The Rise of Marketplace Lending Securitization

Cumulative MPL securitizations

With the evolution of digital banking and mobile-commerce, marketplace lending (MPL) has entered a new growth phase. If compared on the basis of loan volume, the U.S. is said to have one of the biggest P2P lending markets in the world (second only to China). According to a report by PwC, the size of the […]

The post The Rise of Marketplace Lending Securitization appeared first on Lending Times.

Cumulative MPL securitizations

With the evolution of digital banking and mobile-commerce, marketplace lending (MPL) has entered a new growth phase. If compared on the basis of loan volume, the U.S. is said to have one of the biggest P2P lending markets in the world (second only to China). According to a report by PwC, the size of the U.S. MPL market is expected to touch almost $1 trillion by 2030. The industry has already crossed $50 billion in originations for 2018, and such numbers have obviously attracted institutional capital to the sector. Financial institutions have been structuring their MPL investments in multiple ways, but, by far, the most important for the growth of the industry is securitization.

The Nascent Stage of Marketplace Lending Securitization

Securitization, in layman language, refers to the selling of illiquid loans by converting them into marketable securities via a process of bundling thousands of small loans into one single security. The buyers of the securities earn returns when people pay back their loans. Securitization provides the twin benefits of increased market liquidity because of easy buying and selling and lower cost to the borrower as the risk of holding (and managing) a small loan gets consolidated.

As per the U.S. Department of Treasury, P2P loan securitization has emerged as a prime funding avenue in the U.S., capturing investment of around $13 billion in 2017. The trend started when Eaglewood Capital Management undertook the first P2P loan securitization in 2013. The transaction was worth $53 million in value. The deal involved securitizing unsecured consumer loans originated by Lending Club.

The securitization of loans helps to tap a new market that may not be available otherwise. In the Eaglewood securitization deal, the final buyer was an insurance company that was not able to directly invest in Lending Club loans. But the securitization deal allowed the insurance company to fund the P2P loans. In 2014, Eaglewood announced yet another round of securitizations worth $75 million.

Along with institutional involvement, the participation of rating agencies in P2P securitizations has also gained momentum. For instance, Blackrock’s securitization of $327 million in Prosper loans was rated by Moody’s and it became the first rated MPL securitization in history. The first quarter of 2017 saw all securitization deals being rated by the rating agencies. Another Prosper loan (Prosper’s PMIT 2017-1) was rated by Fitch, which represents the growing acceptance of P2P securitizations across such agencies. With rating agencies entering the market, even the skeptical institutional investors should not be far behind.

The Growth of MPL Securitization

The increasing securitization of loans is seen as a shift in the P2P loan market as they fight the traditional banking industry for the multi-trillion dollar lending market. This will help the MPL industry go mainstream in its aim to raise funding, and will also deepen the market. Even more importantly, it will bring an additional level of oversight for young lending startups.

Large institutional investors and Wall Street are actively observing the developments in the sector and simultaneously undertaking their research. This signals a strong future of institutional participation in the industry. In the end, if MPL players are able to deliver the promised returns over an extended period of time, fixed income investors will be forced to invest in MPL securities in search for higher yields.

Deal Book

SoFi, the student loan giant, securitized a total of $727 million in loans by issuing SoFi Consumer Loan Program notes in November 2017. The transaction was recorded as the largest offering by an MPL company to date. The company claimed to be one of the U.S.’s biggest sponsors of ABS, completing deals worth $6.5 billion over the past year.

A total of seven deals worth $4.3 billion were finalized in the first quarter of 2018. The total volume indicated an increase of 34% year-on-year against the total volume in the first quarter of 2017. Out of the total issuance, student loan deals accounted for $2.1 billion. SoFi ,who had issued $1.8 billion in just two deals, led the student loan segment.

Average Deal Size Over Time

The Q3 2018 Securitization Report by PeerIQ confirms the growth trend. There were eight MPL securitizations this quarter worth a total of $3.5 billion. The industry has seen a cumulative $40 billion over 134 deals. All deals were rated, and rating agencies seem to be warming up to the sector with 119 upgrades as compared to just 12 downgrades. Wall Street has (as usual) joined the party with Citigroup, Deutsche Bank, and Credit Suisse dominating the issuance league with a combined 57% market share.

Conclusion

The Asset Backed Securities market is backing the MPL industry and record issuances with tightening spreads, and dropping yields are an important testimony to the fact. Investors are voting with their wallets, and they like what they are getting with the burgeoning MPL industry. But the Fed has started with its rate-tightening cycle, and the first wave of defaults will sooner or later hit marketplace lenders. This will help in determining the actual depth in the MPL market and how much the industry has matured.

Author:

Written by Heena Dhir.

The post The Rise of Marketplace Lending Securitization appeared first on Lending Times.

What Happened at the Money 20/20 2018 Conference in Las Vegas?

Money 20/20

Its a good thing that everything that happens in Vegas doesn’t stay in Vegas, which is where the Seventh Annual Money20/20 Conference took place on October 19-21, 2018. With the goal to “fearlessly take on the mission of creating a simpler, fairer, faster and more inclusive financial system for individuals, businesses, and society as a whole,” the three-and-a-half […]

Money 20/20

Its a good thing that everything that happens in Vegas doesn’t stay in Vegas, which is where the Seventh Annual Money20/20 Conference took place on October 19-21, 2018. With the goal to “fearlessly take on the mission of creating a simpler, fairer, faster and more inclusive financial system for individuals, businesses, and society as a whole,” the three-and-a-half day event included more than 500 speakers and 15 agenda themes.

Themes included :

  • Payments and Platforms
  • Banking and Personal Finance
  • AI and Deep Learning
  • Cybersecurity and Fraud
  • Alt Lending and Credit
  • Blockchain and Crypto
  • Digital Identity and Biometrics
  • And much more

While this is going to serve as a brief overview of the Conference, some of the notables who spoke, and bigger announcements, there will be special interest on Alternative lending and credit. We’ll also look at the all-important payments race.

A lot of the coverage is available on YouTube where Money20/20 has its own channel, so, if you missed the conference, you still have free access to some of the information.

Day One

Apple Co-founder Steve Wozniak is always a good bet to help you get a financial conference rolling. The business legend’s assurances that the claims that artificial intelligence (AI) and robotics, along with other forms of technology, are going to cut into human productivity are unwarranted helped to establish an ongoing theme that tech is necessary for the broader inclusiveness of our collective financial future.

Jennifer Bailey, VP Internet Services for Apple Pay, detailed some of the expansions of the new iPhone X, which include face ID security.

Other notable speakers from the first day of the conference included John Collison of Stripe, Michael Mebach, CPO of Mastercard (who spoke on how to build a seven-trillion-dollar middle class), Anand Sanwal of CB Insights, and Bill Ready of PayPal.

Day Two

Day Two’s lineup of speakers was headed by none other than Virgin’s own Richard Branson, who told a remarkable story about how he created Virgin by renting a plane and selling seats to the other passengers scheduled to be on the American Airlines flight that was delayed. Sallie Krawcheck, Ellevest’s CEO and co-founder, had some valuable remarks on diversity, and Vanessa Colella, head of Citi Ventures and CIO of CitiGroup, shared some keen insights on partnerships.

Possibly the speaker from the conferences second day who made the biggest impression was Nikolay Storonsky, CEO of Revolut. The way money is moved is changing rapidly, but if Storonsky is correct in his predictions, it may change even faster. He predicts that in 10 years, two or three large fintech players will take 95 percent of banks’ business marking an industry overhaul akin to how Amazon bypassed the retail industry and Uber took on taxis.

Day Three

Patrick Gauthier, VP of Amazon Pay, spoke to Tracey Davies’s central theme when he talked about the use of technology to make things simpler and more natural between the merchant and the consumer. Harley Finkelstein, CEO of Shopify, pointed out that middlemen will not be totally going away in the financial realm of the future, but they will have to “provide a disproportionate amount of value for their profit margin in the future.”

Other notable speakers included Asiff Hijri, president and COO of Coinbase, who framed the crypto world well when he spoke of the two base use cases of the space, the store of value of bitcoin and the ability to build apps on top of Ethereum, while noting that we’re still looking for that breakthrough app. His quote “Fintech before crypto, and the promise of a stablecoin…is like mobile before the iPhone came along” might be one of those “remember when” moments.

NBA legend Shaquille O’Neal also spoke on the third day of the conference. Now an advisor and advocate of Steady, the platform which helps Americans find work, says his partnership with these efforts is driven by recollections of a past where the only investments that paid off were those he embarked on in order to help others.

Day Four

Much of what happened on Day Four is listed below, including the Uber/Barclays and the Grab/Mastercard partnerships, but the day also had some other mentionable happenings.

Marisol Menendez, head of open innovation for BBVA, introduced the overall winner of the 10th annual BBVA Open Talent competition, the reward going to Sedicii; founder Rob Leslie accepted the award. Sedicii provides a service that identifies data between two organizations without exposing the underlying data.

Also, adding some hope for the financial sector in general, Ripple’s Co-Founder and Executive Chairman Chris Larson stated that he thinks digital assets can help guard against another financial crisis by solving some of the key problems of global liquidity. He also predicts that a fluid digital asset (he thinks it will be XRP, of course) will make more fluid the trillions of dollars that are tied up due to the “clunkiness” of current systems.

Focus on Alternative Lending and Credit Cards

As instant payments and expanded remittance options gain more prominence in the world of payments and commerce, an app designed to speed up the remittance process, designed via Visa APIs, took top honors at the conference.

American Express and Amazon announced a partnership, which will produce a no-annual-fee business card. Cardholders (Amazon Prime members) will get to choose if they want to receive five percent rewards on any Amazon purchase (Whole Foods included) or 90-day payment terms, a reward that might benefit small businesses with cash flow issues.

Goldman Sachs’s Marcus Platform announced a new wealth management offering designed to make the financial market more inclusive for average Americans. The offering will focus on online savings accounts and personal lending, the end game being to educate customers on some of the ins and outs of the financial sector.

Grab Financial and M and A Mastercard announced a partnership that will make prepaid cards available to underbanked and underserved customers in Southeast Asia in order to bring them into the financial realm and allow them to conduct business globally.

Gregory Wright, CPO and SVP of Experian, touched on a common theme from the conference, that of businesses going forward by putting consumers first. He reinforced the platform’s focus on putting the consumer at the center of the lending decision by giving the consumer more control over his or her data to allow them to make a more informed lending decision. The goal is for lenders to make better decisions at lower risk while giving more consumers access to credit.

David Richter, global head of business and corporate development for Uber, joined with Curt Hess, CEO of BarclayCard US, to announce the unveiling of the Uber Visa card. A native app specifically designed for the Uber platform, the app will make it more engaging and enjoyable for Uber riders and Uber eaters to experience the platform. The card will also offer real-time notifications of rewards and balances, rather than customers having to wait a month for a statement as credit cards traditionally do.

