Tuesday June 13 2017, Daily News Digest

credit card charge-offs

News Comments Today’s main news: KBRA assigns preliminary ratings to Lending Club securitization. Ant Financial extends online credit service to retailers. Credit Peers secures 45 million GBP credit line. Today’s main analysis: A significant increase in US credit cards defaults. Today’s thought-provoking articles: 4 in 10 Brits are shunning savings. Why India’s fintech startups are flocking to the […]

credit card charge-offs

News Comments

United States

  • KBRA assigns preliminary ratings to Lending Club securitization. GP:”The securitization volumes continue to increase. This is a package of near prime unsecured consumer loans.”
  • Lending Club markets first sponsored deal. GP:”This should be a teamplate for further securitizations. Why is this important? Because this further diversifies the sources of capital available to Lending Club and also probably makes their capital even cheaper. This should also perhaps enable Lending Club to increase their revenue by turning some profit on these securitizations. All in all, I think it’s a very bullish sign for Lending Club.”
  • Americans are suddenly defaulting on credit cards. GP:”The increase is still not out of the channel bounds we have seen since beginning 2014 for the average credit card company except for Capital One. The question is: Is Capital One ahead of the pack in noting defaults or are they a special case? Further analysis  seems to point that underwriting standards have recently degraded in fact. Would this be seen this quickly in the default performance? “AT:”Excellent analysis. Remember the mortgage crisis? The S&L crisis? Bank failure bailouts? The controversial CFPB was created to solve some of the problems associated with consumer financial management behavior. Could we be headed toward another political crisis? If it is perceived that banks are using poor risk assessment metrics or issuing credit card debt to people who shouldn’t have it, then we may see more headlines soon.”
  • CommonBond closes $231M securitization. GP:”Aa3 from Moody’s. CommonBond’s fourth and largest, and was more than three times oversubscribed by investors.”
  • Marketplace Lending: The Next 10 Years GP:”Most industries follow the same bell curve of solution and no problem, problem found, exponential increase, margin collapse, consolidation, new innovation. I don’t see why online lending is any different.”
  • The next industry Amazon could dominate. GP:”Amazon will probably dominate lending to Amazon vendors. That is not an industry, just a small and growing piece of it. Will Amazon dominate retail commerce in its entirety? I hope not, as in general, we don’t think that monopolies are good for society.” AT: “An overstatement. Amazon is a product retailer. While there may be a good business case for Amazon having a lending vertical, Amazon will never be a specialist in online lending, to small businesses or otherwise. But there are some good points made in this article, one of which is the cost of the loans themselves–not exactly competitive.”
  • Rubicon adds Bond Street for financing options. GP:”Growth through partnerships continues to be the  best way for good cost of customer acquisition which is one of the two pain points (together with cost of capital).”
  • Corporate America has lost control of your wallet. AT: Interesting comparison of PayPal and Bitcoin. All to say that banks may not be necessary, which is arguable despite Bill Gates’ prescient wisdom.”
  • PeerStreet offers new way to bet on housing. GP:”PeerStreet offers p2p investment in debt in real estate. Is the yield sufficient to justify it?”
  • The best way to beat robos: Be more human. GP:”In my experience in capital markets the robos work until the market type changes. And markets change types, due to the underlying source driving source changing, every few months. “AT: “I’m seeing more and more of this type of advice for financial advisors.”
  • Marketplace lending and the future of consumer bitcredit. AT: “Interesting podcast interview.”
  • Fundbox launching new product for SMBs. GP:”A line of credit”
  • SoFi has applied for a bank charter. GP:”Here is the application.”
  • Elevate launches analytics team in San Diego.
  • Lendio Pilots Online Lending Platform with Comcast Business Customers GP:”Growth through partnerships continues to be the  best way for good cost-of-customer-acquisition which is one of the two pain points (together with the cost of capital).”

United Kingdom

China

European Union

International

India

Asia

News Summary

United States

KBRA Assigns Preliminary Ratings to Consumer Loan Underlying Bond (CLUB) Credit Trust 2017-NP1 (Digital Journal), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Consumer Loan Underlying Bond (CLUB) Credit Trust 2017-NP1 (“CLUB 2017-NP1”). This is a $279.388 million consumer loan ABS transaction that is expected to close June 22, 2017.

This transaction is LendingClub Corporation’s (“LendingClub” or the “Company”) first sponsored transaction and the second rated securitization of near prime unsecured consumer loans facilitated by LendingClub’s proprietary technology platform. All loans in this securitization are whole loans that were purchased through a pro-rata allocation of the near prime loans originated on the platform by seven third parties unaffiliated with LendingClub.

Lending Club markets first sponsored deal (Global Capital), Rated: A

San Francisco-based online platform Lending Club is sponsoring its first multi-seller securitization, which is backed by a portfolio of near-prime consumer loans.

“A club deal program enables Lending Club to drive standardisation in offering docs, covenants, structure, servicing, collateral consistency, and offering cadence,” wrote Ram Ahluwalia.

Americans are suddenly defaulting on their credit cards (Business Insider), Rated: AAA

The American economy has looked pretty robust of late — unemployment just hit a 16-year low, and stocks recently reached an all-time high.

This makes it all the more curious that Americans have suddenly stopped paying off their credit-card bills at a rapid rate.

In the past two fiscal quarters, banks reported a steep rise in credit-card charge-offs — debt that companies can’t collect from their customers — according to a report from Moody’s.

The sharp increase, the largest since 2009, is especially unusual given how strong the US employment market has been, Moody’s noted. It suggests that American consumers haven’t fallen on hard times so much as banks have started to loosen their standards and issue credit more aggressively.

Charge-offs and unemployment tend to be related: When people lose their jobs, credit cards tend to be one of the first bills people stop paying, as compared with loans for a home or a car in which people risk losing those crucial assets.

CommonBond Closes $ 231M Securitization (CommonBond Email), Rated: A

Of the transaction, CEO David Klein said:

“Our highest-rated and largest deal yet clearly reflects both the growing investor and customer demand for CommonBond’s products. By maintaining maniacal focus on our category, and delivering the best possible experience for our members, we’ve been able to consistently provide investors with superior credit quality assets. We’re pleased to welcome a standout group of investors to this transaction. And as a programmatic issuer, we look forward to continuing to bring opportunities to market for investors over time.”

Highlights include:

  • The offering achieved AA ratings from Moody’s and DBRS – Aa3 and AA, respectively – which are our highest ratings to date.
  • The transaction was CommonBond’s fourth and largest, and was more than three times oversubscribed by investors.
  • CommonBond and Goldman Sachs acted as co-sponsors for the transaction. Goldman Sachs served as structuring agent, co-lead manager, and book-runner.
  • Barclays and Citi served as co-lead managers and book-runners on the transaction as well. Guggenheim Securities served as co-manager.
  • CommonBond’s inaugural securitization from 2015 was also recently upgraded by DBRS.

Marketplace Lending: The Next 10 Years (deBanked), Rated: A

The marketplace for consumer and small-business loans has come a long way over the last 10 years. Since the early days of peer-to-peer lending, there has been a great proliferation of new types of intermediaries creating new layers of distribution for the risk involved with the lending process. Now marketplace lending has reached an inflection point that will create a much different scenario with fewer players and more partnerships.

The linchpin holding this model all together is technology including machine learning, which is driving more efficient distribution. “Technology is what has made marketplace lending so rich and competitive. But technology firms must now compete within the market they’ve created. And typically technology – once it exists can be commoditized,” said Hadden, adding that technology will eliminate intermediaries, not create new ones.

Meanwhile, growth for the software providers will be through partnerships.

The Next Industry Amazon Could Dominate (Fortune), Rated: A

Amazon revealed last week that it loaned $1 billion to merchants on its marketplace in the past 12 months. Square and PayPal have adopted similarly successful models. As of November, Square’s two-year-old lending arm had lent $1 billion to businesses. PayPal’s small business lending is growing at a rate of $4.5 million a day.

These tech giants’ emergence and momentum in this burgeoning industry might be the boost online lending needs to become a mainstream option for small businesses.

They’re well positioned to succeed for a few reasons. First, the tech giants have massive, active customer bases; Amazon has 2 million potential lending customers already selling products on its own marketplace.

Second, while there are certainly well-known players inside the online lending space, from OnDeck to Lending Club, there’s no direct lender that’s a household name.

Third, companies like Amazon, Square, and PayPal know who they’re lending to. Since their core business model encompasses their customers’ business transactions, they know exactly how much money their customers are making and when that money comes into their business. This information makes the tech giants better prepared and more likely to underwrite loans for businesses that might have been denied elsewhere.

While Amazon’s pricing is particularly attractive, with estimated annual interest rates between 10.9 and 12.9%, PayPal’s annual percentage rate (APR) is estimated to be between 15 and 40% and Square’s is estimated between 30 and 35%. This pricing is competitive for short-term loans, but if business owners have larger, longer-term, or revolving credit needs, they could qualify for more cost-efficient options.

Rubicon adds Bond Street for financing options (Waste Today Magazine), Rated: A

Rubicon Global, Atlanta, has announced online lender Bond Street, New York, has joined as a partner in its RubiconPro consortium buying program. The program delivers fuel, equipment, maintenance and financial benefits for independent waste hauling companies and truckers across North America.

Rubicon says Bond Street is an affordable option for companies to finance growth investments such as hiring additional employees, purchasing inventory or equipment or refinancing a business credit card. An online lender, Bond Street provides one-year to three-year term loans that range from $25,000 to $ 1 million, with rates starting at 6 percent, according to the company.

These loans were created to help homeowners, but for some they did the opposite (Los Angeles Times), Rated: A

Now her mother, who receives $11,600 a year from Social Security and suffers from dementia, is struggling with a roughly $50,000 loan paid through a $5,500 annual tax assessment — an increasingly popular form of home-improvement financing known as PACE.

