Wednesday November 23 2016, Daily News Digest

challenger banks

News Comments Today’s main news: Prosper’s Q3 results: lowest quarterly volume in 2 years. Insights in Zopa’s Bank plan.   Cashboard raises 3 million Euro. Today’s main analysis : FinTech’s remedy for Brexit pain. London tops FinTech index for second time. Today’s thought-provoking articles: Can LaPlanche changes his spots?  What’s next for FinTech? Chinese funding rounds. Will stopping flow of […]

challenger banks

News Comments

United States

  • Is LaPlanche really on his climb back to the top? AT: “I’ve been waiting for someone to say this.”
  • Prosper’s Q3 results. GP:” Lowest quarterly origination in 2 years. Also Prosper gave Colchis warrants for 7% of the company. The Q3 results of Prosper should be compared to Lending Club and OnDeck. Lending Club’s volume were in line with Q3 2015. ”  AT: “Prosper’s situation is different than Lending Club’s. We’re all anxious to see how CEO David Kimball navigates the lender’s turn around.”
  • What’s next for FinTech? AT: “I like this down-and-dirty analysis. FinTech has done some great things. There are more great things to come. I’m looking forward to smart contracts.”

United Kingdom

European Union

  • Cashboard raises 3M Euro. AT: “Cashboard is an independent wealth management company using technology as a tool for better performance.”

China

India

Israel

United States

Can a Laplanche change its spots? (GlobalCapital), Rated: AAA

The debacle made critics question the viability and transparency of both Lending Club and the industry at large, but the recent performance of marketplace loan ABS backed by Lending Club collateral – and that of other industry players – indicate that both the platform and marketplace lending are here to stay.

Laplanche, on the other hand, has much to prove.

According to published reports, Laplanche’s new team comprises Jeff Bogan and Adelina Grozdanova, the capital market executives that Lending Club fired in the wake of his resignation, which could prompt questions about internal controls and best practices at the executives’ new venture.

Already, Credify has one valuable advantage over Lending Club, in that it’s not under investigation by the Department of Justic and the Securities and Exchange Commission, and Thomas Curran – the former Treasury Department official that Laplanche has hired as Credify’s compliance head – should strive to keep it clean.

Prosper’s Climb Back (PYMNTS.com), Rated: AAA

It’s not an easy job — though in fairness to Prosper, their burden these days is not theirs alone. Marketplace lending on the whole has had a rough year — it faced a combination of changing market factors that have broadened investors’ options and the Lending Club meltdown during the spring and summer that has both shaken some confidence in the business model and drawn regulatory scrutiny.

However, while Prosper has not been uniquely hit, it has been very hard hit, and seen massive drops. During the third quarter of this year, Prosper extended $311.8 million in loans — its lowest level in more than two years, according to SEC filings from late last week. That is a drop of 30 percent from last quarter, and a drop of 71 percent from the same time in 2015. Net losses were also up — clocking in at $17.4 million for the third quarter, or over four times as large as the loss the company reported a year earlier.

So the billion dollar question is whether David Kimball, Prosper’s now incoming CEO, can get this ship sailing back on course. Not an impossible task — as marketplace lending has already demonstrated this year, reversals can creep up unexpectedly and fast (though it seems bad ones pull off that trick more often than good ones).

What’s Next For Fintech? (Forbes), Rated: A

So far, the industry’s primary focus has been P2P lending and P2P wire transfers, which have enabled dramatically lower wire fees to crowd funding platforms. But as technology in those key areas mature, and as regulation across the world differentiates, a new era has begun to emerge.

So, what are the new frontier technologies that will push for the next hype in Fintech? Here are some of the more interesting ones:

Robo AdvisorsAlgorithms keep managing the investments to optimize returns and taxes.

Smart ContractsSmart Contracts involves the use of Blockchain technology to validate, negotiate and enforce digital contracts from a distance.

Colored CoinsColored coins is a new technology that puts another layer of information on digital currencies and will allow to easily mint new types of digital currencies for different uses as well as transfer ownership of assets through an extra layer in the blockchain.

However, if US financial regulations continues to weigh, New York City could lose the title as the world’s premier financial capital. Fintech hubs, such as Berlin and Palo Alto, could quickly lose their standing to Zurich, London and Singapore, where Fintech regulation is more friendly.

