News Comments Today’s main news: RateSetter passes 500M GBP in secondary market lending. U.S. economy fuels boom in consumer debt. Seedrs tops 500M GBP in crowdfund securities. Today’s main analysis: China P2P lending crackdown could see 70% firms closed. Today’s thought-provoking articles: Peter Renton’s Q3 2018 MPL results. 2018 was a standout year for fintech funding. 9 big ideas […]
Consumer debt, including credit cards, auto and student loans and personal loans, is on pace to top $4 trillion in 2019.
Consumer spending has increased 2.7% on average in the four quarters through September compared with the same period a year earlier, as disposable income rose 2.7% on average, according to Moody’s Investors Service. Meanwhile, personal savings as a percentage of disposable income was 6.3% in the third quarter, above a 20-year average of 5.9%, according to Bureau of Economic Analysis data.
My trailing 12 month returns for the year ended September 30, 2018 across all my accounts was 4.77% up from 4.46% in my last update. My original six accounts, all with Lending Club and Prosper, also improved over last quarter but are still at a paltry 3.19%.
Robo advisor Betterment currently manages $15 billion in assets for its more than 400,000 customers, firm CEO Jon Stein tells FA-IQ. But at the start of 2016, Betterment’s AUM was just a little over $6 billion, Stein says. The firm has cemented its place on the 2018 Financial Times’ 300 Top RIAs list.
Q: How has Betterment’s client base evolved?
A: When Betterment was first launched, our customer base was mainly young folks in their twenties who were depositing $100-$500 to invest at a time. That client demographic has shifted dramatically over the years. Today, more than one-third of our business comes from customers who are at least 50 years old.
2018 was a volatile year for equity and credit markets, particularly in the fourth quarter. The S&P500 is down ~7.5% for the year, and cyclical stocks are down more. CDX IG spreads have widened ~40 bps and CDX HY spreads have widened ~150bps.
ABS markets enjoyed record issuance. However, spreads widened, and all-in yields were higher leading to rate increases for borrowers and tighter margins for lenders. 2019 is shaping up to be a pivotal year in this late economic cycle. Synchronized global growth could turn into a synchronized slowdown. The risk of policy error is heightened as the Fed navigates record low unemployment and a slowdown in growth. The US yield curve has partially inverted and the all-important 3-month – 10-year yield spread is at ~37 bps.
Our next guest on the Lend Academy Podcast is Kevin Tweddle. His official title is the Group EVP for Innovation and Financial Technology at the Independent Community Bankers of America (ICBA), the leading trade organization representing community banks. He is completely focused on fintech and helping community banks use technology to thrive in the future.
Financial technology (Fintech) and the internet have enabled the creation of online loan marketplaces. Marketplace lending is made possible by technology platforms that use scoring algorithms to determine the borrowers’ ability to repay.
Fintech online loan platforms have started creating partnerships with banks and credit unions to reach small businesses who aren’t as comfortable dealing entirely online. Traditional lenders are eager to jump on the Fintech bandwagon to avoid being made obsolete.
A report in the Wall Street Journal, citing analysts, reported that legislative response to the massive Equifax data breach of 2017 is at the top of the agenda for 2019. The Wall Street Journal noted that existing proposals, some bipartisan, provide a glimpse into how changes can be made to the industry. The paper noted the changes would pertain to how the firms handle consumer information and could include tougher cybersecurity standards and making it easier for consumers to fix mistakes on their credit reports.
White Oak Healthcare Finance, LLC (“White Oak”), today announced it acted as sole lender and administrative agent on the funding of a $161 million senior credit facility for Allegiant Healthcare (“Allegiant”) and Hillstone Healthcare, Inc. (“Hillstone”). The funds were used to acquire and provide working capital for a portfolio of 17 skilled nursing facilities in Ohio.
The one upside to all this is that, although cryptocurrencies may have entered a death spiral, the blockchain economy is here to stay. As well as allowing safe peer-to-peer lending and transactions, it is being used to build more efficient supply chains and in the evolution of the internet of things – to name just a few of its applications.
RATESETTER has passed £500m in lending on its secondary market, marking a major liquidity milestone for the platform.
At the end of December 2018, the peer-to-peer platform revealed that a cumulative total of £500m in liquidity had been provided to investors via its secondary market. According to the platform, in the majority of cases investors were able to access these funds within one working day.
In a blog post, UK crowdfunding platform Seedrs shared that it has now topped £500 million in investment crowdfunding. The money has been raised for 720 deals that have been successfully funded since the platform launched.
iwoca,the UK’s fastest growing small business lender, today announces it has connected to Barclays and HSBC banks under Open Banking. This expands the number of Open Banking connections offered by iwoca to three, including Lloyds Bank, and will enable more than 60 percent of the lender’s customers to take advantage of the Open Banking service.
The number of Chinese peer-to-peer lenders may drop by 70 percent this year, a research firm that tracks the industry says, as the nation intensifies a crackdown on riskier forms of financing.
As few as 300 companies will remain by the end of the year, according to an estimate from Shanghai-based Yingcan Group. The number of operators dropped by more than 50 percent to 1,021 during 2018, it said, adding that there’s been no new entrants into the market since August.
According to Yingcan Group, by the end of 2019, there will only be 300 P2P lenders remaining. During 2018, the market research firm said the number of P2P lenders declined by 50 percent to 1,021. What’s more, no new companies have entered the market since August.
Yidai, an online peer-to-peer (P2P) lending intermediary, is the latest to exit the business as China reins in its US$176 billion experiment with this riskier form of financing.
The company set up a committee to start refunding its lenders after “months” of losses, Yidai said in statements over the extended holiday weekend. It has about 32,000 lenders with an outstanding principal balance of four billion yuan (S$795.4 million), and expects to repay them in three-to-five years.
In the first half of 2018 alone, fintechs secured $57.9 billion, nearing the previous annual record of $62.5 billion set in 2015.
Fintechs including UK neobank Revolut, US insurtech Root, US fintech for gig economy workersEarnin, Hong Kong-based alt lender Oriente, and US crypto exchange operator Coinbase all raised funding rounds of over $100 million this year.
JPMorgan Chase collected more than $1.8 billion in revenue from overdraft fees in 2017, according to an analysis of regulatory data by the Center for Responsible Lending. Bank of America and Wells Fargo both raked in more than $1.6 billion. Big banks typically charge around $35 per overdraft. Many other institutions also rely on such fees.
Give customers some control of their financial data
For decades, banks, credit card networks and credit bureaus have been sharing and selling consumers’ financial data without their knowledge or consent while data aggregators have screen-scraped that information without the full cooperation of financial services providers.
10. New Asset Class – New Asset Backed Lending for Crypto
The likes of Nexo, SALT, CoinLoans & Unchained Capital have emerged in the recent months unlocking the value of your cryptocurrency. There is a list of crypto lending sites here.
8. Banks will rule again
We have seen big banks leveraging Fintech platforms from OnDeck and Avant in 2018. More of it will come in 2019 as banks begins to decentralize banking again.
7. Everyone will be rich (unlocking home equity value)
I attend a talk by Mike Cagney of Figure at 2018’s Lendit China conference. He’s creating something completely different to unlock the potential of the entire “supply chain” process from home equity lines of credit to bundling and tracking this asset class utilizing smart contracts and blockchain. He wants to eliminate the hurdles and ambiguity for the secondary market.
As home equity value rises and interest rates increase, home equity products will need a ton of tech. It has become a forgotten art since the great depression. I am predicting that a lot more of Fintech companies will come to light in 2019 working with the banks to unlock consumers’ home equity value
Amrish Rau is the CEO of PayU India, the country’s leading digital payment solution provider valued at around USD 2.5 billion. Previously, he had founded Citrus Pay, which was acquired by Naspers (PayU) in one of the largest startup acquisitions in India. PayU’s digital lending platform Lazypay has done extremely well with nearly 4.5 lakh customers already using it. He has also invested in multiple startups like Signzy, Elemential, Nuo and Open.
Harshil Mathur : CEO & Co-Founder at Razorpay
Harshil runs one of India’s most innovative Fintechs, Razorpay, which is morphing from a B2B Payment Gateway into a Financial Conglomerate. They have entered the lending business with Razorpay Capital, which has already reached an annual loan disbursal rate of USD 30 million.
Manish Khera : CEO at Happy
Manish is the founder of Happy Loans – one of the fastest growing MSME lending platform in the country.
Naveen Kukreja : Co-Founder & CEO at Paisabazaar.com; CMO at Policybazaar
Naveen is the co-founder and CEO of Paisabazaar.com. Under Naveen’s leadership, Paisabazaar.com has become one of the largest marketplace platforms for lending and banking products. Paisabazaar.com currently disburses annualized loans worth USD 1 billion to more than 1000 towns and cities across India.
The latest entrants into the digital lending sector, peer-to-peer lending platforms, are facing an uphill task attracting investors with regulatory restrictions limiting their growth potential.
OMLP2P is a Mumbai-based lending platform and disburses around Rs 20 lakh per month. Another Mumbai-based P2P lending startup Paisadukaan’s founder Rajiv Ranjan also said that VCs have been shying away from this sector because of the limitation imposed by the RBI.
News Comments Today’s main news: Betterment adds financial advice packages. Funding Circle the fastest growing P2P lender in UK. TransferWise revenue almost doubles. China’s P2P lending problems hit consumer spending. Lending Club CEO says U.S., China need clearer P2P lending regulations. Today’s main analysis: Funding Circle’s IPO, and aggregate excess payment. Today’s thought-provoking articles: How China tech companies are […]
Chinese tech giants are dominating the North American VC market. This is a first, but does it signal a shift in the global balance of power? Not really. China still has a way to go. But it does signal that China has a lot to offer the rest of the world in financial services. The interesting thing is, this historic first happened at a time when China is going through a P2P lending crisis and cracking down on scams.
Where millennials carry the most debt. Of the top 6 highest in terms of median balance, 4 of the metro areas are in Texas. Yes, Dallas and Houston are among them, but not at the top of the list. Interesting.
Betterment, the largest, independent online financial advisor, today announced it will be piloting a new line up of financial advice packages, expanding its access to personalized advice from licensed financial experts. This new service furthers Betterment’s commitment to making advice more accessible and personalized.
Early this week, Funding Circle announced plans to raise £300Mn on the London Stock Exchange through an IPO, valuing the company at up to £1.65 billion. To date, Funding Circle has originated over £5 billion in loans across Europe and the United States. Funding Circle has grown revenue by a 54% CAGR to £63 Mn in the first half of 2018. Funding Circle charges 100bps for servicing and estimates it receives revenue equal to almost 5% of loan value originated.
Hu Liming from Tencent Financial Cloud talked about the importance of the AI offerings within their cloud computing platform. AI is powering their anti-fraud offerings, their lending process, their collections and customer service efforts. More than 20 of the largest banks and insurance companies in China are using Tencent Financial Cloud for their core services.
LendingTree, the nation’s leading online loan marketplace, today released its study on the places where millennials carry the most debt. The study found that student loans make up the biggest share of millennial debt, but auto loans are close behind. The study revealed that the typical urban millennial carries significant debt; the average debt balance for millennials living in the 50 biggest U.S. cities is $23,064.
Millennials in San Antonio, Pittsburgh, and Austin, Texas, shoulder the largest debt burdens of the 50 biggest metros, with median non-mortgage debts of $27,122, $26,403 and $26,164, respectively.
Three California cities — San Jose, Sacramento and Los Angeles — have the lowest median balances on the list at $18,376, $18,691 and $19,299, respectively.
In the top 10 cities, more than half of millennials have outstanding debts totaling $25,000 or more (not including mortgages), and roughly 1 in 4 millennials living in these cities owes more than $50,000.
The 10 Places Where Millennials Carry the Most Debt
For all of the excitement centered around fintech over the past half-decade, most venture-backed fintech companies struggle to acclimate to public markets. LendingClub and OnDeck have plummeted since their late 2014 IPOs after several years of darling status in the private markets. GreenSky, which went public in May of this year, has been unable to return to its IPO price. Square is the exception to the rule.
Sometimes we overlook the companies that hail from the era that precedes the current wave of fintech fascination, a vertical which has accumulated over $100 billion in global investment capital since 2010.
PeerStreet, an award-winning platform for investing in real estate backed loans, today announced the addition of a new investment option, Cash Offer Loans. Cash Offer Loans are a new investment option that provides PeerStreet investors with a shorter duration than typical bridge loans.
Finitive (www.finitive.com), a financial technology platform providing institutional investors with direct access to alternative lending investments, announced today the closing of a $50 million senior secured warehouse credit facility for Bungalow (bungalow.com). This transaction was the first of its kind in the co-living sector.
Lending clubs have revolutionized how small businesses get money and act as a third party between individuals who want to lend money and people who need it. You can think of it as a peer-to-peer lending system that’s normally backed up and insured. You could get around 7% with one of these investments.
FUNDING Circle has unveiled more details of its plan to raise £300m through a listing on the London Stock Exchange’s main market in October.
The peer-to-peer lending platform said retail investors will be able to apply for shares via intermediaries such as Hargreaves Lansdown, AJ Bell Youinvest and The Share Centre, with a minimum application size of £1,000.
Funding Circle will test investor demand for British peer-to-peer lenders in a listing scheduled for October and expected to value it at more than 1.5 billion pounds (US$1.94 billion).
Capitalising on high-street banks’ retreat from lending to that sector since the financial crisis, it has facilitated more than 5 billion pounds in loans to more than 50,000 companies across Britain, the United States, Germany and the Netherlands.
Crypto lending or digital asset backed loanis comparatively a new concept used in earning profits without much effort. It revolves around the concept of shorting. Perhaps, you do not understand how shorting works, do not worry because all you need to know is that you are lending fund to others who are making short trades. In exchange for the funds, you get an interest rate that goes from 5% to 50% each year.
ACORN OakNorth, a UK-based alt lender focused on small- and medium-sized businesses (SMBs) and property financing, has secured a £78 million ($100 million) funding round from the EDBI of Singapore, NIBC Bank, Clermont Group, and Coltrane Asset Management. OakNorth’s loans have helped create 8,500 homes in the UK and 8,000 jobs.
The UK payday loan industry grew rapidly from 2008-2012, coinciding with the global financial crash and the pauperisation of millions of people in the UK. The numbers of loans issued in this period were 10.2 million per year, with a value of £2.8 billion.
Wonga’s posted pre-tax profit losses in 2016 of nearly £65 million, after recording huge profits just a few years before.
In its 2014 review of the payday loans industry, the FCA found that the average income of a payday lender was £16,500 a year, far below the UK’s median wage of £26,500 at that time.
The CMA found most recipients (52 percent) of payday loans have experienced financial problems in the recent past, with 38 percent of all customers having a bad core/credit rating and 10 percent of customers having had a bailiff or debt collector visit to their home. Over half (53 percent) use payday loans to pay for living expenses, food, utility bills—with 7 percent having to use these loans to pay for general shopping such as clothes and household items.
The Chinese government legalized peer-to-peer lending platforms in 2015. P2P sites attract money from individual investors – mostly savers – by offering them extraordinarily high yields. They lend this money at high interest rates to borrowers who have trouble getting loans elsewhere – classic subprime. By the end of 2017, there were over 8,000 P2P platforms, according to the People’s Bank of China, with over 50 million registered users. By the end of June, in a little over two years, the industry had gone from zero to $190 billion in outstanding loans.
In May, new vehicle sales still surged 7.9% from a year ago. Through the first five months of the year, sales were up 5.1%. But in June, the year-over-year sales increase eased to 2.3%. And in July, sales actually fell 5.3% year-over-year.
That 5.3% decline in July was a big, sudden, and unexpected swing from the 7.9% surge in May.
Around 4 a.m. on Sept. 7, construction workers in Jinhua, a city in eastern China’s Zhejiang Province, found the body of a woman hanging from a tree in a park. She was Wang Qian, a 31-year-old single mother who had lost her savings in China’s recent peer-to-peer (P2P) lending crash.
Wang worked as an individual seller on Taobao, a Chinese shopping site similar to eBay. She lost about 260,000 yuan ($37,990). She had invested her money in P2P platform PPMiao, which collapsed on Aug. 6. She lost about 260,000 yuan ($38,000).
Launched in 2013, N26 is a German neo-bank and one of the fastest growing banks in Europe. It serves more than 1 million customers, both businesses and individuals, across 17 European markets, and intends to enter the UK market in 2018 and the US market in 2019.
Smava is a loan portal that aims to make personal loans transparent, fair and affordable for consumers. Based on digital processes, Smava provides a market overview of 70 loan offers from 25 banks. As of January 2018, Smava had originated over US$3 billion in loans through its platform since inception.
Raisin is a fintech startup providing savings and investments marketplaces across Europe. The company operates several localized platforms for the German, French, Spanish, and Austrian markets, and more. These allow savers to shop and compare rates European-wide. In February, it launched a dedicated UK site, enabling savers to access deposit accounts in GBP, and another platform dedicated to the Dutch market in August.
SolarisBank is a platform with a full banking license which enables companies to offer their own financial products. Through APIs, partners gain access to SolarisBank’s modular services including payments and e-money, lending, digital banking as well as services provided by integrated third party providers.
Launched in 2014, CrossLend is a B2B marketplace lending platform that specializes in flexible refinancing via a capital market structure. CrossLend also offers cross-border credit intermediation through cooperation with a partner bank. The company aims to facilitate the borrowing, investing, and trading of money across the globe.
Founded in 2016, Billie offers a fully automated invoice financing platform that aims to “revolutionize small business financing.” Based on big data analytics, fully digitalized processes and a highly scalable state of the art tech platform, the company offers a simple and fast way for small businesses to access capital.
The idea became popular when it was first proposed around a decade ago. The then fast-growing sector fostered a series of unicorns. US P2P pioneer Lending Club was valued at $5.4 billion in its 2014 IPO and its peer Prosper was valued by private investors as worth $1.9 billion in its prime. Although a few years later than its foreign counterparts, Chinese P2P platforms have grown rapidly with leaders in the sector such as Hexindai who has gone public, and the likes of Lufax and Dianrong poised for an IPO.
Merely three years ago, peer to peer (P2P) lending in China was hailed as the banks of tomorrow and the harbinger of financial innovation. Powered by technology and ever burgeoning rounds of funding and valuation, P2P lending was set to disrupt financing the world’s 2nd largest economy dominated by state owned (or sponsored) banks. The new elites in jeans and T-shirts would show the suited up old guard how finance is supposed to work. Here came the new finance, Silicon Valley style – with Chinese characteristics.
Fair was its blossom; and wretched is its downfall. By June 2018, the Chinese financial information provider 01Cajing reported only 1504 functioning P2P platforms, down from over 3000 in the heydays. The change in fortune is as swift as it is bizarre. Is this an omen of darker times to come for South East Asian marketplace lending? Before this question can be addressed, it is necessary to disentangle how the crisis precipitated in China, and the confluences of forces behind the calamity.
