News Comments Today’s main news: Betterment adds financial advice packages. Funding Circle the fastest growing P2P lender in UK. TransferWise revenue almost doubles. China’s P2P lending problems hit consumer spending. Lending Club CEO says U.S., China need clearer P2P lending regulations. Today’s main analysis: Funding Circle’s IPO, and aggregate excess payment. Today’s thought-provoking articles: How China tech companies are […]
Chinese tech giants are dominating the North American VC market. This is a first, but does it signal a shift in the global balance of power? Not really. China still has a way to go. But it does signal that China has a lot to offer the rest of the world in financial services. The interesting thing is, this historic first happened at a time when China is going through a P2P lending crisis and cracking down on scams.
Where millennials carry the most debt. Of the top 6 highest in terms of median balance, 4 of the metro areas are in Texas. Yes, Dallas and Houston are among them, but not at the top of the list. Interesting.
Betterment, the largest, independent online financial advisor, today announced it will be piloting a new line up of financial advice packages, expanding its access to personalized advice from licensed financial experts. This new service furthers Betterment’s commitment to making advice more accessible and personalized.
Early this week, Funding Circle announced plans to raise £300Mn on the London Stock Exchange through an IPO, valuing the company at up to £1.65 billion. To date, Funding Circle has originated over £5 billion in loans across Europe and the United States. Funding Circle has grown revenue by a 54% CAGR to £63 Mn in the first half of 2018. Funding Circle charges 100bps for servicing and estimates it receives revenue equal to almost 5% of loan value originated.
Hu Liming from Tencent Financial Cloud talked about the importance of the AI offerings within their cloud computing platform. AI is powering their anti-fraud offerings, their lending process, their collections and customer service efforts. More than 20 of the largest banks and insurance companies in China are using Tencent Financial Cloud for their core services.
LendingTree, the nation’s leading online loan marketplace, today released its study on the places where millennials carry the most debt. The study found that student loans make up the biggest share of millennial debt, but auto loans are close behind. The study revealed that the typical urban millennial carries significant debt; the average debt balance for millennials living in the 50 biggest U.S. cities is $23,064.
Millennials in San Antonio, Pittsburgh, and Austin, Texas, shoulder the largest debt burdens of the 50 biggest metros, with median non-mortgage debts of $27,122, $26,403 and $26,164, respectively.
Three California cities — San Jose, Sacramento and Los Angeles — have the lowest median balances on the list at $18,376, $18,691 and $19,299, respectively.
In the top 10 cities, more than half of millennials have outstanding debts totaling $25,000 or more (not including mortgages), and roughly 1 in 4 millennials living in these cities owes more than $50,000.
The 10 Places Where Millennials Carry the Most Debt
For all of the excitement centered around fintech over the past half-decade, most venture-backed fintech companies struggle to acclimate to public markets. LendingClub and OnDeck have plummeted since their late 2014 IPOs after several years of darling status in the private markets. GreenSky, which went public in May of this year, has been unable to return to its IPO price. Square is the exception to the rule.
Sometimes we overlook the companies that hail from the era that precedes the current wave of fintech fascination, a vertical which has accumulated over $100 billion in global investment capital since 2010.
PeerStreet, an award-winning platform for investing in real estate backed loans, today announced the addition of a new investment option, Cash Offer Loans. Cash Offer Loans are a new investment option that provides PeerStreet investors with a shorter duration than typical bridge loans.
Finitive (www.finitive.com), a financial technology platform providing institutional investors with direct access to alternative lending investments, announced today the closing of a $50 million senior secured warehouse credit facility for Bungalow (bungalow.com). This transaction was the first of its kind in the co-living sector.
Lending clubs have revolutionized how small businesses get money and act as a third party between individuals who want to lend money and people who need it. You can think of it as a peer-to-peer lending system that’s normally backed up and insured. You could get around 7% with one of these investments.
FUNDING Circle has unveiled more details of its plan to raise £300m through a listing on the London Stock Exchange’s main market in October.
The peer-to-peer lending platform said retail investors will be able to apply for shares via intermediaries such as Hargreaves Lansdown, AJ Bell Youinvest and The Share Centre, with a minimum application size of £1,000.
Funding Circle will test investor demand for British peer-to-peer lenders in a listing scheduled for October and expected to value it at more than 1.5 billion pounds (US$1.94 billion).
Capitalising on high-street banks’ retreat from lending to that sector since the financial crisis, it has facilitated more than 5 billion pounds in loans to more than 50,000 companies across Britain, the United States, Germany and the Netherlands.
Crypto lending or digital asset backed loanis comparatively a new concept used in earning profits without much effort. It revolves around the concept of shorting. Perhaps, you do not understand how shorting works, do not worry because all you need to know is that you are lending fund to others who are making short trades. In exchange for the funds, you get an interest rate that goes from 5% to 50% each year.
ACORN OakNorth, a UK-based alt lender focused on small- and medium-sized businesses (SMBs) and property financing, has secured a £78 million ($100 million) funding round from the EDBI of Singapore, NIBC Bank, Clermont Group, and Coltrane Asset Management. OakNorth’s loans have helped create 8,500 homes in the UK and 8,000 jobs.
The UK payday loan industry grew rapidly from 2008-2012, coinciding with the global financial crash and the pauperisation of millions of people in the UK. The numbers of loans issued in this period were 10.2 million per year, with a value of £2.8 billion.
Wonga’s posted pre-tax profit losses in 2016 of nearly £65 million, after recording huge profits just a few years before.
In its 2014 review of the payday loans industry, the FCA found that the average income of a payday lender was £16,500 a year, far below the UK’s median wage of £26,500 at that time.
The CMA found most recipients (52 percent) of payday loans have experienced financial problems in the recent past, with 38 percent of all customers having a bad core/credit rating and 10 percent of customers having had a bailiff or debt collector visit to their home. Over half (53 percent) use payday loans to pay for living expenses, food, utility bills—with 7 percent having to use these loans to pay for general shopping such as clothes and household items.
The Chinese government legalized peer-to-peer lending platforms in 2015. P2P sites attract money from individual investors – mostly savers – by offering them extraordinarily high yields. They lend this money at high interest rates to borrowers who have trouble getting loans elsewhere – classic subprime. By the end of 2017, there were over 8,000 P2P platforms, according to the People’s Bank of China, with over 50 million registered users. By the end of June, in a little over two years, the industry had gone from zero to $190 billion in outstanding loans.
In May, new vehicle sales still surged 7.9% from a year ago. Through the first five months of the year, sales were up 5.1%. But in June, the year-over-year sales increase eased to 2.3%. And in July, sales actually fell 5.3% year-over-year.
That 5.3% decline in July was a big, sudden, and unexpected swing from the 7.9% surge in May.
Around 4 a.m. on Sept. 7, construction workers in Jinhua, a city in eastern China’s Zhejiang Province, found the body of a woman hanging from a tree in a park. She was Wang Qian, a 31-year-old single mother who had lost her savings in China’s recent peer-to-peer (P2P) lending crash.
Wang worked as an individual seller on Taobao, a Chinese shopping site similar to eBay. She lost about 260,000 yuan ($37,990). She had invested her money in P2P platform PPMiao, which collapsed on Aug. 6. She lost about 260,000 yuan ($38,000).
Launched in 2013, N26 is a German neo-bank and one of the fastest growing banks in Europe. It serves more than 1 million customers, both businesses and individuals, across 17 European markets, and intends to enter the UK market in 2018 and the US market in 2019.
Smava is a loan portal that aims to make personal loans transparent, fair and affordable for consumers. Based on digital processes, Smava provides a market overview of 70 loan offers from 25 banks. As of January 2018, Smava had originated over US$3 billion in loans through its platform since inception.
Raisin is a fintech startup providing savings and investments marketplaces across Europe. The company operates several localized platforms for the German, French, Spanish, and Austrian markets, and more. These allow savers to shop and compare rates European-wide. In February, it launched a dedicated UK site, enabling savers to access deposit accounts in GBP, and another platform dedicated to the Dutch market in August.
SolarisBank is a platform with a full banking license which enables companies to offer their own financial products. Through APIs, partners gain access to SolarisBank’s modular services including payments and e-money, lending, digital banking as well as services provided by integrated third party providers.
Launched in 2014, CrossLend is a B2B marketplace lending platform that specializes in flexible refinancing via a capital market structure. CrossLend also offers cross-border credit intermediation through cooperation with a partner bank. The company aims to facilitate the borrowing, investing, and trading of money across the globe.
Founded in 2016, Billie offers a fully automated invoice financing platform that aims to “revolutionize small business financing.” Based on big data analytics, fully digitalized processes and a highly scalable state of the art tech platform, the company offers a simple and fast way for small businesses to access capital.
The idea became popular when it was first proposed around a decade ago. The then fast-growing sector fostered a series of unicorns. US P2P pioneer Lending Club was valued at $5.4 billion in its 2014 IPO and its peer Prosper was valued by private investors as worth $1.9 billion in its prime. Although a few years later than its foreign counterparts, Chinese P2P platforms have grown rapidly with leaders in the sector such as Hexindai who has gone public, and the likes of Lufax and Dianrong poised for an IPO.
Merely three years ago, peer to peer (P2P) lending in China was hailed as the banks of tomorrow and the harbinger of financial innovation. Powered by technology and ever burgeoning rounds of funding and valuation, P2P lending was set to disrupt financing the world’s 2nd largest economy dominated by state owned (or sponsored) banks. The new elites in jeans and T-shirts would show the suited up old guard how finance is supposed to work. Here came the new finance, Silicon Valley style – with Chinese characteristics.
Fair was its blossom; and wretched is its downfall. By June 2018, the Chinese financial information provider 01Cajing reported only 1504 functioning P2P platforms, down from over 3000 in the heydays. The change in fortune is as swift as it is bizarre. Is this an omen of darker times to come for South East Asian marketplace lending? Before this question can be addressed, it is necessary to disentangle how the crisis precipitated in China, and the confluences of forces behind the calamity.
On Monday, the Preparatory Committee of the Digital Finance Association announced a series of self-imposed regulations that it plans to apply to all member companies when the association kicks off later this year.
Lendit, 8percent and Popfunding, the three P2P firms in the preparatory committee, left the older Korea P2P Finance Association in May along with other firms due to disagreements over its management direction.
News Comments Today’s main news: Opendoor secures $325M in financing. RateSetter IFISA tops 100M GBP. China Rapid Finance’s earnings call slides. Alior Bank, solarisBank, Raisin, Mastercard partner on European digital bank. Harmoney to lend through its own platform. Amazon launches lending platform in India. Today’s main analysis: Rising interest rates and inflation. Today’s thought-provoking articles: Is P2P lending dying? The economic […]
Opendoor has already taken out $1.5 billion in loans for home buying. And the company now says it has accepted another $325 million in new financing that values it at more than $2 billion, according to a person familiar with the matter.
Opendoor will expand to 50 cities with the $325 million round. But SoftBank, with its huge $100 billion checkbook, could help Opendoor expand to even more as soon as later this year. The Japanese investor typically invests hundreds of millions of dollars into private companies, and that sort of check would be expected here, though some of the money tends to buy out existing investors.
The Fed raised interest rates for the 2nd time in 2018 and the target Federal Funds Rate now stands at 1.75% – 2%. The committee indicated that it would raise rates twice more in 2018, a departure from the previous stance of 3 rate hikes in 2018.
The Fed summarizes member views using the “dot-plot”. The dot plot consolidates every committee member’s estimates of rates at the end of 2018, 2019, 2020 and the for long-term. The green line shows the median estimate indicating that most Fed members expect rates to be between 2.25% – 2.5% at the end of 2018, and between 3% – 3.25% at the end of 2019.
Braviant Holdings, a provider of tech-enabled credit solutions for underserved Americans, has entered into a $50 million senior secured credit facility with institutional investment firm Keystone National Group.
The Keystone debt facility allows Braviant to expand its newly launched near prime lending platform, Chorus Credit. Chorus is Braviant’s latest offering in support of the company’s mission to promote financial inclusion for 51 million adults considered underbanked by the FDIC. While the FDIC estimates that these adults make up 19.9% of U.S. households, data from the Fair Isaac Corporation, better known as FICO, suggests that 43% of U.S. consumers have below 700 credit scores. In the traditional banking sector, a lower than average FICO score severely limits access to credit for almost half of the nation’s population. Chorus aims to close the credit gap for middle America by offering $2,500 to $10,000 personal loans that are repaid in small, affordable installments.
Seriously. I’m asking. Is p2plending dying? Returns have sucked the last couple of years for all investors, but especially us retail investors since the 2015 and 2016 vintages have performed so poorly. My own returns are 400-500 basis points lower than my returns on my 2013 and 2014 vintage loans were and I know some colleagues and friends who have lost money on these investments.
On Wednesday, The Federal Reserve decided it was going to increase the federal funds rate by 25 basis points, from 1.75% to 2%. This is the second rate increase already this year. In March, new chairman Jerome Powell and the Fed increased the federal funds rate from 1.5% to 1.75%. The Fed also indicated that they’d be targeting two more increases this year alone.
As I said before, when the Fed increases rates, it usually means something is going well for the economy. And all signs are pointing to that being the case. Unemployment is currently at 3.8%. In the last 50 years, unemployment has only been this low two times. That’s significant, and it means that more people are finding jobs. It may also signify a strengthening job market for you. The Fed projects unemployment will drop to 3.6 percent by the end of the year, too.
Zelle is a year-old service that lets you instantly transfer money to someone else, much like Venmo or Square Cash.
But Zelle differs from either service in a major way: because it was built by seven of the largest US banks, it’s often able to integrate more seamlessly with your bank’s mobile app. While other services make you wait a few days for the money you received from friends to show up in your bank account, Zelle can transfer the money almost instantly.
For those reasons, analysts at eMarketer expect Zelle to “leapfrog” other payments services before the end of the year.
A press release issued on Wednesday (June 13) detailed the May Index’s latest findings, which found that large banks with more than $10 billion in assets are approving of nearly 30 percent of small business loan applications, a two-tenths of a percent increase from April levels. That figure is also a new high for post-recession big bank lending to small businesses.
Digital-only banks cater to younger customers who don’t want to talk to bankers at brick-and-mortar branches — or bother visiting a branch at all. Or so they think.
Recent customer surveys indicate otherwise, according to research findings released this month from Celent, commissioned by Samsung. It revealed that customers want some kind of human interaction for complex issues. The study found that about half of U.S. banking customers aged 18 to 44 said they banked digitally, but prefer to resolve some matters in-person. Overall, most customers surveyed preferred dealing with humans on matters like setting up financial goals or getting investment advice. To respond to fraud, a lost or stolen card, or identity theft, a majority of those surveyed across age categories preferred to phone the contact center or address it in a physical branch.
If your student loan debt is larger than your salary, investing in real estate might sound like a joke. But it’s doable, said Dave Conroy of the startup Meridio, a website in beta testing that lets users invest amounts of money that you might have in your wallet right now–even $20–into specific properties. Using blockchain technology keeps each transaction cost low, said Conroy, whose company is an offshoot of Bushwick-based ConsenSys, which is building myriad applications based on the Ethereum platform.
For investors, the service would reduce transactions costs and make a real-estate portfolio more liquid. For owners, it would unlock more capital and streamline transactions. While Meridio won’t provide market intelligence about properties to invest in, prospective investors can call on their own experience, says Conroy, who previously worked for the National Association of Realtors.
Banks and digital wealth startups are headed toward the same goal from different starting points.
Each side is increasingly seeking to package automated investment advice with checking because customers are expressing an interest in getting both services from one provider.
Fifth Third Bancorp’s securities unit teamed up with Fidelity recently to offer automated advice, while the microinvesting app Acorns rolled out a debit card called Spend and opened up 50,000 checking accounts in two days.
Wells Fargo will simplify the prices it charges small businesses to accept credit and debit card transactions as the bank responds to pressure from startups such as Jack Dorsey’s Square Inc.
The changes, which are tailored for small businesses that process $100,000 a year or less, eliminate many of the complicated pricing policies that varied from client to client, according to Danny Peltz, who leads treasury management and merchant services at the company. Business customers will also be able to apply online for payment processing capabilities with Wells Fargo, Peltz said.
American Banker’s Penny Crosman sat with Cathy Bessant, Chief Operations and Technology Officer, Bank of America to discuss the bank’s use of AI. She described how the bank has inventors all over the world in their distributed innovation model.
RealtyMogul, a pioneer in providing private real estate to discerning investors, announced that it has sold an investment property in partnership with Comunidad Realty Partners at greater than 1.5 times its purchase price.
The property, Lodge at Main, a 208-unit multifamily apartment complex in the Dallas/Fort Worth, Texas area was acquired in 2015.
A bill pending in California aims to tame the disorderly, confusing and largely unregulated world of online small-business lending by mandating that borrowers receive standard price disclosures.
The bill, which passed the Senate without a vote to spare and has failed to garner much support from either the online lending industry or its critics, still faces a tough fight in the state Assembly. But if the measure does get enacted in California, it could serve as a blueprint for other states.
The legislation tackles the question of whether commercial lenders should be required to disclose the price of financing in a way that enables borrowers to compare multiple offers. Just as nettlesome is the question of how any such comparison metric should be calculated.
The bill would apply to small businesses that borrow $500,000 or less.
UK based peer-to-peer lender RateSetter is reporting that subscriptions to its IFISA have surpassed £100 million. This milestone took four months to reach and, according to RateSetter, faster than any other P2P lender. To date, RateSetter has originated over £2.5 billion in online loans to both businesses and individuals. RateSetter states that more than 10,000 IFISA accounts have now been opened. The average annual return received by investors stands at 4.4% with more than £100 million in interest having been paid.
In the UK, where Funding Circle has been established the longest, the platform is now competing directly with banks in the small business lending market – with net lending through the platform exceeding that of the entire UK banking system for two successive quarters at the end of 2017. A survey of Funding Circle’s customers undertaken for the study suggests 89 percent of the platform’s UK small business customers would approach
Funding Circle first again in future, rather than going to a bank.
ALTHOUGH we still tend to think of peer-to-peer lending as a young sector, it is now 13 years since Zopa became the first lender in the market. It was joined five years later by Funding Circle and RateSetter and since then the big three have dominated the P2P market.
Here are some of the key moments in their journeys.
Out of Europe’s 34 unicorns, the UK has produced 13. These have a combined value of $23bn, equal to 38% of the European total. This puts the UK ahead of Germany and France, which have six and three scaleups valued over $1bn respectively. Given the nation has already spawned success stories like Deliveroo and Funding Circle, it’s hardly surprising that VC investment is also booming in the UK. Last year British startups raised $7.9bn compared to Germany’s $3.2bn and France‘s $2.8bn.
Brexit has made UK SMEs worry about talent
Having polled companies in 11 countries, researchers revealed that UK entrepreneurs were much less confident about the conscious uncoupling than those in the EU. Overall, 57% of respondents felt that their biggest challenge was that they had too little time and that they were doing everything themselves. This was double the 24% who thought hiring the right people were their biggest worry.
Over the past year, P2P Global Investments (P2PGI), VPC Specialty Lending Investments and Ranger Direct Lending (RDL) have moved away from pure P2P to boost returns and narrow their discounts, while the Funding Circle SME Income Fund (FCIF) has remained true to its roots, all with varying outcomes.
The FCIF investment trust solely backs loans originated via the Funding Circle platform and saw its net asset value (NAV) return 6.9 per cent last year, while trading on a healthy premium.
In comparison, RDL – which has recently announced its intention to close – returned 5.4 per cent, VPC – which has shifted from P2P towards balance sheet lenders – saw its NAV total return grow by 3.07 per cent, while P2PGI – which last year merged its manager MW Eaglewood with Pollen Street Capital and is focusing more on asset-backed alternative lenders – reported a NAV return of 3.03 per cent during 2017. RDL and P2PGI are both trading at double-digit discounts to NAV.
Redwood is targeting the SME market. Products include mortgages for business owners and professional landlords, as well as a range of savings accounts. Redwood seeks to offer British businesses fast, simple, transparent loans and savings accounts, coupled with superlative service. They also promise that money is being invested back into British business and into the communities they are a part of. Warrington Borough Council has a 33% stake in the firm that was pegged at £30 million.
Regulations introduced after the financial crisis a decade ago to smooth out banking booms and busts should be extended to funds that provide credit, or shadow banks, and fintech firms, the Bank for International Settlements (BIS) said on Sunday.
The introduction of “macroprudential” policy requiring banks to build up separate “countercyclical” buffers of capital if credit markets become frothy was a core crisis-era innovation.
The buffers can be released if loans begin turning sour and maintain resilience of the financial system to shocks – a departure from the traditional “microprudential” focus on the stability of individual banks.
Lufax is wisely trying to grow up in private. The Chinese financial technology giant, which focuses on peer-to-peer lending and wealth management, plans to raise more than $1 billion at a $40 billion valuation ahead of a delayed Hong Kong flotation, says Reuters. That makes sense. Listing now could upset Beijing, and might only be achievable at a discounted price. Abundant venture capital allows the Ping An-backed startup to keep growing without a distracting market debut.
That creates a headache for Lufax, which has been eyeing a listing for years. There’s nothing stopping the Shanghai startup from going public now, but launching a big, showy initial public offering before regulators have finished the job would probably annoy Beijing.
Fintech startup N26 is updating its N26 Metal product and launching it tomorrow. You might remember that the company first announced its premium card at TechCrunch Disrupt Berlin in December 2017. Shortly after the conference, the card was available in early access for existing N26 Black customers.
But the company had to go back to the drawing board and update the card design. N26 Metal customers had some complaints about the design of the card in particular.
For instance, U.S.-based Lending Club, which has been around since 2007 and which is public, has arranged US$35 billion in consumer loans for its two million borrowers. The average loan — and it originates about US$2.4 billion a quarter — is about US$14,000.
Those themes were on full display this week in Toronto at an event organized by the KiWi Private Credit Fund, which raises capital from investors and purchases unsecured consumer loans and secured small business loans originated by established U.S.-based lending marketplaces.
“But they are not good at pricing a 9 per cent or 12 per cent risk,” he added, all of which allows entities such as his, to meet that need. It has US$27 million in assets; an average loan of almost US$14,000 and targets a return in the six- to eight-per-cent range.
An Australian regulator filed a lawsuit against No. 2 lender Westpac Banking Corp (WBC.AX) over a financial planner it alleges gave poor advice for years, upping its scrutiny of a sector already under fire amid an embarrassing public inquiry.
Australia’s A$5 billion ($3.7 billion) financial planning sector has provided some of the most damning evidence at an inquiry into finance sector misconduct, ordered by the government after a string of banking scandals including fraud.
