Friday April 13 2018, Daily News Digest

Friday April 13 2018, Daily News Digest

News Comments Today’s main news: Kabbage to acquire Orchard Platform. Zopa to raise 50M GBP. RateSetter investors wait to file taxes. Shanlin Finance being investigated. Kaleidofin raises $2.8M. Today’s main analysis: Hedge funds depend on public information. Today’s thought-provoking articles: Online lenders adopt the model they disrupted. How Plaid became the happy plumbers. How hedge funds depend on public information. United […]

Friday April 13 2018, Daily News Digest

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United States

United Kingdom

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News Summary

United States

Kabbage to Acquire Startup Backed by Wall Street Titans (Bloomberg) Rated: AAA

Orchard Platform Markets LLC, a provider of lending data and services backed by the former heads of Citigroup Inc. and Morgan Stanley, is set to be acquired by small-business lending platform Kabbage Inc., said people familiar with the deal.

Kabbage plans to use Orchard’s technology, and some of the employees are also expected to move to Kabbage’s New York office, said the people, who asked not to be identified because the plans are private. It’s unclear how much Kabbage will pay, and the transaction could still fall through. Kabbage and Orchard declined to comment.

FUNDS USE PUBLIC INFO TO COMPLEMENT PRIVATE SIGNALS (All About Alpha) Rated: AAA

Alan D. Crane and two colleagues have written a paper on whether and how hedge funds profit from publicly available information, in particular from SEC filings.

To choose the most likely among the other three, the Rice authors looked at so-called “scrapers,” that is, funds whose essentially strategy is the systematic scraping of the SEC website. Scrapers perform best when filings are long and complex. A long and complicated filing will likely contain important information in the details – information that only a scraper is likely to find.

Source: Do Hedge Funds Profit from Public Information?

Read the full report here.

See where Cincinnati ranks for fraud alerts (Cincinnati Business Courier) Rated: A

The bad news is Cincinnati made the list of 50 U.S. cities, according to Charlotte, N.C.-based LendingTree. The good news is the Queen City finished near the bottom of the list, tied for 45th place with Kansas City, Mo.

See where Denver ranks for fraud alerts (Denver Business Journal) Rated: A

The bad news is that Denver made the list of 50 U.S. cities, according to Charlotte, N.C.-based LendingTree. Among LendingTree users in Denver, 6.2 percent have fraud alerts on their credit reports.

Online lenders adopt the model they sought to disrupt (American Banker) Rated: AAA

This week, at the online lenders’ largest annual conference, much of the talk was about building something closer to a full-service bank, albeit one designed for the digital age.

“If the only thing you’re doing is lending money online, it’s going to go the way of the dinosaur,” said Rob Frohwein, the CEO of Kabbage, which started in loans but has added more products for its small-business customers. “Our objective is to sit at the financial nerve center of small businesses.”

Source: American Banker

MoneyLion, a New York-based online lender that focuses on consumers who lack a financial safety net, announced plans to start offering deposit accounts.

Payday Lenders Sue the CFPB Over Consumer Protection Rule (LendEDU) Rated: A

Community Financial Services Association of America (CFSA), the main trade association for payday lenders, filed the lawsuit on April 9 in the U.S. District Court for the Western District of Texas, according to The Washington Post.

At issue is a CFPB rule, effective in August 2019, that could alter the way payday lenders do business. Lenders will be required to verify if borrowers can afford their requested debt prior to receiving money, and the number of times borrowers can take out consecutive loans will be capped.

How Plaid Became Fintech’s Happy Plumbers — And Built A Business Approaching $ 1 Billion (Forbes) Rated: AAA

Plaid software acts as a kind of plumbing, connecting apps to each new user’s bank to quickly confirm an account holder, without any penny deposits or paperwork.

PLAID HOOKS INTO around 10,000 banks. Its internal fortunes have improved, with $59 million in funding from investors such as Spark Capital, NEA and the venture arms of Citi and American Express. In 2016, its $44 million Goldman-led Series B valued the company at $250 million. Today, with sales quadrupled, the company has recently received funding interest valuing the company at $1 billion, according to a source with knowledge of its finances.

Look under the hood at startups like Acorns, Betterment, Coinbase and Clarity Money, and you’ll find Plaid humming away. Developers love Plaid’s fast tech; founders and their investors like saving money by not having to build their own connections. “We built this for ourselves,” Hockey says, “solving problems that were incredibly hard to do.”

Plaid’s own public status page reveals connections to banks with uptime of 98% or even 95%—meaning that 5 out of every 100 authentications with that bank will fail in that moment, a rate that would be unacceptable were it not for the difficulties imposed by the banks.

Fly now, pay later: Are travel loans a good deal? (WTOP) Rated: A

Travel lenders say they appeal to people with average credit scores who may not qualify for travel reward cards that require excellent credit. The loans also can make sense for people who are building credit and prefer the discipline of fixed payments over credit cards’ revolving payments.

White Oak Partners with C2FO on New Venture (Nasdaq GlobeNewswire) Rated: B

White Oak Global Advisors, LLC on behalf of its institutional clients (collectively “White Oak” or the “Company”), announced today that it has partnered with C2FO, the world’s largest market for working capital, to offer new and innovative receivable financing options to C2FO’s extensive network of businesses throughout the U.S.

With the White Oak partnership, C2FO can provide businesses access to additional funding options when early payment is not available from out-of-network customers.

Premium Title Expands National Footprint by Securing Escrow Licensing in Four New States (Altisource) Rated: B

Premium Title, a national provider of title and escrow services, today announced it has secured escrow licensing in Idaho, New Mexico, Oregon and Washington. This additional licensing expands the business’ footprint and allows Premium Title to now provide clients with direct title/settlement services in 45 states plus Washington, D.C.

 

United Kingdom

Zopa is Raising £50 Million, Shuffles Board as it Preps for Bank Launch (Crowdfund Insider) Rated: AAA

The grande dame of peer to peer lending in the UK, Zopa, is raising £50 million at a valuation of £400 million, according to several reports.  SkyNews states this most recent funding round will be led by current investors including Wadhawan Global Capital out of India. The report does not preclude new money joining the round.  Zopa raised £32 million last summer to help fuel its transition into the next generation digital bank. A forthcoming initial public offering is said to be in the queue as well.

The company also revealed a restructuring of boards. The bank and the online lending vertical will now have separate boards to help guide strategy.

Christine Farnish, the founding Chairperson of the UK P2PFA, will become the Chair of Zopa’s peer to peer lending board. Farnish is widely respected within the global P2P industry as well as with public officials and thus represents a significant addition to Zopa’s leadership.

