An anonymous source notified Lending-Times that “Able lending is going bankrupt and are selling their portfolio, which is owned by Community Investment Management (CIM).” Able Lending was founded in 2014 by two Harvard graduates, Will Davis and Evan Baehr. The company was founded on the principle that businesses can receive more capital at lower rates by […]
An anonymous source notified Lending-Times that “Able lending is going bankrupt and are selling their portfolio, which is owned by Community Investment Management (CIM).”
Able Lending was founded in 2014 by two Harvard graduates, Will Davis and Evan Baehr. The company was founded on the principle that businesses can receive more capital at lower rates by raising funds from family, friends, and other fans. Investopedia calls it a “hybrid peer-to-business model” and describes it this way:
Able makes loans of between $25,000 and $250,000 to small businesses for one- to three-year terms, at rates ranging from 8% to 16%. They charge a 3% origination fee, but no penalty for paying the loan back early. Repayments come in monthly installments. The borrower must have been in operation for at least six months before applying and take in at least $50,000 in revenue.
CIM calls itself “the first impact investment firm focused on marketplace lending.” The company was founded in 2012 by managing partners Jacob Haar and Michael Hokenson.
Is Able Lending Really Going Out of Business?
Able Lending received $100 million in debt financing from CIM in September 2016. Backed by PayPal founder Peter Thiel of Founders Fund and Chris Gottschalk of Blumberg Capital, the company claims on its Contact page that inquirers will receive a call back within one hour. After placing a call to the company’s 866 number, listed on the Contact page, and hearing a message that the voice mail box was full and not taking new messages, I requested a call back by clicking the blue button and filling out the web form at 10:42 a.m. today. As of this writing, no company representative had yet called.
The company’s last blog entry was posted July 7, 2017. As late as July 28, 2017, the company was still receiving press attention as Nerdwallet published a review of Able Lending.
In February 2017, the company raised $4 million in a Series B funding round led by RPM Ventures. Crunchbase reports the company has raised $16.5 million in total equity funding in four rounds from 23 investors.
Baehr left the company in October 2016. He made his announcement on Medium that month citing his reason for leaving the company was because he realized he was not the right person to lead Able Lending and noted that his relationships with Davis and Able Lending remain positive.
News Comments Today’s main news: Laplanche shares vision for Online Lending 2.0 at Lang Di Fintech. Elevate named a great place to work (again). FinLeap raises 39M Euro. Crunchbase-like database launches in Singapore. Today’s main analysis: Ant Financial poised for more growth. Fintech use reaching mass adoption among digital consumers. Today’s thought-provoking articles: OCC vs. New York DFS. Ant Financial […]
Elevate named Great Place to Work. AT: “One can’t underestimate the importance of work culture. It’s vitally important for startups to create a great work environment. First, how else will you attract the kind of talent you need to grow into a major player? Besides access to capital, company culture is one of the biggest and most important drivers of early success. Evidently, Elevate has it.”
OCC vs. New York DFS. AT: “The battle over regulatory control of fintech in the U.S. isn’t going to end anytime soon. It’s perhaps the most important thing right now affecting the future of the entire ecosystem.”
Elevate was recently certified as a great workplace by the independent analysts at Great Place to Work®. Elevate earned this credential based on ratings provided by its employees in anonymous surveys. A summary of these ratings can be found at
Online lender Upgrade, launched by former LendingCLub Corp CEO Renaud Laplanche in April, expects to grow its loan volumes and add new asset managers to its roster of buyers in coming months, Laplanche said in an interview on Monday.
Upgrade has been testing its credit quality and risk management systems, compliance framework and other operations, as well as building up its infrastructure to deal with rising volumes before ramping up the service, Laplanche added. The company has signed up six asset managers who are already buying or plan to buy loans originated by the company, including Jefferies LLC and an unnamed Hong Kong firm, he said.
In the rapidly developing world of financial technology it often is unclear who has the legal authority to regulate the activities of newly created companies. Many of these companies do not neatly fit into any established regulatory scheme. However, answering the question of who will be creating the regulatory rules for FinTech companies is important both for regulators and the FinTech companies themselves.
State Regulators Want to Regulate FinTech
Over the past several years, state regulators have been staking out positions as leading regulators of FinTech companies.
During this same period, federal regulators have announced the intention to assert control over the regulation of FinTech companies.
The OCC indicated that its authority to grant FinTech Charters to nonbank FinTech companies stems from 12 C.F.R. § 5.20(e)(1), which states that the agency may grant such charters to institutions that conduct “at least one of the following three core banking functions: receiving depositions, paying checks, or lending money.”
The DFS did not limit itself to criticizing the proposed FinTech Charters. On May 12, 2017, the DFS filed a lawsuit against the OCC in the District Court for the Southern District of New York, alleging that the OCC’s proposed FinTech Charters exceeded the agency’s statutory authority under the National Banking Act and violated the Tenth Amendment. Based on these claims, the DFS sought declaratory and injunctive relief that would declare the proposed FinTech Charters to be unlawful and prohibit the OCC from creating or issuing these charters in the absence of express authorization from Congress.
