- Today’s main news: OnDeck reports Q1 2017 results. dv01 partners with SoFi. Elevate Credit announces Q1 2017 results. SoFi lets employees sell 20% of vested stock. Crowd2Fund announces new venture debt product. Klarna, Trustly fight EBA on bar screen scraping.
- Today’s main analysis: LC may have hit a dead end. The real returns for Prosper investors.
- Today’s thought-provoking articles: On Deck goes from hot tech startup to dull lender. LC keeps pushing its comeback. 11 of the largest companies in China dominate fintech. Fintech and the cashless society.
- OnDeck reports Q1 results. AT: “Things aren’t looking so good at OnDeck these days. Originations are up from a year ago, but net revenue is down. Gross revenue is up 48%. Cost of Funds Rate is up, operating expenses are up, and Total Funding Debt is up 69%. Gain on Sale is way down. Something is going on internally.”
- OnDeck goes from hot tech startup to dull lender. AT: “I’d like to see an in-depth objective analysis of OnDeck’s business.”
- Lending Club may have hit a dead end. AT: “It looks like they hit a wall, but it’s not an impenetrable wall.”
- Lending Club keeps pushing its comeback. AT: “They’re not the only ones. I do see them climbing out the hole, albeit a little slowly. On the other hand, it’s only been a year since the boat was rocked. That’s a short time frame in business.”
- dv01 announces reporting partnership with SoFi. AT: “This is awesome news. I wish the couple a happy marriage.”
- Elevate Credit announces Q1 results. AT: “In contrast to OnDeck, Elevate is looking peachy.”
- SoFi lets employees sell 20 percent of vested stock.
- The real returns for Prosper investors. AT: “Perhaps a relationship with AltFi will prevent future faux pa for Prosper.”
- Square is rolling out its first debit card.
- AI may create illusion of good credit decisions. AT: “Eventually, tech companies that rely on AI will have to pay the piper. The technology is useful, but an over-reliance on the tech could lead to trouble.”
- Affirm looks to launch every-day use virtual cards. AT: “This could be the future of debit and credit.”
- The future of fintech, payments for SaaS.
- Kabbage’s next growth phase.
- How Elsen helps anyone become a data whiz.
- Interim OCC chief should put fintech charter on ice.
- Change the rules and we’ll disconnect fintech.
- With crowdfunding, anyone can own a skyscraper.
- Financial advice is changing.
- Is fintech creating luddites demanding a robot tax?
- Draper to participate in blockchain token sale for first time.
- Insight, JG Wentworth top mortgage lenders. AT: “As reported yesterday.”
- CVC Credit Partners provides financing to support Wastewater Specialties, LLC.
- Crowd2Fund announces new venture debt product.
- Mobile biometric payment volumes to triple.
- PwC appoints leaders for analytics, AI, fintech, and more.
- BofE criticized for partnering with Ripple.
- Rescue deal for motor finance provider.
- 11 of the largest Chinese companies dominate fintech. AT; ‘Some of them are the largest companies in the world in their sector.”
- Ezubao P2P lending fraud trial update.
- United States
- OnDeck Reports First Quarter 2017 Financial Results (PR Newswire), Rated: AAA
- On Deck Goes From Hot Tech Startup to Dull Lender (WSJ), Rated: AAA
- Lending Club may have hit a dead end (Business Insider), Rated: AAA
- Lending Club Keeps Pushing Its Comeback (PYMNTS.com), Rated: AAA
- Leading FinTech Analytics Platform dv01 Announces Reporting Partnership with SoFi (PR Newswire), Rated: AAA
- Elevate Credit Announces First Quarter 2017 Results (Stockhouse), Rated: AAA
- With an IPO on the shelf, SoFi lets employees sell 20 percent of vested stock (CNBC), Rated: AAA
- The real returns for Prosper Marketplace investors (AltFi), Rated: AAA
- Square is rolling out its first debit card (recode), Rated: A
- AI may just create the illusion of good credit decisions (American Banker), Rated: A
- Affirm Looks To Launch Everyday-Use Virtual Cards (Bank Innovation), Rated: A
- The Future of Fintech and the importance of payments to a SaaS business: WePay’s Week in Payments (Wepay), Rated: A
- Kabbage’s Next Growth Phase (deBanked), Rated: A
- How fintech startup Elsen helps anyone become a data whiz (Built in Boston), Rated: A
- Interim OCC chief should put fintech charter on ice (American Banker), Rated: A
- ‘If you change the rules we’re going to disconnect you, fintech’ (American Banker), Rated: A
- Crowdfunding: Now Anyone Can Own a Skyscraper! (Inside Indiana Business), Rated: A
- Robot or human financial advice field is changing (VC Star), Rated: A
- Is Fintech creating Neo-Luddites demanding a “robot-tax”? (Daily Fintech), Rated: A
- Billionaire investor Draper to participate in blockchain token sale for first time (Reuters), Rated: B
- Insight, JG Wentworth among top-rated on online marketplace (Mortgage Professional America), Rated: B
- CVC Credit Partners provides financing to support Wastewater Specialties, LLC (PE Hub), Rated: B
- United Kingdom
- Crowd2Fund Announces New Venture Debt Product (Crowdfund Insider), Rated: AAA
- MOBILE BIOMETRIC PAYMENT VOLUMES TO TRIPLE IN 2017 TO NEARLY 2BN (Juniper Research), Rated: A
- PwC appoints leaders for Analytics, AI, Cybersecurity and FinTech arms (Consultancy.uk), Rated: A
- Bank of England criticised for fintech faux pas (Financial News), Rated: A
- RESCUE DEAL FOR MOTOR FINANCE PROVIDER (Insider Media), Rated: A
- 11 Of The Largest Companies In China Dominate Chinese Fintech (Lend Academy), Rated: AAA
- Ezubao P2P Lending Fraud Update: 26 on Trial (Crowdfund Insider), Rated: A
- European Union
- Fintechs fight plan to bar screen scraping and protect European banks (CNBC), Rated: AAA
- Introduction To P2P Lending Marketplace (Code Brahma), Rated: A
- Fintech vs Bank: Roles And Advantages Of Both Parties (ValueWalk), Rated: B
- Fintech Forging The Future For Cashless Economy (Techstory), Rated: AAA
- 10 tips to get personal loans despite having low credit score or CIBIL score (Plunge Daily), Rated: B
- Home Capital suspends dividend, taps credit line, bolsters board (Reuters), Rated: AAA
OnDeck Reports First Quarter 2017 Financial Results (PR Newswire), Rated: AAA
OnDeck® (NYSE: ONDK) today announced first quarter 2017 financial results, additional planned cost savings, and a target to achieve GAAP profitability in the second half of 2017.
