost 10% of MarketInvoice’s loans. Rakuten invests EUR10M in Kreditech. Today’s main analysis: CCI highest since before great recession. Today’s thought-provoking articles: Bank SME lending surges, alt-lenders flop. Vaya, RateSetter launch online mobile shop. United States OCC FinTech charter could harm agility, […]

consumer confidence index

News Comments

United States

  • OCC FinTech charter could harm agility, cost of innovative firms. GP:” Absolutely everything has a good side and a bad side, including OCC’s new fintech charter. It goes without saying that getting an OCC charter is more onerous than no regulation at all. But is it more or less onerous than partnering with a FDIC Bank ? I think that only once a few fintech companies jumps the gun and get a charter will we be able to compare. In my eyes even if it is more onerous, the benefits of being independent and not at the merci of a life-or-death partner (the FDIC bank) is worth a lot and if I would advise fintechs to setup a separate structure and test the waters with an OCC charter while continuing to operate as they have been so far with their primary structure.”
  • Consumer confidence high. AT: “This is political commentary, but it’s not just political commentary. There is a great deal of insight here regarding the economy on the whole and consumer confidence in the economy specifically, especially regarding investments. If Halbert is correct and consumer confidence leads to increased investments in equities and stocks, how will that affect alternative investments? My guess is, there will be a negative correlation. Remember, part of the reason for the rise in alternative investing has been the decline in the stock markets. On the other hand, millennials are full of surprises, so continued distrust of banks may keep alternatives interesting to a segment of the investor class. Any way you look at it, the next four years should be an interesting run.”
  • Bank SME lending surges, alt-lenders flop. GP:” The interesting number here is the 23.7% approval rate for traditional bank’s SME loan approval rate in Nov 2016. It seems high to me but if it is true, and it could be, that is much higher than the single digits numbers we all had in mind I believe. “. AT: “It’s possible this renewed faith in bank lending is tied to consumer confidence in the economic outlook.”
  • Possible credit score changes for 2017. AT: “The initial comment on this Reddit thread has been redacted. Judging from some of the comments, it likely had something to do with medical bills being removed from credit scores if paid off.”
  • SmartBiz Loans to offer up to $5 million SBA 7(a) CRE loans.
  • InterNex Capital’s asset-based loans now available to small businesses through Bizfi.
  • RECF is here and thriving.

United Kingdom

European Union

Canada

China

News Summary

United States

Fitch: OCC Fintech Charter Could Harm Agility & Cost of Innovative Financial Firms (Crowdfund Insider), Rated: AAA

Fitch Ratings is out with a note on the recently announced Comptroller of the Currency (OCC) Fintech charter. The OCC has crafted a document to allow digital banks to become regulated entities by receiving federal bank charters. Fitch is of the opinion the Fintech charter could have significant impacts on the operating strategies and regulatory environments of these innovative firms. And the impact may not be all good.

As for benefits, some Fintech firms such as marketplace lending platforms may no longer have to partner with banks to facilitate loan origination.  This echoes a similar comment that Moody’s made just a few days back. A Fintech banking charter may also reduce uncertainty regarding state usury rate caps that have become a more prominent issue recently following the Madden versus Midland decision in June, which stated that agreed upon interest may not be enforceable in certain circumstances.

A special purpose digital bank charter may not allow for insured deposit-taking, which would require FDIC approval and regulation, but in Fitch’s opinion, it could be an initial, gradual step in that direction.

Consumer Confidence Highest Since Before Great Recession (ValueWalk), Rated: AAA

The US Consumer Confidence Index has been soaring since the end of the Great Recession, and it hit another recent new high last month. The Conference Board reported Friday that its Consumer Confidence Index rose to a surprising 107.1 in November, versus the pre-report consensus of 101.1, the highest reading since 2008.

On the other hand, the Commerce Department reported that 3Q GDP rose by 3.2% in the 3Q as reported on November 29. That surprising estimate will be revised again on December 22. But if the next GDP estimate confirms that GDP growth is above 3%, we will need to upgrade our outlook for the US economy going forward.

The post-election surge in the major stock market indexes also has buoyed feelings about equities, with 40% saying now is a good time to invest, up 10 points from before the election. Here again, Democrats became somewhat more negative on stocks while Republicans grew significantly more optimistic.

Those differences are also clear in the choice for what Americans believe are the best investments right now. While real estate remains the top choice for the third straight year, stocks gained the most ground at the expense of gold, real estate and Treasuries. For now, the shine is off of gold for Republicans and they, along with Independents, have grown more favorable toward equities.

Virtually everyone expects the Fed Open Market Committee to raise its short-term interest rate by 0.25% at the meeting today and tomorrow. Fed Funds futures put the odds at 97%. While the first rate hike last December sent stocks sharply lower, stocks are today at yet another new record high.

Investors are aggressively seeking alternative investments to generate income in today’s continued low interest rate world. While the US equity markets have soared to new highs since the election, many are wary of an overdue downward correction. That’s understandable.

Bank SME Lending Surges, Alt-Lenders Flop (PYMNTS.com), Rated: AAA

Reports Tuesday (Dec. 13) said Biz2Credit’s latest index showed surges in traditional banks’ SME loan approval rates in November, hitting 23.7 percent. According to researchers, eight out of the past nine months have seen loan approval rates for small business applicants increase among traditional, large banks.

Even small banks have seen their loan approval rates tick up to 48.8 percent.

At the same time, Biz2Credit found continuing declines in alternative lending activity for SME borrowers. November saw a decline in SME loan approval rates among alt-lenders, down to 59.2 percent in November, according to the report.

Growth of consumer borrowing slows a bit (News Journal), Rated: A

Total borrowing rose $16 billion, the Federal Reserve reported Wednesday. The October increase was the smallest since June.

Revolving credit, which covers credit cards, increased $2.3 billion in October. The non-revolving category, which covers auto loans and student loans, rose $13.7 billion in October.

Possible Credit Score Changes for 2017 (Reddit), Rated: A

I had over 12 collections on my credit as of a year ago and about 8 of them were hospital bills. What I did was write each creditor a letter saying essentially: “I dispute this debt. I don’t not recall this debt in anyway and it was not me. However, I am willing to pay the debt in full if you will agree to remove the debt from all credit bureaus. If you agree to these terms please send me on company letterhead the terms. Once I receive the agreement I will send payment by certified mail the same day I received your letter. If you do not accept these terms I am asking you to send me all proof that this debt is mine and I will dispute it further. You and I both know that paying this debt without you agree g to remove it from my credit report will not benefit me at all and I may as well wait until it falls off naturally.”

I now have 3 collections left, the rest were removed and

I’m working on the last few. You don’t even have to offer to pay 100% I’ve seen others offer 50% for a pay for delete and it went through. I offered 100% because I have the funds and I really wanted it off my credit report.

Edit 2: one of the collections was for capital one. They sent me a letter saying they denied my pay for delete request. Then about a month later they sent me another letter saying since I requested proof of the debt and they couldn’t provide it they are removing the debt from my credit report and my balance is $0. So they denied the request then started to assemble the proof and couldn’t find it. Was pretty funny.

SmartBiz Loans Announces New Online SBA Commercial Real Estate Loan Offering up to million (BusinessWire), Rated: A

SmartBiz Loans, the first online SBA marketplace and bank-enabling technology platform, has announced that they will now offer SBA 7(a) Commercial Real Estate (CRE) Loans up to $5 million to eligible business owners based in the U.S.

The CRE loans are now available through SmartBiz for purchase or refinance through an automated, mobile-optimized online flow that allows eligible businesses to pre-qualify online (even on their mobile phones) in less than five minutes without impacting their credit score. Loans are available for amounts between $350,000 to $5 million with 25-year repayment terms, variable rates as low as 5%, no balloon payments and no prepayment penalty after the first three years. Unlike traditional bank commercial real estate loans, SmartBiz SBA 7(a) CRE loans do not require re-qualifying every three to five years.

The loans are available to small-business owners based in the U.S. with a personal credit score of 675, a minimum of three years in business and $250,000 or more in annual revenue.

InterNex Capital’s Asset-Based Loans Now Available to Small Businesses through the Bizfi Marketplace (BusinessWire), Rated: A

Today, Bizfi (www.bizfi.com), the premier fintech company with a platform that combines aggregation, funding and a marketplace on a single platform for small businesses, expands its business lending capabilities through a funding partnership with InterNex Capital, an asset-based digital lender. The partnership will allow small to mid-sized businesses in manufacturing, wholesale, trucking, business and consulting services to apply for and access an asset-based revolving line of credit from $250,000 to $5 million through the Bizfi marketplace at www.bizfi.com.

Along with short-term financing, equipment financing, SBA loans, and many other products, small businesses that require $250,000 or more can easily and quickly apply for the revolving line of credit online. In addition to InterNex, the Bizfi platform features 45 lenders providing financial options to small businesses in the United States. Bizfi also acts as a direct lender on the platform.

Real Estate Crowdfunding is Here and Thriving For Investors (Realty Biz News), Rated: B

As a real estate investor, are you staying current with the latest investing technology? Just like all modern industry, the real estate industry continues to evolve and how investments are made has a new technology that is on the cutting edge for real estate investors, welcome to real estate crowdfunding.

Both dealmakers and lenders found a strong interest in private financing following the Great Recession. Dealmakers needed access to capital that the banks quit providing. Qualified investors and individuals with 401k funds to invest quickly became attractive. For money investors, more reliable and more secure investments (real estate) outside of the stock and bond markets also became attractive. Now, with crowdfunding, this match becomes even more powerful as more investors (beyond qualified investors) are able to participate in the market.

