- Today’s main news: How Funding Circle wants to fix the financial system. VPC Specialty Lending, Ranger Direct see dividends move up. Klarna triples net profit, mainly in Nordic countries.
- Today’s main analysis: International P2P lending volumes.
- Today’s thought-provoking articles: Can Seed solve banks’ digital onboarding issues? How banking institutions can decentralize (The best read of the day). Institutional investors wary of passivity.
- Seed wants to solve banks’ digital onboarding issues. AT: “I doubt that Seed, or any neobank, can save brick-and-mortar banks. This is an issue that traditional banks have to solve for themselves. Of course, the solution may be to partner with a tech company like Seed that can provide for banks what they can’t provide for themselves.”
- Lendio opens franchise in South Carolina.
- Eloan managing director disrupts financial services in Puerto Rico.
- Magilla wants to be Match.com of lending.
- California woman succeeds with Kiva loan.
- Validus Specialty launches underwriting package for U.S. alt lenders.
- Institutional investors wary of passivity.
- Bonds and P2P lending.
- LightStream home improvement survey reveals how home owners intend to spend their money to make improvements.
- Ways to use crowdfunding to own a home.
- FinLab launches contest for startups.
- Kwittken picks up Lauren Road as new client.
- How Funding Circle wants to fix the financial system.
- VPC Specialty Lending, Ranger Direct see dividends tick up.
- Leeds City Council to lend money to businesses.
- IFISAs hit a few stumbling blocks.
- How an Isa works.
- International P2P lending volumes for February 2018. AT: “The big growth this month came to Landbay, Lendix, Mintos, Toborrow (229% and 245% vs. previous month and last year’s month, respectively), and MytripleA. Big losers include ArchOver, Loanbook Capital, MoneyThing, ThinCats, and Proplend (100% and 100%).”
- How banking institutions can decentralize. AT: “Hint: “Go crypto. If you read just one article today, let it be this one. Very interesting read.”
- Anatomy of a successful crowdlending strategy.
- United States
- This neobank believes it can solve banks’ digital onboarding problem (American Banker), Rated: AAA
- Lendio Franchise Announced in Clemson Region (Lendio), Rated: A
- In A Time of Need, A Woman Rises To Disrupt Fintech In Puerto Rico (Forbes), Rated: A
- Fintech Startup Magilla Wants to Be the Match.com of Loans (Big Law Business), Rated: A
- Crowdlending helped Shorewood business woman’s dreams come true (tmj4), Rated: A
- Validus Specialty Launches Package Policy for Fintech Companies (Crowdfund Insider), Rated: A
- What’s next for marketplace ABS? Revolvers, ETFs & IOs (Asset Securitization Report), Rated: A
- INSTITUTIONAL INVESTORS WARY OF PASSIVITY (All About Alpha), Rated: AAA
- Be cautious when seeking income (Money Week), Rated: A
- 2018 LightStream Home Improvement Survey (PR Newswire), Rated: A
- Crowdfunding your way to homeownership (Mic), Rated: A
- JPMC’s FinLab Launches $ 3M Contest For FinTech Startups (PYMNTS), Rated: B
- Accounts in Transit (O’Dwyer PR), Rated: B
- United Kingdom
- Keeping the little guys in the loop: How Funding Circle hopes to fix the financial system (City A.M.), Rated: AAA
- VPC and Ranger funds see dividends tick up, but remain below target (AltFi), Rated: AAA
- Leeds offers business loans through peer-to-peer platform (Room151), Rated: A
- Isas 2018: Innovative Finance Isas hit stumbling blocks (Financial Times), Rated: A
- How does the Isa allowance actually work? (Which?), Rated: B
- European Union
- Klarna’s profits driven by growth in Nordics and Germany (Financial Times), Rated: AAA
- Klarna reports double-digit sales growth (Finextra), Rated: A
- International P2P Lending Volumes February 2018 (P2P-Banking), Rated: AAA
- How Banking Institutions Can be Decentralized (CoinTelegraph), Rated: AAA
- Crowdlending: Anatomy of a successful strategy (EurekAlert!), Rated: A
- Smartag International Signs Agreement to Provide Fintech Solutions to Rural Indonesia (PR Newswire), Rated: A
This neobank believes it can solve banks’ digital onboarding problem (American Banker), Rated: AAA
Since 2014 the neobank Seed has been reimagining one of the sleepier areas of banking: deposit accounts for small businesses.
Rather than walk into a branch — Seed, of course, has none — yoga instructors, food truck owners and other would-be customers can apply for accounts in less than five minutes on the startup’s web or mobile app. If approved, they receive a business debit card in the mail.
