Wednesday August 22 2018, Daily News Digest

Elevate Credit

News Comments Today’s main news: Elevate Credit expected to announce $203.49M in sales. Ant Financial delays IPO again. SocietyOne getting close to $500M in total lending, six years in. ClearScore to offer credit scores in India. Capital Float buys Sequoia and Walnut. Today’s main analysis: 10 years after financial crisis, credit market on upward curve. Today’s thought-provoking articles: New […]

Elevate Credit

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News Summary

United States

Brokerages Anticipate Elevate Credit Inc (ELVT) Will Announce Quarterly Sales of $ 203.49 Million (Baseball Daily Digest) Rated: AAA

Equities research analysts forecast that Elevate Credit Inc (NYSE:ELVT) will post $203.49 million in sales for the current fiscal quarter, Zacks reports. Two analysts have issued estimates for Elevate Credit’s earnings, with estimates ranging from $201.00 million to $205.97 million. Elevate Credit reported sales of $172.85 million during the same quarter last year, which indicates a positive year-over-year growth rate of 17.7%. The firm is expected to report its next quarterly earnings report on Monday, October 29th.

According to Zacks, analysts expect that Elevate Credit will report full-year sales of $803.23 million for the current financial year, with estimates ranging from $801.00 million to $805.45 million. For the next financial year, analysts expect that the company will report sales of $927.09 million per share, with estimates ranging from $926.97 million to $927.20 million. Zacks’ sales calculations are a mean average based on a survey of research firms that follow Elevate Credit.

Financial Crisis – 10 Years Later: Consumer Credit Market on an Upward Curve (Nasdaq) Rated: AAA

Ten years after the biggest financial crisis to hit the United States since the Great Depression, much has changed in the consumer credit marketplace. Serious delinquency rates have recovered since that period, and the credit quality of consumers has broadly improved. Yet the crisis has had a profound effect on consumer access to credit and the relationship they have with it.

TransUnion’s (NYSE:TRU) just-released Q2 2018 Industry Insights Report allows for comparisons between Americans’ credit preferences today versus 2008, specifically in the auto finance, credit card, mortgage and unsecured personal loan markets.

Source: TransUnion

Lawmaker Questions FinTech Industry Over Lending Practices (Govtech) Rated:A

Rep. Emanuel Cleaver (D-Mo.) released a report Friday detailing the lending practices of some prominent fintech companies, finding that some companies could be discriminating against minorities and calling for more transparency from the fintech sector.

Fintech companies are somewhat controversial because many engage in traditional banking practices, and some consumers and regulators are calling for them to be regulated like traditional banks.

Small banks need big data to maintain customer service edge (American Banker) Rated: A

Big data isn’t just for big banks.

The modern banking customer wants advanced online and mobile banking options, and delivering such services requires even the smallest community bank to get a handle on customer data, said Corey LeBlanc, chief technology officer and vice president at Origin Bank.

Blockchain Meets REIT – A New Era in Real Estate Investing (Market Insider) Rated: A

Building Block, Inc. announced today it is the first North American REIT (Real Estate Investment Trust) to embrace the emerging efficiencies of blockchain technology and provide a new way to invest in one of the world’s most well-known and trusted assets, real estate.   Blockchain technology will enable Building Block REIT to virtually eliminate friction in REIT shareholder communication by allowing direct dividend disbursement, secure user voting, and smart contract functions that execute automatically when pre-set parameters are met.

Building Block REIT plans to raise funds in the form of a digital initial public offering (Digital IPO) accepting payments via U.S. Dollars or fractional Ethereum cryptocurrency.  Investors worldwide will be able to purchase shares in Building Block REIT on SEC compliant alternative trading systems (ATS) or peer-to-peer exchanges with whitelisted parties to invest in US commercial office, multi-family and mixed-use real estate.

JPMorgan launching Roar platform for crowdsourced data (Business Insider) Rated: A

JPMorgan’s corporate and investment bank is best known for advising businesses on billion-dollar acquisitions, helping private unicorns tap into the public markets, and managing the cash of Fortune 500 companies.

But now it is quietly working on a new platform that would go far beyond anything the firm has previously done, using crowdsourcing to accumulate massive amounts of data intended to one day help its clients make complex decisions about how to run their businesses, according to people familiar with the project.

The platform, called Roar by JPMorgan, would store sensitive private data, such as hospital records or satellite imagery, that’s not in the public domain. Typically, this type of information is exchanged between firms on a bilateral arrangement so it is not improperly used. But Roar would allow clients to tap into this data, which they could then use in a secure fashion to make forecasts and gain business insights.

New Report Shows Identity Verification a Priority for eCommerce and Online Lending Businesses (Global News) Rated: A

A new report from Whitepages Pro shows that an overwhelming majority of North American companies in ecommerce and financial services surveyed consider identity verification to be a top business priority but many still don’t believe they do it well or have all the data and tools they need to be successful. For the report, “The State of Identity Verification Maturity in North America,” businesses were asked, among other things, to rank themselves on a 4-stage scale of identity verification maturity for how they use identity data to combat fraud and improve the customer experience.

Among the report’s key findings:

  • Driven by the belief that fraud attempts are increasing in frequency and sophistication, identity verification is a priority for most organizations (93 percent). While they vary in the degree to which they use advanced techniques, most organizations want to improve their identity verification methods and outcomes. Just 2 percent believe they are completely successful at identity verification.
  • Organizations want access to more data points (just 13 percent say they have all the data they need) and see data linkages (the relationships between data elements) as a way to improve their identity verification processes. While access to traditional data (like a street address) is common, many still don’t have or use digital data (like an IP address). Most of the survey respondents believe linking data reduces fraud with 77 percent believing it increases confidence in a customer’s identity.
  • Organizations want more and improved identity verification automation. However they often rely on in-house (such as historical data and white/black lists) that make it difficult to expand the use of automation, resulting in an over reliance on costly and time consuming manual reviews. A large majority (71 percent) believe machine learning can play a role in reducing manual reviews and making identity verification more effective.

Bank of the West exec bolts for startup, sees chance ‘to redefine retail banking’ (American Banker) Rated: A

Thibault Fulconis, who until recently was chief operating officer of Bank of the West, has joined the fintech digital banking startup Varo Money as its chief financial officer.

Varo Money is a mobile-first challenger bank that aims to help Americans achieve financial health. It is in the same league as Chime, Digit, Moven, MoneyLion, Qapital and N26.

White Oak Healthcare Finance Closes $ 40 Million Financing for LifeCare Holdings, Inc. (Business Wire) Rated: A

White Oak Healthcare Finance, LLC (“White Oak”), today announced it acted as lead lender and administrative agent on the funding of a $40 million asset based senior credit facility for LifeCare Holdings, Inc. (“LifeCare”). The funds were primarily used to refinance existing indebtedness. White Oak previously announced the financing of LifeCare Home Health LLC, the home health entity owned by LifeCare.

TradeStation Launches New Fully Paid Lending Program (GlobeNewswire), Rated: A

TradeStation, a Monex Group company and award-winning online broker-dealer and futures commission merchant, today announced the launch of its Fully Paid Lending Program. This program allows qualified equities account holders the opportunity to earn interest income on lendable securities in their accounts.

Under the Fully Paid Lending Program, TradeStation identifies stocks in qualified accounts that are eligible for lending. Based on market demand, some or all of a qualified client’s fully paid positions or excess-margin securities may be lent out to other financial institutions to satisfy their customers’ position requirements. While their stocks are on loan, clients automatically receive 50% of the net proceeds earned by TradeStation for lending out the shares, which is accrued daily and automatically posted monthly to their accounts. Daily income ceases to accrue when the client sells a lendable stock or the stock is no longer on loan.

US wakes up to SME cybersecurity needs (Fintech Futures) Rated: B

US President Donald Trump has signed the National Institute of Standards and Technology (NIST) Small Business Cybersecurity Act, a bill which will provide a set of resources for small businesses to best protect their digital assets from cybersecurity threats.

United Kingdom

Private credit offers an escape from miserly bond yields (Citywire) Rated: AAA

For reasons that are quite clear if you follow my writings on a regular basis, equities and bonds will most likely deliver disappointing returns for many years to come.

My central forecast is an annual average inflation-adjusted return of 0-2% on a global portfolio consisting of 40% bonds and 60% equities between now and 2050.

The good news next.  Fortunately, there are many things you can do to improve on those lacklustre numbers. Those returns are for the lazy investor; someone who invests passively.

China

Ant Financial IPO plans pushed back again (Financial Times) Rated: AAA

A blockbuster listing of Ant Financial, the fast-growing electronic payment affiliate of China’s leading tech group Alibaba, has again been delayed as it continues to burn through cash and come under pressure from Beijing’s crackdown on non-traditional financial institutions.

Ant was valued at $150bn in its last private fundraising in June, a round that bankers said paved the way for an initial public offering as early as this year.

Moody’s: China’s new measures on P2P lending are credit positive (ECNS) Rated: AAA

The global credit rating agency Moody’s called China’s newly-issued regulations on peer-to-peer lending platforms are “credit positive”, because they will strengthen protections to individual lenders and prevent risk spilling over to the broader financial system.

Moody’s commentary came after Chinese regulators announced 10 measures to address risks related to P2P lending platforms on August 12. The P2P platforms enable individuals to lend directly to borrowers through the Internet.

The new regulations clarified responsibilities of P2P platforms and their shareholders, stipulated conditions for orderly liquidation of failed platforms, outlined penalties for borrowers that escape their debt obligations and prohibited registration of new platforms.

Next Step to Regulating P2P Lending Platforms — Figuring Out Who Owns Them (Caixin Global) Rated: A

Months into the crisis in China’s online lending industry, regulators want to know who actually owns the country’s peer-to-peer (P2P) lending platforms.

The National Internet Finance Association of China (NIFA) issued a notice on Monday designed to help it keep tabs on key stakeholders in China’s online P2P lending platforms as financial and legal difficulties continue to engulf the business.

The effort to bring greater clarity to the workings of P2P platforms comes after hundreds of online platforms have encountered financial and legal troubles in the last few months. In July, at least 165 P2P platforms had difficulties meeting cash-withdrawal demands, saw their owners abscond with investor funds, or were investigated by police, according to a report by internet lending research firm Wangdaizhijia. The number was nearly triple that in June, Wangdaizhijia said.

In-Depth: Police Launch Global Hunt for ‘Solar King’ Caught Up in P2P Bust (Caixin Global) Rated: AAA

Peng Xiaofeng was once China’s youngest billionaire and a rising star in the solar industry. But the founder of now-bankrupt LDK Solar has been put on China’s most-wanted list, hunted by law enforcement agencies for illegal fund-raising by his peer-to-peer (P2P) lending platform Solarbao.com.

Police in the city of Suzhou, where Solarbao.com is registered, want Interpol to issue a Red Notice against 43-year-old Peng, who is accused of swindling more than 5,000 investors and leaving a trail of debt amounting to 220 million yuan ($32.1 million). They have also branded the platform, a subsidiary of Nasdaq-listed SPI Energy Co. Ltd., a fraud.

HuaAn Finds Itself Target of Investor Ire After P2P Company Accused of Fraud (Caixin Global) Rated: A

The Shanghai office of fund manager HuaAn Future Asset Management Co. Ltd.was surrounded on Monday by throngs of angry investors who blame the company for what they perceive to be its role in an online-lending fraud. HuaAn denies any involvement.

Monday’s protest centered on P2P site PPMiao.com, which was accused of illegal fundraising by police in the eastern city of Hangzhou, where PPMiao.com operator Guangxi PPMiao Internet Technology Co. Ltd. is registered. HuaAn held a 37.5% stake on behalf of an asset management plan in PPMiao.com’s former operator, Hangzhou Fuqian Network Technology Co. Ltd., as of June 30, making HuaAn the target of investor ire when PPMiao.com’s financial problems surfaced.

International

Many countries don’t use credit scores like the US — here’s how they determine your worth (Business Insider) Rated: AAA

In the US, a good credit score can feel like a key determinant of success. It defines how good an interest rate you can get on a car loan or mortgage, the quality of credit card you can get approved for, or if you’ll get approved for any credit at all.

The better your score, the better the perks. A bad score can become a black mark that leads to missing out on the home you want (credit checks are a common aspect of apartment applications), higher car insurance rates, or even difficulty getting a cell phone, according to Nerdwallet.

But as monolithic as the credit score seems, many countries in the world handle credit very differently — with many having no credit score system at all.

Blockchain Can Help Peer-To-Peer Car Lending Schemes Gain Traction (Market News) Rated: A

Blockchain technology can help car-sharing companies to track a person using the car any time. According to industry analysts, the car sharing economy is expected to hit $335 billion by the year 2025.

The car sharing idea has been gaining a lot of interest among car drivers over the recent years. According to estimates by Global Market Insight, the peer-to-peer car sharing sector will amount to $11 billion. The growth has largely been attributed to raising cost of owning a car.

The biggest challenge with the Peer-to-peer lending system is trust. The car owner has to have total trust in the person hiring the car. Additionally, the car owner has to be sure that the hirer has enough money to cover the period the car is hired. The owner of the vehicle would also like to track where the car is as well as the condition in which it is being driven. On the side of the hirer, they would love to know if they are hiring the car from the original owner and that the data exchanged between the two parties is secure.

Australia

SocietyOne Celebrates Sixth Anniversary; Total Lending Now Approaching $ 500 Million (Crowdfund Insider) Rated: AAA

Australia-based marketplace lender SocietyOne announced celebrated its sixth anniversary of operations as total lending since inception approaches $500 million.

SocietyOne also reported it has more than 20,000 customers and since the beginning of 2016, total lending has grown nearly 6 times and the lender’s loan book now totals over $220 million, up from $41 million at the start of 2016.

India

UK’s fintech startup ClearScore set to offer credit scores in India (Economic Times) Rated: AAA

UK-headquartered fintech startup ClearScore is all set to start its business in India offering credit scores to Indian consumers in partnership with Experian, free of cost, to improve the awareness levels of the consumers regarding credit. India is their second international market after the company started operations in South Africa last year.

ClearScore will be available on Google Play Store and will provide details of the credit score, giving alerts about changes in the score and provide details about how consumers can improve the score.

Capital Float buys Sequoia & SAIF-backed Walnut for $ 30 mn (VC Circle) Rated: AAA

Bengaluru-based digital lending platform Capital Float has acquired personal finance management app-maker Walnut for $30 million (Rs 209 crore) in a cash and stock deal, a company statement said. Both the companies count Sequoia Capital and SAIF Partners as common venture capital investors.

Walnut allows users to track spends, check on credit and bank balance, bill payments and split expenses within a group. In July 2017, it launched a small ticket credit line for its users called Walnut Prime based on user data and consumer behaviour. The platform has so far disbursed Rs 100 crore in consumer loans.

OfBusiness Raises INR 200 Crore in Series C Financing (FinSMEs) Rated: A

OfBusiness, a Gurgaon, India – based technology enabled SME financing platform, raised INR 200 crore (approx $29m) in Series C financing.

The round was led by Creation Investments and Falcon Edge with participation from existing investors Matrix Partners India and Zodius Capital. With this new round of funding, the company has raised a total of INR 500 crore of equity and debt funding to date. It has also raised debt lines from Kotak, Tata Capital, RBL Bank and Northern Arc amongst other lending partners.

The capital will be used for continued rapid growth and model scaling.

Five Star Business Finance Raises USD$ 100M in Funding (FinSMEs) Rated: A

Five Star Business Finance Limited, a Chennai, India–based fully-secured small business financing company focused on South India, raises USD$100M in funding.

The round was led by alternative asset firm TPG, with participation from existing investors Norwest Venture Partners, an investment fund managed by Morgan Stanley, and Sequoia Capital. The company’s first investor, Matrix Partners India, continues to stay invested in the company.

Led by D. Lakshmipathy, Chairman and Managing Director, Five Star is a non-bank finance company providing loans to nearly 40,000 customers.

P2P Online Lending Startup Finzy Completes $ 2.3 Mn Pre-Series A Fund Raise (Indian Web) Rated: A

Bangalore-based peer to peer (P2P) lending platform Finzy on Monday announced raising funds worth USD 2.3 million in Pre-Series A round, including USD 1.3 million raised in the first tranche in March 2018.

This funding round has been funded by senior professionals from BFSI industry and successful entrepreneurs. The startup plans to use the freshly raised capital for geographical expansion, technology investment and stronger distribution networks.

Founded in 2016, by Abhinandan Sangam, Amit More and Vishwas Dixit, Finzy is a premier P2P lending solution in India that connect borrowers with investors and make the entire process simple and easy so that one can get a loan in as little as 48 hours.

Five things you should know before lending on P2P platform (Economic Times) Rated: A

Don’t let greed cloud your judgment. If you are in a tearing hurry to pocket double-digit returns, you are likely to overlook many warnings signs. That is why it is always better to start with a small amount, learn the ropes, before going for the kill.

Different platforms have different ticket size for lending. With companies like Faircent offering as low as Rs 750 per loan. The ROI would vary as per the borrower profile and loan tenure. The total amount invested by a lender across all P2P-NBFCs is capped at Rs 10 lakh, as per the existing RBI norms.

The RBI came out with regulations for P2P companies in October. There are around 30 online P2P companies in India, of which only eight have received a certificate of registration (CoR) from the RBI to carry out P2P lending activities.

