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 […]
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.
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’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.
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.
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 Credit Cards
Team Devices (Apple Pay and such)
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.
July 6th – 13th, 2018 QEII Centre, London UK Fintech Week is a series of conferences, exhibitions, workshops, hackathons, meetups and parties. Each day, the focus is on a different topic. There is also plenty of time for networking and meeting other innovators. The main conference/exhibition takes place at the QEII Centre in Westminster, but […]
July 6th – 13th, 2018 QEII Centre, London UK
Fintech Week is a series of conferences, exhibitions, workshops, hackathons, meetups and parties. Each day, the focus is on a different topic. There is also plenty of time for networking and meeting other innovators. The main conference/exhibition takes place at the QEII Centre in Westminster, but other events take place across the city of London, Canary Wharf and “Tech City.”
Expect 600-1,000 conference delegates per day from over 50 countries and 3,000 – 5,000 participants in events throughout the week.
When: June 25, 2015 5 PM – 9 PM EDT Location: New York Alternative financing isn’t going away any time soon, and alternatives to traditional bank commercial lending will have a big part to play in the future. Alternative players have the potential to completely change the landscape of how businesses access capital. At the […]
When: June 25, 2015 5 PM – 9 PM EDT
Location: New York
Alternative financing isn’t going away any time soon, and alternatives to traditional bank commercial lending will have a big part to play in the future. Alternative players have the potential to completely change the landscape of how businesses access capital. At the same time, traditional banks and bank affiliates are not disappearing.
PANEL 1: Financing Alternatives in 2015 and Beyond
Moderator: William Brewer, Winston & Strawn
Marilyn Adler, Medley
Cheryl Carner, Crystal Financial
Gary Lembo, Tennenbaum Capital Partners
John Todd, Bank of America Business Capital
PANEL 2: Changing Landscape of Private Equity Financing-Understanding PE needs for the Deal and Portfolio Companies.
Moderater, Sash Rentala, Moelis & Company
Tobias Nanda, Palladin Consumer Retail Partners
Tory Rooney, Bruckmann, Rosser, Sherrill & Co, LLC
William Spiegel, Pine Brook
This year’s digital lending conclave in India features top speakers addressing consumer lending and SME lending concerns. There will also be discussions in equity financing for alternative lenders and debt capital for alt lenders. Speakers include: Gaurav Chopra Alok Mittal Shilpa Mankar Ahluwalia Samir Bhatia And many more Location: DLAI, C/o Capital Float Zen Lefin […]
This year’s digital lending conclave in India features top speakers addressing consumer lending and SME lending concerns. There will also be discussions in equity financing for alternative lenders and debt capital for alt lenders. Speakers include:
May 16-17 | New York City COMPLY is the world’s largest RegTech and Compliance event — bringing together the most comprehensive gathering of innovators, investors, legal and compliance professionals and regulators from across the globe. Hear from the Regulators: US and International GDPR. Is your Organization Ready? Sales Practices Compliance. Finding the Hidden Risks Consumer […]
May 16-17 | New York City
COMPLY is the world’s largest RegTech and Compliance event — bringing together the most comprehensive gathering of innovators, investors, legal and compliance professionals and regulators from across the globe.
Hear from the Regulators: US and International
GDPR. Is your Organization Ready?
Sales Practices Compliance. Finding the Hidden Risks
Consumer Protection and Data. Is the Consumer Still King?
Higher Ed Marketers. A Playbook for Adapting and Thriving Amidst Adversity
Risk Signals in the Contact Center. Complaints, Compliance and Agent Performance
Compliance Budgets. Learn How This Head of Compliance Took His Budget From Rags To Riches
RegTech’s Who are Changing the Game
Procurement and Selling to the Enterprise. How to Be Successful
FinTechs and Banks: Finally Getting Friendly
Payments: Lending, Credit Cards, Alternative Lending
News Comments Today’s main news: Blend lands $100M investment. Funding Circle achieves ISA manager status. Hive raises over $8M. Innovate UK invests 700K GBP in Paybase. China Life, Baidu launch $1B internet fund. Klarna’s profits increase 138 percent. Today’s main analysis: Bank of America Merrill Lynch to implement AI. Today’s thought-provoking articles: Congresswoman asks FDIC to hold public hearing on […]
Congresswoman asks FDIC to hold public hearing on SoFi bank charter application. AT: “This elevates the conflict over SoFi’s application for a bank charter to another level. The bright side is, it could shine a spotlight on alternative lending and bring it to more prominent position within the general culture, which could lead to more business for alt lenders. Even if SoFi’s bid fails, it could benefit the industry as a whole.”
“Throughout the period December 11, 2014 and continuing through May 9, 2016 (the “Relevant Period”), the Individual Defendants breached their fiduciary duties to LendingClub by failing to institute adequate internal controls regarding financial disclosures, related party transactions, and data integrity and security, all while causing LendingClub to represent in the Registration Statement and a series of subsequent filings that such controls were sufficient.”
The suit has been filed by two shareholders; Kelvin Farley and Jay Fink.
Today, Congresswoman Maxine Waters (D-CA), Ranking Member of the Committee on Financial Services, sent a letter to Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg, calling for the FDIC to hold at least one public hearing on Social Financial, Inc.’s (SoFi) application to establish an Industrial Loan Company (ILC).
In the letter, Ranking Member Waters states that changes in the financial services industry and financial regulation necessitate a public hearing to examine the policy and legal implications of granting federal deposit insurance to ILCs generally, as well as to obtain greater input on the unique risks posed by granting it to a financial technology (fintech) company like SoFi.
I am writing to request that the Federal Deposit Insurance Corporation (“FDIC”) hold at least one public hearing on Social Finance, Incorporated’s (“SoFi”) application to establish an industrial loan company (“ILC”) to provide FDIC-insured Negotiable Order of Withdrawal (“NOW”) accounts and credit card products. As you know, because de novo ILC formations have been affected by regulatory and statutory moratoria for several years, the FDIC has not approved a deposit insurance application for a new ILC charter for some time. Since the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), changes in the financial regulatory regime and financial services industry justify a public hearing to examine the policy and legal implications of granting Federal deposit insurance to ILCs generally, as well as to obtain greater input on the unique risks posed by granting it to a financial technology (“fintech”) company like SoFi, a number of which I will discuss in more detail below.
Appropriate regulatory oversight of any ILC is an essential prerequisite to approving any application for deposit insurance backed by taxpayers. The FDIC has previously acknowledged the importance of strong oversight of any insured bank and its parent company when discussing oversight of ILCs. In reaction to a number of concerns previously raised on the regulation of ILCs, the FDIC even went so far as imposing several moratoria on its ability to approve ILC applications for deposit insurance in 2006 and 2007 to, in the words of former FDIC Chairman Sheila Bair in testimony before the House Financial Services Committee, “allow the FDIC to carefully weigh the safety and soundness concerns that have been raised regarding commercially-owned ILCs. At the same time… the moratorium provides an opportunity for Congress to consider the important public policy issues regarding the ownership of ILCs by commercial companies.”
While some experts have touted the possibility that fintech firms can help promote financial inclusion, others have underscored the challenges posed for our current regulatory regime to oversee these types of companies and have underscored the need for policymakers to carefully evaluate the consequences of allowing them access to deposit insurance and the Federal Reserve discount window. Thus, Federal regulators have taken a varying degree of actions focused on fintech companies and services. For example, while the Office of the Comptroller of the Currency (“OCC”), under its “Responsible Innovation” initiative, has proposed a Special Purpose National Bank Charter for fintech companies (“fintech charter”) questions have been raised about whether the benefits to consumers for this new charter will be widely and fairly shared, and whether there is adequate legal authority, let alone a clearly defined and modern regulatory framework, for such a fintech charter. Indeed, a lawsuit has been filed by state banking regulators challenging the OCC’s authority. As should be the case with the OCC and its proposal to use its authority to federally charter fintech companies, the FDIC should thoroughly consider the implications of offering access to the deposit insurance fund for ILCs that will result in expanding the type of institutions to it, like fintech firms. Fintech firms, whose operations cross state and international boundaries, and may exist entirely online, were undoubtedly beyond original congressional intent in permitting ILCs to access deposit insurance and it is appropriate for stakeholders to weigh in on whether it is appropriate for these firms to have this access without proper oversight of their parent companies.
