Monday January 29 2018, Daily News Digest

financial advice market

News Comments Today’s main news: SoFi buys Clara Lending product, engineering teams. LendingClub files 8K on $200 warehouse agreement. Raisin surpasses 5B Euro. Columbian lender LoanPie goes online. Today’s main analysis: UK P2P lending hits 3.1B GBP, borrowers shift to online lending. Today’s thought-provoking articles: PeerIQ evaluates letter from Consumer Financial Protection Bureau (CFPB) Director Mulvaney. Funding Circle in no […]

financial advice market

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United States

United Kingdom

China

European Union

International

India

South America

News Summary

United States

SoFi Buys Teams From Mortgage Startup Clara to Boost Offerings (Bloomberg), Rated: AAA

Social Finance Inc. has acquired the engineering and product teams of mortgage startup Clara Lending, bolstering the financial technology company’s offerings beyond student-loan refinancing, according to people familiar with the matter.

SoFi confirmed the acquisition on Friday and said taking on the Clara teams allows it to “immediately ramp up our technical capabilities.”

San Francisco-based SoFi has plans to hire about 100 engineers, one of the people familiar with the matter said, and Clara filled about 20 of those spots.

How Credible.com Makes Refinancing Student Loans Easy (Pop Dust), Rated: A

While refinancing my own loans, it was a stressful situation to navigate, even with the help of my parents. Coming out of school with a $200,000 degree but only a $40,000 annual salary was a tough pill to swallow, and I wasn’t alone – several of my friends found themselves in a similar situation.

Credible is working to change all of that by simplifying the refinancing process. Instead of hopping from lender to lender and form to form looking for a good rate, Credible provides a one-stop shop where you can connect with a variety of vetted lenders and get real rates in about two minutes, without affecting your credit score.

LendingClub Files 8K on $ 200 Million Warehouse Agreement (Crowdfund Insider), Rated: AAA

LendingClub (NYSE:LC), the largest marketplace lending platform in the US, has just posted an 8K regarding a warehouse funding agreement with certain lenders. LendingClub has enlisted the assistance of JPMorgan Chase Bank, N.A. as administrative agent, and Wilmington Trust, National Association as collateral trustee. The warehouse is to provide a $200 million secured revolving credit facility.

LendingClub’s 8K filing.

Strong GDP growth, Mulvaney’s New Director for CFPB, SoFi’s New CEO (PeerIQ), Rated: AAA

In this week’s newsletter, we interpret key points of Mulvaney’s letter and how they may affect the lending industry.

Source: PeerIQ

The US economy grew by 2.6% in the 4th quarter, continuing the pattern of strong trend growth in 2017. Global economies continue to enjoy an unusual period of synchronized growth, a constructive pattern last seen in the mid-2000s. US growth was primarily driven by consumer spending of 3.8%. US consumer spending is supported by US consumer credit outstanding which grew at an annualized rate of 8.8% – well ahead of GDP growth.

Bank earnings continued to roll in this week. Retail banks reported that credit card losses rose 20% year-over-year to $12.5 Bn.  Credit card losses as a percentage of outstanding receivables have increased to 4.5% from 2.9% in 2015 as credit normalization trends continue. The combination of high consumer credit growth relative to GDP, full employment levels, and low productivity growth is casting doubts on whether 3%+ GDP prints are sustainable.

Earnest Co-Founder Steps Down a Few Months After Selling Startup (Bloomberg), Rated: A

Louis Beryl, co-founder and chief executive officer of Earnest Inc., left the online lender this week after selling his company in October.

The San Francisco-based startup was acquired by student loan provider Navient Corp. for $155 million after a lengthy search for a buyer. Beryl and his co-founder, Ben Hutchinson, were supposed to remain at the firm and continue running Earnest as a separate unit within the company. Hutchinson remains there as chief operating officer, Navient said.

Don Davis of Prime Meridian (Lend Academy), Rated: A

In this podcast you will learn:

  • When marketplace lending first got on Don’s radar.
  • Why he decided to start Prime Meridian.
  • How his offerings have expanded from one product to four.
  • The total AUM they are at today.
  • Who their typical investor is today and how that has changed over the years.
  • How his conversations with investors have changed.
  • What investors misunderstand about the space today.
  • What platforms his company is investing on today.
  • How they conduct due diligence on new platforms.
  • Don’s views on why some of platforms have failed.
  • How the investor pullback of 2016 affected Prime Meridian.
  • The state of the marketplace lending industry today.
  • What areas Don likes most and what he likes least.
  • The only two things that matter for marketplace lending platforms.
  • How he has been able to grow his company so quickly.
  • What’s next for Prime Meridian.