Other Noteworthy Announcements

  • ViSync took the grand prize in the conference’s hackathon challenge. According to a Visa spokesperson, their entry, an app designed to help send remittance payments overseas, should make it easier for migrant workers to send money back to their home countries.
  • FICO announced an “Ultra” FICO rating. The new device will consider how people manage their checking accounts and will incorporate things like overdraft history to determine credit scores. The goal is to help younger people and others with little or no credit and people who are rebuilding their credit after a couple of setbacks.
  • Tracey Davies, president of Money20/20, also announced the Rise Up! program, the pilot of which took place at this event. Rise Up! seeks to increase inclusion into the financial sector on all levels. This pilot program, which will expand to other demographics in the future, focused on gender (women make up 50 percent of the population, but only 20 percent of leadership roles in the financial sector.). Of the 300 women who applied to the program, only 35 were selected. Those who were selected were privy to special seminars and one-on-one access to various leaders from the financial space.

The Payments Race

Knowing how we build points of sale, I wonder if the organizers of the original event knew just how apropos the payments race would be to the overall message of the Money20/20 events. Whether they did or not, the event serves to draw a good picture of how we use and interact with different forms of currency in our daily lives.

Closely resembling the scavenger hunt of the television series The Amazing Race, five participants were given six days to make it to Las Vegas for the opening day of the convention. They drew to see which host city will host most of their scavenging, and then they all have to make it to their city and then to Vegas. Along the way, they got points for things like the number of states they visited and the different modes of transportation they use.

The catch is this: Each participant was only allowed to use one form of payment; the options were

  • Team Checks
  • Team Cash
  • Team Credit Cards
  • Team Devices (Apple Pay and such)
  • Team Crypto

The episodes—all of which can be seen on YouTube—show the obstacles in trying to perform these tasks with only the given form of payment.

As you can imagine, Team Checks had a hard time of it, and they had to rely on the goodness of many others to navigate their journey. Team Cash didn’t face as many obstacles, but travel required some finagling as they got deeper into the trip. Team Crypto had some transportation issues early on, but also relied on the kindness of others to make the necessary accommodations.

Team Credit seemed to have the most ease traveling—they just rented an RV and drove—and the representative from Team Devices said after it was all over that using only devices proved to be easier than she thought it was going to be; she did have to go to some pretty significant lengths to rent a car.

In all, the little series of videos showed the importance of various forms of payment and that we still haven’t gotten to the point where we can survive conveniently on one single form of payment; still, everything from the conference seems to speak to the reality that we’ll get there.

And how did the race turn out? Well, I haven’t seen an actual crowning, but Team Crypto was the first to get to the Las Vegas sign, which was basically the finish line—I haven’t seen anything that mentioned how each fared at the number of states visited or modes of transportation used. If Team Crypto did prove the winner, it was their second straight title.

The event will return to Vegas next year, the dates being October 27-30, 2019.

Author:

Written by Paul Keenan.

Tuesday October 16 2018, Daily News Digest

Dow Jones VC Report Q3 2018

News Comments Today’s main news: OnDeck creates subsidiary for bank partnerships. Lendio hits $1B in business loans. Blend Network on track to exceed 5M GBP in lending. Hexindai completes P2P compliance self-inspection report. Today’s main analysis: Bank earnings for JPMorgan, Wells Fargo, and Citigroup. Today’s thought-provoking articles: Why Google and Amazon are not a threat to small banks. Cities […]

Dow Jones VC Report Q3 2018

News Comments

United States

United Kingdom

Southeast Asia

Other

News Summary

United States

OnDeck creates new subsidiary for bank partnerships (American Banker) Rated: AAA

OnDeck Capital, an online lender that also provides the technology to JPMorgan Chase’s digital small-business lending platform, is creating a new subsidiary to pursue partnerships with other banks.

The wholly owned subsidiary will be called ODX, according to New York-based OnDeck.

OnDeck, which specializes in online small-business loans, has been working to build its bank partnership business since announcing its deal with JPMorgan Chase in 2015. The nation’s largest bank launched its QuickCapital platform in 2016.

Lendio Tops $ 1B in Business Loans Facilitated Through Its Online Marketplace (PRWeb), Rated: AAA

Lendio today announced it has facilitated $1 billion in financing to more than 51,000 small businesses across the U.S. Since its inception in 2011, Lendio has been bridging the financing gap for small business owners. As a result of access to growth capital, Lendio’s small business clients have burgeoned, generating an estimated $3.8 billion in economic output and creating more than 25,000 jobs in communities nationwide.

Rocky Week for Equities, Strong Bank Earnings (Peer IQ) Rated: AAA

JP Morgan Q3 Earnings

Revenues at JPM grew by 5% YoY to $27.8 Bn, and earnings grew by 24% YoY to $8.4 Bn. Earnings growth was driven by record NII of $14.1 Bn, up by 7% YoY, while fixed income trading revenues dropped by 10% YoY. JPM saw a small increase of 2% YoY in its consumer loan book. Net charge-offs declined by 11% YoY to $1.1 Bn and the provision for loan losses declined by 35% YoY to $0.9 Bn. The bank saw healthy growth of 11% YoY in its digital banking customers to 32.5 Mn. JPM’s ROE for this quarter was 14%, up by 3% points YoY.

Wells Fargo Q3 Earnings

WFC’s revenues were flat YoY at $21.9 Bn, but earnings grew by 33% YoY to $6 Bn. Earnings growth was driven by 1% YoY increase in NII to $12.6 Bn. The consumer loan book continues to decline with a drop of 3% YoY to $440 Bn driven by auto loans. Net charge-offs declined by 13% YoY to $0.5 Bn and the provision for loan losses declined by 19% YoY to $0.6 Bn. Digital banking customers grew by 4% YoY to 29 Mn. WFC’s ROE for this quarter was 12%, up by 3% points YoY.

Citigroup Q3 Earnings

Citi’s revenues were flat YoY at $18.4 Bn, but earnings grew by 12% YoY to $4.6 Bn. Earnings growth was driven by 9% YoY increase in fixed income trading revenue, the first increase since 2017. Citi’s outstanding consumer loans grew by 3% YoY to $309 Bn. Net charge-offs increased slightly by 1% YoY to $1.7 Bn but the provision for loan losses declined by 13% YoY to $1.9 Bn. Digital banking customers grew by 5% YoY to 18 Mn. Citi’s ROE for this quarter was 9.6%, up by 2% points YoY.

Source Peer IQ

Here’s why Google, Amazon aren’t a threat to small banks (American Banker) Rated: AAA

It’s a logical theory that sounds reasonable on its face: Since most small businesses already use Google, Amazon and Facebook for marketing, it will be easy for these tech giants to market loans to small businesses that they already have as customers.

One CNBC headline sums up the sentiment: “Another industry Amazon plans to crush is small-business lending.” The story notes that Amazon has already made billions of small-business loans to thousands of merchants and suggests that the online giant could come to dominate lending. In addition, there are countless fintech startups also seeking to disrupt small-business lending.

That’s because the theory misses a crucial detail: When tech giants and fintech startups target a business segment, they take a programmatic approach of catering to the most common use cases. That’s the opposite of what community banks do.

LendingTree Reveals the Cities with the Most Foreign-born Homeowners (Lending Tree) Rated: AAA

In data for 2017, the Census Bureau found that 13.7% of the U.S. population was foreign-born.

  • Key findings
    Cities with larger foreign-born populations and homeowners have higher home prices. Prices for the top 10 cities average $491,750 compared with $167,560 for the bottom 10.
  • But the lead city has modest home prices. Miami is top of the list with 26% of homes owned by foreign-born residents, but has a median price of just $278,700.
  • Immigrants love the coasts. The rest of the top five are also coastal cities, all in California with 17% and higher foreign-born homeownership rates and home prices above $300,000.
  • Some bargains are available. In addition to Miami, more affordable cities with high immigrant populations include Houston at No. 6 and Las Vegas at No. 7.
  • Cheaper cities are mostly shunned. Immigrants show little interest in bargain hunting in the cities towards the bottom of the list. The percentage of foreign-born homeowners in the bottom five cities is below 3%, despite home prices averaging about $160,000.
Source: Lending Tree

Anju Patwardhan of CreditEase Fintech Fund (Lend Academy) Rated: A

There are many VC firms investing in fintech today but most are based in the US or Europe. Our next guest on the Lend Academy Podcast runs a different type of fund that has its origins in China.

Anju Patwardhan is a Managing Director of the CreditEase Fintech Fund, which has quietly become one of the leading VC firms globally focused on fintech. They only launched in March 2016 and already they have made 45 investments into many of the leading fintech names such as Upgrade, Marqeta, Funding Circle, Ellevest, NAV, Figure, Onfido, DV01 and True Accord just to name a few.

Barclays to challenge Goldman’s Marcus in US retail banking (Financial Times) Rated: A

Barclays is launching a US current account in a move that will put them in a head to head battle with Marcus; the account will be added to their current digital offering in the U.S. which currently includes credit cards, savings and loans to about 13 million customers; “We’re going to launch checking, we’re in the process of doing the build and we’re doing some testing .

We expect to have that in the market next year,” explained Barry Rodrigues, head of cards and payments at Barclays International, to the FT; the company does believe their knowledge in the U.S. market with credit cards can help to position them as they make this push into checking accounts; the company has not released targets for how many accounts they look to attract.

Why Did This Fintech Startup Sponsor A NASCAR Driver? (Benzinga) Rated: A

So how can a fintech startup stand out in an increasingly crowded fintech space? For personal finance and lending startup MoneyLion, the answer is to go where the audience goes—and go around in a loop with them 500 times.

Pedal To The Metal Scaling

That’s why MoneyLion recently announced it was partnering with Penske Automotive Group, Inc. PAG‘s Team Penske to sponsor NASCAR driver Austin Cindric’s Ford Motor Company FMustang for four races this season. It’s an unexpected move from a fintech startup, whose primary marketing channels to date have generally been social media and TV commercials.

6 reasons to invest in your 20s (when all you want to do is spend) (The Next Web) Rated: A

1. Startups, job-hopping, and the gig economy come at a price

Unlike previous generations, we have much more freedom to job-hop. On average we’ll go through at least four different jobs by the time we’re 32.

By 2020, self-employment is likely to triple to 42 million workers with millennials making up 42 percent. This means we can now have our flan and eat it too.

2. Don’t count on social security either

With the number of retirement age citizens (65+) set to increase from 48 million today to 79 million, if reforms aren’t made, social security will start running out by 2035.

4. If you start investing now, you could be a millionaire later

If you want to start off small you can try investing in peer-to-peer lending with a minimum of $25. Instead of going through banks, peer-to-peer lending connects borrowers to lenders. Lenders can finance all or part (along with other investors) of a borrower’s loan at an interest rate of roughly between 5-36 percent.

United Kingdom

Blend Network on track to exceed £5m of lending (Development Finance Today) Rated: AAA

Speaking exclusively to Development Finance Today, Yann Murciano, CEO, and Roxana Mohammadian-Molina, chief strategy officer (left), both of Blend Network, highlighted the company’s significant growth and future plans for the platform.

“We had a target of £5m, which it looks like we are going to exceed, because we will be at more than £4.2m in the next 10 days.

“In the first four months, we provided one facility of £1.3m and one for £1.4m, so this is how quickly we are growing.

Abundance Set To Unveil Fund Raising (Forbes) Rated: A

Green and social infrastructure crowdfunding platform Abundance is set to announce a fund-raising of its own. The platform will this week unveil plans to raise a seven-figure sum to fund its next stage of growth, with an equity issue that will be hosted on its fellow crowdfunding service Seedrs.