Asia

Singapore police recover S$ 27 million linked to China Ponzi scheme (Channel News Asia) Rated: AAA

Singapore police said on Tuesday (Aug 21) they have recovered more than S$27 million linked to one of the biggest Ponzi schemes in China, which saw 1.15 million investors cheated out of 38 billion yuan (S$7 billion).

Ezubao, once China’s biggest peer-to-peer lending platform, folded in 2016 after it turned out to be an online scam that concocted fake projects to attract investment and pocketed funds instead of passing them to borrowers to generate returns.

Latin American

Mexico’s new government wants fintech, banks to help financial inclusion (Channel News Asia) Rated: AAA

Mexico’s next government will look to fintech companies and large corporate banks to increase financial inclusion in the country, where only one-third of adults have a bank account, senior officials said on Tuesday.

Arturo Herrera, one of two future deputy finance ministers, said in an interview that the lack of financial inclusion was one of the biggest obstacles in the new government’s fight against poverty, inequality and slow economic growth.

Authors:

George Popescu
Allen Taylor

Tuesday April 24 2018, Daily News Digest

teachers personal loans

News Comments Today’s main news: SoFi is like a bank, but not a bank. Finastra’s blockchain solution for lenders is live. Linked Finance pass 50M Euro lending mark. Capital Float raises $22M from Amazon. Today’s main analysis: Cities where credit card debt has increased, decreased the most. Today’s thought-provoking articles: Fintech business lenders are evolving. Why marketplace lending needs […]

teachers personal loans

News Comments

United States

United Kingdom

European Union

Other

News Summary

United States

SoFi Becomes More Like a Bank without Becoming a Bank (Crowdfund Insider) Rated: AAA

During the Cagney period, SoFi was promoted as an anti-bank solution for retail customer needs. The Fintech acquired a digital only challenger bank, Zenbanx, while initiating the process to provide banking services by applying for industrial loan charter (ILC).

A few months later, Zenbanx was shut down and eventually Cagney departed SoFi and the ILC process was halted.

Today, SoFi is pushing further into bank like services with SoFi Money, a mobile first challenger bank like platform minus the banking charter.

Cities Where Credit Card Debt Has Increased and Decreased the Most (CompareCards), Rated: AAA

The U.S. economy is in a good place, growing at a healthy rate of nearly 3% annually, and the unemployment rate is around 4%. So it’s perhaps surprising that credit card balances are growing in 20 of the 30 largest U.S. metros while declining in nine with one city unchanged.

The changes in credit card balances range from a 9% increase in Miami to a 6% drop in San Francisco.

Miami led the 30 largest metros by far with a 9% annual increase. Pittsburgh was No. 2 at a nearly 6% rise with New York and Chicago both just above 5%.

Average credit card balances range from $7,276 in Washington, D.C. to $5,114 in Riverside, Calif.

Cities with the largest average credit card balance decreases

30. San Francisco — credit card balances declined 6%.

29. Dallas — credit card balances down 5%.

28. Baltimore — credit balances drop by 5%.

Fintech business lenders evolving (Banking Exchange) Rated: AAA

While the merits of the proposed fintech national banking charter continue to be debated in Washington, online nonbank business lenders haven’t been circling in a holding pattern over Reagan National Airport.

Case in point: The business of lending isn’t lending, but getting paid back, said Andrea Gellert, chief revenue officer at OnDeck, the largest online small business lender in the U.S.

Pros and cons of alternative data

One of the criticisms of traditional credit bureaus is that they have typically relied on backward-looking, historical data. One of the elements of fintech lenders has been use of alternative indicators intended to give a glimpse of the future.

“Alternative data sources have been proven to work to predict credit,” said Luke Voiles, director at QuickBooks Capital, which lends to users of Quicken’s accounting software. (Currently the company caps loans as $50,000.) The input the firm can access provides a strong picture of how a business is doing and may be doing in the future. Gellert said that as loans grow larger, OnDeck adds in methodologies derived from behavioral economics.

Why Marketplace Lending Needs Less Transparency, Not More (PYMNTS) Rated: AAA

Marketplace lending platforms — Lending Club, OnDeck, Prosper and the like — have inarguably and fundamentally altered the geography of the lending landscape.  In the last decade, they’ve gone from being a niche product to representing about a third of unsecured consumer loan volume in the United States as of 2016, according to a recent study by Harvard Business School Professor Boris Vallée and University of Washington Professor Yao Zeng.

The really savvy investors, the study noted, aren’t merely savvy because of the knowledge they possess — but because of the technology they leverage. One popular such technology is LendingRobot’s quantitative modeling that takes in the historical data provided by the platforms and uses it to create rules of purchase — and then allows its user set it to literally auto-invest whenever it encounters a loan that meets the rules’ criteria.

Looking at a swath of loans executed by LendingRobot users between January 2014 and January 2017, with a particular focus on $120 million invested in LendingClub and Prosper during that time period, what they found is that those who used LendingRobot bought much better loans — the average default rate for LendingRobot purchases was 20 percent lower than the average default rate on the platform.

What other banks can learn from BB&T’s glitch (American Banker) Rated: A

In February, BB&T Chief Executive Kelly King took to Twitter with a video apology to thousands of irate customers after an equipment malfunction hobbled ATMs, online and mobile banking. “We are committed to making this right,” he said.

On Thursday, during the Winston-Salem, N.C.-based bank’s quarterly earnings call, King revealed the bottom-line cost of the high-profile, three-day system outage: $15 million in lost revenue and an additional $5 million in noninterest expenses tied to fee waivers and other costs.

Zelle, the Banks’ Answer to Venmo, Proves Vulnerable to Fraud (The New York Times) Rated: A

Zelle, a service that allows bank customers to instantly send money to their acquaintances, is booming. Thousands of new users sign up every day. Some $75 billion zoomed through Zelle’s network last year. That’s more than twice the amount of money that customers transferred with Venmo, a rival money-transfer app.

But the same features that make Zelle so useful for customers, its speed and ubiquity, have made it irresistible to thieves. Hackers and con artists have used the system to steal from victims — some of whom had never used Zelle or even heard of it until someone used it to clean out their bank accounts.

Steve Polsky of Juvo (Lend Academy) Rated: A

In this podcast you will learn:

  • How Steve’s diverse background as an entrepreneur helped in the launch of Juvo.
  • What Juvo does exactly and what problem they are trying to solve.
  • How Juvo is able to extend credit in tiny amounts to prepaid phone customers.
  • Who Juvo partners with to reach these people.
  • What Juvo brings to the table for the mobile operators.
  • The geographies they have focused on.
  • Why their website leads with “Identity Changes Everything”.
  • How they are verifying identity and approving these people with no credit file.
  • How the mechanics work in getting credit to these people.
  • Why the major value proposition is one of convenience.
  • How they are mitigating against fraud.
  • Why they don’t charge the consumer interest or any fees.
  • Why the big opportunity is moving people up to other financial services.
  • The scale they are at today.
  • What the partnership with Samsung means for Juvo.
  • How the information and data on these people will end up being so valuable.
  • What is next for Juvo.

Boiler Rooms Are Not Brands, Kabbage CEO Says (DeBanked) Rated: A

Speaking at LendIt Fintech 2018 Kabbage CEO Rob Frohwein talked about building a brand in the online lending space; he explained most companies think boiler rooms equal brands, he went on to say you need to spend time and money on building your company’s brand; building relationships is the key, not just credit scores and data, you need to understand what your customer wants and needs by engaging with them on a regular basis.

Only Half of Americans Feel Like Banks Can Help Their Financial Progress (Business Wire) Rated: A

When it comes to getting a loan or credit card from their bank, many Americans are not so confident. A newly released study from Elevate’s Center for the New Middle Class (CNMC) found that non-prime Americans – the 2/3rds of US adults with credit scores under 700 – were significantly less likely to depend on a traditional financial institution for access to credit. Compared to individuals with prime credit scores, non-prime Americans are:

  • 4x as likely to have been denied a loan over the last year
  • 8x as likely to not use a bank
  • 6x as likely to use an online-only financial institution
  • 21% less likely to believe their financial institution has products designed for them
  • 48% less likely to believe they would be approved for a personal loan

The non-prime are often characterized by income volatility, making it all the more necessary they have access to credit. Yet, one in 12 non-prime Americans do not even use a traditional bank for their day-to-day needs. Non-prime Americans often move to an online only bank to meet this void.

Blockchain to Help Millennials Get their Foot on the Housing Ladder (CoinSpeaker) Rated: A

Representatives of the so-called millennial generation are approaching their mid-thirties, being the single largest segment of home buyers in America. This, undoubtedly, represents a huge opportunity for the mortgage industry.

Couple this with the fact that the American housing market (which currently stands at $26 trillion) is the largest asset class in the world – even bigger than the U.S. stock market – and it’s clear  that there is certainly a huge wealth of opportunity within this sector.

Teachers take out more loans than anyone else (Thinknum Media) Rated: AAA

When we solved for job titles, we discovered that teachers take out the most Lending Club loans with 47,761 loans issued. “Manager” and “Owner” follow, but as you’ll see in the chart below, teacher reappears (with a lower-case “t”) with another 8,777 loans issued.

Source Thinknum Media

This chart shows average monthly income for the teachers requesting loans. It’s widely beleived that teachers aren’t paid as well as they should be.

Source: Thinknum Media

Reasons Stellar (XLM) Bulls Will Beat The Bears (Crypto Gazette) Rated: B

Daijo is yet another decentralized P2P lending platform built atop the Stellar blockchain. The Demo version for Daijo mobile app is currently available and running, with the full version expected to be released in a couple of weeks, however QIN tokens are available for presale.

The QIN token is Daijo’s very own multi-purpose asset. QIN will be used for basically everything on the platform, from rewards, to loan requests, to repay of loans. Daijo presents a little update to existing lending platform, with this, our arms are crossed to see how Daijo and the QIN tokens would perform on the big stage.

Harvest Properties and Cerberus Capital Management Acquire DC Station in Daly City, California (Markets Insider) Rated: B

Harvest Properties, a full service commercial real estate investment, development, and management firm (“Harvest”) and an affiliate of Cerberus Capital Management, L.P. (“Cerberus”), a global leader in alternative investing, announced today that they have acquired DC Station, an office property located in Daly City, California. The Leadership in Energy and Environmental Design (LEED) Silver certified project is comprised of a nine-story, multi-tenant office building totaling approximately 383,000 square feet.

Why you should search for direct lenders for online loans (Baltimore Post Examiner) Rated: B

Borrowing online has a number of major benefits, from quick approval – as the online lender can tell you more or less instantly if you’re either approved or not – to lower interest rates (if any) and easier approval because they always use alternative information to evaluate your credit worthiness. You can find information about all types of loans, but make sure you search for it in the right places. For example, expert online loan lenders like Credit Cube provide a review of all types of loans and they make sure you choose a loan that satisfies your requests. For now, let’s see what the differences between the main types of lenders are!

United Kingdom

Finastra’s Blockchain-Based Solution Fusion LenderComm Goes Live (Crowdfund Insider), Rated: AAA

UK fintech Finastra announced on Tuesday its blockchain-based solution, Fusion LenderComm, is now commercially available as an app on R3’s Corda platform for financial institutions operating in the syndicated lending market. The launch was announced at the LSTA Operations Conference in New York. Finastra reported that following a pilot, the solution is proven to streamline information exchange between agent banks and lenders, driving transparency and efficiency in the syndicated loan market. 

Fusion LenderComm is now available as a “low-cost” service for financial services institutions acting as agent banks, using Fusion Loan IQ, a syndicated loan servicing platform. However, the Fusion LenderComm platform is an open utility for all institutions involved in syndicated lending, regardless of the loan servicing software in use. 

Landbay reaches Women in Finance targets (Peer2Peer Finance News) Rated: A

LANDBAY has achieved the targets set last year as part of its commitment to the Treasury’s Women in Finance Charter.

The buy-to-let specialist has confirmed that there is now a minimum of one female representative on every interview panel. It has also drafted a formal maternity and paternity leave plan for all employees.

The peer-to-peer lender’s third target was to ensure that for any additions to executive management or the board of directors, at least one woman must be shortlisted. However, there have been no vacancies at an executive and non-executive level since this promise was made in 2017.

Assetz Capital Joins Positive Lending Panel (Crowdfund Insider) Rated: A

UK-based peer-to-peer lending platform Assetz Capital announced last week it has joined the panel of mortgage packager specialist Positive Lending. This news comes just days after the online lender reached a record number of loans available to investors using its Manual Lending Account (MLA), with well over 200 live loans with loan parts available for immediate investment on the secondary market.

Growth Street joins FCA Register as an Appointed Representative, launches P2P investment opportunity for individuals (Growth Street) Rated: B

Growth Street, an alternative banking service provider for SMEs, announced today that it is now listed as an Appointed Representative (AR) on the Financial Conduct Authority’s (FCA) Financial Services Register. Formerly a peer to peer (P2P) platform purely for incorporated businesses to lend and borrow from each other, this new status allows Growth Street to accept individuals as investors on the platform. By expanding the range of investors, Growth Street aspires to provide more businesses with a GrowthLine, its business overdraft alternative.

Commercial financial partnership launched (The Business Desk) Rated: B

The Business Catalyst Club has agreed a deal with commercial finance brokers ABL Business to create Business Catalyst Finance.

The partnership will provide access to a range of funding options such as commercial property finance, business loans and venture capital along with alternative finance opportunities like asset-based lending and peer-to-peer lending.

European Union

Loans from Linked Finance pass the €50m mark (Independent) Rated: AAA

Loans from Linked Finance to Irish small and medium enterprises (SMEs) have passed the €50m mark.

The milestone co-insides with the Irish peer-to-peer lending platform celebrating five years in business.

ID Finance R&D joins Eastern European tech elite at Belarus’ Hi-Tech Park (ID Finance) Rated: B

ID Finance, the emerging markets fintech company, has been accepted into the Belarus Hi-Tech Park (HTP) in Minsk as it seeks to strengthen its R&D team and take advantage of the favourable business environment on offer to technology companies.

International

 

YayProto ICO (YFN Token): Blockchain Money Transfer System? (Bitcoin Exchange Guide) Rated: A

Billions of dollars are transferred every day and people, collectively, lose out on millions in inefficient systems and high transaction fees. There is a lack of transparency and accountability in the system. Another big problem in the major global financial organizations is that more than 3.5 billion (50% of global population) are still unbanked.

A solution to these problems is a crowd-based banking system that secures its customer’s funds by blockchain technology.

Australia

Robo-advice platform Clover.com.au has entered an agreement to provide proprietary online financial advice and wealth management technology to private wealth firm, Collins House.

Clover chief executive officer and co-founder, Sahil Kaura, said the platform would algorithmically assess information provided by customers to determine if a managed discretionary account (MDA) service was appropriate on a case-by-case basis.

India

Indian lending platform Capital Float raises $ 22M Series C extension from Amazon (Tech Crunch) Rated: AAA

Capital Float, the fintech startup that says it is India’s largest online lender, announced today that it has raised $22 million in new funding from Amazon. At the end of last year, reports surfaced that Amazon was considering an investment in Capital Float as an extension of its $45 million Series C, which was announced last August. The Bangalore-based startup confirmed to TechCrunch that Amazon’s investment is indeed an extension of that round and brings the total equity it has raised over the past 12 months to $67 million.

Over the same period, Capital Float  also raised $80 million of debt from banks and other financial companies, which it combines with its own balance sheet to finance loans to small businesses and other borrowers. Amazon India is among several e-commerce platforms that the company has partnered with to provide loans to sellers, including Snapdeal and Shopclues.

Four NBFCs empowering MSME sector (The Siasat Daily) Rated: A

In this regard, here are four NBFCs that can be explored by and SME and MSME players for financial assistance:

  • Lendingkart-This is a non-deposit taking NBFC, providing SME lending in India.
  • Aye Finance-It is a commercial institution built around the mission to solve these challenges of funding MSMEs and enabling their inclusion into the mainstream of the economy.
  • Faircent-Faircent, a P2P platform has been facilitating loans for number of businesses across the country. Its tech-enabled backbone makes the entire process and hassle free.
  • InCred-It is a new-age financial services group that aspires to be the one stop shop for the customers to fund their financial needs.

Authors:

George Popescu
Allen Taylor

Friday September 8 2017, Daily News Digest

mobile payments APAC

News Comments Today’s main news: Square makes big move on banking. Folk2Folk CEO to step down. ZhongAn approved for $1B Hong Kong IPO. KBRA  and DBRS  assigns preliminary ratings to SoFi Consumer Loan Program 2017-5. Assetz Capital to set up in Belfast. ZhongAn approved for $1B Hong Kong IPO. Citi Singapore launches Facebook Messenger banking chatbot. Today’s main analysis: Using digital assets to […]

mobile payments APAC

News Comments

United States

United Kingdom

China

European Union

International

India

APAC

News Summary

United States

KBRA Assigns Preliminary Ratings to SoFi Consumer Loan Program 2017-5 (BusinessWire), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by SoFi Consumer Loan Program 2017-5 (“SCLP 2017-5”). This is a $527.12 million consumer loan ABS transaction.