United Kingdom

Government cash funds almost 10% of peer-to-peer MarketInvoice’s loans (Business Insider), Rated: AAA

The taxpayer-backed British Business Bank is providing a major boost to fintech MarketInvoice, new figures show.

9% of loans by value made over MarketInvoice’s platform to date have been financed by money from the government-backed British Business Bank, according to a Freedom of Information request seen by Business Insider.

The bank has provided the cash for £93.2 million-worth of loans on the platform, out of a total of just over £1 billion made by the platform.

New crowdfunding platforms following peer-to-peer lending are riskier than many realise (Express.co.uk), Rated: AAA

The new breed of crowdfunding platforms that have followed in the wake of P2P are far riskier than many realise.

City regulator the Financial Conduct Authority (FCA) is looking to crack down on these crowdfunding platforms to protect savers who do not understand the dangers.

It is lining up tough new regulations after warning that some platforms fall short of its demands to be “clear, fair and not misleading”.

The best-known platforms are Zopa.com, which has taken £1.89billion from savers since 2005, and RateSetter.com, which has taken almost £1.6billion since 2010.

Their interest rates have dipped lately, but Zopa still pays a variable 3.1 per cent and RateSetter pays 2.9 per cent.

Hannah Maundrell, editor-in-chief of , says P2P platforms need a robust fallback plan so people do not lose money if the company goes bust: “They will also have to carry out more thorough checks on borrowers.

“Some do, but the FCA’s rules could make it compulsory.”

Vaya, RateSetter get together to launch online mobile shop (ITWire), Rated: AAA

Mobile service provider Vaya has teamed up with peer-to-peer lending platform RateSetter to launch an online mobile phone shop.

Vaya says it has worked with RateSetter to provide fair financing terms and an easy online sign-up process for mobile phone customers – combining “some of the sharpest handsets on the market with the choice of outright purchase or wallet-friendly payment terms over 12 or 24 months”.

The two companies say they are bucking the trend of telcos locking people’s mobile plans up with their handset repayments.

Taplend: Viktor Ihnatiuk (Startups.co.uk), Rated: A

Taplend is a financial help service. With our app, people can get up to £2,500 in a few minutes, provided by friends or lending companies.

The problem we are solving is a fairly common one for all of us – situations when you need money urgently, but cannot get it immediately. The mechanism of Taplend is a very simple one: after the user downloads the application, he sets the desired amount of money and return terms, submits detailed information and sends a request via the service to his friends or credit companies.

After the request is accepted, it takes a couple of minutes for the money to come to the user’s bank account or mobile wallet.

While working in the p2p lending area, we noticed that the average time to get a loan through such a platform is around three days, under affordable rates. It is clear that millions of people have the urgent need for money.

Our business model can be split into two parts:

  1. We let friends help each other with money under a 0% interest rate. Taplend would be useful for these people, who might face the strong need for the financial assistance to be provided as soon as possible. In other words, Taplend is a p2p money transfer tool for friends to help each other. In this case, we charge a small split fee from transactions between the users.
  1. Besides asking from friends, Taplend lets the user request the loan from our partners – financial institutions. In this case, we let the user to choose the lender among the list of companies, after this we provide him with specific loan application form (depends on the lender).

When the user finishes filling the application form, we send this data to the lender. If everything is ok with this data, the user gets his request approved, receives the money and the lender pays Taplend a lead generation fee.

Denheath Desserts Closes PledgeMe Crowdlending Campaign With Nearly 0,000 in Funds (Crowdfund Insider), Rated: A

Denheath Desserts, a custard square brand from South Canterbury, has officially closed its crowdlending campaign, which raised nearly $369,001 from 161 investors, on PledgeMe. Denheath Desserts currently produces 10,000 custard squares per day from its Timaru factor.

The UK alternative finance industry is still not transparent enough (City A.M.), Rated: A

One of the most important risks when it comes to crowdfunding and online lending, which will be fairly obvious to anyone with investment experience, is asset risk.

Then there is the risk in the instrument. What do you get for your money? Share, bonds, a loan contract? Are there other lenders? Are you senior or junior? Is the investment secured?

Crowdfunding should not say it is transparent, but be transparent. You don’t think people are funny because they tell you they are comedians. You think they are funny when they tell you a joke that makes you fall off your seat.

That means being transparent about fees for starters. How does that platform get paid? By the lender, the borrower or a bit of both? When does it get paid, and do they take a spread?

Platforms should earn their fees – and yes, those should be completely and clearly set out too.

Appropriateness tests and caps on the amount of investment are just some of the other methods that platforms can implement to help manage risk. Each of these are worth an article in their own right, but the most important thing for investors to be aware of, for now, is that not all platforms offer the same levels of disclosure and protection.

European Union

Rakuten invests EUR10m in Kreditech (Finextra), Rated: AAA

This is another landmark investment in fintech by Rakuten, a leader in internet services and global innovation headquartered in Japan. Rakuten joins Kreditech’s outstanding group of backers, including J.C. Flowers and the World Bank’s International Finance Corporation. Michael Piechalak of the Rakuten FinTech Fund will join the Board as an observer.

Kreditech aims to invest the new funding into further developing its partnership business. The company has launched its Lending-as-a-service in spring 2016. Renowned partners such as PayU (Naspers) are making use of Kreditech’s POS financing integration.

Firm seals biggest-ever Irish P2P loan (Independent), Rated: A

Irish peer-to-peer (P2P) lending firm Linked Finance has completed the country’s largest ever P2P loan, raising €150,000 for serviced workspace provider Iconic Offices.

The loan, which is double the size of the previous biggest amount raised by Linked Finance, will be used to fit out Iconic Offices’ location at Herbert House, Dublin 2.

Linked Finance, which targets the non-bank SME-lending sector, said the loan was fully subscribed in less than 20 hours.

EstateGuru’s average historic return highest in the market! (EstateGuru Email), Rated: B

In December, EstateGuru’s average historic return reached the level 13.4% (since December 2014), which is the highest return among crowdfunding platforms for secured property loans.

Within two operational years, EstateGuru has offered its investors the chance to invest in 95 secured property loans with a record high annual average historic return 13.4%,“ said EstateGuru’s founder and CEO Marek Pärtel.

In comparison, some of Europe’s most popular and most established crowdfunding platforms like LendInvest, PropLend and Saving Stream have an annual average return of respectively 7.06%, 9.39% and 12%.

EstateGuru has managed to offer its investors the best returns due to high-quality projects and additional bonuses (e.g when the loan is repaid earlier, the borrower is obligated to pay the minimum 3-4 months interest). Our platform allows both professional and still experimenting investors earn equally great returns. Moreover, our more eager investors can take advantage of our affiliate program,“ Marek Pärtel added.

EstateGuru’s more than 5600 investors from 34 countries have earned a cumulative interest revenue €648,421 and more than €15 million worth of loans have been funded. Largest investment portfolios on the platform exceed €700,000 and the investors have not lost a single euro on the EstateGuru platform throughout its entire history. EstateGuru’s priority is to offer its investors secured and high-quality investment opportunities in Estonia and abroad.

Canada

NCFA Publishes Research on Alternative Finance in Canada (Crowdfund Insider), Rated: AAA

The National Crowdfunding Association of Canada (NCFA) has published a report on the status of crowdfunding and other forms of alternative finance including online lending.

The report tallied numbers for 2015, tracking 100 online platforms including both rewards and investment, stating that Canada reached $133 million in total volume. This amount is predicted to increase to $190 million during 2016.

The NCFA is not totally complimentary of the current crowdfunding ecosystem. Earlier this year, one industry insider labeled the regulatory approach as a “mess”. Another called it “dead in the water.”

China

eToro Announces Key Strategic Partnership for China with Lufax Holding (Finance Magnates), Rated: A

One of the leading social trading networks in the foreign exchange and CFDs space, eToro has announced that it has signed a strategic partnership with Lufax Holding Ltd. The cooperation agreement between the firms is aiming to boost eToro’s profile with Chinese clients.

Authors:

George Popescu
Allen Taylor

Wednesday November 16 2016, Daily News Digest

smb micro business loans

News Comments Today’s main news: Versara Lending acquires Peerform; P2Binvestor raises $ 7.7 million Today’s main analysis : Benefits and pitfalls of MPL partnerships. Why investors and lenders should dump LC. Today’s thought-provoking articles: Balancing investor supply with entrepreneur demand. Klarna loses three key executives. Sino Guarantee invests in China Rapid Finance. United States Benefits and pitfalls of MPL […]

smb micro business loans

News Comments

United States

United Kingdom

European Union

International

China

India

Asia

News Summary

United States

Marketplace Lending Partnerships – Benefits and Pitfalls (ABL Advisor), Rated: AAA

Marketplace Lenders (MPLs) can offer several potential benefits to small businesses, including reduced application times and expanded access to credit for less-established businesses. MPLs’ partnerships with banks can also be mutually beneficial, allowing MPLs to achieve higher volumes while offering lower rates and allowing banks to expand existing relationships. Despite the potential economic benefits, however, several challenges — especially regulatory and loan performance uncertainty — could stymie the growth of bank and small business MPLs’ partnerships.

MPLs Are Steadily Expanding Credit for SMEs
The number of MPLs serving the U.S. small business community has increased steadily since the financial crisis.

Established small businesses often approach MPLs to meet short-term liquidity needs
Established small businesses more often have existing banking relationships and approach MPLs either when their credit histories are deemed too weak for banks to lend to, or when they have immediate liquidity needs and bank application and approval processes are not fast enough to address their immediate needs.

Small Business MPLs Will Continue to Build Other Alliances to Lend to Small businesses, Especially Micro-Borrowers
Despite its potential benefits, the OnDeck-JP Morgan partnership likely does not address the lending needs of micro-borrowers, an important borrowing group for MPLs. Micro-businesses, which lack the credit histories to obtain funding from banks, are largely unable to benefit from such relationships.