On the banking side, former Standard Chartered executive Richard Goulding, Paul Cutter of  Paddy Power Betfair and former Tandem CEO Peter Herbert will be joining the board. Herbert will reportedly become Zopa Bank board chair.

RateSetter investors facing wait to file tax returns early (Peer2Peer Finance News) Rated: AAA

RATESETTER investors looking to file their tax return early have been stifled by the platform removing its tax statement functionality for enhancements.

The deadline for paper tax returns is at the end of October this year or it can be done online by 31 January 2019, but some may want to file at the start of the tax year in April if they are owed a tax refund.

 

LendInvest Syncs with IRESS & Twenty7Tec: Bringing BTL Loans to Wider Market (Crowdfund Insider) Rated: A

LendInvest, the specialist property finance lender, has partnered with mortgage sourcing partners Twenty7Tec and IRESS’s TriGold system to bring its Buy-to-Let product to more intermediaries. These sourcing systems now bring LendInvest BTL loans to the market in a faster, more efficient way to reach a wider range of customers.

Landbay Surpasses £1.4 Million Through Latest Seedrs Campaign & Announces Funding Round Closing Date (Crowdfund Insider) Rated: A

UK-based peer-to-peer lender Landbay announced on Thursday it is set to close its latest equity crowdfunding round on Seedrs next Tuesday (April 17th). The campaign quickly secured its initial £1.25 million and has successfully raised more than £1.4 million thanks to over 250 investors.

Landbay reported that more than 25% of mortgages on its platform have been originated in the last three months. The lender has had no defaults and no losses to date.

JustUs launches investment opportunity with Mersten (Manchester Business News) Rated: B

JustUs has partnered with property developer, Mersten, to launch the Innovative Finance ISA (IFISA) investment.

Initial funds will be used to renovate and develop a property in south-west London, which will help house residents with learning disabilities and those that require 24/7 care.

Founder Gandesha steps down as chief executive at Property Partner (Property Week) Rated: B

Real estate crowdfunding platform Property Partner has announced RFIB Group chief executive Marshall King as its new top man replacing outgoing chief executive and founder Dan Gandesha.

Gandesha founded the crowdfunding platform in 2015 and overseen year-on-year revenue growth of more than 100% since then as chief executive. He will remain in the company as a member of the board but has stepped down from the top position ahead of plans to relocate to Ireland with his family at the end of the month.

REITs still offer a huge opportunity for the sector (Inside Housing) Rated: A

Combined with the greater flexibility enjoyed by private investors since the pensions freedom reforms of 2015, this has spawned the rapid growth of a new investment class known as “alternative income”.

Although these funds are structured as equity, investors are looking for something which is more akin to a fixed income product, ie stable sources of income (dividend yields are usually 5% or more and sometimes index linked) backed by secure revenues from real assets or other receivables.

More recently another REIT called Fundamentum launched a £150m fundraising in spite of recent sharp falls in the share prices of two social housing REITs.

How to master investment portfolio diversification in 2018 (IG) Rated: B

1. Invest via funds

Funds offer instant diversification, by spreading your investment across a range of stocks and shares which are all linked by a common theme. If you have an interest in one particular sector or geography, a dedicated investment fund is a great way to introduce your money to new areas without taking on too much risk.

2. Create a balanced portfolio

Traditionally, a ‘balanced’ portfolio refers to a portfolio which is largely split between equitiesand bonds, with a small amount of money held in cash.

3. Review your portfolio regularly

As your portfolio matures, you will find that your risk appetite or investment goals change significantly.

China

Private P2P Lender Shanlin Finance Under Investigation (Capital Watch) Rated: AAA

On April 10, Shanghai-based peer-to-peer lending company Shanlin Finance, which reportedly has over $2 billion in assets under management, was shut down by Shanghai authorites. On the same day, investors reported difficulities withdrawing money from Shanlin’s homepage, and the Shanlin Fortune App, which officially launched on May 10, 2016, could no longer be opened.

On that evening, reporters from a website, ndb.com, went to Shanlin’s headquarter in Shanghai and found the office area was still brightly lit, and a display screen in its lobby was still playing Shanlin Finance’s promotional videos. However, there were no employees working in the office, except several security personnel, and at least five workers were using carts to carry a number of packed carton boxes to a truck parked outside the building.

India

Indian fintech Kaleidofin raises $ 2.8 million for services to unbanked (Impact Alpha) Rated: AAA

About 200 million households in India have no access to formal banking, insurance and investment services. Chennai-based Kaleidofin uses algorithms to tailor financial services to the needs of the unbanked. Investors includes Omidyar Network, Blume Ventures and individual investors.

Asia

PublicInvest maintains outperform on N2N Connect (The Star) Rated: A

PublicInvest Research said it is favourable on N2N Connect Bhd‘s prospects and maintained its outperform call on the stock while awaiting more details on its latest stake acquisition plan.

N2N had announced that it plans to acquire 28% interest in Australian-based OurMoneyMarket Holdings Pty Ltd for A$2.8mil cash.

Authors:

George Popescu
Allen Taylor

Wednesday February 28 2018, Daily News Digest

marketplace lending investment

News Comments Today’s main news: Virgin Money to launch a challenger bank. Equifax partners with Entersekt on digital ID authentication. 1st loan originator in UK joins Mintos. Citi drops $75M into Pagaya. IOU Financial extends Midcap credit facility. Today’s main analysis: Global fintech VC investment sets new record. Global marketplace lending investment in 2017. Today’s thought-provoking articles: Goldman Sachs’ plan […]

marketplace lending investment

News Comments

United States

United Kingdom

European Union

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United States

 

Goldman Sachs, Adviser to the Elite, Wants to Be Your Local Bank (WSJ), Rated: AAA

In a glass-walled tower in Utah’s capital, hundreds of Goldman employees are building what amounts to one of the world’s most ambitious consumer-finance startups.

Their address, 111 Main St., stands as a symbol of the changes afoot inside the firm, better known as an elite adviser to big companies and billionaires. Struggling to make money in the postcrisis world, Goldman is pushing into businesses it once dismissed as pedestrian and gimmicky, assembling a suite of banking products for the middle class it hopes will power growth.

Goldman 18 months ago began making online loans of a few thousand dollars under the brand Marcus, named after founder Marcus Goldman. Individuals once needed $10 million to get the attention of Goldman’s elite private bankers. Today, customers can open a Marcus savings account with as little as $1.

 

Where’s the best place to open a small business? (The Sacramento Bee), Rated: A

LendingTree said Sacramento ascended to the top of the list in a study that included data from more 80,000 queries submitted by new small business owners seeking loan offers through LendingTree’s small business loan marketplace to determine where businesses tend to do the best.

