Thursday March 22 2018, Daily News Digest

Thursday March 22 2018, Daily News Digest

News Comments Today’s main news: LendingTree launches free credit monitoring. Paytm gets into P2P lending. EquityMultiple stops promoting Reg D 506c offerings. Trusted Quid customer info stolen in data breach. PPDai grows revenue as stock rises. Today’s main analysis: Why China Rapid Finance’s ownership structure is important. Today’s thought-provoking articles: Are Amazon, Costco, and Target inching into wealth management? Open banking […]

Thursday March 22 2018, Daily News Digest

News Comments

United States

United Kingdom

China

Other

News Summary

United States

LendingTree Launches Free Credit Monitoring Service (LendingTree), Rated: AAA

LendingTree, the nation’s leading online loan marketplace, today announced the launch of a free credit monitoring service within the My LendingTree platform. In partnership with TransUnion, LendingTree monitors users’ credit profiles daily and sends alerts of any changes or potential suspicious activity within 30 minutes of the credit report being updated.

Real Estate Investment Platform EquityMultiple Gives up on Reg D 506c (Crowdfund Insider), Rated: AAA

No longer will EquityMultiple publicly promote its real estate offerings online and elsewhere. Previously, EquityMultiple has leveraged Reg D 506c – a new securities exemption created by the JOBS Act of 2012. This rule allowed issuers and platforms to promote offerings on the internet – via social media and elsewhere  – in contrast to old Reg D (506b) that was barred from any advertising. And why on earth would EquityMultiple not want to promote unique and compelling investment opportunities? Because of the broken nature regarding the general solicitation rule.

Amazon in wealth management? What about Costco or Target? (Financial Planning), Rated: AAA

With Amazon inching closer to financial services, industry observers say its a worthy exercise to think about other potential retail competitors.

“People may roll their eyes in the land of wealth management and financial services, but it’s no longer a place for just banks. They don’t own it anymore,” said Doug Fritz, CEO and founder of F2 Strategy, a technology and marketing consulting firm to the wealth management industry based in the San Francisco Bay area.

Costco seems like the most obvious candidate to get into the wealth management space, said Fritz.

Incumbents such as Charles Schwab have already boxed in robos with products and are not being shy about advertising them, he adds.

5 Savvy Ways To Invest $ 10,000 In 2018 (Forbes), Rated: A

Online Real Estate Investing

Poll of SMBs Reveal Plans to Make Tech Investments Amid Strong Sales Growth (WWD), Rated: A

In a recent poll of small- to medium-sized businesses, financial and technology firm Kabbage Inc. found high expectations for sales growth this year as well as plans to make investments aimed at automation.

Kabbage, which offers lines of credit of up to $250,000 and cites retail as its top vertical, said more than 67 percent of the brick-and-mortar retailers polled expect revenue growth of over 20 percent this year. More than 73 percent of the online retailer respondents expect the same. The survey was based on responses from 800 businesses.

Regarding automation technology, nearly 44 percent of physical store retailers have plans to make investments in this area compared with 60 percent of online retailers. With cyber security and similar fraud prevention technologies, about 44 percent of both online and physical store retailers have plans to make investments in these solutions.

 

 

 

Hundreds of Start-Ups Tell Investors: Diversify, or Keep Your Money (New York Times), Rated: A

The American venture capital industry, which invested $84 billion in more than 8,000 companies last year, has long faced little to no impetus to alter its demographics. Venture firms are usually small private companies made up of former tech executives or financial types, who are mostly male and white. And because venture firms operate with long-term horizons — their funds generally invest over a 10-year period — the industry’s pace of change is often glacial.

In 2016, 11 percent of venture capital firms’ investment partners were women, according to a survey by the National Venture Capital Association and Deloitte. The survey found no black investment partners at venture firms, while 2 percent of investment partners were Latino.

Buyers acquire taste for deposit-rich banks (American Banker), Rated: A

Total loans at banks with less than $10 billion in assets rose by nearly 17% between 2012 and 2017, surpassing the roughly 5% increase in deposits over that time, according to data from the Federal Deposit Insurance Corp.

 

NYDFS sends survey request to online lenders (National Law Review), Rated: B

The New York Department of Financial Services has sent a letter directed to businesses that the DFS “understands…may be involved in online lending in the State of New York” and that asks recipients to complete a “New York Marketplace Lending Survey” that they can access online.