Bizfi Originates $ 127M+ in Financing to Small Businesses Across the U.S. in Q3 2016 (News on 6), Rated: AAA

Bizfi (www.bizfi.com), the premier fintech company with a platform that combines aggregation, funding and a marketplace for small businesses, announced they have originated more than $127 million in financing in the third quarter of 2016.

The top sectors seeking financing through the Bizfi marketplace include manufacturing, retail, business-to-consumer (B2C) services (i.e. daycare, cleaning) and business-to-business (B2B) services (i.e. inspectors, consultants). Funding to the manufacturing sector doubled, while retail showed a 23 percent increase, B2C services rose 20 percent and B2B fundings rose 15 percent.

Businesses in the following states sought out more capital from Bizfi in Q3 year-over-year:

  • Michigan – 37 percent increase;
  • Pennsylvania – 36 percent increase;
  • Georgia – 24 percent increase;
  • New York and Texas both experienced 10 percent growth, with significant volume increase

Dump Lending Club As An Investor And A Lender (Seeking Alpha), Rated: AAA

I have been investing in Lending Club (NYSE:LC) since 2015. I had a very clear investment plan.

The results of my investment after more than a year were pretty satisfying.

Well, after telling you how well everything goes, one might ask why did I leave Lending Club. Firstly, if you do want to invest there, I think my strategy is working. However, I still have my fears. The biggest fear is the lack of transparency.

Why I didn’t like it as a lender
As I said, transparency is the major issue. If I am to lend money to someone, I need plenty of information about him, and the goal of the loan. I believe that people who look to lend money from Lending Club are looking for better interest than they could get from the bank. Banks have plenty of information on their clients, while I got insufficient amount of data.

When there are problems with the payments, I barely got enough information.

Loan goals are not diversified enough. Sometimes it is really hard to understand what the borrower needs the money for.

Let’s take a deeper look into the fundamentals and valuation
However, when I analyze a company, the most important metrics for me are earnings and free cash flow. I want to make sure that the company I invested in, has a surplus of cash attributed to its shareholders. I know that some investors like to invest in companies that are losing money, because they are still growing, but this is far from my philosophy.

As you can see in the graph above, Lending Club just can’t create positive free cash flow and earnings. This is a major risk for investors and lenders. As the revenues grew by over 400%, the FCF and EPS actually declined, which is worrisome.

Fundrise Spins Off its Real Estate Investment Branch RSE Capital Partners (Crowdfund Insider), Rated: AAA

Crowdfunding real estate platform Fundrise is spinning off  RSE Capital Partners, its real estate investment branch, into a stand-alone company, according to several news sources. The new standalone firm will continuation to focus on origination, underwriting, investment and management for the company’s eREIT platform.

In October Fundrise launched three new eREITs described as a “revolutionary direct to investor crowdfunding model,” putting Fundrise “on track” to raise a quarter of a billion dollars during the coming year. Fundrise now lists 5 different eREIT options; Growth eREIT, Income eREIT, West Coast eREIT, Heartland eREIT and East Coast eREIT.

Peer-to-Peer Lending — Balancing Investor Supply With Entrepreneur Demand (Forbes), Rated: A

NextAdvisor, a consumer information website that includes views and ratings of a variety of financial services and products, has seen a large increase in interest in P2P lending solutions.

Frustration with the traditional lending process appears to be the major driver of all forms of alternative lending, P2P included. Fintech as a master category has evolved precisely because traditional lending products, services, and technology were not coming together quickly or smoothly enough to meet prospective borrower needs.

With crowdfunding becoming a more mainstream idea, P2P lending is a more credible concept. And P2P offers a very different experience than traditional lending.

As the P2P space matures, a new crop of niche-focused services has emerged that focus on particular kinds of investors and businesses.

Average Percentage Rates (APRs) are a driver—and admittedly are all over the place—but they don’t provide a complete picture of a loan’s cost. Lending Club, for example, advertises rates as low as 5%, although not all qualify.

So with a set of leaders growing rapidly, and pent up startup demand, why are people speculating about a P2P bubble? Because balancing the growth on both the demand and supply side is a tough business. It is one thing to build a fintech pipe with a beautiful user experience and a polished brand. It is another thing entirely to continue to feed demand (borrowers) and supply (individual investors) in equal measure.

Key Considerations in Peer-to-Peer Lending (Prime Meridian), Rated: A

Now that you have decided to invest in P2P loans, what next? Before you jump right in, there are numerous issues to take into consideration. As the saying goes, “Knowledge is power” and that phrase certainly has meaning when it comes to investing. As with other types of investments or any new endeavor, it may be best to start small before committing any significant amount of capital.

Loan selection: Before you begin building a P2P loan portfolio, come up with a game plan as to how your funds will be invested.

Risk management: Just like any other investment, P2P lending carries its own set of risks.

A couple of questions to ask yourself are:

  1. How will I try to manage prepayment risk?
  2. How will I try to manage default risk?

One of the easiest and most effective ways to try to manage both default risk and prepayment risk is to diversify your investments.

How will you measure your success? When it comes to investing, it is imperative to have some type of benchmark that you can use to gauge your returns, or lack thereof.

A deeper performance evaluation: After comparing the performance of your portfolio with the performance of a relevant index, you can elect to make some changes in your portfolio going forward based on relative performance. If you are beating the index by a significant amount, you may want to consider taking a closer look at the amount of risk you are taking. On the other hand, if your portfolio is severely underperforming the index, you may want to consider adding more risk within your tolerance.

Marketplace Lender P2Binvestor Raises Additional $ 7.7 Million to Expand Operations (PR Newswire), Rated: A

P2Binvestor (P2Bi), a marketplace lender that provides growing businesses with debt capital through a crowdfunding model, announced today that it has raised $7.7 Million in Series A1 funding led by Rockies Venture Club (RVC), the largest angel investor network in Colorado and Future Venture Capital Co., Ltd. (FVC), a Japanese venture capital firm with its US subsidiary, FVC Americas.

P2Bi has funded over $350 million in revolving credit to its more than 80 borrowers since May 2014 and its average line of credit size is $1 million.

REGULATORY RISKS IN MARKETPLACE LENDING (Legal Solutions Blog), Rated: A

As marketplace lending becomes more commonplace and occupies larger part of the overall loan market, it will become essential for marketplace lenders and consumer financial services practitioners to familiarize themselves with the unique regulatory issues facing this fast-growing industry.

As Pearson and Steinbacher explain, the issues facing marketplace lenders depend on the type of products they offer, who those products are offered to, and how their business is structured. Marketplace lenders that act as marketing and servicing agents for banks and do not originate loans themselves face the most prominent regulatory challenges. These include a couple of issues that affect a marketplace lender’s ability export interest rates of their partner banks.

Separate from these two significant issues are actions taken by state licensing authorities to require licensure by marketplace lenders, or to prohibit existing licensees from participating in transactions which would be prohibited by state usury laws.

Versara Lending Acquires P2P Marketplace Lender Peerform (Crowdfund Insider), Rated: A

NYC-based Consumer lender Versara Lending has acquired the personal loan marketplace lender Peerform aiming to grow its prominence in the consumer lending space. Peerform will now operate out of the Versara Lending offices.

Founded in 2010 by Wall Street executive Mikael Rapaport, Peerform targeted dependable borrowers whose needs were not being met by existing lenders, offering them personal loans up to $25,000.

Former Auction.com Business Exec Launches OffrBox (PR Newswire), Rated: B

Eric Andrew, former Auction.com business executive, announced his new real estate tech venture. OffrBox.com is the first and only end-to-end transaction management marketplace for residential investment properties. As a simple and secure online marketplace, OffrBox.com streamlines the real estate investing process for buyers, sellers and brokers.

Wells Fargo and SigFig team up on robo offering (Financial Planning), Rated: B

On Tuesday, Wells Fargo announced that SigFig will power its digital advice offering.

Earlier this year, Wells Fargo outlined a pilot program to introduce robo advice in 2017 through its community bank unit. The platform would eventually be available to all of its brokers and clients, executives said.

United Kingdom

LendInvest completes two deals in Scotland (Bridging&Commercial), Rated: AAA

The online lender officially began operating in Scotland four months ago and deals recently completed included bridging loans for £480,000 and £200,000.

LendInvest provided the £480,000 loan to an investor buying in a prestigious part of Edinburgh, who required the funds quickly.

LendInvest’s Scottish presence has been helped by the appointment of Peter McDermid as business development manager for Scotland, who joined from Shawbrook in June and brought with him experience of the Scottish mortgage market.

LendingCrowd thinks outside the bank using the power of the crowd (City A.M.), Rated: A

It’s not hard to see why peer-to-peer lending has established such a strong foothold in just a handful of years. Seeing the opportunity, LendingCrowd offers a real alternative to traditional bank funding with loans up to £250,000 at competitive rates. This is also good news for the loan funders — many are private individuals — who can earn a return significantly higher than on offer from traditional bank deposits.

LendingCrowd was attracted to Scotland’s complete and complementary financial sector.

Its customers come from right across the UK and span a wide range of industries — from technology and professional services to manufacturing and agribusiness. Since 2014 the company has facilitated over £6m through more than 80 loans. Over 2,000 individual investors have signed up to their online platform.

Edinburgh has proven to be a strong location for LendingCrowd; recruitment has gone well, with a wealth of skilled technology professionals at all levels.

Locating in Scotland has been instrumental in helping to find the right skills — the company’s lending team have credit expertise gained with RBS and Clydesdale Bank. The next stage of its development is already advanced: the company has raised share capital — part from private investors whose funding is matched by Scottish Investment Bank’s Co-investment Fund — that will allow it to accelerate growth.