Sacramento was one of three California cities on the 10-best list, joining Fresno at ninth and Los Angeles at 10th. Following Sacramento on the list were Grand Rapids, Mich; Portland, Ore.; Knoxville, Tenn.; Denver; Seattle; Tulsa, Okla; Albuquerque, N.M.; Fresno; Los Angeles; and Oklahoma City, respectively. Los Angeles and Oklahoma City tied for 10th.

Cincinnati topped the list of the 10 worst cities to start a new small business. No California cities were on the 10-worst list.

Fiserv Consumer Survey Finds Digital Experiences Factor in Life’s Most Important Financial Decisions (BusinessWire), Rated: AAA

For instance, four of the top five loan payment methods are now electronic, and 21 percent of millennial investors use a robo-advisor service to make investments.

Affluent Consumers and Financial Advice
Human interactions remain an important part of financial advice, especially for the 34 percent of consumers with at least $100,000 in household investable assets. Fifty-eight percent of these affluent consumers work with a financial advisor. Among those without an advisor, only 11 percent report high interest (8-10 on a scale of 0-10) in using one. At the same time, 32 percent of affluent consumers who invest their own money grade their knowledge and expertise as a “C” or lower, suggesting an opportunity to bridge the gap with a hybrid of human and digital advice.

Among all consumers who invest on their own, only 8 percent use a robo-advisor service. However, use of such a service is much more likely among millennials (21 percent) and urban consumers (18 percent).

Rates, Fees and Service Prevail
Topping the list of selection factors among those with at least one loan are interest rates (83 percent) and low fees/service charges (83 percent), followed by customer service (75 percent), company reputation (70 percent), and knowledge of staff (65 percent). Sixty-five percent of consumers say prior experience with a lender is important.

Many consumers expressed willingness to try new ways of interacting with their lender, if there’s a benefit. For instance, if it makes the loan process faster, more than half of consumers would be willing to use a mobile device to e-sign loan documents (56 percent), take and upload photos of loan documents (54 percent), and verify their identity with a photo (51 percent). Forty-two percent of consumers indicate they would be willing to provide access to their financial information by providing their credentials to other online banking applications, up from 32 percent in 2016.

Digital channels, especially mobile, are now leading ways of communicating with a lender, although context matters based on the interaction. A lender’s mobile app is the preferred way to check when a next loan payment is due (21 percent), check the balance term (20 percent) and request a payoff (17 percent), among consumers who have conducted each of these activities in the past six months. For account questions, consumers significantly favor speaking live with a representative via phone (21 percent) over using an automated voice response system (12 percent), e-chat (11 percent) or the mobile app (11 percent).

As online lending grows up, banks work to strengthen partnerships (Tearsheet), Rated: A

Marketplace lending as an industry is hitting its stride. Some platforms are becoming profitable, some are diversifying, new players are entering the market with new business models and the competition is heating up. But that means banks need to start strengthening ties with their online lending partners.

As more consumer-facing fintech companies are learning, that’s best done by building products that make people’s lives easier.

 

 

Fintech Startups Need Industry Partners to Thrive, Report Says (Bloomberg), Rated: B

More than 75 percent of fintech executives surveyed in a new report said their primary business objective is to collaborate with traditional firms, such as banks and insurance companies. Only 18 percent said the main goal was to compete with the established players.

According to the World FinTech Report 2018 from consulting firm Capgemini and corporate networking website LinkedIn Corp., most of the startups are likely to fail if they don’t build partnerships, despite raising more than $110 billion since 2009. The survey, published Tuesday, was based on the responses of 110 global financial technology firms.

Varo Money is bringing bank fees and financial health into its marketing (Tearsheet), Rated: A

Varo Money has been targeting customers of big banks whose fees they’re tired of having to understand and pay. Despite its appeal to potential customers to switch to Varo, its ads don’t call out specific companies, as some of its peers do.

Coming to your banking app soon: Predictive analytics (Bankrate), Rated: A

Bank of America will let mobile banking customers use its new digital assistant, Erica, in March. Besides helping consumers complete routine tasks like transferring funds, Erica will offer financial advice tailored for each user.

If you have a low balance and you’ve spent a lot of money, Erica might warn that you are in danger of overdrawing your checking account. Or she could share opportunities to save additional money.

Wells Fargo has made providing customers with advanced digital tools a top priority. In February, its 17 million mobile users with consumer deposit accounts found themselves with a new predictive banking feature.

Wells Fargo confirmed that these new mobile capabilities are powered by Personetics, a company providing banking solutions that anticipate what consumers might need in the future. Personetics also powers Royal Bank of Canada’s free automated savings tool, NOMI Find & Save, which gives mobile banking customers customized tips and alerts.

Companies like Saylent are trying to help banks make sense of their data resources by identifying the customers they should focus on. Saylent gives customers tools to target people that are shopping for a car loan or a mortgage. The platform will be used by institutions like BankFirst Financial Services, a community-based institution headquartered in Mississippi.

B of A is latest big bank to announce aggressive branch expansion (American Banker), Rated: A

Bank of America plans to open more than 500 branches over the next four years as part of a large-scale investment in retail banking.

The $2.28 trillion-asset company said in a press release Monday that it will hire more than 5,400 employees as part of the expansion. The Charlotte, N.C., company did not specify where the new branches will be located, nor did it say how much the proposed brick-and-mortar expansion plan would cost.

Don’t write off branch banking yet, says KeyBank Colorado exec (Denver Business Journal), Rated: B

Customers “want to talk to people. They want to be guided,” says Michael Walters.

Fintechs’ charter hopes may lie with new FDIC board (American Banker), Rated: A

Among federal bank regulators, the Office of the Comptroller of the Currency has been the most active on fintech chartering options. But another agency, the Federal Deposit Insurance Corp., may provide crucial guidance for fintechs in the shorter term.

The FDIC still has pending an application by Square for an industrial loan company, a limited-purpose bank typically chartered in Utah that receives deposit insurance.

Can Crowdfunding Mortgage Down Payments Make Homes Affordable? (SavingAdvice), Rated: A

A lot what’s being called crowdfunding is actually more like matching funds or subsidies for down payments. The growth of these options seems to be a sign of the times — so few people can afford to buy homes nowadays that the industry has gotten creative.

Unison Financial (formerly known as Rex Home Buyer) offers down payment subsidies in exchange for equity stakes in the home. The program requires that the home buyer put up a down payment of at least 10%.

HomeFundMe provides incentives for individuals to seek out grants that are actually matching funds on down payments. Although the match ratio is impressive, two-to-one, the total grant limited to $2,500 — do the math and you see that the buyer would need to come up with another $5,000 at that maximum amount.