The chartering of a fintech company as an ILC also raises a number of consumer protection concerns that the FDIC should consider. For example, the California Reinvestment Coalition (“CRC”) has opposed SoFi’s application on the basis of concerns with the institution’s Community Reinvestment Act (“CRA”) plan, as well as its intended approach to financial inclusion, fair lending, and consumer protection. CRC notes that SoFi’s business model targets “students from elite universities that have strong earnings and wealth potential,” and offers products and services “designed to exclude working class households.” CRC also notes that SoFi’s CRA plan is grossly inadequate, considering that: (1) SoFi’s assessment area will be limited to areas in Utah, but the company will accept deposits and operate nationally; (2) SoFi’s current core products are not designed to serve the “convenience and needs” of low- and moderate-income (“LMI”) communities in which the bank would operate, but rather are focused on serving SoFi’s members; and (3) SoFi’s CRA plan does not encompass measurable commitments to lending, investments, and services for LMI communities.
Two student loan refinancing companies, LendKey and Earnest, have changed their student loan refinancing interest rates in recent weeks, according to LendEDU.
Effective August 10th, LendKey’s variable interest rate range for their student loan refinance product was altered slightly. LendKey, a leading lending partner of both banks and credit unions, now offers a variable rate range between 2.67 and 6.31 percent for student loan refinancing.
This new variable rates for LendKey mark an increase on both the low and high ends of the range. Previously, the online lending partner offered a variable interest rate range between 2.52 and 6.16 percent since June.
Blend has landed a significant funding round to the tune of $100 million. The funding was led by Greylock Partners with participation by Emergence Capital. Existing investors joined in the round as well.
The Hive Project, which intends to build the world’s first cryptocurrency-based invoice financing platform, has raised 2,087 BTC, or over US$8.9 million, from 2,234 investors through its initial coin offering (ICO).
Using invoice finance, the business “sells” its outstanding invoices at a small discount to a financier. The business immediately receives up to 85% of the value of the invoice instead of having to wait the usual 30 to 90 days to get paid by customers.
Hive uses the Ethereum blockchain and smart contracts to assign a unique fingerprint to every invoice issued. These invoices are then tokenized and published on a blockchain, and made available as a shared source of liquidity for factoring and invoice financing.
JP Morgan CEO Jamie Dimon in his annual letter would agree that the banking system is safer and stronger today. Nevertheless, Mr. Dimon believes that economic growth and lending is below potential. For instance, JPM estimates $1 Tn in loans could have been generated in recent years generating an additional 50 bps in annual GDP growth thru regulatory reform.
The specific regulatory reform areas Mr. Dimon identified include:
Simplification of the annual stress-testing process
Release or enable banks to deploy excess capital towards small business loans, lower middle market, and near-prime mortgages
Rationalization of supplementary leverage ratios and operational risk capital
National servicing standards for the mortgage servicing market
Federal Housing Administration (FHA) reform
Complete securitization standards to encourage private capital and reduce exposure to taxpayers
Role for 3rd party risk infrastructure to strengthen markets
Large banks are increasingly playing the role of financial intermediaries that connect non-banks to the capital markets. Banks are providing liquidity facilities (“lending to the lenders”) and capital-light securitization programs. Although Yellen is right that lending continues to grow, critically, the nexus of credit formation–including for a majority of personal loans, auto loans, student re-fi loans, and even mortgages–now takes place between a consumer and a non-bank.
Under this new landscape, the soft underbelly of the credit markets has shifted from bank wholesale funding to non-bank wholesale funding. And when investor confidence seizes, the transmission mechanism connecting policy to the real economy can break down. Spreads widen, funding costs increase, and markets freeze exactly when policymakers seek to ease financial conditions.
Recently, Crowdfund Insider published an article about Marqeta signing a partnership with Visa on payments and loans. The marriage is designed boost innovations in commercial and consumer payments and online lending. Visa also made a strategic investment in Marqeta at that time to the tune of $25 million. Total investments in Marqeta now stand at over $70 million.
Isn’t this just all about borrowers getting a better interest rate [and investors earning more]?
Candace: Lenders are looking to increase renewals (repeat borrowers are easier to sell than new borrowers), beat out the stackers (top of wallet, top of mind) and decrease risk (new data on spending reduces risk for future loans). On the heels of 2016, these have become as important as the interest rate for the lender.
For the borrower, speed to funds has become increasingly important, and distributing loan funds to a card allows a way to immediately spend the funds without waiting for the funds to be deposited into the borrower’s bank account.
If Credit Cards drop their rates then they can become competitive. For Visa to partner with Marqeta – isn’t it just how the debt is carried? For the consumer / business, they are indifferent?
Candace: The rates apply to the underlying loan per the agreement between the lender and the borrower, not to a prepaid card that is used to assist with making purchases. The prepaid card bears no interest charge. The terms for the loan (from which the loan proceeds are distributed to the card) continues as agreed upon between the lender and the borrower. That debt does not change.
Ahead of Riskalyze CEO Aaron Klein’s speaking engagement at the Benzinga Fintech Summit in San Francisco, Benzinga caught up with him to learn more about how the company is upgrading financial advice.
BZ: How did you go about identifying this need for financial advisors? What kind of research did you do?
What’s interesting is that we invented a new space. There was no risk-alignment platform that helped advisors do that. There were questionnaire products that answered half the question, there were a few portfolio analysis tools that would answer the other half, but we invented the concept of the risk number. We can help advisors pinpoint the client’s risk number and then we score portfolios using that number.
Klein: I’ll talk about the two different sides of the coin. A lot of the innovation was figuring out those sides of the coin and bridging the two together. On the one hand, we took some concepts that had really never made it out of academia and into everyday use. They’re centered around the economic framework called prospect theory, which won the Nobel Prize for economics in 2002. We took prospect theory and built a bunch of proprietary technology on top of it to understand how to move up and down a client’s personal financial spectrum to understand when they prefer risk and when they prefer certainty.
Once we do that, we built a mathematical formula behind the scenes that lets advisors turn that into the client’s risk number. That’s how the client-side works.
On the flip side, we need to match that up with a portfolio. So, the inputs for that piece of the technology are largely market data. We effectively take daily pricing data for nearly a quarter-million securities — every U.S. stock, ETF, mutual fund, variable-annuity sub accounts, SMA third-party money managers, proprietary non-traded strategies, all kinds of different products. We take all the data for those, we have new data streaming into our systems every night on those securities.
American Express is in the hot seat this week as the Consumer Financial Protection Bureau (CFPB) ordered the credit card company to pay out a very large amount to consumers in Puerto Rico and the U.S. Virgin Islands. It’s being confirmed that over a 10-year period, American Express provided inferior card offerings to people in those territories than what was being offered in the U.S.
Here are the numbers:
$240 million | Amount Prodigy Finance raised in its venture capital equity funding round
$96 million | Amount CFPB ordered American Express to pay out to affected Puerto Rico and the U.S. Virgin Islands consumers
$200 | Starting point for potential Walmart installment loans
According to statistics from the U.S. census bureau, Millennials make up about 83 million of the nation’s current population. The unique experiences of the Millennials will shape the way we buy and sell, forcing companies and businesses to adjust their business strategy for decades to come.
