By the very definition of FinTech, online lenders have been using technology to transform financial services. In the early days, this equated to moving the mountains of paperwork into digital forms and automating manual processes. Rather than optimizing transactions and speeding approvals, the same inefficient processes were often recreated. The same documents were required — […]
By the very definition of FinTech, online lenders have been using technology to transform financial services. In the early days, this equated to moving the mountains of paperwork into digital forms and automating manual processes.
Rather than optimizing transactions and speeding approvals, the same inefficient processes were often recreated. The same documents were required — now in a PDF format rather than paper. In fact, some lenders made the mistake of modernizing the front-end customer experience but didn’t link their digitization efforts to the back office.
User-Focused Design and Branding
What’s changed? Now, consumers are demanding more security, privacy and personalization from their banks and financial service providers. Online lenders and financial institutions must upgrade their user experience by speeding transactions, providing personalized pricing and integrating data sources to reduce documentation requirements.
Evolving end-to-end workflows and processes
This long-running trend to simplify and streamline the often arduous loan approval process is now including new data sources. Financial institutions are re-thinking the requirements to originate a loan and reworking their customer experience and internal workflow to deliver a frictionless lending experience.
Friendly Financial Advice Delivered Digitally
Borrowers value personal advice and often require 24/7 access to answers. Fortunately, digital tools are becoming more acceptable with the flexibility of self-service and collaborative models to deliver information quickly and efficiently.
The next generation of digital lending will engage consumers in new ways, such as digitally-augmented human support, voice interaction, AI-powered virtual assistants and chatbots, wearables, and augmented and virtual reality.
Since online-only lenders don’t have storefronts to develop in-person relationships, clear communications are critical for building trust. Opportunities to better serve online customers include:
Discrete Research and Application Process
Plain Green Loans recently conducted another round of focus groups with customers and received feedback about the need for protecting their privacy. As a provider of short-term loans to consumers during emergencies, Plain Green’s customers require discretion as they research loan options online. Customers also expressed appreciation for a simplified and streamlined loan approval process. The consumers seeking emergency loans are on tight deadlines and need immediate responses to determine next actions. A fast review of applications and loan approvals are imperative to these consumers. In fact, a recent PwC survey of more than 1,600 adults with full-time employment found that 46 percent of those in the study – which typically has more stable finances than other groups – stated that financial challenges are the number one source of stress in their lives. The study concluded that lenders have tremendous opportunities to assist consumers in understanding their financial options and help them choose the best solution based on their personal situation.
Building Consumer Confidence
Feedback from the Plain Green customer focus groups emphasized the need for authenticity, being real and believable.Creative Bloq’s list of big branding trends in 2018 cited the recent massive data breaches and natural disasters occurring one after the other as the reason consumers want extra assurance from brands that they will provide security. They say, “consumers are looking for clues to determine whether a brand can be trusted, from the overall design quality and experiential thoughtfulness, to ratings and feedback on social media. Brands have to view all of their activities through the lens of a skittish public and a tumultuous world; particularly online.”Online reviews were a major topic of discussion during the focus groups. Several customers said they don’t believe the reviews on websites because the testimonials are all positive or have high ratings. Instead, they preferred to research customer feedback on their own using Yelp, Google or other platforms to give them a broader understanding of experiences the general population may have encountered.
Brand Images Reflecting Diversity
Focus group participants expressed a desire for more diversity in branding images. They want real people shown on websites and in communications that reflect wider demographic groups.Customers stated that they distrust images of people looking too happy, too sad or with fake, over the top emotions. Especially when making a financial decision, the customers want to see people with expressions that underscore the serious nature of the transaction.The focus groups provided meaningful insights that will inform our customer care team, website development, and acquisition and loyalty programs.
It’s clear that online lenders and other financial services providers must continuously seek customers’ feedback to align product development and business strategies to customers’ needs.
With more than 12 years of experience designing groundbreaking marketing strategies for Fortune 500 companies and financial technology brands, Guy Dilger, Guy Dilger, VP of Marketing, Plain Green, LLC, is known for generating engaging content and compelling concepts that resonate with targeted consumers. Prior to Plain Green, Dilger held senior positions within fintech and retail spaces where he managed national marketing campaigns and customer-centric loyalty initiatives for Sears and Kmart. Previously, he was part of the management team at Limited Brands, where his marketing work in support of Express brand included CRM, email, web-based programs and the redesign and relaunch of a private label credit card. Dilger has an MBA, as well as a bachelor of science in economics, from Southern Methodist University.
Cryptocurrencies entered the mainstream in 2017. The million dollar fortunes made and 1,000% returns hogged the headlines. But behind all the hoopla is blockchain, the technology behind cryptocurrencies, quietly and steadily changing the business universe. The technology has myriad applications. Also called distributed ledger technology (DLT), it can reimagine entire industries in hitherto unknown ways. […]
Cryptocurrencies entered the mainstream in 2017. The million dollar fortunes made and 1,000% returns hogged the headlines. But behind all the hoopla is blockchain, the technology behind cryptocurrencies, quietly and steadily changing the business universe. The technology has myriad applications. Also called distributed ledger technology (DLT), it can reimagine entire industries in hitherto unknown ways. From issues of security to scalability and cost effectiveness, entrepreneurs are incorporating DLT to bring the benefits to the masses.
Similarly, alternative lending has changed how Americans borrow. Small business and consumer lending was hard hit when banks decamped en masse after the 2008-09 crisis. Online lending came to the fore with players like Lending Club, SoFi, OnDeck building multi-billion dollar lending platforms.
Almost 10 years since, alternative lending is growing but not at the speed which experts had imagined. Morgan Stanley had predicted Trillion Dollar funding via such platforms in the coming future. The sector is nowhere close to these figures. Aside from corporate governance issues, fraud and high default rates have been the true bane of the industry. IdentityMind, a RegTech company, reports that fraud caused 12% of losses in P2P online lending. That translates to almost 1.2% of total funding, which is also 2-3 times as compared to banks or retail cards.
Blockchain and Alternative Lending
Blockchain is an open, distributed ledger that records transactions between two parties in a verifiable and efficient manner. Putting digital assets (contracts, documents, financial data, etc.) on blockchain technology helps build a wall against unauthorized access and prevents fraud. Blockchain helps maintains transparency between entities; it could be between buyer and seller, business and employee, or customers and investor.
A World Economic Forum report predicts that, by 2025, 10% of GDP will be stored on blockchains. Amalgamating blockchain and alternative lending has not only a technical appeal but is business common sense. Online finance decentralized lending allows savers to directly fund borrowers; they took away the middlemen, traditional banks, who otherwise used to take the major benefit away from the transaction. Now, it is the alternative lending sectors’ turn to leverage the power of decentralization via blockchain.
The Benefits of a Decentralized Distributed Ledger
Currently, alternative lenders hold their complete data centrally, in either their own servers or on Amazon Web Services-type cloud structures. This is a honey pot for hackers. In 2017, an Equifax data breach collected 145.5 million users’ data. The breach was caused by a software flaw that allowed the hackers to take over the company’s website.
Lenders have access to extremely sensitive data such as bank account numbers, social security numbers, and other personal identification information. Losing control of that data can compromise the entire financial history of an individual or a business. Blockchain eliminates the risk by storing information on a decentralized ledger. So a massive data hack would never be possible because it will be practically impossible for the hackers to have access to each and every part of the distributed record.
A distributed ledger also provides transparency and allows that all transactions are recorded are on the blockchain in an immutable manner. Thus, backdating of contracts is not possible under any circumstance (Re: Lending Club backdating loans scandal). Corporate governance improves across the board, and investors and regulators can breathe easy knowing that the data they are seeing is the absolute truth.
Digital loans can be tokenized via blockchain and be constructed as a tradeable security. This, in effect, allows securitization for loans; so you don’t need to wait till you are a billion dollar fintech lender. Othera, a blockchain lending platform, is doing just that. It creates an online marketplace where lenders can tokenize their cashflow by putting the loan on the blockchain and selling it to investors.
Apart from this, blockchain technology is more user-friendly as it is open to the public with no authentication or permission issues. It is scalable and cost efficient for businesses to incorporate into their existing systems and allows for all stakeholders to easily extract relevant information about their transactions without risking the entire system’s database.
Digital identity verification
Identity theft is one of the biggest reasons for online lending fraud. That is exacerbated by the fact that the lender and the borrower usually never meet in real life. The old traditional way was to go through the lengthy and costly process of physical verification. But in the age of blockchain, by merging identity verification with decentralized blockchain principles, a tamper proof digital-id can be used as the digital signature for recording and validating all transactions.
How Blockchains Are Revolutionizing Lending
Alternate lending has seen many iterations and pivots since inception. From being a pure peer-to-peer platform, the sector has metamorphosed to one dominated by balance sheet lenders and institutional investors. Now, the era of Alt Lending 2.0 is emerging, which is going to be dominated by players who have co-opted blockchain as an integral part of their business processes.
Here is a brief description of some companies that are doing innovative work in the field.
The ERP giant is experimenting with blockchain on an enterprise level. One of its applications is focused on KYC. The distributed ledger solution is to store a customer’s ID and link it to their personal documents, which are not stored on the blockchain. Once the transaction is cleared, the link is established and the documents are accessed to prove identity and the onboarding process continues. In this, SAP provides a solution to KYC issues, with running proof of identity. Thus, there is a single source of truth for all parties.
WishFinance is a Singapore- and Honk Kong-focused lender to merchants and small businesses. It is keeping its entire loan portfolio on a public blockchain to push transparency for investors. The investors can evaluate the performance of a loan at anytime (the data is anonymized so no identifiable borrower information is shared).
SALT is reversing the model by allowing crytpocurrency holders to cash out without actually selling their crypto assets. It allows loans for Bitcoin. The borrower can redeem his crypto assets once the loan is paid.
Blockchain has the power to allow alternative lending companies to scale effortlessly and solve fraud and KYC issues haunting the industry. Lenders who are able to get their blockchain game right should see renewed investor interest and benefit from higher unit economics.
In the last 25 years, technology in general, and the internet in particular, has unimaginably altered our way of living. After four long years of controversy, and push and pull, on April 14, 2016, the EU parliament finally approved the landmark General Data Protection Regulation (GDPR). GDPR was introduced to replace the Data Protection Directive […]
In the last 25 years, technology in general, and the internet in particular, has unimaginably altered our way of living. After four long years of controversy, and push and pull, on April 14, 2016, the EU parliament finally approved the landmark General Data Protection Regulation (GDPR). GDPR was introduced to replace the Data Protection Directive 95/46/EC and integrate data protection laws throughout Europe, allowing non-European organizations to adhere to these laws. GDPR will be effective from May 2018.
The Principles of GDPR
The concept of GDPR has been initiated because the internet has fundamentally redone how businesses interact with personal information. Data is the new oil, and internet companies were harvesting user data to make billions in profits. European Union legislators felt like they had to do something to protect consumer information.
It seems like there’s a news story almost daily about data breaches involving retailers, credit bureaus, or government entities. While many of the stories focus on the immediate consequences for consumers, the downstream effects of these data breaches can wreak havoc on online lenders and their customers. The trouble for lenders often starts when fraud […]
It seems like there’s a news story almost daily about data breaches involving retailers, credit bureaus, or government entities. While many of the stories focus on the immediate consequences for consumers, the downstream effects of these data breaches can wreak havoc on online lenders and their customers.
The trouble for lenders often starts when fraud teams respond too aggressively to a major data breach. By setting overly conservative identity verification screening rules, for example, lenders can end up rejecting good customers, resulting not just in the loss of immediate business but also the potential for long-term customer revenue. Once they are denied a loan that they probably should have been approved for, customers are unlikely to return and certainly won’t be likely to recommend the lender to others.
While it’s a difficult balance to strike, there are proven methods for lenders to confidently verify a customer’s identity in the era of constant data breaches. Here are three rules of thumb:
#1. Assume every identity has been compromised
In the first half of 2017, the number of data breaches climbed 29 percent. From the Republican National Committee contractor whose breach exposed voting data on nearly 200 million Americans to Verizon’s breach that affected more than 14 million customers, data hacks are increasing in frequency and severity across all industries.
The recent breach of credit reporting giant Equifax is another example. Reported by the Wall Street Journal as the largest social security data breach in history, approximately 143 million U.S. consumers’ confidential data, including social security numbers, names, birth dates, and addresses were compromised. What’s more, the breach exposed the credit card numbers of 200,000 consumers as well as “dispute documents” with personal information of another 180,000.
Because personal data of every kind is readily available to fraudsters, online lenders face significant identity verification challenges. They need smarter systems to allow borrowers to use their own (likely compromised) data while being able to recognize when criminals are using the same data illegally.
#2. Go beyond Social Security Numbers
For many online lenders, the social security number has long been regarded as a key indicator of identity. But if it wasn’t made abundantly clear by the Equifax data breach, social security numbers (SSNs) can no longer be a trusted piece of identity data. In fact, SSNs were never meant to serve this purpose in the first place. They were created solely as a way to keep track of an individual’s earnings for social security and benefits purposes.
So, what do you do if SSNs are a key customer identifier for your business? Start incorporating modern identifiers into your verification process. Those include home address, email, phone, and IP address. Better yet, verify all of these elements and link them back to the customer.
#3. Confirm Whole Identities by Linking Identity Data Attributes Together
While it’s easy to use and piece together stolen identity data, it is impossible to fabricate the linkages that effectively mimic a real person. Legitimate borrowers can be confirmed by verifying many identity data elements and ensuring they all connect to the individual behind the transaction, clearly distinguishing them from bad actors whose data elements won’t correlate properly.
Linkage analysis can include connecting name, address, phone, IP, and other non-personally identifiable information (non-PII) data.
Some positive signals include things like:
an email address age of more than 720 days
an IP address within 10 miles of the physical address
a match between phone and address
a match between email and name
a match between phone and name
a match between address and name
And common risk signals include:
a mismatch between linked email, phone, or address details
an email address less than 90 days old
a non-fixed VoIP or toll free phone number
a phone country code and physical address mismatch
invalid phone, email, or address info
a proxy IP address
Eva Casey Velasquez, President and CEO of the ID Theft Resource Center, which provides non-profit resources and support to victims of identity fraud, has recommended businesses take action with multi-factor authentication processes. “We are encouraging businesses to be fearless in their security,” she said. “At the end of the day, it is your customer base that you are helping.”
The rate of data breaches continues to pick up speed with no end in sight. Lenders that fortify their fraud management strategies with a multi-layer approach will be able to avoid reactive decision-making in the aftermath of a data breach.
Just because the personal data of your borrowers is available on the dark web doesn’t mean that verifying their identity is hard or impossible. It just means that basic identity data attribute verification won’t work and whole identity verification will be required. Your teams will appreciate their newfound ability to excel through the wake of the next data breach and your growing base of happy customers will be more apt to refer your business to a friend.
Tom Donlea leads the global marketing efforts of Whitepages Pro, the worldwide identity verification data provider for risk management in banking and online lending. With over ten years of online payments and risk experience, he previously was the founding executive director of the Merchant Risk Council.
Consumers have a reason to be concerned as news of personal data mining, bundling, and selling seems to be accelerating. As a result, the data brokerage industry has grown. Opiria’s white paper indicates the industry has a market value of $250B USD. That’s a quarter of a trillion dollars made off other people’s rightfully-owned data, […]
Consumers have a reason to be concerned as news of personal data mining, bundling, and selling seems to be accelerating. As a result, the data brokerage industry has grown. Opiria’s white paper indicates the industry has a market value of $250B USD. That’s a quarter of a trillion dollars made off other people’s rightfully-owned data, but precious little of it went to the people whose data is in question.
Opiria have an idea that attempts to make both sides of the consumer experience more successful and rewarding. How often have consumers chosen not to do something online because they were concerned about the security of their data? If Opiria’s platform is successful, those concerns could be a thing of the past.
The Opiria Solution
Opiria is an online consumer and usability research platform enabling companies to optimize products and services by understanding what consumers think, experience, see, and feel. Through mobile surveys and mobile diaries distributed directly to consumers’ smartphones, companies can get a better understanding of their target audiences without violating their personal data rights.
Christian Lange, the company’s CEO and founder, sheds light on the Opiria vision. He says the Opiria system is a decentralized marketplace built on the Ethereum blockchain for the secure trading of personal data. Consumers sell their data to companies for compensation, which is measured with the PData (for personal data) token.
Lange started his first company in 2005. Focused on measuring human behavior, that company developed software that was used by automotive companies worldwide offering detailed analysis to measure driver behavior with modifications to the automobile’s navigation system. The solution was limited, however, as companies only received data from one driver at a time.The need for big data was evident. This led Lange to the development of a new idea– something easy to use and makes it easy to collect data with technology available worldwide.
To fill that need, Opiria came up with a smartphone app for companies to get feedback from consumers worldwide, 24/7. They began designing the app in September 2015 and had the first version ready to launch by the close of 2016.
How Opiria Works
Opiria is a market research platform for which companies pay an annual licensing fee. The software allows them to interact with consumers through the Opiria app. The system centers on consumer feedback and opinions, part of it is based on surveys.
Still, those who don’t have the time for surveys, or who are not inclined to take them, still have data to sell. “We generate data through our web browsing and our online shopping,” Lange said. “We give information on our wearables, our smart devices, and pretty much anything that has anything to do with being human in the Internet world.”
Through the Opiria app, the company can sell that data knowing that consumer personal data is completely protected. Consumers share what they want to share and with whom they want to share it. Those who care to receive surveys will only receive those which fit their profiles. Being that the app is built on a blockchain, the data will be securely stored to release to further inquirers going forward.