Peer to peer lender Lending Crowd has cut its borrower interest rates for all new business and personal loan applications including vehicle purchases and debt consolidations.
A1 grade personal borrowers will have a market leading rate of 6.89% pa and SME businesses will have rates available from 7.98%. Interest rates across all loan grades will range from a low of 6.89%
to a high of 18.96% (previously 7.90% to 19.75%).
Survey shows 60% of parents are giving kids $10,594 to buy their first car.
According to research conducted by RateSetter, parents are stumping up $10k to get their child their first set of wheels.
RateSetter found that among parents who bought their child a car, 15% chose a new model, 71% opted for a used one and 14% donated their own vehicle. The majority of families could afford a car under $10,000, while 26% spent between $10,000 and $20,000. A lucky 12% of kids were gifted over $20,000 towards their ride. Parents in Victoria spend the most on their child, up to $13,386. In NSW, the average outlay was $10,404.
RBI had created a special category called NBFC-P2P, in view of the proliferation of P2P entities. While mandating Rs 20 million as minimum net worth, RBI had also imposed a Rs 1-mn cap for individual lending on such platforms.
So far, a couple of these entities have got an NBFC licence from RBI. Faircent says it got the licence about 20 days earlier.
Amazon India has launched a platform for lenders and sellers wherein sellers can choose from competitive rates and loan offers. It will also open its APIs to lenders to plug in and lend to the sellers as part of the new programme, called the seller lending network.
India will be the first geography for Amazon where it has launched such a seller platform.
Fintechs offer loans to individuals with low credit scores as well. For instance, in the case of Qbera, individuals with a minimum credit score of 600 can qualify for personal finance. This is not quite so in the case of private banks – individuals need to have a minimum credit score of 750 to be eligible.
India is still struggling with a huge credit gap that is holding back the economy. Getting a bank loan is an extremely cumbersome and long-drawn process for salaried individuals and small businesses, alike. According to a study conducted jointly by ASSOCHAM and EY, around 19% of India’s population remains unserved by the traditional banking sector.
Several million MSMEs that lack a tangible financial record are thus not eligible for credit from legacy financial institutions who still use traditional credit and financial data to evaluate eligibility. For the Indian economy to achieve the next level of growth, the current gap of nearly $200 billion in credit supply to MSMEs and significant under-banked population of India needs to be addressed immediately.
In Korea, P2P firms, which directly connect borrowers with investors through online platforms, are not under the direct supervision or management of financial authorities. The Financial Services Commission (FSC) only indirectly supervises them by requiring registration of P2P firms’ lending subsidiaries, which most P2P firms use to carry out the process of lending money to borrowers.
But this safeguard also has many loopholes. TheHighOneFunding, for example, had uploaded the name of a different person as CEO when it registered its lending subsidiary with government regulators.
With more investors attracted to the idea of making easy money through high interest rates on P2P lending, the cumulative amount of loans on such platforms has dramatically increased, from 37.3 billion won in late 2015 to 3.50 trillion won as of May.
According to the Khalifa Fund for Enterprise Development, nearly 50 to 70 per cent of loan applications made by SMEs in the UAE are declined by traditional banks, while loans to SMEs account for around four to five per cent of the outstanding bank credit in the UAE.
Enter peer-to-peer lending.
Over the years, such platforms have become big business: In 2016, the size of the peer-to-peer lending market in the US, UK, the European Union, Australia and New Zealand was estimated to be more than $72 billion, according to AltFi. In China, loan originations in 2015 were estimated at $101 billion.
News Comments Today’s main news: Tala raises $65M for international expansion. The House Crowd hits 1M GBP in one day. Silicon Valley investment into UK hits $1B. 100Credit gets $159M from state-owned fund in China. Mintos adds ID Finance loans issued in Kazakhstan. Today’s main analysis: The 5 best personal loans for good credit. Today’s thought-provoking articles: LendIt Fintech […]
LendIt Fintech 2018 wrap-up. AT: “If you didn’t get to attend the conference, this is a good overview of the most important keynotes and talks by industry leaders.”
5 best personal loans for good credit. AT: “The first of several good reads from Student Loan Hero today. Geared toward consumers, there are some worthwhile competitive intelligence takeaways, as well.”
Last week the sixth annual LendIt USA conference took place in San Francisco. Officially known as LendIt Fintech USA 2018 this event was, in my opinion, the best we have ever produced.
The opening keynote, for the second year in a row, was delivered by Scott Sanborn, the CEO of LendingClub. He gave a different kind of presentation this year. He didn’t talk much about LendingClub at all, instead choosing to focus his keynote on financial health and the looming crisis that maybe coming. He gave us all something to consider beyond just disruption, he said we should think about three key areas: financial inclusion, regulatory innovation and customer alignment. He ended with a call to action for the industry. He wanted everyone to focus on what problem you are solving and what you can do to help restore financial health to all Americans.
The average credit score of Americans is 700, based on April 2017 data from Fair Isaac Corp., an analytics company that issues the FICO credit score.
If your score meets or beats that average, it’s enough to put you in the good credit score range, which goes from 670 to 739. As a result, you should have a good chance of getting approved for some of the best personal loans for good credit.
As you compare, you’ll find LendingClub, Citizens Bank, and FreedomPlus— all online lenders that accept cosigners. They all accept FICO scores under 700, with LendingClub accepting FICO scores as low as 600.
Here’s a list of some online lenders that accept cosigners for personal loans:
Wunder Capital, a firm that develops and manages solar investment funds through partnerships, test processes, underwriting framework and its investment portal, announced on Wednesday it secured $112 million in equity and debt financing to accelerate the growth of the company.
Blankfein commented on the other obvious strategic advantage. Their cost of capital is super low. Unlike many of the early entrants into the online lending sector, Marcus has access to deposits via their acquisition of GE Capital Bank several years back – something no other US based online lender can claim. Even with their industry leading interest rate for current accounts (now 1.6% when most banks pay a fraction of that), Marcus can crush the competition in loan originations.
Marcus has originated more than $3bn of loans since inception, recently it has become know that more than 10 percent of the loans were sub prime; they have said this is a natural evolution of the loan business and they are being very selective in approving of applications.
As an online loan servicer, GreenSky works with borrowers and merchants to provide low-cost personal loans for home improvement, specialty retail, and healthcare expenses. It’s funded more than $10 billion in loans to over 1.3 million customers, according to the lender.
Individual borrowers can apply for home improvement loans, which can be used for flooring, windows, landscaping, or other projects. Home improvement loans come with fixed APRs between 3.99% and 23.99%, as of April 18, 2018. You can choose terms of 42, 66, or 90 months. For the most up-to-date rates, check GreenSky’s website.
Right now, real estate crowdfunding companies are becoming very popular because they allow you to pool your resources in order to buy property or to finance real estate companies who are looking to build properties.
About 48 million records of detailed personal information on tens of millions of individuals have been leaked, containing Cambridge Analytica–style information gathered and scraped from multiple sources.
The culprit, as is the case all too often, is a misconfigured cloud storage repository, in this case belonging to a company called LocalBlox. LocalBlox bills itself as a personal and business data search service, but it’s bread and butter is data-harvesting and the creation of psychometric profiles of individuals.
Point, a fintech platform that allows homeowners to unlock home equity wealth without taking on new debt, has agreed to a forward flow purchase program with investment firm Atalaya Capital Management to purchase up to $150 million of Point’s structured home equity investment instruments.
Financing military veteran-owned small businesses lender StreetShares announced on Wednesday it has appointed Mohan A. Rao as Chief Product and Technology Officer. According to the online lender, Rao is the former Chief Technology Officer of Hobsons, Inc., and brings more than 25 years of experience with building software products, R&D, and management consulting to the StreetShares team.
Millennium Trust Company, LLC, was honored at LendIt Fintech USA 2018 as the “Professional Services Company of the Year,” which is awarded to the service provider that has demonstrated deep expertise, unique value, strong ROI, commitment to clients, and the fostering of a deeper understanding of fintech. Organizations such as Cloud Lending Solutions, Deloitte, First Associates, Manatt and Salesforce also received nominations for the award.
Capsilon, an enterprise SaaS digital mortgage solution partner to the mortgage industry, today announced the expansion of its digital mortgage platform through the addition of big data capabilities and a new set of smart tools designed to radically improve back office workflows and accelerate loan production. With this new data audit functionality, Capsilon can reduce manual data entry and speed up data auditing across the loan process, enabling companies to automate up to 80% of manual processing functions.
Property crowdfunding platform The House Crowd have raised just over £1.3 million over a 24-hour period to support housing developments in Greater Manchester. This is the first time the business has broken the £1 million mark in a day.
Most of the money – £1.2 million – was for its Egyptian Mill Development of 42 house and 15 apartments in Lees, just outside of Manchester. Attracted by a typical return of 10 per cent each year over a 15 month investment term, investors have clambered to raise funds and support new build houses and flats as the UK housing crisis continues.
The new report found that software companies take the lion’s share of this investment, benefiting from £2.2 billion in funds since 2011. The number of deals from Silicon Valley into UK firms has increased by 252% over that period.
LENDING at the UK’s largest peer-to-peer finance platforms is fast approaching £9bn.
Data from the industry’s trade body the Peer-to-Peer Finance Association (P2PFA), released on Thursday, showed its eight members – Crowdstacker, Folk2Folk, Funding Circle, Landbay, LendingWorks, MarketInvoice, ThinCats and Zopa – reached cumulative lending of £8.96bn at the end of the first quarter of 2017.
The figure is up 11.5 per cent on the fourth quarter and 57 per cent higher year on year.
Research shows that most SMEs turn to traditional sources of funding – such as overdrafts, credit cards and bank loans – when they need a cash injection. What’s more, many are unaware of – or are unclear about – the recent expansion in alternative forms of business financing such as crowdfunding or P2P lending. That’s a shame, because many of these new funding options are very well suited to the needs of SMEs and start-ups.
Mechanics Cooperative Bank has selected the Fusion Phoenix core banking system from Finastra, as well as a full suite of ancillary offerings, to provide its new technology foundation. The solution will bring together a wide-range of proven, specialized software into a single environment that is more easily managed in the back-office, providing greater workflow and interface efficiencies for the bank’s staff, and ultimately customers.
As the exclusive “Global Leader” partner of LendIt Fintech USA 2018, Yirendai was awarded “Top Consumer Lending Platform” and was the only Chinese enterprise to receive a LendIt Fintech industry award, which demonstrates high recognition of its outstanding contributions to the innovation of the financial services industry. In addition, Ms. Yihan Fang, CEO of Yirendai was nominated for “Executive of the Year” and CEFIF was nominated for “Top Fintech Equity Investor”. Both nominations are strong recognition of the great achievements CreditEase has made in both wealth management and Fintech investment fields.
China Reform Fund Management Co.,Ltd, a private equity firm backed by China Reform Holdings Corporation Ltd and other central state-owned enterprises, has led a RMB1 billion (US$159 million) series C round in 100Credit, a fintech start-up that uses big data to provide credit services.
Existing investor Sequoia Capital China also participated in the round, according to 100Credit’s announcement on its official WeChat account.
Alipay pilots digitized national ID cards (China). The digital payments app run by Alibaba affiliate Ant Financial is testing out integration of the Chinese government’s pilot digital ID card scheme, which could one day replace physical ID cards.
Orange Bank has already onboarded more than 100,000 customers since launch, only Revolut and Boursorama, Société Générale’s digital banking arm have made more progress in the same timeframe; this continues the wider trend across Europe as digital banking becomes a bigger part of the financial services ecosystem.
Last year, after raising €14 million in funding from a consortium of traditional and online banks, Tink pivoted to licensing its technology to banks so they can build their own apps and fintech services.
The startup is now doubling down on its B2B business by launching a third-party developer platform. This means that the same technology that Tink has provided to banks like Nordea and SEB, will now be open to any company that wants to gain access to a given consumer’s account data (with the consumer’s permission).
There are some concerns that the rise of crowdfunding will cause major disruption across industries. According to the world bank, 2016 saw more money raised from crowdfunding than from venture capital.
In Finland, for example, there is no requirement for crowdfunders to have an MiFID licence, which means that companies who have obtained a licence are more strictly regulated than their unlicensed competitors. Other nations have been quicker to adapt – in France and the UK existing legislation has been brought smoothly up to date to be compatible with crowdfunding.
The difference between ‘data’ and ‘sensitive data’ – that is, between Article 6, which we considered in more detail here, and Article 9 – is that the individual must give explicit consent to the processing of each type of special category of data.
If, for example, a firm will be asking someone whether they are a smoker and will also be recording they are a member of a specific trade union, then the firm would to need capture explicit consent from the individual that they are happy for the firm to collect and process this data about their health and their trade union membership.
For financial advisers, this consent will need to be gathered early in the customer engagement process, with it being made clear the data will be processed and what it will be processed for.
Mintos, an online marketplace that provides individuals with a simplified way to invest in loans originated by a variety of alternative lending companies, announced on Wednesday that fintech firm ID Finance has further diversified investment opportunities on the Mintos marketplace by launching personal loans listed in Euro (EUR) and Kazakhstani tenge (KZT) under its Solva brand in Kazakhstan.
According to the companies, Solva uses a scoring system built around machine learning, advanced risk assessment techniques, multiple search technologies, big data and text mining. The system also evaluates the device on which the loan application is being filled out and the user’s behaviour when filling out the application.
California-based fintech company Tala said that it is bringing its lending app to India. This expansion was announced along with a new $50 million Series C funding led by Revolution Growth its operations in the country which is already in progress. In addition to Revolution Growth, Tala’s Series C round includes existing investors IVP, Data Collective, Lowercase Capital, Ribbit Capital, and Female Founders Fund. Steve Murray, managing partner at Revolution Growth, will join Tala’s board of directors.
The Singapore Fintech Association (SFA) today announces the launch of the Marketplace Lending committee and website, in response to the rapid growth in the sector.
In 2016, Southeast Asia’s alternative finance market reached a record US$215.94 million, a growth of 362% compared with 2015. Data for 2016 showed that Singapore’s alternative finance market size was valued at US$163.75 million, more than double the entire value from 2013-2015. This upward trend is reflected internationally. The global lending market valued at US$3.5 billion in 2013, expecting to reach US$1 trillion by 2050, according to Statista, a market research company.
Rishi Stocker, head of partnerships at Revolut, is currently focused on coordinating the banking challenger’s entry into Japan. Speaking to AltFi, Stocker said that the Japanese market, unlike others in Asia, is a tough nut to crack.
He said that regulators are “very keen on local presence and very concerned about international companies entering and then suddenly changing their strategy and leaving”.
To allow Revolut to set up shop in Japan, regulators have insisted that the fintech firm appoint an experienced local Japanese expert as a director of the entity. “That’s quite an interesting nuance of Japan whereas a lot of other markets are a lot more open – so long as there’s a strong compliance team based in our head office in London,” explained Stocker.
News Comments Today’s main news: IEG Holdings wants to turn Lending Club into a balance sheet lender. Groundfloor launches nationwide. Crowd2Fund launches 30M GBP fundraise. China may get a second consumer credit bureau. Klarna expands e-commerce footprint. Today’s main analysis: LendingTree releases mortgage offer report for December. Today’s thought-provoking articles: Are corporations posting fake comments on government regulatory websites? History […]
Groundfloor expands nationwide under Reg A. AT: “To my knowledge, this is the biggest and the best opportunity for non-accredited investors in marketplace lending. Larger platforms that have been around much longer, such as Fundrise, Prosper, and Lending Club, have opportunities for non-accredited investors, but Groundfloor was started specifically to give non-accredited investors opportunities to invest in real estate, and their offerings are something the average non-accredited investor can understand. Not to mention, their minimum investment is only $10. In a world where the average person can’t afford a $400 emergency fund, that’s a huge door of opportunity. The big question is, is their business model sustainable?”
On January 5, 2017, IEG Holdings (OTC:IEGH) launched a tender offer for up to 4.99% of LendingClub (NYSE:LC).
– Management believes it can convert LendingClub from a broker of loans into a balance sheet lender
Non-accredited and accredited investors in all 50 states can now participate in real estate crowdfunding investment opportunities with Groundfloor. Groundfloor, the first issuer qualified by the U.S. Securities & Exchange Commission to offer real estate debt investments via Regulation A that are available to non-accredited investors, today announced that it has received qualification as an issuer under Tier 2 of Regulation A. The qualification allows over 150 million additional investors to access real estate investment opportunities that have been previously unavailable to them, tripling Groundfloor’s addressable market.
In 2017, Groundfloor saw tremendous growth of over 380% in origination volume and 786% in revenue, prior to announcing a partnership with its first institutional investor, Direct Access Capital (DAC).2 Groundfloor lends in 27 states, and has self-originated over $50 million in loans for 398 real estate projects earning individual investor portfolios average annualized returns of 11.74 percent to date. Groundfloor has also raised $9.1M in venture capital from leading fintech VCs and angel investors.
LendingTree®, the online loan marketplace, today released its monthly Mortgage Offers Report which analyzes data from actual loan terms offered to borrowers on LendingTree.com by lenders on LendingTree’s network. The purpose of the report is to empower consumers by providing additional information on how their credit profile affects their loan prospects.
December’s best offers for borrowers with the best profiles had an average APR of 3.80% for conforming 30-year fixed purchase loans, up from 3.75% in November. Refinance loan offers were up 1 bps to 3.70%.
For the average borrower, purchase APRs for conforming 30-yr fixed loans offered on LendingTree’s platform were up 12 bps to 4.42%, the highest since July 2016. The loan note rate hit the highest since March 2016 at 4.32% and was up 14 bps from November.
Consumers with the highest credit scores (760+) saw offered APRs of 4.26% in December, vs 4.56% for consumers with scores of 680-719. The APR spread of 30 bps between these score ranges was 3 bps wider than in November and the widest since this data series began in April 2016. The spread represents nearly $15,000 in additional costs for borrowers with lower credit scores over 30-years for the average purchase loan amount of $233,586. The additional costs are due to higher interest rates, larger fees or a combination of the two.
Refinance APRs for conforming 30-yr fixed loans were up 7 bps to 4.31%. The credit score bracket spread widened to 24 from 20 bps, amounting to $12,000 in extra costs over the life of the loan for lower credit score borrowers given an average refinance loan of $241,973.
Average proposed purchase down payments have been rising for 8 months and reached $63,740.
A significant number of fake comments appear among thousands criticizing a proposed federal rule meant to prevent conflicts of interest in retirement advice, according to a Wall Street Journal analysis.
Consider the experience of Robert Schubert, a Devon, Pa., salesperson. A comment posted in his name on the Labor Department website opposed the rule, saying: “I do not need, do not want and object to any federal interference in my retirement planning.”
In an interview, Mr. Schubert said the comment was a fraud. He didn’t post it and doesn’t agree with it. “I am disgusted that people can post comments using my name,” Mr. Schubert said.
Mr. Schubert is among 50 people who responded to a survey last week conducted by research firm Mercury Analytics for The Journal—40%, or 20 of whom said they didn’t post the comment listed under their name, address, phone number and email.
A pattern of cyber deception is appearing across the federal government in the nooks and crannies of the process where White House directives or Congress’ laws are turned into the rules Americans must abide by—or in the Trump era, are repealed.
Hundreds of thousands of comments, purportedly made by Americans, have come in over the electronic transom to at least five different federal agencies calling for an end to Obama-era consumer protections and other regulations that impede profits, a series of investigative reports by the Wall Street Journal found. Except, the people who supposedly sent these comments never did.
The US economy added 148k jobs in December and the unemployment rate held steady at 4.1%. The jobs number was below economists’ estimates of 190k, but average hourly earnings rose 2.5%, a strong increase, and a metric that market participants are watching as a precursor to higher inflation.
In regulatory news, Indiana is planning legislation that would cap the interest rate on personal loans at 36%, down from the current cap of 391% on payday loans. If passed, this legislation would affect the payday lending industry and some experts have expressed concerns that this may crimp credit availability to the neediest individuals. The US government is also considering updating the credit scoring methodology used in evaluating mortgage applications, to use competitors to FICO score like VantageScore, with the hope that the new scores would expand mortgage credit access to borrowers.
Frank, a New York-based student loan startup, announced this week that it has secured $10 million through its Series AFunding Round, which was led by Apollo Global Management, with participation from Reach Capital, and Aleph. This funding round brought its total funding amount to $15.5 million.
Digital superannuation advice startup SuperEd has completed a $5 million capital raise from both external investors and staff members to ramp up its expansion, with the 2012-founded company betting on digital advice being a big deal for fund managers going forward.
Earlybird Advance is a no-fee, no-interest loan from MetaBank that allows users who file through Credit Karma to claim from $500 to $1,000 of their tax refund as soon as 24 hours after the IRS accepts their tax return. This is a step up from the three-to-four week time period it generally takes for taxpayers to receive their funds.
“Digital leaders report an 8.6 percent increase in revenue, an 11.3 percent rise in productivity, and a 6.3 percent improvement in market share. Advanced firms now generate 32 percent of their revenue through digital channels, and expect that amount to rise to 48 percent by 2022,” the study pointed out.
Digital leaders acknowledge what will be the growing importance of AI in the digital transformation of industry from the front office to the back office over the next five years. According to the study, while more than half of the digital leaders are already using AI to increase productivity, some 40 percent are extending AI applications to investment management as well.
Community Reinvestment Fund, USA (CRF) – a mission-driven non-profit lender dedicated to improving communities and transforming lives – announced today that it has partnered with U.S. Bank to deliver a new solution for connecting small business borrowers with responsible lending options from community-based lenders across the country.
There are approximately 28.8 million small businesses in the U.S., accounting for more than 63 percent of the net new jobs created between 1993 and 2013. However, the Federal Reserve Bank’s 2016 Small Business Credit Surveyfound the most common challenge facing small businesses was “credit availability or securing funds for expansion.”
Second, Comptroller Otting may be helpful to Fintech companies in addressing important issues such as the Second Circuit’s decision in Madden v. Midland Funding and the so-called “true lender” issue. For example, the OCC could adopt a rule or issue interpretative guidance: (1) providing that loans funded by a bank in its own name as creditor are fully subject to Section 85 and other provisions of the National Bank Act for their entire term; and (2) emphasizing that banks that make loans are expected to manage and supervise the lending process in accordance with OCC guidance and will be subject to regulatory consequences if and to the extent that loan programs are unsafe or unsound or fail to comply with applicable law. (The rule should apply in the same way to federal savings banks and their governing statute, the Home Owners’ Loan Act.) In other words, it is the origination of the loan by a supervised bank (and the attendant legal consequences if the loans are improperly originated), and not whether the bank retains the predominant economic interest in the loan, that should govern the regulatory treatment of the loan under federal law.