Third, even if the OCC prevails and begins granting FinTech Charters, state agencies such as the DFS will still attempt to regulate FinTech companies. This could lead to future disputes over the nature and scope of the federal preemption of state regulations, which will add to the confusion over which regulations apply to which FinTech companies.
As a result of these issues, FinTech companies have little idea what the future regulatory terrain will look like. This uncertainty makes it difficult for companies to predict the future regulatory cost of business decisions they would like to make today.
Worthy, a digital investment app that redefines how Americans access investment products, diversify their portfolios and save for retirement, announced the successful closing of its seed financing round. The funds will be used for the full-scale roll-out of the Worthy mobile app, and will enable Worthy to expand its growing user base as well as to broaden the array of investment product options it offers retail investors.
Worthy provides users with the unprecedented ability to spend their way to retirement by investing retail round-ups into high-yielding fixed interest bonds, the proceeds of which fund growing businesses. In doing so, anyone has the capability to build a nest egg, enhance portfolio returns, mitigate risk, and generate both social as well as financial returns. Worthy investors grow their portfolios while simultaneously supporting American entrepreneurs.
Krieg and Robinson realized then that they had an opportunity to help.
They founded Stash, an app that lets you build a portfolio and start investing with only $5, plus it teaches you the ins and outs of the stock market.
Krieg and Robinson realized then that they had an opportunity to help.
The company launched in October 2015 and just closed on a $40 million Series C led by Coatue Management. That brings Stash’s total funding to $78 million and values the New York-based startup at $240 million, according to a person familiar with the company.
Stash makes money by charging a subscription fee of $1 per month for accounts with less than $5,000. When an account has more than $5,000, Stash charges a fee of 0.25% fee.
Robo-advisors and robo-analysts are both important to enabling wealth management firms to cut costs without sacrificing quality of advice, but the importance of a robo-analyst to enhance the quality of investment advice shouldn’t be underestimated.
Today, many of the tasks performed by robo-advisors are low value-added services such as determining and communicating asset allocation strategies (e.g., 60% equities, 30% fixed income and 10% cash). In fact, these services are so low value-added that advisors cannot make money doing them unless they are bundled with higher value-added services.The value proposition of a robo-analyst is very different.
Specifically, by shining an analytical light in the dark corners of financial filings, robo-analyst technology can identify many critical data points overlooked by most research analysts today. No longer must investors rely on the headlines or management-manipulated earnings. With new technologies, investors can receive a much fuller, more comprehensive analysis of financial filings, company profits and valuation so as to make better informed decisions than ever before. As a result, robo-analyst tech raises the analytical bar universally, enabling investors to transcend the short-sighted and high turnover trading mentality that, in the long run, does more damage to investors than good.
A quarter of banking’s “front line” professionals are worried about losing their jobs to robots and artificial intelligence-boosted mobile apps, according to a LinkedIn survey.
In the poll of 1,012 pros from financial technology, investment banking, retail and corporate banking, financial and hedge fund management, accounting, insurance, and private equity, 25 percent said they are concerned automation will impact their job security – with 34 percent of retail bankers saying it is a significant concern for them.
The survey also found 42 percent of financial services pros think financial technology is a “direct threat” to traditional financial services, compared with 13 percent of professionals who work in traditional financial services, and 18 percent of all the financial professionals.
In today’s episode of the Lend Academy podcast we have Matthew Wong of CB Insights. He has been following innovation in the insurtech space for some time and his weekly insurtech newsletter has a subscriber base of more than 18,000 people.
In this podcast you will learn:
Matt’s background and how he first became involved in insurtech.
What CB Insights does.
The headwinds facing insurance industry incumbents today.
Why millennials are not buying insurance as much as other generations.
Why insurtech is hot right now when it comes to VC investments.
Some of the most interesting companies in the insurtech space right now.
Why it will probably take a long time for these startups to get to scale.
Why Matt likes Zhong An Insurance, the first and largest online insurer in China.
How the incumbent insurance companies have been reacting to this surge in startup activity.
Why Munich Re is one of the most interesting incumbents.
Matt’s view on what SoFi is doing partnering with a life insurance company.
Solar loans are on the rise as the industry undergoes a transition and credit investors consider whether these asset-backed securities are worth the risk. In some ways, they’re similar to other types of collateral, and credit investors are already used to dealing with the types of risk they pose. However, analysts at Moody’s warn that they’re one of the riskiest securitization asset classes.
The reason solar loans are so new is because until now, the residential solar market has been dominated by third-party ownership of solar panel systems via power-purchase agreements and leases. GTM Research projected late last year that 2017 will be the year direct ownership of residential solar panels retakes its position as the top solar financing model.