A bank’s unfolding plan to enter online consumer lending (American Banker), Rated: A

Meta Financial Group in Sioux Falls, S.D., has struck a deal to provide personal loans to customers of Liberty Lending, an online lender based in New York.

The $5.2 billion-asset Meta said it expects to originate $500 million to $1 billion in personal loans during the three-year partnership. The program marks Meta’s first foray into the direct-to-consumer credit business.

Discover CEO bashes online lenders (American Banker), Rated: A

Discover Financial Services CEO David Nelms said this week that many of the online lenders that have emerged in recent years do not understand how to underwrite the loans properly over the long run. He also jabbed at the technology-focused firms for their failure to achieve profitability.

JP Morgan Chase invests $ 20bn for new branches and jobs (Fintech Futures), Rated: A

JP Morgan Chase has unleashed a five-year $20 billion investment plan that includes 400 new branches, 4,000 jobs and an increase in staff wages across the US.

It is also a stark contrast to yesterday’s report concerning branches in 2017. Last year, US banks accelerated their pace of branch closures, shutting down 2,069 locations (an 18% increase compared to 2016).

According to JP Morgan Chase, these new branches and bankers will help the firm increase small business lending nearly 20%, or $4 billion, over three years.

7 failed fintech ideas that might succeed today (PaymentsSource), Rated: A

Blippy’s card-sharing social network

Contactless payment cards

Opendoor Raises $ 135M in Funding (Finsmes), Rated: A

Opendoor, a San Francisco, CA-based online home-selling service, raised $135m in funding.

The round was led by Fifth Wall Ventures and Lennar with participation from Rialto Capital Management.

Technology will have a massive impact on your financial future: here’s why (The Next Web), Rated: A

For consumers, that’s mostly good news; it means you have access to more services in a digital format, and at a much less expensive rate. For the finance industry, this is coming with big changes; as banks digitize more, Citigroup estimates that the industry will lose 1.7 million jobs or more to automation and digital environments.

On a level that’s probably more familiar with mainstream consumers, we can look to the emergence of money savings appsstock exchange appsbudgeting apps, and other tools designed to make financial management easier for the average customer.

As many as 45 percent of financial intermediary services are victims of economic crime every year, which makes security and privacy top concerns for the finance industry.

 

Ladenburg Thalmann Launches Tech Innovation Platform (Financial Advisor), Rated: B

Brokerage and advisory firm Ladenburg Thalmann Financial Services has announced the launch of its Enterprise Innovation initiative and Innovation Lab. The company said innovation strategist Dan Sachar has been named as the vice president of enterprise innovation.

United Kingdom

P2P Lending Tops £3.1 Billion in 2017, Q4 Sees Borrowers Shift to Online Lending (Crowdfund Insider), Rated: AAA

The UK Peer to Peer Finance Association (P2PFA) has published aggregate fourth quarter data for of 2017 for its member platforms. The P2PFA shows that during 2017 £3,145,098,842 in peer to peer loans were facilitated. Cumulative lending transacted through P2PFA member platforms exceeded £8 billion.

Funding Circle heads for market (The Times), Rated: AAA

Sources close to the lender said it was in “no hurry” to do an initial public offering but, if markets remain favourable, the float could go ahead in the second half of this year.

Atom Bank chairman to step down (AltFi), Rated: A

Anthony Thomson, the founder of UK challenger bank Atom Bank, is planning to step down from his role as chairman after it completes its latest £150m fundraise.

Existing non-executive director, Bridget Rosewell, will be taking over the helm of the Durham-based lender, subject to regulatory approval.

Best buy-to-let areas in the UK for 2018 (Simply Business), Rated: AAA

LendInvest’s latest buy-to-let index is out, and it makes great reading for landlords looking for the best buy-to-let areas.