To ease your anxiety, you might consider adding a small dose of alternative investments–things that zig when the stock market zags–to your portfolio, even if it means giving up some potential returns.
Wells Fargo Investment Institute, the research and strategy arm of the giant bank, recommends a 23% allotment to various alternative investments for moderate-risk investors, for example, up from 16% two years ago. At Altfest Personal Wealth Management, in New York, 15% of client assets are invested in alternatives, up from 10% last year.
Market-neutral funds. If your goal is to invest in an asset that doesn’t move in sync with the S&P 500, consider a market-neutral fund, such as a merger-arbitrage fund.
Options-based funds allow you to maintain your stock exposure–or even put new money in the market–with some degree of safety.
Long-short stock funds. These funds bet on some stocks and against others with the goal of delivering respectable returns with low volatility. The funds have been 15% to 25% less volatile than an S&P 500-stock index fund over the past decade.
What do an undocumented immigrant in the South Bronx, a high-net-worth entrepreneur, and a twenty-something graduate student have in common? All three are victims of our dysfunctional mainstream bank and credit system. Today nearly half of all Americans live from paycheck to paycheck, and income volatility has doubled over the past thirty years. Banks, with their high monthly fees and overdraft charges, are gouging their low- and middle-income customers, while serving only the wealthiest Americans.
I recently left RealtyShares, the online marketplace for real estate investing, as CEO after founding the company in my living room back in 2013.
When Zach realized I was leaving the CEO role at RealtyShares, he reached out and asked if I wanted to get involved with MetaProp, the first real estate technology incubator based out of NYC.
This opportunity would give me a chance to pursue my passion in real estate technology through a different lens while mentoring startup founders and CEOs and helping them as they embark on the same journey I embarked on four years ago.
AlphaFlow, the first automated alternative investment platform for real estate, announced today that Chris Woida has joined the company as co-Chief Investment Officer. Woida will serve as co-CIO alongside the firm’s CEO Ray Sturm, who will act as both CEO and co-CIO.
Woida brings over 10 years of experience in the financial services industry, previously helping build BlackRock’s smart beta and factor-based platforms and serving as the lead investment strategist for its flagship style-factor hedge fund during his seven years with the company. Most recently, he served as Managing Director, Head of Index Solutions at Axioma, a provider of enterprise market risk and portfolio analytics solutions. In this role, Woida helped the index business expand into derivatives, fixed income and alternative data sources, including AI and ESG.
MPOWER Financing, a public benefit corporation focused on removing financial barriers to higher education in the U.S., has appointed Lutz Braum as its vice president of marketing and business development.
LendingTree®, the online loan marketplace, and Access Intelligence, a business information and marketing company, today announced a new initiative to showcase the top innovations in financial technology (fintech) lead generation at LeadsCon Las Vegas this March.
Startups and established businesses from around the world can apply today for a chance to receive exposure, bragging rights and $25,000 in cash.
Crowd2Fund has embarked on an ambitious series of fundraises that it hopes will see £30m raised within the next 24 months.
The peer-to-peer lender, one of the first to launch an Innovative Finance ISA, has already raised £1.5m from 113 of its own investors (all of whom are either sophisticated or high net worth individuals). More shares were made available after demand exceeded the initial target of £1m. These investors have bought shares in the company at a valuation of £33m. The capital is being raised through Crowd2Fund’s platform.
Rapid growth in Britain’s consumer credit has been driven by borrowing by people with good credit scores, not subprime lending, according to research from regulators on Monday.
Unsecured consumer lending grew at near double-digit rates in 2016 and 2017, and concern that lenders had overestimated their borrowers’ creditworthiness led the Bank of England to tell them in September to hold 10 billion pounds ($13.54 billion) of extra capital.
However, research jointly published by Britain’s Financial Conduct Authority and a BoE blog showed that two-thirds of outstanding lending as of November 2016 was held by borrowers with credit scores in the top 30 percent.
Wherever you are on your life cycle, knowing the financing options available to you is a crucial part of growing and running your business.
Equity finance can be used at various stages of your business life cycle and giving up equity can be a big decision.
Private equity focuses on more medium to long term investment and will usually involve the development of the product and a new management structure to improve the performance of the business.
Crowdfunding aims to connect businesses with a large number of potential investors via a shared online platform.
Debt finance is usually used as a means of long term investment or funding working capital.
Peer to Peer (P2P) lending
P2P lending brings individual borrowers and lenders together via an online platform by by-passing traditional banks with the aim of achieving better rates for all.
Assets can be purchased via leasing or hire purchase agreements which can assist the cash flow of the business. The asset is not fully paid for upfront but over a fixed period of time and the lease or hire purchase agreement is secured on the asset being financed.
A debt factor will take on the sales ledger of the business and chase money owed by your customers. The factor will advance most of the value of the outstanding sales invoices to the business with the balance being paid once the customers have fully repaid their debt.
Last week, on January 4, the People’s Bank of China (PBoC) accepted a license application for consumer credit bureau led by the National Internet Finance Association of China. As of now, the Credit Reference Center of the central bank is the only consumer credit bureau in China.
A boom in asset-backed securities issued by micro-lenders aiming to expand in China’s fast-growing online credit market looks set to slow this year amid growing regulatory scrutiny.
Rules announced on Dec. 1 limited the amount of lending backed by the products the companies can make. They were also required to consolidate them on their balance sheets.
Ant Financial is the largest issuer of consumer loan securities, accounting for 60 percent of all issues in 2017, according to Reuters calculations based on data from China Securitisation Analytics.
Its two Chongqing-based micro-loan companies had total net capital of 10.6 billion yuan, but issued 265.1 billion yuan in loans by the end of June, according to CIB Research, a unit of Industrial Bank Co (601166.SS). Outstanding loan securities issued by the two units have exceeded 250 billion yuan, it said.
ACI Worldwide (NASDAQ: ACIW), a global provider of real-time electronic payment and banking solutions, today announced an extended partnership with Klarna, leveraging ACI’s UP eCommerce Payments solution. This will enable online businesses in 10 major markets, including the U.S. and U.K., to easily integrate Klarna’s payment products, and offer shoppers a fast and frictionless checkout process that can improve conversion rates immediately.
The peer to peer lending platform has seen a decent spike after it featured heavily across exchange Coinspot’s Facebook page as they look too soon be listed on the exchange. That exposure has also highlighted the achievements the Estonian company has made recently, including launching its fiat based loans at the end of 2017.
Strict terms and conditions usually govern the circumstances in which prepay cards can be issued by unlicensed (non-bank) institutions due to their popularity with the unbanked or low-credit community as well as their propensity to be taken advantage of for money laundering reasons. These T&Cs tend to be jurisdiction dependent, and can in some cases restrict the types of funds that can be loaded onto cards by source (for example the source of funds might be restricted to welfare payments and/or employer compensation for services rendered).
Take as an example the following condition attached to a card brought to market by an outfit called TenX:
LOADING FUNDS TO YOUR ACCOUNT
Five.1 Your Card is a payout card tied to an account directly or indirectly established by an employer or other such corporate payor (each, a “Payor”) on behalf of a consumer to which electronic funds transfers of the consumer’s wages or other compensation are made on a recurring basis, whether the account is operated or managed by the employer, a third party payout processor, or a depository institution. Only funds from a Payor may be loaded to your Account In case of errors or questions about the funds loaded to your Account, contact your payout provider.
Globally, venture investors put $7.6 billion in cybersecurity companies last year, which was up from $3.8 billion in 2016, according to the research firm. The number of cybersecurity-related investments jumped to 548 in 2017 from 467 deals the year before.
Global spending on cybersecurity was estimated to reach $83.5 billion in 2017, and that number could hit $119.9 billion in 2021, according to an IDC report from October.
Banks will increasingly start looking at startups in the FinTech, RegTech and InsurTech space as their extended innovation arms with a view to collaborate with them.
The BharatQR code, a unique interoperable payment acceptance solution developed by the NPCI (National Payments Corporation of India), Mastercard and Visa will enable point of sale (POS) transactions to be made more seamlessly. Along with banks, payment wallets like Paytm and MobiKwik will continue to make huge investments to leverage this new standard.
Startups in this space are likely to well as adoption by banks and other financial institutions rises in AI, ML, NLP (Natural Language Processing) and NLG (Natural Language Generation).
In credit-scarce Myanmar, obstacles abound for budding entrepreneurs with bright ideas, big potential and dry pockets. With banks reluctant to lend to individuals without appropriate collateral and proven track records, many small businesses ultimately fail.
Ma Khin Yadana is among those with a success story behind her garment business, which she started from scratch around five years ago.
To get back on her feet, Ma Khin Yadana sought help from a small business group on Facebook, where she met with other garment shop owners across Myanmar who were willing to invest in start-up businesses like hers by extending credit via a peer-to-peer (P2P) lending system. In return, the funds would be paid back with interest within 15 days.
However, the constant pressure of having to repay loans has begun to take a toll on the young entrepreneur. “Most of the loans from investors are on six-month terms. So far, I have 70 investors to whom I must repay K100 million in total.
When the loans are due, I have to repay in full plus interest. The main problem is the 15pc interest rate, which is too high,” she said.
In mid-2017, with higher levels of debt coming due, Ma Khin Yadana negotiated with investors for lower interest rates of 10pc.
Today, CIBC (TSX: CM) (NYSE: CM) introduced CIBC Innovation Banking, a full-service business that delivers strategic advice and funding to North American technology and innovation clients at each stage of their business cycle, from start up to IPO and beyond.
News Comments Today’s main news: CFPB issues first no-action letter to online lender. SoFi defends its mortgage underwriting standards. Was SoFi’s FICO-free zone really FICO-free? RealtyShares raises $28M for commercial real estate investing. Betterment partners with Goldman Sachs, BlackRock. JustUs receives full FCA authorization. Raisin offers term deposits to businesses. Earthport partners with Cross River Bank. Reserve Bank of India waiting for government […]
SoFi defends mortgage standards denying Fast Company’s allegations. AT: “These allegations put SoFi on the defensive and will likely be a bigger public relations bruise for the company than the sexual harassment allegations that recently came to light. In fact, there seems to be a shift away from the salaciousness toward the actual business practices of the company, and that’s a good thing. But not for SoFi.”
SoFi’s FICO-free zone may not have been so FICO-free. AT: “This is an interesting allegation and may not actually be as bad as it seems. Depending on the timing of SoFi’s announcements to revert back to using FICO scores, it could have just been the case of a company changing its mind. However, erasing all evidence of making the announcement in the first place is a bit suspect. I have a feeling this is going to be in the news cycle for a while.”
Betterment partners with BlackRock, Goldman Sachs. AT: “The portfolio partnership with Goldman Sachs is interesting given the larger company’s interest in online lending through Marcus. I wonder why they didn’t just roll out a product of their own to compete with Betterment and Wealthfront.”
The imperative of self-sovereign identification. AT: “This is one of the most interesting ideas I’ve read on data security yet. I’m suspicious of biometrics. I can’t really see that they’re a lot more secure than passwords (maybe a little). And, of course, with digital technology, there is no 100% secure solution. I’m sure some smart hackers will figure out how to break the blockchain. Nevertheless, this idea seems much more practical on the surface. If we could just get widespread adoption of the blockchain.”
The Consumer Financial Protection Bureau on Thursday issued its first no-action letter to online lender Upstart Network Inc., allowing the company to continue using alternative credit data to evaluate borrowers in exchange for providing data to the federal consumer finance watchdog.
SoFi, also known as Social Finance, adamantly said it doesn’t shy from criticism, stepping up to defend itself amid the recent negative news coverage on the company’s alleged toxic workplace environment.
Included in Fast Company’s coverage of the fintech company is a bold claim that “in the first round of SoFi mortgages, some homes lacked appraisals.”
According to a SoFi spokesperson:
In late 2014, we tested a simplified version of our home mortgage product that used paystubs for income verification and did not require home appraisal. The test did not proceed into a launched product, and we launched our mortgage product with requirements for full income verification and home appraisal, which is still the case today. All of these mortgages met the ability-to-repay standards promulgated by Dodd-Frank and none of these pilot mortgages were ever sold to investors, and we continue to hold those loans on our balance sheet.
According to conversations with numerous former SoFi employees, the company’s “FICO-Free Zone” loan product actually relied quite heavily on evaluating applicants by their FICO score. After very publicly announcing in early 2016 that SoFi would no longer use FICO scores to evaluate loans, sources tell Dealbreaker that the company saw defaults tick up and made the internal to decision to reintegrate FICO data. No announcement of the shift back was ever made, the “FICO-Free” language disappeared from the website and some evidence of the SoFi’s move away from FICO was even scrubbed from the company’s blog.
I’ve sat on panels that discuss all the benefits the aforementioned Silicon Valley approach brings to housing. Having SoFi around isn’t one of them, if their underwriting standards are as bad as some claim.
Ainsley Harris writes: “In the first round of SoFi mortgages, some homes lacked appraisals.”
Why on earth would a lender not get the value of the collateral it was lending to? Did SoFi think in-depth valuations where unnecessary? Do investors know that SoFi doesn’t know how much these homes are worth in the event of an REO?
Let me say this, whatever the reason to potentially forego appraisals, SoFi’s investors will disagree with that decision. The Fast Company revelation is so baffling that SoFi’s plan for an IPO will be delayed, perhaps indefinitely.
Let’s hope so. A company that plays fast and loose with its own people is shameful. A company that plays fast and loose with prudent lending practices is downright dangerous.
SoFi has published a public letter addressing the allegations leveled by NYT.com earlier this week.
The letter is republished in its entirety below. (Ed. Note: Excerpted by Lending-Times)
Mortgage: The story cites unnamed sources saying there was some period where we were “not doing enough” to validate income for mortgage borrowers. This is an incredibly vague claim, and we have no idea what this means. We underwrite our mortgage loans consistent with market standards, which includes rigorous income verification, and consistent with the ability to repay requirements put in place by Dodd-Frank.
Personal Loans: The story implies that our personal loans business grew in part because of a change in the way loans were approved: that customer service reps were approving loans rather than underwriters. That view reflects a lack of understanding of our business. We underwrite loans using a highly automated platform where all credit decisions are made by a pre-defined algorithm that analyzes each applicant’s credit profile and ability to pay.
A Thriving Business: The story did mention our business performance, and indeed, SoFi is thriving. Since inception, we have funded more than $20 billion in loans, $3.1 billion in the second quarter alone. In Q2, we had $134 million in revenue, up 67% year over year, with adjusted EBITDA of $61.6 million, up 60% year over year. We have more than 350,000 members, and they like what we do – our products run Net Promoter Scores in the 60-80 range, among the highest in financial services.
RealtyShares is raising a $28 million Series C round led by Cross Creek Advisors, with participation from existing investors including Union Square Ventures, General Catalyst Partners, and Menlo Ventures.
Founder and CEO Nav Athwal says that RealtyShares has over 120,000 users on the platform. The startup says it has deployed over $500 million across more than 1,000 properties since it was founded in 2013.
In a recent op-ed in American Banker (derived from a longer blog post), professor Adam Levitin argues that the recent legislative proposals to “fix” the repercussions of the United States Court of Appeals for the Second Circuit’s Madden v. Midland Funding decision are “overly broad and unnecessary and will facilitate predatory lending.” The legislation Levitin opposes would restore the ability of banks to sell loans to nonbanks and have the loans remain valid on their original terms, the type of transaction on which the Madden decision has cast doubt. I disagree, at least with regard to marketplace lending. There are compelling legal and policy arguments to undo the Madden decision that Congress should consider.
Levitin is certainly right that the Nichols case and the similar 19th-century cases reflect a different fact pattern than was presented in Madden. It does not necessarily follow, however, that the principle of valid-when-made should not also apply under the Madden facts.
The issue at question in Madden, the interest charged on the loan, was set by the bank at the loan’s inception. The borrower got the benefit of the federal regulatory regime, which includes the incorporation of the bank’s home state usury law, when the loan was created, and the relevant characteristics did not change. So why is there suddenly a problem?
The impact of Madden on innovative credit is harmful to borrowers
Madden also appears, as would be expected, to be reducing access from marketplace lenders to credit for borrowers with lower credit scores. Contrary to Levitin’s argument, a recent study shows a reduction in credit availability not just for borrowers with FICO scores under 625 (though that is where the reduction is most pronounced). The study indicates that borrowers in New York and Connecticut with FICO scores under 700 saw a reduction in availability relative to comparable borrowers outside the Second Circuit.
For example, it is important to keep in mind that the majority of marketplace loans are used to pay off bank-issued credit cards (which are not subject to borrower state usury laws) or consolidate existing debt. Denying borrowers access to these loans does not leave the borrowers unencumbered by debt; it leaves them in the situation they view as worse than taking out this new loan. This is especially true given that there is evidence that marketplace lenders can help provide expanded access and competition, services in areas that have few banks, and better pricing for some borrowers than they would receive from banks. Cutting off access isn’t protecting borrowers, it is leaving them with fewer, perhaps inferior, tools to protect themselves.
Usury caps can lead to loan arrangements being distorted in ways that make the loans legal but worse for the borrower. We see examples of this in the shift from payday to “payday installment” and subprime auto loans, where lenders bound by interest rate caps change the loan principal amount or repayment schedule to make the loans viable. These loans can actually be more expensive in total because the lower interest rate is applied to a higher principal over a longer time period. Larger loans also can be more expensive for borrowers if they pay them off early or go into default. Borrowers also could be forced into using suboptimal options like pawn shops or illegal loans, or find themselves without credit altogether.
Betterment, the largest roboadviser with $10 billion under management, has enlisted the support of financial juggernauts Goldman Sachs and BlackRock for two new portfolio options.
The portfolio managed by Goldman Sachs is a smart-beta option, providing users with a more aggressive alternative to Betterment’s core portfolio, which allocates money to stocks and bonds, according to Arielle Sobel, a spokeswoman for the firm. It will be more exposed to emerging markets and REITs, according to a press release.
The other portfolio option is an income-based portfolio, managed by BlackRock, the largest fund manager in the world with $5.7 trillion under management. It provides investors a more conservative option and delivers target income.
As we have known for a long time now, it is no longer good enough to use customer’s personal information for account access. After Ashley Madison and so many other incidents (Tesco Bank, Lloyds Bank, JPMorgan Chase, SWIFT, the Federal Reserve, the IRS, the Department of Homeland Security eBay, Yahoo, Google, Adobe, Target, Neiman Marcus, Home Depot …), surely we should be moving away from this antiquated system. Bear in mind it’s been used for almost two decades, it’s no wonder the system is no longer working.
So the banks add second-factor authentication (2FA) with secure entry pads and PINs, but they still rely on personal information for account access when you ring their call centres, and this is just annoying.
Is there a solution?
First is biometrics and TouchID, voice, eyes and more can easily be used for authentication via a smartphone. Why banks aren’t incorporating these into their onboarding and access mechanisms beggars belief …. or maybe not, as banks would need modern systems to use such radical authentication techniques, and that’s a big ask. Far easier to rely on name, address, date of birth and all the information the hackers stole from Equifax.
Emerging technologies (particularly blockchain, although not exclusively) are making the development of “self-sovereign identity” a real possibility.
The basic idea behind self-sovereign identity is that rather than have our information held by third parties (often without us even knowing what that information is) and used to guarantee our identity and make decisions that affect us; we could turn the entire model on its head and give each individual control over their own digital identity.
With self-sovereign identity, you would hold all of the different elements of your online identity in a “box” or “wallet”, and would then be able to choose which of those elements to reveal in any given context.
PayPal’s global head of product communications Anuj Nayar has left to become head of communications at peer-to-peer investment company Lending Club.
In his new role that starts on Monday, Nayar will be in charge of the team running all internal and external communications, as well as social media, for the $2.5 billion publicly-traded fintech company.
Last night we learned that Goldman Sachs is poaching roughly 20 employees from online lender Bond Street, which seems to have paused making new loans, according to The Wall Street Journal.
It is indicative of Goldman’s strategy that the bank has forced its way onto the AltFi (“Alternative Finance”) homepage three times this week. Those incursions were tied to its £100m investment in UK employee benefit lender Neyber, its $300m deal with home solar financing firm Mosaic, and the announcement that it plans to launch an online bank in the UK.
So its latest decision, to nab 20 workers from the dormant Bond Street, is not without precedent. But Bond Street is not a consumer lender. It offers term loans of up to $1m to small businesses. Could Goldman, then, be sizing up an expansion into small business lending for Marcus?
Year-to-year, community financial institutions have become more conservative about consumer lending. So as to not open themselves up to additional risks, many of these institutions tend to only service consumers with prime and super prime credit. However, consumers with non-prime credit make up a solid portion of the consumer lending market, so this desire to stick with “safer” loans leaves quite a few loan opportunities on the table. And when many community financial institutions are dropping their rates to as low as 0% in order to compete with large national lenders for prime and super prime consumers, missing additional revenue opportunities for your loan portfolio is not a small matter.
Market disruptors like retail lenders (i.e. Costco), mobile lenders (i.e. AutoGravity), and peer-to-peer lenders (i.e. Lending Club) are finding ways to bypass the existing banking system, credit bureaus and financing requirements to lend to this highly sought after demographic.
Fidelity Investments introduced a program Thursday that will let employers make regular payments to their employees’ student loan accounts, much the way companies already pay into their workers’ 401(k)s or health care savings accounts.
Some smaller financial services companies already facilitate this type of benefit program, such as First Republic Bank and startups like Student Loan Genius and SoFi.
But the entry into the market of Fidelity Investments — one of the country’s biggest mutual fund, money management and financial planning companies — is a sign that student debt relief may soon become a mainstream benefit that employers will have to offer to remain competitive.
If you’re living paycheck to paycheck, on the other hand, even small unexpected expenses can put you in the red. The two weeks between paychecks is an eternity for an hourly worker whose credit card is already maxed out, or who doesn’t have one to begin with. Every parking ticket and hospital co-pay is a potential crisis. By the time payday comes, it’s too late — the next crisis has already arrived.
Financial technology startup DailyPay thinks giving people in this situation more frequent access to wages would go a long way toward solving this problem and putting them on the path to financial security.
DailyPay’s solution works like this:
1) The startup integrates with a company’s established payroll and time-tracking systems. Instead of going directly to an employee’s bank account, paycheck deposits are set up to go through DailyPay first.
2) An employee can withdraw wages he or she has earned but not yet received throughout the two weeks or month before formally getting the paycheck. DailyPay fronts the money for a small fee, and keeps the expense on its balance sheet.