New To The UK, Royalty Finance Seeks To Reach The SMEs That VCs And Lenders Pass By (Forbes) Rated: A

But there is perhaps one small corner of the alternative finance universe in which the UK has been behind the curve – namely royalty finance.  Originally developed to service the mining and commodities industries, the concept of royalty finance has been adapted to the needs of SMEs and mid sized companies. US businesses have been able to access this form of funding since the early  1990s, when a fund called Cypress Growth Capital was established to provide an alternative to venture capital,  but to date the idea has  failed to gain much traction in the UK.

But things are changing. Corporate finance companies  offering variations on the royalty finance theme are emerging – including 

FCA sounds redress warning over high cost credit (Peer2Peer Finance) Rated: A

The Financial Conduct Authority has written a “Dear CEO” letter to platforms providing high-cost short-term credit – which includes some peer-to-peer lending firms – to check on their creditworthiness assessments, particularly for repeat borrowers, and to assess whether customers are being treated fairly.

It warns that firms must be able to fund any remediation costs from complaints and should inform the FCA if they are unable to.

The letter follows the collapse of payday lender Wonga in August.

China

Hexindai Completes Submission of P2P Compliance Self-Inspection Report (PR Newswire) Rated: AAA

Hexindai Inc. (NASDAQ: HX) (“Hexindai” or the “Company”), a fast-growing consumer lending marketplace in China, today announced it has completed the submission of its P2P Compliance Self-Inspection Report to the Beijing Municipal Bureau of Financial Work, completing one of three key steps for compliance with industry reforms from the National P2P Rectification Office.

Hexindai is actively supporting and participating in this compliance process, which aims to foster the stable growth of the P2P lending industry in China. The result of this process will be a set of standards and best practices across the whole industry to protect the interests of both borrowers and lenders.

Now, Hexindai will focus on the next two steps in the process, including an inspection conducted by Beijing Internet Finance Industry Association. This will be followed by verification of inspection results by the Beijing Municipal Bureau of Financial Work with field inspection and possible final check by higher level government organizations.

China’s Financial Regulators Issue Anti-Money Laundering Anti-Terrorism Financing Regulations for Fintech Industry (Crowdfund Insider) Rated: A

On October 10th, People’s Bank of China, China Banking & Insurance Regulatory Commission and the China Securities Regulatory Commission jointly issued the “Administrative Measures on Anti-Money Laundering and Anti-Terrorism Financing for Internet Finance Institutions (Trial)” (hereinafter referred to as the “Administrative Measures”).  The purpose of this document is to regulate the possible anti-money laundering and anti-terrorist financing of Internet finance institutions, and to effectively prevent money laundering and terrorist financing activities.

The “Administrative Measures” will be implemented from January 1, 2019, and require deeper compliance requirements for Internet finance institutions. At the same time, NIFA should coordinate with other industry self-regulatory organizations to formulate industry rules to achieve effective linkage between supervision and self-discipline management.

European Union

European VC Funding Rises in Q3 but Deal Flow Declines (Crowdfund Insider) Rated: AAA

Source Crowdfund Insider

Dow Jones VentureSource is out with their quarterly report on VC activity for Q3 of 2018. According to their numbers, European VC fundraising increased during Q3 but investment in European companies “showed a notable decline in deal flow activity and investment levels.”

The report states that VC investment for the quarter totaled €3.51 billion across 24 European VC funds. This is a significant increase of 50% versus Q2 of 2018. Additionally, when comparing to Q3 of 2017 both capital and fund closings increased by 90% and 14% – respectively.

Australia

New digital ‘banking alternative’ launches (The Advisor) Rated: AAA

A new digital platform, run in partnership with Bendigo and Adelaide Bank, has launched to give Australians a “radically different banking alternative”.

The new digital app, called Up, was created by Melbourne-based technology developer Ferocia and operates under Bendigo and Adelaide Bank’s banking licence.

The smartphone banking app was officially launched last week and enables customers to track their money in real time, predict upcoming bill charges automatically and pay them on time, and also offers multiple saver accounts, round-ups on purchases, digital payments (such as Apple Pay and Google Pay) and no international transaction fees.

India

Funding the wanderer (DNA) Rated: AAA

Start-ups in fintech and peer-to-peer (P2P) lending platforms are devising strategies of attracting more millennials towards small-ticket loans ranging from Rs 10,000 – 200,000, which are being mainly utilised towards experiential travel. Entrepreneurs say small ticket loans generally go towards home renovation, home decoration, home repairs, purchase of second cars/bikes, etc.. “But off late, the trend is tilting more towards utilisation of such loans for fulfilling travel ambitions,’’ say entrepreneurs.

“There is no doubt this segment (travel) is rising and more people are opting for this loan. Any customer would love a packaged deal which comes with financial support to go on a vacation, and this will also help them enjoy their vacation well,” says Bhavin Patel, co-founder and CEO, LenDenClub.

Although people going for longer vacations or to expensive destinations take loans that are in lakhs, during long weekends, the frequency of very small loans ranging from Rs 3,000 – 10,000 increases significantly, observes Bala Parthasarathy, co-founder and CEO, MoneyTap. The idea is to supplement their existing cash coffers, without causing any imbalance in their daily lifestyles, say experts.

Making FinTech Model Work for India (Entrepreneur) Rated: A

It’s 2018. We’re facing the impending risk of climate change, rampant wealth inequality, and increasing populism around the world. We need to think beyond quarter-to-quarter profits to survive this. Companies must think about the long-term effects of their work—beyond their bottom dollar.

Find a purpose for your company that will help you soar during the good times, and persevere during the tough. What’s helped me fight fires every day—and get through the hardest challenges—is our mission of powering a new, more equal digital economy in India. A true mission serves a massive need in our society, especially for SMBs navigating the post-GST economy, and has the potential to create millions of jobs for companies looking to digitize and become compliant.

What’s my business model? How does it relate to my mission? What vulnerabilities does it have?

A mission should be more than words on your website’s ‘About’ page. It should lie at the core of everything you do, including your business model. You’re destined to fail—or at least be gravely disappointed—if your mission and business model do not align.

One of India’s fastest growing P2P lending platforms, ATL facilitates instant unsecured loans (personal, education and business loans) to eligible borrowers by connecting them with investors or lenders across India through a 100% digital ecosystem.

With this certification, ATL joins a select group of fintech startups who hold the NBFC-P2P accreditation. RBI follows a very stringent due diligence process while granting this license, which involves eligibility criteria like financial stability, business continuity plan, and how the business will aid in RBI’s larger vision of financial inclusion. The startup says that recognition from RBI is a strong validation of the startup’s sharp business model, processes and compliance with the RBI guidelines.

Africa

How internet is helping revitalise agriculture sector in Africa’s most populous nation (Devdiscourse) Rated: AAA

It looked like the end had arrived for Adewale Fatai’s chicken farm. Money was running out. Built to house 30,000 chickens, the farm was producing fewer than 2,000 chicks. His family had no funds to lend, and Nigeria’s banks weren’t interested.

Instead, he went online.

Two years later, Fatai now has 20,000 chickens. Flanked by thousands of chirping birds at his farm in Nigeria’s southwestern Ogun state, Fatai says his operation was saved by Farmcrowdy, one of a breed of new peer-to-peer lending companies aiming to match farmers with small investors.

Equity of Kenya Sees $ 22 Million FinTech Income This Year (Bloomberg) Rated: A

Equity Group Holdings Ltd., Kenya’s biggest bank by market value, expects its financial-technology unit to bring in as much as 2.2 billion shillings ($22 million) of revenue in its first year of independent operations, according to Chief Executive Officer James Mwangi. The bank “has resolved to make Finserve an independent commercial subsidiary,” Mwangi said in a statement published in the Nairobi-based Sunday Nation newspaper. The unit serves 1.96 million subscribers on its mobile-banking platform, Equitel, he said.

The unit, Finserve Africa Ltd., became an independent entity this year and facilitates cross-border transactions in seven Eastern African nations worth 2 billion shillings each month, according to the statement. It has a startup capital base of 1 billion shillings and its assets are valued at 1.98 billion shillings, Mwangi said.

Asia

SoftBank is the new form of IPO (Krasia) Rated: AAA

With a walloping around US$100 billion check, SoftBank’s Vision Fund is the world’s largest venture capital vehicle, and it’s also considered too big to be a conventional one. The Vision Fund is known for throwing gigantic amount at startups, urging them to compete for more market share at costly expenses.

Online lender Social Finance’s ex-CEO Mike Cagney, after investments from SoftBank in 2015, said that the funding “takes the pressing need of an IPO off the table,” and allow the company to put off an IPO indefinitely.

It seems that, receiving SoftBank investment is the new form of doing an IPO.

The firm in Southeast Asia invested in Grab and is encouraging the ride-hailer to form joint ventures with its portfolio companies to help them enter the region.

Shady online lenders still active in Indonesia despite blacklists (Krasia) Rated: A

Unethical debt collection practices are part of the reason Indonesia’s financial services authority, OJK, has been strictly monitoring the sector. It recently blacklisted 407 online lenders for not registering with the authority. Raja Uang was one of them.

OJK cracks down on all firms who operate without being registered with OJK, but in practice, it’s difficult to ensure they do shut down for good.

Indonesia’s CROWDE raises funding from GREE Ventures (E27) Rated: A

Indonesian agritech startup CROWDE today announced that it has raised an undisclosed seed funding round from Tokyo-based venture capital firm GREE Ventures.

Crevisse Ventures also participated in the funding round.

In a press statement, CROWDE CEO Yohanes Sugihtononugroho explained that the funding will be used to increase the number of farmers that the company aims to help by giving them capital boost.

Authors:

George Popescu
Allen Taylor

The Technology Edge: How Non-Banks are Seeking to Dominate Point of Sale Lending

The Technology Edge: How Non-Banks are Seeking to Dominate Point of Sale Lending

LendIt Fintech USA 2018, April 9-11 in San Francisco, was a huge success. One of the more interesting panels was on how the non-banking sector is taking over point-of-sale (POS) lending. Kim Gerhardt, director at the San Francisco office of Edgar, Dunn and Company, moderated the panel. Other panelists included Peter Kalen, Michael Garrity, Mark […]

The Technology Edge: How Non-Banks are Seeking to Dominate Point of Sale Lending

LendIt Fintech USA 2018, April 9-11 in San Francisco, was a huge success. One of the more interesting panels was on how the non-banking sector is taking over point-of-sale (POS) lending. Kim Gerhardt, director at the San Francisco office of Edgar, Dunn and Company, moderated the panel. Other panelists included Peter Kalen, Michael Garrity, Mark Lorimer, and Camilo Concha.

Kalen is founder and CEO of Flexiti Financial, a Canadian company founded in 2013 that specializes in providing easy, instant POS financing through its award-winning mobile application process.

Garrity is co-founder, CEO, and president of a platform that has enabled merchants to facilitate consumer lending since November 2010. Financeit has processed over $2.5 billion in loan applications from thousands of merchants.

Lorimer represents LendingPoint, a lending company founded in 2014 that focuses on personal loans and debt consolidation. He is chief marketing officer. LendingPoint recently acquired LoanHero, which is in the POS lending business.