The firm projected that 55% of the U.S. residential solar capacity that’s installed this year will be bought by customers who either pay in cash or take out a loan to finance their systems.
US prepaid card and P2P payment services provider Cascade Financial Technology Corp has signed a 3-year contract to power customer onboarding and KYC with 2nd generation ID authentication and onboarding automation. AU10TIX Secure Customer onboarding (SCO) cloud service that already powers major players across financial services markets, is known not only to increase KYC robustness and fraud protection but also improve customer conversion success chances and operating efficiency.
In the last ten years, the fundamental assumption that financial institutions are the only avenue to financial transactions is being called to question, especially by Millennials, who are by far the most entrepreneurial generation.
In a disruptive world, what does the future of banking and finance look like? How can and should financial institutions adapt to remain relevant, or even lead in this era of change?
Seamless, efficient and fast
Payments are perhaps the most basic and prevalent interaction with finance for the masses, yet for the longest time, payments to businesses saw minimal innovation. P2P transfers were never a focus for banks since it was a zero commission business. This was a pain-point to Millennials, who are used to sending everything from photos to documents electronically – having to withdraw physical cash or obtaining account details to securely transfer money for lunch is considered old fashioned!
Flexibility and access to funds
Traditional unsecured loans might require a strong financial history or proof of steady income stream, which would be unlikely if the individual were not taking a salaried job. Cash advances on credit cards would usually incur overly high interests costs.
This creates opportunities for peer to peer (P2P) lending marketplaces such as Prosper and Lending Club, platforms which create alternative ways to access cash loans while providing alternative yields on deposits.
Websites such as MoneySmart, DirectAsia, GoBear and Milelion position themselves as third-party and an unbiased advisor of investment products and policies. They perform the heavy lifting of trawling through multiple sites to aggregate and analyse information, empowering consumers to make informed purchases in the shortest time.
The reversal to brand love
The answer lies in placing the consumer in the centre of their businesses and asking the right questions constantly to redefine scope of value-add. It is an iterative journey, and worthwhile to include consumers as co-creators in product design and transformation.
Wela, a personal finance app that pairs artificial intelligence (AI) and human advisors, announces today it is available for download on Android devices in addition to iOS. Wela pairs real financial advisors with AI through the personification of its digital advising algorithm, Benjamin. The first true digital advisor, Benjamin utilizes AI to track users’ daily, weekly and monthly spending habits and provides personalized advice based on their financial needs and goals. Unlike other free consumer finance apps, Wela also offers access to real financial advisors via phone, video chat or in-person at no additional cost.
The Android app contains the full functionality of the iOS version and employs the same innovative features that allow users to track all their financial accounts in one place. Wela protects user privacy by leveraging bank-level security, as well as 256-bit SSL encryption and two forms of secure authentication. Capable of aggregating data from more than 13,000 financial institutions, Benjamin pulls linked account information to run a complete analysis, helping users take steps toward financial wellness based on three main pillars: creating an emergency reserve, paying off debt and implementing an investment strategy. In addition to Benjamin’s foundational metrics, the algorithm delivers custom insights on demand, helping users stay on track to reach their short- and long-term goals.
This past February, MarketInvoice shared it had funded invoices over £1.1 billion since platform launch in 2011. The online lender said it expects to top the £2 billion in invoices funded by the end of the year.
In Q2 of 2017, MarketInvoice announced that it had funded invoices from UK businesses worth £161.9 million. Compare this amount to the £103 million funded in Q2 of 2016 and the platform is generating some serious momentum.
In the first quarter of 2017, MarketInvoice generated £130 million in invoice finance.
RATESETTER’S new non-executive chairman Paul Manduca (pictured) has heralded the peer-to-peer lender’s “simplicity”, citing its provision fund as an example, on his first day in his new role.
The asset management veteran said that financial innovation can sometimes result in overly-complex products that investors cannot understand, which is “complacent and out of step with what customers want”.
The LIM Asia Special Situations Master Fund has increased its stake in the £243m Ranger Direct Lending fund, following the portfolio’s move to a double-digit discount.
The Hong-Kong based fund had already invested in the closed-ended portfolio, which invests in a host of online lending platforms, owning less than 4 per cent. Last week it increased its holding to 5.48 per cent (on the 7th July).
Assetz Capital is continuing its strategy of establishing a local presence across the UK with the appointment of Ian Craig as Regional Relationship Director to help manage operations in Scotland. The appointment comes as Assetz Capital says growth in Scotland continues with a target of £50 million in lending (subject to two upcoming completions). Assetz Capital says it is well on its way to becoming the second largest alternative finance lender in Scotland.
Craig will be responsible for helping local Scottish businesses acquire finance through the peer-to-peer platform and ensure borrowing with Assetz Capital runs seamlessly.