Edwards said the contractor explained that “a government program” would help the octogenarian afford the improvements, but never explained how the payments would work or warned them Hill could lose her house if payments were missed.

The total amount lent for residential PACE projects topped $1.5 billion in 2016, up from $350 million just two years earlier, according to trade group PACENation.

The loans are secured by a property lien and if unpaid a borrower can be foreclosed upon. Consumers put no money down and usually don’t pay anything for at least six months. Eligibility is largely based on home equity. Credit score and income are not a factor.

Many consumers simply know their loans as the HERO program, the name of the PACE program from the industry’s biggest lender, Renovate America in San Diego.

Critics say PACE can serve a worthy purpose, but worry too many consumers are agreeing to loans they don’t need or understand after being contacted by aggressive contractors, who often make cold calls or engage in door-to-door marketing.

According to lawsuits and interviews with borrowers and their advocates, some contractors are inflating the cost of their services and misrepresenting how much the loans cost or how they are paid back.

Contractors can get consumers approved on the spot, having them sign documents on a tablet computer — an experience advocates say can be confusing, particularly for elderly homeowners. Lenders then send final financing documents to homeowners for their signature, with the process taking a few hours to several days.

The three major private lenders — Renovate America, Renew Financial of Oakland and Ygrene Energy Fund of Petaluma, Calif., — say most of their customers come away happy and point to low default and delinquency rates as evidence the programs are working.

Across the nation, less than 1% of all securitized PACE loans that Kroll Bond Rating Agency tracks have defaulted, said Cecil Smart, a senior director at the company.

Renovate America said over the last five years, none of its clients have been foreclosed on for not paying their PACE loan, but nearly 80 homeowners with such financing, or 0.08% of the total, have been foreclosed upon after they didn’t pay their mortgage.

Corporate America Has Lost Control Of Your Wallet, Thanks To These Innovators (Huffington Post), Rated: A

For as long as there have been big banks, Wall Street has controlled your money. They’ve chosen who gets loans, how much they cost, who gets access – they’ve basically hand picked the economic winners and losers of the world. But not anymore, thanks to the rise of the sharing economy, financial technology, and the disruption of the traditional banking system.

The democratization of money starts with decentralizing control over that money. And that means more peer-to-peer payments, greater convenience, and a simple, easy-to-use electronic payments system working behind the scenes. Wirecard AG is a leader on all these fronts, helping consumers break free of big bank control.

We’ve had a pretty convenient way of sending money abroad, paying for odd jobs and transferring money online for goods and services for a while now. All by using an email address. PayPal came onto the scene breaking down the need for costly bank transfers and setting up recipients.

Like payment company, Square. Their convenient app, Square Cash, lets you send money from email to email.

Peer to peer lending companies like Lending Club, Prosper, and Upstart, now provide individual loans of up to $35k and business loans of up to $300k.

And for those of you comfortable with an unregulated, digital type of platform, now you can buy and sell in Bitcoin.

In fact, a report by Goldman Sachs found that one third of millennials don’t believe they’ll need or have a bank account within the next five years! And that makes Wall Street traders tremble.

PeerStreet Offers New Way to Bet on Housing (Investopedia), Rated: A

Whether he stills feels this way or not, Burry has placed a different bet on the U.S. housing market by taking a seat on the board of PeerStreet, a peer to peer marketplace that allows investors to buy into the debt of real estate investments. Think Lending Club, but for real estate, where investors can access prime traunches of real estate debt. It’s real estate loan securtization by any other name, but by investing in the debt of a real estate investment at low loan to value ratios, PeerStreet is offering what it calls a ‘safer type of real estate investment’. If things go sour, debt investors are paid off ahead of equity investors, thereby cushioning the risk. Furthermore, PeerStreet advertises 6-12% annualized returns, and the loan periods are as short as 6 months to a just a couple years, but only for accredited investors.

The best way to beat robos: Be more human (Financial-Planning), Rated: A

Anything in an adviser’s daily routine that can be automated should be outsourced to technological tools, says Alan Moore, co-founder of XY Planning Network. According to Bloomberg, 58% of an adviser’s role can be automated with artificial intelligence.

Fava agrees, suggesting that rather than trying to best robo advisers, advisers should shift their focus to aspects of their organization that requires a human touch.

Virtual meetings can take place anytime via video chat and chat bots can help answer routine questions. In his research McDermott says he’s found a growing number of advisers using video chat for initial consultations and their clients are satisfied with telephone consultations afterwards.

Another easy automation is password management software, McDermott says. Using that tool is simpler than trying to remember 70 passwords or having to input and look them up individually on a spreadsheet, he says.

Marketplace Lending and the Future of “Consumer Bitcredit” (American Bankruptcy Institute), Rated: A

A podcast interview with Profs Andrew Dawson and Christopher Odinet.

Marketplace Lending and the Future of “Consumer Bitcredit” – Episode 203

Fundbox Launching New Product for SMBs (Fundbox Email), Rated: B

Tomorrow, Fundbox, the leading cash flow optimization platform for small businesses will unveil its newest product, Direct Draw – a revolving line of credit (up to $100,000) that offers business owners instant access to working capital, without using personal credit scores and we wanted to give you an early look. The company will also reveal survey findings indicating the widespread industry need for the Direct Draw product; 65 percent of business owners don’t believe that FICO should be tied to business credit.

Direct Draw enables Fundbox to help the 18M SMBs in the U.S. that are underserved by existing funding options, most of which rely on personal credit, something that is unpopular with many SMBs. For Direct Draw, customers are approved using bank account data.

Would you like to see the embargoed release and / or speak with Eyal Shinar, Founder & CEO? Eyal has often said that he aims to be the next Visa, and they are on well on their way. Also, Direct Draw is possible because of the company’s deep investments in artificial intelligence and Eyal can speak to that as well.

SoFi has applied for a bank charter (Tech Crunch), Rated: B

In May, SoFi CEO Michael Cagney told TechCrunch the company would be applying for a bank charter “in the next month.” Well, it’s about a month later, and — surprise! — the company has actually done so.

On June 6, SoFi applied for a de novo (or “new”) bank charter, according to a filing notice on the FDIC website. There will be an open comment period on the application for the next month, which will close July 6. The company confirmed it submitted the application, which TechCrunch has received a copy of.

The company is applying for an industrial loan charter under the name SoFi Bank in Utah, listing a Salt Lake City location as its proposed depositary address.

Elevate Launches Analytics Team In San Diego (SocalTech), Rated: B

San Diego-based Elevate Credit, a fintech startup aimed at providing credit to non-prime customers, said it has launched a new “Advanced Analytics” center in San Diego. The company said the San Diego team has more than 35 data scientists, including more than 25 member with advanced degrees, and eight with PhDs.

Lendio Pilots Online Lending Platform with Comcast Business Customers, (Email), Lendio

Lendio, a marketplace for small business loans, today announced a pilot agreement with Comcast Business designed to provide its small business customers with quick and easy access to capital. Through the collaboration, Comcast Business customers will have more streamlined access to Lendio’s marketplace and network of more than 75 lenders, where they can get matched with the financing they need to help them start, grow and thrive.

According to the Small Business Administration (SBA), there are more than 28 million small businesses in America, accounting for 48 percent of U.S. employees. Many of these businesses face obstacles getting a loan, like researching an overwhelming number of potential lenders, soliciting financing offers, and determining what loan is right for them. The collaboration between Lendio and Comcast Business will seek to resolve these challenges by providing more direct access to capital through an established set of lenders offering a wide range of loan offerings, and personal attention from small business loan experts.

Comcast Business customers participating in the pilot will be able to choose from various loan products such as lines of credit, working capital loans, Small Business Administration (SBA) loans, term loans, equipment loans, accounts receivable financing, and more.

United Kingdom

Four in 10 Brits shunning savings, RateSetter warns (P2P Finance News), Rated: AAA

ALMOST four in 10 Brits failed to save a penny in the three months to April, RateSetter research has found, with the peer-to-peer lender warning that this could lead to financial difficulties down the line.

37 per cent of UK adults did not put any money away, and just 21 per cent expected to be able to save more over the next 12 months, data from the platform showed on Tuesday.

Almost half of respondents to a survey commissioned by RateSetter blamed the non-existent returns currently available on cash, with the higher rate of inflation compressing income opportunities.

Credit Peers Secures £45 million Credit Line (PR Newswire), Rated: A

Credit Peers, one of the first peer-to-business (P2B) secured property lending platforms in the UK, announced today that it has secured a credit line of £45 million from a European investment management firm.

The financing should allow Credit Peers to expand its growing business by providing fast-tracked debt funding to experienced property investors and developers on investment grade property transactions across the UK.

Earlier this year Credit Peers launched its loan-based P2B platform offering property transactions to the public that were previously only available to institutions and banks. Credit Peers aims to significantly speed up the process of property financing compared to the traditional model.

Fintech CEO on how to create Buzz in a start-up (CNBC), Rated: A

A fintech can effectively become a ‘concierge’ directing its customers to insurance, or any other financial service if they control the data. However, linking to established insurers or banks, which often have legacy IT systems and data silos that cannot interact with newer formats, messaging standards and more modern IT, can be problematic for any start-up looking to partner with a financial institution (FI). This may be an issue for BuzzGroup in the future as it attempts develop a data-centric ‘concierge’ business and scale up.

The spin-off BuzzVault insurtech digital inventory and app, which stores and protects belongings on the blockchain, takes a fee from insurers for its services, effectively acting a sales channel. But it offers insurance partners a fresh approach to customer acquisition and retention that they would not otherwise possess.

Many older fintech firms see insurance as another vertical in which they can use the same artificial intelligence (AI) techniques, big data analysis, blockchain or other technologies that they’ve already used in the investment or retail banking arena , to disrupt a new area. Other newer start-ups are focusing on insurtech as a standalone vertical because they believe the younger unploughed field has more scope for growth. BuzzGroup falls into this later group.

