Wednesday August 29 2018, Daily News Digest

US economic growth poised to accelerate

News Comments Today’s main news: Yirendai’s Q2 2018 financial results. Crowdstacker exceeds 50M GBP in funds raised for British businesses. Data breach complaints soar in the UK. Flender raises 10M Euro for SME lending. Google partners with banks on digital lending in India. Today’s main analysis: Moody’s says Q2 2018 has a strong outlook. Today’s thought-provoking articles: If Wonga […]

US economic growth poised to accelerate

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United States

United Kingdom

China

International

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News Summary

United States

Venmo is considering eliminating its public feed (Business Insider) Rated: AAA

PayPal executives are in talks about potentially eliminating the ability for users to publicly post and view transactions on Venmo, its peer-to-peer payments app, Bloomberg reported, citing a person familiar with the matter.

2Q 2018: Strong performance in line with positive outlook (Moody’s Email) Rated: AAA

The PMIs reported strong results in the second quarter of 2018, reflecting growth in new production, earned premiums from high-quality recent vintage business and lower incurred losses. Although mortgage rates have begun trending higher and housing affordability lower, we believe credit fundamentals will remain positive for the sector, and likely drive healthy performance through the second half of the year.

Other key areas the report looks at in-depth include:

  • New business volume rises in Q2. In Q2 2018, PMIs produced about $80.3 billion of new insurance written (NIW), up 14% from Q2 2017. For the first half of 2018, NIW totaled $138.8 billion while production was also up 14% on the year.
  • Premium rate cuts highlight competitive pressure. In April 2018, MGIC (senior Ba2) reduced its premium rates on its most popular policies by about 11%, effective June 2018. Competitors, inspired by corporate tax cuts, then cut rates themselves, essentially wiping out gains from the tax cuts. Given the current high persistency rates and expected ordinary loan amortization profiles, we do not expect the new lower premium rate business to become a majority of in-force business for several years.
  • GSE pilot programs signal potential changes in industry dynamics. In March 2018, Arch Capital Group (ACGL, senior Baa1 stable) and Freddie Mac (FMCC, senior Aaa stable) announced a new risk transfer pilot program, IMAGIN (Integrated Mortgage Insurance) through a newly formed Arch subsidiary that will cede 100% of the risk exposure to multiline reinsurers as an alternative to traditional mortgage insurance. A few months later, in July, Fannie Mae (FNMA, senior Aaa stable) announced a pilot program for enterprise paid mortgage insurance (EPMI). Both programs effectively serve as substitutes for single premium MI policies and highlight the evolution of the mortgage risk transfer market.
Sources: U.S. Bureau of Economic Analysis, Moody’s Analytics forecast

Read the full report here.

US credit card firm Deserve raises $ 17m funding (Fintech Futures) Rated: A

US-based credit card company Deserve has raised $17 million in Series C funding for its Generation Z ambitions.

The round was led by an unnamed investor, with additional participation from Accel, Aspect Ventures, Pelion Ventures, Mission Holdings, Alumni Venture Group and GDP Venture.

These are the most valuable cities in the US (Fox Business) Rated: A

The value of residential real estate in New York is greater than the GDP of all but six countries, according to a new study from online lenderLendingTree, which ranks the most valuable cities in the U.S. based on real estate values.

1. New York, $2.54 trillion

2. Los Angeles, $2.17 trillion

3. San Francisco, $1.25 trillion

4. Chicago, $813 million

5. Washington, $795 million

6. Boston, $697 million

7. Miami, $648 million

8. Seattle, $641 million

9. Dallas, $549 million

10, San Jose, Calif., $535 million

Docutech owner Serent Capital increases investments in fintech lending (Housing Wire) Rated: A

Serent Capital, a San Francisco-based private equity firm, and owner of Docutech, just made its 12th investment in fintech and fourth in the lending technology market.

GDS Link helps clients efficiently manage credit risk strategies and improves lending and account management efforts.

Why P2P lending should be a part of retirement portfolio? (The Financial Express) Rated: A

Below are four reasons why peer to peer lending should be an integral part of retirement portfolio:

1. Diversified Portfolio – Retired people should always have a backup option if in case one of the investment plans fails and someone suffers a loss.

2. Low Risk Investment – While it is a common belief that P2P lending carries higher risk, the reality is different.

3. Compounding Benefits – Since one receives a part of interest and principal amount back every month, the retired person can reinvest this amount and earn interests on the whole amount.

4. Is It Safe To Invest Retirement Money In P2P Lending? – Since P2P lending removes the intermediary and is a relatively new concept, many people are sceptical about this investment option.

United Kingdom

Crowdstacker Milestone: Online Lender Exceeds £50 Million in Funds Raises For British Businesses (Crowdfund Insider) Rated: AAA

Crowdstacker, a UK-based peer-to-peer (P2P) lending platform, recently announced it has exceeded £50 million in funds raised for UK businesses that are featured on its portal. According to the online lender, 100% of the P2P lending funds raised for British businesses through Crowdstacker has come directly from Crowdstacker’s “crowd.”

Top tech investors stand to lose millions if Wonga collapses (The Times) Rated: AAA

Some of the technology industry’s most respected investors face losing tens of millions of pounds as Wonga stands on the edge of failure.

Early investors including Accel, Balderton Capital and Greylock Partners are among the backers of the sub-prime lender that face losing their entire investment as it teeters close to collapse amid a rise in compensation claims.

Wonga’s backers had put about £90 million into the payday lender, including £10 million in the past month. However, if Wonga is placed into administration, shareholders are likely to be left with nothing as its assets are sold off to pay creditors, including customers with outstanding claims for redress.

If payday lender Wonga collapses what will it mean for customers? (The Guardian) Rated: A

Aside from the well-rehearsed arguments about whether or not to take out payday loans (on Monday Wonga’s website was advertising a short-term loan at an annual percentage rate (APR) of interest of 1,509%) the latest news about the company’s struggles should not particularly affect that choice. The company is still operating and is making loans. If Wonga collapses, those loans will likely end up being owned by another lender.

If Wonga falls, responsible credit providers must be there for those in need (Metro News) Rated: A

Research from StepChange Debt Charity found that an estimated 1.1million people used high cost credit for everyday household costs in 2016. A recent update of this research found that this had increased in 2017 to an estimated 1.4million people. It’s becoming a bigger and bigger problem.

This has led to a situation where one in four working adults in the UK are now unable to afford an unexpected £500 bill and a growing number of low income households are becoming reliant on credit to cover basic needs.

UK data breach complaints soar under new EU rules (Financial Times) Rated: AAA

The Information Commissioner’s Office (ICO) said they received more than 6,200 complaints in the first 6 months of GDPR; the majority of complaints were from customers saying their data was shared without permission and companies self reporting cases where data was accessed.

10 percent of complaints come from the financial services market, other sectors include education, healthcare and local governments.

The ICO is looking to increase funding by almost 50 percent and hire more than 200 more workers to handle the amount of complaints.

Victory Park Capital fund holds steady with dividend, eyes performance fee (Altfi News) Rated: A

The £332m VPC Specialty Lending investment trust has announced its second consecutive dividend of 2p per share this year, its target level, following a two year turnaround amid lower than expected returns, according to an investor update.

Following on from recording its highest monthly return to date for May 2018 the closed-ended fund has declared an interim dividend of 2p pence per share for the three-month period to 30 June 2018.

Tide CEO: Why SMBs Need Their Own Bank (PYMNTS) Rated: A

Small business (SMBs) are distinct from other customer groups, Tide CEO Dr. Oliver Prill told Karen Webster during this week’s Monday Conversation, with a specific set of product and service needs that often go unmet because they are so unique. That means small businesses of all sizes — particularly the small businesses with fewer than 10 employees — simply deal with inefficiencies in their work flow that are actually rather damaging.

Starling looks for further funding as users grow fivefold (Financial Times) Rated: A

UK based digital bank Starling Bank is looking to raise additional capital as the bank has seen user growth reach more than 200,000, up from 43,000 in November.

The bank is also making significant progress on account balances, Starling accounts averaged £420 while competitor Monzo came in at less than £150.  The fresh capital raise will be led by existing investor Harald McPike who owns more than 50 percent already and is a Bahamas based hedge fund investor.

Starling to help RBS develop digital bank (FinExtra) Rated: A

Royal Bank of Scotland (RBS) has reportedly enlisted the help of challenger bank Starling in its efforts to develop a digital bank of its own.

The news, reported by The Times newspaper, came as a result of a letter to shareholders from Starling’s chief executive Anne Boden which stated that it has signed a contract “to provide payment services to support new initiatives at RBS/NatWest”.

China

Yirendai Reports Second Quarter 2018 Financial Results (PR Newswire) Rated: AAA

In the second quarter of 2018, Yirendai facilitated RMB 11,736.2 million (US$1,773.6 million) of loans to 177,754 qualified individual borrowers through its online marketplace, representing a year-over-year growth of 38%; 23.4% of loan volume were generated by repeat borrowers who have successfully borrowed on Yirendai’s platform before; 76.3% of the borrowers were acquired from online channels; 100% of the loan volume originated from online channels was facilitated through mobile.

In the second quarter of 2018, Yirendai facilitated 202,380 investors with total investment amount of RMB 12,175.4 million (US$1,840.0 million), 100% of which was facilitated through its online platform and 96% of which was facilitated through its mobile application.

Chinese fintech company X Financial files for a $ 250 million US IPO (Nasdaq) Rated: AAA

X Financial, which operates a peer-to-peer lending platform in China, filed on Tuesday with the SEC to raise up to $250 million in an initial public offering.

The Shenzhen, China-based companywas founded in 2014 and booked $445 million in revenue for the 12 months ended June 30, 2018. It plans to list on the NYSE under the symbol XYF. X Financial filed confidentially on January 8, 2018. Deutsche Bank and Morgan Stanley are the joint bookrunners on the deal. No pricing terms were disclosed.

China Holds to Hard Line on Peer-to-Peer Lending, Pledged-Stock Loans (Caixin) Rated: A

At a recent meeting entitled “Disposing of Financial Risk,” regulatory officials devoted most of their time to discussing China’s peer-to-peer (P2P) lending industry and pledged-stock loans.

In fact, they spoke of little else.

Beijing (Failed) Protests Over Collapse of China’s Peer-to-Peer (P2P) Industry (Whats on Weibo) Rated: A

China’s P2P industry has seen a quick rise and fall over the past year, causing some panic and chaos.

Earlier this week, China’s New Fortune magazine reported of one case where an investor had just invested 360,000 RMB (±US$52,700) into P2P platform Guojinbao, when they discovered the platform was already abandoned the day before, and there was no way to get their money back. It is just one among many recent cases.

European Union

Irish P2P Lending Platform Flender Raises €10 Million Through Latest Funding Round For SME Lending (Crowdfund Insider) Rated: AAA

Irish peer-to-peer lender Flender has reportedly raised €10 million through its latest funding round to lend to small and medium-sized enterprises (SMEs). Flender, which was launched in early 2017,  is authorized and regulated by the Financial Conduct Authority under Registration Number 657861. The online lender is now on a mission to enable businesses and consumers the ability to borrow money through their existing networks of friends, family, and customers. 

Flender also reported that it intends to offer established small businesses an innovative new way to access finance by leveraging their loyal customer base. The lender will facilitate and formalize an existing and large market of social lending across the UK and Ireland.

International

Aussie super asset allocation “riskier”: Research (Financial Standard) Rated: AAA

UBS Asset Management’s latest pension fund indicator report highlights the propensity of Australian superannuation funds to invest a substantial portion of retirement savings in “risker” assets such as equities.

According to the report, the asset allocation of Australian superannuation funds is heavily geared towards equities, with 45% of assets allocated to equities. The asset manager said Australia’s equity allocation is almost double its bond allocation, which attracts 26% of assets.

Source: Financial Standard

MAKING SENSE OF PRIVATE CREDIT FUNDS (all About Alpha) Rated: AAA

The paper distinguishes among five strategies, then adds a catch-all “other” category. The five are:

  1. Business Development Companies. The BDCs operate under specific regulations mandating their “significant managerial assistance” to their debtor companies. The majority of BDCs are treated as RICs for tax purposes, which involves additional regulatory oversight.
  2. Senior Loan Funds. These are closed-end vehicles that make first or second lien loans to small- and mid-sized companies. They use floating rate spreads composed of a risk premium and the benchmark rate, and typically target gross returns in the neighborhood of 10%.
  3. Mezzanine Funds. These are also closed-end vehicles. Typically, they make junior capital investments (often a hybrid between debt and equity) in small- and medium sized companies funding acquisitions, growth, recapitalizations, or buyouts. They typically target return in the mid- to upper teens, given their position subordinate to the senior liens.
  4. Distressed Debt Funds. These can be either closed- or open-end vehicles. They invest in the debt securities of mid- to large-sized companies that are experiencing financial distress, seeking deeply discounted purchases. There are a variety of strategies involved under this broad heading, including loan-to-own or turnaround lending.
  5. Special Situation Funds. These are typically closed-end vehicles. They, too, target mid- to large-sized companies in tight circumstances. They have a much broader mandate than the distressed debt funds, investing across the capital structure.

Getmoder Foundation Offers a Reliable Platform for Lending and Borrowing Crypto Currencies and Digital Assets (Digital Journal) Rated: A

Cryptocurrency has significantly opened a new world in financial sector which was primarily owned by bank namely lending and borrowing capital. Even through peer to peer lending and borrowing has developed in the recent years in fiat currency space, it’s only recently hat options for lending and borrowing cryptocurrencies are on the rise. Getmoder Foundation provides reliable platform for this recent practical option.

