What Does Blockchain Tokenization Mean for P2P Lending?

tokenization P2P lending

The growth of peer-to-peer lending was a direct result of the 2008 economic recession. Banks vacated the consumer and SMB lending space, which allowed fintechs to capture the demand left by that gaping hole. According to a recent study, by the end of 2024, the P2P lending industry will be worth $897.85 billion. The market […]

tokenization P2P lending

The growth of peer-to-peer lending was a direct result of the 2008 economic recession. Banks vacated the consumer and SMB lending space, which allowed fintechs to capture the demand left by that gaping hole. According to a recent study, by the end of 2024, the P2P lending industry will be worth $897.85 billion. The market expects to grow at a CAGR of 48.2%.

Hitting a trillion dollars an important milestone. But with traditional banks and lenders investing heavily in getting their digital lending game right, it is critical to evaluate the source of the next wave of innovation in fintech lending. Though crypto lending is on the verge of hitting the mainstream, it is tokenization that we believe can change the face of the industry in myriad ways.

TOKENIZATION: The New Disintegration Technique?

Tokenization is a method that converts real world assets into transferable digital tokens that live on a blockchain.

  • Liquidity: Liquidity is a major concern when people invest. From real estate to VC funds, many lucrative assets are constrained by their ability to provide the investor a timely exit. Thus, investors are stuck with an investment for 5 – 10 years because they have no way to trade it. Tokenization brings in the necessary liquidity by converting interest into a tradeable asset.
  • Monetization: Many assets such as patents, copyrights, and carbon credits do not have a physical identity but exist in a digital format. The easiest way to convert these into their monetary equivalent is to tokenize them.
  • Access: 99.9% of investors do not have access to the next Facebook because they cannot invest the minimum 10 million dollars required for getting entry into Peter Thiel’s next fund. Tokenization creates democracy of access as it allows the everyday investor to bet just $1,000 on the next unicorn. Tokenization empowers inclusion of retail investors, and their participation is a game changer in the long term.
  • Use Case: For instance, you would like to own the Empire State Building (ESB), but you do not have the estimated $3 billion required to buy the building. On the other hand, ESB is on sale and its owners can’t find a ready buyer for such a large asset. Selling it piecemeal would degrade its value. With the help of tokenization, you can convert ESB into 3 billion tokens worth $1 each and sell it across the investing world. The investor gets to own an iconic asset at $1, and the seller will have a larger buyer universe to pitch a $3 billion asset.

How Would Tokenization Work for P2P Lending?

There are new applications coming out daily, but we believe these are the earliest use cases:

  • Tokenization would allow P2P loans to be funded by thousands of micro investors. Instead of institutional investors controlling the lending on platforms, the ‘P’ in P2P lending can be an individual investing $100 in a loan.
  • The loans would become truly tradeable, and liquid. If you invested in a 3-year loan but need the money back after 6 months, you can simply sell your digital asset on an exchange at a fair price.
  • Crypto P2P loans can enter the mainstream with tokenization, allowing development of fixed income instruments in crypto. This will allow wider participation and lure institutional investors to the market.

CASE STUDY

Blackmoon has launched a tokenization platform on this theme. Its Prime Meridian real estate lending fund is built on a similar thesis that tokenization has the power to change P2P lending fundamentally. It is in a strong position to capture a currently niche market, which will soon to grow to encompass the primary P2P lending industry.

Impact on the P2P Lending System

A P2P loan is not liquid, and the lender usually has to see through the period of the loan tenure. It can be difficult to find a third party looking to buy the same loan. The lender might need to sell at a deep discount due to lack of liquidity. Tokenization will help create more buyers/sellers and a functioning secondary market for the sector leading to more liquidity.

The process of tokenization allows for fractionalization so that the lender can sell any portion and at any time. This breaks everything you own into its digital equivalent. This enables users to create a stock or single proof of ownership tied to the specific asset. It will also make investing easier for the average investor.

Tokenization reduces trading friction and transaction costs. It would also make fractional ownership simple and easier to execute. As the financial asset is already divided into tokens, there would no duplication of legal costs after every transaction.

With integration of the tokenization process in P2P lending, lenders can list their assets as collateral. It is through tokenization, that assets such as patents, intellectual property, or even branding, can be used for raising loans. Moreover, tokenization can allow a brand new form of P2P funding to arise. Tokenized assets can also be offered for collateral funding. So if you own 10% of an apartment, you can borrow against that fractional asset on the alt-lending market.

It can spread risk across a variety of loans. Tokenization will attract more investors to alt-lending platforms as you can now diversify risk for even an amount as small as $100.

Investors have more freedom to invest around the globe. Tokenized currencies enable investors to trade in any geographic area they wish to. Now an American Investor can lend to Asian borrowers in US-denominated loans and Asian accredited investors can invest in certain property loan platforms that are open only to a certain class of investors.

Conclusion

Tokenization is an interesting development with myriad applications in finance. One of its biggest impacts should be felt in the P2P lending industry. With the advent of new players like Blackmoon, P2P lending 2.0 is on the horizon.

Author:

Written by Heena Dhir.

Wednesday August 2 2017, Daily News Digest

Bank branch proximity

News Comments Today’s main news: PeerIQ wraps up $12M Series A financing, expands into traditional lending. LendInvest 5.25% bond offer closes Friday. Confirmed: LendInvest pulls out of P2P Finance Association. RateSetter enter hire purchase market with new partner. Yirendai’s Q2 results. Dianrong raises $220M from Asian investors. Lending Loop launches auto-invest, raises $2M. Today’s main analysis: Consumers prefer digital banking capabilities […]

Bank branch proximity

News Comments

United States

United Kingdom

China

European Union

International

India

Asia

Middle East

Canada

Philippines

News Summary

United States

PeerIQ Secures $ 12M in Series A Financing to Expand Leading Data and Analytics Platform for Lending Markets (Globe Newswire), Rated: AAA

PeerIQ, a provider of data and analytics for the lending sector, today announced that it has closed a $12 million Series A funding round, co-led by TransUnion, Hearst’s Financial Venture Fund and Macquarie Group, along with existing investors Uprising and former Morgan Stanley CEO John Mack. With the new capital, PeerIQ will expand its core platform to unlock more value for its clients, extend beyond online into traditional lending markets, and collaborate on new product initiatives with its strategic partners.

Already a core data partner to PeerIQ, TransUnion is deepening its relationship, with Steve Chaouki, executive vice president and head of TransUnion’s financial services business unit, joining the PeerIQ board. Shea Wallon, managing director of Hearst’s Financial Venture Fund, which invests in early-stage financial information, service and technology companies, is joining the board as well.

Consumers Prefer Digital Banking Capabilities Over Branch Proximity (The Financial Brand), Rated: AAA

The 2017 Omni-Channel Shopper Study, published by Novantas, found three major shifts in consumer behavior that will impact bank distribution and sales strategies in the future.

  1. A significant shift from branch dependence to digital preference
  2. A redefinition of the drivers of bank consideration and purchase
  3. An increase in demand for digital account opening

A Shift in Dependence on Branches

The research found that segments that placed the highest importance on branches for their checking relationship shrunk significantly in the past year, at the same time that those segments with the lowest branch attachment grew. The same was true for segments that were the most dependent on branches for ongoing transactions. These segments also shrunk significantly over the past year.

A New Definition of Convenience

The biggest news is that the drivers of ‘perceived convenience’ start with an organization’s digital capabilities. In fact, the importance of branch-centric factors have dropped in each of the past three years of the study. This is especially true for consumers aged 18-54.

Another significant trend of note is the increasing importance of being able to access cash without a fee, irrespective of primary bank proximity.

The Novantas shopping survey found that 79% of consumers are doing at least some of their shopping for new checking accounts digitally, with 54% using only digital channels. These digital-only shoppers are both older and wealthier, with the size of the digital-only shopper category increasing in size.

Juvo Raises $ 40M In Series B Funding Led By NEA And Wing Venture Capital (PR Newswire), Rated: A

Juvo, a pioneer in mobile Identity Scoring, today announced a $40 million USD Series B funding round led by New Enterprise Associates (NEA) and Wing Venture Capital. Also included in the round are investments from SignalFire as well as add-on investments from existing investors. Juvo will leverage these new funds to drive global growth and scale, with a particular emphasis on Asia,  Latin America and Europe, and broaden its suite of financial service offerings targeting the financially excluded. The company also announced the appointment of Peter Wagner, founding partner of Wing, to Juvo’s board of directors.

Juvo, who came out of stealth mode 10 months ago, was founded with an overarching mission: to establish financial identities for the billions of people worldwide who are creditworthy, yet financially excluded. By partnering with mobile operators and financial institutions around the world, Juvo uses sophisticated, data science-based credit algorithms to identify previously anonymous prepaid subscribers, enabling them to build financial identities and gain access to basic financial services.

Juvo currently partners with seven mobile operators around the world, with a reach of over 500 million subscribers across 25 countries and four continents. Juvo’s operator partners have reduced churn by 50 percent or greater, while lifting average revenue per user (ARPU) numbers by as much as 15 percent. Most importantly, operators across the board are seeing an average increase in subscriber lifetime value of 65 percent.

Reverse Mortgage Funding Named One of LendingTree’s Top Reverse Mortgage Lenders (BusinessWire), Rated: A

Reverse Mortgage Funding LLC (RMF), a leading national reverse mortgage lender dedicated to helping older Americans achieve financial peace of mind, today announced that it has been named one of the nation’s top reverse mortgage lenders by LendingTree, a leading online lending exchange that connects consumers with multiple lenders, banks, and credit partners. Based on loan volume from the top reverse mortgage lenders for the third quarter of 2016 analyzed by LendingTree, RMF was chosen for consistently scoring high approval ratings and reviews among consumers.

Microsoft rolls out Surface Plus financing, support programs (ZDNet), Rated: A

Called Surface Plus and Surface Plus for Business, the two programs are available in the US only as of noon ET on August 1. The plans can be purchased in the US Microsoft brick-and-mortar stores or online at Microsoft.com.

Students seem to be one of the primary, if not the main, target of the new Surface Plus program.

Microsoft’s Surface Plus page is now live. It notes that new Surface Pros will go for $34 per month for 24 months; Surface Laptops for $42 per month for 24 months and Surface Books for $63 per month for 24 months under the plan. Payment plans are arranged with Klarna Inc.

Marketplace Lender Blackmoon to Launch Ethereum Token Management Platform (Coindesk), Rated: A

Released by Blackmoon Financial Group today, Blackmoon Crypto is designed to enable verified asset managers to create and manage tokenized funds in a legally compliant manner. Operating in nine countries, Blackmoon has attracted $2.5 million to date in investment from firms including Target Global and Flint Capital.

Even Financial launches tool to semi-automate financial compliance for online ads (Martech Today), Rated: A

For the financial industry, which has long dealt with compliance requirements, New York City-based Even Financial is out with a Programmatic Compliance Tool that helps to semi-automate the process of staying within boundaries.

In real time and via an API, the tool looks at the blog, web or app page where a client’s ad for a financial product will appear. Image recognition analyzes daily screen grabs to assess ad placement. The tool also parses the surrounding text on the page to detect any issues that could pose problems with US federal or state regulations, as well as any nearby content that could be embarrassing for the advertising financial service.

CEO and co-founder Phillip Rosen told me that Even’s clients are financial companies — including Lending Club and Discover Loans — which run ads and offer affiliate links for loans, credit cards or other products on about 200 sites, blogs and apps.

How Legacy Financial Institutions Are Deepening Financial Inclusion Through Fintech Partnerships (PR Newswire), Rated: A

The Center for Financial Inclusion at Accion (CFI) and the Institute of International Finance (IIF), with the support of MetLife Foundation, today released a new report examining how partnerships between mainstream financial institutions and fintechs are expanding access to the formal financial economy to the unserved and underserved, particularly in emerging markets.

The report, “How Financial Institutions and Fintechs Are Partnering for Inclusion: Lessons from the Frontlines” is based on 24 in-depth interviews with firms and experts from around the world, and highlights 14 partnerships in as many countries. The report identifies four key financial inclusion challenges in emerging markets that mainstream financial institutions address through fintech partnerships:

  • gaining access to new market segments
  • creating new offerings for existing customers
  • data collection, use, and management
  • deepening customer engagement and product usage

15 Biggest Mid-Day Losers For Tuesday (Benzinga), Rated: B

  • Yirendai Ltd – ADR YRD shares dropped 10.7 percent to $34.18. Yirendai posted Q2 earnings of $0.66 per share on revenue of $174.5 million.

Get the full scoop on Yirendai under the China heading today.

United Kingdom

LendInvest 5.25% bond offer closes on Friday (Citywire), Rated: AAA

Peer-to-peer lending group LendInvest is offering investors exposure to the property market and a 5.25% return from through a retail bond.

The LendInvest bond is offering a return of 5.25% with a maturity date of 2022, the first time a bond has been listed on Orb paying over 5% since April 2016. Neither has there been a retail bond listed on Orb that has a maturity of five years since Orb opened in 2010.

The bond can be held in ISAs and self-invested personal pensions (Sipps) and the minimum investment is £2,000. It can be purchased through a number of investment platforms including, Hargreaves Lansdown, AJ Bell Securities, Alliance Trust Savings, Barclays Bank, Equiniti Financial Services, Interactive Investor, Redmayne Bentley, and Syndicate Room.

LendInvest leaves the P2PFA (Bridging&Commercial), Rated: AAA

The Peer-to-Peer Finance Association (P2PFA) has confirmed that LendInvest has withdrawn its membership of the self-regulatory body.

The P2PFA said communication of LendInvest’s intention to withdraw from the P2PFA with immediate effect had been received and the lender is no longer a member of the association.

“As we continue to scale the business, we’re increasingly looking to diversify our funding model and expand our capacity to lend to underserved borrowers, as well as to create new entry points to an attractive asset class that suits a broader range of investors seeking competitive risk-adjusted returns,” said Christian Faes, co-founder and CEO of LendInvest.

RateSetter unveils partner as it enters hire purchase market (P2P Finance News), Rated: AAA

RATESETTER has named leasing and asset finance specialist Corporate Asset Solutions (CAS) as its partner in the launch of new hire purchase loans on the peer-to-peer platform.

Businesses will be able to access hire purchase agreements for up to £750,000, processed by CAS.

British fintech start-up Neyber secures £21m in funding (Financial Times), Rated: A

What do several thousand police officers, two former Goldman Sachs executives and an Indian investment company have in common?

They all are central players in a £21m fundraising set to be announced this week by a British fintech start-up, which provides loans that are repaid out of people’s salaries.

Neyber is a kind of digital credit union.

The police officers — more than 5,000 of them — make up the majority of borrowers on Neyber’s platform, which has lent more than £65m over two-and-a-half years.

FCA answers your questions on robo-advice (FT Adviser), Rated: A

Set up in May 2016, the advice unit offers regulatory feedback to firms developing automated models providing low-cost advice.

So far 17 firms have worked with the unit, which was launched following the Financial Advice Market Review, a joint initiative by the Treasury and the FCA to look at ways to bridge the gap between people who could benefit from financial advice and those who can afford it.

Oxford University is getting into fintech (Business Insider), Rated: A

The university’s Saïd Business School announced on Wednesday that it will launch an online short course in fintech — financial technology for the uninitiated — that is designed to help prepare business executives for a future where more and more financial services functions are based around tech.

Oxford has launched the programme in conjunction with educational technology firm GetSmarter, which was recently acquired by fellow ed-tech business 2U for $103 million (£78 million).

Banking jobs ‘will completely change’ (Business Insider), Rated: A

Business Insider chatted with Axel Lehmann, chief operating officer of Swiss bank UBS, to ask how the organisation is coming to terms with fast-changing world of fintech.

Axel Lehmann: True change is really coming from outside the industry.

It’s less the technology, as such, providing a transformative element in the banking industry. It’s really alternative business models that have the potential to shake up everything and eat into our cake.

AL: I truly believe that whole question of robotics and artificial intelligence over a time horizon of four to eight years will fundamentally change the banking business. As banks, we understand that our business is all about data. These technologies have the potential to really fundamentally change the way we operate in terms of getting smarter with the customer, understanding what kind of products we should offer and so on.

AL: Dealing with fintechs is a cultural shift that needs to take place and you want to have the local people to innovate. At UBS we have a systematic process on how we expose ourselves to fintech companies.

L: We have to be mindful going forward. Regulation shouldn’t stifle innovation. The banks should welcome when regulators like the PRA in the UK or the MAS in Singapore open up to fin tech and allow companies to better explore potential changes in the business model. The one request we would have is a level playing field.