On Monday, the Preparatory Committee of the Digital Finance Association announced a series of self-imposed regulations that it plans to apply to all member companies when the association kicks off later this year.
Lendit, 8percent and Popfunding, the three P2P firms in the preparatory committee, left the older Korea P2P Finance Association in May along with other firms due to disagreements over its management direction.
News Comments Today’s main news: OnDeck completes two international credit facilities. Elevate launches prime credit card for non-prime customers. RateSetter backtracks on Rolling Market rate changes. China’s P2P lender are falling like dominoes. Banco BNI Europa invests in US consumer loans. Today’s main analysis: Deloitte’s survey on fintech lenders. Today’s thought-provoking articles: An inside look at SoFi-Promontory Interfinancial Network […]
Deloitte fintech lender survey. The cost of funding is the No. 1 concern among lenders. Liquidity and inability to diversify are also in the top 3 concerns. Larger companies, however, have securitization as an option. I’d want to know why smaller companies find it hard to diversify.
Why bank without a branch. There are several benefits to branchless banking, but it may turn that traditional banks end up owning this space as challenger banks in the U.S. have not caught on. It may be because there hasn’t been a real online-only banking solution for small businesses, which I think can open up the floodgates for this market.
Elevate and Capital Community Bank of Utah announced the launch of Today Card powered by Mastercard. As the first non-prime credit card with a full suite of prime features, Today Card will be issued by Capital Community Bank of Utah and will specifically help expand access to credit for members of the New Middle Class, the nearly 160 million non-prime Americans who are too often overlooked by mainstream financial institutions.
The recent surge in financial innovation has caused many community banks to rethink how they are serving their customers and what they can do to improve that experience. I recently spoke with two community banks about their decision to buy SoFi loans using Promontory Interfinancial Network’s service.
I spoke with Brian Plum, CEO of Blue Ridge Bank, which is a Virginia based community bank with mortgage offices in North Carolina, and Nicole Austin, Chief Lending Officer of Pioneer Bank, which is a New Mexico-based community bank.
Both banks had experience in looking at fintech partnerships before moving ahead with their decision on the SoFi program. They both said that as lending and banking changed, they needed to better understand how new technology could help their businesses.
Blackstone is launching a $10 Bn direct lending fund focused on middle-market corporate credit opportunities. The search for yield has pushed investors into higher-yielding middle-market lending, with direct lending funds raised $54 Bn in 2017. Consumer, small-business and middle-market lending have been a consistent theme among investors starved for yield by low global interest rates.
Deloitte’s Survey on Fintech Lenders
The main take-aways from the study:
1. 7% of respondents listed cost of funding as one of the top 3 concerns, with liquidity and an inability to diversify rounding out the top 3.
PeerIQ view: Securitization remains the cheapest source of large-scale financing. MPL bonds continue to go mainstream as credit spreads tighten vs comparable consumer credit issuers. Emerging issuers continue to take efforts to build a brand in the ABS markets via repeat issuance.
3. Investors remain interested in the online lending space with $11 Bn in equity capital expected to flow into the sector in 2018. The number of startups has decreased, suggesting a maturing market and some consolidation.
The first online banks hit the U.S. market more than 20 years ago, attracting customers with higher interest rates and lower fees. While some early innovators are no longer operating, others have evolved. Take ING Direct, for example, which was acquired by Capital One and transformed into Capital One 360 in 2012, or Ally Bank, which is one of the most dominant names in the online banking market.
Today, however, these banking institutions face competition from new direct banks as well as traditional banks that are looking to expand using the online-only model. For instance, Finn by Chase and Marcus by Goldman Sachs bring digital banking to areas in which the companies have no physical presence.
Fortunately, some lenders offer long-term small business loans, which give borrowers the opportunity to repay the loan over a longer period of time (typically up to 25 years).
Long-term business loans certainly do exist but if you’re hoping to score one, you’ll need to have an established business (i.e., no startups or new businesses) and have good business credit.
There are a variety of lending institutions, both traditional and non-traditional, that offer long-term financing, so it’s always best to review all your options, including those offered by your chosen banking institution. However, there are a few lenders that consistently top the charts, and those that follow are known to offer competitive rates, flexible terms, quick access to funds, and positive customer feedback.
Walmart’s experiment with offering Even.com’s money management and pay-advance app to employees appears to be off to a good start.
The retailer launched the app to employees in December. On Thursday, Walmart and its fintech partner announced that 200,000 Walmart employees are now using it. (The retailer employs 1.5 million people in the U.S.)
About 75% of associates use the app every week and 46% use it every day.
The New York State Department of Financial Services (“DFS”) found that online marketplace lending has increased dramatically since 2015. In the newly published report, DFS analyzed responses from a “New York Marketplace Lending Survey” along with comments from relevant stakeholders.
Based on data from 2017, DFS found that:
the total number of loans increased approximately 118% and the total dollar amount of all loans increased approximately 42% as compared to 2015 levels;
many more individuals were being served in this market than small businesses;
lenders generally charge a variety of fees (e.g. origination fees, closing fees, processing fees, maintenance fees, transactional fees, and penalty fees), with origination fees being the most common;
delinquent loans (both to individuals and businesses) represent approximately 11% of the total number of loans outstanding as of the end of 2017; and
respondents used “internal models with various inputs provided by the applicant such as employment history, business history, bank statements and tax records” to determine whether a borrower qualifies for a loan.
Gradifi today said it is now offering access to LendKey’s nationwide network of lenders through Gradifi Refi, a student refinance program for employers seeking to help their employees save money or reduce the monthly payment on their student loans.
Gradifi Refi is one of three employee benefit solutions from Gradifi that enable employers to positively impact their employees’ financial well-being. Gradifi’s SLP Plan (Student Loan PayDown)benefithelps employees pay off their student loans faster through employer-sponsored contributions to their student loan provider. The College SaveUp benefit helps employees save for their children’s education and avoid further student debt through employer contributions to an employee’s 529 college savings plan account.
P2Binvestor (P2Bi), a marketplace lending platform offering crowdsourced, asset-secured lines of credit to growing companies, today announced a partnership with Amalgamated Bank, a socially responsible bank based in New York.
The P2Bi bank partnership program gives growing businesses a way to quickly access capital while allowing banks to increase their addressable market and improve their conversion rates. This particular alliance will enable Amalgamated Bank to continue to help fund emerging socially responsible businesses.
The UK’s challenger banks are busy getting on with it. They’ve got their licences, they’ve deployed their services, they’re partnering with third parties and creating marketplaces. Much of this was cited in a report by CBInsights, comparing the features of the five most notable new ones: Atom, Starling, Monzo, Revolut and Tandem.
N26 were also included, but is not a UK start-up and their report builds on the one I blogged about last month from Optima. The thing I took from the CBInsights report is the massive numbers of users that Revolut and Monzo have already gained. At that time, it was 1.5 million for Revolut and 500,000 for Monzo.
Christian Faes could hardly have picked a worse time to get into mortgage lending. It was 2008, financial markets were in free fall and most people were more concerned about putting food on the table than buying a house.
That did not deter Faes, a former lawyer who had moved to London from Australia’s Gold Coast 10 years earlier. He co-founded Montello Bridging Finance in a “windowless serviced office” in the City and set about cold-calling potential investors. “The idea was really sound, but it wasn’t the best moment to be setting up a mortgage lending company,” said Faes, 41.
The shakeout in China’s $192 billion peer-to-peer lending industry is accelerating at a rapid clip.
At least 118 platforms have failed this month through early Friday, according to Shanghai-based Yingcan Group, whose tally for July stood at 57 just three days ago. The number of failures, which includes platforms that have halted operations or come under police investigation, is already the highest in two years with more than a week left in the month.
China’s clampdown on financial risk has weighed on P2P platforms for the past two years, but the pressure has intensified in recent months after the country’s credit markets tightened and the banking regulator issued an unusual warning to savers that they should be prepared to lose all their money in high-yield products. While that has triggered bouts of panic among users of smaller P2P platforms, there’s little evidence that the turmoil has spread to more systemically important parts of China’s financial sector.
A string of Chinese internet lenders have shut their doors in recent weeks, stranding investors as the economy slows and regulators tighten controls over an unruly side of the fintech sector.
Across China, more than 200 internet-based fund managers since late June have either shut down, closed parts of their operations or are reeling from cash crunches, missing executives and other problems, according to industry tracker Wangdaizhijia.
The tide began to turn against the sector as an end-of-June deadline for new stringent registration regulations approached. With a slowing economy making it difficult for some companies to pay back loans, some lenders decided to shut down, analysts said. Investors, already souring on the sector, began pulling out funds, further pinching the lending platforms.
Figures from Bloomberg Economics based on data from the People’s Bank of China indicated that three major assets of shadow banking – trust lending, entrusted loans and banks’ acceptances – increased by $555 million in 2017. Entrusted loans, for example, are when businesses loan money to each other, using banks as intermediaries. Meaning that larger (state owned) companies may lend money to smaller companies and make a profit from the differences in interest.
Micro-lending is another phenomenon that has ballooned in recent years, with a proliferation of online lending or peer-to-peer lending platforms springing up. Outstanding debts on these sites increased by 256 percent between October 2015 and October 2017, topping 1.2 trillion yuan (over $179 million).
These issues have been acknowledged by the Chinese government, with China’s top banking regulator, Guo Shuqing, promising the shadow banking industry will be ‘dismantled’.
The Shanghai municipal government has announced it will soon launch a campaign to enforce compliance of financial regulations on the city’s peer-to-peer (P2P) online lending platforms, according to a report by domestic website the Shanghai Observer, in a sign that local authorities will put order into China’s troubled fintech sector.
The Shanghai Office of the Leading Group for the Special Campaign against Internet Financial Risks said that it will investigate the local online lending industry and severely punish those committing illegal fundraising and financial fraud, as well as fugitive owners. The authorities have reasserted their support of law-abiding firms in a bid to promote a more orderly internet finance industry.
In the last 50 days, up to 163 P2P lending platforms have essentially gone out of business, stopping cash withdrawals from customers, and many have seen their owners run away and declared fugitives, chinanews.com reported.
German mid-market lending platform Creditshelf has successfully closed its IPO, raising €16.5m at the fixed price €80.00 per share.
In the end, the company had no need of its €15m backstop order, provided by Hevella Capital GmbH & Co. KGaA, part of a group controlled by Rolf Elgeti. But Obotritia Capital KGaA, which is also part of the group, subscribed for an additional amount of €1.5m, underlining its support for the firm.
OnDeck (NYSE:ONDK) announced today the closing of an AUD75 million asset-backed revolving credit facility with Credit Suisse, and the closing of a CAD50 million asset-backed revolving credit facility with Crédit Agricole, to finance OnDeck originations in Australia and Canada, respectively.
The new Credit Suisse facility will be used to refinance OnDeck Australia’s current loan book at a significantly lower cost, as well as to fund future originations. The Crédit Agricole facility is the first for OnDeck Canada and provides the business with access to CAD25 million of committed capacity and an additional CAD25 million of capacity available at the discretion of the lenders. Both facilities are floating rate and have an initial weighted average interest rate of approximately 5.6%. The Credit Suisse facility and Crédit Agricole facility are scheduled to mature in June 2020 and June 2021, respectively.
European challenger bank Banco BNI Europa and Fintex have entered into a strategic partnership to invest in Upgrade’s consumer loans and expand access to affordable credit to consumers in the United States. Banco BNI Europa, which is active across Europe, now invests in US consumer loans through Upgrade, one of the fastest growing platforms in the US. This loan purchase programme was implemented by Fintex Capital, which issued a bond to Banco BNI Europa backed by the portfolio and Fintex acts as asset manager for the underlying loans.
As part of the agreement, Banco BNI Europa committed an initial sum of USD 30 million. Banco BNI Europa has already invested in US consumer loans originated on platforms like Lending Club and Prosper through a third-party fund.
In fact, one report by CB Insights found that about 29 percent of startups failed because they ran out of working capital, which speaks volumes about the morbid state of business financing for startups and budding businesses.
Consequently, business financing has become one of the many areas of fintech that could benefit immensely from blockchain, the decentralized ledger that has been disrupting industries for over a decade.
Here are a few ways that showcase why blockchain could change the way enterprises access funding.
A startup looking to build a credit scoring protocol on top of the recently-launched Ontology blockchain has raised $8 million in seed funding.POINTS, founded in 2017, said it drew funding from a mix of traditional venture capitalists including Danhua Capital and Ceyuan Ventures, a backer of OKCoin. Other participants in the seed round include the Ontology Foundation as well as Zhong Cheng Xin Credit Technology, China’s first nationwide credit rating agency.The new capital will be used to expand the company’s engineering team in an effort to speed up its development of blockchain-based know-your-customer (KYC) and credit scoring applications. The idea is to build its protocol on top of a decentralized network and empower apps that can eliminate repetitive processes around identity.
The crypto lending platform Salt Lending just got a dose of some strange news when the company suddenly released an announcement stating the appointing of what they call an interim CEO. The former CEO ,who was essentially the face of the company and one of the cofounders, Shawn Owen, appears to have left the company.
But the circumstances under which he left are unclear.
Salt tokens (that run on Ethereum) have been on a strong downward slide for the last few months, and are currently sitting at just over one dollar each. The tokens entered the market at the three dollar range and so are down by more than 66% post ICO. It is also unclear as to whether or not Salt Lending is still operating or giving out new crypto-to-cash loans.
The growing user base of cryptocurrency and related products has skyrocketed, with the highest number originating from countries like New Zealand, Denmark and Belgium. The community growth is expected to follow the upward trajectory to hit 100 million users soon.
RAD Lending platform might just be the push the market needs to fill the gap between crypto holdings and real-life fiat spending. The P2P lending platform from RAD will act as a matchmaker between loan requests and funding proposals.
A Boston Consulting Group (BCG) report suggests that digital lending in India will become a $1 trillion opportunity in the next five years.
According to the report, four fundamental drivers that pushed the space are internet giants that changed the way consumers behave, rapid growth in technological advances including the proliferation of smartphones and consequent increase in the consumption of data. Also the digital market lending prospered under supportive regulatory conditions across the globe.
This week 16 startups received funding, of which 10 received a total sum of about $228.5 million. Among them, BookMyShow raised the highest investment of $100 million, followed by Cars24 which raised about $50 million.
Meanwhile, funding for six of the total funded startups remained undisclosed.
P2P lending platform LenDenClub has received its NBFC-P2P certification from the Reserve Bank of India (RBI), the Economic Times said. The RBI issued those guidelines last October, to register and accredit P2P lending firms that resell loans from individuals who have money to invest.
Out of the 8.8 million businesses in India that file taxes, at least 6.6 million businesses do not have access to the credit sources such as banks, non-banking financial companies (NBFCs), and upcoming online lenders. This is a problematic situation for both lenders, and for businesses (especially small businesses), looking for capital loans.
The problem of credit shortage for small businesses is daunting, but the regulators in India have already set things in motion to address the issue. According to Sharma, the revamped goods and services tax (GST) structure, the Reserve Bank of India’s (RBI’s) new public credit registry (PCR) initiative, and UPI (Unified Payments Interface) 2.0 will solve the shortage of data for lenders.
The rise of promising tech-startups has been successful in ushering India into a dawn of technology.
While AI is believed to revolutionize the current modus operandi and bring about fast-paced automation and efficiencies, it still remains an abstract topic, palled by a lack of nuanced understanding amongst the general public.
The same has inspired present-day companies to advance their understanding and grasp of the discipline, and discover innovative ways of bringing this powerful technology to the masses.
Here are some enterprises that are integrating AI in everyday tasks:
Faircent: Making Lending more conducive with AI & Machine Learning
If you think AI is only limited to the IT industry, think once again. Faircent, India’s largest P2P (peer-to-peer) lending platform, has been utilizing the technology to provide users with money during your financial crunch. Doing away with methodologies of conventional lenders (which can often prevent a creditworthy applicant from securing a loan,) the platform leverages Machine Learning and Artificial Intelligence to enhance the effectiveness of its credit profiling and assessment.
Global on-demand software provider Ebix Inc on Friday announced the acquisition of Indus Software Technologies Pvt. Ltd. (Indus), a global provider of enterprise lending software solutions to financial institutions, captive auto finance and telecom companies, for approximately $29 million, including $5 million of contingent earn-out.
Further to this acquisition, key Indus business executives will become a part of the combined EbixCash senior leadership. The acquisition will increase the employee strength of Ebix in India by 900, to approximately 7,200 employees.
OnDeck Canada, the local online arm of the U.S. headquartered OnDeck now has a $50-million asset-backed credit facility, provided by Crédit Agricole, to fund its loans. According to a recent ranking of assets, the French bank is the world’s ninth largest. Its Montreal office offers commercial and investment banking services.This is the first time that OnDeck Canada — which has originated $180 million in small business loans since 2014, all made using a “wide spectrum of data, technology and analytics” — has arranged funding from a source other than its parent.There are two parts to the three-year facility that will finance loan originations created by OnDeck Canada: a $25-million committed facility and an extra $25 million that can be drawn if needed. OnDeck provides term loans up to $250,000 and revolving lines of credit of up to $50,000 to small business.
News Comments Today’s main news: SoFi seeks to poach Twitter COO for CEO slot. Zopa increases investor interest rates. SoftBank considers IPO in London. TransferWise launches borderless bank account. Spotcap partners with BAWAG Group for same-day financing. Today’s main analysis: Super high-interest loans in California have boomed. Today’s thought-provoking articles: How online branding can help businesses get a loan. Today’s […]
SoFi offers Twitter COO top slot. AT: “I’m sure they’re making a lucrative offer, but the indication here is that Anthony Noto may decline. I would imagine this would be a good move for him, a high-profile move in a growing industry with a chance to make a historical mark. Of course, if Twitter counters with a more lucrative offer to keep him, then the ball will be in SoFi’s court.”
How businesses can use online branding to get a loan. AT: “To my knowledge, no alternative lender in the U.S. is using social media as the primary source of credit data. It’s more than they use alternative data as additional information to traditional metrics, but this could change.”
California’s super high-interest loans are booming. AT: “I’d be curious to see how they’re doing in other states, as well. Given that Texas-based Elevate Credit is one of the top three lenders in this segment, it’s likely that other states have seen a similar increase in these types of loans.”
Anthony Noto, a top Twitter Inc. executive, is in discussions to become the next chief executive of Social Finance Inc., according to people familiar with the matter, as the online lender grapples with accusations of improper workplace culture.
The San Francisco-based company has offered the job to Mr. Noto, currently Twitter’s operations chief and before that a top Silicon Valley banker atGoldman Sachs GroupInc.,people familiar with the matter said. Mr. Noto is likely to make a decision in the coming days, the people said.
He may turn down the offer, as terms haven’t yet been completed, or Twitter might lobby hard to keep him, especially with CEO Jack Dorsey splitting his time between the social-media service and Square.