For example, a growing number of Millennials are choosing to live with their parents. They have been reluctant to buy items such as cars, music, and luxury goods. Luxuries that used to be important for previous generations are not as important for Millennials. They are reshaping the real estate market and are responsible for the growth of the sharing economy.
A recent survey of Interns conducted by Goldman Sachs in 2013, found out that 30% of millennials do not intend to purchase a car in the future. 25% said they will only buy one if there is a need for it, otherwise they are indifferent. Another 25% said buying a car is important but not a big priority. 15% said purchasing a car is extremely important. And the last 5% do not feel strongly about it.
A recent report shows that student loans have increased by 84% over ten years with an average student having a loan balance of $29,000.
Online banks are now offering much higher rates on savings accounts — significantly higher than the current rates at traditional, bigger banks. So with that in mind, why not just move your savings to take advantage of the bigger return?
However, the platform has no immediate plans to launch its IFISA product, telling customers earlier this week that it intended to roll out the tax-free investment wrapper “before the end of the tax year.”
Fast forward to today, we’ve originated over £3.2 billion worth of loans through the platform. In the UK, that lending has helped create about 60 thousand jobs, and the £2.5 billion of loans has created about £5 billion of GDP or gross economic value added, according to an independent survey by the Centre for Economics Business Research.
In fact, we think we make up about 2 per cent of the total money that’s going to gross-lending small businesses. And if you actually look at the money going into the economy, we make up about a third of net new lending— which is the preferred Bank of England measure. We did about 300 million versus 600 million in the entire banking system in the first half of this year.
Say a small business decides to come to you: what is it they’re getting that they don’t get with a bank?
We turn around loan applications specifically within 24 hours. We are better in that we give better service; everyone can find an account manager.
We’re cheaper, in that our prices are very, very competitive, and often we’re often providing cheaper loans than businesses would be able to get at the bank. We also don’t have the overheads that banks have.
We all know that Brexit is going to shake up the financial sector. What can Funding Circle do to help businesses rise to the challenge?
Net lending by banks fell by 220 million in Q4 last year. Ours actually rose to 167 million.
On top of that, we’ve also had large insurance companies like Aegon, which is a big Dutch insurer, commit to fund £160 million in year one, but actually committed over a four-year period to purchase our loans. The fact a large foreign insurer would want to do that shows that actually, despite Brexit, there’s a vote of confidence in the UK economy, particularly in small business.
There’s been much collective gnashing of teeth over the last few months at the evolution of peer to peer lending, as practised by Zopa, Ratesetter and most latterly Funding Circle. The big bone of contention has been a shift amongst all three – with FC falling into line just a matter of days ago – to a passive lending model. This means that lenders on said platforms now lend passively to a full slice of borrowers rather than picking their borrowers individually. To the critics this implies that the traditional peer to peer (P2P) model is slowly dying out. If you’re not lending to your peers, don’t you just sound like any other finance business such as a bank?
I’m not convinced by this criticism. Collectively a crowd – many peers – are still lending to another crowd, but just in a format that looks closer to a passive, collective fund basis rather than one on one. There is no bank balance sheet lurking around and the ‘crowd’ still sets the rate at which it’s happy to lend. Credit scoring has always been a feature of all the platforms, whether they be ‘pure’ P2P or passive P2P. Someone, somewhere at the centre of the online marketplace needs to set the lending criteria and make decisions about who to lend to.
It is almost true that borrowing money from traditional financial institutions is a thing of the past.
It has been observed that P2P online lending platforms are not the source of the problem or the risk. However, it seems to be the ease with which loans are available that causes the problems.
Online P2P lenders also offer student loans. It is very important to realize that student loans these days are available everywhere. But what is ultimately the truth is that the loans are burdensome. Any student that avails of such a P2Ponline student loan emerges as a graduate burdened with a heavy debt.
If an individual wants to apply for a P2P online loan, it is best to start with checking credit reports. It is a good idea to fix any errors that may be found on these reports. Otherwise, the interest rates may be hiked up. It is also a good idea to do some research prior to applying for the loan. It is worthwhile to find out as to which lender offers a lower rate of interest even if they fall outside the ring of online P2P lenders. Never decide on which loan to pick up by looking at the monthly amount to be paid. The total amount that you are going to repay and the time period of the repayment are the more important factors to be considered. This gives the total cost of the loan.
Bank of Communications, the nation’s fifth biggest lender, joined with Suning Holdings and its financial affiliate Suning Finance as strategic partners last week, the latest of the big five banks to ally with internet firms.
So far, all big-five banks, accounting for more than one-third of China’s banking assets, have allied with technology giants.
Industrial and Commercial Bank of China allied with e-commerce major JD.com for cooperation in sectors including fintech, retail financing, corporate credit and asset management. Agricultural Bank of China agreed to work together with dominant search engine operator Baidu. Bank of China and Tencent Holdings jointly set up a fintech lab, focusing on cloud computing, big data, block chain and artificial intelligence.
Earlier this month, mid-sized Industrial Bank and JD.com’s financial affiliate JD Finance launched a debit card in Beijing and most cities in affluent Zhejiang province.
China Life Insurance Group Co and Baidu Inc will form a 7 billion yuan ($1 billion) private equity fund, targeting internet and other technology investments, China Life’s listed arm said on Thursday.
The Baidu Fund Partnership will be capitalized by China Life through a special partnership, which will contribute up to 5.6 billion yuan, China Life Insurance Co Ltd said in a Hong Kong Stock Exchange statement.
Baidu, the Chinese language internet search provider, will contribute as much as 1.4 billion yuan.
Alibaba’s Ant Financial Services Group and JD Finance are at loggerheads in the Chinese, and increasingly, global e-commerce scene. In 2015, JD Finance recommended the use of “FinTech.” In December 2016, Ma Yun coined the ”TechFin” as a rebuttal, and as a show of thought leadership.
Ant Financial’s unveiling of “TechFin” shows the firm’s focus on building technology rather than financial products.
Critics believe there is not much difference between TechFin and FinTech. Critics believe Ant Financial coined TechFin to gain a foothold from the conceptual standpoint; a counteroffensive to JD Finance’s aggressive marketing of FinTech. This is inevitable considering “FinTech” as a term already achieved credibility within the finance and other related industries.
Ant Financial and JD Finance are more complementary than competitive
Onlookers see Ant Financial and JD Finance as longstanding rivals. JD.com’s recent sale of JD Finance for US$2.1 billion in cash was seen part of a deal to spin off its burgeoning finance arm and raise its game against Ant Financial.
Ant Financial focuses on the traditional model of the Internet while JD Finance focuses on product innovation, for a start. Each business model has its advantages.
Ant Financial also seeks to leverage on Ant Check Later (花呗), a virtual credit card, to open up a whole new road map for credit distribution in Internet finance. In contrast, JD Finance aims to boost user’s consumption through its products. Its Jingxiaodai (京小贷) appeals to merchants who need fuss-free and almost instant access to credit.
The Swedish e-invoicing giant posted 2,05 billion Swedish crowns ($254,2m) in revenue for the first two quarters of 2017. Meanwhile, operating profits jumped to 228 million ($28m) from last year’s 96 million ($11,9m), reports tech site Di Digital.
Magic Circle law firm, Allen & Overy, has named Corlytics as one of the eight companies selected to move into its Fuse programme. Fuse is a newly launched innovation space where its lawyers and technology firms team up to develop legal, regulatory and deal-related improvements.
There was a time when digital banking was perceived as synonymous with online banking and mobile banking. Financial services industry, along with other sectors, is experiencing an explosion of digitization thanks to smartphones, tablets and access to affordable high-speed internet. The number of smart phone users is expected to equal the number of bank accounts in near future as all mobile users link their bank accounts to their smart phone and get onboard with mobile-based digital wallets and savings platform.
