Wednesday January 4 2016, Daily News Digest

p2p lending volume

News Comments Today’s main news: Fannie Mae says SoFi’s home loan refinance program may include other lenders. Today’s main analysis: International P2P lending volumes. Today’s thought-provoking articles: FT Partners’ CEO FinTech market analysis. Why equity crowdfunding cap should be raised. Bridg offers Bluetooth-enabled mobile payments. United States Interview with Fannie Mae’s Jonathan Lawless. AT: “This is important […]

p2p lending volume

News Comments

United States

International

European Union

  • Top 10 Baltic FinTech companies. AT: “Interestingly, six out of 10 are based in Latvia. Three of the other four are in Estonia. Several of them are important outside of their home countries.”

China

India

Asia

United States

New Home Loan Refinance Product May Help Address Student Debt Debacle (MortgageOrb), Rated: AAA

Jonathan M. Lawless, vice president of single-family analytics and affordable housing at Fannie Mae, says research shows that borrowers who use home equity to pay down student debt perform well on their mortgages.

Q: How does SoFi’s cash-out refinance program work? What kind of loan-to-value (LTV) mortgages are eligible? Is this offering only for primary residences?

Lawless: This program allows borrowers to refinance their loans and increase their loan amounts to use the additional cash to retire student debt, which typically carries a higher interest rate. This will allow borrowers to increase their balances up to 80% LTV, to keep people from taking on more debt than they can handle, and requires that the property be their primary residence. The mortgage being refinanced does not need to be an existing Fannie loan. The loan – as long as it meets our standards – will become a Fannie loan once it is refinanced.

Q: By some estimates, about $1.4 trillion of student debt is outstanding. How many homeowners could benefit from the cash-out refinance program?

Lawless: SoFi estimates that 8.5 million Americans with or co-signed on student debt also own a home. A large share of those homeowners is likely to have equity to use to pay down student debts.

Q: How did SoFi and Fannie Mae come together to create this novel cash-out refi program for student debt?

Lawless: Fannie Mae has been working on a variety of programs to address the significant burden that student debts have put on achieving homeownership. When we started thinking about how to leverage the close to $8 trillion of home equity today to lessen some of the $1.4 trillion of student debt, we approached SoFi, a new customer of ours, to learn about student debt and refinancing. Through those discussions, we developed this program.

Q: Will this cash-out refinance program be made available by other lenders?

Lawless: Our intention is to make this program available to all lenders, depending on the level of consumer interest and final approvals from our regulator. Our hope is that this will be made widely available early next year.

FT Partners’ CEO Monthly FinTech Market Analysis (FT Partners Email), Rated: AAA

FT Partners regularly publishes profiles on key transactions in the FinTech sector. Please feel free to download these reports below.  And if you don’t already, please follow us on here.

A Million Bucks Crowdfunding… Not Enough? (Crowdfund Insider), Rated: AAA

Many entrepreneurs quickly point out, the $1 million cap under Regulation Crowdfunding (Reg CF) is limiting. $1 million may not provide sufficient capital to scale, especially after offering expenses and portal fees are deducted at closing. No longer can equity crowdfunding be written off so quickly. Building a fundraising strategy that incorporates equity crowdfunding AND traditional methods of fundraising is not only possible but being successfully implemented by savvy startups today.

Regulation Crowdfunding provides for a maximum annual amount that can be raised of $1 million. Regulation D does not contain the same maximum offering restrictions. In fact, under Regulation D, Rule 506, an unlimited amount of funds can be raised from accredited investors.

2017 may prove to be an especially promising year for the startup community. A legislative fix addressing many of the shortcomings of the JOBS Act, called the Fix Crowdfunding Act(HR 4855) is on its own path through Capitol Hill.

In its original form, the Fix Crowdfunding Act sponsored by Representative Patrick T. McHenry, included an amendment to permit issuers relying on Regulation Crowdfunding to increase their maximum offering amount under the exemption from $1 million to $5 million.

This amendment would tremendously serve startups and small businesses seeking seed, bridge and Series financing. Those issuers seeking more than $5 million in financing per year could still choose to conduct multiple offerings in reliance on alternative exemptions as discussed above.

US digital payments market is expected to reach $ 4,300 bn in the future (India Info Line), Rated: A

Technological developments such as data analytics, social networks and increased penetration of the smartphone have led to the emergence of newer models such as marketplace lending, people based marketing, equity crowdfunding, peer-to-peer lending and several others.

