News Comments Today’s main news: LendingClub restructures SME lending. Funding Circle lowers return projections. RateSetter receives Queen’s Award for Enterprise. SoFi could get $500M funding from Qatar. Today’s main analysis: How personal loans impact credit scores a year into repayment. Today’s thought-provoking articles: Employer payday loans and continuous billing using today’s technology. Interview with Deserve’s […]
How to get an early paycheck. The audience here is clearly employees, but it’s an interesting read for lenders too. It mentions several employers using technology to pay employees by the day, and there’s an interesting segment on continuous billing at utility companies. Some interesting insights into using technology to deliver innovative services that 20th century technology was limited by.
US peer-to-peer lending pioneer Lending Club has closed the doors on its in-house small business lending operation, reports Julie Muhn at Finovate.
Opportunity Fund, a non-profit small business lender; Funding Circle, one of the largest alternative small business lending platforms in the US; and Lending Club have teamed up to offer Lending Club’s small business clients’ access to credit. Businesses can now borrow up to $300,000 for rates as low as 5%.
One year after taking on a personal loan, 52% of borrowers owed less overall on credit cards and personal loans. These borrowers’ balances — the sum credit card and personal loan balances — fell $811 on average.
Among baby boomers who took out personal loans, 56% lowered their overall balances after their first year of repayment, compared with 52% of Generation X and 48% of millennials.
Boomers also lowered their balances by much larger amounts, owing an average $2,048 less after a year. Balance reductions of younger borrowers were more modest: Generation X lowered their overall balance by $338, and millennials reduced their overall balance $250.
A year into repaying a personal loan, credit scores declined slightly for all age groups. Boomers’ credit scores declined the least, with the median falling just 1 point from 669 to 668. The median score of Generation X personal loan borrowers fell 7 points, from 659 to 652. Millennial credit scores fell 10 points, dropping from 661 to 651.
Credit utilization rates — the ratio of the sum of credit card balances to the sum of credit card limits — show a similar trajectory. One month after taking a personal loan, the median utilization rate fell from 35% to 26%. But after the first month, utilization increased. The median utilization rate one year after taking a loan increases to 44%.
Speaking of Walmart, the retailer has partnerships with two fintech startups–Even Responsible Finance and PayActiv–that enable its US workers get part of their salary paid before payday.
Employees can get up to eight drawdowns (called Instapays) on their salary ahead of scheduled payouts. The first eight drawdowns are free to the employees, and then in subsequent use, fees are levied across a personal finance app available through Even.
There’s no reason why billers can’t provide continuous information about what a customer owes, in real time, online or through mobile apps.
The financial system has always struggled with young people. Because the system uses credit history, young people were frequently excluded from credit products because they’re new to the system. If you’re an immigrant or foreign student studying in the US, it’s way worse. Kalpesh Kapadia set out to change a system that was skewed against young people. He’s the co- founder and CEO of Deserve, which offers credit cards to college students at 2500 universities in the US.
To do this, he’s created an analytics-based lending platform that’s also branching out into powering credit cards as a service. We talk about how Deserve is able to underwrite credit-thin files and why he thinks his firm is at an advantage when it comes to competing against Marcus’s credit products and Apple’s new credit card.
According to Forrester Research, business-to-business (B2B) eCommerce is poised to reach over $1.8 trillion by 2023. To help power this explosive growth, Resolve today announced that it has formally spun out of Affirm to launch an automated payments platform offering extended net terms. Early customers using Resolve’s payment automation technology have realized significant increases in B2B sales, growth in order size, and faster sales cycles.
Things are different now. Almost every financial institution has an online presence, and most offer information about car loans on their site. Most also provide an opportunity to apply for financing online, with a growing number able to take car buyers through the entire auto loan process without ever having to visit a bank or credit union branch.
There is $1.5 trillion worth of student loan debt outstanding in the U.S. and it is creating problems.
Admittedly the plan is quite a bit more complex than that, as detailed by Sen. Warren in a Medium post that went live yesterday (April 22). In broad strokes, for students from families with less than $100,000 a year in annual income, $50,000 in student loan forgiveness would be available. The post also calls for “substantial debt cancellation for every person with household income between $100,000 and $250,000.” The Warren plan also calls for the elimination of tuition at all two-year and four-year public institutions of higher learning, and would create a fund of at least $50 billion specifically for historically black colleges and universities. Federals subsidies for for-profit colleges would be banned.
The cost, however, put it out of reach. A single round of IVF rings in at about
dv01 Launches Credit Risk Transfer Market Surveillance Offering (dv01 Email), Rated: A
dv01 today announces the launch of its Credit Risk Transfer (CRT) Market Surveillance offering, which will be showcased on April 25 at the 4th Annual Credit Risk Transfer Symposium in New York.
dv01’s latest offering adds $1.8 trillion of Freddie Mac (STACR) and Fannie Mae (CAS) CRT securitizations to dv01’s modern web-based data analytics platform, furthering their goal of bringing greater transparency to capital markets. Building on the success of dv01’s Market Surveillance offering for consumer loans (launched in 2017), the CRT offering will allow investors to analyze historical performance of CRT deals both individually or as combined deals, perform whole market analysis, and run cash flow scenarios.
As of 2017, approximately 6.5% of households in the U.S., totaling more than eight million, don’t have an account open at an insured bank, according to the Federal Deposit Insurance Corporation. An additional 24.2 million households utilize non-traditional financial services that often make them vulnerable to usurious lending rates.
Equifax Inc., a global data, analytics and technology company has acquired PayNet, a company that provides commercial credit risk underwriting and management solutions to online and alternative finance lenders, and commercial finance and leasing companies in the U.S. and Canadian markets.
Recently a state court in Colorado ruled that securitization trusts that acquire marketplace lender loans originated to Colorado consumers are subject to Colorado jurisdiction. The court’s ruling derailed the attempt by the securitization trusts to escape the ongoing battle between the State of Colorado and marketplace lenders over rates and fees that can be charged to Colorado residents.
In a long-awaited opinion, the U.S. Court of Appeals for the Second Circuit today ruled that borrowers who took out loans from the Native American-affiliated online lender Plain Green can proceed with their nationwide RICO class action in Vermont federal court. The Second Circuit affirmed a May 2016 ruling by District Judge Geoffrey W. Crawford and comes nearly two years after oral argument on Defendants’ appeals. Berman Tabacco and Gravel & Shea PC are Lead Counsel in the case, Gingras, et al. v. Rosette, et al., No. 5:15-cv-00101-gwc (D. Vt.).
White Oak Global Advisors, LLC (“White Oak”) today announced it acted as sole lender and administrative agent to provide a $30 million senior credit facility to Danimer Scientific Holdings, LLC (“Danimer”), a manufacturer of specialty compostable and biodegradable plastics. This transaction expands on White Oak’s ESG-lending platform, which aims to finance small and medium-sized enterprises (“SMEs”) that are developing solutions to help address environmental and social issues around the world.
Online Lender Upgrade, a Fintech serving the consumer credit market, has been named a “Best Place to Work in the Bay Area’”by the San Francisco Business Times and Silicon Valley Business Journal. Upgrade is the creation of CEO Renaud Laplanche, the founder of publicly traded marketplace lending platform LendingClub. This is the second time Upgrade has been recognized as a nice place to work in the notoriously work focused bay area.