  • Manchester is currently the best place to buy-to-let in England and Wales. It ranked highest for rental yields (5.55 per cent) and rental price growth (5.76 per cent). Manchester took the top spot after a steady climb up LendInvest’s rankings throughout 2017.
  • Colchester in Essex and Luton in Bedfordshire are in second and third position, with rental yields of over 3.78 per cent. Colchester has the strongest capital gains of all postcode areas over the last 12 months, while Luton remains a popular commuter town within easy reach of London.
  • The Midlands is still the buy-to-let location to watch, though – Leicester rose an incredible 17 places to reach ninth place in December’s index, while Birmingham narrowly missed out on the top 10, coming in at 11th.

According to the research, here are the 10 best buy-to-let areas 2018:

  1. Manchester
  2. Colchester
  3. Luton
  4. Rochester
  5. Southend-on-sea
  6. Hull
  7. Romford
  8. Norwich
  9. Leicester
  10. Ipswich

Top 10 areas for capital gains in the UK

Area Capital gains
Colchester 11.96%
Southall 11.09%
Hemel Hempstead 10.27%
Slough 10.19%
Harrow 9.89%
Ipswich 9.44%
Luton 9.16%
Southend-on-sea 9.12%
Ilford 8.82%
Hull 8.46%
Source: LendInvest

FCA reports increase in advice firm numbers (Money Marketing), Rated: A

Figures drawn from regulatory returns show 5,270 financial advice firms had at least one staff member advising on retail investments, with a total of 25,951 advisers recorded as at the end of November 2017.

The number of advisers at banks and building societies continued to decrease, however, from 3,525 to 3,374. 34 banks had at least one adviser as at the end of November last year, compared to 38 the December before.

Expert Tips to Keep a Close Eye on your Cash Flow this Year (NewBusiness), Rated: B

Find the right finance for you

Here are some examples of the various types of external finance that may be available if you need a helping hand:

Bank loan – one of the most commonly chosen finance options. The loan will be fixed over an agreed period, with a fixed rate and monthly repayments.  Eligibility for this can be dependent on how long you have been trading for.

Peer-to-peer lending – this is a form of borrowing without using a traditional financial institution such as a bank or building society. The lending involves individuals or ‘peers’ where you are matched up to people willing to invest in, and lend money to, your business.

Merchant cash advance – an alternative financial solution if you have strong sales and good volume of card transactions every month. You receive a lump-sum payment to be repaid via an agreed percentage of your future credit and debit card transactions.

Business credit card – stay in control of your business expenses and keep your cash flow moving. A business credit card is a short-term flexible way to manage expenses.

London fintech start-up Duco raises £20m (The Times), Rated: B

Duco, which was founded eight years ago by a computer science postgraduate from University College London, allows financial institutions to manipulate enormous amounts of data through remote internet servers, popularly known as the cloud. It is understood the funding round values the company at about $100m.

China

Future FinTech Announces Digital Assets Transfer Agreement (PR Newswire), Rated: A

Future FinTech Group Inc. (NASDAQ: FTFT) (“Future FinTech”“FTFT” or “the Company”), a financial technology company and integrated producer of fruit-related products, today announced that on January 23, 2018, one of its wholly owned subsidiaries, DigiPay FinTech Limited (“DigiPay”), entered into an agreement to acquire 60% of the digital assets associated with DCON, a blockchain development project that has developed 100 communities utilizing blockchain technology and which intends to conduct a variety of financial businesses to provide users with a diversified blockchain experience.

European Union

Deposit marketplace Raisin surpasses €5bn after record year (AltFi), Rated: AAA

Since its founding four years ago, Raisin has returned its first cash flow positive month after passing €5bn in brokered savings deposits.

The European marketplace for savings and investment products increased its total customer deposits by over €3bn in 2017, after its international expansion efforts bolstered growth. The company now serves over 30 European markets, with around 20 per cent of all new customer acquisitions coming from abroad.

Europe’s Alternative Finance Sector Accelerates (Forbes), Rated: AAA

Europe’s online alternative finance market continues to grow, but remains dominated by the UK, new research shows. The Cambridge Centre for Alternative Finance says the market was worth €7.7bn by the end of 2016, the most recent period for which data is available, with €5.6bn of that total accounted for by the UK.