One featured tool of the app is the Mobile Data Survey, which allows feedback over a longer period of time than the moment of usage. When consumers use a product or service, they can provide feedback in the moment. Then they can document it through videos, photos, and comments. This allows companies to get real-time data within seconds where most market research tools are email- and browser-based, and can take as long as a week to provide a company with the data.
For consumers, not only is the app free, but they can also turn their involvement into profit. The PData tokens can be saved and traded for cash.
Opiria’s Progress to Date
A profitable privately held company, Lange says the company needed no external funding to get off the ground. An ICO was launched on January 8 to raise capital. They set the hard cap at $19M USD.
The market has yet to be fully realized, but Opiria has almost 50 companies and 4,000 to 5,000 consumers signed up. Mercedes Benz, BMW, Audi, Intel, and Proctor and Gamble are among the major players paying for the service. Lange tells us that other customers come from every realm of the bitcoin industry including restaurants, hotels, fitness studios, and retail companies.
Opiria is also planning to use 60% of the funds generated from the ICO to grow the number of consumers to 1 million by the end of the year. “If we have a million customers, companies will flock to us,” Lange said.
One attractive aspect that might help them toward the goal of 1 million consumer participants is that personal information is not shared, only consumer data.
Opiria’s Competition and Future Outlook
While Lange says the company has a lot of competition, Survey Monkey possibly being its biggest competitor, he isnt concerned about it. “What gives us the advantage is that we do it all by app; it’s a faster way to do research and a direct line to the consumer,” he said. “A company can send out a survey and it can be delivered to consumers within seconds.”
The next thing they plan to release is software to capture, in an unobtrusive manner, where someone is looking and the emotions they have when they browse the Internet. Marlene Gagesch, the company’s co-founder and chief technical officer, is overseeing this work in Engostott, Germany.
Opiria is also working with Quicken Loans, a collaboration that hopes to equip Quicken with a mobile app that will do a longitudinal study of how people are tracking interest rates, among other things.
Lange goes on to list some other ways Opiria can be beneficial to online lenders. Understanding what kind of lending products people are interested in, for instance. “We can survey potential customers to understand how much interest they are willing to pay, the duration of loans, how you would like your contract laid out, and more,” he said. “You could perform A/B tests to see how people react emotionally to different offers made.”
Lange lays out the process in order to show how Opiria can “perfectly adapt [an] offering to meet potential customer expectations; deploy, get feedback, improve product, repeat.” This process takes weeks or months with classical market research, but with Opiria, it’s done a matter of minutes. “That gives companies a huge competitive advantage,” he said.
Why Opiria, and Can It Do Any Good?
If personal data is already out there for companies to buy—and it’s evident that they are buying it—then who’s to say this is going to work? Lange had an answer for that as well. It seems we’re getting better at guarding our information, and we’ve even gotten to a point where companies find themselves looking for data that just doesn’t exist. That has created this new market for personal data.
Opiria is one of those ideas off the beaten path enough to catch hold. A problem exists–consumer data needs protection–and consumers have to hope that something comes along that pays them for giving up some personal data security. If anyone knows that, it’s Opiria.
News Comments Today’s main news: 400K UK consumers may have been affected by Equifax breach. Independent Community Bankers of America letter opposing ILCs. RateSetter launches consumer hire-purchase product. Klarna partners with Wacom. Google enters digital payments in India. Payday type loans come to e-tailers in India. Today’s main analysis: Analysis of SoFi deal SCLP 2017-5 and Lending Club deal CLUB 2017-P1. […]
Did lending just change permanently? AT: “A must-read. This really gets to the heart of what the CFPB no-action letter means for alternative lending. An interesting question for me is, how could this impact the ILC discussion. Long-term, if this analysis is correct, the prospects could be good for online lenders to own banks.”
As you may be aware, ICBA recently filed a comment letter with the FDIC objecting to the deposit insurance application of SoFi Bank, an industrial loan corporation to be chartered by the state of Utah. In our letter, we urged FDIC, for safety and soundness reasons and to maintain the separation of banking and commerce, to not only deny SoFi Bank’s application but also impose a moratorium on ILC deposit insurance applications. Furthermore, we said that Congress should close the ILC loophole because it not only threatens the financial system but creates an uneven playing field for community banks.
The news that Square also intends to apply to the FDIC for deposit insurance as an industrial loan corporation has significantly increased our concerns and made it even more urgent that the FDIC immediately impose a moratorium on approving deposit insurance applications for ILCs. As we noted in our SoFi Bank letter, the ILC charter is nothing more than a loophole in the law to circumvent the legal prohibitions and restrictions under the Bank Holding Company Act.
SoFi Bank and Square are applying as ILCs and not as commercial banks because their parent companies and their affiliates do not want to be subject to the legal restrictions and supervision attendant to the BHCA. Square, for instance, already owns a point-of-sale hardware appliance business and a food delivery service and therefore could not own a commercial bank without divesting its commercial activities. For safety and soundness 2 reasons and to maintain the separation of banking and commerce, the FDIC should deny SoFi Bank’s application and impose a moratorium for at least two years on future ILC deposit insurance applications, including any application by Square.
Bank lending regulations have rarely been thought of as dynamic or exciting but last night’s ruling by the Consumer Financial Protection Bureau (CFPB) to allow a lender to begin using alternative data in their underwriting could herald the beginning of a new era in lending and how banks work.
Why is this significant?
US banks have traditionally been guided by three key pieces of legislation, the Truth in Lending Act of 1968, the Equal Credit Opportunity Act of 1974 and the Community Reinvestment Act of 1977.These three acts were created before the era of personal computers yet still guide bank lending today.Since the rise of marketplace lending, which began in 2006, where borrowers go through a platform and investors fund those loans, it is becoming increasingly apparent that many of these regulations are in need of updating.
In an overly simplistic interpretation (and I am not an attorney), the regulator is giving an online consumer lender the right to underwrite loans using ‘alternative data’ which before was not in line with how the Equal Opportunity Act is interpreted by lenders.It is not clear what data will be allowed but in a CNBC interview, Upstart co-founder Paul Gu suggested that SAT scores, college grades and even college majors are data points which are helpful in predicting loan defaults.
So assuming the change stands, what is next?
As alternative lenders have more scope to use alternative data, machine learning complex data analysis is opening up an entirely new space for investors.Gone are the days where banks only competed against each other with marketplace lenders now allowing investors to allocate capital in a similar way to banks, choosing loans to fund based on their own ideas and risk profile. For now, this is mostly impacting consumer credit, but in the years to come, look for marketplace lending to impact all areas of lending as investors get more comfortable investing in this space regulations start to adapt.
SoFi’s application to become a bank has almost no chance of approval in the wake of a sex scandal that forced out its chief executive, says a close adviser and former chairman of the Securities and Exchange Commission.
But last week’s departure of Mike Cagney, the co-founder, chairman and chief executive, has effectively killed the application, said Arthur Levitt, a former chairman of the SEC, who began advising the company two years ago.
“This departure of Mike makes that a very questionable attainment,” Mr Levitt said, referring to the charter.
He noted that the FDIC had turned down this type of application “many times” before.
We turned first to SoFi, a consumer-finance unicorn that has raised more than a billion in equity, and over $2 billion in total. The company is now down a CEO after allegations of misconduct brought censure upon its CEO, Michael Cagney, and the company’s culture.
Goldman Sachs has been pilloried for lackluster results from its trading division (paywall), so this week the bank gave investors a peek into its plans (pdf) for making more money. Surprisingly, the Wall Street powerhouse thinks it can generate as much revenue from online consumer loans—a market targeted by many fintech startups—as from buying and selling securities.
Specifically, Goldman thinks it can make $1 billion in extra revenue from its consumer lending business over the next three years, as much as it expects for its trading operations. Combined with new lending for the wealthy and companies, the bank expects to bring in $2 billion in additional sales from loans. Goldman co-chief operating officer Harvey Schwartz said it’s one of the fastest-growing lending platforms ever launched, even though he says the bank is taking its time with the nascent business. The bank’s digital consumer-lending arm called Marcus is expected to have lent out $2 billion by the end of the year.
Meanwhile, big banks have access to cheaper funds than peer-to-peer lenders like Lending Club or Zopa. With consumer deposits and the billions of dollars they routinely borrow in credit markets, banks can undercut the loan rates offered by smaller companies.
That said, Schwartz acknowledged that consumer lending isn’t immune to economic downturns, and analysts cited by Bloomberg were skeptical about Goldman jumping into a market outside its core expertise.
It might seem like it is only a matter of time before the tech giants knock on banking’s door. In fact, a recent World Economic Forum report posited that big tech companies present a greater challenge to banks than fintech startups. The report notes that regulators will accept a more “oligopolistic distribution of financial services products by tech firms.” Already, the fintech providers Social Finance and Square have applied for FDIC-insured banking charters, just as the Office of the Comptroller of the Currency continues work to develop its limited-purpose fintech charter. Are the largest tech firms next in line?
Incumbents still hold the upper hand. The risk of an Amazon or Google or Apple dominating the traditional banking sector is nowhere near a slam dunk.
In every scenario, the tech giants would need to persuade regulators to grant them some kind of charter access in order to effectively compete and level the playing field on funding costs. This would involve easing traditional limits on commercial firms owning banks, and potentially navigating opposition from members of Congress.
But more fundamentally, tech giants have had mixed experiences in rolling out financial services such as Google Wallet and Apple Pay. And despite the reported consumer skepticism of legacy institutions, banks still continue to maintain a high volume of customer relationships.
In the fallout of the Equifax breach, the leading credit bureaus are dealing with an overwhelming volume of credit freeze requests from consumers. While it is still too early to tell, it seems that the genie is out of the bottle. The breach is sparking additional focus on FinTech innovation to protect consumers (e.g., digital identity verification, disposable card numbers, etc.).
Beyond the headlines, SoFi’s growth engine continues. In Q2 2017 alone, SoFi funded $3.1 Bn in loans with $134 Mn in revenue and $61.6 Mn in adjusted EBITDA. Revenue and adjusted EBITDA were up 67% and 60% year over year respectively. The news of Cagney’s resignation coincided with SoFi marketing its latest personal loan deal which priced this Friday. Interest in SCLP 2017-5 was initially strong, however the bond priced somewhat wider than guidance.
SoFi’s Latest Consumer Lending Deal: SCLP 2017-5
After Mike Cagney’s resignation on Friday, the lead underwriter re-launched SCLP 2017-5. Since guidance was released before the critical NY Times article on Tuesday, we have a close (but imperfect) control to study the consequences of management upheaval on deal execution.
ABS investors reacted negatively to the news; the bonds priced 10 to 15 bps wider than guidance on Monday.
LendingClub’s Self-Sponsored Prime Consumer Deal: CLUB 2017-P1
This is the second self-sponsored deal from LendingClub, and it follows the success of CLUB 2017-NP1. LendingClub expects to alternate between prime and near-prime securitizations at least once a year going forward. Of the $363 Mn outstanding, approximately $100 Mn came from LendingClub’s balance sheet (a shift from prior management’s business practice); the remaining loans were contributed from investors.
The CLUB 2017-NP1 and CLUB 2017-P1 deals total to approximately $628 Mn in loans, yet LendingClub has facilitated almost $29 Bn in loans on its platform as of Q2 2017 making it a small part of LendingClub by dollars loaned but a meaningful portion of EBITDA.
Fintech has become a major force over the decade since the financial crisis, with $12.8 billion in venture capital flowing into the sector in 2016 alone. But of the nearly 500 deals that took place in the U.S. last year, less than a dozen went to companies founded by women.
“It’s lonely to be a woman in fintech, especially as a CEO,” says Rachel Mayer, cofounder and CEO of Trigger, an automated tool for investing alerts.
At Anthemis, based in London, 56% of employees are women, a remarkably equitable gender breakdown that is consistent at every level.
Former banking executive Sallie Krawcheck is following a similar playbook with her female-focused investing service, Ellevest. Since founding the company three years ago she has raised over $50 million in venture funding.
In an interview Friday, Upstart co-founder and CEO Dave Girouard explained why the fintech applied for the letter and how it works.
Is it fair to think of a no-action letter as a stay-out-of-jail-free card?
DAVE GIROUARD: We’re careful about not trying to interpret it in any way that is different than what the CFPB says it is. The letter makes it clear that they have reviewed what we do and how we do what we do and that they don’t find issue with it.
How do you feel about the agreement?
We’re pleased that the CFPB recognized the consumer advantage of alternative data and machine learning, the fact that it could make affordable credit more broadly available to more people.
So it’s not just about Upstart for sure — it’s the acceptance of these more modern techniques because they can and will benefit consumers broadly over time.
The new hire is accompanied by the completion of the company’s SOC 2 Type 2 Certification, which affirms that Sharestates now meets the security requirements and parameters for storing information on the cloud as laid out by The American Institute of CPAs (AICPA).
ReliaMax®, the complete private student lending solutions provider for banks, credit unions and alternative lenders, today announced at the 23rd Annual ABS East 2017 Conference a new whole loan trading service, ReliaMax Portfolio Placement, as an extension of its existing capital markets and liquidity programs. The ReliaMax Portfolio Placement service will facilitate qualified existing private student whole loan portfolios for sellers and buyers.
The ReliaMax Portfolio Placement service provides unique value to the private student lending marketplace in multiple ways including insurance, default prevention, credit analysis, and servicing. Some benefits include:
State-of-the-art servicing through ReliaMax helps buyers maximize the value of their portfolio, providing compliance and regulatory support and staffing to manage student loan-specific servicing requirements.
Loan insurance through ReliaMax Surety Company covers 100% principal and interest and mitigates risks, reduces defaults, and provides better cash flow.
Portfolio review and credit analysis provides guidance around the price at which the portfolio might transact.
ReliaMax has been involved in many third-party portfolio transactions. For example, in December 2106, MetaBank acquired a $151 million student loan portfolio which ReliaMax Surety Company now insures. The transaction also included the conversion of the portfolio servicing onto the ReliaMax Platform. Over the last three years, ReliaMax has provided insurance and/or servicing on 12 portfolio placement transactions.
Lendio, the nation’s leading marketplace for small business loans,today announced a partnership with Ocrolus, the emerging leader in bank statement review automation. The PerfectAudit API, powered by Ocrolus, analyzes uploaded bank statements with 99+% accuracy, replacing manual review with automation. Ocrolus technology allows lenders, for the first time, to review every potential borrower’s bank statement data automatically, regardless of whether or not the borrower provides sensitive bank login credentials.
In April, Lendio became the first lending marketplace to integrate with Ocrolus, whose clients include banks, alternative lenders, accounting firms, law firms, and government entities. The PerfectAudit API gives Lendio the ability to systematically combat bank statement fraud and conduct a hyper-accurate review for every potential borrower.
From peer-to-peer lending to online banking, the fintech industry is a rapidly growing area for technology investment. In the first quarter of 2017 alone, U.S. venture capital-backed fintech start-ups raised $1.1 billion across 90 deals, according to CBInsights Global Fintech Report. The only region to outdo the U.S. during this same period was Asia, which reported for the same group investment of $2.7 billion across 226 deals.
There exists a wide range of technologies that fall under the definition of fintech, and each is seeing significant growth. One such technology is artificial intelligence, which, according to the PricewaterhouseCoopers 2017 Global Fintech Report, 30 percent of large financial institutions are investing in. For example, another factoid from a separate PricewaterhouseCoopers report, projects that, by 2020, AI will automate a considerable amount of underwriting.
Mobile payments are another rapidly growing area of fintech, with TechCrunch reporting that there will be an estimated $60 billion worth of payments made on mobile platforms in 2017. The site also predicts that, by 2020, 90 percent of smartphone users will have made a mobile payment, which serves to underscore just how commonplace this fintech will be within a very short time.
A new report from Aon discusses the contemporary market for alternative risk premia: where it is, how it got here; where it may be headed.
The authors, Matthew Towsey and Chris Walvoord, begin with some very basic considerations of what ‘risk premia’ are. They are, on the one hand, the payments one receives for taking on a risk that others do not wish to hold (providing insurance), or they are on the other the winnings one pockets on strategies that take advantage of market anomalies.
How does NerdWallet create its content and recommendations? Do data and algorithms play a role in your platform? I’m curious about the company from a fintech perspective.
It’s actually a mixture of both — algorithms and incredibly smart, financially savvy humans power our recommendations, reviews and expert advice.
The company seems to simplify financial information for everyday consumers. Do you think NerdWallet has helped to democratize the space?
That’s the goal! I truly believe that a person that has spent no time at all thinking about personal finance and can’t afford a financial advisor, should be able to make the same quality of choice as the most financially savvy person in the country
Experts deliver new alternative investment advice and resources for individuals being impacted by the giant 2017 Equifax data breach. This includes all new episodes of SDIRA TV with national finance experts and investment advisors, as well as a side by side comparison white paper on retirement investing options.
Deeper concerns have surfaced as it was discovered three Equifax executives sold off substantial amounts of personally held stock before making the breach known.
In general, those are new untested platforms, which may or may not do well for you over time. These investments have not been time tested during a recession. In addition, I do not understand very well how investment assets are segregated in those platforms, and how things would work out if a project you invested in fails miserably.
He’s talking about fintech, which has leveled the playing field for non-New Yorks to flourish in financial services. Inspired by emerging tech trends, Raznick and Benzinga are taking stakes in Michigan’s future by spearheading the new Detroit Fintech Association.
The nonprofit trade organization will enhance the community’s exposure, connect startups with national leaders and mentors, support talent recruitment and magnify the Detroit voice in U.S. regulatory discussions. The DFA also aims to improve financial literacy in the city through work with Detroit high schools and higher education institutions.
