Lendr is a platform that is looking to revolutionize the loan origination and loan management process by considering all parameters like past performance and future potential, and it is not dependent exclusively on credit score. The team at Lendr aims to provide a fast, transparent, and simple solution for businesses and fill the gap for […]
Lendr is a platform that is looking to revolutionize the loan origination and loan management process by considering all parameters like past performance and future potential, and it is not dependent exclusively on credit score. The team at Lendr aims to provide a fast, transparent, and simple solution for businesses and fill the gap for specialty finance on the broker’s side of the business.
Lendr was established as a joint venture with four partners by founder Tim Roach in New York in 2011. Its core business was feeding leads to lending companies.
George Greco was the co-founder of the company, but he left in 2016. Roach served as CFO from 2011 -2013 and, in 2016, was appointed CEO.
The company also left its legacy system in 2016 and invested in a new lending platform to provide a seamless experience to customers. The company was initially incorporated as Viking Funding Group but, in 2016, was rebranded to Lendr and subsequently moved its headquarters to Chicago.
Lendr has over 40 employees and has achieved double-digit growth since inception. The company has gone on to raise $5 million in equity from a set of five investors.
The Lendr Business Model
Lendr’s core offering is in specialty financing called merchant cash advance (MCA). This is not a traditional loan, and disbursement depends on the company’s everyday credit/debit transactions.
Unlike underwriting models such as FICO that focus on current/past cash funds and transactions, Lendr is based on a forward-facing model, which primarily focuses on the future ability of a borrower to repay funds. For instance, repayment of funds is carried out by taking a percentage of daily bank deposits until the loan is repaid. Lendr offers a broad variety of loan-related products. These include business financing, startup business funding, working capital, small business funding, and equipment financing.
The company leverages Wizard, its proprietary underwriting credit model, for capturing information and searching databases to find the right loan for the borrower. The Lendr platform is based on cutting edge technology capable of providing a lender score (0-100) based on customer responses within two hours. Based on this score, a rate card, interest rate, and advance rate can be calculated. The score is not dependent on FICO for loan eligibility. Once an application is approved, funds will be remitted in less than two business days. A daily or weekly amount will then be automatically debited from borrower account.
The company leverages artificial intelligence to capture borrower data and identify patterns. It is using AI to predict what will happen in the future.
AI also helped Lendr increase its speed in underwriting. Roach said the underwriting process once took three days. In 2017, that was reduced to eight hours. Now, the algorithm can complete a case in just two hours.
In April 2018, Lendr launched a business debit card for SMEs that allows a borrower to get access to funds instantaneously through a virtual master card. It followed this up by also launching a traditional plastic card. It will have the facility to auto renew without waiting for approval, which earlier used to take up to two hours. Also, consumers are not required to wait for disbursement of funds (1-2 days) and will get direct access to funds without any paperwork. Repayment will be weekly or daily based on consumer preference. By the end of Q3 2018, the company is looking to offer a line of credit to borrowers.
Lendr APIs and Competitive Advantage
Lendr has association with many third-party vendors to facilitate the loan process. It has built robust API rules to interact with external vendors and also makes sure to comply with data privacy rules and regulations.
The integration process costs have been reduced by 90% due to the APIs, which are able to interact with multiple vendors and can extract data related to collections, sales, and customer relationship management. This data can be used to perform predictive analysis and run different algorithms to extract results. Results obtained from these algorithms can be used to understand client risk profile, comparing different clients with same kind of risk profile, and provide automated tax analysis with a scoring matrix.
As of now, Lendr processes are around 40%-50% automated loans, and the company can achieve disbursement of funds in 1-2 days. By the end of this year, the startup’s goal is to approve a loan within 90 minutes and fund clients within the same day.
Kabbage is one of the largest of the five or six serious competitors. These competitors can be an expensive proposition for a borrower as they levy higher-than-expected interest rates. Some small businesses are being charged over 180% interest for merchant cash advances. Lendr, on the other hand, charges 15%-25% APR, which is extremely reasonable as compared to other competitors.
Lendr has also recently partnered with MidCap Financial Trust to close a $25 million senior credit facility. This partnership solidifies Lendr’s position in the specialty finance niche.
Lendr is able to achieve MCA originations of $8-$10 million per month and is committed to increasing this number to $12-$15 million by year end. Since inception, the customer base has surged to over 10,000. The company has also been successful in retaining its clients and is providing approximately 2.8 loans per customer. The company aims to increase this to four loans per customer. Lendr is also looking to increase the overall average loan tenure to 14 months.
Features like flexible payment plans, no priority to credit history, short term loans, disbursement of the amount in 1-2 days are key differentiating factors, which makes Lendr a fine choice for small and medium businesses.
In many ways, Canada has long lived under the shadow of the U.S. The alternative lending industry has proven to be no exception. The last few years, however, have seen Canada turn the corner on marketplace lending (MPL). With MPL markets around the world (especially Europe, U.S., and UK) maturing, startups around the world are […]
In many ways, Canada has long lived under the shadow of the U.S. The alternative lending industry has proven to be no exception. The last few years, however, have seen Canada turn the corner on marketplace lending (MPL).
With MPL markets around the world (especially Europe, U.S., and UK) maturing, startups around the world are scampering to find new locations and new opportunities to tap. Though it is not fair to term Canada as a new entrant to the fintech ecosystem, it has finally garnered the attention as one of the most promising alt-lending hubs.
Canadian Alternative Lending Numbers
As the above image indicates, the Canadian alternative finance industry is on a strong growth momentum. All segments of alt-lending (consumer, SMB, real estate) have shown multiple times growth albeit on a very low base. With a GDP of over 1.5 trillion dollars, it is a massive market for lenders. The current size of the market does not even reach a billion dollars, a paltry sum for a country with household debt over 2 trillion dollars.
A Supportive Regulatory Framework
Ontario Securities Commission (OSC), the fintech regulatory body of Canada, has been very supportive of the industry and is one of the major tailwinds for alternative lending in Canada. In October 2016, OSC started LaunchPad with an aim to support and guide fintech startups with compliance. This initiative was followed by the establishment of a Fintech Advisory Committee in January 2017, which helps apprise the regulator on fintech-related developments as well as regulatory challenges faced by businesses. Feedback from the committee will be used by OSC to frame future regulatory guidelines.
Lending startups will still have to comply with different regulatory compliance obligations depending on what kind of financial services are offered by them. Also, depending on which province they are operating in, they will be subject to different regulation and licensing requirements.
Leading P2P Lenders in Canada
Lendified was founded in 2015 by Troy Wright and is headquartered in Toronto, Ontario. It raised $80 million in a couple of funding rounds. Small business owners can apply online in under 10 minutes, receive an instant quote, and get funded in as fast as 48 hours. It offers loans ranging from CAD $5,000 to CAD$150,000 with APR ranging from 8%-18% and terms ranging from 6-24 months.
Borrowellwas founded in 2014 by Andrew Graham and Eva Wong. It’s also headquartered in Toronto. It recently raised over $57 million in funding for aggressive expansion and offers free credit score monitoring, personal loans, and product recommendations. It has lent over $10 million to over 10,000 customers. Borrowell offers loans ranging from $1,000-$35,000 and offers two terms–36 months or 60 months–with APRs ranging from 5.6%-25%.
Financeit was founded in 2011 by Casper Wong, Michael Garrity, and Paul Sehr. Headquartered in Toronto, it has managed from inception to raise over $38 million and recently was acquired by Goldman Sachs for an undisclosed amount. Over the years, Financeit has worked with over 7,000 merchants and processed over $2.5 billion in loan applications. Financeit offers a platform that allows businesses to offer consumer financing to their customers from various devices in Canada. It works with multiple lending partners and automates the banking role for its partner financial institutions, entirely managing loan origination, credit adjudication, regulatory reporting, loan servicing, and collections.
FundThroughwas founded in 2014 by Steven Uster. Its headquarters is in Toronto, and it has raised over CAD $26 million in multiple funding rounds. FundThrough is an innovative technology company helping American and Canadian small business owners improve their cash flow through invoice factoring and financing. It charges 0.5% fees on the top of the funding amount and the borrower has to repay within a period of 12 weeks. The average invoice ranges from $1000 to $100,000 while the average outstanding loan is around $50,000-100,000.
Lendful Financial was founded in 2015 by Alex Benjamin and is located in Vancouver, British Columbia. It has raised $15 million in multiple funding rounds and offers three-to-five-year, fixed-term loans to credit-worthy borrowers with a credit score of 650 and over. It offers loans up to CAD $35,000 with APRs starting from as low as 7.9%. Loan terms range from 3 to 5 years.
Lending Loop was founded in 2014 by Brandon Vlaar and Cato Pastoll. Headquartered in Toronto, it has raised $12 million in debt and equity. Lending Loop is Canada’s first and only regulated peer-to-peer lending marketplace focused on small businesses. Its core focus is on providing businesses with accessible capital at a fair rate of interest through a simple online process. Loans range from $5,000- $250,000 with rates starting as low as 5.9% and terms from 3-60 months.
Progressa was founded in 2013 by Ali Pourdad, David Gens, and Michael Jover. Since inception, it has raised over $11 million. Progressa is a direct-pay lending platform that helps Canadian individuals who are in debt pay back their due bills. It pays its users’ bills directly so they are able to manage debt, interest payments, and collections. The platform provides users with partial payment loans between $1,000 and $15,000 with payback terms ranging from 6 to 60 months. It enables its users to get access to automated interest rate reductions every six months helping them cut down borrowing costs with good payment behavior.
From a global point of view, Canada is a relatively small market and still at a nascent stage. But the supportive regulatory framework coupled with growing interest of VCs and investors in the Canadian market says that major expansion is just around the corner. The Canadian market would also be conducive for U.S. players looking to expand their geographical ambitions.
News Comments Today’s main news: SoftBank leads $120M funding round for Lemonade. Shareholders file class action against Qudian. RateSetter looks to cautious growth in car financing. LoanBook rakes in 650K GBP on Crowdcube. Prospa planning a 2018 IPO. Today’s main analysis: Muddy Waters goes cold on China Internet Nationwide Financial Services Inc. (CIFS). Today’s thought-provoking articles: Two big banks […]
Two big banks to launch online lending platforms. AT: “I suspect more to come. This Lend Academy analysis is worth the read and highlights how online lending has grown to the point of being ‘legitimized’. Marcus has proven that traditional banks can compete with up-and-coming tech companies. But will they be the only success story? Maybe not, but we will have to wait and see.”
The law firm of Kessler Topaz Meltzer & Check, LLP announces that a shareholder class action lawsuit has been filed against Qudian Inc. (NYSE: QD) (“Qudian” or the “Company) on behalf of investors who purchased the Company’s securities between October 18, 2017 and November 20, 2017, inclusive (the “Class Period”).
Qudian shareholders may, no later than February 12, 2018, petition the Court to be appointed as a lead plaintiff representative of the class through Kessler Topaz Meltzer & Check, or other counsel, or may choose to do nothing and remain an absent class member.
A little over a year ago Goldman Sachs launched their consumer lending platform Marcus as part of a digital strategy to move into the retail banking segment. They have since grown faster than any online lending platform with originations approaching $2 billion. Goldman Sachs now believes revenues from online loans will equal that of trading in the near future.
U.K. based Barclays has been increasing their footprint in the U.S. the last few years through the Barclaycard brand. They are now one of the top 10 credit card issuers in the US. News broke last month that Barclays would be launching a digital bank in 2018 and rebranding from Barclaycard to Barclays in the US.
After a meteoric rise, marketplace lending has had its share of challenges and scrutiny, but the future should still be bright for such an industry on the forward edge of technology and consumer needs. Yet marketplace lending seems to be ending 2017 under an unwarranted attack from regulators and commentators determined to find similarities in marketplace lending to the subprime mortgage market in the years leading up to the financial crisis.
CEO Charles Clinton and CIO Marious Sjulsen co-founded EquityMultiple with a shared vision of transforming real estate investing through tech and by providing new access to private transactions while streamlining the investment process.
Erin:Please share EquityMultiple’s latest stats.
Charles: We’ve funded 32 investments to date and are expecting to hit around 100% year-over-year growth in dollars invested. For investments that have fully repaid or are currently cash-flowing to investors, we’re averaging around a net 9% annualized dividend.
Erin: What sets EquityMultiple apart from its industry peers? How will EquityMultiple continue to differentiate itself?
Charles: We’ve taken a different path from most of our direct competitors and I suspect that will continue. This started at the very beginning – rather than look for venture capital financing, we sought out a real estate firm to partner with and found that in Mission Capital, a national capital markets firm that has done over $70 billion of business in its 15-year history.
Erin: Earlier this year you stated that individuals made up 100% of EquityMultiple’s investments. Has institutional money entered into this investment flow? Why or why not? What are your methods of tapping into new investors?
Charles: We are still 100% focused on individual investors by design. We feel that individual investors are the customers that we provide the most value to. For institutional investors, there often is no real accessibility issue for getting into commercial real estate. Individual investors, on the other hand, are significantly under-allocated into real estate by comparison.
Investors can access the robo-adviser by itself for 25 basis points (formerly 50 basis points), which includes algorithmic portfolio construction, tax minimization strategies, and now support from human advisers via email and text.
For 50 basis points and an account minimum of $50,000, investors can access Ellevest Premium, which includes the technology platform as well as personalized goals-based planning from an adviser with certified financial planner credentials.
Roughly a quarter of American families suffer a major disruption to their income each year, according to the Urban Institute. Nearly one in five of those families suffer an income drop of 50% or more: a potentially catastrophic shock for low-income families.
But it’s not just these one-time shocks that affect families’ ability to plan and save — it’s the month-to-month fluctuations, as well. The JP Morgan Chase Institute foundthat, between 2012 and 2015, 55% of the bank’s customers regularly experienced more than a 30% change in income — up or down — from one month to the next.
BankMobile has become the first bank to start using online lending software developed by Upstart, which is designed to use artificial intelligence and alternative data to determine the creditworthiness of consumers with thin or no credit files.
BankMobile, the digital-only subsidiary of Customers Bank in Wyomissing, Pa., which is due to be spun off and merged with Flagship Community Bank in mid-2018, is planning to use the software to offer its first credit product to the students it reaches through relationships with 800 universities.
Finra has fined Merrill Lynch $1.4 million for alleged supervisory failures related to extended settlement transactions, the industry’s self-regulator says in a press release.
From April 2013 through June 2015, the wirehouse allegedly didn’t collect enough margin to offset credit, market and exposure risk presented by the longer time period between trades and settlements inherent in such trades, Finra says.
Banks have always proclaimed themselves as technology companies with banking licenses. But culturally, banks are still banks: conservative. Innovation teams can only innovate so much before someone in legal or compliance tells them no; they can only move so fast before someone tells them to slow down.
In this installment of Confessions, in which we trade anonymity in exchange for honesty, we spoke with an analyst at a startup attached to a large bank about internal innovation, attracting strong talent and why alternative bank service companies should get serious about becoming or partnering with a bank.
Move over Wells Fargo, another prominent financial firm has taken your place as the poster child for bad behavior.
Equifax, the credit reporting agency whose primary responsibility is to protect consumers’ personal information, became public enemy No. 1 this year when it revealed that thieves hacked into its database and stole the personal information — birth dates, credit card data, Social Security numbers — of some 145 million consumers.