Increasingly regulation will have to shift to a more functional regulatory approach. At the moment, if I’m a bank I’m regulated like a bank. If I’m an insurance company, I’m regulated like an insurance company. However some of these lending platforms are partially unregulated although to the customer it looks the same as a regulated offering. To avoid regulatory arbitrage regulators will have to move to a more functional perspective.

Evolving For Symbiosis: Rethinking The Bank-Fintech Puzzle (The Financial Brand), Rated: A

While a few traditional financial institutions continue to view fintechs as pure competition, there is a broad realization that the way customers and businesses consume financial services is changing faster than banks are able to adapt—especially while maintaining focus on a premier experience for full-service banking customers.

Failure to adjust to changing expectations and preferences will result in falling behind the market while more nimble, non-traditional players poach current customers and dominate the attention of the next generation of account holders.

Collapsed engineer Morgan Tucker owed creditors £3m (Construction News), Rated: B

Failed engineer Morgan Tucker collapsed owing an estimated £3m, according to the administrators’ latest report.

The Newark-based company was estimated by administrator FRP Advisory to owe a total of £3,038,952 to creditors when it entered administration on 30 May.

The biggest unsecured creditor was the Funding Circle, one of the country’s biggest peer-to-peer funding firms, which was owed a total of £218,911.

China

Yirendai Reports Second Quarter 2017 Financial Results (PR Newswire), Rated: AAA

In the second quarter of 2017, Yirendai facilitated RMB 8,189.6 million (US$1,208.0 million) of loans to 138,529 qualified individual borrowers on its online marketplace, representing a year-over-year growth of 80%; 70.9% of the borrowers were acquired from online channels; 51.2% of the loan volume was originated from online channels and nearly 100% of the online volume was facilitated through mobile.

In the second quarter of 2017, Yirendai facilitated 199,591 investors with total investment amount of RMB 11,446.7 million (US$1,688.5 million), 100% of which was facilitated through its online platform and 90% of which was facilitated through its mobile application.

For the second quarter of 2017, total net revenue was RMB 1,183.1 million (US$174.5 million), an increase of 61% year over year; net income was RMB 269.1 million (US$39.7 million), an increase of 3% year over year.

Here’s Why Yirendai Stock Is Crashing Today (The Motley Fool), Rated: AAA

Shares of Yirendai (NYSE:YRD) are plunging today, down by 16% as of 12:25 p.m. EDT, after the peer-to-peer lender reported second-quarter earnings.

The company’s loan volume grew 80% year over year, and is up by 18% from the first quarter, continuing an amazing streak of growth. Revenue grew by 61% year over year (16% from last quarter), and both loans and revenue handily surpassed the company’s own expectations.

Loans and revenue increased by 18% and 16%, respectively, during the quarter, but total expenses shot up by 29%, including a 32% rise in sales and marketing expenses. This is the main reason net income fell 23% from last quarter, and grew by just 3% from last year, despite the 61% revenue growth.

European Union

European fintechs are ‘valued too highly’ and consolidation is coming (Business Insider), Rated: A

Victor Basta, cofounder and CEO of London-based Magister Advisors, wrote in a blog post shared with Business Insider ahead of publication: “Many fintech companies are valued too highly in financing rounds, and need years of performance for their ‘cash value’ to catch up to the financing round valuations.

TransferWise was reportedly valued at $1.1 billion in its funding round last year. It said earlier this year that it is on track for revenues of £100 million in 2017 and should make its first ever operating profit.Revolut was reportedly valued at £300 million in a recent $66 million funding round. Its first year of full accounts show it lost £7.1 million on £2.3 million of revenue.

International

JPMorgan to Unveil Robot to Execute Stock Trades (Newsmax), Rated: AAA

JPMorgan reportedly plans to develop a robot to execute stock trades, essentially replacing the human touch in the process.

Daniel Ciment, JPMorgan’s head of global equities electronic trading, told the Financial Times that the AI — known as LOXM — has been used in the bank’s European equities algorithms business since the first quarter and will be launched across Asia and the U.S. by year’s end.

India

Anshu Jain-backed InCred on the hunt for buyout deals to grow lending biz (VC Circle), Rated: A

InCred Finance, a non-banking financial company backed by private equity firms and former Deutsche Bank co-CEO Anshu Jain, is looking to make acquisitions to start microfinance and vehicle loan businesses as part of efforts to expand its loan book.

Asia

Singapore’s GIC Leads $ 220 Million Funding Round for Chinese P2P Firm Dianrong (U.S. News), Rated: AAA

Chinese peer-to-peer lending platform Dianrong said on Wednesday it raised $220 million from a group of investors led by Singapore sovereign wealth fund GIC Pte Ltd, looking to step up research of new technology as it expands across China and explores ventures in other countries in the region.

Other investors in the funding round included CMIG Leasing, a unit of China’s biggest private investment conglomerate China Minsheng Investment Group (CMIG), and South Korean fund manager Simone Investment Managers, Dianrong said.

The Shanghai-based firm would use the funds to automate some of its new branches across China, for research and development and potential acquisitions, Soul Htite, co-chief executive of Dianrong, told Reuters.

Middle East

Dubai Regulations for Crowdfunding: Issuers May Raise Up To Million (Crowdfund Insider), Rated: AAA

The Dubai Financial Services Authority(DFSA) announced the enactment of a regulatory regime designed to engender a robust crowdfunding ecosystem for the country.

At a high level, crowdfunding offers are capped at $5 million. This is in line with the UK but far higher than Reg CF in the US.

As for the specifics of the rules you may view them here.

Fintech in Iran: An Overview (Fintech News), Rated: A

Fintech is gaining steam in Iran as the country’s central bank, financial institutions and government agencies are taking steps to make Tehran a regional hub for financial innovation.

Several fintech events have been organized in Iran in recent months, including the Fintech Festival sponsored by Bank Pasargad Iran earlier this year. The bank also held the Second Fintech Trig-Up during the festival wherein 45 experts help startups develop their ideas.

The CBI is planning to launch a new regulatory body specifically for fintech firms. The authority has also been working on a regulatory framework for fintech companies since 2015.

In March, a group of Iranian fintech companies joined hands to form an association representing the industry. Called Fintech A, the organization is set to bring industry players under one roof, mainly to find a solution to their problems and boost innovators’ relations with regulatory bodies.

Online payment services provider ZarinPal, peer-to-peer payment app Bahamta, online invoicing service Hesabit, money transfer service PayPing and crowdfunding platform Mehrabane are among founding members of the association.

Canada

LENDING LOOP RAISES $ 2 MILLION, LAUNCHES AUTOMATED INVESTMENT PLATFORM (Betakit), Rated: AAA

Toronto-based Lending Loop, a peer-to-peer lending platform, has raised $2 million in funding from the MaRS Investment Accelerator Fund. The round also saw participation from a group of finance and technology investors.

Lending Loop said the funding will help the company roll out its latest product Auto-Lend, which allows lenders to automatically invest in loans through Lending Loop’s marketplace. The company also plans to invest in machine learning capabilities to assess the risk of borrowers applying for loans.

Flexiti Financial Announces Closing of $ 6.25M Convertible Unsecured Debentures Offering (Newswire), Rated: A

Flexiti Financial, a provider of point-of-sale (POS) financing and payment technology for retailers, is pleased to announce the closing of an oversubscribed $5M convertible debentures offering. Oversubscription amounts totaled an additional $1.25M of aggregate principal, for a total investment of $6.25M. These funds will allow Flexiti Financial to accelerate its rapid growth and further develop the company’s award-winning POS lending platform technology, which is currently adopted in over 1,500 merchant locations and used by over 10,000 customers across Canada.

Philippines

Oriente-Express joint venture to address financial inclusion through fintech (Inquirer.net), Rated: AAA

Greater China-based Oriente and Express Holdings, Inc. (a subsidiary of JG Summit Holdings, Inc.), through an exclusive partnership, will address the financial exclusion problem of underbanked consumers and MSMEs in the Philippines.

This joint venture is setting up a digital financial services marketplace that will enable Filipinos to tap into credit facilities to bridge their ever-growing needs, whether to pay for tuition, unexpected medical expenses or even finance a small business.

According to the World Bank, close to 90 percent of adult Filipinos are not covered by a credit bureau and many people resort to informal means to borrow money. In addition, according to the Banko Sentral ng Pilipinas, of the 43 percent of the population who save money, only 14 percent of households maintain a deposit account and 68 percent keep their savings in unsecured places.

Authors:

George Popescu
Allen Taylor

Thursday March 16 2017, Daily News Digest

sofi net loss triggers

News Comments Today’s main news: Blackmoon, ID Finance partnership results in $10.71 mil investment. OCC issues draft manual for FinTech charter.  Yirendai reports Q4 and full year 2016 results.Marlette cuts staff to push for profitability. Today’s main analysis: Are SoFi borrowers really defaulting more? Robo-advice stirs up more competition. Today’s thought-provoking articles:  ISA myths for robo-investors. Beijing vows to […]

sofi net loss triggers

News Comments

United States

United Kingdom

European Union

  • N26 hits 300K customers. AT: “App-only banking is taking millennials by storm. I think this will become a big deal in most of the world, particularly Europe and Asia.”

International

Australia

China

  • Yirendai reports Q4, the full year 2016 results. GP:”Yirenday originates $1bil per quarter, approx 1/2 the size of Lending Club. And reports approx. $158mil in EBITDA profit in 2016. Our understanding is that this profitability is due to being focused on lower quality borrowers than previously. To be noted as well: 97.8% was facilitated via the mobile app. ” AT: “Added bonus: See the Yirendai presentation at LendIt USA 2017.
  • Beijing vows to clean up digital small lenders.

Asia

Latin America

News Summary

 

United States

EXCLUSIVE: Blackmoon, ID Finance partnership results in 10 mil EUR investment (ID Finance Email), Rated: AAA

As reported yesterday, Blackmoon and ID Finance have integrated for packaged loans to investors. Total investments so far: 10 mil EUR, the equivalent of about US $10.71 million.

From the press release:

ID Finance has integrated with Blackmoon and is now executing investment transactions via the Russian lending platform. Blackmoon, which was cofounded by the former vice president of VK.com Ilya Perekopsky and whose backers include international venture capital firm Flint Capital, can now offer professional investors the ability to acquire portfolios of loans made to emerging market borrowers. The loans have been screened and scored by ID Finance’s advanced risk assessment system and allow Blackmoon investors to benefit from interest rates higher than traditional investment tools.

If the issued loans meet the strategies of investors that deal with Blackmoon, the system registers the fact of sale, the investor’s funds are transferred to the creditor and the transaction is deemed closed. Hence, ID Finance registers the profit by the securitised portfolio and continues servicing borrowers who are redeeming the loans now to the benefit of Blackmoon investors. In this case, Blackmoon ensures execution of transactions, analysis, accounting and investment process management for the investor and lender. ID Finance will benefit from a new steady scaled funding source from professional investors.

ID Finance is currently operating in Russia, Kazakhstan, Georgia, Poland, Spain and Brazil. Presently, the loan portfolios available to Blackmoon investors cover Poland, Georgia and Spain although additional markets may be added in the future. Thanks to ID Finance’s advanced credit scoring and risk analysis technology, investors who purchase loan portfolios via Blackmoon receive an enhanced income-and-risk ratio compared to conventional investment instruments.

For additional context, read TechCrunch and VentureBeat.

Are SoFi Borrowers Really Defaulting More? (Lend Academy), Rated: AAA

There was an article in Bloomberg earlier this week that called into question the performance of a 2015 SoFi securitization. Given that I have always held SoFi out as the gold standard in industry performance I was surprised to read about these issues. So, I did some digging and discovered that Matt Scully (the author) did not provide the complete story.

The Cumulative Net Loss (CNL) trigger for this deal in February was very low, reportedly below 3% and the actual CNL for February barely went above these low trigger points. But what is more important is that it is misleading to use this case as another example of underperformance. As I said this was a one-off deal between a motivated buyer and seller and was much tighter than subsequent deals.

One final point. Because the triggers were barely breached it is quite possible that in coming months future triggers will not be breached and the deal will cure. The reality is that triggers were not set at the appropriate level for this deal. SoFi did not set these triggers and likely did not agree with them as they were negotiated directly between the buyer and the seller. So to read anything into this particular breach is misleading.

Online Lender Marlette Cuts Staff in Push for Profitability (WSJ), Rated: AAA

Online lender Marlette Funding LLC is cutting around one-fifth of its workforce after the company decided to mothball plans to branch out into businesses beyond making unsecured personal loans, according to people familiar with the matter.

While smaller than better-known rivals like LendingClub Corp., Marlette expanded more quickly in recent years. The Delaware-based company said earlier this month that it extended more than $3 billion in loans under its Best Egg brand in its first three years in business, a milestone that took LendingClub around twice as long to reach. Marlette’s 2016 loan volume was $1.1 billion compared with $8.7 billion for LendingClub.

Robo advice gets human, stirring competition again (Financial-Planning), Rated: AAA

Over the past two years, there has been a clear divide in the assets of robo advice startups and the initial efforts of incumbent firms. But that partition could collapse, as the major players gravitate to one model and price competition takes hold.

Forming a separate cluster ranked by AUM are the independent digital startups, with Betterment the leader with over $7 billion, followed by Wealthfront, Personal Capital, and other offerings.

But by last year, firms realized that customers wanted a human touch with their digital solutions, and numerous analysts came to the conclusion that hybrid robo platforms would be the go-to model for digital wealth management.

Schwab’s hybrid seems to be aimed at the leading competition as well, undercutting Vanguard’s PAS with account minimums of $25,000 and fees capped at $900 a quarter. It’s priced aggressively enough that even industry observers such as Joel Bruckenstein, co-creator of the Technology Tools for Today conference series, wondered if it was “the beginning of the commoditization of entry level planning.”

Another factor to keep in mind: the biggest banks are reinvigorating their PFM applications and developing their own hybrid robo advice solutions, keen to keep even small retail assets rather than seeing them leak to digital wealth firms or custodians.

OCC Issues Draft Licensing Manual for Fintech Charter Applicants (ABA Banking Journal), Rated: AAA

The Office of the Comptroller of the Currency today released its long-awaited draft licensing manual for fintech companies seeking the agency’s new limited-purpose national bank charters. The manual spells out in greater detail than at any point previously how applicants can seek a charter and how the OCC will review applications and examine newly chartered fintech firms. Consistent with previous OCC statements and papers, the manual makes clear that the special-purpose charters will be subject to all applicable banking laws and regulations. It also clarifies that the special-purpose charters will not authorize deposit-taking.

The manual walks through the initial steps of applying, the chartering standards the OCC will apply, the business plan the applicant is expected to provide and the OCC’s final decision-making process. For example, the manual notes that some members of the organizing group, management and board would usually be expected to have “experience in regulated financial services” in addition to experience with the kind of novel products or services the company may propose to offer.

In response to concerns expressed by ABA, the draft manual makes clear that the agency “will not approve proposals that would result in an inappropriate commingling of banking and commerce.”

Marketplace Lending Industry Sees Efficiency, Cost, Authentication and… (Broadway World), Rated: A

Ninety percent of those involved in the burgeoning marketplace lending industry anticipate an increase in traditional bank and marketplace lender partnerships in 2017, eOriginal, Inc., the expert in digital transactions, today announced as part of the results of a survey conducted at last week’s LendIt USA 2017 Conference in New York.

Survey takers were also asked to highlight challenges to growth within marketplace lending. The top answers included regulations (47 percent) and access to capital (25 percent). When asked to focus specifically on the adoption of end-to-end digital transaction management solution, participants cited the challenges to be full adoption by partners (31 percent), lack of infrastructure (29 percent), security and privacy concerns (22 percent) and cost (17 percent).

House GOP demands that OCC slow down on fintech charter (American Banker), Rated: A

A group of House Republicans is asking Comptroller of the Currency Thomas Curry to slow down on the creation of a fintech charter.

ProducePay raises $ 77 million in debt and equity to revolutionize farm financing (TechCrunch), Rated: A

His company has just raised $77 million in equity and debt to provide financing to farmers of perishable goods. While there are all sorts of financial instruments for certain types of farmland — including billion-dollar investment funds for timberland, and certain kinds of non-perishable crops — most fruits and vegetables aren’t considered good prospects for loans.

ProducePay has come up with a model that works for those farmers whose crops can’t be siloed or stored.

ProducePay reaches out to farms to buy their crops at a price that the company sets up front, then goes out and sells those crops on the market. If the company breaks even, the farmer doesn’t owe a cent. If the company makes a profit, the profits are returned to the farmer minus a commission or percentage of the profit that ProducePay collects.

And by using the crop as collateral, Schwarzbeck’s company manages to avoid forcing farmers to put up their farms as collateral — the phenomenon that forced many farmers into bankruptcy in the 80s and hastened the advent of industrial farming.