The letter states that the DFS is conducting the survey to gather information for a public report that it is required to issue by July 1, 2018 and which must include information about online lenders operating in New York and their business practices, including lending practices, interest rates and costs charged, and consumer complaints and investigations about the industry.

United Kingdom

Open Banking prompts UK fintechs to reassess collaboration partners (P2P Finance News), Rated: AAA

A report from accountancy firm EY, released on Thursday, found that 59 per cent of UK fintech firms see Open Banking as an opportunity to review their collaboration strategies.

The survey of 31 UK fintech firms also found that 74 per cent of respondents believe that new competitors such as tech firms will become increasingly important over time.

The new data rules, which mandate high street banks to share anonymised customer data with approved third parties, came into effect in January 2018. Peer-to-peer lenders such as Zopa and Lending Works have already announced their plans to capitalise on the new initiative.

94 per cent of fintech firms said they were focused on enhancing their current products and services and 81 per cent said they are planning to use Open Banking to build new services.

Early Returns From Open Banking Show a Mixed Picture (Lend Academy), Rated: A

Banks have not really stepped into the new world until recently as HSBC has stated they will be set to go live with a product by early May, RaboBank is creating a mobile ecosystem and RBS has explained they are working on solutions which includes a stand alone digital bank.

Digital banks Monzo and Starling Bank have already established themselves as early leaders in the market with their open APIs. Both have created financial marketplaces to allow for easy integration and access to different banking services.

Payday lender Trusted Quid admits 66,000 customers details were stolen in data breach (The Sun), Rated: AAA

Details of 66,000 customers including phone numbers, dates of birth, addresses, loan details, employment status and bank account information, were all taken from the website.

In a statement the company said: “There has been a theft of data from unauthorised access to the Trusted Quid website.”

“The incident relates to data directly entered by people applying for a loan only on the Trusted Quid website between 1 July 2016 and 17 February 2018.”

Trusted Quid say they have made three previous attempts to contact customers affected by the data breach.

 

Feature: Is London cooling? (Mortgage Strategy), Rated: A

Research from online estate agent HouseSimple in January showed only 387 properties for sale in zones 1–2 below the magic £300,000 level, rising to just 1,235 in zone 3. For homes valued at £300,001–£500,000, there were just 7,687 in zones 1-3 that were eligible for a stamp duty cut.

BUSINESS SHOWCASE : LOANBIT (Irish Tech News), Rated: A

LoanBit is a multi-currency platform that supports everything from fiat currencies to the latest cryptocurrencies. It allows you to send money in an encrypted format and secure it with state-of-the art security measures.

LoanBit offers an armor of a protection for the lenders. It safeguards the interests of the lenders in the community by covering up to 75% of the loan.

With LoanBit you can:

  • Keep money in a multi-currency wallet,
  • Trade on the integrated exchange,
  • Invest money in cryptocurrencies, and
  • Get a loan in the currency of your choice

ISAs 2018: Innovative Finance Isa can offer rates from 5 to 10 per cent (Express), Rated: A

The Innovative Finance Isa, or Ifisa, was announced by the Government in April 2016, giving ordinary savers the opportunity to invest in growing British businesses free of tax through the growing peer-to-peer (P2P) lending market, sometimes called crowdlending.

Landbay targets 3.54 per cent, Zopa aims for 4.6 per cent a year, Ratesetter offers between3and 6 per cent and Money&Co an average of 8.6 per cent.At the riskier end of the scale the RebuildingSociety is aiming for 9.7 per cent.
China

Is Ping An China’s Most Valuable Insurer or a Tech-Investing Fad? (The Wall Street Journal), Rated: AAA

The $100 billion question for the world’s second-largest insurer: is it an insurance firm or is it a technology firm?

Shares of China’s Ping An Insurance—the biggest insurer by market value after Warren Buffett’s Berkshire Hathaway—have more than doubled in the past year, far outpacing peers. The increase in its market capitalization—of more than $100 billion—is partly due to the fast growth of its life- and health-insurance business. The value of new business last year grew 33% from 2016.

Shares Rise as PPDai Reports Revenue Growth, Stock Buyback (Capital Watch), Rated: AAA

PPDai Group Inc., an online peer-to-peer lending platform in China, reported today that its operating revenues for the fourth quarter increased more than 85 percent compared with a year earlier.