Altisource Portfolio Solutions S.A. (“Altisource”) (NASDAQ: ASPS), a provider of real estate, mortgage and technology services, today issued the results of its inaugural Default Servicing Survey, a survey of over 200 mortgage default servicing professionals. According to the study, nearly three-quarters (71 percent) of servicing professionals surveyed predicted FHA/VA loan volumes would increase within their organizations in the next 12 to 24 months; 41 percent believed FHA loans will offer their organizations the most portfolio growth over the same time period.
According to the U.S. Department for Housing and Urban Development, FHA loans accounted for over 17 percent of newly originated mortgages in 20161 and currently constitute 35 percent of all loans delinquent for 30 or more days2. As the issuance of FHA loans grows, so does the potential increase in volume of default assets. Thus, it is not surprising that 93 percent of servicing professionals surveyed stated that foreclosure/trustee and Claims Without Conveyance of Title (CWCOT) capabilities are important factors to consider when evaluating a vendor to manage growing default portfolios.
Servicing Professionals Cite Challenges Stemming from Costs of FHA Conveyance and Managing CWCOT Programs
Servicing professionals (29 percent) cited remitting fees, costs and financial obligations associated with FHA conveyance as the greatest challenge for effective CWCOT programs. For servicing professionals working with third-party vendors to manage CWCOT portfolios, 15 percent said overall vendor management is a challenge associated with managing CWCOT programs while another 15 percent pointed to timeline delays and increased costs due to attorney oversight; 11 percent cited not having enough in-house personnel on staff to effectively manage the program.
Third-Party Expertise and Central Coordination are Critical to Successful CWCOT Program Administration
In order to overcome the financial, regulatory and oversight challenges associated with their vendors’ CWCOT programs, servicers must carefully evaluate their third-party vendor strategy to ensure vendors possess the right expertise and resources to execute the program. Most servicing professionals surveyed (97 percent) said they are exploring options including a single-vendor approach to help achieve their objectives; 91 percent identified FHA asset management experience as an important criterion for vendors. When specifically evaluating single vendors, 72 percent of servicing professionals surveyed said consistency and efficiency in managing REO properties is a very important consideration; 69 percent also pointed to compliance management.
Equifax, the US credit-reporting company at the heart of a cyber-security scandal, has admitted that as many as 400,000 UK consumers may have had their personal information stolen.
The company said that while its UK systems were not affected by the massive cyber raid that targeted information for as many as 143m Americans, UK customer data “may potentially have been accessed”, because it was stored on US systems between 2011 and 2016.
If Equifax’s forecast is borne out, the data breach will be the biggest in UK cyber history, bypassing that of payday lender Wonga, which affected more than 250,000 customers.
RATESETTER has launched a hire-purchase (HP) product for individuals looking to buy vehicles.
Consumers will be able to borrow up to £25,000, but the peer-to-peer lender expects the agreements typically to be around £6,000. The terms range between 12 and 60 months, with APRs going from 19.9 per cent to 49.9 per cent depending on the customer’s creditworthiness.
Peer to peer lender Assetz Capital is reporting it has seen a year-on-year increase of 175% in the number of property development projects funded around the UK. The online lender says this rise comes following sustained growth in the funding pool for property developments, as investors hunt for a piece of the development market.
But as new types of Isa have emerged and new rules have been introduced, the situation has become more complicated.
And some Isa features – notably “flexibility”, which allows account holders to make withdrawals and then pay the money back in during the same tax year while keeping the tax benefits – have not been introduced by all providers, which has further muddied the waters.
A Help to Buy Isa, a type of cash Isa, is also an option. First-time buyers can deposit £1,200 in the first month and £200 a month thereafter to put towards a home purchase. The Government then tops up savers’ money by 25pc.
However, you can’t pay into a normal cash Isa and Help to Buy Isa in the same year, unless you choose a provider that allows you to split the cash. Nationwide and Aldermore both offer this option; they pay 2pc and 1.75pc respectively.
The Lifetime Isa is the newest addition to the Isa family.
Consumers between the ages of 18 and 40 can use the accounts to save towards their first home or retirement. Up to £4,000 can be put away each year into either a cash Lisa or a stocks and shares version. Eligible savers can continue to contribute until the age of 50.
Hargreaves Lansdown, Britain’s biggest fund shop, and rivals including AJ Bell, The Share Centre and Nutmeg, an online wealth manager, offer investment Lisas.
Innovative Finance Isas
These Isas shield peer-to-peer investments, which allow consumers to offer unsecured loans to individuals and businesses through online platforms such as Zopa and Ratesetter, and certain “crowdfunding” investments, from tax.
Lending Works was the first to offer the new Isa, paying the same return as the firm’s existing accounts.
Zopa allows existing customers to sell their loans and buy them back within the Isa. They can also transfer their Isas with other providers to Zopa.
There are a lot more people in the world that can collectively lend micro loans on a regular basis than there are corporations that can regularly distribute loans above the value of a thousand dollars.
“A network of independent lenders committed to distributing micro loans could potentially rival long established financial organisations in terms of the combined value of peer to peer loans serviced to borrowers on a world wide scale” says Richard Ochieze, Managing Director at Ledgermark, LTD.
The case for Digital Collateral
The internet makes non repayment of loans a marvellously simple task for borrowers and as such; organisations like the Funding Circle, a peer to peer lending firm, are left wide open to have the profits of their retail investors depleted due to this lingering risk.
Traditional financial institutions have been able to maintain a fortress of checks and balances such as strict collateral requirements for both business and personal loans in order to provide themselves with a means of recourse should a borrower fail to repay his debt.
In this digital age in which peer to peer transactions are becoming the norm, this same form of protection must be made available to the average individual who wishes to loan his money out to borrowers in return for profit.
However, the question must be asked: how can a borrower pledge his house or farm as collateral via an online loans application?
Prior to the invention of the Blockchain such an asset did not exist and now that it does, the door has been opened to allow individuals based anywhere in the world to distribute and/or become the recipient of a secured micro-loan.
Robo-adviser Wealth Wizards, for example, typically charges £65 for advice on investments of up to £30,000, and 0.30%, or £300, for guidance on what to do with a £100,000 retirement savings pot.
A typical financial adviser, meanwhile, charges about £580 for telling you how to invest a £200-a-month pension contribution, or between £1,000 and £2,000 for at-retirement advice on your £100,000 pot, according to figures from UK adviser network Unbiased.
China will strengthen its supervision of overseas investment risks and capital flows from insurance funds, the insurance regulator said on Monday, adding that it will urge companies to improve their risk monitoring systems.
The China Insurance Regulatory Commission (CIRC) will step up supervision over the use of insurance funds, with focus on “chaos” such as irrational stock market fundraising and overseas acquisitions, said Guo Jing, vice head of the finance and accounting department of the CIRC.
Shanghai-based BTCC is the largest and first domestic bitcoin exchange in China. On September 14th, BTCC announced that it would immediately stop new user registration and close operation in China on September 30th.
The 2nd China Fintech Conference (2017) will be held on September 17th, 2017 in Beijing.
IDC Financial Insights announced the 2017 Fintech Rankings and Real Results at Finovate Fall New York 2017. This year, 4 Chinese companies won the honor to be named in the 2017 IDC Fintech Rankings. They are Ping An Technology (38), Hundsun Technologies Inc. (54), Pactera Technology International, Ltd. (55) and ECCOM Network System, Ltd. (64).
Last week, China’s financial and educational regulators announced to ban online lenders from offering loans to college students, and encouraged commercial banks to offer micro-credit products for the campus market. As a response to the call, Industrial and Commercial Bank of China (ICBC) has launched its own student loan product Rong e Loan this week.
Sofort has been bought by Klarna. Although everything should function as normal according to Klarna, since the switch the order is not going into “pending” after checkout — order status is “in checkout”.
This is a good place trying to get this sorted. My questions are:
Is this a new shop or one that runs for a while and worked OK before?
From the screenshot it looks like Sofort sends notifications pretty often, is that true?
The expectation is that the first of those notifications should switch the status to pending and confirming that to Sofort so that they know you got it and then they wouldn’t notify you again, right?
That’s exactly why this is failing. The Ubercart payment module wants to write into its table the value Aus sofort-Überweisung wird Klarna into the field method.
You should notify Sofort AG about this problem and I will do the same.
Today we are proud to announce a new partnership with global technology company Wacom® that further accelerates Klarna’s expansion in the U.S. Wacom is now bringing our simple retail financing solution to the world of creative interface technology and software.
Financing a purchase over time has historically been optimized for brick and mortar stores. But the online equivalent can often be an ordeal, with redirects, lengthy forms and unclear information. Our process only requires a few fields of information, and lets consumers know instantly if they qualify for the financing solution.
Digital technology has changed financial services. It has facilitated innovation, increased competition and made the mobile customer experience the key differentiator.
This embodies a strategic threat with McKinsey estimating that legacy financial institutions will see profits decline by up to 60% by 2025 if they fail to evolve, a figure which should be motivating incumbents to look outside of traditional practices for growth and sustainability.
Millennials and digital natives have turned away from traditional banks in search of mobile alternatives. They are drawn to the best products and experience, and banks with the right level of service can win over this large market. Mobile-only banks like N26 are leading the way.
SME lending also offers a significant opportunity for growth. The European Commission’s SME Performance Review estimated just under 23 million small and medium enterprises generated €3.9 trillion in value add and employed 90 million people in 2016-2016, and McKinsey has identified a $350 billion untapped lending opportunity within this sector.
One path is acquisition, which banks like BBVA have followed by acquiring companies like Finland’s Holvi and neobank Simple. This is an expensive option complicated by having to find a company with the right fit for the business.
Given the technology available, a cleaner option would be to build a digital banking spinoff which can operate like a FinTech.
The far reaching nature of the internet has allowed the myriad of local economies that exist in the world to become merged into one, global, interwoven marketplace.
Despite this, it is still incredibly difficult for people to get a loan from an international organisation – without offering some form of collateral and/or proving credit worthiness.
The average size of deposit needed to get a mortgage is 62% of annual income, and in London, it’s 131%.
As a result, only 20% of 25-year-olds own their home today compared with 46% 20 years ago – less than half.
If you have a bad (or no) credit history, it is virtually impossible to borrow from a mainstream lender.
Banks and building societies advertise temptingly low rates, but they only need to apply to 51% of successful applicants, so almost half of all borrowers pay a different rate – probably higher.
Director of Ledgermark LTD, Richard Ochieze, explains:
An alternative should be offered to people who are being let down by the traditional banking system. We believe that the Meridian system can do a lot to alleviate some of the problems that exist in today’s online lending market.
The Meridian service offers users the opportunity to procure a loan of up to one Bitcoin at a time.
To qualify for a loan users must pledge a certain amount of Meridian tokens as collateral.
Meridian tokens can be purchased during the ICO on 12 October 2017 and will then become tradable on all alternative currency exchanges.
Google is expected to launch a mobile payments app in India next week, according to several news reports. Google Tez, which means “fast” in Hindi is the anticipated name of the payments service, which Indian news outlet The Ken says is “largely fashioned on the company’s global product – Android Pay“.
As TechCrunch notes, “this is a big deal because Google hasn’t made a big push into payments outside of the US.”
In a first of its kind for India, ICICI Bank will partner with e-commercefirms to provide automated payday loan-type credit to customers at the bottom of the digital pyramid. Unlike other software-based loans, the digital credit planned by the bank will be available to non-customers and new-to-credit borrowers.
Speaking to TOI, Anup Bagchi, executive director, ICICI Bank, said that the bank would price these loans similar to credit card advances. In the West, payday loans are advances that fund the low-income individuals to make up for cash shortfalls until their salary. The difference in the ICICI Bank loan is that for the first month, the buyer will get free credit for up to 45 days. It is only if they do not pay on the due date that borrowers will be charged interest at close to credit card rates.
The bank will lend to new-to-credit customers based on their track record with the e-commerce provider.
“The RBI is concerned that this can go big and get out of control,” says Harish.
Faircent—which is backed by financial institutions like JM Financial, venture fund Aarin Capital and Mohandas Pai-promoted 3one4 Capital—is seen as the largest online P2P lender in India. Other names include Lendbox, Rupaiya Exchange and LenDen Club.
There are typically three models through which such lenders operate, says Aditya Kumar, founder and chief executive officer at Qbera.com, an online lender that began operations in February this year and claims to have a Rs 10 crore loan book. “While there are at least 30-40 P2P players, who connect lenders to borrowers, 15-20 do marketplace lending (where money is raised from banks and other financial institutions) and then there are loan aggregators who have been around for longer,” says Kumar.
While Kumar says the total P2P lending market size would be around Rs 25 crore, Rajat Gandhi, founder and CEO at Faircent, puts the figure at Rs 50-70 crore on an annualised basis.
Figures available with Peer2Peer Finance Association (P2PFA) suggest that the global P2P lending market saw cumulative lending of £8.5 billion during the first quarter of 2017, against £5.8 billion three quarters before. In the same period, the number of lenders grew by a fifth from 1.5 lakh to just over 1.8 lakh.
The discourse around P2P lending has always been centered around what it means for borrowers and the advantages they can derive. However, what gets missed is that P2P lending has the potential to be a great source of investment for the lenders contributing to their retirement fund.
P2P lending is an investment delivering multiple benefits when building a retirement plan:
1. Add Lending to your Portfolio Mix: The adage that talks of not putting all your eggs in one basket still holds true. An investor should not limit his portfolio to only a few asset class, but focus on investing across investment opportunities so that market fluctuations do not have a huge negative impact on their retirement funds.
2. Steady and high returns not Linked to Stock Markets: P2P lending adds to building such a diversified investment portfolio while delivering returns that are not merely comparable, but often preferable to returns from other investment instruments such as mutual funds, stocks, and SIPs.
Lenders on Faircent.com are earning gross returns to the tune of 18% to 24% per annum on an average by building a diversified loans portfolio.
3. Income Generation & Power of Compounding: Another reason that P2P investment does well is because investors can compound their earnings. Lenders are earning back part of their investment, both principal and return, every month.
MicroMoney co-founder and CEO Anton Dzyatkovsky on attracting new customers, recruitment issues and risks in greenfield countries.
Now that we’ve opened new offices in Myanmar, Thailand and Sri-Lanka, our decision to start with Cambodia can be seen as a definitive step which enabled us to embrace the largest community of unbanked people in the region, bringing the advantages of Blockchain as the key technology for global financial inclusion.
Cambodia is all about banks
For us as Europeans, the first surprise was the population’s absolute trust in local banks.
The US dollar is as used in Cambodia as the local currency is, and the exchange rate has remained stable for over 20 years. State regulators do not exercise particular pressure on the financial industry, and by the time we stepped into the game, 50 organizations had been involved in the consumer loan industry, each with an average capital of $1.5 mln and an ARPU of $5,000.
30-day overdue loans in Cambodia account for only 0.9 percent of the total, so the PAR ratio (portfolio at risk) is quite profitable (according to the local Central Bank).
Our Cambodian lessons
A growing share of the middle class due to the growth of GDP. For instance, Cambodian GDP grew six percent in 2016.
A market capable of generating cheap leads. We discovered all Cambodians belonging to the target audience have at least one active Facebook account, and for them Facebook often equals Internet in general: every national mobile operator provides free access to Facebook.
Dormant or non-existent competition. in Cambodia there were no paperless lending services without an escrow of land or real estate property.
Eager audience in need of a product. when we were checking out the market, we found only five percent of the population had a credit record. According to McKinsey, the number of ‘unbanked’ people in Asian region overall ranges from 65 to 80 percent of the adult population.
Collaboration at the local level. It helped us understand local customers and comply with local regulations (in this case you must be ready to assign 51 percent of your newly established company to a local partner).
Funding Societies, which started in Singapore in 2015, is one of the first peer-to-peer (P2P) financing companies to open its doors here in Malaysia in February this year. It is also present in Indonesia.
Wong, who learned about alternative financing while studying at Harvard Business School, says P2P is well-suited for the Malaysian and South-East Asian markets where there is a big gap in SME financing. He estimates financing needs for small businesses in Malaysia to be at RM80bil.
According to Research and Markets, the global P2P lending market was valued at US$26bil in 2015 and is projected to reach US$460bil by 2022, growing at a compound annual growth rate of 51.5% from 2016 to 2022.
Funding Societies has made it to the Fintech 250 list, which is recognised and regulated by Securities Commission Malaysia, to provide financing to SMEs. The company also provides flexible investment opportunities with rigorous risk assessment and returns of up to 14% per year for investors, says Wong.
So far, the company has done more than 800 deals and disbursed more than RM180mil in financing to SMEs in Malaysia, Singapore and Indonesia.
Taiwanese could soon be able to open bank accounts denominated in foreign currencies on the Internet after the central bank on Thursday gave its go-ahead to the plan.
Local banks could seek approval for the new accounts by the end of this year, or 60 days after the introduction of the new regulations, the central bank said in a statement.
Taishin, the banking arm of Taishin Financial Holding Co (台新金控) and the nation’s largest online lender by the number of accounts, told reporters that it aims to be the first applicant when the notification period begins.
News Comments Today’s main news: CFPB issues first no-action letter to online lender. SoFi defends its mortgage underwriting standards. Was SoFi’s FICO-free zone really FICO-free? RealtyShares raises $28M for commercial real estate investing. Betterment partners with Goldman Sachs, BlackRock. JustUs receives full FCA authorization. Raisin offers term deposits to businesses. Earthport partners with Cross River Bank. Reserve Bank of India waiting for government […]
SoFi defends mortgage standards denying Fast Company’s allegations. AT: “These allegations put SoFi on the defensive and will likely be a bigger public relations bruise for the company than the sexual harassment allegations that recently came to light. In fact, there seems to be a shift away from the salaciousness toward the actual business practices of the company, and that’s a good thing. But not for SoFi.”