Runway Growth Credit Fund Inc. (“Runway Growth Credit”), a provider of term debt to fast-growing companies seeking an alternative to raising equity, today announced the successful closing of its $275 million initial equity capital raise with an increased commitment to $139 million from OCM Growth Holdings, LLC, an entity owned by certain investment funds managed by Oaktree Capital Management, L.P. (“Oaktree”), along with commitments from other investors.
As reported by CoinDesk, the first leg of the sale – in which the firm is selling Simple Agreements for Future Equity (SAFEs) that will later be redeemed for tokens by accredited investors – began yesterday, albeit a bit laterthan planned. Hiccups aside, Byrne told CoinDesk the sale ultimately attracted a big crowd – some 2,000 accredited investors.
As such, he indicated the company may move to shorten the initial two-month timeframe for the token sale.
Some of the offers, he said, were as high as $5 million or more for single token allocations.
Comptroller of the Currency Joseph Otting said in a press conference Wednesday morning that there is a place in the banking world for some kind of fintech charter, though the exact parameters of such a charter are still unclear and have to be worked out.
“I’m not sure what it looks like, and how it’s funded, but I do think there’s a space there that a technology solution can solve,” Otting said when asked whether he sees a future for the Office of the Comptroller of the Currency’s nascent fintech charter.
An October paper put out by Strategic Partners Fund Solutions, of Blackstone, argues that(despite risks and drawbacks) investing in the secondary private equity market can still be a smart play, offering “accelerated returns with lower volatility, lower loss rates, and greater downside protection” than the primary market.
The 2016 Small Business Credit Survey, published by the Federal Reserve Bank of New York, reports that startups are more likely than their mature counterparts to be undergoing growth and planning to add jobs. The report shows 70 percent of startup applicants are in need of funding to support this growth, versus 60 percent of mature applicants. Additionally, in 2016, 52 percent of startups applied for financing.
The Credit Survey highlights that only “31 percent of startup applicants were approved for the full amount of financing sought”.
Debt crowdfunding: Peer-to-Peer lending
Lending Tree was a revolutionary option for individuals to secure financing when they simply wanted to compare options or if they may not have been bankable. Kiva, for example, allows lenders to contribute small amounts, sometimes as little as $25, to help fund requests.
As of October 2017, Kiva reports funding over 1M loans resulting in $1 billion being lent.
Now, instead of searching for affluent individuals looking to invest in a business, entrepreneurs can turn to sites like MicroVentures. MicroVentures is a public, online venture capital investment bank. Investors have the opportunity to invest as little as $100, which opens up the market to a much larger pool of potential investors. This option is best suited for established companies with strong historical performance and larger financial needs. Since their launch in 2011, MicroVentures reports facilitating over 160 investments, resulting in over $100M in capital investment to date.
Bank on Atlanta, a financial access program that will focus on providing free or low-cost banking products, along with financial education and financial counseling, to unbanked and underbanked residents in the city of Atlanta has been created.
Research shows that relying on alternative financial service providers such as check-cashing or payday lending establishments makes it hard for residents to rise out of poverty in our city.
Online student loan marketplace LendEDU.com studied the most sought-after gift cards and listed them in descending order: Amazon (AMZN – Get Report) , Walmart (WMT – Get Report) , Target (TGT – Get Report) , Best Buy (BBY – Get Report) , and Subway. But these cards sold for only 2% to 5% less than face value, compared with 1-800-Flowers (FLWS – Get Report) , H&M or Dress Barn gift cards which offered, on average, 30% off face value on their sites. Even Dunkin’ Donuts (DNKN – Get Report) and Godiva mark down their gift cards by 25%.
Credit Karma, the leading personal finance technology company in North America, today announced it has appointed Gannesh Bharadhwaj as general manager of credit cards. Previously president of Renew Financial, Bharadhwaj brings a strong background in financial institutions as Credit Karma remains focused on using innovative technology to bridge the gap between banks and consumers.
Entrepreneurs can make charity a part of their approach to business, and in a variety of ways. A survey by Funding Circle revealed some interesting figures, as reported by Joshua Sophy last December for smallbiztrends.com.
Of 1,400 small business owners polled, 52 percent said they were donating or had already donated to charity.
Chip, the chatbot app that plugs into your bank account and lets you automatically save for a rainy day, has raised nearly £1.1 million on equity crowdfunding platform Crowdcube.
The fund raise, which is part of a larger £2.4 million funding round, forms part of plans for the London-based startup to apply for a banking license so that it has more flexibility regarding the kinds of products it can offer in the future. The app currently claims 30,000 active users “who are collectively saving millions a month”.
We conclude that China Internet Financial Services Inc. (NASDAQ:CIFS) is a King Zero – just another worthless China fraud, says Muddy Waters Research.
Every one of the purported borrowers to which CIFS disclosed having made loans (accounting for 84.2% of loan balances) appears to be a sham counterparty. (The purported borrowers of the remaining 15.8% of reported loan balances were not disclosed; however, we strongly suspect that most – if not all – of these loans and associated income are also fabrications.)
CIFS’s recently announced “big data” company purchase also appears to be a lie.
47.3% of CIFS’s reported 2016 net income purportedly was generated by its Kashgar subsidiary; however, that subsidiary existed for only two days in 2016.
CIFS is too good to be true – claiming to turn a seeming commoditized business model into an overnight juggernaut with purported gross margins over 97% and net margins over 70%.
Since 2009, China has surpassed the United States as the largest market for new-vehicle sales, according to Deloitte Consulting LLC. And now, auto finance is starting to catch up.
For many years, the Chinese automotive market has been propped up by government incentives like tax breaks, which encouraged customers to purchase cars. So far, this incentive has led to more than 2 million cars being sold a month, with growth running up 15% last year, the Wall Street Journal reported in March. But as the tax breaks are expected to wind down, auto lenders have a greater opportunity to step in and capture marketshare in China, where penetration rates remain lower than other developed nations.
In the U.S., for instance, 84% of new cars in the U.S. were financed in 2014 compared with 20% in China, according to Experian. The Chinese auto finance rate rose to 38% in 2016, and is expected to rise steadily in the next few years; reaching an estimated 55% in 2021, according to ReportLinker.
China maintains a public blacklist of debtors that effectively restricts their movements and their spending habits.
The country’s highest court publishes the names and ID numbers of “dishonest people” on its website and restricts those people from flying domestically, using high-speed trains, or enrolling their children at expensive private schools.
Defaulters are also prevented from staying at hotels with three-stars or more. They also face tougher exams if they want to join the civil service, and are charged higher fees for booking cars. The bans work by linking to a person’s ID number. Some people used their passport when travelling to circumvent the ban, but that loophole now appears to be closed.
LoanBook, a Spanish marketplace lending platform, has successfully secured its initial £650,000 funding target from more than 200 investors through equity crowdfunding platform Crowdcube. Founded in 2013, LoanBook claims to be Spain’s largest marketplace lending platform, with a 4-year track record of working capital lending to Spanish SMEs and 40% market share.
iZettle CEO Jacob de Geer says you should team up with peers – and experiment.
“Apart from getting the business started, is to experiment with whatever idea you have. Most of your trials will fail, but one in 100 will work. If you view problem solving as a way of increasing the value of the company that you are building, then you are off to a good start.”
Klarna co-founder Sebastian Siemiatkowski thinks it’s important to have a holistic approach to problem solving.
When I advise young entrepreneurs, I tell them, “It’s not about figuring out the best business ideas, and it’s not about solving problems theoretically, but it’s about testing your ideas. It’s about coming up with an idea, and then trying it and learning from it.”
Investment bankers lining up for a stronger 2018 pipeline of initial public offerings have online business lender Prospa in their sights.
Street Talk understands a handful of banks have pitched their wares to Prospa’s chief executives Greg Moshal and Beau Bertoli in recent weeks ahead of a planned run at the local bourse some time next year.
Alternative investing is as much a mindset, as it is about specific investments. Here are some alternative investments approaches culled from our members around the world that are applicable to any investment decisions.
Invest in markets or assets that your analysis leads you to believe will do well; don’t invest in a product just because it’s likely to (or, worse, has in the past) “outperform the market”.
Understand that returns are one-dimensional, risk is multi-dimensional
You should constantly revisit your assumptions of the return drivers of the investment (much more so than its price performance), in case they change and you need to rethink your investment.
When we’re asked to define alternatives, we often end up saying “well, anything that’s not traditional”. Actually that’s not quite such a lame definition; alternative investment practitioners know that the best opportunities are usually those that are yet well known or exploited, and hence the field of “alternative investment” is one populated by investment ideas that may not be immediately obvious.
Diversification is the only free lunch – make sure you are diversified
India has a unique problem of too much money chasing too few customers. So at one end, we have traditional salaried class getting loan offers and at the other end, people are left at the mercy of hawkish money lenders ever-more resembling Shakespeare’s Shylock. Clearly, P2P lending and borrowing is the disruption that was waiting to happen as banks and NBFCs have successfully struggled at twin accounts of making credit affordable and accessible in a credit-hungry nation.
If 2016 saw demonetisation change India’s fintech ecosystem forever, this year will be remembered for the Reserve Bank of India’s (RBI) multiple regulations aimed at organising the sector. Recognition of peer-to-peer lending startups, revised guidelines for digital wallets, finalising charges for digital payments—the second half of the year saw it all, setting the template for a more mature yet challenging 2018.
The 22nd Wharton India Economic Forum (WIEF) has announced the finalists of the Yes Bank – Wharton India Startup challenge.
Perpule:Perpule’s 1Pay is a self -checkout app for express checkouts and easy payments in Perpule’s partnered stores like Hypercity, Spar etc.
Capzest: Capzest is a digital lending platform focused on providing unsecured credit to individuals for income generation purposes. It secures partnerships with income generation service platforms and provides short term capital to their various stakeholders. It was founded in October 2015 in Mumbai by Rohan Adlakha andSayantan Sarkar.
Luharia Technologies Pvt. Ltd: Based in Hyderabad, Luharia Technologies owns and operates peer-to-peer platforms for businesses and individuals. Founded by ISB alumni Keerthi Kumar Jain, Luharia’s flagship solution is Vote4Edu, which is an online peer-to-peer lending platform for K-12 education loans. The company also runs Vote4Cash, a P2P marketplace where borrowers can avail cash loans. Machine Bank, an infrastructure ecommerce platform, and P2P lending platform SMEBank are also owned by Luharia Group.
Your credit score reflects how well you have treated your credit in the past. It is one of the most important factors that lenders consider while evaluating a loan or credit card application. But what if you don’t have a credit score?
If your bank has rejected your personal loan application, approach NBFCs. Since they usually target customers with low or no credit score, they are more flexible with credit scores than banks.
Peer to Peer Lending
Since P2P platforms connect borrowers and investors online, they run with lower overheads and resultantly offer services cheaper than what traditional financial institutions have to offer. There are over 40 peer-to-peer lending platforms in India that are helping a large section of people who have been failed to qualify for loans from banks.
News Comments Today’s main news: Ron Suber shares lessons learned from his first 120 days in ‘rewirement’. Paytm invests in CreditMate. Faruqi & Faruqi law firm investigates Qudian. China clamps down on microlending. Australian alternative lenders make Fintech 100. Today’s main analysis: Americans having trouble paying off credit cards. Today’s thought-provoking articles: Alt lenders accuse banks of not following […]
Ron Suber shares lessons learned from rewirement. AT: “I like this. Suber is always thought-provoking, but what I notice here is that many of these lessons were learned (supposedly) from experiences not related to lending at all, or business for that matter, but which apply all the more. A great read.”
Faruqi & Faruqi investigates Qudian. AT: “The implication here is that Qudian may have overvalued its own stock. The question is whether their sudden fall was due to market forces (see the China news section) or due to misleading statements. I’m guessing this is what the investigation is about.”
Early stage investing vs. real estate investing. AT: “Note that AdaPia d’Errico’s role has changed. She’s no longer COO at AlphaFlow, but has her own consulting company focused on helping firms integrate female leadership skills into company cultures.”
The first 120 days were filled with new languages, cultures, histories, beliefs, and people. I visited four foreign lands that were completely new to me, and no, New York and Silicon Valley were not on the itinerary.
Here are some lessons I’ve gained from the journey.
LESSON 1: Being first, ahead of your time and unique doesn’t guarantee success and longevity.
LESSON 3: The USA credit card and payments industry has a long way to go to catch up. No one (and I mean no one) swipes a credit card nor inserts a chip credit card in a machine and then signs a paper receipt in Australia and Singapore.
LESSON 4: There is still a huge opportunity to disrupt the currency exchange market. Upon arriving in Australia, I went to change US dollars to AU currently and was faced with: “No, you are not a customer” or “Yes, no problem” followed by a bad conversion rate and a 12% fee!
LESSON 8: New and old global giants are awakening to the FinTech Golden Age and responding accordingly, albeit slowly. Singapore is now a major global financial center that has come a long way very fast, and generally not focused on the short term.
The big successes are coming to those thinking long term (Bezos/Musk), the balance of power is shifting globally and the best is yet to come!!
Qudian, the Chinese online payday loan platform, could be facing a rash of class-action lawsuits in the US after its share price tumbled drastically this week on the New York Stock Exchange, triggering concerns over the integrity of the firm.
New York-based law firm Faruqi & Faruqi, is now encouraging investors in Qudian to get in contact with it, as it is now “investigating potential claims against Qudian”, it said in a statement. Qudian was unavailable for comment.
Shares in the leading provider of online small consumer credit in China tumbled 5.28 per cent on Monday to close at US$20 in New York, 16.7 per cent down from its IPO price of US$24, and more than 40 per cent down from a historic intraday high of $35 reached on its trading debut on October 18.
Some fintechs are accusing financial institutions of not following either the spirit or letter of the data-sharing principles the Consumer Financial Protection Bureau released in October.
One of fintechs’ primary accusations is that banks are selectively choosing fintechs to work with — leaving the rest out in the cold. Though the CFPB data-sharing principles do not spell out that banks should work with everyone equally, the spirit of the document suggests financial institutions should work with all trusted third parties.
Capital One has signed agreements with five fintechs and data aggregators—Clarity Money, Intuit, Abacus, Xero and Expensify—since introducing its data-sharing application programming interface in February. It says more are in the pipeline.
Banks have too many conflicting requirements
Another issue cited by fintechs is that it’s tough dealing with each bank’s different set of standards and requirements.
“Some of those standards may be in conflict,” Petralia said. “It can take years to comply with a bank’s requirements and it probably eliminates access to newer startups, to smaller businesses that don’t have a lot of cash sitting on their balance sheet, to support that kind of long lead time for legal requirements.”
Both venture capital (VC) investing and real estate investing involve some level of risk assessment, they both have the potential for big returns, and investors have the opportunity to help someone else reach a desired goal. Despite this common ground, there are some distinct differences. Private Equity Investing
To realize returns on this type of investment, investors must understand the different stages of the startup cycle, how to evaluate a business plan, understand how to assess talent, technology, and business processes to determine whether a startup has the potential to succeed, and know how to judge market forces that could have an impact on the startup company. Real Estate Investing
Real estate investments can be structured in many ways to benefit investors who are looking for specific types of returns. For instance, house flipping (Fund That Flip and Peerstreet) or commercial or multifamily flips (Sharestates andPatch of Land) offer short-term gains while rental properties (Roofstockand HomeUnion) offer long-term passive income. Commercial real estate investing (CrowdStreet and RealtyShares) may involve property development or long-term leasing with spans of three, five, ten years or more. New REITs (FundRise eREITs and MogulREIT) offer investors a way to invest in multiple properties or types of real estate through a single vehicle. Real estate funds or portfolios (AlphaFlow) also allow investors to diversify their debt investments through a single vehicle. How to Evaluate an Early Stage or a Real Estate Crowdfunding Opportunity
Due diligence in real estate investing is also important. Basic criteria for evaluation include:
The platform – Does it have a strong financial position and available capital? Is the underwriting done in-house or outsourced? What is the background and experience of management team? What is their plan for insolvency, recouping losses, and managing risk?