BuzzGroup has so far raised $9.2m in five rounds of equity fundraising from a mix of nine angel, seed and accelerator investors.

  • Wayra contributed €532,610 ($579,865) in February 2015, having been part of an earlier €597,129 ($650,000) BuzzGroup fundraising round in March 2014 that included Andrew Weisz, Justin Peters, Tom Singh and Avonmore Developments.
  • Wayra also contributed €60,000 ($65,000) at the birth of BuzzGroup in May 2013, alongside money from the founder.
  • The last round of investment in August 2016 raised £6 million ($7.75m) from White Mountains Insurance Group – the largest insurtech seed investment at that time in Europe – and emanated from the SBC InsurTech London.

One possible way around the recruitment challenge is to hire hungry youngsters who want to be part of an innovative new company and to perhaps offer them an equity stake in exceptional circumstances to help retain and motivate them.

As start-ups grow the ability to hand out equity stakes naturally diminishes, especially as angel and seed fund investors will be hungry for their cut.

Venture capitalists jamming on the brakes in 2017 (CNBC), Rated: A

The tidal wave of venture capital (VC) money that flowed into global financial technology (fintech) investments during 2016 has already shown signs of receding, according to the U.K.’s fintech chief.

Continuation of such momentum is critical given than once the U.K. has left the EU – with the clock already ticking down to a March 2019 deadline – the domestic fintech industry will lose access to the European Investment Fund. This EU body provides financing to small and medium sized enterprises and contributed around EUR 2.3 billion ($2.6 billion) to U.K. VC funds between 2011 and 2015.

Two institutional investors increasing stakes in Funding Circle and Honeycomb investment trusts (AltFi), Rated: A

Two newer entrants include the £405m Funding Circle SME Income fund, launched November 2015, and £300m Honeycomb, launched December 2015. The two portfolios differ greatly but both are products of the bank-deleveraging trend and have seen their assets grow as high investor demand has also prompted new issuance of shares.

The Railways Pension Trustee Company recently increased its stake in Funding Circle SME Income to fund to a 26.18 per cent of total share capital making their holding worth – according to today’s prices – more than £100m.

Invesco Perpetual, which backed Honeycomb since launch, recently increase its stake following an oversubscribed share issuance of more than £100m. It now has 37.8 per cent held in the fund, representing £113m at today’s share price.

China

Ant Financial extends online credit service to retailers (China Daily), Rated: AAA

Ant Financial Services Group, the online finance firm backed by billionaire Jack Ma, will extend its online consumer credit service to four million retail businesses across the country to boost sales and encourage spending-as China’s consumers increasingly feel more comfortable shopping with borrowed money.

iang, vice-president of Alipay Business Unit at Ant Financial, said that sales surged by an average 41 percent per client year-on-year from 2015 to 2016 after a number of retailers adopted Huabei, or Ant Check Later, a loan and installment service.

Credit score by Alibaba applicable for visa applications to Japan or Luxembourg (ECNS.com), Rated: A

Sesame Credit, a credibility scoring system used on Alibaba’s Ant Financial platforms, could be used as supporting documents for visa applications to Japan and Luxembourg, the People’s Daily reported on Thursday, citing the company’s announcement.

Ant Financial users with a score of at least 750 for Japan, or 700 for Luxembourg, on the scale which ranges from 350 to 900, will be “exempt from the normally required process of submitting bank records when applying through Alibaba’s travel-booking service provider for visas,” said the statement.

Interview with Co-founder and CEO of Monaco, Kris Marszalek (Urban Crypto), Rated: A

KM: We’ve certainly seen a number of people questioning this approach, I think it remains to be seen whether the decision was right or not. Our initial plan was to follow the advice of TokenMarket and launch in July, after at least a month of pre-marketing. We decided to go with an accelerated timeframe when we found out a competing project, that also does FX+Crypto was getting ready to launch their ICO in June.

UC: Can you tell us where are you guys based?

KM:  The only physical presence we have is in Hong Kong at the moment.

UC: What is the status of the Visa connection?

KM: We’re in the process of becoming a VISA program manager. Our card designs were not approved yet, so you can’t see any VISA logos on the website and apps. We’re just following the protocol here. Another reason we want to be extra careful is that TKN case showed VISA and other companies are not really keen on being associated with ICOs at this moment.

European Union

Revolut expands into business market (CNBC), Rated: AAA

Revolut, a financial technology (fintech) firm that offers foreign currency to consumers abroad at the interbank rate available on the financial markets is to expand into the business sector with claimed interest from large European corporations such as Virgin Atlantic.

Users of the new Revolut for Business app can set up an account within five minutes and hold, exchange or transfer money from 25 currencies, including British pounds, euros or U.S. dollars from this home bank account.

Three packages ranging from £25 up to £1,000 per month are available to business end users, who get additional features such as real-time spending notifications and data analysis alerts, plus dedicated customer support.

International

Real Estate & Alternative Investments in Bulgaria & Around the World (Novinite), Rated: A

The latest innovation in smart investing comes from stREITwise with their use of new legislation to provide one of the first crowdfunded office REITs. The idea behind their launch was to deliver private real estate crowdfunding into the hands of a younger group of investors who enjoy crowdfunding sites and would like to invest using the same technology.

Instead of relying on buying private REITs through financial advisors with hefty sales commissions and REIT fees added on, their new REIT keeps fees around 2% while avoiding joint venture deals that tend to add an additional layer of costs. New property deals are sourced directly to avoid outside consultants. Their first REIT specializes in acquiring and managing office space in central business districts and other neighborhoods in the U.S. where there is a need.

India

Why India’s Fintech Startups Are Flocking To Disrupt The UAE (Forbes), Rated: AAA

According to the Associated Chambers of Commerce & Industry in India (ASSOCHAM), India now stands third after the UK and USA in fostering the growth of technology startups.

Sandeep Jhingran, co-founder of cross-border payment start-up Remitr, says, “UAE has a high appetite for innovation. Investors here are ready to pay for creativity, and disruptive companies stand a fair chance to thrive.”

With more than 2.6 million members and a 30% population share, Indians constitute the largest expatriate community in the UAE. Specifically, there is a growing need for diverse financial services. While India’s fintech sector peaked in 2015, with investment reaching USD$2 billion, UAE’s fintech sector is showing signs of steady growth. A report titled State of Fintech by Wamda says that the number of fintech startups launched in the MENA region will reach 250 by 2020 from the current 105, and will be predominantly involved in offering payment solutions, P2P lending or raising capital. Notably, most of the startups surveyed in the report originated from the UAE.

India’s top court halts plan to link for biometric ID to tax (SMH), Rated: A

Indian citizens cannot be forced to enroll for a 12-digit unique identity number to be able file tax returns, the country’s top court said in a ruling that may be a hurdle for Prime Minister Narendra Modi’s plan to move transactions online.

The Supreme Court partially stayed a law that made the Aadhaar card mandatory for filing returns or for obtaining a 10-digit alpha-numeric code the Income Tax Department issues to tax payers. The stay is needed till a question on the right to privacy under Indian laws is decided by a constitution bench of the top court with at least five judges, a two-judge panel ruled.

Asia

PT INVESTREE Radhika Jaya (Investree), a pioneer peer-to-peer lending (P2P) marketplace in Indonesia, officially registered with the Financial Services Authority (OJK) on May 31 with the registration number of S -2492 / NB.111 / 2017 as indicated on the “Investee Radhika Jaya Registered Evidence” letter from OJK.

Investree is registered as an Information-Technology-based Lending and Borrowing Service Provider under the Directorate of Institutional and Products of Non-Bank Finance Industry (IKNB) administration.

As of June 5, 2017, Investree had successfully disbursed loans amounting 148 billion rupiah with 592 total loans, a 17.5% average rate of yield, and no defaults.

3 Western Governments Partnering With Asian FinTech Intitatives (Edgy Labs), Rated: A

The OCC feels it is high time to create a regulatory framework for FinTech banking institutions as the number of FinTech companies in the U.S. has soared. Investment in FinTech companies has increased more than ten times in the last five years, currently around $24 billion USD worldwide.

Meanwhile, FinTech Investment in Other Parts of the World

According to Nikkei again, soon, 10 new cryptocurrency platforms will be in use in Japan. This is all building on top of Japan’s already significant FinTech investment. Both legally and financially, Japan laid the groundwork in the spring of 2016 when they passed bills to recognize cryptocurrencies as the digital equivalent of money.

Singapore has FinTech Investment deals with South Korea, the UAE, France, and Japan, and their unique position in Asia makes them an ideal partner for FinTech-friendly countries in other regions.

In an effort to make intellectual Fintech investment, the Australian Securities and Investments Commission signed an agreement with Indonesia in order to share information of FinTech market trends and regulatory developments.

Swift, operator of the global interbanking platform, recently chose Hyperledger Fabric as the core tech for its blockchain proof-of-concept.

Nostro accounts make international transactions for the global banking system possible. Simply put, banks put their money into nostro accounts that are closer to a transaction destination so that funds are available to make global transactions more efficient.

The Australia and New Zealand Banking Group (ANZ), BNP Paribas, BNY Mellon, DBS Bank, RBC Royal Bank and Wells Fargo will all be participating in testing the Swift PoC.

Authors:

George Popescu
Allen Taylor

Wednesday April 19 2017, Daily News Digest

FinTech MENA

News Comments Today’s main news: SoFi raised new $105M fund.Landbay unveils March 2017 UK Rental Index.P2P-Banking launches IFISA comparison database.Personal loan applications surge in Australia. Today’s main analysis: Development of fintech in Hong Kong.Fintech startups in MENA raise $100M last decade. Today’s thought-provoking articles: OCC fintech plan uncertain as comptroller term expires.Goldman’s internal fintech revolution can’t […]

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United States

Online lender SoFi has a new $ 105 million fund for yield-hungry investors (CNBC), Rated: AAA

SoFi, the online lending start-up sporting a lofty $4.3 billion valuation, has just raised a $105 million fund to give outside investors another way to buy into the company’s loans.