PEER-TO-PEER lenders were among the delivery partners helping the British Business Bank (BBB) fund £717m of loans to small businesses last year, the firm’s annual report revealed.
The state-backed institution, which has channelled funds through P2P platforms such as RateSetter, Funding Circle and MarketInvoice, facilitated 94 per cent of its finance through banks outside of the ‘big four’ last year, up from 90 per cent in 2015 and 79 per cent in 2014.
The BBB has a key performance indicator of having more than 75 per cent of its finance facilitated through providers other than the four largest banks over five years, so it has already surpassed that aim.
In his first public appearance in over a year Renaud Laplanche, the CEO of Upgrade, gave a presentation this past weekend at Lang Di Fintech, LendIt’s annual Chinese conference, in Shanghai. Titled Online Lending 2.0 he laid out his vision for where he thinks the online lending industry is going next.
He talked about how one of the big innovations in Online Lending 1.0 was the introduction of more data into the underwriting process. Ten years ago, which marked the beginning of Online Lending 1.0, this new data allowed more accurate underwriting of consumers. But in Online Lending 2.0 this has expanded dramatically with not just more data but new and better tools available to analyze this data.
The two key data points that are being added in Online Lending 2.0 are location data and free cash flow analysis. We need to adjust underwriting to take into account location because a consumer in New York City has a much higher than average cost of living while a consumer in Greenville, SC has a much lower than average cost of living for example. This is why Debt-to-Income (DTI) is less important than free cash flow today.
Ant Financial, Alibaba’s (NYSE:BABA) financial affiliate, is the largest fintech in the world, and leads the pack of the world’s largest fintech unicorns, the top four of which are from China, the largest fintech market in the world: Ant Financial (US$60 billion), Lufax (US$18.5 billion), JD Finance (US$7 billion) (NASDAQ:JD), and Qufenqi (US$5.9 billion).
Payments make up the biggest portion of fintech in China and this is expected to be the same going forward.
Mobile phones function as mobile wallets for about 425 million Chinese, or 65% of all mobile users. This is the highest penetration rate in the world. At 38 trillion yuan (US$ 5.5 trillion) last year according to data from iResearch, China is the world’s largest mobile payments market and is over 50 times bigger than the American market where mobile payments reached US$112 billion.
China’s e-commerce market is expected to continue its upward climb. Online sales represented 16.4% of China’s total retail sales in the first half of 2016 and this is expected to climb to 21.7% by 2020 which should benefit Alipaygoing forward.
Wealth management is the largest area of fintech after payments.
There are about 325 million Chinese investors in Yu’e Bao, a number almost as big as the population of the United States and the fund has more assets than the rest of the top 10 Chinese peers combined.
The majority of Yu’e Bao users are millennials under the age of 30 and about 99.7% of its investors are individuals, according to its annual report, rather than companies or financial intermediaries as is usually the case at other Chinese money-market funds.
Data from the World Bank’s Global Findex study revealed that the bank account ownership rate among individuals aged 15 and older is quite high in China (79% in 2014) yet credit usage is relatively low at 14% in 2014.
The People’s Bank of China covers credit profiles for just about 25% (around 350 million) of China’s 1.3 billion population and shares this data only with selected banks. This absence of reliable credit scoring is partly the reason individuals and small enterprises experience difficulty obtaining a loan from China’s state-controlled banking system which tends to favor large corporates and state-owned enterprises.
Credit data from the system will also be used to support lending activities at Ant Financial’s MYbank, an internet-only bank which provides loans to SMEs. Set up in mid-2015, the bank will extend loans up to US$800,000 as well as smaller loans that state banks usually don’t pay much attention to.
China has just 8.1 commercial bank branches and 55 ATMs per 100,000 people. This compares with US and Canada which have 28.2 branches and 222 ATMs per 100,000 people and in Europe where there are 28 branches and 81 ATMS per 100,000 people.
China’s central bank has urged financial technology (fintech) companies to help pay for a government-controlled monitoring system to watch over financial transactions on the internet.
Sun Guofeng, director general of the People’s Bank of China’s research institute, said the fast-growing fintech businesses have ratcheted up pressure on authorities to invest heavily in regulatory technology, or regtech, but he pointed out that it would be unfair to cover the costs by using taxpayers’ money.
Recently, Dianrong announced that the company has purchased Quark Finance, Quark Credit Workshop and its related branches and teams. Before that, the merger has been spread for a long time. The merger seems indicate a direction for P2P lending platforms: small platforms might be realise the compliance requirements by being merged, and big platforms also could expand and increase their market share through the acquisition. Thus, mergers and acquisitions might become the next new wave of the P2P lending industry in China.
There are three main areas of finance that are poised to be irreversibly changed, according to PwC. Consumer banking, investment & wealth management and transfers & payments are becoming pretty much all digital and data driven.