Finally, Concha is founder and CEO of LendingUSA, a company that provides innovative financing solutions with a specialization in POS lending. LendingUSA was launched in 2013 and caters to consumer finance in a variety of sectors from medical, pet care, consumer goods and services, etc.

Over the years, the POS lending industry has gained scale and seen a radical change. A convergence can be witnessed in the way payments are made and fintech lending is facilitated. The opportunity in POS financing is massive, and banks seemed to have missed the ball. Traditional banks strive to serve everyone, but when it comes to POS lending, merchants have to filter their prospective customers through a narrow funnel extending loans to a comparatively small customer base.

Flexiti Financial’s Entry in POS Lending

When Peter Kalen was asked about what brought Flexiti Financial into the business, the product that it is offering, and the level of traction it has been able to create in the market among other merchants, he articulated that Flexiti’s product is somewhat similar to what Synchrony or Alliance Data System is offering. Flexiti differs in the way transactions take place and aims to reduce the time consumed in the loan application process.

Many organizations issue private label credit cards, but application processes are long and approval rates low. With its experience and vision, Flexiti Financial has successfully introduced a 100% paperless process to offer instant POS financing. Its virtual credit card application can be downloaded from the Google Play store and the Apple store.

These private label cards speed up the loan application process, bringing the process down to three minutes. This is a win-win for retailers and customers. The platform improves the online retailer’s UX by removing the friction at the front-end.

Financeit and Point of Sale Lending

Garrity also shared his views on point of sale lending. He put emphasis on the fact that personal lending is more about new transactions and focuses less on lending. Everything in POS lending, from the technology to APIs is obsessed with enabling easy sales for merchants, improving their experience, and supporting them as they try to close more business. Merchants and customers want financing options, but they do not want to indulge in complicated programs.

Another area that Financeit targets is debt consolidation. The company has delivered a platform that makes it easy for businesses to offer powerful financing options to their customers from any device.

When asked about how they excel at delivering services to customers, Garrity said they have acquired Centah Inc, a company operating in home improvement work-flow and lead management software with joint partner and investor Goldman Sachs. The company redesigned its website to create a platform that manages the process, helps businesses connect with customers, provide dispatch scheduling systems, and represent financing options to customers throughout the process. He warnes other players that if they only focus on financing and not on the transaction, they will be missing out on an important aspect of dominating this space.

LendingUSA’s Role in POS Lending

Gerhardt asked Concha about his journey into this industry. Concha shared that LendingUSA focuses on point-of-need financing, which sits at the intersection of point of sale and fintech. He believes that businesses in today’s era are not required to be good but great if they want to be successful, and they are required to be great in all aspects, namely, marketing, technology, underwriting, and risk mitigation.

Concha started with a company called 1800mysurgeon that matched cosmetic surgeons with consumers. After starting the company, he realized the need for financing as an important part of the business. He decided to create a platform to interact with both surgery and finance to enhance the merchant’s experience.

LendingPoint’s Emergence In POS Lending

LendingPoint started as a direct consumer online lender specializing in 600-700 FICO score customers. Lorimer emphasized that the company understood very early that customer experience is crucial to POS transactions. Although the players in the market now are very good at generating products that banks like to own, they do not necessarily focus on the merchandise. LendingPoint simplifies the lending process by sharing risk and administering payment plans. LendingPoint also offers merchants risk programs to extend in-house, end-to-end services.

Marketing With Established Merchants

All the banks playing in the market are working to deliver better services to customers in different ways. The biggest players historically are Wells Fargo, Citigroup, and Synchrony Financial. They all have significant relationships.

The question is whether these big banks can be a part of this game. Concha believes that banks are an important part of the ecosystem. These banks are good for purchasing loans but are constrained by reputational risks, marketing, and other issues. Lorimer added that LendingPoint also works with some established banks. Talking of the role of hard pull and soft pull in availing credit, he shared that because a hard pull impacts the credit report of the customer, it is a cause for low approval rates. Soft pulls, on the other hand, do not affect the credit score of the credit seeker leading to a higher approval rate for loans.

Garrity shared his point of view on the tie-ups with established banks and financial institutions that become balance sheet lenders. He said they are participants in securitization, originations, and selling. He believes there is clearly an opportunity for all the stakeholder businesses to grow. Online POS lending usually operates separately considering the fact that it is complicated and technology-driven. Banks are, therefore, slow followers of fintech companies.

The Technology Edge Leads to Domination

The next important aspect analyzed was whether it is the technology that enables online POS lending businesses to dominate the lending space.

Kalen believes technology is the most important element of this space. Concha believes this space is all about keeping merchants and customers happy and building long-lasting relationships with them in the process. Lorimer questions the integration of technology among banks and whether banks will be able to adapt to complex technologies. He believes banks aren’t set up to do that, but to deliver a mass homogenous customer service. Garrity, on the other hand, believes the less you see the technology, the more attractive it is; he also thinks it is better for the merchant to focus on increasing the business close rates.

Talking about data management, Lorimer believes technology definitely provides an edge to the business on the back end. The data is the source for everything and it is analyzed and configured to improve the experience. As technology enables automation and brings security, users can access everything at one place and find it already stored in the system.

Kalen agrees that technology is a boon for backend data management. He added to the discussion saying that the more established players have an edge as they have been in business for many years. They have been able to hone their skills over a period of time.

Concha also believes that technology will work for the POS lending as it is different from other businesses. There is a major role of risk, debt, and strong relationships in POS lending, and none of these can be managed properly without technology.

The Challenges of POS Lending

Technology, scale, and partnerships:
Kalen from Flexiti views POS lending as a very different business than retail lending. Getting customers and coping with technology are major challenges. Other challenges that non-bank businesses face are focusing on the scale. It is important for the business to look at the credit cycle and beware of fraudulent practices as it increases the scale of operations.

Credit cycle:
Being on the right side of the credit cycle is crucial to every lending business. The access to credit in the credit cycle determines the risk and therefore the value of the business. Businesses must prepare their strategies, keeping the future in mind.

Regulation:
Lorimer believes this space requires more regulation since the Consumer Financial Protection Bureau (CFPB) is not very active. Poor regulation and lack of control pose a major risk to the players in the market.

Availability of capital and credit risk:
Another challenge is the availability of capital to extend lending facilities. The fear of credit facilities drying up in a day also bothers businesses.

The Takeaway

Kalen has realized that success does not come easy. The companies in this space need to understand that a lot of lending capital is required along with an understanding of the tricks of the trade.

Concha believes it is a 3-step learning process where the business is required to go through a testing phase, an education phase, and an adoption phase.

With LendingPoint’s recent acquisition of LoanHero, it is comparatively a new entrant in the market.

The crux of the entire discussion is that POS lenders must be specialized to survive in the market. The business has to endeavor to offer value added merchant services instead of being a one-stop shop to be successful. There is a lot of room for growth provided one understands the complexities of the trade.

Author:

Stephanie Vaughan is vice president at  Allen TaylorPosted on Categories Alliance Data System, alternative lending, Analysis, balance sheet lending, Banks, CFPB, Citigroup, consumer lending, Credit, credit risk, Featured, FICO, Financeit, Flexiti Financial, instant financing, LendingPoint, LendingUSA, LendIt 2018, Online Lending, point of sale financing, point of sale lending, POS financing, POS lending, Regulation, Synchrony Financial, Wells Fargo

Tuesday March 27 2018, Daily News Digest

bankruptcy

News Comments Today’s main news: Ron Suber joins MoneyLion board. Prosper reports full year results. Orca launches P2P investment platform. Santander, Ripple partner on money transfer app. Cash Suvidha raises $1M. China opens payment market to foreign companies. Today’s main analysis: The cost of bankruptcy. Today’s thought-provoking articles: LendingTree studies the cost of bankruptcy. Liwwa creates big impact in MENA. The lowdown […]

bankruptcy

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News Summary

United States

Ron Suber Joins Board of Fintech MoneyLion (Crowdfund Insider), Rated: AAA

Ron Suber, President Emeritus of Prosper and a prominent Fintech advocate, has joined the board of directors of MoneyLion.

Prosper Reports Full Year Results (Business Wire), Rated: AAA

Prosper today reported full year results for 2017. Loan originations and transaction fee revenue were up 31% and 37% year-over-year to $2.9 billion and $130 million, respectively. Prosper also generated cash from operations for three consecutive quarters, starting in Q2 2017.

Source: Prosper

Summary of Key 2017 Financial Highlights:

  • Surpassed $11 billion in cumulative personal loan originations through the platform since inception
  • Increased loan originations 31% and transaction fee revenue 37% year-over-year
  • Net loss of $115 million included $89 million of non-cash charges related to warrants to purchase preferred stock that were issued to a consortium of investors and a third party in connection with a settlement agreement
  • Adjusted EBITDA(1) of $5 million increased $43 million year-over-year
  • Generated cash from operations for three consecutive quarters, starting in Q2 2017
  • Closed $50 million Series G funding, ending 2017 with approximately $100 million of liquidity

Citigroup to Again Be a Nationwide Bank, but in Digital Form (Wall Street Journal), Rated: AAA

After years of Citigroup Inc. shrinking its U.S. retail banking franchise to focus on affluent customers and a handful of big cities, the global bank is ready to become a national player once again.

This time, however, it doesn’t plan on gobbling up rivals or opening any new branches. Instead, Citigroup says it will use an expanded mobile app to fully serve new customers.

LendingTree Study: The Cost of Bankruptcy (PR Newswire), Rated: AAA

LendingTree today released the findings of its study on the cost of bankruptcy. The findings show that while a prior bankruptcy can make it more expensive to borrow, it’s certainly not impossible to qualify for credit. If borrowers wait to apply for new loans even just a few years after bankruptcy, they may find rates that aren’t too far off from what other borrowers are being offered.

Key findings:

  • Forty-three percent of people with a bankruptcy on their credit file have a credit score of 640 or higher within a year of the bankruptcy. Within two years of bankruptcy, 65 percent have a credit score above 640.
  • A typical $15,000 auto loan incurs an extra $2,171 in borrowing costs for those seeking offers less than a year after bankruptcy, but just $799 for those who wait at least two years after bankruptcy.
  • Borrowers who have a 3-year-old bankruptcy and apply for a mortgage see an offered APR that is 19 basis points higher than those without a bankruptcy. The higher the APR, the higher borrowing costs will be.
  • Mortgage borrowers with scores between 720 and 739 three years after bankruptcy were offered similar APRs to those without bankruptcy, indicating a strong credit score can counteract the effects of a prior bankruptcy.

With Marcus, Goldman Sachs takes on consumer banking (Bankrate), Rated: A

Despite becoming a bank holding company, Goldman’s business remained focused on corporations and the wealthy. That changed a few years ago as it began plotting new strategies, says Omer Ismail, chief commercial officer for Marcus. The Wall Street Journal recently published an in-depth account of the creation of Marcus, including juicy tidbits like conversations over lunch in the Hamptons.

Goldman decided to tackle the unsecured personal loan space first.

Marcus has found its particular angle in making its loans highly customizable. Rather than setting traditional loan terms, like three years or five years, it asks you how much you can afford to pay each month in addition to asking you how much you need to borrow. So, you might end up with a 31-month installment loan, which is not a conventional loan term.