Loans Under Management increased to $1.2 billion, up 25% from the comparable prior year period, driven primarily by the growth of originations over the period. In the first quarter of 2017, originations were $573 million, up 1% from the prior year period, primarily reflecting the impact of credit tightening implemented during the quarter.
Gross revenue increased to $92.9 million during the first quarter of 2017, up 48% from the comparable prior year period. The increase in gross revenue was primarily driven by higher interest income, partially offset by lower gain on sale revenue. Interest income increased to $87.1 million during the quarter, up 63% from the comparable prior year period, and primarily reflected the growth of average loans, which increased 66% versus the comparable prior year period. The Effective Interest Yield for the first quarter of 2017 was 33.9%, down from 34.5% in the comparable prior year period, primarily reflecting changes in portfolio mix over the period, partially offset by recent price increases.
Gain on sale was $1.5 million during the first quarter of 2017, down 79% from the comparable prior year period. The decline primarily reflected a lower Gain on Sale Rate during the quarter and the decision to reduce the amount of loans sold through OnDeck Marketplace. OnDeck sold $42.0 million1 of loans through OnDeck Marketplace at a 3.5% Gain on Sale Rate during the first quarter of 2017, compared to $123.7 million1 of loans at a 5.7% Gain on Sale Rate in the first quarter of 2016. Loans sold or designated as held for sale through OnDeck Marketplace represented 9.0% of term loan originations in the first quarter of 2017 compared to 25.9% of term loan originations in the comparable prior year period. To optimize long-term financial performance, OnDeck plans to reduce the percentage of term loan originations sold through OnDeck Marketplace to less than 5% for the remainder of 2017.
Net revenue was $35.4 million during the first quarter of 2017, down 13% versus the comparable prior year period. The decline in net revenue reflected the reduction of OnDeck Marketplace sales, which led to lower gain on sale revenue, and higher provision expense in the first quarter of 2017 versus the prior year period.
Provision for loan losses during the first quarter of 2017 increased to $46.2 million, up from $25.4 million in the comparable prior year period. The increase in provision expense primarily reflected a 20% increase in originations of loans designated as held for investment in the period and the comparatively lower original loss estimate for loans originated in the prior year period. The Provision Rate in the first quarter of 2017 was 8.7% compared to 5.8% in the prior year period, reflecting that the credit tightening in the first quarter of 2017 was not in effect for the full quarter and the previously mentioned lower loss estimates in the prior year period. The Provision Rate decreased sequentially from 10.2% in the fourth quarter of 2016. OnDeck expects the Provision Rate for the remainder of 2017, taken as a whole, to be approximately 7%.
The 15+ Day Delinquency Ratio increased to 7.8% in the first quarter of 2017 from 5.7% in the prior year period and from 6.6% in the fourth quarter of 2016 due primarily to the continued seasoning of the portfolio. At the end of the first quarter of 2017, the average term loan age in OnDeck’s portfolio was 4.5 months, up from 3.3 months in the prior year period and 3.9 months in the fourth quarter of 2016. The Net Charge-off rate increased to 14.9% in the first quarter of 2017 from 11.2% in the prior year period and increased sequentially from 14.2%.
The Cost of Funds Rate during the first quarter of 2017 increased to 5.9% from 5.5% in the prior year period primarily due to the increase in short-term rates.
Operating expense was $46.7 million during the first quarter of 2017, up 5% over the comparable prior year period. Operating expense in the first quarter of 2017 was favorably impacted by the company’s previously announced cost rationalization plan which is expected to produce approximately $20 million of annual savings relative to its 2016 exit operating expense run rate. Additionally, operating expense in the first quarter of 2016 benefited from a $1 million release in the reserve for unfunded loan commitments and a $1 million gain related to changes in foreign currency values. Without these benefits, operating expense between the two periods would have been relatively flat. The company is implementing an additional $25 million of operating expense run rate savings compared to OnDeck’s 2016 exit run rate, the majority of which will be implemented over the remainder of 2017. The savings are focused on the company’s U.S. lending operations and will be achieved primarily through a workforce reduction to be implemented in the second quarter of 2017. Combined with the company’s prior workforce reduction, total headcount at the end of the second quarter of 2017 is expected to be approximately 27% lower than December 31, 2016 levels, due to both involuntary terminations and actual and scheduled attrition.
GAAP net loss attributable to On Deck Capital, Inc. common stockholders was $11.1 million, or $0.15 per basic and diluted share, for the quarter, which compares to GAAP net loss attributable to On Deck Capital, Inc. common stockholders of $12.6 million, or $0.18 per basic and diluted share, in the comparable prior year period.
Adjusted EBITDA* was negative $5.2 million for the quarter, versus negative $7.3 million in the comparable prior year period. Adjusted Net Loss* was $7.6 million, or $0.11 per basic and per diluted share for the quarter versus Adjusted Net Loss of $8.8 million, or $0.13 per basic and per diluted share, in the comparable prior year period.