Investors pull funding from fintech start-ups after Brexit vote (Financial Times), Rated: B

Investors pulled funding from dozens of start-ups in Britain’s financial technology industry in the wake of June’s Brexit vote, plunging them into a cash flow crisis, the head of the country’s main fintech association said.

Lawrence Wintermeyer, head of Innovate Finance, said 30 fintech start-ups have had their funding cancelled or postponed by investors since the end of June, forcing them to seek urgent funding elsewhere.

The sharp slowdown in UK fintech funding from VCs contrasts with what has been happening in the rest of the world. Global fintech funding from VCs rose 27 per cent to $15.2bn in the first nine months of the year, driven by particularly strong growth in China, which overtook the US as the sector’s biggest market by value, helped by the $4.5bn raised by Ant Financial Services.

Aztec Exchange named to Forbes Fintech 50 (News Channel 10), Rated: B

Aztec Exchange, a global supplier of invoice finance products and services, today announced it has been named to Forbes second-annual Fintech 50. The list features companies that use technology to disrupt “the way we save, invest, spend and borrow.” Aztec was selected from a group of 300 companies and was one of just 22 new companies to join the ranks.

European Union

Klarna’s leadership reshuffle – loses three key people (Business Insider), Rated: AAA

Swedish FinTech giant Klarna has lost three key executives this Fall. A co-founder, the CFO, and a VP for the Nordics are moving on to new opportunities, reports Breakit.

Matthew Risey, who has been CFO for a year, and with Klarna since 2013, announced his departure from the company in September.

There are speculations that the Klarna’s ongoing application process for a Swedish banking license may become more difficult without Risey, something that CEO Siemiatkowski refutes.

Victor Jacobsson, one of Klarna’s three founders, will leave the company’s executive board.

The third departure news came yesterday, as Anna Borg, Senior VP for the Nordic region, announced she will return to her previous employer, Swedish energy giant Vattenfall.

Fintech poses risks to regulators and consumers, says Central Bank (The Irish Times), Rated: B

The rise of fintech, evidenced by the emergence of crowdfunding and peer-to-peer lending online platforms, is likely to pose specific challenges for regulators and consumers alike, given that many products and services – such as peer-to-peer lending – exist outside of traditional, regulated activities.

While Mr Sheridan highlighted the positive impacts of fintech on society in helping to make products and services more accessible, improving service delivery and providing greater convenience for consumers and increasing choice, he warned that innovators need to take existing consumer protection standards into account.

International

5 Fintech Firms Reshaping Lending and Financing (Business2Community), Rated: A

This month, we’re exploring some of the most disruptive fintech firms changing the face of banking. To kick off, we’re looking at five fintech firms reshaping the lending and financing landscape, including Avant, Lending Club, Qufenqi, Affirm and SocietyOne.

1. Avant

Through the use of big data and machine learning algorithms, the company is able to offer a highly customized approach to consumer credit options.

2. Lending Club

Lending Club provides a platform for individual investors to deposit as much or as little money as they like at attractive rates of return and for borrowers to take out loans of whatever size they desire at lower rates than high street banks are generally able to offer. How is Lending Club able to do this? The answer is simple; they benefit from the efficiency that being a digital-only platform provides.

3. Qufenqi

Founded in 2014, the company specializes in offering students and young, white collar workers micro loans for expensive electronics, white goods and property, working with a number of businesses across China to offer monthly payment plans. In just 2 years, the platform has grown to be worth an estimated $1.3 billion, with sales facilitated by Qufenqi totaling $1.52 billion in the first half of 2016.

4. Affirm

Affirm offers installment loans to customers at the point of sale, quickly allowing people to take out simple loans in seconds, enabling them to turn any purchase into a few monthly payments. Whilst the low costs and efficiency associated with fintech providers allows Affirm to offer competitive rates, their unique selling point is transparency.

5. SocietyOne

Founded in 2011, SocietyOne had received loan demands in excess of $100 million by the end of 2015, taking advantage of Australia’s historically low interest rate on savings to drum up significant interest from career investors and mass market savers alike, who have been able to take advantage of far better returns on savings than traditional bank savings accounts are able to provide.

China

Sino Guarantee, Bank of Shanghai inject fresh capital into online lender China Rapid Finance (South China Morning Post), Rated: AAA

China Rapid Finance, operator of the mainland’s largest online consumer lending platform, is looking to step up its domestic expansion after forging wide-ranging partnerships with China United SME Guarantee Corp (Sino Guarantee) and the Bank of Shanghai.

The state-owned Sino Guarantee, the premier financial guarantor for loans and bonds on the mainland, has made an initial commitment of 500 milllion yuan (HK$ 566.5 million) as lending capital for the China Rapid Finance platform.

It has also invested US$20 million in China Rapid Finance as part of the online lending start-up’s Series C financing round, in which a total funding of US$70 million was raised.

The China Rapid Finance platform has grown to 1 million borrowers, and processed a market-leading 8.8 million loans as of the end of last month.

India

Monexo introduces ‘auto invest’ feature in its platform (Economic Times, India Times), Rated: AAA

Online peer to peer lending platform Monexo has introduced the “auto-invest” feature on its platform. Through this feature, the lenders on Monexo’s platform can automate their entire lending process by setting up their auto-invest rules in 2 simple steps. Lenders select the maximum funding per borrower and desired portfolio allocation across M1 to M8 rating based on their desired risk-return criteria.

More than 90% of Monexo’s customers have expressed their interest in using the “auto-invest” feature and hence it has been made available to the customer much earlier than Monexo had actually planned said the company in a statement to the press.

Asia

Singapore sees Brexit as chance to lure FinTech talent from London (Reuters), Rated: B

Britain’s vote to leave the European Union opens an opportunity for Singapore to recruit talent for its ambitious plans to become a leading financial technology hub, the chief FinTech officer of the city-state’s central bank said.

Simon Kirby, Britain’s economic secretary to the treasury, told the audience that London will remain a leading financial center, though he acknowledged Singapore might be able to lure some of the talent.

He further defended his turf, noting “there are more FinTech businesses in Ireland and the UK than in the rest of Europe put together”. Kirby promised to “do everything” to make sure access to European markets remains in place after Brexit occurs.

Authors:

 

George Popescu
Allen Taylor

Tuesday October 25 2016, Daily News Digest

brexit investors

News Comments Today’s main news: ID Analytics, a new credit bureau created by Lending Club, Prosper, and Marlette. CFPB come out with a report to encourage fintechs. Today’s main analysis : The UK faces a huge test in the wake of Brexit. Today’s thought-provoking articles: How venture capitalists vet deals with crowdfunding. Canada gets its first FinTech […]

brexit investors

News Comments

United States

  • New online lending network promises to protect consumers and businesses. AT: “Following the news of OnDeck leading the way on price comparison and several online lenders cooperating to kick off a marketplace lending association, here is more evidence that online lending is trying hard to keep regulators off their backs. It’s another positive sign of growth and respectability for the industry. My only concern is that it could get out of hand with too many competing self-regulatory attempts.” GP : ” One needs to make the difference between SMART Box and ID Analytics clear : SMART box allows SME borrowers to compare the cost of capital between lenders with a standard method. ID Analytics is perhaps very close to being a credit bureau where Lending Club, Prosper, and Marlette contribute information to prevent loan stacking. If I were them I would certainly expect the regulators to name ID Analytics a credit bureau.”
  • CFPB assesses FinTech as positive. GP ” Like all regulators, CFPB has its detractors and its proponents. CFPB courageously came out encouraging “firms focused on giving credit to access the roughly 45 million consumers with little-or-no credit history by using alternative measures”. The agency also discourages “deceptive, harmful and discriminatory behavior”. It’s hard to disagree with that. While some behavior is clearly over the line, the main issue is to identify a clear method on what is close to the line. For example, if one offers auto loans, and most people buying cars are man, is that discriminatory ? I heard of a company who offers wedding loans, and most people taking them were of a certain ethnicity. Is that discriminatory ? Is that cultural ? Should we shut down that company ? Does it discriminate against people who are planning to never get married ? “
  • How venture capitalists use crowdfunding as a way to vet deals. AT: “Not only is it effective, but it should be encouraged. There’s got to be a way to narrow the prospects for the capital backers. Crowdfunding is a terrific vehicle.” GP: ” With one limitation. Crowdfunding works great for B2C products, not so much for B2B. Also, there is a large tendance to over promise, do an outstanding crowd sale, and make it impossible to deliver. The laws of physics seem to be hard to change no matter how much money one has. Also, and I learned a lot from Lampix and the Highway 1 accelerator, the hardware is slow and most crowdfunding sites are for hardware devices. “
  • Charlotte, NC has its own FinTech accelerator. AT: “If a city the size of Charlotte make the news for this kind of innovation, then who can argue that FinTech is destined to be a major wave of progression?”
  • BoA “hires” a robot to give financial advice. AT: “While I’m all for innovation in the banking sector, I can’t help but wonder how many consumers will actually want financial advice from a bot over the phone.”
  • Fundrise owes a lot to the success of its REITs to Title III of the JOBS Act. AT: “And not just Fundrise, the entire industry owes a debt of gratitude to the president for signing it.”
  • Lantern Credit goes after the underserved in lending. AT: “If there is any way to move the financial services industry forward, it’s wrapping our arms around the underserved.”
  • Bad debts drive CircleBack out of lending. AT: “How much more will follow? Perhaps the online lending sector needs to adopt better vetting practice for borrowers. This is why an online lending network is necessary.”
  • Bizfi gets a veteran payments administrator as CEO.

