Friday October 28 2016, Daily News Digest

lending club auto refinancing

News Comments Today’s main news: The FTC explores the future of FinTech, P2P payments. Today’s main analysis : Can P2P lending be saved by auto refinancing? Why investment trusts are back into fashion. Today’s thought-provoking articles: What happens when Millennials are denied credit. Chinese shadow lending takes over the economy. Worldwide, corporate treasurers are increasing FinTech investments. United […]

lending club auto refinancing

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News Summary

United States

FTC Forum Explores the Future of FinTech, Peer-to-Peer Payments (InsideARM), Rated: AAA

Yesterday the Federal Trade Commission (FTC) hosted a forum – the second in its FinTech series – on peer-to-peer payment systems.

The forum panel discussion was labeled: Peer-to-Peer Payments – Their Emergence and Path Ahead. Participating in the panel were the following individuals: Jo Ann Barefoot, Matt Van Buskirk, Beth Chun, Patrick Eagan-Van Meter, Brian Peters, Duane Pozza, and Christina Tetreault. Their bios and backgrounds can be found on the FTC website for the forum.

Though the event was produced by the FTC, not the Consumer Financial Protection Bureau (CFPB), it has become abundantly clear through rulemaking proposals to date (both at the CFPB and state and levels) that technology advancements are going to be essential to the success of those organizations that engage in debt collection (whether creditor, agency, law firm, or debt buyer). Those who run sophisticated companies need to engage in regular research and education about current developments in FinTech.

After initial introductions the panel discussed the benefits of peer-to-peer payment systems to the consumer. The benefits identified included:

  1. Affordability
  2. Accessibility
  3. Speed of transactions
  4. Security

Members of the panel all agreed that the consumer’s cost to use these payment systems was a significant benefit. They discussed how historically, it was very expensive for a consumer to use services such as Western Union or MoneyGram or to use some expedited mail or delivery service to send funds quickly.  Several panel members highlighted how speed of a transaction was critical to the underserved or underbanked segment of the population. These products can process a transaction in seconds.

The panel members also discussed who was currently using these products. To the surprise of nobody, Millennials are currently the largest market segment.

The discussion then moved to how the products were being utilized. Currently 3 types of use were the most predominant; gifts, bill payments, and entertainment. These 3 categories were well over 90% of total usage.

The group then moved onto a discussion of legal issues surrounding the products. The most obvious concern, money laundering, actually had only a token mention from the group.

The biggest legal issue facing the developers of these products was –  to no surprise, the various state and federal consumer protection statutes, with particular emphasis on state Deceptive Trade Practices.

The reason consumer protection statutes were of such concern was a simple statement made during the discussion: “The consumers that use these products may be very tech savvy, but they also tend to be very unsophisticated.”

The panel next turned its attention to some of the risks in this market.  The risk of fraud exists on three fronts. First, international criminal and sophisticated hackers have and are likely to continue targeting companies in this space. That creates exposure. Second, as many of these products are utilized on a handheld device (i.e. a smartphone) the risk of fraud exists if that device is not secure and is lost or stolen. Third, old scams that have existed forever have simply moved their scam to this new platform. A scam that previously involved a stolen checkbook and forged signature has just moved from paper to the digital world.

Could This .2 Trillion Industry Save LendingClub? (The Motley Fool), Rated: AAA

Top peer-to-peer lender LendingClub (NYSE:LC) hasn’t exactly delivered great performance to its stockholders in its short history as a publicly traded company. In an effort to grow the company’s customer base, LendingClub recently announced that it intends to get into a booming $1.2 trillion industry: auto lending.

Since going public in Dec. 2014 for $15 per share, LendingClub’s stock has lost more than two-thirds of its value. The main reason for the decline is a lending scandal that led to CEO Renaud Leplanche’s departure, but there have been questions about the long-term viability of the peer-to-peer lending business for some time now.

In order to refinance through LendingClub, applicants will need to meet the following qualifications:

  • FICO credit score of at least 640.
  • At least three consecutive on-time payments must have been made on the current loan.
  • Vehicle must be less than seven years old and have less than 80,000 miles.