Fees – Every investment involves opportunity cost. Is there an ongoing management fee, or does the investor pay a percentage based on returns or total portfolio size?
Borrowers – How does the platform assess borrower track record and credit?
The investment – What is the developer’s business plan? What are the expected cashflows, expenses and projected returns? What is the loan-to-value before repairs and after repairs? Are investors in a first-lien position or second? Where is the property located?
The Consumer Financial Protection Bureau squared off against CashCall Inc. and its affiliates in California federal court on Monday about whether it would be appropriate to make the online lender pay as much as $287 million for deceiving consumers, with the CFPB calling the company’s loans “financial snake oil” and CashCall saying its business was legitimate.
A group of major financial firms including JPMorgan Chase and Goldman Sachs has trialed the exchange of equity swaps over a distributed ledger (DLT) system.
By carrying out trades across a network where all parties use the same valuation data and share the same books, in theory, payments can be processed nearly instantaneously and disputes over transactions will be less likely.
Finastra Universe introduces Sophia the humanoid robot (Finastra Email), Rated: B
I wanted to invite you attend Finastra Universe in New York on Tuesday, December 5th. Finastra Universe is a one-day global executive event series focusing on fintech and the future of financial services.
The event will include panel and Q&A sessions, where Finastra experts and guest speakers will explore how financial firms can leverage new, more dynamic technologies within lending and other areas to improve internal efficiencies, deliver connected customer experiences and enhance business outcomes.
More than 125 people attended the inaugural Southeast Fintech Venture Conference on Monday to hear presentations from investors, fintech success stories such as small-business lender Kabbage and new firms just getting off the ground, including some from Charlotte. Sponsors included investment firm Frontier Capital and asset manager Barings, which hosted the event at its new Tryon Street headquarters.
According to the National Venture Capital Association, Charlotte-area companies brought in about $393 million in venture capital investments in 2017, led by a $300 million round for payments company AvidXchange.
Subprime and near prime lending have been subject to intense regulatory scrutiny during the aftermath of the financial crisis. The global economic crisis that took hold in 2007 has largely been attributed to the widespread practice of irresponsible lending to consumers, often with no means of repayment. In 2013, StepChange Debt Charity reported that the average payday loan debt of its clients was £1,657, whereas the same clients’ average net monthly income was a much lower £1,379.
Following the transition in regulatory regimes from the OFT to the FCA, a series of tougher measures have been introduced to move staunchly away from the lending practices which allowed firms such as payday lender Wonga to maintain a representative APR of 5,853% in 2013. The FCA has made it clear that it regards non-standard finance as a “high risk” activity and as such dedicates special resources to intensively monitoring businesses in this sector.
It is a little over a decade since Northern Rock became the first UK bank in 150 years to fail because of a run on its deposits. For a brief moment it looked as if the entire global financial system might collapse overnight, with only government intervention and billions in bail-outs preventing a worst-case scenario.
According to data from the Office for National Statistics (ONS), the number of small businesses that were successful in their attempt to get a loan fell from 90% in 2007, to 65% in 2011.
According to our latest research, just 43% of small business owners see trading conditions improving in the coming year. Meanwhile 52% of start-up business owners say they do not think banks will continue to lend at the same levels in 2018.
More than half of the 1,000 small business owners we surveyed say they are planning to grow or expand their business in 2018.
These alternatives to traditional forms of lending are proving particularly popular among the 96% of UK businesses that employ fewer than 10 people. According to our research, 40% of start-ups and younger business owners say the growth of alternative finance options has made them less reliant on banks for funding.
One area of credit we find attractive, however, is lending to small businesses in the UK and Europe. The opportunity set for companies such as Funding Circle is growing fast, due to the retreat of traditional banks in providing loans for smaller companies. During the last quarter, Funding Circle outstripped the major high street banks for net new loans. We see the company essentially as a technology platform enabling the efficient issue of small loans to thousands of companies. It has a solid management team and is looking to expand its successful business model to other geographies.
Fintech is now worth over £7bn to the UK economy every year and employs around 60,000 people, according to the Treasury office.
Marta Piekarska, director of ecosystems at Linux Foundation’s Hyperledger project, said she believes Brexit will impact fintech in the UK because it will make things harder for collaboration.
“About half of our developer workforce today are non-UK European nationals. Already it is hard to find great developer talent in the UK. Obviously, if freedom of movement isn’t as easy and non-UK EU nationals feel that it’s not really a nice environment to come to the UK to work, then we will have a problem.”
The Payments Services Directive (PSD2) is a major piece of UK/EU legislation that will ensure that all payment service providers (PSPs) that operate in the single market are subject to rigorous supervision and adhere to the appropriate transformative rules to create a fair, open-banking framework.
In practical terms, a customer will be able sign up for a loan, credit card or a mortgage by using a log-in that looks and feels a little bit like Facebook Connect and authorises the provider to see all of the customer’s financial transactions from the previous 36 months. The main gatekeepers and one of the leading innovators in this space are London-based FinTech company TrueLayer. As the go-between between a customer, their bank and the product or service provider, they ensure real-time, secure connectivity of the customer’s data.
BitRent has given itself a mission: to make real estate investing easy, transparent and profitable all over the world. The platform uses a combination of techniques that will allow its users to control construction processes. These techniques include BIM open modeling and computer aided monitoring using RFID chips, to make investing in commercial and residential shared-equity construction more transparent and predictable. On the platform, investors can invest in real estate, without a minimum entry threshold. The online mode allows them to control construction processes and receive dividends when the construction has been completed. Moreover, users can receive data on free area or items of commercial property.
The BIM (Building Information Modeling) technology that the platform uses, allows all users of the platform to monitor a project at any stage.
The platform will release its RNT tokens, based on Ethereum. The token sale will start on the 1st of December 2017, 11:00 UTC and will last till March 1, 2018.
China took steps to rein in the rapidly growing and lightly regulated market for online micro-lenders in the government’s latest crackdown on internet finance, sending shares of U.S.-listed Chinese financial firms into a tailspin.
A top-level Chinese government body issued an urgent notice on Tuesday to provincial governments urging them to suspend regulatory approval for the setting up of new internet micro-lenders, sources who had seen the notice told Reuters.
The multi-department body, tasked by the central government to rein in risks in the internet finance sector, also told local regulators to restrict granting of new approvals for micro-loan firms to conduct lending across regions, according to the sources.
Shares of Qudian ( QD ), Yirendai ( YRD ) and other China-based providers of online credit plunged Tuesday on reports that China’s Internet Financial Risk Management Group had ordered a suspension of online small-loan approvals, but some stemmed their losses by session’s end and others even gained ground.
In addition to Qudian and Yirendai, also falling were China Rapid Finance ( XRF ) and PPDAI Group ( PPDF ).
Shares in online lender Qudian (QD.N), whose shares only debuted last month, sank by as much as 20 percent in early trading.
Shares of China Commercial Credit Inc (CCCR.O) fell 6.4 percent, those in PPDAI Group (PPDF.N) some 17.8 percent. Jianpu Technology (JT.N), which also debuted just this month, fell 9.5 percent and China Rapid Finance (XRF.N) slipped 12.92 percent.
Q: What major trends are you seeing in China’s cybersecurity market?
A: I think the major trend in China is similar to what is happening in the rest of Asia. The frequency and extent of cyber-attacks are increasing rapidly.
Q: What Chinese business sectors are most vulnerable, or need to do more to protect themselves?
A: Tech companies with lots of portals to its websites, especially like peer-to-peer lending, or any tech companies with valuable intellectual property are prime targets of cyber attacks.
Q: What should Chinese tech companies be doing to defend themselves, or at least reduce the damage done by cyber attacks?
A: Firstly, employee education is important. Over 90% of hacking is conducted through phishing and spear phishing. We have worked with a Chinese company with 20,000 employees, and we sent 20,000 emails to them with a link offering a chance to win iPhone. 30% of the staff clicked on the link, which actually is a quite regular percentage. In a real-life scenario, if 30% of your 9000 staff were to click, that’s 3000 cases of malware potentially downloaded into your systems. But after phishing training, finishing the exercises, the number was reduced to 5%.
Q: There are reports saying cyber security experts “cyber bodyguards” is one of the hottest jobs in China. What particular specialty expertise faces the greatest shortage?
The “cyber bodyguards” are in a booming industry, particular for providing preventative measures. Firstly, there are the penetration testers; also known as ethical hackers or white hat hackers. They replicate what a real hacker would do; not stealing any data or doing anything bad, but will scan systems for any gaps and weaknesses in the company’s defenses that may be exploitable during a cyber attack. They will then advise on remediation measures.
The European Banking Authority takes a cautious and carefully balanced view in its deliberations on how it should approach FinTech in its latest Discussion Paper. In reviewing the FinTech landscape in Europe the EBA raises many more questions than it answers, concluding that it should undertake much more detailed follow-up work in a number of areas. But it does raising warning flags about possible unevenness in the playing fields offered by different jurisdictions, in the area of sandboxing and innovation hubs, for example.
Overall, the The European Banking Authority says, FinTech may increase competitiveness in the Single Market by lowering barriers to entry for newcomers while preserving fair competition and incentives to innovate.
The EBA says a significant increase in overall operational risk has been witnessed in the last few years, including higher conduct risk, increased cybersecurity issues and digital fraud issues, and increased outsourcing risk. ‘At the same time new or previously immaterial risks, such as the risk of mismanagement of personal data / lack of data privacy, seem to be amplified by the lack of expertise of human resources and the inadequacy of technology infrastructures.’
It points out that alternative lending platforms such as peer-to-peer lending can put pressure on the interest income from loans of existing credit institutions while new entrants offering commoditised products and services at lower costs, such as money transfers and brokerage, can reduce the fees and commission income of established players.
Meet DreamQuark, a French startup that wants to help banks, insurance companies and asset management firms with all of their artificial intelligence needs. DreamQuark crunches your data, creates models based on machine learning and lets you apply those models on all past and future data points.
Robeco has launched a Global Fintech Equities fund to give wholesale and retail investors exposure to companies that are transforming the financial sector.
The actively managed fund will invest in three distinct segments, labelled ‘today’s winners’, ‘fintech enablers’ and ‘challengers’. Today’s winners include companies that already have a competitive advantage in this space, fintech enablers provide the digital backbone for emerging companies, and challengers are the companies that have the breakout potential to stand out from the pack.
Following a successful pre-ICO, Etherecash has announced a public ICO that launched November 15th and will end December 19th. Focusing on the 2.5 billion unbanked, Etherecash looks to excel in both spending and sending, as well as providing a peer-to-peer lending platform, to enable those with little or no credit history the ability to access funds.
The ICO sale will auction off 144,000,000 tokens, which will help support ongoing development of the platform and can be purchased with Bitcoin or Ethereum. A bonus of 12% is available for participants in the first week, which goes to 3% in week four, and finally to 0% in week five.
The ICO has a soft cap of $15 million, which if not reached, will conclude the ICO as a failure with funds returned to the respective investors. The hard cap is set at $100 million. 40% of funds will be used for further core development; 25% in growth and marketing; 20% for legal, accounting, and advisory feeds; and the remaining 15% for admin and operational costs.
57% of internal frauds are carried out by senior and middle management, according to the whitepaper.
Ten Australian companies have been listed in KPMG’s Fintech 100 list, which identifies the top 50 fintech firms and an “emerging 50” list of companies “seeking to boldly push the envelope in financial services”.
US-based lender OnDeck, which broke into the Australian market in 2015, placed 28th in the ranking, up two places from last year’s report, while German fintech Spotcap (which also has operations in Australia) came in at number 32.
Fast forward to three months ago, when I suddenly realised my rate of 4.27% was more than 60 basis points higher than the best on the market. I had become a victim of that time honoured tradition of banks fattening profit margins and it was time to do something about it.
I knew there were now stacks of lenders offering rates below 4.00%, and after comparing the best loans decided to go with an online lender to take advantage of their super low variable rate of 3.64%.
Anshul said that there is a lot of hype and misconceptions related to blockchain. He explained that outside of a small group of crypto-savvy investors and developers, blockchain is often synonymous with cryptocurrency, and erroneously so. Their goal with this hackathon was to give developers (with or without past blockchain experience) a chance to envision how the same distributed ledger technology that powers Bitcoin might be able to improve transparency, efficiency, and honesty in enterprise and government processes, particularly in regions of the world suffering from high corruption.
Anshul added that another objective of the event was to explore use cases for concepts like IndiaChain — a blockchain infrastructure for a Digital India, building on existing initiatives like Aadhar, the world’s largest biometric identity project with unique 12-digit IDs for 1.2 billion Indian residents.
Here are eight hack projects recognised by the partners.
1. SWASHchain: a battery SWApping and SHaring infrastructure verified on the blockchain
2. AgroChain: tracking farm products from farmer to consumer
3. chAIn: decentralised AI with Homomorphic Encryption to guarantee data privacy
4. Betoken: decentralised Hedge Fund for social impact investing
5. Open Complaint Network: crowdsourcing issues and rewards
6. 0xSHG: zero-interest loans for rural microfinance – Hence the team believes that blockchains are a unique solution which address both issues by organising not just financial capital but also social capital. The team has created an Aadhar-linked capital-pooling network.
7. SureFly: last-minute crowdfunded insurance for flight delays – Insurance premium is calculated as a function of the probability that a passenger will miss a flight which is in turn a function of flight time, insurance seeker’s distance from the airport, traffic on the roads, length of airport lines, etc.
The rise of the sharing economy is commonly attributed to culture or ideology. It’s assumed that millennials don’t want to be trapped by houses, cars and other expensive belongings, for example, or that they believe sharing is good for the environment.
Research conducted by the BCG Henderson Institute (BHI) indicates that economics, not attitude, is driving the sharing economy.
Among respondents who use sharing services, 40% of Germans, 57% of Americans and 67% of Indians said that well-priced, convenient offers could convince them to abandon ownership altogether.
Aside from physical assets, investors have also poured $5.7 billion into peer-to-peer lending ventures.
Start-ups by no means have a lock on the sharing market, however. In fact, 55% of consumers in India said they would prefer dealing with established operators—the highest among the countries surveyed.
Banyuwangi Regional Government will again partner with digital platform startups to develop the region.
After with Gojek ride-hailing service provider, there are several more similar companies that will be embraced. One of them is the startup of financial technology (fintech), especially for financing facilities to micro, small and medium enterprises (MSME).
At the third annual Canadian Payments Innovation Forum in Toronto, over 100 payments and banking executives gathered to examine how FinTech is transforming the Canadian financial services industry, and what providers can do to prepare.
After launching with Samsung Pay earlier this year, Gamble indicated that ‘cash alternatives’ would continue to be a focus and something to watch in the market. Due to Interac’s smaller size (the company has about 250 employees), Gamble said they just don’t have the “bandwidth” to do everything themselves, so turning to partnerships is key.