Given this, it is imperative to take a fresh look at whether digital banking means the same as it did a decade ago – both for banks as well as customers – especially since there does not seem to be a consensus on the definition of ‘digital banking’.
Customers today do not have the patience to navigate through multiple screens. They do not want to fill the same KYC details over and over for each product. Presenting paperwork at the branch to support an online application is a big no-no. They expect to resume the application they started on Smart phone on their home computer and may want to talk to the customer care executive on phone while doing that. They do not want to be bothered with cold calls and random sales pitches; they prefer to see only personalized and contextual cross-sell offers with direct purchase links. In short, digital customer today wants one-touch, one-click, personalized and integrated user experience across channels.
On the flip side, while customers enjoy the convenience of digital banking for routine tasks, they also want to continue using the branch when they need some face time with a seamless switch between digital and personal interaction. They do not want to forego the privilege of walking into the local branch despite being able to do all their banking via the web or smartphone.
Since its launch in June, fintech startup Ilumony has reported more than $7 million in financial investments. Of the $7 million, it has charged no fees for advice on $1 million worth of customer KiwiSaver money.
Though Flipkart launched in 2007, it was only in 2013 that e-commerce really took off in India. That was the year Amazon entered India through a marketplace model, and Flipkart too launched its own marketplace model.
From selling smartphones, books, and apparel to customers, the two of them now started offering warehouses, packaging, and logistics to sellers.
When ecommerce companies like Flipkart and Amazon wanted to expand to the nooks and corners of the country, they borrowed the idea and recently started offering “No cost EMI” option on selected products. Taking a step further, you now have many fintech companies that have lined up on ecommerce platforms to offer loans to consumers.
Launched in January 2017, EzCred is an alternate lending startup which offers loans to consumers who walk into shop at offline stores.
“Offline is a much larger play than online. A majority of transactions are still done offline,” says Maheshwari.
The startup now has plans to roll out an app for customers to enable them to apply for loans directly. The platform has a credit assessment system which enables the startup to assess the borrowers’ repayment capabilities. This involves various data sources like the borrowers’ CIBIL score, bank statements, information provided by customers, which are then matched with the credit policy of EzCred.
A draft data protection law, which is at the core of the Indian government’s stance that Aadhaar does not violate citizen privacy, will have user consent as its mainstay with a few exceptions.
The draft legislation is expected to be ready in about a year.
This was revealed in interviews with a member of the committee set up by the government to come up with the draft framework — B N Srikrishna, a former Supreme Court judge who is heading it, and a second person with knowledge of the committee’s thinking.
In a bid to impart vibrancy to the fledgling peer-to-peer (P2P) lending space and also further the cause of financial inclusion, the Reserve Bank of India is believed to be looking at allowing players in the sector to have an offline presence besides an online one.
On-the-ground presence may help the platforms reach out to those who are currently not being served by banks/non-banking finance companies and also help break the vice-like grip of money lenders on local lending, especially in rural areas and small towns.
Peer to peer lending (P2P lending) first entered the wider public’s consciousness when it rose from the ashes of the global financial crisis in 2007. By cutting out traditional intermediaries, such as banks, the lending platforms, were able to offer borrowers lower interest rates and lenders higher returns. They were populist alternatives to the casino capitalism that had brought Wall Street to its knees.
According to a 2015 report by Deloitte, in Indonesia, Malaysia, the Philippines, Singapore and Thailand there exists “a clear disparity between what SMEs want and expect from banks and what the banks can deliver”. In Indonesia, the report found as few as 6% of SMEs were able to access bank loans.
Recent statistics from the Asian Development Bank show that the situation is similar in Myanmar, which the bank says suffers from a $2 billion shortage in available credit, a shortfall that Brad Jones, CEO of Wave Money, attributes to the country’s excessively cautious banking regulations.
According to data from Singapore-based venture capital fund Dymon Asia Ventures, less than 0.1% of loans in the region currently originate from P2P lending sources, compared with 10% in China and 2-3% in the UK and US. There is, therefore, sufficient growth potential for the Southeast Asian P2P lending market.
Despite the rising trend of peer-to-peer (P2P) lending in Indonesia, an economist believes that online-based businesses have increased risk of bad debt if the lenders ignore the importance of supervision.
The credit application mechanism in P2P lending is risky. There is no integrated costumer blacklist data-base like in the banking industry, said Samuel Aset Manajemen economist Lana Soelistianingsih said in Jakarta on Friday.
Moreover, she said P2P lending offered annual interest rates of up to 18.5 percent to investors, adding that such aggressive offers could increase the risk of business failure.
Flinks, a financial API for banks and credit unions, announced a partnership with Merchant Advance Capital, an online lender for small and medium-sized businesses.
Merchant Advance Capital partnered with Flinks to reduce loan approval time for its customers. Flinks will allow Merchant Advance Capital to connect its app directly with customers’ banks, allowing the company to validate account ownership, account balances, and transaction histories.
News Comments Today’s main news: April US consumer credit rises $8.2B. China Rapid Finance targets 3 million new users by end of year. TSB Bank lent $50M unsecured consumer loans through Harmoney. Today’s main analysis: UK house prices fall for three months in a row. Today’s thought-provoking articles: Amazon lent $1B to merchants in last 12 months. SBA enabled on […]
April US consumer credit rises $8.2B. GP:”The origination volume in aggregate is slowing down from a 6.2% annual growth to 2.6%. “AT: “A slow-down in the increase of consumer credit does not necessarily spell trouble for the economy. If Americans increased their debt substantially in previous months, then it could simply be a sign of things evening out in the long run.”
Amazon lent $1B to businesses in the last 12 months. GP:”$1bil in origination is impressive especially giventhe time lines.”AT: “It might come as a surprise to many readers that Amazon is now acting like a bank. It shouldn’t. When you have money lying around, it makes sense to put it to work. And Amazon has plenty of money lying around. Why not lend it?”
Amazon has secretly become a giant bank. GP:”With banking come handcafts as well, I don’t believe becoming a bank is the right way for Amazon or any non financial institution.”AT: “It wouldn’t surprise me to see Google and Facebook follow. They may already be pursuing their own banking interests. I mean, beyond payments.”
SBA enabler on sprouting more loans. GP:”SmartBiz started as a consumer lender and migrated to SMB lending, a very interesting trasition process worth thinking about.”AT: “This is the most interesting read of the day.”
On June 1, 2017, representatives of the Company provided us with a computer-generated data file and related record layout containing data, as represented to us by the Company, as of the close of business on May 25, 2017, with respect to 46,766 unsecured consumer loans (the “Statistical Loan File”).
At the Company’s instruction, we randomly selected 115 unsecured consumer loans (the “Sample Loans”) from the Statistical Loan File and performed certain comparisons and recomputations for each of the Sample Loans relating to the unsecured consumer loan characteristics (the “Characteristics”) set forth on the Statistical Loan File and indicated below.
US consumer credit increased $8.2bn in April following a revised increases of $19.5bn which was originally reported as $16.4.bn.
The April increase was lower than consensus forecasts of around $16.0bn and the weakest reading since August 2011.
The annual increase slowed to 2.6% from 6.2% the previous month. Revolving credit slowed to an annual rate of 1.8% from 6.5% previously while there was a slowdown in non-revolving credit to 2.9% from 6.1%.
Amazon.com Inc has stepped up lending to third-party sellers on its site who are looking to grow their business, a company executive said in an interview on Wednesday.
The e-commerce giant has doled out more than $1 billion in small loans to sellers in the past 12 months, compared with more than $1.5 billion it lent from 2011 through 2015, said Peeyush Nahar, vice president for Amazon Marketplace. Sellers have used the money to expand their inventory or discount items on Amazon, he said.