Loans will come with interest rates ranging from 2.49% to 19.99%, depending on the borrower’s qualifications. It’s fair to assume that a borderline applicant (credit score just over 640, a few late vehicle payments, and a vehicle that barely meets the standards) would fall on the upper end of the range. However, since the average car loan has an interest rate between 4% and 5% depending on the terms, I’m assuming that the majority of refinancers will be toward the lower end, if LendingClub’s savings claim is accurate.

There is approximately $1.2 trillion in outstanding auto debt in the United States, and only about $40 billion of that, or 3.3%, is refinanced every year, so there’s clearly a large market to be addressed. In fact, LendingClub believes that the refinancing volume could double if the process were a little easier. In other words, there is an immediately addressable market for an easy-to-use auto loan refinancing platform.

Eve Picker, Founder of Real Estate Platform Small Change, Shares Insight into Reg CF Approval (Crowdfund Insider), Rated: A

Pittsburgh-based Small Change was approved as a Reg CF funding portal by FINRA, an approval the platform believes to be a first for a real estate funding portal.  Small Change is a real estate crowdfunding platform launched by urban evangelist Eve Picker targeting “transformational” real estate projects by connecting developers with investors.

Pittsburgh-based Small Change was approved as a Reg CF funding portal by FINRA, an approval the platform believes to be a first for a real estate funding portal.  Small Change is a real estate crowdfunding platform launched by urban evangelist Eve Picker targeting “transformational” real estate projects by connecting developers with investors.

Picker has developed dozens of buildings in blighted neighborhoods around the city (through companies no wall productions and we do property management), founded a non-profit called cityLAB, built Pittsburgh’s first tiny house, organized a speaker series and a creative school, launched a Pittsburgh e-zine called Pop City, and established downtown Pittsburgh’s first co-working space.

Eve: We don’t believe we can make Reg Crowdfunding work, we KNOW we can make it work. Real estate has proven itself to be a frontrunner when it comes to crowdfunding investment opportunities.  We are certain that this will play out for Regulation Crowdfunding as well. Funding portals are going to provide a very necessary, and highly desirable financing tool for the right sort of projects.  And everyday investors are going to be excited to invest both locally and nationally in projects they are interested in. That’s a perfect match.

Eve: We’ve nearly 8000 followers across the country, growing at 20% per quarter through all of our communications channels, and out of those, we’ve heard from a quite a few real estate developers looking at this as a tool to catalyze projects – and we anticipate hearing from many more. Developers are attracted to our mission of making cities better and offering people the opportunity to directly participate.

Eve: Regulation CF is a thoughtful first foray into the world of securities for everyone – it is altogether groundbreaking. While there may be some shortcomings, there is plenty to work with immediately and that is evidenced by the funding portals that already have a plethora of offerings available.

Eve: We’ve heard the complaints loud and clear, but there is plenty to work with today. We think Reg CF is a great start.  The SEC intended for the first three years to be a trial run so we are going to use the time for that – a trial run!  We’re going to take it slow and steady, and inch into bigger raises.  There is plenty to understand and plenty to get efficient at before we want or need to offer a $5M raise.  Today, we can already let everyone over the age of 18  participate in a completely new way of investing. And we can help developers tap into a completely new pool of investor funds.

Fintech Apptrade’s ‘Stockmarket Of Apps’ Lures Crowdfund Investors (Forbes), Rated: A

Apptrade, a US start-up based in California, has revealed to potential investors attending the CoinAgenda bitcoin and cryptocurrency conference in Las Vegas that is creating and cooking up what the fledgling fintech describes as the ‘Stockmarket of Apps’, complete with “regulatory tools and compliance” mechanisms.

The aim of Apptrade is to create what is touted as a ‘Stockmarket of Apps’, whereby developers can raise money with “regulation-compliant” blockchain tokens. Investors will be able to trade these assets, backed by app revenue streams, on the ecosystem of OpenLedger, a decentralized conglomerate(DC).

The start-up will offer its own token for their ICO, which entitles investors to 10% of the net market value and revenue of the Apptrade portfolio ecosystem.

FTC Hears From Company Leaders as Crowdfunding Grows (Corporate Counsel), Rated: A

Investors poured $22.3 billion into fintech startups around the world in 2015, up 75 percent from the year before, according to the Information Technology & Innovation Foundation.The industry has been hailed for its potential to help communities that are underserved by traditional lending institutions.