SoFi’s FICO-free zone may not have been so FICO-free. AT: “This is an interesting allegation and may not actually be as bad as it seems. Depending on the timing of SoFi’s announcements to revert back to using FICO scores, it could have just been the case of a company changing its mind. However, erasing all evidence of making the announcement in the first place is a bit suspect. I have a feeling this is going to be in the news cycle for a while.”
Betterment partners with BlackRock, Goldman Sachs. AT: “The portfolio partnership with Goldman Sachs is interesting given the larger company’s interest in online lending through Marcus. I wonder why they didn’t just roll out a product of their own to compete with Betterment and Wealthfront.”
The imperative of self-sovereign identification. AT: “This is one of the most interesting ideas I’ve read on data security yet. I’m suspicious of biometrics. I can’t really see that they’re a lot more secure than passwords (maybe a little). And, of course, with digital technology, there is no 100% secure solution. I’m sure some smart hackers will figure out how to break the blockchain. Nevertheless, this idea seems much more practical on the surface. If we could just get widespread adoption of the blockchain.”
The Consumer Financial Protection Bureau on Thursday issued its first no-action letter to online lender Upstart Network Inc., allowing the company to continue using alternative credit data to evaluate borrowers in exchange for providing data to the federal consumer finance watchdog.
SoFi, also known as Social Finance, adamantly said it doesn’t shy from criticism, stepping up to defend itself amid the recent negative news coverage on the company’s alleged toxic workplace environment.
Included in Fast Company’s coverage of the fintech company is a bold claim that “in the first round of SoFi mortgages, some homes lacked appraisals.”
According to a SoFi spokesperson:
In late 2014, we tested a simplified version of our home mortgage product that used paystubs for income verification and did not require home appraisal. The test did not proceed into a launched product, and we launched our mortgage product with requirements for full income verification and home appraisal, which is still the case today. All of these mortgages met the ability-to-repay standards promulgated by Dodd-Frank and none of these pilot mortgages were ever sold to investors, and we continue to hold those loans on our balance sheet.
According to conversations with numerous former SoFi employees, the company’s “FICO-Free Zone” loan product actually relied quite heavily on evaluating applicants by their FICO score. After very publicly announcing in early 2016 that SoFi would no longer use FICO scores to evaluate loans, sources tell Dealbreaker that the company saw defaults tick up and made the internal to decision to reintegrate FICO data. No announcement of the shift back was ever made, the “FICO-Free” language disappeared from the website and some evidence of the SoFi’s move away from FICO was even scrubbed from the company’s blog.
I’ve sat on panels that discuss all the benefits the aforementioned Silicon Valley approach brings to housing. Having SoFi around isn’t one of them, if their underwriting standards are as bad as some claim.
Ainsley Harris writes: “In the first round of SoFi mortgages, some homes lacked appraisals.”
Why on earth would a lender not get the value of the collateral it was lending to? Did SoFi think in-depth valuations where unnecessary? Do investors know that SoFi doesn’t know how much these homes are worth in the event of an REO?
Let me say this, whatever the reason to potentially forego appraisals, SoFi’s investors will disagree with that decision. The Fast Company revelation is so baffling that SoFi’s plan for an IPO will be delayed, perhaps indefinitely.
Let’s hope so. A company that plays fast and loose with its own people is shameful. A company that plays fast and loose with prudent lending practices is downright dangerous.
SoFi has published a public letter addressing the allegations leveled by NYT.com earlier this week.
The letter is republished in its entirety below. (Ed. Note: Excerpted by Lending-Times)
Mortgage: The story cites unnamed sources saying there was some period where we were “not doing enough” to validate income for mortgage borrowers. This is an incredibly vague claim, and we have no idea what this means. We underwrite our mortgage loans consistent with market standards, which includes rigorous income verification, and consistent with the ability to repay requirements put in place by Dodd-Frank.
Personal Loans: The story implies that our personal loans business grew in part because of a change in the way loans were approved: that customer service reps were approving loans rather than underwriters. That view reflects a lack of understanding of our business. We underwrite loans using a highly automated platform where all credit decisions are made by a pre-defined algorithm that analyzes each applicant’s credit profile and ability to pay.
A Thriving Business: The story did mention our business performance, and indeed, SoFi is thriving. Since inception, we have funded more than $20 billion in loans, $3.1 billion in the second quarter alone. In Q2, we had $134 million in revenue, up 67% year over year, with adjusted EBITDA of $61.6 million, up 60% year over year. We have more than 350,000 members, and they like what we do – our products run Net Promoter Scores in the 60-80 range, among the highest in financial services.
RealtyShares is raising a $28 million Series C round led by Cross Creek Advisors, with participation from existing investors including Union Square Ventures, General Catalyst Partners, and Menlo Ventures.
Founder and CEO Nav Athwal says that RealtyShares has over 120,000 users on the platform. The startup says it has deployed over $500 million across more than 1,000 properties since it was founded in 2013.
In a recent op-ed in American Banker (derived from a longer blog post), professor Adam Levitin argues that the recent legislative proposals to “fix” the repercussions of the United States Court of Appeals for the Second Circuit’s Madden v. Midland Funding decision are “overly broad and unnecessary and will facilitate predatory lending.” The legislation Levitin opposes would restore the ability of banks to sell loans to nonbanks and have the loans remain valid on their original terms, the type of transaction on which the Madden decision has cast doubt. I disagree, at least with regard to marketplace lending. There are compelling legal and policy arguments to undo the Madden decision that Congress should consider.
Levitin is certainly right that the Nichols case and the similar 19th-century cases reflect a different fact pattern than was presented in Madden. It does not necessarily follow, however, that the principle of valid-when-made should not also apply under the Madden facts.
The issue at question in Madden, the interest charged on the loan, was set by the bank at the loan’s inception. The borrower got the benefit of the federal regulatory regime, which includes the incorporation of the bank’s home state usury law, when the loan was created, and the relevant characteristics did not change. So why is there suddenly a problem?
The impact of Madden on innovative credit is harmful to borrowers
Madden also appears, as would be expected, to be reducing access from marketplace lenders to credit for borrowers with lower credit scores. Contrary to Levitin’s argument, a recent study shows a reduction in credit availability not just for borrowers with FICO scores under 625 (though that is where the reduction is most pronounced). The study indicates that borrowers in New York and Connecticut with FICO scores under 700 saw a reduction in availability relative to comparable borrowers outside the Second Circuit.
For example, it is important to keep in mind that the majority of marketplace loans are used to pay off bank-issued credit cards (which are not subject to borrower state usury laws) or consolidate existing debt. Denying borrowers access to these loans does not leave the borrowers unencumbered by debt; it leaves them in the situation they view as worse than taking out this new loan. This is especially true given that there is evidence that marketplace lenders can help provide expanded access and competition, services in areas that have few banks, and better pricing for some borrowers than they would receive from banks. Cutting off access isn’t protecting borrowers, it is leaving them with fewer, perhaps inferior, tools to protect themselves.
Usury caps can lead to loan arrangements being distorted in ways that make the loans legal but worse for the borrower. We see examples of this in the shift from payday to “payday installment” and subprime auto loans, where lenders bound by interest rate caps change the loan principal amount or repayment schedule to make the loans viable. These loans can actually be more expensive in total because the lower interest rate is applied to a higher principal over a longer time period. Larger loans also can be more expensive for borrowers if they pay them off early or go into default. Borrowers also could be forced into using suboptimal options like pawn shops or illegal loans, or find themselves without credit altogether.
Betterment, the largest roboadviser with $10 billion under management, has enlisted the support of financial juggernauts Goldman Sachs and BlackRock for two new portfolio options.
The portfolio managed by Goldman Sachs is a smart-beta option, providing users with a more aggressive alternative to Betterment’s core portfolio, which allocates money to stocks and bonds, according to Arielle Sobel, a spokeswoman for the firm. It will be more exposed to emerging markets and REITs, according to a press release.
The other portfolio option is an income-based portfolio, managed by BlackRock, the largest fund manager in the world with $5.7 trillion under management. It provides investors a more conservative option and delivers target income.
As we have known for a long time now, it is no longer good enough to use customer’s personal information for account access. After Ashley Madison and so many other incidents (Tesco Bank, Lloyds Bank, JPMorgan Chase, SWIFT, the Federal Reserve, the IRS, the Department of Homeland Security eBay, Yahoo, Google, Adobe, Target, Neiman Marcus, Home Depot …), surely we should be moving away from this antiquated system. Bear in mind it’s been used for almost two decades, it’s no wonder the system is no longer working.
So the banks add second-factor authentication (2FA) with secure entry pads and PINs, but they still rely on personal information for account access when you ring their call centres, and this is just annoying.
Is there a solution?
First is biometrics and TouchID, voice, eyes and more can easily be used for authentication via a smartphone. Why banks aren’t incorporating these into their onboarding and access mechanisms beggars belief …. or maybe not, as banks would need modern systems to use such radical authentication techniques, and that’s a big ask. Far easier to rely on name, address, date of birth and all the information the hackers stole from Equifax.
Emerging technologies (particularly blockchain, although not exclusively) are making the development of “self-sovereign identity” a real possibility.
The basic idea behind self-sovereign identity is that rather than have our information held by third parties (often without us even knowing what that information is) and used to guarantee our identity and make decisions that affect us; we could turn the entire model on its head and give each individual control over their own digital identity.
With self-sovereign identity, you would hold all of the different elements of your online identity in a “box” or “wallet”, and would then be able to choose which of those elements to reveal in any given context.
PayPal’s global head of product communications Anuj Nayar has left to become head of communications at peer-to-peer investment company Lending Club.
In his new role that starts on Monday, Nayar will be in charge of the team running all internal and external communications, as well as social media, for the $2.5 billion publicly-traded fintech company.
Last night we learned that Goldman Sachs is poaching roughly 20 employees from online lender Bond Street, which seems to have paused making new loans, according to The Wall Street Journal.
It is indicative of Goldman’s strategy that the bank has forced its way onto the AltFi (“Alternative Finance”) homepage three times this week. Those incursions were tied to its £100m investment in UK employee benefit lender Neyber, its $300m deal with home solar financing firm Mosaic, and the announcement that it plans to launch an online bank in the UK.
So its latest decision, to nab 20 workers from the dormant Bond Street, is not without precedent. But Bond Street is not a consumer lender. It offers term loans of up to $1m to small businesses. Could Goldman, then, be sizing up an expansion into small business lending for Marcus?
Year-to-year, community financial institutions have become more conservative about consumer lending. So as to not open themselves up to additional risks, many of these institutions tend to only service consumers with prime and super prime credit. However, consumers with non-prime credit make up a solid portion of the consumer lending market, so this desire to stick with “safer” loans leaves quite a few loan opportunities on the table. And when many community financial institutions are dropping their rates to as low as 0% in order to compete with large national lenders for prime and super prime consumers, missing additional revenue opportunities for your loan portfolio is not a small matter.
Market disruptors like retail lenders (i.e. Costco), mobile lenders (i.e. AutoGravity), and peer-to-peer lenders (i.e. Lending Club) are finding ways to bypass the existing banking system, credit bureaus and financing requirements to lend to this highly sought after demographic.
Fidelity Investments introduced a program Thursday that will let employers make regular payments to their employees’ student loan accounts, much the way companies already pay into their workers’ 401(k)s or health care savings accounts.
Some smaller financial services companies already facilitate this type of benefit program, such as First Republic Bank and startups like Student Loan Genius and SoFi.
But the entry into the market of Fidelity Investments — one of the country’s biggest mutual fund, money management and financial planning companies — is a sign that student debt relief may soon become a mainstream benefit that employers will have to offer to remain competitive.
If you’re living paycheck to paycheck, on the other hand, even small unexpected expenses can put you in the red. The two weeks between paychecks is an eternity for an hourly worker whose credit card is already maxed out, or who doesn’t have one to begin with. Every parking ticket and hospital co-pay is a potential crisis. By the time payday comes, it’s too late — the next crisis has already arrived.
Financial technology startup DailyPay thinks giving people in this situation more frequent access to wages would go a long way toward solving this problem and putting them on the path to financial security.
DailyPay’s solution works like this:
1) The startup integrates with a company’s established payroll and time-tracking systems. Instead of going directly to an employee’s bank account, paycheck deposits are set up to go through DailyPay first.
2) An employee can withdraw wages he or she has earned but not yet received throughout the two weeks or month before formally getting the paycheck. DailyPay fronts the money for a small fee, and keeps the expense on its balance sheet.
3) Come payday, DailyPay deducts whatever money the employee has already withdrawn, and sends the rest of the paycheck through to the employee’s bank account.
Perhaps Lee likens his service to an ATM because the more obvious comparison — a payday loan provider — is often considered predatory.
One key difference is that DailyPay interfaces directly with employers, positioning itself as an HR benefit. DailyPay’s pitch to other companies is that flexible payroll reduces turnover, which is good for the bottom line, and the service is free to implement. One internal study of 20 DailyPay clients found that turnover shrank by 40 percent on average after they adopted it.
Since I run an opportunistic portfolio that seeks out high upside “Fat Pitches” (soon to be a subscription service), it may seem as though I, too, would be stumped; however, I continue to find opportunities, albeit in sectors a bit off the beaten path.
While “value” and “high-growth tech,” may seem anathema to each other (wait till you see the next section), the three public fintech companies – Lending Club, Ondeck, and Elevate Credit – all seem undervalued today relative to their potential, and each have posted strong results in the recent quarter.
Ondeck, which lends to small and medium businesses, also recently decided to scale back its growth, raise rates, and cut staff. The company lowered orginations last quarter by 19% sequentially last quarter, but loss provisions as a percentage of revenues also fell from 8.7% to 7.2%. After implementing a $45 million cost reduction program, the company’s losses declined to only $1.5 million, down from $16 million in losses a year ago.
Speaking of acceptance, it may seem on the that the company that serves the subprime market – thought to be the riskiest of all – is the most profitable of the three. Elevate Credit has been doing everything right – though you wouldn’t know it by its languishing stock price. Last quarter, Elevate grew originations 29% and revenues by almost 19% (due to a higher mix of lower rate, but higher-quality loans), expanded its core RISE product to the state of Kansas—its 16th state, and was able to lower its interest rate on its high-cost funding from Victory Park Capital.
The teams at FinTech startup LendUp and Oakland-based Beneficial State Bank think very differently about that relationship. As LendUpCEO Sasha Orloff and Beneficial State Bank Co-CEO Kat Taylor told PYMNTS in a recent interview, banks and FinTechs need each other, and a very large segment of the population living on the margins of financial services in the United States need these two groups to work together as well.
That constituency, Orloff noted, isn’t always easy to serve – or to serve profitably – without relying on a business model that counts on its customers to fail and then charging sky-high fees for those failures. LendUp and Beneficial State Bank have a different approach: They want to invest and make money on their customers who are succeeding financially and are able to participate in the full spectrum of the financial system.
Fifty-six percent of Americans have a sub-prime credit score, meaning mainstream banks likely can’t approve them for their products; more than half of all Americans could not find $400 in the event of an emergency; and two-thirds of millennials have not started building any kind of credit score, in a system in which having no score or a poor score can cost a person $250,000 over their lifetime.
Lending money beyond what people can bear is the hallmark of predatory lending, she emphasized, and that’s not going to help the customer.
That alternative – the L Card, issued by Beneficial State Bank in partnership with LendUp – is a low annual fee card (starting at $0 and capped at $5 per month or $60 per year) that offers consumers a grace period for payments and even caps late fees (at $7). It has a higher interest rate – 19.99 percent to 29.99 percent – for a credit card than the national average, but according to The PEW Charitable Trusts, is a fraction of the payday lending rate, which is around 400%. Credit limits range from $300 to $1,000 based on credit score, and a year of timely payments and responsible behavior allow customers to double the limits.
Jay Coleman, a Wall Street banker focused on equity raises and initial public offerings, has joined online lender CommonBondas chief financial officer, according to the company’s co-founder David Klein.
While still small, the company had lent about US$1bn to 12,000 borrowers as of May 1, according to Moody‘s Investors Service.
eOriginal, Inc., a rapidly growing financial services technology company, has named Timothy Wall Chief Revenue Officer (CRO).
As CRO at eOriginal, Wall will be responsible for all aspects of the company’s sales organization and revenue development, including direct sales, channel sales, sales engineering and customer success.
Former Iowa Congressman Jim Nussle today said Iowa’s 94 not-for-profit credit unions have filled a void as banks throughout the country and in Iowa continue to consolidate.
More than 1.1 million Iowans are members of a credit union and the state’s credit unions have about $16 billion in assets, according to Nussle.
Nussle indicated the “speed of change” and stress in the industry has been rather dramatic, not only because of the “Great Recession,” but because of incidents like Wells Fargo’s admission that its employees created fake accounts without customers’ permission. The recent growth of on-line “peer to peer” lending presents credit unions with an opportunity rather than a challenge, according to Nussle, because credit unions are member-driven.
GDS Link, a global provider of credit risk management solutions and consulting for multiple verticals within the financial services industry including marketplace lending, retail finance, alternative financial services, credit card, auto, and business leasing, announced its role in bringing the fourth annual LEND360 to Dallas.
“The LEND360 Dallas host committee, co-chaired by Ken Rees, Chief Executive Officer of Elevate Credit, Inc. and Paul Greenwood, President and Co-founder of GDS Link, and supported by other influential members of the fintech community, has been meeting since late 2016 to ensure a valuable attendee experience for the upcoming conference, assist with speaker development and engage innovative industry leaders to take part in the event,” according to a LEND360 press release.