More than 20,000 small businesses have received a loan from Amazon and more than half of those have taken a second loan from the company, it said.
Loans range from $1,000 to $750,000. Sellers have said interest rates are between 6 percent and 14 percent.
Amazon.com (AMZN) said Thursday that its Amazon Lending service has surpassed $3 billion in loans to small businesses since it was launched in 2011.
“We created Amazon Lending to make it simple for up-and-coming small businesses to efficiently get a business loan, because we know that an infusion of capital at the right moment can put a small business on the path to even greater success,” Amazon Marketplace VP Peeyush Nahar said.
When your largest client asks for a favor, you tend to do everything you can to help. For fintech company SmartBiz, that led to completely changing its business model.
The San Francisco-based company began life as an online consumer lender in 2010. However, three years in, the company switched gears to focus on small business lending.
Thus began a transition that culminated in SmartBiz selling off its consumer lending business. In place of that, SmartBiz built a bank-centric marketplace—an “ecosystem” in Singer’s words—in which SmartBiz refers qualified SBA loan applications to a network of banks. Currently the company works with five banks in the U.S.
Banking Exchange:Can you explain further why you made the switch from the consumer loan business to the small business loan market?
Singer: The stores typically needed $50,000 to $200,000, but were having a hard time obtaining financing at a decent rate. When we dove deeper, we found that starting in 2008 with the recession, many banks pulled out of the smaller end of the small business lending market.
They left for many reasons. The main one, though, is that it cost them just as much to originate a $200,000 loan as it did a $2 million loan.
We felt we could convert our existing base technology for use in small business lending. The concept, and what we have been working on since, is three-fold.
• First, it was key that we be able to tap into banks with their low cost of capital to provide well-priced loans to small business. But we had to make it economically feasible for the banks to make these loans, so we developed software that enables banks to auto-underwrite and auto-originate SBA loans quickly and easily.
• Second, small businesses want it to be easy to apply for a loan. SBA loans are typically very difficult to get—they can take months and months. So we made the process easier, automating a lot of the more difficult work, and put it online.
• Third, one of the most important things for a small business is get to a “yes.” So we created the first online SBA loan marketplace, in which we have multiple banks [currently five] looking at the loans.
BE:Do you concentrate on SBA 7(a) loans?
Singer: Yes. We’ve been focused on 7(a) loans in the sub $350,000 market for working capital. About six months ago we launched commercial real estate loans up to $5 million on the platform—also 7(a) loans.
BE:How is the underwriting handled working with the banks in your marketplace?
Singer: Unlike a traditional fintech company, which brings its underwriting model to a bank and says “Use this,” we do the opposite. We take the bank’s underwriting and digitize it. So we customize the underwriting software that each bank uses. That way we can refer the right borrower to the right bank.
BE:What percentage of applications that come into your system don’t make the cut?
Singer: I don’t think we’ve published anything on that. [SmartBiz is a private company.] It would be interesting for a new bank to note, however, that a little over 90% of what we refer to our bank partners they fund.
BE:In general, how do terms and rates in your network compare with others in the online marketplace?
Singer: All of our loans under $350,000 have a ten-year term. Most of the other players in the market—OnDeck or Funding Circle, for instance—are going to have somewhere between a one- and five-year term—most typically it’s two or three years, and at much higher cost. Our average APR is between 7% and 8%—prime plus 275 [basis points], compared with other online marketplace lenders where the average APR is as much as 44%.
BE:Are you reaching out to other potential bank partners?
Singer: Well, I’m not sure we want to add hundreds of banks. We’re picky and choosy about which bank we’re going to add on the platform. They’ve got to be a PLP [Preferred Lending Partner] with the SBA. Essentially the SBA establishes PLP banks as having delegated authority so they can make a loan decision without sending the file to SBA for approval.
What’s critical is that the bank wants to embrace technology; is focused on SBA lending; and has the mindset at the top where they want to partner with a fintech company.
AvidXchange Inc., a firm that automates bill-payment processes for businesses, said Thursday that it raised $300 million in equity from a group of new investors to bring its service to new industries, potentially acquire smaller competitors and to expand internationally.
Investors in the funding round include MastercardInc., Singaporean state investment firm Temasek Holdings Pte Ltd., Canadian pension fund Caisse de dépôt et placement du Québec and and Peter Thiel, the investor and co-founder of payments company PayPal HoldingsInc.
Since its founding, Charlotte, N.C.,-based AvidXchange has raised over $500 million, more than amounts raised by Stripe Inc., Credit Karma Inc. and other well-known fintech players.
The latest investment, one of the largest for a fintech company since lender Social Finance Inc. announced a $500-million fundraising in February, values AvidXchange at around $1.4 billion, according to people familiar with the matter.
EXIT Realty Corp. International and VA Loan Captain (www.valoancaptain.com), the #1 VA Loan Marketplace, have announced a partnership to help educate veterans on their VA Home Loan benefit. As part of the partnership, EXIT Realty will offer veterans unbiased educational content in the form of an eBook, The Ultimate Guide to VA Loans, a VA Loan Learning Center on www.exitrealty.com, and a VA Loan Marketplace powered by VA Loan Captain to increase awareness of the 0% down home loan benefit available to all those who have served in the United States Military.
In addition to educating veteran home buyers, beginning on July 4th, 2017, EXIT Realty will also offer VA Loan Captain’s VA Loan Certification (VALC) to all of its agents. The VALC Certification provides real estate agents and lenders comprehensive knowledge of the VA Home Loan benefit to establish themselves as a local expert for the largely untapped military real estate market while simultaneously helping those who served the country.
Its closely watched monthly house price index showed that the average price of a home fell by 0.2% between April and May, to £208,711. This compares with monthly declines of 0.4% in April and 0.3% in March. The annual growth rate of 2.1% is the lowest since June 2013, and compares with 2.6% in April.
The UK’s other main house price index, from mortgage lender Halifax, is also on a downward trend. It showed a 0.1% fall in April, taking the average property price to £219,649 – nearly £3,000 below the peak in December 2016.
Carmen Dixon, vice-president of PR and Communications at LendInvest, echoed Funding Circle’s sentiments on the British Business Bank.
“Whatever the background or make-up of the new government, we will be urging it progress the (already fairly advanced) commitment made by Theresa May’s government to partner with alternative lenders to lend more,” she said. “That means empowering state-backed vehicles like the British Business Bank to put more money onto alternative lending platforms that will in turn lend more into the economy.”
Meanwhile, RateSetter, one of the UK’s “big three” peer-to-peer lenders, has also called on the next government to be active in its support of the fintech sector:
“The next government must steer the country through a series of huge challenges, not least keeping us safe and managing Brexit. As it does so, it should make the most of opportunities to get behind businesses so that they can thrive, leading to more jobs, output and economic growth.”
China Rapid Finance (CRF), the Chinese financial technology business that recently listed in New York, expects to add up to 3 million users on its lending platform this year despite the government’s push to tighten restrictions on the burgeoning online lending sector.
In the first quarter of this year, the company attracted 545,000 new borrowers who obtained credit ranging from 500 yuan to 6,000 yuan (US$73.50 to US$882.50) per transaction.
To say digital payment volume in India has grown dramatically over the past few months would be an understatement. Since Modi’s demonetization policy in November 2016 the monthly digital payment volume via India’s Unified Payments Interface (UPI) has increased by almost 2300% as of March 2017.
China’s p2p regulator requires platforms must finish bank depository before the end of June. Currently, some platforms have signed depository agreement with banks. According to the latest news, Xeenho announced that they have signed the bank depository. The bank depository system docking is undergoing, which is expected to operate online in the late June.
Under the wave of Internet financial compliance, more and more fintech platforms attach importance to bank depository. According to data, 433 normal operating platforms have signed bank depository up to the end of May, accounting for 20.16% of the total. Among these platforms, 221 of them have finished the docking of depository system used online.