But fintech has also attracted scam artists interested in a new mode to prey on consumers. And it’s raised questions about where to—and who should—draw the line between a self-stated developer who clearly never intended to spend donated funds on a promised project and a dreamer whose plans just never panned out. Industry oversight remains a fuzzy area for regulators, with states’ attorneys general, the IRS, the U.S. Securities and Exchange Commission and the FTC having roles in various areas. The FTC is holding a series of public panels on the topic, including Wednesday’s meeting in Washington, D.C.

The industry has urged regulators to take a targeted and light touch with any new rules.

Debunking Millennial Myths (ID Analytics), Rated: A

ID Analytics’ research shows that the most common consequence for an enterprise declining a millennial applicant is that the consumer walks away for at least a year—both from the enterprise and from credit/ service seeking altogether.

Over 6 out of 10 declined millennials are not seen applying again within the ID Network that year—for anything. Of the millennials who continue to apply, only 2 out of 10 continue to seek the same service, with 8 of 10 seeking an entirely different product or service.

While the impact of declining credit to millennial consumers is harmful to the longterm success of entire industries, common questions are, “How often are they actually being declined?”, and “is the issue confined to young millennials”? To answer these questions, ID Analytics segmented millennials into three age groups and measured how often they were declined for credit in a given year.

The recommended path forward is safe engagement of this burgeoning demographic—an approach which requires thoughtful strategies and an expanded view of applicant credit risk which goes beyond traditional credit bureaus. One way to accomplish this is leveraging alternative credit data solutions like ID Analytics’ Credit Optics, which captures fundamental millennial credit behaviors that are missing from most credit scores. It offers risk managers a way to identify “low score” and “no score” consumers of acceptable risk, and break through the myths dragging down the competition.

United Kingdom

Investment trusts come back into fashion (Financial Times), Rated: AAA

It is no coincidence that as part of his fightback against the asset management “system”, Daniel Godfrey — the ousted chief executive of the UK’s asset management trade body — will launch an investment trust.

Years of quantitative easing and the prospect of rising inflation have boosted the appeal of infrastructure and property, and investment trusts have provided a liquid wrapper for these sectors. Numis, the broker, estimates that 80 per cent of investment trust share issuances in the three years have been in alternative asset classes — including property, private equity, infrastructure, asset-backed leasing and peer-to-peer lending.

Although questions about the quality of the underlying credit-writing remain, the asset class has so far delivered good returns to those investing directly in the loans, — its total return over 3 years has been of 15.86 per cent, according to the Liberum Altfi Index. For investors who are prepared to stomach the risks, the remaining catch is the illiquidity — but this is where investment trusts have stepped in. While no asset manager has invested in peer-to-peer loans directly, plenty have bought shares in the investment trusts. Asset managers including BlackRock, Invesco Perpetual, BNY Mellon and Baillie Gifford have all bought shares in the handful of investment trusts buying peer-to-peer loans.

Another criticism of peer-to-peer lenders is that — for the most part — they do not actually do any lending. Some argue that without so-called “skin in the game”, the lenders are not incentivised to make sure the loan is good.

Is Fintech Being Wooed Away from the UK? (Tech UK), Rated: A

It is no secret that various European governments have seen the UK’s decision to opt for Brexit as an opportunity to lure businesses away from London and to the continent. Bespoke marketing campaigns with offers of tailored assistance directed at UK firms could well accelerate the flight of capital, talent and business following the vote.

The sweeteners on offer could be highly tempting for financial services firms and fintechs, which fear the loss of their ‘passporting’ rights. Current rules mean that any company which is given a licence to conduct regulated activities by UK authorities can, ipso facto, conduct such activity anywhere in the EU without the need for further regulatory authority and without having to establish a base elsewhere. The loss of these rights could significantly damage the UK’s status as a gateway to Europe for big international financial service firms.

Despite the uncertainty surrounding the UK’s financial passporting status and the need in future to reconcile competing data regimes, the UK Government remains steadfast in its optimistic outlook for the UK’s burgeoning fintech industry and related sectors.

P2P lender secures multi-million-pound investment (Bridging & Commercial), Rated: B

Peer-to-peer (P2P) platform LendingCrowd has secured a £2.75m investment from the Scottish Investment Bank (SIB).

