Thursday January 31 2019, Weekly News Digest

fintech vc 2018

News Comments Today’s main news: Kabbage expands into India. GreenSky launches loan product for elective health care. Lending Works hits 150M GBP in loans in five years. Ant Financial’s money market fund shrinks to two-year low. Ant Financial raised close to combined raise of all U.S., Europe fintechs last year. Varo Money raises annual percentage yield on savings accounts to […]

The post Thursday January 31 2019, Weekly News Digest appeared first on Lending Times.

fintech vc 2018

News Comments

United States

United Kingdom

International

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News Summary

United States

GreenSky launches new loan product for elective health care (American Banker), Rated: AAA

The Atlanta fintech on Tuesday announced the launch of a revolving credit line of up to $25,000. GreenSky previously offered only installment loans; the new product is designed to be a better fit for elective medical providers that rely heavily on repeat business.

Is SoFi Money the Bank Account of the Future? (Lend Academy), Rated: AAA

There are three main benefits that SoFi touts with the SoFi Money account:

  1. Pay zero account fees.
  2. Earn more interest.
  3. Free ATMs everywhere.

SoFi will pay (as of this writing) 2.25% on balances held in a SoFi Money account. Note about the small print: you will only earn this 2.25% for the first three months and then the interest rate drops to a (still respectable) 1.25% unless you do one of two things. Either setup a salary direct deposit of $3,000 or more a month or do $500 in debit card transactions each month. I am in the process of moving my salary deposit to my SoFi Money account.

The cash balance in SoFi Money Accounts is swept to one or more program banks where it earns a variable rate of interest and is eligible for FDIC insurance. FDIC Insurance is not provided until the funds arrive at partner bank. There are currently six banks available to accept these deposits, making customers eligible for up to $1,500,000 of FDIC insurance (six banks, $250,000 per bank).

Mixed Credit Card Issuers’ Earnings (PeerIQ), Rated: AAA

Credit card master trust data shows that delinquencies have picked up from their lows but remain significantly below their peaks. Issuers (with the exception of Capital One), have increased loan loss reserves at a rate higher than loan growth as credit renormalization continues.

30 and 90-day delinquency rates from credit card master trust data

Source: Bloomberg, Bank Credit Card Trust Data, PeerIQ

How online platforms shook small-business lending in America (Financial Times), Rated: AAA

In the years after the financial crisis, small businesses that needed credit were stuck. New capital rules discouraged big banks from touching any borrower perceived as risky. The bond and loan markets, where larger businesses flocked for inexpensive debt capital, have little use for sums under $100,000 — which is what most small enterprises need.

A handful of non-bank lenders, payment and e-commerce companies have leapt into the gap. In an environment of easy money and economic expansion, small business lending operations at OnDeck, Kabbage, PayPal, Square and others have grown fast.

LendingTree Analysis Reveals How Personal Loan Purposes Vary by States and Credit Scores (PR Newswire), Rated: AAA

Key takeaways

  • Managing existing debt is far and away the most popular reason for a personal loan, representing 61 percent of all loan requests in 2018. Thirty-nine percent of borrowers plan to use their loans to consolidate debt, and 22 percent plan to use it to refinance credit cards.
  • Consumers seeking personal loans to manage debt also requested the highest origination amounts: $14,107average amount for credit card refinance, and $12,670 for debt consolidation.
  • Almost 15 percent of loans reasons are categorized as “other” — the third most popular choice. Home renovation and improvement loans are the next-most popular loan purpose, accounting for 7.7 percent of loan requests with an average loan amount of $12,384.
  • New Englanders are the most likely to use their loans to manage existing debt, taking the top five spots. The residents of MississippiLouisiana, and Arkansas are the least likely.
  • Washington, D.C. is home to the highest rates of a few offbeat loan purposes, with more residents requesting loans here for a move (7.4 percent) or business (2.6 percent). It’s also tied with New York and Louisiana as the place where wedding loans are most requested, with 1.5 percent of loans in these states intended to cover the costs of tying the knot.
  • West Virginia is the top state for borrowers requesting loans for their home, specifically home improvements (8.6 percent of loans requested in this state) or home buying (4.9 percent).
  • In Wyoming, residents request personal loans for medical expenses more than anywhere else (6.5 percent). In fact, most of the states where people are more likely to request a loan for medical costs are low-density states with more rural areas.
Source: LendingTree

See the full report here.

Cities Where Homeowners Stay Put the Longest (LendingTree), Rated: AAA

  • Cities with shorter housing tenure have greater price appreciation. The top 10 cities had an average tenure of 7.46 years and an average three-year home price appreciation of 12%. The bottom 10, with an average tenure of 6.63 years, have average price appreciation 30%. This suggests that higher housing turnover drives prices upwards, while faster price appreciation could be enticing home owners to sell.
  • The northeast dominates the list of cities with the longest tenure. The top three cities, Pittsburgh, New York and Buffalo are all in the northeast. An additional three northeastern cities are in the top 10 for a total of six.
  • Hot and sunny places have the shortest tenures. The three cities with the shortest tenures — Las Vegas, Phoenix and Austin — are all in warm-weather areas. This reflects high migration rates to those cities, something we looked at in a prior study on where Americans are moving. Denver is the only city in the bottom 10 that experiences a significant winter season.

A George Soros-backed fintech has raised millions to analyze consumer loan trends just as recession worries pick up steam (Business Insider), Rated: A

dv01, a New York-based startup, has raised $15 million in a series B round led by Pivot Investment Partners, a venture capital firm started by a a trio of bankers who worked together at Deutsche Bank AG. One of those ex-bankers, Dinkar Jetley, will join dv01’s board.

Kabbage hires chief revenue officer from LegalZoom (Biz Journals), Rated: A

Atlanta-based Kabbage Inc. has hired the chief marketing officer at LegalZoom as its new chief revenue officer.

Laura Goldberg‘s appointment is effective immediately, according to a Kabbage spokeswoman. She succeeds Victoria Treyger, who vacated the CRO position at Kabbage in August 2018 to accept a position with Felicis Ventures.

Varo Raises Annual Percentage Yield on Savings Account to Industry-Leading 2.80% (PR Newswire), Rated: AAA

In a move to make high-yield savings available to more Americans, no-fee mobile banking company Varo Money, Inc., announced today that it raised the Annual Percentage Yield (“APY”) on its FDIC-insured Varo Savings Account to 2.80% for customers whose Savings Account balance is $50,000 or less, and who have qualifying direct deposits and debit card purchases from their Varo Bank Account.1 An APY of 2.12%1 will apply if these conditions are not met.

Elevate’s RISE Brand Announces Scholarship to Promote Financial Literacy (BusinessWire), Rated: A

Elevate Credit, Inc. (“Elevate”), a tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, today announced that its largest consumer product, RISE, will offer college scholarships in an effort to promote financial literacy.

The RISE scholarship will offer five $5,000 awards each year to students who demonstrate a desire to improve their financial knowledge and educate others on personal finance. To be eligible for the scholarship, students must complete an online financial literacy course that was developed in partnership with digital education expert EVERFI.

Credit card player Petal picks up $ 30m funding (Fintech Futures), Rated: A

New York-based credit card firm Petal is back in the money with $30 million in Series B funding.

This is Petal’s second investment from Valar, which was also the lead investor in its Series A funding round. Back in October 2018, Petal got $34 million in financing.

Fintech targets banks keen for out-of-market CRE loans (American Banker), Rated: A

As more banks take the often risky step of expanding outside their traditional markets, especially through digital means, some fintechs sense an opportunity to offer them data they need to find new customers and assess risk.

LendingClub, OnDeck Capital and Lending Tree are each online lending platforms that have bet on this trend. CrediFi, a finance data provider, aims to do the same with a focus on one of the largest asset classes around: commercial real estate.

LoanSnap Raises $ 4.7M in Funding (Finsmes), Rated: A

LoanSnap, a San Francisco, CA-based creator of smart loan technology, raised an additional $4.7M in funding.

The round, which brought total financing to $17M, was led by Thomvest Ventures and existing investors.

Oxygen gets $ 2.3m funding for digital banking life (Fintech Futures), Rated: A

San Francisco-based digital banking service Oxygen has raised $2.3 million in funding to breathe life into its gig economy plans.

In this round it got funding from Digital Horizon Capital; Cynthia Chen, investor, advisor, executive and board member for several US-based fintechs and now co-founder and chief risk officer at Figure; ZMT Capital (China); Locus Ventures; Endure Capital; PioneerFund; Magic City; Light Bridge; Strawberry Creek; Base Ventures; The House Fund and Sam Yam, co-founder of Patreon.

Better Mortgage Secures $ 70 Million in Series C Funding from American Express Ventures and the Healthcare of Ontario Pension Plan (PR Newswire), Rated: A

Better Mortgage, one of the leading digital mortgage lenders in the U.S., today announced its closing of $70 million in Series C financing from American Express Ventures and the Healthcare of Ontario Pension Plan (HOOPP), in addition to existing investors Kleiner Perkins, Goldman Sachs, and Pine Brook. The new capital will support continued growth and investment in Better’s technology platform.

CFPB Announces $ 3.2 Million Settlement with Online Payday Lender (JD Supra), Rated: A

On January 25, 2019, the Consumer Financial Protection Bureau (CFPB) announced that it had entered into a consent order with an online lender that extends unsecured payday and installment loans, as well as lines of credit, resolving allegations that the lender had engaged in unfair acts or practices in violation of the Consumer Financial Protection Act (CFPA), 12 U.S.C. §§ 5531, 5536.

Popular ‘robo-advisor’ Betterment picks Philly for its first office outside New York; to hire 20 by end of 2019 (Philly.com), Rated: A

Betterment, a digital wealth manager popular among millennials, has picked Philadelphia for the first office outside its New York home base.

The company, which manages $15 billion in assets, plans to open a Philadelphia office as soon as February, according to founder Jon Stein. Betterment is looking for office space in Center City, with the intent of adding 20 employees in its computer and engineering departments by the end of 2019.

Numerated and PayNet Partner to Improve Digital Lending (BusinessWire), Rated: B

Numerated announces that it will integrate PayNet’s MasterScore v2 within its real-time lending and growth platform. PayNet, a leading commercial lending data and analytics firm, will integrate its proprietary database within Numerated’s customizable rules- and segment-based credit decisioning engine to offer banks additional business scoring criteria for managing risk when lending to businesses in real-time.

Planet Home Lending Opens Several Branches; Sees Growth in Business Channels (PR Newswire), Rated: B

Planet Home Lending, LLC opened 26 active distributed retail branches and brought on 165 mortgage loan originators in 2018. Planet Home Lending also enjoyed additional growth in 2018 in its other channels.

Senior Counsel, Litigation (Employment Focus) (Built in Chicago), Rated: B

Guaranteed Rate is building a winning team to reinvent the mortgage experience through innovation, technology and a relentless focus on providing industry-leading mortgage products and superlative customer service.  The Senior Counsel will embrace and support these efforts by working to pursue claims and resolve disputes as appropriate through negotiation, arbitration or litigation, with a particular focus on employment claims and matters.