Preliminary Ratings Assigned: SoFi Consumer Loan Program 2017-5

Source: BusinessWire

DBRS Assigns Provisional Ratings to SoFi Consumer Loan Program 2017-5 (DBRS), Rated: AAA

DBRS, Inc. (DBRS) assigned provisional ratings to the following classes of notes issued by SoFi Consumer Loan Program 2017-5 (SCLP 2017-5):

— $287,200,000 Class A-1 Notes at AA (sf)
— $173,800,000 Class A-2 Notes at AA (sf)
— $66,120,000 Class B Notes at A (sf)

RATINGS

Issuer Debt Rated Rating Action Rating Trend Notes Published Issued
SoFi Consumer Loan Program 2017-5 LLC Class A-1 Notes Provis.-New AA (sf) Sep 7, 2017 US
SoFi Consumer Loan Program 2017-5 LLC Class A-2 Notes Provis.-New AA (sf) Sep 7, 2017 US
SoFi Consumer Loan Program 2017-5 LLC Class B Notes Provis.-New A (sf) Sep 7, 2017 US
US = USA Issued, NRSRO
CA = Canada Issued, NRSRO
EU = EU Issued, NRSRO
E = EU Endorsed
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating

Square Makes Its Big Move On Banking (PYMNTS), Rated: AAA

According to WSJ reports, Square intends to submit an application later today (Sept. 7) to form a wholly owned and operated bank in Utah.

That business unit would be called Square Financial Services Inc. — and it would be designed to offer loans and deposit accounts to small businesses. The bank would be capitalized with around $56 million in cash.

Online lender SoFi made a similar move, as did mobile banking start-up Varo Money Inc. The timing is not quite a surprise — federal regulators have been more open to the idea of new banks recently than they have been at any time since the Great Recession.

Square Wants to Be a Bank, Sort of (Paybefore), Rated: AAA

Mobile point-of-sale pioneer Square Inc. is applying for an Industrial Loan Company (ILC) charter to support the expansion of its lending business, the volume of which grew 123 percent year-over-year in the second quarter to $189 million.

The news was met with immediate rancor by at least one community banking group, which also lodged complaints about blurring the lines between commerce and banking when online lender SoFI applied for the same charter in June.

Before Square made its move, the Independent Community Bankers of America (ICBA) wrote in an August blog post that it would fight “tooth and nail” against attempts to remove the “historic separation of banking and commerce in federal law and regulation.” It reiterated that sentiment in news reports about Square’s plans on Sept. 7.

For more than a decade, CFSI has been conducting research and bringing various stakeholders—industry, regulators, consumer advocates—together around using technology to increase access to financial services. Its 2016 research estimates the size of the financially underserved market in the U.S. to be $140.7 billion.

The Dodd-Frank Act had placed a moratorium on such charters that ended in 2013, but the FDIC has been “gun-shy” since Walmart’s failed attempt to secure an ILC charter in 2006, Moeser notes.

Walmart and Affirm: A match Amazon will find hard to beat (RetailDive), Rated: AAA

At the end of August, news flashed across the wire that Walmart and Affirm were close to finalizing a pilot deal with each other. This is a game changer for three critical reasons:

  1. Affirm was started by PayPal wunderkind Max Levchin – Through a simple online application process, Affirm customers can obtain loan financing with interest rates in the range of 10% to 30% for their desired online purchases. Customers can clearly and easily see what they will owe at the time of checkout online, with no hidden costs or surprises.
  2. Walmart is involved – All indications are that Walmart is aggressively going after scan-and-go/checkout-free shopping in their stores. Scan-and-go quite possibly will be the technology that most impacts physical retail in the next 10-15 years.
  3. Affirm and Walmart are a match made in heaven for budget conscious America – Affirm’s digital financing capabilities and Walmart’s scan-and-go capabilities, when combined, will stretch the bank accounts of all Americans — especially Americans who cannot afford Prime membership fees (uh oh Amazon).

A screen pops up, and what used to be a three-pack of Crest for $5.00 is now suddenly the same three-pack but for $0.83/month for six months, or for $0.42/month for 12 months instead.

Lima One Capital Acquires RealtyShares’ Residential Debt Origination Business (Broadway World), Rated: A

Lima One Capital, the premier lender for residential real estate investors, announced today that it has acquired the residential debt origination business of RealtyShares, an online marketplace for real estate investing and financing.

Lima One Capital began partnering with RealtyShares as an institutional investor in early 2017, drawn by the quality of deals listed on the marketplace platform.

New Credit Card Option for Those With Scant Credit Histories (The New York Times), Rated: A

A New York start-up aims to use everyday financial information to qualify people with scant or no credit histories for its credit cards.

The company, called Petal, considers an applicant’s standard credit scores, when available. But it also analyzes their digital financial records, like checking accounts or, in some cases, prepaid debit cards, to rapidly assess their income and spending habits.

The company plans to target consumers who are “new to credit,” like young adults, recent immigrants and lower-income consumers, as well as others who may lack traditional credit scores, Mr. Gross said.

The idea is that by sharing information about their personal cash flow, consumers can get a quick decision on a card application and access to a low-cost card, even if they don’t fit the traditional profile of a top-tier credit customer.

The company’s Petal Visa card isn’t widely available yet, but is being tested privately starting this month. Consumers can sign up online to receive an invitation to apply.

Introducing Petal — a simple, no-fee credit card (Medium), Rated: A

Today, it’s hard to exist without a credit score.

You need one to get a credit card, finance a car, purchase a home, or qualify for a small business loan. And, increasingly, you need credit to do things that seem to have little to do with credit, like sign a lease for an apartment, set up a cell phone plan, or even get a job — nearly 50% of employers today are checking credit reports as part of a job application.¹

That access is important. The cost of a poor credit score can be as much as $250,000 in additional interest and fees over the course of your lifetime.²

The number of American adults that lack access to credit because they are new to credit is staggering:

Over 65 million, and growing as a percentage of the total population.³

The 65 million credit invisible, unscorable and thin-file consumers in the U.S. are not a snapshot of America. They are disproportionately likely to be young, black and Hispanic, first- and second-generation immigrant, and/or low- and moderate-income. The same groups that have been historically underserved by the banking system are routinely denied access and opportunity because of how the credit system works.

Two years later, we’re launching Petal — a simple, no-fee credit card, designed to make life easier for everyone.

Petal makes money from merchants when customers swipe the card, and on interest when customers carry a balance past their due date. And before customers carry a balance, we show them exactly what it will cost — in dollars, not just in interest rates and APRs. It’s our belief that customers should be able to use credit safely and affordably, without falling into costly debt.

SoFi’s Career Incubator, SoFi Accelerate, Going to Chicago (LendEDU), Rated: A

Social Finance, Inc., a fintech and student loan refinancing company, announced this week that SoFi Accelerate, the company’s career incubator, will be visiting Chicago this September.

On Sunday, September 24th, SoFi Accelerate will head to the Windy City to offer professionals a chance to hear from a couple of speakers and to develop their own path for career success.

The career incubator will only last one day and is open to SoFi members and non-members as well. There will be two speakers, Adam Foss and Ryan Holiday, that guests will have the chance to listen to.

The event will be held at the Chicago Botanic Garden at 1000 Lake Cook Road in Glencoe, Illinois from 9:30 AM to 6:00 PM central time. For SoFi members, the price of admittance will be $75, while non-members will have to pay $125 upon entry. However, the first 50 non-members will receive a special discount so that they only have to pay $100 to attend.

Americans Are Spending Mind-Blowing Money on Lotto Tickets in These Top States (TheStreet), Rated: A

In some states, buying lottery tickets is an extremely popular pastime that borders on obsession. The U.S. generated $66.78 billion from lottery sales with the exception of seven states who have not legalized lotteries — Alabama, Alaska, Hawaii, Mississippi, Nevada, Utah, and Wyoming — based on an analysis of data conducted by LendEDU, a Hoboken, N.J.-based student loan marketplace, utilizing 2015 data released by the U.S. Census Bureau. Out of the total amount, $42.27 billion was allocated for prizes, $3.18 billion was allocated for administration and $21.35 billion was allocated for proceeds.

For 2016, the Census Bureau projected there were $323 million people living in the U.S. which means the average amount spent on various types of lottery tickets is $206.69 per year, LendEdu said.

Some residents are diehard fans of playing the lottery, and Massachusetts natives spend the most money per capita at $734.85 annually while Rhode Island follows a close second at $513.75 each year. The third highest amount was spent in Delaware at $420.82, New York with $398.77 and West Virginia at $359.78.

The states with the largest amount of people generated the largest revenue – New York’s total was $7.78 billion, followed by California at $5.52 billion, Florida at $5.27 billion, Massachusetts at $5.01 billion and Texas at $4.28 billion.

Leading Carrier and Reinsurer Partner with Insurtech Startup Bestow on its Highly Anticipated, On-Demand Platform (PR Web), Rated: A

Bestow Inc., the company behind a revolutionary new approach to life insurance, today announced a partnership with Munich American Reassurance Company, the U.S. life and disability reinsurance division of Munich Re, and North American Company for Life and Health Insurance®, a top-rated carrier in the United States and member company of Sammons® Financial Group, to develop new life insurance products for Bestow’s anticipated on-demand life insurance platform.

Together, the three brands are actively working on products that will premiere as part of Bestow’s full stack, digital platform later this fall. Upon launch, the platform will give consumers an entirely new way to research, buy, and manage life insurance with product options that are affordable, simple to understand, and seamless to purchase.

Bestow’s partnership with Munich Re and North American follows the company’s recent announcement of closing $2.5 million in seed funding, led by NEA.

How to Leverage Crowdfunding to Invest Like a Millionaire (Inc.com), Rated: A

You probably don’t think of relatively small investments and passive income opportunities when talking about commercial real estate. But the new standards for commercial real estate investing are surprisingly simple and potentially profitable. Here’s what Jilliene Helman shared about the industry-disrupting platform.

Platforms like RealtyMogul let you crowdfund multi-million dollar commercial real estate investments with as little as $1,000 to $5,000. Depending on your cash flow, you can make an investment immediately and continue reinvesting the profits.

Anyone who has ever been a landlord knows that dealing with tenants and all the hands-on work that comes with it is cumbersome. But commercial real estate can be a completely passive opportunity that doesn’t require you to do anything. Jilliene agrees that you don’t need to be active in all of your investments.

Jilliene shares that in RealtyMogul’s case, they’ve now gone through 12 months at 8% distribution annualized. While some investors might take that distribution and spend it, others will take that 8% and keep reinvesting it to turn it into a compounding investment. In the second month of a payout, investors will be earning on that original 8% in addition to interest earned each subsequent month of distribution.

Affirm: The San Francisco Startup Using Fintech To Simplify Lending (Benzinga), Rated: A

Rob Pfeifer, chief risk officer at the San Francisco fintech startup Affirm, remembers the moment the company began lending: 7:57 p.m. on Aug. 21, 2014.

Since going live, Affirm has made more than 1 million loans totaling more than $1 billion.

The platform originally targeted millennials, but has drawn a wider clientele, said Pfeifer, 35, who’s scheduled to speak at the Benzinga Fintech Summit Sept. 28 in San Francisco.

BitX Funding takes online middleman approach to small-business lending (Westfair Online), Rated: A

“About four to five years ago, I worked for OnDeck Capital in Manhattan,” said Rowe, referring to a non-bank lender to small businesses, where he was a senior business development manager. “Back in 2008, when we had the market correction, banks stopped lending and small-business owners had nowhere to go to get funds. OnDeck, at the time, filled that gap.”

In 2013, Rowe in Southport launched BitX Funding as an online marketplace for small-business owners and aspiring entrepreneurs to seek financing for their endeavors.

BitX Funding works with a borrower in fill out data on the company regarding how much money they want to borrow, the time frame they are working in to receive their funds and how long they have been in business. Rowe reviews the information and contacts the applicant to receive more information about the depth and scope of the requested loan. The BitX founder Rowe, who is now working with 20 banks as his company’s financing outlets, determines which applicants have the best chance of moving forward.

To date, Rowe has secured 100 small-business loans for clients. Applicants do not pay him a fee or a commission for the service, he noted, with his revenue coming from the participating lenders.

“I’m actually pre-underwriting the applications. Because of Dodd-Frank and all of the other regulations and paying an underwriter a $100,000 salary for a $50,000 loan, it’s not really in their (lending banks’) wheelhouse.”

Washington DC-based RegTech Startup Securrency Joins Forces With International FinTech Firm Humaniq (PR Newswire), Rated: A

Securrency, a RegTech company with a platform designed to streamline regulatory compliance for token offerings, has just signed an extensive strategic partnership with Humaniq, an Ethereum-based Blockchain ecosystem looking to bring financial inclusion to over 2 billion unbanked people globally.

The partnership included an investment into Securrency by Humaniq as the lead investor of their current investment round. Humaniq will also provide additional technological capabilities which will be used for their collective efforts on a LegalTech platform. This LegalTech platform is designed to efficiently match capital to opportunity in transformational emerging technologies. The platform will provide efficient access to capital for startups, liquidity for frontier markets, and a scalable securitization process for established global industries. By automating certain compliance functions and connecting legacy financial services to the power of the blockchain, the team sees a path to revolutionize technology finance.

Payments firm Baton Systems adds former Citi vice chairman Kaden to advisory board (Finextra), Rated: B

Baton Systems (“Baton”, formerly known as Ubixi), the platform for clearing, settling and managing payments between financial institutions, has appointed former Citigroup Vice Chairman Lewis B. Kaden to its Advisory Board.

He joins Arjun Malhotra, Co-Founder of HCL Technologies and Headstrong, as the newest addition to Baton’s Advisory Board.

Kaden was labeled “The Most Powerful Banker You’ve Never Heard of” by Bloomberg Businessweek in 2009. He joined Citigroup in 2005, where he oversaw the bank’s global functions and advised the CEO on numerous strategic and business matters. Kaden has also served as Chairman of the United States Government Overseas Presence Advisory Panel, as well as Chairman of the Industrial Cooperation Council of the State of New York and Governor Mario Cuomo’s Commission on Competitiveness. He holds degrees from both Harvard College and Harvard Law School.

Home Point Financial Names Ross Gloudeman Chief Compliance Officer (Business Insider), Rated: B

Home Point Financial Corporation (“Home Point”), a national, multi-channel mortgage originator and servicer, today announced that Ross Gloudeman has been named Chief Compliance Officer.

Prior to joining the Home Point team, he was a Principal at AIMD Consulting, LLC, providing advisory and contract risk or compliance expertise to financial services clients. Previously, he was Senior Vice President, Executive Risk and Compliance Officer, at Walter Investment Management Corp.

United Kingdom

Industry reacts to 2,000 IFIsas opened (Bridging&Commercial), Rated: AAA

Data also showed that the average investment into IFIsas during 2016/17 was £8,500, while £17m was invested collectively.

Octopus Choice launched its IFIsa last month, allowing investors to deposit as little as £10 in loans underwritten by Octopus Property.

Folk2Folk launched its IFIsa in July to its existing lenders.

Giles Cross, CMO of Folk2Folk, said: “Since the introduction of our IFIsa in July, we have seen a huge amount of interest from investors looking for an alternative income with tax-free returns.”

Some peer-to-peer platforms have found the HMRC’s figures promising, including Landbay, which launched its IFIsa early in the year.

John Goodall, CEO of Landbay, said the number of accounts that had been opened had exceeded expectations.

Folk2Folk CEO to step down (Bridging&Commercial), Rated: AAA

Peer-to-peer lending platform Folk2Folk has announced the resignation of its chief executive officer Jane Dumeresque (pictured above), who will step down during September.

During her tenure, Folk2Folk opened new regional offices in Yorkshire, Somerset and the Three Counties, built further representation in Cumbria, Dorset, Cheshire and East Anglia and grew the platform’s cumulative loan book from £30m to over £170m.

Peer-to-peer lenders pledge to set up base in Belfast (Irish News), Rated: AAA

PEER-to-peer lending platform Assetz Capital, which to date it has lent more than £300 million to businesses across the UK, is expanding its operations into Northern Ireland.

Get bigger profits from mini bonds (MoneyWeek), Rated: A

But in the past year we’ve seen a steady rise in the quality of these bonds, partly because reputable alternative asset managers have moved in with asset-backed propositions (ie, companies that own physical assets, providing a certain amount of security for lenders). Downing, for instance, has its own “crowd bond” business that provides debt capital to businesses, usually within an Innovative Finance Individual Savings Account wrapper. Currently Downing has two projects that allow instant access (ie, no maturity), paying a 3% yield on an energy-backed business. This is a bit on the low side, but Downing also advertises an imminent bond that involves lending to a pub business for 18 months at 5.5%.

Property lender LendInvest raised £50m when it issued the alternative finance sector’s first retail bond, paying 5.25% a year over five years. The bond issue was oversubscribed, and the bonds now trade at £102 (implying a net yield to maturity of just over 5% a year).

In the news…

• Peer-to-peer lender RateSetter has reignited the debate about transparency after it admitted placing loans via rival platforms without telling its customers, reports The Times. It placed around £10m in property development loans on Wellesley, and an unspecified sum via Archover, which lends to small businesses. Both Wellesley and Archover offer investors a higher return than RateSetter. A spokesman for RateSetter said it would not lend via either platform again. RateSetter withdrew from industry body the P2P Finance Association last month after admitting it had “breached the principles of the Association”, but stressed that “no customer has experienced any loss from our actions”.

A third of financial technology startups expect to IPO within five years (City A.M.), Rated: A

The UK’s ambitious fintech startups are eyeing success on the public markets with a third of them planning an IPO in the next five years, new figures reveal.

Transferwise, Revolut and World Remit are among the country’s innovative financial technology companies with long-term ambitions of going public, signalling the burgeoning industry’s confidence.