An increasing number of the largest online lenders, such as Kabbage (a ValuePenguin affiliate) and Funding Circle (also a ValuePenguin affiliate), are relying on online data in addition to traditional data points to gain a fuller picture of a business’s health.
Kabbage, which recently received $200 million in funding from Credit Suisse, uses a fully automated underwriting process (involving no humans) to approve applicants and requires business owners to link online accounts, which run the gamut from bank accounts to vendor accounts, to complete an application.
Even traditional lenders are getting in on this trend. JPMorgan Chase (a ValuePenguin affiliate), which recently renewed its partnership with online lender OnDeck (also a ValuePenguin affiliate), the largest online lender to small businesses, uses the latter’s underwriting technology, which considers online data points, to help it offer online business loans.
Not long ago, personal loans of this size with sky-high interest rates were nearly unheard of in California. But over the last decade, they’ve exploded in popularity as struggling households — typically with poor credit scores — have found a new source of quick cash from an emerging class of online lenders.
These pricey loans are perfectly legal in California and a handful of other states with lax lending rules. While California has strict rules governing payday loans, and a complicated system of interest-rate caps for installment loans of less than $2,500, there’s no limit to the amount of interest on bigger loans.
In 2009, Californians took out $214 million in installment loans of between $2,500 and $5,000, now the most common size of loan without a rate cap, according to the state Department of Business Oversight. In 2016, the volume hit $1.6 billion. Loans with triple-digit rates accounted for more than half, or $879 million — a nearly 40-fold increase since 2009.
The number of loans between $5,000 and $10,000 with triple-digit rates also has seen a dramatic 5,500% increase, though they are less common. In 2016, loans of that size totaled $1.06 billion, with $224 million carrying rates of 100% or higher.
Many of the loans can be tied to just three lenders, who account for half of the triple-digit interest rate loans in the popular $2,500-to-$5,000 size range. LoanMe, Cincinnati firm Check ‘n Go and Fort Worth’s Elevate Credit each issued more than $100 million in such loans in 2016, as well as tens of millions of dollars of loans up to $10,000 with triple-digit APRs.
Within this large document, there are four key actions being proposed:
Affordability test: This imposes two burdens on payday lenders. First, conducting an affordability analysis would increase the cost of underwriting a loan. Second, people generally turn to payday lenders when they are broke.
Limit payday rollovers
Exemptions made for alternatives to payday lenders, including credit unions and community banks: If a lender derives less than 10% of its revenue from payday loans, it is exempt from some of the most onerous rules. This particular restriction is odd. Why is the hated payday lending product acceptable, so long as the institution making the loan only generates 9.99% of its revenue from such activities? Are high rates and frequent rollovers acceptable when coming from a bank? Or is there a presumption that payday lenders are evil while bankers are not?
Limit on the number of times a checking account can be debited. This rule limits the lender to two unsuccessful debit attempts. Afterwards, the lender can only attempt to debit the account if it receives authorization from the borrower.
The outrageously high APRs paid on payday loans can make anyone’s stomach churn. But why are APRs so high? I believe there are three main drivers:
Risks are high: The people using payday loans are very high risk borrowers.
Price competition is absent: For a payday loan, people value speed and access.
Good behavior does not get rewarded: Payday lenders generally do not report to credit bureaus.
The Consumer Financial Protection Bureau on Thursday dropped a lawsuit against four payday lenders.
Since 2012, two of the firms — Golden Valley and Silver Cloud Financial — offered online loans between $300 and $1,200 with interest rates of up to 950%. The other two firms — Mountain Summit Financial and Majestic Lake Financial — also offered similar terms on loans, according to the bureau.
BofA added about 2 million users to its digital channels, predominantly to mobile. The bank’s active digital users jumped from 32.9 million to 34.9 million annually, an increase largely driven by mobile banking users, which increased by 2.6 million users year-over-year (YoY).
Engagement is rising too. Mobile channel usage rose 34% YoY to reach 1.3 billion interactions in the quarter.
BofA consistently updated its digital and mobile offerings throughout 2017, adding contactless ATM functionality, for example, and integrating tools like the popular peer-to-peer (P2P) offering Zelle. These innovations have likely contributed to rising interactions.
Just under 30 percent of U.S. households are underbanked or unbanked, according to the FDIC. What these terms mean has been up for debate and subject to misconceptions. Let’s look at some of the most pernicious myths regarding underbanked Americans and debunk them:
The person-to-person payments service Zelle differentiates itself from rivals by promising users that transactions sent over its network will clear in near-real time. Yet in recent months, the service has faced a number of complaints from consumers who say they are having problems sending or receiving money or setting up accounts in the first place.
Zelle has acknowledged the problems, but says the occasional delay is the price some users will have to pay as the big banks’ rival to PayPal and Venmo aims to create one of the industry’s strictest fraud-prevention programs.
One of the biggest (and most unique) new companies working in the online lending space is Loanable – a platform that brings together crowdfunding and peer-to-peer lending, but with a twist.
According to Bernard Worth, who created Loanable along with co-founder Justin Straight, there is a whopping $1.3 trillion in American student loan debt.
This system, which just launched in October of this year, is designed specifically for loans from friends and families. Loanable is an innovative way to get a low-interest loan from multiple friends and family members, without of lot of the awkwardness and tension that’s typically involved with borrowing from people you know.
The friends and family loan set-up process is pretty straightforward. You simply need to enter some information:
The full amount of the loan
Each lender’s name, address and email
The borrower’s name, address and email
The interest rate – which is usually between 2% and 10% for friends and family loans
With tax season around the corner you might have noticed a deluge of Jon Hamm commercials for interest free tax refund advance loans. This is a newer product used by tax preparation firms to build their customer base around tax season.
Zopa, one of the largest peer to peer lenders in the UK, has announced an increase in interest rates paid to investors. Zopa currently offers two diversified investment tiers: Zopa Core and Zopa Plus. Returns have increased from 3.7% for Core and 4.5% for Plus respectively. The higher rate reflected by Plus is indicative of an increase in risk profile. Zopa said this is the first time target returns have increased since 2015.
Softbank Group, the Japanese technology conglomerate, is considering the sale of 30 per cent of the shares in Softbank Corp, a subsidiary that is Japan’s third-biggest mobile phone operator, in an initial public offering.
The mega-deal could raise up to two trillion yen (£13 billion) and may take place this year in Tokyo and London, with the proceeds channelled into investments in new technology businesses, the newspaper Nikkei reported last week.
Research from an independent senior recruitment specialist firm, Tindall Perry, reveals that 74 per cent of finance directors describe their knowledge of alternative finance as average or above. However, only a quarter said they were comfortable with accessing crowdfunding or peer-to-peer lending.
In contrast, 85 per cent of companies said that they understood how best to access asset-based lending (ABL), while invoice finance, trade finance and venture capital all saw a positive response rate of between 55 and 75 per cent.
Despite this, traditional bank lending remained the funding of choice for financial directors, with 83 per cent suggesting that they would approach their bank for finance in the first instance.
Envestnet | Yodlee has launched a single API solution to make it easier to comply with the UK’s PSD2 and open banking API specifications for account information services, reports David Penn at Finovate (FinTech Futures’ sister company).
“We’ve recruited more than 1,000 specialised consultants across BCG working on topics which didn’t exist just five years ago,” says Mr Morel. They are technologists, data scientists and process specialists who help banks decide what to prioritise and how to design and implement solutions. Most of those newcomers work in financial services, including 100 who work with UK institutions.
In fact, with real estate crowdfunding services like Fundrise Reviews you can invest with as little as £500 in commercial real estate. Something that means you could be looking at a return of over 10 per cent, not bad for such a small investment.
Peer to peer lending is another fantastic option for investors that have a smaller pool of capital to work from.
The past New Year’s Day holiday might not have been a time of celebration for some Peer-to-Peer (P2P) investors in China.
Several Chinese online lending platforms announced a repayment delay or liquidation amid tightening government regulations.
On Dec. 26, 2017, a Beijing-based online lending platform ishoutou.com made an online announcement that it was going into liquidation due to compliance risks. It promised to pay back all loans by 30 percent, 30 percent and 40 percent respectively in the three months from February to April.
However, the company owner, Yang Yinghua, went missing the next day.
And yet it is Orange that has launched one of the most audacious attempts to break into mainstream banking and challenge tarnished incumbents. A couple of months ago Orange Bank was launched with a mission to attract 2m clients and shake up the staid world of French finance.
The shift to smartphone banking should put telecom operators, handset makers and the big technology groups in a strong position to go head to head with the traditional banks.
Springhouse today announced that it has received Morningstar Credit Ratings, LLC’s MOR RV2 residential-vendor ranking as an asset valuation provider. Morningstar’s forecast for the ranking is Positive.
As a member of the Altisource Portfolio Solutions S.A. family of businesses (“Altisource”), Springhouse leverages Altisource’s shared services.
Eiffel Investment Group actively supports the development of digital lending throughout Europe.
We are excited to sponsor the first EUROPEAN DIGITAL LENDING AWARDS.
The event will take place on February 1st, 2018, in Paris (25 Rue du Petit Musc, 75004 Paris) at 7 pm. If you would like to attend, please send us an email at firstname.lastname@example.org (advanced registration is mandatory).
Launched in January, the company’s ‘borderless’ account – coupled with a debit card – allows users to hold up to twenty-eight currencies. Once signed up, account holders can carry out transactions in a currency of their choice as they travel around the world.
But there are other new players in the market. For instance, Revolut – which styles itself as a digital banking alternative, offers a prepaid debit card that allows users to hold up to sixteen currencies. Again, transactions can be carried out in the currency of choice.
Meanwhile, WorldFirst – a foreign exchange broker serving companies and relatively wealthy individuals – last year announced that it was launching a World Account, Aimed at SMEs, the new account offers the ability to open local bank accounts overseas and hold dollars, sterling and euros.
To Illustrate the potential demand for its service, Worldfirst cited research suggesting that small and medium-sized companies were carrying out foreign-exchange trades to a value of £76bn every month.
According to Bank of America’s Year-end Millennial Snapshot, 49% of Millennials believed that the Great Recession drastically altered their attitudes about banks, specifically with regard to their saving, investment and expenditure.
According to PwC’s Global FinTech Report 2017, FinTech startup funding is over $40 billion in cumulative investment, growing at a compound annual growth rate (CAGR) of 41% over the last four years.
Embrace the Millennial Banking Revolution
59% of Millennials interviewed by BNY Mellon says they’ve never come across a financial product specifically meant for them. A report by The Millennial Disruption Index cited that all the four leading banks in the US are among the least-loved brands by millennials.
AlfaToken, a service enabling startups and innovative entrepreneurs to create their own ICO tokens and smart contracts without coding skills, is gearing about to conduct its Initial Token Offering with the help of ICOBox, the world’s leading provider of ICO solutions. AlfaToken plans to offer services in 14 smart contract areas, from initial coin offerings and real estate rentals, lending and insurance, to business process management, smart homes and property transfers.
Founded in 2017, AlfaToken identified a gap in the ICO market where initial coin offerings are forecast to rise from 43 in 2016 to 537 in 2017, according to coinmarketcap.com. In particular, the company perceived an opportunity for its Ethereum smart contracts in the real estate rentals market, worth $2.8 billion (Airbnb forecasts), in the peer-to-peer lending market (including mortgages), worth up to $180 billion according to Business Insider, and also the insurance market valued at $4.5 trillion according to a 2016 report by the Institute of International Finance.
Every digital financial transaction you’ve ever made in your life has had to go through a bank or large financial institution at some point. They authorise, facilitate and record the transaction, often taking a cut along the way. Blockchain essentially replaces the middleman in this process. It’s international, unregulated, instant and unhackable.
94% of economists surveyed by finder.com.au in November 2017 expect blockchain will have widespread use in the financial sector and economy.
2. Biometric payments
Although biometric payments are increasing, finder.com.au research shows 60% of Aussies – over 11 million people – either feel uncomfortable using biometric identification when logging on to their mobile banking apps, or aren’t really sure about it.
3. The end of our low-interest world
Australia’s cash rate sat stagnant throughout 2017 at a record low of 1.5%, producing low savings rates, cheap mortgages and escalating property prices.
4. The declining human face of banking
A sharp rise in mobile and online banking has meant Australians are less likely than ever to need to visit their local branch. We expect the number of branches to fall further in rural, regional and remote areas.
5. The rise of one-to-one lending
For example, the average three-year term deposit in December 2017 paid 2.55% interest. However, peer-to-peer lender RateSetter are currently offering 7.4% for the same period.
6. The disappearance of ATMs and cheques
The number of ATM withdrawals per month has fallen from a high of 73 million in 2010 to just 47 million in 2017.
It has been noted that youngsters are averting eyes towards quick personal loans with lesser interest rates rather than the credit cards, says Aditya Kumar, founder of Qbera, a Bengaluru based fintech company. They recently compiled a stats on spending on travel loan trends in 2017. “Millennials, covering more than 50 percent of the Indian population are constantly looking for online digital platforms to plan their finances for holidays; unlike their predecessors who’ve always relied on savings. It has been a regular practice to narrow down their search to fintech lenders for financing their travel needs,” he adds.
According to his company’sstatistical report, out of 1700 applicants of travel loans till last year November, the age of 728 applicants is below 28 years and 105 female applicants within the age span of 20-28 years (both single and married), he adds.
The Financial Services Authority (OJK) is planning to issue a policy in financial services institutions, including guiding principles for Digital Financial Services Providers that include registration and licensing mechanisms as well as the application of regulatory sandbox and policy on crowdfunding.
Not only has the US Federal Reserve started to raise interest rates – a move mirrored by China’s central bank and the Hong Kong Monetary Authority with more developed countries expected to follow suit – but a market correction may be in the works following a strong run in both the US and Malaysian stock markets.
Yet despite its prices taking a plunge recently, its demand is still going strong. Similarly, ethereum, ripple, litecoin and Zcash continue to enjoy the mania status garnered by anything related to cryptocurrency. Equally enticing opportunities are abound with the rapid growth of equity crowdfunding (ECF) and peer to peer (P2P) lending platforms.
Russia’s biggest lender Sberbank plans to help small firms raise funds from private investors with a peer-to-business platform, three sources familiar with the plans said, competing with two other ventures that support the cash-starved companies.
The state bank’s foray into p2b lending suggests it sees a revival in fortunes for small businesses as consumer spending picks up.
It also reflects the commitment of chief executive German Gref to enhance the bank’s use of new technology.
News Comments Today’s main news: Impact investment performance. The UK home lending market had a watershed year. Opus, Statista predict digital payments to rise in 2018. Crowd Genie opens up blockchain-based lending to Singapore. Fast Invest offers crypto-enabled loan investments across Europe. Today’s main analysis: Where financial institutions will spend money on fintech in 2018. Today’s thought-provoking articles: The […]
Where money will be spent on fintech in 2018. AT: “American Banker predicts where banks and other financial institutions will put their investments in 2018. A good read with some solid predictive analysis, and good reporting. Top of the list: Blockchain & AI. Big surprise: Bank will get more aggressive with student lending and mortgages.”
Performance of impact investing. AT: “Regardless of what you call it, impact investing allows investors to grow portfolios while performing a social good, but how do these investments do over time? Not bad.”
A study released in December found that 82% of U.S. commercial banks plan to increase fintech investment over the next three years; 86% of bank senior managers surveyed said they intend to boost fintech funding imminently. The research was commissioned by the global fintech provider Fraedom.
Here are the fintech markets likely to get some love in the coming year:
Up till now, many blockchain pilots have been about gaining back-office efficiencies, such as in clearing securities, Canaday noted. She said she expects the use of blockchain to shift to ways to make money.
“There was a study done about last quarter’s conference calls where the count of the number of times companies said ‘artificial intelligence’ in their calls was 800, up 25% quarter over quarter,” Steinberg said. “When you’re competing with 800 companies, it’s probably a difficult experience.”
While many fintechs focus on serving consumers, “toward the end of this year we started to see more of a shift in investment toward the B-to-B side,” said Grewal. “There’s big money being thrown into the B-to-B space. We’re seeing a lot of new company formation around the B-to-B payment space in a way we haven’t seen before. That’s one trend we’ll see a lot more of next year.”
Banks could “unlock” $11 billion in new revenue streams from small and midsize businesses by 2020, according to an Accenture report.
Better experiences from fintech apps like Digit and Acorns are turning financial services firms into “ingredients” rather than “destinations,” according to Schwark Satyavolu, general partner at Trinity Ventures.
Grewal also sees a lot of interest in the cross-border commerce space — consumers from China wanting to make purchases in the U.S. and the U.K. and vice versa.
Now that the Consumer Financial Protection Bureau has been defanged, so to speak, banks can get back into student lending and mortgages without fear of reprisal, he said.
The Global Impact Investing Network has offered its own take on a much discussed question: do “impact investing” and its variants under various names – sustainable investing, socially conscious investing, ESG investing, etc. – work? And, if so, how well? It looks at this question in a very granular way, focusing especially on II through private equity and private debt. Given this focus it engages in a meta-study, or literature review.
The GIIN begins with the observation that private equity is the most commonly employed vehicle for impact investing. It is used by more than 75% of the impact investors.
How did they do? That 2015 study made the following points:
Since inception the 71 funds have generated aggregate net returns of 5.8% on average, with 4.6% showing up as the median.
The fund level internal rate of return can vary a good deal. The top 5% of funds get 22.1% or higher and the bottom 5% lose 15.4% or more.
That range itself is “similar to what is seen in conventional investing and illustrates that fund manager selection is key to strong performance.”
According to government statistics, 28.8 million small businesses currently operate in the U.S., employing 57 million people. A study by U.S. Bank notes the major reason these businesses fail is due to cash flow problems. Eighty-two percent of those businesses, in fact, are tanking because of lack of cash.
“You have this compression happening across every stage along the way,” Graham says. “For example, 24-hour turn with orders, better systems allowing a distributor to invoice faster, and easier ways to accept payment up front. It’s enabling everything to move faster. The need for financing is not as great as it used to be as a result of the options available now to be able to turn everything faster.”
There’s also big growth in the online lending space, Graham says, allowing for a lot of flexibility and options to get bank-like financing for business needs. But she thinks the next huge financing shift will surround something completely different.
“I think a lot of the real changes are going to happen around digital currency,” she says.
“Document requirements won’t change,” Seagraves says. “To get a loan today, you need to have some vehicle to communicate your plan, and that vehicle should include a set of business projections, like an Excel spreadsheet that talks about your financial requirements for the short term and how long it’ll take to become cash flow-positive. Then the lender is going to want to know your financial position as an individual and if any of your assets can be leveraged to secure a loan. These are all very traditional requirements, and I don’t see them changing any time soon.”
Eight out of ten American adults feel anxious about the state of affairs of their personal finance.
In addition to this, neural activity associated with “stressful information processing” was 20% higher among people who made their own money decisions compared to someone who received financial advice.