Getmoder is a known open-platform for lending and borrowing cryptocurrencies and digital assets. This platform allows lenders and borrowers to enter to fully collateralized crypto versus crypto lending agreement. With Getmoder lenders will be able to earn increased interest income on their long-term digital assets investments.

Australia

Australia: How can you avoid unfair contract terms? (Mondaq) Rated: AAA

Have you heard about Prospa? This startup shot to Australian Financial Review fame in early June this year. It is an online lender which offers unsecured business loans to small businesses which big lenders consider to be too risky.Their own business was going remarkably well. So well in fact that Prospa was getting ready to take the ASX by storm and launch an IPO. The excitement was surely palpable, the founders would have been so proud of themselves and their strong team for getting to this point. The dollars were about to roll in!

And then, right before the IPO was about to take place, ASIC raised concerns purportedly regarding Prospa’s potentially unfair contract terms. This is not surprising given the climate of industry-wide reviews of lending practices. This concern led to postponement of the IPO on 6 June 2018, only 15 minutes prior to launch. A $576 million dollar ASX float on hold, indefinitely, whilst these standard form contracts were scrutinised. The issue? Potentially unfair terms in their standard form contracts contrary to the Australian Consumer Law.

India

Google Teams With Banks to Launch Digital Lending for India (Bloomberg) Rated: AAA

Alphabet Inc’s Google is partnering with four Indian banks to grant consumer loans online, as the fight for a $1 trillion digital finance market intensifies.

The U.S. search giant is teaming with HDFC Bank Ltd.ICICI Bank Ltd.Kotak Mahindra Bank Ltd. and Federal Bank Ltd. to offer instant, pre-approved loans to customers “right within Google Pay in a matter of seconds,” it said in a statement.

From Facebook Inc.’s WhatsApp to Jack Ma’s Ant Financial, internet giants are joining a race to provide financial services in the world’s fastest-growing mobile arena. Online lending is becoming the next frontier as mobile users look for small loans with minimal paperwork, served to them even without credit ratings as fintech companies use data and algorithms to determine risk.

Digital Lending Startup ZestMoney Raises $ 13.4 Mn From Xiaomi, Others (Inc42) Rated: A

Bengaluru-based digital lending startup ZestMoney has raised $13.4 Mn in extended Series A round of funding led by Chinese smartphone maker Xiaomi.Existing investors PayU, Ribbit Capital and Omidyar Network also participated in the round.

The company plans to strengthen its technology and data science capabilities as well as expand use cases for the core ZestMoney Affordability Product.

How digital lending is helping bridge the credit gap in India (Qrius) Rated: A

Over the past two years, digitisation and the rising penetration of internet in India have irrevocably transformed the lending process from being extremely long and complex to a quick and technologically-exercise. The emergence of digital lending has challenged the stronghold of traditional financial institutions as the chief credit enablers in the economy while presenting consumers with an opportunity to access credit in a simplified and efficient manner.

Credit lending in India: Then and now

For decades, the credit lending market in India has been dominated by traditional banks and Non-banking financial companies (NBFC’s). Their complex policies and methods of operation have made it extremely difficult for the majority of Indians to avail credit. As a result, the gap between the demand for and supply of credit has amplified, while the number of underserved consumers in the country has risen exponentially.

Asia

Indonesia offers a fresh battleground for fintech (Nikkei Asian Review) Rated: AAA

Coinhako is just one of the many “fintech” startups flocking to Indonesia. The Indonesian Fintech Association said there are more than 200 fintech companies in the country, including the 31 e-payment providers that have secured licenses from Bank Indonesia and more than 60 peer-to-peer lending companies registered with the Financial Services Authority.

Despite still seeing fintech companies as potential threats, Indonesia’s major banks are also investing in local startups. Bank Mandiri has invested in P2P lending startups Amartha and KoinWorks through its venture capital arm Mandiri Capital Indonesia.

P2P Lending Fintech May Contribute Rp25tn to GPD, Indef Says (Indonesian News Portal) Rated: B

The Institute for Development of Economics and Finance (Indef) said that fintech-based companies offering peer-to-peer lending services can improve Indonesia’s macroeconomics capability.

Indef’s review, done together with the Indonesian Fintech Association (Aftech), estimates that fintech development in Indonesia can contribute up to Rp25.97 trillion to the GDP.

Speaking at the discussion with the theme “Lending Fintech Roles to Indonesia’s Economy” in Jakarta, August 28, Indef economist Bhima Yudhistira Adhinegara said that the Rp25.97 trillion contribution includes both direct and indirect impacts.

Authors:

George Popescu
Allen Taylor

Wednesday July 25 2018, Daily News Digest

Lending Club IPO

News Comments Today’s main news: Square, eBay partner on businesss loans. BNP Paribas launches UK fund for SME lending. Crowdstacker seeking 800K GBP on Seedrs. PPDAI to boost tech investment. Alipay, WeBank competition heats up. Today’s main analysis: The good news and bad news about Lending Club. Today’s thought-provoking articles: Americans are splurging on personal loans. How irresponsible mortgage lenders […]

Lending Club IPO

News Comments

United States

United Kingdom

China

Other

News Summary

United States

eBay & Square Partner on Business Loans (Crowdfund Insider) Rated: AAA

eBay (Nasdaq:EBAY)  and Square Capital (NYSE:SQ) have signed an agreement to provide up to $100,000 in credit to sellers – in as little as one day. The partnership is not only a streamlined offering of financing for small businesses that use eBay but also a whack at traditional banks which are mostly unable to match such a speedy lending agreement.

Scott Cutler, Senior Vice President, Americas at eBay, says that eBay is committed to helping their sellers and providing credit in partnership with Square simply makes sense.

For example, if you have $30,000 CC debt and good credit you can get a 3-year payoff at about 6% and a 5 year at about 7%. That is a big improvement over a typical rate of 17.5% on purchases and an amazing 23.5% on cash advances. So you take out the $30,000 loan, pay off your credit cards and save thousands in interest while you are at it. In addition, your CC is now zero and you can start using it again.

Source: Seeking Alpha

They came to market via an IPO late in 2014 and were an immediate hit rising over 50% their first day. They were immediately valued at over $9 billion. Today they are at less than $2 billion, a drop of almost 80%.

And finally here is LC’s chart since the IPO. Talk about ugly.

Source: Seeking Alpha

Americans are splurging on personal loans thanks to fintech startups (Quartz) Rated: AAA

The stock of personal loans outstanding has grown to about $120 billion as of March, according to TransUnion data. That compares with $71.9 billion a decade ago—worth around $90 billion adjusted for inflation—when the subprime mortgage crisis crescendoed. About 17 million Americans have this type of debt which, unlike mortgages and automobile loans, isn’t collateralized by an asset.

Source: Quartz

Upstart financial technology companies like Lending Club, Prosper, and Avant account for about a third of this lending, up from less than 1% in 2010.

Source: Quartz

How Irresponsible Mortgage Lenders Created A Second Housing Bubble (Seeking Alpha) Rated: AAA

Rents Are Falling, But Prices Are Surging

I believe the culprit is a new crop of lenders who are outside of Fannie Mae and Freddie Mac regulations on FICO scores and DTI. For example, San Francisco lender Social Finance (SoFi) is offering up to 3 million dollar loans with 10 percent down and “flexible DTI.

Source: Seeking Alpha
Source: Seeking Alpha

Firms like SoFi are the engine driving the madness in the California housing market. Here’s what Michael Tannenbaum, former Vice President of SoFi, had to say about their loans in 2016, “Sixty-five percent of the business we do is first-time home buyers; it’s a big deal we’re opening up to the jumbo first-time market.” A year later, he was gone. Other gems from the San Francisco Chronicle article – SoFi’s average loan at the time was $800,000 and two-thirds were in California. I shudder to think what their average loan size and DTI is now. Also, in addition to not being big fans of debt to income ratios, SoFi isn’t big on using other traditional measures like FICO scores to evaluate borrowers. In 2016, they declared their company a “FICO Free Zone” in a press release. Said a former business development associate, “The volume of applications coming in was crazy.” Other sources reported on the wild sex culture at the firm. As for their underwriting practices? As long as housing prices went up, they were more or less irrelevant. But, if prices go down, SoFi and their backers stand to lose a lot of money.

A Conversation with Figure’s Mike Cagney (Financial Revolutionist) Rated: A

Mike Cagney’s return to fintech’s center stage had been foreshadowed by a handful of reports suggesting that his new company would be focused on the origination of real estate-related assets and that, somehow, blockchain would figure into the mix. But Cagney, who played a foundational role in building SoFi into one of fintech’s biggest success stories before his departure, isn’t the type of entrepreneur who thinks small and nichey. With his new company, Figure, and the blockchain protocol it has built, Provenance, Cagney and his team of 80 professionals are taking aim at the gigantic world of institutional capital markets transactions. Why? Because that’s one place where the vig (i.e., rent-seeking) still sloshes around in copious amounts. But unlike SoFi, which is taking aim at banks, Cagney is now fixing his gaze on the administrators, trustees, custodians and other intermediaries who take a cut out of each securitization and other types of deals. On the eve of the first transaction to be put on Provenance (a HELOC), The FR’s Gregg Schoenberg sat down with Cagney to learn more about his plans and how blockchain is central to his mission.

Could Fintech & Blockchain Lending Further Drive The Housing Market Boom? (Forbes) Rated: A

Those who do not have the scores to secure loans from traditional lenders now have alternatives particularly in the form of P2P lenders. These platforms pool together money from interested investors and loan them out to borrowers.

They also have a much quicker turnaround compared to what customers might experience with banks and other large lenders. While these services started out only to fund smaller personal loans, some like LendingClub have grown and expanded to allow larger-value loans like mortgages to be made on the platform.

Blockchain-based lenders have built upon this crowdfunding concept and enhanced it with blockchain’s capabilities with smart contracts and tokenization. While initial efforts as espoused by the likes of 

Employer-focused PFM company gets $ 40 million (Business Insider) Rated: A

US-based personal finance management (PFM) company Even has raised a $40 million Series B funding round led by Keith Rabois of Khoshla Ventures, and including Valar Ventures, Allen & Company, Harrison Metal, Ron Conway, and Silicon Valley Bank.

Source: Business Insider

Even integrates with attendance, payroll, and banking systems to help consumers improve their financial health. Its features include Instapay, which enables users to request the money they have earned before their actual payday, and it uses AI to give users an “okay to spend” amount, so they don’t get surprised by sudden expenses. Additionally, it offers an automatic savings feature, similar to other PFM companies including Acorns and Cleo.

Fintech Startup LoanSnap Raises $ 8m in Series A Financing (Finsmes) Rated: A

LoanSnap, a San Francisco, CA-based developer of technology that protects people against dumb loans, raised $8m in Series A financing.

The round was led by True Ventures with participation from Baseline Ventures, Richard Branson’s Virgin Group, Core Innovation Partners, Joe Montana’s Liquid 2 Ventures, OVO Fund, Transmedia Ventures, and angel investors.

BlockFi Raises $ 52.5M for Cryptoasset-backed Loans (Business Wire) Rated: AAA

BlockFi, the leading cryptoasset to USD lender, announced today it has raised $52.5M to expand operations. Galaxy Digital Ventures LLC, a digital currency and blockchain technology investment firm founded by Mike Novogratz led the deal. This marks the industry’s first institutional investment in cryptoasset backed loans. BlockFi’s existing investors, which include ConsenSys Ventures and PJC, also participated in the funding round.

  • BlockFi planning rapid expansion of cryptoasset-to-USD lending platform
  • BlockFi partners with Galaxy Digital Lending LLC on loan purchasing facility and receives equity investment from Galaxy Digital Ventures LLC
  • Marks first institutional investment in cryptoasset backed loans

Credit Card Payoff App Tally Raises $ 25 Million (Cheddar) Rated: A

Tally, an automated debt-managing app, has raised $25 million in Series B funding with the goal of expanding its reach and finding new ways to alleviate consumers’ financial anxiety, Cheddar has learned.

Southern States Multifamily Portfolio Sells, Exceeding Targeted Returns for ArborCrowd Investors (The Daily Times) Rated: A

ArborCrowd (the “Company”) today announced its Southern States Multifamily Portfolio (SSMP) investment has been realized ahead of schedule, outpacing targeted return estimates. One of the properties in the portfolio is located in Mississippi and sold in late 2017. The two remaining properties, located in Alabama, recently sold. The aggregate portfolio sales price was $25.85 million, generating an internal rate of return (IRR) of over 29% for ArborCrowd investors.

The transaction marks the first of ArborCrowd’s six deals to complete its investment cycle, and its success is a great sign of the long-term viability of the Company’s growing platform. The SSMP investment opportunity was quickly oversubscribed when ArborCrowd presented the deal on its platform in February 2017, raising over $2.1 million in just 5 days. The over 29% IRR generated by the sale of the portfolio far exceeded the targeted 17% to 20% IRR projected by ArborCrowd at the time of the offering.

Lendio Reports Q2 Results: 90% Year-Over-Year Revenue Growth (Lendio) Rated: A

Lendio, the nation’s leading marketplace for small business loans, today announced record growth across all areas of its business, including 90 percent year-over-year quarterly revenue growth. To date, Lendio has helped facilitate more than $900 million in financing to over 45,000 small businesses across the U.S. and Canada through its marketplace of more than 75 small business lenders. The growth milestone comes after an 80 percent increase in loans funded through the Lendio platform in the last year.