Some high level bullet points on China and Fintech include:
68% of financial institutions expect to increase Fintech partnerships in the next three to five years
85% believe mobile apps are the fastest growing customer channel
71% regard price wars as one of the challenges of Fintech
Personal loans are at the top of the list for moving to Fintech over the next 5 years
FinLeap, the startup platform behind Germany’s solarisBank, has secured EUR39 million in equity capital to support its ongoing fintech incubation programme.
Having launched twelve fintech ventures so far – including bank account switching platform FinReach, digital debt management outfit Pair Finance, insurance broker Clark, and Germany’s solarisBank – FinLeap is already active in ten European countries.
On Friday 14th July Brian hosted an event at the European Parliament offices in Dublin entitled ‘Regulating FinTech: the Way Forward’. Speakers at the event were the Minister for Financial Services Michael D’Arcy TD, Neil Ryan, COO Quaternion Risk Management; Derek Butler, CEO Grid Finance; Camille Blackburn, Central Bank of Ireland, and Ruth McCarthy, Director of the FinTech and Payments Association of Ireland and CEO of FEXCO Corporate Payments.
The panel discussed regulatory responses to FinTech services at EU and domestic level, as well as examining opportunities within the FinTech ecosystem in Ireland.
Strong networks, good government supports and the presence of major innovators are enabling Ireland to stay at the cutting edge, and these factors will help Ireland to achieve its IFS2020 target for job creation in financial services.
Financial institutions of various types are required to conduct periodic reporting to local regulators, like the Swedish Financial Inspection and EU-authorities like the European Banking Authority. Following the financial crisis of 2007/2008 numerous resolutions were past to increase regulations of the participants in financial markets. These initiatives are now being implemented regularly. Both MiFID II and MiFIR are scheduled to be implemented as of January 2018 with extensive reporting requirements and scarce information of how this should be implemented practically. During 2017, financial institutions and FinTech companies were impacted by EU-reporting in practice. One example is the reporting file format called XBLR were a lot of confusion exists.
Findings from the EY Fintech Adoption Index 2017, published by EY, indicate that fintech firms are approaching mass adoption among digitally active consumers. Leveraging digital technology, combined with personalized solutions, fintech firms are differentiating the customer banking experience. Simplicity, clean design, personalization, real-time insights and transparency are the defining components of these new solutions.
The four key themes that emerged from the 2017 EY Fintech Adoption Index were:
Fintech services have reached mass adoption in most global markets
New services and players are driving increased adoption
Fintech users prefer digital channels and technologies
Fintech adoption will continue to gain momentum
According to the EY report, some of the primary strategies used by fintech firms to gain traction include:
Offering a service for free or at a much lower cost that traditionally had a cost associated
Solve a problem an existing customer base
Provide an entirely new service
Create word-of-mouth advocates
Build a strong brand identity
Leverage highly targeted marketing
The most dramatic variance between fintech users and non-users is the ways consumers prefer to manage their lives. According to EY, “64% of FinTech users prefer managing their lives through digital channels, compared to 38% of non-FinTech users. FinTech users are also more likely to be users of non-fintech digital platforms, such as on-demand services (digital taxis, online food, etc.) and the sharing economy (bike and housing rentals).”
TachyLoans is an online lending marketplace catering to both Individuals & Small and Medium Enterprises (SMEs). Their platform is based on Peer-to-Peer lending paradigm that uses the proprietary credit decision model designed with some of the best and innovative practices in the financial industry using the cutting edge technologies like Artificial Intelligence & Machine Learning and is built through state of the art technology.
Founded by Brahma, TachyLoans is based out of Bangalore and was established in the year 2016. Brahma brings to the table more than 20 years experience and expertise in Retail Banking, Sales, Marketing and Operations.
The regulations will lay out the corporate structure that each of the platforms would need to follow and most importantly the DOS and Don’ts related to dealing with lenders and borrowers. However, of late, there has been an interesting trend of platforms coming up with a lender protection fund. What does it do? In case a lender loses the money he has extended to a borrower as a loan, the lender protection fund is expected to cover the losses for the investor. On the face of it, it sounds like a good idea, but if you dig deeper, there are several issues.
The flyer is aware of the risk, but he trusts the plane. You have a life vest under your seat for an emergency landing on water, but you do not have an escape pod that can be activated if a flight is about to crash. Similarly, the lender on a P2P site should be able to trust that the lending platform has built a system that can help Lender earn higher returns by mitigating risk. While a P2P platform cannot shirk its responsibilities when it comes to investor protection, having a fund to mitigate losses is not the answer. Proper systemic safeguards and strong ethics should alone suffice.
Launching LPF would in some ways signal that a platform does not have confidence in its own credit evaluation and risk-mitigation system.
The Singapore Fintech Association (SFA) announced today it has created an online directory for fintech companies based in the city-state. The database contains a short description of each company and information about its founding team, funding status, and business model.