Apple Pay, Android Pay, Samsung Pay and PayPal wallet were the most used mobile wallets by customers for making online and in-store payments in the US. Dwolla, Venmo and Chase QuickPay were the pioneers in the space of P2P money transfers.

Digital payment segment was by far the most revenue generating segment that saw maximum customer interest and participation. The segment was majorly driven by the overwhelming sales of e-commerce market in the country.

The digital commerce market includes all the transactions made for online purchase of goods or services in the country through payment gateways. The market is the largest segment of the digital payment market in the US because of the heightened transactions for e-commerce in the country which have grown due to highly developed internet ecosystem and high internet penetration.

P2P money transfers have been on a rise especially amongst the teens and young working class, with the major transfers happening between friends, family of co-workers.

Three Tech Trends That Will Impact Small Business Lending (Forbes), Rated: A

Banks and FinTech companies are using technological advances to improve access to capital, which is the lifeblood for small business growth.

Artificial Intelligence

AI is causing a transformation in small business lending by improving credit assessment, financial product development, and loan decision-making.

For instance, FinTech companies are partnering with online accounting software platforms, and that the data collected is used to target business owners in need of financing. Thus, Artificial Intelligence enables lenders to offer ever more personalized unsecured business loans.

Convergence

While marketplace lending currently accounts a relatively small percentage of the small business loan transactions today, technological innovations are forging partnerships between banks and marketplace lenders that could never have been seen a few years ago.

Convergence is on the uptick and this will continue into 2017.

Serving The Underserved

Banks are being encouraged fund minority business owners and ventures in economically disadvantaged areas. Meanwhile, marketplace lenders are in the forefront of providing capital to entrepreneurs and communities where their small business financing needs are not being met.

The National Federation of Independent Businesses’ November index of small business optimism climbed from 94.9 to 98.4  its sharpest surge since 2009.

Will OCC’s New Charter Go Beyond Fintech Firms? (National Mortgage News), Rated: A

The Office of the Comptroller of the Currency’s decision to offer a special-purpose charter for fintech firms may entice more players than expected, including mortgage lenders and even some payday lending shops.

In the leadup to the charter’s release last month, most had expected it to focus on marketplace lenders and others with a more technologically oriented business model. But the wording of the charter is broader, potentially allowing other nonbank players a way to enjoy the benefits of federal preemption and avoid state by state registration.

Some attorneys are even hearing interest in the charter from payday lenders. Though it might be a long shot for them to obtain the OCC’s blessing, observers say that the agency might at some point prefer to handle these companies through direct supervision.

23rd Annual VC & Private Equity Conference Announces Keynote Speakers and Agenda (BusinessWire), Rated: B

Conference panels will comprise a wide variety of leading alternative investment professionals, including general partners, limited partners, intermediaries, and industry consultants, among others. To view the full schedule of speakers and events, and to register to attend, please visit:

International

International P2P Lending Volumes December 2016 (P2P-Banking), Rated: AAA

The following table lists the loan originations of p2p lending marketplaces in December. The total volume for the reported marketplaces adds up to 414 million Euro.

P2P-Banking’s Lehmann: Predictions for 2017 (Crowdfund Insider), Rated: B

“2017 will be a boom year for the UK P2P lending sector as it will be the first year which fully benefits from the newly introduced IF ISAs. On the continent origination volumes will continue to grow and several new marketplaces will launch. For the marketplaces it remains a challenge to attract enough creditworthy borrowers to match the investor demand. New VC activity in the sector will be slowing, possibly made up partly by bank engagements in the companies. The year may also offer some cues how fintech companies can profitably incorporate blockchain/bitcoins in alternative lending use cases – though on a small scale in absolute numbers.”

European Union

Top 10 Fintech companies in the Baltics (TechBullion), Rated: AAA

In the recent years Baltic States have become a lot more active in Fintech sector and the most rapidly growing areas are lending, payments and insurance. Thanks to the local Peer-to-Peer lending companies, the Baltic region has also undergone an uprising in alternative loan segment. According to the research performed by KPMG, in 2016 Latvia alone broke into the top 3 countries by the size of alternative lending volume with the third largest volume of funded loans archived in Q1-Q3 2016.

BitFury is currently operating in the US, Iceland, United Kingdom, Netherlands, Georgia and Hong Kong.