The Shanghai-based company, which completed its initial public offering in November, said during the quarter, it had a net loss attributable to ordinary shareholders of $200.4 million, or 89 cents per American depositary share. That was in contrast to income of $2.8 million a year earlier. Revenue for the three months ended Dec. 31 was $140.2 million, up from $75.7 million in the year-earlier period.

Why China Rapid Finance Limited’s (NYSE:XRF) Ownership Structure Is Important (Simply Wall St News), Rated: AAA

I am going to take a deep dive into China Rapid Finance Limited’s (NYSE:XRF) most recent ownership structure, not a frequent subject of discussion among individual investors. When it comes to ownership structure of a company, the impact has been observed in both the long-and short-term performance of shares. The same amount of capital coming from an activist institution and a passive mutual fund has different implications on corporate governance, which is a decisive factor for a long-term investor. It also impacts the trading environment of company shares, which is more of a concern for short-term investors. Therefore, I will take a look at XRF’s shareholders in more detail.

Source Simple Wall Strett

Institutional Ownership

In XRF’s case, institutional ownership stands at 18.79%, significant enough to cause considerable price moves in the case of large institutional transactions, especially when there is a low level of public shares available on the market to trade.

Insider Ownership

Another important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market.

General Public Ownership

The general public holds a substantial 42.76% stake in XRF, making it a highly popular stock among retail investors.

Private Equity Ownership

Private equity firms hold a 16.12% stake in XRF.

Private Company Ownership

Potential investors in XRF should also look at another important group of investors: private companies, with a stake of 5.44%, who are primarily invested because of strategic and capital gain interests.

China toughens supervision on third party payment (xinhuane), Rated: B

Agricultural Bank of China announced in a recent notice that it would cut off the payment channel for Internet finance businesses such as peer-to-peer lending, the Xinhua-run Economic Information Daily reported.

The move followed a series of penalties levied at banks and online payment companies, which analysts said were aimed at curbing risks arising from direct clearance agreements between them.

European Union

 

Danish online lender basisbank to implement Fico Blaze Advisor (Finextra), Rated: B

With FICO Blaze Advisor decision rules management system, Basisbank risk analysts will be able to quickly make changes to credit strategies for unsecured consumer loans and point-of-sale financing in order to increase profitability and reduce the risk of loans going unpaid. Basisbank receives more than 75 percent of its credit applications from mobile devices.

International

How digital banks are raising the bar for customer experience (Tearsheet), Rated: AAA

Challenger bank N26 raised $160 million in Series C funding this week to fuel its expansion to the U.S., and other markets, later this year. Revolut, another U.K. challenger, has been planning a U.S. launch this year too and Monzo is rumored to follow.

Digital-only challenger banks have changed customer expectations, including customer service and how customers want to use financial products. Big banks are taking notice, with companies developing sub-brands to hook younger, digital-savvy customers or others — the most recent of which is rumored to be the Royal Bank of Scotland.

For Monzo, which just crossed 500,000 current account holders, the absence of physical branches doesn’t mean a lack of interaction with customers. Monzo’s approach is to release early versions of products to a group of customers and get customer feedback from within the app and through an online forum. It’s an approach that gives customers a sense of ownership and excitement about the brand. For Monzo’s marketplace beta, it sought out feedback from 3,000 customers.

India

Digital payments player paytm wants slice of P2P lending (The Economic Times), Rated:AAA

Paytm, the country’s largest digital payments company, is trying to enter the lending space and is seeking a licence from RBI to become a peer-to-peer lending platform.

According to documents sourced by ET from the Ministry of Corporate Affairs, the company moved a board resolution on February 7 saying it intends to “carry on the business of non-banking financial company — peer-to-peer”.

Authors:

George Popescu
Allen Taylor

Will Upgrade Live Up To Its Name?

Upgrade

It can be argued that the same qualities that make Renaud Laplanche a world-class yachtsman are also those that make him the type of innovative thinker and driven doer to be a world-changing captain of finance. It can further be surmised that these qualities are what brought about the loan irregularities that led to Laplanche’s […]

Upgrade

It can be argued that the same qualities that make Renaud Laplanche a world-class yachtsman are also those that make him the type of innovative thinker and driven doer to be a world-changing captain of finance. It can further be surmised that these qualities are what brought about the loan irregularities that led to Laplanche’s resignation from Lending Club in 2016.