Currently listing around 300 startups, the database is free to use and data is maintained by the companies themselves. The directory looks similar to Crunchbase and Tech in Asia’s own startup database, but it’s exclusive to fintech.
The SFA built the directory in collaboration with US data company Let’s Talk Payments and its Medici platform, which provides information and resources about the fintech industry.
According to The Korea Herald, officials at South Korea’s Financial Supervisory Service (FSS) announced last week that they expect approximately 40 FinTech firms to provide international money transfer services starting August 15.
Per Yonhap News Agency, South Korea’s international money transfer market currently totals approximately 10 trillion won ($8.7 billion). Opening the market to FinTech firms will encourage competition and drive down costs to consumers since the companies can offer money transfer services at much lower prices than traditional banks.
Single transfers via FinTech firms will be capped at $3,000, and individual annual limits will be set at $20,000. For FinTech firms to qualify for the FSS permit, they must possess 2 billion won ($1.77 million) and a debt-equity ratiobelow 200 percent.
News Comments United States EarnUp raises a $3mil seed round to help 200 million consumers smooth their loan repayment experience. Could EarnUp be a good lead source for lenders ? Or a good alternative data source ? A great table of MPL raises and valuations from CrunchBase, who claims that data hints at future down […]
EarnUp raises a $3mil seed round to help 200 million consumers smooth their loan repayment experience. Could EarnUp be a good lead source for lenders ? Or a good alternative data source ?
A great table of MPL raises and valuations from CrunchBase, who claims that data hints at future down rounds for marketplace lenders. However, we have recently seen BizFi, Promise Financial and more raising good rounds at decent terms. Perhaps there is a difference between fund-raising for mature MPLs and fund-raising for challenger Alt Lending 3.0 start-ups.
Very interesting 1st hand data from Morningstar about the state of US consumer debt, including trends and statistics. Credit Cards charge-off rate chart, 90 days delinquent data per asset class.
500 Startups shares fintech investment trends chart and data and discussed government policies that could and should enable fintech innovation.
Through the survey of France’s P2P and MPL lenders, a great analysis of the lessons learned from Lending Club’s crisis.
Securitization trends in Marketplace Lending. A must read.
Acquiring borrowers is difficult. Acquiring borrowers at purchase decision time is easier. Focusing on point-of-sale partnerships to generate credit demand is a very interesting direction which is, therefore, popular and gaining ground. A quick article as a reminder of this interesting direction.
Royal of Canada dumped 99.5% of their LC stock in Q1 2016. Interesting timing.
Getting SME lender’s loan data is at best difficult. In a space where we talk about transparency, SME originator’s data is a good example of the opposite. RateSetter stands out for publishing their data which lead to a nice summary, mostly figure based, article. I am not sure if this data is from RateSetter Australia only or includes other geographies.
A small article, that is not well researched, not well documented, but asks a question that is worth exploring a lot more “How can p2p lending companies fail, and what happens in that case ?” . The quick and dirty answer is: if they are setup right, where the operations and the loan books are separate with backup servicing, the only effect is that new loans stop being generated. We would love to publish a long article on this matter.
EarnUp, a consumer-first fintech platform that intelligently automates loan payments, announced its launch today with $3 million in seed funding. Blumberg Capital, Kapor Capital, Camp One Ventures, Fenway Summer Ventures, and other leading angel investors provided seed capital to accelerate the platform’s development and expand user access with a mission to improve consumer financial health. Forbes recently announced EarnUp as a winner of the prestigious Financial Solutions Lab in partnership with JPMorgan Chase & Co. (NYSE: JPM) and the Center for Financial Services Innovation. Though still in private beta, EarnUp already manages hundreds of millions of dollars in consumer loans on its platform. More information is available at www.EarnUp.com.
“Millions of Americans suffer financial stress from income volatility, where their income doesn’t match up with when loan payments are due,” said Matthew Cooper, co-founder of EarnUp. “Our product solves this issue by effectively budgeting for the consumer. We help put money aside as it comes in, giving people peace of mind in knowing the money they need will be there when loan payments need to be made. We give control back to the consumer.”
There are over 200 million Americans with debt and a typical household may have income and expenses hitting their bank accounts over 20 times a month. This financial chaos causes incredible stress for consumers, who may struggle to come up with even the minimum loan payments on time. EarnUp works by automatically putting a few dollars aside for future loan payments whenever consumers can afford it, then sending those payments and making sure they are applied in a way that reduces debt faster.
EarnUp has been bootstrapped to date and the $3 million in seed financing represents the company’s first institutional funding.
Private valuations across the lending space, where available, showed marked appreciation in 2014 and 2015. SoFi, for instance, was valued at $3.5 billion as of July, up from about 1.4 billion in early 2015 and $400 million in early 2014.
Those are post-money values, but the appreciation is well in excess of the sums invested. Avant showed a similar rise, with its post-money valuation doubling in less than a year. And Prosper more than doubled in less than a year, hitting a $1.8 billion valuation in April of last year.