It’s difficult to study the phenomenon very precisely. We do observe shadow lending in various forms growing throughout the world, including in the U.S., and, if left unregulated, this type of lending could mean that household and financial institution leverage keeps rising in a way that is both unregulated and undocumented.
Because the Chinese government believed that the shadow sector was partly responsible for the crash, it seized the data from some shadow lending platforms and allowed us to analyze it.
Q: Who’s providing the financing in these situations?
The exact sources of financing are not well known. Some of it could be other stock investors that have put up their own holdings as collateral and borrowed against it and then lend out the proceeds on the shadow market. It could also be peer-to-peer lending platforms. It’s also believed that some of the financial institutions and brokerage firms within China may have also lent out within the shadow sector.
The tit-for-tat tariff war with the US and the broad hostility is seen as a major risk endangering China’s “economic security”, along with a property bubble, local debt, unemployment and online financing including peer-to-peer lending, according to the latest edition of China’s Economic Security Outlook.
French financial services giant Societe Generale Group has issued about $112 million worth of bonds in the form of a security token on the public ethereum blockchain.
Announced today, a subsidiary called Societe Generale SFH used the OFH token (obligations de financement de l’habitat, or home financing obligations) to represent 100 million euros of covered bonds, a type of security that is backed by specific assets but remains on the issuer’s balance sheet.
The bond has a five-year maturity with a 12-month extension period, Moody’s said.
Fintech startup Social Finance Inc. is in the final stages of closing a funding round from the Qatar Investment Authority and others, according to four people familiar with the matter.
The new round, which could close as soon as this week, is said to value the startup at an amount similar to the $4.3 billion valuation of its 2017 funding round, led by Silver Lake. Two of the people said that in order to achieve the same valuation, investors were asking for more protections should the company raise money or sell itself for a lower price tag in the future. The terms of the deal have not been finalized and could still change, the people said. All of the people asked not to be identified because the discussions are private.
Fintech industry funding has already reached new highs globally in 2018, with overall funding hitting $32.6 billion at the end of Q3.
What it does: Brex is a US-based corporate credit card provider, which initially focused on serving startups.
Why it’s hot in 2019: Raisin became a fintech unicorn after raising $114 million in January, and has since then formed partnerships with Commerzbank and ClearScore. Additionally, the startup partnered with Starling Bank in 2018 to launch bank accounts in the UK
Why it’s hot in 2019: While the company previously focused on loans, including student loans, in 2019 it has made some significant moves into the wealth management space, and launched both free ETFs and an investment product, dubbed SoFi Invest. As it becomes a more rounded financial product, SoFi will be worth watching in the next few years.
What it does: Lending Express is a US-based lending platform, which focuses on SMBs, and helps them gain access to more funding by providing them with advice.
Why it’s hot in 2019: In January, Volt became Australia’s first fully licensed neobank. The challenger bank will first offer a suite of retail banking products, as well as budgeting and account aggregation tools, and plans to enter the SMB banking sector in 2020.
Fresh off a $100 million funding round last year, the British startup OakNorth is preparing to license its business lending technology to U.S. banks and beyond.
The 3-year-old small-business lender is entering the U.S. at a time when fintechs and banks have stepped up their digital business lending efforts. Though OakNorth has not announced any official partnerships in the U.S., CEO Rishi Khosla said there’s appetite for what the firm is offering.
Crypto lending startup BlockFi has gathered another $18 million of bitcoin and ether deposits since last month, bringing its total interest-earning accounts to $53 million.
The company also lowered its minimum balance to earn interest on bitcoin from 1 BTC to 0.5 BTC and expanded its operations to India, meaning its service is now available globally, except for territories sanctioned by the U.S., U.K. and E.U.
The penetration of the internet of things and devices such as smartphones has brought in many advancements. This has made economic activities available at the touch of a button. Among the various sectors, the digital world has evolved the way traditional banking processes are being carried out. A growing number of businesses and individuals are filling applications online for taking loans rather than getting into the lengthy lending process.
“[ConsenSys Labs] has put up a few bounties in the vein of rethinking the lending market, and thinking about a peer-to-peer lending and a decentralized credit score system,” explains ConsenSys’ Operations Lead Vivek Singh. Instead of relying on centralized credit agencies, such a system—if successful—could allow borrowers to leverage their social connections into a sort of decentralized credit score.
Money Loji, a modern money ending platform, has launched its App, which offers quickest and the most secure loans to salaried professionals for an immediate requirement with flexible repayment options starting from 7 days to a maximum of 90 days. They follow a unique three-step process – application, approval, disbursement which is carried out within 3-4 minutes. The eligibility criterion is a minimum in-hand salary of Rs 20,000/month and a minimum age of 23 years. The application requires the users to upload an identity proof, an address proof, last 3 months bank statement alongside the salary slips.
ConsenSys ventures backed Nuo.Network, which is a non-custodial lending platform recently made it to the top 5, dollar Defi (Decentralized Finance) projects and it presently the largest lending platform based in Asia. In the past month, the value of loans given has doubled, this is partly due to the growth of DAI reserves, which is now about 500,000 USD and the surge in Maker stability fees.
The archipelago is viewed as an ideal market to benefit from the services offered by the enterprise. According to the Ping An Group, Indonesia, at around US$27 billion in 2018, is the largest and fastest-growing internet economy in Southeast Asia.
It fell to a mobile phone company more than a decade ago to financially empower tens of millions of Africans who found themselves passed over by the traditional banking sector. Now, some 12 years after Vodafone co-founded M-Pesa, the mobile payments venture that took east Africa by storm, banks are upping their game to improve financial inclusion rates across Africa and the Middle East, as technology widens their ability to deliver banking services at lower costs.
In east Africa, the Catalyst Fund has backed Sokowatch, a three-year-old Kenya-based fintech that enables small retailers to order goods from suppliers registered on the mobile-focused platform and receive same-day deliveries. It also offers access to credit. The platform has already expanded into Tanzania and Rwanda.
In the Middle East, Citigroup has given $5m to a microloans fund in Jordan that helps give women access to credit. The financial support will help provide loans to around 10,000 additional women.
Around 7m Iraqis are now receiving welfare benefits or public sector salaries electronically, as the government replaces cumbersome cash dispersals with biometric debit cards that can be used at ATMs and in shops.
Only 23 per cent of Iraqis aged 15 and over held an account with a financial institution in 2017, according to the World Bank — although that figure has doubled since 2011.
Users will now be able to borrow in EUR, USD, or Stablecoin against their Dash as well as use the site to covert Dash to any crypto or fiat on the platform and withdraw to their crypto or fiat wallet. If a user enters their credit/debit card on the platform then they can “convert DASH to fiat and instantly withdraw that amount onto their personal cards, adding a unique “real world” utility for crypto”.
Toronto is another significant fintech force in North America, and the leading fintech zone in Canada, because of the high concentration of financial organizations and technology development in Ontario. Last year Toronto accounted for CA$221 million (US$165 million) in total fintech investments across 25 deals, according to a recent report from Toronto Financial International (TFI).
Toronto ranks ninth out of the top 15 global fintech hubs, according to TFI. Currently the region has more than 190 fintech companies and 20 incubator/accelerators in operation. Payments represent the single leading category of fintech investment in the Toronto area, and combined with lending and digital currencies/FX firms it accounts for half of all local fintech activity, according to TFI.
FinanZero, a Brazilian fintech that operates as a consumer loan broker, received a new round of investment, raising USD 11 millionfrom Atlant Fonder, Dunross & Co and Vostok Emerging Finance, among other investors.
