Wednesday November 22 2017, Daily News Digest

delinquent credit cards

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 […]

delinquent credit cards

News Comments

United States

United Kingdom

China

European Union

International

Australia/New Zealand

India

Asia

Canada

News Summary

United States

LESSONS FROM THE FIRST 120 DAYS OF REWIREMENT (Ron Suber), Rated: AAA

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!!

P.S. Two young new FinTech companies to watch: Finch and Friendly Transfer. (No, I am not invested…yet)

US law firm launches investigation into star Chinese payday loan lender Qudian (SCMP), Rated: AAA

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.

Source: South China Morning Post

Americans are having trouble paying off their credit cards — and it could spell trouble for the economy (Business Insider), Rated: AAA

US credit-card debt recently surged to record highs, surpassing peaks seen before the 2008 financial crisis. Several large US banks and credit-card companies reported a rise in credit-card delinquency rates for August, the second consecutive monthly rise.

Source: New York Fed
Source: New York Fed

Fed funds is just 1% to 1.25% after four increases starting in December 2015, and yet many Americans pay credit-card rates well into the double digits.

Banks aren’t following CFPB data-sharing guidance, fintechs say (American Banker), Rated: AAA

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.”

Early Stage Investing vs. Real Estate Investing: Similarities and Differences (Crowdfund Insider), Rated: A

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 and Patch of Land) offer short-term gains while rental properties (Roofstock and 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?

CFPB, CashCall Spar Over Possible $ 287M In Restitution (Law360), Rated: A

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.

JPMorgan, Goldman Sachs Trial DLT for Equity Swaps (Coindesk), Rated: A

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.

Small Business Saturday: Why Banks And Businesses Need To Start Playing Offense (Forbes), Rated: A

Similarly, while I do believe the banking industry has made strides in embracing technology over the past few years, the reality is that far too many bankers are still “playing defense” when it comes to fully integrating technology into every aspect of their business.

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 5thFinastra 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.

I’ve included a link to the full agenda Where: Marriott Marquis Times Square, 1535 Broadway, New York

When: Tuesday, December 5th, 2017
 
Click 

Financial tech is a big business. What Charlotte’s doing to become a larger player. (Charlotte Observer), Rated: B

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.

United Kingdom

Consumer credit – walking the regulatory tightrope (Lexology), Rated: AAA

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.

Almost half of SMEs have never checked their credit score (Bridging&Commercial), Rated: A

Nearly half of SMEs (44%) have never checked their credit score, according to the latest research from RateSetter’s business finance division.

RateSetter’s research also found that a further 6% of businesses had not checked their credit score within the last 12 months and only 18% had viewed their score within the last six months.

Never mind the Brexit: Alternative finance offers a route to prosperity (Startups.co.uk), Rated: A

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.

Investment Committee: Arnaud Gandon, Heptagon Capital (Citywire), Rated: A

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.

Here’s what the UK’s fintech community is most concerned about over Brexit (Verdict), Rated: A

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.”

Open Banking: How can customer centricity drive innovation? (City A.M.), Rated: A

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.

Blockchain Based Building Platform BitRent Announces Token Sale (The Merkle), Rated: B

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

China clamps down on online micro lending; U.S.-listed shares plunge (Reuters), Rated: AAA

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 Chinese Online Credit Providers Crash Over Crackdown Fears (NASDAQ), Rated: A

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 ).

U.S.-listed Chinese financial firms dive on regulatory action (Reuters), Rated: A

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.

From Drone Hackers to Cyber Bodyguards, China Cyber Security a Growing Concern (China Money Network), Rated: A

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.

European Union

EBA weighs up risk and rewards of Fintech in new Discussion Paper (FinanceJobs.ie), Rated: AAA

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.

DreamQuark beefs up financial services through artificial intelligence (TechCrunch), Rated: A

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.

International

Robeco launches fintech investment fund (Finextra), Rated: A

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.

Australia/New Zealand

Aussie lenders make Fintech 100 list (TheAdviser), Rated: AAA

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”.

Online SME lender Prospa was the highest ranked Australian company at number 24. It also placed second on the Australian Financial Review’s Fast 100 list after averaging a 239 per cent revenue growth since 2013–14 and holding $50 million in equity and debt funding in 2017.

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.

How I’m Saving a Week (or ,500 This Year) on My Home Loan (Mozo), Rated: A

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%.

India

Paytm invests in online lending startup CreditMate (VC Circle), Rated: AAA

One97 Communication Ltd, which runs mobile wallet firm Paytm, said on Tuesday it has picked up a stake in Mumbai-based fintech startup CreditMate.

CreditMate helps two-wheeler dealers and financiers assess and approve vehicle loans to customers with no formal credit history, Paytm said in a statement.

8 ‘blockhain hacks’ which NITI Aayog, AWS, Microsoft, Accel, Coinbase believe are beneficial for society (YourStory), Rated: AAA

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.

Gif credit- Proffer

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.
  • 8. MyH2OBot for “Habit Economics”

Sharing economy: creating opportunities in the digital era (livemint), Rated: A

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.

Asia

Banyuwangi Regent Anas Connects MSME with Fintech Startups (Netral News), Rate: A

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).

Canada

CANADIAN PAYMENTS INNOVATION FORUM SAYS COLLABORATION CONTINUES TO DRIVE FINTECH INNOVATION (Betakit), Rated: A

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.

Authors:

George Popescu
Allen Taylor