In a regulatory filing Monday afternoon, SoFi Prime Income Fund is listed as the issuer of equity in a limited partnership. According to the filing, the fund has 33 investors that put in a minimum of $500,000 each.

Nino Fanlo, SoFi’s chief financial officer, said the fund is the first of its kind for SoFi and provides another avenue to raise capital for issuing loans. Returns after fees are expected to be in the low double digits, he said.

OCC Fintech Plan Faces Uncertainty as Comptroller Term Expires (Credit Union Times), Rated: AAA

As the term of Comptroller of the Currency Thomas Curry expires and with no replacement in sight, the OCC could be headed toward a showdown with Congress over the agency’s decision to issue special charters to fintech companies.

In March, the OCC published a draft supplement to its licensing manual, which contains existing regulations for chartering national banks.

And although Curry said the OCC will issue charters to fintech companies, his own future is in doubt. His term expired this month and President Trump has not nominated a replacement, although Joseph Otting, a former associate of Treasury Secretary Steven Mnuchin at OneWest Bank ,has been mentioned as a possible nominee.

Sens. Sherrod Brown (D-OH), ranking Democrat on the Senate Banking Committee and Jeff Merkley (D-OR) said earlier this year that authority to issue such charters must come from Congress.

Meanwhile, traditional banking and credit union trade groups are divided over the charter proposal.

Earlier this year, NAFCU said that the OCC must ensure that online lenders are subject to the same consumer protections and data standards as banks and credit unions.

The American Bankers Association has said it supports the concept of the OCC issuing fintech charters, but wanted it to ensure that companies meet the same standards as traditional banks.

For Goldman, the Fintech Revolution Can’t Come Soon Enough (NYT), Rated: A

Goldman Sachs’s internal technology revolution cannot come soon enough.

Goldman’s fledgling Main Street operation is a bright spot. With more than $115 billion in deposits, it’s already one of the top 25 banks in the United States by that measure. Marcus, as the online consumer-lending unit is called, is experiencing “demand more robust than we thought,” the unit’s boss, Harit Talwar, said recently.

Consumer lending can earn at least a 3 percent return on assets — triple what Goldman has been managing as a whole of late.

For now, lending through new web platforms remains a small industry, with just $40 billion of credit extended over a decade, according to Deloitte.

CREATING A BETTER TOMORROW (NYSE), Rated: A

Texas-based Elevate Credit (NYSE: ELVT), which recently held its IPO at the exchange, exists because of what it sees as an opportunity in the financial services market.

In between are working people, roughly 170 million residents of the U.S. and the U.K., whom Elevate refers to as “the New Middle Class.” These are people with low or no credit scores, who often have to resort to non-prime lenders in moments of personal or medical emergency.

Elevate offers three products. The first, called Rise, is an unsecured, online loan vehicle; Sunny is its U.K. counterpart, and Elastic is a line of credit issued by Kentucky-based Republic Bank, Member FDIC. While the company’s customers have credit scores typically in the 560 to 600 range, those with lower credit or no credit can also be approved, depending on what Elevate’s data analysis reveals about their reliability.

Elevate’s analytics platform, DORA, is home grown. It’s based on open-source software tools that enable model development and risk analytics. DORA inputs and outputs are monitored and evaluated to help ensure legal and regulatory compliance. Elevate’s IQ platform deploys business logic and algorithms. And driving the analytics and decision-making technology is the very human decision to create specific data sets, generated from sources that monitor non-prime customers.

The platforms draw on more than 10 different sources of consumer information, including the big three credit bureaus as well as other bureaus that specialize in non-prime customers. In addition, Elevate acquires data from LexisNexis, ID Analytics and other unique data sources to validate the applicant’s identity and to draw inferences about the applicant’s intent to repay. Elevate uses this data in ongoing tests to optimize its underwriting, to ensure that fraud and serious credit risks are more easily distinguished from acceptable risks.

In the last year, Elevate’s charge-off rates have remained steady, while its customer acquisition costs have dropped, says Rees.

Elevate also uses its nimble, data-driven underwriting model to reward its best customers. Borrowers who establish a history of on-time repayment, and who take advantage of online financial literacy tools and videos, will see their APRs drop over time. Currently, the most responsible Elevate customers pay APRs as low as 36 percent.

Is An OnDeck Acquisition On Deck? (PYMNTS), Rated: A

When OnDeck completed its IPO in 2009, it entered the public markets with a massive amount of buzz, ending the day with a share price north of $20 dollars and a valuation around $1.9 billion.

Two years out, and the banks’ lunch remains uneaten — because those alternative lenders like OnDeck have had a rather bumpy two years.  OnDeck’s share price is down 75 percent since its 2014 IPO — in the last 12 months the firm has shed 37 percent of its value.

Today OnDeck’s market cap stands at $330 million.

Marathon Partners Equity Management, LLC has owned 1.75 percent of OnDeck since the end of 2016 — and the activist investor is now pushing for a new direction, preferably one that involves a sale.

That letter apparently did not get quiet enough of a reaction from the board — OnDeck’s official response was that they “value dialog with their shareholders,” and so as of the end of last week, the campaign ramped up.

Whether or not very drastic changes are coming soon to OnDeck remains to be seen — the annual meeting for shareholders will likely be spirited.

Not Everyone Is Happy About Latest Fintech Charter Proposal (Corporate Counsel), Rated: A

Public comments are now available from companies, regulators, advocacy groups and individuals weighing in on the Office of the Comptroller of the Currency’s licensing manual draft supplement for special purpose national bank charters.

The OCC received only 17 total comments on its March 15 supplement for evaluating bank charter applications from financial technology companies, far from the 120 it received on the broader whitepaper Exploring Special Purpose National Bank Charters for Fintech Companies, which introduced the idea of the OCC granting fintech companies these bank charters back in December 2016.

“While many states have made admirable efforts to align their regulations with technological innovation, state laws by and large were drafted for a physical branch banking environment that did not envision online delivery of financial services,” wrote Robert Lavet, general counsel of San Francisco-based personal finance company Social Finance, or SoFi, in his comments to the OCC.

In her comments, personal lending company Oportun Inc.’s chief compliance officer Joan Aristei voiced no concerns with the financial inclusion standards. She wrote the guidance on this type of plan will “inform our discussions regarding how we can modify and enhance the efforts we have already undertaken,” adding that she “appreciates the OCC’s willingness to innovate and look beyond traditional measures of financial inclusion.”

New York State Department of Financial Services superintendent Maria Vullo called the OCC’s proposal for fintech charters a “hasty and misguided effort.” She said that regulation for the financial technology providers is better left to the states, not the OCC.

The Tax Implications of Real Estate Crowdfunding (Alpha Flow), Rated: A

The first thing to understand is that an equity investor in a syndication is actually a partner in partnership. Investments in syndications will generally be considered “passive” activities.

When combining all passive activities, if the investor has a net passive loss, then the remaining net loss is effectively “suspended” whereby they are carried forward to future years and subject again to the passive activity rules. If an investor has passive income then that is taxed at the taxpayer’s marginal tax rate.

In the subsequent tax year, any passive losses that carried over can offset passive income that is generated.

Crowdfunding syndications offer one additional special tax advantage and that is favorable long-term capital gains rates. When a property (apartment building, retail center, etc.) is acquired through a syndication and is held for longer than one year, the sale of the property would typically result in long-term capital gains. These gains are taxed at a rate of 15% (with certain exceptions). Any depreciation that was deducted on the property would be subject to tax rates not to exceed 25%.

MortgageHippo raises $ 2.25M to help lenders give you a mortgage online (Chicago Tribune), Rated: A

MortgageHippo, a mortgage-technology startup based in Chicago, has raised about $2.25 million in seed funding, the company announced Tuesday.

CMFG Ventures, based in Madison, Wis., led the $1.5 million round that closed last week, Saportas said. CMFG is the venture capital arm of CUNA Mutual Group, which sells insurance and investment products to credit unions. The investment closed MortgageHippo’s seed funding.

Inside Bond Street’s content marketing strategy (Tearsheet), Rated: A

Jones said the company is “passionate about building a brand,” which it does by creating editorial content. It has a blog that profiles business owners Bond Street serves across the country, like the guys behind the Two Hands cafes and restaurants or the women that launched Sky Ting Yoga in New York City; and an online magazine that looks at the cultural and economic impact of independent businesses in New York (celebrity restaurateur Daniel Boulud and artist Baron von Fancy are among many interviews that address the importance of supporting local businesses). It also has a podcast called the Nitty Gritty that features the entrepreneurs behind brands like Sweetgreen, charity:water, McNally Jackson and Smitten Ice Cream; and a series of city-specific resources for female entrepreneurs.

Jones declined to share Bond Street’s annual content marketing budget, but said the company has two dedicated employees working on content marketing, out of about 40 total employees.

Marketing has become expensive for online lenders because of the high cost of customer acquisition. Partnerships are an easy way to bring that cost down, Benton said. To date, Bond Street has partnered with WeWork to offer loans to member companies of the co-working space company; SMB-focused software companies like Booker and Front Desk to offer their clients discounted loans; and most recently, with NerdWallet, the comparison shopping site for credit cards and other financial services, to help provide small business owners with financing options.

Payix and Nortridge Software Announce Strategic Alliance (BusinessWire), Rated: B

Payix® and Nortridge Software announce they have formed a strategic alliance to help lenders connect with their borrowers and improve their ability to collect payments. The alliance allows Payix to offer real-time integration between its suite of collections tools and the Nortridge Loan System (NLS).

Payix’s collections tools include its intuitive, engaging and affordable mobile collections application, as well as web, interactive voice response (IVR), text, and collector portal applications. Nortridge clients can add the Payix solutions to their existing collections tools with virtually no IT work on their part and in just a few weeks’ time.