United Kingdom

Lending Works hits £150m of loans in five years (AltFi), Rated: AAA

Lending Works, the peer-to-peer lender, has surpassed £150m in loans to households and firms.

Nick Harding, Lending Works Co-Founder and CEO, says the firm is aiming to reaching £300m loans by the end of 2019 thanks in part to its “greatest ISA season yet ”.

LendInvest provides GBP7.35 million bridging loan in under seven days (Property Funds World), Rated: A

UK property finance specialist LendInvest has facilitated a GBP7.35 million bridging finance loan for a developer in just seven days.

Brexit blamed for slowdown in consumer lending (P2P Finance News), Rated: A

UNSECURED consumer lending has slowed to its lowest level since 2014, as Brits scale back their spending amid Brexit uncertainty.

The latest Bank of England Money and Credit statistics also found that the total number of mortgage approvals fell from 126,794 to 124,829 in December 2018, indicating an overall lag in the lending market.

Meanwhile, mortgage approvals for house purchase were around 63,800 in December – just slightly less than the 2018 average of 65,200.

Ultimate Finance lends record £1.4bn to small firms (AltFi), Rated: A

Small business financer Ultimate Finance said it lent a record £1.4bn to small firms across the UK last year.

The Bristol-based business said its overall lending jumped 35 per cent in the year to December 2018, boosted by writing more loans across its operations.

It said its bridging loans more than doubled to £31m over the period, asset finance jumped 37 per cent to £46m, while invoice finance also increased by almost a quarter to £117m.

Primary Factors to Have At Hand When Borrowing Money Online (EconoTimes), Rated: A

Online borrowing should be all about convenience, and Loanski loans have made this aspect their rising pillar for excellence. The only requirement for one to apply for a loan through the platform is they must be United Kingdom residents and have an active bank account. These minimum requirements essentially mean that anyone who uses their bank accounts frequently can have the pleasures of having an instant loan when they need it the most.

China

Ant Financial’s money market fund shrinks to 2-year low (Financial Times), Rated: AAA

The world’s largest money-market mutual fund, Ant Financial’s Tianhong Yu’E Bao, was at its smallest for two years by the end of last year as Chinese regulators pressured it to downsize over concerns about systemic risk.

The shrinkage is a sign that Ant, the financial services business of Alibaba Group, is shifting away from marketing its own financial products to serving as a platform for other groups to access its huge customer base.

Cryptocurrency and pyramid schemes add to US$ 44.5 billion surge in illegal fundraising in China (SCMP), Rated: A

Chinese police investigated more than 10,000 cases of illegal fundraising last year, a 22 per cent rise in the caseload, according to China’s top prosecutors.

The total amount involved also rose, more than doubling to about 300 billion yuan (US$44.5 billion), the Supreme People’s Procuratorate said on Wednesday.

Apart from traditional hotbeds such as product marketing, real estate investment, and education, there has been a big rise in fundraising schemes in online lending, wealth management, private equity, cryptocurrency, and elderly care services.

European Union

Europe’s fintech companies are preparing for a no-deal Brexit (CNBC), Rated: AAA

Europe’s fintech companies are getting serious about the possibility of a no-deal Brexit.

As uncertainty looms over the U.K.’s split from the EU, the industry gathered this week at the Paris Fintech Forum. Payments providers, cryptocurrency exchanges and digital banks all said they were taking steps to prepare for the worst-case scenario.

N26 is a Berlin-based digital bank that was recently named one of Europe’s largest fintech start-ups.

Synsam Group and Klarna Launch Innovative Contact Lens Subscription in the Nordics (Webwire), Rated: A

Synsam Group has over 50 years of experience in improving people’s eye health and is today Sweden’s largest optician chain with over 190 stores in Sweden, and 500 stores throughout the Nordic region. One of the company’s most popular services is Synsam Lifestyle Contact Lens Subscription, which includes home deliveries and annual contact lens examinations. To create a better and smoother customer experience, Synsam Group and Klarna have developed a new concept that allows customers to subscribe to contact lenses by using their mobile phones instore, while they can manage all the administration around the subscription online.

International

China’s Ant Financial raised almost as much money as all US and European fintech firms combined (Quartz), Rated: AAA

When it comes to financial technology companies, Ant Financial is in it own league. The affiliate of e-commerce giant Alibaba raised $14 billion in venture capital last year, not far from the $15.9 billion for all fintech investments in the EU and US in the same period. A key question is whether the growth of the world’s most valuable fintech firm is an anomaly or a sign of things to come from China.

Ant Financial accounted for 35% of global venture capital investment in fintech firms last year, according to CB Insights.

Source: Quartz

Cross River and Railsbank Announce Partnership (BusinessWire), Rated: A

Cross River Bank (“Cross River”), a leading innovator and provider of banking services for financial technology companies, and Railsbank Technology Limited (“Railsbank”), a leading UK-based open banking and RegTech technology services platform, today announced that they have entered into a partnership arrangement that will provide Railsbank the opportunity to offer a variety of API-powered, banking and payment processing services across the U.S.

Fintech companies raised a record $ 39.6 billion in 2018 (Reuters), Rated: A

In the last three months of the year, five companies joined the coveted ranks of fintech “unicorns”, or companies valued at more than $1 billion. These include credit card provider Brex, digital bank Monzo and data aggregator Plaid.

Australia

Canada’s Eguana will set up local manufacturing to join South Australia Home Battery Scheme (Energy-Storage.news), Rated: AAA

The South Australia Home Battery Scheme, launched by the state government, offers a maximum of AU$6,000 assistance per household for the purchase of battery energy storage. Home storage systems are typically, but not always, paired with solar PV, and homeowners can get back between AU$500 and AU$600 per kilowatt hour of battery storage capacity purchased.

Announced in September and then launched a month later, the scheme will assist up to 40,000 households financially, with the state government putting in AU$100 million and peer-to-peer lending group RateSetter later committing the same amount of funding in the form of low-interest loans.

ING latest lender to hike variable home loan rates (Mozo), Rated: A

Online lender ING has become the latest bank to lift its variable home loan rates following an announcement earlier today.

The lender will raise rates across all of its variable rate home loan products by 15 basis points, effective as of February 7, 2019.

India

Small Business Lender Kabbage Expanding to India (Lend Academy), Rated: AAA

Kabbage has opened an office in Bengaluru (formerly Bangalore) and plans to have 125 employees by year end. For comparison, the company has about 350 employees in their Atlanta headquarters.

To our knowledge Kabbage is the first US-based lender to enter the Indian market.

RBI directs P2P lenders to file quarterly reports on key metrics (TechCircle), Rated: AAA

Lending has been our star performer: MobiKwik founder (India Times), Rated: A

As of the end of the last financial year, we have a register user base of more than 107 Mn users and a network of over 3 Mn merchants. We are aiming at 400% growth this fiscal. We are aiming at 400% growth this fiscal. We are adding over 3 Mn new users every month, one of the highest in the industry. We will have close to 200 million users by the end of 2019.

A) Lending is growing by leaps and bounds ever since we started out. The opportunity is huge with less than 10% of Indians having access to credit.

Blockchain-based Loan Marketplace Streamsource Raises $ 1 Mn Seed Funding from Accel India (IndianWeb2), Rated: A

Gurgaon-based StreamSource Technologies, a decentralized marketplace for loans, has raised $1 million in seed funding from Accel India, making it Accel’s first local investment in the blockchain sector.

Indian banks unveil blockchain-linked funding for SMEs (Fintech Futures), Rated: A

A group of 11 Indian banks have teamed together to unveil the nation’s first blockchain-linked funding for SMEs.

According to the Economic Times, the participants include ICICI, Axis, HDFC, Kotak Mahindra, Yes Bank, Standard Chartered, RBL, South Indian Bank, IndusInd Bank, State Bank of India and Bank of Baroda.

How are interest rates set on P2P platforms? (India Times), Rated: A

“Borrowers on our platform are given a score out of 100, which determines their risk profile. A score of 52 to 60 points is high risk while a borrower with more than 60 points will get a lower interest rate,” says Bhavin Patel, Founder & CEO, LenDenClub.

IndiaMoneyMart App Brings P2P Investment and Wealth Creation for Masses (Business Standard), Rated: A

lending or lending is a mode of direct financing that enables individuals to borrow and lend on mutual terms. Platforms like IndiaMoneyMart (IMM) eliminate the traditional financial institutions and enable businesses to flourish through a people to people contact.

P2P industry expectations from Budget 2019 (India Times), Rated: A

“While a great boost to the P2P industry would be via the regulator easing lending caps, we look forward to a critical role from the finance ministry for better financial inclusion by extending SOPs to retail investors,” says Dhiren Makhija, CEO, Cashkumar.

Here’s how you can invest in peer-to-peer lending (CNBCTV18), Rated: A

According to i2ifunding.com, a category A borrower may face the least risk while a category F borrower faces the highest risk.

Following interest rates are paid by borrowers across categories:

  • A category borrowers – 12.00 percent to 14.99 percent
  • B category borrowers – 15.00 percent to 17.49 percent
  • C category borrowers – 17.50 percent to 19.99 percent
  • D category borrowers – 20.00 percent to 22.49 percent
  • E category borrowers – 22.50 percent to 24.99 percent
  • F category borrowers – 25.00 percent to 36.00 percent

CreditVidya receives $ 3m funding to develop credit score tech (Fintech Futures), Rated: A

CreditVidya, an Indian alternative credit score firm, has raised $3 million in a funding round led by Bharat Innovation Fund.

Ryan Khoury, Navroz D. Udwadia and Rick Gerson (founding members of Falcon Edge Capital) also participated in the round.

Abhinav Kumar, of Trivago fame, joins Paisadukan as a marketing advisor (India Times), Rated: B

Digital marketing strategist Abhinav Kumar who shot to fame because of his appearance on television commercials of travel search engine Trivago has joined peer to peer lending platform Paisadukan as a digital marketing and branding advisor and also will be on the company’s advisory board.

Asia

P2P lending third most complained about business sector (The Jakarta Post), Rated: AAA

The country’s growing peer-to-peer (P2P) lending sector has become one of the most complained about business sectors partly because of high interest rates and aggressive debt collection practices, according to a report.

The report by the Indonesian Consumers Foundation (YLKI) shows online lending platforms are the third most complained about business sector while property and banking rank second and first respectively.

NTU and Chinese online lender WeBank launch research centre (Straits Times), Rated: A

Nanyang Technological University (NTU) and China’s first digital-only bank have opened a research centre that aims to help customers manage their finances in real-time wherever they are.

NTU research scientists and engineers from WeBank will also study how to provide personalised wealth management advice to customers, among other projects, in the five-year partnership.