Of the 250 fintechs surveyed in fresh research from EY and Innovate Finance on behalf of HM Treasury measuring the health of the industry, more than half also said they expect revenue to more than double over the next 12 months. Collectively, they expect to raise more than £2.5bn in their next funding rounds, having already raised £3.5bn to date.

Digital challenger bank Revolut told City A.M. it has an ambition to go public “later down the line”, while co-founder of “unicorn” startup Transferwise Taavet Hinrikus said over the summer it was time to think seriously about becoming a public company “in a few years”.

Using Digital Assets to Secure a Bitcoin Loan (Cryptocoins News), Rated: A

Ledgermark Ltd develops, markets and issues distributed ledger technology, specifically; various forms and implementations of distributed ledgers that can be used in combination with technologies like Bitcoin.

The company is launching a new digital asset; Meridian (MDN). Meridian represents a fork in the road as it is different from traditional digital assets. Instead of being positioned as a bitcoin alternative, Meridian is being designed to be used in combination with bitcoin. In short, via their Bitcoin Loans Platform, Ledgermark Ltd will be accepting Meridian tokens as collateral for bitcoin loans of higher value.

Is the P2P lending industry working with Bell Pottinger? (P2P Finance News), Rated: B

The P2P industry – and those linked to it – have a relatively small exposure to Bell Pottinger, with most firms opting for smaller PR agencies.

Basset & Gold, which advises and provides financing to P2P platforms and direct borrowers, is still a client of Bell Pottinger as of 6 September 2017, but is reviewing its relationship.

P2P lender Wellesley & Co previously had a relationship with Bell Pottinger, but is no longer using them.

MangoPay – which provides payment technology for P2P lenders – was still a client of Bell Pottinger as of 2 June 2017.

Darktrace in UK’s top three fastest-growing tech companies (Business Weekly), Rated: B

Norwich-based Know Your Money is the other new entrant – in at 97.

Cambridge company CashFlows surges from 94th last time to 58th in the pantheon with annual sales growth of 72 per cent to £37.3m.

Norwich’s strength in FinTech is further demonstrated by the inclusion of  Epos Now, a payment systems developer, which is placed 53rd (down from 32nd) with growth of 81 per cent to £13.9m.

The companies in the East appear with businesses from around Britain, including designer fashion website Farfetch, peer-to-peer lending platform Funding Circle and money transfer provider WorldRemit.

China

Chinese online insurer ZhongAn wins HK approval for $ 1 billion IPO (Reuters), Rated: AAA

ZhongAn Online Property and Casualty Insurance Co Ltd, China’s first internet-only insurer, secured Hong Kong stock exchange approval for its planned initial public offering which could raise more than $1 billion, sources with direct knowledge of the deal said on Friday.

The company plans to start gauging investor appetite for the IPO as soon as Monday after receiving the nod from the listing committee of the Hong Kong stock exchange, added the sources. It plans to launch the IPO and take orders from investors on Sept. 18.

The IPO would be the biggest by a financial technology company (fintech) in the city, which wants to lure more new listings of so-called new economy startups. Hong Kong has had $5.73 billion worth of new listings so far in 2017, compared with $21.3 billion in all of 2016, Thomson Reuters data showed.

Sino Fortune buys $ 2.8m equity interest in online lender TouZhiJia (Deal Street Asia), Rated: A

Chinese fintech solutions firm Sino Fortune Holding Corp has acquired a 4.45 per cent stake in Shenzhen TouZhiJia Financial Information Service Co Ltd (TouZhiJia) for about $2.8 million (RMB19.1 million).

Sino Fortune is making the 4.45 per cent equity interest acquisition through Puhui Equity Investment Co Ltd (Puhui).

Founded in September 2014, TouZhiJia’s main businesses include vertical P2P search engine, private wealth management, and secondary loan exchange services.

TouZhiJia has reportedly accumulated 2.74 million registered users and facilitated 1.98 million transactions with aggregate transaction value of more than $2.30 billion (RMB 15.63 billion). TouZhiJia is an affiliate of Yingcan Group.

European Union

LendIt Europe Agenda Released, Discounted Pricing Ends Soon (Lend Academy), Rated: AAA

The full agenda is on the LendIt website, but here are a few topics I am most excited about:

  • How to Navigate Open Banking (Imran Gulamhuseinwala, Ernst & Young)
  • Digitization of Finance How Customer Expectations are Changing (Anne Boden, Starling Bank, Rhydian Lewis, Ratesetter Giovanni Daprà, Moneyfarm)
  • Implementing AI in Financial Services: Case Study (Francesco Brenna, IBM, Roberto Mancone, Deutsche Bank)
  • How Big Banks Are Approaching the New Connected World (Gilad Amir, Lloyds Banking Group, Benoit Legrand, ING, Raman Bhatia, HSBC, Gustavo Vinacua, BBVA)
  • Renaud Laplanche of Upgrade talking about Online Lending 2.0 and the state of the US fintech market.

Summer pricing of £1,295 ends at midnight on September 8th. After that, ticket prices will rise to £1,495. As always Lend Academy readers can receive an additional 15% discount by using the code LENDACADEMYVIP at checkout.

What Kinds of Fintech Platforms Help Startups with Fundraising (TechBullion), Rated: A

By the way, the alternative funding market in Europe is not just a developed one, but it is often supported by the state in every way. Moreover, crowdlending currently is a major competitor for the conventional banking area. In the future, it will consolidate its position because, due to introducing new Basel lll requirements to banks, including a reduction of risk assets, the requirements to bank lenders will become ever more stringent.

For instance, in 2015, Austria adopted an act that governs and legalizes the operation of companies involved in non-banking lending. But at the same time, in the biggest fintech country in Eastern Europe – Russia – and in several EU countries, there is yet no such document. Germany has a credit rating of companies that protect the investor.

What kinds of non-banking business lending platforms exist?

According to data of KPMG studies, the last 3 years period demonstrated a 131% growth of the share of mutual business lending, with the share of peer-to-peer consumer lending having increased merely by 54%.

  • Crowdfunding– investments for a remuneration from a company.
  • Crowdlending– this is mutual business lending assuming a return on investments (Funding Circle).
  • Crowdinvesting – an investor receives a share in a company with a view to growth of the value of one’s purchased share and, certainly, receiving dividends from company operations (Crowdcube, Seedmatch).
  • Refinancing receivables or online factoring. A loan is provided on collateral in the form of expected payments or accounts receivable.
  • Invoice discounting – this is in essence factoring, but with a somewhat other funding structure. Within its framework, funding is not split into deliveries but is paid in full on spot. In case of assignment of claims, the lender will bear the obligations of reimbursing the factor the funds underpaid by the borrower.

The Microfinance Centre’s (MFC’s) Alternative Finance Forum; October 5, 2017; Warsaw, Poland (MicroCapital), Rated: B

Event Location: Copernicus Conference Centre; Warsaw, Poland

Summary of Event: This forum aims to “introduce new forms of financial services” while covering topics including equity-based crowdfunding, social impact bonds, online lenders to small businesses and peer-to-peer lending platforms. The event has support from the European Union and its European Investment Bank Institute.

Cost: Participation is free of charge

Event Website: 

International

How digital assets are revolutionizing payments (The Asset), Rated: A

Experian, an information services group, estimates that the average error rate of bank account data is around 12.7%, indicating that there is a lack of understanding of foreign bank codes and account numbers.

A key problem with cross-border payments today is the fact that transactions are at the mercy of correspondent banking relationships.

Ripple, a global digital payment provider, has designed its XRP digital asset solely the cross-border transfer of value between enterprises.

Aside from Ripple, other companies have started to look at the usage of digital assets for transactions. Visa for instance recently filed a patent with United States Patent and Trade Office (USPTO) on the creation of a digital asset network to eliminate third parties and simply their transaction process.

Fintech Companies Disrupting Finance, Creating Bank of Tomorrow (Cointelegraph), Rated: B

One popular recent development in the Blockchain community is the creation of multi-crypto/fiat debit cards. These cards allow users to interchange between the given set of currencies in a seamless manner.

Luhaaar notes that fintech companies have consistently delivered better results in individual financial system services. He says that Change Bank wants to bring these companies together to create a global fintech bank of tomorrow.

India

Capital Float Digitally Removes Credit Gap (CXO Today), Rated: A

In an exclusive interaction with CXOToday, Rohan Angrish, CTO, Capital Float, takes us through how they have made it possible with the aid of technology which helped reduce wait times for SMEs, and enabled disbursement of funds in just three days. Last month, the company announced an equity raise of $45 Million (Rs. 293 crores) in Series C funding.

CXOToday: Tell us about your expansion plans across India. Any plans to go global in the near future?

Angrish: Over the past year alone, we have disbursed loans of over Rs. 2,100 crores to 12,000 plus customers across 300 cities. We will continue to identify and serve under-served SME segments. We have also ventured into financing micro-entrepreneurs like taxi drivers, travel agents, and Kirana store owners. Although these are small-ticket loans, the sheer size of these segments indicates immense potential. India will keep us busy for the short term. By the end of the financial year, we expect to have our geographic footprint spread across 500 cities from our current number of 300 cities, without increasing headcount.

CXOToday: Who are your customers?

Angrish: These include SMEs who have traditionally been denied finance due to ineligibility based on credit parameters set by formal financiers, lack of collateral and inability to furnish the required documentation.

CXOToday: Please throw light on your corporate partnerships.

Angrish: The company has partnered with ecosystem leaders across various verticals such as e-commerce (Amazon, Flipkart, Snapdeal, PayTM, Shopclues, eBay, Alibaba, etc.), travel and hospitality (VIA and Yatra), retail (Mswipe, Pine Labs, Bijlipay, ICICI Merchant Services) and taxi aggregators (UBER and Ola) etc. Through these partnerships, we are able to effectively expand our reach to SMEs operating on these platforms.

Fintech startup EarlySalary raises Rs 5cr in debt financing from IFMR Capital (YourStory), Rated: A

Fintech startup EarlySalary, which offers instant cash loans and salary advances, has raised debt financing of Rs 5 crore from IFMR Capital. Previously, this past May, the company had raised a Series A round of $4 million (Rs 28 crore) in equity funding from IDG Ventures India and DHFL and plans to leverage its equity multiple times over the next few months.

In an earlier interaction with YourStory, Co-founder and CEO Akshay Mehrotra had said that almost 75 percent of the Rs 28 crore would be utilised for building their lending book. The remaining amount was to go into expanding their team, with a specific focus on machine learning skill sets, and helping grow the customer base.

EarlySalary has already disbursed more than 7,000 loans last month. Currently operating in eight cities including Mumbai, Pune, Chennai, Bengaluru, Hyderabad, New Delhi, Jaipur, and Ahmedabad, it is looking at expanding into other cities as well.

Growth deals drive VC investments in August (The Times of India), Rated: B

Online lender Capital Float attracted $45 million, while Treebo Hotels took $34 million. Bioinformatics company MedGenome attracted $30 million from investors led by Sequoia India and fitness chain operator Curefit raised $25 million from existing investors including Accel Partners and IDG Ventures.

With seed funding becoming more challenging, early stage investors are asking questions on whether the business is viable and if it can raise follow on capital, which is an indication of the market maturing, he adds.

APAC

Citi Launches First Facebook Messenger Banking Chatbot in Singapore that Provides Customer Account Information (Fintech News), Rated: AAA

Citi Singapore today announced the launch of Citi Bot – the bank’s new natural language chatbot on Facebook Messenger. Singapore is the first market for the launch of the chatbot which will be introduced progressively in the Asia Pacific region over the next few months.

This landmark initiative furthers Citi’s open architecture approach to digital banking as the bank taps on its global network to form strategic partnerships and to co-create with leading players in digital ecosystems globally and locally.

Citi Bot will first be made available to some 600 Citi customers and employees who will form Citi Singapore’s Beta Testing Community, referred to as the Citi Beta Community.

The second phase of the Citi Bot will introduce more new features such as card activation, ability to lock and unlock credit cards and transaction alerts for cards among others.

India, Indonesia lead growth in mobile payments (The Asset), Rated: AAA

Asia-Pacific now leads the way in the adoption of mobile payments, according to a report by ACI Worldwide (ACI) entitled “Global Consumer Survey and Consumer Trust and Security Perceptions.”

Within the Asia, India and Indonesia saw the biggest growth of mobile wallet use with 56% of Indian and 47% Indonesian participants of saying that they used mobile wallets. This represents a significant increase from 2014 results which saw 47% of Indian and 32% of Indonesian survey participants using mobile wallets.

Source: The Asset

Authors:

George Popescu
Allen Taylor

Monday August 21 2017, Daily News Digest

Bulge Bracket Banks

News Comments Today’s main news: Prodigy Finance raises $240M in debt and equity. RateSetter withdraws from UK Peer to Peer Finance Association. OCC motions to dismiss lawsuit. Funding Circle offers manual investment in Self Selected Loans. Lufax turns profit ahead of IPO. N26 has half a million customers. Today’s main analysis: Regulatory clarity RE: Madden v. Midland; Q2 earnings season […]

Bulge Bracket Banks

News Comments

United States

United Kingdom

China

European Union

International

Australia

India

APAC

Middle East

Africa

News Summary

United States

OCC Motion to Dismiss Regarding Conference of State Bank Supervisors Lawsuit (Crowdfund Insider), Rated: AAA

In a motion to dismiss the lawsuit, the OCC states;

“The Complaint by the Conference of State Bank Supervisors represents a fatally premature attempt to invoke the jurisdiction of this Court to remedy a speculative harm that CSBS alleges may arise from future action by the Office of the Comptroller of the Currency – action that the OCC may never take. The CSBS Complaint challenges:

(1) provisions of an OCC regulation amended in 2003 to authorize special purpose charters that have, to date, never been used to charter a bank; and

(2) a series of public OCC statements as part of an ongoing policy initiative that CSBS alleges to be a final decision by the OCC to make charters available to “nonbank” financial technology (“fintech”) companies.

CSBS’s denomination of these public statements as a “Nonbank Charter Decision,” Compl. ¶ 52, is wrong in two fundamental respects: it ignores that the proposal contemplates a form of national bank charter and that no final decision has been reached.”

Read the full memorandum here.

Student Online Lender Prodigy Finance Raises $ 240 Million in Equity and Debt (The New York Times), Rated: AAA

UK-based online lender Prodigy Finance has raised $240 million in equity and debt funding, as it seeks to speed up its expansion in the United States.

The funding round comprises of $40 million in equity led by venture capital firm Index Ventures, with participation from Balderton Capital and AlphaCode, and $200 million in a debt facility led by a global investment bank, Prodigy Finance said on Monday.

Regulatory Clarity in Sight for Madden V. Midland; Q2 Earnings Season Highlights (PeerIQ), Rated: AAA

Congress may clear up the regulatory uncertainty introduced via Madden V. Midland before year end. Representatives Gregory Meeks, (D-NY) and Patrick McHenry (R-NC) introduced Protecting Consumer’s Access to Credit Act of 2016. The bill reaffirms the “valid when made” doctrine, which holds that interest rates originated by a national banks are legal even after a loan is assigned to a third-party. Political insiders assign favorable odds to the passage of the bill due to its bipartisan support.

Research has shown that the Madden V. Midland district court ruling has “significantly reduced credit availability for riskier borrowers”. PeerIQ has also observed a significant reduction in the willingness of warehouse lenders to finance loans subject to “Madden Midland” risk.

Bulge Bracket Banks

Compared to a year ago, all of the banks have increased their focus on lending business lines as revenue from trading continues to come under pressure.

Source: PeerIQ; Bloomberg

Non-Bank Lenders & FinTech 

  • OneMain is leading the pack in YTD stock performance by a large margin. OMF has improved ROE and NIM while keeping charge-off rates to mid-single digits.
  • Except for Enova, all of the non-bank lenders increased their reserves as a % of total loans outstanding.
  • We see a trend of higher net-charge off rates and increased reserves. We believe this reflects prudent risk management and responsiveness to changing borrower behavior (e.g., stacking, greater access to credit, late stage credit cycle dynamics, etc.)
Source: PeerIQ; Bloomberg

Has Fintech Industry Growth Just Begun? (The Motley Fool), Rated: AAA

However, recent earnings releases from each of three public fintech stocks — Lending Club (NYSE:LC)OnDeck Capital (NYSE:ONDK), and Elevate Credit, Inc. (NYSE:ELVT) — show the tide may be turning. Here are three positives each company showed in the quarter.

Improving credit

While Lending Club began tightening standards well over a year ago, OnDeck did so more recently. While originations declined 19% sequentially, loss provisions also declined from 8.7% to 7.2%. That, combined with a $45 million cost-reduction plan, led to an adjusted net loss of only $1.5 million, a huge improvement over the $16 million loss in the prior-year quarter.  If not for a $3.2 million severance charge, the company would have recorded positive GAAP income.

Increasing acceptance

In Lending Club’s case, tightening credit attracted banks back to its platform in a big way. Banks funded 44% of loans in the quarter, compared with 13% in the third quarter of 2016.

Trending up

While Lending Club took a year to repair controls and rebuild investor trust, last quarter’s loan originations were up 10%, both sequentially and year-over-year. Even better, revenue was up 35% year over year, as the company was able to earn more revenue per loan.

And while OnDeck deliberately slowed down in a big way this quarter, the company still grew revenues 25% year-over-year.