Klarna Finds Feintuch (O’Dwyer’s), Rated: A

Swedish e-commerce company Klarna has retained New York-based Feintuch Communications as its PR agency of record for North America.

Feintuch will work with Klarna’s North American and headquarters teams to increase market support for the payments provider through an integrated PR and social media campaign.

Innovative criminals embrace online opportunities (Financial Times), Rated: A

Good innovation must therefore be differentiated from bad. And one area in which this is becoming abundantly clear is the fast expanding high-tech financial service industry, colloquially known as “fintech”. Fintech innovators boast their technologies are making financial services more convenient, more inclusive and more competitive, all the while bringing down costs.

But the spike in digital financial crime accompanying the frictionless payments systems these technologies promote suggests criminals may be innovating as quickly, if not quicker. For now at least, more fintech equals more “crimtech”.

Of particular concern is the phenomenon of “transaction laundering”. Think of the cost savings brought about by e-commerce and mobile app services for the legitimate e-retailing sector and then apply them to the world of money laundering. Whereas an old-school money launderer would face the headache of managing a bricks-and-mortar front business to launder his illicit profits, today’s online criminals need only set up a bogus online website to achieve the same effect, or else partner — on a commission basis — with a legitimate e-retailer prepared to process their illicit transactions.

With the costs so low, there are few obstacles to criminals seeking to set up their own transaction laundering fronts. Add identity fraud to the mix, and criminals might not even have to put their own reputation at risk.

Flu Season Hits Small Businesses Especially Hard — And It’s Not Over Yet (Small Biz Trends), Rated: B

The impact of the flu on small businesses is big. New data from Funding Circle shows that 47.4 percent of small businesses report being adversely impacted by the flu virus.

Almost half of all small businesses suffered loss of productivity or disruption of operations due to flu, Funding Circle found during a 2016 small business owner survey.

The U.S. Centers for Disease Control and Prevention (CDC) notes that 111 million work days are lost to the flu every year. That includes big businesses, too, of course. The financial impact of the flu each year adds up to about $7 billion, including both lost wages and slowed productivity. Since most businesses in the U.S. are small businesses, their share of those totals is considerable.

Mike Bingle, Steven Freiberg and Robert L. Joss AC Elected to SoFi’s Board of Directors (PR Newswire), Rated: B

SoFi, a modern finance company taking an unprecedented approach to lending, wealth management, and insurance, announced today the election of Mike Bingle, Steven Freiberg, and Robert L. Joss AC to its Board of Directors.

Bingle is a Managing Partner and Managing Director at Silver Lake. He currently serves on the Board of Directors of Ancestry.com, Fanatics, Gartner, and SolarWinds. Bingle has been a private equity investor for over 20 years, and he has invested in numerous financial technology companies, including having served as a Director of: TD Ameritrade, Datek Online Holdings, Inc., Interactive Data Corporation, IPC Systems, Instinet, Mercury Payment Systems, and Virtu Financial. Prior to joining Silver Lake, Bingle was a principal at Apollo Management; he also worked in the Investment Banking Division of Goldman, Sachs & Co. Bingle holds a BSE in Biomedical Engineering from Duke University.

Freiberg is also a long term veteran of the financial services sector, having held multiple positions at Citigroup over a 30 year period including serving as the Co-Chairman and CEO of Citigroup’s Global Consumer Group, and most recently as the CEO of E*TRADE Financial Corporation where he led the company back to profitability in the aftermath of the 2008 financial crisis. He is currently a Board member of Fair Square Financial, MasterCard, OANDA, Purchasing Power, and Regional Management, and a senior advisor to several companies including The Boston Consulting Group and Verisk Analytics. Freiberg holds a BS in Finance as well as an MBA in Finance from Hofstra University.

United Kingdom

The ISA myths robo advice investors should dispel this ISA Season pt.1 (AltFi), Rated: AAA

With returns on cash ISA meagre at best, many are looking to the new Innovative Finance ISA and regular stocks and shares ISAs for both income and growth.

Many experts are also expecting ISAs to play a bigger role in investors overall wealth planning, not least as the current allowance of £15,240 is set to rise to £20,000 in April. In this brave new world, however, a huge gulf of information exists.

  • Myth 1: the money is locked in
  • Myth 2: ISAs are only for people with lots of money
  • Myth 3: ISAs are just for cash savings
  • Myth 4: Stocks and shares ISAs are for seasoned investors
  • Myth 5: The ISA limit is the total limit of what I can invest this year
  • Myth 6: If I get a stocks and shares ISA I’ll have to do a tax return
European Union

App-only bank N26 hits 300,000 customers as startups across Europe race to be the finance app for millennials (Business Insider), Rated: AAA

App-only bank N26 has tripled customer numbers in little over a year, announcing on Wednesday that it now has 300,000 users across Europe.

The customer number is up from 100,000 in January 2016. N26 has customers in 17 European countries, including 30,000 in France and 10,000 in both Spain and Ireland.

The startup also announced on Wednesday that it has processed €3 billion (£2.6 billion, $3.1 billion) of transactions, with more than 60% of that total in the last year alone.

Berlin-based N26 is one of a number of app-only bank or bank-like services that have sprung up across Europe in the last few years. Many of them are competing to become the go-to bank for millennials, the generation glued to their smartphones who find bank branches as old school as sending a fax. N26 highlights in a blog post announcing the milestone that 59% of its customers are aged 18-34.

N26 has a significant war chest to take on any would-be rivals. The 200-person business has raised over $55 million, most recently raising $40 million from investors including Hong Kong billionaire Li Ka-Shing last June. N26 has said it plans to launch in Britain later this year.

International

Financial Services Application Market Projected to Grow (Broadway World), Rated: AAA

Investments in financial technology (fintech) are growing rapidly. According to a new report published by Accenture, in the first quarter of 2016, global investment in financial technology ventures reached $5.3 billion, a 67 percent increase year over year. About 62 percent of the investments went to fintech companies in Europeand Asia-Pacific. China is the world’s leader in the fintech industry. For the period of July 2015 to June 2016, Chinese FinTech investments surged to $8.8 billion, commanding the largest share of global investment in this sector, according to a report by EY.

Australia

LONG HOT SUMMER CREATES SMALL BUSINESS WINNERS AND LOSERS (The Bull), Rated: A

New research has found that 1 in 5 Australian business owners took a hit to the bottom line in this summer’s heatwave, facing a double whammy as customers stayed at home and energy bills soared.

The sweltering summer season created headaches for thousands of business owners, with almost 30% saying their business performed worse than the summer before and almost the same number unhappy with their level of trade over the period.   Some reasons cited for a drop-in business were lower foot traffic as customers stayed indoors, it being too hot to work outside, heat and rain damaging stock, and hot and bothered customers being in a bad mood.

Mr Poolman said 1 in 4 OnDeck loans were used for purchasing stock or inventory, with business expansion, more staff, marketing & advertising the other top reasons.

The weather is not the only thing impacting Australian small businesses at the moment, according to the research. Of the 300 businesses surveyed, more than half (53%) believe Australia’s high cost of housing is having a negative impact on consumer confidence – and in turn the small business community.

China

Yirendai Reports Fourth Quarter and Full Year 2016 Financial Results (Yahoo! Finance), Rated: AAA

Yirendai Ltd. (YRD) (“Yirendai” or the “Company”), a leading online consumer finance marketplace in China, today announced its unaudited financial results for the quarter and full year ended December 31, 2016.

Starting from the second quarter of 2016, the Company changed its reporting currency from the U.S. dollar (“US$”) to the Renminbi (“RMB”), to reduce the impact of increased volatility of the RMB to US$ exchange rate on the Company’s reported operating results. The aligning of the reporting currency with the underlying operations will better depict the Company’s results of operations for each period. This release contains translations of certain RMB amounts into US$ for convenience[1]. Prior period numbers have been recast into the new reporting currency.

In the fourth quarter of 2016, Yirendai facilitated RMB 6,675.2 million (US$961.4 million) of loans to 110,785 qualified individual borrowers on its online marketplace, representing a 102% year-over-year growth; 57% of the borrowers were acquired from online channels; 37% of the loan volume was originated from online channels and 98.8% of the online volume was facilitated through the Yirendai mobile application.

In the fourth quarter of 2016, Yirendai facilitated 194,505 investors with total investment amount of RMB 7,806.9 million (US$1,124.4 million), 100% of which was facilitated through its online platform and 85.0% of which was facilitated through its mobile application.

For the fourth quarter of 2016, total net revenue was RMB 1,071.1 million (US$154.3 million), up by 137% from the same period in 2015; net income was RMB 379.8 million (US$54.7 million), representing an increase of 356% from the same period in 2015.

In the full year of 2016, Yirendai facilitated RMB 20,277.9 million (US$2,920.6 million) of loans to 321,019 qualified individual borrowers on its online marketplace, representing a 112% year-over-year growth; 57% of the borrowers were acquired from online channels; 38% of the loan volume was originated from online channels and 97.8% of the online volume was facilitated through the Yirendai mobile application.

In the full year of 2016, Yirendai facilitated 597,765 investors with total investment amount of RMB 25,038.3 million (US$3,606.3 million), 100% of which was facilitated through its online platform and 83.0% of which was facilitated through its mobile application.

For the full year of 2016, total net revenue was RMB 3,238.0 million (US$466.4 million), up 146% from the same period in 2015; net income was RMB 1,116.4 million (US$160.8 million), representing an increase of 305% from the same period in 2015.

See the full LendIt USA 2017 presentation delivered by Yihan Fang and Yang Cao, CEO and COO/CTO, respectively, of Yirendai here.

Beijing vows to clean up digital small lenders (Financial Times), Rated: AAA

Chinese authorities are preparing new rules to reduce risks caused by the rapid growth of online small-loan companies, which have emerged as among the most active lenders in the country following a crackdown on peer-to-peer rivals.

Loans outstanding among China’s 8,673 small-loan companies totalled Rmb927bn at the end of last year, according to government data. That is more than the Rmb673bn outstanding from peer-to-peer lenders, according to Online Lending House.

But even that figure understates the true scale of activity by small-loan companies because these groups are among the most active issuers in China’s burgeoning securitisation market. Securitisation of small-loan assets hit Rmb82bn in 2016, up from Rmb13bn a year earlier, according to data from Wind Info.

Traditional, offline small-loan companies are restricted to lending within their home provinces where they know local businesses. But provincial governments have approved a new wave of online small-loan companies in recent years. These new online groups are not subject to regional restrictions, opening the door to new risks.

Online small-loan approvals have become a valuable commodity amid aggressive enforcement of new rules on P2P lending announced last year. The rules cap P2P loans at Rmb200,000 for an individual and Rmb1m for a company. They also forbid peer-to-peer lenders from operating “fund pools” that allow platforms to fund payouts on maturing investment products with inflows from new product sales.

The goal of the ban on fund pools is to force P2P groups to serve as pure intermediaries that match investors with loans. Yet fund pools have been crucial to enabling these platforms to offer products with both short maturities and high yields. By contrast, small-loan companies rely on their own capital to fund loans, which means they have greater freedom to manage liquidity.

Asia

This real estate start-up will help you invest with as little as Rs50,000 (The Express Tribune), Rated: AAA

NEST, one of the finalists at the Fintech Disrupt Challenge 2016, will be offering an entry-level ticket, as low as Rs50,000 ($477), to own a small stake in a managed commercial/residential property.

Fintech Disrupt Challenge 2016 was organised by Karandaaz Pakistan and will be facilitating people with shared social demographics and interest in real estate, investing to pool money and purchase properties. Arazi Ventures CEO Umair Sheikh said the team has been working on this project for quite some time but getting past the current regulatory framework has been a major challenge.

Latin America

Startupbootcamp bets on Latin American fintech (Global Trade Review), Rated: A

Accelerator firm Startupbootcamp has launched a fintech-focused programme based in Mexico City, targeting the wealth of start-ups that have recently appeared in Latin America.

The company has teamed up with the region’s main fintech champion, Finnovista, on the project, which will be led by Nektarios Liolios, CEO and co-founder of Startupbootcamp Fintech, together with Latin American entrepreneurs Fermín Bueno and Andrés Fontao from Finnovista.

Though based in Mexico City, the programme is open to all fintech start-ups from across Latin America, with ‘FastTrack’ events scheduled to be held in all major Latin American cities from March to May 2017 to introduce companies to the Startupbootcamp team and encourage them to apply.

Authors:

George Popescu
Allen Taylor

Wednesday March 15 2017, Daily News Digest

funding circle

News Comments Today’s main news: Enter the bear market in bonds? D+H launches cloud-based small biz lending platform for banks. Over 50K investors register with RateSetter. Revolut partners with Lending Works to offer cut-price instant credit. Blender procures Electric Money Institution license. Blackmoon partners with ID Finance. Today’s main analysis: Fundbox study reveals impact of late SMB payments. The British Business Bank […]

funding circle

News Comments

United States

United Kingdom

European Union

MENA

News Summary

United States

Enter the Bear Market in Bonds? (WSJ), Rated: AAA

Stocks and bonds struggled while the dollar climbed Tuesday.

The yield on the 10-year Treasury note on Monday rose to 2.609%, the highest since September 2014. That’s up from 1.867% on Election Day, and nearly double the all-time low of 1.366% hit last July.

Bill Gross, the famed bond investor, underlined the 2.6% yield in January as the pivot point that will usher in the long-anticipated bear market in bonds. Mr. Gross warned that, should yields march above that threshold, it would indicate a “secular bear market has begun.” A break above 2.6%, he observed in chartist vernacular, would break a downward trend line that has been in place for the past three decades.

 

Fundbox Study Reveals Impact of Late SMB Payments (Fundbox Email), Rated: AAA

Late and unpaid payments cripple small businesses (SMBs) and it’s something they have to deal with on a daily basis. In fact, 64% of SMBs are affected by late payments on open invoices. I would like to give you an early look at a new Fundbox study, which dug deeper to understand the microeconomic impact that takes place when a business is paid late.

Key findings include:

  • Hiring freeze – 23% can’t hire new employees
  • Owner pay cuts – 79% of SMB owners said they can’t pay themselves
  • New equipment gets the squeeze – 23% can’t invest in new equipment
  • Can’t advertise – 20% can’t spend on marketing efforts
  • Reduced Payroll – 18% hold back on pay increases or bonuses for employees
  • Inventory freeze – 17% can’t build up inventory

If paid on time, Fundbox estimates that these SMBs across the U.S. could hire an additional 2.1 million employees, which would reduce unemployment by 27%.

Fundbox helps SMBs overcome cash flow gaps by funding outstanding invoices. Attached please find the infographic. Would you like to also see the release? I can also connect you with Prashant Fuloria, Chief Product Officer at Fundbox who can discuss the critical need for services that solve cash flow gaps.

 

D+H Launches Cloud-Based Small Business Lending Technology (D+H Email), Rated: AAA

DH Corporation (TSX: DH) (“D+H”), a leading provider of technology solutions to financial institutions globally, today launched Total Lending™ Small Business, a new digital, mobile-first lending solution designed to boost profitability of financial institutions and improve the lending experience for small business owners across the United States. Now, banks and credit unions can deploy an intuitive, online loan application for small businesses, enabling more application throughput than the traditional paper-based branch model.

Total Lending™ Small Business is designed to empower financial institutions to build a more profitable small business loan portfolio. By bringing the loan process online, banks will benefit from reduced overhead and greater scale. An improved application process will also attract more loan requests from new and existing customers who prefer the convenience of the online or mobile experience.

New Data Shows C&I Lending Can Bring Higher Profitability to Community Banks in 2017 (PayNet Email), Rated: AAA

At $4.4 trillion in trade payables, term loans, and working capital loans, private-company credit represents one of the largest credit markets in the U.S. Today, C&I lending represents about 25% of all loans, down from over 40% in 1950. According to a new study by PayNet, Inc. banks can look to higher profitability in 2017 in their core franchise credit C&I business.

PayNet’s study shows that between 2008 and 2016, banks could have achieved $2.6 billion in additional net income, at a higher risk-adjusted return, had they maintained their share of C&I lending.

Banks can find financial technology useful to reduce the time to underwrite a loan from 50 hours to just over 2 hours. In addition, banks can further utilize technology to lower the cost of loan review by 40% while at the same time increasing the frequency of the loan review cycle from once per year to four times per year for the highest risk accounts.

‘Car vending machine’ firm Carvana hires banks for IPO (Reuters), Rated: A

U.S. used-auto retailer Carvana LLC, which allows customers to pick up cars they buy on the internet from vending machine-like towers, has tapped investment banks for an initial public offering, according to people familiar with the matter.

Carvana has hired Wells Fargo & Co (WFC.N) and Bank of America Corp (BAC.N) to lead its IPO, the people said this week.

Carvana sells cars through its website and operates automated towers that store cars in U.S. cities such as Austin and Dallas in Texas, and Nashville, Tennessee.