Unpaid Principal Balance was $1.03 billion at the end of the first quarter, up 57% over the prior year period. The increase primarily reflected originations growth over the year and OnDeck’s decision to retain more loans on its balance sheet in connection with reducing OnDeck Marketplace loan sales.
Total Funding Debt at the end of the first quarter of 2017 was $788 million, up 69% over the prior year period, which primarily reflected the growth of Unpaid Principal Balance as well as the increased utilization of debt facilities during the period. OnDeck continued to expand its funding capacity in 2017. During the first quarter of 2017, OnDeck extended the maturity date of its asset-backed revolving debt facility with Deutsche Bank to March 2019 and increased the facility’s borrowing capacity to approximately $214 million. During the first week of May 2017, OnDeck extended the maturity date of its asset-backed debt facility that finances OnDeck’s line of credit offering to May 2019, increased the facility’s borrowing capacity to $100 million, and decreased the funding costs by 200 basis points.
At the end of the first quarter of 2017, cash and cash equivalents were $73 million, as compared to $80 million at December 31, 2016.
Guidance for Second Quarter and Full Year 2017
Second Quarter 2017
- Gross revenue between $85 million and $89 million.
- Adjusted EBITDA between negative $3 million and positive $1 million.
Full Year 2017
- Gross revenue between $342 million and $352 million.
- Adjusted EBITDA between positive $5 million and $15 million.
Adjusted EBITDA guidance for the second quarter and full year 2017 includes an approximately $3.5 million charge to be recognized in the second quarter of 2017 associated with the planned workforce reduction.
On Deck Goes From Hot Tech Startup to Dull Lender (WSJ), Rated: AAA
The online lender said Monday that it would put a renewed focus on achieving profitability by slowing growth and cutting costs. Shares fell by nearly 7% in response. Fundamentally, investors are finally waking up to the fact that On Deck is more of a niche financial company than a revolutionary technology platform.
Loan originations may decline by a fifth next quarter, and total originations will be lower this year than last.
If these sound like the business objectives for an ordinary bank, that’s no coincidence. The company plans to sell less than 5% of its loans through its online marketplace this year, Chief Financial Officer Howard Katzenberg said, down from 18% in 2016 and 34% in 2015. Of the rest, some will be securitized, but most will be held on its balance sheet.
On Deck’s shares are down 79% from their initial public offering in December 2014. At 1.2 times book value, it is now valued like a financial company and roughly in line with the average bank. This still looks a bit rich because it has no profits.
Lending Club may have hit a dead end (Business Insider), Rated: AAA
Lending Club Keeps Pushing Its Comeback (PYMNTS.com), Rated: AAA
The last 12 months have undoubtedly been a difficult period for marketplace lending pioneer Lending Club.
But, as Q1 earnings hit last week, it seems clear that progress is happening — albeit at a fairly slow pace.
Retail investors also expanded, though more slightly — reaching 15 percent, up from 13 percent in the prior quarter.
Lending Club also announced $2 billion originations, surpassing $26 billion in total loans since inception almost ten years ago and 2 million total consumers served on its platform.
Moreover, investing in marketplace lending is not so profitable as it has been in the recent past, and returns to investors have dropped sharply. Competition has forced down interest rates in the marketplaces to attract consumers with cheaper underwriting, and charge-offs have risen.
According to data from Orchard, a technology provider to the industry, total returns from an index of U.S. consumer loans came to 3.95 per cent last year, down from 8.71 per cent in 2014.
Lending Club’s stock performance has been flat over most of the last year, though it has lost roughly 60 percent of its stock value.
The firm has also seen a massive change-over in its staffing and leadership since its more scandalous days a year ago. CEO Scott Sanborn cut and rehired 179 jobs and brought on a new CFO, COO, general counsel and chief capital officer.
Leading FinTech Analytics Platform dv01 Announces Reporting Partnership with SoFi (PR Newswire), Rated: AAA
dv01, the reporting and analytics platform that brings transparency to lending markets, today announced a reporting partnership with SoFi, a modern finance company taking an unprecedented approach to lending and wealth management. Institutional investors who use dv01 to conduct analysis on consumer loans and bonds will now have access to all SoFi securitizations, including student and personal loans.
Under the first phase of the partnership, dv01 will receive securitization data directly from SoFi, which it will normalize, format, and roll up for monthly level reporting. The data, which includes 23 historical deals, will be available through the Securitization Explorer, dv01’s online reporting and analytics portal for consumer securitizations.
Investors who have been approved to view SoFi data will have 24/7 access to updated loan level performance and composition details, as well as a suite of reporting and analytics tools. dv01 will be responsible for updating deal collateral data monthly, so investors can continue to track the evolution of a pool over time, even after the deal has closed.
dv01 has provided similar reporting services for several other online lenders, overseeing an aggregate securitized collateral balance in excess of $7 billion. The company launched its dedicated Securitization Explorer tool in February, and since then has also announced its role as Loan Data Agent for the Prosper Marketplace loan purchase consortium led by Jefferies LLC, Soros Fund Management, Third Point LLC, and New Residential Investment Corp, a Fortress Investment Group REIT.
Elevate Credit Announces First Quarter 2017 Results (Stockhouse), Rated: AAA
Elevate Credit, Inc. (NYSE:ELVT) (“Elevate” or the “Company”) today announced results for the first quarter ended March 31, 2017.
First Quarter 2017 Financial Highlights
- 20% year-over-year revenue growth: Revenues totaled $156.4 million, a 19.6% increase from $130.7 million for the prior-year period.
- Nearly 40% year-over-year growth in loans receivable: Combined loans receivable – principal, were $444.5 million, a 38.6% increase from $320.7 million for the prior-year period.