With most residential mortgage lenders requiring minimum down payments of at least 5%, that limits the buyer to homes worth no more than $150,000. That’s well below the average home price in the U.S. — and even beneath affordable housing program prices in many cities.

HOW INVESTING IN CROWDFUNDED REAL ESTATE IMPACTS YOUR TAXES (The College Investor), Rated: A

There are two types of investors in a crowdfunded real estate investment: Accredited and non accredited.

An accredited investor has more opportunities to invest than a non accredited investor but they also bear more risks. SEC Rule 501 of Regulation D defines accredited investor.

These investors have an annual income of least $200,000 for the previous two years and a net worth of more than $1 million.

Non accredited investors buying shares of a fund have the simplest tax impacts.

They receive a 1099-INT from the crowdfunding real estate company they are investing with and are taxed at their ordinary income tax rate.

If the investor is invested in multiple funds, their investments can be aggregated into one 1099-INT rather than receiving an individual 1099-INT for each fund.

For investors who are investing in equity investments, things get more complicated. These investors will receive a K1 tax form. A K1 is for income through business partnerships.

PeerStreet Named a Finalist in Top Real Estate Platform Category in the Second Annual LendIt Fintech Industry Awards Competition (BusinessWire), Rated: B

LendIt Fintech recently announced that they have selected PeerStreet as a finalist in the Top Real Estate Platform category for the LendIt Fintech Industry Awards.

PawnGuru pulls in $ 2.5 mln Series A (PE Hub), Rated: A

PawnGuru, an online marketplace connecting pawn shops and consumers, today announces the close of a $2.5 million Series A. With this funding, PawnGuru intends to expand its network of shops within the US, as well as to international markets, giving consumers worldwide the power to buy directly from local pawn shops online.

 

5 Financial Mistakes That Push Striving Startups Into Bankruptcy (Newsmax), Rated: A

  1. Think Big/Start Big Syndrome – You are permitted to think big but start small to have adequate fund to invest in other areas of the business. When you don’t properly handle these areas, your business might join the 90% businesses that never survived after 5 years.
  2. Lack of Financial Mentorship
  3. Inability to Utilize Viable Loan Options – Bank loans, equipment loans, invoices financing, car title loans, peer-to-peer lending networks and more, are avenues small business owners can obtain loans. It’s however pertinent to get information and evaluate the cost implications of taking a loan to finance your business.
  4. Under-utilization of Digital Technology – In terms of advertising, marketing, automation, time management, human resource functions, cloud computing, data management, blockchain technology etc. digital technology has infused speed and efficiency which has resulted in reduced cost to carryout daily business operations.
  5. Poor Recording of Cash Flow

Understanding the International Student Lending Ecosystem in the U.S. (Lend Academy), Rated: A

There are almost 1.2 million international students currently studying in the United States. They hail from countries all over the world with almost a third – more than 360,000 – coming from China and just over 205,000 coming from India. South Korea and Saudi Arabia follow behind dropping down to just over 70,000 and 55,000, respectively. With education costs often approaching six figures and beyond, an international student loan ecosystem has emerged both in the U.S. and abroad to serve the educational funding needs of this demographic.

Navigate your student-loan maze with this Philly-made calculator (Technical.ly), Rated: B

From his home office in Fishtown, Temple University grad Mason Gallik, 23, is hoping his college debt calculator can help others from making bad choices.

“It’s about being realistic about your decisions,” said Gallik, the founder of LoanMajor. “Sometimes it’s smart to look at college from a financial side and not just an emotional one.”

Currently, the company’s source of income is through affiliate links with loan marketplace Credible. For every visitor that LoanMajor leads to Credible, they get a fee. Another source of revenue Gallik hopes to set up is through affiliate links to credit card companies and banks.

United Kingdom

U.K.’s Virgin Money to Launch Digital Challenger Bank (Bank Innovation), Rated: AAA

U.K.-based lender Virgin Money said it will offer current accounts and savings products.

In its earnings call today, Virgin Money said it will begin testing these products later in the year and has already spent £38.3 million ($53.3 million) over the past year developing this digital bank.

Amigo Loans hires JP Morgan and RBC to prepare 500 million pound London IPO (Reuters), Rate: AAA

British subprime lender Amigo Loans is preparing for a stock market float in London that could value the consumer credit firm at more than $700 million.

1PM Joins Online Business Loan Marketplace For Retail Investors Mintos (London South East), Rated: AAA

1pm PLC said Tuesday that it has entered into a cooperation agreement with AS Mintos Marketplace to be a loan originator on its online loan marketplace.

The AIM-listed financial services provider to UK businesses said that it is the first loan originator from the UK to join the Mintos marketplace, which already has about 30 other loan originators globally.

British banks ordered to help people pay off credit card debts (Reuters), Rated: A

Britain’s Financial Conduct Authority ordered banks on Tuesday to take steps to help people with persistent credit card debt to keep up with repayments.

The FCA’s new rules will, however, will still allow banks to ultimately suspend a credit card if a customer fails to make any progress in repaying debts.

European Union

MIFID II aids RoboAdvice (AltFi), Rated: A

Unfortunately, in the current marketplace many opaque structures lead to charges that even a Finance degree can’t help unravel.  But technology is here to help and most of the new Robo-Advisors have simple and transparent fee structures enabling savers to compare different product offerings quickly and easily.

Whilst many in Financial Services have been critical of the growing ‘regulatory burden’ the changes MiFiD II will bring should be net positive for end users and ultimately society. Although legacy providers are likely to see revenues and margins shrink.

International

Equifax is partnering with a digital ID verification company (Business Insider), Rated: AAA

US credit bureau Equifax has formed a partnershipwith South Africa-based Entersekt, a company specializing in customer authentication and device security.

Fintech Pagaya Receives $ 75 Million in Debt Financing from Citi (Crowdfund Insider), Rated: AAA

Pagaya Investments, a Fintech company in the asset management space, has received $75 million in debt financing from Citi. Simultaneously, Pagaya announced the creation of the “Opportunity Fund” to meet growing institutional interest in consumer credit as an asset class.

Global Venture Capital Investment in Fintech Industry Set Record in 2017, Accenture Analysis Finds (BusinessWire), Rated: AAA

Fintech financing rose 18 percent in 2017, to US$27.4 billion, with the value of deals in the U.S. jumping 31 percent, to $11.3 billion. Deal values almost quadrupled in the U.K., to US$3.4 billion, and soared nearly fivefold in India, to US$2.4 billion. The number of fintech deals also rose sharply, from just over 1,800 in 2016 to nearly 2,700 in 2017, underscoring continued appetite from investors scouring the globe for innovation in insurance, banking and capital markets startups.