From July 2017 to June 2018, Lendio facilitated nearly $400 million in loans to more than 22,000 small businesses. The average initial loan size among Lendio’s small business customers grew to nearly $35,000. The top five industries funded through Lendio’s marketplace include construction, retail, restaurants, health care and information media.

GM Maven CEO: Peer-To-Peer Auto Lending Will Be A Large Market (Bloomberg) Rated: A

Julia Steyn, Maven CEO, on their new peer-to-peer lending program for GM car owners, and the progress Maven is making in the shared economy.


Whitepages Pro Unveils Pro Insight, a Global Identity Review Solution Powered by Machine Learning (Global Newswire) Rated: A

Whitepages Pro, a global leader in digital identity verification, today announced Whitepages Pro Insight, a new and improved manual review solution designed to help businesses assess the identity risk of their customers, approve good transactions, and investigate fraud on a global scale. As the only global identity review solution that provides six ways to search, it enables users to balance accuracy and efficiency through direct workflow integrations, machine learning-informed insight, and robust analytics.

Within Pro Insight, users are first presented with Identity Review, a comprehensive interface that verifies and cross-checks both digital and traditional identity attributes (name, email, phone, primary and secondary addresses, and IP) to verify the identity behind a transaction. The solution analyzes and presents the relationships between the five core identity attributes in several intuitive ways:

  • Confidence Score – An overall measure of the risk associated with a transaction that cross-references the five core identity attributes. The Confidence Score is powered by machine learning insights from billions of transactional patterns across the Whitepages Pro Identity Network and the 70+ data signals of the Identity Check API.
  • Positive and negative signals – A concise list of primary factors that influence a given Confidence Score.
  • Results columns – A detailed list of matches, mismatches, and invalid inputs based on the links between a transaction’s identity elements. Users can click on specific attributes to further investigate associated people, historical data, and more.
  • Distance Map – A visual representation of geographical distances between phone, primary address, secondary address, and IP address.

Center For The New Middle Class: Non-Prime Consumers Spending More Responsibly On Vacation (Payment Week) Rated: A

Non-prime consumers are significantly less likely to be taking to the road for vacation this summer, opting for staycations instead, and spending far less on vacations if they take one, a new study released today from Elevate’s 

Source: The Center for the New Middle Class

Key findings from the CNMC survey conducted in June include:

  • The non-prime are 29% less likely to take a vacation
  • The non-prime are 22% more likely to “staycation”
  • If they do take a vacation, the non-prime spend half as much
  • The non-prime are 2x as likely to have turned down a vacation due to financial constraints
  • The non-prime are 61% more likely to borrow money for a vacation
  • Non-prime spend 18% less per child on summer entertainment
  • Those with children were more likely to take vacations and borrow money to cover costs

The research also indicated that across both credit segments, summer community resource utilization (i.e. pools, parks, libraries, etc.) was relatively high, with more than 85% in both segments using these facilities. Summer entertainment expenses per child were also very similar between the prime and non-prime groups.

Read the full report here.

United Kingdom

P2P Lender Crowdstacker Now Seeking £800,000 Through Seedrs Funding Round (Crowdfund Insider) Rated: AAA

Crowdstacker, a UK-based peer-to-peer lending platform, is now seeking £800,000through its equity crowdfunding campaign on Seedrs. Founded in 2014, Crowdstacker describes itself as an award-winning FCA regulated online alternative investment platform that provides ISA eligible P2P loans, bonds, and loan notes.

BNP Paribas launches UK fund for SME lending (FinTech Futures) Rated: AAA

BNP Paribas Asset Management will launch BNP Paribas UK SME Debt Fund 1, offering clients access to the UK SME lending market.

The asset management arm of the bank’s new fund will invest in senior loans to SMEs with an annual turnover of less than £50 million through its BNPP AM’s SME Alternative Financing platform.

The platform uses proprietary big data technology, which pairs with the bank’s balance sheet and infrastructure.

Podcast 159: Christoph Rieche of iwoca (Lend Academy) Rated: A

Christoph Rieche is the CEO and Co-Founder of iwoca, a small business lender based in London with operations also in Germany and Poland. The name iwoca stands for instant working capital so they have leveraged technology in order to provide capital to small businesses quickly and efficiently.

In this podcast you will learn:

  • Why Christoph decided to start iwoca.
  • The segment of the small business market they focus on.
  • What is behind the continued decline in overall small business loan volumes.
  • The loan product offered by iwoca.
  • The typical size of their credit lines.
  • The kinds of businesses applying for credit at iwoca.
  • How their underwriting works and level of automation they use.

Navigating through the P2P property maze (Peer2Peer Finance) Rated: A

Landbay investors can expect returns of around 3.54 per cent on its fixed-rate product, or 3.18 per cent with its tracker-rate option, by investing in loans secured by UK property.

The Peer-to-Peer Finance Association member launched its IFISA in February last year, meaning that Landbay customers can also benefit from tax-free earnings on their investments.

LandlordInvest’s investors have earned average annual returns of 11.3 per cent to date, secured by residential or commercial property, with the option of an IFISA wrapper

London Proptech Firm Goodlord Forms New Open Banking Partnership With TrueLayer (Crowdfund Insider) Rated: B

Goodlord, a UK-based proptech platform, has formed a new open banking partnership with TrueLayer. Founded in 2014, Goodlord reports that its cloud-based platform is trusted by hundreds of agencies across the UK. The company has created a one-stop-shop by providing access to a dynamic suite of specialized services, including insurance, e-signing, referencing, and e-payments.

Starling Bank takes on Monzo with daring debit card design (FinTech Futures) Rated: B

UK digital challenger Starling Bank is upping its design game with the launch of a new teal-coloured vertical debit card as it plays catch up with Monzo.

The new card has all customer details, including name, card number and expiry date, on the back – and it’s rolling them out this week.

The card is inspired by the blue-green tones of the plumage of the starling bird. It is also one of the initial group of 16 original “web colours” formulated in 1987 to display web pages, reflecting Starling’s digital heritage.

China

PPDai to boost technology investment (Shine) Rated: AAA

PPDai, China’s first online peer-to-peer lending platform listed in the US, said today it would increase its registered capital to 1 billion yuan (US$149 million) and expand its artificial intelligence applications to hedge risks and improve investor confidence amid concerns over P2P lending.

The Shanghai-based company, which has about 71 million users ,employs AI, Big Data and blockchain to fight against risk and fraud.

Alipay and WeBank competition heats up as China reins in leverage (Financial Times) Rated: AAA

Alipay and WeBank are set up perfectly to take advantage of new priorities from Chinese policymakers to increase the flow of capital to small companies and households, their approach is different as WeBank looks to use bank partnerships to make capital connections.

Alipay uses scale, data and technology capabilities to compete with banks for deposits and funds its borrowing through the ABS market.

Alipay and WeBank plan to list their finance arms soon which will continue to put pressure on the rivalry as well as the broader financial market in China.

Zennon Kapron on what’s next for Chinese fintech (China Economic Review) Rated: A

Analysing these questions is all part of the day job for Zennon Kapron, the head of fintech research and consulting firm Kapronasia. In this interview with China Economic Review, Kapron gives his take on some of the market’s recent developments, and explains why China’s fintech industry is such an exciting space to watch.

CER: How worried should we be about the recent panic surrounding China’s small P2P lending platforms?

ZK: The fact that P2P lending platforms are failing is not surprising. Many of these platforms had inadequate internal operational processes, poor lending practices, and in some cases, were just complete scams. What will be interesting to see is if retail investors will still want to put new money on these platforms. I get the impression at the moment that many investors are just trying to get their money out. Even if the P2P industry manages to right itself, it may find that all the investors are gone.

China’s P2P Online Lending Dominoes Continue to Fall (Ciaxin) Rated: A

Another domino in China’s peer-to-peer lending industry fell.

Beijing-based iqianbang.com was the latest online P2P lending platform to close down. The company announced a “benign exit” last Friday night, citing “deteriorating online lending environment and drying up liquidity.”

Investors in several P2P platforms, including iqianbang.com, gathered Monday at a local Beijing police station to report the loss of money to police.

Chinese P2P Lender’s Controller Disappears After Sponsoring Portugal (Yicai Global) Rated: A

Zheng Yansen, the controller of peer-to-peer lender Guangzhou Leader Internet Financial Information Service has disappeared, the firm announced yesterday.

It also acknowledged that ‘some of its projects are delayed’ and said it will set up a work group as soon as possible to inventory its assets and businesses, request borrowers to repay loans earlier than scheduled, and liquidate collateral as quickly as possible.

European Union

FinLeap Partners With Fabrick to Launch Financial Management Startup for Small Businesses (Crowdfund Insider) Rated: AAA

FinLeap, the fintech start-up platform behind Germany’s SolarisBank, announced on Monday it has teamed up with Italian open banking platform Fabrick to launch a new financial management startup specifically for small businesses. According to FinLeap, the startup, called Beesy, will simplify accounting, tax and banking services for micro-enterprises and freelancers.

As soon as Beesy is launched, FinLeap added it will provide more details about the services and how they work.

Rabobank’s novel approach to protecting customer data (American Banker) Rated: A

Take Dutch-based Rabobank, for example, which now converts customer data to the Latin names of flowers and animals in order to comply with the General Data Protection Regulation that sensitive client information be disguised.

At the heart of all these regulations is the mandate that companies must make sure no one can access customer data who shouldn’t, and that every effort is made to protect that data from breaches. Storing customer data in the clear — not encrypted, anonymized, or pseudonymized — is not acceptable, to regulators or anyone else.

Source: American Banker
International

MoneyGram And Visa Team To Deliver Real-Time Global P2P (PYMNTS) Rated: A

MoneyGram and Visa announced today (July 24) that they have partnered to deliver real-time digital disbursements to MoneyGram customers using Visa’s push payments platform, Visa Direct.

Launching in October in two key markets, Mexico and the Philippines, MoneyGram will expand its options in which receivers from those markets may receive and use funds instantly  via their bank-issued Visa-branded debit card or Visa-branded prepaid card  and senders may choose the option by which to send those funds. The partnership leverages the trust that consumers globally have in the MoneyGram and Visa brands, as well as the ability for receivers to access funds 24/7/365 without having to visit an agent location to pick up cash.

Australia

Property Connect enters technology agreement with Clearmatch to market new lending products (Small Caps) Rated: A

Realty services group Property Connect Holdings (ASX: PCH) has entered into a minimum five-year licence agreement to use a technology platform powered by marketplace treasury company Clearmatch, in the development and marketing of its own lending products designed to ease property market transactions.

The binding heads of agreement allows Property Connect to use the SocietyOne platform owned by Clearmatch to develop products focused on the emerging project development finance and residential mortgage sectors within the private peer-to-peer lending market.

India

P2P lending platform Monexo partners with Cube Wealth for new-clientele (Business Standard) Rated: B

Peer-to-Peer (P2P) lender, has partnered with to provide clients with an alternative avenue for investments. The app-based firm’s user-base of 350,000 customers will have an option of placing a portion of their investments onto Monexo’s platform.

The market space is only three years old and until last October operated without any regulatory oversight. While there are 3,000 lenders in China with a total lending book of $500 million, the Reserve Bank of India (RBI) is said to have approved licenses to around eight firms.

Authors:

George Popescu
Allen Taylor

Friday January 12 2018, Daily News Digest

bitcoin debt

News Comments Today’s main news: More LendingClub-IEG drama.Black Fish raises $145M.Moneygram partners with Ripple.Kreditech expands into India with Mambu. Today’s main analysis: JP Morgan Chase’s investments into digital technology.Is Yirendai undervalued? Today’s thought-provoking articles: Investors go into debt to buy bitcoin.Small business financing trends.How open banking could change how people manage money.Banks, trade finance, and […]

bitcoin debt

News Comments

United States

United Kingdom

China

European Union

International

India

APAC

Africa

News Summary

United States

Lending Club has a bitcoin pivoting suitor (Financial Times), Rated: AAA

Lending Club has all kinds of problems: a history of profit warnings, faint traces of scandal after a management upheaval almost two years ago, and a share price still more than 80 per cent adrift from its peak.

Add to that list: a bizarre, crypto-fuelled activist campaign waged by a Las Vegas-based payday lender called Paul Mathieson, who told authorities in his native Australia that he fled to America in 2008 because he feared being killed by a mobster.

Mathieson’s case for change at Lending Club, laid out in a letter to the company’s board on 2 January, is not a terrible one, on the face of it. He argues that the cost structure at the loss-making company, a pioneer in peer-to-peer lending, is “excessive,” noting fancy headquarters in San Francisco and “hundreds” of “excess” developers. He says that the board should consider a pivot to using its own balance sheet to lend, rather than acting as a broker, taking fees for matching borrowers with lenders. Underwriting has been sloppy, he says, resulting in sub-par returns to investors.

Mathieson is offering 13 shares in his own penny-stock company, IEG Holdings, for every share in Lending Club. At the time of the offer on Monday morning, that was a premium of 19 cents, or about 5 per cent.

Source: Financial Times

SeeThruEquity Issues Update on IEG Holdings Corporation (Bay Street), Rated: A

IEG Holdings Corporation (OTCQB: IEGH) provides online unsecured consumer loans under the brand name “Mr. Amazing Loans” via its website, www.mramazingloans.com, in 20 US states. The company offers $5,000 and $10,000 personal loans over a five-year term at rates ranging from 19.9% to 29.9% APR. IEG Holdings plans future expansion to a total of 25 US states, which would cover 240mn people and represent approximately 75% of the US population.