- Stable credit quality: Loan loss provision was 52.9% of revenues and within our targeted range of 45%-55%. The ending combined loan loss reserve, as a percentage of combined loans receivable, was 15.7%, slightly lower than the 16.3% we reported for the prior-year period.
- Record low customer acquisition costs: The total number of new customer loans for the first quarter of 2017 was approximately 53,000 with an average customer acquisition cost of $198, compared to approximately 41,000 customer loans and an average customer acquisition cost of $235 for the prior-year period.
- Positive net income: Net income of $1.7 million, or $0.06 per pro forma diluted share, which was based on a 2.5 to 1 stock split and all preferred stock converting into common stock upon the IPO but it excludes the 14.3 million common shares issued in the IPO since this happened after quarter end.
- Continued improvement in Adjusted EBITDA margin: Adjusted EBITDA was $24.9 million and the resulting Adjusted EBITDA margin was 15.9%.
For the full year 2017, the Company expects total revenue of $680 million to $720 million, net income of $13 million to $19 million and Adjusted EBITDA of $95 million to $105 million.
Online lender SoFi is letting employees cash out a portion of their holdings to give them liquidity as the company waits to go public.
Last month, SoFi employees and ex-employees were permitted to sell 20 percent of their vested options in a secondary share sale that totaled $336.5 million, according to sources familiar with the matter. The offering priced the shares at $16.30, said one source, who asked not to be named because the deal was confidential.
The real returns for Prosper Marketplace investors (AltFi), Rated: AAA
Yesterday we learnt that leading US marketplace lender Prosper has been misstating investor returns, due to a system error.
The system error did not affect the money received by investors, only the calculation of their annual return.
Prosper has recently been equipping itself to represent its performance more accurately. The firm signed a deal with analytics firm AltFi Data in March, thus opening itself up to third-party scrutiny.
Square is rolling out its first debit card (recode), Rated: A
Last month, Jack Dorsey teased the launch of a Square debit card. Today, the company started allowing some users of its Square Cash money-transfer service to order one of these cards for themselves.
The prepaid card isn’t linked to your bank account, but instead to the Square Cash app. That means you can only use it to spend money that you are holding in your Square Cash account.
A Square spokesperson said these signatures are screened before printing to prevent inappropriate words and drawings from making their way onto the cards. But there is obviously wiggle room to include your Twitter handle, if you want to be like Jack, or just a first name, too. The cardholder’s first and last names are printed on the back of the card.
Creating a deeper relationship with Square Cash customers might also open up other business opportunities in personal finance for the $7 billion payments company. Lending, anyone?
AI may just create the illusion of good credit decisions (American Banker), Rated: A
AI is also second only to blockchain technology as the most overused and overhyped term referring to technologies that are taking over banking and finance, particularly in credit decisions.
The reality is AI will make lending more consistent and efficient; however, it remains to be seen if it will make lending safer.
How will regulators ever know if the AI algorithms are performing in a nonbiased way? Humans are the programmers of the algorithms, and therefore human biases and tendencies cannot but leak into the overall decision process.
We know the saying “bad data in means bad data out.” AI should help to solve that challenge as it more accurately identifies the “bad” or not useful elements. However, the challenge with AI may not be with “bad data” but rather a lack of necessary data as the economic environment changes.
To this end, neural networks, which are self-learning and so complex that the humans who create them are unable to describe them, also present a number of problems. The foremost problem is: If you don’t know how the decision is made, you cannot be confident that the decision is being made correctly. Yes, you can judge by credit performance. But when a lender runs afoul of a regulation, the regulators won’t accept “We just don’t know how it works” as an excuse.
Affirm Looks To Launch Everyday-Use Virtual Cards (Bank Innovation), Rated: A
Affirm, the lending startup that provides loans at the POS, is looking into launching everyday-use virtual credit cards, Bank Innovation has learned.
The company, launched by a PayPal cofounder Max Levchin, provides point-of-sale loans that allow customers, particularly millennials, to finance purchases with participating merchants. Once approved, consumers receive a one-time use virtual card via Affirm’s app, which they can use for the purchase. Then, depending on individual consumers, Affirm splits the bill into monthly payments.
The Future of Fintech and the importance of payments to a SaaS business: WePay’s Week in Payments (Wepay), Rated: A
Scanning the news in the payments world this week was an interesting exercise because the two standout themes are very much aligned with what we do here at WePay and with the future of digital payments. The first theme is around the future of Fintech and where the nascent industry is headed and the second is around the huge impact of delivering payments as a an integrated part of a solution rather than as an afterthought.
David Dunn, of Braintree Europe, has a piece in ITProPortal about why payments are more than plumbing. It’s a good piece and makes a great case for integrating payments. He says that you can help your business by making it easier for your customers to get to a checkout and by making it easier to scale. We would argue that a SaaS business can go even further by using payments to better retain existing customers and help them grow, better adding new customers by scaling as Dunn mentions and also by optimizing revenue for the platform itself. The way to achieve these goals is via white-label payments.
Kabbage’s Next Growth Phase (deBanked), Rated: A
When you consider the recent milestones Kabbage has achieved it makes it difficult to think of the fintech lender as a startup. In recent weeks Kabbage surpassed a couple of major milestones comprised of extending $3 billion in funding to 100,000-plus small businesses. More than half of those loans were directed toward existing credit lines. Kabbage also recently priced a $525 million private securitization, which tips the company’s hand on strategy.
Kabbage is pursuing its growth plans all while performing a confidential search for a new chief technology officer, details for which are expected to unfold in the coming months.
At the LendIt USA 2017 event, Kabbage co-founder & CEO Rob Frohwein alluded to the online lender’s plans to reach new territories, details for which were scarce. Treyger shared, however, that Kabbage’s global growth plans are somewhat tied to the company’s pipeline of banking partnerships.