“Much of the growth, particularly in the U.S. and UK, has been driven by big new investment flows from China, Russia, the Middle East and other emerging economies,” said Julian Skan, senior managing director in Accenture’s Financial Services practice.

“Much of the growth, particularly in the U.S. and UK, has been driven by big new investment flows from China, Russia, the Middle East and other emerging economies,” said Julian Skan, senior managing director in Accenture’s Financial Services practice.

India, US, UK drove global growth

Kabbage Inc, a U.S. online lender for small businesses, alone raised US$900 million in three separate rounds in 2017. Online lender Social Finance Inc, also known as SoFi, raised US$500 million in February, and LendingPoint raised US$500 million from a credit transaction in September. As startups grow and their businesses mature, funding rounds have increased in size, while some companies have opted to use credit facilities to speed up their expansion.

In the U.K., digital insurance distributor BGL Group raised US$900 million, pushing overall fintech investments in the country to an all-time high of US$3.4 billion. Payments venture TransferWise had the second-largest fundraising in the U.K., raising US$280 million.

India’s digital payments startup Paytm received US$1.4 billion in venture capital, helping drive fintech fundraising activity in the country to nearly five times the 2016 levels. The number of fintech deals in India increased 65 percent over 2016.

More deals in China, fewer megadeals

Mega fintech deals that had catapulted China to the top destination in the world for venture capital money in 2016 fell in 2017, as investors pulled back after pouring billions of dollars into giant-sized transactions. Fintech funding in the country declined 72 percent in 2017, to US$2.8 billion, from a record US$10 billion in 2016, when several companies – including Ant Financial and wealth management platform Lufax – had multi-billion-dollar financing rounds. The average deal size in China in 2017 was US$19 million, down from US$186 million in 2016, though the country still had large transactions, such as the US$440 million that real estate broker Homelink raised in April and the US$290 million that online finance firm Tuandai raised in June.

P2P and marketplace lending equity investments recover in 2017 to set new record (AltFi), Rated: AAA

Deals in the sector slowed down in 2016 with a year on year decrease of 12.8 per cent, possibly as a result of Lending Club’s annus horribilis. Total amount invested fell from $8.6bn in 2015 to $7.5bn the next year.

However, investment rebounded in 2017 to reach $8.9bn, a year on year increase of 18.6 per cent. The top ten P2P and marketplace Lending deals in 2017 raised half of the total funding for the year, raising a combined total of $4.4bn. The largest deal in 2017 was the previously mentioned $1.2bn Series B round to Lufax, led by COFCO with co-investment from China Minsheng Bank and Guotai Junan Securities.


Creditcoin Turns Digital Wallets into an Investment Market (Coinspeaker), Rated: A

In response to this, two reputed fintech innovators, Gluwa and Aella Credita have joined forces to launch Creditcoin, an inter-blockchain P2P lending market that operates across distributed ledgers ensuring permanent record of transactions that cannot be alter or tampered with.

Allianz Investment Arm Co-Leads Funding Round in Fintech C2FO (Bloomberg), Rated: B

Financial technology startup C2FO raised $100 million in funding in a new round led by the investing arm of global insurance and asset management giant Allianz SE as well as Abu Dhabi’s Mubadala Investment Co.

MSTS Taps World Fuel VP As Head Of Business Development For APAC (Payment Week), Rated: B

Australia

Fintech business lenders to self-regulate (Financial Review), Rated: AAA

A lack of transparency around fintech borrowing costs for small businesses has prompted the industry committing to adopt a code of conduct and standardised interest rate and fee disclosures.

The fintech sector hopes moves to self-regulate will help start-ups win trust and avoid concerns that helped prompt the royal commission into the banks.

The Australian Small Business and Family Enterprise Ombudsman, FinTech Australia and the Bank Doctor, an SME advocate, will drive start-ups to improve disclosures that will allow small business customers to compare total costs, understand obligations and penalties if payments are missed, and ensure disputes are dealt with quickly and fairly.

India

Extending access to credit: Are alternate finance platforms creating tangible impact? (ET Rise), Rated: A

In its ‘Consultation Paper on Peer to Peer Lending’, the RBI highlighted how these web-based platforms are providing easier access of credit to small entrepreneurs by bringing prospective borrowers and lenders together. With more individuals lending to one another, interest rates for borrowers are going down, even as the increased availability of affordable credit stimulates greater financial activity and drives business growth. As a result, consumer segments such as MSMEs – until now either com ..
Borrowers from tier-2 and tier-3 cities comprised 20% and 17% of the total number of loans disbursed. New-to-credit borrowers comprised 35% of fulfilled borrowers on the platform, while those with poor credit ratings accounted for 10% of the overall number. Most strikingly, an analysis of credit bureau reports revealed how only 2.5% of the borrowers from tier-3 cities who received funds from the platform got any loans from other banks or financial institutions after the Faircent loan, underlining the major credit gap that the online platform is plugging within the economy.
Asia

Equity crowdfunding in Japan poised to grow fivefold this year (Asian Review), Rated: AAA

Crowdfunding campaigns that offer stock in exchange for capital are set to swell this year in Japan as the prospect of high returns draws investors to a relatively new channel for fledgling companies.

Indonesia’s P2P firm UangTeman likely to raise up to m Series B (Deal Street Asia), Rated: A

Indonesian peer-to-peer lending platform UangTeman said it is set to raise a Series B financing round by mid-2018, claiming it would be one of the largest such rounds for a fintech firm in Southeast Asia.

Canada

IOU Financial Extends Credit Facility with Midcap Financial (Cision), Rated: AAA

IOU FINANCIAL INC. (“IOU” or “the Company”) (TSXV: IOU), online lender to small businesses (IOUFinancial.com), announced today that it has modified and extended its secured credit facility (the “Credit Facility”) with MidCap Financial, (“Midcap”) until December 31, 2020. The amount of the Credit Facility is USD $20 million, with a term portion equal to USD $15 million and a revolver amount of USD $5 million.

IOU and Midcap have further agreed to allocate USD $1 million from the Credit Facility amount of USD $20 million, to support Canadian loan originations. This will be formalized in a separate amendment to this facility.

Authors:

George Popescu
Allen Taylor

Wednesday September 14th 2016, Daily News Digest

Wednesday September 14th 2016, Daily News Digest

News Comments Today’s main news : Sharestates hits $1.3bil in funding capacity; MeasureOne raised $2.3 mil for student loan analytics ; Indian p2p market is growing at 30-35% per month, examples, and data; Fitch claims the Chinese structure finance market is heating up. Today’s main analysis : Moody’s SME securitization challenges ; US SME loans are […]

Wednesday September 14th 2016, Daily News Digest

News Comments

United States

Israel

China

India

 

United States

Moody’s: US small business marketplace lending securitizations encounter four key risks, (Moody’s ), Rated: AAA

The report can be found here.