Now Seed, led by veterans of the fintech Simple, is selling banks software to help them solve one of their most pressing problems: finding a way to open accounts online as branch transactions continue to decline.
Lendio Franchise Announced in Clemson Region (Lendio), Rated: A
Lendio, the marketplace for small business loans, today announced the opening of a new Lendio franchise in the Clemson, South Carolina Region. Through the Lendio franchise program, Andy Ronemus will help local businesses in the community apply for loans, review their options and secure funding, easing the financial hurdles for small business owners.
In A Time of Need, A Woman Rises To Disrupt Fintech In Puerto Rico (Forbes), Rated: A
Fintech Startup Magilla Wants to Be the Match.com of Loans (Big Law Business), Rated: A
Since its launch in January 2016, Sacramento-based startup Magilla Loans says it’s originated more than $5 billion in loans and is changing the way lenders connect with borrowers. The platform can shrink into a few days what can often be a weeks- or months-long process of loan applications, data submissions and waiting just to get a loan term sheet.
Crowdlending helped Shorewood business woman’s dreams come true (tmj4), Rated: A
One Shorewood businesswoman did this all on a website called Kiva.
Shelia Long’s business is a workspace that helps ladies who work from home come together to get inspired.
“It was so great as the loans were coming in you can see like Switzerland, Boston, Carlsbad, Texas,” said Shelia Long.
One-hundred-thirty-seven people in total used PayPal to help her get to a goal of raising $8,000 at zero-percent interest.
Validus Specialty Launches Package Policy for Fintech Companies (Crowdfund Insider), Rated: A
Validus Specialty Underwriting Services, Inc. (Validus Specialty) announced on Thursday a comprehensive package policy specifically designed for private U.S. fintech companies. According to the company, the solution is designed to address Fintech’s complex risk management needs, which are traditionally underserved by incompatible and inadequate policy forms.
What’s next for marketplace ABS? Revolvers, ETFs & IOs (Asset Securitization Report), Rated: A
Last year, marketplace lenders learned that maintaining diverse sources of funding is just as important as managing the credit risk in their loans.
LendingClub, Marlette Funding and others developed their own securitization platforms, rather than relying on whole-loan sales to large investors. They also invited some of these investors to contribute seasoned loans to collateral pools for these in-house deals.
INSTITUTIONAL INVESTORS WARY OF PASSIVITY (All About Alpha), Rated: AAA
Geopolitical events are the most worrisome prospect on the minds of the decision makers at institutions looking ahead to 2018. The percentage of respondents who believe such events will have a negative impact this year is at 74%. The second most worrisome? Asset bubbles (65%).
More than three fifths (63%) of those surveyed said that the growth of passive investing has increased systemic valuation risk: 59% believe that flows into passive strategies artificially suppress volatility.
In 2015, Natixis found that 64% of institutions said they were upping their investments with active managers. In 2016, that number rose to 67%. In the latest survey it rose again, to 68%.
Be cautious when seeking income (Money Week), Rated: A
But Square Pie had sold bonds on the Crowdcube platform, offering lenders 8% a year. It illustrates why so many people are suspicious of mini-bonds (debt issued by small, retail-orientated firms). Anyone thinking of lending to just the one relatively new business has to be aware of the risks – and then ask: is 8% enough?
A more diversified option
The latest offering in this category comes from a platform called Goji, which aggregates a variety of direct-lending and peer-to-peer (P2P) platforms. It has just brought out a Renewables Lending Bond, which pays out anything from 5.5% for a three-year term (with regular income) to 7.6% over five years, where the interest is rolled up at repayment. The underlying assets are provided by a direct lender called Prestige Group, which lends to clean-energy projects.
The book of loans – around 39 – has an average duration of four years, with a typical loan-to-value ratio of between 70% and 80%.
2018 LightStream Home Improvement Survey (PR Newswire), Rated: A
More than half (58 percent) of homeowners are planning to spend money on home improvement projects in 2018, according to the fifth annual LightStream Home Improvement Survey. LightStream is the national online lending division of SunTrust Banks, Inc. (NYSE: STI). Budgets for renovations are on the rise: among homeowners planning renovations, 45 percent will spend $5,000 or more — an all-time survey high. Those planning to spend $35,000 or more doubled from 2017.