The data means the alternative finance market across Europe grew by 41 per cent during 2016, providing a range of valuable funding for entrepreneurs and small and medium-sized enterprises that was not available from traditional funding sources. Stripping out the UK, however, the market was up by 101 per cent, with the less mature alternative finance industries of continental Europe now growing very rapidly.
The UK’s share of the European alternative finance market fell to 73 per cent in 2016 from 81 per cent a year earlier as other markets grew faster. France, Germany and the Netherlands are now the three largest alternative finance markets outside the UK, followed by Finland, Spain, Italy and Georgia.
Consumer lending remains the single biggest sub-sector of the alternative finance industry, with peer-to-peer lending sites accounting for 34 per cent of the marketplace. However, SME funding is significant, with peer-to-peer business lending, invoice trading and equity-based crowdfunding together accounting for 40 per cent of the market.
International

FintruX – Disrupting P2P Lending and Unsecured Loans on the Blockchain (ChipIn), Rated: A

Peer-to-peer lending platforms are also still on a global uptick. In just one country where this new kind of access to capital is having a major impact, the UK, over $3.3 billion in P2P loans were facilitated in 2017. That number is expected to continue to rise globally this year, and blockchain is likely to be right in the middle of it.

The FinTruX Network is one of the world’s first blockchain-based online marketplaces for unsecured lending that connects the dots in an environment augmented by specialized servicing agents who can configure and construct each borrower’s (smart) contract in real time.

Cascading levels of credit enhancement help borrowers improve creditworthiness. Lenders are provided with several forms of reassurances that their money will be repaid. Loans are over-collateralized. Local third-party guarantors and cross-collateralization act as an additional kind of insurance.

And here is the best part: All of this is enabled by a system token which creates not only a fee structure but a tracking device, authenticator, and payment system, all in one place.

Robo Advice: Are ETFs the Solution? (CFA Institute), Rated: A

RiskSave and True Link are examples of such emerging technology. The portfolios generated from a broader spectrum of assets improve on the current robo model, offering more efficiency and superior risk-return characteristics.

Robo advice and digital asset management will open up financial advice to a much wider market. People who previously were priced out of financial advice will now be able to afford it. The reduced costs of robo advice in the United Kingdom could give as many as 16 million more people access to financial advice, according to estimates from the Financial Conduct Authority (FCA).

Are ETFs the correct solution?

Much of the financial management industry has concluded that ETFs are the future of automated advice. That is naive.

Tradeshift explores new Frontiers with innovation lab launch (Fintech Futures), Rated: B

Business commerce platform Tradeshift has unveiled Tradeshift Frontiers, an innovation lab and incubator designed to apply emerging technologies like artificial intelligence (AI), distributed ledgers, and internet of things (IoT) to business networks, supply chains, and global trade, reports David Penn at Finovate (FinTech Futures’ sister company).

India

FinTech platforms providing robust loan disbursal to MSMEs (Outlook), Rated: A

CreditMantri helps small business connect with NBFCs and banks on its platforms and avail financial assistance. The easy and hassle-free digital procedure makes it easy for a business to avail a loan in lesser time.

Aye Finance, along with its commercial operations, also funds its non-profit initiative to coach MSMEs on market knowledge, business book-keeping and advising on operations techniques. These, in turn, help sustain employment at the bottom of the pyramid. Aye Finance has already impacted an ecosystem of over 40,000 MSMEs through its business enterprise loans.

CoinTribe is confident about the adoption of digital in the SME segment especially as younger generations enter the domain. With increasing digital adoption in the country and expansion of the MSME sector, CoinTribe aims to facilitate USD 5 billion of loans through its platform over a period of 5 years and is rapidly scaling up its marketplace operations.

Faircent’s P2P model serving business loan requirements is an example of how far lending industry has come to serve MSMEs. The platform has over two lakh registered borrowers and 18,000 registered lenders.

South America

Columbia business launches $ 1.8M investment website (Columbia Daily Tribune), Rated: AAA

LoanPie, an online local marketplace based out of Columbia for residential and commercial real estate investing, last week launched its website with over $1.8 million in investments available.

The company seeks to introduce more accredited investors to the secondary mortgage market using a web-based platform. LoanPie’s goal is to create return on investment for 25,000 subscribers by the end of this year.