News Comments Today’s main news: Yirendai’s Q2 2018 financial results. Crowdstacker exceeds 50M GBP in funds raised for British businesses. Data breach complaints soar in the UK. Flender raises 10M Euro for SME lending. Google partners with banks on digital lending in India. Today’s main analysis: Moody’s says Q2 2018 has a strong outlook. Today’s thought-provoking articles: If Wonga […]
PayPal executives are in talks about potentially eliminating the ability for users to publicly post and view transactions on Venmo, its peer-to-peer payments app, Bloomberg reported, citing a person familiar with the matter.
2Q 2018: Strong performance in line with positive outlook (Moody’s Email) Rated: AAA
The PMIs reported strong results in the second quarter of 2018, reflecting growth in new production, earned premiums from high-quality recent vintage business and lower incurred losses. Although mortgage rates have begun trending higher and housing affordability lower, we believe credit fundamentals will remain positive for the sector, and likely drive healthy performance through the second half of the year.
Other key areas the report looks at in-depth include:
New business volume rises in Q2. In Q2 2018, PMIs produced about $80.3 billion of new insurance written (NIW), up 14% from Q2 2017. For the first half of 2018, NIW totaled $138.8 billion while production was also up 14% on the year.
Premium rate cuts highlight competitive pressure. In April 2018, MGIC (senior Ba2) reduced its premium rates on its most popular policies by about 11%, effective June 2018. Competitors, inspired by corporate tax cuts, then cut rates themselves, essentially wiping out gains from the tax cuts. Given the current high persistency rates and expected ordinary loan amortization profiles, we do not expect the new lower premium rate business to become a majority of in-force business for several years.
GSE pilot programs signal potential changes in industry dynamics. In March 2018, Arch Capital Group (ACGL, senior Baa1 stable) and Freddie Mac (FMCC, senior Aaa stable) announced a new risk transfer pilot program, IMAGIN (Integrated Mortgage Insurance) through a newly formed Arch subsidiary that will cede 100% of the risk exposure to multiline reinsurers as an alternative to traditional mortgage insurance. A few months later, in July, Fannie Mae (FNMA, senior Aaa stable) announced a pilot program for enterprise paid mortgage insurance (EPMI). Both programs effectively serve as substitutes for single premium MI policies and highlight the evolution of the mortgage risk transfer market.
The value of residential real estate in New York is greater than the GDP of all but six countries, according to a new study from online lenderLendingTree, which ranks the most valuable cities in the U.S. based on real estate values.
Serent Capital, a San Francisco-based private equity firm, and owner of Docutech, just made its 12th investment in fintech and fourth in the lending technology market.
Serent recently announced it made a minority investment in GDS Link, a global provider of credit risk management software for the financial services industry. Serent is already investing in Optimal Blue and Mercury Network.
GDS Link helps clients efficiently manage credit risk strategies and improves lending and account management efforts.
Crowdstacker, a UK-based peer-to-peer (P2P) lending platform, recently announced it has exceeded £50 million in funds raised for UK businesses that are featured on its portal. According to the online lender, 100% of the P2P lending funds raised for British businesses through Crowdstacker has come directly from Crowdstacker’s “crowd.”
Some of the technology industry’s most respected investors face losing tens of millions of pounds as Wonga stands on the edge of failure.
Early investors including Accel, Balderton Capital and Greylock Partners are among the backers of the sub-prime lender that face losing their entire investment as it teeters close to collapse amid a rise in compensation claims.
Wonga’s backers had put about £90 million into the payday lender, including £10 million in the past month. However, if Wonga is placed into administration, shareholders are likely to be left with nothing as its assets are sold off to pay creditors, including customers with outstanding claims for redress.
Research from StepChange Debt Charity found that an estimated 1.1million people used high cost credit for everyday household costs in 2016. A recent update of this research found that this had increased in 2017 to an estimated 1.4million people. It’s becoming a bigger and bigger problem.
This has led to a situation where one in four working adults in the UK are now unable to afford an unexpected £500 bill and a growing number of low income households are becoming reliant on credit to cover basic needs.
The Information Commissioner’s Office (ICO) said they received more than 6,200 complaints in the first 6 months of GDPR; the majority of complaints were from customers saying their data was shared without permission and companies self reporting cases where data was accessed.
The £332m VPC Specialty Lending investment trust has announced its second consecutive dividend of 2p per share this year, its target level, following a two year turnaround amid lower than expected returns, according to an investor update.
Following on from recording its highest monthly return to date for May 2018 the closed-ended fund has declared an interim dividend of 2p pence per share for the three-month period to 30 June 2018.
Small business (SMBs) are distinct from other customer groups, Tide CEO Dr. Oliver Prill told Karen Webster during this week’s Monday Conversation, with a specific set of product and service needs that often go unmet because they are so unique. That means small businesses of all sizes — particularly the small businesses with fewer than 10 employees — simply deal with inefficiencies in their work flow that are actually rather damaging.
UK based digital bank Starling Bank is looking to raise additional capital as the bank has seen user growth reach more than 200,000, up from 43,000 in November.
The bank is also making significant progress on account balances, Starling accounts averaged £420 while competitor Monzo came in at less than £150. The fresh capital raise will be led by existing investor Harald McPike who owns more than 50 percent already and is a Bahamas based hedge fund investor.
Royal Bank of Scotland (RBS) has reportedly enlisted the help of challenger bank Starling in its efforts to develop a digital bank of its own.
The news, reported by The Times newspaper, came as a result of a letter to shareholders from Starling’s chief executive Anne Boden which stated that it has signed a contract “to provide payment services to support new initiatives at RBS/NatWest”.
In the second quarter of 2018, Yirendai facilitated RMB 11,736.2 million (US$1,773.6 million) of loans to 177,754 qualified individual borrowers through its online marketplace, representing a year-over-year growth of 38%; 23.4% of loan volume were generated by repeat borrowers who have successfully borrowed on Yirendai’s platform before; 76.3% of the borrowers were acquired from online channels; 100% of the loan volume originated from online channels was facilitated through mobile.
In the second quarter of 2018, Yirendai facilitated 202,380 investors with total investment amount of RMB 12,175.4 million (US$1,840.0 million), 100% of which was facilitated through its online platform and 96% of which was facilitated through its mobile application.
X Financial, which operates a peer-to-peer lending platform in China, filed on Tuesday with the SEC to raise up to $250 million in an initial public offering.
The Shenzhen, China-based companywas founded in 2014 and booked $445 million in revenue for the 12 months ended June 30, 2018. It plans to list on the NYSE under the symbol XYF. X Financial filed confidentially on January 8, 2018. Deutsche Bank and Morgan Stanley are the joint bookrunners on the deal. No pricing terms were disclosed.
China’s P2P industry has seen a quick rise and fall over the past year, causing some panic and chaos.
Earlier this week, China’s New Fortune magazine reported of one case where an investor had just invested 360,000 RMB (±US$52,700) into P2P platform Guojinbao, when they discovered the platform was already abandoned the day before, and there was no way to get their money back. It is just one among many recent cases.
Irish peer-to-peer lender Flender has reportedly raised €10 million through its latest funding round to lend to small and medium-sized enterprises (SMEs). Flender, which was launched in early 2017, is authorized and regulated by the Financial Conduct Authority under Registration Number 657861. The online lender is now on a mission to enable businesses and consumers the ability to borrow money through their existing networks of friends, family, and customers.