United Kingdom

Canada

European Union

Australia

India

Asia

News Summary

 

United States

ID Analytics Announces the Online Lending Network to Help Protect Consumers and Businesses (Yahoo! Sports), Rated: AAA

ID Analytics LLC, a company in consumer risk management, today announced the launch of the Online Lending Network, a new consortium formed to enhance responsible lending, help protect consumers and businesses, and address credit and fraud risks. Founding members include Lending Club, Prosper Marketplace, and Marlette Funding, as well as lenders representing online, marketplace, specialty finance and social lending. The network has achieved significant coverage of prime and sub-prime lending in only a few months, including over two-thirds of marketplace lending activity.

Through the Online Lending Network, lenders report when a consumer requests an offer for a loan product, submits a loan application, or when a loan is funded. In return, the lender receives information on whether that consumer has either requested other loan offers or applied for loans elsewhere in the days, hours or minutes before. The near real-time nature of the response makes high-velocity fraud, like loan stacking, very difficult. It also has the potential to protect authentic consumers from overextending their credit capacity to facilitate responsible lending.

The Online Lending Network will also provide access to tools to evaluate credit, including the detection of synthetic identities, and detection of potential identity theft, as online lenders are a target for fraudsters using stolen identities.

CFPB Gives Upbeat Assessment of Fintech in ‘Project Catalyst’ Report (The Wall Street Journal), Rated: AAA

The federal consumer finance regulator released a report Monday on consumer-friendly financial-technology products, marking the agency’s first overview of the rapidly expanding industry.

The report covers the work the Consumer Financial Protection Bureau has done on its “Project Catalyst,” which aims to encourage the development of innovative consumer financial products that meet regulatory requirements.

The CFPB outlined in its report the types of fintech products and services that it would encourage. In particular, the agency is looking at firms focused on giving credit access to roughly 45 million consumers with little-or-no credit history by using alternative measures. The agency is also looking at firms that provide better technology for mortgage servicing, digital disclosures, credit reporting, and products that help consumers refinance student loans and manage cash flows through access to their wages.

The report also came with several broad warnings to fintech firms about creating products that are harmful, deceptive or discriminatory. The CFPB noted that both banks and nonbank fintech firms should be held to the same rules and oversight—a topic driving much debate among consumer groups, who want fintech firms to adhere to the same rules that apply to banks, and some in the industry who don’t want sweeping regulation.

How VCs are Using Crowdfunding to Vet Deals (VC-List), Rated: A

The crowdfunding industry is growing at an incredible rate, allowing startups and small businesses to launch more crowdfunding campaigns than ever before. Entrepreneurs from all types of industries have leveraged the opportunities that crowdfunding offers to raise much-needed capital for their companies. As such, some VCs have begun to embrace crowdfunding as a new source of deal flow that allows them to vet deals much quicker than in days past.

Crowdfunding platforms not only provide VCs with efficient instruments to review deals and maintain communication with entrepreneurs, it also provides them with the additional deal flow. It gives them the ability to look at more deals in more geographically disparate locations and invest. VCs can review business plans, proforma financials, disclosures and other documentation without having to listen to a glossy sales pitch. They are then able to ask crucial questions of the entrepreneur seeking funding.

Crowdfunding also helps the class of VCs and other investors that don’t have staff dedicated to sourcing projects, and when entrepreneurs approach this class of investor, they are more likely to get a more personal and direct response, rather than be vetted by staff that are not likely to be as knowledgeable as the investors who make the final decisions.

Crowdfunding, while still a relatively young industry, is proving itself as a valued partner to the VC community. As it continues to grow, we will likely see much more interaction between the two industries.

Queen City Fintech looks for 2017 class as Charlotte’s financial tech scene grows (Charlotte Business Journal), Rated: A

Queen City Fintech, the accelerator program based in uptown, is currently accepting applications for its 2017 cohort.

The program has gained support from major financial firms since launching in 2011. Companies including Bank of America, Wells Fargo, Ally Bank, Synchrony Financial, BB&T, Barings and Ernst & Young see value in investing in an accelerator for the financial technology space.

Charlotte has also made strides in the fintech space as a city, which makes the program more appealing to entrepreneurs around the world.

Bank of America’s Bot Will Spout Financial Advice Through Your Phone (Fortune), Rated: B

Bank of America plans to provide customers with a chatty “virtual assistant” named Erica who will use artificial intelligence to make suggestions over mobile phones for improving their financial affairs.

Michelle Moore, head of digital banking for Bank of America, said in an interview on Monday that Erica will be smarter than a robot because she will bring up topics on her own, using predictive analytics as opposed to only answering questions customers ask.

Erica will be introduced to customers late next year, and will be able to converse by text as well as voice, said Moore.

How Title III of the JOBS Act helped Fundrise ‘democratize real estate’ (Technical.ly), Rated: A

When Dupont-based Fundrise first launched in 2012, the company’s mission was to “democratize” real estate investing — to “give everyone the opportunity to invest directly in high-quality real estate.”

The company’s tech-driven model allowed for a significant departure from the old school methods of real estate investing, but there was a rub — Fundrise’s democracy had imposed legal limits. That’s because, back in 2012, Fundrise couldn’t actually give “everyone” the same investment opportunity. Under the SEC rules of the time, any individual investing with Fundrise needed to be an “accredited investor” — an individual with a net worth of $1 million or $200,000 in annual income. That’s a pretty limited democracy.

But even back in 2012 this was starting to change. That year President Barack Obamasigned the JOBS Act, Title III of which opens up equity crowdfunding to non-accredited investors. And finally, on May 16, 2016, that section of the Act was implemented by the SEC.

There are still some limitations, though. For example, each Real Estate Investment Trust (REIT or eREIT as Fundrise calls them) that the company sets up has a $50 million cap. According to Davis, demand is much higher than this.

Lantern Credit CEO Chad Swensen on Enabling Lending to the Underserved Consumer at Money20/20 (Businesswire), Rated: A

Large segments of the US population are unable to access mainstream credit offer for various reasons. Lending to those underserved segments requires specialized credit risk assessment and management. As banks try to expand access to credit to underserved borrowers, they are turning to innovative technologies to meet the financial needs of more people.

Lantern Credit is using machine learning real-time credit modeling and education to enable consumers to gain better control over their finances and improve their credit wellness. The Company is partnering with lenders and retailers to predict credit worthiness of consumers with greater precision and to facilitate improved matching between credit products and interested customers.

Bad Debts Trigger Online Lender To Stop Dealing (iExpats), Rated: A

Ripples of fear are spreading across online peer to peer lending and crowdfunding platforms as more signs of failing investments become public.

The latest victim is the US online lending platform CircleBack.

The firm has ceased lending as cash from investors dried up on reports of borrowers defaulting on their loan repayments.

The business model was to borrow funds from equity investors that were then loaned to US consumers at interest rates ranging from 6.6% to 35%.

However, investors were concerned that losses were running at 13.5%.

Another concern is crowdfunding equity valuations.

Bizfi Appoints Alternative Finance and Payments Veteran John Donovan as CEO (Yahoo! Finance), Rated: B

Bizfi (www.bizfi.com), a leading fintech company with a platform that combines aggregation, funding and a marketplace for small businesses, announced its board of directors has appointed John Donovan as the Company’s chief executive officer (CEO). Donovan is a 30-year veteran in the payments and alternative finance industry serving both small businesses and consumers.

United Kingdom

Brexit Confronts U.K.’s Online Lenders With Biggest Test Yet (Bloomberg), Rated: AAA

British peer-to-peer lenders were preparing for serious trouble even before the Brexit vote rocked the U.K. on June 23.

Funding Circle Ltd., the No. 1 online lender to small and medium-sized businesses, carried out a stress test envisioning a three-year recession beginning in January 2017 that would crater the property market. If the U.K.’s split from the European Union wreaks that type of havoc, investors in the platform’s loans should still pocket a net return of 6.4 percent, says Jerome Le Luel, the firm’s chief risk officer. That’s not far off the 7.2 percent the loans should generate without a crisis.

The debate shows the tension at play as the industry, which accounts for just 3.6 percent of total lending to small businesses and consumers in Britain, tries to move into the mainstream. First developed 11 years ago by Zopa, the model has taken off around the world: Global peer-to-peer loan volume is projected to hit almost $350 billion this year, a 12-fold increase since 2013, according to research firm AltFi Data Ltd.

The fallout from the Brexit vote isn’t the only source of uncertainty facing the industry. After more than a year of review, the FCA has yet to clear the way for Funding Circle, Zopa, and other big platforms to tap a deep well of new customers: the government’s Individual Savings Account program. Millions of savers use so-called ISAs to manage assets worth 518 billion pounds.

Meanwhile, Philp, the member of Parliament, is pushing for changes that could upend the industry’s economics. He’s asked Andrew Bailey, the head of the FCA, to consider requiring peer-to-peer lenders to invest their own capital as a portion of every loan they arrange for investors.

Policy makers keen to stimulate economic growth are embracing the approach. The week of the EU referendum, the bloc’s European Investment Bank started distributing 100 million pounds in loans to British small businesses through Funding Circle’s platform. The firm was hopeful it would be the first tranche of a recurring program. Now, due to Brexit, it’s probably a one-off.

At first blush, Brexit hasn’t frightened off investors. In September, British platforms originated a record 364 million pounds in loans, a 30 percent jump over September 2015.

Brexit feeds into more European commercial real estate investment numbers (FTSE Global Markets), Rated: A

As £1.4bn has been pulled from UK property funds post Brexit, a new study from BrickVest says 21% of respondents both Dublin and Hamburg as top European cities; while 16% selected Frankfurt, highlighting a new trend towards German commercial real estate.