Finally, while Elevate’s revenue growth slowed to 19%, this is mainly due to the rapid growth of its Elastic product, which carries a lower interest rate than its other products; however, Elastic typically has a better-quality customer, with lower chargeoff rates. Originations grew 29% year over year, which is still very healthy.

ActiveProspect Announces Partnership with LendingTree to Independently Certify Web Leads (Benzinga), Rated: A

ActiveProspect, a SaaS provider of lead acquisition solutions, is partnering with LendingTree, the nation’s leading online loan marketplace, to independently certify its web leads using ActiveProspect’s TrustedForm product.

Venture Capitalists Wary Of Online Lenders (PYMNTS), Rated: A

According to a news report in CNBC, BlueVine CEO Eyal Lifshitz said that when meeting venture capitalists in recent years, the company has had to have a good story as to why it is different from other online lenders in order to get funding — something it didn’t have to deal with three years ago.

BlueVine, which is an online lender that is focused on the small business market, raised funding last year and has secured a total of $188 million in venture capital funding since 2013.

Investors have become skeptical about online lending since early pioneers flamed out (CNBC), Rated: A

Online lending startups looking to raise money now have to answer one important question that didn’t get asked much in the past: how do avoid the fate of early pioneers like Lending Club or On Deck, which have lost nearly 80 percent of their value since going public in 2014.

According to CB Insights, the number of funding rounds in the online lending space is on pace to hit a 5-year low in 2017. The dollar amount is also expected to drop to $2 billion in 2017, less than half of the $4.4 billion the sector saw in 2015.

Kabbage raised $250 million at a reportedly higher valuation than its last round, while Prosper is reported to be raising at a valuation that’s 70 percent below its previous round. Both companies last raised in 2015.

BLOCKCHAINS, INNOVATIONS, AND INTERMEDIARIES (AllAboutAlpha), Rated: A

One investment fund that intrigues Kaal is LendingRobot, which invests in lending marketplaces such as Prosper Funding Circle and Lending Home.  What fascinates him is that its trading is automated, an algorithm based on investor risk preference. Due to blockchain technology, all transactions are a matter of public record, in compliance with best execution obligations. This facilitates the location and auditing of trades, internal investigation, and reporting to regulators.

Blockchain might very well diminish the role of banks in the asset management industry. As Kaal writes, banks charged $1.7 trillion in processing fees in 2014. But with blockchain “financial transactions can be executed instantaneously at near zero transaction costs, increasing the efficiency for businesses and individuals exponentially.”

Online loan marketplace DebtX to accept bids on nearly $ 1.1 billion in loans tied to First NBC collapse (The Advocate), Rated: A

DebtX, which operates an online marketplace for loans, plans to accept bids starting next month on nearly $1.1 billion in loans tied to First NBC Bank’s collapse.

On Sept. 12, DebtX plans to accept bids on a $117 million, single-relationship loan pool secured by energy-related assets in Louisiana. Bidding ends Sept. 29.

Data-sharing debate grows contentious as fintechs vent grievances (American Banker), Rated: A

A recently formed group representing 31 data aggregators and fintech companies, called Consumer Financial Data Rights, says banks still aren’t forking over as much data as they should be. The group is meeting with bank regulators to plead their case and trying to get consumers to petition regulators on their behalf, urging them to send a Tweet that says, “.@CFPB protect Americans’ ability to grant access to their financial information. #handsoffmyfinancialdata.”

The leaders of the CFDR accused banks of pushing bilateral agreements that restrict the types of data that will be shared and the use cases under which it can be shared. They also said large banks refuse to even talk with them about these issues. They say they would like to see the industry coalesce around a set of principles such as the European Union’s General Data Protection Rule.

Banks say they have no intention of restricting data sharing, that they want to let customers decide with whom their bank account data should be shared, and that they want to make sure that data is secure.

Marketplace Lending News Roundup – August 19 (Lend Academy), Rated: A

PayPal acquires Swift; Lending Club and OnDeck Q2 Earnings from PeerIQ – The weekly PeerIQ newsletter delves into the recent LendingClub and OnDeck earnings.

SoFi Is Being Sued by an Employee Claiming He Was Fired for Reporting Sexual Harassmentfrom Fortune – Bad news for SoFi. A former employee is suing the company and a class action lawsuit is coming.

Daylight Transparency: A Win/Win for Lenders and Investors from eOriginal – Transparency is so important in marketplace lending and eOriginal weighs in on recent comments from Ron Suber.

Why cybercriminals like AI as much as cyberdefenders do from American Banker – Penny Crosman takes an interesting look at the competition in AI between cybersecurity and criminals.

Five Key Things To Know About LendingClub Notes from LendingClub – This week LendingClub released a paper to help retail investors understand what is important.

Original Tech helps banks offer better loan applications (TechCrunch), Rated: A

Americans apply for more than 250 million new financial products each year, but the majority of those applications are completed on paper or over the phone. A startup called Original Tech wants to change that by providing white-label software to improve loan applications completed online.

It enables borrowers to apply for loans on desktop, tablet or mobile devices without needing to go through the manual process of filling out paper applications or fax documents to the financial institution.

For lenders, Original Tech takes care of the data collection, fraud prevention and compliance enforcement. But its system is designed to work within lenders’ existing workflows and allows them to apply all their own underwriting rules.

United Kingdom

RateSetter Withdraws From the UK Peer to Peer Finance Association (Crowdfund Insider), Rated: AAA

n Friday, P2P lending platform RateSetter announced it has withdrawn from the Peer-to-Peer Finance Association (P2PFA). This news comes less than a month after the online lender was hit with a series of significant operational challenges as several large loans have struggled.

As previously reported, RateSetter hit an operational hurdle that culminated in approximately £80 million worth of loans being taken over by the platform. The online lender apparently lent £36 million to the Vehicle Trading Group Limited and the company has since fallen into administration (bankruptcy) after taking on too much debt. Additionally, £12 million was lent to an advertising company Adpod and £8.5 million of the loans are still outstanding and should not have cleared its own credit policy.

Funding Circle Stops to Offer Manual Investment in Self Selected Loans (P2P-Banking), Rated: AAA

UK p2p lending Marketplace Funding Circle announced today that from September 18th, there will be an important change to how investors can invest on the marketplace. From that date Funding Circle will withdraw the option to manually choose which businesses to lend to and which loan parts to sell. Instead Funding Circle says it will launch a significantly improved and upgraded version of existing Autobid and Autosell lending tools.

Investors will be able to choose one of two new lending options based on their personal preference. Both options will be available as a Funding Circle ISA, which Funding Circle intends to launch later this tax year.

  • Balanced: you will automatically lend to the full range of creditworthy businesses (A+ to E), aiming to achieve an attractive, stable return. This will allow you to build a balanced portfolio similar to the makeup of small businesses in the UK today. The projected return is estimated to be 7.5% per year after fees and bad debt.
  • Conservative: you will focus on lending to businesses that have been assessed as lower risk (initially A+/A) but with a lower projected return. The projected return is estimated to be 4.8% per year after fees and bad debt.
Source: P2P-Banking

The ‘finance franchise’ and fintech (Part 1) (FT Alphaville), Rated: AAA

To the authors, there are three ways finance operates through the economy: 1) credit intermediation 2) credit-multiplication and 3) credit generation.

Source: FT Alphaville

“Credit-multiplication” they note is the most familiar counter-example. This encapsulates the theory of fractional reserve banking, the idea that the banking system lends out more than it receives in investor deposits and holds only enough of the latter to handle anticipated daily withdrawals. The rest is continuously lent out.

 

 

 

If banks are free to create money from thin air, what then are the limitations?

The authors argue since credit outstanding is not fundamentally dependent upon—or, therefore, limited by— pre-accumulated investment capital, it must be limited only by investment opportunities which are viewed as potentially profitable. “In other words, credit is endogenous rather than subject to exogenously given, pre-accumulated funds.” If the opportunities are there, banks will generate the funds (on effectively maximum leverage by way of an accounting trick) to find ways to finance them.

Source: FT Alphaville

The ‘finance franchise’ and fintech (Part 2) (FT Alhpaville), Rated: A

What’s really interesting, however, is how it applies to the budding fintech sector, which aims to increase its independence from the official sector by recreating models based on loanable funds (credit intermediation) assumptions.

While the authors note it’s probably too early to decisively write off fintech, the way things are proceeding seems to support their theory. In short, they believe that if these systems are to expand beyond their peripheral place, they will have to reintegrate into the core finance franchise system eventually.

Why security is king in P2P lending (FT Adviser), Rated: A

The Peer to Peer (P2P) lending market has risen from zero, around 10 years ago, to an outstanding investment level of more than £8.7bn of loans in the UK alone.

An obvious point perhaps, but the first thing to understand about P2P platforms is that no two operate the same model. Despite residing in a busy market-place, every platform takes a different approach to security, risk assessment and its lending processes.

1) Pre-approval of loan: The checks put in place to ensure that high-quality loans are approved, where the loan can be afforded by the borrower but still recoverable in case one day it is not.

2) Post-approval of loan: The measures put in place to deal with loans defaulting and the recovery of capital in that situation.

LendingCrowd is offering both new and existing investors the chance to earn £150 cashback when they invest £2,500 or more before 31 August.Lending Crowd offers two investment products, which are both eligible for the £150 cashback offer.Both can be included within the company’s Innovative Finance ISA.The Growth Account automatically invests funds in a diversified portfolio, which offers a target rate of 6% a year (after fees and bad debt). You need a minimum of £1,000 to invest.The Growth ISA and Self-select ISA allow you to invest up to £20,000, with the target returns being tax-free. The platform also allows transfers in from existing ISAs.

Croydon is high-risk mortgage hotspot (Mortgage Finance Gazette), Rated: A

According to new research by peer to peer secured lending platform Lendy, Croydon saw a 35.6% rise in the number of high-risk mortgages, up from 309 in 2015.

Across the UK, 88,057 high-risk mortgages were taken out last year, equating to 8.1% of all home loans. The percentage of high-risk mortgages taken out in Croydon was more than double this at 16.5%.

Lendy says that lower LTVs play a big role in ensuring that risk is reduced for their investors and it offers LTVs of 70% or below on its properties.

Source: Mortgage Finance Gazette

Two alt lenders land major business-boosting deals (Business Insider), Rated: A

Two of the UK’s biggest names in small- and medium-sized business (SMB) alt lending, 

Chatbots, application-free lenders and consumer hubs – Moving the mortgage tech debate on (Mortgage Solutions), Rated: A

Advancements in mortgage technology have been made but it seems they have yet to revolutionise the mortgage process – but every one knows they will.

The ideal is a digitally joined up housing, mortgage and legal process allowing the consumer to transact in a way which is convenient to them, and in a shorter time frame – but this has yet to be achieved.

Full online integration of APIs in the UK mortgage lending market is being worked on by a handful of stakeholders, although attendees said that behind closed doors a lender is close to rolling out its application-free mortgage process.

2 discounted investment trusts for income investors (AOL), Rated: A

Investing in peer-to-peer lending is one way to improve the return on your savings, but for investors who don’t want to go through the trouble of setting up their own account with a peer-to-peer lending platform and micro-managing each debt investment, P2P Global Investments (LSE: P2P) offers an alternative route for savers to gain access to the sector.

Shares in the investment trust have gained 12% since April, after the fund manager announced a review of its performance in light of falling returns.

At a current price of 861p a share, P2P Global Investments currently trades at a dividend yield of 5.6%.

KeyBank partners with Invesco’s robo-adviser (Robo Advice News), Rated: B

Invesco, the parent company of UK-based Invesco Perpetual, is continuing to expand into robo-advice and passive investing.

Digital start-up Starling taking financial services by storm (CNBC), Rated: B

Boden founded her British fintech start-up in 2014, shortly after she left one of Ireland’s biggest financial institutions, Allied Irish Bank, where she worked as the chief operating officer.

“I started thinking about a bank that really focused on doing a couple of things well, that was all about everyday transactional banking, the daily banking business, and what (would happen) if you used the information on each transaction, to give people insight into their overall lives.”

Boden believes that the challenger bank’s smaller scale operation gives it an edge over larger players, by significantly reducing the costs of running a bank.

China

Ping An’s online lending platform Lufax turns profit ahead of IPO (Asian Review), Rated: AAA

Shenzhen-based financial conglomerate Ping An Insurance Group said Friday that its online lending operator Lufax Holdings was no longer loss-making as it prepares for an initial public offering.

Established in 2011 with the help of Shanghai municipal government, Lufax, or Shanghai Lujiazui International Financial Asset Exchange, is currently the largest peer-to-peer lending platform in mainland China in terms of outstanding loans, totaling 1.5 trillion yuan ($225 billion) as of Friday, according to industry consultant WDZJ.com.

Of Ping An’s nonstandard debts, 56.9% were exposed to infrastructure investments, followed by 27.7% to non-bank financials and 12.3% to real estate.

Compared to last year when Ping An netted 9.5 billion yuan from a restructuring, net profit of its internet finance business fell 94.7% to 420 million yuan in the first half. That represented 0.9% of the wider group’s net profit, which totaled 43.43 billion yuan in the first half, up 6.5% from a year ago.

Greg Gibb of Lufax (Lend Academy), Rated: A

Lufax has gone from a simple peer to peer lending platform that launched in 2012 to a diversified wealth management platform with over $60 billion in assets under management. They are a true success story and how Greg and his team have done this is simply fascinating.

  • How Greg, an American, ended up in China becoming the CEO of a fintech company.
  • What was the opportunity that Greg and the Ping An chairman saw that led to the founding of Lufax.
  • What they really wanted to do and why they ended up deciding to start with a P2P lending platform.

Jack Ma-backed Yunfeng leads $ 1.7 billion purchase of MassMutual Asia unit (Reuters), Rated: A

Yunfeng Financial Group (0376.HK) said it would be the main investor in a $1.7 billion acquisition of insurer MassMutual International’s Hong Kong unit – a deal that sent shares in the Jack Ma-backed finance firm soaring as much as 30 percent.

Yunfeng will own 60 percent of MassMutual Asia. The rest will be owned by other investors such as Ant Financial Services, an affiliate of billionaire Jack Ma’s Alibaba (BABA.N), as well as Singapore sovereign wealth fund GIC Private Ltd and Chinese Internet and telecoms firm SINA Corp (SINA.O).

Students failing to learn debt-control lessons (China Daily), Rated: A

In April, a sophomore in Xiamen, Fujian province, killed herself because she was unable to repay 570,000 yuan ($85,448) she had obtained via a peer-to-peer lender, according to reports in Fujian Daily.

Earlier this year, the Inner Mongolia Morning Post reported that about 900 university students in the autonomous region were cheated out of more than 9 million yuan after they signed up for a “promotion” that purported to offer iPhones for 800 yuan, rather than the usual price of about 2,000 yuan. In fact, they had unwittingly applied for loans from a peer-to-peer platform and were quickly pressured to repay the money at high rates of interest.

Although there are no nationwide statistics related to criminal incidents linked to peer-to-peer lending, a number of provinces and regions have released data that illustrate the gravity of the situation.

In May, police in Jilin province said they had handled 193 cases related to the issue, busted three gangs and detained 31 people suspected of using the system to defraud would-be recipients.

Online Automobile Leasing Platform ‘Come Use a Car’ Wins RMB 100 Series A (Marbridge Consulting), Rated: A

Tianjin-based Gongming Zhongtai International Assets Leasing, operator of online and mobile automobile leasing platform Laiyongche (literally “Come Use a Car”), has won RMB 100 mln in Series A funding, according to an announcement from CEO Lu Yuquan at a press conference in Beijing. The round was led by P2P lending platform Meili Jinrong (Meili Finance) and mobile gaming company Jinke Culture Industry (300459.SZ), with participation from Xingyi Capital and Xu Xuepeng, founder of Yuehui Capital.

Techies don’t always want to work in Hong Kong banking. Here’s why they should (efinancial careers), Rated: B

As blockchain, AI and other emerging technologies become ever more prevalent in Hong Kong finance, demand for specialist tech candidates is heating up and firms have to offer more – both financially and in terms of career development – to prospective employees.

In short, we need to build a larger financial technology talent base in Hong Kong – not just developers and engineers, but also fintech entrepreneurs and creative thinkers.

European Union

N26 now has 500,000 customers for its bank of the future (TechCrunch), Rated: AAA

Fintech startup N26 is getting more and more customers. The company reported 300,000 customers back in March. It now has 500,000 customers across Europe.

More importantly, growth seems to be accelerating as the startup announced that it was adding a thousand customers every day back in March. Now, around 1,500 customers sign up every day.

International

IVC Poised to Invest in Fintech Unicorn Transferwise (Crowdfund Insider), Rated: AAA

IVC, one of the original venture capital firms on Sand Hill Road in Silicon Valley, is poised to take a substantial stake in Fintech unicorn Transferwise. This is a according to a report by Sky News that indicated IVP would invest approximately $60 million in the young firm that is an express route to disrupt the banking industry.

Fintech Funding Roundup: Instamojo, AnyPay, Aegon, Funding Circle (Paybefore), Rated: A

Options, a provider of cloud-enabled managed services to capital markets, has received nearly $100 million in investment from New York-based private equity firm Bregal Sagemount. The money will be used for growth and platform innovations.

Instamojo, an India-based digital payments platform for SMEs, has raised undisclosed pre-Series B funding from Japanese payments company AnyPay.

Dutch financial services provider Aegon is partnering with online lending platform Funding Circle.