This Insurance Startup Wants to Cover Tomorrow’s Self-Driving Cars (Backchannel), Rated: A

Now an auto insurance startup called Root is taking that conclusion to the bank, so to speak. It believes that the investigation, as well as its own studies on the matter, make a strong case that Teslas with Autopilot are safer than just plain humans. So confident is Root about this that, starting today, it is charging Tesla drivers lower fees if they turn on and use the controversial Autopilot feature.

The Tesla discount is a natural outgrowth of Root’s business model, which is based on using technology to identify safe drivers and offer them low rates. If you suck at driving, you don’t get a policy. Before getting coverage, customers must submit to a two-to-three-week testing period, downloading the Root app to their phones, which will use the sensors in the device to track location, speed, acceleration, and whether they are weaving recklessly between lanes at 2 a.m. after leaving a taproom. Or whether they are using the actual phone measuring their driving skills to text while in motion. This actually happens, says Timm, because after a few days drivers forget that they are being monitored and revert to bad habits.

According to Timm, about 70 percent of those who undergo this process will be deemed safe drivers, whereupon the company will offer them a low rate, with the entire transaction done on the phone. (Even your proof-of-insurance card will be stored on the device.) The other 30 percent have to get insurance from Root’s competitors.

One might think this will be a boon for insurers, who will see claims drop dramatically. Timm argues otherwise: The paucity of accidents and claims will drop the real cost of insurance so low that the established companies, stuck with high overheads, won’t be able to cut their prices enough. They will thus be subject to Uber-level disruption from newcomers who will be able to charge fees as low as $30 every six months.

Root has not contacted Tesla directly, but says that even without the car manufacturer’s help, the Root app can figure out when a Tesla owner is using Autopilot. Timm hopes that in the future, the company can work directly with Tesla to get better data.

SmartBiz Loans Adds Former SBA Head of Capital Access to Board of Directors (SmartBiz Loans Email), Rated: B

SmartBiz Loans, the first SBA marketplace and bank-enabling technology platform, today announced the addition of Ann Marie Mehlum to the company’s board of directors, a former Small Business Association (SBA) associate administrator and seasoned banking industry veteran, with more than 30 years’ experience.

As former associate administrator for the SBA’s Office of Capital Access, Mehlum directed the government agency’s flagship credit programs including the 7(a) general business loan guarantee program, the 504 program for real estate and long term asset financing, and the microloan programs, with a combined portfolio of more than $100 billion. The SBA is a federal agency that encourages lenders, typically banks, to originate loans to small businesses by providing a guarantee for these loans.

SmartBiz Loans’ SBA marketplace automatically connects small business owners with the right bank which helps to increase loan application approval rates and speed. SmartBiz®bank partners utilize the SmartBiz software platform to increase their efficiency in processing SBA loans by up to 7­0 percent. SBA loans are widely considered the best type of loan for many small businesses because of their low rates and long repayment terms.

Fintech firm relocating to Orlando and creating high-wage jobs (MRINetwork), Rated: B

Financial tech firm Finexio is moving its hub from Silicon Valley to Orlando – a move that will open up 10 high-wage jobs, the Orlando Business Journals reported. The startup, which offers a business-to-business commercial payment network, recently decided that the relocation is necessary in order to support its growth.

The company chose Orlando because of its growing reputation as an innovative city, drawing in professionals particularly in the financial technology industry. This move echoes that of other industry giants such as Deloitte and KPMG, which have ramped hiring in Central Florida.

At its new Orlando-based location, Finexio will be looking to hire professionals to work in its corporate headquarters and engineering department.

According to the Orlando Economic Partnership, another reason Finexio chose Orlando is because of the resources available in the area for hiring software engineers. For example, the University of Central Florida is located nearby, which offers a top-tier engineering school.

United Kingdom

Over 50,000 investors register with RateSetter (Bridging&Commercial), Rated: AAA

Peer-to-peer lending platform RateSetter has announced it now has over 50,000 investors.

This was just one of a number of milestones that RateSetter has recently reached, including collecting £1bn of repayments, investors having now earned more than £60m in total interest and more than £1.75bn of loans being delivered to borrowers across the UK.

Revolut partners with P2P lender to offer customers cut-price instant credit (Finextra), Rated: AAA

Revolut has today announced a partnership with peer-to-peer (P2P) loan firm Lending Works to provide instant credit at half the cost of UK banks.

In just two minutes, Revolut customers can now apply for credit from anywhere in the world via their smartphone and receive funds instantly to their Revolut account.
This process cuts out the banks entirely, meaning that Revolut customers are charged just £52 on average to borrow £1,000 over a 12 month period, with a representative APR of 9.9%. In contrast, a recent survey of five major UK banks, whose personal loans are notoriously expensive with time-consuming application processes, showed that consumers are charged £120 on average to borrow the same amount over a 12 month period, with a representative APR of 23.8%*. Credit card rates are also sky-high, reaching a record average purchasing rate of 21.6 per cent APR in March 2016 (Source: moneyfacts).
The new credit features mean Revolut is the first company to approve and pay out P2P loans instantly.
The Revolut app currently offers UK users credit from as little as £500 to a maximum of £5,000, and users can adjust their repayment period between 12 and 60 months. In contrast to many banks, there are no fees to repay the loan early.

The British Business Bank invests £135m in P2P platforms (Bridging&Commercial), Rated: AAA

Since it was established in November 2014, the British Business Bank has invested £135m in peer-to-peer platforms.
Following a freedom of information request submitted by Bridging & Commercial, it was also discovered that in the calendar year 2016, £11.5m was drawn down for participation in loans generated by peer-to-peer lending platforms.

Investment Platform CapitalRise Launches Innovative Finance ISA For Residential Property (Crowdfund Insider), Rated: A

CapitalRise, a London-based property investment platform, announced on Monday it is launching an Innovative Finance ISA (IFISA) wrapper for residential property. According to the platform, the new IFISA allows savers to invest a minimum of £1,000 and up to £15,240 in the current tax year (rising to £20,000 in the 2017-2018 tax year) in residential property, targeting tax-free returns between 10-14% per annum.

Digging into the data: How investor returns change over time (Funding Circle), Rated: A

We used five full years of historical loan performance data to simulate how the returns in a typical investor’s portfolio can change over time. In our example, an investor lent £10,000 across all the loans originated through Funding Circle in 2012. Each month, the loan repayments and interest received were lent to new borrowers.

The below chart shows the annualised return, after fees and bad debt but before tax, earned by the example investor over a five year investment period.

For the first few months the investor’s annualised return is at its highest, at approximately 7.8% after the 1% annual servicing fee is deducted. This is because the investor has typically yet to experience any borrowers being unable to repay their loans.

Bad debts generally start to occur approximately six months after the loans are made. This is reflected in the chart above, where our example investor’s return starts to dip after six months. This trend then naturally decreases over time as the rate at which businesses run into difficulties tends to decrease.

After 18 months the example investor’s return stabilises, then generally increases as recovery payments start to arrive. As of 1st February 2017, 44% of the value of loans defaulted between 2010 and 2014 has been recovered. This trend typically continues for the rest of the investment period, with the example investor ending the five year investment period having earned an annualised return of 6.5% after fees and bad debt.

London Independent Financial Advisor launches robo advice for clients (AltFi), Rated: A

A London-based financial advisor has launched a robo advice like service for its clients. FOL Wealth, began offering its automated service at the end of February to give customers access to low-cost advice.

The wealth manager charges an annual fee of 0.90 per cent with a minimum investment of £1,000.

Nicola Horlick: Why P2P can prove a haven in stormy times (Professional Adviser), Rated: A

Events abroad meanwhile are dominated by what is happening in the US, where the volatility of change and the frequency of significant news events – what journalists call ‘story burn’ – are increasingly alarming.

In the case of Money&Co, the company I founded and of which I am CEO, we bring individuals looking for a good return on capital together with carefully vetted, well-established and profitable small and medium-sized enterprises (SMEs) seeking funds for growth. We have also recently introduced property lending.

As a P2P business lender, Money&Co does what the banks cannot or will not do – we fund SMEs and we provide a gross yield of nearly 9% a year to the lenders, who extend credit via our platform.

To be fair, banks have baggage we do not – for example, headcount, bonus culture and general institutional sclerosis.

The IFISA was launched almost a year ago, but most P2P lending platforms are still unable to offer it, as they require full Financial Conduct Authority (FCA) approval in order to do so. Money&Co has full FCA approval and so we can now offer the IFISA.

Money&Co’s loan book is currently generating an average gross yield of 8.95%. Investors can choose to either roll up the interest in their ISA account or pay the interest out monthly. We take a fee of 1% a year and so the net yield is 7.95%.

We will also be offering asset-backed loans for inclusion in the IFISA.  They will yield slightly less – at around 7% a year net of fees – but I would expect them to be particularly popular with ISA investors.

Fintech firm launches fund due diligence platform (Citywire), Rated: B

Fintech firm Door has launched a digital platform to streamline the fund due diligence process between fund investors and asset managers.

The information will be used by professional fund investors when monitoring and screening funds.

Door is registering fund investor users in groups of 100.

For asset managers, Door is used to reduce the repetitive nature of responding to due diligence requests and help to improve their responsiveness to client requests.

Earn 7% lending cash to strangers: Peer-to-peer trounces the pitiful rates being offered by banks… but there are risks (This Is Money), Rated: B

Yet while the average rate on an easy-access account stands at just 0.37 per cent, the rates on so-called peer-to-peer lending range from 2.6 per cent to 7.2 per cent.

Zopa was the first UK firm to set up in 2005 and now has 75,000 investors on its books.

It was swiftly followed by RateSetter and Funding Circle, which together with Zopa now account for two-thirds of the UK’s peer-to-peer market.

RateSetter alone lent £668 million to individuals and businesses across the UK last year.

It offers three accounts. There is a rolling account — which means your money is not tied in for any length of time — paying 2.6 per cent, a one-year fix at 3 per cent and a five-year deal at 4.8 per cent.

Zopa has three deals on offer, paying 2.9 per cent, 3.7 per cent or 6.1 per cent.

European Union

Blender Procures Electronic Money Institution License in EU (Finance Magnates), Rated: AAA

Blender, an international consumer e-lending platform, has garnered a new license to operate as a financial institution in the European Union – the license recognizes Blender as an E-Money Institution, which includes a range of banking activities for the group, per a company statement.

In particular, Blender can now grant loans, transfer funds between customers and service the platform to other companies. Moreover, the licensing agreement also allows for the execution of most banking activities, except leveraging deposits.

Online Lender Blackmoon Partners with ID Finance to Offer Loans to Investors (Crowdfund Insider), Rated: AAA

ID Finance has integrated with Blackmoon and is now executing investment transactions via the Russian online lending platform. ID Finance is a data science, credit scoring and “nonbank digital lending as an application” provider. ID Finance has is currently operating in Russia, Kazakhstan, Georgia, Poland, Spain and Brazil.

Under the arrangement, loans are screened and scored by ID Finance’s advanced risk assessment system. Blackmoon investors may benefit from interest rates higher than traditional investment tools. If the issued loans meet the strategies of investors that deal with Blackmoon, the system registers the fact of sale, the investor’s funds are transferred to the creditor and the transaction is deemed closed. ID Finance registers the profit by the securitised portfolio and continues servicing borrowers who are redeeming the loans now to the benefit of Blackmoon investors. In this case, Blackmoon ensures execution of transactions, analysis, accounting and investment process management for the investor and lender.

Intel buys Mobileye for .3 billion, fintech funding and acquisitions in Europe, and the EDF Pulse Awards (Tech.eu), Rated: A

On this episode of the Tech.eu podcast, we talk about European fintech funding rounds and an acquisition, Intel’s purchase of Israel’s Mobileye and more.

Listen to the podcast here.

MENA

10 FinTech Firms to Watch in 2017 and Beyond (Tech Financials), Rated: A

These include AimBrain, which has developed a multi-modal mobile biometric authentication platform.

Another two on the watch list are EZMCOM, a developer of a technology that identifies users with their passphrase, voice modulations and facial authentication, with advanced liveness detection features such as movement of lips and blinking of eye, and Crowd Valley, a technology platform that can create, operate and manage online investing or a lending marketplace.

Qumram made their regional debut at Meftech 2017 when showcasing technology that ensures compliance, aids fraud detection and improves customer experience by recording, analysing and replaying every digital interaction – on web, social and mobile.

The Personal Financial Management innovation of Strands is also on display, while White Label Crowdfunding won the delegates over with their online marketplace lending solution that connects credit demand and supply in a transparent and efficient way.

Software company Leveris was also a highlight with their solution that promises to bypass the ‘spaghetti junction’ of IT legacy architecture with a modular banking-as-a-platform (BaaP) solution.

The BlinkID real-time ID scanner by MicroBlink was another star of the show. And making up the impressive list is a platform developed by Agreement Express that allows financial institutions to on-board new clients without requiring paper or ink signatures; and a dynamic Enterprise Planning Platform for Financial Institutions by Inplenion.

Authors:

George Popescu
Allen Taylor

Monday November 14 2016, Daily News Digest

lc marketplace loan originations

News Comments Today’s main news: Orchard weekly online lending snapshot. U.S. Small business borrowing falls while delinquencies rise Today’s main analysis : LC loan volume stabilizes. AltFi Data sees equity crowdfunding market shrinking. Today’s thought-provoking articles: OCC considers FinTech charters. Singapore hosts world’s largest FinTech event. Future of FinTech. United States Orchard Weekly Online Lending Snapshot. AT: “Note the […]

lc marketplace loan originations

News Comments

United States

United Kingdom

European Union

Australia

China

India

Singapore

Africa

Israel

International

News Summary

United States

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

This year saw the launch of the first online lending-focused, registered closed-end funds (or ’40 Act funds) in the U.S. It is a significant step that further legitimizes the industry to U.S. investors by providing a way to gain exposure to the loans of multiple originators via professionally managed, SEC-registered investment vehicles. RiverNorth Capital Management, LLC, the investment manager that launched the

LendingClub Loan Volume Stabilizes (The Wall Street Journal), Ratd: A

LendingClub Corp. said its loan volume stabilized after the surprise ouster of its chief executive six months ago, sending shares climbing 15% to their biggest one-day percentage gain ever.

The San Francisco-based loan-marketplace operator reported Monday third-quarter revenue and adjusted per-share earnings that exceeded analysts’ expectations, in addition to a large, new loan-sale arrangement with a unit of one of Canada’s largest banks.

Third Quarter 2016 Results (Lending Club)





Fundrise Launches RSE Capital as Stand-Alone Company (Multi-Housing News), Rated: AAA
Crowdfunding real estate platform Fundrise is spinning off its real estate investment branch, RSE Capital Partners, into a stand-alone company. The new firm will focus on origination, underwriting, investment and management for the company’s eREIT platform. RSE will collaborate with top brokers and real estate firms nationwide, focusing on institutional-level assets, primarily multifamily acquisitions,multifamily development and infill bridge lending.

RSE has already closed several deals, including three with one its first partners, Arlington-basedInsight Property Group. The two companies aim to invest $200 million in D.C. real estate annually.

Five Issues to Watch as OCC Mulls Fintech Charters (Bloomberg BNA), Rated: AAA

The Office of the Comptroller of the Currency could soon decide whether to offer national charters to financial technology companies, and as a Magic 8 Ball might say, “Signs point to yes.”

More concrete signals come from a couple of arcane regulatory moves by the agency in September: A Sept. 13 proposed rule that deals with receiverships for insured national banks, and a Sept. 28 revision of its charters booklet for the Comptroller’s Licensing Manual that addresses possible trust and special-purpose charters for charter-holders lacking deposit insurance.

If and when the OCC unveils its proposal for a fintech charter, here are five things to look for:

One: Who Will Be Covered?
The OCC exercises charter-granting authority for ventures that engage in at least one of the typical banking functions of taking deposits, lending money or paying checks. The lending criterion would take in online platform lenders, for example, but how wide is the “paying checks” qualification?

Two: Capital Requirements
It remains to be seen how the OCC will set capital and liquidity requirements for companies to receive a fintech charter.

Three: Leveling the Playing Field
Banks are worried that fintech companies may gain an advantage if they’re not held to the same standards as the banks.

Four: Application Process
How long will it take to apply for and receive a charter?

Five: Partnerships With Banks
The OCC will be looking to strike a balance between its primary duty to preserve the safety and soundness of the national banks it supervises and its stated intention to promote what it calls responsible innovation.

Will They Use It?
Some fintech companies look to national charters as a way to simplify their operations by, for example, pre-empting the patchwork of state laws that govern lending. But others are skeptical, viewing the concept as just another layer of government regulation.