Flender also reported that it intends to offer established small businesses an innovative new way to access finance by leveraging their loyal customer base. The lender will facilitate and formalize an existing and large market of social lending across the UK and Ireland.
UBS Asset Management’s latest pension fund indicator report highlights the propensity of Australian superannuation funds to invest a substantial portion of retirement savings in “risker” assets such as equities.
According to the report, the asset allocation of Australian superannuation funds is heavily geared towards equities, with 45% of assets allocated to equities. The asset manager said Australia’s equity allocation is almost double its bond allocation, which attracts 26% of assets.
The paper distinguishes among five strategies, then adds a catch-all “other” category. The five are:
Business Development Companies. The BDCs operate under specific regulations mandating their “significant managerial assistance” to their debtor companies. The majority of BDCs are treated as RICs for tax purposes, which involves additional regulatory oversight.
Senior Loan Funds. These are closed-end vehicles that make first or second lien loans to small- and mid-sized companies. They use floating rate spreads composed of a risk premium and the benchmark rate, and typically target gross returns in the neighborhood of 10%.
Mezzanine Funds. These are also closed-end vehicles. Typically, they make junior capital investments (often a hybrid between debt and equity) in small- and medium sized companies funding acquisitions, growth, recapitalizations, or buyouts. They typically target return in the mid- to upper teens, given their position subordinate to the senior liens.
Distressed Debt Funds. These can be either closed- or open-end vehicles. They invest in the debt securities of mid- to large-sized companies that are experiencing financial distress, seeking deeply discounted purchases. There are a variety of strategies involved under this broad heading, including loan-to-own or turnaround lending.
Special Situation Funds. These are typically closed-end vehicles. They, too, target mid- to large-sized companies in tight circumstances. They have a much broader mandate than the distressed debt funds, investing across the capital structure.
Cryptocurrency has significantly opened a new world in financial sector which was primarily owned by bank namely lending and borrowing capital. Even through peer to peer lending and borrowing has developed in the recent years in fiat currency space, it’s only recently hat options for lending and borrowing cryptocurrencies are on the rise. Getmoder Foundation provides reliable platform for this recent practical option.
Getmoder is a known open-platform for lending and borrowing cryptocurrencies and digital assets. This platform allows lenders and borrowers to enter to fully collateralized crypto versus crypto lending agreement. With Getmoder lenders will be able to earn increased interest income on their long-term digital assets investments.
Have you heard about Prospa? This startup shot to Australian Financial Review fame in early June this year. It is an online lender which offers unsecured business loans to small businesses which big lenders consider to be too risky.Their own business was going remarkably well. So well in fact that Prospa was getting ready to take the ASX by storm and launch an IPO. The excitement was surely palpable, the founders would have been so proud of themselves and their strong team for getting to this point. The dollars were about to roll in!
And then, right before the IPO was about to take place, ASIC raised concerns purportedly regarding Prospa’s potentially unfair contract terms. This is not surprising given the climate of industry-wide reviews of lending practices. This concern led to postponement of the IPO on 6 June 2018, only 15 minutes prior to launch. A $576 million dollar ASX float on hold, indefinitely, whilst these standard form contracts were scrutinised. The issue? Potentially unfair terms in their standard form contracts contrary to the Australian Consumer Law.
From Facebook Inc.’s WhatsApp to Jack Ma’s Ant Financial, internet giants are joining a race to provide financial services in the world’s fastest-growing mobile arena. Online lending is becoming the next frontier as mobile users look for small loans with minimal paperwork, served to them even without credit ratings as fintech companies use data and algorithms to determine risk.
Bengaluru-based digital lending startup ZestMoney has raised $13.4 Mn in extended Series A round of funding led by Chinese smartphone maker Xiaomi.Existing investors PayU, Ribbit Capital and Omidyar Network also participated in the round.
The company plans to strengthen its technology and data science capabilities as well as expand use cases for the core ZestMoney Affordability Product.
Over the past two years, digitisation and the rising penetration of internet in India have irrevocably transformed the lending process from being extremely long and complex to a quick and technologically-exercise. The emergence of digital lending has challenged the stronghold of traditional financial institutions as the chief credit enablers in the economy while presenting consumers with an opportunity to access credit in a simplified and efficient manner.
Credit lending in India: Then and now
For decades, the credit lending market in India has been dominated by traditional banks and Non-banking financial companies (NBFC’s). Their complex policies and methods of operation have made it extremely difficult for the majority of Indians to avail credit. As a result, the gap between the demand for and supply of credit has amplified, while the number of underserved consumers in the country has risen exponentially.
Coinhako is just one of the many “fintech” startups flocking to Indonesia. The Indonesian Fintech Association said there are more than 200 fintech companies in the country, including the 31 e-payment providers that have secured licenses from Bank Indonesia and more than 60 peer-to-peer lending companies registered with the Financial Services Authority.
Despite still seeing fintech companies as potential threats, Indonesia’s major banks are also investing in local startups. Bank Mandiri has invested in P2P lending startups Amartha and KoinWorks through its venture capital arm Mandiri Capital Indonesia.
The Institute for Development of Economics and Finance (Indef) said that fintech-based companies offering peer-to-peer lending services can improve Indonesia’s macroeconomics capability.
Indef’s review, done together with the Indonesian Fintech Association (Aftech), estimates that fintech development in Indonesia can contribute up to Rp25.97 trillion to the GDP.
Speaking at the discussion with the theme “Lending Fintech Roles to Indonesia’s Economy” in Jakarta, August 28, Indef economist Bhima Yudhistira Adhinegara said that the Rp25.97 trillion contribution includes both direct and indirect impacts.
News Comments Today’s main news: Kabbage buys Orchard.Ascentium Capital issues $330M securitization.LendingTree reports record Q1 results.Funding Circle issues second MPL deal.Revolut raises $250M, achieves unicorn status.BBVA issues first blockchain loan from a global bank.IOU Financial releases 2017 results. Today’s main analysis: Canadian fintech funding declines 60 percent in Q1. Today’s thought-provoking articles: Where the oldest […]
So, what will become of Matt Burton and his team? Some clues are provided in the press release:
Orchard’s CEO and co-founder, Matt Burton, as well as Chief Analytics Officer and co-founder, David Snitkof, will both join Kabbage in leadership roles upon the closing, helping oversee technology integrations and future innovations. In total, Kabbage will add more than twenty Orchard employees who are predominantly focused on advanced analytics, data science and engineering to its New York City office.
Kathryn Petralia, president and co-founder of Kabbage, said the acquisition will help the company diversify its business and offer more data-driven services to small businesses and financial institutions. It currently works with ING, Santander and Scotia Bank. Kabbage’s U.S.-based loans are issued by Celtic Bank in Salt Lake City.
The Orchard name will not survive. “At closing we will be Kabbage,” Burton said.
Until now, Orchard has been providing loan and portfolio analysis to other online lenders. This business model will be discontinued and those relationships will most likely end. Orchard’s current clients are being told about its sale to Kabbage, Burton said.
Ascentium Capital issued a $330 million small ticket equipment securitization of Ascentium Equipment Receivables 2018-1 Trust.
This represents the company’s ninth securitization since 2012 and the first time a non-investment grade, independent equipment finance company received triple AAA and Aaa ratings from both Standard & Poor’s and Moody’s.