“We strive to deliver alternatives to cash, and as a community, we’ve done an amazing job of delivering contactless capabilities at POS. Canadians moved more than $90 billion in etransfers this year, so our little country is significantly leading the space in P2P transfers.”
AI is already moving forward quickly in financial advice and management, and the use of financial technology, or fintech, seems to be growing among older Canadians.
“Our average client is 47 years old and our second largest demographic group is baby boomers,” says Randy Cass, CEO and founder of Nest Wealth, a Canadian financial robo-advisor that was founded in 2013.
“For retirement planning, the AI isn’t necessarily cutting the financial advisor out of the process. What we’re likely to see is AI helping the financial advisor to get faster and more comprehensive data analysis and provide more seamless client support,” Mr. Narvey says.
It had to happen. Artificial intelligence is shaking up the fintech world. The opportunity to get an in-depth analysis of client’s creditworthiness, have fast credit decisions, and score thin-file people makes AI a goldmine for many lenders today. Besides, machine learning and AI-based techniques have become affordable (like never before) to a wider audience, empowering […]
It had to happen. Artificial intelligence is shaking up the fintech world.
The opportunity to get an in-depth analysis of client’s creditworthiness, have fast credit decisions, and score thin-file people makes AI a goldmine for many lenders today.
Besides, machine learning and AI-based techniques have become affordable (like never before) to a wider audience, empowering small and midsize lenders with the latest technology tools.
Why Today Lenders Ignore Traditional Scoring
For years, traditional scorecards, linear models, decision trees, and so widely-used FICO scores have played a significant part in a decision-making process. Although they don’t tell an applicant’s full history and can’t cope with big data, they are still used by the 90% of the top industry players.
However, more and more lending startups come to the conclusion that ‘your grandpa’s approach to data analysis’ is not enough. Because many traditional underwriting systems are missing out on a huge number of deserving borrowers.
To get traditional credit, you often need a credit history. However, according to ID Analytics, nearly 20% – or 45 million U.S. consumers – have no credit history or lack sufficient information to generate a credit bureau score. Sounds like a catch-22.
Is AI Making Credit Scores Better?
Ultimately, AI needs to improve the ‘underperforming loans’ metrics and optimize risks vs. returns for each loan issued. If it’s not doing this, then it fails.
The Efma report found that 58% of banking providers believe AI will (eventually) have a significant impact on the fintech industry.
Today, lenders have been using machine learning algorithms to solve problems both big and small, by making manual processes more simple, accurate, faster and less expensive.
“AI allows you to better or more accurately predict the one’s probability of default,” says Peter Maynard, SVP of enterprise analytics for Equifax. “Because each attribute can have multiple weights.”
Can AI Outperform Experts?
Today, in order to build a well-performing scoring model, you need to hire an expert with a fairly extensive and specific expertise in the field of mathematical statistics. Besides, this expert needs complex, specific, and very expensive software to build a model. In the end, you’ll spend hundreds of thousands of dollars and no one guarantees you results.
Paul Meehl, a clinical psychologist and professor of psychology at the University of Minnesota, conducted an experiment: He compared the predictive power of human experts with simple algorithms. The results showed that in all 20 cases, simple algorithms outperformed experts based on data such as past test scores and records of past processing.
However, algorithms won’t replace humans in complicated fields. Maybe someday, but not now. Today, AI is aimed to help experts. Scoring solution providers strive to ensure that machine learning techniques can be easily used by any lender without a need to hire a team of data scientists and developers.
AI Scoring as a ‘Black Box’
Due to the inability to understand how decisions are made, AI has been seen as a ‘black box’. Lenders admit that the hidden part of the underwriting process (in particular, how it makes predictions) looks unreliable and insecure. Business owners want to avoid the appearance of biased credit rejections, and quite often look for explainable and accountable solutions.
However, AI-based credit scoring is of limited interpretation because of its complexity. And this complexity is quantitative, not qualitative. Let me explain:
AI scoring is a set of simple rules (Age – 25+, gender – female, income is more than 1.000 but less than 1.200, etc.). These rules can be created by the tens of thousands, and it’s impossible to track all of them by with human skills.
GiniMachine, an AI-based Credit Scoring Solution
GiniMachine shares an IBM principle: Machines should do all the hard work, freeing people to think. The core idea of the solution lies in building predictive models of high quality at a reasonable cost.
Founded in 2016, a young but fast-growing fintech startup, GiniMachine aims to fight bad loans with AI.
GiniMachine combines lenders’ data insights with the best machine learning algorithms, supplemented with the set of heuristics and methodological findings. The software allows you to build custom scoring models in a few seconds without attracting expertise in the field of mathematical statistics and machine learning.
Today, lenders’ decisions to issue a loan are influenced by the credit score as well as general data like socio-demographic information or place of work of the borrower. Today, lenders take into account data from mobile devices, social media networks, the time of filling out the questionnaire, etc.
“Collecting and processing all these parameters costs a lot of money. However, not all of this information is necessary when drawing up a successful model for assessing the creditworthiness of the borrower. One of the tasks of GiniMachine is to determine which of the parameters are really important,” says Ivan Kovalenko, Co-founder of GiniMachine. “An important feature of our platform is that it knows how to work with raw data. As a result, the model built for each client is unique.”
AI promises to bring lenders worldwide to the technology breakthrough. Armed with powerful solutions and best machine learning approaches, financial organizations can more effectively respond to the increasingly demanding customer base and ultimately increase acceptance rates.
Natalie Pavlovskaya is CMO at GiniMachine, an AI-based solution for fighting bad loans. She has been actively involved with digital marketing since 2011 and has a broad range of expertise. She is passionate about fintech, AI, and e-commerce.
News Comments Today’s main news: CreditEase Wealth Management approved by SEC to be RIA. RateSetter sees decline in net lending volumes. Fluid expands into 32 states with no-interest student loans. Landbay loans achieve AAA rating. Funding Circle fund on track despite Brexit risks. BBVA rated best mobile banking service in the world. Today’s main analysis: Squaring all-time high credit scores […]
RateSetter sees decline in let lending volumes. AT: “The implication seems to be that not having yet been authorized by the FCA for IFISAs has caused RateSetter’s lending volumes to fall, but I’m not sure yet we can draw that connection. RateSetter may have to make more adjustments to its business structure, however.”
CreditEase Wealth Management has recently been approved by U.S. Securities and Exchange Commission (SEC) as a registered investment advisor (RIA). At its first stop overseas, the firm can start providing advice to investors in the U.S., representing a globalization milestone to better serve especially Chinese investors around the world.
Citigroup, J.P. Morgan and Wells Fargo reported Q2 bank earnings last week as earnings season kicked off. All three banks beat analyst expectations for earnings, but also posted declines in trading revenue:
J.P. Morgan reported better than expected second quarter earnings, beating on the top and bottom line due to the company’s strong loan growth, partly due to the success of Chase Sapphire Reserve product.
In this week’s newsletter, we illustrate the flaw of FICO as a forward-looking credit score.
Below is a histogram showing the distribution of FICO credit scores for Avant’s 2017 deal:
The distribution is relatively similar across historical ABS deals suggesting the credit risk across deals is similar. However, Avant has substantially tightened and improve credit quality in recent vintages. The FICO credit score is not able to capture this. For instance, as compared to AVNT 2016-C, the collateral in the AVNT 2017-A contains loans made to borrowers with a much smaller balance ($5,348 vs $6,589) and a shorter weighted-average remaining term of 33 months vs. 40 months in AVNT 2016-C. Also, AVNT 2017-A has 93.9% of loans under 36 month term, a significantly different collateral pool mix than that of AVNT 2016-C, which has only 47% 36-month loans. Shorter term 36-month loans carry less credit risk than 60-month loans all things being equal.
On LendUp’s website, the company states that more than half of the U.S. population has a credit score under 680, meaning they cannot be approved for credit at most financial institutions. The site explains that consumers in this segment will pay more than $250,000 over the course of their lifetimes for basic financial services. LendUp believes it can make a profit by offering affordable financial products to these consumers, which will simultaneously help them build their credit.
Regular users of PayPal probably know that PayPal offers credit to its customers through its PayPal Credit platform. PayPal normally offers credit to customers at checkout, offering account holders no-interest payments on purchases greater than $99 if the loan is paid off within six months. PayPal also offers credit to small- and medium-sized businesses through its PayPal Working Capital program, which is then paid back through small amounts from each transaction going back to PayPal. Schulman believes both services are important to PayPal’s future.
In its most recently reported quarter, PayPal CFO John Rainey stated that loan losses for its consumer and retailer credit programs totaled $129 million, or approximately 4.3% of revenue. The net charge-off rate was 6.9%.
Fluid, a Fintech and Adtech startup has expanded its service to US students into 32 different states. The App based lender is available on iTunes allowing up to $500 in credit without any additional interest payments. The description on iTunes explains it is exclusively designed for 22 million college students in the United States. Fluid not only allows for an interest free loan but it empowers uses to build a credit profile. Fluid’s target market is Generation Zs (Age 7 to 21 as of 2017. Fluid notes there are 75 million and 1.8 billion Generation Zs that will start shaping this world in the coming years.
Student loan debt now stands at a whopping $1.3 trillion. There are more than 44 million borrowers. And we’re coming up on the season when many recent graduates start paying down their student loans.
1. SoFi – SoFi only refinances loans for graduates with at least a Bachelor’s degree from a Title IV accredited university or program. Its credit and income requirements are also fairly strict, putting SoFi refinancing out of reach for many recent graduates.
2. CommonBond – CommonBond offers somewhat broader refinancing services since it refinances student loans and Parent PLUS Loans. It also offers borrowing services, if you’re considering consolidating your undergraduate loans and then going to graduate school.
Like SoFi, CommonBond expects borrowers to have a fairly high credit score (here are ways to check your score for free). Borrowers have a median income in the low six figures, as well.
3. Earnest – Earnest has a unique way of qualifying borrowers. Instead of looking at your income and credit score solely, it looks at how easily you can afford your expenses, how regularly you save, and whether you have a retirement account. It also allows you to choose your own monthly payment, and then it builds your interest rate and terms around that.
6. Purefy – Purefy allows married couples to refinance their loans together, which may or may not be a good idea for you. But if you decide to go this route, it will use the higher of your two credit scores to determine the interest rate.
Where do we see LPB taking hold? For starters, consider Bitcoin and other electronic currency vaults. They are essentially LPB cash mutual funds — mutual funds that hold only cash. They provide a safe payment system that can never collapse, barring technical disasters. Next, consider peer-to-peer lending. These are closed-end mutual funds that purchase the loans of small- to medium-sized enterprises. The investors have equity stakes and they can go online and check out their investments in real time. That’s a form of disclosure you will never get from, say, JPMorgan Chase.
What about mortgage lending? LPB mortgage mutual funds could materialize overnight, via either peer-to-peer lending or by slightly transforming the centuries-old Northern European covered-bond market by forcing investors to take on the default risk of the mortgages that cover the bonds.
In the information age, we don’t need trust-me banks that take our money and give us no clue where it’s invested. In this Bitcoin era, we don’t need trust-me banks to guarantee our holdings of cash. In this block chain world, we don’t need trust-me banks to assure us they will square up our bets. And we don’t need an enormous army of government bureaucrats to watch over trust-me banks gambling at the taxpayer’s expense.
LendingTree has announced Brad Wilson as its new chief marketing officer. He will oversee the company’s brand strategy, marketing operations and consumer engagement as LendingTree continues to expand into new financial service categories.
Nearly half – 48 percent – of managed account sponsors price their hybrid advice at between 25 and 50 basis points, or between $250 and $500 on a $100,000 account, according to a recent survey conducted by Cerulli Associates.
Another 28 percent of sponsors believe an internet algorithm backed by a flesh-and-blood advisor should be priced at between 50 and 75 basis points, or between $500 and $750 on a $100,000 account, the survey found.
We are now starting to see large inflows and investments into the leading U.S. based marketplace lenders. This growth has been driven primarily by investors from Asia, Europe, and Middle East (primarily Israel) who have started to provide their clients with more options to invest in MPL assets outside their home countries.
What are best practices for investing in the MPL asset class in the U.S.?
Jeremy has compiled his answers into this free report.
Two of the UK’s “big three” peer-to-peer lenders are authorised, and will soon launch their Innovative Finance ISAs. The other, RateSetter, is not yet authorised, and has had to make a few changes to suit the requirements of the regulator in recent months. Mostly notably it has had to put a stop to its wholesale lending business.
Whether or not RateSetter continues to make changes at the behest of the regulator is unclear. But what is clear, using the latest figures from AltFi Data, is that its lending is slowing down significantly. RateSetter posted its first negative month of net lending (new loans net of repayments and defaults) in April, and continued in the same direction in May, with a net lending figure of around -£5m for the month. In June, its net lending fell to almost -£15m.
FUNDING Circle’s listed fund performed in line with expectations in its first full year of operation, which saw its net asset value increase by 11 per cent to £164.8m.
The Funding Circle SME Income Fund, which is quoted on the main market of the London Stock Exchange, launched in November 2015 to give a wider range of investors access to the peer-to-peer platform’s loans.
In its annual report for the year to 31 March 2017, released on Friday, it said that investors received dividends of 6.5p per share over the last four quarters, in line with the target of 6-7p per share.
In finance we tend to seek an edge, a marginal advantage that inches a company ahead of its competitors.
What attracts me to RateSetter is the simplicity of the business. The primary function of finance is to connect those who want to invest money with those who can put that money to productive use. The peer-to-peer sector is solving this age-old challenge in a refreshingly simple and innovative way. A good example of this innovation is the Provision Fund, which spreads risk across the entire portfolio and allows even the smallest investor to achieve diversification.
GLI Finance (AIM: GLIF) has announced that FundingKnight has been granted full Authorisation from the Financial Conduct Authority (FCA). FundingKnight is an online / P2P Lender providing access to capital for UK SMEs. FundingKnight has been operating under interim permissions since 2014, when the FCA commenced the process of regulating the peer-to-peer lending industry.
A NEW platform connecting investors with alternative finance opportunities from around the world has launched.
Amsterdam-based Yieldport acts as a community and search engine, crawling the web for new projects using a custom search algorithm. It currently offers more than 2,000 opportunities – such as business loans, mini-bonds and equity start-up investments – from 30 different countries.
Growth Street, an FCA-authorized UK business finance platform focusing on SME loans, has aimed to become a flexible working capital solution since launching in 2014. Greg Carter founded Growth Street while still working at Arts Alliance Ventures, a venture capital firm that was founded in 1996 and has since backed over 40 companies, including Growth Street, which it incubated. Carter recently became the CEO of the platform.
Erin: Could you please share Growth Street stats? Milestones?
Greg: I’m very proud of the fact that six months since launching our first product for individual investors, we now have over 1,000 lenders signed up to use our platform. This includes small businesses, who are also taking advantage of our platform to lend themselves. Another key milestone was attaining Appointed Representative status, allowing us to accept individual investors; the next goal for us is to be fully regulated ourselves.
Erin: Please talk about Growth Street’s How to Improve Cash Flow tool. How is it addressing UK SME cash flow ‘pain points’? Which other tools set Growth Street apart from its peers?