Rod Buscher of Blinker (Lend Academy), Rated: A

In this podcast you will learn:

  • How Rod first made a name for himself in the car business.
  • The idea behind Blinker and why Rod decided to start the company.
  • How the buying and selling process works at Blinker.
  • The patents they have received to help identify any car in the U.S.
  • How they are able to make a safe environment for conducting a car transaction.
  • The percentage of car buyers at Blinker who opt for financing instead of paying cash.
  • How their financing process works.
  • The limits on the kinds of cars they finance.
  • The data they are using to make an underwriting decision.
  • The spectrum of the different credit profiles of their car buyers.
  • How they are getting the word out to find these buyers and sellers.
  • How they are funding their loans today.
  • Their move into auto refinancing and how they have built this business.
  • How they approach licensing in the states they operate.
  • The total number of transactions that have taken place on Blinker to date.
  • The other services they are providing to Blinker customers.
  • Rod’s vision for the future of Blinker.

Synthetic Identity Fraud: The Perfect Crime (Lendit), Rated: AAA

Synthetic identity fraud usually involves creating an entirely new identity composed of information with no ties to a known consumer. This identity is then used to apply for credit and services. Synthetic identities are one of the most difficult fraud threats institutions face today and their prevalence has exploded over the past several years. Synthetic identity fraud is arguably the perfect crime because there is no consumer victim.

Put yourself in the shoes of a fraudster. As you consider your many nefarious options for committing a crime and getting away with it, you decide that the best crime is one where there is no clear victim. Sure, robbing a bank using a synthetic identity victimizes the enterprise, its shareholders, its employees and taxes its customers. However, no one individual is intentionally, directly hurt. Therefore, the non-existent victim does not alert authorities and the fact that a crime has been committed is lost to history. There is a “credit loss” and the debtholder is impossible to locate. The debt is written off, or sold, and the fraud is perpetuated yet again. Like I said, the perfect crime.

Candex Raises $ 3.5M in Seed Funding (Finsmes), Rated: A

Candex, a San Francisco, CA-based fintech startup, raised $3.5m in seed funding.

Backers included Edenred Capital Partners, Partech Ventures, Advisors.Fund, Camp One Ventures, NFX, Tekton Ventures, Big Sur Ventures and fintech angel Mark Goines.

Hawaii is state with highest average debt-to-income ratio, study says (Pacific Business News), Rated: A

The average borrower in Hawaii spends 36.2 percent of their monthly paycheck on credit card, student loan, and housing payments, according to a study by Credible.com, making Hawaii the state with the highest average debt-to-income ratio.

According to the online lender marketplace, the average monthly credit card payment for a Hawaii resident is $238, the average monthly student loan payment is $385, and the average monthly housing payment is $1,091, for a total of $1,714.

With average annual income in Hawaii at $56,889, the state’s average debt-to-income ratio is 43 percent more than residents of Michigan, the state with the lowest debt-to-income ratio.

On average, Michigan residents in the dataset spent 25.3 percent of their monthly income on credit card, student loan and housing payments.

Nationwide, the study found the average American in the dataset paid $207 on credit card debt, $370 on student loans and $906 on housing each month, while taking home an average salary of $60,671.

Transparency Can Help Position a Fund for Growth (Lendit), Rated: A

When fund managers choose  experienced service providers, including custodians, auditors, accountants, attorneys and administrators, they can increase transparency in the fund, which can in turn promote investor confidence. Service providers can be much more than just an added expense;  they can be  valuable partners that can help position the fund for success.

United Kingdom

Orca Launches Investment Platform to Drive Mainstream Adoption of P2P Investing (Crowdfund Insider), Rated: AAA

Orca, an independent data, research and analysis provider targeting the the UK peer-to-peer (P2P) lending market, has launched its premier investment platform. The new platform will allow investors to easily diversify across multiple P2P lending platforms from a single P2P investment portfolio.

Orca seeks to provide their new service to the retail investor market.

Total cumulative lending is £13 billion since the asset class was created in 2005. Orca’s secondary service, Orca Analytics, has 2016 to 2017 growth at 18%, with £4 billion lent in 2017 alone. The estimated customer-base stands at approximately 200,000-250,000 retail investors.

The Orca Investment Platform Features include exposure to both consumer, business and property lenders. Investors may expect a return of 5% net of Orca’s cut which is a 0.65% fee.

UK digital bank that beat peers to an annual profit ‘will go into’ China — eventually (CNBC), Rated: A

OakNorth, a start-up bank based in London, recorded a pre-tax profit of £10.6 million ($15 million) in 2017 and is considered to be the first U.K. digital-orientated bank to reach such a milestone.

Khosla said his firm is already in “open conversations” with multiple countries about its global expansion plans, including the U.S., Canada, Spain, Italy, Germany, Singapore, South Africa and Australia. The company has already established offices in some of those countries, he added.

OakNorth is expanding abroad by licensing its technology platform, ACORN, to banks in other countries. The platform uses big data and machine learning to optimize credit for small-to-medium sized enterprises (SMEs).

OakNorth offers loans between £500 and £30 million to SMEs. It was granted a banking license by U.K. regulators in 2015.

‘No firm views’ on IPO

OakNorth is currently valued at $1.4 billion, which puts it in the ranks of the U.K.’s “unicorn” companies — firms valued at $1 billion or more.

It raised a total of £244 million last year in a combination of investments — the “largest U.K. fintech financing to date,” according CEO Khosla. Singaporean sovereign wealth fund GIC took a 10 percent equity stake in the firm.

Look to the Innovative Finance Isa for market-beating returns on your tax- free savings (City a.m.), Rated: A

IFISAs are also a way for investors to do something interesting with their savings. For example, Oaksmore has recently launched an Isa which allows investors to capitalise on historic renovation.

This particular IFISA, specialising in historical building renovation, offers a tax-free return of up to 7.5 per cent each year.

Another lender trying to do some- thing different is Folk2Folk, a peer-to- peer platform for rural and local businesses. It is offering an IFISA which gives lenders the opportunity to earn 6.5 per cent interest a year, while supporting British businesses within their local area.

China

China opens its payments market to foreign companies (The Paypers), Rated: AAA

China has decided to open up its payments market, allowing companies to apply for a payments license.

The People’s Bank of China said in a statement that foreign players who apply for payment licenses will receive the same treatment as local companies.

Applicants must set up local units, establish payment infrastructure — including disaster recovery systems — and store client information domestically, the central bank added.

European Union

Banco BNI Europa launches online account opening system through videoconference (Fintech Finance), Rated: AAA

Banco BNI Europa launched an online account opening process through videoconference. This new process also introduces an innovative system of documents signature with a qualified digital certificate and is available for Portuguese citizens who want to open an individual current account. The process is simple, fast and intuitive, without the usual bureaucracies associated with account opening.

This product is offered in partnership with DigitalSign, a Portuguese Certifying Entity specialized in the issuance of qualified digital certificates, registered in the National Security Office as an accredited entity. The partnership with Digital Sign allows, in addition to the online account opening, the issue of a digital certificate, with similar strength to a physical signature, which may be used by the client in the context of other contractual relations with the Bank.

International

Santander is set to launch an international money transfer app with Ripple (Business Insider), Rated: AAA

Santander is on track to launch an international money transfer app in partnership with fintech startup Ripple in the next few months, the bank’s UK CEO has confirmed.

Nathan Bostock told the International Fintech conference in London on Thursday: “This spring, if not one beats us to it, we will be the first large retail bank to carry out cross-border payments at scale with blockchain technology.”

 

Peoples Trust Company selects Finastra to fulfill end-to-end lending vision (PR Newswire), Rated: A

Peoples Trust Company of Saint Albans has selected Finastra to provide a single, end-to-end lending solution for commercial and consumer lending. Using Finastra’s Total Lending solution, which packages the power of the Fusion LaserPro, Fusion DecisionPro and Fusion CreditQuest products, the bank will be able to manage its lending process from origination through to booking and thus increase efficiency and customer service.

FintruX raises $ 25 million in their token sale to build P2P lending platform for small businesses and startups (Tech Startups), Rated: A

FintruXNetwork is a global P2P lending blockchain-based ecosystem,  powered by Ethereum. FintruX Network aims to connect borrowers, lenders, and rated service agencies. FintruX facilitates marketplace lending in a true peer-to-peer network to ease the cash-flow issues of small businesses and startups. The startup announced today it has successfully raised over 22,000 ETH  ($25 million) in token sale from contributors around the world. The proceeds of the sale will be used to build an Ethereum-based platform that will fundamentally enhance the P2P loan experience for small businesses and startups.

 

 

 

India

Lending platform Cash Suvidha raises $ 1 million in pre-series A (Financial Express), Rated: AAA

Delhi-based fintech startup, Cash Suvidha, has raised $1 million in its pre-series A round of investment from Initia Holdings Ltd., Vipin Agarwal, Partner in India Industrial Growth Fund and others. The company plans to use the newly secured funds to increase customer base and to further strengthen its technological infrastructure.

The company claims to receive 15,000 loan applications every month and disbursement of loans in another 2 working days. The company has raised a total of $5.2 million and claims to have disbursed over Rs 152 crore.

Further, Cash Suvidha has disbursed loans to over 35,000 borrowers with an average ticket size between Rs 20,000 – Rs 5,00,000.

SBI To Create Blockchain-Based Exchange For Recovering NPA’s (Inc42), Rated: A

Reportedly, India’s largest public sector bank, State Bank of India is looking to create a blockchain-based exchange for Non-Performing Assets (NPA’s).

To be launched in association with 30 banks, this platform will assist the banks in data-driven price discovery.

SBI is said to have assets over $460 Bn and offers services in areas such as retail, corporate banking, financing, and insurance. The Indian banks are said to have to battle with NPA’s worth $210 Bn of which $30 Bn resides with SBI alone.

Digital lending venture success secrets for the new-age CIOs (CIOL), Rated: AAA

Velocity

Broadly, there are three types of software systems that enterprises employ. These include:

a)Systems that help in running a business process

b)Those that help companies to grow their businesses

c)Systems that transform businesses

In the year 2013, China reported an eight-fold rise in the total number of borrowers that touched 1,49,300. The growth continued through 2014, with total borrowers reaching 630,000 by the year’s end.

Quality

Traditionally, lenders considered credit score as the key parameter in defining a borrower’s creditworthiness. In case of digital lending, a borrower’s risk profile is defined based on aspects such as Aadhaar for identification, salary slips for working professionals, and the applicant’s financial behavioral patterns determined based on information curated from online sources such as social media channels.

User Experience

Boston Consulting Group estimates that by 2020, 48% of India’s internet users will be rural and of that, 21% will be women.

Asia

Facing regulatory bar at home, QARASoft robo adviser heads overseas (Korean Herald), Rated: A

QARASoft’s now-defunct platform, called “QARA,” connected individual asset managers with funds pooled — or borrowed — from peer-to-peer investors, in part by making use of the venture firm’s artificial intelligence-powered robo adviser.

The “decentralized” platform collected some 100 retail investor loans in the first two weeks. But they were retrieved after the Financial Supervisory Service banned its operation, despite a patent earned the previous year for the pooling scheme of the fund and the platform’s three-year operation of its beta version.

The service will primarily target retail investors in overseas markets in the United States, the United Kingdom and Singapore, and the English version will be launched prior to a Korean version.