LendingTree, Inc. (NASDAQ: TREE), operator of LendingTree.com today announced results for the quarter ended March 31, 2018.
First Quarter 2018 Business Highlights
Revenue from mortgage products of $73.5 million represents an increase of 17% over first quarter 2017 driven by strong growth in both purchase and refinance revenues at 13% and 18%, respectively. According to Mortgage Bankers Association, originations industry-wide were projected down 4% in the comparable period.
Record revenue from non-mortgage products of $107.6 million in the first quarter represents an increase of 55% over the first quarter 2017.
Revenue from our credit card offerings continued its momentum, growing to $46.1 million in 1Q, up 36% over the first quarter 2017.
Personal loans revenue of $26.0 million grew 53% over first quarter 2017.
Home equity revenue continued to climb, growing 81% over first quarter 2017.
More than 8.0 million consumers have now signed up for free credit scores and savings alerts through My LendingTree. Revenue contribution from MyLendingTree grew 76% in the first quarter compared to the prior year period as new features, such as Credit Analyzer and free credit monitoring, are driving increased engagement.
LendingTree today released the findings of its study on the places that buy the oldest used cars. LendingTree analyzed auto loan offers for borrowers in the top 50 U.S. metros (based on population) to find the average age of used cars financed in each metro, as well as which makes of used cars were most popular.
The national average age of a used car people sought to finance was six years old, but some parts of the country prefer older used cars more than others.
Apps for mobile banking have become some of the most widely used by Americans, according to Citi’s 2018 Mobile Banking Study, released today. The survey of 2,000 U.S. adults found that, measured by top two ranked responses, 31 percent of consumers use their mobile banking app the most, behind only apps for social media (55 percent) and the weather (33 percent).
“Over the past year we’ve witnessed this increase in engagement first-hand, with mobile usage in North America increasing by almost 25 percent, and we don’t see this trend slowing down any time soon.”
Pay attention to both the interest rate advertised, as well as the annual percentage rate (APR), Clements said. If they’re different, the lender is likely factoring additional fees into your annual percentage rate.
You may need to borrow more money than you expected if that’s the case, he said, because the total amount you would receive will be less than you asked for.
Research several lenders before choosing which one you want, he said. And if there are any unfamiliar terms, or any confusion about how much you’ll pay back monthly, ask.
The core systems provider Nymbus is offering a new product for bank customers that want to get in on the burgeoning trend of having a stand-alone, digital brand.
Dubbed SmartLaunch, the offering enables financial institutions to create a digital brand under their existing charter in as little as 90 days, according to Nymbus. The product is built on Nymbus’ cloud-based SmartCore platform, and the company says it provides banks that use the service with all outsourced operational and technological requirements to run the digital bank. Also included are client support, digital marketing and website services.
RealtyMogul, a pioneer in providing private real estate to discerning investors, announced that MogulREIT II, its real estate investment trust or “REIT,” has completed investments in multifamily apartment complexes in Fort Worth, Texas and San Antonio, Texas, consisting of over 450 units.
The properties were acquired through a partnership with Comunidad Realty Partners, a dynamic real estate investment firm specializing in workforce housing communities in culturally diverse neighborhoods.
Loans on PeerStreet are sourced and curated from vetted private lenders throughout the United States. These lenders have real estate expertise and established borrower relationships. To date, PeerStreet has helped to finance over $900 million in loans by using this partnership approach. The properties they help finance are typically smaller in value – a segment of the industry that is usually overlooked by big institutional money. Loans range from 6 to 24 months and are first lien so investors have a good degree of security. Most of the loans are below a loan to value of 75%. About a year ago, PeerStreet announced having funded $300 million in loans. In less than 12 months, PeerStreet has funded double that number.
PeerStreet is doing small loans commercial, some multi family and mixed used properties. The largest loan size is around $5 million but there can be exceptions. The rate of return for investors during 2017 stood, on average, at 8% net of fees. As for defaults, so far only five loans have gone into foreclosure but they have not experienced any loss of principle – a positive metric.
Citizens Bank, working with Infosys as its implementation partner, has selected Finastra to power the trade finance solution it offers to its corporate clients. This new capability will enable Citizens’ corporate clients to digitize traditionally paper-based trade processes, leading to increased efficiencies and reduced costs.
The new trade finance offering will allow the bank to meet increased client demand. Citizens picked Finastra’s Fusion Trade Innovation for its end-user experience, ability to support all trade products, capacity to integrate with downstream systems through open APIs and its high level of configurability.
However, a new study finds that consumers in the biggest Midwest cities, including Columbus, are much less likely to put alerts on their credit reports than those in other cities, such as Las Vegas, Houston, Miami and New York. The study by online lender Lending Tree was based on a random sample.
Joseph Otting, Comptroller of the Currency, said he believed standards should be relaxed to allow banks back into the small dollar loan market; loans would range from $500 to $5,000 and be paid back in 45 and 90 days; right now payday lenders dominate this space and typically take advantage of borrowers by charging high fees and rolling over the principal; allowing banks back into the market will help to bring more regulation and cut down on abuses.
David Stahl, senior vice president, SunTrust Bank: We acquired an online lender called LightStream two years ago, and that has been a huge opportunity for us. The days of people walking into a bank and applying for a loan are pretty much gone.
This morning, WallStEquities.com observes MoneyGram International Inc. (NASDAQ: MGI), Navient Corp. (NASDAQ: NAVI), Oaktree Specialty Lending Corp. (NASDAQ: OCSL), and On Deck Capital Inc. (NYSE: ONDK). Credit Services companies originate, acquire, and service loans to individuals and corporations. Their products include student loans, mortgages, lines of credit, private equity, and venture capital. All you have to do is sign up today for this free limited time offer by clicking www.wallstequities.com/registration
Covr Financial Technologies, a digital, multi-carrier life insurance platform for financial institutions, announced that Chris Growney, an advisor with venture capital and advisory firm Nyca Partners has joined Covr’s Board of Directors following Nyca’s role in Covr’s June, 2017 fundraising. Growney, a director, advisor and investor in a broad range of start-up and growth companies was most recently the founder of Clearwater Analytics, an investment analytics and accounting software company based in Boise, Idaho.
6th Avenue Capital, LLC (“6th Avenue Capital”) announced today the promotion of Darren Schulman to President, effective immediately. In his new position, Schulman has oversight over originations, underwriting, operations, collections and strategic initiatives. He previously served as Chief Operating Officer, and will continue to report directly to Chief Executive Officer Christine Chang.
The company also announced today that Chang and Schulman have been appointed to the company’s Board of Directors.
Best Egg, the consumer lending brand of Marlette Funding, LLC, is providing both classroom education and other inspiring financially-related activities for Junior Achievement of Delaware (JA of DE). This announcement coincides with National Financial Literacy Month, being celebrated throughout the month of April.
Sole arranger and lead manager Deutsche Bank announced Thursday a £207m UK SME securitization from Funding Circle, Small Business Loan Origination Trust 2018-1, the second ABS offering from the online lender.
In addition to being just the second deal from Funding Circle, and the third European marketplace loan ABS overall, SBOLT 2018-1 marks the first time Kroll Bond Rating Agency has assigned a public rating for a European securitization deal.
Kroll Bond Rating Agency Europe Limited (KBRA) has assigned preliminary ratings to four classes of notes (“Rated Notes”) issued by Small Business Origination Loan Trust 2018-1 DAC (“SBOLT 2018-1”). This is a £206.6 million ABS transaction collateralised by unsecured loans made to small and medium-sized enterprises (“SMEs”) incorporated in the United Kingdom (“UK”).