Authors:

George Popescu
Allen Taylor

The post Thursday January 31 2019, Weekly News Digest appeared first on Lending Times.

Alternative Credit Scoring – Financial Salvation For Those With Low or No Credit Score

alternative credit scoring

Reports estimate that over one-third of the American population has no record in any of the credit bureaus and, therefore, have no credit history. Millions of Americans do not have access to financial services, and this is an even more common scenario in developing markets. Over 80% of the African population do not use lending […]

alternative credit scoring

Reports estimate that over one-third of the American population has no record in any of the credit bureaus and, therefore, have no credit history. Millions of Americans do not have access to financial services, and this is an even more common scenario in developing markets. Over 80% of the African population do not use lending or banking services because they have no fixed income. The situation creates a question mark on the relevance of traditional credit scoring agencies and their impact over the larger population. Thankfully, fintech innovators are heading towards new, alternative data sources like rent payments, cell phone data, and even social media usage to evaluate credit risk. The aim is to replace traditional credit models with a more complete assessment of a prospective borrower. The focus is to create a win-win situation for both lenders and loan seekers by providing a new foundation to lenders for credit underwriting and providing millions of borrowers a chance to step up on the credit ladder.

The Current Credit Scenario

People with a low or no credit score find it impossible to prove their eligibility for loans. The most disenfranchised are minorities and women. This then creates a vicious circle as they can’t get a loan due to no score, and they can’t improve their score because no one is ready to give them credit.

Currently, the credit score of a person is calculated depending on the information in his credit reports. This information consists of the person’s name, phone number, social security number, employment information, account information, loan repayment details, and credit card accounts.

Alternative Credit Scoring Models

The following alternative credit scoring models have a different approach, leveraging their own data sources, proprietary algorithms, and technology to disrupt existing industry systems. The idea is to reach new audiences and onboard creditworthy borrowers who are lost due to the current model’s shortcomings.

FICO Score XD

FICO (Fair Isaac Corporation) is best positioned to bring the change. Its FICO is synonymous with credit scoring and is usually the most important element in deciding if a person can qualify for a loan.

FICO’s new alternative model, FICO Score XD, developed in partnership with LexisNexis Risk Solutions and Equifax, considers alternative data sources like internet and phone bills to help users who do not have credit data attain a score.

The new scoring system has had a major impact:

  • FICO Score XD 2 was able to score over 26.5 million previously unscorable consumer files
  • 11.8 million were without any credit file and unscorable via any traditional bureau
  • The new system has increased coverage from 91% of applicants to almost 98% of applicants

CreditVision Link

Another scoring model has been developed by credit reporting giant TransUnion in order to integrate alternative data and provide a solution to those who do not have any credit score. It concentrates on “trended data” as compared to only considering historical data in silos. So it not only evaluates the current situation of the borrower but also the credit details for last two years for a more comprehensive credit-scoring model. It has been able to score over 60 million borrowers who were previously unscorable.

Cignifi

Cignifi, based in Cambridge, Massachusetts, is an interesting alternative credit scoring startup. Backed by the Omidyar Network, it provides a platform for providing credit and marketing scores for consumers (especially in the developing world) via mobile phone behavior data. Its big data engine allows the mobile network operators and insurance partners to discover eligible customers for credit cards, loans, insurance, savings, and other banking services.

Cignifi’s main focus is on “financial inclusion,” which uses risk scoring technology to serve the unbanked population who do not have credit scores. It leverages mobile and texting patterns, routine of being at workplace or home, and contact with reputable borrowers.

CreditVidya

This India-based fintech startup offers alternate data-based credit scores for underwriting first-time borrowers using machine learning and big data analytics. It has raised $7 million in funding and uses over 10,000 digital footprints via in-house designed APIs. It has been able to help lenders attract first-time borrowers as well as reduce the processing time from days to 30 minutes.

India alone has 800 million unscored individuals, thus the market size is huge and lenders desperately need a service which can help them tap such a massive segment of the population.

Advantages of Alternative Credit Scoring Models

  • Access to a wider customer base: It enables the widening of the prospective borrower base. This is extremely vital for fintech lenders as it is difficult for them to compete with the big banks on pricing. But their ability to utilize new credit models and give borrowers with “thin” credit files a chance will lead to the expansion of the entire market.
  • Customer experience: Alternative credit scoring also automates the process of credit decisioning and allows for a more hassle-free digitally-enhanced experience. This enhances the utility to millions of borrowers who were otherwise supposed to visit their nearest branches for processing of their loan applications.
  • Improved underwriting process: All the alternative data adds a layer of analytics to the existing data, as well. This gives deep insight to the underwriters and helps in developing an enhanced credit-scoring model.

Conclusion

These alternative credit-scoring models aim to bring banking to the unbanked. This empowers lenders to reach out to individuals who were rejected for the reason that they had no/thin credit flies. The new models will shake up the industry, and lenders incorporating them into their credit underwriting process will see better traction and stronger customer loyalty, especially from those who were earlier denied credit on a faulty premise.

Author:

Written by Heena Dhir.

Thursday September 7 2017, Daily News Digest

robo-advisors

News Comments Today’s main news: Square plans to apply for an ILC banking license. Laplanche boosts volumes at Upgrade. SoFi CEO pulls out of Goldman fintech conference due to recent sexual harassment allegations. RealtyMogul launches MogulREIT II. Today’s main analysis: Why broker-dealer robo-advisors miss the point. Today’s thought-provoking articles: Why broker-dealer robo-advisors miss the point. RateSetter says even a millionaire couldn’t […]

robo-advisors

News Comments

United States

United Kingdom

China

European Union

International

India

MENA

Canada

Africa

News Summary

United States

Square to apply for industrial bank, inflaming ILC debate (American Banker), Rated: AAA

Payment processor Square is seeking an industrial loan company, according to several sources familiar with the matter, further sparking debate over whether fintech companies should be allowed to use the controversial charter.

“ICBA’s feeling about Square applying for an ILC is the same about SoFi,” said Camden Fine, the president and CEO of the Independent Community Bankers of America. “If these entities want to be banks, they should apply for banking charters and come under full and unified banking supervision.”

Square’s main purpose for the charter will be to extend its small-business lending business, the spokesperson said. Though it also intends to take deposits, which would provide some amount of funding for its on-balance-sheet loans, the lion share of the company’s loans would still be sold off to third parties.

Square also felt the ILC charter was best suited to its structure, as the company owns a point-of-sales hardware appliance business and even a food delivery service called Caviar.

Ousted Lending Club chief boosts volumes at new venture (Financial Times), Rated: AAA

Renaud Laplanche, the former Lending Club chief ousted over a governance scandal last year, is stepping up lending at his new venture, determined to re-impose himself on the market for refinancing more than $1tn of credit card debt.

Mr Laplanche launched his firm, Upgrade, in April, having raised $60m in Series-A funding from a group of investors including Union Square Ventures, Ribbit Capital and CreditEase, China’s leading online lender. As at Lending Club, he is homing in on consumers struggling with big balances on credit cards — offering to swap a floating rate of, say, 17 per cent for a fixed rate about 5 percentage points less.

While Mr Laplanche declines to say how much business he has done so far, he has begun to boost volumes, responding to steady demand from consumers and also for high-quality assets from half a dozen core institutional investors. That new cadre of investors is unfazed by the scandal which erupted in May 2016, he said.

SoFi CEO Backs Out of Goldman Event Amid Sexual Harassment Probe (Bloomberg), Rated: AAA

Social Finance Inc. Chief Executive Officer Mike Cagney was supposed to take the stage at the Goldman Sachs FinTech Conference in New York City on Thursday, but he backed out amid a lawsuit and internal investigation at the firm.

Why broker-dealer robo advisors miss the fintech point (Financial-Planning), Rated: AAA

Over the past two years, there’s been a growing trend of broker-dealers announcing prospective launches of their own robo advisor solutions. From LPL developing a platform with BlackRock’s FutureAdvisor to Voya planning to launch a robo advisor, and Kestra Financial announcing it is working on a robo platform on the back of its acquisition of H. Beck, there’s been no shortage of announcements.

Launching a robo advisor does hold appeal among broker-dealers. Many of their reps are asking for it, either because it’s an easier way to handle smaller clients, or just to have a robo advisor option for millennial clients. Who wouldn’t want a button for the advisor’s website that young people can click to open up small accounts that will grow with time? And from the broker-dealer’s perspective, ideally, this helps them address the coming generational shift of assets from baby boomers down to millennials.

But for a broker-dealer that in the aggregate is losing 3% to 5% a year in asset outflows a decade from now, it’s a crisis, because a broker-dealer still has a multi-decade open-ended timeframe as an ongoing business entity. This is why we see broker-dealers, as well as RIA custodians, so obsessively beating the drum about advisors needing to focus more on younger clients. It’s not actually because advisors desperately need younger clients for our businesses to survive. It’s because they, the broker-dealers and RIA custodians, need us to get younger clients for them so their businesses survive and so they have younger clients after we’re gone and retired!

And so from the broker-dealer’s perspective, if millennials are pursuing robo advisor solutions, then the broker-dealer wants to roll out a robo advisor to get those younger clients and solve its own long-term generational issue. But here’s the problem with the strategy: robo advisors live and die by their ability to get clients online, and that’s not easy for anyone, especially a large base of independent registered representatives.

DOOMED TO FAIL

Betterment is just over $10 billion in total assets after six years. Wealthfront is just over $7 billion AUM in that same duration. Schwab made news for $15 billion dollars of assets, but has actually noted only a third of that total was new assets. Vanguard is now over $80 billion, but remember they had much of their assets already as well. Vanguard is direct-to-consumer through the Internet already; those in Vanguard’s Personal Advisor Services were predominantly existing Vanguard investors, simply upsold to human advice. Even Edelman online, which launched in early 2013, has accumulated barely 1,000 clients and just $62M of AUM after four years (and their average robo client is actually a baby boomer anyway.)

Source: Financial-Planning

VALUE IN EFFICIENCY
In other words, the real blocking point of robo advisors is the client acquisition cost — what it takes to market and get a young investor to invest on your platform. As the founding companies learned the hard way, this is not an “If you build it, they will come,” kind of asset-gathering opportunity. Instead, robos at best have been struggling to solve those client acquisition costs in the face of slowing growth rates, and many have been getting outright buried by those costs. That’s why robo advisor growth rates continue to slow down. Most of them have already sold, and most of the ones that are left aren’t even really focusing on a pure robo strategy anymore.

RealtyMogul.com Launches Second Real Estate Investment Trust, MogulREIT II, to Invest in Multifamily Apartment Buildings (BusinessWire), Rated: AAA

RealtyMogul.com, the online marketplace for commercial real estate investing, today announced the launch of the company’s second real estate investment trust or “REIT,” MogulREIT II.