The Nortridge and Payix teams collaborated in the development of the seamless web services interface between the Nortridge Loan System and the Payix payment system, ensuring that transactions could be carried out in real-time and without interruption.

Payix’s collections tools are white-labelled to help lenders promote their own brands with their borrowers, and they were specifically designed for any size lender to use easily and affordably.

China Rapid Finance will be the Fifth Online Lender to IPO in the US (Lend Academy), Rated: B

In late March, 2017 we learned that Chinese online lender China Rapid Finance filed to go public, hoping to raise up to $100 million. They will list on the New York Stock Exchange under the ticker symbol XRF and will be the second Chinese online lender to go public in the United States.

Milbank Advises FinTech Lending Company College Ave Student Loans in Its $ 30 Million Capital Raise (Milbank), Rated: B

Milbank, Tweed, Hadley & McCloy LLP advised College Ave Student Loans on a $30 million capital raise.

The Milbank team was led by Corporate partner Roland Hlawaty with Corporate associate Joanne Luckey.

$ 3M Raised for Clarendon Park Apartments in Phoenix Through RealtyShares (Yahoo! Finance), Rated: B

RealtyShares, a leading online marketplace for real estate investing, today announced that its network of accredited investors has collectively funded a $3 million investment for the acquisition of Clarendon Park Apartments, a 138-unit multifamily property in Phoenix, Ariz.

The deal is sponsored by Rincon Partners, an Arizona-based owner and operator of multifamily properties focused primarily on the Southwestern United States. Rincon Partners intends to use the funds to rehabilitate and modernize the apartment interiors and amenities to potentially improve its position within the market.

The property is located in midtown Phoenix, between the city’s two largest employment corridors and close to shops, restaurants and newly developed amenities. The property itself features a swimming pool, spa, clubhouse and fitness center, as well as access to light rail within two blocks.

United Kingdom

Landbay Unveils March 2017 UK Rental Index (Crowdfund Insider), Rated: AAA

Last week, UK-based peer-to-peer lending platform Landbay released the March 2017 Rental Index. This report reveals details about the country’s rental market.

“Since March 2016, average rents in the UK have risen by 0.9% to £1,191. In England, rents were up 0.87% to £1,222; in Northern Ireland, they rose by 0.07% to £557; meanwhile in Scotland rents rose to £723 following annual growth of 1.25% and in Wales, the average rent is up 1.41% to £636. Average rents for one, two and three-bed properties hit £1,012, £1,152 and £1,321 respectively in March 2017.”

P2P-Banking Launches Database to Enable Investors to Compare IFISA Providers Easily (P2P-Banking), Rated: AAA

P2P-Banking launches a new IFISA database, that enables investors an easy comparison of offers by IFISA providers. UK taxpayers can invest up to 20,000 GBP per year tax-free in ISAs. This amount is per tax year, so a person could invest 20,000 GBP this tax year and invest 20,000 GBP in a different ISA next year. The Innovative Finance ISA, short IFISA, was introduced in 2016 with most offers becoming approved by HRMC only in the 2017/2018 tax year.

The new database of IFISA offers allows speedy selection and sorting to review IFISA products by different providers and then links to the provider’s website for in detail information. Investors can filter by interest rate, term, loan type, minimum investment amount, possibility of transfers in and out, flexible IFISA, bonus & cashback promotions and several other criteria.

Fintech synergy as challenger bank teams up with robo advice app (AltFi), Rated: A

Starling Bank is partnering with app-based wealth manager Moneybox for real-time savings.

Moneybox’s savings and investment services will be now offered by digital-only bank Starling to enable customers to easily open ISAs and round up their spending in real time.

The service will be available to Starling customers as early as the end of April.

The new service is made possible through Starling’s open APIs. The integration has two distinct features. Firstly, it allows customer data to be securely shared between the two apps, meaning transactions will appear within the Moneybox app in real time as customers spend.

Secondly, the integration with Starling means that customers will be able to set up round ups from their Starling account in a matter of seconds.

Starling Bank publicly launched its API and developer platform to enable external developers and technology companies to integrate with the banking app earlier in April, and Moneybox is the first to launch a live integration on this API.

CEO Stephen Findlay Comments on BondMason’s New SIPP Service (Crowdfund Insider), Rated: A

In response to growing demand from investors in search of better investment returns for their pensions, UK P2P service provider BondMason has launched a new Self-Invested Personal Pension (SIPP) service.

The new SIPP service offers a flexible, tax-efficient way to save for retirement and allows investors to access returns from a diverse set of approved P2P Lending opportunities. Investors can open with a lump sum from £5,000 and there is no tie-in – an investor can typically exit in full within 48 hours. The service also aims to allow SIPP administrators to easily and compliantly grant their clients access to returns from P2P Lending.

Social P2P venture hindered by wholesale crackdown (P2P Finance News), Rated: A

THE FOUNDER of ThinCats has said that the regulator’s clampdown on wholesale lending will affect projects that can be funded through his social peer-to-peer lending platform Community Chest.

Kevin Caley (pictured) launched the social enterprise last year and it funded its first loan in February 2017 for £130,000. The debt facility went to a local Birmingham finance company called ART Business Loans, which supports West Midlands enterprises.

But Caley says the Financial Conduct Authority (FCA)’s tighter restrictions on wholesale lending mean that loans like these will no longer be possible, as the money was lent to another lender.

ClearBank: a MSFT Azure B2B Fintech (Daily Fintech), Rated: A

A well kept secret of the UK B2B banking sector, is now public. Clear Bank, a clearing Bank in the UK, is ready to compete with the four UK clearing banks,

  • Barclays
  • HSBC
  • Lloyds
  • Royal Bank of Scotland (RBS).

Clear Bank is the fifth UK clearing bank and the only one that is pure B2B since it does not offer services direct to the consumer.

Back in the 60s there were 16 clearing banks in the UK. Consolidation in this part of transactional banking has left the UK currently with 4 clearing banks that process over 80 Trillion pounds annually worth of payments in the UK.

Clear Bank will be helping Challenger banks to access the payment system at the Bank of England level, at the same level as incumbents.

Clear Bank will help the 44 UK Building societies offer current account services in a cost effective way. Right now, only 2 out of the 44 offer such capabilities to their members due to prohibitive costs.

Clear Bank will boost indirectly retail banking by reducing the substantially processing costs, which will facilitate competition for incumbents in the UK.

Clear Bank will help Fintechs by providing Banking as a service through the Cloud at a very low cost. Clear Bank will be offering an API so that Fintechs can interconnect to the ClearBank Fabric.

UK Firms VC Funding Holds Steady Despite Brexit (PYMNTS), Rated: A

According to Venture Beat, U.K.-based startups raised $1.04 billion in venture capital (VC) during the first three months of 2017. That’s a slight decrease from the $1.17 billion raised during same period one year ago, but it’s above the amounts raised in each of the last three quarters.

The U.K. remains number one in Europe for VC raised, with Germany second at $779 million and France third at $665 million.

Peer-to-peer lending service Funding Circle helped push the U.K. into the number one spot, raising $97 million in VC funding and $43 million in debt funding during the first three months of 2017.

Which fintech stocks does Neil Woodford own? (The Motley Fool), Rated: A

The fintech — financial technology — sector has emerged rapidly over the last decade. The Confederation of British Industry expects it to be worth £300bn in the UK alone by 2020.

Given Neil Woodford’s long-prevailing dislike of the big banks, it’s perhaps not surprising that he’s attracted by the relatively simple business models and exciting investment opportunities in the fintech sector.

Woodford is invested in some unquoted fintech companies, such as RateSetter, a peer-to-peer lending platform, and Seedrs, which opens up venture capitalism “to anyone with an internet connection”. However, he also has two holdings that are listed on the stock market — and very interesting they are too.

P2P Global Investments (LSE: P2P) is a FTSE 250 firm with a market cap of around £700m.

VPC Specialty Lending Investments (LSE: VSL) is in the FTSE SmallCap index but is a decent-sized company with a market cap of around £290m. Its business is similar to P2P’s and like the FTSE 250 firm, considerable quantities of cash flow into shareholders’ pockets.

George Banco appoints RateSetter co-founder to board (Loantalk), Rated: A

Guarantor lender George Banco has appointed the co-founder of peer-to-peer platform RateSetter as a non-executive director.

Peter Behrens (pictured above) – who also serves as the chief operating officer at RateSetter – co-founded the platform in 2010, and has seen more than £1.8bn of loans facilitated through the company in this time.

Alternative funding options come into focus (Works Management), Rated: B

Alternative funding options will be a major theme at Business, Innovation, Technology and Efficiency (BITE) 2017 hosted by MHA Carpenter Box at the Amex Stadium, Brighton on Thursday 27 April.

Andy Davis (pictured), former editor of FT Weekend and author of the ‘Beyond the Banks’ report on alternative finance, will be one of the industry experts forming an ‘alternative funding panel’ at the free one-day conference, where he will share his expertise with local business leaders.

European Union

Why EU Passporting Is Vital For Britain’s Fintech Firms (Forbes), Rated: AAA

The impact on fintech could be significant, as an Emerging Payments Association (EPA) report Passport to the Future makes clear: “HM Treasury estimates the UK fintech market employs 60,000 people and is worth £6bn to the UK economy. Fintech is part of the UK’s financial services sector that employs 1.9 million people and contributes 10 per cent of the UK’s GDP. Payments represents over 40 per cent of financial services in revenue terms and in 2016, 40 per cent of all fintech investments were in payments companies, amounting to £10bn globally.”

In a recent survey of its members, the EPA found that 88 per cent of its members think that passporting rights are important or very important to their current businesses, while over 91 per cent think passporting is important or very important to the UK’s fintech sector and its continued growth.

As the EPA’s report states: “This could see the flight of some or part of the 5,500 licensed companies abroad and have a significantly negative impact on the UK economy.”