Some 40% of the top ten voted European cities were German, compared with 38% of institutional real estate investors who cite London as the top European city to invest in commercial real estate, ahead of Berlin (36%), Munich (31%) and Paris (22%).  Even so, real estate investment platform, BrickVest’s research showed that three in ten (30%) institutional investors believe Brexit will either increase or significantly increase European commercial real estate investment opportunities. A further one in four (23%) institutional investors believe that Brexit will have no impact on commercial real estate investment opportunities.

The research did, however, highlight some concern regarding the illiquidity of commercial real estate investing. Three-fifths (61%) of respondents do not believe that in light of £1.4bn being pulled from UK property funds post Brexit, real estate investors have enough access to a secondary property investment market.

In light of Brexit, which European cities are you currently looking at/planning to look at for commercial real estate investment? (survey with 96 investors)

 

London

38%
Berlin 36%
Munich 31%
Paris 22%
Dublin 21%
Hamburg 21%
Frankfurt 16%
Barcelona 11%
Zurich 11%
Amsterdam 10%
Brussels 10%
Copenhagen 10%
Warsaw 5%
Milan 4%
Madrid 3%
Stockholm

1%

Bruce Davis, MD of Abundance, Shares Insight & Perspective on FCA Regulatory Review (Crowdfund Insider), Rated: A

The UK has been heralded as the gold-standard of regulatory policy regarding crowdfunding, peer to peer lending and Fintech in general. Many countries have studied the approach established by the Financial Conduct Authority (FCA) before enacting rules of their own.

Today, the FCA is in the midst of a scheduled post-implementation review of the crowdfunding market and regulatory framework.  The agency has published a paper explaining their thoughts and perspective on how disruptive finance has evolved alongside some of their concerns.

Bruce Davis: The FCA made great efforts to consult the industry in the process of developing the regulatory framework for crowdfunding in 2014.

At an individual level, the sector is supervised by a flexible team within the FCA who cover issues as and when they arise. We believe that this level of supervision is sufficient for the risks within the industry although we would like to see a greater emphasis on enforcement of rules against businesses which are adjacent to our sector or operating under an exemption.

Bruce Davis: Aside from the odd ‘off the cuff’ comment, we have found the FCA takes its responsibilities to foster competition and innovation seriously. It could still do more to encourage innovations which will encourage more people to take control of their money and how it is invested.

Bruce Davis: I think that pound for pound the crowdfunding industry is perhaps the most supervised sector in the whole financial services industry. Our track record of customer satisfaction and low levels of complaints suggests that this could be scaled back and more focus put on enforcement of the rules against those who operate outside of our regulated sector (but who still offer investments to the public under exemptions or old assumptions about the permissions surrounding an offer of investments to the public).

Canada

OSC Launches Canada’s First Regulatory Sandbox for Fintech (Finance Magnates), Rated: AAA

The Ontario Securities Commission (OSC), one of the thirteen provincial financial regulators in Canada, today unveiled a new fintech-focused hub called LaunchPad which aims to help guide FinTech startups through the complexities of the regulatory framework.

LaunchPad will be staffed by a dedicated team who will work directly with fintech companies to help them navigate, and even potentially tailor, Ontario’s securities laws while ensuring investors remain protected.

The OSC will apply what it learns through the LaunchPad hub more broadly to modernize regulation for similar businesses. These include online advisory firms, peer-to-peer lending services, crowdfunding platforms and angel investor organizations.

The program has a dedicated website, which can be accessed through www.osclaunchpad.ca, and already accepting now requests for support from eligible fintech businesses.

Lending Loop reopens peer-to-peer lending after regulator OK (WHBL), Rated: A

Canadian financial technology startup Lending Loop said on Monday it was re-launching its online lending marketplace after receiving regulator approval to sell investment opportunities to lenders regardless of their wealth.

The company, which paused its unlicensed operation in March, said the Ontario Securities Commission has now granted it an exempt market dealer license, and that it can connect small businesses looking to raise capital to individual lenders seeking a return on capital everywhere in Canada except Quebec.

The approval, which follows a rival company’s green light last month, suggests Canadian regulators are coming to terms with the peer-to-peer lending model, which is already popular in the United States, Europe and elsewhere.

The company will allow borrowers – typically small and medium-sized businesses – to seek loans of between C$5,000 and C$500,000 and over durations ranging from 3 months to 5 years.

Rival Lendified Holdings Inc and its Vault Circle Inc subsidiary secured an exempt market dealer license on Sept. 28. It plans to present lending opportunities only to accredited investors, who must have significant financial assets when it launches in the first quarter of 2017.

European Union

Post Brexit: Bondora Plans European Office in Germany Instead of London (P2P-Banking), Rated: A

Estonian p2p lending marketplace Bondora will open a new European office in Germany, saying that post Brexit London is no longer attractive as a Fintech hub. Bondora formerly planned to move to London but stopped the plan after the Brexit vote. ‘There is too much uncertainty, the UK lost its attractiveness as a fintech hub’ explains Bondora CEO Pärtel Tomberg the decision.

For the Bondora business model very good access to the European market is crucial says Tomberg. He sees uncertainty how long London might be able to provide this.

P2P Lending Won’t Displace Banks; Dealing with Credit Risk Management (Fintech News Switzerland), Rated: A

Peer-to-peer lending, which aims at shaking up the banking market and attacking one of the core profit-generating activities of banks, is not likely to displace banks from their core roles of lending to retail consumers, according to a report by Deloitte.
Despite the promising outlook, the P2P lending industry has recently come under fire as Renaud Laplanche, CEO of Lending Club, one of the leading platforms in the US, was forced to resigned after the company revealed that it had provided mis-assessed loans to Jefferies and Co., which was distributing the loans to institutional investors, reports the Wall Street Daily.

The skepticism over P2P lending has also been felt in China where loan sharks have been widely criticized for practicing aggressive debt recovery tactics, demanding, for instance, nude photos as collateral from female borrowers for blackmail if they fall behind on their repayments, reports the Financial Times. Other disturbing debt recovery tactics in China include property destruction and bodily injury.

While P2P lending has enabled the masses to gain access to credit and investment opportunities in China, the sector has nevertheless a Wild West aspect with lenders reportedly peeking in bathrooms in order to assess credit risks and borrowers settling payment obligations with bottles of spirits.

Yet, P2P lending remains a risky bet compared to other savings and investment options, according to Deloitte. However, it highly depends on the market. Switzerland seems to be a very attractive destination. The country is known to be very reliable and strict in credit-Risk Management and investors can get attractive yields with the likes of CreditGate24 and others.

Australia

Bravura Solutions chief: fintech doesn’t need to go abroad to be successful (Australian Financial Review), Rated: A

Bravura Solutions is proof that fintech is one of Australia’s unheralded export successes. At least that’s the view of chief executive Tony Klim, who says his company’s return to the ranks of the ASX will show it is possible to build an internationally successful fintech business based in Australia.

Bravura, which is in the midst of a $200 million, pre-Christmas share sale, provides software and technology services for superannuation, life insurance, and private wealth firms. It administers about $2.3 trillion of assets for clients including Bank of New York Mellon, JPMorgan, Mercer, Fidelity, and Citigroup.

The initial public offering for the company, backed by local private equity firm Ironbridge, is Bravura’s second attempt at life on the ASX, coming a decade after it first floated on the exchange as a two-year-old business focused on the British and Asian markets.

One of the biggest differences between then and now, Klim says, is that Australia is much more focused on technology, as the commodities boom that has powered the national economy for decades fades and the government attempts to identify and help develop other sectors that may one day take the place of mining.

While fintech firms operating in consumer niches such as peer-to-peer loans have captured the imagination of the media and investors alike, Klim proudly says Bravura has been profitable by focusing on less sexy stuff.

9 Australian companies have made it to the latest global Fintech 100 (Business Insider), Rated: B

Nine Australian companies are in the global 2016 Fintech 100.

The latest annual list, compiled by accelerator H2 Ventures and KPMG, includes Prospa (31), Tyro (43) and SocietyOne (50) among the leading 50 established fintech companies.

Another six are in the 50 emerging stars list: Afterpay, Brighte, Data Republic, Identitii, Hashching and Spriggy.

India

Our take: as Fintech firms allowed 100% FDI through automatic route, challenges for regulators (Medianama), Rated: A

Fintech companies classified under “other financial services” will now be permitted 100% foreign direct investment (FDI) through the automatic route, as opposed to the approval route earlier, according to a Reserve Bank of India (RBI) notification.

The RBI and other regulatory authorities have an uphill task of trying to figure out which fintech companies fall under whose purview. Regulators will have to spell out explicit rules and come out with more detailed classification. Fintech companies operate in areas where regulation in unclear, and regulators need to update themselves on their activities and specify  what a particular company can and cannot do.

A great example of this was the RBI’s consultation paper the peer-to-peer (P2P) lending companies which sought to regulate them as NBFCs. It added that it took into consideration SEBI’s guidelines on crowd funding, and clarified that since P2P lending it is not a transaction where equity or debt is exchanged, it would come under the RBI’s ambit.

The RBI’s review of guidelines for prepaid payment instruments (PPIs) is welcome and it will be in the interest of everyone to understand new developments in the fintech space. Other regulators would be wise to issue or clarify rules for developments in their sectors.

Asia

P2P lending rises in Korea in Q3 (Korea Herald), Rated: A

Peer-to-peer lending in South Korea rapidly grew in the third quarter, reaching 188 billion won (US$166 million), according to the data compiled by industry tracker Crowd Institute.

Local banks shunned lending to such small businesses amid a protracted economic slowdown, but for investors hunting for high returns, P2P lending emerged as an alternative investment tool amid record low-interest rates in Asia‘s fourth-largest economy.