MogulREIT II aims to invest in multifamily apartment communities across the United States that have demonstrated consistently high occupancy and income levels across market cycles. MogulREIT II also plans to invest in multifamily properties that offer value add opportunities with appropriate risk-adjusted returns and potential for appreciation objectives.

According to the U.S. Census Bureau’s Housing and Vacancy Homeownership Report, the U.S. apartment market has experienced a strong recovery, as evidenced by the steady drop in vacancies and an average annual effective rent growth of 3.9% per year, between 2010 and 2015.

MogulREIT II plans to only consist of properties that satisfy RealtyMogul’s rigorous zero-based underwriting process, which analyzes each potential deal from scratch through a combination of proprietary in-house analytics and underwriting. RealtyMogul also spends over $1 million annually for the use of third-party data and technology to vet each deal. The process is so intensive, fewer than 1% of the requests reviewed by RealtyMogul pass its high underwriting standards. Keep in mind there are risks to investing, including loss of capital, so one should evaluate the full offering materials.

RealtyMogul MogulREIT II Survey Data (RealtyMogul Email), Rated: A

Overview

RealtyMogul recently commissioned Harris Poll to conduct an online survey among over 2,000 U.S. adults to better understand the reasons people choose to rent over buying a house.

Americans have shifting priorities and owning a home might not be at the top of the list

  • Roughly 7 in 10 Americans (71%) believe the home buying process is overwhelming
  • 70% of Americans believe people these days will need to rent well into their 30’s in order to save enough money to buy a home
  • Over a third of Americans (35%) would prefer renting over owning a home to maintain a flexible lifestyle
  • Roughly a third of Americans (34%) would rather save their money to spend on traveling than to put it towards buying a home
  • A third of Americans (33%) would prefer to rent than own a home if it meant they could still afford small luxuries (e.g. eating out, fancy coffee, avocado toast) in their everyday life

Read the full survey results here.

LendingRobot CEO exits (Geekwire), Rated: A

Emmanuel Marot has left LendingRobot, the peer-to-peer lending company he co-founded in 2013. He served as CEO of the startup for the past four years, navigating LendingRobot through a merger with NSR Invest in August.

Marot isn’t sure what his next career move will be but remains General Manager of Zenvestment.com, according to LinkedIn.

Legislative Update 162 (Experian Email), Rated: A

Highlights this issue:

  • On September 7, the House Subcommittee on Financial Institutions and Consumer Credit has scheduled a hearing to review “Legislative Proposals for a More Efficient Federal Financial Regulatory Regime.” The Subcommittee has not released the full agenda, but it is expected that the hearing will focus on several bills affecting consumer credit.
  • Congress continues to consider legislation that would repeal the CFPB’s Arbitration Rule using an expedited legislative process under the Congressional Review Act (CRA). The House of Representatives passed a resolution of disapproval on July 25. The Senate is expected to take up the measure upon their return from the August recess, although there is uncertainty when a vote will take place given other priorities that Congress must pass by September 30, which is the end of the US Fiscal Year.
  • On August 30, three Democrats on the House Energy and Commerce Committee sent a letter to the Government Accountability Office (GAO) requesting that GAO further evaluate post-breach identity protection products used by government agencies.
  • Legislators in California continue to debate legislation that would enact a broadband privacy law in the state, similar to the one first issued by the FCC and then overturned by Congress. A.B. 375 would prohibit an internet service provider from using, disclosing, selling or permitting access to customer personal information.

Read the full report.

StartEngine Files to Raise $ 5 Million Reg A+ Crowdfunding Offer (Crowdfund Insider), Rated: A

StartEngine, one of the most activea investment crowdfunding platforms in the US, has filed with the Securities and Exchange Commission to raise up to $5 million in common equity at $5 per share.

The actual listing is not yet live on the StartEngine platform. The filing indicates that up to an additional 100,000 shares may be issued as “bonus shares”. There are no selling shareholders and the entire proceeds will go to the company. According to the filing, the minimum investment is $500.

Web site steered U.S. borrowers into bad, illegal payday loans: CFPB (Reuters), Rated: A

The bureau imposed a $100,000 fine on California company Zero Parallel LLC, which as a “lead aggregator” identifies potential borrowers and then sells their information. The action shows the agency has its eye on the online side of the industry, which crosses state lines and has grown in recent years. Potential borrowers fill out web forms and then are immediately sent to a lender’s site to take out the debt.

According to a CFPB statement, Zero Parallel sold applications to lenders it knew did not follow states’ usury laws, interest-rate restrictions and prohibitions on who can make the loans, and kept borrowers in the dark about risks and costs.

Zero Parallel simply sold leads to the highest bidders, according to the CFPB, and borrowers did not know they were taking out illegal loans.

Zero Parallel will pay the fine without admitting or denying the allegations, the CFPB said. The agency also said it had reached an agreement with Zero Parallel’s owner, Davit Gasparyan, to resolve similar charges filed last year against his previous company, T3Leads, with a $250,000 fine.

FINTECH Gains Traction as Businesses Embrace Alternative Banking and Financial Solutions (PR Newswire), Rated: A

Global Payout, Inc. (OTC: GOHE) makes payment solutions available to clients around the world, serving the needs of everything from commercial enterprises to government institutions. Its Global Reserve Platform is a web-based banking platform that includes everything domestic, foreign exchange, and international payment service providers need to conduct financial transactions. It handles online banking, compliance, mobile wallets, card management, biometric payments, authentication, merchant payment processing, bill payments and more, while also offering core and traditional banking products. Global Payout’s primary focus in this area is logistics, in addition to small to medium size companies, banking, and travel firms.

The CEO of Able Lending Responds to the Rumors (Lend Academy), Rated: A

Yesterday, the CEO of Able Lending, Will Davis, reached out to me to clear the air. Here is his unedited statement:

We believe this story originated by the fact that we’ve been in active discussions with a number of originators to acquire Able, and there’s a non-zero chance this story was placed in order to throw an interested party off the trail.

This anonymous source doesn’t seem to be anyone close to Able, because Able does not own a portfolio of loans (it originates and distributes loans to direct lenders, who then hold those loans on their balance sheet) and therefore has no portfolio to sell. In any event, we have no plans to go out of business and no plans to declare bankruptcy.

Passive Investments In CRE: Do They Really Exist? (Seeking Alpha), Rated: B

The wealth of new crowd-funding opportunities in CRE is just the latest addition to a long line of traditional equity funds, REITs and ETFs already offering investors the chance to invest without the high upfront cost traditionally associated with a direct CRE investment. It sounds easy, right? But how truly “passive” are these opportunities?

The only problem with passive investing in CRE? Pure 100 percent passive investing doesn’t exist.

United Kingdom

RateSetter: Even a millionaire could no longer live off savings interest (P2P Finance News), Rated: AAA

ROCK-BOTTOM interest rates are now challenging the convention that someone with £1m in savings could live off the interest, RateSetter claims.

The peer-to-peer platform’s latest savings tracker found on average UK adults think they would need an income of £26,140 per year to live comfortably, but £1m in an average savings account would pay just 0.14 per cent interest, equating to £12,500 each year.

£1m invested in a one-year bank bond with an average rate of 0.79 per cent would earn just £7,900, while the same amount could earn £45,000 in a RateSetter account earning 4.5 per cent interest.

Investors opting to put their £1m into FTSE 100-listed stocks would have earned £80,000 in interest over the 12 months to the end of August, the research found.

Funding Circle reveals new brand positioning and identity with ‘Made to do More’ campaign (The Drum), Rated: A

The challenge was to find an emotional positioning that resonated with Funding Circle customers while instilling trust and confidence as a financial services company. Rooster Punk helped Funding Circle to identify a common thread that connects small business owners, investors and the people who work at Funding Circle. Results revealed they share a uniquely driven yet positive attitude to work and life, a restless determination to succeed and the tenacity to get there. The agency called this ‘Made to do More’.

Rooster Punk’s founder, Paul Cash, commented: “Developing Funding Circle’s new position and identity had to go deeper than a product message around faster business loans. We set out with the ambition that we didn’t just want people to buy from Funding Circle, instead we wanted them to buy into them.

Meet the firm which hopes to solve the late payment problem (City A.M.), Rate: A

This warning comes from Tony Duggan, chief executive of fintech firm Crossflow Payments, a company which acts like a cog between corporations, their suppliers, and funding providers – ensuring that suppliers don’t have to wait for a month or more to get paid.

Duggan’s warning is not just a reference to Brexit, but centres on the introduction of new payment practice laws, which will make it a criminal offence for a corporation not to make public whether it is paying suppliers according to the terms of the contract.

The code looks to stamp out problems with late payments. Ultimately it aims to improve the cashflow of businesses – largely suppliers – by making sure they are paid by their corporate customers on time.

Crossflow is a no frills sort of business; it’s basically a B2B version of peer-to-peer lending, and one that is currently pretty unique in the UK arena.

Peer-to-peer lender Linked Finance marks 1,000th loan (RTE), Rated: A

Peer-to-peer lending platform Linked Finance has funded its 1,000th loan for a small or medium sized company here.

Figures published by Linked, which facilitates loans from individuals directly to businesses outside the banking system, show €31m has now been borrowed through the platform.

The company, which was launched in 2013, also said that €2.5m in interest has already been repaid to Linked Finance lenders.

Marrying self organising teams and customer obsession – Interview with Andrew Lawson (Customer Think), Rated: A

Highlights from my conversation with Andrew:

  • Capital One was an early pioneer in big data, data driven decision making , customer centricity and human centred product design.
  • Back in 2014, a lot of banks were talking a lot about being customer centric but when you get inside the banks there was little evidence to back that up. [Ed: Have things changed?]
  • Customer obsession is very much behind the growth of peer-to-peer lending.
  • When Andrew joined Zopa in 2014 they were a team of around 50 people lending about £20mill per month.
  • Zopa was founded to “make money simple and fair”.
  • Zopa was awarded Superbrand status in the early part of 2017. The annual Superbrands’ league table is based on independent research to identify the UK’s strongest brands, as voted for by marketing experts and thousands of British consumers.
  • Zopa still thinks of itself as a start-up despite the fact that they have been going for 13 years now.
  • In that time Zopa have never spent any money on growing their brand and have grown organically and via word of month.
  • Zopa has won a bunch of customer service awards that celebrate and recognise their approach.
  • Zopa has recently moved to a system of self-organising teams and that is helping them to achieve more and deliver more on their customer promise.
  • In the first quarter of 2016 they delivered more than they had in the whole of 2015 with the same number of people.
  • Ultimately, it’s all about creating an environment where you find and allow great people to go and solve problems.
  • Andrew’s role is all about ensuring they have the right people in the right tribes solving the right problems. It’s not about him being able to come up with all the answers as that just doesn’t scale.
  • In terms of mistakes, initially they found that their tribes went too tribal and it was difficult seeing what was going on within the tribes. That was a problem particularly given the level of technical and strategic dependencies that exist between tribes.
  • On a day to basis, their teams work in a way that is akin to a modern agile environment and are able to pick the right model (1 week sprints, 2 week sprints, kanban etc) depending on their context and preferences.
  • As is the nature of agile working, they are constantly tweaking and looking for ways to improve.
  • Other challenges they have faced include the management of people from different backgrounds, skillsets and with different experiences.
  • Given that they are now 250 people in London, the next big challenge for them will be how do they move this system into a remote context.
  • The heart of their success has been in creating those relationships where there weren’t relationships before i.e. between business people and tech people. It’s easy when you sit next to them or are in the same office but more difficult when you are in different locations, time zones or even speaking different languages.
  • They embraced a lot of Spotify’s approach as there are lots of things written about them and by them on how they organise themselves (videos, talks, blog posts, slide shows etc). Google ‘Spotify and Tribes’ to find more.
  • Don’t make assumptions around customers needs. Go and ask then as you will almost certainly be wrong.