This transaction represents the second ABS securitisation collateralised by unsecured loans to SMEs originated through the online lending platform operated by Funding Circle Limited (“Funding Circle”), and the first European rated ABS securitisation for KBRA.
Confirmation of that came on Thursday as Revolut became the first of Britain’s digital-only banks to achieve “unicorn” status – in other words, a privately held start-up company with a valuation of more than $1bn (£720m).
Revolut, which was only founded in July 2015, has been valued at $1.7bn (£1.22bn) in its latest funding round.
The bank, which started out as a currency exchange app but later moved into providing personal banking and cryptocurrency trading services, raised $250m (£180m) from backers including DST Global, an investment firm backed by the Russian billionaire Yuri Milner, whose previous early-stage tech investments have included Facebook, Twitter, Airbnb and Spotify.
Ranger Direct Lending (RDL) has criticised shareholder Oaktree Capital Management for trying to force the struggling alternative income fund to wind up.
Oaktree, the second largest shareholder in the fund that invests in and through lending platforms, has made public its correspondence with Ranger, which it described as a ‘sub-scale platform’ with shares ‘too illiquid to attract large institutional investors, especially in light of its persistent trading discount to net asset value (NAV)’.
Goji has now got more than £50m of assets on its platform a little over a year after opening its doors to investors. With over 5,000 customer accounts, our hard earned growth is testament to the work the whole industry has done in selling the asset class to the UK public.
After campaigning hard to change the tax laws to open up the ISA rules so that non-lending platforms could also offer an IFISA, Goji was the first firm to offer investors diversification across a number of platforms through a single Innovative Finance ISA. Goji’s Diversified Lending Bonds target 5%, whilst it’s Renewables Lending Bond targets returns in excess of 8%.
Fat Lama, which announced $10 million in its Series A on Wednesday in a round led by Blossom Capital, says it will use its latest funding to further its reach within the US and to create a mobile-first offering (so far, the site’s mobile app is only available in the UK).
Fat Lama lets users borrow everything from drones to camera equipment to printers.
The site insures any item listed on its site for up to $30,000, and Englander said his company has plans to raise that amount to $50,000 in the near future.
They created ArchOver, a peer-to-peer (P2P) lending platform that allows firms that have been operating for more than two years to borrow money from lenders using its website. Companies borrow a minimum of £250,000, with interest rates starting at 7.7% a year.
Since it launched in the autumn of 2014, ArchOver has helped its lenders to inject more than £65m into British businesses, bringing in more than £2.5m in interest at an average return of 7.3%. In an age when bank savings accounts are paying less than 0.5%, it’s easy to see the attraction for investors who understand the risks as well as the rewards.
Commerce platform Magento is giving merchants the option to activate Klarna instant credit for online checkouts.
Sweden-based Klarna is built into the latest version of Magento Commerce, giving merchants a streamlined path to offer goods consumers may opt to pay for immediately, within 30 days, or longer via installments, Klarna said in a Thursday press release.
Taaleri Plc has decided to exercise its option to acquire an additional 7.3% holding in Fellow Finance Oy, as outlined in the shareholders’ agreement signed in 2015. After the transaction Taaleri’s shareholding in Fellow Finance, which offers a crowdfunding platform for companies and for consumers, will increase to 45.7%. The transaction is scheduled to be realized in April-May.
BBVA has successfully completed the first global corporate loan transaction using blockchain technology from the negotiation of the deal to its signing, in line with their close collaboration to leverage cutting-edge technologies to streamline business processes.
The pilot enabled the closing of a €75 million loan using a solution developed by BBVA based on distributed ledger technology (DLT). This demonstrates how BBVA continues to incorporate innovative and disruptive technology into its customer solutions, including those products that up to now have seen limited digital innovation, as is the case with wholesale finance.
Many of these start-ups, moreover, are equipped with enough cash to be able to compete with their banking counterparts on salaries. According to assessments by recruitment site Glassdoor, for example, a London-based software engineer at online lender Funding Circle will earn a base salary of £51,000 on average, which is equal to the salary paid at Goldman Sachs for a similar role. At UBS, that figure is £59,000, while at challenger Monzo Bank it is currently £64,000. Speaking recently to Bloomberg, co-founder and CEO of property lending platform LendInvest, Christian Faes, asserted that between 30 and 40 percent of the company’s hires are from major financial institutions, while banks also account for 100 percent of its small-risk and compliance team. Similar trends are also being reported by UK online lender MarketInvoice Ltd., where three-quarters of its 85 employees have come from either the financial-services or accountancy space.
In rebranding his company from SelfScore to Deserve, CEO Kalpesh Kapadia explained “we believe that access is everything and everyone deserves a chance to build a positive credit history. So we are making our products available to all students, U.S., and international, and to all those who seek to build and/or maintain a good credit history.”
And now Deserve is $50 million closer to serving this broader population of potential customers. The Accel-backed fintech has just secured a $50 million debt facility from Keystone National Group to drive growth in account receivables and help “jumpstart” first-time credit owners’ financial journeys.
At Bamboo Capital Partners, we believe fintech can help low-income people reduce vulnerabilities, build assets, manage cash flow, and increase income, and we have invested as such: In the last couple of years, we have made four equity investments in fintech companies in Colombia, Mexico, Chile, and Tanzania, committing more than $16 million. Our investees are helping democratize access to finance through peer-to-peer lending platforms (KuboFinanciero), promoting access to insurance (ComparaOnline), enabling mobile payments and savings for low-income people through nano deposits (Movii), and providing a smart data platform for emerging market financial institutions (First Access).
Brazil’s Central Bank on Thursday released rules for credit start-ups that include authorization for peer-to-peer lending, as a way to increase competition in loans in a country with notoriously high interest rates for consumers.
Credit fintechs will be allowed to operate with a minimum capital of 1 million reais ($288,000), according to the new regulation. Peer-to peer lending had not yet been formally authorized in the country. The practice involves lending between individuals through online services.
Canadian fintech companies received $88 million in investment over the first quarter of 2018, representing a 60-percent decline, says a new report from PwC.
Total investment in Canada in the first quarter of 2018 was over $1 billion, which is a 52-percent increase over the last quarter. A total of 105 deals were signed as compared to 81 in the previous quarter, representing a 30-percent increase.
Under the proposed license, BlackChain will retain exclusive rights for use of the technology for P2P Lending. DMG will be entitled to a royalty on commercial revenues generated by Blackchain using the technology. The parties intend to negotiate and finalize a definitive agreement by May 15th, 2018.
Moving this structure onto the blockchain, and powering the investments with cryptocurrency now means the average cryptocurrency investor can easily access the real estate investment market. Global REIT will begin in their home of Dubai, a place where real estate is currently exploding, and acquire assets within the U.A.E, before branching out globally.
Top MBA schools for income-to-debt ratio. AT: “SoFi’s studies on income earners after college are quite interesting and usually deliver a few surprises. For instance, Wharton School of Business MBA graduates earn the highest average income three years after graduation (which isn’t surprising), but the University of Pennsylvania program isn’t even in the top 10 for salary-to-debt ratio. The top school there is the University of Wisconsin-Madison. Brigham Young is second. The question is, what determines the debt part of this scenario? If those attending the top 10 schools for salary-to-debt fund their education with daddy’s money instead of student loans, then this list is an indication of which schools are most likely to be attended by students who do not seek loans for education–on the average.”