Since 2013, IEGH has obtained additional state lending licenses, and they are licensed and originating direct consumer loans in 20 states including: Alabama, Arizona, California, Florida, Georgia, Illinois, Kentucky, Louisiana, Maryland, Missouri, Nevada, New Jersey, New Mexico, Ohio, Oregon, Pennsylvania, Texas, Utah, Virginia, and Wisconsin. The Company was founded in 2010 and is headquartered in Las Vegas, Nevada.

IEG Holdings Plans to Create its own IEGH Crypto/Blockchain Currency Backed by Gold Metal and SEC Registration as a Security

IEGH announced that its wholly owned subsidiary, Investment Evolution Crypto, LLC (“Crypto”), is negotiating to purchase a gold project with gold metal in the ground and prospecting licenses. IEG Holdings plans to utilize a gold resource to investigate creating, through Crypto, and a joint venture with Investment Evolution Corporation, also a wholly owned subsidiary of IEG Holdings, its own gold metal-backed crypto/blockchain currency, and potentially offer loans and accept loan repayments in its own crypto/blockchain currency.

IEGH increases loan originations

The company stated that it provided $960,000 in new consumer loans through its online property mramazingloans.com, from the October 2017 to December 2017 period. This represented a 12.3% increase over its July to September 2017 operating period, during which the company’s new loan originations were $855,000.

Desperate to get into bitcoin, investors slip into debt (CNBC), Rated: AAA

Roughly 18 percent of people who buy bitcoin use a credit card to do so, according to a new survey by loan marketplace LendEDU. Of those, 20 percent have not paid off their balance. The phrase “buy bitcoin with credit” has been trending on Google for weeks.

Another problem with going into debt for cryptocurrencies is that people will have to pay back their debt before they see sufficient returns, said Erika Safran, founder of Safran Wealth Advisors. That may require tapping other resources, potentially creating further financial trouble.

Credit card debt from CNBC.

Small Business Financing Trends To Stay Abreast Of (CXO Today), Rated: AAA

  • Traditional bank loan rejections are notoriously high in all markets
  • Small Business Administration (and equivalent agencies) are nefarious for overextending the time-to-credit tolerances of small businesses
  • Volatility of markets, and exposure of almost all markets to disruption by startups could pose urgent cash needs for businesses, which are generally not considered for loan applications by traditional lenders.

Online Lending And Its Deepening Hold Over The Small Business Finance Market

In 2014, a Federal Reserve (US) survey concluded that one in five small business owners opted for loans from online lenders. Since then, the proliferation of online lending platforms has been on the surge, to the extent that traditional brick and mortar lending institutions have also had to move base to the online domain. In the coming years, multiple factors will result in the success and sustainability of online lending platforms. These include:

  • Growing confidence among small business owners to trust online lending platforms
  • Availability of cheaper, quicker, and more convenient loans
  • Options to truly personalize and customize the loan repayment terms to suit the business’ interests

The Call for Transparency in the Online Lending Market

Though the online lending market has been growing year on year, this doesn’t detract from the concerns around lack of transparency in the way some of these platforms operate. Some of the key concerns are around undisclosed APRs and hidden fees. In fact, some online lenders have been castigated for charging significantly high rates of interests from borrowers, often with service quality issues post-approval. Thankfully, there’s already some progress towards bringing a degree of regulation in place for online lending platforms to be at par with traditional lending regulations.

JPMorgan Chase Competitive Strategy Teardown: How The Bank Stacks Up On Fintech & Innovation (CB Insights), Rated: AAA

JPMorgan is making a bigger push into payments technology as digital banking becomes a strategic priority.

In 2016, the bank spent $9.5B on technology and Dimon has committed $300M alone to improve JPMorgan’s technology for its asset management products. Relative to its peer group, JPM claims the highest number of mobile banking customers and its Chase Mobile app currently sports a 4.7 (out of 5) rating in the App Store.

Earnings call analysis – Barclays, Bank of America, Morgan Stanley talking up digitization

  • JPM discussed continued digital consumer banking growth, which grew 6% in Q3’17.
  • Bank of America spent portions of its Q1’17 and Q3’17 talking about digital banking initiatives and technology investment. Specifically, CEO Brian Moynihan mentioned the bank spent $2.25B on technology initiatives in the first three quarters of 2017. The bank also now sees mobile devices account for 1 of every 5 deposit transactions.
  • On Morgan Stanley’s Q3’17 earnings call, Morgan Stanley CFO Jonathan Pruzan mentioned the bank is beta testing new customer-facing digital products it plans to launch, potentially in the robo-advisory space. Specifically, Pruzan noted: “When we think about our wealth business, it’s a business that’s built on scale. And it’s built on the fact that people with wealth want personal advice. So it’s going to be both a mix of technology and digital with the personal element of the advice channel. And we think that’s the winning formula going forward.”

Based on the data, JPMorgan ranks ahead of most bulge bracket banks when it comes to overall fintech investment since 2013, but behind its peers Goldman Sachs and Citi.

Online Marketplace Lender Nav Facilitated More Than 20,000 Small Business credit Approvals in 2017 (Crowdfund Insider), Rated: A

Nav, a small business marketplace lending platform, announced this week it has facilitated more than 20,000 small business credit approvals in 2017.

The company currently has more than 327,000 entrepreneurs now using its platform to manage their data and access capital.

Bono’s Fund Makes Its First Fintech Investment, Backing Acorns (Bloomberg), Rated: A

The Rise Fund, a private investment firm co-founded by the U2 lead singer, is making its first known bet on a fintech business by backing Acorns Grow Inc., said people familiar with the matter, who asked not to be identified because the details are private.

Georgia Company Acquires S.D. Fintech Startup LoanHero (San Diego Business Journal), Rated: A

LoanHero, one of San Diego’s few financial technology startups, has been acquired by Georgia-based company LendingPoint.

Terms of the deal, announced Jan. 11, were not disclosed.

Small-dollar lender Oportun to open 20 offices in Florida (American Banker), Rated: A

Oportun, a community development financial institution that provides small loans to individuals with little or no credit history, is planning to open 20 lending offices in Florida.

The Redwood City, Calif.-based lender said this week that it has already opened four offices in Miami and Hialeah and that it expects to add 16 more in the Sunshine State, primarily in South Florida, by the end of the year.

6 Key Trends in Fintech to Watch in 2018 (Lend Academy), Rated: A

  1. Convergence of Software and Financial Products  One of the important lessons that Square taught the market is that bundles of software solutions (loyalty, POS, analytics, scheduling and many others) and lending are essential drivers in advancing growth of payment processing.
  2. InsureTech
  3. The Power of the Machines  Companies like LendingClub are using machines to discover new relationships and patterns to introduce more tailored financial offers to their customers.
  4. Emerging Economies  Many growing companies in Africa, Asia, and Latin America are developing and adopting financial solutions, often faster and with more innovation than in developed economies.
  5. Wealth Management
  6. Rise of Crypto and Blockchain

Google Pay brings payment tools under a single brand (Tearsheet), Rated: A

The Internet giant is finally putting its many payments capabilities — Google Wallet, Android Pay and Pay with Google — under a single name, Google Pay, after lagging for years behind Apple Pay and Samsung Pay.

Ladder Secures $ 30M Series B Led by RRE Ventures (coverager), Rated: A

CA-based life insurance MGA Ladder announced it has raised $30M in a Series B round led by RRE Ventures, with participation from Thomvest Ventures, as well as Ladder’s existing investors: Canaan Partners, Lightspeed Venture Partners and Nyca Partners . Ladder launched its fully-digital life insurance solution in California on January 10, 2017, and has since expanded to nearly every state across the country.

Fifth Third regains top CRA grade, an entree to M&A (American Banker), Rated: A

Fifth Third Bancorp has received top marks from the Federal Reserve on its most recent Community Reinvestment Act examination as expected.

Fifth Third announced the results on Wednesday, saying in a press release that the Fed gave it an “outstanding” rating on its most recent exam. The Cincinnati company had said in a regulatory filing last month that it expected to ace the test, which covered the period between Jan. 1, 2014, and June 30, 2016.

A Beginner’s Guide to Applying for College Loans (Student Loan Hero), Rated: A

Student loan debt statistics show that more than 70 percent of students graduating from four-year colleges have debt, so you aren’t alone if you need to borrow to cover educational costs.

Step 1: Understand your options

  • Federal loans for students
  • Federal loans for parents
  • Private loans for students
  • Private loans for parents
Source: Federal Student Aid

Step 7: Determine if you’ll need to apply for private loans

  • Family contributions if parents or other family members are willing and able to pay
  • Savings
  • Scholarships or grants from community groups or other sources
  • Parent PLUS Loans
  • Private student loans

Step 8: Learn how to apply for private student loans

Because there are many private student loan lenders, it’s a good idea to shop around. You should consider:

  • Loan eligibility requirements: What do you need to qualify?
  • Loan terms: How long do you have to repay the loan?
  • Repayment terms: When do you need to start repaying, and is there a prepayment penalty?
  • Fees: Is there a cost to apply for the loan or a loan origination fee?
  • Interest rates: Is the rate fixed or variable? How much will you pay to borrow?

You can visit our private student loan marketplace to find private student loan lenders offering loans to parents and students.

Here are the top 6 lenders of 2018!

LENDER RATES (APR) ELIGIBLE DEGREES
CHECK OUT THE TESTIMONIALS AND OUR IN-DEPTH REVIEWS!
2.58% – 7.25% Undergrad
& Graduate
VISIT SOFI
2.57% – 6.39% Undergrad
& Graduate
VISIT EARNEST
2.76% – 7.25% Undergrad
& Graduate
VISIT COMMONBOND
2.99% – 5.15% Undergrad
& Graduate
VISIT LAUREL ROAD
2.74% – 7.26% Undergrad
& Graduate
VISIT LENDKEY
3.11% – 8.46% Undergrad
& Graduate

 

 

Roostify adds tech veteran Adnan Habib as vice president of engineering (Housingwire), Rated: B

Roostify announced Thursday that it hired Adnan Habib as the company’s new vice president of engineering.

In this role, Habib will lead Roostify’s growing product delivery team and will be responsible for making improvements to the Roostify’s digital lending platform.

Roofstock Appoints Suresh Srinivasan as Chief Marketing Officer (BusinessWire), Rated: B

Roofstock (www.roofstock.com), the leading online marketplace for buying and selling leased single-family rental homes, today announced the strategic hire of Suresh Srinivasan as chief marketing officer. Srinivasan has 20 years’ experience leading marketing, product, and e-commerce functions at Fortune 500 and high-growth tech startups. Most recently serving as the SVP of Marketing for Xome, Srinivasan brings a deep understanding of the fast-growing real estate technology sector to Roofstock where he will be responsible for accelerating growth of Roofstock’s marketplace for single-family rental homes and developing the company’s partnership network.

United Kingdom

An invisible banking reform that ‘could fundamentally change how we manage our money’ is days away (Business Insider), Rated: AAA

Regulators in Europe and the UK are ordering banks and credit card companies to share customer data with other companies if their customers agree. The companies will also be able to carry out payments on a customers’ behalf.

Open Banking forces lenders to offer a digital “fire hose” of data that any third party can use to get standardised access — provided the startup is registered with the UK Financial Conduct Authority (FCA) and the customer agrees to share their data. They won’t have to negotiate deals with banks, just plug into their digital systems and go.

The aim of Opening Banking is to give customers greater control over their data and to encourage account switching.

An investigation by the UK Competition and Markets Authority in 2015 found just 3% of customers switched their banks in the last year, meaning many were left with accounts that were not right for them.

 

ThinCats Says 2018 is Poised for Growth in SME Lending (Crowdfund Insider), Rated: A

ThinCats says 2018 is poised for growth. The online lender reports that December was a record month booking £12 million of funding listed on the platform followed the biggest-ever ThinCats-listed loan of £6.7 million to the Chelsea Yacht & Boat Company at the end of September.

Loan Store Reveals to Reduce Interest Rates on Instant Cash Loans for the UK People (MENAFN), Rated: A

Loan Store is the responsible lending hub that reveals to reduce the interest rates on instant cash loans for the UK people.

Hennery Dicosta, a senior adviser of Loan Store, has offered the complete details about this announcement. This is what he said- In a recent scenario, people usually try to borrow a small loan amount. That is why we have decided to provide the loans for bad credit people with no guarantor and no fees on an instant decision to resolve their short term emergencies. We never charge any processing fee and we are now providing these loans on quite low rates of interest. Besides, we do not judge the creditworthiness of the borrowers with their credit rating and give an instant decision on their loan request.

Crowdstacker joins the Peer-to-Peer Finance Association (P2P Finance News), Rated: B

CROWDSTACKER has joined the Peer-to-Peer Finance Association (P2PFA), becoming the self-regulated trade body’s eighth member.

The business lending P2P platform will be represented by chief executive Karteek Patel.

China

3 Growth Stocks at Deep-Value Prices (The Motley Fool), Rated: AAA

With that in mind, we asked three Motley Fool investors to each profile a company that has a low valuation now compared to its earnings-growth potential. They identified Yirendai (NYSE:YRD)Criteo S.A.(NASDAQ:CRTO), and Changyou.com (NASDAQ:CYOU) as strong contenders trading at attractive discounts.

China’s first P2P online lending platform

The Chinese P2P lending market blossomed in the late 2000s, catering to  customers who were underserved by traditional banks, and is worth about $60 billion today.

Analysts expect Yirendai’s revenue and earnings to rise 74% and 14% respectively this year, followed by 43% revenue growth and 41% earnings growth next year. Yet the stock trades at just 14 times earnings, compared to an industry average of 26 for credit service providers. Based on those numbers, Yirendai looks likely an undervalued growth stock.