The thing about elephants in the room is that they are sometimes so large that we forget that there are other things in the room. In this case, those other things are Laplanche’s proven record as a pioneer in fintech.

From its beginnings in 2006, as one of Facebook’s first applications, Lending Club continuously set records. A peer-to-peer lender (P2P), Lending Club was designed to leverage existing connections among users. The idea paid off in spades.

It was the first P2P lender to register its offerings as securities with the SEC, which opened the door for it to become the first lender to offer loan trading on a secondary market. It is the world’s largest P2P lending platform with more than $20B in loans to Americans to refinance debt at lower rates and pay off credit card debt with personal loans with fixed and lower rates. It raised $1B in the largest tech IPO in the U.S. in 2014, and, as of April of this year, the company had raised nearly $400M through 14 funding rounds. The result of all of that was nothing short of this: Two million American families have access to more affordable credit due to the company’s efforts.

And when he speaks of the problems that brought about his exit from the company, Laplanche details just how a driven person of business, a proven winner who sometimes lets his gut get out in front of his reasoning, might be entangled by issues in a new world of thought and an ever-changing world of technology.

“What I learned was that we had a compliance issue, and it reinforced in my mind how critical compliance is when you run a financial service. With fintech companies, the balance is critical. We want technology attributes and to generate a culture of trying things that have never been done before. You have to balance that with discipline and compliance, risk management. That balance is really hard to strike. At Lending Club, we were trained to find the right balance, and we were very focused on compliance, but not sufficiently.”

Laplanche Launches Upgrade

And also like a winner of races, Laplanche couldn’t stay out of the game long, and thus we have Upgrade. Launched in April with co-founder, Jeff Bogan, who made the move from Lending Club as well, Upgrade is a Series A early stage venture, which offers a one-page application and a decision within seconds and causes no negative to the credit score, whatever the decision. The company sports an online lending platform that combines personal loans with free credit monitoring, helping the borrower to secure more affordable credit in the long run.

Offering loans up to $50,000 and with available repayment periods of 36 and 60 months, Upgrade offers low fixed rates, low monthly payments, and no prepayment fees.

Looking at those attributes, it’s evident why Laplanche and Bogan chose to call the company Upgrade. A lot of the information on the company resembles what Lending Club must have looked like a decade ago. It’s all similar except for the upgrade, of course. And what is the upgrade?

The upgrade is the use of technology for credit monitoring tools to give what Laplanche refers to as “a new standard of transparency.” By combining the credit monitoing features of a service like Credit Karma with a Blockchain protocol to protect data integrity—plus working on a process to create “an immutable timestamp record of every borrower transaction by committing each document to a public ledger”—Laplanche states the company goal of a “very strong record and the establishment of better data integrity.” He also says that he and his partners at Upgrade have taken their “experience and everything [they’ve] learned to design version two of online lending, technology that wasn’t available to them 10 years ago, which will make the company more efficient and valuable to customers.

Laplanche and Upgrade Look Into the Future

Things seemed off to a good start for the company in March when the initial funding round raised $60M from 10 investors including Union Square Ventures, Sands Capital Ventures, and Silicon Valley Bank. Things have been slow going since then, however, and Laplanche tells us that was because they “spent the first few months testing the compliance framework with management.” Having made some changes based on data in late July, he says the company then “felt ready to upscale and started ramping up.” When we asked if he could share with us the company’s main performance numbers he said the company has not reached the point when it is ready to start releasing performance data publicly.

Laplanche’s Thoughts on the Future of Online Lending

Experts project $200B in worldwide loan originations by 2020, and Laplanche doesn’t see Upgrade having any competition in the market in which online lenders continuing to capture market share; rather, he sees the company’s main competition coming from the inertia of consumers doing nothing about the trillion dollars in outstanding credit card balance that currently exists in the U.S. “We educate consumers on the fact that a credit card balance is essentially a loan, and since it is a loan, you can refinance at a lower rate.” We use “modern technology and online delivery to lower costs. We pass that on to consumers and help them save money on their credit card bills.”

Laplanche’s zeal may have caused him to move too fast and overlook some things he should have seen at Lending Club, but his caution and due diligence in these first few months of Upgrade indicate that he has seen his error and is focused on doing the things to not repeat it in the future. So, if there’s a race to see which fintech companies can grab a good share of this expanding market, Laplanche probably isn’t someone we should count out without serious consideration.

Author:

Written by Paul Keenan.