Australia

Loans rebound but APRA caps could limit short-term growth (Courier Mail), Rated: AAA

BUNDABERG-based Auswide has criticised how lending regulatory caps are impacting small banks, saying they will partially suppress its own loan growth in the next six months.

The comments come as the 23-branch lender reports a rise in profits and dividends.

Auswide accelerated lending in the second half, and its loan book rose 4.01 per cent for the year to $2.773 billion. That remains off industry averages of 5.4 per cent, according to Reserve Bank of Australia statistics.

Auswide profits rose from $11.7 million to $15.1 million – expenses from merger activity in fiscal 2016 were not repeated. On its preferred underlying result, earnings rose from $14 million to $15.6 million.

India

Fintech startup Capital Float raises $ 45 mn in Series C round led by Ribbit Capital (VC Circle), Rated: AAA

Bengaluru-based digital lending platform Capital Float has raised $45 million (Rs 293 crore) in its Series C round of funding led by Silicon Valley-based fintech-focussed venture capital firm Ribbit Capital.

Existing investors SAIF Partners, Sequoia India and Creation Investments also participated in the round, Capital Float said in a statement.

Finding the right balance on crowdfunding (livemint), Rated: A

There are currently two crowdfunding models that are of interest to regulators. The equity-based model allows for a stake in the venture via private placement. And peer-to-peer (P2P) lending, which falls under the Reserve Bank of India’s (RBI’s) purview, connects lenders and borrowers who may mutually agree upon either a fixed interest rate or a variable one. Both operate via third-party digital platforms.

Other benefits are less obvious. In a 2016 paper for the US government’s small business administration, Research On The Current State Of Crowdfunding: The Effect Of Crowdfunding Performance And Outside Capital, Venkat Kuppuswammy and Kathy Roth found that crowdfunding success served as proof of concept and made it easier to subsequently access capital from more traditional sources such as banks, venture capitalists and angel investors.

The immaturity of digital crowdfunding globally and the start-up sector in India mean that these come with plenty of caveats, however.

APAC

Vietnam Startup Ecosystem (Vietnam-Briefing), Rated: A

Fintech has emerged as the most attractive sector in which to invest with remarkable growth figures in 2016, having received USD$ 129 million in investments. M&A activity has also been intense lately, which contributed to the overall progress of the ecosystem. Payment still accounts for the largest pool of fintech startups. Foreign and local startups could easily break into new sectors, namely InsurTech (insurance), Wealthtech (wealth), and Regtech (regulation). Vietnam has even set up a steering committee on fintech led by the Central Bank with the purpose of supporting the State Bank of Vietnam Governor in his policies.

BSP readies rules on fintech platforms (Inquirer), Rated: A

The Bangko Sentral ng Pilipinas (BSP) is studying new digital solutions as financial technology platforms proliferate, opening up new markets and access for broader segments of society while also increasing the risk of harm to unwitting consumers and investors.

Espenilla said the BSP was considering two solutions: An API system, which streamlines the reporting requirements between the BSP and regulated entities such as banks, and an automated complaint handling portal, which establishes a direct link with customers.

Middle East

Funding squeeze hastens take-off of non-bank lending in Middle East (Reuters), Rated: AAA

Middle East investment companies are ramping up their lending to businesses, providing a lifeline for small and medium-sized firms struggling to secure finance from banks that tightened credit after a suffering rise in bad loans.

Industry participants estimate non-bank lenders in the region could provide around $1 billion over the next three to five years, including secured loans, mezzanine debt, preferred shares and convertible loans and bonds.

Africa

Sanlam buys into EasyEquities (IOL), Rated: AAA

Sanlam Investment Holdings has acquired shares in financial technology business EasyEquities.

Authors:

George Popescu
Allen Taylor

Wednesday August 16 2017, Daily News Digest

unsecured personal loan market

News Comments Today’s main news: SoFi battles its first PR crisis. Small businesses braced for higher costs post-Brexit. ID Finance sees potential in Brazilian market, sees 82% revenue growth in 2017 first half. Today’s main analysis: Pullback in subprime loans. Prosper’s Q2 numbers. Today’s thought-provoking articles: New fintech lenders encroaching on business banking turf. Pullback on subprime loans. Hongling Capital […]

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United States

SoFi battles its first major PR crisis (Tearsheet), Rated: AAA

In a wrongful dismissal suit filed last week, a former employee reportedly claimed he was let go after he told management he had seen female employees subjected to lewd and inappropriate comments and that managers canceled loan applications when internal errors were made — a tactic to secure quarterly bonuses of up to $15,000. There’s also talk of a second class-action lawsuit alleging broader mistreatment of employees at the company.

But experts said the extent of the damage to the SoFi brand will center on whether other employees come forward to corroborate the allegations.

Jim Prosser, vp of communications and policy at SoFi, said the company carried out an internal investigation into the matter and challenged the notion that loan applications could be arbitrarily cancelled.

Based on sentiment expressed on Twitter, the lawsuit hasn’t made a big dent in SoFi’s brand reputation. Since the news broke Friday, 119 tweets mentioned the SoFi Twitter handle, 53 percent of which were positive and 47 percent were negative, according to Brandwatch. Compared to the past month, the SoFi handle attracted 920 mentions, 75 percent of which were positive. Still, Terry maintains that it’s not a massive conversation, and the news may have gotten less play with the violence in Charlottesville, Virginia, capturing headlines.

Start of a New Trend? Pullback in Subprime Loans Observed (GlobeNewswire), Rated: AAA

For the first time since 2012, originations to subprime consumers declined year-over-year for a number of major credit products, according to TransUnion’s (NYSE:TRUQ2 2017 Industry Insights Report. The report, powered by PramaSM analytics, found that 4.63 million subprime consumers originated an auto loan or lease, personal loan or credit card in Q1 2017. Comparatively, 4.89 million subprime consumers originated one of these products in Q1 2016.

In Q1 2017, subprime personal loan originations declined 10.6% year-over-year, compared to a positive annual growth rate of 11.0% in Q1 2016. This marks three straight quarters of year-over-year declines in originations. More than 100,000 fewer subprime consumers opened a personal loan in Q1 2017 than in Q1 2016.

In fact, personal loan originations declined for all risk tiers, but at lower rates than for subprime originations. Total originations dropped 6.9% from 2.99 million in Q1 2016 to 2.78 million in Q1 2017.

In the credit card market, subprime originations declined by 1.8% to start 2017, the second consecutive quarter of decline. Since 2014, subprime originations had increased at a rapid rate, averaging growth of 29.2% in the first quarters of 2014, 2015 and 2016. In Q1 2017, subprime originations declined at nearly the same rate as total originations (down 1.9%).

As subprime consumers gained access to credit cards, lenders kept subprime credit lines low. In Q1 2017, subprime consumers held just 2.6% of total credit lines.

Auto loan originations declined 8.9% year-over-year from Q1 2016 to Q1 2017. Originations to subprime consumers dropped to 1.10 million in Q1 2017, down from 1.20 million in the first quarter of 2016. At the same time, total originations declined just 2.9% to 6.73 million in Q1 2017.

Source: TransUnion

Mortgage Delinquency Rate Drops to New Low since Recession

The mortgage delinquency rate reached the lowest level since the recession in the second quarter of 2017, dropping below 2% for the first time in almost 10 years. The mortgage delinquency rate was 1.92% in Q2 2017, down 16.5% from 2.30% in Q2 2016.

Viewed one quarter in arrears, mortgage originations remained relatively steady year-over-year in the first quarter of 2017. Up slightly from 1.46 million in Q1 2016, mortgage originations reached 1.49 million in Q1 2017. Largely due to the rise in interest rates, originations declined 28.3% between Q4 2016 and Q1 2017. A year prior, originations only declined 9.4% between Q4 2015 and Q1 2016.

More than 83% of mortgage originations were in the prime and above risk tiers in the first quarter of 2017. Market share of prime and above risk tiers has remained roughly in that range since Q4 2013.

The average new account balance, also viewed one quarter in arrears, declined 1.6% from $223,262 in Q1 2016 to $219,743 in Q1 2017.

Source: TransUnion

Total Credit Card Balances Rise Following Rich Credit Offers in 2016

The latest TransUnion Industry Insights report found that total credit card balances continued their steady year-over-year increase in the second quarter of 2017. Total card balances reached nearly $714 billion, up 7.8% from $662 billion in Q2 2016. The average balance per consumer grew 3.3% to $5,422, up from $5,247 in Q2 2016.

The credit card delinquency rate reached 1.46% in Q2 2017, up 13.2% from 1.29% in Q2 2016. This brings the card delinquency rate above the average Q2 delinquency reading of 1.27% for the last three years.

Source: TransUnion

Auto Delinquency Rate Rises after Years of Non-prime Origination Growth

TransUnion’s latest Industry Insights Report found that the auto delinquency rate reached 1.23% in Q2 2017, an increase of 10.8% from 1.11% Q2 2016.

Viewed one quarter in arrears, auto originations declined to 6.73 million in Q1 2017, down 2.9% from 6.93 million in Q1 2016. This marks the third consecutive quarter of year-over-year declines in auto originations and the first decline in origination growth in any first quarter since 2010.

Total auto balances achieved a new high in Q1 2017, reaching $1.145 trillion. The total balance was up 6.9% from $1.072 trillion in Q1 2016.

Source: TransUnion

Personal Loans Reach New Milestones as Balances Grow and Delinquencies Drop

In the second quarter of 2017, the personal loan delinquency rate declined to the lowest level since 2009. The delinquency rate was 3.02% in Q2 2017, an 8.5% decline from 3.30% in Q2 2016.

Personal loan balances achieved a new milestone of nearly $107 billion in Q2 2017, growing 10.8% over Q2 2016, when total balances were $96 billion. While balances increased, the growth rate was lower than the average Q2 growth rate of 24.7% for the past three years. The average balance per consumer also reached a new high at $7,781 in the second quarter, up slightly from $7,745 in Q2 2016.

Personal loan originations, viewed one quarter in arrears, declined 6.9% to 2.78 million in Q2 2017, compared to 2.99 million in Q2 2016.

Source: TransUnion

Please visit  more charts and details about TransUnion’s Q2 2017 Industry Insights Report or to register for TransUnion’s Q2 2017 Industry Insights Webinar.

Prosper Reports Strong Q2 Numbers – Is Cash Flow Positive Again (Lend Academy), Rated: AAA

Source: Lend Academy

As you can see in the graphic above Prosper had a rocky 2016. They went from a quarterly origination high of over $1.1 billion in Q4 2015 to a low of $312 million in Q3 2016. Since that time they have shown some solid growth with originations in Q2 2017 coming in at $775 million up from $586 million in Q1. They still have a long way to go before they reach record levels but growth has returned to the first US marketplace lender.

  • Total originations from inception through June 30, 2017 was $9.7 billion.
  • Transaction fee revenue rose to $35.4 million, up 32% quarter-over-quarter and 84% year-over-year.
  • Whole loans represented 94% of total loan volume in Q2.
  • Adjusted EBITDA was $6.7 million up from a loss of $11.6 million in Q2 2016.
Source: Lend Academy

New Fintech Lenders Encroaching On Business Banking Turf (The Financial Brand), Rated: AAA

Small and micro businesses struggle to get the cash they need. According to the Federal Reserve’s small business credit survey, 60% of applicants obtained less financing than they needed.

And they need money. The top challenge facing small businesses, says the Fed, is credit availability or securing funds for expansion (44%), followed by paying operating expenses (36%), making payments on debt (25%), and purchasing inventory or supplies to fulfill contracts (17%).

Unfortunately, size makes these loans unattractive to many banking providers. More than half (55%) of small businesses needed $100,000 or less and three-quarters sought $250,000 or less.



Can Smaller Banks and Credit Unions Compete? And Should They?

First, while online lender websites may be alluring, small business owners are still concerned about data security and privacy — particularly with these neo-lender startups. Second, the product features among fintechs are not always clearly stated, making it difficult to compare product offerings and costs.

These issues mean many small businesses still prefer to get a loan from a bank. Half (50%) seek financing from a large bank, and 21% from online lenders. And their preference is for loans not credit cards; 86% say they applied for a loan or a line of credit vs. only 31% who just applied for a credit card.

Smaller loans can be profitable, if you approach them in new ways using new tools.

  1. Reengineer the Process with Big Data. With so much data available on small business owners and more computing power, banks can use big data in innovative ways to decision loans. No longer limited to a credit score, big data can analyze the behavior of the business and predict its ability to pay back the loan. Big data also means that fewer applications must be sent to a human for decisioning. Real-time decisioning cuts costs for the bank and since so much customer data is already digitized, there’s less need to require borrowers to submit reams of documentation.
  2. Partner with Fintech. Rather than try to compete with online alternative lenders, consider joining them. IN 2015, J.P. Morgan Chase & Co. announced a partnership with On Deck Capital to create online small business loans. Called Chase Business Quick Capital, it provides Chase customers with faster access to cash than a traditional bank loan. Chase states that the capital can be available in the same day. In the past, a small business loan could take weeks to decision and then fund.

Goldman Tops Banks Betting on a New Type of Hedging (Bloomberg), Rated: A

Goldman Sachs Group Inc. and JPMorgan Chase & Co. are leading big banks in plowing record funds into outside ventures trying to disrupt their industry, a role typically dominated by venture capital firms, according to a report from Opimas, a management consultancy.

Goldman Sachs has invested in about 15 so-called fintech firms focusing on capital markets businesses this year, while JPMorgan has bet on nine, the report shows. Altogether, banks and other established companies will probably pump a record $1.7 billion into the sector through 44 deals in 2017, Opimas estimated.

A hot fintech startup has amassed nearly $ 5 billion from people willing to hand over their bank logins (Business Insider), Rated: A

  • Personal Capital is a startup known for its free platform, which allows people to plug in their bank and investment accounts to see all their financials at once.
  • CEO Jay Shah says Personal Capital has been monetizing the business by getting richer clients to pay for financial advice.
  • The startup recently raised an additional $40 million in outside funding.

The company is managing assets for Americans worth about $4.9 billion, and increasingly the customers are more affluent, Personal Capital’s CEO, Jay Shah, told Business Insider in a recent interview.

Shah declined to say how many of the company’s estimated 1.5 million free users convert to paying for financial advice from the free platform.

What you need to know about financial services fraud (Tearsheet), Rated: A

In finance, there are three distinct patterns of fraud: transaction fraud, application fraud and account takeover fraud.

Card issuers lost $15.72 billion (72 percent) in gross fraud losses in 2015 and merchants and acquirers lost the remaining $6.12 billion (28 percent), according to the Nilson Report.

Application fraud is the fastest-growing type of fraud in financial services and happens when a fraudster actually pretends to be you using actual account credentials to open new lines of credit. We can break it down even further into three types:

  • Third party fraud: when someone gets enough of someone’s personal information from a compromised data set to go to a bank and pretend to be that person to apply or a loan or credit card
  • First party fraud: when the person coming to the bank (or other service) really is the person he or she claims to be but intends to not pay back the loan or credit card; in instances of first party fraud, the bank or business is the victim, not the customer
  • Synthetic fraud: when someone creates a persona using fake or borrowed information, like a social security number, and adds other, made-up elements of personally identifiable information like a name, address or date or birth

Account takeover fraud is the final type of fraud (for the purposes of this primer, at least). It happens to people when fraudsters obtain their various user IDs and passwords to be able to access other accounts that involve financial transactions.

Did those new chip cards I got help?
Kind of! Account takeover incidents increased 61 percent to $2.3 billion from 2015 to 2016, according to research by Javelin published in February. Victims pay an average of $263 out of pocket and spent 20.7 million hours to resolve it in 2016 – six million hours more than in 2015.

Community banks stand to gain from blockchain — if they work together (American Banker), Rated: A

Blockchain is most widely known as the platform to house virtual currencies such as bitcoin,ethereum and litecoin. But the uses for blockchain are going well beyond virtual currencies. The Republic of Georgia, for example, voted in April 2016 to implement a land ownership registry that relies on blockchain to verify ownership of property. If the United States did something similar with blockchain, banks could close real estate loans more quickly. Think about a world where ownership interests in real estate can be verified immediately and with certainty.

In this world, the expansive role of the title agent would essentially dissipate (or be greatly minimized), the time taken to verify title would be eliminated and, most important, the cost associated with confirming a title interest through title insurance would be dramatically reduced. All of these results would improve the closing process, both from an efficiency standpoint for banks and from a cost standpoint for the customer.

Technologists are also using blockchain to try to replace our needlessly difficult residential mortgage loan origination processes so that the process, from application to closing, can be reduced from a few weeks to a few days.

To realize these kinds of opportunities, community banks in a region should collaborate on strategies to bring blockchain into the banking industry.

Top and The Best Peer-To-Peer (P2P) Lending Sites For Online Loans (FX Daily Report), Rated: A

A PriceWaterhouseCoopers report noted that though the P2P industry is in its infancy loans to the tune of $5.5 billion have been disbursed by the P2P websites in the U.S. in 2014 alone. According to PriceWaterhouseCoopers, P2P lending could be more than $150 billion by 2025.

#1: Funding Circle

Funding Circle has disbursed more than $1 billion in loans to over 8,000 businesses in the world. Along with the growth in terms of the number of businesses borrowing from the company, Funding Circle has seen a substantial growth in the number of investors too. In fact, Funding Circle’s investor base includes banks, other financial institutions, and more than 40,000 retail investors. Even the U.K. government is an investor.