But there are some obvious reasons why investors are discounting it.

First, Yirendai is a subprime lender. Just 1.7% of its loans were rated as prime “Grade A” last quarter. Another 8.7% were Grade B, and 14.1% were Grade C — but 75.5% were rated Grade D. Yirendai collects higher fees from lower rated borrowers, but its business could collapse if its delinquency rates rise.

The company only discloses delinquency rates for loans past due by 15 to 89 days, and that rate came in at a low 1.8% last quarter. But it doesn’t report any data on loans delinquent for over 90 days.

Chinese finance platform Black Fish raises $ 145m from Gobi, Lightspeed, others (Deal Street Asia), Rated: AAA

Black Fish, a consumer finance platform based in China’s Nanjing region, has received $145 million in a series A round from a cluster of firms  including Lightspeed China Partners and Shanghai and Kuala Lumpur based Gobi Partners.

Others who participated in the round include Morningside Venture Capital, JAFCO Asia, Fullcent Capital and Zhang Tao, founder of Dianping.com.

At this point, the average annual growth rate of consumer finance is 16.4 percent.

China’s Renren Is Poised To Unlock Value From Its Investment Portfolio And Grow With Blockchain (Seeking Alpha), Rated: A

Renren holds a significant investment portfolio that is easily worth $12 per share.  This value will likely be realized in the near term due to multiple catalysts.

The company has started to get involved with blockchain-related businesses, which potentially turns them into a “blockchain play”.

This situation leads to an asymmetrical payoff structure in which there is very little downside and significant upside. My target price is $18.

Renren was an early VC investor in Sofi, taking part in its seed round of financing as well as a later follow-on round. They currently hold a 13% stake in SoFi, having sold 14.1% of their holdings (representing 2% of SoFi) in April 2017 for $92 million.

Source: Seeking Alpha

Dianrong Signs Strategic Agreement with Dalian Finance Development Bureau & Dalian Finance Industry Investment Group (PR Newswire), Rated: A

Dianrong and the Dalian Finance Development Bureau and Dalian Finance Industry Investment Group (DFIIG) recently signed a strategic cooperation agreement to drive financial innovation in Dalian and across China. According to the agreement, Dianrong will develop a series of specific projects in partnership with the Dalian government, including:

  • Assist the Dalian Finance Development Bureau in creating a financial technology (fintech) cloud platform to provide fintech capabilities for small loan and guarantee companies, and other small and medium-sized financial institutions in the region and at large. Tools and services will include sophisticated fraud detection, big-data risk management tools, payment channel integration, and compliance reporting. The fintech cloud platform will also provide regulators with easier monitoring of local lending activities and trends in an ongoing and comprehensive way, helping them provide timely policy guidance and support on risk management.
  • Work with DFIIG to establish a special Internet finance investment fund for Dalian. The fund will focus on investment in fintech projects and startups with the potential to strengthen Dalian’s new economy and financial services industry.
  • Develop a supply-chain trading platform in Dalian utilizing advanced fintech and blockchain capabilities to help more small and medium-sized suppliers secure needed funding. Last year, Dianrong created the first blockchain platform for supply-chain finance with FoxConn Group, a global leader in consumer electronics.

Shanghai tightens financial sector supervision (Ecns), Rated: B

Shanghai is one of China’s largest financial markets by market trading volume. In 2017, its trading volume was 1,438 trillion yuan ($220.9 trillion).

Shanghai has already launched a campaign against fraud and illegal behavior in financial consumer markets, such as internet-based peer-to-peer lending, cash loans to college students, and pay-day loans.

European Union

Rocket Internet CEO says ready to pounce with cash pile (Business Insider), Rated: AAA

Germany’s Rocket Internet needs to hold on to its mountain of cash so it can compete with rivals from the United States and China and pounce when investment opportunities arise, the chief executive said in an interview.

CAUTIOUS MARKET

Rocket is invested in more than 100 start-ups, including in financial and property tech, logistics and travel sites, with its stakes in the five biggest of them potentially worth more than 1 billion euros to Rocket, according to Berenberg bank.

International

MoneyGram Signs Deal to Work With Currency Startup Ripple (WSJ), Rated: AAA

MoneyGram International Inc. MGI +2.63% signed on to run a pilot program testing XRP, a digital currency created by San Francisco startup Ripple, in its payments network, the companies said Thursday.

The Dallas-based company agreed to test XRP as a tool for reducing money-transfer costs and settlement times.

How Banks Can Use Trade Finance Services and Data to Increase Share of Wallet (Traxpay), Rated: AAA

While global trade presents tremendous growth opportunities, businesses of all sizes are none-the-less finding it difficult to access much needed credit, resulting in a global trade finance gap. According to an Asian Development Bank’s (ADB) 2017 Trade Finance Gaps, Growth, And Jobs Survey, that gap was $1.5 trillion in 2016.

Non-financial institution competitors are aggressively targeting this market, using innovations such as blockchain to develop products and tools that not only replace outdated paper and manual-based processes, but also deliver unprecedented levels of cybersecurity that are critical in today’s digital transaction space. The same ADB survey revealed more than $13 billion in venture capital was invested in FinTech trade finance in 2016 alone.

The recent Simmons & Simmons Hyperfinance studyof the world’s leading trade banks found that only 7% believe they are at the forefront of digital innovation in spite of the fact that 80% of innovation leaders report digitally-driven products and services introduced over the past three years have expanded revenue growth. This illustrates the reality that financial institutions recognize the importance of developing a digital strategy, but few are moving aggressively enough to take advantage of these new technologies.

PRINCIPLES, ESG, AND CREDIT RISK (All About Alpha), Rated: AAA

The question before the house right now, though, is: what about the credit rating agencies? The question comes in three parts: there are the global CRAs; the smaller/regional CRAs in most of the world, and regional CRAs in the special case of China.

First, the global CRAs [there are just two of them, Moody’s and S&P] are making “strong efforts” to incorporate an understanding of ESG issues. They are hiring staff with ESG backgrounds, equipping their existing analysts with the relevant expertise, and drawing on third party providers.

Then there is China. Its CRAs include Dagong Global, China Chengxin, and Golden Credit Ratings. The idea of integrating ESG into their analyses is thus far limited to the issue of green bonds, that is, bonds issued for the development of brownfield sites. Government policy in China encourages green bonds and the CRAs have responded. The resulting assessments are focused on the “E,” not so much the “S” or the “G.” And their environmental assessments rely on measuring the impact of the project the bond aims to finance.

  • Research very generally supports the hypothesis that there exists a causal link between ESG factors and the credit worthiness of a borrower;
  • Academic research in limited in that it is too exclusively content to measure credit risk by credit ratings, rather than testing the ratings themselves against alternative measures;
  • But some research does employ the spread of credit default swaps as an independent measure of risk;
  • Anecdotal observation indicates a clear link between G and defaults, although the linkage between E and S and defaults is more difficult to pin down;
  • There is much evidence in the linkage of ESG to macroeconomic factors and potential growth, which in turn are important to sovereign risk in particular.

ABS braces for more auto deals after strong start to year (IFR), Rated: A

The asset-backed bond market is braced for a slew of new issues next week, with deal flow expected to be dominated by auto issuers including BMW and Mercedes.

Just two issuers sold deals this week – GM Financial and Consumer Portfolio Services – and both auto trades were met with strong demand from investors. One banker on the GM deal said the deal was over-subscribed across the capital stack.

The biggest tightening though was seen on the smallest and lower rated tranches. The 3.58-year Class B, rated Aa3/AA by Moody’s and Fitch, priced at 30bp over interpolated swaps versus guidance of 35-40bp and whispers of 45bp area.

The 3.58-year Class C, rated A1/A, priced at 50bp over interpolated swaps versus guidance of 55-60bp and whispers of 65bp area.

FROM BANKING TO BITCOIN, FINTECH IS POISED TO CHANGE THE WORLD (Tech Genix), Rated: A

Currently, it represents only 1 percent of the global financial industry. By comparison, digital media accounts for 40 percent while eCommerce accounts for around 10 percent.

Source: Tech Genix

To give you a perspective, venture capitalists invested more than $13 billion across 840 different fintech holdings in 2016, according to a report by KPMG. This is 7 percent more than they invested in 2015.

According to the McKinsey report, five areas will see high growth over the next decade. They are consumer finance, mortgage, lending, retail payment, and wealth management.

Online payments

PayPal handled $1.73 billion worth of transactions in the first quarter of 2017 alone, representing a 30 percent increase year-on-year.

Borrowing and lending

However, the delinquency rates have been increasingover the last few years. These rates have increased from 0.56 percent in January 2015 to 0.75 percent in December of the same year.

Overstock.com’s 2017 Highlights: Innovation, Expansion, and Recognition (Business Insider), Rated: A

Overstock’s blockchain-focused subsidiary, Medici Ventures, named its board of directors in 2017, and also saw a number of its portfolio companies continue to use blockchain to revolutionize industries including capital markets, money and banking, property registry, voting, identity, and underlying blockchain technology, including:

  • tZERO, the world’s first SEC approved, blockchain-based alternative trading system, launched its initial coin offering (ICO), which attracted over 10,000 subscribers and raised $100M in commitments in the first 12 hours of its pre-sale. A significant portion of the tZERO security tokens issued will be available to accredited investors in the public sale beginning in January, 2018.
  • DeSoto Inc., a joint venture between Overstock.com founder and CEO Patrick Byrne and world-renowned economist Hernando de Soto, was created to develop a global property registry system to surface the property rights of billions of people in the developing world.
  • Bitt, a Barbados-based financial technology company using blockchain to create central banking tools and mobile money applications, named Rawdon Adams, son of former Barbadian Prime Minister Tom Adams, as its CEO. Bitt also fully launched its new mMoney digital payment product, bringing to market a blockchain-based mobile wallet that allows users to participate in digital transactions on their smartphones without the need for a traditional bank account, helping to foster financial inclusion in the region.
  • South-American based Ripio (formally known as BitPagos), participated in an ICO that raised $37M to fund its Ethereum-based peer-to-peer lending platform, Ripio Credit Network.
  • Belgium-based SettleMint launched a token sale for its DataBroker DAO, a peer-to-peer marketplace created to provide Internet of Things (IoT) sensor-owners with a clear path to data monetization, and data consumers with a decentralized marketplace in order to buy IoT sensor data. SettleMint also signed an agreement with The Islamic Research and Training Institute, the research arm of the Islamic Development Bank Group, to work with local partner Ateon on developing blockchain-based financial products that can be used to support development and inclusion in IsDB member countries.

Global lender selects Aussie fintech, Trade Ledger, as worldwide technology partner (PR Newswire), Rated: A

Zürich-based lender, TradePlus24, has selected Australian deep tech startup, Trade Ledger, as its global technology partner to roll out its new trade insurance wrapped lending product across their European lending network, and enter the Australian market.

Bankers fear they will get Amazon-ed in tech disruption (Financial Times), Rated: A

According to IDC, only about a quarter of US bank technology budgets is spent on digital transformation, as opposed to business as usual. They expect this to grow to nearer 40 per cent in 2020.

Secondly, this spending could substantially boost banks’ productivity, and profits.

Banks will drive up the cost of customer acquisition for start-ups who will increasingly struggle unless they build network effects and scale very quickly. Roboadvisers and peer-to-peer lenders will be on heightened alert. Some start-ups will need to rethink their plans to disrupt and look to form partnerships instead.

Changes in financial regulation, such as a lighter touch fintech charter being examined in the US or the second payment services directive in Europe, could potentially make this more likely. The tech giants have the brands, customer reach, digital processes and flair to develop good products, and to take swift advantage of any regulatory changes.

Karma token trading opens after successful million ICO campaign (Crypto Ninjas), Rated: B

India

German Online Lender Kreditech Heads to India (Bank Innovation), Rated: AAA

German online lender Kreditech is making its way to India, Bank Innovation has learned.

For this expedition, the fintech has teamed up with SaaS banking platform Mambu for providing short-term lending products specifically tailored to local consumers.

Kreditech selects Mambu’s SaaS banking engine for its passage to India (Finextra), Rated: A

Kreditech currently operates in Europe and Latin America and will expand into India in early 2018, together with its partner PayU, a global online payments provider and Mambu client in Latin America.

The loan product is expected to go live in the first quarter of 2018, all data will be hosted by AWS India.

NiYO Solutions Raises $ 13.2M in Series A Funding (FINSSMES), Rated: A

NiYO Solutions Inc., a Bangalore, India-based fintech startup for salaried employees, raised $13.2m (85 crore) in Series A funding.

APAC

Myanmar takes small steps towards providing greater liquidity for SMEs (Myanmar Times), Rated: AAA

A rising number of start-ups as well as small and medium enterprises (SMEs) are emerging in Myanmar as business opportunities rise. However, many companies fail to achieve their full potential and contribute substantially to the economy because capital assistance is lacking in the country.

A rising number of start-ups as well as small and medium enterprises (SMEs) are emerging in Myanmar as business opportunities rise. However, many companies fail to achieve their full potential and contribute substantially to the economy because capital assistance is lacking in the country.

Currently, local banks extend loans at interest rates ranging between 8.5 percent and 13pc. The local banks began offering SME loans at8.5pc interest in 2015. Since then, the Japan International Cooperation Agency (JICA) and KfW Development Bank from Germany have also launched SME loans.

P2P lending

To get around the financial constraints, borrowing from family members and peers is common.