The Online Lending Policy Institute (OLPI), the leading voice for policy analysis, in-depth research, and education for the online lending industry, today announced its roster of speakers for the Second Annual Summit on Sept. 25 at the Renaissance Hotel in Washington D.C. The Online Lending Policy Summit provides an opportunity for industry participants to share insights, propose standards, and have an open dialogue with regulators and policymakers to build consensus viewpoints on the regulation of online lending. Keynote addresses will be delivered by the following four policy leaders:
Keith Noreika, Acting Comptroller of the Currency. Mr. Noreika advocates for the need to embrace innovation while ensuring that new products and services do not present undue risk to the financial system. He will discuss how regulators and industry can work together on “responsible innovation” and with principles for governing the rapidly growing financial technology sector.
Congressman Gregory W. Meeks (D-NY-5), now in his tenth term, serves one of the most diverse constituencies in the nation. Mr. Meeks is known for being an effective, principled, and commonsense leader. Congressman Meeks is a senior member of the U.S. House Financial Services Committee, and is the lead Democratic sponsor of important legislation dealing with the Madden v Midland Funding court case.
Congressman Tom Emmer (R-MN-6) represents Minnesota’s 6thDistrict in the U.S. House of Representatives. He began his congressional career on January 6, 2015 and serves as a key member of the U.S. House Committee on Financial Services. Prior to his congressional service, Mr. Emmer practiced law for several years, and followed his entrepreneurial calling and opened his own law firm. In 2004, he was elected to the Minnesota House of Representatives and re-elected by overwhelming majorities in 2006 and 2008. After a narrow loss in the 2010 gubernatorial race, Tom entered the radio business as a conservative radio host.
Peer-to-peer lending platform JustUs announced this week it has received full authorization by the Financial Conduct Authority (FCA). The online lender revealed that the full authorization is a pre-requisite to offer the JustUs Innovative Finance ISA (IFISA) and registration forms have been submitted to HMRC with a planned launch of the ISA in October.
Crowd2Fund, a relative newcomer to the alternative finance industry, is accusing Funding Circle, one of the market leaders, of turning its back on the whole ethos of peer-to-peer lending.
The row follows an announcement last month by Funding Circle that it will no longer allow investors on its platform to choose which specific companies they want to lend their money to. Instead, the platform will automatically spread investors’ cash across a group of businesses looking for funds – much as a professional collective fund manager in any other asset class chooses investments on behalf of its investors.
Crowd2Fund said Funding Circle’s move reflected the larger platform’s increasing focus on large institutional investors in peer-to-peer lending, as well as concern about the growing regulatory scrutiny of the sector.
ARCHOVER’S chief executive Angus Dent (pictured) has urged small business owners to be more confident in taking on debt, after new figures showed that 80 per cent of small- and medium-sized enterprises (SMEs) are refusing to apply for new finance.
The boss of the peer-to-peer business lender said that while their caution was understandable, it is the “wrong attitude” for SMEs that want to scale up.
LendInvest has received public support from three major industry bodies for its property development academy.
The Centre for Entrepreneurs, Homes for Scotland, and the Home Builders Federation have each praised the academy, which was established in 2016 to help develop the skills of aspiring and new small-scale housing developers.
Birmingham, the site of LendInvest’s latest Property Development Academy, is a perfect example of this. Time and again we heard from attendees of just how exciting the city is for property development currently, and why they are so desperate to get cracking with their own development projects.
It’s notable that in last year’s Emerging Trends in Real Estate report from PwC and the Urban Land Institute, which looked specifically at which European cities present the best opportunities for investors, Birmingham was the best performing UK city. It ranked 22nd, ahead of cities like Manchester, Edinburgh, London, Brussels and Rome.
All of this has led to a thriving rental sector. Our most recent Buy-to-Let Index found that the city currently boasts a rental yield of a very strong 5.03%, with capital gains of 4.97% over the last year.
The latest UK Economic Outlook report from PwC named the West Midlands as one of the housing hotspots, predicted to see house price growth of 4.5% this year, compared to a UK average of 3.7%.
Democratic Progressive Party Legislator Lin Chun-hsien (林俊憲) yesterday urged the Financial Supervisory Commission (FSC) to curb bad debts stemming from fraud and loan sharking on Internet-based peer-to-peer lending platforms.
Online lending platforms have existed for years in other nations and have caused many problems, Lin said, adding that in China they are blamed for generating an estimated 60 billion yuan (US$9.2 billion) of bad debt.
Like electric cars, whose era of global dominance has yet to arrive, the app-driven insurance industry is more of a concept than reality. That doesn’t mean investors should dismiss the Hong Kong initial public offering of ZhongAn Online P&C Insurance Co., despite its hefty price tag.
Bankers are currently sounding out investors for an IPO that could raise as much as $1.5 billion, giving ZhongAn a valuation of $11 billion. That’s well above CLSA’s $8 billion estimate, which already ranks the online insurer as China’s third-most valuable fintech company after Ant Financial, an affiliate of Ma’s Alibaba Group Holding Ltd., and Lufax, the peer-to-peer lender owned by Ping An Insurance (Group) Co.
ZhongAn is the world’s sixth-most-valuable e-finance company, at about $8 billion.
So here’s the bad news. ZhongAn is tiny. Its net written premiums were a mere 3.4 billion yuan ($520 million) last year, or 0.5 percent of China’s insurance industry, according to Bernstein Research analyst Linda Sun-Mattison.
It’s also expensive. The $11 billion valuation implies an adjusted price-to-book level of 4.3 times, Smartkarma analyst Ke Yan estimates.
Pan-European marketplace Raisin continues its trailblazing expansion. Having penetrated new geographies with international and localized services in 2016, the Berlin-headquartered startup is now broadening its offering to address a new customer segment: small and medium-sized enterprises (SMEs). Starting September 14, businesses can open term deposit accounts on Raisin’s German site www.weltsparen.de, or more precisely, on www.weltsparen.de/geschaeftskunden.
Earthport (AIM: EPO), the leading payment network for cross-border transactions, is pleased to announce its partnership with Cross River, a US-based bank, to provide inbound cross-border payment services across the US market, adding to its existing capabilities to process payments in the US.
The partnership will facilitate the execution of inbound ACH payments through Cross River, and further strengthen Earthport’s global payment network, enabling high volumes of low-value payments originating outside the US to be serviced more efficiently.
Half the world is unbanked. That’s the provocative title of a 2009 research paper published by the Financial Access Initiative (FAI), a consortium of researchers from New York University, Harvard, Yale and Innovators of Poverty Action.
Their study also provided an empirical grounding that, although it is possible to serve low-income communities at scale with financial services, there are still billions left to reach. According to figures from the World Bank, as of 2015 there are still 2bn people who lacked access to any formal financial services.
The advent of mobile technology along with increasing smartphone penetration, especially in developing countries, has opened up a new portal of possibilities.
This newfound access in countries across South East Asia and Africa has provided the perfect ecosystem to initiate financial inclusion.
Nick Ogden – founder and Executive Chairman, ClearBank
The number one thing that’s going to occur in 2018 is fragmentation of the marketplace as we know it today. The days of big banks delivering everything and being specialists in everything are over. Some of them might still not accept that but the reality is that it’s happened.
Karen Kerrigan – Chief Legal Officer, Seedrs
Rather than looking at a specific technology, have a look at a particular sector. There are a lot of challenger banks out there at the moment – Starling Bank, ClearBank, Monzo, Tandem – and they’re all vying for the same space. They’re all doing things slightly differently, but ultimately are taking on the banks.
Tokens may not be available to all persons in all jurisdictions as certain offering restrictions may apply. In particular, no tokens will be available in the US, Singapore or the EEA. Offering and trade restrictions, as well as the rights of holders of FundCoin, will be set out in further detail in the offering memorandum.
That little snippet is from the last page of the “whitepaper” for FundCoin, which deserves a spot in the pantheon of initial coin offerings (ICOs) to which regulators should be paying more attention. FundCoin is “the first private equity token ICO” and is the creation of Finles, a 40-year-old Dutch fund of hedge funds manager that has decided to turn to the crypto markets to raise money.
Cryptocurrencies are the most undervalued asset class in the world, says Farzam Ehsani, leader of Rand Merchant Bank’s blockchain initiative.
The combined market capitalisation of all cryptocurrencies was only about $120bn, Ehsani said on Thursday at the Business Day/Financial Mail Investment Summit, held in partnership with Old Mutual Wealth.
By comparison, the market capitalisation of all stock markets is about $68.5-trillion, according to figures from the World Federation of Exchanges.
The Reserve Bank is waiting for a gazette notification from the Government on getting the peer-to-peer lenders under its regulatory ambit before coming out with guidelines on the sector, a senior official said on Wednesday. “Following up on the consultation paper we did last year, we are shortly going to come up with guidelines on peer to peer lending,” RBI’s executive director Sudarshan Sen said at an industry event here.
According to the official, the P2P lending interface will come under the purview of RBIs regulation by defining these platforms as NBFCs under the RBI Act by issuing a notification in consultation with the Government.
Indonesian peer-to-peer (P2P) lending platform Investree announced that it has been appointed by the country’s Ministry of Finance to run a pilot project that aims to develop online transaction system of state securities for retail investors.
According to a DailySocialreport, through the project, users will be able to purchase state securities through the Investree platform.
India’s demonetization experiment has been declared a failure by economic pundits. However, it has expanded India’s tax base and fast-tracked the digitization of payments, which is a good thing.
Some nine-million-odd new taxpayers came into the fold thanks to the scheme. Around 20 million new bank accounts were created by Indians panicked by the possibility of having their cash holdings voided.
Second, the scheme accelerated the digitization of payments in India, with a vast swathe of merchants forced to accept digital payments in lieu of cash.
The global crowd-funding industry generated about USD 34.4 billion in 2015.
Apart from raising capital, crowdfunding is also a way to create awareness among the masses and support for a project from the people around you.
Crowdfunding has exploded new ways to raise funds for start-ups, social sector, real estate, inventions and so on.
In India, transaction value in the “Crowd-funding” segment amounts to a meagre USD 6 million in 2017.
Transaction value is expected to show an annual growth rate (CAGR 2017-2021) of 24.8 percent resulting in the total amount of USD 16 million in 2021.
The most used method for real estate crowdfunding is “equity crowdfunding” which helps individual become partial owners in distinct properties, allowing them to participate alongside real-estate companies who acquire, redevelop, or build.
Another type of crowdfunding used for real estate is syndicated debt crowdfunding. This fast growing platform takes some or all of an existing real-estate loan, secured by a deed on the underlying property, and syndicate it out to a network of individual investors at a fixed rate of return.
IOU FINANCIAL INC. (“IOU” or “the Company”; TSX-V:IOU), a leading online lender to small businesses (IOUFinancial.com), announces today that Canadian Business and PROFIT ranks IOU Financial as the fourth-fastest growing company on the 29th annual PROFIT 500, the definitive ranking of Canada’s Fastest-Growing Companies. Published in the October issue of Maclean’s magazine and at CanadianBusiness.com, the PROFIT500 ranks Canadian businesses by their five-year revenue growth.
IOU Financial makes the 2017 PROFIT 500 list as the fourth fastest growing company with five-year revenue growth of 8,600%.
News Comments Today’s main news: Equifax cybersecurity breach. Goldman to take on UK retail banks. China cracks down on online lenders, cryptocurrency dealers. Klarna is testing credit cards with employeees. Today’s main analysis: CECL overview. Today’s thought-provoking articles: Consumers who go to Equifax for help after data breach may not be able to sue. The data behind Zopa’s lowered return […]
Consumers who seek help from Equifax may lose right to sue. AT: “Arbitration clauses are in place for a reason: They are an insurance policy for corporations against class-action lawsuits, and could save companies millions of dollars. If consumers sign them, they could be giving up their right to join a class-action lawsuit at a later date. Evidently, Equifax wants consumers to sign an arbitration agreement before it helps them rebound from data breach. I think the more important thing is that you get your privacy and security back.”
Square becoming a bank is brilliant. AT: “If it makes sense for any company to become a bank, it’s got to be Square. This article brings out the one huge benefit for companies like Square: If they become a bank, they may not longer need to partner with Fintech is no longer a boutique financing optiona bank. This could be why banks are so vociferous in opposing them. It would give Square a fair advantage.”
Goldman Sachs to take on UK retail banks. AT: “Might as well. The UK market is the one to beat, so if your plans are to be the premier international online investment bank, then you should compete against the early leaders. They’re in the UK.”
Online lenders, cryptocurrency deals feel the heat. AT: “It’s interesting that Chinese regulators are banning crypto-products, but not online lending where the biggest problem has been. Could this be about something else? Maybe their worried about how it will impact fiat currency.”
Klarna is reportedly testing credit cards with employees. AT: “This is an interesting approach. First, issue credit to your employees. If it goes over well, expand it to your existing customers, then go beyond those to the wider world. Klarna is getting serious about this banking thing.”
At Equifax, we recognize that consumers and customers expect us to provide superior data security, and we work hard to do that every day. Unfortunately, on September 7th, 2017, we announced a cybersecurity incident involving consumer information. This cybersecurity incident strikes at the heart of who we are and what we do. Above all else, our first priority is to support consumers and you, our customers, by doing what we can to make this right.
On July 29, 2017, Equifax identified a cybersecurity incident potentially impacting approximately 143 million U.S. consumers. Criminals exploited a U.S. website application vulnerability to gain access to certain files. Equifax discovered the unauthorized access and acted immediately to stop the intrusion. We promptly engaged a leading, independent cybersecurity firm that has been conducting a comprehensive forensic review to determine the scope of the intrusion, including the specific data impacted. We also reported the criminal access to law enforcement and continue to work with authorities.
What information may be impacted?
The information accessed primarily includes names, Social Security numbers, birth dates, addresses and, in some instances, driver’s license numbers. Criminals also accessed credit card numbers for approximately 209,000 U.S. consumers, and certain dispute documents with personal identifying information for approximately 182,000 U.S. consumers.
We have found no evidence of unauthorized activity on Equifax’s core consumer or commercial credit reporting databases. In addition, we have found no evidence that this cybersecurity incident impacted Equifax’s core consumer or commercial credit reporting databases, including, ACRO, Workforce Solutions, including The Work Number payroll data, NCTUE, IXI and CFN.
To see if you are potentially impacted, you can click on the Potential Impact Tab
To enroll in complimentary identity theft protection and credit file monitoring services and how to find out if your personal information may have been impacted, you can click on the Enroll Tab.
To learn more about the complimentary offering, you can click on TrustedID Premier Tab. TrustedID Premier provides you with copies of your Equifax credit report; the ability to lock your Equifax credit report; 3-Bureau credit monitoring of your Equifax, Experian and TransUnion credit reports; Internet scanning for your Social Security number; and identity theft insurance.
To speak to someone directly, we have also established a call center at 866-447-7559, available every day (including weekends) from 7 a.m. – 1 a.m. EST, for individuals to ask questions.
On Thursday credit bureau Equifax said a data breach put personal information of 143 million people at risk. Now its response is drawing more outrage, as lawmakers and others accuse it of encouraging consumers who come to it seeking answers to sign away their chance to seek recourse in the courts.
Following the breach, which compromised tens of millions of Social Security numbers and other valuable data, Equifax set up a website to help worried consumers determine whether or not their information was at risk. That website encouraged visitors to sign up for a program known as TrustedID Premier, the company’s credit monitoring service, which provides automated alerts to credit changes and up to $1 million in ID theft insurance. That’s where the trouble began.
TrustedID’s terms of service include an arbitration clause, insisting that customers agree “all claims, disputes, or controversies…shall be finally settled by arbitration” rather than a court of law. Such clauses aren’t unusual for credit monitoring services — or indeed many other consumer products. But in this circumstance, it created the impression that Equifax was asking consumers it had harmed to surrender their legal rights — including becoming part of a class-action law suit — before it would agree to help them.
One key legal avenue that arbitration clauses typically close off for consumers is the class-action lawsuit. That could be significant for Equifax — at least on one proposed class-action lawsuit was already filed against the company late Thursday, according to Bloomberg.
The 143 million Americans whose information was compromised by the Equifax data breach may still be on edge even with the free credit monitoring service being offered by the company.
Everything from names, addresses, social security numbers and credit card numbers were hacked in the Equifax data breach.
Kuehner said right now the company is sending out letters letting people know if they have been potentially affected. They can also check online at equifaxsecurity2017.com.
However, it is not only the breach that has consumers concerned, it is the company’s response.
“We’re taking unprecedent step of offering every U.S consumer in the country a comprehensive package of identity theft protection, ecredit file monitoring at no cost,” said Rick Smith, Equifax Chairman, and CEO, in a statement released online.
This past Wednesday, FASB released an update to the current expected credit losses methodology (CECL) for estimating credit loss allowances. This new accounting standard, which was initially published in June 2016 (in conjunction with regulators such as the FDIC, OCC, and NCUA), will apply to financial assets carried at amortized cost, including loans held for investment and held-to-maturity debt. Once in place, these assets must be held on the balance sheet net of an expected loss account. Changes are effective for fiscal years beginning after Dec 15, 2019, for all for-profit companies that file with the SEC.
Once firms adopt CECL, management will have increased discretion around forecasts and ultimately net asset carrying value. This represents a dichotomy for investors. Assets should be carried at more accurate levels and better reflect the organization’s financial position. However, management estimates will significantly affect the balance sheet and income statement.
The major change with the CECL methodology is that organizations are expected to include forward looking information when determining credit losses. Banks will need to calculate expected credit loss at the loan level for the entire life of the loan and then aggregate with similar instruments.