Kabbage already counts as partners household names including Santander, ScotiaBank, and ING, all of which license software from Kabbage. Meanwhile, as big banks are accessing smaller businesses, Kabbage’s growth blueprint includes serving larger ones.
How fintech startup Elsen helps anyone become a data whiz (Built in Boston), Rated: A
With less than $1 million in total funding, fintech startup Elsen may not have much by way of investments, but a recent partnership with Thomas Reuters should bring some star power to the burgeoning company.
Founded in 2013 by three Northeastern grads, Elsen is a platform-as-a-service company that enables anyone at large financial institutions to harness massive quantities of data for better decision making and problem solving.
Besides offering data storage to some of the largest vendors in the world, Elsen’s product uses machine learning and AI to speed up the testing of financial algorithms by way of backtesting, a process that sifts through historical financial data to see how an algorithm would perform at tasks like automatically picking stocks, for example.
Interim OCC chief should put fintech charter on ice (American Banker), Rated: A
One thing that Keith Noreika, the new acting head of the Office of the Comptroller of the Currency, could tick off of his to-do list is to pause the OCC’s efforts to develop a fintech charter. Noreika should then take some time to assess whether the charter is developing in a way that best serves the public.
Former Comptroller Thomas Curry deserves major credit for getting the OCC to think about how to encourage innovation in the banking sector. The fintech charter is an important piece of this effort. Unfortunately, based on the most recent information put out by the OCC, it appears that the previous leadership wasn’t thinking sufficiently outside of the box. The charter is shaping up to needlessly mimic many of the requirements of traditional depository institutions, even though those requirements do not make sense in the nondepository context.
For example, requiring firms to get OCC permission to change business plans, and to convince the agency that the firm will not fail, are not necessary.
However, the OCC should not press pause on its response to the lawsuit filed by the Conference of State Bank Supervisors challenging the charter.
‘If you change the rules we’re going to disconnect you, fintech’ (American Banker), Rated: A
As one of the banking industry’s largest vendors, FIS says it might be well suited to help banks effectively navigate the world of fintech.
ANTHONY JABBOUR: When Apple Pay came out, banks weren’t running to Apple Pay because they thought it would drive new streams of revenue for them. A lot of them did it because they were afraid the bank across the street would offer it and they would suffer by not offering it.
One thing we’re trying to do that’s a little different is, if we believe there’s value for our customers, we want to have the disruptor connect to the FIS network and have our banks connect to it from the FIS network, so we can leverage our banks’ negotiating power with the fintech.
What are some of the types of companies you’re thinking of—alternative lenders, PFM app providers, billing companies?
JABBOUR: Payments would be one. The banks that I speak to look at lending and they say banks lost the lending franchise and exclusivity and other companies popped up over the years and took a major portion of that. And they look at payments right now and they feel strongly they can’t lose the payments franchise.
Do you think that banks can take back market share in U.S. person-to-person payments with Zelle?
JABBOUR: We think that has a lot of potential. We offer Zelle to our clients. I believe we can create a capability for P-to-P for our banks that would be better than any fintech’s because we could make it real-time and it would be accessible from an ATM. I could send you money and you can go to an ATM with your mobile phone and withdraw the cash without having a bank account. We could also tie it with prepaid cards, so instead of me sending you $500, I could send you a $500 Home Depot gift card as a housewarming gift. It’s P-to-P, but it’s more thoughtful because we’re integrating it with prepaid.
What does it take for a payment platform to work? It takes brand recognition so people know it exists, and it needs ubiquity, it needs to work in every place you would want it to work. It’s never about the technology. I like with Zelle that banks said look we have to find a way to solve the brand issue, and if we all use the brand Zelle, that’s going to help. And I think it will.
I could see that argument, but you could argue that banks are late to this P-to-P payment party and that PayPal’s Venmo is the clear leader. Do you think the Zelle brand can win hearts and minds?
JABBOUR: Without question, banks are late to a number of capabilities. When you look at P-to-P, Venmo is the brand, it’s a verb. Whether or not banks can catch up with Venmo comes down to how compelling they make the offer, what else they can wrap around it, how much do they ultimately invest in it. What I know is, if they hadn’t pursued Zelle, they would have fallen further behind.
Crowdfunding: Now Anyone Can Own a Skyscraper! (Inside Indiana Business), Rated: A
Have you ever wanted to own a skyscraper? How about an entire apartment complex? Well, good news, now you can! And, you don’t have to meet “accredited investor” requirements. How? It’s called crowdfunding!
According to the University of Cambridge Judge Business School, in 2015 crowdfunding real estate transactions topped $1.2 billion; over three times the amount in 2014.
Research the Crowdfunding Platform: Currently, more than 125 crowdfunding platforms exist. According to Jason Best, a partner at Crowdfund Capital Advisors, you’ll want to consider comparing associated fees, the quality of property management, and the sustainability of the platform. As with any new industry, it’s safer to choose among the larger more-established companies such as Realty Mogul, Realty Shares, and iFunding, to name a few.
If you’re interested in learning more about this topic, I suggest you listen to podcast Episode #108, “Investing in Real Estate Via Crowdfunding Platforms,” on J. David Stein’s website, Money for the Rest of Us.
Listen to the podcast below:
Robot or human financial advice field is changing (VC Star), Rated: A
What if a visit to the financial adviser was more like an impromptu coffee grab than a dental checkup?
Instead of a boring annual visit, imagine a quick call from you adviser in which he makes a couple simple suggestions to keep your portfolio on track.
That’s the future, according to Michael Kitces, research director for Pinnacle Advisory Group in Columbia, Maryland. Speaking to financial advisers attending last month’s Morningstar Investment Conference in Chicago, Kitces tried to reassure them that investors, rather than turning their money over to automated investment platforms, will continue to pay for advice if it’s relevant and timely.