Marketplace Lending as a Service Startup Blackmoon Secures $ 2.5 Million in Equity Funding (Fintech Finance), Rated: A

Blackmoon Financial Group has secured $2.5 million in an equity funding round that includes Target Global, A&NN Group, Flint Capital, and several private investors. The valuation of the company and the structure of the investment are not disclosed.

Blackmoon will use the funds for the further development of its technological platform and front-end solutions, and for further expanding its presence in the U.S. market, which will be a key growth area in the next year and a half.

Blackmoon makes money by charging investors for getting access to the unique supply of loans that can not be found on other platforms. According to its own data, monthly transaction volume has grown by a multiple of 2.5 since June 2016 and exceeded $5 million in September 2016.

Four Lessons as Rating Firms Look at Marketplace Lenders (American Banker), Rated: A

Whether we like it or not, independent oversight and regulations exist in financial services for a reason: to protect borrowers, lenders and society’s greater economic health. In other words, they help make industries viable. Therefore, as the marketplace lending industry continues to mature, it needs the oversight equivalent of Standard & Poor’s, Moody’s Investor Services and Fitch Ratings.

In 2008, the credit ratings agencies had clear profit incentives. The agencies were paid by the companies issuing debt — a revenue model that often resulted in ratings agencies bending standards in order to gain business. As we contemplate rating agencies for marketplace lenders, we must avoid repeating this past mistake. Marketplace lenders should not pay the agencies in any way.

Rating agencies for marketplace lender-originated loans need IT solutions that calculate and recalculate, automatically and continuously, consumer and small-business loan ratings. At any moment in time, these ratings should take into account all available information on particular loans and bundles of loans in order to deliver the most accurate risk assessments based on real-time market conditions.

While ratings agencies are very valuable, investors should not over-rely on them, as they often did in 2008.

U.S. small business borrowing falls, delinquencies rise (Reuters), Rated: AAA

Nov 1 Borrowing by small U.S. firms slipped in September, and the percentage of firms late on repaying existing loans rose to its highest in nearly four years, data released on Tuesday showed.

The Thomson Reuters/PayNet Small Business Lending Index fell to 128.9 from a downwardly revised 132.8 in August. Measured from a year earlier, it was the fourth straight monthly decline, with the index at its lowest point since January.

Credible Expands Student Loan Marketplace & Announces Partnership With Massachusetts Educational Financing Authority (Crowdfund Insider), Rated: A

Student loan marketplace Credible announced on Wednesday it has formed a partnership with the Massachusetts Educational Financing Authority (MEFA).  The organization will now be offering student loan refinancing to borrowers nationwide through Credible’s multi-lender platform.

Credible users may now be able to access student loan refinancing options provided by six lenders, which are Citizens Bank, College Ave, CommonBond, iHELP, MEFA, and the Rhode Island Student Loan Authority (RISLA).

Fintech’s Most Powerful Dealmakers of 2016 (Institutional Investor), Rated: A

General Atlantic also stressed partnership in leading a $325 million Series E funding late last year for marketplace lending platform Avant, with Korngold joining the company’s board.

Although there is, by definition, a collaborative element in any investment or advisory relationship, the sector that has come to be known as fintech has special needs. The culture of a start-up is very different from that of an established financial institution; even if the latter wishes to be more nimble and embrace new ideas and technologies, its procurement and compliance bureaucracy can get in the way. Hence the emergence of ecosystems designed to lower such barriers. Eighteen-year-old FTV Capital (<a href=” Bernstein and Richard Garman</a>, No. 7) pioneered in this regard with its Global Partner Network, which includes major financial companies that invest in FTV funds and thereby gain insight into new developments.

Citi Opens APIs to Third-Party Fintech Developers (American Banker), Rated: A

The API Developer Hub was launched Thursday to foster collaboration and partnerships between fintech companies and consumer brands. Such portals allow developers to build their own financial services applications and client solutions that easily connect to Citi. Mastercard, Virgin Money and others are already leveraging Citi APIs to create customer solutions.

There are four APIs currently available to developers: one that allows Citi customers to access their account summaries; an authorization API that gives customers secure access to their account data for more streamlined transactions; one that approves access to shared Citi customer profile information for deeper engagement; and the Pay with Points API, which allows an app to accept a customer’s Citi rewards points to pay for their purchases.

10 reasons fintech startups fail (Banking Exchange), Rated: A

My employer, William Mills Agency, has represented hundreds of fintech companies. We’ve seen startups with (in our opinion) marginally acceptable products or services thrive. And we’ve also witnessed companies with (again, in our opinion) incredible ideas fail—miserably.

Here are 10 deadly mistakes fintech startups make, as well as some simple solutions to avoid them.

  1. Mistake 1. Underfunding the startup. Solution: Before I start any do-it-myself project I’ve learned (the hard way) that it’s going to cost me twice as much and take three times as long.
  2. Mistake 2. Underestimating the length of the sales cycle. Solution: If you’re selling fintech to any financial institution— be it small community or money center bank—expect a long, arduous sales cycle with multiple setbacks and delays.
  3. Mistake 3. Not understanding the market. Solution: Too many startups are blinded by their own arrogance. They’ve sold themselves into believing their solution will completely change the way the financial world operates, and that they don’t need to work within existing parameters.
  4. Mistake 4. Failing to devise a sound sales strategy.
  5. Mistake 5. Don’t put all your sales chips on “Bob.”
  6. Mistake 6. Don’t blow your shot with a poor start. Solution: If your organization is still trying to figure out what it is and to whom you’re selling, don’t make it up on the fly.

Read the rest at Banking Exchange.

Nead.co to Release Open Fintech Platform for Investment Banking (Eries News Now), Rated: A

Nead.co, provider of middle market finance and technology consulting solutions will soon be launching a dedicated fintech platform for mergers, acquisitions and investment banking. In preparation for the launch, the company is inviting independent software developers with a keen interest in financial technology engineering to join the company’s ever-growing ecosystem.

Fintech developers are encouraged to join by submitting detailed information regarding the types of applications they intend on building into the platform. If accepted, Nead & Co. management will open up the firm’s API tools for access by engineers who wish to develop into a growing ecosystem of expert financial and technology experts.

The War Between Fintech And Traditional Finance Reaches A Crossroads (News BTC), Rated: A

To put this into perspective, the financial sector has an annual revenue of roughly US$5tn. As is always the case, they want that number to keep growing. To do so, they partner with fintech startups to realise new ideas and improve existing infrastructure. Combining the US$5tn market with a US$20bn fintech industry can lead to exciting developments.

Change is inevitable at this stage. The sooner banks and financial institutions realise this inconvenient truth, the better for everybody. Fintech should not be ignored, and various subsectors of this industry are making waves. Blockchain, Bitcoin, robo advising, and AI are just a few examples of what the future holds. Exciting times are ahead of us, even though we are all cogs in the global financial war machine.

Kabbage Hires Chief Technology Officer and Chief Data Officer (PRWeb), Rated: B

Kabbage®, a pioneering financial services technology and data platform, today announced Amala Duggirala has been appointed Chief Technology Officer, and Rama Rao has joined Kabbage as Chief Data Officer.

Amala Duggirala is highly accomplished in building large-scale, high-performing systems with a keen eye toward exponential business growth. Bringing nearly two decades of experience to Kabbage, she is responsible for advancing the automation and growth of the Kabbage Platform and for implementing strategic information technology and product initiatives to power financial services for organizations worldwide.

NYU Stern Hosts Inaugural FinTech Conference Featuring President and CEO of PayPal (BusinessWire), Rated: B

New York University’s Stern School of Business, the first business school to establish aFinTech specialization for MBA students, held its inaugural FinTech Conference on November 9, 2016. Featuring keynote speaker Dan Schulman (MBA ‘86), president and CEO of PayPal, the conference addressed many critical issues in the industry, ranging from regulation to public policy, equity crowdfunding, marketplace investing and blockchain technologies

81% OF NONPRIME AMERICANS DO NOT OVERSPEND: STUDY FROM ELEVATE’S CENTER FOR THE NEW MIDDLE CLASS (Elevate Email), Rated: A

In the wake of last week’s seismic election, Elevate’s Center for the New Middle Class today issued new research on how underserved Americans maintain their financial health, showing that 81% of nonprime Americans – those with credit scores lower than 700 – spend only what they earn, or less on everyday expenses.

Elevate’s Center for the New Middle Class is a research-focused body that engages and educates the public about the growing needs of individuals who do not have access to traditional credit options. In this study, the Center outlines how nonprime Americans are financially savvy in a number of ways, especially in comparison to their prime counterparts. Additional key findings from the study include:

  • Nonprime Americans check their bank account balances 50% more often than prime
  • Nonprime consumers check their credit scores 40% more often than prime
  • Two-thirds of this group plan for major expenses
  • 67% consider themselves “careful spenders”
  • 72% say they know how to create a budget

“Our research shows the narrative about the New Middle Class being less engaged in their finances is just not the case. In fact, it’s the opposite in many situations,” said Jonathan Walker, executive director of the Center. “Because they have fewer financial options, the New Middle Class clearly recognizes and appreciates the need to be fully aware of their financial position at any given moment.”

“Although most nonprimes spend what they earn or less, little room is left for unexpected expenses. When you are one car repair away from a significant financial problem, you have every incentive to know exactly where you stand financially,” concluded Walker.

United Kingdom

AltFi Data sees UK equity crowdfunding market shrinking in 2016 for first time (SMN Weekly), Rated: AAA

The UK equity crowdfunding market is set to close 2016 with more than £130 million new equity issuance, posting a slowdown in momentum for the first time, according to a report of financial markets analytics provider AltFi Data. The segment is expected to facilitate young companies in the UK raise more than £130 million growth capital in 2016.

The report includes data for all equity crowdfunding in the UK from 2011 (when when the industry was started), covering a total of 955 equity crowdfunding rounds and 751 companies. The data refers to six platforms that offer equity crowdfunding services – Crowdcube, Seedrs, SyndicateRoom, Venture Founders, Code Investing(previously CrowdBnk), and Angels Den, the last one of which was new addition for 2016.

Following are details about the funded volume for first nine months of 2016 (and 2015) of the six UK equity crowdfuning platforms included in the report:

Financial Stability Board: Fintech Firms Not Posing a Risk to Financial System (Crowdfund Insider), Rated: AAA

Secretary General of the Financial Stability Board (FSB) Svein Andresen announced at a Chatham House conference in London earlier this month that Fintech firms looking to disrupt traditional banking and financial systems are not yet posing an immediate threat, according to Reuters.

The FSB’s mission is to promote global financial stability, conduct outreach to non-member countries, and monitor implementation of agreed policies.  Members include the G20 countries and key financial centers — Hong Kong, Singapore, Spain, and Switzerland.

UK FinTech Bridge to China (Finextra), Rated: AAA

Today it is another significant milestone for the UK FinTech ecosystem as the Financial Conduct Authority (FCA) signed the Co-operation Agreement with the People’s Bank of China.

The purpose of this agreement is to provide a framework for co-operation between the parties with respect to promoting innovation in financial services. The Agreement sets out how the parties plan to share and use information to promote innovation in their respective markets.

Bank of England: We Set Up the Fintech Accelerator to Develop Our Practical Experience of Fintech (Crowdfund Insider), Rated: A

In a speech this past week by Charlotte Hogg, Chief Operating Office of the Bank of England, she welcomed the launch of the Bank’s Fintech Accelerator while explaining their mission.

The Bank of England is currently working with the following Fintech firms:

  • BMLL: This machine learning platform provides access to historic full depth limit order book data. The BMLL platform aims to facilitate analysis and anomaly detection. We have agreed to test their alpha version for this Proof of Concept.
  • Threat intelligence: As part of the Bank’s wider information security and threat intelligence work we have partnered with two firms – Anomali and ThreatConnect– that provide innovative technologies to collect, correlate, categorise and integrate security threat data. For this project, we have asked them to offer a solution to consolidate threat intelligence into a searchable repository that can optimise information collation, enrichment and sharing in support of a proactive intelligence-led defence strategy.
  • Enforcd: In this proof of concept, we are using an analytic platform designed specifically to assess and draw out trends on regulatory enforcement action using publicly available information.

UK’s FCA fully licenses crowdfunding platform UK Bond Network (SMN Weekly), Rated: A

Bond crowdfunding platform UK Bond Network said on Wednesday it has obtained a license from the UK Financial Conduct Authority (FCA). Prior to getting fully licensed, the platform operated under an Appointed Representative temporary authorization.

The platform seeks to grow its business and expand its investment solutions. It considers launching new offering investments which would qualify for the Innovative Finance ISA (IFISA), a program for tax-free peer-to-peer (P2P) lending.

Investor Views: “Peer-to-Peer Lending Boosts my Income” (Morningstar), Rated: A

Harman, who lives in West Sussex with his wife, has built up a portfolio of using pension and ISA wrappers over a number of years. More recently he has also invested in peer-to-peer lending.

Harman says: “It certainly isn’t for everyone but I am comfortable with the risks. I get a steady income stream from the money I’ve lent out, currently around 5 to 6% a year.”

Crowdfunding might make you money but it’s not an alternative to savings (Herald Scotland), Rated: A

For one thing, investors have so far not received any return on their capital and, with BrewDog’s exit route not yet articulated, it is unclear when they will.

For Adam Tavener, chair of both Clifton Asset Management and funding platform Alternative Business Finance, it is for this reason that equity crowdfunding should never be seen as an alternative savings vehicle.

European Union

Fintech Golem’s ‘Airbnb’ For Computing Crowdsale Scores $ 8.6M In Minutes (Forbes), Rated: AAA

Golem Network, the first decentralized global market for computing power, raised more than $8.6 million (m) in just 29 minutes on Friday for its Golem Network Token (GNT) and in so doing became the third largest platform ICO (Initial Coin Offering) ever.

Acting and dubbed as an ‘Airbnb for computers’, Polish-based Golem Network is a peer-to-peer (P2P) network with no central server that allows both application owners and individual users (‘requestors’) to rent the resources of other users’ (‘providers’) machines, and be paid in cryptocurrency.

As the third largest ICO for a platform behind Ethereum, a public blockchain-based distributed computing platform ($18m in 42 days) and Waves, a blockchain-powered tokens platform ($16m in 30 days), Golem claims it “substantially lowers” the price of computations to make applications more accessible to everyone.

Denmark establishes FinTech hub (FS Tech), Rated: A

The Financial Services Union Denmark, the City of Copenhagen and the Danish Bankers Association have collaborated to form Copenhagen FinTech – a new association that will develop an ecosystem for FinTech entrepreneurs in the city.

Copenhagen is currently home to a range of FinTech companies, but many believe it needs investment if the city is to establish itself as a hub for innovation. The City of Copenhagen hopes to see growth and jobs as a result of the new efforts – following a study which showed that FinTech has the potential to create 10,000 new jobs in Denmark.

The association is launching, amongst other things, a co-working space under the name Copenhagen FinTech Lab, where entrepreneurs take lodgings and become part of a FinTech environment with sparring from established companies and other entrepreneurs.

Australia

Australian Treasurer Promotes the Benefits of Fintech & Regtech (Crowdfund Insider), Rated: A

At the inaugural Fintech Australia Summit this month, Scott Morrison MP, the Treasurer of Australia, delivered a speech that addressed this “collision” between Regtech and financial innovation.

Regtech, in Morrison’s opinion, can seamlessly integrate into financial firms creating a “compliance by design” environment where risks can be mitigated as everything is monitored in real-time.

Applying Regtech to Fintech  may ease the burden of the highly regulated industry;

“…we cannot allow our financial regulatory framework to act as a handbrake to this innovation. Excessively stringent rules and obligations result in less business, less competition and ultimately worse outcomes for consumers. RegTech can equip us to avoid these outcomes.”

China

Two banks trialling biometric technology under Hong Kong fintech ‘sandbox’ (Reuters), Rated: A

Hong Kong’s banking regulator received applications from two banks to test emerging biometric technologies under a new regulatory regime, Hong Kong Monetary Authority Chief Executive Norman Chan said on Friday.

The banks have applied to test the use of biometric authentication of securities trading, Chan said at the regulator’s first ever financial technology or “fintech” day on Friday.