The survey shows robust enthusiasm for renovation, as well as a thoughtful desire to balance a home’s needs and the homeowners’ budget, so they have the financial confidence to move forward. Specifically, the survey revealed the following trends:
- Home “Sweat” Home
The majority of homeowners plan to invest sweat equity, as 65 percent say they’ll do at least some of the work themselves. The 18-34 group is particularly fond of do-it-yourself projects, with 70 percent planning to work on at least a portion of their renovation.
- Staying — and Aging — in Place
Only seven percent of homeowners are renovating to prepare their homes to be sold, the lowest percentage since 2015. Instead, 14 percent of homeowners across all age groups — not just baby boomers — are citing “aging in place” as a reason for making a home improvement. Even respondents aged 18 to 34 (11 percent) and 35 to 44 (10 percent) say they’re renovating “to prepare my home so I can stay in it as I get older.”
- Tax Reform Boosting Budgets
With recent passage of tax reform, homeowners have already begun calculating how the changes might affect what they spend on home improvements. One in four homeowners who have set a budget for renovation projects stated that tax reform has had an impact, with 18 percent increasing their budget and seven percent decreasing it.
- Paying for Projects
The majority of homeowners (62 percent) plan to pay for projects, at least in part, by using savings. Additional payment strategies were further revealed. Intent to fund through home equity lines of credit (HELOC) jumped from 10 to 13 percent. “U.S. economic growth and limited housing inventory have contributed to healthy home equity gains,” said Ellen Koebler, SunTrust head of consumer solutions. “HELOCs can offer a financial solution for many homeowners, as accrued value may be available to tap for renovations.”
- Home “Sweat” Home
At the same time, the percentage of people intending to use a home improvement loan has grown 29 percent from 2017 with 54 percent more 18- to 34-year-olds planning to fund projects through home improvement financing.
Crowdfunding your way to homeownership (Mic), Rated: A
According to recent research from the National Association of Realtors®, 24% of buyers under age 36 saved for their down payment for more than two years.
NAR research also found that 25% of homebuyers ages 36 and younger used a gift from relatives or friends for some or all of their down payment.
An estimated 1,500 “nesters” have used Feather the Nest to crowdfund a down payment since 2014, according to company president Beth Butler, with an average goal of $10,000 to $15,000.
JPMC’s FinLab Launches $ 3M Contest For FinTech Startups (PYMNTS), Rated: B
To help identify FinTech products that may improve the financial health of underserved populations in the U.S., the Financial Solutions Lab (FinLab) launched its fourth annual $3 million challenge. The lab focuses on products that meet the financial needs of overlooked populations, JPMorgan Chase said in an announcement.
Accounts in Transit (O’Dwyer PR), Rated: B
Kwittken signs up Laurel Road, online lender of student loans, personal loans and mortgages. Aaron Kwittken’s firm will be responsible for raising awareness of the company’s products through content marketing, brand activations, thought leadership and traditional media relations. Laurel Road, which is part of Darien Rowayton Bank, recently surpassed $3 billion in student loan originations.
Keeping the little guys in the loop: How Funding Circle hopes to fix the financial system (City A.M.), Rated: AAA
“When we think about the people we hire, it’s all about energy,” says Funding Circle co-founder James Meekings. “We want staff to share their excitement about what they do with others in the office – even if they’re talking about tax.”
“Even though we now have 800 employees, we still feel like a small business. We still push for opportunity and for people to be creative.”
VPC and Ranger funds see dividends tick up, but remain below target (AltFi), Rated: AAA
The £219m Ranger Direct Lending and £337m VPC Specialty Lending investment trusts have announced their latest quarterly dividends with both portfolios showing an uptick since their last pay-outs.
Leeds offers business loans through peer-to-peer platform (Room151), Rated: A
Leeds City Council is to use a peer-to-peer lending platform to lend money to local businesses.
The authority has decided to use the rebuildingsociety.com platform — based in the city — to provide money for small and medium sized businesses with an LS postcode.
Isas 2018: Innovative Finance Isas hit stumbling blocks (Financial Times), Rated: A
Innovative finance Isas (IF Isas) offer the promise of a good return, sheltered from tax, to investors willing to take on the higher risks of the peer to peer (P2P) finance market.
The market has taken longer than expected to ignite, however, as providers struggle to match growing demand with limited supply. Many new investors will find the door shut, at least for now.
Growing consumer indebtedness in the UK combined with the prospect of rising interest rates could push up default rates on loans, sharpening the dangers for those invested in the highest-risk P2P products.
How does the Isa allowance actually work? (Which?), Rated: B
For the tax year 2017-18, the maximum amount you can pay into one – or a combination – of Isas held in your name, is £20,000.
Once the new tax year for 2018-19 begins on 6 April, your allowance resets – once again to £20,000.