The alternative lending service has gained popularity in the past few years, with accumulated P2P loans reaching over 150 billion won as of June this year, and the figure is expected to top 300 billion won by the end of the year.

Overcoming challenges: Building a strong and sustainable fintech sector (Business Times), Rated: A

While fintech holds great promise for the society with key benefits being cost-effectiveness, efficiency, and exceptional user experience, it is still a fairly nascent sector. As with all industries that are developing rapidly, there are growing pains and issues to be ironed out, especially those surrounding corporate governance and regulatory requirements.

Singapore has been proactively addressing the subject with the Monetary Authority of Singapore (MAS) setting up a fintech and Innovation Group in 2015 to examine regulatory policies and sector development strategies.

Besides online lending, cryptocurrencies such as bitcoin have also had their fair share of issues. Bitcoin famously vouched to give a bank account to anyone without requiring identity verification. While the process becomes more seamless, the anonymity of it may expose it to vulnerabilities. In August this year, hackers stole US$65 million worth of bitcoins from bitcoin exchange Bitfinex and in 2014, US$460 million of bitcoins vanished from Mt Gox, the world’s largest bitcoin exchange before it declared bankruptcy after the hack. Incidents such as these are a cause for concern, but it is important to keep in mind that they are rare and far between. These scandals expose the gaps in the sector and provide a valuable learning experience.

In Singapore, the MAS has set up a regulatory sandbox to allow startups to experiment with fintech solutions within a well-defined space and duration. For that period, the MAS will ease certain regulatory requirements and provide appropriate safeguards to contain the consequences of failure for customers. Other countries such as Thailand, Australia, the UK, and Malaysia are also implementing their own versions of a regulatory sandbox to develop a safe and conducive sector where innovation has the space to flourish.

As with every worthy endeavor, growing pains are an inevitable part of the process. With the government’s active involvement in the sector, Singapore is in a good position to learn from experience and embrace change instead of being hampered by short-term challenges.

Authors:

George Popescu
Allen Taylor

Tuesday September 13th 2016, Daily News Digest

Tuesday September 13th 2016, Daily News Digest

News Comments Today’s top news : Klarna is taking over the online retail (credit?) market; Point raised $15.4 mil ; Lending Club hired new CFO ; and Facebook is enabling payments in their 30,000 chat bots. Analysis : A great summary of the P2P market economics ; US SME’s optimism survey and retail credit card […]

Tuesday September 13th 2016, Daily News Digest

News Comments

United States

United Kingdom

China

 

United States

Facebook Messenger now allows payments in its 30,000 chat bots, (TechCrunch), Rated: AAA

Messenger bots can accept payments natively without sending users to an external website, Facebook’s head of Messenger David Marcus announced today onstage at TechCrunch Disrupt SF 2016.

Finally, the credit card info people already have stored in Facebook or Messenger can be used to instantly make purchases in bots that are part of the new closed beta the developers can apply for. Marcus also revealed that 34,000 devs have joined the platform and built 30,000 bots in the April launch, up from over 10,000 devs in May and 11,000 bots in July.

To support payments in Messenger, Marcus says that the company is working with all the major players in the industry including Stripe, PayPal, Braintree, Visa, MasterCard and American Express — not just Stripe and PayPal which the Facebook developer blog post mentioned.

During the talk, Marcus discussed Messenger’s rise to 1 billion users thanks to a forced migration from Facebook’s main app, his relationship with Mark Zuckerberg, and the early stumbles with chatbots that have been used by millions of people across 200 countries.

Optimism of America’s Small Businesses at Record High, (Business Wire), Rated: AAA

The survey found that 87.5 percent of small business owners are investing more in their business in 2016 than 2015. Of those business owners who said they will be investing, the vast majority (91.4 percent) plan to borrow funds to do so. More than a third (38.3 percent) plan to borrow between $10,000 and $40,000, and 37.5 percent plan on borrowing more than $40,000.

When it comes to assessing growth or working capital, the majority (67.6 percent) of small business owners prefer alternative financing over other available options, including traditional bank loans. 20.7 percent plan to access short-term financing, less than a third (31.53 percent) plan to borrow funds from a local bank, and 27.9 percent plan to use a credit card or line of credit. In addition, 28.7 percent of respondents said they were affected by the Federal Reserve’s interest rate hike earlier this year, which impacted their willingness to spend and invest in their businesses.

More than half of respondents (61.7 percent) are borrowing funds for working capital, and of those 38.3 percent will use the money for marketing purposes. More than a third (38.3 percent) are borrowing to invest in inventory, and 30.9 percent are doing so to hire employees.

In total, 63.1 percent of all respondents are increasing their staff. Of those, 48.8 percent are hiring full-time employees and 32.5 percent are hiring a mix of full-time and part-time staff.

In addition, 42.9 percent of business owners plan to expand locations this year, and of those borrowing money, 22.3 percent are doing so to add locations.

The Small Business Growth Survey, which surveyed small businesses from around the country, was conducted by Bizfi, the platform that combines aggregation, funding and a marketplace for small businesses. Bizfi surveyed more than 100 small business owners in 33 states. The companies ranged from restaurants, retailers, healthcare providers and transportation to real estate. More than half of the businesses have four employees or less and 38% have between 5 and 50 employees. The revenue of the companies range widely from less than $100,000 to more than $5 million.

Bizfi surveyed more than 100 small business owners in 33 states. The companies ranged from restaurants, retailers, healthcare providers and transportation to real estate. More than half of the businesses have four employees or less and 38% have between 5 and 50 employees. The revenue of the companies range widely from less than $100,000 to more than $5 million.

Study Says US Credit Card Debt Jumped in Q2 as Average Household Indebtedness Moved Up, (Crowdfund Insider), Rated: AAA

WalletHub has published their Credit Card Debt Study that shows a dramatic increase in household indebtedness – specifically in credit card debt. According to the report, US consumers cranked up on credit during Q2 of 2016 generating $34.4 billion in debt. This is the largest Q2 accumulation since 1986, according to the report. Credit card debt is now on track to hurdle $1 trillion in outstanding balances by the end of 2016 with average debt balances moving up to $8500 per household.  The authors called the situation “perilous” and stated;

“Q2 2016 also appears strikingly similar to Q2 2007, which ended less than six months prior to the start of the Great Recession.”

The report said “we are flirting with financial disaster” coming on the heels of last year’s record increase in credit card debt of $71 billion and last quarter’s record-low first-quarter pay down of $27.5 billion. Consumers may be reverting to bad habits.

Lending Club Hires Former Chase, Citi Exec as CFO, (American Banker), Rated: A

Lending Club, which has been rebuilding its executive ranks in the wake of a recent scandal, is hiring Thomas Casey as its chief financial officer.

Casey worked most recently as executive vice president and CFO at the medical device company Acelity. He previously spent more than two decades in senior leadership roles at GE Capital, Washington Mutual, JPMorgan Chase and Citigroup, Lending Club said in a press release.

In an interview, Sanborn said that Lending Club’s search for a new CFO began before Dolan’s resignation, since she had signaled her intent to leave the company.

Yirendai Limited (NYSE:YRD) Sellers Covered 31.46% of Their Shorts, (Press Telegraph), Rated: A

The stock of Yirendai Limited (NYSE:YRD) registered a decrease of 31.46% in short interest. YRD’s total short interest was 725,200 shares in September as published by FINRA. Its down 31.46% from 1.06M shares, reported previously. With 1.04 million shares average volume, it will take short sellers 1 days to cover their YRD’s short positions. The short interest to Yirendai Limited’s float is 8.53%. The stock decreased 3.48% or $0.74 on September 9, hitting $20.51. About 512,373 shares traded hands. Yirendai Ltd – ADR (NYSE:YRD) has risen 370.41% since February 5, 2016 and is uptrending. It has outperformed by 357.23% the S&P500.

HERO Funding securitization, (Kroll Bond Rating Agency, Email), Rated: A

Kroll Bond Rating Agency (KBRA) assigns a preliminary rating of AA(sf) to HERO Funding 2016-3 (“HERO 2016-3) Class A1 Notes and Class A2 Notes (together, the “Class A Notes”). The notes are newly issued asset-backed securities backed by a portfolio of Property Assessed Clean Energy (PACE) bonds.

The notes are secured by an Initial PACE Bond Portfolio and a Subsequent PACE Bond Portfolio (together, the “PACE Bond Portfolio”), each consisting of limited obligation improvement bonds (each, a “PACE Bond”) issued by the Western Riverside Council of Governments (“WRCOG”), San Bernardino Associated Governments (“SANBAG”) and the County of Los Angeles, California. The Initial PACE Bond Portfolio comprises 180 PACE Bonds with an aggregate principal balance of approximately $264.1 million and is secured by 12,394 PACE assessments levied against 12,394 residential properties (“PACE Assessments”) in 34 California counties. The average PACE Assessment is approximately $21,310 with an average annual payment of approximately $2,916. The Subsequent PACE Bond Portfolio is expected to consist of PACE Bonds with an aggregate principal balance of $66.0 million. The transaction benefits from credit enhancement in the form of excess spread, over collateralization, and a liquidity reserve.

Point Raises $ 15.4 Million In Total Funding, Led By Andreessen Horowitz, To Help Homeowners Unlock Home Equity Wealth Without Borrowing, (PR Newswire), Rated: A

Point, the first financial technology platform that allows homeowners to unlock their home equity wealth without taking on new debt, announced today that it has raised $8.4 million in Series A funding led by Andreessen Horowitz which also led the company’s seed round in 2015, bringing the total funding to $15.4 million (including venture debt financing). Alex Rampell, general partner at Andreessen Horowitz, has taken a board seat at Point. Andreessen Horowitz was joined by the company’s earlier backers Ribbit Capital and Bloomberg Beta. Individual angel investors include Orogen Group CEO Vikram S. Pandit, Airbnb CFO Laurence Tosi, LendingHome founder/CEO Matt Humphrey, and Invitation Home’s co-founder Brad Greiwe.