3) Come payday, DailyPay deducts whatever money the employee has already withdrawn, and sends the rest of the paycheck through to the employee’s bank account.
Perhaps Lee likens his service to an ATM because the more obvious comparison — a payday loan provider — is often considered predatory.
One key difference is that DailyPay interfaces directly with employers, positioning itself as an HR benefit. DailyPay’s pitch to other companies is that flexible payroll reduces turnover, which is good for the bottom line, and the service is free to implement. One internal study of 20 DailyPay clients found that turnover shrank by 40 percent on average after they adopted it.
Since I run an opportunistic portfolio that seeks out high upside “Fat Pitches” (soon to be a subscription service), it may seem as though I, too, would be stumped; however, I continue to find opportunities, albeit in sectors a bit off the beaten path.
While “value” and “high-growth tech,” may seem anathema to each other (wait till you see the next section), the three public fintech companies – Lending Club, Ondeck, and Elevate Credit – all seem undervalued today relative to their potential, and each have posted strong results in the recent quarter.
Ondeck, which lends to small and medium businesses, also recently decided to scale back its growth, raise rates, and cut staff. The company lowered orginations last quarter by 19% sequentially last quarter, but loss provisions as a percentage of revenues also fell from 8.7% to 7.2%. After implementing a $45 million cost reduction program, the company’s losses declined to only $1.5 million, down from $16 million in losses a year ago.
Speaking of acceptance, it may seem on the that the company that serves the subprime market – thought to be the riskiest of all – is the most profitable of the three. Elevate Credit has been doing everything right – though you wouldn’t know it by its languishing stock price. Last quarter, Elevate grew originations 29% and revenues by almost 19% (due to a higher mix of lower rate, but higher-quality loans), expanded its core RISE product to the state of Kansas—its 16th state, and was able to lower its interest rate on its high-cost funding from Victory Park Capital.
The teams at FinTech startup LendUp and Oakland-based Beneficial State Bank think very differently about that relationship. As LendUpCEO Sasha Orloff and Beneficial State Bank Co-CEO Kat Taylor told PYMNTS in a recent interview, banks and FinTechs need each other, and a very large segment of the population living on the margins of financial services in the United States need these two groups to work together as well.
That constituency, Orloff noted, isn’t always easy to serve – or to serve profitably – without relying on a business model that counts on its customers to fail and then charging sky-high fees for those failures. LendUp and Beneficial State Bank have a different approach: They want to invest and make money on their customers who are succeeding financially and are able to participate in the full spectrum of the financial system.
Fifty-six percent of Americans have a sub-prime credit score, meaning mainstream banks likely can’t approve them for their products; more than half of all Americans could not find $400 in the event of an emergency; and two-thirds of millennials have not started building any kind of credit score, in a system in which having no score or a poor score can cost a person $250,000 over their lifetime.
Lending money beyond what people can bear is the hallmark of predatory lending, she emphasized, and that’s not going to help the customer.
That alternative – the L Card, issued by Beneficial State Bank in partnership with LendUp – is a low annual fee card (starting at $0 and capped at $5 per month or $60 per year) that offers consumers a grace period for payments and even caps late fees (at $7). It has a higher interest rate – 19.99 percent to 29.99 percent – for a credit card than the national average, but according to The PEW Charitable Trusts, is a fraction of the payday lending rate, which is around 400%. Credit limits range from $300 to $1,000 based on credit score, and a year of timely payments and responsible behavior allow customers to double the limits.
Jay Coleman, a Wall Street banker focused on equity raises and initial public offerings, has joined online lender CommonBondas chief financial officer, according to the company’s co-founder David Klein.
While still small, the company had lent about US$1bn to 12,000 borrowers as of May 1, according to Moody‘s Investors Service.
eOriginal, Inc., a rapidly growing financial services technology company, has named Timothy Wall Chief Revenue Officer (CRO).
As CRO at eOriginal, Wall will be responsible for all aspects of the company’s sales organization and revenue development, including direct sales, channel sales, sales engineering and customer success.
Former Iowa Congressman Jim Nussle today said Iowa’s 94 not-for-profit credit unions have filled a void as banks throughout the country and in Iowa continue to consolidate.
More than 1.1 million Iowans are members of a credit union and the state’s credit unions have about $16 billion in assets, according to Nussle.
Nussle indicated the “speed of change” and stress in the industry has been rather dramatic, not only because of the “Great Recession,” but because of incidents like Wells Fargo’s admission that its employees created fake accounts without customers’ permission. The recent growth of on-line “peer to peer” lending presents credit unions with an opportunity rather than a challenge, according to Nussle, because credit unions are member-driven.
GDS Link, a global provider of credit risk management solutions and consulting for multiple verticals within the financial services industry including marketplace lending, retail finance, alternative financial services, credit card, auto, and business leasing, announced its role in bringing the fourth annual LEND360 to Dallas.
“The LEND360 Dallas host committee, co-chaired by Ken Rees, Chief Executive Officer of Elevate Credit, Inc. and Paul Greenwood, President and Co-founder of GDS Link, and supported by other influential members of the fintech community, has been meeting since late 2016 to ensure a valuable attendee experience for the upcoming conference, assist with speaker development and engage innovative industry leaders to take part in the event,” according to a LEND360 press release.
The Online Lending Policy Institute (OLPI), the leading voice for policy analysis, in-depth research, and education for the online lending industry, today announced its roster of speakers for the Second Annual Summit on Sept. 25 at the Renaissance Hotel in Washington D.C. The Online Lending Policy Summit provides an opportunity for industry participants to share insights, propose standards, and have an open dialogue with regulators and policymakers to build consensus viewpoints on the regulation of online lending. Keynote addresses will be delivered by the following four policy leaders:
Keith Noreika, Acting Comptroller of the Currency. Mr. Noreika advocates for the need to embrace innovation while ensuring that new products and services do not present undue risk to the financial system. He will discuss how regulators and industry can work together on “responsible innovation” and with principles for governing the rapidly growing financial technology sector.
Congressman Gregory W. Meeks (D-NY-5), now in his tenth term, serves one of the most diverse constituencies in the nation. Mr. Meeks is known for being an effective, principled, and commonsense leader. Congressman Meeks is a senior member of the U.S. House Financial Services Committee, and is the lead Democratic sponsor of important legislation dealing with the Madden v Midland Funding court case.
Congressman Tom Emmer (R-MN-6) represents Minnesota’s 6thDistrict in the U.S. House of Representatives. He began his congressional career on January 6, 2015 and serves as a key member of the U.S. House Committee on Financial Services. Prior to his congressional service, Mr. Emmer practiced law for several years, and followed his entrepreneurial calling and opened his own law firm. In 2004, he was elected to the Minnesota House of Representatives and re-elected by overwhelming majorities in 2006 and 2008. After a narrow loss in the 2010 gubernatorial race, Tom entered the radio business as a conservative radio host.
Peer-to-peer lending platform JustUs announced this week it has received full authorization by the Financial Conduct Authority (FCA). The online lender revealed that the full authorization is a pre-requisite to offer the JustUs Innovative Finance ISA (IFISA) and registration forms have been submitted to HMRC with a planned launch of the ISA in October.
Crowd2Fund, a relative newcomer to the alternative finance industry, is accusing Funding Circle, one of the market leaders, of turning its back on the whole ethos of peer-to-peer lending.
The row follows an announcement last month by Funding Circle that it will no longer allow investors on its platform to choose which specific companies they want to lend their money to. Instead, the platform will automatically spread investors’ cash across a group of businesses looking for funds – much as a professional collective fund manager in any other asset class chooses investments on behalf of its investors.
Crowd2Fund said Funding Circle’s move reflected the larger platform’s increasing focus on large institutional investors in peer-to-peer lending, as well as concern about the growing regulatory scrutiny of the sector.
ARCHOVER’S chief executive Angus Dent (pictured) has urged small business owners to be more confident in taking on debt, after new figures showed that 80 per cent of small- and medium-sized enterprises (SMEs) are refusing to apply for new finance.
The boss of the peer-to-peer business lender said that while their caution was understandable, it is the “wrong attitude” for SMEs that want to scale up.
LendInvest has received public support from three major industry bodies for its property development academy.
The Centre for Entrepreneurs, Homes for Scotland, and the Home Builders Federation have each praised the academy, which was established in 2016 to help develop the skills of aspiring and new small-scale housing developers.
Birmingham, the site of LendInvest’s latest Property Development Academy, is a perfect example of this. Time and again we heard from attendees of just how exciting the city is for property development currently, and why they are so desperate to get cracking with their own development projects.
It’s notable that in last year’s Emerging Trends in Real Estate report from PwC and the Urban Land Institute, which looked specifically at which European cities present the best opportunities for investors, Birmingham was the best performing UK city. It ranked 22nd, ahead of cities like Manchester, Edinburgh, London, Brussels and Rome.
All of this has led to a thriving rental sector. Our most recent Buy-to-Let Index found that the city currently boasts a rental yield of a very strong 5.03%, with capital gains of 4.97% over the last year.
The latest UK Economic Outlook report from PwC named the West Midlands as one of the housing hotspots, predicted to see house price growth of 4.5% this year, compared to a UK average of 3.7%.
Democratic Progressive Party Legislator Lin Chun-hsien (林俊憲) yesterday urged the Financial Supervisory Commission (FSC) to curb bad debts stemming from fraud and loan sharking on Internet-based peer-to-peer lending platforms.
Online lending platforms have existed for years in other nations and have caused many problems, Lin said, adding that in China they are blamed for generating an estimated 60 billion yuan (US$9.2 billion) of bad debt.
Like electric cars, whose era of global dominance has yet to arrive, the app-driven insurance industry is more of a concept than reality. That doesn’t mean investors should dismiss the Hong Kong initial public offering of ZhongAn Online P&C Insurance Co., despite its hefty price tag.
Bankers are currently sounding out investors for an IPO that could raise as much as $1.5 billion, giving ZhongAn a valuation of $11 billion. That’s well above CLSA’s $8 billion estimate, which already ranks the online insurer as China’s third-most valuable fintech company after Ant Financial, an affiliate of Ma’s Alibaba Group Holding Ltd., and Lufax, the peer-to-peer lender owned by Ping An Insurance (Group) Co.
ZhongAn is the world’s sixth-most-valuable e-finance company, at about $8 billion.
So here’s the bad news. ZhongAn is tiny. Its net written premiums were a mere 3.4 billion yuan ($520 million) last year, or 0.5 percent of China’s insurance industry, according to Bernstein Research analyst Linda Sun-Mattison.
It’s also expensive. The $11 billion valuation implies an adjusted price-to-book level of 4.3 times, Smartkarma analyst Ke Yan estimates.
Pan-European marketplace Raisin continues its trailblazing expansion. Having penetrated new geographies with international and localized services in 2016, the Berlin-headquartered startup is now broadening its offering to address a new customer segment: small and medium-sized enterprises (SMEs). Starting September 14, businesses can open term deposit accounts on Raisin’s German site www.weltsparen.de, or more precisely, on www.weltsparen.de/geschaeftskunden.
Earthport (AIM: EPO), the leading payment network for cross-border transactions, is pleased to announce its partnership with Cross River, a US-based bank, to provide inbound cross-border payment services across the US market, adding to its existing capabilities to process payments in the US.
The partnership will facilitate the execution of inbound ACH payments through Cross River, and further strengthen Earthport’s global payment network, enabling high volumes of low-value payments originating outside the US to be serviced more efficiently.
Half the world is unbanked. That’s the provocative title of a 2009 research paper published by the Financial Access Initiative (FAI), a consortium of researchers from New York University, Harvard, Yale and Innovators of Poverty Action.
Their study also provided an empirical grounding that, although it is possible to serve low-income communities at scale with financial services, there are still billions left to reach. According to figures from the World Bank, as of 2015 there are still 2bn people who lacked access to any formal financial services.
The advent of mobile technology along with increasing smartphone penetration, especially in developing countries, has opened up a new portal of possibilities.
This newfound access in countries across South East Asia and Africa has provided the perfect ecosystem to initiate financial inclusion.
Nick Ogden – founder and Executive Chairman, ClearBank
The number one thing that’s going to occur in 2018 is fragmentation of the marketplace as we know it today. The days of big banks delivering everything and being specialists in everything are over. Some of them might still not accept that but the reality is that it’s happened.
Karen Kerrigan – Chief Legal Officer, Seedrs
Rather than looking at a specific technology, have a look at a particular sector. There are a lot of challenger banks out there at the moment – Starling Bank, ClearBank, Monzo, Tandem – and they’re all vying for the same space. They’re all doing things slightly differently, but ultimately are taking on the banks.
Tokens may not be available to all persons in all jurisdictions as certain offering restrictions may apply. In particular, no tokens will be available in the US, Singapore or the EEA. Offering and trade restrictions, as well as the rights of holders of FundCoin, will be set out in further detail in the offering memorandum.
That little snippet is from the last page of the “whitepaper” for FundCoin, which deserves a spot in the pantheon of initial coin offerings (ICOs) to which regulators should be paying more attention. FundCoin is “the first private equity token ICO” and is the creation of Finles, a 40-year-old Dutch fund of hedge funds manager that has decided to turn to the crypto markets to raise money.
Cryptocurrencies are the most undervalued asset class in the world, says Farzam Ehsani, leader of Rand Merchant Bank’s blockchain initiative.
The combined market capitalisation of all cryptocurrencies was only about $120bn, Ehsani said on Thursday at the Business Day/Financial Mail Investment Summit, held in partnership with Old Mutual Wealth.
By comparison, the market capitalisation of all stock markets is about $68.5-trillion, according to figures from the World Federation of Exchanges.
The Reserve Bank is waiting for a gazette notification from the Government on getting the peer-to-peer lenders under its regulatory ambit before coming out with guidelines on the sector, a senior official said on Wednesday. “Following up on the consultation paper we did last year, we are shortly going to come up with guidelines on peer to peer lending,” RBI’s executive director Sudarshan Sen said at an industry event here.
According to the official, the P2P lending interface will come under the purview of RBIs regulation by defining these platforms as NBFCs under the RBI Act by issuing a notification in consultation with the Government.
Indonesian peer-to-peer (P2P) lending platform Investree announced that it has been appointed by the country’s Ministry of Finance to run a pilot project that aims to develop online transaction system of state securities for retail investors.
According to a DailySocialreport, through the project, users will be able to purchase state securities through the Investree platform.
India’s demonetization experiment has been declared a failure by economic pundits. However, it has expanded India’s tax base and fast-tracked the digitization of payments, which is a good thing.
Some nine-million-odd new taxpayers came into the fold thanks to the scheme. Around 20 million new bank accounts were created by Indians panicked by the possibility of having their cash holdings voided.
Second, the scheme accelerated the digitization of payments in India, with a vast swathe of merchants forced to accept digital payments in lieu of cash.
The global crowd-funding industry generated about USD 34.4 billion in 2015.
Apart from raising capital, crowdfunding is also a way to create awareness among the masses and support for a project from the people around you.
Crowdfunding has exploded new ways to raise funds for start-ups, social sector, real estate, inventions and so on.
In India, transaction value in the “Crowd-funding” segment amounts to a meagre USD 6 million in 2017.
Transaction value is expected to show an annual growth rate (CAGR 2017-2021) of 24.8 percent resulting in the total amount of USD 16 million in 2021.
The most used method for real estate crowdfunding is “equity crowdfunding” which helps individual become partial owners in distinct properties, allowing them to participate alongside real-estate companies who acquire, redevelop, or build.
Another type of crowdfunding used for real estate is syndicated debt crowdfunding. This fast growing platform takes some or all of an existing real-estate loan, secured by a deed on the underlying property, and syndicate it out to a network of individual investors at a fixed rate of return.
IOU FINANCIAL INC. (“IOU” or “the Company”; TSX-V:IOU), a leading online lender to small businesses (IOUFinancial.com), announces today that Canadian Business and PROFIT ranks IOU Financial as the fourth-fastest growing company on the 29th annual PROFIT 500, the definitive ranking of Canada’s Fastest-Growing Companies. Published in the October issue of Maclean’s magazine and at CanadianBusiness.com, the PROFIT500 ranks Canadian businesses by their five-year revenue growth.
IOU Financial makes the 2017 PROFIT 500 list as the fourth fastest growing company with five-year revenue growth of 8,600%.
News Comments Today’s main news: OnDeck reports Q1 2017 results. dv01 partners with SoFi. Elevate Credit announces Q1 2017 results. SoFi lets employees sell 20% of vested stock. Crowd2Fund announces new venture debt product. Klarna, Trustly fight EBA on bar screen scraping. Today’s main analysis: LC may have hit a dead end. The real returns for Prosper investors. Today’s thought-provoking articles: […]
OnDeck reports Q1 results. AT: “Things aren’t looking so good at OnDeck these days. Originations are up from a year ago, but net revenue is down. Gross revenue is up 48%. Cost of Funds Rate is up, operating expenses are up, and Total Funding Debt is up 69%. Gain on Sale is way down. Something is going on internally.”
Lending Club keeps pushing its comeback. AT: “They’re not the only ones. I do see them climbing out the hole, albeit a little slowly. On the other hand, it’s only been a year since the boat was rocked. That’s a short time frame in business.”
OnDeck® (NYSE: ONDK) today announced first quarter 2017 financial results, additional planned cost savings, and a target to achieve GAAP profitability in the second half of 2017.
Loans Under Management increased to $1.2 billion, up 25% from the comparable prior year period, driven primarily by the growth of originations over the period. In the first quarter of 2017, originations were $573 million, up 1% from the prior year period, primarily reflecting the impact of credit tightening implemented during the quarter.
Gross revenue increased to $92.9 million during the first quarter of 2017, up 48% 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 $87.1 million during the quarter, up 63% from the comparable prior year period, and primarily reflected the growth of average loans, which increased 66% versus the comparable prior year period. The Effective Interest Yield for the first quarter of 2017 was 33.9%, down from 34.5% in the comparable prior year period, primarily reflecting changes in portfolio mix over the period, partially offset by recent price increases.
Gain on sale was $1.5 million during the first quarter of 2017, down 79% from the comparable prior year period. The decline primarily reflected a lower Gain on Sale Rate during the quarter and the decision to reduce the amount of loans sold through OnDeck Marketplace. OnDeck sold $42.0 million1 of loans through OnDeck Marketplace at a 3.5% Gain on Sale Rate during the first quarter of 2017, compared to $123.7 million1 of loans at a 5.7% Gain on Sale Rate in the first quarter of 2016. Loans sold or designated as held for sale through OnDeck Marketplace represented 9.0% of term loan originations in the first quarter of 2017 compared to 25.9% of term loan originations in the comparable prior year period. To optimize long-term financial performance, OnDeck plans to reduce the percentage of term loan originations sold through OnDeck Marketplace to less than 5% for the remainder of 2017.
Net revenue was $35.4 million during the first quarter of 2017, down 13% versus the comparable prior year period. The decline in net revenue reflected the reduction of OnDeck Marketplace sales, which led to lower gain on sale revenue, and higher provision expense in the first quarter of 2017 versus the prior year period.
Provision for loan losses during the first quarter of 2017 increased to $46.2 million, up from $25.4 million in the comparable prior year period. The increase in provision expense primarily reflected a 20% increase in originations of loans designated as held for investment in the period and the comparatively lower original loss estimate for loans originated in the prior year period. The Provision Rate in the first quarter of 2017 was 8.7% compared to 5.8% in the prior year period, reflecting that the credit tightening in the first quarter of 2017 was not in effect for the full quarter and the previously mentioned lower loss estimates in the prior year period. The Provision Rate decreased sequentially from 10.2% in the fourth quarter of 2016. OnDeck expects the Provision Rate for the remainder of 2017, taken as a whole, to be approximately 7%.
The 15+ Day Delinquency Ratio increased to 7.8% in the first quarter of 2017 from 5.7% in the prior year period and from 6.6% in the fourth quarter of 2016 due primarily to the continued seasoning of the portfolio. At the end of the first quarter of 2017, the average term loan age in OnDeck’s portfolio was 4.5 months, up from 3.3 months in the prior year period and 3.9 months in the fourth quarter of 2016. The Net Charge-off rate increased to 14.9% in the first quarter of 2017 from 11.2% in the prior year period and increased sequentially from 14.2%.
The Cost of Funds Rate during the first quarter of 2017 increased to 5.9% from 5.5% in the prior year period primarily due to the increase in short-term rates.
Operating expense was $46.7 million during the first quarter of 2017, up 5% over the comparable prior year period. Operating expense in the first quarter of 2017 was favorably impacted by the company’s previously announced cost rationalization plan which is expected to produce approximately $20 million of annual savings relative to its 2016 exit operating expense run rate. Additionally, operating expense in the first quarter of 2016 benefited from a $1 million release in the reserve for unfunded loan commitments and a $1 million gain related to changes in foreign currency values. Without these benefits, operating expense between the two periods would have been relatively flat. The company is implementing an additional $25 million of operating expense run rate savings compared to OnDeck’s 2016 exit run rate, the majority of which will be implemented over the remainder of 2017. The savings are focused on the company’s U.S. lending operations and will be achieved primarily through a workforce reduction to be implemented in the second quarter of 2017. Combined with the company’s prior workforce reduction, total headcount at the end of the second quarter of 2017 is expected to be approximately 27% lower than December 31, 2016 levels, due to both involuntary terminations and actual and scheduled attrition.
GAAP net loss attributable to On Deck Capital, Inc. common stockholders was $11.1 million, or $0.15 per basic and diluted share, for the quarter, which compares to GAAP net loss attributable to On Deck Capital, Inc. common stockholders of $12.6 million, or $0.18 per basic and diluted share, in the comparable prior year period.
Adjusted EBITDA* was negative $5.2 million for the quarter, versus negative $7.3 million in the comparable prior year period. Adjusted Net Loss* was $7.6 million, or $0.11 per basic and per diluted share for the quarter versus Adjusted Net Loss of $8.8 million, or $0.13 per basic and per diluted share, in the comparable prior year period.
Unpaid Principal Balance was $1.03 billion at the end of the first quarter, up 57% over the prior year period. The increase primarily reflected originations growth over the year and OnDeck’s decision to retain more loans on its balance sheet in connection with reducing OnDeck Marketplace loan sales.
Total Funding Debt at the end of the first quarter of 2017 was $788 million, up 69% over the prior year period, which primarily reflected the growth of Unpaid Principal Balance as well as the increased utilization of debt facilities during the period. OnDeck continued to expand its funding capacity in 2017. During the first quarter of 2017, OnDeck extended the maturity date of its asset-backed revolving debt facility with Deutsche Bank to March 2019 and increased the facility’s borrowing capacity to approximately $214 million. During the first week of May 2017, OnDeck extended the maturity date of its asset-backed debt facility that finances OnDeck’s line of credit offering to May 2019, increased the facility’s borrowing capacity to $100 million, and decreased the funding costs by 200 basis points.