Alfa Finance Launches New P2P Lender DoFinance (Crowdfund Insider), Rated: A

Latvia based Alfa Finance Group has launched a new peer to peer lending platform named DoFinance.  The company stated it had invested €2 million to get the P2P lender up and running. The online lender is said to be available in all EU and EEA countries.

International

Simplex Partners with Beacon – Risk Magazine’s FinTech Start-Up of the Year (BusinessWire), Rated: A

Simplex Inc., one of Asia’s leading financial services technology firms, announced a strategic partnership with Risk Magazine’s FinTech start-up of the year, Beacon Platform, Inc.

The partnership combines Simplex’s expertise in implementing trading and risk management solutions with Beacon’s experience in building cross-asset trading and risk management platforms for industry leaders including Goldman Sachs, JP Morgan and Bank of America Merrill Lynch.

Australia

Personal loan applications surge as credit cards wane (The Sydney Morning Herald), Rated: AAA

Australians are shunning high interest credit cards and turning to personal loans for large purchases.

Driving the switch are tech-savvy consumers taking up loans from peer-to-peer (P2P) lenders, a new breed of online competitors to banks.

Credit card applications fell by almost 4 per cent in the March 2017 quarter compared with the same quarter last year, the latest report on consumer credit by credit bureau Equifax shows. That’s the biggest fall since September 2012 quarter.

Reserve Bank figures suggest that more frequent but lower value transactions are being made on credit cards.

One P2P lender is showing an interest rate on its website of 10.3 per cent on a $10,000 unsecured personal loan paid back over three years.

Banks would typically charge 13.02 per cent for a loan on the same terms, while credit cards are higher still – typically 14.15 per cent for a non-rewards credit card and 19.6 per cent for a rewards card, plus annual fees.

China

Development of Financial Technologies (Legislative Council Panel on Fiancial Affairs), Rated: AAA

This paper provides an update on the local financial technologies (Fintech) landscape and measures to support the development of the industry.

The number of Fintech start-ups operating in co-working spaces and incubator/accelerator programmes in Hong Kong increased by 60% between August 2015 (86) and August 2016 (138), according to Invest Hong Kong (InvestHK)’s Start-up Profiling Survey.

Hong Kong attracted about US$400 million of venture capital (VC) investment in Fintech companies during 2014-2016, lower than the Mainland and India (both of which are economies with huge domestic markets) but ahead of regional peers such as Australia, Japan and Singapore1 .

Universities such as The Chinese University of Hong Kong and The Hong Kong Polytechnic University will launch dedicated, publicly-funded firstyear first-degree and senior year programmes in Fintech starting from the 2017/18 academic year. Moreover, The University of Hong Kong’s School of Professional and Continuing Education has been offering a part-time, four-month programme, Executive Certificate in Internet Finance.

For payment services, the general public is increasingly receptive to new products and services, as Stored Value Facility (SVF) operators are launching new services while banks are rolling out new payment services (such as a note-issuing bank’s mobile App which enables cross-bank P2P fund transfer through mobile messaging). Building on the momentum from the introduction and development of various new payment channels in the market, the Government will strive to provide more convenient means for settling government bills and fees, such as making on-line credit card payment through digital wallets in mobile phones. HKMA will also work with the Government to explore with the industry ways of improving the payment infrastructure (such as introducing the Faster Payment System in 2018) and encouraging more standardisation in payment applications across various services providers, including the use of QR codes in streamlining the payment process, and facilitating the development of new electronic and mobile payment channels by the Government for various government services.

Read the full report here.

Alibaba’s Ant Financial Increases Bid for MoneyGram (Crowdfund Insider), Rated: A

Dallas based MoneyGram (NASDAQ:MGI), a global provider of money transfer services, has become quite popular. This past January, Alibaba’s Ant Financial subsidiary announced it had offered the firm $13.25 per share to acquire the company. The two companies had entered into a definitive agreement to merge.  Today, it appears that agreement was not quite as definitive as thought as Ant Financial has now increased the share offer to $18/share.

Last night, MoneyGram and Ant Financial announced they had updated the agreement in an effort to fend off a competing bid by Kansas based Euronet Worldwide.

Dianrong Announces New Financial Leadership Appointments (Crowdfund Insider), Rated: B

Chinese peer-to-peer lending platform, Dianrong, announced on Tuesday the following financial leadership changes, effective immediately: Xuxia Kuang, the lender’s CFO, has been named COO. Yawen Cui has joined Dianrong as the new CFO. Kuang and Cui will report to Dianrong founder and CEO Soul Htite.

MENA

‘Fintech startups in Middle East, North Africa raised $ 100m last decade’ (Venture Burn), Rated: AAA

Fintech startups in the Middle East and North Africa have raised $100-million over the last decade, yet 28% fail in their initial years, says a new report by business support organisation Wamda and online payment gateway Payfort.

The region was home to 105 fintech startups by the end of 2015 (see featured image), with half of these having been launched since 2012. In all 30 firms are situated in North Africa. The UAE leads with 30 fintech startups, followed by Egypt with 17 and Jordan and Lebanon with 15 each.

Just 10% of fintech startups in the region account for 43% of investments and employ 55% of the 1600 employees in the sector.

Africa

How to make sure your crowdfunding campaign is successful (Destiny Man), Rated: AAA

“The vast majority of the South African market activity – $13,8m – came from peer-to-peer consumer and business lending, with the remaining $1.2 million spread across microfinance, donation-based and reward-based crowdfunding,” according to a report published by the Cambridge Centre for Alternative Funding.

In order to reap the benefits of crowdfunding, it’s important to launch a great campaign. Patrick Schofield, CEO and founder of Thundafund, a crowdfunding platform that has helped several companies start or expand, says there are several things you can do to increase the chances of success for your business.

“Spend as much time on pre-campaigning planning as you would on your actual campaign. If you’re thinking of [running a campaign] for up to 45 days spend, 45 five days getting your ducks in a row,” he says.

Approaching journalists and key influencers will get you enough people who can make noise about what you’re doing.

‘Crowdfunding is the future’(Times Live), Rated: A

In an alternative funding benchmarking report by the UK’s Cambridge Centre for Alternative Finance, published last month, South Africa was identified as the potential leader in the growth of online and peer-to-peer lending models in Africa.

In 2015 South Africa represented 18% of the total African online alternative finance market, raising more than $15-million. Kenya was the only African country ahead of it, with $16.7-million raised. South Africa’s online alternative finance market focused more on business activity and less on charitable causes.

Local IT firm Khonology has partnered with the UK’s White Label Crowdfunding to develop bespoke crowdfunding platforms for entrepreneurs here.

Authors:

George Popescu
Allen Taylor

Wednesday April 5 2017, Daily News Digest

Wednesday April 5 2017, Daily News Digest

News Comments Today’s main news: Colorado targets Marlette, Avant on ‘True Lender’ grounds. CRB sues Colorado. SoFi raises variable student loan refi rates. Kabbage extends $3B in funding to over 100K small biz customers. RateSetter adds expected losses committee. P2P Global Investments considers change of loan fund manager. Dango RECF platform celebrates 1M investors. Today’s main analysis: International P2P lending statistics. […]

Wednesday April 5 2017, Daily News Digest

News Comments

United States

United Kingdom

European Union

International

Australia

China

Asia

News Summary

United States

Colorado Attorney General Pursues ‘True Lender’ and ‘Madden’ Actions Against Major Non-Bank Online Lenders (JD Supra), Rated: AAA

On February 15, the Colorado Attorney General filed substantially similar, separate amended complaints in the U.S. District Court of Colorado against Marlette Funding LLC and Avant of Colorado LLC, alleging violations of Colorado’s Uniform Consumer Credit Code based on “true lender” and loan assignment cases. Both actions were originally filed in state court on January 27, 2017, and both were subsequently removed to federal court — on March 3, 2017 and March 9, 2017, respectively. In each instance, the complaint cites CashCall, Inc. v. Morrisey, 2014 W. Va LEXIS (W. Va. May 30, 2014), and Madden v. Midland Funding, LLC, 786 F.3d 246 (2d Cir. 2015), as legal authority for claims alleging usury and other violations of Colorado’s Uniform Consumer Credit Code.

The amended complaint filed in Mead v. Marlette Funding LLC d/b/a Best Egg asserts that Marlette paid all costs, including legal, marketing and other expenses, incurred by Cross River Bank in originating Best Egg loans. In addition, the complaint asserts that Cross River “bears no risk that it will lose its principal in the event consumers default on the Best Egg Loans that it sells to Marlette or to Marlette’s non-bank designees” because: (i) Marlette maintains a bank account in favor of Cross River in the amount of Marlette’s anticipated purchases; (ii) Best Egg loans originated by Cross River are sold to Marlette within two business days; (iii) the parties’ contract specifies that Cross River has no liability to Marlette for sold loans, and (iv) Marlette is obligated to indemnify Cross River “against any claim that any aspect of the Best Egg lending program violates the law.”

The amended complaint filed in Mead v. Avant of Colorado LLC, in turn, similarly asserts that Avant and not WebBank, which originated the subject loans, bears all cost and expenses, including the costs of evaluating loan applications and credit reports and the costs associated with dispersals of loan proceeds.