Point reached several key milestones including building a proprietary pricing engine that unifies property risk and homeowner risk, investing in over 50 properties across California, and bringing investor capital to its platform.

Point is the first financial technology platform that allows homeowners to unlock their home equity wealth without taking on new debt and gives investors access to a new asset class — owner-occupied residential real estate.

Weekly Orchard Lending Snapshot, (Orchard Platform), Rated: A

Self-driving cars to cut U.S. insurance premiums 40%, Aon says, (Property Casualty), Rated: A

Comment: Not really in our field , but I find interesting to talk about how financial sectors are being disrupted by technology.

(Bloomberg) — Premiums for U.S. auto insurers may drop more than 40 percent once the use of automated vehicles has been fully adopted by 2050 and driving becomes safer, according to insurance broker Aon Plc.

United Kingdom

Alternative finance lending market booming on the back of low rates, (Consultancy.uk), Rated: AAA

 

The report also sought to identify what the main drivers for the use of MPLs are for borrowing money among consumers. Ease and quick turnaround are the most cited reasons by respondents, 81% say that one of the main drivers is an easy/quick application process, with 72% saying that it is the fast decision-making that makes the use of MPLs attractive. Additionally, MPL services offer competitive rates, and repayment flexibility – attracting a wide range of price conscious customers.

The consultancy firm further explores whether the MPL business model is really of sufficient improvement on that of the traditional banking proposition, to give rise to a ‘disruptive’ shakeup of the SME and consumer lending market. As it stands – within the current banking environment – the cost of an unsecured personal loan comes in at around 815 bps at banks, while at MPLs total costs stand at around 800 bps. For retail buy-to-let mortgages the bps for loans comes in at 460 for MPL and 500 for banks, while for SME loans, MPL can offer solutions at around 720 bps while banks offer loans at around 715 bps.

The current market conditions are, in many ways, abnormal. Interest rates remain at historic lows, while QE and other measures continue to operate across Europe. The researchers consider whether the current financial environment, rather than a disruptive new business model, is the main driver for the rise of MPL.

As part of the research the Big Four firm considers the total cost of attracting the required funds for the respective loans. For banks, a large portion of the loan is not sensitive to changes in rates, at around 270 bps, while for MPLs around 90 bps is not sensitive to changes in rates. This means that, as a proportion of the total bps of the loan, the credit environment disproportionately affects MPL loans – mainly in terms of return to lenders whose money is on the line. When, and if, the UK, European and US rates again begin to see relatively significant increases, the higher proportion of interest sensitive loan costs will disproportionately affect MPLs, seeing an unsecured loan increase from 470 bps to 530 bps for banks, while for MPLs the increase is from 635 bps to 795 bps.

Neil Tomlinson, Deloitte UK head of banking, says that MPLs are unlikely to become a disruptive force in the long-term, “More broadly, our research shows that total funding costs for banks are lower than for MPLs, and the interest rate-sensitive component of an MPL’s funding profile is higher than that of banks. On that basis, MPLs’ costs could rise by more than banks as the credit environment normalises and interest rates increase. Despite the challenges, MPLs do have an opportunity to carve out a niche market and can do so by exploiting their market-leading user experience and boosting word-of-mouth recommendations. These benefits could decrease customer acquisition costs, making MPLs a more viable option. As more MPLs become fully authorised by the FCA, issues surrounding trust and security could lessen. In turn, we may well see banks become more open to partnering with them to enhance their overall customer proposition.”

Study identifies uptick in P2P interest since Brexit vote, (Professional Adviser), Rated: AAA

Among the findings of the study by P2P lender ThinCats was that almost a third (30%) of those surveyed said they had been put off investing in more traditional asset classes following the EU referendum.

ThinCats Caley concluded: “In the last two months alone, our research tells us, thousands of investors have started looking at P2P lending as a way of earning meaningful returns while avoiding the rollercoaster ride of volatile markets.”

According to Caley, “a major attraction of P2P lending is it sits apart from market volatility, providing high and predictable returns, whichever way the market winds are blowing” although he also recognised continuing misgivings from the wider financial services sector.

“Another obstacle preventing advisers from suggesting P2P to their clients is the FCA classification of it as a ‘non-standard’ investment’. Change is in the air, however, with the Innovative Finance ISA in the pipeline. When it arrives, this will allow people to invest their full ISA allowance in P2P without paying tax on the interest they earn.”

Fintech unicorn Klarna just signed a big deal with Sir Philip Green’s Topshop and Miss Selfridge, (Business Insider), Rated: AAA

Comment: Klarna in the US has very recently ” launched a real-time consumer financing solution for the US commerce market. They are launching together with Shopify, BigCommerce, Magento, Cybersource, Demandware and OpenCart. Financing will be available via core integrations and plugins.”

To separate buying a product from paying for it online, Klarna effectively offers credit to buyers although they do not go through lengthy application processes. Credit is a highly regulated space.

Swedish fintech unicorn Klarna has signed a deal with Sir Philip Green’s huge retail conglomerate Arcadia, marking the first major partnership for the online consumer credit company in the UK.

The deal will see Klarna launch its “Buy now pay later” online payment option on the websites of Topshop and Miss Selfridge, two of Arcadia’s biggest brands. It will then be rolled out to Arcadia’s other five brands, which include Burton and Dorothy Perkins.

While Arcadia does not breakout online sales numbers, the conglomerate had revenues of just over £2 billion last year and digital sales surged 24%.

Siemiatkowski says Klarna has been working on the Arcadia deal for almost a year.

Klarna uses non-traditional credit measures to assess whether to approve buyers, but Siemiatkowski stresses that the company looks at a range of different factors rather than simply eye-catching examples such as browsing habits.

Sir Philip Green, the retail tycoon behind Arcadia, has been in the headlines for all the wrong reasons lately, caught up in the row over the collapse of BHS and its pensions black hole. Siemiatkowski didn’t express an opinion on the furore, saying he has not met Sir Philip and Klarna dealt with Arcadia’s e-commerce team.

Fintech start-ups put banks under pressure, (Financial Times), Rated: A

Some established companies have drawn inspiration and are creating their own fintech projects. Clydesdale and Yorkshire Bank, for example, recently launched a mobile banking app called ‘B’. Similar to the new mobile banks, B aims to help customers manage their money, for example by sending prompts when customers fall into an overdraft.

Other traditional companies have dedicated funds that invest in external fintech firms

Santander UK recently teamed up with Kabbage, a US company in which it invests, to allow it to provide small businesses with funding in a matter of hours. [Comment: old news for our readers.]

For financial services companies, often weighed down by old IT systems, partnerships with fintech firms can be a more efficient way of plugging gaps in their business models.

Royal Bank of Scotland, for example, has joined forces with a number of online lenders to small business, including Iwoca.

Warren Mead, global co-head of fintech at KPMG, said: “Getting access to customers is very hard and expensive, so more fintech companies are turning to banks to have partnerships. I don’t see them dominating the space in banking; I think they’ll end up being acquired. One or two could merge.

Some incumbents have already taken large stakes in a number of fintech firms. Spanish Bank BBVA, for example, acquired a 30 per cent stake in Atom Bank last year.

LendInvest calls on Government to lift barriers on small-scale housebuilding, (Dash.com), Rated: A

Recent decades have seen the numbers of SME housebuilders plummet. In 1988, the number of small builders – defined as those building 100 units or fewer – stood at 12,200 in the UK.

This fell to 5,700 by 2006 and then 2,400 by 2014.

Land

  • The Government should take action to ensure that land is not unnecessarily banked and that larger developers who do not develop land in their stock sell it on to SMEs who will develop the land swiftly.
  • Place increased scrutiny on the land market, including requiring the publication of data on land pricing, option agreements and ownership.
  • Prioritise SMEs over major housebuilders in bids to develop land released from public ownership.

Finance

  • The Government should explore state-backed funding schemes to provide businesses like LendInvest with more capital to lend to SMEs.
  • Put SME property development at the heart of the industrial strategy. Commit to and act upon the funding understood by industry to have been earmarked by government for SME development projects.
  • Build on the Government’s support for alternative finance as a route for SME growth by promoting cross-fertilisation between small scale developers and alternative finance companies.

Skills

  • The Government should support industry initiatives to develop skills for property developers.
  • The Industrial Strategy should go further in incentivising development activity to position property development as an attractive entrepreneurial opportunity.
  • Government at all levels must work with SME developers to make it easy to plan and develop property.
China

Protesters Wrongly Target Ernst & Young in Shanghai, (Caixin Online), Rated: A

Dozens of peer-to-peer online financing investors lodged an hours-long protest in front of Ernst & Young in Shanghai last Friday — only to learn they had targeted the wrong business.

At about noon, dozens of P2P investors gathered in front of the EY office in the bustling financial district of Lujiazui in Shanghai. They complained they lost money after investing in Uprosper Asset, an online lender that boasted of a “strategic cooperation” with EY, one of the “big four” audit firms. Some protestors refused to leave until 6 p.m.

However, the London-based EY dismissed any strategic cooperation with the P2P lender and told Caixin it has never audited or commented on that company’s financial reports.

EY demanded the online lending company remove all “relevant falsified information.” Since then, the names of all companies with whom the P2P site claimed to have a partnership have been deleted.

In June, Usprosper Asset owner Wang Mian disappeared, causing investor panic and a cash crunch at the P2P platform. Since then, 2,216 investors have been unable to get back a combined estimated 436 million yuan ($65.2 million).

Author:

George Popescu