The investment is the SIB’s first venture into the alternative finance market and is expected to stimulate loans of up to £35m to Scottish small- and medium-sized enterprises (SMEs).

Borrowers will apply for loans of between £5,000 and £250,000 over terms ranging from six months to five years.

Zopa Announces Zopathon16 Challenge (Crowdfund Insider), Rated: B

Earlier this week, peer-to-peer lender Zopa announced it will be hosting Zopathon16, which is described as a 24-hour opportunity to developers, product people, and designers to present their fintech ideas.

The event will be held on November 18th-19th on the first floor of the Cottons Center in London. The 18th’s schedule is:

  • 5-6pm: Introduction and Inspiration (APIs etc) 
  • 6-7pm:  Meet your team, brainstorming and dinner
  • 7-8pm: Pitching ideas 
  • 8pm onwards: All hands on deck

On the 19th presentations and prizes will happen from 5 to 7pm. To register for the event, click here

European Union

Swedish fintech startup: Norwegian banks are blocking us (Business Insider Nordic), Rated: A

A fintech revolution is sweeping across Scandinavia. People are downloading apps to send money, pay without credit cards and to structure their finance management.

The Swedish fintech company Trustly, founded in 2008, is offering payments online without the use of a credit card. According to the Swedish news paper Dagens Industri Trustly has been partially blocked in Norway by some elements in the banking sector.

Trustly’s troubles in Norway started already in 2014, when they launched in the country. According to the CEO of Trustly, an important certficate for verification, Bank-id, was revoked for those who used Trustly.

Things have gotten so bad that Trustly has fielded a complaint with the Norwegian competition authority.

Fintech: Blockchain And Artificial Intelligence Startups Are Flocking To HEC Paris — Here’s Why (Business Because), Rated: A

Few topics get business schoolers’ pulses racing like financial technology — from blockchain and cryptocurrencies to artificial intelligence, the fintech revolution has already made its way into a suite of MBA degrees.

And according to one top French business school, fintech start-ups like TransferWise or GoCardless now vie with investment banks and traditional financial services companies for digitally skilled, entrepreneurial recruits.

Spreadsheet-savvy MBAs may not seem like the type for fast-paced tech firms, but their growing appetite for MBAs was on full display at HEC Paris’ second annual Fintech Talent Fair this month. From start-ups like Blockchain and PayinTech to larger financial institutions such as Bloomberg and BNP Paribas, companies representing the full fintech spectrum were out in force.

Why should business students consider a career in fintech?

For a lot of reasons actually. First, fintech is probably one of the hottest and most dynamic sectors in tech today. It’s attracting a lot of interest and funding. Second, working in fintech gives you the opportunity to have a real impact on the day to day life of a very large number of people. Lastly, fintech start-ups deal with a fairly complex environment and designing simple products in that environment is a real challenge, and therefore intellectually stimulating. It requires knowledge of a broad array of topics — perfect for business students.


Uberization of Mortgages Seen Withing 5 Years (, Rated: A

Advisors may have the ability to offer clients direct online investing in mortgages within five years.

That’s the hope of Lending Loop chief executive Cato Pastoll, who expects peer-to-peer lending in Canada to expand quickly into consumer lending like mortgages after such an evolution of the sector in the U.K. and U.S.

In what’s been called the “Uberization” of lending, California’s Lending Club, the world’s biggest peer-to-peer lender, has plans to move into auto loans and mortgages after American online lender SoFi started offering residential mortgages about a year ago. U.K. peer-to-peer platform Landbay also allows retail and institutional investors to get into the country’s buy-to-let mortgage market.

CIBC partners with fintech innovator Borrowell to deliver “one-click” online loans (Newswire), Rated: A

In a move that changes the traditional process for applying for a loan, CIBC (TSX: CM) (NYSE: CM) announced today it is partnering with Borrowell to offer “one-click” online lending for clients. A first in Canada, the new partnership allows CIBC to leverage the fintech’s unique technology and underwriting approach to adjudicate loans for existing clients online in real time, with funds typically issued the next business day directly into a client’s CIBC account.