Cross River Bank Sues State of Colorado (Over the Transom), Rated: AAA

News Summary:

  • On April 3rd, Cross River Bank filed a Declaratory Judgment Action (Federal District Court) against the State of Colorado to protect its federal statutory and contractual rights to freely extend credit and to freely sell those loans on a nationwide basis
  • Previously (in January 2017), the Colorado Attorney General sued Marlette Funding in an attempt to prohibit Marlette from enforcing loans validly made by Cross River and validly sold by Cross River to Marlette
  • Cross River filed the declaratory judgment action in support of Marlette Funding (an MPL partner), and the broader bank-platform model
  • According to Cross River General Counsel, Arlen Gelbard, “the Colorado Attorney General is attempting to undermine the concept of federal preemption, and with it 150-years of established banking law.”
  • More specifically, Colorado’s action violates Federal Deposit Insurance Act (Section 27) and National Bank Act, as well as the “valid when made” doctrine
  • “It is clear to us that Colorado’s lawsuit against Marlette intentionally did not name Cross River as a party because Colorado knows that Cross River’s actions are protected by its status as a state-chartered, federally regulated Bank, which affords complete preemption over state law”

The Issue – Federal preemption/uncertainty:

  • The federal preemption provisions which allow small banks like Cross River to compete with larger entities, have come under attack by several states and in some recent court cases such as Madden v. Midland Funding and other so-called “True Lender” cases.
  • While we believe these cases were wrongly decided as a legal matter, the broader impact has been to encourage states and other plaintiffs to disregard or undermine key legal doctrines of federal preemption and loans as being “valid when made”, leading to market uncertainty.
  • The characteristics of the Cross River model are very different from many others in the marketplace, where the named lender has little to no involvement in the origination process and retains no “skin in the game”
  • This lack of certainty about what loan terms apply to subsequent purchasers has broad, adverse ramifications for US banking and financial markets. Specifically, certain investors have moved away from this asset class, which has reduced liquidity in the market.
  • “Although the action taken by the Colorado Attorney General is being positioned as one to protect the consumer, the actual result will likely have a negative impact on consumers and small businesses, as their access to this important source of credit is significantly reduced.”

SOFI RAISES THE VARIABLE STUDENT LOAN REFINANCING RATES (lendedu), Rated: AAA

The Federal Reserve’s interest rate increase last month is starting to show up in some loan products including student loan refinancing. Fixed rate borrowers are safe for now, but those with variable interest can expect to pay more.

As of April 1st the interest rate on a variable student loan at SoFi increased both on the low and high ends of the range. Borrowers will now pay anywhere from 2.565 percent to 6.490 percent interest on a variable refinance loan. That compares with 2.365 percent to 6.29 percent interest just a month ago. The interest rate on SoFi’s fixed rate products held steady at 3.375 percent to 6.74 percent from March to April.

Kabbage Extends $ 3 Billion in Funding to over 100,000 Small Business Customers (IT Business Net), Rated: AAA

Kabbage®, a pioneering financial services, technology and data platform, announced it has extended more than $3 billion to small businesses across all 50 U.S. states, covering every industry. The company has also now served over 100,000 small businesses through its platform, representing the largest customer base of any online small business lender.

ApplePie Capital CEO & Co-Founder Denise Thomas Makes Marketplace Lending Success Look Easy (Crowdfund Insider), Rated: A

“We have gained a foothold within the industry by partnering with 42 brands to date. Moving forward we will continue to innovate…”

Erin: You recently signed new investors plus funding capital, thus standing out in a challenging market. Please share details about your MO. How long did it take to raise the money?

Denise: It took five months. The two main sources of funding we closed were new strategic partners and existing investors. Our strategy was to continue to tell our story and educate investors about franchise debt as an asset.

Erin: Please share your experience about dealing with a prominent Bay Area VC saying, “You don’t look like Fintech.”

Denise: Statistically, there are far more men running fintech companies, clearly there are some biases out there around that. A study released by Peterson Institute for International Economics in 2016 found that “An increase in the share [on executive teams and boards] of women would be associated with a 15% rise in profitability.” At the end of the day, you want people in your board room who are supportive.

Erin: You have spoken quite positively about your relationship with Fifth Third. How and why does ApplePie’s relationship with this bank differ from others?

Denise: As opposed to our other loan purchasers, Fifth Third has made a strategic investment in our company and holds a stake in the growth of our business. They co-led our B round with QED Investors, with whom they have now also partnered to make strategic investments in VC-backed fintech companies. They have a long term vision for our industry and provide their expertise to create better financial solutions and a superior experience for our borrowers.

Erin: ApplePie Capital’s loans are backed by personal guarantee and unsecured. Personal assets are not required to back loans. Tell me more…

Denise: In franchising, there is a blueprint for the business owners to follow, in terms of cost analysis and every other aspect. This is measurable and people have a path to multi-unit ownership. We look at each brand and evaluate the sustainability of the business model, which has proven itself over the last 25 years through historical SBA data.

5W Public Relations Named Agency of Record for Sharestates (Yahoo! Finance), Rated: A

5W Public Relations, one of the 15 largest independently owned PR firms in the US, has been named PR Agency of Record by Sharestates, an online real estate investment marketplace that is an industry leader in crowdfunding for individual and institutional investors.

Could Real Estate Crowdfunding Help Millennials Retire Sooner? (Realty Biz), Rated: A

Real estate crowdfunding has proven a popular choice for one of the most fickle investing groups in the marketplace: Millennials.

On the surface, it seems improbable. Millennials investing in real estate? This is a group that has been loathe to purchase homes, with less than a third of Millennials becoming homeowners compared to 64 percent of the general population. After a little analysis, however, there are powerful reasons why real estate crowdfunding appeals to Millennials—enough that more are certain to join the crowd of investors in the coming years.

The stereotype, of course, is that Millennials are all underpaid with limited skills and few opportunities. That’s not reality, but even if it were, real estate crowdfunding has very low barriers to entry. Some of the best and most successful crowdfunding portals allow for investment minimums as low as $5,000. That lets Millennials get into the real estate investment game much earlier than previous generations.

Second, real estate crowdfunding is an investment option that allows Millennials to bypass banks. Having come of age during the Great Recession, many Millennials don’t trust financial institutions or Wall Street firms. They do, however, see the need to protect their money from the kind of financial breakdowns that hurt their parents’ retirement plans nine years ago by investing in hard assets. Real estate crowdfunding offers the chance to do just that.

PayPal Directors Hit With Class Action Suit from Shareholders Over Venmo (Crowdfund Insider), Rated: A

On March 24, 2017, shareholders of PayPal Holdings Inc., the parent company of mobile-payment provider Venmo, filed a derivative suit against its directors in the District Court of Delaware. A derivative suit is a form of class action in which shareholders can sue company officers or directors on behalf of the company.

The plaintiff shareholders claim in the suit that the directors of PayPal willfully or recklessly caused PayPal to make false or misleading statements which led to direct damages against PayPal. The false and misleading statements are alleged to have been made in PayPal’s quarterly reports, annual reports, and proxy statements which failed to disclose any of the alleged unfair and deceptive business practice or the fact that those practices would lead to increased regulatory scrutiny.

View the filing here.

Over 250,000 Shoppers And 1,400 Dealers Turn To AutoGravity (PR Newswire), Rated: A

AutoGravity, the FinTech pioneer transforming car shopping and finance with advanced mobile technology, today revealed that over a quarter million users – more than half of whom are millennials – have downloaded AutoGravity iOS and Android apps for car shopping and financing. AutoGravity also confirmed that its network of partner car dealerships has grown to more than 1,400 franchise dealers.

Since launching in 2016, AutoGravity has achieved significant growth across the United States, securing partnerships with the nation’s top automotive lenders, as well as four of the top five national dealer groups, representing all new and used car brands available in the country.

  • New cars remain popular with boomers. AutoGravity data shows two-thirds of car shoppers ages 50+ who pursue financing do so for new vehicles. In contrast, only half of AutoGravity car shoppers ages 18 to 25 who pursue financing do so for new vehicles
  • Japanese brands perform in California. Japanese economy and luxury car brands are more searched relative to American brands in California (as compared to the US overall)
  • Economy cars continue to be a popular choice. Economy brands rank in the top four most searched for vehicles across the US – luxury car brands round out the top seven
  • Millennials more cost sensitive than Gen X. Among car shoppers seeking financing on AutoGravity, millennials look to borrow ~15% less (finance amount requested) and seek to contribute ~25% less (cash down payment) relative to car shoppers ages 36+

Why FutureAdvisor orphaned its B2C book of business and other learnings at CFA Society’s robo-panel in San Francisco (RIABiz), Rated: A

The bad news: Selling robo financial advice to millennials — at least until they grow up and start acting like boomers — is a fool’s game.

Cianciolo provided the fullest update yet on FutureAdvisor since the firm’s eye-popping sale to BlackRock in 2015. See: Why BlackRock’s purchase of FutureAdvisor for $152 million could be a deal of destiny.

The robo — once the No. 3 retail player behind only Wealthfront and Betterment — no longer takes assets to millennials.

Standing up for retail and millennials was Zhang, a millennial herself, who questioned whether Roy and Ciancolo were being unduly pessimistic in capitulating to established players.

Jemstep had a brief period where it went for retail business but veered quickly to the B-to-B market.  “Can somebody [create a viable B-to-C robo advisor]?” Cianciolo asked. “Sure but you’re taking double and triple risks.”

Jamie Dimon Pushes for Simpler, More Coordinated Bank Regulations (WSJ), Rated: A

J.P. Morgan Chase JPM 0.33% & Co. Chief James Dimon laid out his wishlist of regulatory changes in his annual shareholder letter Tuesday, calling for simpler and better coordinated rules that could help to spur more lending and in turn economic growth.

Any changes are likely to help the bank. Mr. Dimon wrote that the “anticipated reversal of many negatives and the expectation of a more business-friendly environment” in addition to the bank’s results are among the reasons its stock price jumped about 30% in 2016.

Mr.. Dimon has previously said that rules should be coordinated among agencies, simplified and consistent, but in Tuesday’s letter spelled out what that meant for the first time.

He said banks have too much capital and that could be used instead to safely finance the economy.

Mr. Dimon reiterated that the so-called “gold plating” of international standards by U.S. regulators should be eliminated. Making U.S. rules stronger than international rules was in some cases a priority of Federal Reserve Governor Daniel Tarullo, who was the central bank’s regulatory point person but is stepping down this week.

Mr. Dimon also suggested reforms to the mortgage market since the housing sector has been “unusually slow to recover.”