Since ECL is calculated for the life of the financial asset, rather than the annual rate, almost all held-to-maturity instruments that are not risk-free will have a credit loss allowance. These long-dated assets may appear more volatile than financial statement users are accustomed to because their impairment has large implications for the balance sheet and income statement. Under the new regulation it will be more important to have correct, auditable, and explainable expected credit losses.
Overall, we applaud the coming changes to US GAAP and expect investors to respond favorably.
Although the banking sector has tried, most banks still have too many fees and capital requirements to provide business accounts with their needs. Numerous freelancers or startups just can’t satisfy those requirements because banks are still designed with the larger business in mind.
More small businesses need smaller sized loans to tap into for their launches and expansion. Recognizing how peer-to-peer lending has grown together as an entire industry illustrates how ripe the financial industry is for more competition. Peer-to-peer lending is more personal, with a much needed boost to the financial sector in watching to find new ways to provide the much-needed financial support of smaller entities and businesses.
With these products, it makes sense that the company could become a one-stop shop for financial needs. To become a one-stop service requires obtaining a bank charter, which is what the company has now applied for under the moniker, Square Financial Services Inc.
While your average American doesn’t have much in the way of savings, the younger “millennial generation” is actually saving at a higher rate than any other generation. More than 80% of those “investment professionals” will then go on to underperform the market and get paid anyway.
If all of this sounds too daunting already and you want the easy way out, use Betterment.
Founded in 2013, Los Angeles startup PeerStreet has taken in just over $21 million in funding from investors that include Andreessen Horowitz to build “a marketplace that provides unprecedented access to high quality real estate loan investments“. Before you start getting too excited, take note that you’re going to need some cash to bring to the table. PeerStreet shows you some dropdown boxes when you create your account and unless you choose the one that says you make $300,000 a year or the one that says you have $1 million in assets, you’re not going to be allowed in. Those of you who were smart enough to major in a STEM subject are more likely to be squared away here while those of you who majored in underwater basket weaving should probably just stop reading right now.
Right away we can see that this is a property that is out of reach for the majority of Americans with a hefty $3.78 million price tag.
This means that the amount of money we could get from selling our property falls to around $3 million which still makes it very easy to pay off a $2 million loan. In fact, the only point we would start to worry is if property prices fell more than -53% over an 18-month period. This would represent a “black swan” type of event which has a very low probability of occurring. Of course there’s always the risk of PeerStreet going under but then you still have the property as collateral for the loan and you are first in line to receive payback should their property portfolio be liquidated. For providing everyone with this great service, PeerStreet takes a reasonable .75% fee which is paid each month alongside the interest payments.
The first thing to note here is that the price of entry is an extremely attractive $1,000. You’d be joining the 295 other investors who have already plunked down an average amount of $6,169 which brings the loan up to 91% funded. If you then went out and found 9 other properties to invest in, you’d have a nice little diversified portfolio of 10 various property investments that are transparent and relatively simple to understand (provided you took the time to understand the risks as we have done with this example), all for just $10,000.
The early days of peer to peer lending have morphed into a far more complex and data driven credit service that is competing against not just innovative Fintech startups but traditional lenders seeking to maintain relevance. Crowdfund Insider recently asked Lend360 organizers a few questions on their perspective of the online lending industry and what has changed – and what they expect going forward.
What has changed in the lending environment in the past 12 months?
The biggest change is that Fintech is no longer just viewed as a boutique financing option, but a key component of today’s lending market. For proof of this change one only needs to look at the push for a national Fintech charter.
Where do you see current opportunities?
As long as there is a demand for credit, there will be an opportunity for Fintechs to step up and fill the void.
Less than half—43%—of the non-prime Boomers in the company’s research feel comfortable with their ability to manage their day-to-day finances, let alone prepare for retirement. Not that prime Boomers all feel confident, either, with 76% saying they can manage daily financial needs.
Elevate’s study, based on a survey of over 1,000 prime and nonprime consumers, found that non-prime Boomers are 14 times as likely as prime Boomers to have difficulty predicting monthly income—and 4 in 10 say they live paycheck to paycheck. They also tend to have difficulty predicting monthly expenses and are therefore more likely to experience unexpected expenses, the research says.
Among non-prime boomers, 7 in 10 run out of money at least once a year, in spite of generally decent employment levels—frequently, in fact, with more than one job apiece.
The study asked respondents how they would meet an emergency need for $1,200. Among the non-prime Boomer respondents, nearly half had difficulty coming up with a source of funds—1 in 8 could think of no solution at all.
22% of non-prime Boomers could cover the $1,200 surprise through savings—about half of the portion of prime Boomers who could do so.
22% said they could use a credit card to cover the surprise, but less than a third said they could pay off that borrowing before it began to accrue interest.
11% said they could tap family or friends for the money. Interestingly, only 2% of prime Boomers would go that way.
A small portion—4.4%—of non-prime Boomers would use payday lenders, deposit advances, or overdraft programs. Interestingly, in a separate question, 13% of non-prime Boomers said they’d used a payday loan in the previous 12 months.
And as part of the change, SmartX is bringing on 27 new investment strategies from firms like Blackrock, Morningstar Investment Management and Nasdaq Dorsey Wright. The models will cover strategies including ETFs, income portfolios, international equities, global/macro investing and U.S. equity strategies.
RIA in a Box Introduces Trade Monitoring
The technology company has a new employee trade-monitoring tool for its MyRIACompliance software platform that RIA in a Box says will help firms comply with Rule 204A-11, which requires the submission of securities holdings and transaction reports. The new tool digitizes the process, provides an interface for employees to electronically link applicable personal brokerage accounts, and provides chief compliance officers with supervision, administration and reporting capabilities.
CoinIRA, a subsidiary of Goldco focused on digital currencies, is launching Digital IRA Bundles, new investment products that come prepackaged with combinations of popular cryptocurrencies such as Bitcoin, Litecoin and Ethereum.
Commonwealth Selects Quovo for Aggregation
Commonwealth Financial Network announced the completion of an upgrade to the account-aggregation features within Investor360 using Quovo.
We all know payday lenders, loan sharks, and credit cards profit when you go into debt and, therefore, they can be dangerous. But many of these companies conceal their danger with clever marketing. Beware: a debt trap by any other branding is just as dangerous.
The difference between this service and a typical subprime loan seems to mostly lie in the marketing. Unlike other loans, Affirm is a bit more upfront about the terms you’re getting into.
Everyone is picking on Affirm here, but the issue is not unique to them. This reminds me of the recent fiasco with Navient, the student loan servicer that was sued by the Consumer Financial Protection Bureau (CFPB) over shady business practices like misapplying student loan payments. In the lawsuit, Navient said they have no obligation to act in their customers’ best interest. But that’s not exactly the message that comes across on their “Financial Tips Blog.” These companies use financial literacy to hook you into making bad financial moves.
High-interest debt, such as credit cards, sometimes seems impossible to pay off.
Peer-to-peer loans are unsecured — you don’t have to tie any collateral to them. They’re attractive to borrowers with high-interest rate debt because they provide concrete payoff dates and an option for a fixed — and potentially lower — interest rate.
In fact, according to peer-to-peer platform Lending Club, its borrowers — on average — secure a 24% lower interest rate when using its peer-to-peer loans to consolidate debt.
SS&C Technologies Holdings, Inc. (Nasdaq:SSNC), a global provider of financial services software and software-enabled services, today announced the availability of Precision LM™ 3.0, the latest version of the company’s loan origination, servicing, accounting and asset management solution. The new version marks the culmination of significant input and engagement from Precision LM clients as well as SS&C’s proven ability to execute on its comprehensive development roadmap.
Automated financial advice is becoming more commonplace in the hunt for bigger returns, yet Pefin bills itself as “the world’s first [artificial intelligence] financial advisor.” The company aims to use machine learning to deliver a range of financial planning and investment advice via a chat interface.
“I started Pefin mainly because when you think about less affluent people, there’s really no access to financial advice aside from robos,” Joseph told CNBC in an interview recently.
“Robos are trying to execute a transaction, while we are trying to manage your finances. Investing is optional with us, and we’ll help you if we think it’s the right move for you” rather than generating fees for the company, she told CNBC.
Pefin, the world’s first Artificial Intelligence (AI) financial advisor, welcomed Catherine Flax as Chief Executive Officer today.
Flax has had a multi-decade, distinguished career on Wall Street, as the Managing Director and Head of Commodity Derivatives, Americas at BNP Paribas and as Chief Marketing Officer of J.P. Morgan. She was named the Most Influential Woman in European Investment Banking in 2012 and one of the 100 most influential women in European Financial Markets in 2010 and 2011. Flax has been a leader in the FinTech space, as a Board Member of leading blockchain company, Digital Asset Holdings, and for the last two years, as an Advisor to Pefin in matters of Marketing, Regulation, Business Development and International Growth.
Pearl Capital Business Funding, a provider of direct financing to small and midsize businesses, announced Jared Kogan joined the company as chief revenue officer.
Kogan joined Pearl following a 10 year career in the fintech space, most recently serving as the director of OnDeck’s broker division where he funded 10,000 loans for over $650 million in volume and was able to grow production from $14 million to over $40 million per month. Prior to OnDeck, Kogan served as vice president at Newtek, the largest non-bank SBA lender in the country.
Typically, these lenders operate only on the web and promise quick assessment and disbursal with less bureaucracy. Some specialist bad credit lenders are ready to structure loans according to your convenience. You can also look at peer-to-peer lending platforms that give you access to individuals who are looking to invest their money in different ventures. Again, these platforms can get cash relatively more quickly into the system.
Goldman Sachs is looking to expand its retail banking business to the UK, replicating its mass-market offering in the US, as it continues a steady march from Wall Street to Main Street.
The New York-based investment bank began to pivot in the US about 18 months ago, offering high-interest online savings accounts for a deposit of as little as $1. Last October it took a step further by launching Marcus by Goldman, a digital consumer-lending platform that seeks to rival the San Francisco trio of Lending Club, Prosper and SoFi.
Now Goldman is taking it international, aiming to launch an online deposit business in the UK about the middle of next year. According to Stephen Scherr, the bank’s head of strategy, the lender plans a greenfield start in the UK under the Marcus brand, but could look to buy a book of deposits — as it did in the US — if the opportunity came its way.
The data behind Zopa’s lowered return projections (AltFi Data Email), Rated: AAA
Zopa has an enviable track record of delivering net returns as evidenced by a more than 10 year track record of delivering 4-7% returns (after losses and fees).
INVESTORS rank the expected rate of return as the most important factor when choosing an investment provider, research shows.
Analysis by bond provider Minerva Lending, based on a poll of 1,000 adults with more than £50,000 to invest, found 61 per cent consider the rate of return as the most important factor when choosing who to trust their money with.
The research, released on Friday, does not refer to peer-to-peer lending but investors appear to be looking for many factors that P2P firms offer.
THE UK is facing a technology skills shortage that may worsen because of Brexit, Zopa’s co-founder and chairman has warned.
Giles Andrews (pictured) said that the peer-to-peer consumer lender’s decision to open a hub in Barcelona was partly due to a concern that it would be harder to recruit top tech talent following the UK’s departure from the EU.
Assetz Capital, part of the Manchester-based Assetz Group, has relocated from Newby Road in Hazel Grove where it occupied 3,000 sq ft of a 6,000 building, to take the newly refurbished Building 3 on a 10-year lease.
On Friday, Caixin, a Chinese business news outlet, reported that financial authorities have decided to shut down virtual currency exchanges.
Beijing appears eager to eliminate money laundering and choke off capital outflows by shutting down bitcoin exchanges and other virtual currency trading platforms. It is also tightening its grip on peer-to-peer lending, in which individuals privately contract to borrow and lend.
Some exchanges have temporarily halted trading in response to the report. Investors rushed to sell their digital currencies for cash, sending bitcoin about 20% lower versus the yuan at one point on Saturday, compared with the day before, to below 24,000 yuan ($3,703).
According to report from the Central Bank, in the second quarter of 2017, banking financial institutions have handled 36.247 billion electronic payment services, amounting to 545.58 trillion RMB, which was down about 4.4% from the same period of last year.
Actually, non-bank payments including Alipay and wechat Pay are growing rapidly. The Central Bank’s data also shew that in the second quarter of 2017, the scale of non-bank payment market reached to 570.95 trillion RMB. Compared to the amount of 23.35 trillion in the same period last year, it has significantly increased 34.87 percent.
On September 6th, Zhao Jianjun, deputy director of the Department of Finance at Ministry of Education, announced at a press conference that online marketplace lenders are banned from lending to college students in China.
On September 6th, Zhao Jianjun, deputy director of the Department of Finance at Ministry of Education, announced at a press conference that online marketplace lenders are banned from lending to college students in China. According to WeChat Pay, users of the new product will be able to make payments and transfer, send Hongbao, pay back credit card debt and be awarded with interest on their digital wallet balances.
As response to the latest regulation, NEO Council announced it would offer refunds for NEO purchased through its ICO.
On September 4th, China’s leading digital payment service Alipay announced to expand its operation to Norway.
Early this week, Proptech BBT announced that the platform had managed to secure RMB 60 million Pre-A funding from Hongdao Capital at the beginning of August.
Since Klarna received its full banking license this summer, there have been many questions as to how exactly it would be leveraged. One among many speculative scenarios includes launching the company’s very own credit- and bank cards.
Now there are some initial reports indicating that the credit card rumours are for real. Referring to internal documents it has been able to access, Breakit reports that the Swedish e-invoicing giant, valued at $2,5 bn, is testing credit cards in-house.
A memo sent through the company’s intranet has supposedly given Klarna’s Swedish employees the opportunity to test proprietary payment cards for a limited amount of time.
SME lender Grid Finance is expanding its offering to include a digital pension product targeted at the owners of small businesses. The company has engaged Conexim to provide the back office infrastructure on the product – as well as the regulatory umbrella – while Grid will act as distributor.
It is the latest piece of innovation being undertaken by the company, which is looking to build what chief executive Derek F Butler calls “a small business bank in all but name”.
The 10 selected entrepreneurs reflect the acceleration of the Swiss fintech scene in the recent years and the impressive quality of its startups. They will join the intense journey taking place from September 10 – 16 in New York.
Advanon, Phil Lojacono: Advanon in its basic version is an online platform that allows SMEs to pre-finance their open invoices directly through financial investors.
Algo Trader, Andy Flury: The startup provides an algorithmic trading software that allows automation of complex, quantitative trading strategies.
Creditgate24, Teddy Amberg: CreditGate24 is an independent Swiss company and a fully automated platform for lenders and borrowers which offers efficient, transparent and scalable credit processing at high quality.
KiWi (eBOP), Christian Sinobas: KiWi transforms merchant’s phone into a smart point of sale.
Monito (Global Impact Finance), François Briod: Sending money abroad? Monito is the Booking.com for money transfers, helping migrants and expatriates find, review and compare money transfer services.
OneVisage, Christophe Remillet: OneVisage is a leading cyber-security company developing biometric solutions to help financial services eliminating identity theft and increasing user’s digital experience.
SONECT, Sandipan Chakraborty: SONECT enables every shop in the neighborhood to act as a virtual ATM.
Consultancy firm Accenture found that 68% of global consumers would be happy to use robo-advice to plan for retirement, with many feeling it would be faster, cheaper, and more impartial than human advice.
Joe Ziemer, vice president of communications at Betterment, a US robo-adviser with more than $9bn under management, says: “The Betterment service takes your information and uses a series of algorithms to create an asset allocation plan, which might be, for example, 90% equities and 10% bonds for a retirement saver.”
Wealth Wizards, for example, typically charges £65 for investments up to £30,000, and 0.30%, or £300, on a £100,000 investment pot. Betterment charges 0.25% a year.
That’s peanuts compared to human advisers’ fees, which come in at about £580 for advice on a £200-a-month pension contribution, or £1,000-£2,000 for guidance on what to do with your £100,000 pot when your retire, according to UK adviser network Unbiased.
The young lender says the total amount of investments now exceed €1.8 million. Approximately €400,000 in loans were added in August. The average invested amount per investor gained 2.2% to the previous month at €3,270 in August. In regards to the number of investors using the platform, in August Robo.cash added 188 users. Currently, there are more than 900 investors in total who have joined the platform in the first six months of operation.
For the first time at FinovateFall, Mitek (NASDAQ:MITK) (www.miteksystems.com), a global leader in mobile capture and identity verification software solutions, will demonstrate Mobile Verify® for Lending. This new, five step digital lending experience enables lenders to verify identity and bank account information in real time for fast loan decisions with a simple process for borrowers.
When applying for a consumer loan from a desktop computer, the borrower will first log into their online bank account and agree to have their account information shared with the lender. A text message is then sent to the borrower’s smartphone directing them on how to take four photos: front and back of their driver’s license, a selfie and a photo of their pay stub or other trailing document, to complete the loan application process. This new digital experience is quick and easy for the borrower and provides the lender with real-time identity and bank account verification.
Moroku lands on the BNP Paribas Radar (Moroku Email), Rated: A
Last week Moroku was identified as one of the top 4 Fintech’s globally best positioned to take on the battle for Millennials
The financial technology boom has transformed the way over a billion people engage with financial services, particularly when it comes to making payments, but Larry Fink, chief executive of BlackRock, the world’s largest money manager, said that no company has yet managed to use technology successfully to get people investing for the long term.
Both in China, and in Europe and North America, a plethora of investment platforms and robo advisory services are evolving, but none has yet reached critical mass.
Eurasia, the platinum, palladium, iridium, rhodium and gold production company, is pleased to announce it has entered into a Memorandum of Understanding with GoldMint PTE (“GoldMint”), a Singapore based Limited Company.