At the end of the first quarter of 2017, cash and cash equivalents were $73 million, as compared to $80 million at December 31, 2016.
Guidance for Second Quarter and Full Year 2017
Second Quarter 2017
Gross revenue between $85 million and $89 million.
Adjusted EBITDA between negative $3 million and positive $1 million.
Full Year 2017
Gross revenue between $342 million and $352 million.
Adjusted EBITDA between positive $5 million and $15 million.
Adjusted EBITDA guidance for the second quarter and full year 2017 includes an approximately $3.5 million charge to be recognized in the second quarter of 2017 associated with the planned workforce reduction.
The online lender said Monday that it would put a renewed focus on achieving profitability by slowing growth and cutting costs. Shares fell by nearly 7% in response. Fundamentally, investors are finally waking up to the fact that On Deck is more of a niche financial company than a revolutionary technology platform.
Loan originations may decline by a fifth next quarter, and total originations will be lower this year than last.
If these sound like the business objectives for an ordinary bank, that’s no coincidence. The company plans to sell less than 5% of its loans through its online marketplace this year, Chief Financial Officer Howard Katzenberg said, down from 18% in 2016 and 34% in 2015. Of the rest, some will be securitized, but most will be held on its balance sheet.
On Deck’s shares are down 79% from their initial public offering in December 2014. At 1.2 times book value, it is now valued like a financial company and roughly in line with the average bank. This still looks a bit rich because it has no profits.
The last 12 months have undoubtedly been a difficult period for marketplace lending pioneer Lending Club.
But, as Q1 earnings hit last week, it seems clear that progress is happening — albeit at a fairly slow pace.
Retail investors also expanded, though more slightly — reaching 15 percent, up from 13 percent in the prior quarter.
Lending Club also announced $2 billion originations, surpassing $26 billion in total loans since inception almost ten years ago and 2 million total consumers served on its platform.
Moreover, investing in marketplace lending is not so profitable as it has been in the recent past, and returns to investors have dropped sharply. Competition has forced down interest rates in the marketplaces to attract consumers with cheaper underwriting, and charge-offs have risen.
According to data from Orchard, a technology provider to the industry, total returns from an index of U.S. consumer loans came to 3.95 per cent last year, down from 8.71 per cent in 2014.
Lending Club’s stock performance has been flat over most of the last year, though it has lost roughly 60 percent of its stock value.
The firm has also seen a massive change-over in its staffing and leadership since its more scandalous days a year ago. CEO Scott Sanborn cut and rehired 179 jobs and brought on a new CFO, COO, general counsel and chief capital officer.
dv01, the reporting and analytics platform that brings transparency to lending markets, today announced a reporting partnership with SoFi, a modern finance company taking an unprecedented approach to lending and wealth management. Institutional investors who use dv01 to conduct analysis on consumer loans and bonds will now have access to all SoFi securitizations, including student and personal loans.
Under the first phase of the partnership, dv01 will receive securitization data directly from SoFi, which it will normalize, format, and roll up for monthly level reporting. The data, which includes 23 historical deals, will be available through the Securitization Explorer, dv01’s online reporting and analytics portal for consumer securitizations.
Investors who have been approved to view SoFi data will have 24/7 access to updated loan level performance and composition details, as well as a suite of reporting and analytics tools. dv01 will be responsible for updating deal collateral data monthly, so investors can continue to track the evolution of a pool over time, even after the deal has closed.
dv01 has provided similar reporting services for several other online lenders, overseeing an aggregate securitized collateral balance in excess of $7 billion. The company launched its dedicated Securitization Explorer tool in February, and since then has also announced its role as Loan Data Agent for the Prosper Marketplace loan purchase consortium led by Jefferies LLC, Soros Fund Management, Third Point LLC, and New Residential Investment Corp, a Fortress Investment Group REIT.
Elevate Credit, Inc. (NYSE:ELVT) (“Elevate” or the “Company”) today announced results for the first quarter ended March 31, 2017.
First Quarter 2017 Financial Highlights
20% year-over-year revenue growth: Revenues totaled $156.4 million, a 19.6% increase from $130.7 million for the prior-year period.
Nearly 40% year-over-year growth in loans receivable: Combined loans receivable – principal, were $444.5 million, a 38.6% increase from $320.7 million for the prior-year period.
Stable credit quality: Loan loss provision was 52.9% of revenues and within our targeted range of 45%-55%. The ending combined loan loss reserve, as a percentage of combined loans receivable, was 15.7%, slightly lower than the 16.3% we reported for the prior-year period.
Record low customer acquisition costs: The total number of new customer loans for the first quarter of 2017 was approximately 53,000 with an average customer acquisition cost of $198, compared to approximately 41,000 customer loans and an average customer acquisition cost of $235 for the prior-year period.
Positive net income: Net income of $1.7 million, or $0.06 per pro forma diluted share, which was based on a 2.5 to 1 stock split and all preferred stock converting into common stock upon the IPO but it excludes the 14.3 million common shares issued in the IPO since this happened after quarter end.
Continued improvement in Adjusted EBITDA margin: Adjusted EBITDA was $24.9 million and the resulting Adjusted EBITDA margin was 15.9%.
For the full year 2017, the Company expects total revenue of $680 million to $720 million, net income of $13 million to $19 million and Adjusted EBITDA of $95 million to $105 million.
Online lender SoFi is letting employees cash out a portion of their holdings to give them liquidity as the company waits to go public.
Last month, SoFi employees and ex-employees were permitted to sell 20 percent of their vested options in a secondary share sale that totaled $336.5 million, according to sources familiar with the matter. The offering priced the shares at $16.30, said one source, who asked not to be named because the deal was confidential.
The prepaid card isn’t linked to your bank account, but instead to the Square Cash app. That means you can only use it to spend money that you are holding in your Square Cash account.
A Square spokesperson said these signatures are screened before printing to prevent inappropriate words and drawings from making their way onto the cards. But there is obviously wiggle room to include your Twitter handle, if you want to be like Jack, or just a first name, too. The cardholder’s first and last names are printed on the back of the card.
Creating a deeper relationship with Square Cash customers might also open up other business opportunities in personal finance for the $7 billion payments company. Lending, anyone?
AI is also second only to blockchain technology as the most overused and overhyped term referring to technologies that are taking over banking and finance, particularly in credit decisions.
The reality is AI will make lending more consistent and efficient; however, it remains to be seen if it will make lending safer.
How will regulators ever know if the AI algorithms are performing in a nonbiased way? Humans are the programmers of the algorithms, and therefore human biases and tendencies cannot but leak into the overall decision process.
We know the saying “bad data in means bad data out.” AI should help to solve that challenge as it more accurately identifies the “bad” or not useful elements. However, the challenge with AI may not be with “bad data” but rather a lack of necessary data as the economic environment changes.
To this end, neural networks, which are self-learning and so complex that the humans who create them are unable to describe them, also present a number of problems. The foremost problem is: If you don’t know how the decision is made, you cannot be confident that the decision is being made correctly. Yes, you can judge by credit performance. But when a lender runs afoul of a regulation, the regulators won’t accept “We just don’t know how it works” as an excuse.
Affirm, the lending startup that provides loans at the POS, is looking into launching everyday-use virtual credit cards, Bank Innovation has learned.
The company, launched by a PayPal cofounder Max Levchin, provides point-of-sale loans that allow customers, particularly millennials, to finance purchases with participating merchants. Once approved, consumers receive a one-time use virtual card via Affirm’s app, which they can use for the purchase. Then, depending on individual consumers, Affirm splits the bill into monthly payments.
Scanning the news in the payments world this week was an interesting exercise because the two standout themes are very much aligned with what we do here at WePay and with the future of digital payments. The first theme is around the future of Fintech and where the nascent industry is headed and the second is around the huge impact of delivering payments as a an integrated part of a solution rather than as an afterthought.
David Dunn, of Braintree Europe, has a piece in ITProPortal about why payments are more than plumbing. It’s a good piece and makes a great case for integrating payments. He says that you can help your business by making it easier for your customers to get to a checkout and by making it easier to scale. We would argue that a SaaS business can go even further by using payments to better retain existing customers and help them grow, better adding new customers by scaling as Dunn mentions and also by optimizing revenue for the platform itself. The way to achieve these goals is via white-label payments.
When you consider the recent milestones Kabbage has achieved it makes it difficult to think of the fintech lender as a startup. In recent weeks Kabbage surpassed a couple of major milestones comprised of extending $3 billion in funding to 100,000-plus small businesses. More than half of those loans were directed toward existing credit lines. Kabbage also recently priced a $525 million private securitization, which tips the company’s hand on strategy.
Kabbage is pursuing its growth plans all while performing a confidential search for a new chief technology officer, details for which are expected to unfold in the coming months.
At the LendIt USA 2017 event, Kabbage co-founder & CEO Rob Frohwein alluded to the online lender’s plans to reach new territories, details for which were scarce. Treyger shared, however, that Kabbage’s global growth plans are somewhat tied to the company’s pipeline of banking partnerships.
Kabbage already counts as partners household names including Santander, ScotiaBank, and ING, all of which license software from Kabbage. Meanwhile, as big banks are accessing smaller businesses, Kabbage’s growth blueprint includes serving larger ones.
With less than $1 million in total funding, fintech startup Elsen may not have much by way of investments, but a recent partnership with Thomas Reuters should bring some star power to the burgeoning company.
Founded in 2013 by three Northeastern grads, Elsen is a platform-as-a-service company that enables anyone at large financial institutions to harness massive quantities of data for better decision making and problem solving.
Besides offering data storage to some of the largest vendors in the world, Elsen’s product uses machine learning and AI to speed up the testing of financial algorithms by way of backtesting, a process that sifts through historical financial data to see how an algorithm would perform at tasks like automatically picking stocks, for example.
One thing that Keith Noreika, the new acting head of the Office of the Comptroller of the Currency, could tick off of his to-do list is to pause the OCC’s efforts to develop a fintech charter. Noreika should then take some time to assess whether the charter is developing in a way that best serves the public.
Former Comptroller Thomas Curry deserves major credit for getting the OCC to think about how to encourage innovation in the banking sector. The fintech charter is an important piece of this effort. Unfortunately, based on the most recent information put out by the OCC, it appears that the previous leadership wasn’t thinking sufficiently outside of the box. The charter is shaping up to needlessly mimic many of the requirements of traditional depository institutions, even though those requirements do not make sense in the nondepository context.
For example, requiring firms to get OCC permission to change business plans, and to convince the agency that the firm will not fail, are not necessary.
However, the OCC should not press pause on its response to the lawsuit filed by the Conference of State Bank Supervisors challenging the charter.
ANTHONY JABBOUR: When Apple Pay came out, banks weren’t running to Apple Pay because they thought it would drive new streams of revenue for them. A lot of them did it because they were afraid the bank across the street would offer it and they would suffer by not offering it.
One thing we’re trying to do that’s a little different is, if we believe there’s value for our customers, we want to have the disruptor connect to the FIS network and have our banks connect to it from the FIS network, so we can leverage our banks’ negotiating power with the fintech.
What are some of the types of companies you’re thinking of—alternative lenders, PFM app providers, billing companies?
JABBOUR: Payments would be one. The banks that I speak to look at lending and they say banks lost the lending franchise and exclusivity and other companies popped up over the years and took a major portion of that. And they look at payments right now and they feel strongly they can’t lose the payments franchise.
Do you think that banks can take back market share in U.S. person-to-person payments with Zelle?
JABBOUR: We think that has a lot of potential. We offer Zelle to our clients. I believe we can create a capability for P-to-P for our banks that would be better than any fintech’s because we could make it real-time and it would be accessible from an ATM. I could send you money and you can go to an ATM with your mobile phone and withdraw the cash without having a bank account. We could also tie it with prepaid cards, so instead of me sending you $500, I could send you a $500 Home Depot gift card as a housewarming gift. It’s P-to-P, but it’s more thoughtful because we’re integrating it with prepaid.
What does it take for a payment platform to work? It takes brand recognition so people know it exists, and it needs ubiquity, it needs to work in every place you would want it to work. It’s never about the technology. I like with Zelle that banks said look we have to find a way to solve the brand issue, and if we all use the brand Zelle, that’s going to help. And I think it will.
I could see that argument, but you could argue that banks are late to this P-to-P payment party and that PayPal’s Venmo is the clear leader. Do you think the Zelle brand can win hearts and minds?
JABBOUR: Without question, banks are late to a number of capabilities. When you look at P-to-P, Venmo is the brand, it’s a verb. Whether or not banks can catch up with Venmo comes down to how compelling they make the offer, what else they can wrap around it, how much do they ultimately invest in it. What I know is, if they hadn’t pursued Zelle, they would have fallen further behind.
Have you ever wanted to own a skyscraper? How about an entire apartment complex? Well, good news, now you can! And, you don’t have to meet “accredited investor” requirements. How? It’s called crowdfunding!
According to the University of Cambridge Judge Business School, in 2015 crowdfunding real estate transactions topped $1.2 billion; over three times the amount in 2014.
Research the Crowdfunding Platform: Currently, more than 125 crowdfunding platforms exist. According to Jason Best, a partner at Crowdfund Capital Advisors, you’ll want to consider comparing associated fees, the quality of property management, and the sustainability of the platform. As with any new industry, it’s safer to choose among the larger more-established companies such as Realty Mogul, Realty Shares, and iFunding, to name a few.
If you’re interested in learning more about this topic, I suggest you listen to podcast Episode #108, “Investing in Real Estate Via Crowdfunding Platforms,” on J. David Stein’s website, Money for the Rest of Us.
What if a visit to the financial adviser was more like an impromptu coffee grab than a dental checkup?
Instead of a boring annual visit, imagine a quick call from you adviser in which he makes a couple simple suggestions to keep your portfolio on track.
That’s the future, according to Michael Kitces, research director for Pinnacle Advisory Group in Columbia, Maryland. Speaking to financial advisers attending last month’s Morningstar Investment Conference in Chicago, Kitces tried to reassure them that investors, rather than turning their money over to automated investment platforms, will continue to pay for advice if it’s relevant and timely.
In a future aided by software tracking customer portfolios and everyday spending, advisers will already know their clients’ problems and will use more frequent chats to figure out fixes, he said.
A (hypothetical) documentary titled “Software has been eating the world” about Microsoft, would have to cover the first decade (‘75-‘86) before the company went public and the stunning and difficult to replicate nowadays fact that about 12,000 Microsoft employees became millionaires, in addition to the 3 billionaires.
So, when Bill Gates spoke in February about the idea of “the robot that takes your job should pay taxes”, the world reacted.
In financial services, there were no such issues raised when ATMs, online brokerage and e-banking transformed the financial industry.
In this second wave that follows the accelerated pace of tech innovation of other sectors, we all agree that we don’t want a world in which no bank submits candidacy for the Global Finance awards Call For Entries: Digital Bank Awards 2017. Or a world that has an increased tax for the winner and those shortlisted in the Euromoney Best Digital bank awards: for 2016, Singapore’s DBS Bank, and the short list included BBVA, Citi, and ING. Or a world that taxes more startups providing the “picks and shovels” for the future of Invisible Finance, like:
– Cloud banking platforms offering Banking as a Service, like Mambu
– Cloud based investment financial app stores, like Investcloud
Billionaire venture capitalist Tim Draper soon plans to take a step that even he, a long-time bitcoin aficionado, has eschewed to now: buying a new digital currency offered by a technology startup.
Draper, an early supporter of bitcoin and its underlying blockchain financial ledger technology, told Reuters in an interview he will for the first time participate in a so-called “initial coin offering” (ICO) of Tezos slated later this month.
Tezos, a new blockchain platform launched by a husband and wife team with extensive Wall Street and in hedge fund backgrounds, will launch the ICO on May 22. Draper will also invest in U.S.-based Dynamic Ledger Solutions Inc, the creator of Tezos, but did not disclose details.
CVC Credit Partners (“CVC”) announced today that CVC’s U.S. Middle Market Private Debt business acted as Administrative Agent on a first lien senior secured debt facility provided to Wastewater Specialities, LLC (“WWS”). The proceeds were used to refinance existing debt and support future growth through equipment purchases.
On Friday, crowdfunding platform Crowd2Fund announced the launch of its new venture debt product, which is targeted towards early stage businesses that have a short term requirement to access cash to facilitate growth. The funding portal noted that the interest rates for the product’s loans range from 10% to 15%, with a borrow time period of normally no more than 12-18 months.
Crowd2Fund also noted those businesses that are suitable for the venture debt will be able to increase their value during the loan duration.
Furthermore, the size of the opportunity has been boosted by the greater availability of fingerprint sensors. According to the new research, around 60% of smartphone models are expected to ship with such sensors this year, with many Chinese vendors incorporating them into mid-range models.
The research emphasised the increasing momentum behind alternative biometric solutions. It recognised Mastercard as an early leader in this space through its Identity Check Mobile capability, due to go live later this year. Informally known as “selfie pay”, this allows users to scan their fingerprints and/or take selfies to validate their identities and thereby make payments.
In a bid to expand its footprint in the rapidly growing digital and technology-led innovation space, PwC, one of the major players in the field, has in recent weeks appointed a number of new senior technology positions in the UK wing of their group.
In another appointment aimed at driving growth in technology and financial technology (FinTech), Zubin Randeria, a PwC partner for 23 years non-consecutively, was unveiled as the new lead for around 200 cyber security experts in the UK, as the firm continue to focus on advising companies how to resist digital threats; a key concern of modern business.
Mark Leaver, PwC’s head of Financial Services Consulting since 2015, will meanwhile expand his existing role to include the multi-billion pound FinTech market in his scope. The FinTech space is growing fast, withinterest in services particularly high among younger tech savvy users, and on the back of the spike global investments in FinTech companies grew to $25 billion last year, according to data from KPMG.
The Bank of England has come under fire for working with a fintech startup that was fined $700,000 by a US regulator for breaking banking secrecy laws.
Players in the fintech field have accused the central bank of appearing not to have conducted proper due diligence when selecting its partners after it emerged that Ripple, the startup chosen by the Bank of England to help research new blockchain technology, was fined for “willfully violating” several requirements of the Bank Secrecy Act.
Of the 1.4 billion people in China, only about 300 million are in the national credit bureau, which means that more than a billion people have no credit profile. Hundreds of millions of Chinese “unbanked” consumers are middle class, have high discretionary income, and would be considered prime or super prime borrowers. On top of that, the large Chinese banks have no history in making consumer and small business loans and were never designed for that purpose (they make infrastructure and commercial real estate loans).
We are seeing the leading Chinese companies from a diverse set of industries muscle their way into the fintech sector. This article highlights some of the key players that have made the horizontal jump into fintech.
Ant Financial Services Group is owned by Alibaba Group, the largest e-commerce firm in the world. Ant Financial is focused on serving small and micro enterprises as well as consumers. Ant Financial is the largest fintech company in the world.
JD Finance Group operates seven lines of business: supply chain finance, consumer finance, crowdfunding, wealth management, payment services, insurance and securities trading. JingBaobei is their microlending platform and Baitiao is their crowdfunding platform.
Baidu Jinrong is focused on many different verticals under different brands including consumer finance (Baidu Umoney), wealth and fund management (8 Baidu), payments (Baidu Wallet) and financial asset transaction platform services.
Greenland Group (Stock Code: 337.HK) is one of the world’s largest publicly traded real estate development companies with more than 15 million clients. They are the largest Chinese developer in the US. Greenland Financial was formed in December 2015 and it includes three main business sectors: an online wealth management platform for individual investors; a professional asset allocation and wealth management service for middle-class clients; and a cloud platform to provide internet technology and data analysis services.
Wanda Internet Finance Group leverages Wanda’s offline commercial platform to form a business division comprising of four activities: data application, credit service, online lending and payment, and creating an innovative financial offline-to-online model.
Lufax Holdings is one of the world’s largest and most successful fintech firms. It is owned by Chinese insurance giant Ping An Group. The business consists of three divisions: Shanghai Lujiazui International Financial Assets Commodity Exchange Co (Lufax), Shenzhen Qianhai Financial Asset Exchange Company Ltd (QEX), and Puhui Financial. Lufax offers wealth management and insurance services to its 23 million registered users, QEX focuses on institutional business and cross-border business, and Puhui Financial provides loans to consumers and micro-businesses.
Zhong An is China’s first Internet-based insurance company utilizing Big Data analytics.
Tencent has recently created Tencent FiT (Financial Technology Group), which includes TenPay (payments), WeChat Pay, Mobile QQ Wallet, Tencent Credit Services, and Tencent Licaitong, its money market fund and wealth management platform.
Tencent also launched WeBank, the first online-only bank in China, a joint venture that also includes Shenzhen Baiyeyuan Investment and Shenzhen Li Ye Group.
SinaPay is a social payments solution. Weiquanbao is a social wallet focused on mobile payments. Weicaifu is their Internet financial services company with a focus on personal financial management.
Phoenix Finance is an online platform, established by Phoenix Satellite Television Holdings, to provide intelligent financial services for Chinese investors worldwide.
Do you remember the Ezubao Ponzi scheme that ended in the single largest peer to peer lending fraud of all time? Investors, saw approximately 50 billion CNY or about USD $7.2 billion flushed down the tube. Reportedly 900,000 investors were impacted as an astounding 95% of the loans listed on the P2P lender’s site were said to be totally bogus. Well process kicked off at the end of last year and according to a report from Xinhua, 26 Ezubao executives are now on trial. Proceedings are taking place in No. 1 Intermediate People’s Court in Beijing. Ezubao executives Anhui Yucheng and Yucheng Global and 10 company executives, including Yucheng chairman Ding Ning, have been charged with fraud.
A coalition of 62 financial technology (fintech) firms including Klarna and Trustly and lobbying organizations such as the European Fintech Alliance (EFA) are fighting plans by the European Banking Authority (EBA) to ban screen scraping of customer data from online banking interfaces.
The screen scraping ban would come into force as part of the draft regulatory technical standards (RTS) rule under the European Union’s (EU) revised Payment Services Directive (PSD2) regulation.
Screen scraping is the process of collecting screen display data from one application and translating it so that another application can display it. This is normally done to capture data from a legacy application, such as an IBM mainframe computer for instance, in order to display it using a more modern user interface such as a PC or mobile. However, it can also be used to steal data or, depending on your point of view, legitimately gather business intelligence.
The EBA proposals are meeting fierce resistance from European fintechs that have signed a manifesto to fight the plan.