United Kingdom

Better, boring banking has always been the aim for edgy ‘P2P’ lenders (GlobalCapital), Rated: AAA

Zopa’s “Next Generation” bank will sit alongside the firm’s existing marketplace platform, and offer deposit accounts protected by the Financial Services Compensation Scheme as well as overdraft products. The approval process is expected to take 15-24 months.

In case there were any lingering doubts, this is a clear sign that the pure peer-to-peer model of online lending is very much a thing of the past.

It seems ironic that a market that once seemed a disruptive force in finance, one that positioned itself as vastly different to the banking model, has decided that retail banking is a good thing after all.

But this has always been the goal of online lenders — to do banking better than the high street incumbents, which are weighed down by antiquated IT systems and an expensive branch network. In the early years, the capital-light, low regulation regime provided an ideal incubation environment for lenders to develop the IT systems and underwriting methods that they hope enables them to do credit better than the incumbents.

Fintech’s Remedy for Brexit Pain (Bloomberg), Rated: AAA

Lenders have proven resilient backers of fintech start-ups — on the principle that if you can’t beat ’em, join ’em or, better, buy ’em.

Corporate and strategic participation in European venture capital deals in the fintech industry rose for the third straight quarter in the three months to September, accounting for 26 percent of all transactions, according to CBInsights/KPMG. Meanwhile, overall investments in fintech firms fell to their lowest level in more than a year.

Supposedly disruptive models like peer-to-peer lending have become dependent on demand from traditional financial firms. LendingClub Corp.’s shares recently soared the most since its IPO after the company announced a $1.3 billion loan-purchasing deal with National Bank of Canada. British robo-advisor Nutmeg got the bulk of its latest funding round from Asian financial advisory firm Convoy.

London tops fintech index for second straight year (Business Insider), Rated: A

For the second year in a row, London has topped the European Digital City Index (EDCi), a composite index designed by innovation foundation Nesta and the European Digital Forum, according to on Friday, ranks European cities by how well they support digital entrepreneurship, and how attractive they are to fintech founders and companies.

Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on fintech regulation that explains how regulators in Europe are successfully growing fintech innovation and how it’s becoming a model for regulators around the world.

 

The new software taking on the automated advice market (Money Marketing), Rated: A

Finametrica is a well-known software provider, both in the UK and 20 other countries in which it operates. Unlike many of its peers, it concentrates on one key part of the process: risk profiling.

Plan Plus and Finametrica have announced they will be bringing their partnership to the UK and, from what I have seen, could make a welcome addition to our automated advice market.

Although the UK version of miPlan Plus is in its early stages, the attention to detail in the risk profiling journey is impressive. It addresses many issues the FCA sees as essential, including the risk profile relating to a specific goal, flagging inconsistent answers, and considering the user’s financial experience, understanding and capacity for loss.

Finery adopts Klarna payments for online checkout (Essential Retail), Rated: A

Customers at womenswear e-tailer Finery can now purchase items by entering their email and postcode thanks to the integration of Klarna’s eCommerce technology at the online checkout.

Using this payments method allows customers to avoid inserting lengthy log-in information and card details, while the Pay After Delivery aspect means shoppers have the option of paying for the items up to 14 days after they have received them. Finery sees this as a way of allowing customers to return unwanted items without having to seek a refund.

Royal London: robo services could prove value of advice (Citywire), Rated: A

Royal London has said the rise of self-service, online investment services will make it clearer to the public what an adviser should be paid for.

Simon Massey, wealth management director at MetLife UK, said Tait could be wrong and that robo-services would in fact deter people from seeking advice.

European Union

Berlin startup Cashboard raises €3 million as German fintech momentum continues (Business Insider), Rated: AAA

Berlin-based online investment startup Cashboard has raised €3 million (£2.5 million), as Germany’s fintech industry continues to flourish.

Cashboard, a marketplace for investment products, has raised the sum from Digital Space Ventures, a $50 million (£40.2 million) fintech fund headquartered in Luxembourg. Existing investors Redalpine Capital and Earlybird also to part in the round.

Recent figures showed that investment into German fintech companies outpaced British rivals in the third quarter of the year. UK companies raised $78 million in the third quarter, compared with Germany’s figure of $108 million.