Alternative lending currently looks like the reverse of the standard VC model, in which private markets are where one builds a business, and public markets are where one gets a lucrative exit.
That said, while we can expect down rounds near-term, it’s not clear VCs will lose their shirts in marketplace lending forays, particularly those who were mid- or early-stage investors.
High VC ownership levels mean that even a lackluster exit could return all or more of invested capital. Even after LendingClub’s stock plummet, for instance, VC’s post-IPO stakes would be worth more than the $392 in disclosed investments before going public.
Nonhousing consumer debt levels are increasing, with student-loan debt leading the charge, according to the Federal Reserve. Student-loan delinquencies more than 90 days past due have risen since late 2011. With the proliferation of postcrisis loans made to students, especially to those attending for-profit colleges with focused specialties, Morningstar Credit Ratings, LLC expects to see challenges in the sector.
Credit Card and Mortgage Delinquencies at Lows Since the crisis, credit-card and mortgage delinquencies have
Since the crisis, credit-card and mortgage delinquencies have improved, with the balance more than 90 days delinquent declining, according to the Federal Reserve Bank of New York. After seaking at 8.9% in the first quarter 2010, mortgage delinquencies have come down considerably from their highs, resting at 2.1% at the end of the first quarter. Credit-card delinquencies have also dropped, with the current level of 7.6% nearly half the 13.7% recorded in the first quarter of 2010. Low interest rates made it easier for consumers to either refinance or stay current on their debt obligations.
Meanwhile, after little change over the past few years, auto- loan delinquencies have edged higher, as competition among underwriters led to an increase in subprime auto loans. While we expect to see an uptick in auto delinquencies given the larger subprime component, overall auto-loan delinquency rates remain at relatively low levels. If unemployment remains in check, those auto-loan delinquency gains should be within reason, while we expect credit-card and mortgage delinquency rates to remain low.
New data that has been released since publishing solidifies the trend of consumer spending improving after a typical slow start of the year, with 1Q16 GDP growth at 1.1%. In addition, consumer confidence has strengthened.
Eye on the Road: Student and Auto Loans Bear Watching Consumers are adding to their household debt levels, with student-loan debt leading the way behind mortgages. Postcrisis, students enrolled in for-profit colleges in record numbers, with dreams of a future career. For many, those dreams never materialized, and they were left saddled with heavy student-debt obligations that they were unable to meet. This pool of nonpaying indebted students contributed to the student loan delinquency rate rising steadily since the end of 2012. While the pace of student-loan delinquencies has slowed, Morningstar Credit Ratings views the sector as vulnerable to declines in employment as the delinquency rate remains near record levels despite a generally healthy job market.
Quarterly financing to VC-backed fintech companies has been growing immensely:
But investment is not flowing freely everywhere. For example, in 1Q2016, Chinese fintech companies received $2.4 billion in funding (albeit primarily from two mega-deals), while the rest of Asia received only $0.2 billion. Meanwhile in Europe, deal count increased but the amount of capital invested did not. Even when the investment flows, the performance often does not.
Fintech’s 3 Ecosystem Challenges
1. Regulatory regimes are often ill-suited for fintech. Regulations in the finance sector are often unclear or highly complex, and regulatory processes and agencies may be slow.
2. Traditional financial institutions may hold down fintech startups, intentionally or unintentionally. Not long ago in the U.S., many banks did not even entertain meetings with or extend invitations to fintech startup founders.
3. Customer preferences may not be ready for certain fintech solutions. Customer acquisition is very difficult in fintech. Banks in the US spend over $500 to acquire a single user, and over time many startups will get there as well.
5 Ways Goverments Can Help
1. Create a “regulatory sandbox” that provides startups the opportunity to test new ideas without immediate threat of regulation. 2. Offer fast and transparent regulatory review of potential new fintech products or services.
3. Create a support system or kit to help fintech startups meet regulatory requirements.
4. Roll out consumer awareness initiatives to increase demand.
5. Encourage traditional financial institutions to invest in or partner with fintech startups — preferably non-exclusively.
Lending Club’s problems should make the sector reflect on the governance issues that arise from the mixed business models that some crowdfunding platforms have evolved into.
Banks lend their own money and take risk on their balance sheet; hence, they must meet regulatory requirements such as Basel III. Asset managers manage other people’s money and invest on their behalf; hence, they are regulated as financial advisers. Platforms must clearly choose their business model because it has regulatory consequences. It also has an impact on the market valuation of the company. Marketplaces are currently much more highly valued by investors than banks. Even before the scandal, Lending Club’s stock was valued rather like a bank’s stock. Eventually, mixed business models potentially lead to conflicts of interest of the type observed at Lending Club.