In a future aided by software tracking customer portfolios and everyday spending, advisers will already know their clients’ problems and will use more frequent chats to figure out fixes, he said.
Is Fintech creating Neo-Luddites demanding a “robot-tax”? (Daily Fintech), Rated: A
A (hypothetical) documentary titled “Software has been eating the world” about Microsoft, would have to cover the first decade (‘75-‘86) before the company went public and the stunning and difficult to replicate nowadays fact that about 12,000 Microsoft employees became millionaires, in addition to the 3 billionaires.
So, when Bill Gates spoke in February about the idea of “the robot that takes your job should pay taxes”, the world reacted.
Just recently, the city of San Francisco announced a change in its public policy framework that will make it the first city to implement a robot tax (Business Insider May 2, San Francisco is considering a once unthinkable measure to offset the threat of job-killing robots).
In financial services, there were no such issues raised when ATMs, online brokerage and e-banking transformed the financial industry.
In this second wave that follows the accelerated pace of tech innovation of other sectors, we all agree that we don’t want a world in which no bank submits candidacy for the Global Finance awards Call For Entries: Digital Bank Awards 2017. Or a world that has an increased tax for the winner and those shortlisted in the Euromoney Best Digital bank awards: for 2016, Singapore’s DBS Bank, and the short list included BBVA, Citi, and ING. Or a world that taxes more startups providing the “picks and shovels” for the future of Invisible Finance, like:
– Cloud banking platforms offering Banking as a Service, like Mambu
– Cloud based investment financial app stores, like Investcloud
– AI chatbot technology providers like Kasisto
– Self-Sovereign identity solutions, like Uport
– Mortgage enterprise solutions providers like Roostify
The Fintech ecosystem is still relatively un-bundled and it would seem even more problematic to develop and apply a framework for a “robot tax” for the Fintech space.
Billionaire investor Draper to participate in blockchain token sale for first time (Reuters), Rated: B
Billionaire venture capitalist Tim Draper soon plans to take a step that even he, a long-time bitcoin aficionado, has eschewed to now: buying a new digital currency offered by a technology startup.
Draper, an early supporter of bitcoin and its underlying blockchain financial ledger technology, told Reuters in an interview he will for the first time participate in a so-called “initial coin offering” (ICO) of Tezos slated later this month.
Tezos, a new blockchain platform launched by a husband and wife team with extensive Wall Street and in hedge fund backgrounds, will launch the ICO on May 22. Draper will also invest in U.S.-based Dynamic Ledger Solutions Inc, the creator of Tezos, but did not disclose details.
Insight, JG Wentworth among top-rated on online marketplace (Mortgage Professional America), Rated: B
Insight Loans, JG Wentworth Home Lending and CBC National Bank have taken the top three spots in an annual ranking of mortgage lenders.
The league table from online loan marketplace LendingTree rates the lenders on its platform in three categories – mortgages, personal loans and auto finance – based on customer reviews.
CVC Credit Partners (“CVC”) announced today that CVC’s U.S. Middle Market Private Debt business acted as Administrative Agent on a first lien senior secured debt facility provided to Wastewater Specialities, LLC (“WWS”). The proceeds were used to refinance existing debt and support future growth through equipment purchases.
Crowd2Fund Announces New Venture Debt Product (Crowdfund Insider), Rated: AAA
On Friday, crowdfunding platform Crowd2Fund announced the launch of its new venture debt product, which is targeted towards early stage businesses that have a short term requirement to access cash to facilitate growth. The funding portal noted that the interest rates for the product’s loans range from 10% to 15%, with a borrow time period of normally no more than 12-18 months.
Crowd2Fund also noted those businesses that are suitable for the venture debt will be able to increase their value during the loan duration.
MOBILE BIOMETRIC PAYMENT VOLUMES TO TRIPLE IN 2017 TO NEARLY 2BN (Juniper Research), Rated: A
A new study by Juniper Research has found that the number of mobile payments authenticated by biometrics will rise to nearly 2 billion this year, up from just over 600 million in 2016.
The new research – Mobile Payment Security: Biometric Authentication & Tokenisation 2017-2021 – found that while Apple Pay had provided the catalyst for initial growth, other leading wallets including Android Pay and Samsung Pay were increasingly offering biometric solutions for authentication.
Furthermore, the size of the opportunity has been boosted by the greater availability of fingerprint sensors. According to the new research, around 60% of smartphone models are expected to ship with such sensors this year, with many Chinese vendors incorporating them into mid-range models.
The research emphasised the increasing momentum behind alternative biometric solutions. It recognised Mastercard as an early leader in this space through its Identity Check Mobile capability, due to go live later this year. Informally known as “selfie pay”, this allows users to scan their fingerprints and/or take selfies to validate their identities and thereby make payments.
PwC appoints leaders for Analytics, AI, Cybersecurity and FinTech arms (Consultancy.uk), Rated: A
In a bid to expand its footprint in the rapidly growing digital and technology-led innovation space, PwC, one of the major players in the field, has in recent weeks appointed a number of new senior technology positions in the UK wing of their group.
In another appointment aimed at driving growth in technology and financial technology (FinTech), Zubin Randeria, a PwC partner for 23 years non-consecutively, was unveiled as the new lead for around 200 cyber security experts in the UK, as the firm continue to focus on advising companies how to resist digital threats; a key concern of modern business.
Mark Leaver, PwC’s head of Financial Services Consulting since 2015, will meanwhile expand his existing role to include the multi-billion pound FinTech market in his scope. The FinTech space is growing fast, with interest in services particularly high among younger tech savvy users, and on the back of the spike global investments in FinTech companies grew to $25 billion last year, according to data from KPMG.