More brokers will diversify into the SME loan space due to increased competition in traditional markets and growing demand from clients, the lender’s head of sales Michael Burke said.
“Brokers are not only looking to move into online lending because of the speed and ease of doing business it offers, but because their time-poor customers are demanding a more convenient solution involving faster turnaround times.”
As well as providing a digital platform to facilitate the loan process, OnDeck’s underwriting policy also helps ease the broker’s burden, Burke told Australian Broker.
PledgeMe, the equity crowdfunding and peer-to-peer lending platform, has joined rival Equitise in signalling plans to enter the Australian market ahead of a law change coming into effect across the Tasman this month.
Co-founder Anna Guenther will relocate to Brisbane for six months to establish the Wellington-based company’s Australian arm, according to a PledgeMe blog post. PledgeMe will participate in the Queensland government’s HotDesQ programme, which provides networks, support, and funding for companies to relocate to the state.
SoftBank Vision Fund, the world’s largest pool of private capital, placed its second major bet on an Indian startup in a span of two months with its investment in OYO Rooms. The $250-million funding has taken OYO’s valuation from $460 million in August last year to between $850 million and $900 million.
Allow me to set the scene: in the wider region of Southeast Asia that surrounds Singapore, where Lattice80, our not-for-profit fintech hub that we launched last year is based, there is a huge unbanked population. KPMG estimates put the number at about 438 million. In poor countries like Cambodia, the population with a bank account falls to just 5 percent.
McKinsey did a similar study in 2010 on the world’s 2.5 billion unbanked. Asia’s emerging markets were identified as a hotbed of unbanked. The same study suggests that reaching the unbanked population in ASEAN could increase the economic contribution of the region from US$17 billion to US$52 billion by 2030.
Q WHAT IS THE ATTRACTION OF MULTI-ASSET INVESTING?
A It is the ability to combine a range of asset classes with different and largely independent economic drivers in order to achieve consistent return and reduce downside risk.
Years of central bank intervention in markets have depressed interest rates and left investors hunting for reliable yield. More asset classes beyond traditional equities and bonds have become more accessible in the past decade.
Q WHAT IS THE COMPOSITION OF YOUR MULTI-ASSET PORTFOLIOS?
More recently, we added peer-to-peer lending, mortgage and corporate funds that offer excess return over corporate bonds for a similar level of risk, litigation financing and credit funds. The world’s largest institutional investors have already diversified into these assets. Now, smaller institutions and individual investors can too, through our multi-asset strategies.
“Data is a precious thing and will last longer than the systems themselves.” – Tim Berners-Lee, inventor of the World Wide Web. In today’s world, corporations realize that data is currency and leave no stone unturned to protect it. Companies are spending millions of dollars to protect private customer information from hackers, but hackers have become […]
“Data is a precious thing and will last longer than the systems themselves.” – Tim Berners-Lee, inventor of the World Wide Web.
In today’s world, corporations realize that data is currency and leave no stone unturned to protect it. Companies are spending millions of dollars to protect private customer information from hackers, but hackers have become increasingly sophisticated; hence, the number of data breach cases has surged in recent years.
Statistics show the number of data breach incidents that exposed credit and debit cards have increased by 169% in the last five years. It’s also estimated that fraudsters have stolen over a hundred billion dollars in the last six years from consumers and corporations. This presents a huge opportunity for companies like XOR Data Exchange to grow their data-as-a-service business by assisting organizations fight fraud.
The dark web is that part of the internet that requires special software to access and allows users and website operators anonymity. The identity and geolocation of the user cannot be tracked because of layered encryption systems. Thus, communication and transfer between users are kept confidential, and it’s usually impossible to identify the source of information. This has led to the dark web becoming a den of illegal activities with trade in stolen consumer data at the top of the list.
Lumen and E-commerce Partnership
After tasting considerable success with its last product, Compromised Identity, XOR Data Exchange is ready to roll out its new offering Lumen, specifically developed to “to seek out consumers’ personal information on the internet including non-indexed dark web sites that traffic in stolen data and prevent it from being used to perpetrate identity theft and fraud.” The underlying matrix of Lumen is similar to that of Compromised Identity. Through Lumen, XOR Data Exchange is able to discover stolen data available on the dark web and determine whether the data is being used for any kind of fraud.
When Lumen identifies compromised data, XOR Data Exchange automatically includes it in Compromised Identity Exchange. The two products then cross-leverage each other’s strengths. The insights are used to prevent fraud and identity theft.
XOR Data Exchange is also introducing a free product for e-commerce companies based on the Compromised Identity Exchange model. The solution will help e-retailers identify how many data breaches they’ve had, if data is being used to commit fraud, and if particular data is available for sale on the dark web. This allows the company to build insight into specific customers and identify compromised credentials in order to stop them from committing fraud.
Lumen in Numbers
Since formally launching Lumen in May, the company has collected 1.8 billion records from the dark web.
Acquiring this data is not easy. XOR Data Exchange uses a crawler to pull down the data. During the process of selling the breached data, hackers have to make a sample copy, and that too is pulled down by Lumen. The target zone is emails and login addresses, which are hacked to get into bank accounts.
It charges companies on the basis of the number of transactions. The charges depend on the volume and, usually, the cost varies from 0.50 cents to $2 per record. The company sells this service as an anti-fraud product rather than as a credit product.
Funding and Future Services
XOR Data Exchange wants to develop a product that can help a consumer to know if their information is compromised on the dark web. Products like haveibeenpwned.com, which cater to this problem are not that comprehensive, therefore, founders want to develop a combination of XOR and credit bureau products to provide customers an effective solution to the data breach problem.
XOR has been able to raise funds in all investment climates. More importantly, its business is not especially capital intensive. The company focuses on customized products for clients and doesn’t need prior funding for development efforts. They were able to secure $2 million in an extended Series A round at the beginning of this year. In 2015, they secured $8 million in two rounds of funding ($1.8 million seed and $6.2 million Series A)
XOR Data Exchange in the News
XOR Data Exchange roped in former FICO CEO Larry Rosenberger as an investor and board observer. Rosenberger’s expertise in implementing data and analytical models will help XOR achieve the gold standard in fraud mitigation.
The company has also entered a partnership with Zoot Enterprises for offering its suite of products to Zoot clientele.
Dark web and data breaches are a reality in today’s digital-first world. With consumer personal information being saved by multiple entities from banks to e-retailers, personal data is at perpetual risk.
It is vital how corporations deal with a data breach, both internally and as a peer or associated party. How companies deal with external data breaches is also critical as users tend to have same credentials on multiple platforms. This creates an opportunity for hackers to leverage information to attack multiple websites with the same stolen data set. XOR, with its proprietary technology, understands the risk and is developing the next level data technology and networks to create a potent fraud mitigation mechanism.
News Comments Today’s main news: VantageScore to include trending data or excessive credit capacity. Patch Homes exits beta, raises $1.5M. Chinese industry news. Today’s main analysis: The debate over U.S. fintech regulation. UK digital lenders can grow with more tech innovation. Today’s thought-provoking articles: FC lending impact, borrower stories. United States VantageScore to include trending data or excessive […]
VantageScore to include trending data or excessive credit capacity. GP:”This is a huge change for VantageScore. I am not sure how many people use the Vantage score over FICO. Perhaps this is the difference that will make the VantageScore more relevant. “AT: “The FICO score is outdated. Trending data makes much more sense in calculating credit risk since people either meet their obligations or fail to meet them on a monthly basis as their payments are due. By observing trending data, lenders can determine whether a missed payment is due to a financial crisis unforeseen by the borrower or if the borrower simply has bad payment habits. A lot more can be determined with trending data, and the data is available.”
An obscure regulatory debate has put the U.S. fintech community on edge. AT: “The headline is misleading. The fintech community isn’t on edge at all. State regulators are the ones on edge. The gist of the conflict is there is a power struggle brewing below the surface of the entire U.S. financial sector. States want to regulate fintechs, but the federal government wants that authority too. This battle will not be solved until it blows up into the public pundit-sphere and/or heads to the Supreme Court for a fundamental shake down. At some point, fintech companies themselves will have to weigh in. What is driving this is politics, nothing more.”
Patch Homes exits private beta, raises $1.5M to revolutionize home equity. GP:” I am sure there is a cost somewhere as the company and investors have to make money. My best guess is that they take the lion’s share whent he home owner sells the house finally which should be translated into an actual APR over the duration of the deal to the home owner. 2 other companies who are doing the same thing had to discuss this APR with the regulator in fact which wanted it capped at 20%. “AT: “This is truly a revolutionary idea. Until now, homeowners in financial trouble had few options, one of which was to sell their home outright to some investor who would flip the house and squeeze its equity out for profit. With Patch Homes, homeowners can keep their homes, nix the monthly payment on a home equity loan, and simply sell a portion of their home equity to get the money they need right now. Keep the home, get the loan, and avert monthly payments. Not a bad deal.”
The math behind your credit score is getting an overhaul, with changes big enough that they might alter the behavior of both cautious spenders as well as riskier borrowers.
The new method is being implemented later this year by VantageScore, a company created by the credit bureaus Experian, TransUnion and Equifax. VantageScore handled 8 billion account applications last year, so if you applied for a credit card, that score was likely used to approve or deny you.
Using what’s known as trended data is the biggest change. The phrase means credit scores will take into account the trajectory of a borrower’s debts on a month-to-month basis. So a person who is paying down debt is now likely to be scored better than a person who is making minimum monthly payments but has been slowly accumulating credit card debt.
An important metric in calculating credit scores has been the portion of their available credit people are actually using. A person with $5,000 in credit card debt with a $50,000 limit across several cards could score better than someone with $2,000 in debt on a $10,000 limit because of that ratio.
But VantageScore will now mark a borrower negatively for having excessively large credit card limits, on the theory that the person could run up a high credit card debt quickly.
Taking civil judgments, medical debts and tax liens out of the equation comes after a 2015 agreement between the three credit bureaus and 31 state attorneys general.
People with those items on their credit reports now could see a bump of as much as 20 points. But it won’t help much if they also have negative marks like delinquencies and debts that have gone to collection.
An obscure request for comments on regulatory standards, released by the Office of the Comptroller of the Currency (OCC) last March, has since evolved into a complex turf war between the states and Washington, DC.
The debate centers around a proposal made in December by Thomas J. Curry, the Comptroller of the Currency, in which the OCC details a program for fintech companies to apply for charters as “special purpose national banks.”
Though fintech can still be thought of as a relatively young industry, it is growing quickly enough that it may soon determine how most people save, exchange and invest their money. This proposal comes at a time when the world — from the U.K. to Germany to India to Korea — is evaluating what kind of guard rails the fintech sector needs.
With this in mind, the OCC wants to take the first step to create a uniform, nationwide set of standards for fintechs. But what should have been an uncontroversial first step instead unearthed a slew of objections from a complex web of stakeholders. These parties quickly raised concerns about stifling innovation, overstepping the limits of federal authority and understanding the nuances of fintech, among many others. At the very heart of this battle is the question of what fintech really is. And as evidenced by the debate, that question is much harder to answer than it may seem.
Financial malpractice is just as pernicious today. In its first five years, from 2011 to 2016, the new Consumer Financial Protection Bureau (CFPB) received more than 900,000 consumer complaints about financial services providers.
Fintechs themselves have not been free from fraud and scandal. The publicly traded TrustBuddy, based in Sweden, was forced into bankruptcy for massive misappropriations of investor funds. Cincinnati-based SoMoLend came under similar fire for misleading investors. And China’s peer-to-peer lending sector has spent years battling its way out of the shadow of massive fraud that has tainted the industry.
Weirdly enough, fintech companies, which will arguably be the most impacted by the charter, have been relatively quiet. The strongly vocal opponents of the charter have been an alphabet soup of state regulators, who view this move as a broad overreach of federal authority:
New York: DFS Superintendent Maria T. Vullo in January released a stern public comment letter to the OCC. In it, she argued that banks with national charters don’t have to abide by some state lending rules, and this charter could allow payday lenders to sign up for protections meant for tech companies.
Florida: OFRC Commissioner Drew Breakspear called the charter a “solution to a problem that does not exist.”
Ohio and Oregon: Senators wrote in to the OCC saying this would complicate existing state fintech laws and initiatives.
California: Jan Lynn Owen, the commissioner of the CA DBO, argued that the proposal would complicate the DBO’s efforts to compile data on online marketplace lenders — such as fintech firms SoFi, Lending Club, Funding Circle and Prosper — in order to separate them from payday lenders.
Even so, to give some credit to regulators, there are still very real reasons this charter could easily hurt the not-nascent-but-not-yet-matured fintech sector in many ways:
Bureaucracy: The OCC has granted only one national bank charter in the last six years. Would it move quicker to enable fintechs? It’s difficult to see how it would.
One-size-fits-all: Fintechs are too diverse to be included in a charter generally drafted to legitimize deposit-holding institutions. As The Hill notes, this charter could lump together “payday lenders, marketplace lenders, and peer-to-peer payment companies” with robo-advisers, bank service providers, insurance tech, stock market apps, etc… Should they all be treated as banks?
A competitive moat: Though the charter could narrow the gap between fintechs and banks, allowing fintechs to compete nationally instead of applying for state-by-state licenses, it could also lead to a “thinning of the herd” by being too cumbersome or expensive for young companies. This could easily stifle innovation.
More compliance risks: Fintechs could find themselves written into a narrower and narrower regulatory box, increasing the chances they’re shut down for benign compliance missteps.
Balkanized regulators: Similar to the CFPB’s “no action letter,” which promises the bureau won’t take action against companies that meet its standards, gaining a charter from the OCC still won’t shield fintechs from other regulators who may have different rules.
Predictably, it seems national regulatory agencies such as Moody’s are in favor of the charter. Credit unions, which see the charter as a way to level the playing field with fintechs, are also in favor. The Conference of State Bank Supervisors is against it. It seems everyone but fintechs themselves has an opinion on the charter.
Despite the heated pushback against the OCC’s charter plan, there are still very good reasons for centralized, consistent and national oversight of the fintech industry. As ex-Treasury Secretary Tim Geithner notes in Stress Test, his excellent memoir of the financial crisis, one of the reasons the Great Recession was so bad was that the “safeguards for traditional banks weren’t tough enough […] but what made our storm into a perfect storm was nonbanks behaving like banks without bank supervision or bank protections.”
Then what would a good set of national fintech regulations look like?
It would set basic underlying consumer protections. For instance, no fintech firm should be allowed to misrepresent its fees — and this is something that shouldn’t vary by state.
It would preserve state sovereignty.
It would recognize the heterogeneity of fintech. Most fintechs disintermediate banking services, each tackling only one of a wide range of services. On top of that, some fintechs (Zopa, SoFi) are themselves starting to build banks, while others (Moven, Monzo, Atom) want to be “bank-lites.” A banking charter runs the risk of being too broad (and weak) or too narrow (and inflexible). Regulation should be flexible enough to encompass new fintech models as they develop, without risking losing its teeth.
It would promote innovation while following the Hippocratic Oath of first doing no harm.
Like many black markets, alternative finance and shadow banking would be safer if it were brought into the light and monitored.
Patch Homes Exits Private Beta and Raises $ 1M to Revolutionize Home Equity (Patch Homes Email), Rated: AAA
Patch Homes, a home equity financing platform that creates a way for existing homeowners to cash out equity at 0% interest with no monthly payments, today announced it is coming out of private beta in California. The company recently secured $1.0 million in seed funding, led by prominent venture capital firms and fintech angel investors, including Techstars Ventures, KIMA Ventures, Eric DiBenedetto and Airbnb co-founder Nathan Blecharczyk, among others.
“There’s a problem with the current home financing market, in that 67% of homeowner wealth is trapped in home equity,” said Sahil Gupta, Co-founder of Patch Homes. “Most homeowners are asset-rich but cash-poor, and we want to help bridge that gap and solve their cash flow problems. Our model offers home equity financing without any monthly payments, allowing homeowners to tap into their home equity and use their money the way they choose, whether to pay down debt, invest in their future, or make needed home improvements. Each Patch Homes’ product should be a step toward making homeownership a more affordable, accessible and liquid investment.”
In exchange for 0% interest, Patch Homes shares in future appreciation or depreciation of the home value. The model allows customers to receive capital from investors to finance their home equity, without interest rates or monthly payments, in exchange for a fraction of future home value change. Both the homeowner and investor will see a profit when the home appreciates in value and Patch Homes will share in downside loss with homeowners, should the house decrease in value.
Each contract has a 10-year term, although homeowners have the option to exit the contract by selling or refinancing their home at any time before that, without any penalty or exit fees. In the meantime, homeowners can use the cash newly freed up from home equity however they choose.
“What’s unique about Patch Homes is that it’s solving a problem for more than 40% of US homeowner population,” said Eric DiBenedetto, an investor in Patch Homes, an early backer of Lending Club and an active real estate investor.
The company has reached several key milestones in the past year, including launching a digital financing portal for homeowners and bringing investor capital to the company platform.
“Throughout our beta program, we saw homeowners engage deeply with the product and debt-payoff was among the top reasons for cashing out equity” said Sundeep Ambati, Co-founder of Patch Homes. “We’re excited about bringing a new approach to the way Americans look at financing their homes. There is over $4.5 trillion in untapped home equity across millions of homeowners in the US. They want something that is suited to their needs and financial circumstances.”
The seed funding will enable Patch Homes to expand its team and geographical footprint, and continue to develop its innovative solution and assist with marketing efforts. Patch Homes currently serves homeowners in California, with plans to expand to additional states before the conclusion of the year.