Bond Street Partners With NerdWallet (Bond Street), Rated: A

Today, we are thrilled to announce that we’re partnering with NerdWallet to help more small business owners access fair and affordable financing. According to the Federal Reserve Bank, only 1 in 5 businesses that apply for a loan from a big bank are approved.

Together, we’ll create resources, guides and webinars to support the growth of businesses. In addition, entrepreneurs will now be able to access financing from Bond Street via NerdWallet’s Small Business Loan Tool.

Prominent Fintech Marketing Firm Leverage PR Sold to Caliber Corporate Advisors (Crowdfund Insider), Rated: B

Leverage PR, a prominent marketing firm engaged in the crowdfunding and Fintech sector, has been sold to Caliber Corporate Advisors.  Founded by Joy Schoffler, a well-known and highly visible participant in the emerging industry of financial innovation, shared the news with Crowdfund Insider, explaining she expects to remain engaged with the firm but in a different role.

Leverage PR was founded in 2010 and was the first marketing firm to recognize the potential of alternative finance.

United Kingdom

RateSetter continues to boost transparency with new expected losses committee (P2P Finance News), Rated: AAA

RATESETTER has set up a new committee on expected losses as part of a review of the way it monitors and reports on credit risk.

The panel, which will come into effect later this month, comprises the peer-to-peer lender’s chief executive Rhydian Lewis, its chief finance officer Harry Russell and various heads of consumer and commercial credit risk.

Boosting expected losses data is the latest of a batch of strategic changes RateSetter has put in place to price risk more accurately following higher-than-expected losses on its 2014 and 2015 loans.

Peer-to-peer loan fund considers change of manager (Financial Times), Rated: AAA

The UK’s first peer-to-peer loan fund is to review its investment manager as a swath of funds struggle to generate returns from the emerging asset class.

The listed fund, P2P Global Investments, buys loans from websites matching interest-paying borrowers with lenders in the UK, US, Europe and Australia, as well as holding stakes in the platforms.

It is currently managed by MW Eaglewood Europe, an asset manager majority-owned by UK hedge fund Marshall Wace. In a short announcement to the stock market on Tuesday, the board said it would review the arrangement following discussions with Eaglewood and “significant shareholders” and would update the market in due course.

Oakam Brings Gamification and Rewards to Consumer Finance with New Mobile App Feature (BusinessWire), Rated: A

Oakam has enhanced its mobile app with the launch of Oakam Grow, a new feature that uses gamification to make consumer finance more engaging, rewarding and inclusive. Oakam Grow builds on the UK-based consumer lender’s application of behavioural science to encourage the development of positive credit habits, and supports its strategy to bring digital disruption to the largely analogue micro-credit industry.

Oakam Grow gamifies the experience for Oakam’s mobile app users through the application of social currency theory, which enables customers to share in the financial upside of their responsible credit behaviour. Customers earn points when making repayments via the app or referring friends, redeemable for loan repayments, cash-back, store vouchers, lower rates on future loans, or to socially vouch for friends in the loan application process. Oakam’s award-winning mobile app first launched in 2015, and today more than 55 per cent of its customers are regular users. The addition of Oakam Grow will further drive app downloads and engagement.

Oakam has seized on the opportunity to disrupt the £1.8 tn global micro-lending industry through the use of AI, machine learning and cognitive science. The century-old industry has seen little innovation since its founding and today relies on the same analogue processes that keep cost-to-income ratios above 50 per cent, and prices high for consumers. The industry’s network of around 200,000 doorstep loan agents globally also leaves consumers with poor or no credit history, vulnerable to misleading offers and predatory practices.

Oakam’s omni-channel model, comprising its digital properties and UK retail network, confronts both the issues of inefficiency and consumer protection.

RateSetter Business Finance Adds Relationship Manager Amanda Sharp (Crowdfund Insider), Rated: A

RateSetter has appointed Amanda Sharp as Regional Relationship Manager for London and the South East. Sharp previously spent 35 years with RBS Group.

How to navigate the P2P maze (FT Adviser), Rated: A

Against a backdrop of rising inflation and continued low interest rates, it is no surprise that a growing number of the UK’s financial advisers are looking for ways to make their client’s money work harder.

And there is one solution in particular that has caught the attention of eagle-eyed advisers: peer-to-peer (P2P) lending.

Assuming current Bank of England inflation at 2.3 per cent, according to latest figures, and interest rate forecasts, money deposited in the average high street savings account today will shrink in real terms after both one and two years.

In fact, some high street bank cash savings accounts are offering just 0.01 per cent in savings – less even than the current Bank Base Rate of 0.25 per cent.

Even in its slowest year yet, 2015, the sector grew by over 80 per cent according to one report (Nesta, Pushing Boundaries: the 2015 UK alternative finance industry report).

P2P lending is likely to grow even faster as more and more P2P lenders receive their full FCA authorisation – heralding the arrival of the ‘Innovative Finance ISA’ (IFISA), which will almost certainly add to the momentum the sector is experiencing.

European Union

Why Stockholm is creating more unicorns than London per capita (elite business magazine), Rated: AAA

The result of the Swedish government’s tech drive of the 1990s is that while Silicon Valley may be the undisputed champion of the world when it comes to producing unicorns, Stockholm comes a close second. According to SparkLabs, the seed-stage fund, the Californian city has produced 10.7 unicorns per million inhabitants, the Nordic city produced three and Tel Aviv, which came third, birthed 1.2. So it’s no wonder the European Digital City Index ranked the metropolis as Europe’s second best city after London when it comes to supporting its digital entrepreneurs. “In Stockholm, we’re really freaking good,” says Stark.

But even though access to a solid infrastructure has proven vital in fostering this thriving entrepreneurial community, it isn’t the only factor. Equally important for the success of Sweden’s startups is the fact that that the nation has a population of just under ten million, which means new enterprises have to be thinking about international expansion from the get-go.

‘Shadow banks’ step into the spotlight (Financial Times), Rated: A

The growing influence of alternative capital is most evident in the US — in April 2015, nonbank lenders accounted for more than half of new government-backed mortgages. Banks are still the biggest lenders in Europe, but rivals are emerging. Many of the new players are linked to the securitisation industry, where loans are packaged up and sold on as bonds to capital markets investors.

Private equity-funded upstarts have quietly taken a more active role in the UK’s securitisation market, which used to be dominated by big banks.

Today one of the largest users of securitisation in the UK is not a bank. The Northview Group, which writes mortgages under the Kensington brand and is funded through securitisation, describes itself as a nonbank challenger lender.

A wave of nonbank lenders, including companies such as Munt and Dynamic Credit, have appeared in the past few years. These players now account for close to a fifth of new Dutch mortgages, according to IG&H, a consultancy. This is up from almost nothing just a few years ago. The companies take capital from institutions and lend to homeowners.

Technology companies that facilitate lending between investors and businesses make up another area of growth in shadow banking, and they are becoming more adventurous in the services they offer.

Funding Circle is one of Europe’s best known peer-to-peer lending platforms, where retail users can invest in loans made online. It lends £100m a month in the UK and is expanding in Europe.

As with other forms of shadow banking, European P2P lending lags far behind the US market. Investors who use Funding Circle, which is also active in North America, said they were disappointed last summer with the performance of US loans written by the company. The concerns followed losses that investors made on P2P loans securitised by OnDeck, a nonbank lender.

International

Statistic of International P2P Lending Services March 2017 (P2P-Banking), Rated: AAA

The total volume for the reported marketplaces adds up to 532 million Euro.

Milestones reached this month are:

  • Mintos crossed 150 million EUR in originations since launch
  • Moneything reached 50 million GBP since inception

Australia

Agri-lending helped drive SocietyOne to a new loan record (Finder), Rated: AAA

Peer-to-peer (P2P) lender SocietyOne has announced a new lending record, passing the $250 million lending mark in March of this year. Part of the lender’s success is due to increased demand for its two agri-lending products, which, combined with a surge in personal loans over the post-Christmas and New Year period, saw an additional $45 million lent to customers.

China

China P2P industry lending nears Rmb1tn despite crackdown, new regulations (Financial Time), Rated: AAA

Growth in China’s peer-to-peer lending sector has proven resilient in the face of new regulations and a year-long crackdown by authorities on online financing, with total P2P loans blowing past the Rmb900bn ($130.7bn) mark last month.

Outstanding P2P loans came to Rmb920bn at the end of March, according to new figures released today by lending platform Wangdaizhijia.

Month-on-month growth in outstanding loans slowed compared to before the new regulations were introduced in August, from 5.7 per cent in July 2016 to 4 per cent last month.But when viewed in renminbi terms, growth has ratcheted up, with the industry tacking on an average Rmb35.6bn a month in the seven months since regulations were introduced, compared to an average rise of Rmb29.1bn in the seven months ended August.

China curbs ‘Wild West’ P2P loan sector (Financial Times), Rated: AAA

Peer-to-peer lending in China is at an inflection point as state regulators aim to transform it from a “Wild West” industry rife with fraudsters into a respectable market in which legitimate lenders can offer funds to willing borrowers.

With their offer of attractive fixed returns over short periods, P2P investments appear similar to saving products that reputable commercial banks offer as an alternative to low rates available for deposits. P2P yields are typically higher than those available from banks, making them an easy sell to investors.

Since 2011, 3,556 platforms have collapsed, according to Online Lending House, a website that tracks the sector. In a third of the cases, law enforcement agencies closed the platforms or their owners or managers simply disappeared.

Asia

Dangoestate.com Real Estate Crowdfunding Platform Celebrates 1,000,000 Investors (Digital Journal), Rated: AAA

Dango estate, the now five months old Singapore based investment platform is growing by leaps and bounds. The mood at their three offices around the world was very high yesterday as they celebrated the 1,000,000’th investor on the platform.

Dango estate has achieved great success in the crowdfunding industry in the shortest time, the platform has already funded more than $500,000,000 in loans worldwide and delivered over $350,000,000 in principal and interest to investors, with yields as high as 10%.

Authors:

George Popescu
Allen Taylor