India

Authors:

George Popescu
Allen Taylor

Thursday October 6th 2016, Daily News Digest

Thursday October 6th 2016, Daily News Digest

News Comments Today’s main news: Zopa and AirBnb partner; PeerIQ’s quarterly securitization update. Financeit raised $US 17 mil in equity. Today’s main analysis : New 40-act funds launching in the US ;4 charts on the state of digital migration in banks Today’s thought-provoking articles: An interesting article on Insure-tech startups ; An interesting article on using character profiling in lending; CrowdLending Fund One in […]

Thursday October 6th 2016, Daily News Digest

News Comments

United States

Canada

United Kingdom

European Union

Australia

India

News Summary

 

United States

PeerIQ’s MPL Securitization Tracker for Q3 2016, (PeerIQ), Rated: AAA

  • Marketplace lending securitization remains a bright spot in the ABS market. Total issuance topped $2.3 billion this quarter—a record—and is up 34.8% from Q2, with cumulative issuance now totaling $12.6 billion.  YTD issuance of the sector stands at $5.4 billion as compared to $3.0 billion from the prior year, an 80% increase as compared to a 10% decrease in non-MPL ABS issuance.
  • Although MPL origination volumes have declined at some platforms, ABS issuance is increasing as is the proportion of loans funded by ABS. The percentage of loans funded by ABS is over 50%.
  • The movement towards rated securitizations at larger transaction sizes continues.  All the deals issued in the third quarter were rated, with the exception of LCIT 2016-NP1. Further, the growth in average deal size continued, growing to $267 million in 2016 as compared to $64 million in 2013.
  • New issuance spreads continued to tighten in—a friendly environment for securitization.  Across all segments in MPL, Q3 2016 saw spread compression across each part of the capital structure, indicating strong investor appetite for MPL ABS paper in the market.
  • We estimate $6.0 to $10.3 billion MPL ABS issuance for 2017. Goldman Sachs, Morgan Stanley, and Citi take top positions on the league tables.
  • Differences in execution and losses are emerging across issuers. SoFi maintains a significant execution advantage over peer originators, and remains the largest issuer in the category. PeerIQ expects 3 additional deals to breach loss triggers in the coming months.

With new mutual funds, marketplace lenders continue to seek diversified sources of capital, (Tradestreaming), Rated: AAA

The first two marketplace lending mutual funds were approved in the U.S.
Total size of marketplace lending securitization issuance volume to date is $10.3 billion.

The first two marketplace lending mutual funds, sponsored by Stone Ridge Asset Management and RiverNorth Capital Management, were approved recently in the U.S. by the S.E.C., with similar funds launched earlier in the U.K.

“This is an exciting opportunity for RiverNorth and our investors,” said Philip Bartow, co-portfolio manager of the RiverNorth fund. “The benefit of being early to the retail market will give us the enhanced ability to purchase loans directly from quality online lending partners with whom RiverNorth has negotiated loan acquisition and servicing relationships.”

More funds have filed to become ’40 Act funds for marketplace lending and are awaiting S.E.C. approval.

Though anyone can invest directly on the marketplace lending platforms, they are cumbersome compared to mutual funds, a product investors and advisors know how to manage. In order to invest in marketplace lending, one needs to open a new account and learn a new set of analytical tools to aggregate and select loans that fit his risk preferences. If an investor wants to invest in more than one platform, this problem might become prohibitive.

Alternatively, hedge funds, which comprise a big chunk of the capital in marketplace lending, are only open to accredited investors. Launching these mutual funds will give retail investors easier access to consumer debt.

“By expanding marketplace loans to a broader investor base, these new funds will transform the industry and could eventually move today’s platforms towards principal broker-dealer markets, similar to other fixed income instruments,” Monja, a marketplace lending analytics solution, explained in a blog post.

TransUnion Launches Fraud Prevention Exchange to Reduce Online Fraud, (TransUnion Email), Rated: AAA

TransUnion data show that, on average, 4.5% of borrowers take out more than one personal loan on the same day.

TransUnion (NYSE:TRU) today announced the launch of its

4 charts on the state of digital transformation in banks, (Tradestreaming), Rated: AAA

Only 11 percent of banking executives plan to enhance mobile or omnichannel banking this year.
Projects prioritized in the next 24 months, are more likely to be middle- and back-office focused, like building an enterprise-wide compliance architecture.

Ten fintech start-ups that are causing a stir in insurance, (Financial Times), Rated: A

Insurtech — or instech — is now attracting entrepreneurs and the investors that back them.

The start-ups are targeting all parts of insurance. Many are focusing on distribution, using new technology to reach consumers that traditional insurers miss. Others are looking at analytics, helping insurers to use data to make better underwriting decisions. Blockchain — the technology that underpins bitcoin — is increasingly popular, while health insurance has been a big area of start-up activity in the US. Nor have start-ups ignored the potential of the “internet of things” — the growing use of data-collecting devices in everyday items, from cars using telematics systems to connected homes.

Few start-ups have become full, risk-bearing insurers. Analysts say that the capital requirements, regulatory burden and complexity required, combined with the desire of investors for short-term returns, means that very few of them underwrite their own policies.

Form D Alert: Crowd Lending Fund One Filing. Daniel Najarian Submitted Oct 5 SEC Form, (Frisco Fastball), Rated: A

The Massachusetts-based Crowd Lending Fund One, Llc had published FormD because of $10.00 million offering. This is a new filing. The Limited Liability Company raised $1.05 million so far. That is 10.50% of the $10.00 million offering. The total offering amount was $10.00 million. This form was filed on 2016-10-05. Crowd Lending Fund One, Llc’s clarification was: none. The offering has $8.95 million left to be raised and is still open.

Crowd Lending Fund One is based in Massachusetts. The company’s business is Pooled Investment Fund. The SEC form was submitted by Daniel Najarian Manager. The company was incorporated in 2016. The filler’s address is: 17 Main Street, Watertown, Ma, Massachusetts, 02472. Daniel Najarian is the related person in the form and it has address: 17 Main Street, Watertown, Ma, Massachusetts, 02472. Link to Crowd Lending Fund One Filing: 000168619216000001.

On average, companies in the Pooled Investment Fund sector, sell 37.80% pooled investment interest. Crowd Lending Fund One sold 10.50% of the offering. The average offering amount is $24.76 million for companies in the Pooled Investment Fund industry sector. The total amount raised is 95.76% smaller than the average for companies in the Pooled Investment Fund sector.

Payoneer raises $ 180 million for its global payments technology, (TechCrunch), Rated: A

Payoneer, a global provider of payment processing technologies, has added another $180 million to its already sizable war chest as it looks to continue to grow its payment services.

Already profitable, and with a solid amount of cash on the balance sheet, the new money will double the company’s product development and technical staff, according to the company’s chief executive officer Scott Galit.

For now, the company’s focus seems to be on China, where Payoneer has launched local bank account services in China for customers that don’t have Chinese accounts.

Oleg Seydak on Blackmoon & Marketplace Lending as a Service, (Crowdfund Insider), Rated: A

Blackmoon Financial Group is a newer entry into the marketplace lending sector.  Launched in 2014, Blackmoon is marketed as “marketplace lending as a service” or MLaaS. Focusing on balance sheet lenders, Blackmoon has developed technologies to provide integration with  loan originators with institutional investors. The platform started in Europe – starting with Russia – and adding multiple platforms before crossing the Atlantic. Blackmoon has also launched a $100 million fund, along with Target Asset Management, to invest in loans originated by European balance sheet lenders. Announced early in 2016, the fund is open to international investors with minimum commitment size of €125,000 and targeting annual returns of 12-13% net of fees.

This past July, Blackmoon entered the US marketing opening an office in Manhattan.

Blackmoon has set an ambitious goal of $1 billion in brokered loans by the end of 2017.

So far, Blackmoon has had a “good experience in the US”. They currently have 5 institutional investors using their platform including 3 family offices and 2 private equity funds.

The most difficult part of setting up operations in the US?  The regulatory environment.

“We have already spent a good amount of money on counsel and attorneys. It is hard to get a clear answer and it is costly.  There is no “stop factor”…”

Tests of character, (The Economist), Rated: AAA

How personality testing could help financial inclusion.

In rich countries, lenders use credit scores to weigh risk. But just 7% of Africans and 13% of South Asians are covered by private credit bureaus. Bailey Klinger of the Entrepreneurial Finance Lab (EFL), which explores new kinds of credit data, argues that psychometrics could scoop many more people into the financial system. Everyone has a personality, after all.

Some lenders are convinced. Grupo Monge, a retailer, uses psychometrics to sell household goods on credit to low-income Peruvians. “Most of the time we are the first company to give them credit,” says Gabriel Trelles, its boss in Peru. The biggest market for psychometrics is for such consumer loans. But microlenders and banks are catching on. EFL’s software has been used in 690,000 loan decisions in 27 countries. Creditinfo will use its psychometrics unit, recently acquired from a marketing firm, to expand in emerging markets.

The technique is still in its infancy and will not replace credit bureaus, says Miriam Bruhn of the World Bank. The best way to tell if somebody will repay a loan in future is to see if they have repaid one in the past. But bureaus improve more slowly than technology. Lenders, looking for an edge, will find ever more ways to peer into their customers’ souls.

Canada

Financeit announces $US17 million investment round led by The Pritzker Organization, DNS Capital and existing investors, (Email), Rated: AAA

Financeit, a point-of-sale financing provider, today announced a new round of equity financing led by new investors–Pritzker family business interests advised by The Pritzker Organization, L.L.C. (“TPO”) and DNS Capital, LLC (“DNS”)– as well as existing investors.

The capital raise, which follows the close of a minority equity financing round led by Goldman Sachs in October 2015, will also support the ongoing needs of the company as it continues its rapid growth.

This investment round of $US17 million ($CAD22 million) enabled Financeit to fund the recently-announced acquisition of TD Bank Group’s indirect home improvement financing assets, which included the purchase of more than 800 merchant dealer agreements and the transition of a number of former TD relationship managers and operational staff.

After a transition period, the transaction will also lead to Financeit servicing approximately 45,000 existing TD consumer loans.

United Kingdom

Two P2P Sharing Economy Players Team Up– Airbnb and Zopa, (Finovate), Rated: AAA

Here’s how it works, upon logging into their Zopa dashboard, borrowers click a link to sign up to become an Airbnb host. If they earn £500 from Airbnb within six months, they get £50 off their loan. If they earn £1,000 from Airbnb rentals, they get £100 off. U.K. hosts earn an average of £2,000 per year for renting their home for 46 nights, which means borrowers would need to rent out their homes around 18 times over the course of a year to take full advantage of Zopa’s offer.

While the partnership makes sense for Zopa– it’s a focused way to help borrowers increase their income– I don’t envision banks making the same move.

Zopa debuted at FinovateSpring 2008. Since then, the company has weathered the ups and downs of the financial crisis and the P2P lending industry itself. Earlier this year, Zoparevamped its product lineup, debuting Classic, Access, and Plus, which allows institutions to lend to higher risk borrowers. In May, the company began offering auto loan refinancing, tapping into the used car financing market. Most recently, Zopa appointed Ronen Benchtrit as its CTO in an effort to grow its technology strategy.

CrowdBnk Re-Launches & Rebrands as Code Investing, (Crowdfund Insider), Rated: A

Our focus on supporting proven small businesses seeking larger sums of growth capital, means we no longer feel the name CrowdBnk is fully representative of what we do and the services we provide. We have never been a bank and neither do we wish to emulate their position.

Management stated that around one-in-ten firms are considering P2P lending in the coming year. Additionally, one in six firms with revenues over £10 million are considering this option.  This data supported the decision to reposition their platform and help SMEs raise between £1 million to £20 million in financing.

European Union

Aztec Exchange launches online early payment solution ePayMe in Spain through Grupo SERES, (Email), Rated: A

DUBLIN, IRELAND and MADRID, SPAIN – Aztec Exchange, a global supplier of invoice finance products and services, today announced the launch in Spain of its early payment solution ePayMe (payme.cloud/es/) through Grupo SERES, reaching their 6,000 SME clients.  With this partnership, Aztec continues to grow its position among European SMEs seeking early payment – a nearly €1.6 trillion market.[i]

ePayMe takes traditional early payment services like factoring and turns it on its head.  Typically issuing payment within 24 hours, ePayMe offers complete transparency, so there are no hidden costs or interest charges, and suppliers only pay minimal fees. Additionally, a supplier can sell as many invoices as it wants, provided the corporate debtors are creditworthy, and there are no long-term contracts.

Kreditech announces former Bank Managing Director Michal Panowicz as CPIO, (Email), Rated: B

Hamburg, October 6 2016 – Kreditech, the consumer finance technology Group, today announced that Michal Panowicz is joining as Chief Product and Information Officer (CPIO). In the newly created role of the CPIO, Michal will be responsible for the product and technology departments. Michal joins the Executive Team in the Hamburg Headquarters together with Founder and CEO Alexander Graubner-Müller, CFO Rene Griemens, CDO José Garcia Moreno-Torres and COO Oliver Prill.

Kreditech Group’s mission is to improve financial freedom for the underbanked by the use of technology. Combining non-traditional data sources and machine learning, the Company is aiming to provide access to better credit and a higher convenience for digital banking services.

Australia

Marketplace Lender DirectMoney Appoints New CEO, (Crowdfund Insider), Rated: A

Australian marketplace lending platformDirectMoney has appointed Anthony Nantes as CEO. Former CEO Peter Beaumont will move into the Chief Operating Officer role. DirectMoney released a statement that Nantes will bring a set of skills that will deliver the next phase of company growth.

He was previously Chief Operating Officer at Prospa, a fintech lending company, which during his tenure in 2015 was recognised by Deloitte as the fastest growing technology company in Australia.

DirectMoney is listed on the ASX and shares have performed poorly during the past 12 months. The company has garnered some support from Macquarie Group but has struggled at times to find sufficient capital to fund loans.  The most recent financial results published indicate top line growth of 177% and loan originations growth of 77%.  The company continues to deliver a net loss.

India

Faircent forays into secured loan, (Business Standard), Rated: A

Faircent, country’s largest peer-to-peer (P2P) lending firm, has now started focusing on secured loans, a segment that these players had so far not been present in. Now, with tie-ups with the firm has forayed into auto loans and is eyeing dispensing loans for other asset backed products.

Vinay Mathews, Co-founder and Chief Operating Officer,explained that apart from personal loans, even for the secured products some consumers may find it difficult to take a because of their income or risk profile.

Apart from this is also looking at exploring other products such as gold loans, against property etc.

As per a RBI report in April, there are around 30 start-up P2P lending in India, RBI said. Globally, the cumulative lending through P2P platforms at the end of fourth quarter of 2015 reached ?4.4 billion, from just ?2.2 million in 2012. And in most countries where these firms are allowed to exist they are treated as banking intermediaries. Now, even RBI is looking at regulating this sector and is supposed to come out with guidelines pertaining to it.

Author:

George Popescu

Monday September 11th 2016, Daily News Digest

Monday September 11th 2016, Daily News Digest

News Comments Today’s key news in an exhaustingly long news list : US SME borrowers will receive increased regulatory protection starting Nov 12th; Well Fargo and Amazon were called by the CFPB after being contacted by Sen. Brown’s office, and the deal fell apart after 1 month;  large European corporate bonds are also at negative […]

Monday September 11th 2016, Daily News Digest

News Comments

United States

United Kingdom

European Union

News Summary

 

United States

Movement in marketplace lending regulation for small business loans, (Lexology), Rated: A

From 12 November 2016, some businesses will receive the same protection currently available to consumers as unfair contract terms in small business contracts will become prohibited.

Under the new law, a contract term will be unfair if:

  • it would cause a significant imbalance in the parties’ rights and obligations;
  • it is not reasonably necessary to protect the interests of the party who would be advantaged by the term; and
  • it would cause detriment to a party if the term is relied on.

The Government is also considering further protections for small businesses. Earlier this year, the Parliamentary Joint Committee on Corporations and Financial Services conducted an inquiry into the impairment of customer loans. One of the recommendations made as a result of the inquiry was to extend responsible lending obligations and ASIC’s monitoring ability under the National Consumer Credit Protection Act to small business loans. In response to the recommendations, in August the Government directed the Australian Small Business and Family Enterprise Ombudsman to undertake an inquiry into small business lending practices and identify if further reforms are required. The Government is due to receive the final report in November.

Orchard Platform Launches Data Partner Program for Loan Originators, (Email), Rated: AAA

Orchard Platform, today announced the launch of the Orchard Data Partner Program, which includes loan data from a range of leading online lenders. The Orchard Data Partner Program is part of the Orchard for Originators product suite. The suite provides unbiased third-party validation of the internal consistency and quality of an originator’s data. Through the Orchard Data Partner Program, qualifying originators will gain the ability to analyze and compare their loan performance to that of their peers (on an aggregated and anonymized basis), and share their data in a consistent and transparent manner with new and existing capital providers.

The Orchard Data Partner Program establishes a framework for loan originators to share their origination and performance data within the Orchard ecosystem in exchange for detailed asset class analytics. By securely submitting loan and payment data to Orchard — and having Orchard standardize the data — originators have access to a number of unique product offerings, including Education & Insights, Data Integrity, and Reporting & Analytics.  Originators also have access to a centralized data storage facility, which can be opened to current and prospective whole loan buyers and other parties during the due diligence process.  Institutional investors seeking to take a growing position in this market have a desire to utilize this information in a transparent and user-friendly way, and the Orchard Data Partner Program provides originators with a scalable solution that helps investors assess such opportunities.