The technology allows clients to apply for a loan of up to $35K using a simplified application process, with the ability to securely upload documents online for verification. Future plans to extend the borrowing platform to a wider client base will be based on client experience feedback and input from this first phase.


Australian FinTech Firms Recognized as World Leaders in FinTech (Cryptocoins News), Rated: B

The annual FinTech 100 list has listed nine Australian FinTech companies among the world’s leaders in the sector, according to a report by StartupSmart, an Australian publication for the startup community.

Compiled by H2 Ventures and KPMG FinTech, it listed Prospa, Tyro, and Society One within the top 50 established leaders category, and HashChing, Afterpay, Brighte, Data Republic, Identitii, and Spriggy within the top 50 emerging firms.


China’s shadow bank lending balloons to 58trn yuan, as focus shifts to risks from fintech platforms (South China Morning Post), Rated: AAA

China’s shadow bank lending has grown to more than 80 per cent of the economy, fuelled partly by off-balance-sheet lending originating from lightly-regulated fintech platforms, prompting warnings from analysts of potential risks arising from insufficient supervision.

Moody’s research released on Thursday showed that lending via the shadow banking system grew by 19 per cent annualised in the first half to reach 58 trillion yuan (HK$66.37 trillion), or a 82 per cent of GDP.

Leverage continues to increase throughout the Chinese economy. Total social financing (TSF), a measure of broad credit, has risen to an estimated 220 per cent of GDP at the end of the third quarter, up from 206 per cent of GDP at the start of year, Moody’s said.

Chinese financial website Caixin reported on Tuesday that some financial insiders believe the People’s Bank of China may soon require commercial banks to incorporate off-balance-sheet wealth-management products into the Macro Prudential Assessment (MPA) system, as a way to improve oversight of shadow lending.


India Quotient to raise million as part of third fund in 2017 (Economic Times, India Times), Rated: A

Early stage fund India Quotient as a part of its third fund, plans to raise $60 million by January/February 2017. The firm aims to spend 30% of the funds on fintech players within lending, insurance and investment sectors. The remaining portion of the funds will be spent on gaming, media, health and education.

Within fintech the fund is interested in the peer-to-peer lending model as well as online NBFC’s similar to the likes of Capital Float and Lendingkart. India Quotient recently invested $500,000 in CreditMate, a lending startup that focuses on lending to individuals looking to purchase used two wheelers.


Bitcoin startup Coins raises US million for Asia expansion (The Asset), Rated: A

Digital payments and blockchain startup Coins announced that it has raised a new US$5 million round of funding to further its mission of expanding access to basic financial services to unbanked individuals in the Philippines and throughout Southeast Asia.

The Series A funding round was led by the Accion Frontier Inclusion Fund, managed by Quona Capital, and also includes a number of notable investors such as: Eric Schmidt’s Innovation Endeavors, Pantera Capital, Digital Currency Group, Wavemaker Labs, Global Brain, BeeNext, and Rebright Partners. Amongst the company’s investors are also Kickstart Ventures and Ideaspace Foundation, the investment arms of Globe Telecom and Smart Communications, respectively, the Philippines’ biggest telecommunications companies.

Founded in early 2014, Coins is a mobile-first, branchless, blockchain-based platform that provides consumers with direct access to basic financial services such as remittances, bill payments, and mobile airtime. To provide these services, Coins has partnered with a multitude of banks, financial institutions and last-mile retail outlets, spanning a network of over 22,000 cash disbursement and collection locations in the Philippines alone.

More than 60% of Southeast Asia’s population of 600 million remains unbanked, and less than 5% have a credit card. At the same time, mobile internet penetration is rapidly increasing and bringing millions of people online every month. Coins has been able to capitalize on this technological shift by delivering everyday financial services through its mobile platform. To date, the company has signed up over 500,000 users.

Leveraging the blockchain has enabled Coins to connect its services to partners with a presence in over 40 countries.


Corporate treasurers are upping their fintech investments globally (, Rated: AAA

Business research firm East & Partners has found corporate treasurers in the UK, Asia and Australia are ramping up their fintech investments. The results came from the Treasury Fintech Index, developed by East & Partners and Contentive Media, and is based on direct interviews with corporate treasurers in eight key global markets.