Authors:

George Popescu
Allen Taylor

Bringing the Mortgage Process Out of the Dark Ages

the mortgage process

LendIt’s second day feature an interesting panel discussion on mortgages titled “Bringing the Mortgage Process Out of the Dark Ages.” Panelists includes Clara Lending CEO Jeff Foster, Blend founder and CEO Nima Ghamsari, Digital Mortgage General Manager Simon Moir, Sindeo CEO Nick Stamos, and SoFi Director of Business Development Joshua Tatum. The panel was moderated […]

the mortgage process

LendIt’s second day feature an interesting panel discussion on mortgages titled “Bringing the Mortgage Process Out of the Dark Ages.” Panelists includes Clara Lending CEO Jeff Foster, Blend founder and CEO Nima Ghamsari, Digital Mortgage General Manager Simon Moir, Sindeo CEO Nick Stamos, and SoFi Director of Business Development Joshua Tatum. The panel was moderated by Bankless Times Managing Editor Tony Zerucha.

Moir kicked off the discussion by saying this year’s buzzword is “digital mortgage” and there seems to be a huge focus around the concept.

“It’s all about minimizing stress for the borrower,” he said. “Lenders have to pull data from multiple sources.”

Ghamsari agreed. He said consumers are starting to democratize the digital experience while mortgage companies just want better data and are starting to offer benefits to banks and other institutions for collecting data on their behalf. But he added, “A nice end-to-end solution would both problems.”

Foster noted that when the digital experience comes into conflict with taking on a mortgage, that’s a big deal.

“The nexus is to deliver the digital experience while providing exceptional customer service and education that meets the needs of the customer,” he said. “People also want to take their time, assess the options, and understand what they’re getting into.”

Foster also noted that the digital experience has the opportunity to provide a credible experience for every mortgage customer, but the key is getting the data and the technology to the place where that personal experience can happen seamlessly.

“You can give all the data in the world to the consumer,” said Stamos, “but we try to offer products that are accurate to the situation and not just a bunch of options. They get what they qualify for up front.”

Sindeo’s value proposition is to leverage technology to streamline the mortgage application process while offering access to a marketplace of lenders that fit each borrower’s unique financial situation.

Ghamsari addressed the different needs of consumers and mortgage providers saying “One side needs less friction and one needs more information. Technology is inevitable because it is good at gathering data and delivering rules.”

Moir pointed to Amazon as a prime example of something that was once scary for consumers but is now commonplace. He challenged the mortgage industry to create digital products that will fit the needs of all consumers and not just millennials.

On the other hand, Tatum said, “Under TRID, it’s almost impossible to close a loan in under eight days. Consumer expectations may want things to happen faster, but regulatory structural considerations actually inhibit some of those expectations.”

Ghamsari said the best way to solve regulatory issues is with automation.

“Regulation and technology are well aligned, but historically, there hasn’t been as much focus on technology in the mortgage industry,” he said. “If we focused on technology earlier, we’d be much further along.”

Foster noted that the industry adapted to TRID over time and that a new TRID will come some time down the road. Regulation is always changing.

“The mortgage industry is not a closed ecosystem,” Moir said. “There are a lot of different participants. We’re coming out of the dark ages, but we’re not out yet.” He noted some of the challenges of legacy systems interacting with new technologies.

“We work with about 50 different lenders,” Foster said. “We use the broker model, a one-stop shop for consumers. There is a lot of federal and state regulation so doing business in different states is different. You have to be flexible and build to the consumer first. Build technology around that.”

Tatum agreed.

“You can have all the technology in the world,” he said. It begins with the consumer. If the consumer doesn’t understand the platform, you’re dead.” He also recommended educating the consumer through social channels and educational events.

Ghamsari followed up with an example of a traditional mortgage company trying to leverage the Internet for business, but they required the consumer to log in to three different portals during the application process. He said it’s important for mortgage providers to streamline the process and make it simple for the consumer.

Moir said, “We need to encourage an ecosystem of providers. You can’t do it all yourself.”

Indeed, you can’t. What will bring the mortgage industry out of the dark ages? First, technology, but not just technology. It must be a technology centered around streamlining and enhancing the customer experience. Strategic partnerships and a healthy competitive landscape wouldn’t hurt either.

Authors:

Allen Taylor