#2: Lending Club

As leading online lending marketplace, the company that connects borrowers and lenders has disbursed loans to the tune of $11,167,217,348 as of mid-2015.

#3: Upstart

The minimum amount you can borrow is $3,000 and the maximum is $35,000. The annual percentage rate or APR starts at 4.7 percent. They offer loans for just about everything.

#4: CircleBack Lending

Loans are offered by CircleBack Lending for tenures of 3 or 5 years and amounts ranging from $3,001 to $35,000. The APR ranges from 6.63 percent to 36 percent.

#5: Prosper Marketplace

The company has registered tremendous growth since its inception and currently has a client base of more than 250,000. Prosper has disbursed loans worth more than $4 billion so far.

#6: Peerform

This popular lending marketplace offers 3-year loans ranging from $1,000 to $25,000 with an APR of 7.12 percent to 29.99 percent. Peerform does not look at the FICO score alone in order to measure the risk of lending. The company’s Loan Analyzer carries out the evaluation on a case to case basis. According to Peerform, the Loan Analyzer was developed in consultation with leading economists and it follows a differentiated method for determining the creditworthiness of each borrower. As a result, even individuals whose credit scores are in the range of 600 may be able to secure loans.

#7: SoFi

SoFi’s offers loans starting from $5,000 and up to $100,000, which is higher compared to the standard amount of $35,000 offered by many other players in the peer-to-peer marketplace.

CFPB Says Tribal Online Lender Case Belongs In Illinois (Law360), Rated: A

The Consumer Financial Protection Bureau urged an Illinois federal judge Monday not to transfer a suit claiming four Native American tribe-owned companies charged excessively high interest for online loans, saying there’s much more reason to keep the suit in Illinois than to move it to the companies’ preferred Kansas venue.

Golden Valley Lending Inc. and three other online lenders owned by the California-based Habematolel Pomo of Upper Lake Tribe had asked U.S. District Judge Thomas M. Durkin in June to transfer the CFPB’s suit to Kansas,….

Why fintech startups love advertising on the New York City subway (Tearsheet), Rated: A

For a consumer fintech startup, it’s the perfect place to put some advertising dollars. TransferWise has built its business around the ability to let people send money overseas at a low cost. Sixty percent of its users are immigrants; 40 percent are American-born. Its employees represent more than 50 countries. Its user base and prospective customer pool looks a lot like the people of New York.

Even if they’re American-born, theres still a chance they moved to New York from someplace else. TransferWise wants to send the message that it celebrates that diversity.

The subway is a hot destination for startups in general, looking to stretch their marketing budgets. E-commerce startups like Thinx and Casper both love advertising on the subway, calling them “conversation starters” and a way to be in a city where “trends are set.” They’re also effective, say these companies: David Zhang, Casper’s CMO, told Tearsheet’s sister site, Digiday that subway ads are highly effective to target local audience because when riders get stuck on the train, they have nowhere to look except at those ads.

Three years ago Venmo ran an ad campaign around the New York subway featuring an everyday millennial called “Lucas” (who, it turns out, was a Venmo engineer). Venmo’s message to subway riders was the same (although less nostalgic and bittersweet): we do the same things you do, we understand you. The campaign sparked a lot of frustration and confusion for consumers — but the company was engaging with them.

Charlotte fintech startup targets couples who don’t merge finances (Charlotte Agenda), Rated: A

Couples today are getting married later.

And when they do get hitched, they’re much less likely to combine their finances. Only one-third of millennial couples are putting everything in a joint bank account and fully merging their money. That’s down from about half of couples overall, according to research from TD Bank.

Honeyfi, an app planning a formal beta launch later this week, is designed to allow couples to blend finances to the extent they’re willing to — and figure out how to manage things accordingly.

Both sides load in all their financial accounts but can choose what’s visible to their significant other — both at the account level and at the individual transaction level. If you want to keep your shopping spree under wraps, you can do that with Honeyfi.

Small banks’ fintech efforts held back by Volcker Rule (American Banker), Rated: A

The Dodd-Frank Act’s Volcker Rule was meant to protect the financial system by prohibiting banks from engaging in certain risky activities. But it may also be stopping community banks from being able to reap significant benefits from the fintech revolution.

I bought a new Surface with the Surface Plus program (onmsft.com), Rated: A

Here’s a couple of things to note: In order to be considered for the Surface Plus Program, you are required to purchase Microsoft Complete and you will be required to do a credit check through KLARNA. KLARNA handles the financing and you will have to make your monthly payments through KLARNA and NOT Microsoft. After choosing the Surface Pro (fan-less Intel Kaby Lake i5 processor, 8 GB RAM, 256 SSD)I found that my 24-month payment plan is similar to a AT&T phone payment plan.

I have not started making payments yet, but my payments will be about $63 a month, with an option to upgrade after 18 months.

 

It takes about a week. I placed my order on August 1, got order on August 8. It is annoying that there is no tracking, but they don’t next-day a device to you when you order online through KLARNA. It can be frustrating I know, I checked my status every day freaking out. Going to a Microsoft Store is a better option.

Alan Gellman Joins Credible as Chief Marketing Officer (PR Web), Rated: B

In the latest move to capitalize on its expanded offerings and accelerate recent growth, personal finance marketplace Credible.com today announced that former Esurance CMO Alan Gellman is joining Credible as its first chief marketing officer.

Gellman who, prior to Esurance, led digital marketing at Wells Fargo, said joining Credible will allow him to pursue his goal of helping a consumer-centric growth-stage company realize its potential.

After launching as the first personal finance marketplace to provide instant, personalized offers for student loans, Credible expanded its offerings to include personal loans, and this month announced the pilot of its credit card marketplace. In the first half of 2017, more than 80,000 people qualified for loan offers through the Credible marketplace.

In his most recent position as chief marketing officer at Esurance, a leader in the self-directed insurance market, Gellman was named one of “The 50 Most Innovative CMOs in the World” by Business Insider. His appointment follows an announcement earlier this month that Ron Suber joined Credible as executive vice-chairman and a member of the board of directors.

New Leaf Communities, in Partnership With RealtyeVest, to Build 35 Unit Townhome Project Near Amazon Fulfillment Center (GlobeNewswire), Rated: B

New Leaf Communities, in partnership with RealtyeVest, announced plans today to raise capital for the new construction of Camden Crossing, a 35-unit townhouse development located in thriving northeast Jacksonville, FL. Online retail giant, Amazon, has plans to open a fulfillment center which will add approximately 1,200 new jobs located less than 2 miles away from the planned property. Additionally, Camden Crossing will be located less than 2 miles from River City Marketplace (a large, bustling outdoor shopping center) and Jacksonville International Airport (JIA). Forbes named Jacksonville one of America’s fastest growing cities in 2017. The 1,495 square foot townhouses will have 3 bedrooms, 2.5 baths, single car garages, and will be located on 6.15 acres.

According to Lee Arsenault of New Leaf Communities, Camden Crossing will offer investors an opportunity to earn an above market return while being secured in a hard asset like real estate.

RealtyeVest was chosen exclusively to raise capital for this project due to their powerful real estate crowdfunding platform, which allows individuals to review and invest in real estate online.

United Kingdom

Funding Circle: Small businesses braced for higher costs after Brexit (P2P Finance News), Rated: AAA

MORE THAN two thirds of small businesses that import goods and services expect costs to increase when Britain leaves the European Union, Funding Circle claims.

A poll of 1,325 small business borrowers by the peer-to-peer platform found 69 per cent of firms expect their average costs to increase by £5,300 per month resulting in £60,000 per year of extra spending.

Businesses were also deflated by the overall result of the general election with only 12 per cent stating that they feel positive about the outcome, while 41 per cent were concerned.

Buy-to-let property platform hits £50m milestone (Property Industry Eye), Rated: A

Founded in 2012 with an initial focus on Manchester, the House Crowd claims to offer investors returns of 8-10% to fund property projects, known as peer-to-peer (P2P) lending.

There have been 307 projects funded so far, all of which are secured on the underlying property.

 

4thWay Criticizes Competitors: “Comparison Websites Display Wildly Inaccurate Information About Peer-to-Peer Lending” (Crowdfund Insider), Rated: A

The worst inaccuracies were found to be:

  • Five of the six are presenting peer-to-peer lending as “savings” rather than “investing” a year after the Financial Conduct Authority expressed well-founded concerns about this practice.
  • The two money sites that compare P2P investments in their comparison tables include P2P lending in savings account comparison tables rather than separate investment comparison tables.
  • Risk of fraud and negligence were not mentioned by any of the money sites.
  • Just one of the six mentioned the risks to investors of concentrating their pots on just one P2P lending platform.
  • Risks identified in behavioral investing theory (such as poor investing results from those who are too greedy or fearful) were not mentioned by any of the sites.
  • None of the six explained the full costs to investors of using P2P services, typically covering just a smaller part of the costs (the lending fee), while sometimes leaving the impression that lending is completely free. (It is never free for investors due to hidden costs.)
  • No money sites made clear the vast difference in risks between the various P2P lending platforms.
  • Just one generic money site explains that bad debts might be higher in a financial downturn.
  • While all showed the risk of losses if a P2P lending platform goes out of business, five did not explain that you could experience delays in getting your money back.
  • Five out of six relied heavily on provision funds and on the level of interest rates to assess whether a P2P lending platform is safe, assuming safety is always correlated. (Interest rates are an unreliable measure of risk and provision funds are a secondary risk-control or risk-measurement devices. Much more important factors include such things as solid underwriting and credit-risk models, good security and low bad debt history.)
  • Some of the money sites did not explain that provision funds might not always be sufficient to cover losses.
  • All six fail to mention that you might not in all circumstances be able to get your money back as soon as you expect, even if there is an option to sell your loans and exit early.

The Start Up Loans Company and NatWest to help UK firms access alternative finance (Startups.co.uk), Rated: A

The Start Ups Loans Company, headline sponsor of the Startups Awards 2017, has announced a partnership with NatWest to help UK businesses access alternative sources of funding.

The government-backed Start Up Loans Company joins six other finance providers on the Capital Connections scheme including Seedrs, Funding Circle, Assetz Capital, iwoca, Together and NatWest Social & Community Capital.

Robo roundtable: Restricted advice like buying an ill-fitting suit (Citywire), Rated: A

New Model Adviser® sat down with the heads of three robo firms, or ‘digital wealth managers’.

  • Adam French, chief executive, Scalable Capital
  • Johann Bornman, director of product, ETFmatic
  • Giovanni Dapra, chief executive, Moneyfarm

Friday March 24 2017, Daily News Digest

unbanked

News Comments Today’s main news: OnDeck’s bumpy ride isn’t over. UK equity crowdfunding recovers. Capital Float partners with Amazon in India. Today’s main analysis: Subprime auto loan delinquencies on the rise. 8 out of 10 online shoppers vow not to return to retailers if they have bad returns experience. Today’s thought-provoking articles: The state of bank innovation. An earthquake […]

unbanked

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United States

OnDeck’s Bumpy Ride Isn’t Over (Bloomberg), Rated: AAA

On Deck Capital Inc. jumped as much as 11 percent on Thursday after a report that the New York-based online lender is an acquisition target of closely held rival Kabbage Inc.

Assuming Kabbage were to propose a traditional takeover at a standard premium, it probably would be swiftly rejected by On Deck’s earliest investors, who still own a combined stake of more than 45 percent, according to data compiled by Bloomberg.

A different type of merger arrangement might not be such a terrible idea, especially in the face of potentially heightened regulation. Together, Kabbage and On Deck could share the costs of compliance, if increased scrutiny of online lending is formalized. The combined company could also cut overlapping costs and create scale, which may help it better compete against other providers of loans to small businesses including Square Inc., PayPal Holdings Inc. and CAN Capital.

Could Kabbage’s purported interest in On Deck draw other suitors?

‘Subprime credit losses are accelerating’: There’s a problem in the auto loan market (Business Insider), Rated: AAA

US auto loan and lease credit loss rates weakened in the second half of 2016, according to a new report from Fitch Ratings, which said they will continue to deteriorate.

Losses on subprime auto loans have spiked in the last few months, according to Steven Ricchiuto, Mizuho’s chief US economist. They jumped to 9.1% in January, up from 7.9% in January 2016.

Banks are losing share in the auto lending market, potentially as a result of tightening lending standards. Independent finance companies and credit unions are stepping in to the void.

The state of bank innovation in 5 charts (Digiday), Rated: AAA

Of the more than 100 banking executives surveyed for industry strategist Jim Marous, 71 percent cited improving the digital experience in their top three priorities for 2017; half also identified enhancing data analytics as a priority and 41 percent cited reducing operating costs. 

Just 10 percent, most likely those from major institutions, indicated that investing in or partnering with a third-party fintech startup is a priority.

The biggest challenge for banks seems to be hiring and retaining innovation talent and leadership with the specialized skills necessary to lead an increasingly digital bank, according to a new report by Celent, Innovation Outlook 2017: Making Progress.

Is Kabbage Gearing Up To Buy OnDeck? (PYMNTS.com), Rated: A

OnDeck Capital, Inc has market capitalization of $321 million at present, meaning it won’t be a cheap buy. But OnDeck has seen its share price drop 80 percent since first going public in 2014, and as of February of this year had posted five straight quarters of losses. And more losses are widely expected to come — OnDeck has already publicly noted that it has been forced to set aside additional funds for future losses after determining its calculations in its internal models were off.

Kabbage announced earlier this month that it has priced the largest asset-backed securitization of small business loans in the online lending industry. That means it will be selling about $525 million worth of loans to investors, which Kabbage says will allow it to up its loan volume to around $2.7 billion.

Marketplace Lending Industry Sees Efficiency, Cost, Authentication and Transparency as Primary Drivers of Growth (PRWeb), Rated: A

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

The increasing convergence of traditional and marketplace lenders was a sentiment echoed by Prosper President and eOriginal Advisory Board Member Ron Suber in his keynote at the conference. According to survey respondents, the anticipated growth in partnership was despite the ongoing obstacles for collaboration, including technology integration (38 percent) and conflicting goals (27 percent).

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

Alexa Now Orders Starbucks From Ford Sync 3 (PYMNTS.com), Rated: A

Starbucks just recently announced an ordering integration with Ford’s SYNC3, the automaker’s voice-activated technology powered by Alexa. In a nutshell, this will allow drivers to voice-order their caffeinated beverage of choice while on the road.

On the new in-car voice ordering feature, customers reportedly assign their usual Starbucks order in advance and can direct the request to the 10 stores they’ve most ordered from.

Is Lending Club Really Like Amazon? (The Motley Fool), Rated: A

At the recent Lendit conference, CEO Scott Sanborn made an interesting argument: that online lending is currently in a similar place to online retail at the turn of the millennium. He read passages from a 1999 Barron’s story, “Amazon.bomb,” which criticized Jeff Bezos and foretold the end of Amazon (NASDAQ: AMZN) as we know it. As Amazon investors are well aware, that didn’t happen!

Does Sanborn have a point?

Lending Club was also a first mover in its field, and commands a leading 45% market share Sanborn argues this scale enables a similar “network effect” that will allow Lending Club to get through this tough period.

The second parallel Sanborn drew was cost savings. Just as online retailers like Amazon cut out the costs of physical stores, Lending Club and other online lenders don’t need bank branches or human underwriters. These costs savings allow online lenders to offer loans at lower rates than credit cards, which is how people traditionally obtained unsecured personal loans.

And while sites like eBay and Amazon need buyers, investors in high-yield loans are more fickle. The current low-interest rate period has made high-yield online loans attractive — but that could change if the Fed raises interest rates.

If defaults spike, Lending Club’s underwriting algorithms would come under scrutiny, and lenders might flee the platform again. In contrast, an Amazon customer pays right away, a good is shipped, and the transaction ends. And while Amazon needs to cultivate repeat customers, Lending Club is much more dependent on the financial behavior of others on an ongoing basis.

Why China’s .6 Billion Peer Lending Fraud Is Unlikely To Happen To Lending Club (LC) (CNA Finance), Rated: A

A key difference between the Chinese and US peer lending scene is the level of defaults that occur due to fraudulent listings. Up until the recent regulatory crackdown, fraudulent listings on Chinese lending platforms were rampant, often running as high as 50% versus 1% in the US.

The lack of regulation in China has also fostered a large number of fly-by-night operations opening up shop, often with dubious intentions from the get-go. The hurdles to entry for peer-to-peer lending platforms in the US by contrast are substantial. In fact regulation of the sector is considered so severe that Zopa, the largest based marketplace lender in the UK has actively shelved their expansion plans into the US in order to avoid becoming tied up in US regulations.

Why mobile might be the only platform to serve underbanked (American Banker), Rated: A

In 2015, a Federal Deposit Insurance Corp. study found that one in five citizens were “underbanked.” That same study also found that almost 8% of respondents were completely “unbanked.”

Yet financial institutions globally are serving more people than ever. A recent report from the World Bank found that from 2011 to 2014, 700 million people became account holders at banks, other financial institutions or mobile money-services providers. The number of unbanked individuals dropped by 20%, to 2 billion adults, during that same time period.

To be sure, the use of mobile banking is also growing in the United States. A recent Bank of America report found that 54% of consumers used a mobile banking app, for instance.

In 2015, Pew Research found that although two-thirds of Americans owned a smartphone, 19% of respondents rely on a smartphone to some degree for staying connected to the world around them. Further, 10% of Americans who own a smartphone lack broadband internet at home and 15% who own a smartphone admit to having a limited number of options for internet access beyond their cell phone. Deemed “smartphone-dependent,” this group is largely made up of relatively low-income individuals, consumers with less education, younger adults and minorities.