In fact, a rising number of businesses have resorted to P2P lending for funds to build up their businesses. Without any guarantees of success though, many entrepreneurs ultimately end up in debt. Others fall prey to fraud. Last year, The Myanmar Times reported at least three cases of fraud involving fake promises of repayments with up to 30pc interest.

Cloud Lending Solutions Recognized as a Top 25 FinTech Company of 2017 (BusinessWire), Rated: B

Cloud Lending Solutions was recognized as a “Top 25 FinTech Company for 2017” by APAC CIO Outlook Magazine. A panel of industrial experts and executives collaborated with the editorial board to curate the list with an aim to provide clarity into the ideal FinTech partners.

Africa

Local digital currency eyes real estate disruption (ITWeb), Rated: AAA

Cape Town-based fintech company, Wealth Migrate, has launched a global   – WEALTHE Coin.

According to Wealth Migrate, while almost half of the world’s wealth is held in real estate, fewer than 13% of people have access or the resources to invest in and  from this lucrative market.

Authors:

George Popescu
Allen Taylor

Thursday January 12 2017, Daily News Digest

p2p loan investing

News Comments Today’s main news: Funding Circle raises another $100M, praised by chancellor. Today’s main analysis: Brussels, London form FinTech bridge. Today’s thought-provoking articles: What every entrepreneur needs to know before starting a business. United States What every entrepreneur needs to know before starting a business. AT: “Sharestates CEO Allen Shayanfekr shares from his own […]

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India

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  • Global loan servicing software market to grow over 14% through 2021. AT: “This is a come-on to sell a report, but the interesting thing is that the software we’re talking about is software that can be used by MPLs and other financial services in the alt lending space. If the software market goes up, it’s a good sign that the industry is moving in the same direction.”

News Summary

United States

What Every Entrepreneur Needs To Know Before Starting a Business (Fortune), Rated: AAA

As the founder of a real estate crowdfunding startup, I have learned a lot over the last two years and am eager to share that information with other entrepreneurs.

The first tip I would give any entrepreneur is to forget the concept of a 9-5 work day. If you start your company thinking that all of your responsibilities will be handled in an 8-hour day, you are setting yourself up for failure.

Without a solid operations team, the inefficiencies from department to department will end up costing much more in the long term.

The capital raising environment is volatile and the key to survive a raise is to find the quickest path to profitability even if it means growing slower. Because raising capital is a long and tough process, you should make every single penny count. Sharestates started out with a $25,000 family loan and now has originated over $200 million in real estate loans since its inception in 2014. Until your company is ready to raise capital, be sure to be in touch with each department’s spend to ensure you are maximizing each dollar.

Make sure you consult an attorney to ascertain all regulatory and compliance risks – not everyone is aware that sometimes their line of business is subject to some form of scrutiny. This is especially important in an industry as new as marketplace lending.

SoFi: A Financial Services Provider That Is So Not Wall Street (TheStreet), Rated: A

In the old days, banks were imposing granite buildings housing massive vaults and offering 3% on savings and 6% mortgages. Later they morphed into unassuming suburban branches distinguished from fast-food outlets primarily by having multiple drive-through lanes. 21st Century banks increasingly live online, and the chief exemplar of that is SoFi.

Another difference is that SoFi relies less on credit scores when deciding to grant a loan compared to mainstream lenders. “We’re looking primarily at free cash flow — do you have enough money at the end of the month to pay us back for this loan?” Macklin says.

Perhaps the most marked divergence between SoFi and mainstream banks is its interest in customers’ personal lives. The company hosts meet-and-greet singles events and community dinners and provides career planning and job search assistance. It even offers coaching to help would-be entrepreneurs launch businesses.

Roseman says SoFi appears to seek refinancing business with borrowers whose student loan balances are $80,000 and up. “With that type of loan balance, they’re looking at the Ivy Leagues and the Stanford grads, more of the private college folks,” he says.

On life insurance, he suggests looking at other options before signing up for SoFi’s. SoFi doesn’t require medical exams from applicants. which means the insurer shoulders more risk, which generally means higher premiums.

He also cautions against refinancing government student loans as part of a mortgage refinance without accounting for the fact that government loans may allow for modifying payments or forgiving part of the loan.

Why You Should Invest In Peer-To-Peer Loans In 2017 (Forbes), Rated: A

Most lenders spread their loans across a variety of rankings—with the bulk in the highest-quality ratings (lowest default risk) and some in the lower quality, where yields can top 20% to offset the higher risk.

One of the big advantages of P2P lending is the very low correlation these loans have to traditional stock and bond markets.

Due to the nature and number of the loans you’ll make, the correlation to the stock market for a P2P portfolio is just 0.19. For US bonds, the correlation is even less, -0.13.

There are also add-on services you can use to improve your overall returns while better managing your risk. One tool we analyzed in our report consistently provided a net annual return of over 14%.

WILL THESE TECHNOLOGIES KILL CASH ONCE AND FOR ALL? (Ozy), Rated: A

Financial technology (fintech) is a young but $78.6 billion–strong industry, and legal precedents can only help it thrive. Unethical business practices by one company can ruin opportunities for all, and that would be a tragedy given that alternative finance holds the power to transform the industry, bringing services to millions who have long been excluded from the system.

Traditional firms like Goldman Sachs will capitalize on Lending Club’s missteps by arguing that point of sale is where it’s at — and they’ll be right.

Mobile apps aren’t merely add-ons for banks trying to appeal to younger generations; they’re now baseline requirements.

2017 will be the year of alternative payments. Heavy hitters like PayPal, Apple Pay and Google Pay will continue to flourish as merchants increasingly encourage customers to pay via their phones or digital wallets. But smaller companies will emphasize mobile payments as well, using new apps and streamlined systems to drive more widespread adoption among consumers.

The natural next step from alternative payments is for smartphones to become people’s go-to personal finance management systems. Individuals will pay their bills, monitor their budgets and make purchases almost exclusively through mobile apps and notifications.

Approximately 24 million U.S. households rely on services like pawnshops and payday loans to access cash and credit. Fintech companies will target these millions through new products and underwriting models that look beyond traditional credit indicators.

Improved efficiencies will empower consumers and hold banks and fintech companies to higher standards of transparency and ethics.

Enhancements in financing will also enable individual verticals or marketplaces build cooperative microeconomies, thanks to improved access to capital.

Does Funding Circle’s 0M Round Signal A Return To Boom Times For Online Lending? (Fast Company), Rated: A

Last spring, following a loan-doctoring scandal at Lending Club—at the time, the industry leader—capital for online lending startups became harder to come by and many suffered layoffs. Avant, Prosper, and Lending Club cut staff by the hundreds.

Funding Circle weathered the storm, closing 2016 on a high note with $485 million in Q4 loans to small businesses. In total last year, the company lent $1.4 billion. According to Hodges, Funding Circle is cash-flow positive in its home market, the United Kingdom (where it benefits from the support of the government-owned British Business Bank), and expects to make its U.S. business profitable in 2017.

Online lenders also face increased competition from banks, many of which have shiny new platforms thanks to partnerships with startups. Kabbage, for example, has made bank partnerships central to its strategy; CEO Rob Frohwein says that licensing Kabbage technology to banks has grown to become an “eight-figure business” for his organization.

LQD Business Finance Announces Breakout Business Results In 2016 (PR Newswire), Rated: A

LQD Business Finance, an alternative lender that uses a proprietary credit-scoring algorithm to underwrite business loans, announced standout business results in 2016, its first full year of operations. Last year, LQD grew its flow of loan applications to over $140 million and loans closed to $33 million. In addition, the company closed a significant Series A funding round, complementing the $30 million credit facility secured in 2015.

Looking ahead, Souri said LQD anticipates growing its origination run rate to $80 million by the end of 2017 and to more than $200 million over the next 24 months, largely by expanding its data-driven lead generation and targeting the $200 billion market of prime and near-prime loans between $250,000 and $2 million. That market is underserved by both banks and existing alternative lenders. Additionally, LQD is in partnership talks with several banks interested in the company’s underwriting platform.

Professional Bank Services and Austin Associates Announce Strategic Merger (ProBank Email), Rated: B

Professional Bank Services, Inc. (PBS) and Austin Associates, LLC (Austin) announced today they have completed a strategic merger to create the nation’s premier bank consulting and investment banking firm. The resulting firm will operate under the name ProBank Austin, with offices in Louisville, KY, Nashville, TN and Toledo, OH.

Transaction terms are not being disclosed. ProBank Austin will continue to be privately-owned by the management and employees of PBS and Austin.

PwC Launches Blockchain & FinTech Program for Young Entrepreneurs (Coin Telegraph), Rated: A

PricewaterhouseCoopers (PwC), one of the Big Four auditors and a multi-bln dollar professional services firm, launched a program called “Startup Collider” in early September of last year. The program, which begins today, will support young entrepreneurs and startups working within the Blockchain and fintech industries.

By the end of the program, PwC hopes to see its startups cooperate with industry leaders and introduce their technologies to mlns of users and consumers. Dissimilar to many venture capital firms or accelerators, PwC also allows startups to test their technologies with its multi-bln dollar clients and partner corporations. If startups wish to pivot away from their focal point to another market within fintech or Blockchain, PwC will support the decision.

United Kingdom

Chancellor hails ‘vote of confidence’ in UK economy as Funding Circle raises £82 million (Business Insider), Rated: AAA

Chancellor Philip Hammond has praised Funding Circle as “a real success story” after the British peer-to-peer lender raised a further $100 million (£82 million).

The company announced its sixth funding round on Thursday, which takes its total equity funding to over $370 million (£300 million).

The latest funding round was led by existing investor Accel Partners, with participation from other existing backers including Baillie Gifford, DST Global, Index Ventures, Rocket Internet, Temasek, and Union Square Ventures.

UK MD and co-founder James Meekings told Business Insider that the money will go towards building out Funding Circle’s technology platform and hiring more staff.

Brussels and London Form ‘Fintech Bridge’ (Fortune), Rated: AAA

“B-Hive,” the part-government-owned platform set up to facilitate innovation between Belgium’s fintech sector and the traditional financial and technology sectors, has signed a memorandum of understanding (MoU) with Innovate Finance, the trade body for Britain’s fintech sector, it said on Wednesday.

In 2015 Britain’s fintech sector, whose ranges from app-based payment services to crowdfunding and peer-to-peer lending firms, employed over 60,000 people and generated 6.6 billion pounds ($8 billion) in revenue, according to the Treasury.

Crowdstacker Claims the Title of Biggest UK Crowdfund (Crowdfund Insider), Rated: A

Yesterday we published an article about BrewDog raising £10 million on Crowdcube.  The funding round via Mini-bonds was described as the largest ever on a UK crowdfunding platform.  Later in the day, Crowdfund Insider was contacted by Crowdstacker saying not so fast – they believe they have the largest crowdfund record for a UK platform.

Their new record-breaking claim to a single raise has been undertaken via its peer to peer lending platform for leading specialist lender, Amicus Finance plc.  To date, £12 million has been invested.

P2P Platform Flender Surpasses £485,000 During the Final Week on Seedrs (Crowdfund Insider), Rated: A

With less than a week until its Seedrs campaign comes to an end, P2P lending platform Flender has secured 98% of its £500,000 funding target (more than £485,000) from 225 investors.

Funds from the equity crowdfunding campaign will be used for key hires, including a direct sales team and in-house software developers; marketing, including online targeting and above-the-line advertising; product development, specifically native iOS and Android versions plus roadmap features for all channels. Flender’s Seedrs initiative is currently scheduled to close next Tuesday (January 17th). 

iBAN Seeking £100,000 on Seedrs to Create Crowdlending App iBAN Wallet (Crowdfund Insider), Rated: A

Online lending platform, iBAN, recently launched an equity crowdfunding campaign on Seedrs with a mission to raise £100,000 to create its new crowdlending app, iBAN Wallet.

The lender stated that the app would connect lenders and borrowers directly, helping them to control their finances and transfer money while on the go. Through the app, iBAN users will have a modern money management tool, integrated with gamification, and risk management.

4thWay Predicts UK P2P Lending Market to Grow Up to 50% in Coming Year (Crowdfund Insider), Rated: A

4thWay, a P2P ranking site, has published a report on the UK peer to peer lending market.  According to their numbers, delivered another “record year”, with a total of £3.02 billion facilitated via 35 various platforms in the UK.

The totals are as follows:

  • Consumer loans £1.27bn
  • SME loans including invoices £1.01bn
  • Development and short-term property loans £690m
  • Asset-backed (HNW pawnbroking) £40m
  • Rental property £10m

4thWay said investors typically received returns of 3%-7% net of costs and bad debts. Lower returns went to investors who desired greater liquidity and the higher returns to those lending for up to five years.

Bad debts at the majority of P2P lending platforms remained consistently very low at less than 1%.

LandlordInvest gains ISA manager status from HMRC (P2P Finance News), Rated: A

LANDLORDINVEST has been approved by HMRC as an ISA manager, paving the way for the launch of its Innovative Finance ISA (IFISA), Peer-to-Peer Finance News has learnt.

At present, just 18 companies are authorised to offer IFISAs, most of which are very small firms. Out of the eight members of the Peer-to-Peer Finance Association, only Lending Works has HMRC approval. Just before Christmas, Landbaygained full authorisation from the FCA, meaning that HMRC permission is the next step.

LandlordInvest has said that its IFISA will offer investors annual returns ranging between five and 10 per cent.

P2P to “explode” in 2017, but some platforms may close (P2P Finance News), Rated: A

PEER-TO-PEER lending will grow by 50 per cent this year driven by the Innovative Finance ISA (IFISA), but some platforms will fall by the wayside, predicts new research.