In a new report, Moody’s Investors Service examines several credit risks in securitizations backed by loans to small businesses which are originated by US marketplace lenders (MPLs) that focus on lending to businesses with less than $10 million in revenues. These key risks have been recent topics of discussion and debate among sector participants. As small business MPLs originate more loans, they are likely to continue to turn to asset-backed securities (ABS) to fund their loans.

1. As a result of the short history of MPLs, the lenders often have not calibrated their proprietary credit models for a long enough period of credit history, such as a full credit cycle, to be considered dependable.

2. Lack of alignment of interest between the MPL and securitization investors could pose risks to the securitizations.

3. Moody’s says the regulatory environment with regards to small business marketplace lending is relatively new and susceptible to change.”If MPLs are negatively affected by regulatory scrutiny or changes, a weakening of their financial strength could damage their securitizations in a scenario in which that outcome leads to servicing disruptions or leaves MPLs unable to honor obligations to repurchase ineligible loans from the transactions under their representations and warranties, among other potential risks,”

4. The ability of small business MPLs to carry out servicing responsibilities through a credit downturn is a risk in small business marketplace lending transactions because MPLs have short operating histories and may be financially vulnerable in a credit downturn if loan origination volumes deteriorate significantly.

Comptroller Discusses Marketplace Lending, (OCC.gov), Rated: AAA

The speach can be found here.

I’ve been fortunate to oversee financial services, banks, and savings associations of all shapes and sizes for more than 30 years, at the federal and state levels.

Marketplace lending may use new technology or techniques, but it’s still about extending credit to borrowers—something that’s been done for more than 3,000 years. As entrepreneurs, you recognized an opportunity to deliver greater value by improving how credit is provided, making it faster, cheaper, and more convenient.

The rapid growth in marketplace lending over the past few years suggests that, as a group, you are on to something. The surging demand for this type of service has gotten investors’ attention. Whole loan sales to institutional investors have been increasing as a source of cost-effective funding, and asset-backed securities have provided an additional source of funding. In 2015, institutions originated about $6.6 billion in securities backed by marketplace loans—that’s three-fourths of the $8.2 billion in such securities originated to date.2 Maintaining strong, stable funding sources is critical to sustaining the sort of growth we’ve seen in marketplace lending.

However, the growth that we’ve witnessed has occurred under relatively positive conditions.

Long-term performance is just one thing to watch. The expansion of marketplace lending raises four other important policy and regulatory questions.

First, do new techniques, technologies, and products raise concerns about compliance with existing laws and regulations? Let’s take the example of the new algorithms for determining the creditworthiness of a consumer. While they have the potential to make credit available to more people who may not have otherwise qualified, do they raise issues of illegal bias? Does an underwriting model create a disparate impact on a particular protected class? New companies and companies deploying new technology should understand and ensure their products and services comply with existing laws, such as the Equal Credit Opportunity Act, that apply to all creditors—even those that are not banks. Lenders who operate without considering these questions may be accruing underappreciated financial risks and reputational liabilities.

Second, are existing laws and regulations adequate? I understand that earlier today, you heard from Congressman McHenry, who has been a real thought leader on these issues, about his views on the adequacy of the current statutory framework.

Third, do innovative activities, products, or services present a need for entirely new regulation or law to protect the public’s interest or prevent risk to the broader financial system?

The fourth type of policy question regarding innovation involves answering should innovation be regulated and, if so, “who” should be responsible for regulating an organization or activity. To some extent, the conversation about whether there should be a national substantive law or a federal license or charter for marketplace lenders and fintech firms is part of answering the question of “who” should regulate the activity.

We have heard voices on both sides of whether to grant federal banking charters to fintechs. Some have suggested that federal charters could ensure that fintechs engaging in banking activity receive rigorous, bank-like federal regulation and ongoing supervision. This may also provide a more level playing field for financial services offered on a national scale. Others have suggested that federal charters could help fintechs better navigate the existing regulatory landscape by consolidating oversight, reducing licensing burden, and applying a single uniform set of rules

On the other side, some have expressed concerns that, if granted a limited charter, companies might face lighter supervision or fewer consumer protections would apply. Others expressed concern that fintechs may seek federal charters to avoid consumer protections granted by state laws. The agency faced similar questions when it granted the first charter for Internet based banks in the late 1990s.

If we at the OCC do decide to grant limited-purpose charters in this area, the institutions who receive the charters will be held to the same strict standards of safety, soundness, and fairness that other federally chartered institutions must meet.

These four types of policy questions are among the many that our Innovation Framework Development Team is considering in their work to create a framework to enable the OCC to assess responsible innovation.

One. The framework will support responsible innovation.

Two. The framework will foster a culture within the OCC that is receptive.

U.S. bank overseer plans report on marketplace lending this fall, (Reuters), Rated: A

The U.S. Comptroller of the Currency said on Tuesday his agency plans to complete this autumn a framework to regulate marketplace lending, citing concerns that new financial-technology innovations may pose risks to consumers and the banking system.

Sharestates Hits the $ 1.3 Billion Mark in Funding Capacity, (PR Newswire), Rated: AAA

New York based Sharestates, one of the US online real estate crowdfunding platforms, announced today that it has surpassed $1 billion in committed capital for the purchase of loans.

Sharestates launched its full operation less than two years ago in February of 2015. Since then, the firm has originated over $150 million in loans across more than 210 projects, with an average loan size of approximately $728,000. To date, Sharestates has returned over $50 million to investors with an average return rate of 11.36% for 2016, with zero loss of principal. Sharestates’ current trajectory has it on a $25-$30 million month to month origination volume, leading it to break over $200 million in originations by years end.

This new round of financing comes a few months after Sharestates received $300 million in loan purchase commitments, driven by collaborations with Prime Meridian Capital Management and Colony American Finance.

To compete in the market, Sharestates leverages proprietary technology and a close partnership with The Atlantis Organization, which – founded by Radni Davoodi and Raymond Y. Davoodi in 2004  – has become one of the nation’s leading title agencies with over $4 billion in closed transactions.

Finding Cheap Loans Is Getting Harder For Small Businesses Around the World, (Bloomberg), Rated: AAA

Only 48 percent of small- and medium-sized businesses said they can get financing at rates below 8 percent, according to a new survey from C2FO, a financial technology startup that has created a marketplace where small- and medium-sized businesses can get paid early by the large companies they supply. The inaugural such survey, released last year, showed nearly 60 percent of respondents were able to secure funding at rates below 8 percent.