In response to the regulatory policy, Xeenho Wallet signed the bank depository to guarantee the independent management between funds of platform and users, so as to eliminate the risk of misappropriation.
Dr. Yang Li, CEO of Xeenho, said that the agreement of bank depository has laid a solid foundation for the future development of the company, and they will continue to proactively response to regulatory policies, aiming at achieving the goal of universal finance.
An online finance company in China bilked its investors of over $7.6 billion, that was spent on lavish gifts, salaries and buried that evidence according to authorities who described it as being a huge Ponzi scheme.
These accusations throw a big shadow over the online China finance industry, a lucrative sector that has nurtured global leaders. However, it is one that authorities are saying also has seen a number of flameouts and frauds.
In China, there has been an increase in long-term overdue payments. From 2015 to 2016 the number of corporates experiencing average payment delays of between 90-119 days increased by 25% (from 21% to 26.3%), according to a survey of Chinese corporates, conducted by Coface. The survey also shows that corporates dealing with overdue payments of 150 days or more grew by 60% from 2015 to 2016 (from 9.9% to 15.9%).
In Asia-Pacific (ex-China) invoice trading volume grew from almost nothing in 2013 to a US$116.95 million market in 2015, as noted in the Asia-Pacific Alternative Finance Benchmarking report. Within China, invoice trading in 2015 represented a US$1.46 billion market compared to only US$25.59 million in 2013.
Crowdfunding and Peer-to-Peer lending appear to be the areas which are bringing real business and willing investors together.
The World Bank has predicted the Crowdfunding industry will be worth $95 billion by 2025 and Goldman Sachs said in a report $1.2 trillion of opportunities could be addressed by Crowdfunding in the coming years.
Camden Town Brewery raised £1.5m in Equity Crowdfunding in July 2015, valuing the business at £28m. By December the company had been bought by AB InBev for £85m, netting investors a healthy return.
According to a new report published by Allied Market Research, titled, Peer to peer Lending by End-User Types and Business Model type: Global Opportunity Analysis and Industry Forecast, 2014-2022, the peer to peer (P2P) lending market was valued at $26,064 million in 2015 and is projected to reach $460,312 million by 2022, growing at a CAGR of 51.5% from 2016 to 2022. In 2015, small business loans dominated the market, whereas consumer credit loans is anticipated to grow at a robust rate, in terms of market share.
North America is leading the peer to peer lending market, followed by Asia-Pacific.
Asia- Pacific would witness the highest CAGR of 54.1% mainly led by China, owing to emergence of a number of small scale peer to peer lending service providers.
TSB Bank has finally acknowledged that it’s lending money through peer-to-peer (P2P) lender Harmoney.
The bank has disclosed this in its annual report, released on Friday, saying it has lent $50 million through Harmoney to date.
Heartland Bank, which holds a 12.59% stake in Harmoney, also lends money through the P2P lender. By December 31 last year Heartland had lent $62 million through Harmoney’s online platform. TSB has not disclosed a shareholding in Harmoney.
The key takeaways from the FSB’s report (which can be found here) are:
A growing sector: In absolute terms, the largest FinTech credit market is China, followed at a distance by the United States and the United Kingdom.
Benefits: The benefits include lower transaction costs, convenience for users, increased credit access for underserved segments of the population or business sectors, and (in relation to financial stability) a lower concentration of credit with traditional banks and more pressure on those banks to increase efficiency.
Risks: The risks include: increased financial risk in platforms due to a greater credit risk appetite; untested risk processes and relatively greater exposure to cyber-risks; swings in investor confidence impacting the financial performance of platforms; and (in relation to financial stability) lower lending standards, incumbent banks taking on more credit risk in response to competition, securitisation increasing the connection between traditional and FinTech credit and the challenges posed to the regulatory perimeter.
Business models: The nature of activity varies greatly across and within jurisdictions due to the diverse business models used. These models include: the ‘traditional P2P lending’ model (a borrower-lender matching service with the platform often providing a risk assessment); the ‘notary’ model (a matching service where the loan is originated by a partnering bank – Germany and Korea); the ‘guaranteed return’ model (the platform guarantees a return to lenders – prevalent in China); the ‘balance sheet’ model (the platform originates and retains the loans on its own balance sheet – Australia and Canada); and the ‘invoice trading’ model (factoring services to manage cash flow for the start-up and small business segments).
Sources of funding: Securitisation capital markets have become an important source of funding for FinTech credit platforms in the US. Cross-border funding is higher in Asia Pacific (ex-China). The average retail investment is around US$8,000 in China but, due to regulatory caps, only €500 in France.
Borrowers: The available data suggests that consumer loans are typically in the range of US$5,000 to US$25,000 with the US at the top end of that range. Average loans in China are much larger, at more than US$50,000.
The Monetary Authority of Singapore (MAS) has proposed to make it easier for digital advisory services providers to operate by offering some major concessions under the financial regulatory framework.
One is to allow digital or robo advisers operating as fund managers under the Securities and Futures Act to offer their services to retail investors. This could happen even if robo advisers do not meet track-record requirements, as long as they provide certain safeguards.
A MAS consultation paper released on Wednesday proposed that there would not be separate licensing for digital advice. But firms offering these services would have to comply with some safeguards.
One is that portfolios must be diversified and comprise non-complex assets.
15-16th June 2017
New York City, US
The most established Collateral Management event in Europe comes to the US for the 6th time. In 2017, the non-cleared margin rules compliance will take the spotlight, providing attendees …
15-16th June 2017
New York City, US
The most established Collateral Management event in Europe comes to the US for the 6th time. In 2017, the non-cleared margin rules compliance will take the spotlight, providing attendees with insights on how to shift from tactical compliance to a long term strategy.
News Comments Today’s main news: Modi’s plan to turn India into a fintech powerhouse. Georgia Supreme Court rejects narrowing Payday Lending Act. New York state rules MCAs are loans. Today’s main analysis : India’s PM Modi’s strategy for making his country a FinTech superpower. Today’s thought-provoking articles: India’s decision on rupee notes. How Aussie government can spur FinTech. WeiyangX FinTech […]
New York State rules that Merchant Cash Advance is a loan under the state’s usury laws. GP :”This is very important for the merchant cash advance industry. New York continues to make ripples in MCA, after Madden vs Midland in unsecured personal lending. The attorneys here suggest ways in which MCA companies can still try to consider their product a different non-loan product. The problem with the usury law is that it caps interest to 25% and nearly all MCA products are above 25% APR”.
Modi’s master plan to make India a FinTech superpower. AT: “The best reading today is about India, which seems to be moving toward the cashless society and FinTech firms in that country are eating it up. Here’s how the Prime Minister has positioned the company since 2014. There’s a lot going on in Asia right now with India and Singapore taking great strides to compete with China.”
India’s decision on rupee makes FinTech happy. GP:”The fact that Modi actually took a real , swift action by discontinuing the large banknotes in India and forcing people to go to electronic money is a token to his commitment for action on fintech. Very impressive. ” AT: “Forbes talks to FinTechs in India to get their views of Modi’s recent decision to nix certain rupee notes.”
LendInvest introduces exit opportunity for developers. GP:” As I was writing previously, online crowd real estate companies need to find more products beyond short term property flipper loans. LendInvest added a medium expensive medium duration loan at 0.7% per month interest rate loan. Easier to sell a new product to existing customers then finding new customers for new product.”
Does the debate on robo-advice hamper innovation? GP: ” I doubt a debate hampers innovation. If there is a real business case, a pain point ,a solution, and an ROI , people will buy them, and therefore people will make them. If the RoboAdvisors are not doing well, it’s because of other reasons and not because we are talking about them.”