The membership of the Equity Release Council in the UK has increased annually by 23%, rising to 219 from 178 at the same time last year, boosted by new entrants to the market, the latest official figures show.
Lending in the third quarter of 2017 surpassed £800 million for the first time in any single quarter, with the sector also on course to reach a record-breaking £3 billion in lending for the first time in a single year.
By any measure, 62-year-old Shan Juzhen was an easy mark. After the shortest of conversations with other investors, Shan put more than US$15,000 – or nearly a year of her pension – into a lending club she had never heard of.
She felt it unnecessary to check the qualifications of the lending club, which serves as an alternative for borrowers who cannot get a loan from a big bank. She also did not ask questions about how her money would be lent. The only thing Shan wanted to know was would the platform give her a high return on her investment.
A report published in December by Chaoyang Court in Beijing found that the number of Chinese senior citizens involved with lending-related disputes surged to more than 4,400 in 2016, a nearly sevenfold increase from a year earlier. And among all lending-related disputes the court handled last year, about 45 per cent involved elderly Chinese.
P2P online lending has now reached US$908 billion in transactions, according to Internet Loan House, a website that tracks the industry.
Given this assessment, the ESAs are of the view that, even though automation in financial advice is not presently observed equally across all financial sectors and/or EU Member States, the phenomenon has the potential to continue to grow. The ESAs will assess the feedback to this Discussion Paper in order to better understand the phenomenon and to decide which, if any,
regulatory and/or supervisory action is required.
In considering the topic of automation in financial advice, the ESAs have observed the following across the banking, securities and insurance and pensions sectors :
In the banking sector:
i. Automation specifically in relation to financial advice does not seem to be very widespread. However, human contact is supported more and more by the use of various automated tools. These include comparison websites that can compare products offered by various financial institutions, and websites providing information on specific products and helping consumers to select between products by using simulators and calculators.
ii. New business models that are based in providing advice through automated advisory tools have nonetheless emerged (e.g. automated tools where the consumer fills in all relevant information and receives an advice on which mortgage to get as a result).
In the securities sector:
i. Automation in relation to financial advice is a more mature phenomenon, although the provision of advice that is completely automated appears to feature only in a few EU Member States. In this business model, automated tools are used as a type of financial adviser, often referred to as a ‘robo-adviser’: the automated tool asks prospective investors for information about their specific circumstances and, based on the answers provided, an algorithm is used to recommend transactions in financial instruments that match the customer’s profile.
ii. Different automated tools may be used to support different parts of the advice process, for example the collection of information, risk profiling, portfolio analysis, and order processing or trading.
iii. Some advice services are entirely automated, whereas other services foresee human interaction between the consumer and the advice provider at some stage.
iv. In a greater number of European jurisdictions, other automated tools exist that offer various online functionality to consumers. Such offerings include (but are not limited to): the possibility to open and manage online trading accounts that allow the consumer to trade financial instruments on an execution-only basis; automated portfolio management services; and automated tools that compare the prices of transacting in different financial instruments.
Peer-to-peer (P2P) lending platforms have disrupted American financing. That is old news. What is more interesting is the impact of such platforms in Europe where big banks have long dominated the entire loan-initiation process as well as the investment chain.
European P2P initiatives grew 92% in 2015 to 5.4 billion euros. P2P consumer lending is, so far, the biggest and fastest growing market segment, although far from the only one.
Brexit will mean that British banks will lose what is called “passport rights” that enable them to have access to European markets. And P2P lenders are already jumping into the void this is creating, as well as allowing new kinds of services and income investment opportunities.
Introducing Fast Invest
Fast Invest’s mission is to create a cross-European platform where investors can earn returns for investing in loans. At present, the platform offers an 8-15% return based on past performance for short-term investments of as low as 1 euro, US dollar, pound or Polish zloty after ten months.
Today, before the crowdfunding, the company has 8,500 plus daily customers across Europe, 21 certified lenders, 36 client origin countries and over 50 employees on staff.
Investors will be able to choose between investing in cryptocurrency or a crypto-proved loan investment. This will significantly increase yield over regular bank returns which are about 1.25% API at present. These investments include traditional and alternative investments including issued loans, real estate, private equity and other structured finance products.
Investors can invest as little as 1 euro and get that back within one day with the Fast Invest buyback guarantee.
FIT tokens allow investors to participate in a growing P2P market opportunities across Europe and the US.
Cork-based loan investors are the most likely to back local firms, according to data from peer-to-peer lending platform Linked Finance.
The numbers are based on business loans made over the Linked Finance platform, which matches investors to their choice of borrowers using the so called peer-to-peer lending model that cuts out banks.
Analysis of the investors using the platform found that just over one in three (34pc) of lenders have incomes in excess of €100,000, 39pc own their homes outright and 40pc are homeowners with a mortgage.
2017 was a significant year of growth for digital payments, according to an Opus Consulting report, together with the emergence of alternative payments. Peer-to-peer, wallets and mobile payments reached “high adoption levels” in the mainstream, reaching $3.6 trillion in terms of transactions during 2016-2017. According to the report, that amounted to a 20 percent year-on-year growth–a number that will only continue increasing from here.
In terms of global mobile payment revenue, the report states the number is estimated to reach $930 billion in 2018, representing a 19 percent growth from 2017 with China leading the way in the mobile payments market. Global payments revenue as a whole is poised to reach $2.3 trillion, with 43 percent of that representing banking revenues.
Similarly, data from Statista indicates that transaction values are expected to grow at a compound annual growth rate of 41.9 percent over the next five years to 1.32 trillion, while the number of users in the mobile point of service payments will reach 977 million by 2022.
Fintech outlook 2018: Companies to watch
Glance Technologies, whose flagship product is its mobile app, Glance Pay, decided in 2017 that it would create its own cryptocurrency built on the ethereum platform to use smart contracts to provide rewards, which Green says will be purchases in conjunction with its mobile payment app.
The development of biometrics on mobile devices is set to have an outsized impact on mobile wallets and international money transfer. Advances such as fingerprint login, retinal scan, and facial recognition offer a rare opportunity for remittance companies to both combat fraud and improve the user experience.
Mobile wallet transactions alone are expected to reach nearly $1.4 trillionin 2017, growing 32% compared to 2016, and the number of mobile phone users will top 5 billion.
Biometrics improves the user experience by reducing form fields, eliminating the need to upload a picture of a physical ID, and fully automating the know-your-customer (KYC)/anti-fraud process. Moreover, for the first time, digitally funded transfers will offer better KYC and fraud checks than banks or brick-and-mortar competitors.
With hacked or compromised credentials, attackers can wreak havoc by posing as legitimate users and moving or stealing unauthorized funds. Not only is there a risk of theft, but fraudsters also exploit peer-to-peer (P2P) money transfer services for money laundering and terrorism financing. Considering the fact that P2P payments are expected to be used by nearly129 million adults in the US by 2021, the threat isn’t going away anytime soon.
The number of people living outside of the country in which they were born has surpassed 244 million, representing a 41% increase between 2000 and 2015. Many of these people come from places where the identity infrastructure is weak and disconnected from developed systems in the US and Europe.
About 93% of consumers would rather use biometrics than passwords.
Earlier this year, McKinsey & Co. published a paper on impact investing in India. The data base for that study consisted of 48 PE and VC transactions, of which 31 targeted the “financial inclusion” sector: that is, enterprises designed to bring banking and bank-like services to the unbanked.
In this case they varied from a loss of 46% to a gain of 153% with a median gross IRR of 10% and a weighted average of 11%.
Investments in the fintech space in India also witnessed frenzied activity this year, with total value of investments jumping by 388% from $383 million in 2016 to $1,868 million in the first three quarters of 2017, according to industry database CB Insights.
With over 1 billion mobile phones, 325 million broadband connections and 306 million new bank accounts, India became a case study in digital financial inclusion, driven by the Jan Dhan Yojana, Aadhaar and mobile (JAM), as reported by the communications ministry.
More than 225 alternative lending companies were founded in India in 2017 and the segment was the second most funded in India’s fintech space, as per data from an industry database Tracxn.
According to the National Payments Corporation of India (NPCI), eKYC verifications have jumped almost 77% to 84 million in FY18 over FY17, speeding up the on-boarding process and reducing costs significantly.
In 2017, almost 46 strategic partnerships and deals took place between lenders, payments companies and fintech innovators. Some of these were the tie-ups between Paytm and ICICI Bank for short-term interest-free credit lines; Amazon India and Bank of Baroda for unsecured micro loans; Mobikwik and Bajaj FinServ for offering all features and benefits of Bajaj Finserv EMI cards over a digital payments wallet; Fisdom and Lakshmi Vilas Bank for a robo-advisory platform; and between Senseforth and HDFC Bank for chatbots.
RBI’s recognition of P2P lendingstartups as a new category of non-banking financial companies (NBFCs), was celebrated all-round by the sector.
One of the most celebrated advantages of the fintech boom is that of ‘financial inclusion’ and the potential to service the underserved. However, the sector is hoping that the guidelines placed will initiate control and check on the unorganised side of money lending and the digital push will bring about competitive rates and transparency.
Another announcement the RBI made in October was the introduction of guidelines for digital wallet companies. There were mandates on higher capital requirements for license holders of prepaid payment instruments or digital wallets, KYC or know-your-customer norms and the initiation of interoperability of various digital wallets.
Rohit Lohia, CO-Founder and COO of Cointribe believes 2018 will see scaling up of players in the lending space especially in small business lending.
The government’s decision to bear the merchant discount rate (MDR) on digital payments of up to Rs2,000 will bring greater level of acceptability for digital payment systems. Digital payments will become a way of life both for consumers and merchants and bring a cultural shift in digital payments.
Renu Satti, MD and CEO, Paytm Payments Bank
India is currently at the center of the banking world, and is set to emerge as a benchmark in digital and financial inclusion.
The global economic meltdown of 2008 was the catalyst to get people to shift gears, and supplement their income by sharing assets that they owned. Added to this, the increasing internet penetration and the evolving economic system helped companies such as Airbnb and Uber popularise the concept of shared economy, and successfully pave the path for other industries.
However, while these platforms helped millions of people find alternative sources of income, they suffered elementary setbacks. To begin with, the companies have significant amount of transactional overhead, be it monetary or operational. Second, international boundaries restrict cross-border economic sharing. Thus, the peer-to-peer markets are unable to foster collaborative ownership which is crucial to enable true sharing of resources.
Blockchain — the key to global sharing
The peer-to-peer network in the sharing economy, allows individuals to organise themselves without the involvement of any third party. As the intermediaries are based on the algorithms, the technology builds trust, making it a versatile technology that can be match specific user requirements.
According to a PwC report, the peer-to-peer-lending global market is pegged to touch $335 billion by 2025. As the sharing economy continues to grow, the idea of private ownership is being replaced by the revival of collaborative and shared consumption and adoption of blockchain can guarantee safe and secure transactions.
Crowd Genie is a peer-to-peer lending platform based in Singapore. It connects small to medium businesses seeking loans with capital via a blockchain-based cryptocurrency system.
Lenders can expect to make at least 14% return with all funds held in escrow. This peer to peer lending activities will be tokenized using smart contracts to enable lending without borders more efficient, cheaper and safer. Ultimately, the team has a vision to build an Asset Trading Exchange on Blockchain that will democratize trading and allow investment in infrastructure, stocks, cryptocurrency, and bonds across Asia, which would be prohibitively expensive, and potentially unfeasible due to issues of transparency and trust without Blockchain.
Hi, Akshay. Thanks for joining us today. Can you tell us more about yourself and Crowd Genie?
Crowdfunding is popular in the West, but the idea is relatively new in Singapore and other Asia countries. Observing how lenders getting low returns from the banks because of the overhead costs and how established SMEs unable to receive full funding desired and become under-banked, I would like to match this two parties together to solve the problem and that’s what Crowd Genie has been doing.
Why did you decide to use blockchain in building Crowd Genie?
Although our existing P2P digital loan business is incredibly innovative in the Singapore financial sector, it would have been impossible to scale to enable lending without borders and offer Asia-wide asset trading before blockchain technology was introduced.
To build and scale an asset exchange with pre-blockchain technologies would be prohibitively expensive, and potentially unfeasible due to issues of transparency and trust.
In the whitepaper, you talk about creating “Asian Passport” rights or identities. Tell us how you came up with the idea and how you think you will implement this regionally. Is this based on the idea of European passport banking rights?
To build an end-to-end Asset Exchange, a Digital Passport is essential for us to identify who are the lenders and borrowers, are they associated with negative news, illegal activities or politically exposed. We will continue with our existing due diligence process where we ask for proof of identity and bank statement and check it against a world-wide recognized database. Thereafter we set up a digital passport and store in on blockchain.
Please explain the notion of “fractionalized assets,” and how it is redefining how P2P lending is occurring.
P2P lending is an illiquid investment. Imagine that you have invested in a 12 months tenure loan, but would like to get some money back before it matures, say 2 months later. You can do so by selling it on Crowd Genie Asset Exchange by indicating the fraction of your assets that you would like to sell.
Every time there are talks of a rise in interest rates, financial institutions go into a frenzy. The 2008 recession had forced central banks around the world to drop their rates to historical lows. But with the global economy stabilizing, the US Fed and other central banks have started tightening rates. We will be covering […]
Every time there are talks of a rise in interest rates, financial institutions go into a frenzy. The 2008 recession had forced central banks around the world to drop their rates to historical lows. But with the global economy stabilizing, the US Fed and other central banks have started tightening rates. We will be covering effects of the rising interest rates on three of the biggest P2P markets in the world: the UK, US, and China.
Last year, Bank of England (BoE) reduced the interest rate by 0.25 percent along with a sling of monetary policies to encourage growth. But in October of this year, BoE increased the interest rate, though only marginally by 0.25%. Both of these times, banks and other financial institutions immediately reviewed the mortgage and saving rates, and the effect was passed on to customers. But the change is too small to have any damaging effect on P2P lenders.
News Comments Today’s main news: LexinFintech relaxes on IPO funding goal. Welendus exceeds Seedrs funding target. LendingTree provides 2018 guidance prior to Investor Day. Yirendai invests in Lion Rock. Mercer delivers financial advice with AI through Facebook Messenger. Today’s main analysis: Online lenders test the faith of investors. Today’s thought-provoking articles: Why Google, Amazon scare BlackRock, Fidelity. A new chapter […]
Google, Amazon scare the bejeezus out of Fidelity and BlackRock. AT: “While I certainly see the concern, I’m still not entirely convinced Google has any interest in rolling out financial services, and I’m pretty sure they wouldn’t be as good at it as search. Amazon, that’s a different story, but I don’t see them getting too far afield of their core competency — e-commerce — either.”
“You are not on track to meet your retirement goal,” replies Amazon.com Inc.’s voice-activated digital assistant, with not a bit of sugar-coating. Then she suggests turning over $76 a month to Fidelity Investments and its advisers.
This won’t actually happen if you try it on your Amazon Alexa device at home. It’s a demonstration put on by EMoney Advisor LLC, a company owned by Fidelity, in its offices in Radnor, Pa. Amazon provides software for third-party developers to experiment with new functions. Fidelity is trying to find ways to apply artificial intelligence, computer algorithms, and voice-recognition software to the hidebound world of money management and investing.
Earlier this year, Boston-based Acadian Asset Management LLC struck a deal so its portfolio managers could use Microsoft Corp.’s Bing Predicts, which makes forecasts using search and social media data, to help pick stocks; that agreement later ended.
BlackRock, led by chief executive officer Larry Fink, in recent years has been buying stakes in other companies, particularly technology firms. Through these purchases, the company is pushing into new lines of business.
Fidelity bought EMoney in 2015. It sells software to investment advisers that’s designed to make it easier to interact with their customers on budgeting for weddings, college, or retirement.
Tianqiao Chen still wants to be part of Lending Club. Last week, while shares in America’s biggest listed online lender were tumbling after another cut to profit forecasts, the chief executive of Shanda Group bought 4m more of them, further cementing his position as the company’s biggest shareholder.
Many operators are feeling the effects of a big push for market share in the latter half of 2015 and early months of 2016, says David Snitkof, chief analytics officer at Orchard. As the platforms rushed to offer new loans, credit quality suffered, and loans originated during that period are among the worst performers, with loss rates well ahead of projections.
Across the sector, valuations have fallen. Earnest, a San Francisco-based student loans specialist, sold itself in October to Navient, the loan-servicing company, for $155m, or about 40 per cent of its peak valuation. Personal lender Prosper, once a “unicorn”, saw its pricetag drop from a peak $1.9bn to $550m in a fundraising last month.
That meant platforms had to spend heavily to bring compliance and controls systems up to scratch. Lending Club’s latest quarterly filing, for example, shows it had $1.21 of operating expenses for every dollar of fee income over the first nine months — up from $1.03 at the same point two years ago.
Revenue is anticipated to be in the range of $770 – $790 million, representing growth of 27% – 30% over the high-end of full-year 2017 guidance of $608 million.
Variable Marketing Margin is anticipated to be $270 – $280 million.
Adjusted EBITDA is anticipated to be in the range of $145 – $150 million, up 28% – 33% over the high-end of full-year 2017 guidance of $113 million.
The Analyst and Investor event is being hosted in New York at the Nasdaq MarketSite in Times Square. The presentation will begin promptly at 10:30 a.m. ET. A live audiocast with accompanying slides will be made available on the company’s investor relations website at investors.lendingtree.com.
An ICO is simply the initial public sale of a new type of digital “coins”, or “cryptocurrency”.
Judging from the prolific way these new cryptocurrency ICOs are popping up, like mushrooms after a spring rain, one might imagine any clever techie could spin one up at the kitchen table with little more than an internet connection and some well-caffeinated daring-do. Yes, ICOs are easier than crowdfunding, they have that special “blockchain” cachet going for them, and the “regulators talons” have not yet sunk deep.
In a real-life example, on September 29, 2017, the SEC filed a civil complaint in federal district court against ICO promoter Maksim Zaslavskiy and two companies run by Mr. Zaslavskiy. According to the complaint, between July and October Mr. Zaslavskiy and his companies raised at least $300,000 in an ICO touting a new cryptocurrency called “REcoin” — “the first ever cryptocurrency backed by real estate.” According to the SEC complaint, Mr. Zaslavskiy and his companies have been peddling unregistered securities. Furthermore, the complaint alleges, the companies never had any real operations even though Mr. Zaslavskiy told investors in REcoin they could expect sizeable returns from those company’s operations; the securities he sold weren’t backed by any real estate or other assets as he claimed they were; and no “REcoin” digital tokens ever actually existed.
ICOs and Crowdfunding
Circling back to the original crowdfunding thesis, we should also expect this disruptive new technology to begin surfacing in even more impactful nextgen “killer apps” for commercial real estate investment. That’s right, real estate crowdfunding may actually make a comeback by dint of being co-opted into the blockspace. New-age real estate crowdfunding ecosystems are already forming; for instance, the Real Estate Asset Ledger (“REAL”) is one application currently being talked up as a real estate crowdfunding network built on blockchain infrastructure.