Elevate announces FY 2017 results. AT: ” As expected, Elevate is looking good. Y-over-Y growth is at 16%. Y-0ver-Y growth for combined loans receivable is at 28%. Adjusted EBITDA is up 45% compared to the prior year.”
Customers of online lender Social Finance Inc. are missing their loan payments at an unexpectedly high rate, a misstep for a company that has boasted that its focus on high-earning individuals would yield better borrowers.
The privately held San Francisco-based company said it missed its internal fourth-quarter earnings projections, due in part to a markdown in the “value of certain personal loan assets due to lower-than-expected credit performance,” according to a letter to investors that was reviewed by The Wall Street Journal. The company also cited increased hiring costs and expenses related to recent management changes.
SoFi examined 60,000 student loan refinancing applications to determine which MBA programs churn out the highest earners, and which produce grads who are mired in student debt.
According to SoFi, these are the top 10 business schools, ranked by average salary three years after graduation:
1. University of Pennsylvania (Wharton School of Business): $224,034
2. Columbia University: $189,295
3. Stanford University: $186,534
4. Harvard University: $184,463
5. University of California, Berkeley: $171,270
6. Dartmouth College: $169,498
7. Northwestern University: $167,770
8. Cornell University: $167,544
9. University of Chicago: $166,215
10. Massachusetts Institute of Technology: $165,666
These 10 programs have the best salary-to-debt ratio in the US:
Elevate’s Fourth Quarter 2017 Financial Highlights are the following:
Fourth quarter GAAP net loss due to federal tax law charge, but fourth consecutive quarter of net income on an adjusted basis: Fourth quarter 2017 net loss totaled $12.2 million, or $(0.29) per diluted share, reflecting a one-time $12.5 million charge associated with the change in the federal tax law resulting from the tax reform in 2017. Excluding the impact from the tax law change, net income for the fourth quarter of 2017 would have been $0.3 million, or $0.01 per diluted share, versus a net loss of $4.4 million, or $(0.34) per diluted share, for the fourth quarter of 2016. The net loss for full-year 2017 totaled $6.9 million, or $(0.20) per diluted share. Excluding the impact of the federal tax law, net income for full year 2017 would have been $5.5 million, or $0.16 per diluted share, compared to a net loss of $22.4 million, or $(1.74) per diluted share, for full-year 2016.
16% year-over-year revenue growth: Revenues for the fourth quarter of 2017 increased 14.5% from the fourth quarter of 2016 and were up 16.0% for full-year 2017 versus 2016. Revenues totaled $193.4 million in the fourth quarter of 2017 compared to $169.0 million for the prior-year period. Full-year 2017 revenues totaled $673.1 million compared to $580.4 million for full-year 2016.
More than 28% year-over-year growth in combined loans receivable – principal: Combined loans receivable – principal totaled $618.4 million, a 28.5% increase from $481.2 million for the prior-year period. The Rise installment loan and Elastic line of credit combined loans receivable – principal balances as of December 31, 2017 were up 19.6% and 47.4% over the prior year-end balances, respectively.
Adjusted EBITDA up 45% compared to prior year: 2017 Adjusted EBITDA totaled $87.5 million, up 44.7% from $60.4 million in 2016. Adjusted EBITDA margin was 13% for both the fourth quarter of 2017 and full-year 2017.
The ending combined loan loss reserve as a percentage of combined loans receivable was 14.3%, lower than the 16.1% reported for the prior-year period due to the improved credit quality and the continued maturation of the loan portfolio. Charge-offs as a percentage of originations for full-year 2017 continued to trend below previous years at less than 25% of principal originations.
The total number of new customers acquired during the fourth quarter of 2017 was approximately 95,000 with an average customer acquisition cost of $231, below the targeted range of $250-$300. This represented a 34.6% increase over the approximately 70,000 new customers acquired in the fourth quarter of 2016.
Volatility made an abrupt return to capital markets after a nearly 18 month hiatus. Equity markets dropped almost 10% from their peaks, as investors focused on rising US treasury yields. 10-year yields touched 2.88% – nearly a four-year high. Corporate bonds (CDX.IG spreads) widened 5bps this week to 60bps, while high-yield widened 16bps to 353bps.
US consumer credit grew by $18.4 Bn in December 2017, at an annualized growth rate of 7.7%. Revolving credit card debt increased by $5.1 Bn to $1.03 Tn, the highest on record. Consumer spending has boosted US GDP, although the increasing cost of leverage and rising rates could create a drag on growth.
The model is attracting a new generation of startups, as well as investors, eager to bail out American students drowning in $1.3 trillion in student debt. The Brookings Institute estimates as much as 40% of students who entered college in the early 2000s may default on their loans by 2023, based on historical trends.
One of the first firms to enter the US market was the Chilean firm Lumni founded in 2002 (although it only came to the US in 2009) followed by 13th Avenue (2009), Cumulus Funding (2011), Upstart (2012), Pave (2012), and Vemo (2015). Not all are still signing ISAs, but current interest seems to be based on growing demand.
Are income-sharing arrangements a good deal for students?
The federal government already provides more than $200 billion (paywall) in grants, loans, and work-study assistance for students’ post-secondary education each year. Private lenders hand out about $8 billion in student loans annually, estimates the Consumer Financial Protection Bureau. Parents and family contribute still more.
Almost 60% of college graduates in the US carry student debt, and about 57% of Americans regard it as a major problem, reports the Harvard Kennedy School of Government. Yet many are not even confident their college educations are still the golden ticket they once were. A 2017 survey of 32,000 college students revealed only one-third felt prepared to enter the job market, while only half said their major will lead to a good job.
MissionU, a one-year training program in data analytics and business intelligence, offers students a blended online (80%) and in-person curriculum (20%), and work experience. It charges no tuition. After graduates earn at least $50,000, they pay back 15% of their income for the first three years.
Symphony, a messaging service that has gained some traction among Wall Street firms, has been integrated into OpenFin, an operating system built for financial-services, the two companies announced Thursday.
OpenFin hosts more than a hundred applications on its platform, and the integration means Symphony will be “interoperable” with those apps, the same way social media apps on your phone are able to talk with one another.
For new immigrants, buying a home or getting a cellphone is complicated and expensive. Even if they have financial identities and wealth in their home countries, they have no credit history in the U.S.
It’s a challenge for millions of people, and a handful of fintechs, including Nova Credit, CreditStacks, and Petal, see an opportunity to help with some creative solutions.
Others, like Deserve (formerly SelfScore) and Petal have been hoping to woo immigrants and other thin files with their own credit products, while still others like eCredable are crunching alternative data to help people build up their credit history.
And in January, CreditStacks announced a credit card product aimed at immigrant professionals who want to have a U.S. credit card in hand when they arrive in America.
San Francisco mortgage fintech Lenda, which offers mortgages faster and at lower cost than traditional rivals, expects growth to accelerate this year as it expands into a dozen states and puts to work the $5.25 million it raised in its first venture round.
When I wrote my book on P2P Lending for the retail investor, P2P Investing 101 (the paperback version here), that came out in November, there were only 7 options for retail investors. Those options were Lending Club and Prosper, as well as 5 options that take advantage of the adjustment to SEC Regulation A known as Reg A+.