One of the biggest advantages of using an online P2P lending platform is that the loans are usually cheaper as the platforms operate with lower overheads and software powered automation. The P2P lenders charge money for the platform and doing credit checks for borrowers.
So, if a platform decides the unit note to be valued at $10 and an investor decides to invest $10,000 she’ll end up with 1000 notes to invest in borrowers.
One loan is typically funded by multiple investors. An investor willing to invest 1000 notes can choose to fund 10 different loans with 100 notes each or can mix and match the amount with loans.
According to a PwC report, the P2P lending platforms in the United States issued loans worth $ 5.5 Billion approximately. The global P2P market was estimated at $26.16 Billion in the year 2015. Transparency Market Research predicts the market to grow by CAGR of 48.2% year on year, reaching a whopping $897.85 Billion by the year 2024. Research and Markets expects the P2P market to grow at a CAGR of 53.06% between the years 2016 and 2020. Morgan Stanely predicts the market to be valued at $490 Billion by 2020.
Globally, fintech funding was US$5.5 billion since 11 years ago and can be up to US$78.6 billion now.
According to TechinAsia, the reasons why consumers can adopt fintech are because of it is easy for them to set up an account, in fact, rates and fees that fintech offered are more attractive and cheap. On the other hand, fintech helps SMEs to acquire some funds.
Banks provide many services such as savings, loans, transfer of funds and much more. Some said that banks would disappear in the future. However, as long as bank dominates on lending, investing and deposits, they will sustain in the market. Banks basically will keep the customer’s information and will not easily give it to other parties. So the customer will feel more secure and safe doing the transaction with the bank.
When Prime Minister Narendra Modi announced on November 8 that over 80% of our paper currency would be obsolete thereon, most of the country was left spell bound. While this was a move to discourage and partially halt the flow of counterfeit currency in a supposedly invisible economy, also crippling most industries and investors, there was one industrial sector that sat by the side and smirked – FinTech.
While the ripples of the move are still being felt every now and then, the financial climate is much more stable now than it was 5 months ago.
The first challenge, aided in part by the recent Demonetisation announcement, is that of making the population aware of the ease and comfort associated with online banking and cashless transactions. Not only does this involve an ideological shift, it also requires the population to cross a mental barrier – security.
Looking at it through this lens, it comes as no surprise that a report by Finextra Research Ltd. states that 69% of existing FinTech firms plan on raising their expenditures on content marketing. The scope of development for an online app of such a sort can be exponential, as has been witnessed by the growing popularity of Paytm!
In fact, certain projections point to a 30% decrease in banking employment over the next decade, as the concentration of delivering banking services in person decline with time.
While we have always been used to being dependent on our banking corporations to provide the chunk of capital services that we have always required, over time, it will be these fintech apps that will do the job, with banks holding safe, liquid assets and deposits. The borrowers and savers will now all be available on your smartphone.
While the landscape of lending and borrowing might change when it comes to user experience, the degree and scope of investments will only increase. However, the way we read and process it may change over time. As cryptocurrencies becomes easier to process and handle worldwide, other technologies supporting the development of transactions in such currencies will develop.
As innovation takes the lead while the scope of integration broadens, startups can create a real impact in society through different mediums like the P2P marketplace.
Take Kiva, for example, a wonderful peer-to-peer micro finance website that aims to alleviate poverty by allowing everyday people in developed nations to finance budding entrepreneurs in developing nations. Kiva allows you to make a loan to an entrepreneur across the globe for as little as $25. It is one of the world’s first online lending platform connecting online lenders to entrepreneurs across the globe.
PayActiv is another app that encourages better ways and modes of saving regularly, thereby increasing the independence of many of its users over time.
Banks do not give unsecured loans like personal loans as easily as they do secured loans like home loan or auto loan. They take various parameters into consideration and not everyone can pass the stringent eligibility criteria. Credit score is where most applicants lose out on, especially when half of them have no idea what credit score is in the first place. Lenders are totally dependent on CIBIL (country’s biggest credit bureau) among others to understand customers’ past credit behavior and hence, credit worthiness.
Meanwhile, here are ways to get personal loans despite having low credit score:
Approaching non-traditional or alternate lenders – Qbera offers one such personal loan product that is specifically designed for salaried employees above age 23 with high earning potentials. They offer emergency loans if your CIBIL score is 625 and above.
Having a good salary at present
Getting the help of spouse or other close family member or friend
Applying with the same lender
Applying to lenders that caters to people with low CIBIL Scores – Many online lenders understand that a low credit score doesn’t necessarily translate to low credit worthiness. There could be plenty of reasons for a less-than-ideal score due to technicalities.
P2P lending for personal loans – Quite a popular lending trend in developed countries is peer-to-peer lending, it is not that common in India. Customers haven’t taken to it because the loan amount offered is small while the rates are high.
Work on improving your credit score
Mixing it up wisely – If you have taken more loans, please ensure that you have a wise mix of secured and unsecured loans rather than having only one kind.
Home Capital Group Inc on Monday suspended its dividend, tapped its credit line and added new directors, the latest attempts from Canada’s biggest non-bank lender to restore investor confidence and stem the flow of customer withdrawals.
The company also estimated that the balance in its high-interest savings accounts (HISA) halved in the past week and said it has withdrawn from its C$2 billion ($1.5 billion) credit line for the second time. Home Capital said the balance in its HISAs is expected to slump to about C$192 million on Monday, down 50 percent from a week ago.
News Comments Today’s main news: Nyca Partners raises $125M for second FinTech VC fund Today’s main analysis: P2P lenders lead increase in personal loans. Corporate bond ratings. Today’s thought-provoking articles: Will the UK retain the FinTech crown? United States Nyca Partners raises $125M for second FinTech VC fund. GP:” We are curious to see in which […]
Most consumers open to robo-only retirement advice. AT: “This was a global survey. Be sure to click the link labeled ‘a new survey’ and read a more detailed breakdown of the survey results. As I’d suspect, younger persons are more open to robo-only advice of any kind and older persons are more interested in the best price on services, which often includes robo-advice.”
Morningstar’s corporate credit research highlight. GP: “Most interesting part: The levels in the corporate bond markets are the tightest that credit spreads have registered since the fall of 2014 and are significantly tighter than their long-term averages.”
Will the UK retain the FinTech crown? AT: “This question is asked more and more, since Brexit. But I see no evidence that the UK is losing its ground. However, this interview with Gillian Roche-Saunders is a must-read for its insights in the UK FinTech sector. One interesting comment she made is that the government itself ‘has taken their foot off the Fintech pedal.”
Most people are willing to trust robo-advisors for retirement planning and investment advice, but the majority also want human interaction when it comes to more complex tasks, according to a new survey from consulting firm Accenture.
Sixty-eight percent of people are open to robo-only advice for retirement planning and 78% say they’d welcome it for investing advice, according to a survey of close to 33,000 consumers, of which close to 10,000 were working with a professional wealth or asset manager, in 18 countries and regions conducted in May and June by Accenture.
Nonetheless, Accenture also found that 38% of consumers would switch to Google, Amazon or Facebook for financial advice services, while only 31% would go to one of the tech giants for banking and 29% for insurance.
The levels in the corporate bond markets are the tightest that credit spreads have registered since the fall of 2014 and are significantly tighter than their long-term averages. The average spread of the Morningstar Corporate Bond Index is 42 basis points tighter than its long-term average of +168 since the end of 1998. The average spread of the Bank of America Merrill Lynch High Yield Master Index is currently 187 basis points tighter than its long-term average of +580 basis points since the end of 1996.
Lovell Minnick Partners, a private equity firm specializing in financial and related business services companies, today announced that it has made a growth capital investment in Currency Capital, LLC, an online equipment financing exchange serving owners of small- and medium-sized companies. The investment will support Currency Capital’s growth strategies. Financial terms of the private transaction were not disclosed.
With Currency Capital, borrowers are provided with unparalleled, instant access to financing options from hundreds of lenders with “one click,” making the entire application, selection, approval and funding process simple and transparent.
Currency Capital provided approximately $150 million in loans to customers in 2016. Equipment buyers are also able to purchase equipment for sale by the Company’s industry-leading partners: eBay, Big Tex Trailers, IronPlanet and Proxibid.
Nyca Partners, the venture capital firm focused on the FinTech market, raised $125 million for a second fund. According to a report, Hans Morris, the former Visa president turned venture capitalist, created Nyca Partners in 2014, launching a $30 million fund. The fund invested in a slew of FinTech startups, including Lending Club, SigFig and Orchard. The new fund, which includes 10 institutional investors and 29 limited partner advisors, has made investments in about a dozen startups, including Embroker and Ladder, two insurance FinTechs.
The change in government, and the ramifications of the Brexit decision, has clearly stressed the UK’s prominence in innovative finance. Continental Europe is attempting to take advantage of the decision to depart Europe and Asian business centers, like Singapore and Hong Kong, are seeking to claim the Fintech crown.
Crowdfund Insider: 2016 was a choppy year for some Fintech/Crowdfunding platforms.
Gillian Roche-Saunders: 2016 was a year of highs and lows, and I think it’s fair to say the lows have received more press.
One of my key takeaways from the year is how crowdfunding now feels established as an alternative source of capital.
Crowdfund Insider: What about Peer to Peer lending platforms? You predicted last year there would be more robust rules for online lenders like the handling of client money, vetting, and wind downs. Is that still going to occur?
Gillian Roche-Saunders: What I didn’t predict was that there could be such a disconnect over the definition of peer-to-peer lending activity. The Treasury drafted article 36H specifically to capture the peer-to-peer lending industry’s activities, yet we’ve spent much of the year debating with the FCA whether the industry is actually undertaking that same activity. It could sound like quite a dull and technical debate until you realise that only article 36H loan agreements can go into the Innovative Finance ISA. The knock-on effects of the FCA and Treasury not being joined up on this point are significant for consumers and platforms.
Crowdfund Insider: How is the current political environment for Fintech? Does the government embrace the strategic importance of Fintech for the UK innovation economy?
Gillian Roche-Saunders: If you’d asked me a year ago I would have said that political support was beyond dispute. We had the best ecosystem for Fintech with a regulator and government behind it 100%. I still think we’re heading in the right direction, and let’s not forget it’s been quite a year for the UK, but it does seem as if the government has taken their foot off the Fintech pedal.
Crowdfund Insider: Are you seeing additional Brexit driven concern for Fintech firms? Anyone moving to Paris or Berlin?
Gillian Roche-Saunders: There continues to be a lot of chatter about the Brexit risk, and comments that we will see our talent and companies move abroad. Anecdotally, we have seen the opposite.
As for UK companies, the impact of Brexit will vary depending on the client base. Institutionally focused players, like enterprise tech and Regtech firms, may find their client base moving overseas and need to follow. The challenges in operating in a truly cross-border way have meant that crowdfunding hasn’t been reliant on Europe and that is likely to insulate the industry now.
Crowdfund Insider: What are your predictions for 2017 regarding alternative finance? Another year of growth & innovation or consolidation?
Gillian Roche-Saunders: It’s stating the obvious but 2017 will be the year of the Innovative Finance ISA. Many firms have been laying the groundwork on that for quite some time but we’ve seen a real spike in activity since autumn.
We can certainly expect more innovation generally. As platforms continue to compete for profile and customers, new opportunities to differentiate will be taken up. It will be interesting to see if there is more cross fertilisation between the lending and investment models. We’ve advised clients to focus on one route or another initially – the FCA may treat both sectors under the broad church of crowdfunding but the models are very different – but this year may be the first time when bringing together both under one roof makes sense.
CROWD2FUND is rolling out a white label solution for institutions wishing to expand into peer-to-peer lending.
The platform, which is one of only four P2P lenders to offer the Innovative Finance ISA, is already in talks with potential partners.
Institutions – such as investment firms – will be able to use Crowd2Fund’s “Powered by” feature to operate as a P2P platform under their own brand. Crowd2Fund says it has already seen “significant demand” from institutions looking to leverage their customer base, although it declined to name which ones.
The latest Quarterly Consumer Credit Demand Index from credit agency Veda shows the number of personal loan applications for the December 2016 quarter was 12.4 per cent higher than the December 2015 quarter.
There was a significant pick-up in the growth of personal loan applications in all states and territories, led by NSW and the Northern Territory with an increase of 14.5 per cent, Queensland with 13.1 per cent and Victoria with 12.5 per cent.
Overall consumer credit applications are up 7.7 per cent, with credit card applications rising 3 per cent and mortgage applications up 6.6 per cent.
However, the Veda figures reveal wide geographic variations with mortgage applications.
They were 14.9 per cent higher in the Australian Capital Territory, 11.2 per cent higher in Tasmania, 10.6 per cent higher in Victoria and 9.6 per cent higher in NSW.
However, in Western Australia, applications were 10.6 per cent lower and 10.8 per cent lower in the Northern Territory.
Israel’s Finance Ministry released a draft version of a proposed law Monday that would encourage online peer-to-peer lending by creating a regulatory framework for it. The new law will also create protections for the people lending money through P2P websites, as well as for the borrowers – a move the treasury hopes will give the nascent industry more legitimacy and enable it to become a more serious competitor to the banks and credit card companies.
The Capital Markets Authority will be responsible for enforcing the proposed regulations.
News Comments Today’s main news: MPL securitization tracker Q4 2016. Today’s main analysis: Mobile payments patent landscape. Today’s thought-provoking articles: Orchard updates online lending infographic. China Rapid Finance vows to triple number of users. 2016 breakout year for Canadian MPL. United States MPL securitization tracker Q4 2016. AT: “Securitization continues to grow. This is a trend that […]
New data on online lending in 2016. AT: “I think it’s interesting that 1/3 of borrowers choose a loan provider with the fastest funding time. It’s also interesting that “inorganic channels” produce a 30% higher default rate within the first three months of the loan.”
Top 10 FinTech predictions for 2017. AT: “Some of these are no-brainers, but I was particularly intrigued by the mention of LendingClub and Facebook as direct competitors. On closer scrutiny, however, it does make sense.”
We encourage readers to take a look at our Outlook section highlighting challenges and opportunities for investors in the year ahead.
Here are some highlights:
Marketplace lending securitization remains a bright spot in the ABS market. Total issuance topped $2.4 Bn this quarter with cumulative issuance now totaling $15.1 Bn. Total issuance for 2016 came in at $7.8 Bn, as compared to $4.9 Bn in 2015, a 59% increase.
Although MPL origination volumes have declined at some platforms, the percentage of loans funded through ABS is at a record high of 70%.
The movement towards rated securitizations at larger transaction sizes continues. Further, the growth in average deal size continued, growing to $252 Mn in 2016 as compared to $35 Mn in 2013.
New issuance spreads continued to tighten in — a credit friendly environment for securitization. In 2016 we saw moderate spread compression across senior classes, indicating stable investor appetite for MPL ABS paper in the market.
We estimate $6.3 Bn to $11.2 Bn MPL ABS issuance for 2017. Goldman Sachs, Morgan Stanley, and Citi take top positions on the league tables.
Ratings Agencies grow increasingly comfortable with assessing MPL risk. Kroll provided the first rating for a securitization of Madden-Midland loans. DBRS tops the league tables in ratings activity.
We expect higher volatility from rising rates, regulatory uncertainty, and an exit from a period of unusually benign credit conditions. Platforms that have sustained low-cost capital access, can build investor confidence via 3rd party tools, and have strong risk management frameworks will grow and take share.
The following data includes borrower behavior on choosing a loan, average loan size by credit score, conversion rates, average time to fund, top platforms and loan performance. Some key data points include:
Over ⅓ of borrowers choose the originator with the fastest funding times, not the originator with the lowest APR
The top 4 originators with the fastest funding times also have the highest take rates (percentage of borrowers who ultimately accept the loan offer once the borrower is approved), which is between 20-30%
Average time to fund a loan is 4.55 days
The average loan size is:
Excellent Credit – $15,684
Good – $10,928
Fair – $9,765
Borrowers sourced via “inorganic channels” (display ads, performance marketers, etc.) have a 30% higher default rate within the first 3 months
EquityMultiple, a real estate crowdfunding platform, describes itself as the only online investing platform backed by an established real estate company – Mission Capital. This relationship provides a solid backstop that can help with access to deals and institutional horsepower. While Mission Capital does big deals, EquityMultiple sees itself as a perfect fit in matching accredited investors to opportunity in the $2 million to $30 million range.
Charles Clinton: To date, EquityMultiple investors have invested in 18 offerings (16 closed, two still live). Total investment for Q4 looks like it will more than double Q3 and, overall, total investment on the platform has tripled since the end of Q2 of this year.
Charles Clinton: For deals that are already cash-flowing, annualized cash returns are over 10%. This includes fixed-rate investments in senior loans, fixed rate preferred equity investments and distributions from cash-flowing equity deals.
Charles Clinton: Nearly 100% of our investors are individuals and non-institutional entities and trusts.
Charles Clinton: Investors have the added comfort of knowing that the Mission Capital senior leadership in involved in the sourcing and vetting of our deals.
“Lenders don’t want to support industries that they feel are in nefarious markets,” says Ryan Conti, the Customer Success Director at Fundera who manages the team advocating on behalf of small business owners who need funding. “Even though alternative lenders are more open to different businesses and models than banks are, there are certain industries that no one will touch.”
The next most common reason for being blacklisted is operating in some sort of speculative industry.
Since many lenders haven’t been around for an especially long time, their data is often contained within the last 10 to 15 years—sometimes as few as 5 years—and the housing market is one of several that did exceptionally poorly during the recent economic downturn. The decisions created by these lenders’ algorithms reflect that.
This is where things get more nebulous. Those algorithms we mentioned are unique to each lender, so their decisions about whether to lend to your business can differ depending on which lender you go to. The same business might get different answers from different lenders because each one has their own preferences—influencing the industries and locations they finance, and the rates they give these businesses.
One preference for many lenders that often doesn’t require their algorithm: any sort of other lending service, like check cashing or bail bonds. If you do lending, lenders would rather lend directly to your customers instead of starting a chain with you as a middle link.
This is why many enter the alternative lending space, where thousands of non-bank lenders—like peer-to-peer lending sites or companies that have secured their capital through wealthy individuals—can provide a lifeline.
A great example of restaurant crowdfunding comes from Manu Alfau, chef and owner of La Bodega in Seattle, Washington. Manu used his existing customer base to raise $9,000 to build an outdoor patio. For gifts, he offered parties and food from La Bodega — things that he already knew his supporters would love.
For startups, one advantage of crowdfunding is the opportunity to make people feel like they are truly invested in the success of your business. Simply put, crowdfunding is a way to create a sense of community ownership, which is incredibly important when it comes to sustaining a small business.
It’s great to have a bold plan when you are crowdfunding but you’ll need to understand how much you can raise from your crowd. Think carefully about what funds you need for your idea and how you can create a network of people who’ll be interested in supporting your idea.
When you are crowdfunding you need to know if you have access to email databases – and don’t forget social media.
Some of the best crowdfunding campaigns in the world have had a solid timeline and plan behind them. This means you know exactly what is going to happen at each of the stages of your crowdfunding campaign. Break it up into segments, give yourself targets and milestones, set reminders to update your backers, know when you’ll be emailing your database, sharing great social media updates and images.
According to a report by market intelligence firm International Data Corporation, the worldwide annual transactions volume of mobile payments is expected to cross US$ 1 trillion in 2020 from US$ 500 billion in 2015.
The patent landscape of mobile based payments should help in putting things into perspective. Fintech companies are ruling the patent realm. Visa and Mastercard dominate with over 300 worldwide patented inventions each. PayPal is expanding its digital presence by investing huge in acquiring promising startups. In 2015 alone, it bought four startups including Xoom Corp., a digital money transfer company for US$ 890 million and Paydiant, a mobile wallet company for US$ 280 million. With such acquisitions and strategic partnership with Mastercard since 2007, PayPal is clearly one of the strongest mobile payments contender.
Apple is placed at 13th position with respect to number of inventions but 2ndwhen it comes to the total number of patent publications (issued patents and pending publications). Samsung appears as the strongest competitor with 86 inventions and is placed ahead of all tech players. It acquired LoopPay, a mobile payments startup in 2015 for US$ 250 million and immediately rolled out tap-n-pay feature with its Galaxy S6. With this, Samsung is taking on potential market capturers like Apple Pay, Google Pay and PayPal-Mastercard partnership.
$50 million in financing from the British Business Bank landed at Funding Circle, on the condition that the funds be used to finance SMEs, reports said this week. The investment by the BBB in the alternative lender signals support from the state-run bank for the industry overall, though the BBB is also working to introduce stricter requirements for firms like Funding Circle to protect both investors and borrowers. The latest investment round brings the total funds the BBB has provided to Funding Circle up to more than $122 million, reports said.
$4.7 million has been financed to startups via a new venture fromInnoVen Capital, an India-based venture capital company that formed its Credit Assistance Program.
60 minutes is all it takes for Barclays to approve of an SME loan, thanks to the launch of its newest small business lending service on the mobile app.
60% of SME invoices are paid late in the U.K., a statistic that Amicus Commercial Finance said reveals the need for small businesses not only to diligently manage cash but to access external financing when clients don’t pay up.
1.67% fewer SME loans slid into delinquency last November, according to the most recent Thomson Reuters/PayNet Small Business Lending Index.The data revealed the first increase in SME lending in the U.S. in six months, with the change in delinquency rates marking the first decline in a year or so, reports said.
1 new SME lender enters China, thanks to certification from the China Banking Regulatory Commission. Reports this week said the CBRC has allowed Yilian Bank to begin lending to small and micro-sized companies.
Internet of Things (IoT), Wearables, Smart Home and Connected Car will bring massive change to the Fintech industry forever.
The death of privacy is upon us – sorry for the news flash. We don’t need to look too far to get a glimpse of the future. To receive a microloan in China, you need your photo, personal email credentials and your last 60 days of mobile call logs.
The mobile device will be required as the basis for Continuous-Authentication-As-A-Service for all forms of financial transaction.
The rebirth of trust is upon us with the advent of distributed ledger. For my marketplace lending friends… can we not solve the “Stacking” issues now with distributed databases?
As the genre of Insurtech grows, there will be an explosion of shared risk platforms where people find likeminded folks to insurance each other in the forms of Micro Insurance. A dollar a day could provide coverage for many of life’s little inconveniences.
Marketplace Lending, Insurance Platforms, Payment Systems are not going to gobble up smaller competitors. Instead, these firms will be looking for opportunities for vertical integration.
LendingClub and Facebook are definitely competition for the same eyeballs. Creditors should turn themselves into “APIs” and vertically integrate themselves into every social media platform to extend credit.