Zeus CrowdFunding earned high marks recently from an independent ranking and reviews portal. The Real-Estate Crowdfunding Review named Zeus CrowdFunding the #7 real estate crowdfunding site on the Web based on its “incredible volume” and other impressive advantages.
The ranking also lauded Zeus CrowdFunding’s low default rate and semi-liquidity option and guarantee and called the company “one of the few platforms offering conservative loans below 65% LTV.”
To read The Real-Estate Crowdfunding Review’s ranking and review of Zeus CrowdFunding, visit
Open Banking is set to launch in Europe next month. As banks and fintech firms rush to ensure compliance we wanted to explore the effects on the US fintech market. Recently the CFPB set forth data sharing guidelines for banks and fintech firms to share information. There has since been a number of articles in the news pointing to frustration among fintech companies as banks have not been forthcoming with data sharing.
The current process is clumsy and requires consumers to login many times across many different services. This has also been something banks have complained about to agencies like the CFPB. Services such as Personal Capital and Mint constantly ping bank accounts for information that users have open access to. Setting up a similar initiative in the US could not only allow for a better experience but will undoubtedly be safer for the banks and fintech firms.
Simility, a provider of machine learning–powered adaptive fraud prevention solution, today announced it has secured $17.5 million during its latest funding round. PayPal, Inc. also participated in the round as a new strategic investor along with existing investors The Valley Fund and Trinity Ventures.
Matt Harris, Bain Capital Ventures: “SoftBank buys 20 percent of Stripe for $3 billion. PayPal continues to push itself down the path of being the leading financial services company for millennials and the mass market.” Dion Lisle, Capgemini SA: “‘Alexa, buy this’ or ‘Siri, I need an Uber, pay for it with my AmEx.’ Payments are going to be activated by that voice because that’s a great security method.”
Spencer Lazar, General Catalyst Partners: “Potential changes to the Consumer Financial Protection Bureau (CFPB) under the Trump Administration will likely turn back the clock on Obama-era regulations on non-bank lenders. This will be a boon to startup lenders, making it far easier to dole out capital. The fear is that rates could potentially become predatory.”
Amazon vs. JPMorgan
Andy Weissman, Union Square Ventures: “Some combination of Amazon, Google, Facebook, Apple, etc. will move deeper into online financing of small businesses.”
Tyler Sosin, Menlo Ventures: “Stripe and Adyen will merge, forming a $20 billion plus enterprise-value business and API-driven merchant processor.”
Charles Birnbaum, Bessemer Venture Partners: “Valuations in the alternative-lending space were overly optimistic in our opinion over the prior five years, but we do feel that the pendulum has likely swung back too far in the other direction following the recent pullback” leaving the sector ripe for potential funding or M&A.
Braviant Holdings, a leading fintech startup that offers analytics and technology-driven credit solutions for underserved Americans, is now offering personal loans up to $10,000 in Californiathrough its Chorus Credit online lending platform. Chorus will complement Braviant’s existing installment lending business, Balance Credit, by offering higher loan amounts at lower rates to the estimated 26% of California consumers who are underserved by traditional banks.
In 2017, we increased our solar project pipeline by an order of magnitude. This is due in large part to more resources dedicated to pipeline development, advancements in our lending practice, and – at a macro level – a rapidly growing solar market and commercial sector.
Yesterday U.S. District Judge Naomi Reice Buchwald of the Southern District of New York dismissed one of those lawsuits, Vullo v. Office of the Comptroller of the Currency. The judge dismissed the suit of the New York State Department of Financial Services, headed by Maria Vullo, against OCC on the grounds that the matter is not “ripe” for a decision on the legal ability of the Comptroller’s Office to issue such specialized charters.
Indeed, at the recent RegTech Enable conference in late November, OCC’s Beth Knickerbocker, chief innovation officer, characterized the proposal as “on hold.”
Why New York’s claim isn’t ripe
Judge Buchwald’s decision recapped the history of the proposal at length. Her decision came down to this sentence: “Claims are not ripe if they depend on the occurrence of contingent future event that may never occur at all.”
She pointed out that no injury would occur if OCC never issues such a charter to a fintech company.
Vanguard is moving to use blockchain to simplify how it updates index data underlying mutual funds, executives said on Monday, an important sign of confidence for the new financial technology.
Closely-held Vanguard, the top mutual fund firm with nearly $5 trillion under management, has successfully tested blockchain to automatically update data like the names and share prices of companies in index funds, processes that must currently be closely overseen by individuals, said Warren Pennington, a principal in Vanguard’s investment management group, in Pennsylvania.
Further, to date, the parties have not raised an important argument that this Court should consider, namely, that restricting the President’s authority over the CFPB Director’s replacement only exacerbates the serious constitutional questions currently before the D.C. Circuit with respect to the CFPB’s structure. As CUNA explains, such questions could be avoided by adopting Defendants’ position in this case. Thus, CUNA’s perspective on the central issues in this case is invaluable and unrepresented by the parties.
The startup revealed today that, through an existing partnership with MicroVentures, it will begin offering services to projects seek to use the blockchain funding model.
Specifically, accredited investors purchase Simple Agreements for Future Tokens (SAFTs), with the tokens set to be delivered at a later date. The mode has been used by a number of ICOs in recent months, and according to the page on MicroVentures, $915,000 has been raised from nine investors thus far in the new ICO.
The payments company today announced it is launching a new service called Assemble, which it calls a “prepaid innovation hub” designed to allow Mastercard partners or issuers to provide checking, budgeting, and payment features, as well as additional money management tools.
The media company evaluated personal loan companies in five key areas, reviewing data on eligibility, loan terms, fees, repayment methods and additional features. LendingPoint was cited as 2017’s top lender for people with fair to good credit, who have merit-based qualifications beyond FICO scores that make them worthy loan candidates.
Quesnay is pleased to announce that Goalsetter is the winner of the inaugural Female Founders in Tech, spotlighting female founders that positively impact the financial services and/or insurance technology industries.
The winners represented cutting-edge businesses that were also socially conscious:
– Goalsetter – Goalsetter is a goal-based savings and gifting platform, targeting millennials.
– Marinus Analytics – Marinus uses technologies to help identify and fight crimes like human trafficking and money laundering associated with it and other illicit activities
– LENDonate – LENDonate provides a marketplace lending platform for non-profits and supporters.
Approximately 100 women-led startups registered for the program with solutions ranging from artificial intelligence to blockchain to creative financial literacy and savings solutions. Seven finalists presented in New York to a panel of judges which included industry leaders from the sponsoring organizations: John Hancock, MassMutual, RGAx, Sterling National Bank, TD Bank and Thomson Reuters.
London-based MarketInvoice, which arranges loans for small companies secured by accounts receivable, will handle the underwriting for Investec customers in the partnership, according to the bank’s website. Investec will provide 50 million pounds ($67 million) in the first year to fund the loans, Anil Stocker, the startup’s co-founder and chief executive officer, said in an interview.
British banks have been mired in criticism for not lending as much as they could.
Many businesses have meanwhile found that alternative lenders lack the data to provide products that are tailored to their needs.
Rate hikes typically result in an increase in lending profitability, and so the increase often stimulates the appetite to lend.
But an increased appetite to lend doesn’t always follow an increased ability to price risks on all loan applicants, and herein lays the risk: lenders become creative with the ways in which they entice borrowers and mitigate their risks.
These loans from mainstream lenders look like the payday loans that flooded the market in the height of the recession. They take minutes to apply for, turnaround is within one day, and command interest rates of up to 23 per cent APR – five times more than some personal loans.
The figures showed growth across the UK’s alternative finance market, including crowdfunding, invoice trading, and marketplace lending. The date found a year-on-year rise of 43 per cent in 2016 from £3.2 billion to £4.58 billion.
Business marketplace lending grew by 28.5 per cent from £881 million in 2015 to £1,232 million in 2016, placing it ahead of consumer marketplace lending, which previously had the biggest share.
On Wednesday, specialist property lender LendInvest released its latest LendInvest Buy-to-Let Index report, which ranks all 105 postcode areas around England and Wales based ona combination of four metrics, which are capital gains, transaction volumes, rental yields, and rental price growth.
The Index report’s key findings include:
Manchester, leader of the Northern Powerhouse, takes top spot
Leicester breaks into the Top 10 and Birmingham climbs 8 places from #18 to #11, signaling upward mobility in the Midlands markets
Hull marks itself as biggest climber for 2017, rising 93 places to #6
Enfield tumbles from Top 10 in February to Bottom 10 in December
Those with pot sizes of less than £50,000 are increasingly being turned away by their financial adviser. In 2014 just under a quarter of clients were shown the door, whereas in 2017 this figure rose to 50 per cent.
Mr Bonanzinga thought he could combine internet data and machine learning to do a better job of ferreting out prospects. It took two years and £5m in investment for InReach Ventures to create the software, which has so far trawled through 95,000 European start-ups, picking out 2,000 that Mr Bonanzinga might be interested in.
The software determines this based on the people they are hiring, the products they are developing and the traffic on their website, among other things.
LexinFintech Holdings Ltd., a Chinese online lender that is planning to go public in the U.S., scaled back its fundraising ambitions after regulatory changes in China sparked a rout in shares of similar companies.
Lexin, a four-year-old company whose backers include Chinese online-retail giant JD.comInc., is planning to raise $120 million in an initial public offering, according to a Wednesday filing with the Securities and Exchange Commission.
Lexin Fintech plans to offer 12 million American depositary shares at an indicative price range of US$9 to US$11 a share, raising as much as US$132 million, the company said in an updated filing on Thursday to the US Securities and Exchange Commission.
The fundraising value is sharply down from an originally planned US$500 million, as mentioned in the IPO prospectus issued last month.
Local banking regulators have until the end of June to weed out noncompliant peer-to-peer (P2P) lenders, according to a circular issued by a special working group led by the China Banking Regulatory Commission (CBRC).
Yirendai Ltd. (NYSE: YRD) (“Yirendai” or the “Company”), a leading fintech company in China, announced today that it has made a strategic investment in Lion Rock, a comprehensive financial services platform that is focused on global asset allocation, through Lion Rock’s Series A financing of HK$50 million.
Lion Rock is headquartered in Hong Kong and offers a wide-variety of high-quality financial products, financial news, robo-advisory services as well as asset allocation services through its online platform.
FastInvest, a p2p fintech platform, recently studied data from over 8500 EU investors daily and came across a really unexpected finding. Highly specific traits and behaviors were driven by nationality over and above other individual factors when looking at big data.
From traditional investment metrics like risk aversion, to outside the box items like nationalistic tendencies and compulsive behaviors. Across numerous areas, national cultural traits could be seen solely based on country to country locales.
Even with the EU offering a bit of a more stable currency, only 1.76% of residents prefer to invest in Euro based currency loans.
Only 2.20% of Belgian investors choose PLN (Polish) currency based loans as opposed to their own Euro.
Germans appear to be the most open minded of EU countries, with 15.73% making investments in PLN currency.
The Netherlands followed behind Germany in diverting from the euro, with 9.08% of investors choosing PLN based loans.
Etherecash is one step closer to actualizing its vision of bridging the financial divide between the banked and the unbanked with the successful conclusion of its ICO ahead of schedule. The ICO is now scheduled to finish on 12th Dec 6:29 PM (GMT) after four impressive bonus rounds that outperformed expectations.
With over $30 million raised and 45000 registered participants, Etherecashcan now set its sight on eliminating traditional borders, intermediaries and prejudices in the way money is lent, spent, and sent.
Australia’s 17 million active Facebook users spend on average 1.4 hours a day liking, commenting and sharing stories with family and friends. Moreover, with roughly 17% of the earth’s population being active users of Facebook Messenger, there is irony in the fact that the smartphone generation is spending more time engaging on Facebook rather than thinking about their future financial readiness.
Accessed through Facebook Messenger, SuperBot represents the ultimate opportunity to scale financial advice across a very large proportion of the population.
Eighteen of the 25 participants in the KPMG non-bank financial institutions performance survey posted increased earnings in 2017, generating a total net profit of $216.7 million, up from $196.6 million a year earlier. Total assets grew 12 percent to $10.96 billion, with lending boosted by the nation’s strong demand for new vehicles and several non-bank institutions testing the waters in the mortgage space as the major banks become more reticent in some of their credit criteria.
The use of financial advice among high-net-worth investors (HNWI) has fallen to a five-year low, according to the insights, which show 435,000 millionaires own more than $1 million of investable assets.
Almost 75% of HNWIs relied on the expertise of a financial advice professional in 2013 – but this has declined to 68% in 2017.
Credit Suisse found the number of Australian millionaires rose by 200,000 in the year to June, marking the third-largest increase after the US and Germany in its global wealth ranking.
Indeed, interest rates on small business loans have “remained relatively high” due to a lack of competition – leaving banks as the major provider of lending to small businesses (80 per cent).
But a CCR regime would offer lenders more information about potential borrowers’ credit history than just negative credit information, as per the current standard.
The Australian government has determined a mandatory credit reporting regime to come into effect in July 2018, but a number of financial institutions such as NAB have already announced it will roll out such a regime.
Other forms of accessing finance for smaller firms or entrepreneur were large technology firms and alternative financing platforms, such as marketplace lending and crowdfunding, he added.
Financial technology firms that generate credit scores based on digital footprints of individuals will have a major role to play as banks begin to focus on lending to first generation customers who do not have credit history, former Deputy Governor of Reserve Bank of India H.R. Khan said here on Wednesday.
Mumbai-based fintech startup CapitaWorld Platform Pvt. Ltd has raised an undisclosed amount through convertible equity from high-net-worth individuals, corporate honchos and investors from Hong Kong and the Middle East.
The investors who participated in the latest round include former chief executive of Indian Banks’ Association Mohan Tanksale, Swift India CEO Kiran Shetty, Madhu Silica’s managing director Darshak Shah and former JP Morgan executive Mandar Mhatre, the startup said in a statement.
Berkshire Hathaway Specialty Insurance Co. (BHSI) announced it has introduced Financial Institution Professional Indemnity (FIPI) insurance in Asia.
The new BHSI policy is designed to cover a range of claims, from allegations of failure to disclose information, to misleading financial advice and breach of contracts, the company said in a statement. The policy combines coverage for civil liability, pre-investigations, mitigation expenses, bail bond costs, court attendance, loss of documents, and more.
The policy is designed for medium to large financial institutions, including securities dealers, regional banks, insurance companies, reinsurance companies, diversified institutions, and financial technology (fintech) and corporate advisory firms.
Brazilian fintech Nubank has launched an engineering center in Berlin as part of a plan to boost its software engineering function internationally.
Nubank has expatriated four of its engineers to Berlin to kickstart the European operations. It has also already started to hire local experts such as Gavin Bell, a senior engineer who previously managed the core data infrastructure platform at Soundcloud.
News Comments Today’s main news: Lending Club rolls out its next-generation small business credit policy. Elevate’s RISE surpasses $300M in outstanding loans. Upgrade, Corridor collaborate on big data, credit analytics. Assetz Capital completes Seedrs funding round with 1.6M GBP. Alibaba seeks majority stake in SenseTime. Revolut banks on cryptocurrency. Comunitae suspends activities due to fraud. Today’s main analysis: The hidden relationship between […]
Who wants to take out a loan for a pair of jeans? AT: “This illustrates that its all about psychology. Millennials, who have shown an aversion to credit cards, feel better about buying high-dollar fashion items–like designer jeans–on credit when they’d feel guilty for paying cash for the same items. But, really, is POS credit any different than credit card debt, which are often used at the POS to buy the same vanity items. Affirm has designed a smart product targeted at the psychology of a generation that wants to do things differently than their parents. You can’t beat that.”
Elevate Credit, Inc., a leading tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, today announced its RISE product has surpassed $300 million in total outstandings, with more than 130,000 open accounts.
Lending Club arguably pioneered peer-to-peer lending, which has been one of the most vibrant segments of the credit market. Some analysts, however, have questioned the company’s ability to continue growing without adopting some traditional banking practices, like taking deposits.
Lending Club has failed to manage costs well over the past two years, leading to its inability to net profits. As illustrated in the chart below, the company’s trailing 12-month revenue now stands at about $551 million, but it has managed to reduce the net loss from about $175 million in the first quarter to about $94 million in the third quarter.
Lending Club’s first-half 2017 loan originations figure, however, declined from the prior-year period, dropping to approximately $4.1 billion versus $4.7 billion last year.
Jocelyn Vera Zorn is not eager to talk about the loan she took out to buy the pants. “It’s kind of embarrassing,” she grimaces.
For merchants, Affirm provides exceptional benefits, increasing average order values across the board; perhaps not surprisingly, people will shop more, and more often, when they don’t immediately feel the costs. And for many customers, including Jocelyn, the predictable, convenient payments are worth the higher interest rates.
Affirm claims to be a more transparent and honest, if not cheaper, line of credit for the underserved. Using internal, proprietary data science and artificial intelligence, the company says it approves 126 percent more borrowers than traditional lenders, based on soft credit pullsand an opaque mosaic of consumer information.
While more than two-thirds of Americans own at least one credit card, 20 percent are considered subprime, with a FICO score of 600 or below. Another 10 percent are on the bubble.
Upgrade, Inc. (), a consumer credit platform that combines personal loans with tools that help consumers understand and monitor their credit, today announced a strategic partnership with Corridor Funds (), a new credit analytics and portfolio management platform founded by Manish Gupta. Mr. Gupta was recently EVP, Global Head of Information Management and Advanced Decisioning at American Express and prior to that spent many years as Chief Credit Officer of the Amex US consumer lending business. Under the terms of the partnership, Corridor will provide independent analytical review and validation to investors in Upgrade’s personal loan products, and will collaborate with Upgrade on new product design.
Announced today at CoinDesk’s Consensus: Invest in New York, TechCrunch founder Michael Arringtonrevealed he’s raising $100 million for a hedge fund that will buy and hold crypto assets while making investments in token sales and (some) equities and debt.
Launched under a new entity called Arrington XRP Capital, the fund claims to be the first that will require all limited partners (LPs) to make investments in XRP, the cryptocurrency that powers San Francisco startup Ripple’s RippleNet software.
Five years later, LendUp customers are improving their credit scores, and now I’m proud to say that LendUp Loan customers have saved $150 million versus what they would have spent with traditional small dollar lenders, all while improving their credit score to open up more financial options in the future.
Two-thirds of LendUp Loan customers report having income swings of $100 or more a month. And since our newest customers lack short-term savings — 83% aren’t confident they can cover a $400 emergency — 77% report that they often miss bill payments.