UK fintech investment rises in H1 (Finextra), Rated: A

More than a billion dollars was invested in British Fintech companies in the first half of this year, over a third more than the same period in 2016, according to trade body Innovate Finance.

Fintech employs over 60,000 people in the UK and contributes $9bn (c.£7bn) to the economy.

Two peer-to-peer lending platforms also received significant rounds of investment. London-based FundingCircle a marketplace which allows investors to lend directly to SMEs raised another £80m in equity funding. Venture capital group Accel led the funding round alongside investors such as Temasek from Singapore. The business lent £1.1bn in 2016. In June Zopa another peer-to-peer lender raised £32m from Indian investor Wadhawan Global Capital and European venture capital fund Northzone. The business plans to use the funding for the ambitious roll out of its own retail bank.

China

After regulators ban on coin fundraising, over 40 ICO platforms closed (Xing Ping She), Rated: AAA

Several platforms have taken steps after the central bank’s announcement of ban on ICO (initial issue of tokens). Up to September 5th, more than 40 platforms in China have taken measures to suspend the operation, registration or even permanently stop the service of ICO. Among them, ICOAGE, a well-known ICO platform, has launched a one-key withdrawal function. Meanwhile, ICOAGE’s official website says that it will actively negotiate with the project side, and even if the project does not accept the refund, ICOAGE will pay the relevant digital currency in advance to ensure the safety of investors. It is worth mentioning that, despite the regulation to stop the ICO, there still stages “the last madness” in the market, with some of tokens’ daily gains exceeding 30%.

China steps up financial regulation to address risks (China.org.cn), Rated: A

China’s ban on Initial Coin Offerings (ICOs), a digital coin fundraising scheme, was only part of a broader campaign to curb the country’s financial risks.

In an announcement Monday, China’s central bank ordered a complete halt on new ICO offerings, in which technology start-ups issue their own digital coins, or “tokens,” to investors to access funds.

Similar to ICOs, peer-to-peer (P2P) lending served as an Internet-based alternative for companies and individuals to borrow money. As the P2P industry took off in recent years, it also made room for high-profile fraud, which prompted regulators to act fast.

European Union

Klarna’s newest investor could hold the key to ‘growing the company’s revenues manifold’ (Business Insider), Rated: AAA

Klarna last week reported some impressive revenue growth, which, combined with a push into digital banking and recent deals with VISA and Stripe make its future prospects look rosy.

What could make Permira a strategic asset for Klarna, is its stake in Magento, one of the world’s biggest e-commerce platforms. The idea would be to integrate Klarna with Magento; a goal that Lundell says was in the works already before Permira’s entry.

Seeing that Magento runs some 15 percent of global e-commerce, getting visibility on the platform could open up a gigantic new market for Klarna and its CEO and cofounder Sebastian Siemiatkowski.

Mambu’s SaaS Banking Engine Helps N26 Transform Operations (Fintech Finance), Rated: A

Mambu announced that its innovative solution is being used by N26 to allow the Berlin-based mobile bank to integrate systems and quickly bring services to market in support of its growth strategy.

Before N26 was granted a full banking licence in July last year, it used the services of a partner bank and then migrated to its own platform in late 2016. Since then their customer base has grown by 500%, helping them reach the 500,000 customer mark in August 2017.

Mintos Reports Topping €300 Million Milestone in Online Lending (Crowdfund Insider), Rated: A

Latvia based Mintos has reached a new milestone having now topped  €300 million in online loans since platform launch two years ago. Mintos reports that more than €200 million has been invested in 2017 alone, making Mintos a market leader in continental Europe claiming a 40% market share.

Mintos states that as of September 2017, approximately € 1 million is invested in loans through Mintos daily, which is three times more than just a year ago.

European Central Bank working on new fintech licensing guidelines (Independent), Rated: A

The European Central Bank is working on new licensing guidelines that would also cover financial technology firms, Daniele Nouy, the ECB’s top bank supervisor told a conference on Wednesday.

The fintech sector, though still relative small, has been stealing market share from traditional lenders in a variety of sectors from payments to lending, attracting investment $6.5bn (£4.9bn) in the first half of the year.

Wirecard Supports Fellow Finance’s Market Entry in Germany and Ensures a Completely Digital Credit Process (Business Insider), Rated: B

Wirecard supports the Finnish FinTech company Fellow Finance to enter and provide a digital infrastructure for the German financial market. Wirecard is supporting Fellow Finance by placing their German full banking licence at the Fellow Finance’s disposal and in addition enabling a completely digital credit process. For example, the identification of the borrower as well as the signature of the credit agreement are made fully electronically.

The market volume of German alternative online financial services grew enormously between 2013 and 2015. In peer-to-peer consumer lending alone, there was year-on-year growth of 95%.

International

Q2 2017 Fintech Insights (FT Partners), Rated: AAA

Source: FT Partners

Get the full report here.

Banking the Unbanked through AirFox ICO (Cryptocoins News), Rated: A

AirFox’s groundbreaking idea involves using a mix of micro-credit and advertising to facilitate to make mobile data plans accessible to the world’s poor and underprivileged.

AirFox will launch their initial coin offering (ICO) on September 19, 2017 at 10:00 am EST. The token on sale is called AirTokens (AIR) and the period of sale has been fixed at 31 days. There are plans afoot to sell a total of 1.5 billion AIR, out of which 1.05 billion (70 per cent) are on offer at the crowdsale. AirTokens are based on the Ethereum (ETH) blockchain.

Laying out his vision Victor Santos, CEO and Co-founder of AirFox says, “Investors will be able to hold AirTokens that will be used by Lenders and Advertisers to sponsor the mobile internet of millions of users. There will be a market for buyers and sellers of AirTokens. Those who wish to take the AirTokens and lend micro-credit to users, will also be able to earn an interest using the data that we collect on the smartphone.”

AirFox raises $ 6.5M in token presale (CoinReport), Rated: A

AirFox, the firm utilizing advertising and blockchain technology to bring smartphone data and internet to 4 billion people in the developing world, has met the presale target of its token, AirToken (AIR), almost two weeks early, raising $6.5 million, according to an email CoinReport received from BIGfish Communications, AirFox’s PR firm.

India

Modalku Gets Audited to Gain Public Trust (Jakarta Globe), Rated: A

Mitrausaha Indonesia Group, also known as Modalku, a homegrown marketplace that provides peer-to-peer lending, received an “unqualified opinion” which is the best possible audit outcome  from public accounting firm Purwantono, Sungkoro & Surja, hoping it will help the company gain the public’s trust.

Purwantono, Sungkoro & Surja, a member of Ernst & Young, granted the company an “unqualified opinion” ranking after reviewing the company’s financial statements, income reports and other relevant comprehensive income statement, equity changes, cash flow datat and other information for the year ending Dec. 31. A ranking of this stature means the statements are deemed sound.

Credit scoring platform CreditVidya bags $ 5 mn from Matrix, Kalaari (VC Circle), Rated: A

Mumbai-based InfoCredit Services Pvt. Ltd, which operates credit scoring platform CreditVidya, has raised $5 million (Rs 32 crore) in a fresh round of funding led by Matrix Partners, the company said.

Existing investor Kalaari Capital, which had invested $2 million in June 2016, has also participated in the round. While Matrix put in Rs 23.81 crore, Kalaari accounted for the rest.

What is P2P lending and borrowing: All you want to know about Digital marketplace for loans (Financial Express), Rated: A

In layman’s terms, Peer-2-Peer (P2P) lending and borrowing is like a digital marketplace for loans. Hence usually it is known as ‘marketplace lending’ or often gets confused with crowd-funding. Instead of applying for a loan with a bank, NBFC, private finance company or any other loan institution, you can request a loan from regular people like you and me (therefore, the term Peer-2-Peer).

Most of these loans are unsecured for a large number of people who are underbanked or thinly banked.

The actual logistics of Peer-to-Peer can be a little more complicated in India, but some platfoms like ours allow the borrower to download the app, fill the application form and apply for the loan. As a borrower, you have to fill a quick online registration form and pay the upfront registration fee which is refundable. Then proprietary credit assessment is done and a brief commentary of why you want a loan is shared with the lenders. The app requires the loan applicant to submit bank statement, upload basic KYC documents like PAN card, Aadhaar card etc. The proprietary algorithm assigns the loan interest rate and tenure to post the loan on the marketplace for lenders to assess and invest.

MENA

Developing Asia accounts for large trade finance gap (The Asset), Rated: A

Businesses particularly the micro, small and medium-sized enterprises (MSMEs) continue to face challenges in accessing sufficient credit, resulting in a global trade finance gap of US$1.5 trillion in 2016.

Emerging economies continue to face the greatest shortfalls with developing Asia accounting for 40% of the global total in trade finance gap. The MSMEs have the biggest difficulties in accessing trade finance, representing 74% of the total rejections in 2016, compared with 57% in the previous year.

The cost of regulatory compliance can lead banks to exit client relationships as reflected by the 40% response in the 2016 survey and 45% in 2015, including the withdrawal of correspondent relationships.

Mideast fintech startup NOW Money fetches $ 1.46 mln (PE Hub), Rated: A

NOW Money has closed its bridge funding round with a total of US$1.46m.

In addition to the recent US Venture Capital investment, mentioned in a previous press release, this funding round includes $700,000 from Dubai-based Venture Capital firm, Myrisoph Capital. Other contributions have come from private investors and MENA-based women’s investor network WAIN.

WAIN is the first investor network for women in the MENA region. Its goal is to build an informed ecosystem of women investors who support women entrepreneurs in the Arab world.

Canada

IOU Financial Partners with Rubicon Global to Fund Recycling Ecosystem (Business Insider), Rated: A

IOU FINANCIAL INC. (“IOU” or “the Company”; TSX-V:IOU), a leading online lender to small businesses (IOUFinancial.com), is pleased to announce a strategic partnership with Rubicon Global.  IOU joined the RUBICONPro buying program to provide Rubicon’s network of independent haulers with fast, convenient and reliable, non-collateral funding solutions.