Last week, in Western Sky Financial v. State of Georgia, the Georgia Supreme Court issued a decision rejecting challenges to the state’s Payday Lending Act (the “Act“) and affirming the denial of a motion to dismiss claims alleging violations. The decision confers sweeping authority on the state’s Attorney General to regulate out‑of‑state lenders who extend small, high-interest-rate loans to Georgia residents.
Georgia’s Payday Lending Act imposes civil and criminal liability on lenders extending loans in the amounts of $3,000 or less, unless the loans are permissible under applicable state usury law or subject to certain exemptions.
On October 25, 2016, the New York Supreme Court of Westchester County issued a decision in Pearl Capital Rivis Ventures, LLC v. RDN Construction, Inc. that helps clarify the circumstances under which the provision of a merchant cash advance in exchange for the assignment of future receivables may be deemed a loan subject to usury restrictions, versus a non-loan purchase and sale agreement.
In Pearl Capital, the New York Supreme Court, which is the trial-level court in that state’s court system, considered whether the merchant cash advance arrangement between plaintiff Pearl Capital and defendant RDN Construction was either a loan subject to New York’s criminal usury restrictions or a non-loan contract for the purchase and sale of future accounts receivables. Athough New York’s civil usury laws do not apply to commercial loans, such loans are subject to the state criminal usury statute (N.Y. CLS Penal § 190.40), which imposes a 25 percent maximum interest rate. Under the terms of the parties’ agreement, the court deemed the arrangement to constitute a loan.
Although the defendant’s witness testified that by purchasing future receivables RDN Construction accepted business risks besides the normal risks of repayment common to a loan, the court discounted this testimony on the basis that “[m]erely telling the Court that risk is contemplated under the terms of the Agreement is inadequate…”
The Pearl Capital case highlights the critical importance of paying close attention to the terms and conditions of any merchant capital advance agreement. In considering a judicial challenge to the parties’ agreement, a court is likely to look beyond the general nature of the relationship and probe the precise terms of the governing contract.
For a sale of receivables to be treated as a purchase and sale agreement versus a loan, the sale must be without recourse to the seller. In the case of a sale without recourse, the purchaser accepts the business risk that the seller may not perform as expected, and that the planned-for future receivables may not materialize.
A violation of certain representations and warranties in the merchant cash advance agreement may allow the purchaser of the receivables to proceed directly against the seller for breach of contract, such the seller’s opening other bank accounts, filing bankruptcy, or engaging in fraud or other misconduct.
Helping FinTechs prepare for the regulations of tomorrow is the focus of an afternoon briefing, Growing a FinTech Enterprise: Legal and Business Frameworks, which is part of the Bloomberg Next series. The event takes place at the Washington, D.C. offices of Bloomberg Government the afternoon of Wednesday, November 16 and is underwritten by Sullivan & Cromwell. For additional event and registration information, visit
Fintech companies in Georgia generate about $72 billion in annual revenues. Only New York and California produce more income from financial technology, making Georgia third in the entire country. Atlanta and its surrounding areas have grown into one of the country’s fintech capitals. Because of this, the state can also claim global leadership in this emerging industry. This makes Atlanta the perfect location for a networking and career event called Future Stars 2016.
When: Rising Stars 2016 will be held on Tuesday, November, 15 from 8 AM until 11 AM.
Where: The Research Institute Conference Center at Georgia Tech will house the event.
Host:FinTech Atlanta will host this event in order to fulfill its mission of supporting the rise of the financial technology industry in the Atlanta Metro Area.
A new analysis from Cerulli Associates projects the digital advice market will exceed $83 billion by the end of the year, with no sign of slowing growth through the end of the decade.
The Cerulli research observes that growth for robo-advisers is strong now and will likely remain strong for some years to come, but at the same time, it is becoming increasingly apparent that robo-advisers “are not necessarily the fundamental disruption that the traditional financial industry has been concerned about.”
As the dust settles on the reality of a Donald Trump presidency, Bradley Tusk, a prominent venture capital investor, said start-ups should prepare for a less intrusive regulatory regime, but warned that the new administration might also be more willing than his predecessor to protect legacy industries.
Endeavor hosted its first ever New York City Fintech Tour on November 8-9, connecting ten entrepreneurs from eight different countries with leading Fintech innovators in the city.
Day one began with advisory board-style sessions at Barclays, in which the bank’s senior executives and managing directors strategized with participating entrepreneurs on their growth challenges. The group then toured Bloomberg, the original Fintech innovator, and discussed the company’s historical focus on building Fintech products and services with the core B2B customer in mind with with Global Head of Platform Technologies Cory Albert.
Day two kicked off with an entrepreneur-to-entrepreneur lunch for members of the fintech community in Endeavor’s own network to share their own challenges, best practices, and solutions with each other.
In all this flurry of the government scrapping Rs 500 and Rs 1,000 notes with immediate effect, what most have failed to see is the series of moves that had been leading up to this moment.
First, there was the Pradhan Mantri Jan-Dhan Yojana launched on August 28, 2014. The move was essentially to set the foundation of creating bank accounts for the unbanked and bringing them under the gamut of financial inclusion.
Then came the much awaited Unified Payment Interface (UPI), which allowed individuals to make payments through a single identifier like Aadhaar number or virtual address. This, along with the Bharat Bill Payment System (BBPS) launched in September 2016, was an effort to institutionalise digital payments in the country.
This almost seems like the Indian economy has started the curve of becoming a credit economy like the US.
Anurag Jain, co-founder and COO of peer-to-peer online invoice discounting platform KredX believes that the elimination of black money will lead to more compliance from businesses.
Speaking to YourStory, Govind Rajan, Freecharge CEO, claimed that post the announcement, there was a 12x surge in their customer’s wallet balances overnight.According to Govind, the average transaction size on a wallet ranges from Rs 500– 700. With individuals using wallets for higher value transactions, this is expected to double in the coming year.
In a move that surprised many, Indian Prime Minister Narendra Modi in a speech on Tuesday evening announced that Rs 500 ($7.5) and Rs 1000 ($15) notes were abolished as of midnight. The move is aimed at reducing black money and busting the counterfeit currency racket in the country since moving unaccounted cash transactions to online will ensure monetary dealings to fall under the purview of scrutiny by the income tax department. This is expected to give a push to the PM’s Digital India vision — a move to increase cashless transaction and empower India, a largely cash-driven economy, as a digital nation. Fintech companies, not surprisingly, are rejoicing.
Paytm, the country’s top mobile wallet company, is already seeing a surge in its user base.
Capital Float, one of the most funded startups in the fintech lending space in the country, said the move will help startups target more customers.
Other fintech companies like ftcash and PayPal see this as a watershed moment for the industry.
The product, available on loans between £250,000 and £5m, is for developers who have completed projects but not yet sold all the units.
It is priced at 0.7% interest per calendar month, allowing developers to switch to short-term, lower-cost funding. A maximum loan-to-value of 75% applies but there are no early repayment charges and borrowers may be able to retain part of the proceeds from every unit sale.
Zorin Finance, a residential development finance specialist, has broken cover after having funded more than £100m in development loans (with a gross development value of over £150m) in just 12 months. The platform is backed by funds managed by MW Eaglewood and Sir John Beckwith’s Pacific Investments, and has been flying almost entirely under the radar up until now.
Zorin, which was founded in 2011, set out to plug the financing gap for small-to-medium sized house builders that had emerged in the wake of big banks pulling back from real estate developments. The technology oriented firm claims to lend faster and more flexibly than its counterparts in the world of banking.
Online mortgage lender LendInvest has completed a series of bridging and development finance cases in Scotland.
Deals already agreed include a £480,000 bridging loan to an investor buying in Edinburgh’s Quartermile area and a £200,000 bridging loan on a property in the West End of Glasgow, which is to be refurbished into a house in multiple occupation (HMO).