Bank of England criticised for fintech faux pas (Financial News), Rated: A
The Bank of England has come under fire for working with a fintech startup that was fined $700,000 by a US regulator for breaking banking secrecy laws.
Players in the fintech field have accused the central bank of appearing not to have conducted proper due diligence when selecting its partners after it emerged that Ripple, the startup chosen by the Bank of England to help research new blockchain technology, was fined for “willfully violating” several requirements of the Bank Secrecy Act.
RESCUE DEAL FOR MOTOR FINANCE PROVIDER (Insider Media), Rated: A
A Leicester-headquartered vehicle finance provider has been acquired out of administration.
Vehicle Trading Group called in administrators from Grant Thornton on 2 May 2017.
The company provided finance via its subsidiaries Vehicle Stocking Ltd and Vehicle Credit Ltd, which have now been sold to RateSetter.
11 Of The Largest Companies In China Dominate Chinese Fintech (Lend Academy), Rated: AAA
Of the 1.4 billion people in China, only about 300 million are in the national credit bureau, which means that more than a billion people have no credit profile. Hundreds of millions of Chinese “unbanked” consumers are middle class, have high discretionary income, and would be considered prime or super prime borrowers. On top of that, the large Chinese banks have no history in making consumer and small business loans and were never designed for that purpose (they make infrastructure and commercial real estate loans).
We are seeing the leading Chinese companies from a diverse set of industries muscle their way into the fintech sector. This article highlights some of the key players that have made the horizontal jump into fintech.
Ant Financial Services Group is owned by Alibaba Group, the largest e-commerce firm in the world. Ant Financial is focused on serving small and micro enterprises as well as consumers. Ant Financial is the largest fintech company in the world.
JD Finance Group operates seven lines of business: supply chain finance, consumer finance, crowdfunding, wealth management, payment services, insurance and securities trading. JingBaobei is their microlending platform and Baitiao is their crowdfunding platform.
Baidu Jinrong is focused on many different verticals under different brands including consumer finance (Baidu Umoney), wealth and fund management (8 Baidu), payments (Baidu Wallet) and financial asset transaction platform services.
Greenland Group (Stock Code: 337.HK) is one of the world’s largest publicly traded real estate development companies with more than 15 million clients. They are the largest Chinese developer in the US. Greenland Financial was formed in December 2015 and it includes three main business sectors: an online wealth management platform for individual investors; a professional asset allocation and wealth management service for middle-class clients; and a cloud platform to provide internet technology and data analysis services.
Wanda Internet Finance Group leverages Wanda’s offline commercial platform to form a business division comprising of four activities: data application, credit service, online lending and payment, and creating an innovative financial offline-to-online model.
Lufax Holdings is one of the world’s largest and most successful fintech firms. It is owned by Chinese insurance giant Ping An Group. The business consists of three divisions: Shanghai Lujiazui International Financial Assets Commodity Exchange Co (Lufax), Shenzhen Qianhai Financial Asset Exchange Company Ltd (QEX), and Puhui Financial. Lufax offers wealth management and insurance services to its 23 million registered users, QEX focuses on institutional business and cross-border business, and Puhui Financial provides loans to consumers and micro-businesses.
Zhong An is China’s first Internet-based insurance company utilizing Big Data analytics.
Tencent has recently created Tencent FiT (Financial Technology Group), which includes TenPay (payments), WeChat Pay, Mobile QQ Wallet, Tencent Credit Services, and Tencent Licaitong, its money market fund and wealth management platform.
Tencent also launched WeBank, the first online-only bank in China, a joint venture that also includes Shenzhen Baiyeyuan Investment and Shenzhen Li Ye Group.
SinaPay is a social payments solution. Weiquanbao is a social wallet focused on mobile payments. Weicaifu is their Internet financial services company with a focus on personal financial management.
Phoenix Finance is an online platform, established by Phoenix Satellite Television Holdings, to provide intelligent financial services for Chinese investors worldwide.
Ezubao P2P Lending Fraud Update: 26 on Trial (Crowdfund Insider), Rated: A
Do you remember the Ezubao Ponzi scheme that ended in the single largest peer to peer lending fraud of all time? Investors, saw approximately 50 billion CNY or about USD $7.2 billion flushed down the tube. Reportedly 900,000 investors were impacted as an astounding 95% of the loans listed on the P2P lender’s site were said to be totally bogus. Well process kicked off at the end of last year and according to a report from Xinhua, 26 Ezubao executives are now on trial. Proceedings are taking place in No. 1 Intermediate People’s Court in Beijing. Ezubao executives Anhui Yucheng and Yucheng Global and 10 company executives, including Yucheng chairman Ding Ning, have been charged with fraud.
Fintechs fight plan to bar screen scraping and protect European banks (CNBC), Rated: AAA
A coalition of 62 financial technology (fintech) firms including Klarna and Trustly and lobbying organizations such as the European Fintech Alliance (EFA) are fighting plans by the European Banking Authority (EBA) to ban screen scraping of customer data from online banking interfaces.
The screen scraping ban would come into force as part of the draft regulatory technical standards (RTS) rule under the European Union’s (EU) revised Payment Services Directive (PSD2) regulation.
Screen scraping is the process of collecting screen display data from one application and translating it so that another application can display it. This is normally done to capture data from a legacy application, such as an IBM mainframe computer for instance, in order to display it using a more modern user interface such as a PC or mobile. However, it can also be used to steal data or, depending on your point of view, legitimately gather business intelligence.
The EBA proposals are meeting fierce resistance from European fintechs that have signed a manifesto to fight the plan.
Introduction To P2P Lending Marketplace (Code Brahma), Rated: A
One of the biggest advantages of using an online P2P lending platform is that the loans are usually cheaper as the platforms operate with lower overheads and software powered automation. The P2P lenders charge money for the platform and doing credit checks for borrowers.