Just five IFISAs have been launched so far, but independent P2P analysis firm 4th Way is forecasting a total of 16 by the end of the year, which will boost lending.

“Interest rates in peer-to-peer lending will continue to fall in 2017, benefiting borrowers at the expense of lenders,” he said. “However, we believe P2P has been kind to lenders, as they have been rewarded generously for low risk.

“Over the long term, the amount of interest lenders can earn will be aligned to risk. The high-quality of the loans that most lenders are lending in means more lenders will pile in to push rates closer to a fairer level.”

India

Crowdfunding versus REIT: Crucial differences (MoneyControl), Rated: A

Crowdfunding, the world over, has been about peer-to-peer funding. However, there are many challenges in the Indian real estate market, such as the absence of an organised trust/agency, which make crowdfunding a non-starter. So, what makes crowdfunding different from a Real Estate Investment Trust (REIT)?

With REITs, investors only know the portfolio and not the properties. However, in crowdfunding, individuals can single out a particular building or builder to invest in, he explains.

David Walker, MD of SARE Homes, points out that REIT has already gained official sanction, while crowdfunding is still not officially recognised in India, unlike in the developed nations.

International

Global Loan Servicing Software Market to Grow at a CAGR of Over 14% Through 2021 (Yahoo! Finance), Rated: A

Technavio market research analysts forecast the global loan servicing software market to grow at a CAGR of more than 14% during the forecast period, according to their latest report.

The market study covers the present scenario and growth prospects of the global loan servicing market for 2017-2021. The report also presents a detailed analysis of the key vendors in the market, along with a comprehensive analysis of the emerging trends and challenges faced by the vendors.

The increasing demand for the lending market has given rise to efficient loan servicing software that helps the lenders in managing loan databases and debt collection activities.

Loan servicing software enables lending organizations to minimize financial risk exposure in addition to increasing their operational efficiency. Loan servicing software also supports a wide variety of loan industries and lending products that include SME lending, peer-to-peer lending, mortgage lending, payday loans, credit unions, microfinance, retail lending, POS financing, auto lending, and medical financing. Loan servicing software handles the mortgage, home equity, and other consumer loans on one platform. All these factors are collectively increasing the adoption of loan servicing software.

Authors:

George Popescu
Allen Taylor

Monday January 9 2017, Daily News Digest

mobile payments FinTech

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 […]

mobile payments FinTech

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Canada

News Summary

United States

Marketplace Lending Securitization Tracker Q4 2016 (PeerIQ), Rated: AAA

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.

Lendscape: Orchard Updates Online Lending Infographic as 2016 Comes to a Close (Crowdfund Insider), Rated: AAA

Orchard Platform, the nexus of institutional money flowing into online lending platforms, has updated their Lendscape: a visual presentation of the online lending ecosystem.

Reflecting the shifting sands of online lending, Orchard has added “two new key buckets” to Lendscape.

First, they have added the legal sector (probably the only part of the industry happy to see more regulation).  These firms include Manatt, Pepper Hamilton, Winston & Strawn, and Kaye Scholer.

The other bucket is called ‘Verification’ that includes eOriginal, Global Debt Registry, and VeriComply.

Orchard has also doubled the size of the ‘Loan Servicer’ bucket by adding PFSC, Scratch, and Orion First.

New Data on Online Lending Industry in 2016 (Even Financial), Rated: A

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

Real Estate Crowdfunding Platform EquityMultiple Expects Investment Volume to Grow by an Order of Magnitude (Crowdfund Insider), Rated: A

Inman, in their 2017 Real Estate Industry Outlook, says there is solid optimism for 2017.

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.

Why Some Lenders Won’t Work With Certain Industries (The Huffington Post), Rated: A

“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.

Crowdfunding: Can It Work for Brick & Mortar? (CrowdFundBeat), Rated: A

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.

THREE STEPS TO AVOIDING CROWDFUNDING PAIN POINTS (Virgin Startup), Rated: B

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.

International

Mobile Payments: FinTech vs. Non-FinTech Patent Landscape (IP Watchdog), Rated: AAA

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.

Alternative, Traditional SME Finance Spheres See Growth (PYMNTS.com), Rated: A

$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.

Top Ten Fintech Predictions for 2017 (Crowdfund Insider), Rated: A

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.

Top 4 Alternative Investment Opportunities of 2017 (The Merkle), Rated: B

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.

United Kingdom

Zopa’s 2016 Recap: We Lent Over £680 Million (Crowdfund Insider), Rated: AAA

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.

Crowdstacker’s Karteek Patel Reports: IFISA Secures £1 Million A Month (Crowdfund Insider), Rated: A

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 interviewPatel 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.

Could an Innovative Finance ISA be the right option for your savings in 2017? (The Investment Observer), Rated: A

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.

Offshore company backs crowdfunding firm run by minister’s brother (The Guardian), Rated: A

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.

Scottish University Launches UK’s First Fintech Course (Cryptocoins News), Rated: B

Scotland’s University of Strathclyde has announced the launching of its new FinTech masters course, making it a first in the U.K. in an announcement on the university’s website.

The Master of Science (MSc) in Financial Technology will provide students the financial, programming and analytical skills needed to help companies accelerate and enhance their security.

An economic modelling study found last year that Scotland could lose more than 14,000 jobs in its financial sector over the next ten years if it fails to embrace the FinTech wave.

European Union

Country spotlight: Lithuania – the young ones (Banking Technology), Rated: A

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

China Rapid Finance to triple number of users on its consumer lending platform (SCMP), Rated: AAA

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.

India

Loany to introduce new products (Deccan Herald), Rated: A

Loany, which acts as a bridge between the lender and the borrower by connecting them, plans to launch more FinTech tools.

Canada

2016: A BREAK-OUT YEAR FOR ON-LINE AND MARKETPLACE LENDING IN CANADA (Aspire FinTech), Rated: AAA

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:

  1. More bank partnerships.
  2. Increased institutional participation.
  3. One (or two) IPOs?
  4. Asset performance will be tested in the US.
  5. Consolidation in the US; not in Canada.
  6. A Canadian pension fund invests strategically.
  7. Regulation.

Authors:

George Popescu
Allen Taylor

Thursday September 22nd 2016, Daily News Digest

Thursday September 22nd 2016, Daily News Digest

News Comments Today’s main news: Zopa’s securitization ; SoFi’s new life insurance product; New true lender decision in California. Today’s main analysis: 4 charts about emerging markets; Today’s thought-provoking : Ant Financial is worth more than Goldman Sachs. Are you paying attention yet ? ; Lemonade’s charity model to reduce fraud. United States SoFi is about to […]

Thursday September 22nd 2016, Daily News Digest

News Comments

United States

United Kingdom

New Zealand

Australia

China

News Summary

 

United States

SoFi Plans to Offer Life Insurance by End of Year, (Bloomberg Technology), Rated: AAA

The San Francisco company will soon start selling term life insurance to its base of mostly millennial customers, said people familiar with the matter. SoFi expects to roll out the product, which pays out a benefit if a customer dies during the period of time covered by the plan, before the end of the year or as soon as next month.

SoftBank Group Corp. led a $1 billion investment in the startup last year, valuing it at $4 billion, and it’s now seeking to sell an equity stake of about $500 million to help fund its rapid growth, people familiar with the matter said this month. Last year, the company issued $5 billion in loans and is on pace to double that this year, two of the people said.

SoFi could take a slice of the $159 billion in U.S. life insurance premium revenue generated last year, according to data from the National Association of Insurance Commissioners, a trade group.

People are more likely to purchase policies around certain life events, such as getting married, having children or buying a home, according to a study published last year by Deloitte LLP. SoFi may be well positioned to capitalize on that demographic thanks to its already sizable base of young customers.

Mike Cagney, SoFi’s chief executive officer, chairman, and co-founder, has said his goal is to eventually render banks obsolete.

New true lender case provides support for the bank partnership model, (Pepper Hamilton), Rated: AAA

On September 20, the U.S. District Court for the Central District of California dismissed a class action suit alleging illegally charged usurious interest rates on private student loans in violation of California law. Beechum v. Navient Solutions, Inc.

In doing so, the court rejected the plaintiff’s arguments that the defendants were the de facto “true lenders” of loans made by a national bank under a bank partnership with a non-bank partner.

The plaintiffs, in this case, obtained private student loans using loan applications that identified Stillwater National Bank and Trust Company, a national bank, as the “lender.”

The plaintiffs alleged that the “actual lenders” of the loans were the Student Loan Marketing Association (SLMA) or subsidiaries of the SML Corporation.

Under the agreement, SLMA would originate, underwrite, market and fund loans on which Stillwater would be identified as the lender and which SLMA would then purchase from Stillwater.

The court relied on two California appellate decisions in holding that courts “must look only at the face of a transaction when assessing whether it falls under a statutory exemption from the usury prohibition and not look to the intent of the parties.”

In looking “solely to the face of a transaction” in determining whether the subject loans were exempt from California’s usury prohibition, the court applied an objective standard that, unlike the highly subjective and fact-sensitive “true lender” line of reasoning, would result in consistent outcomes from one case to the next.

While this recent decision does not address the question of whether the claims were preempted by the National Bank Act, the case represents the latest “true lender” case, with a reasoned and measured approach to bank partnerships. In dismissing this case, the court rejected the idea of looking beyond the face of the transaction and into the intentions of the parties.

The Central District of California is the same court that, just three weeks prior, provided the decision in Consumer Financial Protection Bureau v. CashCall, Inc.Unlike the CashCall decision, the court did not use the “predominant economic interest” test for determining “true lender” status and acknowledged the negative effect on the secondary market of looking to the intentions of the parties instead of the transaction on its face.

Lendio and Supplier Success Partner to Improve Access to Capital for Minorities, (PR Web), Rated: A

Lendio, a marketplace for small business loans, today announced a partnership with Supplier Success, LLC, a Detroit-based company focused on providing working capital solutions, and on improving minority and women business owners’ access to capital.

Through this strategic partnership, Lendio and Supplier Success will provide minority and women business owners access to transparent lending rates and respectful business practices. Lendio recently reported facilitating more than $250 million in funding to more than 10,000 small businesses.

By joining forces with Supplier Success, we’re able to expand our capabilities to provide minority business owners easier access to financing,” said Brock Blake, CEO, and co-founder of Lendio.

P2P insurance startup Lemonade launches with charity pledge, (FinExtra), Rated: A

Lemonade raised $13 million in the biggest seed round of 2015 and, having secured a license as a full-stack insurance carrier by New York State, the firm is now inviting homeowners and renters to sign up online and through its app. Under the peer-to-peer model, Lemonade will ask customers to nominate a charity when they buy a policy.

Claims are paid out of these pools and any funds that are left at the end of the year go to the chosen charity. Policies start at $35 a month for homeowners and $5 for renters, with the entire process digitized, “replacing brokers and bureaucracy with bots and machine learning”. Lemonade takes a flat 20% fee and says that its model not only benefits charities but also customers and the company itself by reducing the incentive for fraud.

American Express Adds Its Bot to the Party, (Bank Innovation), Rated: A

When Facebook Messenger launched five (!) years ago this month, it was not immediately clear why or what it might do — messages already existed within Facebook, everyone was texting madly already, so why launch a whole new app?

A Forrester report in August warned banks off bots. Today’s bots are not ready for regulated industries that demand a certain level of user experience.

But the warning came too late — banks embraced bots, and a whole host of bots was wheeled out at Finovate. Perhaps most significantly, Kore (from the guys that brought you Kony) introduced its Smart Bot platform for banks to build their own bots. (In response to Kore’s demo a few fintech watchers at the show tweeted various versions of, “Uh oh.”)

DOL fiduciary rule to cost the securities industry $ 11 B by 2020: study, (Investment News), Rated: A

Implementing the Department of Labor’s new fiduciary rule for retirement accounts will cost the brokerage industry $11 billion in revenue over the next four years.

Hardest hit will be independent broker-dealers, who stand to lose $4 billion in revenue, or 22%, of the industry’s total, according to the study, which was released in August. IBDs are also expected to see a decline of $350 billion in client assets, or 11% of the industry’s total.

Personal Finance App MoneyLion Launches in Malaysia, (Business Wire), Rated: A

MoneyLion is headquartered in New York with offices in San Francisco and Kuala Lumpur, Malaysia.

MoneyLion’s free mobile app will help Malaysian consumers gain a 360-degree view of their finances through a suite of analytics tools that track spending and saving activity across multiple bank accounts.

RealtyMogul.com Closes $ 8.2 Million in Multifamily and Retail Transactions, (Business Wire), Rated: A

Following last month’s launch of MogulREIT I, RealtyMogul.com’s first crowdfunded real estate investment trust, the company announced today that it had closed five transactions in markets across the country. Four of the five deals were equity investments into multifamily properties, while the fifth marked the commercial real estate platform’s largest 1031-qualified transaction to date.

4 charts on banks, mobile money and financial inclusion in emerging markets, (Tradestreaming), Rated: AAA

Africa has long been touted as the continent whose specific geographical challenges and the widespread poverty of many of its inhabitants have enabled it to skip over traditional banking infrastructures into the waiting arms of cost-efficient fintech solutions.

The statistics, for those who are rooting for a cashless, bankless Africa, are encouraging. The following charts, sourced from a recent report on financial inclusion in emerging markets published by the institute of international finance, demonstrate that the economy is Africa is starting to pick up, along with mobile phone ownership.

Mobile money accounts aren’t exactly threatening the banks, even in developing countries.

According to an analysis from the Global Findex, 2.2 billion, or 95 percent, of the total 2.3 billion adults in low- and middle-income countries with a financial account held the account at a financial institution in 2014.