Many businesses could optimise cash flow better, but the tactics and strategies often vary from business to business. So, our How to Improve Cash Flow tool asks a series of questions to diagnose any cash flow problems within the business: respondents then get a bespoke, tailored assessment of their position from Growth Street, for free. How to Improve Cash Flow is the first in a series of tools we’ll be launching in the coming months to give businesses more data about their cash flow, helping them make better decisions and hopefully improving their access to capital.
Erin:What are your thoughts on transparency in the sector? How much is too little, too much? Or is there ever enough?
Greg: I believe the most important goal for the sector is to achieve clarity for our customers about the risks and returns of marketplace lending. Transparency is important, but the way information is presented matters a great deal. I don’t think it is enough, for example, to just publish loan book statistics; we also need to explain in plain language how we use this data to manage risk. As the industry matures and looks to grow beyond a base of early adopters, I believe a focus on clarity will best help us to attract new investors.
Is Landbay ready for the PRA underwriting standards coming in from October?
Yes, we are. We introduced our broker portal in Q4 2016. It was built with PRA changes in mind and was designed to capture the additional information this would require from day one.
The buy-to-let sector has been buffeted by significant regulatory winds recently. What are the prospects for the sector?What have been some of your biggest professional challenges?
We are seeing a big uptick in applications from limited companies and we expect this to grow further from 1 October.
What have been some of your biggest professional challenges?
For investors, one of the key things that we needed to do was build trust. As a start-up lender with no record, you cannot do that overnight, so getting the credit function right was crucial. Now that we have been lending for three years, I think we have reassured investors and built that trust.
Which one change would you like to see in the market overall?
A greater focus on technology to improve the service for brokers and borrowers.
Payment company Klarna questioned 2,000 UK consumers, in a survey carried out by Censuswide, and found that members of the millennial generation, aged between 16 and 34, were three times more likely to feel excitement while adding items to their online basket, compared to older shoppers. Millennials are also more likely (68%) than shoppers aged 55 and over (24%) to feel anxiety and guilt at the point of payment.
Klarna suggests that allowing shoppers to try before they buy would be an easy way to build brand loyalty. Deferred payment options would also reduce anxiety among 20% of millenials, making one in five more likely to finish their purchase.
The consumer research judges a myth the idea that items added to a basket show a clear intention to purchase. It found that a significant 89% of millennials used the basket as a tool to review costs, while more than three quarters used their basket as a wishlist, compared with only 29% of over-55s. Meanwhile, nearly three quarters (74%) admit to “buzz browsing” – adding items to a basket with no clear intention to buy.
Luke Griffiths, General Manager at Klarna UK, looks at the psychological factors that come into play when older consumers embark on the online shopping journey.
The flip side of this excitement is lows caused by anxiety and guilt, with 52% of millennials saying that they worry that they can’t afford the purchase during checkout. That’s compared to 16% of over 55s, who in many cases will have more disposable income than their younger counterparts – showing there’s a sizeable prize for retailers who get the customer experience for older generations right.
While the millennial customer journey is full of twists and pitfalls, baby boomers are patient, calm, and rational shoppers. They experience low emotional responses, with only 3% of those surveyed feeling guilty when adding things to their basket, and only 5% feeling impatient.
The over 55s buy things because they need them – only 21% are more likely to make a spontaneous purchase online because they deserve a treat – so tapping into necessity is key. And over half (52%) of those surveyed said they would reconsider an online purchase due to high delivery charge, so retailers with costly fees should reconsider their charges or face losing custom.
The peer-to-peer lender will offer the nearly 30,000 restaurants which use Just Eat to get takeaways into people’s laps a deal on loans.
“Our partners Just Eat directed us to Funding Circle who arranged the loan for us in a matter of days. By not spending months speaking with the banks I was able to get the finance I needed and focus on running the business and planning for the future.”
Gas Superstore lost hundreds of thousands of pounds in an online hack prior to going into administration, new documents reveal.
The Leicestershire retailer – which sold electrical goods and gas fires to the public – collapsed in April with debts of about £2.7 million.
FRP said trade creditors were owed more than £1.2 million when the business went bust – including the Google Adwords service, which was owed almost £50,000, and peer-to-peer business loan company Funding Circle, which was owed £275,000.
Blockchains, the distributed databases conceptualised in 2008 as core components of the digital currency bitcoin, are increasingly finding their way into financial technology and helping to redefine the boundaries of traditional banking. They can be used as open, distributed digital ledger systems that can record transactions efficiently.
Dianrong and Foxconn are currently working together to apply the Chained Platform for Foxconn’s suppliers.
Dianrong is expanding its team in preparation for the increase in supply chain finance loans through Chained Finance. The company has plans to hire 500 more staff in Shenzhen in addition to the 60 they already employ, Htite said.
By 2020, 60% of systems in China’s banking industry will be deployed in the cloud, most with the approval of the China Banking Regulatory Commission. According to the report, China Banking Regulatory Commission (CBRC) has been seeking to partner with 19 Chinese banks to establish a Fintech cloud stack, and the investment amount of each bank should not be less than CNY 20 million.
Online Market Lender Dashu Finance Raises CNY 800 million for Series C Round
On July 7th, Dashu Finance, a Shenzhen-based provider of online small and micro loan services, received CNY 800 million (USD 118 million) for its Series C financing round.
China’s Central Bank Issues Report on Financial Stability
On July 4th, The People’s Bank of China (PBOC), the central bank of China, released a financial stability report, warning China should redouble its efforts to regulate key risk (such as Bitcoin) in the financial sector to ensure financial stability.
China’s P2P Lending Industry Financing Drastically Decreases in the First Half of 2017
Statistics show, by the end of June, only 15 P2P online lending platforms received financing in China, and the total amount was just about CNY 4 billion (USD 5,987.1 million). Tuandaiwang.com completed the largest round of financing with CNY 1.8 billion, followed by xiaoying.com’s CNY 1 billion.
Alipay Makes Tuition Payments Easier
Thanks to a new cooperative effort between Hangzhou-based Alipay and other 30 banking financial institutions, Chinese students enrolled in primary and secondary schools are now able to pay their tuition online.
China’s Online Insurance Company Zhong An Introduces Flight Delay Insurance
Last week, Zhong An Insurance launched a WeChat-based fight delay insurance. Passengers can just buy the insurance on the Wechat platform 15 minutes before fights take off, rather than one day before departure as termed by the traditional delay insurance. The insurance pays a traveler RMB 10 if a departing or connecting flight is delayed by half an hour, and the compensation is up to RMB 120.
On 15th July, LendIt, the world’s largest and most high-profile summit of fintech was held at Kerry Hotel in Pudong, Shanghai. Including keynote speech, seminar and group discussion, the summit covered all the frontier topics of internet finance. Fintech, online lending, block chain, bank & technology, inclusive finance, Asia-pacific and global vision are the fileds discussed.
LendIt is known as the largest fintech summit around the world. It was founded in 2013 by Bo Brustkern, Jason Jones and Peter Renton. The original intention of the summit was to provide social networking and communicating opportunities for the entire online lending and financial technology community. So far, the annual summit has been held for several times in the US, Europe and China, and it is the second time for LendIt held in China.
Over 2000 elites from global fintech and traditional finance participated in the summit, including decision makers, institutional investors, and regulators. It worth mentioning that both Dr. Yang Li, the CEO of Xeenho and CSO of Xing Ping She, and Sherry Yang, the vice president of Xeenho, were invited to attend LendIt China, discussing the development and trend of global internet finance. On April 2017, Xeenho and Xing Ping She have officially reached strategic cooperation with LendIt.
AMTD-LendIt Conference officially kicked off today in one of the most metropolitan cities in the world, Hong Kong, China.
The 2nd annual AMTD and LendIt FinTech Summit is well attended by heads of state from PwC, FuTu Securities (Wealth Management and Robo Advisor), AMTD and many of the leading industry heavyweights giving the audience a preview of what’s to come.
PwC Global FinTech Survey
PwC unveiled their latest Fintech survey from hundreds of financial institution’s CEO and found that more than 60% of the CEOs are making investments into Fintech and some have dedicated 15% of their top line revenue into Fintech R&D.
I was most impressed with Futu Securities Robo advisor chatbot. Leveraging artificial intelligence, Futu’s clients can pose a question to the A.I. assistant on what’s causing a particular stock in their portfolio to fall. The A.I. algorithm then mines social media sites, news sites and the internet, in general, trying to establish whether there was a press release, news articles that may have caused the drop in stock price.
BBVA has the best mobile banking app in the world, according to Forrester Research’s latest report “2017 Global Mobile Banking Benchmark.” The study, which was published today, analyzed 53 apps from large retail banks in 18 countries, including the U.S., the U.K., France, Brazil, Turkey, China and Australia.
BBVA Spain’s mobile banking services received a final score of 87 out of 100 – the highest score since Forrester began the global rankings in 2013.
Across Europe the 10 largest digital bank financings have totalled $500 million so far, with Atom alone raising more than half that amount.
However, look more closely and it’s clear the era of digital-only challenger banks may actually be coming to a close. Systemic difficulties in turning profits with pure digital-only banking will drive more businesses to adopt a broad-based approach focusing on digital financial services, of which banking is part.
Customer acquisition costs (CAC) for pure digital banking businesses are rising – fast. The fundamental problem, in Europe as well as in the U.S., is one of demographics: Dozens of fintechs are chasing a small, well-defined target customer base. These customers need to have enough disposable income, be digitally-savvy, and usually live in key urban areas. It can easily cost $100-250 to acquire customers in certain segments, and it takes an awful lot of $5-10 transaction fees for single-use services to generate a return on these customers. It boils down to a supply and demand issue: The number of high-value prospects is static, but there is a glut of well-funded and aggressive fintechs chasing them.
Consultancy firm PwC, together with The Crowdfunding Center, analyzed 450,000 crowdfunding campaigns across the globe over the past two years and found that those led by women were 32 percent more successful at reaching their target than those carried out by men.
The results of the study, which were published on Thursday, also found that female-led projects are able to attract an average $87 pledge per funder, while men received $83 on average.
To identify relevant crowdfunding platforms with a focus on equity- and loan-based platforms located in the Muslim world, the database of Crowdsurfer was consulted. It lists in 32 of the 57 member states of the Organisation of Islamic Cooperation (OIC) a total of 108 crowdfunding platforms.
The findings were somewhat surprising:
The platform that was characterised in its Crowdsurfer profile as a “Sharīʻah-compliant equity platform for SMEs and start-ups in Malaysia” (AtaPlus) did not mention the Sharīʻah compliance on its website. The only hint of Sharīʻah compliance was the list of activities in which a fund-seeking entrepreneur must not be involved.
Only one loan-based crowdfunding platform – Liwwa (Lebanon) – outlines the importance of Sharīʻah compliance and gives a brief explanation of its business model (based primarily on murābaḥah) in the FAQ section of its website.
A loan-based platform in the UAE – Beehive – applies a dual approach: it offers both conventional as well as Sharīʻah-compliant lending techniques. The Islamic option is explained in a rather detailed manner on the website.
One of the oldest equity crowdfunding platforms in Egypt – Shekra – quotes several previous Islamic awards on its website. It does not explain how it assures Sharīʻah compliance, but the founders have propagated their approach in journals and conference papers. The platform operates as a “closed investors network”, which is quite unusual for a crowdfunding platform.
Finally, an Indonesian platform for student loans – Danadidik – applies a profit- (or income-) sharing model to calculate the returns for investors. Although this is vaguely reminiscent of Islamic financing techniques and the platform claims to adhere to Islamic principles, the Sharīʻah compliance is uncertain.
Federal Treasurer Scott Morrison has today announced new banking reforms that will allow credit unions and building societies to legally call themselves banks, in a move aimed at increasing competition between home loan providers.
Morrison and MP Kelly O’Dwyer said in a joint statement that the government will axe the restrictions deposit-taking institutions currently face, which mean they can only attain “bank” status with $50 million or more worth in capital.
Aussie aerial mapping business, Nearmap, has appointed a new VP of marketing among two senior executive hires aimed at driving its next phase of international growth.
Silvia Arrigoni will be Nearmap’s new VP of marketing and Shane Preston will be vice-president of sales.
Arrigoni, who previously held positions as head of brand marketing at online lender, SocietyOne, and as group business director for marketing agencies such as Havas and Arnold Furnace, brings decades of experience to Nearmap.
YES Bank, which runs a start-up accelerator programme called Yes Fintech, is looking at exclusive global exchange programme partnerships to help Indian start-ups gain access to developed markets in terms of business and investments.
Towards this end, the bank has already tied up with MaGIC (Malaysian Global Innovation & Creativity Center), a Malaysian government initiative. It is also looking for similar partnerships with the US, Sweden, Norway, Singapore, the UK and Israel over the next few years.
The cost of education has skyrocketed over the past decade by 160%, be it colleges or even elementary and secondary school. This has become a major setback for middle class families in India to provide their children with quality education.
Quiklo offers collateral-free loans to students with relatively smaller ticket size. Its biggest USP is that the loan is approved in a day and the amount is disbursed in the next few days
It runs on both a B2B and B2C model.
Quiklo offers collateral-free loans to students with relatively smaller ticket size. Its biggest USP is that the loan is approved in a day and the amount is disbursed in the next few days
It runs on both a B2B and B2C model.
Under the B2C model, parents can go to its website or download the app, enter their details, the student’s details, their financial problems, the course fees and submit the application. There is an algorithm that runs to check their credit worthiness depending on a few parameters like salary, etc.
Under the B2B model, Quiklo ties up with colleges and test prep companies. When a student goes there for admission, the college pitches Quiklo to them in case they are in the need of financing.
Fixed Deposits, investment in gold, and many other traditional options are losing grounds when trying to woo the new age investors.
Digital gold currencies are issued by a number of companies like now Paytm as well, each of which provides a system that enables users to pay each other in units that hold the same value as gold bullion.
Peer-to-peer (P2P) lending in India currently gives a net return of 18-22 percent to lenders.
An online-only platform for retail investors will launch here in the third quarter, China’s Ping An Group announced on Monday (July 17).
Lu International (Singapore) Financial Asset Exchange, a spin-off from the Shanghai-based Lufax, has received an in-principle approval from the Monetary Authority of Singapore for its capital markets services (CMS) licence.
The company, which will offer investments via mobile devices with no face-to-face encounters, hopes to attract customers who may have less wealth than those served by private banks.
Connector – powered by Indonesian angel investor network (ANGIN) and the UNDP – has garnered over 400 startup applications since its beta version was introduced two weeks ago.
The idea is to help startup founders find the right investors for their ventures. Often, founders waste resources chasing the wrong investors, or even don’t have the channels nor the experience to source funding.
So far, Connector team has received more than 420 applicants, of which 70 per cent are technology companies. About 50 per cent have requested further connection (eg. pitch deck, call or meeting). Most applicants (38 per cent) are looking for equity, while the rest are looking for grants (14 per cent), collateralised loan (13 per cent), bridge loan (9 per cent), non-collateral loan (7 per cent), trade financing (5 per cent), and invoice financing (3 per cent).
P2P lending platform Modalku has announced that it will launch a new app next week. The app will be a “new innovation for lenders and debtors alike”, and is hoped to further bolster Modalku’s mission to support the small and medium enterprises in Indonesia.
South African payments company Yoco today announced that it now has 10 000 small and medium-sized enterprises (SME) clients in South Africa using its point-of-sale payments platform to accept card payments.
Maphai said the company is adding over 1 000 new SMEs to its base every month. This makes it the largest independent mobile point-of-sale player in South Africa by number of merchants, he claimed.