Are Peer To Peer Loans Right For Your Portfolio? (Forbes), Rated: A

Estimates vary, but the peer to peer market is expected to grow to somewhere between a few hundred billion to over trillion dollars over the coming years, as it captures a high single digit share of consumer lending. The key medium term questions for growth are firstly, how well banks react with their own online lending services, and secondly how successful peer to peer lenders are at maintaining effective lending standards.

Due to differing state regulation, peer-to-peer loans are available in the majority of states, but not everywhere, income qualifications may also apply, such as having an income of over $70,000. Currently, if you live in Iowa, New Mexico, North Carolina or Pennsylvania then your ability to own loans via peer to peer platforms is likely constrained, but in most other states in the US you may qualify.

Often peer to peer debt is issued for several years and so earning a, say, 9% return in one year is great, but if the next year the loan defaults and you lose the full value only 1 year into a 3 year loan term, then that temporary 9% return is not so attractive, and you’ve lost money.

With debt investing, you do need to pay careful attention to your downside risk if you want to be successful, because your interest payments (your upside) can be fairly small relative to the total amount you have at risk (your downside).

Again, to return to the graph above, how many of borrowers can’t pay you back in a bad economy is a reflection of your lending standards, with tighter standards you’re likely to see more borrowers able to pay you back, with looser standards your loans could see far higher loss rates on your investment. There are strong voices on both sides of this debate.

This matters because as interest rates increase, your peer to peer loans are received fixed interest payments. So earning, for example, 5% may seem attractive now, but if the Federal Reserve were to sharply raise interest rates in the coming years, then 5% may be less attractive if government debt also paid 5% interest and so you could invest in government securities, rather than peer to peer and achieve a similar interest rate, or purchase newly issued peer to peer debt at higher interest rates.

With peer to peer lending you may be invested invested in a loan for several years, whether you like it or not. Some peer to peer lenders have so-called ‘secondary markets’ that enabled notes to be traded, though there’s no guarantee your note will sell.

It is possible to defer or eliminate tax on peer to peer loans, by purchasing peer to peer loans within an IRA for example.

5 local startup leaders weigh in on what’s in store for fintech in NYC (Built in NYC), Rated: A

Clarity Money

My hope is to see more technical talent join the New York tech community in general. There are already a few unicorns in the space based in New York and this is very promising. We are noticing a lot of people in banking and consulting who are joining the fintech community because of the lack of innovation and disruption in big corporation due to regulations and bureaucracy.

CommonBond

First, this location is unparalleled for access to talent. New York is home to so many diverse industries — from design to marketing to risk analysis — and that helps us hire top-notch team members. Second, as a fintech company, there’s no better place to be than in one of the world’s largest financial markets.

Payoneer

Being based in New York has made all the difference for Payoneer. New York has always been a financial services hub, but has really become a ‘high-tech hub’ and that has helped our digital payments business grow beyond our expectations. The combination of the city’s dynamic startup community and established financial services community has allowed Payoneer to build a very strong foundation of employees, partners and customers. There are people with big dreams in all of the hi-tech hubs, but particularly in New York many of these people have been in demanding, professional environments for years, so they bring a different focus and discipline to the table. In my opinion, there truly is no place better to start or expand a fintech company than in NYC.

Forter

Being in New York enables me and the whole team to be close to our customers and partners, making sure we understand what their vision is and how we can help them overcome their challenges. The fintech ecosystem in the city has grown significantly in the recent years which enables us to learn and cooperate with other local companies.

NYC is still a significantly more traditional market than the Silicon Valley, especially in the financial sectors, and we haven’t seen as much crossover of experienced successful executives into fintech companies. In the last few months, I’ve started to get the feeling that this is beginning to change. Several people I know, who worked for 30-plus years for big banks, have moved to startups that are challenging those same banks to be better, and leaner.

ConsenSys

ConsenSys now employs 160 blockchain and Ethereum experts with offices in several major cities around the world including the Middle East and Asia, making it the largest blockchain startup. About 40 percent of our staff works out of our office in Bushwick, Brooklyn. We’re proud of our remote-first work culture, and at the same time, many of the Fortune 500 clients of our enterprise group works with are based in New York.

Although Ethereum is increasingly catching on all over the world, there is so much excitement about it in New York that we chose to host the launch of the Enterprise Ethereum Alliance right in Brooklyn, along with 30 partners. New York has been a financial capital of the world for many years, so it makes sense that interest in blockchain would be high here.

What Is a Mortgage REIT? (Yahoo! Finance), Rated: B

Mortgage-backed securities got a black eye in the financial crisis, but real estate investment trusts that own them are currently generous to income income-oriented investors, with dividend yields averaging nearly 10 percent, according to the National Association of Real Estate Investment Trusts.

But with interest rates expected to rise, are they safe enough for a retiree who must preserve principal? Experts have mixed views.

Like ordinary bonds, mortgage securities can lose value when rising rates make older issues with lower yields less appealing. On the other hand, funds that own mortgage securities can gradually pay higher yields as newer securities are added to the portfolio.

Trying to get REIT investors to think like a property investor — and not a stock market investor (FP Street), Rated: B

In other words, to generate a return in REITS, investors need to think like a property investor — and not a stock market investor. All of which means that perceived wisdoms — including that REITs are an interest play, higher-dividend-paying REITs are more attractive investments, and REIT returns are macro-driven — need to be expunged.

6 Guidelines for Building a Client-Friendly Financial App (Think Advisor), Rated: B

The Fintech App Development Compass outlines six steps to help firms build and launch an effective app for their clients.

  1. Know Your User
  2. Focus on Access – One of the hallmarks of fintech is that it can bring financial services to underserved portions of the population.
  3. Establish and Maintain Trust – To keep that trust, they need to make sure that clients will be safe when using the app, and that their concerns and feedback will be heard by developers.
  4. Test and Iterate
  5. Drive Positive User Behavior
  6. Recognize the Value of Mutual Success

Closed-End Funds: Democratizing Alternative Investment Strategies (Think Advisor), Rated: B

Flows into the alternative asset category show this; a 2015 McKinsey article notes that global alternative assets under management grew at a 10.7% annualized rate between 2005 and 2013, twice as fast as traditional investments.

As a result, lines have blurred between traditional and alternative asset classes as investment managers battle for an overlapping opportunity set.

Open-end mutual funds can invest only 15% of their portfolios in illiquid securities. Closed-end funds do not have this restriction, making them attractive vehicles for investing in alternative strategies.

United Kingdom

8 out of 10 online shoppers vow not to go back to a retailer if they have a bad experience returning items (Net Imperative), Rated: AAA

Retailers who fail to provide consumers with a customer friendly and easy returns service risk losing a large proportion of their customer base, according to new data from leading European payments provider Klarna.

Online returns are big business for British retailers today, with nearly 9 out of 10 (87%) of online shoppers having returned items they have purchased online.

On average online shoppers estimate they returned 10% of their total online purchases in the last twelve months. With online spending in the UK reaching £133 billion in 2016, the online returns economy in the UK could be valued as high as £13bn.

A survey of 2,000 UK consumers reveals that 83% of respondents who shop online would not shop with a retailer they have a bad returns experience with. Over three quarters (77%) of online shoppers believe UK retailers need to improve their returns capabilities, while one in four (28%) have been put off returning items due to the hassle of the retailer’s returns process.

Two thirds of online shoppers (67%) say easy returns are an essential factor in their choice of retailer. 28% of online shoppers would spend more if there was an easier online returns process, while 67% say free returns mean they will buy more from a retailer over time.

Report: UK Equity Crowdfunding Recovers from January Slump (Crowdfund Insider), Rated: AAA

The report states:

“February’s OFF3R Index data, made up of 6 equity crowdfunding platforms, has shown a strong uptick funds raised since January. The figures have jumped from just under £9 million in January to well over £16 million in February. These figures were boosted by large rounds from Hibergene (raised via SyndicateRoom) and CauliRice (raised via Crowdcube). Early data from March appears to suggest that this momentum will continue for the equity crowdfunding sector. There has been an increase in the number of larger rounds this month across many of the platforms. This is consistent with the data trends that we saw last year as investors increase investments in equity crowdfunding just before the end of the tax year.”

How tech can help close the advice gap (FT Adviser), Rated: A

Robo advice has been touted over the past 24 months as an answer to the advice gap.

In the Review, which was published in March 2016, robo-advice was hailed as one of several areas where development of technology-based services could go some way towards closing up the so-called advice gap.

“That is why we need to defend professional advice and help firms by using any new emerging technology and have it embedded in their businesses, so the experience the customer receives when they come and meet with their adviser is as streamlined and professional as possible. Quite simply we cannot allow our profession to be left behind.”

As the FCA’s Mr Geale explains, technological innovation will create new ways for consumers to engage with the financial services industry, and the industry will find new ways to provide compliant products and services.

There will always be circumstances or considerations that cannot be captured by an automated model, which is why some firms, such as Learnvest in the US, offer a 24/7 email contact offering, while Australia’s Movo offers tiered packages tied to different levels of human involvement.

Open APIs to shake up small business banking market (Finextra), Rated: A

The global fintech industry, with an estimated 12,000 fintechs and counting, has changed the way small businesses can manage their money in all kinds of ways.

The promise of fintech is so great that $36 billion of venture capital and growth equity has been invested in the sector globally in 2016 alone, representing exponential growth since 2010. The promise of fintech is so great that $36 billion of venture capital and growth equity has been invested in the sector globally in 2016 alone, representing exponential growth since 2010.

Although there are big differences between small business banks and loans in costs and quality (with some banks charging twice what others do for monthly bank account fees, for example), 28% of UK start-ups don’t look into the lifetime costs of a bank account when they open one, and only 4% of businesses switch bank accounts each year. And 35% of businesses who think their banking service to be poor are still not considering switching.

To align with the Open Banking agenda, Nesta’s Challenge Prize Centre has launched the ‘Open Up Challenge’, a new £5m prize fund to inspire the creation of next-generation services, apps and tools designed for the UK’s 5 million small businesses. The Challenge is looking for 20 winning entries from anywhere in the world that will use the UK’s open banking APIs – newly available from early 2018 – to transform the way small businesses discover, access and use core financial products.

Why investors should demand even greater levels of disclosure from P2P platforms (City A.M.), Rated: B

These platforms are proving that, when it comes to matching borrowers and lenders, online is a superior location to the traditional bank branch network. A chunk of bricks and mortar cost has been removed and platforms are able to access new sources of data to determine the expected risk of the loan. This results in better rates for both borrowers and lenders.

Thankfully, the market-leading platforms, both in the UK and the US, have significantly developed their approach to disclosure. They recognise that the answer lies in validation and standardisation. They may not eat their own cooking – but they can ensure that their output is subjected to the most intense scrutiny. Zopa, Funding Circle, Ratesetter, Market Invoice, and now Prosper Marketplace in the US, are providing sufficient disclosure to allow third party validation of their lending data, in order to show their returns to a consistent standard.

Presenting granular historic data of this kind also demonstrates the correct alignment between platform and investor. Lenders should seek platforms that can demonstrate that their overriding motivation is to originate loans at an interest rate that adequately compensates for the risk of default.

Platforms rely on revenues derived from loan origination fees. So, if the status of historic lending can be meaningfully appraised, then continued loan origination fees rely on the performance of historic loans. That results in a genuine alignment between investor and originator because the economic outcomes for both have become inextricably intertwined.

European Union

An earthquake in European banking (The Economist), Rated: AAA

To date, despite dire warnings, European retail banking has been remarkably unscathed by technology-driven disruption. Customers stay loyal, and banks still do the most of the lending. Financial-technology (“fintech”) companies are beginning to mount a challenge, most conspicuously in the online-payments industry in northern Europe: Sofort, iDEAL and other fintech firms conduct over half of online transactions in Germany and the Netherlands, for example. But their reach is more limited elsewhere in Europe. Physical payments are still overwhelmingly made with cash or bank cards.

Regulators, however, are about to transform the landscape. The Payments Services Directive 2 (PSD2), due to be implemented by EU members in January 2018, aims to kick-start competition while making payments more secure. Provided the customer has given explicit consent, banks will be forced to share customer-account information with licensed financial-services providers.

This should change the way payment services work. They could become more integrated into the internet-browsing experience—enabling, for example, one-click bank transfers, at least for low-value payments. Security for payments above €30 ($32) will be tightened up, with customers having to provide two pieces of secret information (“strong authentication”) to wave through a transaction.

According to Deloitte, a consultancy, banks’ lockhold on payments serves as a handy source of income, earning European banks €128bn in 2015, around a quarter of retail-banking revenue. Many see PSD2 as a threat to their business models; they fear becoming the “dumb pipes” of the financial system.

European Commission opens public consultation on fintech (Finextra), Rated: B

The Commission has set up a Task Force on Financial Technology working across issues relating to financial regulation, technology, data, access to finance, entrepreneurship, consumer protection and competition.

Market participants and EU citizens are invited to give their feedback by responding to an online questionnaire which addresses emerging aspects of the fintech ecosystem, including the application of artificial intelligence and big data, distributed ledgers, and barriers to market entry for fintech startups.

Australia

Money Management asked financial service law firms and an Australian regtech what the top 10 common areas of regulatory and legal concern were, and broke down the nexus of technology, advice, and regulation.

The Fold Legal managing director, Claire Wivell Plater, said the fintech ‘regulatory sandbox’ specified in ASIC RG 257, would not shake up traditional advice due to capped limitations.

New said the legal crux with sandbox was taking disclosure, reduced compensation, and additional dispute resolution requirements into account.

Nearly three years after the implementation of the Future of Financial Advice (FOFA) reforms, Wivell Plater said advisers could trust technology solutions and recognise that through all the FOFA changes, it played a part in the agenda to maintain integrity in financial advice.

Managing director of regtech firm GRC Solutions, Julian Fenwick pointed to conflicted remuneration, best interests duty and continued issues of conduct risk; advisers would need to be flexible and ensure a technology partner would not compromise legal obligations or align them to a third-party.

The potential lack of flexibility in technology solutions placed best interests duty compliance as a significant area of attention for the regulator.

Vigilance was required around updates to ASIC and the Australian Prudential Regulation Authority (APRA) policy amendments, and would help advisers stay abreast of legal hurdles.

The Financial Planning Association (FPA) last year proposed robo-advisers appoint independent actuaries to monitor automated advice.

Wivell Plater said advisers were skating on thin ice when it came to ensuring automated advice still provided client and situation accurate solutions.

Lack of specialist knowledge on algorithmic resources was a pitfall for unintentional non-compliance.

‘Regtech,’ or regulatory technology, emerged as a major forerunner last year in financial services, and New said advisers had questions about check-ups on newly-implemented technologies and how they could be utilised for risk mitigation.

Wivell Plater recommended advisers check that both their systems, and those of their technology providers, were well protected against cyber-attacks which compromised privacy law.

Technology was no substitute for professionalism, which meant planners needed to ensure their own competency was up to scratch.

Wivell Plater reminded advisers that it was their ASFL duty to safeguard themselves and maintain regular checks on technological services.

China

Report: China’s digital edge export-worthy (China Daily), Rated: A

China is in a strong position to export its internet financial services and standards to economies along the Belt and Road Initiative, as the country maintains an “obvious” edge in the booming sector, a key report said on Thursday.

As of October 2016, the Chinese mainland had about 1,850 peer-to-peer lending online platforms, with total transactions in the first 10 months of last year exceeding 1.59 trillion yuan ($232 billion), data from the report showed.

India

Capital Float partners with Amazon India to disburse loans to e-sellers (India Times), Rated: AAA

Digital lending platform Capital Float has announced its partnership with Amazon India to disburse thousands of loans to e-sellers. The company – the only fintech startup to partner with the e-commerce giant – has also partnered with other leading online platforms including PayTM, Snapdeal and Shopclues.

Capital Float has designed a collateral free credit facility for online sellers called Pay Later that helps them make supplier payments within 24 hours.

3 Ways Fintech Is Disrupting The Indian Lending Space (CXO Today), Rated: A

The Indian fintech sector saw investments upwards of $1.6 billion in 2016 and has been growing at a steady rate, while investments in the global sector grew by 10% to $23.2 billion.

P2P lenders in India are primarily focussing their portfolio on categories such as personal loans, commercial loans and micro finance. The P2P lending model has great potential for growth in India considering the fact that there are over 5.5 crore small businesses operating in the country, a large percentage of which do not own bank accounts.

Though robo advisory has a low market share, it is nonetheless expected to grow at a CAGR of 68% and manage assets worth USD 5 trillion by the year 2025.

Bengaluru NGO extends loans to farmers widows in Warangal (Th Hans India), Rated: B

Rang De, peer-to-peer lending platform has associated with the town-based Sarvodaya Youth Organisation, is offering loans to the farmers’ widows in the district. At a programme held in Hanamkonda, Parkal MLA Ch Dharma Reddy distributed loan of Rs 50,000s to a group of widows of Atmakur mandal.

The selected widows were given each Rs 50,000 loan and every month 20 farmers’ widows would be selected to distribute the loans. The loans could be repaid in instalments spread over 24 months, he added.

Canada

Cato Pastoll of LendingLoop Presents Bringing Peer-to-Peer Lending to Canada (StartUp Toronto), Rated: AAA

Authors:

George Popescu
Allen Taylor