Moreover, contrary to popular belief, financial incumbents are major drivers of economic inclusion in developing countries.

Banks have a number of reasons aside from profitability to expand their activities in emerging markets, such as CSR and investment. Whatever the cause, the way forward for banks in developing countries will probably start with cellphones, smart or otherwise.

United Kingdom

Zopa readies £ 138 m debut securitisation, receives Aa3 rating, (AltFi News), Rated: AAA

The first securitisation of loans issued by leading consumer lending platform Zopa – “Marketplace Originated Consumer Assets 2016-1 plc” (“Moca 2016-1”) – has been provisionally rated by Moody’s. The loans that make up the £138m portfolio were funded in the first instance by P2P Global Investments, the £870m investment trust.

Deutsche Bank was heavily involved in Funding Circle‘s inaugural securitisation and is now acting as the sole arranger and lead manager for the Zopa deal.

Moody’s has assigned a rating of (P)Aa3 to the £114m senior tranche of Class A Notes. The Class B Notes, of which there are £7.5m, were rated (P)A2. The £7.5m of Class C Notes were assigned a rating of (P)Baa2. The £9m of Class D notes were rated (P)Ba3. There are also £12m of Class Z Notes which will not be rated. All Notes are due October 2024. Target Servicing Limited has been appointed as the back-up servicer of the portfolio.

We now learn that Fitch has conferred a landmark rating on the Zopa deal. Fitch rated the Class A Notes “AA-(EXP)”. This is the highest rating to have ever been assigned to a marketplace lending transaction by Fitch. There has been over $10bn in global securitisation issuance by the marketplace lending sector to date. Fitch declined to rate Funding Circle‘s SBOLT 2016-1 earlier this year.

This will be the UK marketplace lending sector’s second securitisation to date. Funding Circle’s SBOLT 2016-1, a £130m transaction, received an Aa3 rating from Moody’s in April. The Class A Notes, which were sold to KfW, came with a guarantee from the European Investment Fund attached.

Moody’s assigns provisional ratings to Marketplace Lending ABS to be issued by Marketplace Originated Consumer Assets 2016-1, (Moody’s Investor Service), Rated: AAA

The securitised portfolio as of 31 August 2016 consists of unsecured consumer loans to UK private borrowers. According to the borrower but not verified by the platform provider these loans are mainly used to finance cars (36.2%), for debt consolidation (34.0%) and for home improvements (22.3%). The portfolio consists of 27,137 contracts with a weighted average seasoning of 10 months and a maximum loan term of five years. Most borrowers are employed full-time (89.9%) and their average outstanding loan balance with Zopa is GBP 5,500.

According to Moody’s, the transaction benefits from: (i) a granular portfolio originated through the Zopa marketplace lending platform, (ii) a static structure that does not allow to buy additional receivables after closing, (iii) continuous portfolio amortization from day one, (iv) an independent cash manager and liquidity provided through two reserve funds, (v) an appointed back-up servicer at closing, and (vi) credit enhancement provided through subordination of the notes, reserve funds, and excess spread.

Moody’s notes that the transaction may be negatively impacted by: (i) misalignment of interest between the platform provider Zopa and investors who finance the loans, (ii) the fact that Zopa does not retain a direct economic interest in the securitized portfolio, (iii) the limited historical data that does not cover a full economic cycle, (iv) a higher fraud risk due to the online origination process, (v) an unrated servicer with limited financial strength, and (vi) the regulatory uncertainty due to the still developing regulation for the marketplace lending segment.

Moody’s determined the portfolio lifetime expected defaults of 7.0%, expected recoveries of 5% and Aaa portfolio credit enhancement (“PCE”) of 35.0% related to the loan portfolio. The expected defaults and recoveries capture our expectations of performance considering the current economic outlook, while the PCE captures the loss we expect the portfolio to suffer in the event of a severe recession scenario. Expected defaults and PCE are parameters used by Moody’s to calibrate its lognormal portfolio default distribution curve and to associate a probability with each potential future default scenario in the ABSROM cash flow model to rate Consumer ABS.

The principal methodology used in these ratings was “Moody’s Approach to Rating Consumer Loan-Backed ABS” published in September 2015. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

In rating consumer loan ABS, default rate and recovery rate are two key inputs that determine the transaction cash flows in the cash flow model. Parameter sensitivities for this transaction have been tested in the following manner: Moody’s tested six scenarios derived from a combination of mean default rate: 7.0% (base case), 7.5% (base case + 0.5%), 8.0% (base case + 1.0%) and recovery rate: 5.0% (base case), 0% (base case – 5%).

Bar Chain BurningNight Group Secures Over £ 500,000 Within First Week on Crowdstacker, ( Crowdfund Insider), Rated: A

BurningNight Group, a city center bar chain, successfully raised over £500,000 within the first week of its crowdfunding campaign on UK’s peer-to-peer lending platform, Crowdstacker. The company is currently offering 7% p.a. interest to those investing in the £3.5 million raise.

According to Crowdstacker, approximately half the funds raised so far have been invested through the Innovative Finance ISA.

Lendinvest announces industry first auction finance partnership is now live, ( Property Reporter), Rated: A

Last month, the two firms announced their partnership as an industry first and will see LendInvest pre-qualify lots at LOT11 auctions which fall within the lender’s criteria.  Lendinvest, the world’s first online lending business for the property, has announced today that details of the properties it has pre-qualified ahead of the next LOT11 auction are now live.

The partnership begins with LOT11’s quarterly auction on 27 September.

NeEw Zealand

New Zealand’s top five P2P lending platforms, (SMN Weekly), Rated: A

HarmoneyCorp Ltd. (www.harmoney.co.nz) – Harmoney became the first FMA-licensed P2P lending platform in mid-2014. The platform has helped match borrowers and lenders for more than $307 million in loans.

Lending Crowd Ltd. (www.lendingcrowd.co.nz) – The platform can be used by either individuals or businesses. It was the fourth P2P lending platform to obtain a license in New Zealand.

Lendme Ltd. (www.lendme.co.nz) – LendMe, New Zealand’s second authorized P2P lender, got licensed in April 2015 and commenced operations just five months later.

Pledgeme Ltd. (www.pledgeme.co.nz) –PledgeMe is a platform that combines three different crowdfunding models in one place – project (aka reward), equity, and lending (aka P2P lending) crowdfunding.

Squirrel Money Ltd. (www.squirrelmoney.co.nz) – Squirrel Money is part of the Squirrel Group, which also provides mortgage brokerage services. The platform helps people borrow funds to finance everyday needs such as renovations or buying a car, or events such as marriage or starting a family. In August 2016, the platform launched New Zealand’s first P2P secondary market, which allows loans to be on-sold to other investors.

Australia

Fintech lender aims to break $ 200 m barrier, (Australian Broker), Rated: AAA

Marketplace lender SocietyOne believes 2016 will be a breakthrough year as it aims to push past $200m in lending.

According to the lender’s latest financial update, the first week of September saw it reach the $150m lending milestone, one year after it hit the $50m mark.

The lender has also announced a significant increase in its funding available for lending, up to $75m after sitting at $20 million on 30 June.

China

Jack Ma’s Finance Business May Be Worth More Than Goldman Sachs, (Bloomberg), Rated: AAA

Leung estimates that most of Ant Financial’s value is in Alipay, China’s most popular online payment service, with a projected worth of $50 billion. Its micro loans service is probably worth another $8 billion, while Ant’s wealth management unit is given a valuation of $7 billion. The rest of Ant Financial’s valuation comes from investments and cash on hand, outstripping Goldman’s roughly $70 billion market value as of Monday.

The company could grow to $100 billion in two years, as the current valuation doesn’t include growth brought in by insurance, credit scoring, and cloud computing, Leung said.

Ant Financial is considering an initial public offering in Hong Kong in the first half of next year, people familiar with the matter said last month.

China big P2P lenders shrug off crackdown, (Morgans), Rated: A

Regulators have unveiled a series of measures to head off signs of rising risks in its fast-growing P2P market, including borrowing limits and forcing P2P platforms to use third-party banks as custodians of investor funds. The regulator’s announcement knocked 22 per cent off the New York-listed shares of Chinese P2P lender Yirendai Ltd, while Chinese stocks fell to a two-week low, weighed by banking shares on concerns over the crackdown on riskier lending practices.

But many larger P2P companies including Lufax, Yirendai, PPDAI and Dianrong.com say they already comply with many of the new requirements, so could benefit from the restrictions.

The volume of P2P loans surged more than 20 times to 656.8 billion yuan ($US98.7 billion) at the end of July from just 30.9 billion yuan in January 2014, according to industry data provider Wangdaizhijia.

Nomura estimates that could reach 880 billion yuan by the end of 2016 and 1.5 trillion yuan by the end of 2018.

Several lenders already segregate investors’ funds into custodial accounts with banks to prevent fraud, while for companies like Lufax, a typical unsecured loan would be in the 100,000 yuan to 200,000 yuan range, below the government cap.

Author:

George Popescu

Mixing investment banking and P2P lending

Mixing investment banking and P2P lending

Crowdstacker stands out for bringing the traditional investment bank manual in-depth underwriting approach to p2p investors. They provide 30 to 40-page information brochures that cover everything about the company including the risk percentage of investing in the company, helping the lender in making an informed decision. As as result, the company was the 2nd FCA regulated […]

Mixing investment banking and P2P lending

Crowdstacker stands out for bringing the traditional investment bank manual in-depth underwriting approach to p2p investors. They provide 30 to 40-page information brochures that cover everything about the company including the risk percentage of investing in the company, helping the lender in making an informed decision.

As as result, the company was the 2nd FCA regulated P2P lender and among the 1st Independent Finance ISA (IFISA) authorized P2P lenders.

The process

They have a simple investment process. They present businesses who want to borrow the money to investors. They call it “the stack.” The stack is built on four criteria’s.

  • Financial Health- It is critical that business is financially sound and can make the payments.
  • Security- In some cases, they take security for a loan over the company’s asset, such as property.
  • Restrictions- It imposes prudent restrictions on the company as to what they can or cannot do.
  • People- It keeps an eye on the reputation and track record of the people who run the business, to make sure they have the experience and qualification.

As an investor, one manually select the business they want to lend to from the Crowdstacker stack. In return, they earn interest every quarter and the principal is return at the end of the term.

In the last 12 months, the start-up has raised $6 Million for two companies. This investment was made by private investors rather than institutional investors.

Crowdstacker is only the 2nd fully authorized P2P lending platform by FCA. Crowdstacker acts a facilitator between lenders/investors and businesses who want to borrow money. The loan size required by borrowers on the Crowdstacker platform is bigger than that of other P2P platforms focussed on small and medium business lending. The main reason for focussing on growing and established businesses is they minimize the risk of defaults.

Company history

Crowdstacker is based out of London and was established in May 2014 and a subsidiary of Nineyards Captial. Two experts in the field of alternate lending came together to start this venture. Karteek Patel has 14 years experience in finance and also a founder of futures and options business, managed independent UCTIS platform and was a fund manager as well. His field of expertise includes launching multiple hedge funds, developing new financial products among other things. Mark Bristow is a chartered accountant and has over 14 years of experience in the financial sector and that includes 5 years in developing financial solutions in renewable industry and has assisted clients in making portfolios of renewable assets using various forms of financing. They have won Best New Peer to Peer Provider Award in January 2016, they were the finalist for “Best P2P Lender 2016” and also nominated for “Best Peer to Peer Platform 2016”by online wealth awards.

Business model

They have a simple business model; they do not charge anything from the lender. They charge a setup fee between 20,000 to 40, 000 GBP from borrowers to put together the documentation with a made to order animation video and 3.5% of the funds raised plus 0.5% admin fee for monitoring the loan and servicing.

The underwriting

Ex-auditors, accountants, attorneys, and sometimes industry specialists make up the credit committee team who decides about the commercial terms of the loan by looking at the company financials and assets. The biggest limitation they are facing is the quality of borrowers.

Since Crowdstacker is the 1st company to become and IFISA manager, their lending volumes have increased quite a lot. They turn down the borrowers who do not match their criteria. Their goal is not to do a bulk of loans at a time, instead, the founders want to concentrate on the quality of loans which is beneficial for the company and the lender. Hence finding the right borrower is fundamental for attracting the lenders.

A criterion for choosing a borrower is decided on few factors:

  • Companies have to have more than 3 years of track record.
  • They need to be profitable.
  • Whether the companies can afford to borrow goven their cash flows.

The regulatory structure

Each lender enters into a loan contract, known as 36H agreement. Each lender loans through that contract to the borrower. The Same type of agreement is required if anyone wants to have such loan in IFISA and the platform also needs to be qualified as well. Crowdstacker acts as a security trustee on behalf of the lenders. It also provides loan monitoring for the clients. It uses a 3rd party custodian to hold the client money and regularly monitor the interest payments and the borrower.

Secured Lending

In the case of defaults, it depends whether the loan is secured or not. So far, they have only done secured loans and they act as security trustee. In the event of a default, they contact the company or they use an enforcer who will take steps to recover the money or the last resort is selling the collateral properties to recover the funds. Default and recovery are the two metrics of the business. In the case of defaults, they make sure they have recourse against the company and its cash flows.

Due to the company’s automation and pre-screening process, they quickly select which companies qualify and merit potential underwriting attention.

Crowdstacker’s goal is to become part of the borrower’s long-term funding strategies with repeat business. They diligently work hard to bring clients on board who can stay with them for a long period of time and who are capable of doing successive raises.

Author: Heena Dhir