Agile, customer-experience-focused financial technology businesses continue to drive innovation, modernization and access to credit in America’s financial services marketplace when banks and other traditional providers can’t meet consumers’ needs. For example, fintech lenders help consumers and small businesses alike find financial products and services that meet their credit needs, whether it’s a short-term loan for an emergency expense or capital to help grow a small business — even when these applicants have been denied by their banks.
Online small business lender OnDeck today launched a new monthly series spotlighting the achievements of its small business customers and how they are thriving as a result of receiving capital from OnDeck.
For December, the customer success spotlight is on Dana Donofree, the owner of AnaOno, a lingerie and loungewear company for women with a unique mission.
“Applying for a loan can be incredibly stressful but fortunately, OnDeck had quick questions and quick responses. Right away, I could see how much financing I was approved for and what that meant regarding payback. I had the opportunity to review everything before I took the loan.”
The old saying goes, ‘money can’t buy happiness.’ It should also say ‘and debt can make you anxious, keep you up at night and cause problems in relationships.’ That’s according to a new telephone survey of 1,004 U.S. adults conducted by Harris Poll on behalf of the American Institute of CPAs (AICPA). The survey found nearly three-quarters of Americans (73 percent) are living with debt driven by factors such as everyday expenses, a lack of income, mortgage costs and student loans, reflecting the far-reaching potential impact of debt upon society.
Recent data shows outstanding household debt reached a record high of $12.84 trillion, making this survey timely. With U.S. consumer spending growing at its fastest pace since 2009, it appears the frugal habits many Americans adopted directly after the Great Recession are a thing of the past.
More than half of Americans with debt (56 percent) say it has negatively impacted their life.
Of those, one-in-five (21 percent) say debt is causing relationship tension with a spouse or partner and one-in-ten (11 percent) have misled family or friends about their financial situation. Debt is not just impacting life at home, it has found ways to creep into all aspects of the day. Nearly a third (31 percent) admit to worrying about their debt in general while nearly one-in-five (18 percent) say they worry while at work and one-in-four (25 percent) worry at bedtime.
Living with debt has become a financial and mental burden for nearly three-in-ten Americans with debt (28 percent) who stress about everyday financial decisions because of their debt. Nearly one-fifth of Americans with debt (19 percent) have received letters and calls from collection agencies. While the low interest rate environment has the potential to keep payments lower, one-in-four (25 percent) say that they’re worried a rate hike could change that.
Nearly seven-in-ten Millennials with debt (68 percent) admit it has had a negative impact on their everyday life compared with roughly half of Baby Boomers (48 percent) and three-fifths of GenXers (59 percent) with debt. Most concerning, the survey found that of those with debt, Millennials are twice as likely to worry about debt compared to Baby Boomers (M: 43 percent, BB: 19 percent) and more than a third (37 percent) admit that their debt causes them to stress about everyday financial decisions.
The world’s largest bitcoin exchange by trading volume is launching in the U.S.
BitFlyer, based in Tokyo, announced Tuesday it became the fourth digital currency exchange to receive a “BitLicense” to operate in New York. The exchange said it also has licenses to operate in 40 other states.
Curry, who was integral in leading the federal banking regulator’s efforts in advancing financial technology, including through the proposal of a special purpose national bank charter for fintechs, joined Nutter McClennen & Fish this week. He is a partner and will co-lead Nutter’s Banking and Financial Services practice group.
How involved with fintech do you plan to be?
That will be a key area and something I’m excited about working with the other members of the firm on. Fintech is interesting, especially if you’re talking about online lending and marketplace lending.
Do you expect the fintech charter will, in fact, move forward?
From my standpoint, I would not have pursued the charter without being very comfortable with the legal foundation for it.
How will you advise clients in the meantime until any special purpose charter is finalized?
Today institutions, banks as well, need to be making strategic decisions about which direction they’re going in. Well before you decide whether to apply to a fintech charter, you should be thinking through the process, so I think the time is now.
This year’s blockchain craze has pushed a huge amount of new money into cryptocurrencies, private blockchain projects, and companies holding initial coin offerings (ICOs). As of now, the total market capitalization of cryptocurrencies stands at more than $340B — a huge leap from where it started the year at $18B.
But you shouldn’t make the decision to refinance your loans lightly. Refinancing can help some borrowers save money, but what refinancing can do for you depends on a number of factors, including the repayment term and repayment options that you choose for your new loan.
Yours Clothing, a UK independent retailer of plus size ladies clothing, has announced a partnership with Klarna which will allow its customers to use the Pay later and Slice it payment options.
Klarna’s Pay later allows customers to try goods first. When checking out online or on mobile, Yours Clothing customers who use Klarna’s Pay later will receive their products and then have 14 days to pay Klarna back interest-free.
Klarna’s second payment option – Slice it – gives shoppers the ability to spread the cost of any purchases over £60 into equal monthly instalments.
Improve your personal credit. Yes, this has everything to do with money. You see, the higher your credit score, the more likely you’ll be able to score lower interest rates on the money you borrow. This can save you hundreds of thousands of dollars over your lifetime, so it’s definitely a resolution worth making.
The rise of online consumer loans in China has spawned a thriving black market in stolen user data.
Virtually non-existent in the country five years ago, consumer lending through websites and mobile apps has expanded rapidly over the past 18 months amid a proliferation of fintech start-ups that use big data to assess credit risk.
In a chatroom devoted to consumer lending on Tencent’s QQ social-media platform, the Financial Times contacted a person claiming to be an employee of an online lender who was offering user data for sale.
For Rmb4 ($0.61) per user, he offered to provide the full name, national ID number, phone number and loan limit. He added that for some borrowers, the data would also include a credit score from Sesame Credit, the unit of Alibaba’s financial affiliate Ant Financial that sells credit scores to banks and consumer lenders with users’ consent.
Alibaba Group Holding Ltd. is in discussions to invest about 1.5 billion yuan ($227 million) and become the largest backer of Chinese facial recognition startup SenseTime, according to a person familiar with the matter.
SenseTime, which says it’s valued at more than $2 billion, is backed by Qualcomm Inc. and considered one of the more advanced players in machine vision technology.
A number of Chinese peer-to-peer (P2P) lending companies went public in the US this year. Those P2P firms have been growing quickly, with some venturing into high-risk segments such as campus loans and cash advances. As they go public overseas, it creates potential risks that may eventually affect China’s financial stability. Supervision is needed to bring the P2P lending sector in order.
That these companies listed in the US reflects several factors. One main reason is the companies are expanding. Most are underperforming, and some are in the red. US stock exchanges do not have strict requirements for indicators such as net profit and cash flow. Also, the US market attracts investors from all over the world, easily raising more funds.
Policy makers from the People’s Bank of China and the China Banking Regulatory Commission convened in Beijing on Nov. 23 to discuss new measures to crackdown on online consumer loan platforms, including those for payday loans and peer-to-peer lending. On the same day, Alibaba Group affiliate Ant Financial said it will enforce a cap of 24 percent on interest rates charged by lenders on its website, or 12 percentage points lower than current rates.
Although the measures haven’t been made public, our industry checks suggest three notable changes. First, the issuance of new licenses to online micro-loan platforms is being suspended, suggesting that regulators are scrutinizing online lending practices. Second, banks and bank-holding companies are being told not to buy loans underwritten by online platforms because such assets are deemed too risky. Third, turning the loans into securities will be forbidden because regulators believe securitization amplifies risks and gives investors less of an incentive to perform due diligence on the underlying assets.
So-called P2P online lending platforms have mushroomed from fewer than 10 to more than 2,000 in just over seven years, but only a few hundred operate with government-issued permits.
According to a report in El Español, peer to peer lender Comunitae has ceased all operations indefinitely due to fraud detected on the platform this past October. The Comunitae web site is still live but certain portions are not functional.
The Swedish Chamber of Commerce for the Netherlands, The Embassy of Sweden and Business Sweden are very proud to announce the winner of the Swedish Chamber Export Prize 2017; Klarna.The prize aims to strengthen the Swedish-Dutch business relations and has been awarded since 2012 to Swedish related companies in the Netherlands.
Paytm Payments Bank aims to create the world’s largest digital bank with 500 million accounts, envisioning an online financial services provider of everything from wealth management to credit cards and stock market trading.
The bank, backed by the country’s largest digital wallet of the same name, launched formally Tuesday and is targeting people who don’t have access to professional financial services. That aligns with Prime Minister Narendra Modi’s ambition to broaden access for the under-banked in the nation of 1.3 billion people.
Paytm was one of fewer than a dozen entities that secured permits to start payments banks, which can accept deposits and remittances but cannot lend.
It said it will operate a mobile-first bank with zero fees on online transactions and no minimum balance.
A major trend shaping the small-business landscape is the rise in cryptocurrency, which can provide alternative means for a variety of cross-border financial transactions.
Cryptocurrency is ideal for cross-border transactions in several ways. In addition to being secure and permanent, cryptocurrency transactions allow borrowers and lenders to sidestep time spent working through a bank, as well as converting from one currency to another. For many investors, the speed and convenience of cryptocurrency-based transactions presents an opportunity to magnify gains.
Along with crowdfunding and peer-to-peer lending, cryptocurrency can improve access to both payments and credit for SMEs.
Independent asset managers shall maintain relationships not only to custodians. Due to disintermediation and distributed ledger technology they will be able to profit from a much broader range of financial assets.
Brussels-based SWIFT has been urging banks to bolster security of computers used to transfer money since Bangladesh Bank lost $81 million in a February 2016 cyber heist that targeted central bank computers used to move funds.
Taiwan’s Central News Agency last month reported that Far Eastern International Bank (2845.TW) lost $500,000 in a cyber heist. BAE later said that attack was launched by a North Korean hacking group known as Lazarus, which many cyber-security firms believe was behind the Bangladesh case.
Nepal’s NIC Asia Bank lost $580,000 in a cyber heist, two Nepali officials told Reuters earlier this month.
He’s now in Sydney at fintech business Prospa, the nation’s leading online lender to small business, where’s he talking to Business Insider about the sector as well as the 12-month investigation into misconduct by the banks.
The article that someone tweeted about, posts that they liked on Facebook, and a new phone just bought on an e-commerce site—all these events now play a crucial role in determining if an individual is eligible for a loan or not.
Online lending firms have seen rapid growth in the last two years, despite the presence of a wide network of banks and non-banking financial companies (NBFCs) in India. That’s because, till 2015, about 70% of Indians remained under-served by banks and other financial institutions, an opportunitythat these firms are trying to cash in on. Now, even banks and NBFCs are tying up with online lending firms to reach out to more customers.
The 166 million households that make up middle-income India—with annual earnings of between Rs2.2 lakh ($3,414)to Rs3.59 lakh ($5,572)—typically apply for personal loans to buy consumer durables, for weddings, to meet medical expenses, set up a new business, and the likes.
“We have about 80-90 parameters that are used to check a consumer’s credit worthiness. And that’s where technology comes into play to ensure that it can be done swiftly and efficiently,” said Satyam Kumar, co-founder, LoanTap, an online fintech platform that provides retail loans to salaried individuals.
GyanDhan, a Delhi-based start-up working in the space of education loans, emerged winner of a GIST pitch competition for enterprises in the Fintech and Digital Economy, one of the four focus sectors at the Global Entrepreneurship Summit, here on Wednesday.
Lupiya Circle, an online market place created by women in Zambia to financially empower women in the African nation through a branchless banking model was declared the runners-up.
Since 2005, the top 200 funded startups in the MENA region have attracted more than $2 billion in capital, according to a report issued by MAGNiTT, which tracks the development of startups across the region.
To date, the majority of top funded startups in the region were established in the UAE, and the primary financial backers have also tended to be UAE-based.
But a recent uptick in funding from Saudi investment firms points to a developing ecosystem for startups in the Kingdom, according to MAGNiTT founder Philip Bahoshy.
Bahoshy said that startups providing solutions for broader regional challenges such as sticky logistics and cross-border banking frictions stand the best chance of attracting meaningful investment.
Next year will be a good year for Sub-Saharan Africa. After a challenging 2017 for many of its nations, 2018 will see economic growth return across the continent, gas activity boom and fintech innovation pick up in speed.
The research department of the Pan-African bank forecasts three key trends that will take hold across Africa during the next 12 months. GTR takes a closer look at them.
3. Africa’s evolving role in fintech leadership
But 2018, he emphasises, will see African fintech firms increasingly driving this innovation. “There will still be international investors, but the actual leadership of fintech development is going to start coming increasingly from the Africans. It’s not going to be the Europeans and Americans going in, saying, ‘you should do this’.”
Ecobank’s research highlights South Africa, Kenya, Rwanda, Nigeria, Ghana and Côte d’Ivoire as tech hubs that will nurture the next wave of African startups and help connect them with investors.
One fintech that has caught Ecobank’s attention in particular is IroFit, a firm that uses the mobile network to enable real-time financial payments without the need for an internet connection.
Other emerging innovations in Africa include digital tools to build credit profiles for the previously ‘unbankable’ or using blockchain technology for digital identity and KYC solutions.
News Comments Today’s main news: RateSetter partners with Experian. Australia publishes fintech regulation draft laws. Lending Loop hits $10M financing milestone. TD Ameritrade offers stock trading through Facebook Messenger. Abra secures $16M in Series B led by Chinese electronics manufacturer. Zero raises $8.5M for credit card that acts like a debit card. Nested raises 36M GBP. TransferWise changes its fee structure, but […]
TD Ameritrade now offers stock trading through Facebook Messenger. AT: “There’s no telling what kind of financial services that will someday be offered through Facebook Messenger. There seems to be an increase in services piggybacking off Facebook’s reputation and user base. Maybe someday we’ll all do our banking through Facebook.”
TD Ameritrade Holding Corp. customers are now able to trade equities and exchange-traded funds using Facebook Inc.’s Messenger services, according to a company statement Monday. Clients can also make deposits, access quarterly performance video statements and receive weekly alerts that rehash market moves.
Hon Hai Precision Industry Co (鴻海精密), the world’s largest contract electronics manufacturer, participated in a US$16 million Series B fundraising program to invest in US-based digital wallet start-up Abra, the new firm said on Monday.
Barhydt said that Abra’s existing investors — Arbor Ventures, American Express Ventures, Jungle Ventures, Lehrer Hippeau and RRE — also participated in the fundraiser that closed on Monday.
The program helped Abra reach more than US$35 million in total capital, Barhydt said, but did not elaborate on potential uses of the additional US$16 million.
A startup called Zero thinks it has a solution to this and it is gearing up to launch a credit card that functions like a debit card. The startup is also raising $8.5 million in a funding round led by ENIAC Ventures, including participation from NEA, Lightbank and others.
In a recent survey it was revealed that 81% of people use the same password for multiple accounts with that number being even higher, at 92%, for millennials.
The introduction of Touch ID on the Apple iPhone in 2013 was a seminal moment in the history of biometrics. People could suddenly use their thumb or finger print as an identity verification tool and forgo using a password. Today, on my phone I can login to my bank account, buy music or apps, buy a plane ticket, even check my Lending Club account all with the press of my thumb.
Behavioral biometrics can capture things like hand-eye coordination, pressure, hand tremors, keystroke dynamics, gait analysis, mouse use characteristics, navigation, scrolling and other finger movements.
Cross River banks some of the biggest names in fintech, including at least a dozen online lending companies like Affirm, Marlette and Rocket Loans. It has also developed payments solutions for faster, more secure and lower-cost transfers that have been integrated by TransferWise and the bitcoin wallet Coinbase, as well as Google Wallet and Stripe in the past.
It’s been almost a year since you announced your VC funding. How have you been using it?
We have absorbed the capital very quickly, managed to deploy it on the marketplace lending side. We like to retain loans from the origination platforms so instead of selling 100 percent of the origination we retain 10 percent. As our partners are growing nicely, naturally that 10 percent has kept increasing.
Can both banks and fintech vendors deliver banking-as-a-service?
We’re strong believers that BaaS has to be delivered by a bank. The fintech players need access to payment rails and they’re going to use a bank ultimately to do that. As a service, the bank could be either the facilitator of a transaction or the purchaser of the BaaS technology to provide it to consumers. There is a level playing field now — consumers can have the same functionalities in a small bank in Nebraska that they can have with a Chase or Wells Fargo.
Are banks prepared?
Most banks are not equipped or not API-driven, ubiquitous, priced properly — and the banks that are, the big banks, have been unwilling to do that because it would cannibalize some of their business or presents high risk — do they have the required compliance and adequate staff to be able to manage the operations?
What’s going on inside Almond?
Almond is our exploratory R&D lab for us to understand the aspirations of consumers. We’re trying to develop a front-end solution that could possibly be a killer app that we could white label and sell as one BaaS functionality — so that would be an online or mobile app for a bank account. We’re moving from the back end to the front end.
Today loanDepot announced an agreement with OJO Labs, Inc. to act as the mortgage provider of its machine-powered assistant known as “OJO.” By matching OJO’s leading AI technology with loanDepot’s digital lending platform, melloTM, the combined offering will allow house hunters to access real estate and mortgage information, and get pre-qualified, through an entirely digital, mobile-first experience.
While large banks and fintechs are ostensibly working more closely together than ever, in private conversations and even publicly at a few conferences, fintech leaders have expressed increased frustration about working with bank partners.
Though they won’t name names, they claim tier-one U.S. banks string them along, fail to communicate, don’t pay anything and, worst of all, out-and-out steal intellectual property.
More seriously, fintechs claim large banks are bad at paying for new technology and services.
Parker Crockford, commercial director for the U.S. at identity verification software startup Onfido, said at the RegTech conference in early October that when he’s engaging with large financial institutions, “we get pulled into a lot of innovation conversations where they just want to pick our brains and look cool. I don’t have time for that any more. I’ll say, ‘I’m happy to give you a white paper or a 20-minute chat over the phone.’”
Entrepreneur Lynn P. Smith is the founder and CEO at Buy The Block – one of the only Black-owned platforms in the country that is dedicated to making investments in real estate as a group more accessible. The movement is presently on its way to recording massive success in funding for diverse development projects across Black communities in the US.
This enviable initiative offers every Black American an opportunity to invest as little as $100, and connect with other investors – with an added advantage of helping every member buy a piece of their first block.
Evolve Capital Partners,Inc. is proud to announce that its client, CleanFund Commercial Capital, Inc., the leading direct provider of commercial Property Assessed Clean Energy (“C-PACE”) financing, recently announced its first closing of a $15 million equity financing round, led by Vulcan Capital affiliated entities. The financing will accelerate CleanFund’s growth across the U.S. and help the company continue to meet growing demand from commercial property owners.
Thrive Inc. (Thrive) is excited to announce the compelling performance of its digital lending technology, ensuing from its multi-year technology licensing agreement with Horizon Community Bank (HCB), a leading Arizona-based FDIC insured bank and subsidiary of Horizon Bancorp, Inc.