Continuous learning for SME executives (The Star Online), Rated: B

SMALL business executives who took part in the AmBank BizRACE gained a new perspective in managing their operations, allowing them to bring the business further.

The top 15 finalists in the programme recently completed two, out of four, executive development programmes at Menara AmBank.

Peoplender Sdn Bhd chief executive officer Kristine Ng, a participant in the programme, said she was inspired with a new structure for her business after the first day itself. Ng recalled one of the trainers talking about constraints that one would face in growing businesses – if it doesn’t fit the business model, then change must occur.

 

MENA

Creating big impact with a small help (Khaleej Times), Rated: AAA

According to the World Bank, 63 per cent of Mena SMEs do not have access to capital.

In Jordan, SMEs represent 97 per cent of companies and create 70 per cent of new jobs in the kingdom, according to Oxford Business Group, Jordan: Finding Financing for SMEs.

Liwwa is a peer-to-peer lending platform in the Mena region that provides SMEs with trade and asset financing. Liwwa’s target audience is divided into borrowers and investors, also referred to as lenders. To date, liwwa has maintained a solid portfolio and delivered annual returns of 10.6 per cent.

The liwwa index delivered 9.45 per cent over the last 12 months, which is attractive.

Liwwa has raised $5.55 million from investors and $6 million in debt to date. Their investors include Silicon Badia, Bank Al Etihad, DASH Ventures and Mena Venture Investments. Their debt partners include Bank Al Etihad, Capital Bank, Arab Bank and the Dutch Good Growth Fund.

Source Khaleej Times

Authors:

George Popescu
Allen Taylor

Thursday November 16 2017, Daily News Digest

securitization

News Comments Today’s main news: Marcus surpasses 2017 goal. LendInvest gets into buy-to-let. Top 3 spots on KPMG Fintech 100 list are all Chinese. Lendix launches SME bridge loans in France, Spain, and Italy. Mauritia issues draft P2P lending rules. Marlette closes fourth securitization in a year. Today’s main analysis: Rising challenges unlikely to deter U.S. securitizations. Today’s thought-provoking articles: […]

securitization

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United Kingdom

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Australia/New Zealand

India

Asia

Africa

Canada

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United States

Marcus from Goldman Sachs Surpasses 2017 Goal (Bank Innovation), Rated: AAA

Martin Chavez, chief financial officer for Goldman Sachs, showed in a slideshow at a Bank of America Merrill Lynch event yesterday that Marcus had already surpassed $1.96 billion in originations as of Nov. 9.

What that means is that from Nov. 9 to Nov. 14, over a span of five days, Marcus originated more than $40 million in loans.

Rising challenges unlikely to deter U.S. securitization in 2018 (Asset Securitization Report), Rated: AAA

As a result, Fitch’s outlook for U.S. structured finance ratings is predominately stable for 2018. That said, given where we are in the credit cycle, Fitch is keeping a close watch on select asset types that could run into some issues over the next 12 months.

Entering 2018, Fitch has either Positive or Stable Outlook on over 90% of its rated securitized bonds.

Perhaps the most notable change that has manifested from risk retention is the shrinking universe of originators bringing new securitizations to market. This is particularly notable in the universe of CMBS originators, which has shrunk from a high of roughly 40 to now less than 20 due to a combination of risk retention and Reg A/B.

Competitive pressures, long in place for subprime autos, are escalating in a marketplace ABS environment that is struggling to find its footing by testing recent underwriting models, asset quality and, in some cases, business models. Delinquencies and chargeoffs of existing assets continue to increase as marginal borrowers increase their leverage. Not likely to help is the drive for growth among large marketplace lenders coupled with rising market pressure from competing banks like Goldman Sachs (Marcus), Discover, and Suntrust. And unless originators tighten their credit policies with discipline, the strain will intensify.

Source: Asset Securitization Report

Online lenders should heed criticism of their effect on borrowers (American Banker), Rated: AAA

The consumer lending industry is abuzz about the Federal Reserve Bank of Cleveland’s recent report on debt consolidation and online lending. This excellent piece of research concludes that, on average, online installment loan borrowers fall into more debt after taking out a loan, experience hits to their credit score and history as a result, and take out online loans despite having access to traditional banking and credit channels.

The first two conclusions are damning, especially as these loans are often marketed as a way to help consumers consolidate credit card debt and improve their finances. At the end of the day, a lender’s duty is not merely to avoid losses. Any loan must be suitable for the customer — which means it should be made only if the lender believes it is improving the customer’s financial health. A lender not guided by that principle should be prepared for severe criticism as well as elevated losses down the road.

But it would be nonsensical to discredit or ignore the study because it includes online lenders beyond well-known fintech names.

The Best of Both Worlds with Prosper for Borrowers and Lenders (DoughRoller), Rated: AAA

Founded in 2005, and generally recognized as the first peer-to-peer (P2P) lending platform in the US, Prosper has funded more than $10 billion in loans since.

While borrowers can get personal loans ranging in size between $2,000 and $35,000, investors can put as little as $25 toward funding those loans.

There is one exception, however. You cannot use loan proceeds for post-secondary educational expenses. That’s because some of the rules in federal law aren’t compatible with P2P lending. More specifically, with education loans, the borrower must have at least 30 days to accept or reject a loan offer.

Medical procedures available for financing under the PHL program include:

  • Cosmetic dentistry
  • Bariatric surgery
  • Cosmetic and plastic surgery
  • Fertility and reproductive procedures

All Prosper loans have a term of either three or five years.

The minimum requirements are:

  • A minimum FICO score of 640, based on a TransUnion FICO 08 score
  • Debt-to-Income (DTI) ratio below 50%
  • Stated income greater than $0 (you must have an income)
  • No bankruptcies filed within the previous 12 months
  • Fewer than seven credit bureau inquiries within the last six months
  • A minimum of three open trades reported on your credit report

Interest rates are between a minimum of 3.00% for the best AA rated borrowers to a maximum of 36.00% for the lowest rated HR borrower grades.

Source: DoughRoller

Prosper for Investors

Prosper advertises that the average rate of return by investors on the platform is 7.41% per year.

Loans rated HR have a much higher average return, at 11.73%.

You can open either a General Investment Account or an IRA. Available IRAs include traditional, Roth, SIMPLE, SEP and rollover IRAs (IRA accounts are held with Millennium Trust Company). At this time, Prosper has made only individual accounts available. You cannot hold an account jointly with someone else.

For regular investment accounts, the minimum is $25. For IRA accounts, the minimum is $5,000.

Similar to other P2P platforms, when you invest with Prosper, you don’t actually invest in whole loans. Instead, you invest in small slivers of those loans, referred to as “notes.” The notes are in denominations of $25. This means that you can spread an investment of $1,000 across as many as 40 different loans.

The servicing fee is 1% of the outstanding balance of a loan. That means that if the loan pays 8%, your net return will be 7%.

Source: DoughRoller

Marlette Funding Closes Fourth Personal Loan Securitization Within Past Year (LendEDU), Rated: A

Last week, marketplace lender Marlette Funding announced the closing of its fourth proprietary securitization. The transaction was worth an estimated $312 million, and it is the fourth securitization announcement since August of 2016 from Marlette Funding.

eOriginal Named as One of Fastest Growing Companies in North America on Deloitte’s 2017 Technology Fast 500 (eOriginal), Rated: A

eOriginal, Inc., today announced it has been named to Deloitte’s Technology Fast 500 list as one of North America’s fastest growing technology, media, telecommunications, life sciences, and energy companies. eOriginal earned the rank of 294 by more than doubling revenues during the evaluation period of FY 2013 through FY 2016.

Betterment, the investing startup with $ 11 billion in assets, is rolling out a new service to make charitable giving easier (Business Insider), Rated: A

Betterment, the New York-based roboadviser, announced Wednesday a charitable giving feature that’ll let users donate shares of their account to partnered charities.

The firm, which manages $11 billion for over 300,000 customers, partnered with 11 charities for Betterment Charitable Giving, including Big Brothers Big Sisters of NYC, UNICEF, and World Wildlife Fund, according to a news release. The new feature is set to go live November 28.

Subprime car loans souring faster at nonbank lenders (American Banker), Rated: A

Despite signs of trouble in subprime auto lending, U.S. banks and credit unions are well positioned to ride out any market turbulence, a new report from the Federal Reserve Bank of New York suggests.

More than $435 billion in auto loans to borrowers with credit scores below 660 were outstanding during the third quarter of this year, the report found. That total has been climbing steadily since bottoming out at $249 billion in early 2011. Delinquency rates have also been rising as it has become easier to qualify for an auto loan.

Fidelity latest financial firm to facilitate data sharing with fintechs (American Banker), Rated: A

Fidelity Investments is joining the ranks of financial firms sharing customer account data with others through an application programming interface.

The new service, called Fidelity Access, will give third parties access to Fidelity customers’ account data for use in apps and services like tax preparation, budgeting, financial planning, spending analysis and portfolio advice — provided the Fidelity customers give their OK. Customer data to be shared includes Fidelity account balances, securities holdings, and transactions.

These are the most valuable fintech companies in America (MarketWatch), Rated: A

Stripe Inc., whose software is used by businesses to accept and track digital payments, leads the way as the most valuable fintech startup in the U.S., with a $9.2 billion valuation.

And just to be clear, fintech startups are nowhere near close to catching up to the big banks. Wells Fargo & Co. has a market cap of more than $266 billion, and Bank of America Corp. has a market cap of more than $273 billion.

RealtyProfits Offers Accredited Investors an Innovative Platform to Invest in the Real Estate Sector (Digital Journal), Rated: A

RealtyProfits (www.RealtyProfits.com) announces today an exciting and innovative investment opportunity, RealtyProfits IV, with a Preferred Return of 12 percent per annum, available exclusively to accredited high net-worth individuals and institutional investors. The private preferred equity securities, available for purchase at www.RealtyProfits.com, are being offered through WealthForge Securities, LLC, a registered broker/dealer and member of FINRA/SIPC.

The geographically diversified portfolio includes properties in 700 cities coast to coast, with a current estimated value of $1.73 billion and more than $700 million of equity in more than 5,900 portfolio properties. The properties include primarily single-family homes and condominiums ranging in value from $100,000 to more than $2,500,000.

Accredited investors can start investing with as little as $20,000. RealtyProfits IV offers monthly cash distributions. Preferred equity investors receive all distributions made by RealtyProfits IV until fully repaid. The Preferred Return is 12 percent per annum, with initial monthly Base Preferred Return payments at 6 percent per annum anticipated depending on cash flow during each of the first 24 months.

Reality Shares Teams up with Nasdaq to Launch Blockchain Tech Index (BusinessWire), Rated: A

Reality Shares and Nasdaq announce the creation of the Reality Shares Nasdaq Blockchain Economy Index, a smart-beta index that tracks the growth and development of leading global companies creating and implementing blockchain solutions.

An ETF that will track the Index is already in the works, with Reality Shares filing for it on November 2, 2017.

Reality Shares and Nasdaq compiled the index by utilizing internal and external research and their proprietary Blockchain ScoreTM ranking system. The Index is comprised of global companies that seek to capitalize upon transformational blockchain technology that may potentially disrupt the markets in which they operate.