Where bank loans are not an alternative, an IOU term loan will help Rubicon’s haulers invest in equipment to take on more recycling volume and proudly join Rubicon’s expansion projects for a more sustainable world.  IOU loans will also be provided to Rubicon’s base of thousands of small businesses embracing recycling to contribute to a healthy planet.  IOU will also promote Rubicon’s innovative model to its thousands of existing and past borrowers.

Africa

Development of African ­crowdfunding platforms (DandC), Rated: AAA

Africanise crowdfunding means setting up local crowdfunding platforms with adapted technology for local investment. No bank account? Not a problem! Many African countries lack conventional money transfer infrastructure; bank accounts and credit cards still tend to be the exception, not the rule. To permit widespread participation in crowdfunding in such circumstances, mobile phone-based money transfer services (like the Kenyan financial service M-Pesa) are needed. The Indian crowdfunding platform Ketto () works with a courier service that collects cash payments.

Copying these approaches is not the way to move ahead in Africa, not least because of the lack of an adequate institutional and legal environment. First and foremost, SME financing  requires national crowdfunding platforms with traditional financing options (donation-, rewards- and lending-based). Minimum contributions must be small and payable in local currency.

Authors:

George Popescu
Allen Taylor

Fintech comes to India- CreditVidya

Fintech comes to India- CreditVidya

According to a report by Credit Suisse, the Indian consumer lending market is going to grow at a CAGR of 18% to $1.2 Trillion by 2020. This prediction highlights the mammoth size of the market. But Indian financial system has been under scrutiny because of the high default rate of loans despite the fact that […]

Fintech comes to India- CreditVidya

According to a report by Credit Suisse, the Indian consumer lending market is going to grow at a CAGR of 18% to $1.2 Trillion by 2020. This prediction highlights the mammoth size of the market. But Indian financial system has been under scrutiny because of the high default rate of loans despite the fact that 80% of approved loans have a CIBIL (Indian equivalent of FICO) score of 750 and above. In addition to this, only 25% of losses are recovered from defaulting parties.

Source: Firstpost.com

The 341,641 Crore INR in the graph represents almost 51 Billion USD in NPAs. This underscores the fact that there is something missing in terms of credit analysis.  The Indian lending sector is in a catch-22 situation because the majority of customers are either new to credit or with a thin file and only 20% of the population is part of the Credit Bureau data. This translates into 80% of Indians having no access to credit because they don’t have a CIBIL Score. Therefore it is becoming imperative to integrate Big Data and detection models in response to new opportunities &threats and to ensure that creditworthy person can have easy access to credit.

CreditVidya

An Indian financial technology start-up CreditVidya harnesses the power of advanced machine learning techniques and big data to re-imagine and re-build credit scoring to provide credit scores to millions of un-scored Indians. CreditVidya’s technology platform helps lenders assess the risk of new-to-credit and thin file customers more accurately than ever before. It was established in 2013 by Rajiv Raj and Abhishek Agarwal. Rajiv Raj has working experience of more than 17 years in reputed banking institutions such as HDFC Bank, Citibank, IDBI Bank, and Canara Bank. He is a specialist on home loans; however, his interest in credit analysis urged him to be in the segment and he was part of the core team that setup India’s first credit agency, CIBIL (Credit Information Bureau of India Limited). Rajiv also worked at Experian India after his stint at CIBIL. Abhishek began his career as an engineer with Thomson Reuters and then worked as an analyst with a top inter-firm dealer brokerage on Wall Street. After his Wall Street stint, he helped scale up various startups in domains as diverse as retail banking, fashion, digital design and mobile VAS across India, the US and the UK. Abhishek was Head of Products and Data Strategy at Experian India before taking the plunge as a fintech entrepreneur.

Company history

CreditVidya was seed funded by Siddharth Parekh from Paragon Ventures and Silicon Valley-based angel investor Munish Mehta. In May 2016, they received funding of INR 14.4 Cr (USD 2 million) from Kalaari Capital. The company provides underwriting as a service to its clients in the lending space. Its platform helps lenders accurately assess the risk of the thin file and new-to-credit customers. Lenders benefit from more effective product cross-selling and up-selling, lower cost of underwriting and increased approval rates. The pricing model is per transaction, similar to that of a Credit Bureau.

CreditVidya started out by servicing NBFCs and banks. The current clientele of the company includes banks and non-banking financial institutions such as IDFC Bank, Bajaj Finserv, Fullerton India, Shriram Housing Finance and Tata Capital. The company has been revenue positive from the second year of the operations. Its revenues grew by 400% in the last financial year. Their goal now is to reach out to newer segments such as Insurance, e-wallets and payment banks who can use their solutions for customer acquisition and management. They also provide services like trust score, verification of services, fraud checks, and propensity models.

Platform

Main features of CreditVidya platform are:

Higher Approval Rates: It helps the lender to grow his loan portfolio responsibly by accurately assessing the risk of new-to-credit and thin file customers.

Lower Credit Losses: Improvements in the credit line, approval, portfolio management decisions, pricing, and pre-screens helps to decrease credit losses.

Lower Fraud Rates: It clears legitimate customers faster and reduces fraud rates by focusing on high-risk applicants.

Higher Cross-Selling: The client can leverage insights into client behavior and life events through the CreditVidya platform for cross-selling and up-selling.

Primary competition of the company is from traditional credit scoring agencies which still dominate the market and which rely heavily on traditional data streams such as details of reimbursement of advances and credit cards to generate credit scores. The demographic profile of India consists primarily of people without a credit history. Therefore, solutions of the company enable lenders to increase profitability by more accurately assessing the credit risk of these customers.

What sets CreditVidya apart from other players in the space:

  1. a) The focus of the company is solely on credit underwriting and scoring models. They are not involved in lending, like many other players. This focused approach enables them to provide superior offerings and more granular credit decisions insights to lenders.
  2. b) Their Insights platform uses up to 10,000 data points, making it one of the richest, most robust and superior credit underwriting services on offer.

The future

With the new wave of growth in India set to be driven by credit and the country increasingly becoming data-rich, CreditVidya believes that they have only just scratched the surface with the depth and range of their offerings. The aim of the company is to serve 100 million customers in the next 5 years across various segments. At present, they are in the process of expanding the team and building a strong team of Data Science analysts and investing in technology.

Analysis: NASSCOM (Premier Indian IT trade Association) has predicted that Fintech software market will double from $1.2 Billion to 2.4 Billion by 2020. Investment in Fintech sector has also grown by 500% from $247 million in 2014 to $1.5 Billion in 2015. P2P in India is focused on consumer, micro and SME lending.

Considering that India has a population of more than 1.25 billion, more than 55 million SMEs; and a minuscule penetration rate of financial services as highlighted by the graph above; it’s a huge market waiting to be tapped.

 

 

August 9th 2016, Daily News Digest

August 9th 2016, Daily News Digest

News Comments Today’s news focus on Lending Club’s results, OnDeck’s results, and the FDIC proposing tougher hurdles for partnerships with marketplace lenders. United States Lending Club results are in my opinion really positive: Originations in Q2 2016 > Q2 2015. I did not expect that ! Yes, there is a reduction in origination vs Q1 […]

August 9th 2016, Daily News Digest

News Comments

United States

United Kingdom

Canada

Mexico

Singapore

India

News Summary

 

United States

Lending Club results reveal pain of governance scandal, (FT), Rated: AAA

Lending Club said that originations of loans between April and June came to $1.96bn in the period, down 29 per cent from the previous quarter but fractionally higher than a year ago. That came as a surprise to some analysts, who had been braced for a steeper year-on-year fall.

Despite the stronger-than-expected top line, profits at Lending Club were hit by a surge in fees to professional services firms engaged in helping it to fight back, goodwill writedowns related to a 2014 acquisition, and a host of payments to staff affected by severance and retention programmes.

The net loss for the second quarter came to $81.4m, compared to a loss of $4.1m a year earlier.

Lending Club ended the quarter with 1,499 employees and contractors, down from 1,545 at the end of March.

There had been “a gaping hole [in management], given that the two most important people in the business — the CEO and Jeff Bogan, head of capital markets, had to leave,” said Peter Renton, founder of LendIt.

Despite the $2bn or so in quarterly loan originations the survival of the company was still in doubt, said Peter Atwater, Delaware-based president of Financial Insyghts.

OnDeck Reports Second Quarter 2016 Financial Results, (PR Newswire), Rated: AAA

OnDeck® today announced second quarter 2016 financial results highlighted by strong credit performance and record levels of Loans Under Management, Originations and gross revenue.

For the three months ended June 30, 2016, OnDeck increased Loans Under Management by 47% year-over-year to $1 billion, grew Originations 41% to $590 million, and increased gross revenue by 10% to$69.5 million.

“Our leadership position and diversified funding model enabled us to produce solid results this quarter,” said Noah Breslow, OnDeck’s chief executive officer.  “Although financial comparisons continue to be affected by our planned reduction inMarketplace sales and its resulting accounting impacts, we believe that retaining a greater percentage of loans on our balance sheet is the right decision for the long-term economics of the business. To that end, our Unpaid Principal Balance grew 57% year-over-year, which will drive future gross revenue.”

Mr. Breslow continued, “In addition, we are encouraged by credit performance trends across OnDeck’s portfolio, which continued to be strong, demonstrated by both sequential and year-over-year improvements in our 15+ Day Delinquency Ratio. We will continue to prioritize responsible growth of Loans Under Management as we progress through the remainder of the year.”

Financial Highlights

  • Gross revenue was $69.5 million for the quarter, up 10% from the prior year period.
  • Net revenue was $28.9 million for the quarter, down 33% from the prior year period.
  • GAAP net loss attributable to OnDeck common stockholders was $17.9 million for the quarter, compared to net income of$5.0 million in the prior year period.
  • Adjusted EBITDA* was a loss of $12.4 million for the quarter, compared to positive $8.7 million in the prior year period.
  • Adjusted Net Loss* was $14.0 million for the quarter, compared to Adjusted Net Income* of $7.3 million in the prior year period.

Key Business Highlights

  • Origination volume increased to a record $590 million for the quarter, reflecting 41% growth over the prior year. Lifetime Originations also reached a new milestone of over $5 billion during the second quarter.
  • Loans Under Management reached $1 billion, up 47% from the prior year period.
  • Unpaid Principal Balance grew to $790 million, up 57% from the prior year period.

Gross revenue increased to $69.5 million during the second quarter of 2016, up 10% from the comparable prior year period.  The increase in gross revenue was primarily driven by higher interest income, partially offset by lower gain on sale revenue. Interest income increased to $63.9 million during the quarter, up 27%, and primarily reflected the growth of average loans, which increased 37%.  The Effective Interest Yield for the second quarter of 2016 was 33.3%, down from 35.9% in the comparable prior year period, reflecting the continued mix shift to lower cost distribution channels, an increase in average term loan length over the period, and OnDeck’s lower pricing and origination fees for repeat loan customers.