Yoco has in the past two years of operation, raised $7-million in funding from international investors and employs over 70 people in Cape Town and Johannesburg.
In light of the importance of regulating fintech firms to prevent any problem in the monetary market, the Center for E-Commerce Development’s deputy has announced that the Central Bank of Iran will define the framework of fintech operations by the end of summer.
According to CBI regulations, innovative financial services are allowed to operate as long as they are not involved in money creation, currency exchange and offering payment tools (like cards) and attract deposits.
Payment aggregators allow sellers to quickly launch a payment gateway on their website, without getting involved in the demanding process imposed by banks and other PSPs.
According to Oskouei, currently 50 fintech firms have announced their commitment to continue their operations until CBI regulations are ready for implementation.
When FICO first introduced the credit score in the 1980s, it had good intentions: To level the playing field for consumers and make decisions easier for lenders. Nearly 30 years later, we still use the exact same model. And while it’s never been perfect, its flaws have become much more apparent in recent years as […]
When FICO first introduced the credit score in the 1980s, it had good intentions: To level the playing field for consumers and make decisions easier for lenders.
Nearly 30 years later, we still use the exact same model. And while it’s never been perfect, its flaws have become much more apparent in recent years as consumers’ financial habits have started to evolve.
Currently, we use a traditional credit score to gauge creditworthiness for untraditional consumers, and this situation has created serious limitations. Fortunately, a solution is well within reach, and it comes in the form of a new, alternative credit score.
Unpacking the Value of Alternative Credit Scoring
In order to meet the evolving needs of consumers, it’s time to introduce a new type of credit score — one that looks at data beyond traditional financial institutions in order to understand the creditworthiness of the growing number of consumers who choose to manage their finances in new ways.
While there’s no single prevailing model for alternative credit scoring, many have already been introduced with great success. These models typically rely on a combination of the following activities as a way to gauge consumers’ propensity to pay bills:
Traditional loan repayment behavior
Non-loan payment data (e.g. utility or rent payments)
Cash flow information
Home, job and lifestyle stability information
Education and employment data
Personal and professional connections
Some of the most common data points used to understand these activities include:
Checking and savings account transactions to understand cash flow based on income, spending habits and account balances
Utility bill, rent, cable and/or mobile phone payments to understand intent to make payments and typical payment patterns (early, on-time, late)
Mobile phone location to verify home and work addresses as a way to understand stability
Social media activity to assess home, job and lifestyle stability, education and occupational attainment, online behaviors and personal and professional connections
While the latter two data points (mobile phone location and social media activity) are considered less reliable than bank account and bill payment data, some alternative credit scoring models have used them with success.
Ultimately, with the right data in place, these alternative models can prove just as trustworthy as the traditional FICO credit score and provide several benefits for consumers and lenders alike.
Trust in Alternative Credit Scoring Models
The trustworthiness of alternative credit scoring is extremely important, as lenders must be able to rely on these models to limit their risk. Fortunately, there are several data points that have proven their worth.
According to a recent study on the predictive value of alternative credit scores by the Center for Financial Services Innovation, utility bills and rent payments are among the most reliable data points used in alternative credit scoring models. The fact that these data points are easy to collect only makes them all the more appealing.
The study also reports that many consumers who would be unable to obtain a loan using traditional credit scoring models actually represent prime or near-prime credit risk for lenders, making alternative models that can generate scores for most adults an ideal solution to safely broaden access to credit.
Of course studies are one thing. How all of this works in practice is quite another. So far, though, the results have been positive. Consider the case of TransUnion, which now uses an alternative credit scoring model that it calls CreditVision Link. The firm has over three billion non-traditional data points for more than 260 US adults including property, tax, and deed records; and checking, debit, or payday lending information. TransUnion has used these alternative data points to accurately score more than 90% of applicants who would have been unscorable under the traditional model.
Benefits of Alternative Credit Scoring Models
Once lenders establish trust in alternative credit scoring models, both lenders and consumers can begin to reap the benefits.
For lenders, the benefits of alternative credit scoring typically include:
Enhanced predictions due to access to more timely and holistic information on consumers’ spending habits and payment behavior
Lower costs and increased efficiency due to the use of less expensive data sources and faster data collection methods
Reduced discrimination due to the use of automated data collection, which removes the need for manual and discretionary decision making
For consumers, benefits of alternative credit scoring typically include:
Increased access to credit due to the use of data points beyond traditional financial behavior that fail to capture information on the millions of unbanked and underbanked consumers
More accurate portrayal of creditworthiness due to the use of more timely information, which can make it easier for consumers to build credit
Better service due to a more efficient and less discretionary processes
When all is said and done, FactorTrust, the alternative credit bureau, reports that underbanked US adults represent $105 billion in untapped opportunity for lenders while VantageScore Solutions finds that alternative credit scoring could help approximately 7.6 million consumers who are currently unscorable reach a credit score of 620 or higher.
Why It’s Time for a Change
Why exactly do we need to introduce a new model for credit scoring? There are many factors driving the need for change, but they are largely led by Millennials who are unlike any generation before them. There’s no shortage of articles that try to pick out defining characteristics of the Millennial generation, good and bad — they’re digital, they’re narcissistic, they support brands with a cause.
And whether or not these broad strokes actually define Millennials, one thing that is certain is that this generation approaches many different everyday challenges in their own unique way. Perhaps the best example of this is how they manage their finances.
A New Financial Mindset
Not too long ago, everyone “banked.” We opened checking and savings accounts and we used credit cards — it was just the norm. Those who didn’t follow this pattern typically did so due to dire financial circumstances.
Today, however, we live in a different world. We live in a world shaped by a great recession in which many people were failed by the very banks that they trusted to keep their finances safe. This experience hit particularly hard for Millennials, who came of age in the throes of the recession.
As a result, many Americans (led by Millennials, but not confined to this generation) have started to re-think how they handle their finances.
Growing Financial Options
In addition to world events shaping a new financial mindset, so too has the rise of technology.
Today, consumers have far more options than they once did for how to store and spend money. For instance, many online options now exist that help consumers manage their money and retain access to it digitally, all without any involvement from traditional financial institutions. One of the best examples of these options is Amazon Cash, which enables consumers without credit or debit cards to load cash directly to their Amazon accounts via kiosks at retailers like CVS.
A Change in Banking Status Norms
As a result of a new financial mindset and the growing number of non-traditional financial options, a change in banking status norms has set in.
According to the FDIC, 27% of US households are unbanked or underbanked. Those terms are defined as follows:
Unbanked: No one in the household has a checking or savings account.
Underbanked: The household has an account at an insured institution, but also goes outside of the banking system to alternative financial providers for services and products like money orders, check cashing, international remittances, payday loans, refund anticipation loans, rent-to-own services, pawn shop loans, and auto title loans.
A large portion of consumers who fall into this group cited non-financial reasons for retaining an unbanked or underbanked status including a lack of trust in banks, privacy concerns, and high or unpredictable bank account fees.
Although the growing number of financial options may make it easy for these unbanked and underbanked households to get by without engaging traditional financial institutions, this status poses a major problem when it comes to credit.
From obtaining a loan with which to buy a house or underwriting for insurance to gauging responsibility when applying for a new job, credit scores are used for a variety of purposes. As a result, credit counts for a lot when it comes to mobility in the US economy.
However, because of how credit scores are traditionally calculated, those who are unbanked and underbanked are typically credit invisible (meaning they have no file with any of the major credit bureaus) or credit unscorable (meaning they have a file with at least one of the major credit bureaus but the information is either too little or too stale to generate a reliable score). Today, 45 million US adults are credit invisible or credit unscorable.
Essentially, this means that the growing group of unbanked and underbanked consumers is severely limited when it comes to activities like buying a house.
It’s Time to Embrace Alternative Credit Scoring Models
Under the status quo, the vast majority of lenders use the traditional FICO credit scoring model. However, this model prohibits 45 million US adults from obtaining credit due to their banking choices rather than the risk they pose to lenders, and seriously limits upward social and economic mobility as a result. Perhaps the most concerning part of this problem is that the overwhelming majority of these credit invisible and credit unscorable consumers are actually good candidates to receive credit.
At a time when more and more consumers are choosing to go outside the traditional financial system, whether it’s because of a lack of trust in banks, the growing number of alternative financial options, or anything else, it’s clear that we need a new type of credit score.
Fortunately, the solution is well within reach. Many firms have already created alternative credit scoring models based on data points like checking and saving account data and utility bill, rent, and mobile phone payment history, and these models have proven their trustworthiness time and again.
Best of all, alternative credit scoring models provide benefits for lenders and consumers alike by enhancing creditworthiness predictions, making the credit application process more efficient and less expensive, and expanding access to credit in a risk-averse way.
News Comments Today’s main news: CAN Capital begins funding small businesses after funding from Varadero Capital. What happened to BizFi?. Zhong An applies for Hong Kong IPO. P2P lending hits 1T won in South Korea. Funding Societies named to Fintech 250. Today’s main analysis: Key trends in modern finance. Angel investors total nearly one third of active fintech investors. […]
CAN Capital back in business. GP:”This is great news and it makes a lot of sense.”AT: “Could this be the start of a great comeback story? I hope so.”
Tiny Florida bank could become national competitor with APIs. AT: “More banks need to think this way, especially small regional and community banks. Otherwise, they could end up going out of business. Technology reduces costs and increases speed. Once banks realize that, it is then a matter of redirecting the business focus to meeting customer needs. Banks of the future will likely be conduits of financial services rather than direct providers themselves. Here’s a bank that looks like it understands that.”
Just One-third of OnDeck borrowers need human intervention. GP:”In the context of CAN capital and BizFi, this is a very interesting data point.”AT: “With all the hype around robos, AI, and machine learning, I think most consumers still like some human interaction. In this case, we’re talking about loan application approvals. I’d like more information. Is this higher or lower than other online lenders?”
What happened to BizFi? GP:”I am surprised they stopped originating. Reorganizations to seek profitability makes sense but they mush have a way to become profitable given their origination volumes. I am surprised. Maybe they should talk to Varadero Capital.”
Will everything be on the blockchain? GP:”We are seeing the same exhuberation in blockchain as we saw in p2p lending. Then there will be scandal in Blockchain due to fraud and the bubble will burst and it will become realistic again.”
Vantiv offers $10B to acquire Worldpay. GP:”Vantiv, Inc. is a public U.S.-based payment processing and technology provider headquartered in the greater Cincinnati, Ohio area. Vantiv is the largest U.S. merchant acquirer ranked by general purpose transaction volume.”
CAN Capital, an online lender in the SME lending space, is back in business following a recapitalization by Varadero Capital, an alternative asset manager in New York City and currently manages about $1.3 billion. The specific deal terms were not disclosed.
CAN Capital announced it will immediately begin funding existing small business customers that are eligible for a renewal and will start funding new customers by working with select sales partners.
CAN Capital said it will start with two products available in all 50 states, term loans and merchant cash advances with funding amounts from $2,500 to $150,000.
Surety Bank in DeLand, Fla., is making what many would consider a risky move. It’s ditching its legacy core vendor for a cloud-based startup core provider with just a handful of clients.
The bank has signed with Nymbus, a startup in Miami, to replace its core system early next year. James said he was attracted to the open platform that relies on application programming interfaces to connect with a variety of providers.
By embracing APIs, Surety will not be beholden to any one vendor and can partner with fintechs and other third-party providers in a quick and efficient manner.
The Federal Trade Commission said it halted the operations of Blue Global Media after the company earned millions of dollars by falsely promising to match them with low-rate loans.
The FTC’s complaint alleged that, starting in 2009, Blue Global set up sites such as cashmojo.com, clickloans.net, and 100dayloans.com, which promised to connect consumers with more than 100 “trusted lending partners” and find the one offering them the best loan terms.
The complaint alleged that complete applications were sold, without consumer consent, “to any potential buyer without conditions and with little regard to how it would be used.”
In a settlement, Blue Global faced a judgment of $104 million. Both Blue Global and Kay filed for Chapter 7 bankruptcy, listing the FTC as a creditor.
At the initial stages of a loan application, “100% of our applicants get algorithmic decisions,” Katzenberg explained. The algorithm then “spits out” one of the three decisions: the applicant is either declined; approved and can move on to the booking stage; or pending and needs further investigation. “In this case, the algorithm picks up on something, or the loan value is larger than our average, or maybe it’s a random test of the model,” he said.
Currently, about one third of OnDeck’s loans experience a manual intervention.
NASB Financial, Inc. (OTCQX: NASB) announced today that its subsidiary institution, North American Savings Bank, F.S.B. (“NASB”), was recently named a Top VA Lender by LendingTree, a leading online loan marketplace. Criteria for the award included loan volume, quality, and customer service. LendingTree noted that “NASB customers benefit from fast and easy processing, low rates, and excellent customer service. The company is also well known for their professionalism, and their ability to get the job done, even in unusual or stressful circumstances.”
This past week, Bizfi gave their remaining employees a 90-day warning notice, according to sources familiar with the matter. Some of those riding out their potentially last 90 days are anxiously awaiting the outcome of nonpublic negotiations to salvage parts of the company’s legacy, if it can be done at all.
The decision to lend money is made on the basis of a form outlining the borrower’s financial history. Users share the risks, and depending on whether the individual returns the money or not, they can lose or earn from $1 to $10.
The default rate also decreases with an increase in accountability. As noted by Eugene Lobachev, Suretly’s founder, the default rate on Suretly is 2-3 percent lower than the market average.
Suretly primarily targets short term loans of up to one month, and has been designed to cater all borrowers, including the ones with poor credit rating.
LendingClub (NYSE: LC), America’s largest online marketplace connecting borrowers and investors, today announces Kenneth Denman as the newest member of its Board of Directors. Effective June 28, 2017, Denman joins as a Class One director and will serve on the Audit and Compensation Committees.
Denman, a venture partner at Sway Ventures, has served as a CEO for over fifteen years leading corporate transformations for the likes of Emotient, Inc. (acquired by Apple in January 2016), Openwave Systems, Inc. (now Unwired Planet), and iPass, Inc. He has held executive roles at MediaOne Group, Inc., US WEST Communications Group and the Battelle Memorial Institute Laboratory.
The Unbanking of America: How the New Middle Class Survives by Lisa Servon – Lisa Servon is a University of Pennsylvania professor who has spent time working behind the counter at a check cashing store and a payday lender. She provides profiles of the kinds of people who use these services and why they choose to access credit outside the traditional banking system. She also shares some of the work that innovative companies are doing to address the unique challenges of the underbanked.
A poll of 2,000 adults in the UK found that more than four in 10 have never tried to find out their credit score, and it’s been longer than a year since checking for nearly 20 per cent.
The survey revealed that the most common use for credit cards was to buy expensive one-off items, although an incredible four in 10 use it to buy anything, as if it was just a debit card of containing free money.
One in 20 have had their applications for a mortgage rejected – and even been denied a mobile phone contract, due to their poor credit history.
More than half of the country doesn’t know exactly how much they owe on credit cards and loans, although estimates suggest that, on average, each Brit has £1,780 worth of credit card debt.
RATESETTER has announced plans to start offering Hire-Purchase (HP) products for commercial and individual borrowers later this month.
While details on the interest rates and underwriting criteria are yet to be released, the company has confirmed that the HP loans will pay into its Provision Fund, just like every other loan on its platform.
The loans will be financed from RateSetter’s existing investment markets, so all new and existing lenders can take advantage of the hire purchase agreements.