How to Choose Between a Peer-To-Peer Lending or Traditional Loan (Experian), Rated: A

Shopping for a loan at a P2P provider is a two-step process. First, based on a credit score (or credit scores) and your answers to a few basic questions—your full name, address, date of birth and annual income—the lender determines which loan offer(s) to extend to you. (It’s possible at this juncture that the lender will decide not to extend any loan offers; if they do, they’ll explain why.)

Once you choose the loan you want, the lender does a more detailed credit check and may ask you to verify your income and to provide additional background information.  Each P2P site has its own lending criteria, including minimum credit scores, and additional information requirements vary accordingly. Some P2P lenders want information on your educational background; others want work history or details about your financial assets. In most cases, you can submit the necessary documents electronically.

The first step in the P2P loan-approval process gets one or more of your credit scores by a method known as a soft inquiry—the same process you use when you check your own credit scores. Soft inquiries have no impact on your credit scores. However, the hard inquiries traditional lenders make when you apply for a credit cards or bank loans are reported to the national credit bureaus. They appear on your credit reports, and typically cause temporary credit-score drops of several points.

In the second step of P2P loan approval, the lender performs a hard inquiry to confirm your credit score and, likely, to review your full credit report.

Before you apply for a P2P loan

  • Take a look at the fine print on the bottom of each provider’s homepage, to get an overview of the loan amounts they offer and the rates and fees they charge.
  • Make sure the lender operates in your state.
  • Check your FICO Score and review your credit reports for any major negative entries. Accounts in collection, liens and civil judgments are among the items that could torpedo your loan application, even if you meet the credit-score requirements.
  • Determine the amount of money you need and watch out for tempting upsells.
  • Consider using the Experian loan-referral tool to explore offers from multiple P2P lenders (and possibly traditional lenders as well).

Resignation of CFPB head gives Trump opportunity to erase Elizabeth Warren’s legacy (Legal Insurrection), Rated: A

Richard Cordray, an Obama appointee and head of the Consumer Financial Protection Bureau (CFPB) announced to staff in an email Wednesday his plans to resign. While he’s yet to confirm his plans, there’s speculation Cordray will return home to run for Ohio’s governorship.

Seven Signs That the Bond Bull Market is Over (INTL FCStone), Rated: A

  • The bond bear market is already here: short and medium-term treasuries have lost value in the past 5 years
  • Buybacks have fallen to a five-year low, and big repurchasers have underperformed
  • Oil prices are at a 30-month high, and the futures curve is in backwardation
  • The long and the short ends of the yield curve are moving together again
  • The Chinese trade surplus has shrunk from 10% of GDP to almost zero in the past ten years
  • The U.S. deficit is growing again, an unprecedented phenomenon in times of expansion and peace
  • Small bubbles are popping out: Auckland houses, Ethereum crypto coins, and collectible cars
Source: Global Macro Report, INTL FCStone

Read the full report here.

Spring Framework Creator Launches Atomist for Development Automation With $ 22 Million in Series A Funding (Marketwired), Rated: A

Today on stage at Structure 2017, Atomist is formally launching and unveiling its Development Automation Platform with an Open Source client and API. As part of today’s launch, Atomist is announcing $22 million in Series A funding from Accel and Matrix Partners.

Bestow Gives Texas Residents First Access to On-Demand Life Insurance (PRWeb), Rated: A

Bestow Inc., the company behind a revolutionary new approach to life insurance, today announced the early access roll out of its comprehensive, full-stack, digital life insurance solution in Texas. For the first time Bestow’s solution is available to the public, giving Texas residents primary access to apply for the only on-demand life insurance solution, instantly and without a medical exam.

Leveraging applied intelligence and algorithmic underwriting, Bestow redefines the way consumers research, buy and manage life insurance. Using data to calculate risk, Bestow removes the need for a medical exam and streamlines the entire process into a matter of minutes. The Texas launch gives consumers access to choice term life insurance plans, including a unique two year term policy never before available for life insurance. Additionally, customers can choose between ten or twenty year term life insurance.

The Zebra Raises $ 40 Million, Taps New CEO To Expand Beyond Car Insurance (Forbes), Rated: A

The Zebra, which has always described itself as the Kayak of car insurance, has hired a longtime Kayak executive as its new CEO.

The Austin-based company, which allows drivers to compare prices for car insurance online, said on Tuesday that it has tapped Kayak’s former president Keith Melnick to run the company.

The Zebra also said it has raised $40 million in a Series B funding round, led by Accel Partners. That brings its total funding to $61.5 million.

MarketScout in Dallas Creates $ 25M Insurtech Venture Fund (Insurance Journal), Rated: B

Dallas-based insurance exchange and MGA MarketScout announced it has launched MarketScout InsurTech (MIT), which will make investments in tech-enabled insurance distribution. The initial funding of $25 million will come exclusively from MarketScout Corp., parent of MIT, according to the firm.

House Financial Services Committee Approves Legislation to Help Keep Lending Partnerships Between Banks and Online Lenders (Crowdfund Insider), Rated: A

The House Financial Services Committee has approved HR 3299 or the “Protecting Consumers’ Access to Credit Act of 2017.” The bill “restores consistency” in lending laws across state boundaries. HR 3299 impacts the case of Midland Funding, LLC v. Madden – an ongoing law suit that has the potential to undermine online lenders. Sponsored by Congressman Patrick McHenry, includes an important statement that clarifies allowable interest rates on loans potentially ending the issue associated with the law suit.

How Do You Beat a Robo-Advisor? Trust (Think Advisor), Rated: A

“Technology by itself cannot create trust,” Robert C. Merton, a Nobel laureate in economics now teaching at MIT, recently told ThinkAdvisor. “The successful advisor must have the trust of their clients.”

Given the importance of trust in the advisor-client relationship, Merton recommends financial advisors (the breathing kind) should:

  • Check what they are doing to retain and enhance trust with their clients.
  • Make sure the business model being used supports the creation of trust.
  • Take advantage of technology to improve/enhance what the advisor does.
  • Do not view technology as a “competitor or substitute” for the advisor.
  • Understand and assess the financial technology they employ to certify trusting its use in client solutions.

HFLA launches initiative to help underserved reach financial stability (Cleveland Jewish News), Rated: A

The Hebrew Free Loan Association has launched its Looking to the Future Initiative with support from the St. Luke’s Foundation and the PNC Foundation. The initiative accounts for $73,000.

The initiative enables HFLA to increase its lending of interest-free loans to Cleveland’s underserved neighborhoods and grows the organization by expanding its reach, according to a news release. HFLA received a $63,000 grant from the St. Luke’s Foundation and a $10,000 grant from the PNC Foundation to launch the effort.

Fundation Purchases Select Assets from Able Lending to Enhance Partnership Strategy (BusinessWire), Rated: B

Fundation Group LLC, a digitally-enabled lender and credit solutions provider, today announced that it has acquired a variety of assets from online small business lender, Able Lending of Austin, Texas.

Former Capital One Executive Troy Jamison Joins Victory Park Capital as Chief Risk Officer (BusinessWire), Rated: B

Victory Park Capital (VPC), an investment firm focused on middle-market debt and equity investments, announced today that Troy Jamison joins as chief risk officer for the firm’s nonbank financial services portfolio. Jamison is based in Chicago and reports directly to CEO and Co-Founder Richard Levy.

CFPB updates website to officially address end of arbitration rule (Housingwire), Rated: B

The Consumer Financial Protection Bureau finally updated its website to acknowledge President Donald Trump revoking the controversial arbitration rule.

blog post from Ballard Spahr previously stressed the importance of the CFPB updating its website to note the rule’s override since the rule was killed nearly two weeks ago.

The webpage for “Arbitration agreements” now has an update on the top that states:

On Nov. 1, 2017, the President signed a joint resolution passed by Congress disapproving the Arbitration Agreements Rule under the Congressional Review Act (CRA). Pursuant to the joint resolution, the Arbitration Agreements Rule has no force or effect. The materials relating to the Arbitration Agreements Rule on the Bureau’s website are for reference only.

HOUSE FINANCIAL SERVICES COMMITTEE PASSES SMALL BUSINESS CREDIT ACT (Coalition for Small Business Growth Email), Rated: B

The 

United Kingdom

LendInvest launches into buy-to-let (Mortgage Strategy), Rated: AAA

LendInvest is launching a range of buy-to-let loans aimed at professional landlords and investors.

Rates start at 3.69 per cent for a two-year fix at 60 per cent LTV.

The firm will offer loans of between £50,000 and £5m, up to a maximum LTV of 80 per cent.

Citigroup joins the AI bandwagon (Business Insider), Rated: A

Citigroup 

Source: Business Insider

SyndicateRoom Alum Squirrel Launches Crowdcube Funding Round (Crowdfund Insider), Rated: A

Squirrel, a personal finance app designed to help users have more control over their money, has launched an equity crowdfunding round on Crowdcube. This initiative debut comes less than one year after the company completed its SyndicateRoom funding round with £585,000 in funds. Squrriel is now seeking £400,000.

Government unveils financial package to support tech (P2P Finance News), Rated: A

THE GOVERNMENT has given a £21m boost to a technology programme that has supported firms such as Zopa and Funding Circle as part of a range of measures to boost the tech sector.

The funding will make Tech City UK and Tech North one national organisation called Tech Nation and help grow government-backed startup support programmes such as Founders Network, Northern Stars, Future Fifty and Upscale.

Cash Converters International Ltd reports security breach and ransom demand (The Motley Fool), Rated: A

Payday lending and pawnbroking business Cash Converters International Ltd (ASX:CCV) announced a cybersecurity breach in its UK operations last night.

Sadly, computer system integrity is becoming an increasingly relevant – and often overlooked – concern for investors, with a vast majority of companies relying in one way or another on computer systems.

Valorem Foundation Launches All-New Cryptocurrency Platform (PR Newswire), Rated: A

Valorem Foundation, a Blockchain startup specializing in stabilized value-based exchange and transactions, has announced the launch of its new cryptocurrency platform. The company has developed a multi-layered platform to disrupt and expand the following services globally: microloans, car loans, student loans, rent payment, P2P networks, buying and selling of goods & services, business investing, real estate crowdfunding, and insurance.

Empowering the world: How you can make money through improving lives (City A.M.), Rated: A

This sea change should explain why investment firm Ethex has managed to scoop up so much support in its short history – raising more than £50m since 2013.

Its business model has a peer-to-peer lending feel – that is, it uses a digital platform to allow retail investors to lend to individuals and entrepreneurs.

But it comes with a twist, because Ethex is a not-for-profit organisation which lets you invest in companies that have a positive impact – socially and environmentally.

If you want to get involved, the platform has a minimum investment of £50, which arguably makes it more accessible to younger generations.

Trussle hires VP engineering from Funding Circle (Mortgage Introducer), Rated: B

Trussle has appointed Matthew Gretton as vice president of engineering from peer-to-peer lending platform Funding Circle.

China

Alibaba affiliates sweep top 3 spots in global fintech ranking (Asian Review), Rated: AAA

Financial technology companies linked to China’s Alibaba Group Holding took over the podium in KPMG’s latest Fintech 100 list, announced on Wednesday.