Gain on sale was $2.8 million during the second quarter of 2016, down 76% from the comparable prior year period. The decline in gain on sale primarily reflected a lower Gain on Sale Rate during the quarter and the reduction of loans sold through OnDeckMarketplace.  OnDeck sold $79.3 million1 of loans sold through OnDeck Marketplace at a 3.5% Gain on Sale Rate during the second quarter of 2016, compared to $149.7 million of loans through Marketplace at a 7.8% Gain on Sale rate in the second quarter of 2015.  Loans sold or designated as held for sale through OnDeck Marketplace represented 15.6% of term loan originations in the second quarter of 2016 compared to 32.8% of term loan originations in the comparable prior year period.

Net revenue was $28.9 million during the second quarter of 2016, down 33% from the comparable prior year period. The decline in net revenue primarily reflected the reduction of Marketplace sales in the second quarter, which led to lower gain on sale revenue, higher provision expense and higher funding costs for the period. Net revenue margin decreased to 41.5% during the second quarter of 2016 from 67.9% in the prior year period, reflecting the decline in net revenue.

Overall, credit performance in the second quarter of 2016 was strong, with the 15+ Day Delinquency Ratio decreasing to 5.3% from 8.0% in the prior year period and from 5.7% sequentially.

The Cost of Funds Rate during the second quarter of 2016 increased to 6.7% of Average Funding Debt Outstanding, up from 5.2% in the comparable prior year period. The increase primarily reflected the acceleration of $1.6 million of deferred debt issuance costs due to the early voluntary prepayment in full of our prior securitization issuance.

Operating expenses were $47.5 million during the second quarter of 2016, up 24% over the comparable prior year period as OnDeck continued investing in our technology and analytics capabilities and incurred expenses related to supporting OnDeck’s overall growth.

Total Funding Debt at the end of the second quarter of 2016 was $554 million, up 52% over the prior year period.  The increase in total funding debt reflected the growth of Unpaid Principal Balance during the period. OnDeck continues to actively explore opportunities to further strengthen its financial flexibility, including upsizing existing debt facilities, adding new debt facilities, entering into additional securitizations, increasing Marketplace sales, and increasing its corporate line of credit.  While no assurance can be given, OnDeck expects that it will continue to be able to obtain sufficient financing to maintain its current level and planned growth of originations.

At the end of the second quarter of 2016, cash and cash equivalents were $78 million, down from $160 million at December 31, 2015. The decrease in cash and cash equivalents primarily reflected the company’s increased funding of loans on balance sheet.

Third Quarter 2016

  • Gross revenue between $73 million and $76 million.
  • Adjusted EBITDA between a loss of $9 million and a loss of $11 million.

Full Year 2016

  • Gross revenue between $280 million and $290 million.
  • Adjusted EBITDA between a loss of $35 million and a loss of $43 million.

FDIC Proposes More Hurdles for Bank Partners of Marketplace Lenders, (Pepper Hamilton), Rated: AAA

On July 29, 2016, the FDIC issued FIL-50-2016, which seeks comment on proposed Guidance for Third-Party Lending for FDIC-supervised institutions when lending through a business relationship with a third party. The guidance would apply to all FDIC-supervised institutions that engage in third-party lending, regardless of asset size.

The proposed guidance defines third-party lending as an arrangement that relies on a third party to perform a significant aspect of the lending process. This includes institutions originating loans for third parties; institutions originating loans through third parties or jointly with third parties; and institutions originating loans using platforms developed by third parties. These include marketplace lending companies with bank partnerships.

Due Date for Comments

Comments are due October 27, 2016 and should be sent to thirdpartylending@fdic.gov.

Questions

The FDIC is seeking comment on the following topics:

  • the definition of third-party lending and scope of the guidance
  • potential risks arising from the use of third-party lending programs
  • elements of third-party lending risk management programs
  • supervisory considerations.
  • examination procedures.

The proposed guidance states that the FDIC would evaluate lending activities conducted through third-party relationships as though the activities were performed by the institution itself.

To manage the risks identified by the FDIC, the proposed guidance requires institutions to establish a third-party lending risk management program and compliance management system that is commensurate with the significance, complexity, risk profile, transaction volume, and number of third-party lending relationships the institution has.

This proposed guidance is another example of the FDIC continuing to raise the bar for marketplace lenders’ relationships with FDIC-insured banks. The FDIC has a negative view of the risks associated with marketplace lending, as evidenced by its November 6, 2015 Financial Institution Letter FIL-49-2015, which addressed the underwriting and credit risks associated with purchased loans and loan participations from third parties. More recently, in the February 1, 2016 issue ofSupervisory Insights, the agency discussed the specific risks that banks need to consider when dealing with marketplace lending companies, including third-party risk, compliance risk, transaction risk, servicing risk and liquidity risk, as well as specific due diligence recommendations.

Carrie Dolan Departs Lending Club as CFO, (Crowdfund Insider), Rated: A

Dolan is a highly respected executive not only at Lending Club but within the financial industry.  Last year, Dolan was named the “Most Powerful Woman in Finance” by American Banker. The same year she was also recognized as the Financial Woman of the Year by the Financial Women of San Francisco. Before coming to Lending Club, Dolan was Treasurer for the Charles Schwab Corporation.

Lending Club released a statement on her departure, alongside Q2 financial results. The company stated;

“Carrie was integral to Lending Club’s maturity and growth over the past six years,” said Scott Sanborn, CEO and President of Lending Club. “She approached us early this year about planning a transition, and in May the Board and I asked her to postpone her plans until we could navigate recent events. I and the Board want to thank her for her leadership, commitment and dedication particularly over the last several months, and wish her well in her next endeavor.”

Dolan for her part said of the decision to leave Lending Club;

“I remain a passionate believer in this business model and this company, and it has been a deeply rewarding experience to help build Lending Club from 40 employees to over 1,500. Now that investors are re-engaged with the platform, I am excited to begin my next chapter.”

Ron Suber, President of Prosper and a marketplace lending industry advocate, told Crowdfund Insider;

“I have known and respected Carrie for many years. We wish her the very best in her next endeavors. She has played a vital role in the growth of not just Lending Club but all of marketplace lending. This industry is maturing and entering a new era.”

The announcement of Dolan’s departure comes at a time when there are rumors of tanking moral at the online lender. The all hands mentality, following the resignation of former CEO Renaud Laplanche, may have taken its toll.

Lending Club CFO Dolan steps down, (FT), Rated: AAA

Chief executive Scott Sanborn, said:

Our efforts to reengage investors are working, with fifteen of our top twenty largest investors back on the platform today.

Despite the unusual disruption to our supply of capital in May, we facilitated nearly $2 billion of loans to nearly 170,000 borrowers. While we still have a lot of work ahead, the value that we bring to borrowers and investors is stronger than ever, and we believe we have the resources and resolve to execute on our mission.

The company said on Monday that its chief financial officer Carrie Dolan had resigned to “pursue a new opportunity”. The San Francisco-based company said that Ms Dolan had approached the board earlier this year about the move but had her delay her departure until the company could “navigate recent events”. Bradley Coleman, who previously served as Controller has been named interim CFO.

News of Ms Dolan’s departure came as the company deepened its losses for the second quarter. Lending Club reported a net loss of $81.4m or 21 cents a share in the three months ended in June, compared with a loss of $4.1m or 1 cent a share in the year ago period.

Excluding one-time items, adjusted loss came in at 9 cents a share, worse than the 3 cent loss that analysts were looking for.

Revenue however climbed nearly 7 per cent to $103.4m, ahead of analysts’ forecasts for $100.6m.

Private agencies devise new credit score models for first-time loans, (LiveMint), Rated: AAA

The inability of traditional credit bureaus to assign credit scores to many loan applicants who haven’t borrowed earlier has spawned a variety of private agencies using novel techniques to fill the gap.

CreditVidya says it looks at data sources ranging from behavioural, transactional, location and social profiles to assess the risk of an individual. This could be, for instance, a check on whether a loan applicant checks office e-mail from a place where she says her office is located. The bureau says its engine runs basic searches around the Internet to verify the applicant’s employment, spending habits and cash withdrawal rates from ATMs. Consistency of a particular behaviour among these data points demonstrates stronger stability of a customer,” said Abhishek Agarwal, co-founder and chief executive officer, CreditVidya.

Hong Kong-headquartered Lenddo, another credit assessment firm, says it uses psychometric tests and application form analysis as tools to check credit risk. The company, which works in 20 countries around the world, is focusing purely on small-value loans between Rs.1 lakh toRs.8.5 lakh in India.

Experian, which started in 2010, has introduced a technique that compares a first-time customer with statistically similar customers who have borrowed before to see the trend in repayment.

According to Sumit Bali, senior executive vice-president and head-personal assets at Kotak Mahindra Bank, the main issue with using third-party services for credit assessment seems to be the issue of invasion of privacy.

Kotak Mahindra Bank has been using surrogates such as educational background, duration of employment and financial stability to assess younger customers who may not have a credit history.

For instance, LenDenClub, a P2P lender, has been looking at a customer’s income data, equated monthly instalments (EMIs) repayment record and credit bureau data and pairing it with behavioural patterns on consumer loans, family details and employer track record to take lending calls.

David Snitkof of Orchard Shares Unique Insight into Online Lending Market Dynamics, (Crowdfund Insider), Rated: AAA

Orchard Marketplace is a platform that is uniquely positioned at the intersection of institutional money and online lending.

From my perspective, the first half of 2016 has proved defining for online lending, further solidifying the fundamental truths of our industry, including broader access to credit, a better customer experience and significantly increased transparency. The unfortunate events of the past few months presented a learning moment for online lending and I’m pleased to see that many participants have taken that opportunity to set the bar even higher.

It’s not surprising that originators are trying to diversify their capital structure.

For the past couple years, originators were flush with investor demand and could compel adherence to their preferred terms.  Today, these originators are more willing to be flexible with investors who make commitments to fund their lending.

The news cycle has started to slow for many of the negative headlines of early 2016, so I expect to see the path cleared for positive developments.

In addition to continued enthusiasm from European investors, we’ve seen strong interest from Chinese Wealth Management firms to invest in U.S. credit, as evidenced by notable US-Chinese partnerships such as those between DriveWealth and CreditEase, Robinhood and Baidu, Saxo Bank, and Shanda group’s growing stake in Lending Club.

There is a common misconception that the online lending industry is not regulated, when in fact, it is.

Marketplace Update: Pre-Qual Changes, (Funding Circle Email), Rated: A

Borrower Minimum Requirement Changes
As our business grows, so does the strength of our risk models. Each loan we review provides us with more data, allowing us to continuously make improvements to the accuracy and efficiency of our assessment process.