China

RRJ Capital leads $ 200m Series A in Jubaohui; iTouzi closes $ 36m Series B (Deal Street Asia), Rated: AAA

The latest in the deals landscape in China has seen RRJ Capital lead a $200 million Series A investmnet in Jubaohui while iTouzi has closed a $36 million Series B investmnet from Sino Fortune.

The Internet finance unit, Jubaohui, was established by HNA Group in 2014 aims to become an integrated full-service online financial platform. Proceeds from the latest investment will fund the development and expansion of its businesses in online micro-credit, crowdfunding, personal credit rating, third party payment and other Internet finance services.

Beijing-based financial technology startup iTouzi has raised RMB250 million (US$36 million) in a Series B funding round from Sino Fortune and an individual investor, Sun Jiexiao. Incepted in 2013, it previously raised $10 million in a Series A from growth equity investment firm Delta Capital in 2015.

Rather that competing with other P2P lending startups, iTouzi acts as an SME finance platform, providing fundraising and guarantee services to small and medium enterprises (SMEs), using a P2C (peer-to-corporation) business model.

India

Will curbing flow of black money further fuel FinTech growth? (Dataquest), Rated: AAA

Payments – It is interesting to note that onee of the largest payment wallets in India reported 1000% growth in terms of the amount of money added to the account in days following the demonetization announcement.

Microfinance – As mentioned before, India still has about 21% of the world’s unbanked population, there’s a big opportunity to get every Indian under the formal banking system. Just in Odisha for instance, there are over 70% of Odisha’s gram panchayats bereft of a bank branch. A large part of rural economy works on cash. What if this were to shift towards cashless transactions?

Lending – Globally, peer-to-peer lending is now a $50 billion industry, where consumers and small lenders can lend and invest in small companies. In India though this industry is still in its infancy. However, with the steps to curb black money, and the rising NPAs, there is every opportunity for this sector to outgrow its peers / incumbents. In-fact, in a recently reported survey by IBA, 85 per cent of banks’ reported a risk in their NPA levels in Jan-June 2016.

Climate Policy Initiative reveals green financing tools for India (Business Standard), Rated: AAA

The three endorsed instruments – a rooftop solar financing facility, a peer-to-peer lending platform for green investments, and a currency exchange instrument – were selected from among a highly competitive pool, and refined and developed over the course of a year. They will now move forward for piloting in India, with the support of India Lab’s public and private lab members.

Loans4SME is a peer-to-peer lending platform that would increase access to debt financing for small and medium enterprises (SMEs) for renewable energy and energy efficiency initiatives, by connecting them directly with lenders. Loans4SME has the potential to mobilise around $2.2 billion in debt financing for SMEs in renewable energy and energy efficiency by 2022, and thereby help in providing access to finance almost 800 Mw of rooftop solar projects.

VC-backed deals in Indian fintech space decline to five-quarter low (Livemint), Rated: A

Despite the buzz around start-ups working on financial technologies (fintech), investors globally and in India are approaching the sector with caution, a report said.

According to ‘Pulse of Fintech’, a report from CB Insights and KPMG, venture capital (VC)-backed fintech funding fell 17% worldwide to $2.4 billion in the July-September quarter from a year ago, while deal activity fell 12% to 178 deals.

Funding to VC-backed Indian fintech start-ups fell 19% to $127 million on a quarterly basis.

India-Based Fintech Company DataSign Technologies Secures Angel Funding (Crowdfund Insider), Rated: B

Datasigns Technologies Pvt. Ltd, an India-based fintech company behind ShubhLoans, has secured an undisclosed amount during an angel funding round, which was led by former MD of JP Morgan Sanjai Vohra and managing director and India CEO of Goldman Sachs, V. Bunty Bohra.

“Our innovative credit scoring model debunks old ways of lending and ensures optimal credit by holistically assessing overall risk.”

Israel

Fintech co PayKey raises $ 6m (Globes), Rated: AAA

Israeli fintech company PayKey has completed a $6 million financing round. The company, founded in 2014, has developed a system enabling banks to provide peer-to-peer fund transfer services via social networks and instant messaging applications.

The company says that its technology enables secure fund transfers directly from the mobile phone keyboard, while the client is in a social conversation, with no need to enter a designated bank application or fund transfer application, such as an electronic wallet.

Authors:

George Popescu
Allen Taylor