Ant Financial, which runs Alibaba’s massive Alipay e-payments network, took the No. 1 spot on the list, which was compiled with fintech accelerator H2 Ventures. Online property insurer ZhongAn Insurance and microloan provider Qudian placed second and third; both have received investments from Ant.

See the full list here.

One of China’s hottest companies rebuffs criticism about transparency (CNBC), Rated: A

Despite public criticism about a lack of transparency in some practices, Ant Financial is doing things the right way, a senior executive at the company said Wednesday.

“The demand for these securities is very healthy and continuing to expand,” Douglas Feagin, senior vice president and head of global business at Ant Financial, told CNBC’s “Street Signs.” “That, at the end of the day, is the ultimate barometer of whether you’re giving enough information to investors to invest.”

Ant Financial will use local partners in Southeast Asia: executive from CNBC.

Earnings at Some U.S.-Listed Chinese Microlenders Taper (Caixin), Rated: A

In the three months ending Sept. 30, Yirendai’s net income was down 12% to 303 million yuan ($45.7 million) from 344.3 million yuan a year ago, the company said Wednesday. Another Chinese microlender, China Rapid Finance Ltd., earlier reported a wider net loss of $4.4 million in the third quarter. Although Qudian Inc., a larger player that listed in New York last month, recently posted a four-fold increase in its third-quarter net profit from a year ago, citing better operational efficiency and its growing borrower base.

Cinda International Leads Massive Round In Chinese Fintech Company 9f Group (China Money Network), Rated: A

Beijing-based fintech company 9f Group has raised a massive new funding round from Cinda International Holding Ltd, a subsidiary of state-owned China Cinda Asset Management Co., Ltd., Focus Media Information Technology’s Chairman Jiang Nanchun, video game developer Youzu Interactive’s chairman Lin Qi and an unnamed Chinese industry fund.

The company did not disclose financial details except to say that it raised “hundreds of millions of U.S. dollars” in the latest financing deal, according to a company announcement. It is also unclear how the company is valued in the round, but 9f Group is listed on China Money Network’s China Unicorn List with a US$1 billion valuation when it last raised a US$110 million series B round in 2015.

European Union

For Spain’s banks, survival means digital (Financial Times), Rated: AAA

Santander’s Openbank has changed a great deal since it was founded as Spain’s first telephone banking service in 1995. Now a fully digital operation, its mobile app allows users to temporarily disarm a lost credit card, as well as to check whether fellow Openbank customers are buying or selling a given stock at any moment. Currently, it has some 1.2m customers in Spain and more than €8bn ($9.3bn) in assets under management.

In recent years, Spain’s two biggest banks — Santander and BBVA — have increased their financial and managerial investment in fintech, digital banking and big data. Like their peers, they are convinced that the days of branch-based lending are drawing to a close.

Spanish banks average about €15m assets under management per employee, says Daragh Quinn, banks analyst at investment bank Keefe, Bruyette & Woods. At a digital operator like Openbank, that number is close to €60m.

The digital push is on two fronts: first, a mobile app that allows customers to access almost all of the bank’s products without going into a branch. Second, a venture capital approach whereby banks invest in or partner with fintech start-ups to add products.

Online Lender Lendix Launches Flexible SME Bridge Loans in France, Spain & Italy (Crowdfund Insider), Rated: AAA

Lendix, online lender for SMEs in continental Europe, has announced the launch of a new financing product: the Flexible Bridge Loan. This product is designed to will allow a greater number of French, Spanish and Italian SMEs to benefit from the speed of execution of Lendix’s lending platform while leaving them the possibility of setting up an overall refinancing solution with other financial institutions.

The Lendix Flexible Bridge Loan is a 5-year amortizable loan with a standard commitment for the first 9 months and the possibility of early repayment at no cost for the remainder of the loan term, even in the event of refinancing by other financial institutions.

Swedish $ 370 Billion Home-Loan Market Gets New Mortgage Fund (Bloomberg Quint), Rated: A

As investors wonder whether Sweden’s housing market is headed for a correction, the country’s first mortgage fund is about to enter the $370 billion Swedish home-loan industry.

Stabelo plans to pool capital from Swedish institutional investors in exchange for fixed-income securities. That money will then be lent to home buyers. The fund starts offering its products this week and will work with Avanza Bank AB, Sweden’s largest online lender. Avanza, which owns just below 20 percent of Stabelo, will handle distribution and marketing.

International

Has P2P marketplace lending become B2P? (Cuffelinks), Rated: AAA

Due to this issue, the original incarnation of peer-to-peer lending has not lasted. As the CEO of Zopa, a UK-based P2P lender said,

“As bad debts soared, the approach was abandoned and Zopa was moulded into a ‘big sausage machine’. Its technology now links lenders with a pool of borrowers without any direct contact or the need for investors to make credit decisions.”

Australia’s major peer-to-peer lender is SocietyOne. It currently has $350 million borrowed through its platform, and is growing rapidly. In fact, loan volumes in the first three quarters of this year have totalled $141 million so far, surpassing the $139 million in loans facilitated over the entire course of 2016, as shown below.

Source: Cuffelinks
Australia/New Zealand

Exemption for personalised digital (robo) advice (Scoop), Rated: A

Following the FMA’s release of its second consultation paper on personalised robo-advice (now called digital advice), the leading law firm has published its tips for providers looking to develop digital advice platforms.

Head of Russell McVeagh’s Corporate Advisory group, Dan Jones, says the exemption is a necessary first step in putting the New Zealand financial advice regime on equal footing with overseas regimes, and may provide particular assistance to New Zealanders in KiwiSaver.

India

How P2P lending can be a route to creating financial inclusion (Daily News & Analysis), Rated: A

For years, banks have had a monopoly in lending money to businesses and individuals. However, the 2007-08 financial crisis created a havoc, rapidly-expanding the funding gap. This led to the advent of a niche fintech vertical, peer-to-peer (P2P) lending.

The geographical reach of a P2P lending platform is far superior, with the major differentiator being its online interface. Such digital financial services play an important role in supporting the objective of financial inclusion. Anybody, from the remotest areas, having access to internet, can be eligible to get/give a loan.

In the age of digitisation where almost everyone has access to internet, such platforms have the potential to change the financial graph of a country.

Are P2P platforms safe for lending and borrowing? (India Times), Rated: B

While banks and non-banking finance companies (NBFC) are the readily available sources for loans, who does the P2P platform cater to? “Unfortunately, banks in India follow mediocre credit assessment policies which are suited only for borrowers who can offer collateral or have an impeccable credit history. In practice, majority of the borrowers lie in between these extremes. Therefore, majority of Indians can borrow on P2P platforms,” says Raghavendra Pratap Singh, co-founder, i2ifunding, an online P2P lending marketplace.

RBI has put a cap on the amount that can be borrowed and lent. The aggregate exposure of a lender or the maximum that one may borrow at any point of time, across all P2Ps, shall be capped at Rs 10 lakh. Even the exposure of a single lender to the same borrower, across all P2Ps, shall not exceed Rs 50,000 and the maturity of the loans shall not exceed 36 months. “More clarity from RBI is expected on how the regulator intends to monitor the compliance of this aspect and how it will fix the responsibility,” says Singh.

Risks for a lender
Since this is an unsecured loan where there is no face-to-face interaction, a P2P lender needs to be aware of the risks involved. Bubna says, “All investments involve risk. However, in comparison to equity or commodity market investments or real estate, P2P lending has lower risk as it is addressed by on-boarding high quality borrowers. Further, lenders are suggested to create a diversified portfolio of loans.”

Asia

Introducing ACE, Crowdo’s New Artificial Intelligence Due Diligence System (Crowdfund Insider), Rated: A

Crowdo, a South East Asian online marketplace for P2P lending and crowdfunding unveiled today its proprietary Artificial Intelligence driven due diligence system, Crowdo ACE, aimed at benefiting both their borrowers and investors. Crowdo ACE takes into account a few thousand unconventional and alternative attributes and represents a new way to perform due diligence versus traditional means used by conventional financial institutions. It has already been applied to process more than 3,000 loans.

In a largely-unbanked Indonesia, Amartha uplifts women micro-entrepreneurs (YourStory), Rated: A

Twenty-six people, four nationalities, 10 days. Travelling across Southeast Asia as a Startup AsiaBerlin Roadshow delegate to explore startup ecosystems was an experience unto itself.

Amartha has so far disbursed over $13 million to 60,000 women micro-entrepreneurs and aims to improve their income, and ultimately quality of life.

Aria: Amartha is an Indonesian financial technology startup that focuses on providing affordable financial access, and mentorship to the unbanked population living below the poverty line. Amartha operates much like a peer-to-peer lending platform, and so far, has disbursed more than $13 million to 60,000 borrowers. The borrowers are mostly women micro-entrepreneurs and Amartha aims to improve their income, and ultimately alleviate their status through financial inclusion.

Aria: When we started operations in April 2016, we disbursed $40,000 a month. By the end of 2016, we were disbursing $800,000. Today, on average, we disburse $2.5 million per month. So far, we have disbursed more than $13 million, across more than 60,000 borrowers. The average ticket size of a loan now is around $300.

We charge a fee based on the profit sharing principle. Of the 22-30 percent annual interest rate paid by borrowers, we collect 11-13 percent for our revenue.

Africa

The Mauritian Financial Services Commission Issues Draft Peer-To-Peer lending Rules (Mondaq), Rated: AAA

Following the announcement of the Government on peer-to-peer lending and funding in the 2017-2018 Budget, the Mauritian Financial Services Commission (“Commission”) has issued draft rules on 10 November 2017 to regulate the peer-to-peer lending sector – as sector which has grown rapidly in other countries.

In the region, Kenya and Africa are leading in the peer-to-peer business lending market. According to a study conducted by the University of Cambridge, within Africa, South Africa had the largest number online alternative finance platforms, with $15 million raised in 2015 (The Africa and Middle East Alternative Finance Benchmarking Report, February, 2017).

Borrower and lender – a borrower must be a resident in Mauritius; however, there is no residency requirement for the lender.

Restrictions on amounts  Hence, a lender, who is a legal person, cannot lend more than MUR 500,000 (approx. GBP 11,000) in any 12 months’ period. A lender, who is a natural person, cannot lend an amount in excess of 10 per cent of his income or a maximum of MUR 300,000 (approx. GBP 6,600), whichever is lower, in any 12 months’ period.

Obligations of a P2P operator – the Peer-to-Peer operator must publish the following information on its website:

  • details of how the P2P lending will operate
  • measures to prevent money laundering and combatting terrorist financing
  • security measures to ensure data protection
  • dispute resolution mechanism.
Canada

Borrowell wins Deloitte Fast50 award (Borrowell Email), Rated: A

Borrowell has won a Companies to Watch award as part of the Deloitte Fast50 program. We are one of only eleven companies across Canada to win that award this year, and the only company from Toronto. Fast50 winners in the category for established companies include well-known names like Shopify, SkipTheDishes, Wave and Influitive. The list was announced an hour ago. 

Russia

Moscow Is On Its Way To Becoming A Smart City And Fintech Powerhouse (Forbes), Rated: A

Its citizens and businesses are also quick to adopt the latest disruptive technologies such as fintech and cryptocurrencies. Moscow has a 35 percent fintech adoption rate, higher than New York’s 33.1 percent.

Authors:

George Popescu
Allen Taylor