KBRA Upgrades and Affirms Ratings on Avant Loans Funding Trust 2016-B (KBRA Email), Rated: A
Kroll Bond Rating Agency (KBRA) upgrades the rating on two classes and affirms the rating on one class of notes issued under the Avant Loans Funding Trust 2016-A (AVNT 2016-A), a consumer loan ABS transaction which closed on April 28, 2016.
The current credit enhancement levels are 86.62% for the Class A notes, 47.01% for the Class B notes, and 23.86% for the Class C notes. Credit enhancement consists of overcollateralization, subordination of junior notes, cash reserves, and excess spread. While losses are above KBRA’s base case loss expectation to date, the continued deleveraging and build in credit enhancement outweighs an increase in loss levels. The transaction has breakeven loss multiples which are sufficient for an upgrade of the rating on the Class A and Class B notes and an affirmation of the rating on the Class C notes.
CommonBond, a leading financial technology company that helps students and graduates pay for higher education, today announces the launch of student loans for undergraduate and graduate students. This launch makes CommonBond the first and only company in the country to offer a full suite of student loan solutions, including loans for current students, refinance loans for graduates, and employer student loan benefits for employees.
“Since CommonBond first helped pioneer student loan refinancing nationwide, we’ve seen very little innovation in the student loan industry,” said David Klein, CEO and co-founder of CommonBond.
CommonBond’s new in-school loans provide:
Competitive interest rates: CommonBond’s rates are among the most competitive in the industry, with variable rates starting at 2.87% APR with autopay discount and fixed rates starting at 5.50% APR with autopay discount.
Flexible repayment options: CommonBond offers four different repayment options for students in school: deferment, fixed monthly payment, interest-only payment, and full monthly payment.
Award-winning customer service: CommonBond knows that paying for college is the first major financial decision that many students make, and provides best-in-class care for prospective and current members.
An industry-first social mission: CommonBond enables its members to drive social good when taking out a student loan. For every student loan funded by CommonBond, the company also funds the education of a child in need through a partnership with Pencils of Promise.
CommonBond is also introducing an interactive tool that helps students understand the financial impact over time of different student loan options, enabling them to make informed financial choices.
CommonBond has funded more than $1 billion in loans to date.
LendKey, the lending-as-a-service provider for banks and credit unions, today released its Student Loan Refinance Report, its second in a series that highlights borrower trends across banks and credit unions. This latest report focuses on the state of student refinancing including the borrower demographic, their lending preferences and loan performance. Key findings show that the student refi market is healthy for banks and credit unions, as well as borrowers, who save an average of 2.2% in annual interest expense after refinancing.
“The LendKey report found that students who refinance significantly reduced their student loan debt over the life of the loan, a substantial amount considering the average student debt is $37,000 for the class of 2016,” said Salil Mehta, SVP of Credit Risk & Analytics, LendKey. “The overall health of the student refi industry proves how beneficial such products are to financial institutions and their millennial customers.
The report leverages data from LendKey’s network of 275 bank and credit union partners nationwide, and examines a seven-year span of borrower data from 2011 – 2017. Key highlights of the report include:
Loan originations: LendKey’s clients totaled $770+ million in originations; outstanding loan balance was close to $620 million.
Borrower savings increased: Borrowers saved an average of 2.2% in annual interest expense over the life of each loan.
Borrower age increased: Average age of a borrower has increased slightly over the years; in 2016 the average age at the time of refinance was 28.7 years for a borrower with an undergraduate degree and 34.3 years for a borrower with a graduate degree.
More graduate students are refinancing: In 2016, borrowers with a graduate degree represented close to 30% of originations compared to 20% in 2011.
Delinquency rates have dropped: Loan performance has improved over the past seven years as delinquency and default rates have dropped. The report found that 30-89 and 90+ day delinquencies are currently 2.2% and 0.5%, respectively.
Student loan debt now exceeds $1.3 trillion and is the largest non-real estate debt among US consumers.
LendKey partners with banks and credit unions to offer a complete online lending solution, including a customized refinancing product. LendKey’s services include loan acquisition, loan origination and loan servicing through a white-labeled platform hosted by the financial institution.
To access the full report, visit:
SmartBiz Loans Adds Five Star Bank to Technology Ecosystem (SmartBiz Loans Email), Rated: A
SmartBiz Loans, the first SBA loan marketplace and bank-enabling technology platform, today announced the addition of Five Star Bank (www.fivestarbank.com) to the Company’s unique technology ecosystem. SmartBiz Loans’ intelligent technology platform will match Northern California-based Five Star Bank to the right customers in a fraction of the time, allowing the bank to originate SBA loans more efficiently while increasing the likelihood that small business owners using SmartBiz® will receive funding.
The partnership underscores the ability for banks and fintech companies to work together in more creative and collaborative ways to better meet customer needs by combining the speed and agility of new technology with the security and infrastructure of traditional banks. SmartBiz Loans’ focus on regulatory compliance along with their deep knowledge of banks’ unique business requirements, make it an attractive partner for banks looking to expand their reach and ability to underwrite SBA loans.
SmartBiz’s full-stack, intelligent technology platform creates an environment of data stewardship in which banks’ data is protected and analyzed to the highest standard. It incorporates elements of artificial intelligence, machine learning and big data analytics to bring agility and efficiency to underwriting and originating government-backed SBA loans. By automating each bank’s underwriting criteria, SmartBiz eliminates weeks of work for banks, and allows banks to originate more loans to customers they may not have previously served while cutting banks’ processing costs by up to 70 percent. On average, 90 percent of the loan applications SmartBiz refers to its bank partners are approved.
Following the announcement that real estate crowdfunding platform PeerRealty had been sold to Brelion, founders Jordan Fishfeld and Juan Hernandez are shifting their energy to solving a pressing issue in the alternative finance space: creating a secondary market for alternative assets including securities sold on real estate crowdfunding platforms.
CFX Markets is described as an end-to-end digital marketplace that is directly integrated with alternative asset issuers, broker-dealers and transfer agents to streamline the process of secondary market trading of alternative assets.
CFX Markets is not alone in targeting this emerging opportunity. Traditional marketplaces such as OTC Markets, NASDAQ and NYSE have each expressed a certain amount of interest in providing liquidity for new asset classes.
Christophe Williams (MBA ’18) chats with Andy Rachleff, co-founder and CEO of Wealthfront. Andy discusses a wide range of topics in FinTech, investing, and how to grow tech companies. He goes in-depth on Wealthfront’s competitive advantages in automated investing and how he approaches product/marketing strategy to grow sustainably. Also covered are Andy’s background in venture capital, the process of founding Wealthfront, and how he sees disruptive innovation affecting financial service incumbents.
For Kundu and others working in the space, ‘inclusion’ is more about creating a another kind of credit system that’s based on social vouching and support. Inspirave’s platform, Kundu said, brings in the notion of a social network of friends and family that can help an individual reach their financial goals and in turn, help vouch for the individual. Instead of a formal credit score, the idea of using a social network of referees acts as a powerful counterpoint to traditional credit assessment systems that exclude millions of Americans who don’t have bank accounts or credit cards.
“We don’t think of traditional due diligence of loan underwriting, a formal business plan or technical due diligence,” said Kelly Chan of Kiva U.S., a nonprofit that’s the U.S. arm of a global online marketplace for crowd-funded small-scale loans. “We’re looking to a social community knowing you have a group of supporters to back you or vouch; for example, ‘Sally is a wonderful mother worthy of Kiva loan.’”
The notion of ‘social underwriting,’ Chan said, can create economic opportunities for Kiva’s 3,700-strong community, many of whom are small-business owners.
Other risks aside from data security cited by the GAO in fintech include:
Marketplace lending: The GAO said payment terms presented by fintech companies in this area must be transparent because “it can be difficult for small businesses to understand and compare loan terms such as the total cost of capital or the annual percentage rate.” The study also suggests there is a risk that small business borrower protections could be overlooked.
Mobile payments: The GAO study indicates that potential risks associated with mobile payments are similar to those found with traditional payment products. The report states that if a smartphone is hacked, lost or stolen or “if a company does not sufficiently protect mobile transactions,” that could be problematic. Another concern is that consumers could deposit or send money to the wrong person with P2P payments.
Digital wealth platforms: Insufficient or incomplete information from customers could cause trouble for digital wealth platforms.
Distributed ledger technology: “The Financial Stability Oversight Council noted that market participants have limited experience working with distributed ledger systems, and it is possible that operational vulnerabilities associated with such systems may not become apparent until they are deployed at scale,” the report said.
First up is Ryan Williams, CEO of Cadre, a company that provides a marketplace of investment opportunities for real estate investors. Founded in 2014, Cadre does all the sourcing, due diligence, decision-making and management of investments it makes available, providing a greater level of transparency and oversight to potential investors than was previously available.
Also joining us is Eddie Lim, CEO of home equity platform Point. His company enables homeowners to unlock the value of real estate they own by selling equity to investors rather than accruing debt by refinancing their homes.
A sudden need for money, like an unexpected medical expense, can lead people to seek a quick source of cash. Online lending services have been eager to fulfill this need, offering fast loans without a credit check. But these loans often come with a slew of consequences, such as high interest rates, hidden fees, and contracts that drag out payments.
“Predatory loans like these can have APRs of over 300%,” explains Mr. Feinstein. “People end up paying several times the cost of the original loan without knowing it, leaving them with no choice but to file for bankruptcy.”
There are some protective laws in effect – for example, the Military Lending Act protects active duty members from being charged interest rates higher than 36% on most consumer loans, including payday loans.
While the U.K. government regulates and champions these lenders, their loan origination growth has trailed that of their U.S. peers. Lower amounts of equity funding to build out technology and continued use of more human processes compared to U.S. digital lenders are some of the reasons for this divergence. Now is the time for U.K. platforms to embrace technological innovation in order to capture future growth opportunities.
A new report by S&P Global Market Intelligence estimates that as of the end of 2016, nine key digital lenders in the U.K. had originated £6.69 billion in loans since their respective inceptions. The nine largest platforms covered in our 2016 U.S. Digital Lending Landscape had originated the equivalent of £53.69 billion from their respective inceptions through the end of 2016.
Using data from venture capital database Crunchbase, we see that as of the end of 2016, nine major U.S. digital lenders, excluding Square Inc.’s digital lending platform, had received $3.49 billion in equity funding. This allowed them to invest more in costly technological build-ups, while their U.K. peers had received only $470.6 million in equity funding through the same date.
In the fourth quarter of 2011, only four of the nine lenders in our report were originating loans. Total originations for that quarter came in at just £27.2 million. Quarterly originations for these nine lenders grew 33.79% year over year to £803.6 million in the fourth quarter of 2016. During the second quarter of 2016, originations dropped due to uncertainty related to Brexit but rebounded in the third quarter and continued to grow.
Meanwhile digital lenders saw SME loan originations increase 23.9% year over year in the third quarter of 2016, followed by an 81.8% year-over-year jump to £357.5 million in the fourth quarter.
Digital lenders in the U.K. could enjoy significant growth as new account options and continued political and regulatory support boost awareness of and participation in the industry. With these prospects on the horizon, digital lenders will need to invest in technology and automate some processes that humans currently handle.
This month we hit more than 60,000 investors, big and small, lending to businesses through Funding Circle. Together your lending is having a real impact on the UK economy. Already in 2017 you’ve helped more than 5,000 businesses access much needed finance to grow and prosper.
Firstnet create 100 new jobs in Leeds
To facilitate the launch of their new data centre, Firstnet Solutions Ltd borrowed £74,480 in October 2016.
Paralympian goes for gold with a Funding Circle loan
Husband-and-wife team Peter and Linda Norfolk are well-experienced in achieving excellence. Nicknamed ‘The Quadfather’, Peter Norfolk OBE is a double paralympic gold medal and multiple Grand Slam winning wheelchair-tennis player, while Linda was Head of Physio for the Paralympic GB team at the Athens Games.
To hire two new members of staff, Equipment for the Physically Challenged (EPC) borrowed £30,000 in 2016.
Flux, a London-based fintech startup founded by three early employees of foreign exchange and banking app Revolut, is on a mission to make store receipts truly digital.
The company, which is de-cloaking this week with a pilot in East London, has built a software platform that bridges the gap between the itemised receipt data captured by a merchant’s point-of-sale (POS) system and what little information typically shows up on your bank statement or mobile banking app.
To be clear, this isn’t digitising paper receipts with OCR, but — by partnering with merchants, their payment processor/POS systems, and banks — making item level receipts digital in the first place. Flux’s first live integration is with EAT and Bel-Air on the merchant side, and digital-only bank Monzo.
“We are… building a software layer that is agnostic to the financial institution or retailer that it plugs into,” Cusden-Ross says. “We connect retailers via a software plug-in to their point of sale and to the consumer via an integration to their mobile banking app. Flux automagically links receipts to your bank card as you pay. Receipts are stored in the same place your transactions live today, your bank statement. Just open up your bank app and you’ll find all the receipts as well as any loyalty right there, it’s seamless and intuitive”.
China’s fintech sector certainly boomed last year especially after Alibaba’s payments company Ant Financial set records with a $4.5 billion funding round. The impact of Brexit is yet to be seen on the UK and Europe as a whole, but investors are still seeing the potential for financial technology in the region, according to the report. G.P. Bullhound highlights that the UK could be described as a standout leader because of three fintech unicorns, or companies that are valued at over $1 billion: Funding Circle, Paysafe and Transferwise.
Despite Asia’s leadership and growth in the alternative finance space, the same could be said about the European market.
Statistics revealed in the report that alternative finance is currently the most successful fintech vertical, ahead of digital payments, digital banking, insurtech and asset management. While in China eight of the 13 fintech unicorns are operating in the alternative finance field, the term ‘alternative’ is somewhat less relevant in the UK and G. P. Bullhound claim that this is because these regions are held back by traditional systems. Perhaps this is why China is forging ahead in the financial technology race?
Industry News-China (Xeenho Email), Rated: AAA
In China, 55 P2P lending platforms cooperating with insurance companies, accounting for 1/6 of all the platforms. Currently, the types of insurance applied in P2P are mainly surety insurance and safety insurance for personal account. However, the insurance is not unlimited. According to a drafted document from China Insurance Regulatory Commission: if the policy holder is a natural person, the maximum coverage is 1 million RMB.
To implement the special rectification of risks of P2P Lending required by P2P Remediation Office, the first tier cities including Beijing, Shanghai, Guangzhou and Shenzhen have been starting an all-round investigation of Cash Loan. Last Thursday, the Association of Internet Finance of Shenzhen promulgated documents to asks platforms submit details of Cash Loan business monthly.
On April 18th, a Cashless Alliance led by Alipay launched in Hangzhou, China. UN Environment and Ant Financial advocate a low-carbon business together with other 15 alliance members. As one of the sponsors, the parent company of Alipay, Ant Financial announced that they will provide 6 billion RMB to help the process of cashless in two years. The efficiency of business will be promoted by 60% by using the cashless pay and data sharing. Every 3580 payment equals to the plant of a bell hammer. The existing Alliance members including: Alipay, Carrefour(China), CAH, HUAQIANG Group, OFO Inc., BESTORE etc. Now, the alliance is open for all the global businesses and organizations.
Venture capital investment in Chinese financial technology firms surpassed $6.7 billion in 2016. The reason for this is simple: China is home to the largest markets for digital payments and online lending. About 40% of consumers use new payment methods. As a result, China boasts the world’s four largest fintech “unicorns,” or startups valued at over $1 billion, including Ant Financial, Lufax, JD Finance and Qufenqi. These firms received large amounts of funding in 2016, with Ant Financial alone receiving $4.5 billion.
China Rapid Finance, a peer to peer lending company, has been approved for listing on the New York Stock Exchange and is planning to raise $100 million for its IPO. Chinese fintech firm CreditEase signed an agreement to provide up to $1.4 billion in funding to American real estate firm Tishman Speyer through sales of its wealth management products.
China’s fintech industry faces some major challenges, however. First is a shortage of skilled workers, and second are increased regulations, particularly in the digital loan sector.
Companies face difficulties in filling positions for software developers and product managers.
The China Banking Regulatory Commission published the Guidelines on Depositing and Managing Online Lending Capital in February, requiring user funds be deposited into commercial banks, transactions be approved by both borrower and lender, and clear records of transactions be recorded. This will help to curb the risky behavior of industry firms, about 60% of the roughly 5,000 which fail to comply with regulations.
Sailing Capital International (Shanghai) Co., Ltd., a RMB-denominated investment and loan fund created under the support of the Shanghai Municipal Government, has led a US$60 million series funding round in SenseTime, a Beijing-based artificial intelligence start-up.
Founded in 2014, SenseTime says its face recognition technology has an error rate below one in 100,000. It also provides text, vehicle and image recognition to mobile Internet companies, financial services and security companies.
The peer-to-peer (P2P) lending space is fast becoming popular in India and abroad as a viable option for borrowers and lenders. The model’s success lies in its ability to connect borrowers, who are in dire need of money with lenders, who are ready to provide for higher returns.
According to Rajat, the disruption by the fintech sector is very slow right now.
“It would be false to state that the fintech companies are eating into the role of banks and NBFC. The sector can really grow very fast. In the next five to 10 years, we will observe a lateral shift in the trend with more and more customers moving to the digital mode, especially for financial services that lend itself to the digital platform like music industry,” he added.
With an increased prominence of fintech in Singapore, demand for locals with the relevant knowledge and skills have gone up. In order to nurture future talent in the industry, Visa today announced a partnership with local polytechnics and Singapore FinTech Association.
According to a press statement, as part of this partnership, students from the five polytechnics in Singapore will have the opportunity to engage with payment experts from the global payments technology company.
“Through this initiative, students will attend learning sessions conducted by Visa representatives and be involved in business case challenges. We hope to inspire our young talent to join this exciting community,” she added.