C2FO canvassed more than 1,800 small- and medium-sized businesses (SMEs) in the U.S., U.K., Germany, France, and Italy, with 80 percent of those firms having $2 million or less in gross annual revenue. It found borrowing was priciest in the U.K. and the U.S. with 42 percent and 47 percent of SMEs borrowing at a rate of below 8 percent, respectively. That compares with 52 of respondents in France, 51 percent in Germany, and 58 percent in Italy.

An apparent higher cost of capital has caused some of these firms to look at other sources, such as peer-to-peer, or marketplace, lending that involves directly matching would-be borrowers with lenders. On average, 18 percent of respondents in each country reported using peer-to-peer lending at some point.

More expensive credit in the U.S. stands somewhat at odds with the most recent survey from the National Federation for Independent Business (NFIB), which showed just 3 percent of small business owners reporting in July that their borrowing needs were not satisfied — 1 percentage point above the record low reached in September of last year. Still, the NFIB small business optimism survey has been sputtering with sentiment making little to no improvement over the last year, falling 0.2 point in August to a three-month low of 94.4.

“Uncertainty is high, expectations for better business conditions are low, and future business investments look weak,” NFIB Chief Economist Bill Dunkelberg said in a statement. “Our data indicates that there is little hope for a surge in the small business sector anytime soon.”

MeasureOne – Higher Education and Student Loan Analytics Firm – Provides Improved Insights into Student Loan Repayment and Risk, (PR Newswire), Rated: A

MeasureOne, a higher education data and analytics firm focused on the $1.4 trillion-dollar student loan market, today announced $2.3 million Seed financing led by Socratic Ventures along with Colchis Capital and University Ventures. The investment will allow MeasureOne to expand its rich data repository and analytics capabilities to help higher education institutions and lenders invest in talent, with better insights into student risk and potential.

MeasureOne specializes in data-driven insight for the higher education finance industry, and its most recent report on private student lending shows that families are effectively managing their private student loans.

MeasureOne, founded in San Francisco with offices in Dallas, TX and Ahmedabad, India. MeasureOne is applying data science and industry expertise in order to increase understanding of student loans and empower student loan lending, risk assessment, repayment, capital market investments and public policy development.

Wall Street’s Insatiable Lust: Data, Data, Data, (Wall Street Journal), Rated: AAA

A new species is prowling America’s most obscure industry conferences: the data hunter.

In one recent example, Mr. Haines discovered a mobile advertising company that also collected data on the type of device someone was using when displaying an ad to them. The data helped estimate iPhone sales ahead of Apple Inc.’s announcements in 2011 and 2012, and it was lucrative for Mr. Haines’s old company, Quanton Data.

Erik Haines, head of data and analytics at New York-based Guidepoint Global LLC, trawls the globe for meaningful data to sell to hedge-fund clients.

Hedge funds and other sophisticated investors are increasingly relying on intermediaries like Mr. Haines, 35 years old, as they seek insights into a company’s sales and health that aren’t readily available from conventional sources.

Gone are the days when a hedge fund would call up a random sampling of Aéropostale stores to ask managers about sales or simply visit big-box retailers to get a feel for the traffic.

The firm struck a deal with a large insurance company to find out every day what kinds of cars received insurance policies, a possible indicator of how sales are going for automobile manufacturers. Another deal is with a company that surveys construction permits across county municipal offices, which is a “proxy for construction activity,” he said.

There are also companies set up to create exhaust. In those cases, often a person’s data is the price of a free phone application or service. For example, app provider Slice Technologies Inc. lets users track the arrival of packages to their homes in its signature Slice app or block spam through another service it owns called Unroll.me without charge. But in exchange for those services, about four million users allow the company to read their emails.  Slice, in turn, also analyzes receipts and other data in a person’s email which it packages into anonymized data for advertisers and hedge funds. It might showAmazon.com Inc. selling more of a particularly profitable item or an increase in Netflixsubscriptions, which investors can use as a factor in their trades.

Steve Schwarzman, Blackstone CEO, interview analysis, (Termsheet, Email), Rated: AAA

Dan Primack in Termsheet reports:

“Blackstone boss Steve Schwarzman was interviewed at a CNBC conference yesterday by Becky Quick, and said four things of particular interest: (1) He believes much of the hedge fund industry will deviate from 2/20 due to performance troubles; (2) When asked what Blackstone’s stock price drop over the past year is a reflection of, he replied: “That’s a reflection that investors are wrong.” (3) The Fed will eventually raise rates (in part because the media is “daring” it to do so), but he believes the only real impact will be on financial markets, not on the real economy. (4) He declined to endorse either presidential candidate, and also seemed to accept the idea of changing the tax treatment of carried interest, as part of a more comprehensive tax reform package.”

Lending Club names former WaMu exec as its new finance chief, as bid to reassure investors continues. (San Francisco Business Times), Rated: A

Comment: We covered these news yesterday. More information today.

Thomas Casey will start his term at Lending Club Sept. 19. He was the finance head at WaMu prior to its sale to J.P. Morgan Chase & Co. in 2008 and was most recently finance chief for Acelity LP Inc.

In mid-July, Lending Club appointed BlackRock Inc. veteran Patrick Dunne as its new chief capital officer, as the company continues to struggle to restore investor confidence after forcing out its former CEO amid a lending scandal. Dunne is well known in Bay Area finance circles, having formerly headed BlackRock’s S.F. office.

P2P lenders not like having money with a bank, (Bendigo Advertisers), Rated: B

A new wave of online marketplaces is offering savers, investors and those running their own super funds much higher interest rates on their cash than they can get from banks.

All use “risk-based pricing”, where borrowers with the best credit scores pay lower rates of interest than those with poorer creditworthiness.

With a bank, everyone who wants a car loan who is considered a good risk pays the same interest rate.

With P2P lenders, the investors say how much money they want to invest, the term and the interest rate they want to receive. Then it is an auction process to match-up lenders with borrowers. [Comment: To my knowledge there are very few P2P lenders who still do reverse auction if any at all ].

While P2P lenders could be a good option as part of a well-diversified portfolio, they are not like having your money with a bank. [Comment: It is in the entire industry’s interest to make sure retail investors have a realistic expectation of risk vs reward of what they are getting into. Unhappy retail investors who have the impression that fraud was committed usually attracts draconian regulation. ]

Israel

A new fintech coworking space finds big bank partners, (Tradestreaming), Rated: AAA

For banks, just keeping up with customer expectations forces them to run at breakneck speed. To do this, some institutions run hackathons or add bean bags and an open space floor plan.