Key Performance Highlights:
Application Time: Avg. of 5 minutes, as opposed to days
Automated Decisioning: 90% of applications are instantly decided; powered by Thrive’s configurable credit rules based algorithms
Time to Decision: <1 Day, as opposed to several weeks
Loan Booking Rate: 100%, as applicants prefer the quick digital application and decision process
Offer to Close: 1.5 Days, digital closing enables efficiency
IBM says it has launched an “industry first” solution to support the full lifecycle of peer-to-peer (P2P) transactions, from the back office of financial institutions to the mobile device.
The project is a collaboration with Zelle, a P2P network in the US built on the clearXchange platform. Zelle now includes over 20 banks and credit unions, and is poised to reach an estimated 85 million US customers this year.
For instance, Jennifer Tescher, founder and president of The Center for Financial Services Innovation (CFSI), has helped launch financial inclusion initiatives by incubating startups addressing U.S. financial health through their Financial Solutions Lab. Some of these startups include Propel, which streamlines the food stamp process; Bee, a mobile alternative to potentially predatory financial services for low-income people; and popular startups that aim to assist with savings and debt repayment including Digit, EarnUp and LendStreet.
Founder and CEO Shivani Siroya, of California-based Tala, is trying to fix the challenge of low access to financial services by providing alternative credit scoring and instant credit delivery via mobile wallet.
Mexico, for instance, sees 38% mobile wallet use, compared to 17% overall in the US, even though 93% of Americanshave access to financial services.
Real estate crowdfunding hit $2.5B in 2015 and shows no sign of slowing down.
Platforms like RealtyShares and Fundrise offer several loan options and flexible payment terms, and cater to different asset classes. The latter prioritizes small-deal properties valued under $50M, and the former charges no fees for the first two years, or until an investment earns a 15% annualized return.
2. Nondirect Marketplace Lenders
Nondirect marketplace lending uses technology to connect lenders directly with borrowers, bypassing traditional banks, reducing barriers to transaction, and offering strong savings for borrowers and good returns for lenders. Popular for auto and student loans, financial institutions have increasingly stepped into the commercial lending role on these platforms, creating a marketplace in which loans are packaged and sent out to individuals, hedge funds, wealth advisers and banks.
3. Direct Lenders
Money360 is a direct lender with discretionary capital that ensures certainty of execution and timely closings. The lender offers loans between $1M and $20M on both bridge and permanent loans, with competitive terms and features similar to traditional lenders. Bridge loans are interest-only, and like banks, permanent loans use 25- to 30-year amortization schedules.
1. How much do you need for a small business loan for your startup?
Microloans work with the Small Business Association (SBA). They are for businesses that need to borrow between $35,000-$50,000 and have a limited credit history.
2. How quickly do you need access to loan funds?
If you’re positive that you need $100,000 right-off-the-bat, then an installment loan may be a better option. If you need $50,000 to start, but believe you’ll need additional capital down the road when you start to grow, you may want to look into revolving credit.
3. What is the loan going to be used for?
4. How long have you been in business?
If your business is still in the early stages, it may be difficult to secure a loan from traditional lenders like a bank since they require a positive credit history, collateral, business plan, projected financial statements, and cash flow projections.
In this situation, you may have to search for a small business loan from an alternative lender like an online lender like Lending Club.
5. Do you have collateral?
Do you have an property or inventory that you can put up as a collateral? If not, you may not qualify for a loan from a traditional lender. Instead, you may have to seek alternative funding options where you would offer accounts receivable, future sales, or a percentage of the company in exchange for the loan.
6. Eliminate your bad debt.
7. Research possible loan provider options.
Do your due diligence and seek lenders that are transparent with their rates, terms, and have positive reviews from customers.
The parent company of payday lender Speedy Cash has filed for a $100 million IPO. It plans to trade on the NYSE under ticker symbol CURO, with Credit Suisse listed as left lead underwriter. The Kansas-based company reports $33 million of net income of $442 million of revenue for the first half of 2017, and is owned by private equity firm FFL Partners.
Our new survey finds out the top 10 ways that people across America would spend their money if they won a $1 billion jackpot, including how many would buy a mansion, and how many wouldn’t give any to charity.
The owner of brands including Topshop, Topman, Miss Selfridge and Dorothy Perkins has joined forces with payment provider Klarna to offer online customers the option of paying for goods 30 days after delivery, without being charged interest.
20% of millennials said they would feel less guilty if they were offered deferred payment options, while one in five were more likely to complete a purchase if they knew they could spread the cost over time.
Fintech startup TransferWise has built a solid reputation when it comes to transparency. The startup just announced new fees for transfers initiated from the U.K. And it’s quite hard to understand if transfers are going to be cheaper or not after the change.
TransferWise is switching from a simple variable fee to a flat transaction fee with a lower variable fee.
Let’s take an example. If you’re trying to transfer £1,000 from the U.K. to the Eurozone. With the old fee, you’d pay 0.5 percent (or the equivalent of £5) in fees. With the new fee, you now pay 0.35 percent + £0.80, which represents £4.30. You eventually get more euros.
For a £1,000, you now pay 14 percent less if you take into account all fees. But this percentage is going to change depending on your transfer.
Because of this tiny little flat transaction fee, you’ll now pay morethan before if you transfer less than £530.
This is even worse for GBP/USD transfers. If you transfer less than £800, you now pay more than before. But it’s now cheaper if you transfer more than £800.
THE PEER-TO-PEER Finance Association (P2PFA) has reported yet another quarter of increased lending among members in the sector, and the figures show just how beneficial ISA manager status can be.
P2P platforms offering Innovative Finance ISAs (IFISA) have previously said that most inflows have been coming in this tax year, and the latest P2PFA data shows just how much of a boost the fully regulated firms are getting.
Lending Works and Landbay, which both received full Financial Conduct Authority (FCA) authorisation and launched IFISAs at the start of this year both recorded some of the biggest increases in loanbook sizes and lenders.
For LendInvest Real Estate Opportunities, a small Luxembourg-based fund run by the former peer-to-peer lending platform LendInvest, post-referendum it has provided an opportunity.
Assets in the fund have more than doubled to £130 million since the Brexit vote as investors have viewed its investments in short-term loans to property developers as a different way to get exposure to bricks and mortar.
The fund can be held in a self-invested personal pension (Sipp) but is not an eligible investment for an individual savings account (ISA).
The real estate fund has become a key focus for LendInvest as it has moved away from peer-to-peer lending after the Financial Conduct Authority (FCA) made it clearer what it thought P2P actually meant.
The fund lends to professional investors, developers and landlords who use their property portfolio as a prime source of income, transact several times a year and operate as a business.
‘He then went into discussions with the bank because he wanted to keep the asset and let it out, so refinanced. It had a valuation of £10 million, so 100% return in 10 months. We charged 15% interest.’
With interest rates that high it is not surprising perhaps that the fund has so far achieved its annual target of an 8% net return.
A new crowdfunding platform is allowing retail investors the chance to back residential property developments by investing as little as £500.
The start-up, called Homegrown, is giving individuals the chance to invest in developments – such as a converted milk processing factory that’s being turned into flats and offices – and claims projected annual returns of around 12 per cent over roughly two years.
While credit conditions have continued to improve over the last 12 months there is still an issue for smaller businesses when it comes to the best finance options available and information on how to access them. There has been rapid developments in the different types of funding available to businesses, including peer-to-peer lending, crowd funding and business angel finance, but small businesses don’t always have the time to navigate around all the types of finance available.
Businesses can discover the funding options available to them including The Start Up Loans Company by using the Business Finance Guide (published by the British Business Bank in partnership with the ICAEW, and a further 21 business and finance organisations).
Whether you’re starting out or experiencing a high-growth phase, equity can be an important resource to provide finance as well as broader expertise. There is a breadth of equity funding options available, including the Northern Powerhouse Investment Fund, which provides early or late stage equity finance ranging from £50,000 to £2m.
At any stage of its development your business is likely to need a mix of different forms of debt, all of which have their advantages for business growth. The Northern Powerhouse Investment Fund offers microfinance covering micro-finance ranging from £25,000 to £100,000 and debt finance covering larger business loans £100,000 to £750,000.
In H1 2017, UK attracted $564 million of VC investment, up 37% on H1 2016. FinTech is worth $9.25 billion to the UK economy and now employs 60,000 people.
About 77% of UK businesses are aware of FinTech products and services and 65% have adopted at least one FinTech application, with a fifth (19%) taking on four. MarketInvoice, a London-based invoice financing firm found that these as result of using FinTech products and services, adopters reported saving (on average) over £5,500 a year.
London consistently attracts foreign direct investments (FDI) from around the world. Between 2006 and 2016, the capital has recorded investments from 67 different countries. The US, India, China, Japan and Spain together accounted for 56% of the investment. Of top source countries, the fastest-growing contributors to FDI into London are China, which has seen a tenfold increase over the last 10 years, Italy (+450%), and Canada (+400%).
According to data provided by professional services firm RPC, the number of trade marks registered by financial services firms has jumped 35% in five years – from 3,141 in 2011 to 4,228 in 2016.
Examples of fintech companies and challenger banks that have registered a number of trade marks recently include Atom Bank, Monzo, and Redwood Bank. Last year, the raft of fintech and financial services trade marks registered in the UK comprises names like “ Zentity” and “Numus Cash”.
One day in July, Carina Shi awoke to incessant phone calls by angry, loud men, seeking repayment on a 20,000 yuan loan taken out by a friend.
Unbeknown to Shi, the 20-year-old college student had been listed as the contact by a friend who defaulted on a loan borrowed from Qudian Inc, the Beijing-based online lender at the centre of the fourth-largest US initial public offering this year. Debt-collection calls only ceased after Shi called her friend’s mother in Inner Mongolia to resolve the debt.
Shi’s experience offers a glimpse into the inner workings of Qudian, a provider of micro loans that ballooned within three years into a sizeable lender offering a loans book of 38.2 billion yuan (US$5.6 billion) to 7 million active users during the first six months of 2017.
The annualised interest rate on 59.5 per cent of loans lent last year surpassed 36 per cent, according to the company. That compares with between 12 and 14 per cent among the country’s largest commercial banks.
That crackdown gave Qudian and other online lenders like Ppdai, Fenqile and Hexindai the niche to build a market, which expanded by 23 per cent in two years to 452.4 billion yuan at the end of last year.
China’s sizable middle class is on fire. A McKinsey & Company report projected that they would account for 76% of the country’s urban population by 2022.
When we say Chinese people are becoming increasingly tech-savvy, we don’t only refer to the fact they are the first adopters of cutting-edge technology software and voracious buyers of smart gadgets. We also have a knack and understanding for technologies to seek better investment returns. The report shows that tech stock is the most popular category for Chinese-speaking investors.
As digital natives, the country’s younger generations are first-movers to the sector. The report points out that post-80s gen represents nearly half (47.2%) of the users with post-90s gen comes as a close second (36.2%).
Over 65% of Chinese traders prefer Chinese companies when investing in the US.
Over 55% of Chinese investors will hold a position for over three months, and 20.03% for longer than a year.
Using data from Renrendai, one of the largest P2P lending platforms in the People’s Republic of China, we investigate how the amount of punctuation used in loan descriptions influences the funding probability, borrowing rate, and default. The empirical evidence shows that the amount of punctuation is negatively associated with the funding probability and borrowing rate. We propose that the use of punctuation affects the readability of a loan description and reflects borrowers’ self-control and cognitive ability.
Investors sent the stock of Chinese online microcredit company QudianInc.QD 7.00% —which literally translates as “Fun Shop”—up nearly 50% on its first day of trading on the New York Stock Exchange last week. But on Monday, following criticism of Qudian’s high lending charges in Chinese social media and newspapers, the stock tanked, dropping almost 20%.
The market does seem ripe for growth: Nonmortgage consumer loans are only around 20% of household deposits in China, according to Bernstein analysts.
Still trading at 6.6 times book value even after Monday’s share price tumble, Qudian is asking for a lot of faith compared with more-established lenders.
Online lending companies are facing a number of issues when planning an initial public offering in Greater China and the US, according to panelists at last week’s IFLR Fintech Asia conference in Hong Kong. Regulators’ attitudes towards business models,
accounting requirements and risk reserves are issues companies need to be mindful of.
China Rapid Finance Limited (“China Rapid Finance” or the “Company”) (NYSE: XRF), one of China’s largest consumer lending marketplaces, today announced the appointment of Zhou Ji‘an, Executive Director and General Manager of China United SME Guarantee Corporation (“Sino Guarantee”), to its board as a non-executive independent director.
A seasoned chief executive in the financial industry, Mr. Zhou brings to the Company more than 18 years of experience in global organizations, financial institutions and government.
Today, there are 214 unicorn startups globally — private companies that have reached a hefty valuation of over $1 billion.
Of these, the United States has taken the largest share of the world’s most valuable private companies, with 127 US-based startups reaching unicorn status since 2013. China follows in second place, producing 59 unicorn companies over the same time period.
Since 2013, the share of new unicorns born each year in the United States has consistently dropped, from 75 percent of all unicorn births in 2013 to less than half (49 percent) by 2015. That number sunk even lower to hit just 43 percent last year.
Chinese unicorns rising
In 2017 YTD, 16 new unicorns have been born in China.
In the third quarter of 2014, Lu.com, a finance marketplace that deals largely with P2P lending, reached a $10 billion valuation after a VC round backed by Morgan Stanley and Ping An Insurance.
Looking at companies with the highest valuations upon their entrance into the unicorn club, 7 of the top 10 spots go to China-based companies, with the US claiming the remaining 3.
BLOCK TRIBUNE: Could you tell us a bit how Wish Finance got started?
EUGENE GREEN: A decade ago I was a small businessman. Several of my closest friends are small businessmen in Asia, Europe and the US. All of them had the same massive problem, which I had – an inability to get a loan. So I founded Wish Finance to solve this major pain point.
BLOCK TRIBUNE: Where do you see the value of Wish tokens in the medium to long-term and the ultimate benefit for token holders?
EUGENE GREEN: We are not selling digital candy wrappers, but a token convertible to real company equity. The token price will go up with the company valuation, and comparable FinTech lending companies showed a fiftyfold valuation growth in only a few years. So the token holders could stand to benefit in a big way.
A research paper published by the Bank of Japan on October 23 suggests using specific purpose companies and specific purpose trusts to strengthen investor protection in the field of P2P lending.
P2P lending matches borrowers and lenders online without making use of traditional financial intermediaries such as banks. In recent years, the amount of outstanding loans in the P2P sector has grown significantly in the UK, the US and China.
The Australian government published draft laws on Tuesday that would let financial technology companies operate without a full licence, a measure it said would encourage innovation without compromising existing levels of consumer protection.
Financial technology companies would be able to test products involving non-cash payments, crowdfunding, consumer credit and provide financial advice on pension funds, life insurance and domestic and international securities.
HackerEarth, a leader in innovation and talent management software, has been selected by Fintech Valley Vizag – a Government of Andhra Pradesh initiative, to host Finackathon 2017.
The hackathon will be held in two stages. The idea phase which began on September 14th is currently underway with entries set to close on October 30th. The shortlisted teams will participate in the final round to be conducted in the first week of December in Visakhapatnam. The winning teams in each category (Banks, Insurance, Capital Markets, and NBFCs) will be awarded a sum of INR 3,00,000. The winners will also be given a chance to carry out Proof of Concept (PoC) with corporates and will need to be executed in Fintech Valley Vizag. Investor network of The Fintech Valley, Vizag will be invited for Hack Day, where they will go through the prototyped solution.
The hackathon is looking for solutions across the following 5 themes:
Restaurant News reports that hourly employees can use a smartphone app to access money for hours worked and have it deposited on a debit card. The amount is limited to 50 percent of what’s earned and–to discourage impulse buying–employees only have an hour after their shift to access the money. There’s no fee for the worker, but businesses pay Instant Financial $1 per active user per month.
Barha is aiming to put a dent into the burgeoning payday loan industry, which was used by approximately 12 million Americans in 2015. His service is also being looked at as a potential recruiting and motivation tool by employers, particularly in — but not limited to — the retail and restaurant industries.
According to a recent USA Today report, almost 150,000 employees at more than 50 companies like McDonalds, Outback Steakhouse and Dunkin’ Donuts as well as other restaurants and retailers, trucking companies and staffing firms have access to the service.
GDS Link, a global provider of risk management solutions and consulting for multiple verticals within the financial services industry including marketplace lending, retail finance, alternative financial services, credit card, auto, and business lending and leasing, today announced that it has joined the Canadian Lenders Association (CLA) as an affiliate member and will be sponsoring the Canadian Lenders Summit.
GDS Link is sponsoring the Canadian Lenders Summit, which has partnered with the CLA. The inaugural event will take place on October 26, 2017 in Toronto, Canada. Representing GDS Link is Rich Alterman, EVP of Business Development.
Brazilian startup Nubank said on Tuesday it would expand from credit cards into digital accounts allowing users to make transfers, pay bills and earn more interest than average savings account, beefing up its challenge to traditional banks.
Tech-savvy millennials have been the core demographic for Nubank’s credit card, but Velez said he hoped new accounts would serve some of the roughly 60 million Brazilians – around 30 percent of the population – who do not have a bank account.
Venture capital firms including Sequoia Capital, Kaszek Ventures, Tiger Global Management and DST Global have invested $179 million in Nubank since 2013, giving it a value of $500 million in early 2016 that made it the largest Brazilian fintech startup.
News Comments Today’s main news: Betterment achieves private unicorn status. Venmo available at 2 million retailers. PayPal sees profits rise after targeting mobile payments growth. Finova secures $102.5M in equity, credit facility. Lendy investors see 100M GBP in returns. PayKey raises $10M for Asian expansion. Lendex.io plans ICO. Today’s main analysis: Qudian’s IPO underlines China’s fintech appetite. Mind the GAP in the […]
Alternative lenders speak on small dollar rule. AT: “Online lenders seem to be in favor of the rule across the board. That’s understandable since a decline in brick-and-mortar payday lenders could lead to a rise in online lenders who can create viable products to fill the gap.”
Betterment, a roboadviser with $11 billion under management, is considered a unicorn in the private markets.
Preferred shares of Betterment are being offered at a price of $11 on EquityZen, an online marketsite for shares of private companies, according to a list of investment opportunities seen by Business Insider. That gives Betterment an implied valuation of over $1 billion.
EquityZen, a four-year-old New York-based company, provides a platform on which private company investors can sell their shares to accredited investors. It serves 20,000 investors and has secured $6.5 million in funding.
Sharp growth in mobile payments led PayPal Holdings Inc (PYPL.O) to report a better-than-expected third-quarter profit on Thursday and lift its guidance for earnings through the rest of the year.
The San Jose, California-based payments company has been working hard in recent years to expand its reach to new customers through partnerships and acquisitions, particularly in mobile payments. Those deals are clearly starting to bear fruit, analysts said.
PayPal shares were up 3.9 percent at $69.89 in after-hours trading following the results.
The company’s adjusted profit rose 32 percent during the third quarter to $560 million, or 46 cents per share, beating the average analyst estimate of 43 cents, according to Thomson Reuters I/B/E/S.