There are five main types of Isas. The current annual limits are as follows:
- Help to Buy Isa: Money can only be used to buy your first home, and savings receive a government bonus of 25%. You can save £1,200 in the first month, then £200 per month thereafter. Therefore, in the first year you will have a limit of £3,400. In the following years the limit will be £2,400.
- Lifetime Isa: Expressly for first-time buyers or to be used in retirement once the account holder has reached the age of 60. There’s a 25% government bonus on savings up until the account holder is 50 years old. You can pay in up to £4,000 per year.
- Cash Isa: A traditional savings account – money you pay in grows with the provider’s interest rate. You can pay in up to £20,000.
- Stocks & shares Isa: Money you deposit is invested in stocks & shares by the provider. Returns can be higher, but so is the risk that you may end up with less money than you paid in. There will also usually be fees involved for managing your investments. You can pay in up to £20,000.
- Innovative finance Isa: Money paid in is invested in Peer-to-Peer (P2P) lending platforms, and you receive the interest when this loan is repaid. There is also some risk involved. You can pay in up to £20,000.
Klarna’s profits driven by growth in Nordics and Germany (Financial Times), Rated: AAA
The Swedish group posted a 27 per cent increase in revenues to SKr4.53bn ($546m) while net profit more than tripled to SKr346m. Klarna processed about €18bn in online transactions last year, an increase of 42 per cent.
Klarna reports double-digit sales growth (Finextra), Rated: A
As a result, 89,000 retailers globally now use Klarna products, this represents a 20% growth compared to the previous year. Available in 14 countries, retailers are increasingly adopting Klarna solutions which makes the payment processes as smooth as possible for consumers. As a result of the surge in retailer adoption, Klarna now handles 10% of all online payments in Northern Europe.
How Banking Institutions Can be Decentralized (CoinTelegraph), Rated: AAA
Decentralized banking is a term that has been construed in the wake of the cryptocurrency boom.
Cryptobanks are decentralized platforms that provide the usual services that centralized banks provide, primarily lending services and credit scoring, but essentially cuts out all of the middlemen that a centralized bank uses. The people needed in a bank to approve loans and structure financial data are replaced in a crypto banking ecosystem by smart contracts and p2p, peer-to-peer, services.
What kind of technologies do crypto banks use?
P2P, Blockchain, cryptocurrencies, Machine Learning, Big Data and smart contracts are used in crypto banking.
All transactions are recorded on the Blockchain.
Machine Learning Big Data.These technologies help to automate the lending process and cut through bureaucracy. AI can work 24/7 and match lenders with borrowers.
Do crypto banks have their own native currency?
Yes. Native cryptocurrencies help make the bank global.
Datarius, the first social p2p crypto bank, for instance, uses their own native token DTRC for all transactions. This helps create a standard for a global payment system within the p2p lending process.
What is social lending?
Thanks to Big Data and AI, crypto banks can see beyond a borrower’s credit score to identify their level of trust. Listings can include Trust Limit, Trust Management and User Ratings which helps AI decide if the participant is justified in borrowing from a specific lender.
Crowdlending: Anatomy of a successful strategy (EurekAlert!), Rated: A
The entrepreneur’s strategy for achieving this can be summarized in three stages. The first consisted of bypassing the banking monopoly on his platform using “cash vouchers,” a tool dating from 1937 that had long been forgotten. They allow personal loans to be made without a bank as intermediary. Secondly, by collaborating with future competitors, the public authorities and the sector’s regulators(2), the entrepreneur contributed to the development of a long-term crowdlending regulation in France. This collaboration relies on the creation of a meta-organization(3) called “Financement Participatif France” (FPF), which worked to define the status of “Intermédiaire en Financement Participatif” (IFP, equivalent to “crowdlending financing intermediary” in English), which regulates this new market.
Smartag International Signs Agreement to Provide Fintech Solutions to Rural Indonesia (PR Newswire), Rated: A
Smartag International, Inc. entered into a joint venture agreement with PT. Supratama Makmur Sejahtera (“PTSMS”), an Indonesian Fintech company to form a Joint Venture Indonesian PMA company in which Smartag will own 51% equity and PTSMS will own 49%. This follows an earlier MOU signed on October 12, 2017 between PTSMS and PT Rijan Dinamis Selaras (“RDS”) representing Pondok Pesantren Riyadhul Jannah Pacer Mojokerjo, founder of Consultative Assembly of Indonesian Boarding Schools which has a network of 28,000 boarding schools to undertake a Fintech project (the “Indonesian Project”).