LendInvest entered the Scottish market in June with the recruitment of Peter McDermid as business development manager for Scotland. He joined from Shawbrook Bank and his appointment was LendInvest’s first official presence outside of London.
Robo-advice tools have the potential to help address the UK’s ‘advice gap’, which was highlighted in the Financial Advice Market Review (FAMR) published earlier this year.
Figures in 2015 showed there was appetite in the UK market for greater regulatory clarity on the use of robo-advice solutions. From autumn 2014 up until 19 August 2015, the Financial Conduct Authority (FCA) received 39 requests from companies for assistance on how to implement robo-advice systems, technology or services, under its Project Innovate initiative.
There remains, however, an unexpressed debate about the way robo-advice tools should be treated for regulatory purposes. The debate – and the uncertainty that results – threatens to hamper innovation in the UK.
eToro, the world’s leading social trading network, is entering the world of thematic investing with the launch of CopyFunds.
CopyFunds will be divided into Top Trader CopyFunds™; comprising the best performing and most sustainable traders on the network and Market CopyFunds™ made up of specially-selected instruments such as stocks, commodities or ETFs allowing investors to track a wide array of sectors around a defined market strategy.
Top Trader CopyFunds™ is built using machine learning technology that selects the best performing traders on the eToro network.
One of the hottest topics in the banking world this year is lending solutions for SMEs. A sudden increase in alternative lenders targeting SMEs, and a surge of innovation from traditional lenders in SME propositions – such as commercial cards and working capital loans – have highlighted the extent to which SMEs have been, and continue to be, under-served since the financial crisis.
Product innovation in SME lending has also required fundamental changes in business models. The ideal SME proposition should incorporate the following key factors:
Speed – Fast decision making and short waiting times for receipt of funding
Simplicity – Easy to understand processes
Flexibility – Flexibility with use of funds and repayment processes
In a more recent interview for the site Crowdfund Insider, Albrecht said that after obtaining the BaFin license – a process that took three years – Bitbond will introduce the Euro as a base currency and will turn its attention to creating a secondary market for investors to buy and sell notes on the platform.
Furthermore, Albrecht added, Bitbond is planning to bring larger institutional investors onto the platform in 2017 in order to scale more efficiently.
Sebastian Siemiątkowski, founder of Klarna, Ricky Knox, CEO of Tandem Bank and Alexander Graubner-Mueller from Kreditech will come to Wroclaw to attend impact’16 fintech/insurtech – a congress devoted to the technological trends in financial sector.
Another guest coming to impact’16 fintech/insurtech is Ricky Knox, founder of Tandem Bank, a financial institution available only through mobile application. Tandem Bank was built thanks to a crowdfunding campaign.
Alexander Graubner-Mueller, CEO of Kreditech will be also present in Wroclaw. Kreditech by using non-traditional data sources and machine learning provides access to better credit and higher convenience for digital banking services. As a result Kreditech can provide us with the information about borrower within less than a minute.
Congress that will take place from 7-8th of December in Wrocław will be focused on the most important problems from fintech and insurtech areas. Among topics covered, we will find such as finacial education, new regulations, blockchain, cryptocurriencies, cybersecurity, information management and new payment methods.
Augen Software Group director and NZTech chair Mitchell Pham made the announcement to set up FinTechNZ at the inaugural Finnotec 2016 conference in Auckland today. The event was organised by fintech company SavvyKiwi, whose founder is passionate about providing a place for the NZ fintech community to learn and grow together each year.
“We have seen the power of collectives in other sectors and countries, and so are 100 percent behind the bringing together of the NZ fintech community.
FinTechNZ will give New Zealand participants a better chance to collaborate, engage and grow, both domestically and internationally.”
Pham says FinTechNZ can leverage on NZTech as a platform to get up and going quickly and efficiently.
Australia is beginning to enjoy the benefits of a fintech boom, but for this emerging industry to grow properly it needs infrastructure support. Without it, we’re at risk of seeing Aussie fintechs left behind as overseas players dominate the Australian and Asian landscape.
There have been some welcome initiatives recently, like ASIC introducing a regulatory sandbox for start-ups to trial new ideas. But compared to other governments around the world, Australia doesn’t have the political support to turn this industry into a powerhouse.
There are four main ways we can support Australian fintech now, in the medium term, and into the future:
Copy the initiatives that are working overseas
Require banks to refer to alternative lenders
Encourage fintech investors by enforcing minimum standard on the quality of advice
Standardise presentation of interest rates to SME borrowers
Kiwis are open to the idea of a robo-adviser helping them manage their finances, but still want real people available to help them with some decisions, research by KiwiSaver provider Kiwi Wealth shows.
The Rise of the Money Robots: Kiwis’ attitudes to roboadvice report has been released to coincide with New Zealand’s first ever “fintech” conference being held today in Auckland.
Few people seek financial advice, and roboadvisors could play a role in providing it easily and cheaply, once New Zealand laws have been changed to legalise roboadvice. Currently financial advice can only be given by a person, not a well-programmed machine.
One of the great things about a country with the size and innovative culture of New Zealand is that when technology shakes up a sector we can get the key people together in one room to share intelligence, identify opportunities and build relationships.
I’m almost certain there will be at least one fintech business of the future that will begin its life as a discussion at the morning tea break of this conference.
I’d like to start by acknowledging the impressive performance of our fintech sector.
Xero has shown now just New Zealand but the world just how far you can go, but it is by no means the only exciting kiwi fintech business.
From our smart-payments start-ups, to our crowdfunders, to our peer-to-peer lending platforms, to some of the work our big banks are doing, we already have a varied fintech ecosystem.
We provide a good test-bed for fintech products, as our population is digitally literate with an appetite for new technology.
We also have a proven history of nimbleness when it comes to regulation and licensing that enables innovation.
This is what allowed us to be ahead of the curve with innovations such as equity crowd-funding and peer-to-peer lending.
I know many of you attended the launch of the new Kiwibank Fintech Accelerator last week. I hear it was a great, and well attended event.
This accelerator is one of three new accelerators supported with money the Government allocated in this year’s budget.
It will be run through Wellington’s Creative HQ and will help ten fintech teams develop their products and pitch to investors.
The teams will work directly with Kiwibank, Xero and other financial industry partners.
It has been reported that Bank of China and HSBC will launch a blockchain-based housing mortgage service in Hong Kong.
On November 3rd, the China Insurance Regulatory Commission (CIRC) announced it would strengthen regulations towards online mutual insurance platforms.
Last week, R3 announced the addition of China Foreign Exchange Trade System(CFETS) to its innovative blockchain consortium, the third member from China after Ping An Bank and China Merchants Bank.
It has been reported that the PBOC is planning to set strict control on Bitcoin-FX exchange in order to prevent excessive capital outflow. However, none of the major bitcoin trading platforms in China have confirmed reciving such regulations.
According to the Interim Provisions issued in August, in order to protect the investors from illegal fund-raising, P2P platforms in China should isolate with the capital of lenders and borrowers, and pool the money in a third-party escrow account in banking financial institutions. On October 13th, the General Office of State Council also urged the establishment of a third-party deposit system in a regulation document about the risk of internet finance.
China Rapid Finance Limited (“CRF”), China’s largest consumer lending marketplace in terms of number of loans facilitated, today announced the cumulative number of borrowers on its platform had exceeded one million as of October 31,2016.
The platform had facilitated 8.8 million loans in total as of the same date, the Company reported.
The EMMA population –who have no credit histories and can’t borrow money from traditional financial organizations– is estimated at around 500 million people in China. This represents the world’s largest untapped consumer credit market. This typically young, urban, educated and internet-savvy group is expected to become the consumer mainstream in China in coming years.