A new model developed by Israeli fintech hub, The Floor, solves this problem. Four of the world’s largest banks, HSBC, Santander, RBS and Intesa SanPaolo partnered with the the coworking space, looking for better dealflow. In addition, Accenture, KMPG and Intel are also cooperating with the new program.

The Chinese Pando Group, a $250 million venture firm, is an investor in The Floor and also provides a bridge to the East Asian market, traditionally ignored by Israeli companies.

Citi and Barclays also operate fintech accelerators in Israel, but those are focused on seed stage startups and operate as any other accelerator. The Floor targets companies in growth stage that have already raised at least $1.5 million in equity. “The goal is to get these startups integrated in banks,” explained Cohen.

The banks have a final say in approving companies into the coworking space. “We are a boutique coworking space,” said Moises Cohen, one of The Floor’s founders.

The Floor targets companies in growth stage that have already raised at least $1.5 million in equity. “The goal is to get these startups integrated in banks,” explained Cohen.

The Floor’s management team uses their industry connections to dramatically shorten the time it takes a participating fintech firm to get a pilot with a major bank. In at least one case, the team managed to get a startup integrated with a partner in under 2 months.

The model has attracted 10 companies since the hub was founded early this year. The Floor plans to expand that number to 25, or 5% of the fintech firms located in Israel. The new coworking space opened in August in the Tel Aviv Stock Exchange building. Before that, the companies worked in their own spaces. One company relocated from Russia to join The Floor.

China

Fitch: Chinese Structured Finance Market Continues to Expand, (Reuters), Rated: AAA

China’s structured finance market will continue expanding in both scope and scale, with increased asset-class diversification.

A total of CNY193.4bn (USD29.8bn) of Chinese structured finance transactions were issued in 2Q16, representing a 96% yoy increase. The increase was principally driven by 242% growth in the Asset-Backed Specific Plan scheme, which is regulated by the China Securities Regulatory Commission.

Issuance under the Credit Asset Securitization (CAS) scheme, which is regulated by the People’s Bank of China and China Banking Regulatory Commission and is the leading structured finance market by size, increased 43% yoy. The increase was predominately due to residential mortgage-backed securities (RMBS) and auto-loan asset-backed securities (ABS) issuances, although limited by a significant fall in collateralised loan obligation issuance. Fitch expects both RMBS and ABS asset-classes to maintain the growth momentum in 2H16.

Highlights for 2H16 include the issuance of three non-performing loan (NPL) ABS and two asset-backed note (ABN) securitisation transactions.

The three NPL ABS deals, originated by Bank of China Ltd. (A/Stable) and China Merchants Bank (BBB/Stable) were pilot transactions, as the regulators have restricted the market during the 2008 global financial crisis.

Fitch expects more NPL ABS to be launched in the near-term, as the government has granted quotas of CNY50bn to six commercial banks to help them deal with rising NPL ratios.

The two ABN securitisation transactions adopted a special purpose trust structure similar to CAS scheme, the first time this asset-class has used this structure since inception in 2012. This type of instrument allows non-financial corporates to issue asset backed notes in China’s interbank bond market.

The opening up of the interbank securitisation market to non-financial corporates leads Fitch to expect a continued flow of ABN issuance, as it provides a deeper investor-base than the stock-exchange bond market

A full copy of the report, China Structured Finance Quarterly – 2Q16, can be found here.

 

India

P2P lending on growth trajectory ahead of RBI guidelines, (Business Standard), Rated: A

While RBI prepares the blueprint to regulate the sector, for some of the pioneers in the field, business is growing at the rate of an average 30-35 per cent on a monthly basis.

Delhi-based Faircent, which started operations around 2014, saw almost more than ten times growth in loan transactions in the last one year, according to Rajat Gandhi, founder and CEO, Faircent. So far, the company has raised close to $3.5 million, with one of the investors being Mohandas Pai, former director at Infosys. On an average, there has been an almost 35-40 per cent growth in monthly business for the company, according to Gandhi. The number of loan requests in the platform too has doubled between April-September 2016, from about 14746 in April to about 29108 in the beginning of September.

Another P2P lending platform, Lendbox, which started operations about ten months back, has already facilitated loans of around Rs 9 crore in its platform. Loan disbursements through the platform has been growing at around 30-32 per cent on a monthly basis, according to Ekmeet Singh, CEO, Lendbox. Further, the company is looking to raise around $3 million from investors.

The industry is expecting RBI to create separate category of NBFCs (non-banking finance company) for P2P lending on the lines of NBFC MFIs (Microfinance Institutions), which in turn is expected to give a strong footing to P2P facilitators.

“Since P2P platforms do not undertake lending themselves, and are mere facilitators, capital requirement of Rs 2 crore, which is at a par with NBFCs, could be too high for most P2P platforms to meet. Hence, we suggested RBI to create a separate category of NBFCs,” according to the founder of a P2P company.

“After came out with draft regulations on P2P lending, there has been an increase in interest in the sector from institutional investors as well as borrowers and lenders. We are in advanced stages of discussions for raising around $3million to fund growth,” said Singh.

Micrograam, a rural-centric P2P firm is looking to raise around Rs 10 crore from investors, said Rangan Vardan, founder, Micrograam. At present, the capital base of the company is close to Rs 2.5 crore. The company has facilitated lending of about Rs 21 crore in the last five years. In 2014, the company had roped in V Balakrishnan, former Chief Financial Officer of Infosys, as its chairman.

Hyderabad-based i-Lend, which started operations around 2013, has been going slow in lending, but is expecting a surge in business and institutional lending after comes out with final guidelines on P2P lending. The company is looking to raise around $1.5-2 million from investors.

“At present, we are growing at a rate of around 15-20 per cent on a monthly basis. We are present in three cities–Hyderabad, Chennai and Chandigarh. We are planning to expand to Bangalore soon. The sector is waiting for guidelines. Once it comes out, institutional investments are likely to increase significantly,” said Shankar Vaddadi, Founder & Director, founder and director, i-lend.

With new RBI norms, P2P lending startups are hoping to attract VCs , (Economic Times), Rated: B

There are about 40 [P2P lending] entities in the country, according to Xeler8, which tracks startup activity in the country. Mohandas Pai, who has backed Faircent, said the Reserve Bank of India’s regulatory guidelines will bring clarity, which will attract more players and intensify competition.

On the other hand, regulation may also lead to many players shutting shop if they’re unable to meet requirements such as maintenance of Rs 2-crore capital and an interest rate cap, which were published in the RBI’s discussion paper in May.

“I know of at least five startups from this space that will have to shut down once the final guidelines are out,” said Sunil Kumar, founder, Bengaluru-based P2P startup Loan-Meet, which has been bootstrapped since it started operations last year.

Author:

George Popescu