Since 2009 Bondora has been consistently delivering double-digit returns to over 14,000 investors on the platform.

In 2016, Creamfinance was acknowledged as a second fastest-growing European company by Inc.5000.

Factury is Latvian-founded blockchain solution supporting secondary market trading of bank loans, smart invoice payment and settlement.

Launched in Latvia, Mintos is a peer-to-peer marketplace where investors can invest in loans originated by non-bank lenders.

Founded in 2013 in Latvia, Monea is a P2P micro payment application providing money transfers via phonebook contacts from bank account into the receiver’s bank account.

TransferGo is a global money transfer company that supports migrant workers to send money back to their relatives without paying unnecessary bank fees.

In August 2015 TransferWise was named a World Economic Forum Tech Pioneer.

Twino is a privately-owned marketplace lender, operating across 10 countries with headquarters in Riga, Latvia.

China

Hong Kong to rank top again this year for global IPOs, PwC predicts (South China Morning Post), Rated: AAA

Hong Kong will continue to rank top globally for initial public offerings in 2017, with 130 companies raising up to HK$220 billion, according to accounting firm PwC.

The estimate, published on Tuesday, is 13 per cent higher than last year’s total and would represent a turnaround after 2016 saw funds raised from IPO plunge 26 per cent from the previous year. Despite the drop, Hong Kong retained the No.1 spot for a second consecutive year.

PwC is also positive about IPOs in the A-shares markets in Shanghai and Shenzhen. It expects the two bourses to raise a combined 220 billion to 250 billion yuan in 2017, up 51 per cent to 66 per cent from HK$167.8 billion last year, which was low because China had suspended IPOs for some months.

India

Financial authority issues regulation on fintech lending (The Jakarta Post), Rated: AAA

The Financial Services Authority (OJK) has finally issued a regulation on financial technology (Fintech) firms that run peer-to-peer (P2P) lending businesses.

The regulation, POJK No. 77/2016, requires a fintech company to have Rp 1 billion (US$74,239) capital when it registers its business with the OJK and for this to rise to Rp 2.5 billion when it applies for a business license.

The figures are lower than the respective Rp 2 billion and Rp 5 billion stated in the draft regulation.

The regulation also does not strictly regulate maximum interest rates on loans. It only states that a fintech firm can advise its investors and customers of an interest rate by “taking into account fairness and national economic development”.

Asia

UAE Tech Duo’s ‘Bridg’ Offers Bluetooth Route To Smarter Mobile Payments (Forbes), Rated: AAA

Pursuing a little off the beaten path, Moussa Beidas and Nadim Jarudi, co-founders of Bridg, have created an app that allows smartphone-to-smartphone payments using bluetooth, and only requires one of the devices to be online.

Surprisingly, the UAE has the highest per capita mobile phone penetration (estimated at 80.6 % of the population) but many in lower income bracket don’t use the device for mobile payments.

For customers, the app operates like a wallet, with all the expendable cash in their smartphones. Money is transferred into the Bridg app from a traditional savings or checking account. The money is then transferred via bluetooth to a participating vendor.

Bridg uses tokenization, a process where sensitive data elements are replaced with a non-sensitive equivalent.

Authors:

George Popescu
Allen Taylor

Profiles of the Leading FinTech Startups in UAE

UAE FinTech

According to International Finance Corporation (IFC), P2P lending in the Middle East and North Africa (MENA) cropped up when the credit gap for SMEs reached to USD $260 billion. While P2P lending is prevalent in the UK and U.S., it is a relatively new concept in United Arab Emirates (UAE). Even though UAE has a […]

UAE FinTech

According to International Finance Corporation (IFC), P2P lending in the Middle East and North Africa (MENA) cropped up when the credit gap for SMEs reached to USD $260 billion. While P2P lending is prevalent in the UK and U.S., it is a relatively new concept in United Arab Emirates (UAE). Even though UAE has a healthy SME sector (about 3 million SMEs account for 60 percent of GDP), they still suffer from lack of funding options as banks reject 50 percent to 70 percent of SME loan applications.

Global FinTech Investments grew from $15.3 billion to $78.6 billion between 2010 and 2015. Though the U.S. and UK have been at the forefront of the revolution, the UAE government has been supportive of the industry with an eye on the untapped MENA market. UAE has set up a regulatory laboratory (RegLab) to help firms deploy new technologies in the financial services industry and to accelerate the entry of FinTech players in the region.