Generation Z is now the biggest population cohort in the United States (70 Million+). Generation Alphas are getting their first with the iPad, iPhone, and Apple Watches as we speak. Their concept of credit, wealth management, and living habits will be dramatically different than how we look at currency and leverage today.
It is increasingly difficult for a Wealth Manager, Investment Advisor to steer consumers into ill-fitting products. The platforms with the most transparent set of insight for their consumers will win in FinTech.
It is increasingly difficult for a Wealth Manager, Investment Advisor to steer consumers into ill-fitting products. The platforms with the most transparent set of insight for their consumers will win in FinTech.
Although real estate markets have seen quite a bit of negative attention throughout 2016, it is still one of the most profitable alternative investment markets.
One of the most obvious choices for alternative financing is gold.
An emerging trend in the financial sector is peer-to-peer lending, also referred to as social lending. At its core, a borrower gets loans at far better rates than what banks can offer. Lenders will earn higher returns compared to storing funds in bank accounts. But without an authorized body to oversee this activity, a lot of people tend to overlook these opportunities.
Bitcoin was the best performing currency in recent years. Interested parties can opt for centralized or peer-to-peer exchanges to buy and sell cryptocurrency without friction.
The lending platform revealed it lent over £680 million to help 20,000 customers improve their home and 29,000 buy a car.
Receiving awards: Named Moneywise ‘Most Trusted Loan Provider’ for the seventh year in a row, the Moneyfacts ‘Best Personal Loan Provider’ for the second year in a row, the MoneySuperMarket’s ‘Best Personal Loan Provider of 2016,’ AltFi’s Editor Choice Award and F5 Awards’ Best P2P Lending Platform.
New Partnerships: Became partners with Airbnb, Unshackled, and Partiti.
New Products: Launched Zopa Access, Zopa Classic, and Zopa Plus.
This week, co-founder and chief executive of Crowdstacker, Karteek Patel, revealed the lender’s Innovative Finance ISA (IFISA) has attracted £1 million from investors each month.
During a recent interview, Patel stated three out of four Crowdstacker’s investors have now lent through the IFISA. He noted that 50% of the lender’s investment came through the IFISa and he expects more take up as the ISA season approaches this April.
According to recently released figures from the Bank of England, savers are missing out on up to £21 billion of interest by using cash ISA deposits.
As at 31 October 2016, the value of all cash ISAs held in banks and building societies was £271 billion. The interest rate drop in October to 0.25 percent, now means that the highest return on easy access cash ISAs is around 1 percent, resulting in a cumulative annual yield of £2.71 billion.
Crowd2Fund, a directly regulated FCA peer-to-peer lending platform, is one of just a handful of platforms to have been given full approval, and have rolled out their IFISA. Within its first six months of operation the number of registrations on the platform increased by 500 percent, when compared with the six months prior to launch.
Three out of 10 IFISA investors on Crowd2Fund have transferred an existing ISA to the IFISA. Transferring is done by filling in a short form from IFISA providers and once this is completed, existing ISAs should be transferred by your old ISA provider in around 10 days.
Balshore Investments, based in Gibraltar, owns a £20m stake in YouGov, co-founded in 2000 by Nadhim Zahawi, the Tory MP for Stratford-on-Avon. It has invested in Crowd2Fund, founded by Chris Hancock, the brother of the culture minister, Matt Hancock.
As minister of state for skills and enterprise in 2013, Matt Hancock worked in the government department responsible for setting up the regulatory framework for crowdfunding.
Zahawi has praised peer-to-peer lending. In one parliamentary debate, he intended to call on businesses to look “beyond the monopoly of the high street banks, at equity options and at some of the innovative new online platforms, [such as] crowdfunding and peer to peer”.
Gwynne said the issue raised concerns about the government’s commitment to cracking down on offshore tax havens.
The P2P lending legislation was about six months in the making. Mitkus says that the team drew upon the expertise of other European jurisdictions, particularly London. He adds that Lithuania is the first country in the Baltics to introduce the national P2P lending regulation, and it will also be among the first ten countries in the EU to regulate crowdfunding on a national level.”
Marius Jurgilas, board member of Bank of Lithuania (the country’s central bank and regulator), points out that the government and the central bank are under a lot of pressure to improve the competitiveness of the financial services market, especially post-financial crisis. At present, 90% of the retail banking market share belongs to three international banks – SEB, DNB and Swedbank. The fintech industry is hoped to diversify the banking sector and boost competition, Jurgilas says.
To this effect, Bank of Lithuania has recently signed a memorandum of understanding with UK-based payments and fintech start-up Revolut.
Revolut, which offers e-transfers, currency exchange, card payments and cash withdrawal across Europe, intends to set up a financial institution in Lithuania and obtain a banking licence. Bank of Lithuania will provide Revolut with access to its managed payment systems enabling cross-border payments in euro.
China Rapid Finance (CRF), the mainland’s largest online consumer lending platform in terms of the number of loans transacted, is looking to triple the number of users this year as it looks to create a business on par with a major commercial bank’s credit-card division.
Zane Wang Zhengyu, founder and chief executive of CRF, told the South China Morning Post that the company would be impervious to the challenges facing other peer-to-peer (P2P) operators on the mainland, and would continue to bolster its online consumer lending businesses in accordance with Beijing’s financial reforms.
CRF, founded in 2010, has 1.2 million borrowers on its platform at present. Wang , however, has set his sights high and wants the firm to have about 3 million borrowers.
One group of companies that represents a significant sub-sector of FinTech in Canada, is the on-line, or Marketplace Lending (MPL) sector.
Financeit purchased over $400mm of Home Improvement assets from TD Bank this fall, after completing 2 equity financing rounds during the year, led by Goldman Sachs and the Prisker Family.
Borrowell partnered with CIBC, Thinking Capital with BNS, Lendful with Alterna Bank, Grow with several BC and other western Canadian credit unions, and US SME lender Kabbage partnered with BNS.
SME lender Lendified became the first Canadian Marketplace Lender since CommunityLend (now Financeit) to apply for and receive an Exempt Market Dealer license to sell debt securities backed by Lendified SME loans to Accredited Investors, under the new OSC Launchpad initiative.
Elsewhere, we saw equity financing rounds for Progressa, Fundthrough and Healthsmart, IOU Financial launched in Canada, Wellspring was re-born as Flexiti, and First Access, a non-prime auto lender based in Alberta, expanded their funding base with credit facilities provided by ATB and Ares Management.
Based on what we saw in 2016, and on-going dialogue and interaction we have with the vast majority of participants in the Canadian on-line and MPL lending sectors, we have a few predictions for 2017:
News Comments Today has a lot of interesting news and analysis : A $1bil fund launched focused on marketplace lending; a very interesting study of SoFi’s cost of capital and their plans; Scott Sanborn answer to Bloomberg; Morningstar is now a rating agency; and KBRA upgrades Kabbage securitization rating. Very interesting UK data : Zopa’s […]
$ 1 bil fund launched: River North Marketplace Lending Corp, (Peer IQ Newsletter), Rated: AAA
Last week saw the final registration and approval for River North Marketplace Lending Corp, a non-listed, closed-end, 1940 Act fund fully dedicated to the marketplace lending sector. Registration docs can be found
We were disappointed to read your article entitled “How Lending Club’s Biggest Fanboy Uncovered Shady Loans” in which you mischaracterize several attributes of the Lending Club platform.
Your reporter Max Chafkin opens his story by citing “critics” who claim Lending Club is a “credit crisis waiting to happen.” He cites neither evidence nor critics beyond a single disgruntled investor.
Far from precipitating a crisis, Lending Club has helped consumers to save $1.4 billion in lower interest payments and enabled investors to earn an average of 5 percent to 9 percent, which compares very favorably with alternatives.
As to the claim that by not identifying borrowers who have two loans, investors are “leaving money on the table,” this reveals a misunderstanding of how our platform works.
Loans are priced according to the borrower’s credit profile at the time the loan is taken out, so a borrower may have two loans with different rates. As an example, if a borrower uses their loan to pay off existing credit card debt, their FICO score would likely improve. If they take out a second loan — we allow a maximum of two concurrent loans with a maximum exposure of $50,000 — they may reasonably get a lower rate. Our approach ensures interest rates are fair to both parties.
We acknowledge the criticism stemming from recent events and view this as an opportunity to make Lending Club a stronger company. It’s unfortunate that your article focused on the unsubstantiated opinions of a single investor, rehashing issues we have already disclosed, when in fact Lending Club has enabled significant financial benefits for millions of people.
Chief Executive Officer of Lending Club
A study of SoFi’s securitization characteristics, (Peer IQ Newsletter), Rated: AAA
The online student loan sector continues to grow rapidly, with total origination to date now exceeding $10 billion.
SoFi leads this segment, with $7 billion originated since its launch in September 2011.
Interestingly, more than other segments, securitization plays a major role in financing student lending. All leading platforms rely on it heavily, with over 50% of originated loans financed through the ABS markets (Exhibit 1).
Source: PeerIQ, DBRS, Securitization Prospectus
SoFi has a Significantly Lower Financing Cost
Source: PeerIQ, DBRS, Securitization Prospectus
Each platform has a mix of different sources of capital—securitization, warehouse funding, retail deposits and others. Here, we use securitizations as a proxy for overall financing cost of the collateral. We look at the Senior Floating Coupon tranches of the recent securitizations by SoFi, Earnest, DRB, and CommonBond. These tranches have a standard interest rate benchmark of 1-Month LIBOR; they are also structurally similar across all platforms. Investors can use spread over 1mo LIBOR to gauge relative value and risk across various shelves.
SoFi has a much lower financing cost than other lenders in this category (1.10% as compared to 1.80%-2.20%). This lower cost is due to many factors. Structurally, SoFi benefits from high over-collateralization, as well as a lower WAL. This lower WAL of SoFi is due to several features that allocate payments to subordinate tranches differently as compared to structures used by other platforms. Further, SoFi also benefits from the strong history of repeat issuance and good execution, thus enjoying the confidence, as well as broad participation, from ABS investors. The implementation of a robust, routine securitization platform, with the benefit of great data management and analytics for enhanced investor confidence, will be a major driver in driving funding costs lower.
Morningstar Credit Ratings, LLC, a subsidiary of Morningstar, Inc. (NASDAQ: MORN) and a nationally recognized statistical rating organization (NRSRO), today announced the Securities and Exchange Commission has authorized Morningstar Credit Ratings to rate corporate issuers and financial institutions under its NRSRO registration.
“Morningstar has a long tradition of providing investors with independent and robust research and ratings on all types of investments. Over the past several years, investors have come to rely on our ratings and analysis in the structured finance markets,” Vickie Tillman, president of Morningstar Credit Ratings, said.
“The expansion of our NRSRO registration to corporate issuers and financial institutions allows us to bring transparency and unique forward-looking perspectives to investors and issuers and provides a compelling alternative to the other NRSROs. Investors will also benefit from the ability to use our ratings to satisfy investment guidelines and determine risk-based capital charges on corporate debt securities.”
The corporate credit analyst team will continue to provide research, ratings, and analysis for corporate entities. The company will pursue rating assignments for security-specific corporate debt offerings, unsecured real estate investment trust debt, and financial institutions.
Morningstar Credit Ratings, LLC is a nationally recognized statistical rating organization (NRSRO) offering a wide array of services including new-issue ratings and analysis, operational risk assessments, surveillance services, data, and technology solutions.
Now the first CMBS deal to be compliant with the U.S. risk retention rules governing commercial mortgage-backed securities has hit the market – and it’s highly significant because it helps commercial real estate players begin to answer some of these questions.
The risk retention rules, legislated under the Dodd-Frank Act, go into effect Dec. 24, which means the time to figure out how to comply is now.
The new deal, Wells Fargo Commercial Mortgage Trust 2016-BNK1, is a conduit deal with an initial pool balance of $870.6 million and includes 40 commercial real estate loans secured by 46 properties, according to a preliminary prospectus filed with the SEC this week.
This CMBS deal is a “landmark securitization,” the Kroll Bond Rating Agency said in its pre-sale report on the deal. Kroll described the deal as having a “vertical” structure, one way of structuring deals so that they comply with the new regulations.
The Wells Fargo deal, in other words, is important because it could potentially serve as a model for other CMBS players trying to figure out how to structure deals that would meet the demands of the Dodd-Frank risk retention rules. These are also known as “skin in the game” restrictions because they aim to increase accountability by requiring sponsors (or their majority-owned affiliates) to hold on to an interest of at least 5%.
KBRA Upgrades & Affirms Ratings on Kabbage Funding 2014-1 Resecuritization Trust, (Email), Rated: A
Kroll Bond Rating Agency (KBRA) upgrades and affirms ratings on certain Resecuritization Trust Certificates issued by Kabbage Funding 2014-1 Resecurization Trust. As part of this rating action, KBRA upgraded the rating on the Class A2-2 Certificates from BBB+(sf) to A-(sf). The rating upgrade is based on structural improvements to the transaction’s concentration requirements and the existence of more historical data relating to Kabbage’s collateral. KBRA is also affirming the ratings on the Class B2A Certificates of BB-(sf), Class B2B Certificates of BB-(sf) and Class B2C Certificates of B+(sf), which were initially rated in November 2015.
The transaction is a resecuritization of notes issued by Kabbage Funding 2014-1, LLC. The Kabbage Funding 2014-1 Resecuritization Trust is a pass-thru structure and the underlying transaction is backed by a pool of short-term small business loan receivables. As of May 31, 2016, the portfolio had an adjusted pool balance of approximately $338.7 million with a weighted average remaining term of approximately 5 months.
Please click on the link below to access the full report:
Social Finance Inc., an online lender branching out from its original focus on student loans, has hired a nearly two-decade veteran of Wells Fargo & Co. as its new chief risk officer.
Kevin Moss has joined SoFi, a representative for the company said, after retiring last year from Wells Fargo, where he was chief risk officer for the bank’s consumer lending business, according to his LinkedIn profile. SoFi’s co-founder and chief executive officer, Mike Cagney, is a former Wells Fargo employee himself. He has said that his goal is to revolutionize the banking system, and that he intends to “kill banks.”
The company has started making personal loans and mortgages, and is considering offering wealth management services, deposit accounts, and insurance, Cagney told Business Insider in December.
To be more precise, blockchain investments beat all other sectors in the Fintech sectors when looking at the 2015 numbers. Half of the 2015 Fintech funding went to distributed ledger companies, and two in three firms successfully raising money are actively developing blockchain solutions.
The CEO of London stockbroker finnCap believes big banks are at risk of Uber-style disruption from startups more in-tune with the outlook of millennials unless they take drastic action to adjust their internal cultures.
Smith is not the only person to warn of possible Uber-style disruption in banking. Former Barclays CEO Antony Jenkins predicted a “Uber moment” for banking last year and even the Bank of England has mentioned the car-hailing app in relation to financial disruption.
“You look at the big investment banks — where does any one of them say their mission is anything other than making money ? Culturally, I think that’s a massive, massive problem.”
As Monzo co-founder and co-CEO Tom Blomfield (who previously founded GoCardless) was unveiling the new name yesterday evening at an event held at the startup’s London office and live streamed on YouTube, little would he have known that somebody at rival Starling Bank had registered the domain name “getmonzo.co.uk” — a domain unfortunately similar to the startup’s existing “getmondo.co.uk”.
What most visitors won’t be aware of is that the latter is a bit of an in-joke between Monzo’s Blomfield and Starling’s Boden, since Starling Bank itself changed its name from BankPossible and the two challenger bank founders have a history.
And fun the Starling team had, with lots of self-congratulatory re-tweets appearing as fintech industry watchers and Monzo users, who were actually asked to crowdsource the new name, began to notice the prank. “Fans of Monzo and Starling joined in. It’s a great community doing something exciting,” adds Boden.
The several law firms have filed class-action lawsuits on behalf of shareholders of Yirendai (NYSE:YRD) who acquired shares at some point during 2016 – some of the filings are specifying date ranges.
The reason this is interesting is that these law firms are faulting Yirendai for actions taking by the Chinese government. If your Mandarin is any good you may read them here. To quote one filing (they are pretty similar):
“Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects.”
While the news of the new rules is still settling in, initial reports appear to indicate that larger, better-capitalized platforms will do fine. It is the smaller, undercapitalized platforms that are in for a bit of a shake out.
Millennials, countless surveys will tell you, are not fans of big banks. They are smart, price-sensitive consumers who are far more likely than older customers to switch lenders if they find a better deal.
They are also a huge, irresistible demographic for the financial industry, which is why banks do everything possible to ensure that these digitally native customers stay loyal once they’ve pinched their noses and opened accounts.
his latest offering from Chase, the U.S. consumer, and commercial banking arm of JPMorganChase & Co., is in partnership with digital car-buying service TrueCar. Called Chase Auto Direct, it layers auto financing onto online car shopping: Approved borrowers that applied via smartphone or computer are routed to a network of Chase-affiliated dealerships that have the car they want; they walk in to find their paperwork ready. Chase Auto Direct is available for Chase customers in 30 states and will roll out to all 50 states next year.
The numbers revealed that despite loans disbursals more than doubled, rising from £265 million disbursed in 2014 to £532 million, and revenues for the year increased £11.5 million in 2014 to £20.6 million, the company experienced net losses of 8.9 million, which is a 45% from 2014 (which had a £6.1 million loss).
The company reported that its headcount increased significantly during the year, going from 70 people in December 2014 to 157 in December 2015.
Zopa noted some of its accomplishments in 2015, including it, topping £800 in loans (over $1.16 billion for the Yanks) and has returned £50 million in interest to investors and becoming the first UK peer-to-peer lending platform to surpass £1 billion (about $1.564 billion) in lending.
Janardana went on to add that he and his team expect 2016’s fourth quarter to be EBITDA positive.
They also believe the company is on track to be profitable in 2017.
In April, the U.K. government launched the Innovative Finance Savings Account (IFSA), which, according to a report from Business Insider Intelligence, “allows UK consumers to invest up to £15,000 ($20,000) in alternative finance platforms and get tax free returns.” Options open to U.K. consumers include peer-to-peer (P2P) platforms.
According to the data, the government’s new IFSA has resulted in “a significant uptick in business” for peer-to-peer lenders that have been approved by the Financial Conduct Authority (FCA).
One of those approved is Crowd2Fund, a P2P lender specializing in lending to small businesses, which has seen a 667 percent increase in funds added to the system and a 373 percent increase in new investor registrations.
Government organizations are increasingly taking advantage of new technology breakthroughs and trends bylooking tocrowdsourcingas a way to spur innovation and decrease costs.
Since its incorporation in May 2014, Harmoney has charged borrowers a ‘platform fee’ that is added to all loans funded through its platform.
Before December 2015 Harmoney set the fee at a percentage of the amount borrowed. The Commission’s view is that the platform fee is a credit fee under the Act, and that Harmoney is a creditor. Harmoney says it is not a creditor, and that the fee is the revenue it earns for running its loans marketplace.
If the Court finds that the platform fee is a credit fee, the CCCFA requires the fee to be reasonable and only cover the lender’s transaction-specific costs, as recently confirmed in the Supreme Court’sMTF/Sportzone ruling.
In March 2014 the Australian Parliament rubber-stamped new Credit reporting & Privacy Laws that enabled Credit Providers (CPs) and Credit Reporting Bureaus (CRBs) to commence voluntary Comprehensive Credit Reporting (CCR).
Australian lenders are well behind on CCR, much to the detriment of Australian borrowers, argue many fintech startups. Compared to the major four banks, fintech CPs suffer from large information asymmetries when it comes to assessing the credit risk of a potential customer.
Many new lenders claim that if they were provided with access to repayment histories and a more detailed breakdown of the lending obligations a customer has outstanding, loan pricing could be far more discretionary and potentially cheaper for a vast number of Australians.
So if CCR data is generally positive for both sides of the lending/borrowing equation, why is the Australian financial sector dragging its feet?
Most likely because this stranglehold on customer data is one competitive moat incumbent financial institutions are relying heavily on going forward. And it certainly is a deep and powerful moat at that.
While many lenders are innovative at the front-end, it’s hard to be truly innovative at the back-end (where credit assessment takes place) when data isn’t readily available.
It has now been a solid two years plus since the new legislation came into effect. Given the opaqueness of CCR implementation across the lending sector, it is unclear how effective the call for voluntary participation has been.
Pre-election, the Labor Party campaigned on driving mandatory CCR. If it keeps the heat on for a Royal Commission into the banking sector then this byproduct issue may get some national attention.
In the Interim Measures for the Administration of Business Activities of Online Lending Information Intermediaries, one of the most notable parts is the limits on the amount that individuals and companies can borrow.
Specifically, the cap for individuals is set at 200,000 yuan ($29,989.50) from a single P2P platform and 1 million yuan from multiple platforms. Companies and other organizations are limited to borrowing up to 1 million yuan from one platform and 5 million yuan from multiple platforms.
Looking at international practices, Li noted that some Western countries have set borrowing ceilings for online lending. For example, in the US, companies can borrow no more than $300,000 from P2P lending platforms. [ Comment: I am not aware of this limit.]
“Nevertheless, even for supporting MSMEs, the lending caps are quite low,” Gao told the Global Times on Friday.
Many P2P lending platforms have let their users borrow way more than the new regulations allow. The website wdzj.com keeps data on the average amount of money borrowed by individual users on 851 P2P platforms. On 72.74 percent of those platforms, the average individual user had borrowed more than 200,000 yuan by the end of July, according to the site’s data. On 46.06 percent of the platforms, the average individual user had borrowed more than 1 million yuan.
Domestic news portal chinatimes.cc on Saturday cited the example of a Shanghai-based P2P platform, which issued 116 million yuan in loans to 92 MSMEs in 2015, with the average loan amounting to 1.26 million yuan, well above the 1 million yuan cap.
Along with the lending caps that are expected to curb the P2P lending business, the new rules also defined the nature of P2P platforms as information intermediaries, rather than credit intermediaries.
Theoretically speaking, classifying P2P platforms as information intermediaries mean that they can’t implicitly guarantee investors’ money, which contradicts the current assumption that the platforms are responsible for investors’ funds, said Luo Mingxiong, president of Beijing Jingbei Crowdfunding Technology Co and director of the Institute of Internet Finance at Shanghai Jiao Tong University.
Given the new classification, however, P2P platforms will no longer be allowed to directly or indirectly guarantee investors’ principal and interest. They are also not allowed to pool investors’ capital or use the money for their own operations, so they will need to set up custodial accounts at third-party banks.
Since the CBRC released the rules for public comment in December 2015, P2P platforms have started to get bank custodians. Yet, as of August 15, less than 3 percent of the P2P platforms had signed custodian agreements with banks, the Securities Times reported on Saturday.