In the UK, treasurers are forecasting a 14.5% increase in their fintech spend for the coming year, while Australia and Singapore are following closely behind with a planned 12.2% increase.

The Index also found that corporate treasurers are reporting that their companies are directly investing in fintech, with Asia leading in these numbers. Nearly one-third of treasurers in China report their company has already invested in fintech, while over 40% are exploring fintech investment opportunities.

In Australia, 17.6% of corporate treasurers have directly invested in fintechs, while 24.2% are looking at opportunities for investment in the fintech space.

How fintech can help create 1 bln new jobs in Asia and Africa (ING), Rated: A

In a quiet neighborhood in the Turkish city of Trabzon, local residents buy most of their daily necessities at Ergan’s, a family-run supermarket established in 1987 that employs six people. But for a long time, there was one item they couldn’t get: meat.

That changed when the owner, Mehmet Turan Ergan, learned he could apply for a loan from ING using his smartphone. He wanted to create a new butcher section and needed 30,000 Turkish lira (around EUR 9,000) to bMultiplying that kind of job creation using the latest financial technology, or fintech, has great potential to reduce extreme poverty in the developing world, according to ING’s latest ‘A Billion to Gain’ a glass counter to display the different meat cuts, an extra refrigerator, and a machine to make ground beef.

Within minutes of sending an SMS with his tax number, he received a positive answer. Today his customers have more choice. But more importantly, he created a new job.

Multiplying that kind of job creation using the latest financial technology, or fintech, has great potential to reduce extreme poverty in the developing world, according to ING’s latest ‘A Billion to Gain’ report.

To finance the growth of 1 billion new jobs for the poorest in Asia and Africa, ING estimates that the number of micro, small and medium-sized companies (MSME) must grow by a third (from currently 400 million enterprises to 530 million) and the loan portfolio to this segment by 80% (around USD 5.5 trillion). Traditional banking won’t be able to close this huge credit gap because it’s too costly to maintain a wide branch network, especially in rural areas.

Regulatory Sandboxes: The Road to Fintech Redemption? (Finance Magnates), Rated: A

A race is under way. Spurred by the initiatives of the UK’s Financial Conduct Authority, countries are embarking on missions to establish themselves as the preeminent jurisdiction for all things fintech.

In recent months, countries such Abu Dhabi, Australia, Hong Kong and Singapore have all announced intentions to launch one. Though specifics vary, the programs share a common theme of promoting the growth of fintech within their borders.

The allure of the sandbox is clear. From a global perspective, program adopters demonstrate their commitment to innovation and developing a local fintech ecosystem. Similarly, participants have the opportunity to test and fine tune their ideas in forgiving environments.

This may also encourage them to push the boundaries of innovation. Consumers ultimately benefit through new financial products offering greater choice and competition between incumbents and startups.

The proliferation of these programs presents challenges and opportunities. Firstly, a degree of cooperation among regulators is advisable in order to avoid jurisdictional arbitrage. For instance, a startup refused entry into one sandbox may attempt to participate in another by taking advantage of differing admission requirements.

Small Biz Cash Management Struggles Across The Globe (PYMNTS), Rated: A

Between the rise of blockchain technology, the market debuts of faster payments initiatives and the advancements in virtual card capabilities, small businesses have more choice and power when it comes to their payments needs. But B2B payment habits continue to stifle suppliers’ growth plans across the globe, found the latest Working Capital Outlook Survey released by C2FO this month.

In the U.S., there is evidence that B2B payment practices are improving. Just 14 percent of U.S. SMEs told C2FO that their corporate payers are paying late, down from 20 percent last year. But the U.S. experience is not universal: In the U.K., for instance, 20 percent of suppliers reported having to deal with late payments, up from 11 percent last year.

Italy has the highest rate of late B2B payments, with 50 percent of small businesses there reporting that they have been paid late. France also has a higher rate of late payments at 27 percent, while Germany came in at 18 percent.

Globally, three-quarters of small businesses surveyed said supplier-friendly payment options that support faster payments are important to them. Again, the importance of faster supplier payment options has also increased in the U.S., from 56 percent reporting demand last year to 77 percent this year.

What all of this means, C2FO concluded, is that small businesses need to get creative — and diverse — when it comes to accessing working capital.


George Popescu
Allen Taylor