The Orchard Data Partner Program currently tracks over $33B in loan originations.

Amazon-Wells Fargo Student-Loan Plan Ran Into Political Obstacles, (Wall Street Journal), Rated: AAA

Amazon.com Inc. teamed up with Wells Fargo & Co. in July to promote private student loans as a benefit to members of one of its services. Instead, it walked into a political firestorm.

The Wells Fargo-Amazon partnership was meant to offer interest-rate discounts on private student loans to qualified members of Amazon’s “Prime Student” service.

Ticas called the partnership “a cynical attempt to dupe current students who are eligible for federal student loans with a record low 3.76% fixed interest rate into taking out costly private loans with interest rates currently as high as 13.74%.”

After publicly slamming the Amazon-Wells Fargo Deal, Ticas took its complaints to Capitol Hill, contacting senators such as Elizabeth Warren, Sherrod Brown, Dick Durbin andPatty Murray, who is from Amazon’s home state of Washington, according to a person familiar with the matter.

In early August, Sen. Brown’s office contacted the Consumer Financial Protection Bureau, which has been critical of private student lending, and bank regulator the Office of the Comptroller of the Currency. The senator’s office raised concerns pertaining to potentially deceptive marketing practices in the deal, according to a spokeswoman for the Ohio Democrat.

In particular, the senator’s office questioned marketing of the rate discount, expressing concerns about whether it disclosed that the underlying rate may be much higher than the cost of loans under federal programs, or that the discount was subject to change or cancellation, said the spokeswoman.

By the end of the month, Amazon and Wells Fargo scrapped their arrangement, which had been more than a year in the making.

A spokesman for the CFPB declined to comment on whether the agency contacted the companies after receiving Sen. Brown’s concerns.

The CFPB has been a vocal critic of private student loans since it launched in 2011 for what it has described as the industry’s high default rates.

Wells Fargo is the second-largest private student lender after Sallie Mae and is one of the few large banks that has remained a big player in the sector. It has about $12.5 billion in outstanding private student loan balances.

Now Companies Are Getting Paid to Borrow, (The Wall Street Journal), Rated: A

German consumer-products company Henkel AG and French drugmaker Sanofi SA each sold no-interest bonds at a premium to their face value Tuesday. That means investors are paying more for the bonds than they will get back when the bonds mature in the next few years.

“We’re trying to get our heads around it,” Edward Farley, head of European corporate bonds at PGIM Fixed Income, said of Tuesday’s deals. “It seems pretty bizarre to ask a corporate to look after your money and give you back less in two to three years’ time.”

Roughly €706 billion of eurozone investment-grade corporate bonds traded at negative yields as of Sept. 5, or over 30% of the entire market, according to trading platform Tradeweb, up from roughly 5% of the market in early January.

Tuesday’s deals, however, are among just a handful of corporate offerings that have actually been sold at negative yields. They include offerings of euro-denominated bonds earlier this year by units of British oil giant BPPLC and German auto maker BMW AG, according to Dealogic. Germany’s state rail operator, Deutsche Bahn AG, also has issued euro-denominated bonds at negative yields.

Funding Circle ‘basically halved’ US lending volumes at the start of the year, (Business Insider), Rated: A

Marketplace lender Funding Circle halved its lending volume in the US at this start of the year after spotting underperforming loans in an earlier batch of loans, according to the fintech company’s chief risk officer.

Since publication, Funding Circle has provided the following quote from Sam Hodges, cofounder and US Managing Director of Funding Circle US: “The Q1 2015 portfolio represents approximately 10% of total lending in 2015. The overall portfolio for 2015 has delivered 8% per annum for the whole loan marketplace.”

Jerome Le Luel, who joined the company from Barclays last October, made the disclosure during a press conference at Funding Circle’s London headquarters on Thursday, citing it as an example of the company’s pro-active approach to managing risk and making sure investors who lend money on the platform are properly protected.

Le Luel told journalists: “Last year, when I came in, we looked at the vintages we’d just created and although 2014 was looking fine, the first quarter 2015 vintage for some reason was going off track. Significantly off track. 50%. It was earlier on, 6 months along.”

Le Luel said lending volumes in the UK, by far Funding Circle’s biggest market, have been unaffected and the company is still growing at around 100% year-on-year.

UK-listed VPC Specialty Lending Investments, which invests in peer-to-peer loans, said in a letter to investors last month that it stopped purchasing Funding Circle US loans late in 2015 after its portfolio “continued to substantially underperform our expectations.”

Funding Circle has lent over $2.6 billion globally over its platform. The company has operations in Germany, Spain, and the Netherlands, as well as the UK and US. The company has raised over $270 million from investors including BlackRock, Singapore investment giant Temasek, Scottish investment company Baille Gifford, and a fund owned by billionaire Russian internet entrepreneur Yuri Milner.

Moody’s Expects Residential Mortgage Backed Securities from Marketplace Lenders, (Crowdfunding Insider), Rated: A

Foreshadowing the inevitability for all forms of finance moving online, Moody’s has published a report stating the Residential Mortgage-Backed Securities (RMBS) will soon be issued by marketplace lending platforms. They also believe that current regulatory and securitization frameworks will reduce additional risk with RMBS issued by marketplace lending platform.

Balancing out this opinion, Moody’s says there is a difference between consumer lending and mortgage loans. The existing laws will demand a higher degree of compliance compelling new online entrants to “make significant capital and knowledge investment.” These standards will help maintain online lending quality in the RMBS space.

The Moody’s report is available here.

Escaping The Squeeze: 3 Forces Challenging Mid-Sized Banks And Credit Unions, (The Financial Brand), Rated: A

Squeeze #1: Fintech Startups Carving Out the Convenience Position

Fintech startups are establishing the bar for convenience. Pundits like to say that firms like Uber and Amazon are the ones setting expectations, but I really believe that consumers’ points of references are those within an industry, not across industry lines.

Are these startups making bad lending decisions? Consumers don’t care. All they see is that the process takes a tenth of the time and effort that it does with traditional financial institutions.

Squeeze #2: Merchants are Attacking Traditional Payments Deposits

What’s important, here, is that this represents the new behavior in how consumers manage their money. Paychecks get deposited in a bank account, then some portion of it quickly gets moved to loyalty and closed loop prepaid cards.

Squeeze #3: Megabanks are Winning the Millennial Market

Escaping the Squeeze

Reinvent marketing. A good rule of thumb in banking is that financial institutions spend about one-tenth of one percent of assets on marketing. That means the typical megabank has a marketing budget of $1.3 billion. Do you really think you can out-market that kind of spending? You can’t. You have to use other tactics.

Own the financial health position. Millenials will be moving to the life stage that puts a premium on convenience and into a stage where advice and guidance become more important.

Mobile banking now only trails online banking as consumers’ preferred method, (Mobile Payments Today), Rated: A

This year’s results show a marked increase in mobile banking popularity compared with the association’s 2014 findings, which showed mobile in fourth place. Branch banking and ATMs rounded out the top four spots.

However, when considering the latest results, it is important to note that the new survey was conducted online, while previous years’ surveys were conducted over the phone. This makes a reliable comparison impossible, according to an ABA press release.

Blackmoon: Marketplace Lending Platform of the Future, (Tech.co), Rated: A

Valued at more than $850 billion, this market is still not being fully explored by European alternative finance, which is lagging way behind the United States and the United Kingdom.

Wanting to swim against these tides is Blackmoon, a technological platform that enables institutional investors to directly invest in newly-originated loans issued by balance sheet lenders in a marketplace fashion. This MPLaaS (Marketplace Lending as a Service) has offices in Russia and Cyprus, having recently launched their newest office in the United States.

Investors have been quite successful when using this platform: in the last year, they averaged returns were bigger than 15 percent, and the cumulative turnaround exceeded $13 million. Blackmoon wants to reach $1 billion in cumulative turnaround until the end of 2017, to which the company’s US expansion shall provide a decisive contribute.

CreditEase’s Online Inclusive Finance Becomes Harvard Business School Case Study, (PR Newswire), Rated: A

This is the second time a CreditEase story has been published in Harvard’s case databank since 2014. This makes CreditEase the first ever ChineseFinTech firm to be published twice.

In 2014, Lena G. Goldberg, a professor at HBS, put together CreditEase’s seven-year journey from 2006-2013 into a business case. Subsequently, Tang Ning, the Founder, and CEO of CreditEase, was invited a number of times to Harvard to share his stories in financial innovation.

In January 2016, Professor Michael Chu visited Beijing for field research and conducted in-depth interviews with Tang and his management team.

CreditEase is a leading FinTech company in China. Its majority-owned subsidiary Yirendai (NYSE: YRD), an online consumer finance marketplace, is listed on the New York Stock Exchange.

Takeaway from Finovate and Next Money: Ditch the Humans, (American Banker), Rated: A

The Rise of ‘Regtech’

Technology intended to help companies stay compliant is having its moment.

SME Lending

Marketplace lending might still be trying to figure out its future as an industry, but it succeeded in pushing banks to reconsider how they approach lending.

That’s particularly true in small-business lending, an area that remains one of the more manual (and paper-intensive) areas of the industry.

“If we add a human into banking, we don’t just slow it down to human speed, humans create friction,” King said. “Humans only ever add friction.”

The Impact of Micro-Investing Technology that No One is Talking About, (Dara Albright), Rated: A

Micro-investing technology, coupled with new crowd financing structures made possible by the JOBS Act, enables a small business to cost-effectively and compliantly build a large, impassioned and well-diversified investor base.

Despite the SEC’s implementation of all key components of the JOBS Act, there are many issuers still reluctant to employ these “crowd finance” exemptions. Some express concern that an expansive cap table is too difficult to manage. Others fear that too many small retail investors on the cap table will be an obstacle to obtaining future venture capital financing. Other issuers mistakenly believe that it is easier and less cumbersome to raise capital from a small band of large investors than it is to pool tiny increments from a massive crowd.

Due to advancements in micro-investing technology, many of these apprehensions are unfounded.

Where the 27 Fintech Unicorns Got Their Start, (Equities), Rated: A

United Kingdom

Ex-Lloyds CEO Joins Board of P2P Lender, (Bloomberg), Rated: A

Eric Daniels, the former chief executive officer of Lloyds Banking Group Plc during the 2008 global financial crash, has joined the board of British peer-to-peer lender, Funding Circle Ltd.

The six-year-old lender catering to small businesses is increasingly turning to traditional bankers as it expands into the U.S., Germany, Spain, and the Netherlands. The company, which has arranged $2.5 billion in loans, is also girding for the economic impact of the U.K.’s decision to quit the European Union.

In July, Funding Circle hired Jeremy Bennett, the architect of the U.K.’s toxic-asset insurance program following the crash and a former chief of Nomura Holdings Inc.’s European division, as its chief financial officer. Jerome Le Luel, the onetime chief risk officer at Barclays Plc’s credit-card unit, joined the London-based startup last October to oversee risk management.

He said he will serve on Funding Circle’s risk and audit committees. Daniels will work closely with another one-time bank chief who’s jumped into online lending: Bob Steel, the former CEO of Wachovia Corp. who sold that bank to Wells Fargo & Co. during the crisis. Steel joined Funding Circle’s board in 2014.

Hargreaves Lansdown delays P2P launch until 2017, (Bridging and Commercial), Rated: A

Hargreaves Lansdown has revealed that it expects to launch its peer-to-peer lending operation in 2017.

Hargreaves Lansdown also reported that it had capitalized £1.1m of staff costs relating to the development of the cash deposit and peer-to-peer platforms.

The firm has been helping clients choose and manage investments since 1981 and its latest results showed that profit before tax had increased by 10% on last year.

Fintech: Opportunities For All? – Remarks Given By Victoria Cleland, Chief Cashier, Bank Of England – Given At The 2nd International Workshop P2P Financial Systems 2016, (MondoVisione), Rated:AAA

Complete speech can be found here.

 

Since 2010, more than $50bn has been invested in almost 2,500 FinTech companies. In 2015 alone, the UK alternative finance sector grew by 84%. 5 Over 24 countries are currently investing in DLT with $1.4bn in investments over the past three years. Over 90 central banks are engaged in DLT discussions worldwide and more than 90 corporations have joined blockchain consortia. 80% of banks are predicted to initiate DLT projects by 2017.6

In his recent speech “Enabling the FinTech transformation: Revolution, Restoration, or Reformation?” 7 the Bank of England Governor Mark Carney, set out the ways the Bank is enabling the FinTech transformation:

 widening access to central bank money to non-bank Payment Services Providers;

 being open to providing access to central bank money to new forms of wholesale securities settlement;

 exploring the use of DLT in our core activities;

 partnering with FinTech companies on projects of relevance to our mission;

 calibrating our regulatory approach to FinTech developments.

European Union

French Crowdlending Platform Unilend Receives a €2.5 million Investment from NewAlpha’s FinTech fund, (Crowdfund Insider), Rated: A

Unilend, a pioneer in SME crowdlending in France, announced on September 7 that it has received a €2,5 million investment from NewAlpha Asset Management (NewAlpha).

This is the third investment coming from the venture capital fund dedicated to FinTech and Assurtech that NewAlpha launched in November 2015. Investors in the fund, such as Crédit Mutuel Nord Europe, find in NewAlpha a leading innovation scout and incubator who proactively monitors usage innovation and technology change in areas of finance including banking, insurance, and asset management. NewAlpha has concluded more than 60 strategic partnerships and invested over one billion euros in French and international FinTech and Assurtech firms.

Founded in 2013, Unilend leads retail crowdlending in France with a strong community of 10,600 lenders. It was the first French crowdlender to pass the €20 million mark of funds raised in July this year. The platform is now looking to conquering a larger share of the €90 billion of French SMEs’ financing needs.

Bondora reaches new record-high loan origination of €2.8 mln in Aug 2016, (SMN Weekly), Rated:A

In August, grade C-E loan originations in Estonia took the highest share of 32%. In Finland, 13% of all loans were grade D-F, and in Spain, new originations were primarily in the higher interest grades of E, F, and HR. Overall, interest rates were highest in Spain, followed by Estonia and Finland.

Bondora is a leading Estonia-based P2P lending platform. The platform has facilitated the disburse of more than €66 million. The average Bondora loan is €2,370, but loans range from €500 to €10,000. Bondora also operates a secondary market for P2P loans where investors can buy and sell their existing investments.

Bondora is authorized by the Securities and Exchange Commission (SEC) in the US, the Financial Supervision Authority (FSA) in Estonia, and the Regional State Administrative Agency (RSAA) in Finland.

Kroll Bond Rating Agency (KBRA) is pleased to announce that Ira Powell has been appointed as Chief of Staff and that Mauricio Noé has been hired to build our presence in the European markets, (Email , Kroll Bond Rating Agency), Rated: A

Kroll Bond Rating Agency (KBRA) is pleased to announce that Ira Powell has been appointed as Chief of Staff and that Mauricio Noé has been hired to build our presence in the European markets. In Ira’s new position, he will be taking on a broader management and operating role and will continue to report to Jim Nadler, President and Chief Operating Officer at KBRA. Powell joined KBRA as Chief Credit Officer in early 2015 and has been an integral part of KBRA’s recent success and growth. After receiving his J.D. from Harvard Law School, Ira worked in various positions across Structured Finance before most recently spending 15 years in Goldman Sachs’ investment banking division.

In addition, KBRA has hired 20-year ex- Freshfields, ABN AMRO, and Deutsche Bank veteran Noé to lead its European business. KBRA is in the process of establishing a presence in Europe and expects to be a full service and locally staffed regulated rating agency in the near future. We have been certified by ESMA since March 2013 in accordance with Regulation (EC) No 1060/2009 and are currently establishing a regulated European subsidiary. In the meantime, we continue to conduct a significant amount of business in Europe, predominantly for European clients issuing securities into the US market notably in the Private Placement, Project Finance, and Aircraft space.

Author:

George Popescu

July 6th 2016, Daily News Digest

July 6th 2016, Daily News Digest

News Comments We believe that today we finally fixed the hyperlinks for the pictures in the analysis and events section of the daily newsletter. We apologize it took us so long to fix them. We also believe the hyperlinks to the articles in the “News Summar” section of the newsletter are also working. We have […]

July 6th 2016, Daily News Digest

News Comments

  • We believe that today we finally fixed the hyperlinks for the pictures in the analysis and events section of the daily newsletter. We apologize it took us so long to fix them.
  • We also believe the hyperlinks to the articles in the “News Summar” section of the newsletter are also working. We have tested on all our devices, OSs and email clients we own but our tests are still limited. We would like to kindly ask our readers to report if you have any particular problems reading Lending Times in your favorite environment and we will continue improving in all ways possible. 