UK tech start-ups are receiving a lot of attention in the press. They’re something we’re rightly proud of – the UK is a centre of innovation. Tech investment in the UK was £6.8bn last year, which is more than double that found in any other country in Europe. France, in second place, only secured £2.4bn.
But there are a lot of tech companies in the mid-market who find it much harder to get access to the finance they need. Once a business graduates from sexy start-up full of promise and astronomical growth models into a steady going concern, it often becomes more difficult to attract the interest of investors.
In short, many mid-market tech companies are ignored by VC because they’re not edgy enough and declined by the banks because they’re not secure enough. But these mid-sized companies are the backbone of the UK’s tech scene, the crop of successful brands which made it out of the initial scrum and built a steady income and a route to profitability. Real success for the UK tech sector means helping these companies keep going on that route – so how do they find the money to grow?
By going down the peer-to-peer lending route, mid-market companies can get access to funding much faster, with a far greater level of flexibility and a much lower minimum threshold for borrowing.
In total, some £2.4 billion worth of venture capital funding has been pushed into Britain’s technology companies since the vote, according to research from London & Partners, a branch of the London Mayor’s office. This was more than double the investment made in Germany and three times the amount poured into France. London in particular is securely established as the tech-centre of Europe, with 554 deals totalling £1.8 billion being made in the last 12 months. In comparison, Berlin has tied up £775 million worth of deals and Paris has secured £557 million in venture investment.
The research found that the first half of 2017 had seen a record £1.1bn of venture capital funding into London start-ups. For the UK as a whole it was £1.4bn, the third biggest on record.
Crowdfunding platform Seedrs has produced an annual return between 14.4 per cent and 49.1 per cent, once tax relief is taken into account.
Unlinked to markets –The other thing to bear in mind is these types of investments aren’t listed on a stock exchange, meaning they are not correlated to the markets. This can be good from a diversification point of view, because crowdfunding investments are not exposed to the same market wobbles.
Different platforms, different risks
Range of requirements
Life after the fundraise – “Without a proper structure in place, and a platform that provides support post-fundraising, the complexity and administrative burden of managing a crowd of investors can be a very real drain on time, money and resource for companies.”
In this episode of our series on financial technology, we sat down with Ning Tang, founder and CEO of CreditEase.
Nicholas Borst: Ning, thank you so much for joining us today. China appears to be at the forefront of the global fintech revolution. What are the main factors why fintech is developing so quickly in China?
Ning Tang: I think several key drivers. One is that compared with the US market, which is more mature, China is still developing. I mean China’s financial system, our credit system. So, the demand is bigger in China, like from small business owners, from micro-entrepreneurs, from consumers, and rural people. So, that’s one.
Secondly, China has adopted technologies such as mobile internet much earlier than the US.
Also, the regulators have played a very important and positive role in promoting market development in a healthy, stable way.
Nicholas Borst: Ning, could you tell us a little bit about how the alternative lending sector in China has developed?
Ning Tang: I think in China, traditionally, banks looked at collateral, a physical good as collateral. Many small entrepreneurs, small businesses don’t have such physical goods. They have intangible value in their data, electronic data. For instance, we have a partnership with eBay, helping Chinese merchants who actually sell goods to US consumers, this segment access financing. They have no physical goods, assets, as collateral, but their data is very valuable. So, we work with eBay and their merchants. Whenever they have a financing need, yet they can provide their data to us, and our credit evaluation engine can real-time assess a credit quality, and match that need with investor money. This is very cool. Many such needs are time-sensitive. It cannot wait for several weeks to allow the borrower to go to a branch office and submit tons of documentation, wait for several weeks. No, that’s not possible.
Nicholas Borst: Are a lot of fintech companies in China sharing information?
Ning Tang: Yes. After we took the first step, some tried first by just using our data first. Then they realized that this is indeed a great system. More and more joined, and now we have over 500 industry players. All kinds of players, like banks, insurance companies, also P2P marketplace lenders, alternative lenders, and all exchange data in this system. At the same time, I expect that the Chinese regulators will step up their effort to create this more comprehensive national credit bureau system, and grant credit bureau licenses to credit bureaus in coming years.
Sean Creehan: Could you talk a little bit about the role of regulators, and the evolution of alternative lending in China?
Ning Tang: A key driver is that the regulators have played a very positive, conducive role in making that happen. They understand that there are a lot of unfulfilled needs in China’s financial system. They also understand that technology and business model innovations can help China do a better catch-up job, potentially doing some leap frog to make financial services more accessible, more cost efficient, more friendly.
For example, in marketplace lending, the regulators made it very clear early on, it’s actually a peer-to-peer like relationship. It’s not like a banking relationship where people make deposits.
About one year ago, we started to have more official regulations on marketplace lending, on payment, and also other sectors of fintech. But more for marketplace lending and payment. These two more mature sectors. I expect that other sectors, like crowdfunding, robo-advisor, insurance tech, and so on, will go through a similar path in coming years. Meaning like the industry will work very well with the regulators creating a healthy and robust industry landscape.
The recently published survey by American Express revealed that 37% of consumers who tried mobile wallets have stopped using them over security concerns, while 73% of retailers reported persistent or increasing levels of fraudulent online sales.
Key Trend #3: Partnerships
Apple Pay: Gaining momentum
Apple Pay is now supported by 1,938 banks and credit unions across the US, although most of them are regional in scope. In Europe, UK is leading the way with 24 banks (including Danske Bank), while Japan (133) and China (73) show the greatest integration in Asia-Pacific.
Alipay: Going global
Alipay users will now have an access to four million retailers across the US. First Data is the largest provider of payment solutions worldwide, processing 45% of all US credit and debit card transactions with 80% market share in gas and groceries.
Key Trend #6: Move towards balance sheet lending model
Consumer lending remained a dominant, accounting for 61% market share, although it appears to be slowing down.
There were 1,666 active angel investors in FinTech since the start of 2014. This translated to 32.3% of the total number of unique investors in the sector during that period. The remaining 67.7% comprised of VCs, investment banks and other financial institutions. The group of angel investors backed 1,010 deals, 16.6% of all deals in the FinTech sector since 2014. 521 of the total number of angel backed deals contained more than one individual investor, while 16.3% of all deals had four or more angels participating as co-investors, showing that most angels prefer to share the investment risk.
Abu Dhabi Shakes on FinTech Investment Pact with China (Cryptocoins News), Rated: B
The UAE’s second largest financial free zone has entered a partnership with a Chinese counterpart to enable fintech development and investment opportunities in both countries.
The two authorities will collaborate over investment opportunities together and a notable objective includes the strengthening of FinTech ecosystems in both markets in an era of digitization.
Peer-to-peer lending in South Korea surpassed 1 trillion won (US$870 million) last month, marking a rapid growth as yield-hungry investors funneled more money in the alternative lending scheme, industry data showed Thursday.
According to data compiled by the Korea P2P Financial Association, lending between peers was tallied at 1.16 trillion won at the end of last month.
The average interest rate of such loans stood at 14.68 percent.
Funding Societies Named to the 2017 Fintech 250 (Funding Societies Email), Rated: AAA
CB Insights named Funding Societies to the prestigious Fintech 250, a select group of emerging private companies working on groundbreaking financial technology. CB Insights CEO and co-founder, Anand Sanwal, revealed the Fintech 250 companies during The Future of Fintech, a gathering of the world’s largest financial institutions, best fintech startups, and most active venture investors.
“We are humbled to be named amongst the Fintech 250 globally and be the only digital lender on the list from Southeast Asia.” said Funding Societies co-founder Kelvin Teo. “Funding Societies currently serves Singapore, Malaysia and Indonesia, where it is known as Modalku, or My Capital in Bahasa. While each country is vastly different and requires us to rethink from scratch, it is a region we’re passionate in. We believe technology advancement in financial services can truly benefit societies here.”
Omise, a fintech startup based in Thailand, has closed $25 million in new financing via a token sale, more commonly know as ICO, that closed today. In doing so, it become the most established tech company to date to take this financing route.
The company, which has raised over $20 million to date from traditional VC investors, held the token sale to raise capital to develop a decentralized payment platform — Omise Go — that it hopes will disrupt the current banking system. The idea is to enable any Omise Go user to share funds through the network without the need for a bank account and without incurring fees or incurring cross-border costs. Beyond peer-to-peer payments, the company plans to sign up retail partners to extend its utility into purchases, and open the system up to other payment players, too.
Omise’s core business is enabling online payments, much like Stripe, in Thailand, Japan and Indonesia, but it became interested in the blockchain a few years ago, CEO Jun Hasegawa told TechCrunch in an interview.
The company has sold an initial 65.1 percent of the total float of OMG via this ICO, with a further five percent of the tokens will automatically be given to anyone who owns Ethereum in what is known as an ‘airdrop.’
Omise capped its token sale at $25 million, eschewing the ‘gold rush’ mentality which has seen other companies raise tens of millions of U.S. dollars more as ICOs have gained a reputation for giving backers huge financial gains quickly.
Over time, investors responded to this new opportunity, and more than five decades after their creation the U.S. stock exchange REITs industry has grown to a $1 trillion equity market capitalization (Nigeria $224M as at 2014 according to the NSE) and nearly $2 trillion in real estate assets.REITs in the U.S. and increasingly around the world now regularly provide investors with the opportunity for meaningful dividends, portfolio diversification, valuable liquidity, enviable transparency and competitive performance.
REIT was established in Nigeria following the enactment of the Investment and Securities Act (ISA) of 2007.
However, in a 2015 comparative (academic) study, Olarenle and others found when they compared REIT dividend payouts in Nigeria to global rates, that Nigeria REIT (N-REIT) underperforms, usingMalaysia REIT (M-REIT) asa benchmark both in terms of average return 4.8% and risk adjusted return -6.77% per annum against the Malaysia REIT 7.5% and 2.47% respectively. They recommended increased capitalization, market transparency and external management as options for N-REITs performance enhancement, all of which can perhaps be correlated to the maturity of the Nigerian REIT market.
News Comments Today’s main news: Proposed U.S. REIT credit rating methodology. Tisa group pushes for P2P lending in Sipps. Dumiao issues first digital lending ABS on Shanghai exchange. Today’s main analysis: Borrowers accelerating paydowns on six-figure student loan debt. Top 10 P2P lending platforms by volume and loan balance in China. Today’s thought-provoking articles: Millions of Americans just got […]
Proposed U.S. REIT credit rating methodology. GP:”Credit Ratings, despite their shortfalls, are one of the pillars of fixed income. I am confident that while no rathing methodology is perfect, some is better than none and REITs can certainly use one.”
Millions of Americans just got an artificial credit score boost. GP:”I would like to see which part of the FICO improvement is just due to the economy improving overall vs FICO gaming. However we just compare the 2005 high vs 2017 we can see a large difference already: 3 points fewer Americans have a FICO credit score below 600. As an anecdote: 66% of Canadians are considered prime (above 640) borrowers vs 60% in US being non-prime (below 640). Perhaps a cooler climate makes one think twice before getting a loan. “AT: “Is this an indication that downplaying FICO in lieu of alternative credit scoring is in the best interest of online lenders? I think it’s worth considering, if your business model is based on approving loans with a heavy weight toward FICO scores.”
How First Federal in Ohio is getting an edge in tech. AT: “I like the idea of community banks teaming up to investing in innovating platforms. Banks from non-competing markets could pool their resources for joint ventures that would compete both with big banks and online lenders.”
What is Nevada’s pro-blockchain bill? GP:”Commonly it is agreed that online lending products are less risky than the stock market with lower return, and riskier than traditional fixed income however delivering higher returns. “AT: “This is interesting. It makes me wonder what is Nevada’s intent in passing this bill? Are state authorities really afraid local governments would tax blockchain transactions? Are there a lot of blockchain transactions taking place in Nevada? My guess is, the casino and gambling lobby is behind this, and it could mean that they are working on blockchain-based gambling products, and who knows what else?”
Most investors not expecting to beat cash, according to RateSetter. GP:”Perhaps UK investors are pessimistic. If they don’t expect to beat cash returns the risk is not worth the return in online lending. The only explanation is the humanitarian aspect of p2p lending or perhaps the anti-bank sentiment pushing retail investors into supporting p2p lending despite cash-only-level returns.”
Dumiao issues first digital lender ABS in Shanghai. GP:”ABS offering on Shanghai Stock Exchange. In general investors see the Shanghai Stock Exchange as being particularly prone to insider trading and not many international investors participate in the market. Despite this there is a need for Chinese ABS and there will be, with or without international investors, a Chinese ABS bond market due to the needs of local insurance, private equity, banks and other participants.”
The four key components that drive MCR’s credit rating methodology for REITs are:
Our Business Risk encompasses various measures of a REIT’s business risk.
Our Cash Flow Cushion ScoreTM is an evaluation of a REIT’s ability to cover debt maturities, interest, and other debt-like obligations.
Our Solvency ScoreTM is a predictor of default based on four key metrics.
Our Distance to Default Score is based on a REIT’s likelihood of financial distress using market-based inputs.
Two separate component scores converge to form our final Business Risk assessment: Country Risk and Company Risk. Once we assign these two component scores, we weight them as follows to determine the overall Business Risk assessment for each REIT:
Country Risk: 10%
Company Risk: 90%
We believe EBITDA is the best measure of size for REITs and assign points for size according to the following scale:
The distance to default metric is a market-based measure of financial health. Both inputs, equity volatility, and the ratio of enterprise value to market capitalization, are calculated using daily updated market data. This allows us to incorporate new information faster through the distance to default calculation compared with accounting-based measures of financial health. As a result, our credit ratings can be more responsive to early signs of financial distress.
Step 2: Calculate current enterprise value/market cap ratio (EVMV).
Step 3: Transform EQVOL into a percentile [0, 1] by ranking it relative to all other stocks in the calculable universe (EQVOLP). 1 represents high equity volatility, 0 represents low equity volatility.
Step 4: Transform EVMV into a percentile [0, 1] by ranking it relative to all other stocks in the calculable universe (EVMVP). 1 represents high leverage companies, 0 represents low leverage companies.
Step 5: Calculate new raw DTD = 1-(EQVOLP + EVMVP + EQVOLP*EVMVP)/3
Step 6: Transform new raw DTD into a decile [1, 10] by ranking it relative to all calculable U.S.-domiciled stocks. 10 represents poor financial health while 1 represents strong financial health.
Morningstar Credit Ratings, LLC (MCR) will accept comments on this Request for Comment until 5 p.m. Eastern Time on July 5, 2017.
Comments should be submitted by the deadline date and time via email to NRSROconsultations@morningstar.com. Comments should contain your name, your title (if writing on behalf of an organization), your organization (if applicable), address, phone number, and email address.
Stated simply, the definition of the all important FICO score, the most important number at the base of every mortgage application, was set for a series of “adjustments” which would push it higher for millions of Americans.
Now, as the Wall Street Journal points out today, efforts to rig the FICO scoring process seems to be bearing some fruit. The average credit score nationwide hit 700 in April, according to new data from Fair Isaac Corp., which is the highest since at least 2005.
Meanwhile, the share of consumers deemed to be riskiest, with a score below 600, hit a new low of roughly 40 million, or 20% of U.S. adults who have FICO scores, according to Fair Isaac. That is down from 20.5% in October and a peak of 25.5% in 2010.