So, if a platform decides the unit note to be valued at $10 and an investor decides to invest $10,000 she’ll end up with 1000 notes to invest in borrowers.
One loan is typically funded by multiple investors. An investor willing to invest 1000 notes can choose to fund 10 different loans with 100 notes each or can mix and match the amount with loans.
According to a PwC report, the P2P lending platforms in the United States issued loans worth $ 5.5 Billion approximately. The global P2P market was estimated at $26.16 Billion in the year 2015. Transparency Market Research predicts the market to grow by CAGR of 48.2% year on year, reaching a whopping $897.85 Billion by the year 2024. Research and Markets expects the P2P market to grow at a CAGR of 53.06% between the years 2016 and 2020. Morgan Stanely predicts the market to be valued at $490 Billion by 2020.
Fintech vs Bank: Roles And Advantages Of Both Parties (ValueWalk), Rated: B
Globally, fintech funding was US$5.5 billion since 11 years ago and can be up to US$78.6 billion now.
According to TechinAsia, the reasons why consumers can adopt fintech are because of it is easy for them to set up an account, in fact, rates and fees that fintech offered are more attractive and cheap. On the other hand, fintech helps SMEs to acquire some funds.
Banks provide many services such as savings, loans, transfer of funds and much more. Some said that banks would disappear in the future. However, as long as bank dominates on lending, investing and deposits, they will sustain in the market. Banks basically will keep the customer’s information and will not easily give it to other parties. So the customer will feel more secure and safe doing the transaction with the bank.
Fintech Forging The Future For Cashless Economy (Techstory), Rated: AAA
When Prime Minister Narendra Modi announced on November 8 that over 80% of our paper currency would be obsolete thereon, most of the country was left spell bound. While this was a move to discourage and partially halt the flow of counterfeit currency in a supposedly invisible economy, also crippling most industries and investors, there was one industrial sector that sat by the side and smirked – FinTech.
While the ripples of the move are still being felt every now and then, the financial climate is much more stable now than it was 5 months ago.
The first challenge, aided in part by the recent Demonetisation announcement, is that of making the population aware of the ease and comfort associated with online banking and cashless transactions. Not only does this involve an ideological shift, it also requires the population to cross a mental barrier – security.
Looking at it through this lens, it comes as no surprise that a report by Finextra Research Ltd. states that 69% of existing FinTech firms plan on raising their expenditures on content marketing. The scope of development for an online app of such a sort can be exponential, as has been witnessed by the growing popularity of Paytm!
In fact, certain projections point to a 30% decrease in banking employment over the next decade, as the concentration of delivering banking services in person decline with time.
While we have always been used to being dependent on our banking corporations to provide the chunk of capital services that we have always required, over time, it will be these fintech apps that will do the job, with banks holding safe, liquid assets and deposits. The borrowers and savers will now all be available on your smartphone.
While the landscape of lending and borrowing might change when it comes to user experience, the degree and scope of investments will only increase. However, the way we read and process it may change over time. As cryptocurrencies becomes easier to process and handle worldwide, other technologies supporting the development of transactions in such currencies will develop.
As innovation takes the lead while the scope of integration broadens, startups can create a real impact in society through different mediums like the P2P marketplace.
Take Kiva, for example, a wonderful peer-to-peer micro finance website that aims to alleviate poverty by allowing everyday people in developed nations to finance budding entrepreneurs in developing nations. Kiva allows you to make a loan to an entrepreneur across the globe for as little as $25. It is one of the world’s first online lending platform connecting online lenders to entrepreneurs across the globe.
PayActiv is another app that encourages better ways and modes of saving regularly, thereby increasing the independence of many of its users over time.
10 tips to get personal loans despite having low credit score or CIBIL score (Plunge Daily), Rated: B
Banks do not give unsecured loans like personal loans as easily as they do secured loans like home loan or auto loan. They take various parameters into consideration and not everyone can pass the stringent eligibility criteria. Credit score is where most applicants lose out on, especially when half of them have no idea what credit score is in the first place. Lenders are totally dependent on CIBIL (country’s biggest credit bureau) among others to understand customers’ past credit behavior and hence, credit worthiness.
Meanwhile, here are ways to get personal loans despite having low credit score:
- Approaching non-traditional or alternate lenders – Qbera offers one such personal loan product that is specifically designed for salaried employees above age 23 with high earning potentials. They offer emergency loans if your CIBIL score is 625 and above.
- Having a good salary at present
- Getting the help of spouse or other close family member or friend
- Applying with the same lender
- Applying to lenders that caters to people with low CIBIL Scores – Many online lenders understand that a low credit score doesn’t necessarily translate to low credit worthiness. There could be plenty of reasons for a less-than-ideal score due to technicalities.
- P2P lending for personal loans – Quite a popular lending trend in developed countries is peer-to-peer lending, it is not that common in India. Customers haven’t taken to it because the loan amount offered is small while the rates are high.
- Work on improving your credit score
- Mixing it up wisely – If you have taken more loans, please ensure that you have a wise mix of secured and unsecured loans rather than having only one kind.
- Paying taxes
- Getting loan against collateral
Home Capital suspends dividend, taps credit line, bolsters board (Reuters), Rated: AAA
Home Capital Group Inc on Monday suspended its dividend, tapped its credit line and added new directors, the latest attempts from Canada’s biggest non-bank lender to restore investor confidence and stem the flow of customer withdrawals.
The company also estimated that the balance in its high-interest savings accounts (HISA) halved in the past week and said it has withdrawn from its C$2 billion ($1.5 billion) credit line for the second time. Home Capital said the balance in its HISAs is expected to slump to about C$192 million on Monday, down 50 percent from a week ago.