United States

  • Debt-to-EBITDA multiples for private equity deals with U.S. targets in 2016 has hit a whopping 6.8x. Are US companies over-leveraged ?
  • After testing the waters with Lendio,(as seen in our article here), AmEx is jumping both feet in with the poorly named “Working Capital Terms” venture. Why not name it AmEx Small Business Loans? In all cases, the SME lending space is heating up with a gorilla-size new entrant.
  • As our readers build origination platforms or lend on p2p platforms, perhaps a scenario they are not setup to handle yet is how to face low-probability-events. Such an example is “what happens in case of death of a lender”. An article surveying a few answers from different platforms.
  • Avant, while downsizing, does offer a buyout to all employees. Readers may want to understand this offer through the example of Zenefit’s down round at $2bil valuation and implications for Zenefits employees.
  • Blackmoon, helping balance sheet lenders to sell whole loans, is entering the US market with a New York office. Our previous article on the company can be found here.

United Kingdom

  • UK Banks expected to lend £150bn , freed by Bank of England’s capital buffer rules relaxation. Since 2008 we have seen that making cheap capital available to banks has not correlated with higher bank loan origination volumes. Is, this time, different ?
  • Interesting discussion of different choices fund managers can make in the search for yield and the advantages of p2p fund’s yields.

Hong Kong

  • LendIt rebrands  “largest conference series dedicated to connecting the global fintech community” from ” largest online lending conference”.

France

  • A great survey of the French p2p market with company names and differences (“prets participatifs” in French).

China

  • Cai Jincong, the founder of Zhejiang Yinfang Investment, was sentenced to life behind bars for running a fake peer-to-peer lending scheme that conned over 88 million yuan (about 13 million U.S. dollars) from 1,200 investors.

 

United States

Pitchbook reports that debt-to-EBITDA multiples for private equity deals with U.S. targets in 2016 has hit a whopping 6.8x, (Term Sheet), Rated: AAA

S&P LDC reports a global average of 5.36x for Q1 2016,  although the figure did top 6x in the third quarters of both 2015 and 2014. Moreover, S&P LDC data shows that large-market deals typically have higher leverage ratios than do mid-market deals, with the Q1 16 large-market figure hitting 5.6x (and, remember, that’s a mean, not a median).

It has been more than three years since the Federal Reserve and FDIC issued leveraged loan guidance to banks, suggesting that any debt-to-EBITDA ratios in excess of 6x (for most industries) is too high. Or, put another way, both lenders and private equity firms are regularly ignoring the Fed’s guidance — and appear to be easily getting away with it (likely because no individual deal is likely to present a systemic risk, and loan syndication makes the “baskets” more like a sieve).

AmEx Challenges Square, On Deck With Online Loan Marketplace, (Bloomberg), Rated: AAA

AmEx’s venture, Working Capital Terms, will approve loans in minutes for existing small-business cardholders, who can use the money to pay vendors. Debts may range from $1,000 to $750,000 with fees of 0.5 percent for a 30-day loan to 1.5 percent for a 90-day loan. AmEx will deposit funds directly into vendors’ accounts in as soon as two days.

AmEx has been looking for new streams of revenue to rejuvenate earnings after deciding last year to part ways with its biggest co-brand partner, Costco Wholesale Corp. In addition to its new in-house loan product, the card issuer offers longer-term small-business loans — ranging from $35,000 to $2 million — through its partnership with Lendio, another online marketplace.

“AmEx can do this because they have good credit knowledge,” said Karen Mills, former head of the Small Business Administration, who’s now a paid adviser for Working Capital Terms. “This will challenge the online competitors, whether or not they respond.” Amex declined to disclose their target for Working Capital Terms’ loan volume.

Working Capital Terms represents “a new type of product for American Express that could eliminate the need for the very expensive, unsustainable products from Square and other online lenders,” said Gil Luria, an analyst at Wedbush Securities Inc.

AmEx isn’t the only big lender pushing into the fray. Wells Fargo & Co., the third-biggest U.S. bank by assets, said in May it was starting a program to offer small businesses online loans in as soon as one day. Larger rival JPMorgan Chase & Co. is collaboratingwith On Deck to speed up the process of providing loans to some of the bank’s 4 million small-business customers.

AmEx shares fell 2.7 percent to $59.08 at 2:46 p.m. in New York. On Deck tumbled 6.9 percent to $4.89, while Square declined 3.6 percent to $8.94. Representatives from On Deck and Square declined to comment.

In the Case of Death, (p2p-banking.com), Rated: AAA

‘What happens when I die’ is a concern occasionaly voiced by investors. Investments in p2p lending will be inherited like any other assets.

Luke O’Mahoney of Ratesetter explained: ‘If an investor dies, we work with the next of kin to establish how they would like the account to be dealt with. Generally they would either use our Sellout function (effectively liquidating their investment) or they would allow the account to run down over time – of course we assist the next of kin or executor with this process’.

Only Assetz Capital mentioned that they have a process to do regular checks on dormant accounts that are in funds to ensure that lenders are aware of those funds.

Personally I wonder, if it would be good practise for marketplaces to contact those investors that have not logged in for a very long period (2 years?) and ask them to update/verifying their data. Failure to do so could then trigger a letter with the same request via postal mail.

Sign of the Times: Avant Offers Buyouts to All Employees, (Crowdfund Insider), Rated: A

Avant, an online lender, has offered the option for buyouts to all 760 of the company’s employees. It was not clear how many Avant employees would accept the offer. The news is a painful reminder that online lending is still struggling to regain its footing following indications of a slowing economy and the unexpected departure of former Lending Club CEO Renaud Laplanche – a now tarnished industry icon.

Russian Lending Marketplace Expands to U.S. in Search of Growth, ( Bloomberg), Rated: A

Blackmoon, a Russian financial technology startup that screens and prices loans issued by others to sell on to investors in a marketplace, is opening a U.S. office to expand in the world’s biggest market for non-bank lending.

Blackmoon is partly counting on an expansion into the U.S. from its new New York base to reach a goal of $1 billion in cumulative loans by the end of next year.

To achieve that, the company will target all kinds of unsecured credit in the largest market for alternative lending: consumer, small-business, student and car loans. Blackmoon currently works with several dozen European online lenders, from Finland to the Czech Republic.

Blackmoon functions as an intermediary between institutional debt investors and lenders — both alternative providers and traditional banks — allowing them to scale their business without additional leverage, while mitigating the risks of default.

Moscow-based Target Asset Management agreed in February to form a $100 millionfund to invest in Blackmoon’s loans.

 

United Kingdom

Carney frees up £150bn in bank lending, (Alt Fi News), Rated: AAA

Mark Carney, Governor of the Bank of England, yesterday took steps to reduce capital buffers for UK banks. The Financial Policy Committee (FPC) has reduced the UK countercyclical buffer rate from 0.5% of the banks’ UK exposures to 0%, with immediate effect. The FPC began to supplement regulatory capital buffers with the UK countercyclical buffer in March of this year, and had intended to increase the buffer to 1% in due course. But now the countercyclical buffer is expected to remain at 0% until at least June 2017.

This reduction is expected to free up £5.7bn in bank lending. The banking sector, in aggregate, targets a leverage ratio of 4%. This means that the £5.7bn in spare capital will allow the banks up to an extra £150bn in lending to UK households and businesses.

While the FPC’s actions would appear to be good news for UK borrowers, they may well herald a more competitive stretch for alternative lending platforms.

Peer-to-peer investing website holding cash of 900 savers goes bust, (This is Money), Rated: A

Comment: this is old news, but a good reminder for people who did not read last week’s Lending Times.

Savers were lured into Funding Knight with promises of returns of up to 8 per cent for lending their cash to small businesses. Last week, the peer-to-peer firm was rescued by investment firm GLI Finance, whose bosses said customers’ money was safe and that they could withdraw it whenever they liked.

Will Neil Woodford’s new higher income fund hold P2P to boost its dividends?, (Alt Fi News), Rated: A

Star fund-manager Neil Woodford is mulling the launch of a new equity income fund that will aim to deliver a higher yield than is currently offered by his hugely popular £8.6bn CF Woodford Equity Income fund.  A 4.5 per cent target yield has been widely reported. Higher yielding equity income portfolios offering an ‘enhanced income’ mostly use call options alongside normal income stocks to boost income pay-outs.

Woodford is bullish on P2P/marketplace lending and has invested in the two specialist investment trusts P2P Global Investments and VPC Speciality Lending – which offer attractive yields of 6 per cent and over for his income fund. He also owns an unquoted positon in P2P platform RateSetter.

The manager currently has 0.96 per cent of his fund’s assets in the P2P Global Investments trust and 0.64 per cent in VPC Speciality Lending trust. These are, respectively, his 28th and 39th largest holdings.  In total he has 109 holdings.

His existing fund is currently hitting a yield of 3.7 per cent. P2P GI and VPC Speciality Lending’s yields are currently a whopping 7.4 per cent and 9.7 per cent, respectively. However, that is partly a function of thier near 20 per cent discounts at present.

LendInvest boosts tech offering with VP of Engineering, (Financial Reporter), Rated: A

Comment: I find surprising that a company of the size and volume of Lend Invest did not, apparently, have a person in charge of technology, until now.

LendInvest has recruited its first VP of Engineering as it continues to drive its technology strategy.

Mike Nuttall joins LendInvest with over 15 years’ senior management experience and has led technology development for companies in sectors such as e-commerce, payments and gaming.

At LendInvest, Mike will be responsible for managing the direction, goals and efficiency of the technology team which now represents over 40% of LendInvest’s workforce.

Free tool launched to help low-carbon businesses source funding, (Startups), Rated: B

Business in the low-carbon, clean technology (cleantech), and sustainability sectors looking for finance can take advantage of a new digital tool launched this week.

Created by Shell Springboard, the Access to Finance Navigator is an interactive database where eco-friendly entrepreneurs can search for funding opportunities and filter funding sources by their location, stage of development, financial requirements, and the user’s business sector.

So far, the database features 84 low-carbon funding sources – said to represent a total value of £157m – from government organisations, angel investors and syndicates, crowdfunding platforms and venture capital (VC) funds.

Sources listed include Funding Circle (crowdfunding), Advantage Business Circle (angel), EcoMachines Ventures (VC), Horizon 2020 (government grants), and funding competitions ran by Innovate UK.

 

Hong Kong

LendIt and AMTD Group Co-Host the First Global Fintech Investment Summit in Hong Kong, (Press Release), Rated: B

AMTD Group Company Limited (“AMTD Group”, “the Group”) is a non-bank financial services group based in Hong Kong offering a wide spectrum of capital markets, asset management, insurance brokerage and risk management solutions to clients across Asia.

LendIt is the largest conference series dedicated to connecting the global fintech community.

LendIt China and AMTD Group will co-host the first Global Fintech Investment Summit in Hong Kong (“Global Fintech HK Summit” or the “summit”) on July 13.

More than 80 leading Asian investors and over 35 international fintech companies are expected to attend the ground-breaking summit.

 

France

The Vibrant Marketplace Lending Industry in France, (Lend Academy), Rated: AAA

The French marketplace lending industry is still in its infancy. Due to a very strict regulatory structure there is only one online consumer lender operating in France, Younited Credit (formerly Pret d’Union) and small business lending platforms have only begun operating in the last 18 months. In late 2014 the French government made it legal to make loans to small businesses without a banking license. This has led to a large number of new platforms, they say the count is around 50, to launch since then.

The French government is also actively involved in the industry through an entity called BPI – setup with similar goals to the British Business Bank. It wants to stimulate lending to small businesses. BPI will take small equity positions in fintech companies, it will invest on platforms and it will make interest free loans to qualifying companies.

Younited is still relatively small compared to the US or UK platforms – they are currently issuing around €17 million in new loans every month in France. With 130 employees they are easily the largest platform in France and one of the largest in Continental Europe.

Earlier this year Younited opened an office in Rome in their first international expansion. One of the great benefits of being part of the European Union is that they can “passport” their banking license to other countries which is what they have done in Italy.

Younited is focused on prime borrowers in both France and Italy offering competitive interest rates to banks. They offer four funds for investors with historical returns ranging from 2.2% for their lowest risk borrowers up to 5.1% for the highest risk fund.

The first online small business lender to launch in France was Unilend – they issued their first loan in November of 2013 a full year before the regulation changed to allow small business lending. The reason is that their loans are setup differently – as a direct contract between the borrower and the investors. They are actually an IOU instead of an actual loan.

Unilend has issued €20 million in loans to date and are currently issuing around €1 million a month. Loan terms range from 3 months to 60 months with interest rates of 4% to 10%. They run a Dutch auction, which allows investors to bid down the rates to a minimum set by Unilend. They have a large investor base of over 10,000 active investors with an average return of 5.25%. They average 700 investors per loan.

BPI has invested in Unilend as an equity holder – they do not own loans. Like every small business platform we met with the loans issued by Unilend are unsecured with no personal guarantees in place. The average loan size is €75,000 with the typical small business doing revenue below €2 million.

One of the curious things about France is that many of these loans are done in partnerships with banks. The small business might be seeking €500,000 in funding but the bank will only issue €400,000. So, they will seek the other €100,000 from a platform like Unilend.

Lendix is a relatively new small business platform, having issued their first loan in April 2015 but they are already one of the leading platforms in France. They currently originate €4 million a month, making them the largest small business lender.

The co-founders of Lendix have all invested their own personal money in the fund which has grown to €29 million in size and is currently yielding 6.5%. They are about to launch a second fund which will be in the €50-70 million range.

As for the loans the average size is €200,000 with a maximum amount of €2 million. The loan terms range from 18 months to 5 years although they have just added short term loan options down to 3 months. They currently have zero defaults although there was one case of fraud where they were able to get the money back.

Finexkap has taken a completely different approach to financing French small businesses. They are providing working capital via receivables financing. But the regulators do not allow invoice financing outside of banks unless it is done in a securitization.

They did €15 million in originations in 2015 and are on track to do €100 million in 2016. Because this is invoice finance the loans are very short in duration. So, even though they have only been issuing loans for a couple of years they have already had 9 turns of their loan book. Of the more than 5,000 transactions they have done they have only had losses on one transaction. So they are developing a solid track record.

The company with the most memorable domain name is Credit.fr. They are part of the new breed of platforms focused on small business loans. They are growing fast and have just crossed €1 million in loans per month issued.

They are open to individual and institutional investors and they have 5,000 registered investors on their platform today. Like Lendix they are also creating a debt fund that they expect to launch in September and that should help them reach scale much faster. The target return for this fund will be around 5% after fees.

Credit.fr has a solid borrower funnel with leads coming from digital, partnerships with companies like Younited and others and also business brokers. The average loan size is €60,000. They feel that their competitive advantage is their risk management where they have an experienced team in place.

Lendopolis is one of the more unique platforms in France. It is actually part of theKissKissBankBank (yes, that is the official name) group of companies that consists of three divisions:

  1. KissKissBankBank – a donation-based crowdfunding site created in a similar vein to Kickstarter focused on primarily cultural and artistic projects. They have financed 15,000 projects since being founded in 2009.
  2. Hellomerci.com – based on the Kiva model of microfinance. These are small loans (less than €10,000) at 0% interest rates loaned out to very small companies.
  3. Lendopolis – launched in 2014 as a more typical p2p small business lender. They have loaned €7 million over 100 loans in their first 18 months.

Like many platforms here Lendosphere also launched soon after the regulations came into effect in late 2014. They are the first platform to be 100% focused on sustainable development projects.

To date they have loaned €6.7 million across 33 projects – either wind turbines or solar panels. The loans are typically 2-5 years at interest rates of 4-8%. They have 3,500 registered investors funding these projects. While it is still a young loan book Lendosphere has had zero defaults and delinquencies.

Most platforms are focused on small business where there has been a lot of entrepreneurial activity in the last 18 months. The French government recognizes that small businesses need more choices when it comes to access to capital so they have helped to create a regulatory environment that enables new approaches to this challenge.

 

China

Lending scheme fraudster jailed for life, (CRI English), Rated: A

A court in east China’s Zhejiang Province has sentenced a man to life behind bars for running a fake peer-to-peer lending scheme that conned over 88 million yuan (about 13 million U.S. dollars) from 1,200 investors.

Cai Jincong illegally raised more than 200 million yuan through Zhejiang Yinfang Investment and Management Co., where Cai fabricated investment products promising over 20 percent in annualized returns, the court said on Tuesday.

Cai, who was under a lot of debt, founded the P2P lending platform in October 2013. It offered returns on investment of up to 50 percent.

The funds were used to service Cai’s own debt and fund the operation of the P2P platform. Cai turned himself to police on January 20, 2015.

Author:

George Popescu