With more than 80 percent of the population unbanked and more than 5 million small and medium enterprises (SMEs) that do not accept online payment, the Middle East has the potential to become a major FinTech hub. UAE is building its FinTech ecosystem while working toward enhancing its FinTech base by encouraging stakeholders to support innovation. By analyzing and replicating proven ideas in FinTech innovation in the U.S. and Europe, UAE is set to make far-reaching changes in the way financial services are provided in the region.

Profiling Leading FinTech Startups in UAE
Beehive is UAE’s first peer-to-peer lending platform that seeks to fill the critical funding gap between SMEs and traditional institutions. Beehive was founded by Craig Moore, who previously worked at Dell, EMC and HSBC, He also co-founded Butterfly Software, a data analytics company acquired in 2012 by IBM. Beehive connects investors with creditworthy businesses to build mutually beneficial partnerships for the growth in the SME sector. Since its inception in 2014, it has funded about 50 UAE-based firms by raising AED $25 million from more than 500 investors through its crowdfunding platform. Beehive has enjoyed considerable success in the short time since its launch, but its biggest achievement was getting Sharia-compliant accreditation from the Shariyah Review Bureau. The platform has managed to connect 32 businesses with USD $4 million Sharia- compliant loans from investors. It has also launched a new invoice finance service for SMEs to manage cash flow by closing the gap between the moment a business issues an invoice and when it receives the actual payment. With this service, businesses will be able to list invoices that are due within 60 to 120 days and receive financing within 24 to 48 hours at rates starting from 0.75 percent per month.

Eureeca has been the pioneer in equity crowdfunding in the region. It was founded by finance execs Chris Thomas and Sam Quawasmi in 2013 and was the first equity crowdfunding platform to get an official license by Dubai Financial Services Authority (DFSA). Eureeca works with the government in the region by using its digital platform to connect SMEs looking for capital expansion with angel investors across borders. It helps investors buy shares in growth-oriented business while providing SMEs access to capital. Eureeca is backed by multiple regulatory authorities that allow it to fund businesses globally. Since its inception, Eureeca platform has raised $735,000 for six companies and has more than 4,000 registered investors on board.

Almost 90 percent of registered businesses in UAE are small and micro enterprises. Despite a strong UAE banking sector, lending to small enterprises accounts for just 3.85 percent. To support the growth of budding micro-entrepreneurs in the region, PiSlice launched its online crowdfunded micro-finance platform. Started by London Business School alumnus Genny Ghanimeh in 2012, it connects high net-worth individuals and companies who want to invest in MENA-based MFIs (Micro Finance Institutes). MFIs use these funds to empower micro-entrepreneurs who do not have access to credit from banking institutions by providing small online loans. PiSlice is a new channel of funding and will not only help MFIs to grow, but will also help to shape the region’s future economy.

Non-Lending, Non-Funding UAE FinTechs

Besides the areas of lending and funding, other FinTech innovators in the UAE include:

Bridg, an innovative smartphone payment platform that processes transactions between two devices even if both devices are not connected to the Internet. Bridg could be a game changer for the FinTech industry as it eliminates the need for Internet/data connections and enables users to pay with Bluetooth-enabled device.

Born in 2015, Democrance makes insurance accessible to the underserved via a mobile application. Considering the market penetration is less than 10 percent, the young startup has a huge runway for capturing market share.

UAE is ranked top in global smartphone penetration. While the majority of its financial transactions are cash-based, 73.8 percent of the population having smartphones. Payfort provides a trusted payment gateway built with the most sophisticated and latest anti-money laundering technology to completely eliminate the risk on both the buyer and seller side of online payments.

BitOasis is all set to find its way into the virtual pockets of consumers by building the foundation for digital payment products using blockchain technology. BitOasis uses advanced Multi-Signature Technology to protect customers from hacking, which adds an additional layer of security to the traditional Bitcoin wallet.

More than 35 percent of UAEs population is younger than 25–the median age is only 30. The country is tech savvy and an oasis of peace and hub for business in a region filled with war and turmoil. This provides the country a unique opportunity to be a leader in the technology segment in general and the FinTech sector in particular. The investment government is making via easing the regulations and creating multiple funding institutions could bear fruit for the economy for a long time to come.

Authors:

Lauren Twardy
Allen Taylor