Based on thorough statistical analysis, our Credit & Risk team have updated our minimum requirements to the following :

  1. Business Tenure – Greater than 2 years
  2. Annual Revenue – No revenue restriction
  3. Net Profit – No net profit restriction (application could be approved based on risk assessment and loan affordability)
  4. Business Type – Should not be sole proprietor
  5. Bankruptcy – Should not have happened in last 7 years
  6. Tax Lien – No auto decline due to tax lien (application could be approved based on risk assessment and paid off status)
  7. Ineligible Industries – Speculative real estate, loan brokers, non-profit, adult entertainment, weapon manufacturers and sellers, money transacting/movement businesses, gambling, marijuana producers/sellers, bail bondsmen, government entities

Elevate Hires GE Executive Director Al Comeaux as Chief Communications Officer , (Business Wire), Rated: A

Elevate, a provider of online credit solutions for non-prime consumers, announced the addition of Al Comeaux, who has assumed the role of Chief Communications Officer. Mr. Comeaux brings to the role nearly 30 years of experience leading digital and online communications strategies at leading international consumer brands.

In his role, Comeaux will focus on investor relations, corporate communications, and internal communications.

Term Sheet: August 09, 2016, (Fortune), Rated: AAA

A new study on the state of startup/corporate collaboration from MassChallenge and Imaginatik shows that not only are corporates more eager to work with startups, 23% of it see it as “mission critical, and 82% said it’s at least “somewhat important.”

Most importantly, 67% of those responded that they wanted to work with earlier stage startups.

It became trendy to launch corporate-run startup accelerator programs, which I used to mock as “innovation by osmosis.” There’s a whole new class of corporate venture arms from non-tech corporations ranging from the insurance industry toCampbell Soup. Fortune 500 companies have hired “startup scouts” and opened innovation hubs in Silicon Valley.

But lately I’ve noticed a shift in the strange, sometimes awkward relationships between corporations and startups. Corporations take startups—even very young ones—far more seriously today. Look no further than the recent Fortune 500 acquisitions of startups as proof:General Motors spent $1 billion (or around that with earn-outs) on Cruise Automotive, a 30-person autonomous vehicle startup that hasn’t even launched a product. Unilever spent $1 billion on Dollar Shave Club, a razor startup that adds just $200 million in revenue to Unilever’s €53.3 billion bottom line. And of course, yesterday Wal-Mart spent $3 billion on Jet.com

Brief: Marketplace Lender LendingUSA Names Brian Walby Vice President of Sales, (Crowdfund Insider), Rated: B

On Monday, marketplace lending platform, LendingUSA, announced it has appointed Brian Walby as its new vice president of sales. Walby previously worked as owner and managing director of RVC Consulting and has held executive and senior level positions at Experian Interactive Media and LendingTree.

United Kingdom

UK regulator responds to government questions on P2P regulations, (Business Insider), Rated: A

FCA’s response to Tyrie’s questions was published last week, the same day the UK announced its first interest rate cut in seven years. This is particularly timely, as the rate cut may end up being a driver behind new growth in the alternative finance industry, as outlined in last Friday’s briefing.

  • Responsibility f0r accuracy of information lies squarely with firms. FCA said that since October 2014 it has considered 37 cases of P2P and investment-based promotion, of which 21 were amended or withdrawn for breaking guidelines. FCA’s hard line on misleading promotions is especially important — falling interest rates will drive a decline in the interest rate paid on bank accounts, which could drive savers to explore P2P lending as an alternative way to earn interest income.
  • Firms have regulatory incentives to ensure creditworthiness of borrowers. P2P lenders must abide by the same rules as legacy lenders when it comes to assessing borrowers’ creditworthiness. Firms also voluntarily publish their loan books meaning they have a commercial incentive to ensure creditworthiness of borrowers — if books showed a default rate, potential investors would be put off, while existing investors would likely withdraw funds.
  • FCA has its own concerns about consumer understanding of risk. There is some evidence that FCA and Tyrie are right to be concerned — 37% of UK consumers who are aware of P2P lending think it is either equally risky, less risky, or are unsure of its risk relative to savings accounts. Savings accounts are covered by deposit insurance while all capital invested via P2P lending is at risk.
  • FCA admits crowdfunding is a small industry but has faith it will grow. FCA expects P2P lending and other crowdfunding models to result in a growing choice of finance providers. We think this may be optimistic and that as banks acquire new technology enabling them to compete with alternative lenders, we will actually see consolidation in the industry.

Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on fintech regulation that explains how regulators in Europe are successfully growing fintech innovation and how it’s becoming a model for regulators around the world.

Here are some of the key takeaways from the report:

  • The financial technology sector is booming, and Europe is a leading region for growth. VC-backed fintech companies in Europe raised £1 billion ($1.5 billion) in funding across 125 deals in 2015.
  • With this boom in funding comes a need to regulate the nascent industry. There are a variety of approaches — active, passive, and restrictive — that regulators can take. The EU and the UK, in particular, have taken an active approach, in order to encourage growth.
  • The regulation that will have the most impact on the European fintech market is the Second Directive on Payments Services, known as PSD2. It will force banks to open up their systems to fintechs. This will allow fintechs to act as intermediaries between banks and their customers.
  • The UK regulator is actively promoting its approach to regulation as a model for other countries to follow. Some of its innovations are already being copied by other regulators around the world.

In full, the report:

  • Examines the different approaches to fintech that regulators can take
  • Explains the key EU laws that will affect the European financial services industry in the next two years and beyond
  • Explores the potential impact of new regulations
  • Details the workings of the initiative central to the UK regulator’s approach to fintech
  • Highlights what can be achieved when regulators, governments, and fintech companies work together

What does a drop in interest rates mean for SME P2P lenders?, (Alt Fi News), Rated: A

Last week marked a historic day for the UK economy. The Bank of England announced a 0.25 per cent cut to interest rates and a raft of monetary policies to encourage growth in the wake of the referendum. A 0.25 per cent base rate is the lowest we’ve ever seen, it’s the first time the monetary policy committee MPC has cut interest rates in seven years, and the committee is not ruling out a further cut later this year.

As expected we’ve already seen banks and building societies review the savings and mortgage rates they pass on to customers but the impact is less clear in the emergent P2P sector. Inevitably, there will be some changes to the rates of return that lenders receive, but whether this will actually have a tangible effect on the appeal of P2P, is doubtful.

In reality, a 50 per cent reduction in base rate is only a 0.25 per cent fall, and that will not, in itself, make much of a difference to the industry.

By providing a steady stream of cheap money for banks to lend, there was little incentive for them to attract deposits from savers, weighing down available rates.

Even with this additional incentive for banks to lend, we’ll have to wait and see whether businesses really do benefit from the scheme.

In this environment, P2P lending has emerged as a genuine alternative to this type of intervention, producing investment income four or five times greater than bank deposits, while simultaneously providing business loans to fill the funding gap left by the banks. When all is said and done, a base rate cut won’t alone be enough to drive business-led growth in the economy and may put some downward pressure on returns, but for peer to peer lenders and the platforms they use it will be water off a duck’s back.

Canada

Asset Direct – Canada’s Marketplace for Unsecured Credit, ( News Wire Canada), Rated: A

Asset Direct of Canada Inc., is proud to announce the launch of their services to consumers inCanada.  Asset Direct is Canada’s premier loan search engine for unsecured credit.  Simple and easy to use, their free platform gives consumers the power to search multiple lenders in order to find a loan and payment plan that best suits their needs.

Asset Direct works with many lenders across Canada including: Canada Drives, Consolidated Credit, Easy Financial, Grow, LendingArch, Magical Credit, OnDeck, and Refresh Financial.  Together, Asset Direct and the above-mentioned companies are co-innovating the lending market.

Mexico

Mexican P2P Lender Kubo.Financiero Raises .5M During Series A Funding Round, (Crowdfund Insider), Rated: A

Last week, Mexican peer-to-peer lending platform, Kubo.Financiero announced it had secured $7.5 million during its Series A funding round, which was led by Bamboo Finance with participation from Endeavor Catalyst, Monex Grupo Financiero, KuE Capital, Tanant Capital, Javier Molinar, Alta Ventures Mexico Fund I, Capital Invent, Vander Capital, and Wayra.

Founder and CEO of Kubo.Financiero, Vicente Fenoll, stated this is a sign of confidence not only for the company but also for Mexico’s fintech industry.

Diego Serebrisky, managing director of Alta Ventures Mexico Fund I, Managing Partner of Dalus Capital and Board Member of Kubo, added:

“We decided to continue supporting kubo in this round of capitalization, because it is one of the leading companies in the Fintech industry in Mexico, offering a much higher financial product competition, generating huge profits for their customers. “

Singapore

Funding Societies raises .5M for its loan marketplace in Southeast Asia, (Tech Crunch), Rated: A

Look! Another notable funding round for a fintech startup in Southeast Asia, after Singapore-based Funding Societies raised a $7.5 million Series A round for its take on marketplace lending.

Fund Societies is active in Singapore and (as ‘Modalku’) Indonesia — Southeast Asia’s most developed economy and its largest economy, respectively — where it is rivaled by the likes of Capital Match and MoolahSense.

The company said it has paid out $8.7 million to date across 96 loans. It claims a 94 percent repayment rate which CEO Kelvin Teo touted as its most notable data point since it shows reliability over volume.

“We’re not the biggest in Singapore, but we have done the most term loans because we take the approach that over-lending to a person will come and bite you in terms of defaults,” he explained.

As for fine details: Funding Societies is primarily focused on working capital loans. In Singapore, the average loan size is SG$90,000 ($67,000) while that falls to SG$25,000 ($18,500) in Indonesia.

It charges a loan origination feed to the borrower (3-4 percent in Singapore, 5-6 percent in Indonesia) and a 1 percent monthly fee to the lender. It claims an approval rate of between 15-25 percent for loan applicants.

Teo told TechCrunch that the company is working to expand its service to Malaysia, where it has a handful of employees and an application to operate locally is pending regulator feedback.

Teo foresaw plenty of competition coming to market — that is why he and co-founder Reynold Wijaya launched the company in 100 days last year while they were in the U.S. completing their studies at Harvard University.

That sounds like a lot, and the company has already grown to some 70 employees, but the Funding Societies CEO insists that the company is matching startup-style growth with the responsibility that comes with providing financial products.

India

RBI governor Raghuram Rajan may unveil P2P norms as parting shot, (India Times), Rated: A

As Reserve Bank of India governor Raghuram Rajan prepares to deliver what would be his last monetary policy speech on Tuesday, speculations are rife that he will announce regulations for peer-to-peer (P2P) lending.

In April, RBI had come out with a consultation paper on P2P lending platforms and asked for public suggestions on the need to regulate them. Next step for the regulator is to come out with draft guidelines and ask for further suggestions before coming out with the real regulations.

People in the know said the buzz at the RBI is that Rajan wants to get all the innovative projects – including P2P platforms, regulations around the financial technology space and new payments procedures like Unified Payments Interface and Bharat Bill Payments – cleared before he demits office.

Author:

George Popescu