A growing number of Americans who have student loan debt are enrolling in repayment plans that ease the burden of their monthly payments by stretching them out over a longer time period. Some borrowers pursuing this strategy may qualify to have their remaining debt forgiven after 10, 20, or 25 years of payments. Others will rack up thousands of dollars in additional interest rate charges without qualifying for loan forgiveness.
Credible’s analysis found most borrowers who have refinanced more than $100,000 in educational debt are taking the opposite approach. Most are on track to dispatch their loans in 10 years or less — saving tens of thousands of dollars in interest payments in the process. Many who have refinanced six-figure educational debt at lower rates will pay it off in just 5 years, Credible found.
June Legislative Update (Experian Email), Rated: A
On May 19 Experian submitted comments in response to the CFPB’s Request for Information (RFI) on the use of alternative credit data and alternative credit scoring models. The CFPB sought comments on the types of information that should be considered alternative data and how it could be used to improve financial inclusion.
On May 18, Representative Marsha Blackburn (R-TN) introduced the Balancing the Rights of Web Surfers Equally and Responsibly (BROWSER) Act of 2017 (H.R. 2520). Blackburn is joined by Representatives Brian Fitzpatrick (R-PA) and Bill Flores (R-TX) as original co-sponsors of the bill. The legislation seeks to bring internet service providers and edge service providers under the same privacy regime, by designating the FTC as the nation’s sole online privacy enforcement agency.
On May 8, Representative Barry Loudermilk (R-GA) introduced H.R. 2359, the FCRA Liability Harmonization Act. The bill seeks to bring consistency to national consumer financial protection laws by capping class action damages and eliminating punitive damages to align the Fair Credit Reporting Act with other consumer financial protection laws.
In New York, S.B. 5601 amends the state’s breach law by adding biometric data to the definition of personal information and permitting email notification unless the breach includes access credentials for an email account. Notification would instead be provided in real time by providing clear and conspicuous notice when the consumer is accessing the account from their usual location.
At the upcoming SCI Marketplace Lending Securitisation Seminar in New York on 22 June, panellists will discuss the structuring and evolution of marketplace loan ABS. The fact that deals are increasingly incorporating features to reduce risk is one area that is expected to be covered.
This trend is supported by the recent US$495m Prosper Marketplace Issuance Trust Series 2017-1 – the first ABS launched by Prosper via its own branded shelf, when previous deals had been issued by Citi on the CHAI shelf. Rated by KBRA and Fitch, the deal comprises US$311m A/A- class A notes and US$70.67m BBB/BBB- class B notes. KBRA rated the US$113m class C notes single B-plus, but these are unrated by Fitch.
Plaid co-founders William Hockey and Zachary Perret noticed the need for something simpler, a system that would do the heavy lifting for other companies aiming to work with real financial data. The pair developed APIs that can ingest the mass volumes of financial data on the backend, transform it into a useable format, and then build a service on top – in other words, a platform.
As developers themselves, they focused on building a platform that was developer-friendly and for building integrations. Due to this focus, they quickly saw growing demand from developers and the emerging fintech industry to help build new applications for financial services.
Hockey and Perret’s goal is to drive innovation in financial services. Instead of attempting to serve consumers directly, the pair believed it was a smarter move to build a business- and developer-facing platform, one that would power the entire fintech ecosystem for consumers indirectly.
Moving forward, Plaid will focus on scaling this year. Its main goal is to continue to grow the platform that is seeing a lot of demand — which also means recruiting more people to join the team. Although the team currently numbers around 90, the leadership hopes to grow the team to somewhere around 120 by the end of the year, hiring across all departments.
“Why can’t a group of 10 community banks figure out how to make investments in an innovative platform down the road?” he said. “Or a group of banks being part of a development fund to steer a variety of tech initiatives?”
With the accelerator, First Federal is teaming up with larger banks. Its partners in the accelerator include Fifth Third Bancorp, Huntington Bancshares, KeyCorp and the insurer Progressive. JPMorgan Chase and Silicon Valley Bank are also part of the initiative.
The vendor has grown from a niche Nordic payments specialist to a global player with operations in 18 markets in little more than a decade. Recently launching in the US, Klarna has chosen to orient its primary go-to-market efforts around an alternative financing offering for e-commerce purchases.
Sequoia Capital said it has raised more than $4 billion for venture and growth funds in the United States, China, India and elsewhere in the world, according to filings with the SEC.
The Silicon Valley-based firm said it raised nearly $2 billion ($1.9995 billion) for its Sequoia Capital Global Growth Fund II, according to the filings. The firm had unveiled the fund in 2015 but without a target. Commitments came from 104 LPs.
The state of Nevada has proven to be quite open-minded when it comes to blockchains and cryptocurrencies these days. In fact, the State Legislature approved a bill preventing local governmental entities from taxing any blockchain transaction.
Senate Bill 398 was first introduced in March of this year and is now presented by Governor Brian Sandoval to be signed. Governmental entities can’t impose any tax or fee on the use blockchains by both individuals and entities alike. Moreover, they can’t require these users obtain a license or permission to use blockchain technology either.
While equities are often thought to yield high returns with fairly low risk, it takes time for them to fully develop and come to fruition. Alternative investment vehicles are coming into the market that are becoming particularly attractive when investing with a low appetite for risk.
With consistency and diligence, the stock market can make for a profitable long-term strategy. According to Credit Suisse, as of February 2017, the U.S. averaged 6.4 percent in inflation-adjusted equity return.
Marketplace lending, on the other hand, has consistent returns with lower volatility. Investopedia names marketplace lending as one of the best investments for high return rates.
Essentially, the main risk associated with marketplace lending is that you are loaning to people who may not have been able to get approved through traditional outlets.
Major peer-to-peer lender RateSetter has unveiled the findings of a new survey of 2,000 people, of whom more than 500 invest their money via products like equities, bonds or peer-to-peer loans. The findings suggest that most of these investors expect their portfolios to be outperformed by cash over the next 12 months.
The average return on cash currently stands at a meagre 0.15 per cent, according to Bank of England data.
PINTEC Group, China’s leading financial technology provider, announced that its wholly owned digital lending technology subsidiary Dumiao successfully issued RMB245 million worth of asset-backed securities (ABS) on the Shanghai Stock Exchange, in the first such issue by a digital lending technology provider.
The underlying assets of the ABS are receivables facilitated by Dumiao on Qunar’s “Naquhua” installment payment service. Qunar, a leading online travel agency in China, is supporting the ABS program, ensuring the asset formation and stable service operation. Dumiao, a leading digital consumer lending technology provider, supplies Qunar with a digital lending technology solution and offers consumers flexible and efficient financial service.
The Dumiao offering represents the first internet consumer finance ABS sponsored by a third-party digital lending technology provider. Prior to the listing of Dumiao’s ABS on the Shanghai Stock Exchange, ABS offerings from the internet finance sector had been dominated by e-commerce companies.
By the end of May 2017, the total loan balance of P2P lending platforms in China reached to $1146.30 billion, and the total volume reached to $366.05 billion. According to the ranking list issued by Online Lending House, we picked out the top 10 P2P lenders per Loan Balance and Volume.
Top10 P2P Lending Platform per Loan Balance in May 2017
Now Laplanche is returning to the public stage as a keynote speaker roster for Lang Di Fintech 2017, LendIt’s Chinese conference. Lang Di Fintech, said to be the largest Fintech conference in China, marks Laplanche’s first public speaking role since founding Upgrade. His presentation is said to focus on the concept of online lending 2.0, including how new technologies such as Blockchain are increasingly incorporated into a Fintech company’s technology architecture.
Singapore-based fintech hub LATTICE80 has signed a memorandum of understanding (MOU) with the Nordic Finance Innovation (NFI), an independent Nordic executive network for the finance industry.
The partnership will raise awareness of fintech’s potential between Asia and the Nordics; office space sharing; events collaboration; in-country exclusivity; exchange programs for members; and the leveraging of mutual contacts and networks.
Meanwhile, 42 per cent of Nordic financial institutions surveyed want to expand their existing partnerships with fintech firms. 42 per cent of Nordic banks surveyed also intend to set up fintech incubators.
Wealth & Finance magazine have announced the winners of the 2017 Alternative Investment Awards. SAIL Capital of Newport Beach, CA has been awarded Most Innovative Sustainable Investment Firm 2017 (Energy & Water) & Recognised Leader in Global Resource Investing 2017.
SAIL Capital has been a pioneer and thought leader in impact/alternative investing since the early 2000’s under the leadership of Founder and CEO Walter Schindler.
Now in its fourth year, the 2017 Alternative Investment Awards casts a light on the individuals, firms and departments from across all sectors that have played a part in shaping this dynamic and imitable industry.
For example ANZ pays 2.4% annual interest on its one-year term deposit, and charges 13.95% annual interest on its personal loan.
Direct banks usually offer slightly higher interest rates on deposit accounts, lower loan costs, and reduced fees because they do away with the costs and inefficiencies (and arguably some of the service) of the traditional banks.
For example, the direct bank ME pays 2.85% annual interest on its term deposit, and charges 12.49% annual interest on its personal loan, making for a spread of 9.64%. Compare this to ANZ’s spread of 11.55% and you’ll note that ME’s more bare bones set up allows it to better cater to the more cost-conscious customers.
For example, the P2P lender DirectMoney Ltd(ASX: DM1) pays the investor around a 7.50% annual return for their personal loan fund, and charges the borrower around 9.50% annual interest on their personal loan. The spread is just 2.0% – a fraction of the banks with ANZ at 11.55% and ME at 9.64%.
The report proposes that ASIC increase its focus on supporting RegTech developers, including by:
establishing a new RegTech liaison group comprising industry, technology firms, academics, consultancies, regulators and consumer bodies to enable networking, discussion of RegTech developments and collaboration opportunities that promote positive applications of RegTech;
continuing to hold RegTech trials and sharing knowledge about those trials with the market to promote wider use of technologies that promote good consumer and market integrity outcomes; and
hosting a problem-solving event (“hackathon”) later in 2017 to stimulate thinking and approaches to deal with problems of regulation commonly faced by the financial services sector.
GyanDhan, an online marketplace for education loans operated by Delhi-based Senbonzakura Consultancy Pvt. Ltd, has secured an undisclosed amount from Sundaram Finance Holdings, a subsidiary of Chennai-based Sundaram Finance Ltd, it said in a statement.
According to Statista, the Transaction Value in the fintech market amounts to US$43,032m in 2017.
Developed by Samsung electronics, Samsung Pay allows users to make payments using compatible phones and other Samsung-produced devices.
Founded in 2013, Viva Republica is a fintech company that offers innovative peer-to-peer money transfer services via a mobile app called “Toss”.
8percent is a leading start-up that brings together savvy investors and creditworthy borrowers together so that both can benefit financially.
Founded in 2012, Rainist offers financial products recommendation based on individual’s life patterns and purchase behaviour.
DAYLI Financial Group is a leading financial technology platform consisting of innovative technologies such as machine learning, payment solutions, big data analytics, bitcoin exchange, and blockchain solutions.
‘Stocks Plus for Kakao’ enables users to check their stock quotes in real-time via Kakaotalk, a multi-platform messaging app.
Founded in 2011, Newsystock is a Robo-Portfolio platform that provides accurate analysis and equity purchase recommendations in the stock market.
Infosonic is the start-up that produces Sonic Pass as mobile authentication and payment app.
Credit reports are a pivotal factor in determining if borrowers will be approved for a loan. But is that the best approach to analyse credit worthiness? One company challenging the status quo of the static credit report is Lantern Credit. Lantern Credit’s Interactive Credit Report helps users evaluate “the impact of their financial actions on their credit […]
Credit reports are a pivotal factor in determining if borrowers will be approved for a loan. But is that the best approach to analyse credit worthiness? One company challenging the status quo of the static credit report is Lantern Credit.
Lantern Credit’s Interactive Credit Report helps users evaluate “the impact of their financial actions on their credit scores and accept new credit offers.” The report is based on an interactive machine learning technology, Beam AI, which provides customized recommendations to its customers on ways to improve their credit score.
The company sells its white label product to banks and financial institutions, which displays the bank’s credit products. This enhances the customer experience and reduces adverse action reporting, which proves to be advantageous for lenders and customers. The banks are charged on the basis of actions taken by consumers on the recommendations of Lantern Credit. A non-labelled solution shows all available credit products in the credit report.
Though there are existing apps available like Kredit Karma, Lantern Credit offers flexibility while suggesting ways bank customers can improve their financial habits leading to improved credit scores.
Goal-Centric Approach to Credit Score Improvements
Lantern Credit is able to meet this need of bank customers through the use of proprietary artificial intelligence technology, called Beam AI. The company focuses on what the customer is trying to achieve in terms of funding (i.e. house, car, education, etc.) rather than on just the credit score. Since all analytics are actionable, the customer is able to act swiftly rather wait for long periods of time.
The interactive credit report provides guidance to consumers on ways to improve their credit score through actions like balance transfers and pay downs. It also offers customers available credit options. Rather than targeting consumers across the board, Lantern Credit concentrates on customers whose credit score lies between 650 and 720.
In order to enhance its machine learning engine Beam AI, Lantern Credit acquired Abstract Regression-Classification (ARC) machine learning library. This tool uses non-linear symbolic regression to generate auditable credit models by applying analytical predictions on consumer data acquired from banks. This helps manage risk and provide credit offers in a timely and actionable manner while elevating data accuracy.
Lantern Credit also appointed ARC’s inventor Michael Korn as chief data officer. Beam AI puts most of its emphasis on customer goal achievement rather than credit score alone. It helps customers access credit for large items like auto, home, and loan refinancing. Banks can also identify potential customers based on their goals.
Since Lantern Credit is not a credit reporting agency, this credit improvement model does not required adherence to FCRA regulations. Also, CFPB considers the model transparent as it provides all rules upfront to the consumer. The founder believes it is a more cost-effective tool than a financial advisor. He suggests advisors can use the tool to provide better wealth management services.
Lantern Credit History
Lantern Credit, LLC was founded in 2013 and is headquartered in Newport Beach, California. The company’s previous name was New England Funding Technologies, but was formally changed on July 20, 2017 to reflect the company’s mission (illuminate the world of consumer credit and debt) more acutely.
The company emerged with the aim to “provide customers with unique patented credit tools that enable them to reflect the impact of their actions on their credit score and manage their financial wellness.”
Lantern Credit raised $10 million in its latest round of funding, backed by three investors– John Mack, John Sculley and Kevin Knight. All three are presently board members. The funds were used by the company to accelerate the development of mPowerCredit, a patented online platform that allows consumers to enhance their credit scores in real-time.
G. Christopher Imrey, founder and executive chairman, has more than 20 years experience in technology innovation. He founded Apollo Enterprise Solutions Ltd and holds nine issued and provisional software technology patents. Chad Swensen, co-founder and CEO, has experience in developing and leading technology companies and founded wireless technology solutions provider Sweet Spot Solutions.
Lantern Credit’s board members include luminaries like John Mack, former chairman and CEO of Morgan Stanley, and John Sculley, former Apple CEO and youngest president of Pepsi-Cola Company. The company has 39 employees and expects to expand to 75-100 by the end of the year.
Lantern Credit has been able to stitch together an impressive team, board of members, and clients. Its revolutionary Interactive Credit Report uses proprietary AI to analyze and suggest actions to consumers to improve credit scores. Its ability to remain out of regulatory cross hairs is an important indicator of how big the company is expected to grow.