Luo attributed the slow progress to banks’ reluctance to provide custodian services to P2P platforms.
Those without a credit history or parental approval can borrow money to buy a smartphone, pay for holidays, or get the latest sneakers through a raft of apps such as Fenqile. The market leader, whose name literally means Happy Installment Payments, has 50,000 part-time marketers across more than 3,000 universities and proudly touts the slogan “Wait no more; love what I love.”
In the last three years, tens of millions of students have taken out micro-loans with the tap of a button to buy things.
The apps sell everything from cameras to concert tickets sourced from third-parties, charging students annualized interest rates typically above 10 percent. The loans are then packaged and sold to wealthy individuals, who find the expected return of as much as 10 percent much more attractive than the central bank’s benchmark savings rate of 1.75 percent.
Unable to afford the $450 smartphone he had been eyeing, the college sophomore from the southern province of Fujian turned to Fenqile, which allowed him to pay $42 per month for a year at an annualized interest rate of 12 percent. By the end of his junior year, he was also borrowing from six other similar apps and accumulated debt of more than $7,500, the equivalent of 10 years of tuition.
Xiao Wenjie, chief executive officer of Fenqile, said in an interview that the industry was not regulated in the past two years, leading to “disorder” that caused officials to impose recent regulations.
Fenqile, founded in 2013 by Xiao, a former executive at Tencent Holdings Ltd., says it has a 60 percent market share. It counts JD.com and Yuri Milner’s Digital Sky Technologies among backers who have invested tens of millions of dollars each. Fenqile raised another $235 million from investors in June.
The student-targeted marketing has proven highly effective. Fenqile had $1.6 billion in loan volume in the first half of 2016 and projects $4.5 billion for the year, while Qudian crossed the 10 million-user threshold in June, according to the companies.
Lending to students sprung up after authorities tightened rules on credit card use in 2009, such as requiring co-signers for student accounts that had been promoted by banks.
Aixuedai, a lending app founded in 2014 by former Alibaba employees, raised $45 million in December from a fund jointly established by Bank of China and the state-owned Zhejiang Railway Investment Group. Fenqile has started selling securitized student loans to Chinese banks and other investors and will gradually link all of its user profiles to the central bank’s credit system as it seeks to serve the hundreds of millions of people who don’t have credit cards, Xiao said.
News Comments Dear readers, today I was traveling all day for my other company Lampix (www.lampix.co) . Unless I am traveling, I aim to send the daily Lending Times at 1pm EST. I was able to do so reliably for sometimes and will continue to aim towards 1pm EST daily. United States Lending Club’s CEO, Scott […]
Dear readers, today I was traveling all day for my other company Lampix (www.lampix.co) . Unless I am traveling, I aim to send the daily Lending Times at 1pm EST. I was able to do so reliably for sometimes and will continue to aim towards 1pm EST daily.
In the UK’s version of today’s comedic note: JustUs is attempting to raise £5.35m, and a Chinese group GuanQun has plowed in …….drumroll….£50k. Yes, 50 thousand GBP. I think this piece of news hurts more than it help.
We respectfully disagree with your characterization of charge-off rates on the LendingClub platform in “Online Lender’s New Issue: Bad Loans” (Money & Investing, July 12). The article fails to note that lower-graded loans, which have experienced higher charge-off rates, represent just 25% of the company’s standard program loan volume, while 75% of standard program loan volume has exhibited stable performance.
We believe the single most critical factor in the discussion of performance is net returns to investors. Our expectation of performance on the loans you have singled out is a net annualized return of roughly 5%. Based on the steps we have taken to improve performance, which aren’t mentioned in the article, we anticipate the performance of any future loans in this subset to be more than 8%. We believe that in the current low-yield environment, LendingClub platform performance continues to compare very favorably with available alternatives. For example, the Barclays U.S. Aggregate Bond Index returned 1.96% for the year ending March 31.
Today, CommonBond, a platform that specializes in loans and refinancing for students, is announcing that it has raised $300 million in debt to loan out to prospective borrowers; and a further $30 million in a Series C equity round to continue building out its platform.
On top of this, the company has acquired another startup, Gradible, for an undisclosed amount to add new services to its business, specifically providing a facility for future employers to contribute to student loan payoffs. (Think of it as a 401k for student loans.)
The funding comes as NYC-based CommonBond says it’s passed the half-billion dollar mark for funds lent on its platform since going national three years ago. David Klein, the company’s CEO and co-founder, told TechCrunch that the company is profitable on a per-loan basis and projects that it will be fully profitable as a business in 2018.
CommonBond is not disclosing its valuation with this round. “We have strategically decided not to play the unicorn game,” Klein said in an interview. “But what I can tell you is that if we were a private company when you bought our stock and were now going public, you’d be happy with the return.”
He also described it as an “unstructured upround”, in reference to situations where a valuation is tied to complex terms that might be seen as a down-round in another light. As a point of reference, one of CommonBond’s competitors, Social Finance (SoFi), raised money last year at what was thought to be a $4 billion valuation.
The $30 million in equity funding takes the total raised by CommonBond to date to just under $80 million, while the $300 million being announced today looks like the closing out of a round that was first reported unconfirmed earlier this year at a lower value. Taking equity and debt funding altogether, the company has raised around $1 billion.
Klein said that the funding his company is announcing today is the first major round of financing raised by an online loan platform this year in the U.S. (The UK’s Future Finance, a would-be competitor that also focuses on students, raised $171 million earlier this year.) So what is CommonBond doing right, exactly, that others are not?
In the case of CommonBond, he said that some of the important factors are the fact that it targets higher education students, who will be earning more over the years when they are working, and it’s also seeing a growth in its loan volumes, which are double what they were a year ago — although the company is not disclosing actual numbers.
That is where the Gradible acquisition comes into play, too. The company — which had raised funding from the likes of AngelPad, 500 Startups and Kima Ventures — will help CommonBond differentiate itself from SoFi and others by giving it an extra set of services to offer to students not just during periods when they are in school, but beyond. The Gradible deal — terms of which were not disclosed — will also mean that CommonBond can tap further into the loan refinancing market as well, competing more against the likes of Earnest.
Baidu, which operates China’s dominant search platform, took part in a $60 million round for payments firm Circle in June. Baidu’s search engine has around 80 percent marketshare in China.
“ZestFinance’s unique ability to analyze and process complex, disparate data to make accurate credit decisions is very valuable to the Chinese credit market, where a centralized credit scoring system has yet to emerge,”
ZestFinance was founded by ex-Google CIO and VP of engineering Merrill, and it uses machine learning and big data to transform information into measurements and signals for credit scoring. It has raised nearly $100 million from investors, with its most recent raise a $20 million Series C round in July 2013. JD.com also put money in as part of its strategic partnership last summer.
Alibaba and Tencent both operate digital banks and micro-loan programs, while Baidu stepped into the banking ring via a partnership with brick and mortar bank CITIC. ZestFinance previously partnered with JD.com, Alibaba’s closest rival in China’s e-commerce space, to power the credit service run by its financial arm, which is valued at more than $1 billion. Then there are multi-billion dollar payment services like Alipay (Alibaba) and WeChat Pay (Tencent), too.
The firm is much beloved of investors, having snapped up a cool $1 billion in Series E Funding in a round lead by SoftBank. The firm is currently valued at $4 billion and has loaned out over $10 billion for student loans. According to its CEO Mike Cagney, he would like to see the company grow to a value of $100 billion someday.
But SoFi, despite its slightly different business model than its marketplace lending fellows (SoFi does not sell off loans in their entirety, and holds on to a percentage of all of them) and fairly rarified customer-base (SoFi’s initial and current focus is on millennial borrowers with debt from elite universities) is still feeling the tidal pressures that are pulling the rest of its segment around.
And, it seems in SoFi’s case, it is being pulled in two nearly opposite directions.
Being Even More Alternative
Whatever else can be said of SoFi – if recent reports in CNN Money about the lengths they go to help their users meet and mingle are accurate – they definitely take the “social” part of Social Finance seriously.
Over 8,000 borrowers have met up at the 300 or so (mostly fully booked) SoFi events held nationwide over the last year. Events include social mixers full of free food and alcohol, yoga classes and the chance to meet other young, upwardly mobile professionals.
“You meet a lot of interesting, like-minded people,” New York-based SoFi Customer Elsa Yan noted of the four different SoFi events she has attended.
Getting Into Traditional Banking
While SoFi may seem to be doubling down on the alternative path by developing their answer to Tinder for the financially responsible – recent reports indicate that SoFi is also moving toward being much more like one of those traditional banks whose methods it has historically eschewed.
And the Super Bowl ad worked a little too well and flooded its website with far more traffic than it was ready to handle. Days passed – customers waited, got mad, and turned to Twitter and online review sites to blast SoFi for being inept.
Then it came out that the firm just plainly didn’t have the capital reserves necessary to meet the surge in loan demand – which didn’t help the PR situation – and had their growth happy CEO singing a slightly different tune.
On the table: SoFi could seek regulatory approval for a state banking charter in Utah. This has the upside of adding the sort of stability lenders would like to see – but comes with the miles of red tape SoFi has built a reputation for speedily avoiding. Also possible options are credit cards and deposit accounts. Finally, partnerships with big financial institutions seem very much in play. That last option has seemed increasingly likely since the former co-chief executive officer of Deutsche Bank AG, Anshu Jain, announced his intention to join SoFi’s board of directors. Cagney also met extensively with JPMC’s Jamie Dimon earlier this year.
So far, SoFi is doing somewhat better than its peers. In May, SoFi received a triple-A rating from Moody’s on a $380 million deal that repackaged loans into bonds. It was the first securitization by an online lending startup to get the top rating from Moody’s.
“I foresee a heightened period of FinTech innovation, where new technologies and platforms will emerge to overcome these recent challenges, and help the industry scale,” Dara Albright says.
“Just this month, Prosper launched a revamped user experience for its retail investors,” explains Albright. “Another online lending product, American Homeowner Preservation 2015A+ LLC, received SEC approval to use Reg A+ to bring a higher-yielding, fixed-income alternative to retail investors, and more and more platforms are incorporating IRA Services’ ISCP™ technology into their platforms in order to help retail investors facilitate tax-deferred P2P investing.
The National Directory of Registered Tax Return Preparers & Professionals (PTIN) has selected premier fintech company Bizfi to provide its tax professionals, accountants, CPAs and their small business clients with access to funding through its aggregation marketplace via a custom referral process.
PTINdirectory.com is the first comprehensive national online directory of federally registered tax preparers. It is independently owned by the National Directory of Registered Tax Return Preparers & Tax Professionals, Ltd. and has no affiliation with the Internal Revenue Service or any government agency.
The partnership gives PTIN’s hundreds of thousands of members access to the full range of Bizfi’s funding products, including lines of credit, short-term financing, equipment and invoice financing, medical financing, franchise financing, medium-term loans and even long-term loans backed by a guarantee from the U.S. Small Business Administration. Members are able to leverage these solutions for their own businesses as well as refer their small business clients to Bizfi to speed the process of applying for and receiving capital.
Bizfi is a fintech company combining aggregation, funding and a participation marketplace on a single platform for small businesses. Founded in 2005, Bizfi and its family of companies have provided more than $1.7 billion in financing to more than 31,000 small businesses in a wide variety of industries across the United States.
1. Lending Club will survive. The fall was great, but it is not a death knell.
2. There will be shake-out and consolidation.
3. Banks will “play ball.” Recently, big names like Wells Fargo and American Express have launched online, fast-decision loan products with a small-business focus. One way or another, we can expect to see more banks looking for a piece of the pie, and it will be interesting to see how Bank of America and others will respond.
4. (More) Regulation is coming — but how much is unclear.
It’s true that charge-offs are ticking up for some consumer credit lenders. As of May 2016, Prosper had charged off, from year-ago loans, about 4.2% of loan principal amounts; at LendingClub, gross charge-offs of its top-graded loans ticked up to 1.51% from 1.46%, while charge-offs of its lower-graded loans went to 6.31% for year-ago loans from 4.58% on loans that had been originated in 2013. These numbers are nowhere near the double-digit charge-offs seen during the financial crisis, but the trend has caused institutional purchasers to re-think how these loans compare with some popular bank offerings, even though banks’ charge-off rates have also ticked higher in 2016 versus their low in 2015.
In the real estate sector, there are additional differences, since loan underwriting turns more on the nature of the underlying property (asset) than the credit worthiness of the borrower. By taking a mortgage on the property, lenders on real estate provide themselves with some level of security – a feature of real value if the borrower turns out to be less than reliable. Because real estate loans are secured by the subject property, they typically involve significantly less risk compared to unsecured consumer loans, at least in the eyes of most sophisticated investors. There’s never any assurance against a widespread drop in asset prices, which would adversely impact asset-backed loans, but the relative infrequency of such events, together with the presence of a significant equity “cushion” on most individual loans, generally acts to mitigate such risk.
The index will track the performance of companies that leverage technology to deliver financial products and services and represents approximately $785 million in total market cap. The index has 49 fintech companies including major data, exchange, trading and payments companies. Their distribution is nearly exclusively electronic.
In May, SoFi received a triple-A rating from Moody’s on a $380 million deal that repackaged loans into bonds. It was the first securitization by an online lending startup to get the top rating from Moody’s. The deal likely presages the continued normalization of the markets.
As non-bank lending institutions, alternative lenders have occasionally come under fire for acting as “shadow banks,” a term coined to describe the subprime lenders that led to the 2008 financial crisis. However, the term is a misnomer when applied to innovative lenders, according to an industry expert.
“As each day, week and month goes by, we are looking at new ways of making data, information, trends, ideas, concepts more available, more transparent, and [bringing] the industry to welcome a very open and robust dialogue,” Goldman said.
However, there’s a lot of work to be done to get to that point, Goldman said, as different loan originators will have different data points and metrics.
Goldman sees standardization of what data originators should provide as a top priority to enforcing true transparency in the industry. He sees Orchard Platform’s work in creating a lending exchange as “[getting] to the heart of that” priority.
KBRA Announces Addition of Xilun Chen to ABS Team, (Press Release), Rated: B
Kroll Bond Rating Agency (KBRA) announced today the appointment of Xilun (Xi) Chen to the role of Senior Director within the Commercial ABS group. Xi will be reporting to Anthony Nocera, Managing Director and head of Commercial ABS. Xi joins from Standard & Poor’s where he spent the last 6 years focusing on various esoteric ABS assets.
LoanMart, one of the nation’s premier financial technology companies, is excited to introduce a new type of loan to meet the significant demand of its customers: an Unsecured Personal Loan.
LoanMart will now offer Unsecured Personal Loans in 8 states including California, Alabama, Missouri, New Mexico, Utah, South Dakota, Georgia and Indiana. LoanMart will also continue to offer vehicle secured loans in 11 states and small business loans for self-employed consumers in another 14 states.
Starting in 2002, LoanMart offers both vehicle secured and personal loans.
The United Kingdom is the leader in online alternative finance in the European market, accounting for just under 75 percent of all transaction volumes in Europe. In 2015, online alternative finance in the United Kingdom grew to GBP 3.2 billion, increasing by 84 percent from GBP 1.74 billion in 2014.
The FCA defines crowdfunding as an umbrella term to capture various “categories” of activity, some of which are regulated whilst others are not.
This broad term includes four sub-categories:
Donation-based crowdfunding: people give money to enterprises or organisations whose activities they want to support.
Pre-payment or rewards-based crowdfunding: people give money in return for a reward, service or product (such as concert tickets, an innovative prod- uct, or a computer game).
Loan-based crowdfunding: also known as “peer- to-peer lending”, this is where consumers lend money in return for interest payments and a repayment of capital over time.
Investment-based crowdfunding: consumers in- vest directly or indirectly in new or established businesses by buying investments such as shares or debentures (FCA 2016a).
The first two categories are exempt from regulatory oversight from the FCA.
In 2015, equity-based crowdfunding experienced 295 percent growth compared to the previous year.
The FCA defines the instruments traded on investment-based crowdfunding as “non-readily realisable securities” that are not listed on regulated stock markets, and are distributed and sold over the internet.
At the time of the February 2015 review, the FCA publically acknowledged the full authorisation of ten firms as of 1 April 2014, with an additional four platforms receiving authorisation by the end of 2014. While the FCA has yet to release a 2016 crowdfunding review, our assessment is that as of March 2016, a total of 24 crowdfunding platforms have permission to function as an investment-based crowdfunding business in the UK. Additionally, a closer examination of the FCA’s registry indicates that at least 12 platforms are operating an investment-based crowdfunding business as an appointed representative.
At the end of 2015, investment crowdfunding raised GBP 337.8 million.
Investment Crowdfunding Risks
In addition to use of social media for financial promotion, equity crowdfunding platforms must also navigate potential additional supervision of the “online forums” typical for most crowdfunding campaigns. While the existing guidance does not specifically discuss how online forums should be supervised, this is probably an area that will attract attention in the future.
Another potential area of risk may relate to the required due-diligence that platforms must undertake before allowing businesses to raise equity on their platform
In March 2016, the FCA indicated that a total of eight firms (only an additional seven in the course of a year) had received full authorisation to operate as a P2P platform, with a further 86 firms awaiting a decision.5 Of these 86 platforms, only 44 have interim permissions related to their previously held OFT license (FCA 2016c).
Interestingly, it seems as though one particular firm, Resolution Capital (FCA 2016d), is “currently attached to” approximately 25 businesses, including several firms operating in the P2P lending space. As such, it seems like a considerable number of appointed representative firms are using the Resolution Capital license.
Loan-based platforms rules
The FCA implemented prudential requirements (FCA 2015a), which reflect the standardised capital reserves that a platform must comply with.
Utilising the GABRIEL portal, platforms are expected to report to the FCA on a quarterly basis, with monthly reporting of any information relating to the holding of client monies (FCA 2016e). Although prudential rules are not easy to generalise, as they are based upon the individual permissions and activities of each platform, P2P lending firms do have a base capital requirement of GBP 50k, with a GBP 20k requirement during the transition period.
At present, firms are obliged to meet minimum capital requirements only upon authorisation, with a transitional period until April 2017 (FCA 2015a). A platform operating in the P2P space is also required to notify the FCA should the value of their loans outstanding increase by 15 percent or more, thus necessitating a recalculation of any prudential requirements. In addition to financial reporting, platforms are required to report any disputes between consumers and the platform.
In addition to capital requirements, platforms are obliged to conform to Client Money Rules, as outlined in the FCA Handbook in the section relating to their Client Asset Sourcebook rules (or CASS) related to “adequate protection”– i.e. no co-mingling of client monies, clear and transparent holding of client monies, etc. (FCA 2016f). Rules related to client money were further modified in 2016, following the Consultation Paper entitled: “Loan-based Crowdfunding Platforms and Segregation of Client Money”.
Loan-based crowdfunding platforms must comply with disclosure requirements, where all communications are “fair, clear and not misleading”.
The FCA’s approach to crowdfunding is often lauded as the “gold-standard” for crowdfunding regulation. With regulation now having been in place for over a year, it is interesting to note the high levels of satisfaction registered by crowdfunding platforms.
Of the P2P Lending (loan-based crowdfunding) platforms surveyed, 91 percent regarded the current regulatory regime as “adequate and appropriate” to their activities, with only 5.66 percent suggesting that “tighter or stricter” regulation need to be implemented. A mere 3.77 percent viewed regulation as “excessive and too strict”.
Crowd2Fund announced on Monday the launch of its new intelligent investment feature known as Smart-Invest, which will reportedly allow investors to automate their crowdlending investments.
Earlier this spring, Crowd2Fund was approved for IF ISA and promoted higher interest rates for investors.
Chris Hancock, CEO and founder of Crowd2Fund added: “The combination of Smart-Invest and the IF ISA government scheme continues to demonstrate our commitment in helping our investors grow their savings whilst supporting great British businesses.”
In June, JustUs embarked on a drive to raise £5.35m, with the bulk (£4m) sought from institutional investors and a further £1m via crowdfunding platform Crowdcube.
The fundraising, which will value JustUs at £26m, will allow the firm to recruit over 100 new staff and launch a new media campaign.
Since its inception, the company has secured around £2m in investment.
Peer-to-peer consumer lending firm JustUs has received backing from a Chinese financial group, giving a boost to its £5m fundraising goal.
Four representatives of GuanQun Investment, which has already ploughed £50k into the Cheshire-based firm, are heading to JustUs’ Alderley Edge headquarters next week (July 29) to discuss ramping up investment and explore strategic global partnerships.
Based in London, GuanQun Investment (GQI) forms part of Beijing-based Guanqun Chicheng, which has supported around 200k SMEs since it was established in 2009
Cloud SMSF administration software provider, Class, has collaborated with peer-to-peer lender, RateSetter, to provide self-managed superannuation fund (SMSF) accountants and their clients with a direct-connect date feed. This would allow for automated data entry and transactions processing within Class.
RateSetter [Australia] has facilitated more than $50 million in loans through its platform since it launched in 2014, with SMSFs providing the funds for close to a quarter of the loans.
Mywish Marketplaces Pvt. Ltd, which operates retail loans marketplace Deal4Loans.com, has raised $15 million from Franklin Templeton International Services (India) Pvt. Ltd. The development comes after VCCircle first reported in May that the company was looking for a big-ticket investment in its first institutional round of funding.
The company had in April raised an undisclosed amount of funding from a bunch of high-profile investors, including Ram Shriram, founding board member and one of the first investors in search engine giant Google; WhatsApp’s global business head Neeraj Arora and Puru Vashishtha, a former Wall Street hedge fund investor.
Founded in 2009 by Durham University MBA alumnus Rishi Mehra, Deal4Loans offers comparison of retail loans across six different categories – home loan, personal loan, car loan, credit cards, loan against property and education loan. The platform has 50 lending partners (a mix of banks and non-banking financial companies) and 7 million registered customers. The marketplace uses algorithms to acquire customers for the participating banks’ loan products and to match customers with products.
According to VCCEdge, the data research platform of VCCircle, Deal4Loans earned a net profit of Rs 78.5 lakh on net sales of Rs 7.7 crore for the year through March 2015.
Reserve Bank of India (RBI) governor Raghuram Rajan on Monday said that the Indian central bank is more open to experimentation at the early stages of a product or method of service but at the same time will have to be more conscious of the risks to stability.
“Non-bank entities are providing innovative payment products and services, forcing banks to reflect upon their strategy—to compete or to collaborate? Banks may not have the wherewithal to compete effectively if they have not been investing in technology and associated personnel. However, if they collaborate without building these capabilities, they may be left with crumbs from the client while their partner take the whole client cake,”
Rajan said RBI welcomes both competition and collaboration.