Revenue rose 21.4 percent to $3.24 billion.
Its mobile payments volume jumped 54 percent during the third quarter compared with the year-ago period, to about $40 billion. Total payments volume rose 31 percent to $114 billion.
Florida fintech firm Finova Financial announced on Tuesday it has secured $102.5 million in equity and credit facility funding. The financing was led by CoVenture with participation from existing investors.
Finova’s current digital products include its Car Equity Line of Credit (CLOC) and Automobile-Secured Prepaid Card. Its services are available in Florida, California, Tennessee, New Mexico, South Carolina, Oregon and Arizona.
Mota Group’s LILY® division today announced a new flexible time-payment option, partnering with Affirm to offer shoppers in the United States the flexibility of buying now and making simple monthly payments for their purchases.
This new option is in addition to LILY’s existing payment methods of credit and debit cards, Bitcoin, and PayPal, making LILY the only consumer drone company to offer all five methods of payment.
LILY customers may select Affirm at checkout and view their monthly payments up front before making their purchase. More information and purchasing options are available at www.lily.camera/affirm.
“The number one thing that prevents entrepreneurs from growing big businesses is access to capital,” says tech entrepreneur and CBC Dragon Michele Romanow. She’s looking to change that for e-commerce businesses.
Today, Romanow’s Clearbanc, which provides revenue-based financing to online businesses, announced a new program with Facebook that will give the social media giant’s five million online merchants across Canada and the U.S. access to up to $500,000 in financing without having to give up any equity or fill out any paperwork or even undergo a credit check.
Facebook advertisers that have been operating for more than six months and are looking for money to grow, and have positive economics on ad spends — meaning when they buy an ad they are making a positive margin on selling that product — can apply online through Clearbanc’s Chrged program, which provides tools to help businesses scale, and connecting their Facebook Ad Account and payment processor.
As a socially-responsible lender on a mission to improve credit access for underserved consumers, LendUp shares the CFPB’s goal of reforming the troubled payday lending market. Since our founding, we’ve been a strong advocate for eliminating the predatory practices that have defined the short-term lending market and are pleased that many of these reforms are included in the rule.
At a time when more than half of Americans are unable to access traditional banking products, it is critical that we offer consumers as many safe credit options as possible.
We believe the CFPB got it exactly right with the rule.
The rule will dramatically change the landscape of non-bank, non-prime lending in this country. In addition to reducing the number of payday lenders and title lenders, the requirements for advanced underwriting and reporting will push most of the mom-and-pop, primarily brick-and-mortar lenders out of existence. We believe that the growing need for non-prime consumer credit will be filled by more sophisticated technology-enabled online lenders.
Climb Credit, a student lending company that expands access to quality education for the new economy, today announced that it has entered into agreements with investors to purchase $130 million of student loans originated by Climb Credit.
The transaction will enable Climb Credit to continue expanding its student loan programs beyond its current network of software development, UI/UX design, robotics, welding, nursing, and other skills-based programs in additional high-earning fields. Climb Credit’s focus is to transform the higher education paradigm by providing better access and affordable funding to students to attend schools that consistently demonstrate a strong return on investment (ROI) for their students.
Roostify, a provider of automated mortgage transaction technology, today announced the upcoming release of Decision Builder, a new tool that will enable lenders to easily provide their prospective applicants with a clear, easily-digestible view of their loan options, based on the lender’s actual product and pricing system. The company will be offering live demonstrations of Decision Builder for the first time at the upcoming MBA Annual Convention.
The Decision Builder tool can be placed on a lender’s existing website, and features a handful of dropdown questions, such as the desired loan amount, the expected down payment, and the ZIP code of the house to be purchased. With that information, Decision Builder will generate a series of loan options based on the lender’s product and pricing system, showing the consumer what products and rates they would qualify for. Each option is presented in a visual, easy-to-understand interface with clear explanation of the benefit of the loan product – for example, a lower monthly payment or low total interest. From there, the consumer can more easily evaluate which loan product is right for them.
With accurate, realistic loan information from the lender’s website, the consumer can carefully consider their options on their own time, without the pressure of having to decide within the limited window of an appointment with a loan officer. When they’ve made a decision, the interface includes a convenient option to move forward on their chosen loan with the click of a button.
Artificial intelligence is becoming a competitive advantage that will force institutions to incorporate it, according to participants at the BankAI conference this week.
“People will have to adopt artificial intelligence,” said Brian Pearce, senior vice president of artificial intelligence at Wells Fargo. “It will have to become part of everyone’s set of tools.”
What banks are doing
Wells Fargo is piloting several chatbot technologies, though it has yet to suggest a launch date for any of them.
The bank has a team dedicated to bereavement — they take these phone calls and help executors manage the estates of the newly deceased.
Bank of America
Michelle Moore, head of digital banking at Bank of America, shared an update on the virtual assistant it announced a year ago, erica. It’s now in use by 300 employees. Sixty percent of the time, employees choose to interact with erica by voice, though they could also use chat, Moore said.
Ally Bank was one of the first to launch an AI-based virtual assistant two years ago: Ally Assist, which is based on technology from Personetics.
Most people who commonly interact with Ally Assist are heavier transaction customers, Morais said.
The bank is also using AI in the back office. For instance, the bank used robotic process automation to streamline an exception process that had required back-office staff to navigate multiple screens and type hundreds of keystrokes. It now takes three clicks.
Robert Sears, executive vice president and global head of product for new digital businesses at BBVA, said the bank is applying AI in credit decisions and focusing on explainability.
For those studying abroad, organizations like Prodigy Finance—a borderless, peer-to-peer lending platform—provide international, post-graduate loans.
Student Loan Hero looked at 116 of the top American business schools to identify which programs are most financially affordable, taking into account the average debt of graduates, average starting salaries, and annual tuition fees.
Jay DesMarteau, head of commercial bank specialty segments at TD Bank, said early-stage businesses will often use their funds for operational necessities such as buying inventory and building products.
Isaac Rodriguez, CEO of Provident Loan Society, notes that as a not-for-profit collateral lender, most of his organization’s loans are made for short-term expenses such as meeting payroll.
David Reiling, CEO of Minnesota-based Sunrise Banks, confirmed this trend, noting that many of the bank’s small business customers now use their borrowed capital for technology purchases.
For example, according to a recent survey from TD Bank, 69 percent of small business owners either believe they do not have a business credit score or believe that business credit scores do not exist.
Of course, an alternative lender may be a better option if you want an even smaller loan or if you don’t qualify for a traditional bank loan.
Student loan marketplace and refinancing website LendEDU polled 1,000 Americans to discover their personal finance preferences when it comes to dating.
The big question, though, was this one: “Would you consider [annual income, student loan debt, or credit card debt] to be a critical factor when deciding to date someone?”
Just over 30% of respondents said that credit card debt was a critical factor in deciding whom to date, compared with just less than 19% who saw annual income as a critical factor and 12% who saw student loan debt as critical.
Acting Comptroller of the Currency Keith Noreika today reiterated his view that companies providing financial products and services should be subject to the same regulations and examinations as traditional banks, while emphasizing that a path should exist for these companies to apply for a national bank charter.
Online lender OppLoans announced on Thursday it has appointed Andy Pruitt to the role of CTO. Pruitt is a hands-on technologist who has helped start and grow three Chicago-area software companies. He isfounder of Data Anywhere, a data management company.
LENDY has announced that it has returned £100m to investors over the last year alone, as it celebrates its fifth birthday this week.
The peer-to-peer property platform said on Thursday that this was a 120 per cent year-on-year increase and that it has now repaid £183m to investors since launch.
Lendy recently announced the repayment of a £7.92m loan, one of the largest seen in the UK’s P2P sector to date. The facility had been repaid ahead of schedule and delivered annual returns of 12 per cent to investors.
First Associates Loan Servicing announced that they have received Financial Conduct Authority authorization to undertake debt administration and debt collection in the United Kingdom.
In addition to having a stellar reputation for their loan servicing support and being the only loan servicer in their class to earn Morningstar Credit Ratings’ highest operational assessment ranking1, First Associates also offers lending support solutions to their roster of industry-lending clients including:
2018 MAY be the year in which the Innovative Finance ISA (IFISA) finally takes off, an industry expert has suggested.
Neil Faulkner, chief executive and founder of peer-to-peer analysis firm 4th Way, noted that the small platforms that have already launched IFISAs have seen massive boosts to their lending volumes, and suggested that the amount of money in IFISAs “will go up many-fold” when the major platforms have their own accounts on offer.
HSBC UK has announced a partnership with Bud through first direct to offer an integrated offering of financial services products and tools across the market.
This first direct trial kicks off in December and it includes proprietary algorithms – Market+ – to suggest the most suitable financial and non-financial products and services based on individual needs.
More than £825million has been pumped into the UK fintech since January – double the amount raised in the same period in 2016 – proving the vote to leave the European Union (EU) has not turned investors off Britain.
In fact, since the EU referendum vote, UK fintech companies have raised more than £1billion, according to research by London & Partners.
The capital has been the major winner from investment, receiving around 90 per cent of all venture capital investment.
London-based firms Funding Circle, Revolut and Receipt Bank each raised tens of millions of pounds of investment this year.
There are several online lenders available to offer you loans; they use your social media data to take a decision. Kabbage is the most popular loan landers working online. Kabbage offers the loan to the small businesses and keeps the cash flow in the different businesses. Before giving you the loan, they will ask you to get the access to your social media accounts.
Mark Arnold – a branding expert advises the credit unions and banks check a business credibility and see how effectively they are grabbing the market through social media. These businesses primarily look at different business especially at LinkedIn pages to determine the loan eligibility.
Use some crowdfunding websites to raise money for your business-like GoFundMe, Kickstarter, and Indiegogo.Share links to your crowdfunding webpages on your social networks on Twitter and Facebook and motivate people to share on their social networks.
Qudian, one of China’s largest online lenders, had a debut to remember on the New York Stock Exchange this week. Its shares closed up 22 per cent, making a multi-millionaire of founder and chief executive Min Luo.
The company, which raised $900m in the share sale, is the latest to underline investors’ appetite for the collision of lending and technology that has given rise to the Chinese fintech sector. Two days before Qudian’s debut on Wednesday, Chinese peer-to-peer lender Ppdai announced plans to raise $350m in New York, and at least a dozen similar issuers are preparing flotations.
About 40 per cent of consumers in China make payments online, and 14 per cent have gone on the web to borrow money, according to DBS.
Qudian’s IPO — the fourth-biggest in the US this year — comes on the heels of Chinese online insurer ZhongAn’s hotly received $1.5bn IPO last month in Hong Kong. ZhongAn’s stock is up 34 per cent from its debut.
Wary of online lending, regulators have strictly limited online financial products such as high interest “payday loans” and microloans by capping interest rates at 36 per cent. Last May, new restrictions wiped out scores of P2P lending networks in China, after worries that it was fuelling real estate speculation and subprime lending.
In the past two months at least seven online lenders backed by SOEs have collapsed. It was a business none should have been in, far removed from the industries they were supposed to focus on. The money potentially lost is trivial—roughly 1bn yuan ($150m), compared with government assets worth more than 100trn yuan. Still, these cases highlight how hard it is for the party to stamp its authority on the vast state sector.
The troubled SOEs include distant subsidiaries of the national nuclear company, an aviation company and a big energy company in Shanxi, a northern province. They had acquired stakes, from as little as 20% up to 100%, in online peer-to-peer (P2P) lending platforms.
They were “marriages of convenience”, says Joe Zhang, chairman of China Smartpay, a financial-services company.
China’s supply chain finance sector is now being tipped to be worth a whopping 15 trillion yuan (US$2.27 trillion) by 2020, and the mainland’s booming internet-based businesses are lining up to grab their own share of it.
And despite the reverberations from the recent peer-to-peer (P2P) lending crisis, a marriage between information technology and financial services is continuing to play a vital role in transforming Chinese business.
That 15 trillion yuan figure was calculated by Forward Business, a Shenzhen-based consultancy focusing on studies of IT and other emerging industries, which also suggests mainland banks granted a combined 12.65 trillion yuan in new loans to the budding sector.
But the grim reality remains, that the larger commercial lenders remain belligerently reluctant to grant small loans to businesses and individuals, who present anything like a risk.
Established in 2013, Tiandihui is an online platform where cargo and trucks are matched.
It s network stretches across 50 mainland cities and it handled some 64 billion yuan worth of transactions last year. The company, which charges fees for its matchmaking, has yet to break even.
Israeli fintech startup PayKey has raised $10 million in its Series B round led by MizMaa with participation from SBI Group, Digital Ventures, SixThirty, Fintech71, and The FinLab.
The new funds will be invested in global expansion, namely in the Asian market. Several of the investors in this round are Asian based while the startup graduated from the Singaporean FinLab accelerator.
The Lending Gap has been one of the most quoted negative consequences of the financial crisis. Many political efforts have been conducted to stimulate the economy. New business models (e.g., private debt, direct lending, alternative finance, peer to peer) were born with the explicit aim and mission to “fill the gap”.
Where are we today, 10 years after the crisis? Are borrowers still suffering? What investment opportunities are out there, if any?
FACT #1. The lending gap has been reduced, and the drivers have changed.
FACT #2. New alternative lending opportunities have opened up.
FACT #3. Banks are in better shape today, but exposed to the digital revolution and various structural challenges.
FACT #4. Credit expansion has resumed since YE 2014.
THE MOVE towards auto-lending among some peer-to-peer platforms may limit interest rates and be a stumbling block for investors worried about the type of businesses they lend to, a European automated P2P firm has said.
Despite being automated itself, Latvia-based Robo.cash has claimed lenders may be missing out on higher interest rates with a passive investment strategy.
As an example, Funding Circle recently moved from manual to auto-lending,now offering a conservation option at 4.8 per cent or a balanced approach at 7.5 per cent.
Online retail marketplace MyDeal.com.au has launched business loan offering MyDeal Marketplace Loans to accelerate the growth of their listed retailers.
Retailers who list their products through the MyDeal Marketplace can now apply for a business loan of up to $250,000 directly through their supplier management system and in many cases receive the funding in under 24 hours.
This offering is in partnership with fintech business Prospa, Australia’s leading online lender for small business.
“We’ve long seen the potential for technology to deliver better personalised financial advice to Kiwis,” said Ramesh Naran, Senior Manager, Digital and Innovation at Kiwi Wealth. “With this decision by the FMA, we can go through the application process and turn Future You into the powerful, personalised tool we’ve always wanted it to be. It’s already on its way to becoming the platform that’ll set the industry standard.”
Mr Naran said the FMA’s approach recognises the ability of technology to improve financial understanding and outcomes for New Zealanders.
In a much-awaited move, RBI issued guidelines to govern peer-to-peer lending or P2P. This is a landmark decision that will go the distance in achieving the objective of financial inclusion.
For the time being, RBI has advised NBFC P2Ps not to offer or arrange any credit enhancement or credit guarantee. Against this backdrop, the principal protection fund, which has been an exclusive offering of i2iFunding so far, may need some tweaking. At present, we are neither guaranteeing any compensation from the third-party nor are we making a claim of apportioning our capital for the purpose. Therefore, we will approach the regulator to get more clarity on this and would do our best in the interest of members of the platform. Existing investors need not hit the panic button.
More than 24,000 branches and 42 crore customers make the State Bank of IndiaBSE 0.00 % the goliath of all banks by sheer size and physical presence but its new chairman Rajnish Kumar is worried about the competition from nimble fintech companies.
“Today, the risk is the disruption that is caused by the technology ,“ Rajnish Kumar, chairman, State Bank of India told ET in an interview. “We have to be very alert to this challenge. Protecting the turf and meeting the challenges from all the new fintech companies is the priority .“
Wallets and other payment mechanisms have become the preferred mode of payments as people walking into branches have dwindled.
Founded and developed in Kazakhstan, the biggest economy of Central Asia, FinTech startup Lendex has announced plans for ICO crowdsale to finance the launch of a cross-border P2P (peer-to-peer) lending platform for underbanked consumers in Central and South East Asia.
Global fintech investment has risen phenomenally in recent years – from $3 billion in 2013 to $24.7 billion in 2016.
Although less than 0.1% of fintech investment originates in the Middle East, growing influence from a soaring millennial population, and increasing expectations for digital solutions, are giving rise to a burgeoning number of fintech initiatives throughout the region. In fact, the number of fintech companies in the Middle East and North Africa (MENA) region is expected to surge – from 105 at the start of 2016 to 250 by 2020. And fintech investment is predicted to grow by 270% in the Middle East this year, indicating the huge potential for digital change –and a strengthening drive to deliver it.
The majority of fintech innovation so far has been in the payments sector. Although fintech has already made a mark in the retail payments space – with new companies such as the UAE’s Beehive, an online marketplace for peer to peer lending, and Telr, an online payment gateway for emerging markets – effecting change in the corporate sector is more challenging. This is primarily due to the often more complex, cross-border nature of corporate payments and the accompanying regulations and security requirements.
SWIFT gpi already has the backing of over 110 banks across the globe – including BNY Mellon – which represents over 75% of SWIFT’s global payments traffic. The UAE’s Mashreq Bank was the first Middle Eastern bank to join SWIFT gpi earlier this year.
Trade finance and fintech development
AI, for instance, offers solutions to improve documentation flow and cut the need for time consuming processes. Two types of AI that could benefit trade finance are optimal character recognition (OCR) and intelligent character recognition (ICR). OCR converts images of paper documents into machine-encoded text, enabling documents used in trade transactions to be verified automatically; while ICR is able to learn and identify patterns of behaviour embedded in trade documentation. These capabilities would both help to improve efficiency and reduce costs in the supply chain.
They launched their Toronto-based venture, MagneTree Books, in the spring of 2015 with the help of a Kickstarter campaign for presales of their inaugural book.
Neither Josie, who was at the end of a maternity leave, nor Ronny, who worked for a humanitarian aid organization, had much savings to fund their startup or the first run of books, which together rang in at more than $65,000. A bank loan wasn’t an option; neither entrepreneur was in a position to cover the debt if something went awry.
Online sales have been slow – just 15 per cent of their books are sold on the web. But corporate gifting and wholesaling has proven fertile. Still, the company has yet to break even. Profit on a run of books rings up at about $7,000.
But they have a big problem: no cash to fund the second book’s production and marketing. Neither sibling is able to personally lend the company money, and they have begun crowdfunding once more.
Mr. Zakharia notes that the amount of money the siblings need to fund their second book is relatively small at between $7,000 and $10,000. Still, their inability to make a personal loan or secure a bank loan will make them unattractive to traditional lenders. “Banks are going to be very conservative,” Mr. Zakharia said.
One option the pair might consider is Lending Loop, a peer-to-peer lending marketplace that might be their fastest route to raising cash. “Because it’s such a small amount, I think it would be pretty easy to raise,” he said.