Lending Club lost its way a long time before the scandal and the subsequent dismissal of Renaud Laplanche. By progressively marginalizing retail investors and letting investment funds securitize Lending Club’s loans on their own terms, Lending Club de facto surrendered the control of the platform to the very same established finance that P2P Lending was supposed to present an alternative to. This change of course created a detrimental layer of complexity, and potentially of systemic risk, in what was supposed to be a simple and direct relationship between private lenders and borrowers.
Beyond the image problem, the impact of the incidents has been small. European institutional investors are still very much interested in marketplace lending, as can be seen from two recent announcements: a$100 million loan program through Funding Circle by the European Investment Bank and €70 million multiplatform crowdlending fund by Eiffel Investment and French insurers Aviva and AG2R La Mondiale.
Marketplace lending securitization volume topped $1.7 billion this quarter, up 14.8% from Q1, with cumulative issuance reaching $10.3 billion. YTD issuance of the sector stands at $3.2 billion as compared to $1.8 billion from prior year, a 77% increase. Q2 saw a total of 6 deals: 3 are backed by student loans, 2 by unsecured consumer loans, and 1 by SME loans. SoFi issued its first rated unsecured consumer loan deal and received an industry first ever AAA rating from Moody’s on its recent student loan transaction.
MPL securitizations are moving towards rated and larger transactions. The second quarter was the first to have all deals rated by one or more rating agencies. Further, the growth in average deal size continued, the average deal size grew to $267 million in 2016 as compared to $64 million in 2013.
New issuance and secondary spread tightened by quarter end, a good sign for the industry. Across all segments in MPL, Q2 2016 saw moderate spread compression in senior tranches of newly issued deals and widening in junior tranches as compared to Q1 2016.
Numerous factors, including lending platform rate increases, and spread tightening in both primary and secondary markets, look to improve future deal economics. The increase in rates from platforms increases excess spread and improves the economics of securitization for residual holders. The demand for
The demand for higher standard of due diligence, transparency and analytics will be the norm. With the recent Lending Club headlines, ABS investors are demanding greater transparency and validation to enhance trust.
A total of 6 deals were done in Q2 and spanned several marketplace lenders and categories. Here is the breakdown from Q2 2016:
Despite Citi stopping the securitization of Prosper loans, they continue to be the leader in marketplace lending securitizations followed closely by Morgan Stanley and Credit Suisse.
Cited as factors for an improving securitization market are increasing platform rates and spread tightening in both primary and secondary markets. A detailed analysis of specific securitizations are outlined in PeerIQ’s report.
Comment: in our market context I would think that lenders would like to acquire/partner/sign up with Point of Sales solutions to extend credit in physical stores.
One such story goes of Swedish payments giant Klarna that recently announced that they were moving beyond its online services into physical stores, which it will accomplish by partnering up with mobile point of sale (MPOS) and e-commerce company Sitoo.
We are approaching a near future where the value chain for payments as we know it will be forever altered and new constellations will surface. More specifically, we expect to see more payment providers partnering up with POS companies to add value to their services and to diversify their position. There’s also a strong possibility that we’re likely to see some of the more aggressive payment providers outright acquiring POS-companies to accelerate growth and control a larger chunk of the value chain.
Royal Bank Of Canada says it sold 35,334 shares last quarter decreasing its holdings in LendingClub Corporation Common by 99.5%. Its investment stood at $1,000 a decrease of 99.7% as of the end of the quarter.
A peer-to-peer website has been rescued after falling into administration, offering a lifeline to 900 savers who faced being unable to get their cash back.
Funding Knight was promising investors returns of up to 12pc for lending cash to small businesses.
Many feared that they would lose their money when the company ran out of cash and went into administration last month.
However, last week the firm was rescued by GLI Finance, an investment firm, which said savers cash was safe and could be withdrawn at anytime. GLI has also invested a further £1m in the business.
Despite Funding Knight savers being assured that their cash is safe by the new owners, the incident has raised concerns over the safety of peer-to-peer lending.
Any funds they lend through a peer-to- peer website are not covered by the government-backed Financial Services Compensation Scheme (FSCS), which protects bank savers up to £75,000.
A spokesman for the Peer-to-Peer Association, a trade body of which Funding Knight is not a member, said:
He said: “We have been consistent in calling for, and embracing, regulation of the sector and requires robust adherence to its published operating principles, including the publication of platform loan books in full and clear information on all fees and charges to investors and borrowers.”
“Peer-to-peer lending offers overall a lower risk profile than some other forms of investment with less volatility, but it is not entirely without risk.
“Within the peer-to-peer lending sector, there are a number of different asset classes each with their own risk-return profile.”
European banks are caught in a conundrum because they still have to clear up their bad loan portfolios, which their US counterparts have largely dealt with. This situation, together with stricter capital requirements, and a challenging policy environment with low or negative interest rates, has led to a double whammy affecting both banks and SMEs. Additionally, credit information is still very fragmented in the EU, as shown by our CFA Institute member survey on the Capital Markets Union from May 2015.