We now have an 8th investment option. The Worthy Bond, which uses Reg A+ and comes from Worthy Financial. By using Reg A+, the Worthy Bond is available to retail investors as a proxy savings account within the p2p lending landscape.
While the average transaction price (ATP) for light vehicles hit $36,270 in January, a whopping $1,360 or 3.9-percent gain over a year earlier, the ATP declined from December’s record, dropping $486 or 1.3 percent month over month.
Subaru 0-percent financing
Subaru, which has been setting sales records, typically runs tight inventories and keeps a close rein on incentives. However, through the rest of February it is offering 0-percent financing for 63 months on select models along with a couple of enticing fleet deals.
The 0-percent deal for 63 months is being extended on 2017/18 Legacy models, 2017/18 Outbacks and 2017 Foresters. On the 2018 Legacy, there’s also a $185 per month lease for three years with $2,595 down. The 2018 Outback is being offered on a 3-year lease deal for $239 per month with $1,739 down, while the 2018 Forester can be leased for 36 months at just $219 with $1,719 down.
Interest rates climb
According to Bankrate.com, the average 60-month new car loan is averaging 4.51 percent interest, a two-basis point increase over rates being offered at the end of November. Shorter 48-month loans are slightly cheaper, averaging 4.44 percent, again, two basis points higher than two months ago. On the used car side of the ledger, rates are closing in on the 5 percent level, averaging 4.97 percent on 3-year loans. That’s up from an average of 4.78 percent at the end of November.
Independent broker-dealers are rebuilding their online presences for a digital investing era, ushering in new client portals and offering automated investing for smaller accounts.
Advisors have pushed the firms to mimic the speed and look of digital investment platforms. Digital advice clients of all kinds will soar 844% to more than 17 million by 2021, according to a September study by Aite Group. In a nod to incumbents’ services, robos have also started offering human advisors to clients.
Narmi, a financial technology company, showcases two of its remarkable fintech integrations – Billshark and Lemonade.
Billshark – Helping Reduce Monthly Bills for Millions of Americans
Billshark helps consumers reduce monthly bills on cable, satellite TV, wireless phone, internet and many other categories. There are currently approximately 375 million monthly bills in America and roughly 80% can be negotiated. The average amount saved per bill is $280-300.
Lemonade – Reinventing Insurance Through Artificial Intelligence
Lemonade provides a mobile-first, artificial intelligence-infused way to obtain a home insurance policy. The company’s focus is on homeowners and renters insurance, and policies start at $25 a month and $5 a month, respectively.
Adding a community touch to automation has proved a profitable lending strategy for one bank.
Marquette Bank in Chicago has been able to digitize its lending processes and improve its credit memo creation time by upwards of 25% using technology from the cloud-based loan origination software firm Baker Hill.
Small-business lending has long been a staple of community banking, but in recent years customers have turned to online lenders and other fintechs for credit, in large part due to the speed and digital aspect of the experience.
The banks behind the Zelle network had more in mind than P-to-P payments between consumers, and BNY Mellon is beginning the network’s evolution by targeting the business payments market.
Zelle will help support tokenized digital payments for institutional and corporate clients in a market that is notoriously resistant to automation. BNY Mellon hopes corporates will see the Zelle network’s ability to increase control over cash flow through near-instant processing.
Webster Investments, a division of Webster Bank, N.A., now offers Guided Wealth Portfolios (GWP), an advisor-enhanced, digital investment platform designed to enhance customer experience by providing an additional option to manage their investments. The online investment platform was designed as an innovative option for clients seeking a technology-enabled investment solution combined with the opportunity to have a relationship with a financial advisor.
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The UK’s major banks are being shown a clean pair of heels by non-bank competitors in the Open Banking space, with new announcements by TrueLayer in tandem with Zopa, and Openwrks demonstrating the determination of third party providers to open up access to consumer account data.
Zopa has worked with TrueLayer to create an income verification product which removes the need to manually upload documents to verify income – replacing it with Open Banking data.
Separately, Openwrks – which likewise enables providers of consumer and small business products and services to access consumer’s financial data – has become the first third party provider to successfully connect to all of the banks currently providing functional APIs (Lloyds, RBS, AIB, HSBC and Danske).
A new bank based in Wales has raised £150 million from a hedge fund to launch as an online lender.
Chetwood Financial has received £50 million in the form of equity from Elliott Advisors, giving the fund a majority holding, with a further debt facility of up to £100 million available. Elliott is one of the best-known investors in the financial services sector.
In the FCA’s December 2016 Feedback Statement containing its interim feedback following a call for input on its postimplementation review of its crowdfunding rules (FS16/13), P2P firms received clear sign-posts on how the FCA is likely to develop its regulation of the sector. In particular, it may:
Require firms to maintain an enhanced control environment, especially as regards retail protections, such as due diligence, disclosure, transparency, and creditworthiness;
Mandate appropriate planning for wind-down/ insolvency scenarios, related controls on client asset and client money/safeguarding and potential enhanced capital requirements; and
Impose additional restrictions around complex business models (e.g. cross-investment) or those where regulatory arbitrage is possible.
China’s Ant Financial Services Group is planning to raise up to $5 billion in fresh equity that could value the online payments giant at more than $100 billion, people familiar with the move told Reuters.
The new round should start with a valuation of between $80 billion to $100 billion, the people said.
A self-regulatory association that draws support from China’s banking and securities sectors is vowing to increase its oversight over cryptocurrency and initial coin offerings (ICO) in 2018.
In its annual meeting held on Feb. 9, China’s National Internet Finance Association (NIFA) revealed that while it has put special efforts into overseeing the sector in 2017, it expects this work to become a regular part of its 2018 agenda.
Online lender, loans.com.au has today slashed rates for both owner-occupiers and investors on certain home loans, and is now offering some of the lowest mortgage rates in the market.
One of the changes was to cut the Essentials Variable 80 rate for owner-occupiers looking to make principal and interest repayments by 12 basis points, bringing it to a red hot 3.52% – the lowest rate for a loan of its kind in the Mozo database.
The rate on loans.com.au’s Offset Variable 80 for owner-occupiers making principal and interest repayments was also slashed by 12 basis points, bringing it down to a competitive 3.60%.
A government-backed inquiry into Australia’s finance sector on Monday said it will start its year-long investigation by scrutinizing the selling tactics of banks’ most lucrative products – mortgages.
Mortgages are Australian banks’ most lucrative money-spinners. The four major lenders – Commonwealth Bank of Australia (CBA), Australia and New Zealand Banking Group, National Australia Bank, and Westpac Banking Corp – hold about 80 percent of the country’s A$1.7 trillion mortgage market.
Eduvanz Financing Pvt. Ltd, an education technology start-up that provides loans for skill development to students, has raised $500,000 in a round of funding led by Blinc Advisors, a venture capital fund, a senior executive at the start-up said.
Neha Kumari needed a new phone urgently after her old one was damaged during a Saturday night party. To add to her difficulties, it was the beginning of the last week of the month and the salary day was 10 days away. Missing client calls for more than a couple of days was out of the question and the weekend was expensive anyway.
Neha, who did not have a credit card, could have borrowed from friends, but most of them were as broke as she was then. And borrowing from the family was ruled out. The last time she had borrowed Rs 10,000 from a friend to book emergency tickets was three …
This is with reference to reports on market volatility. Regulators must ensure that this trend does not end up promoting alternative investment avenues of an uncertain nature. Investor interests demand that risk-based P2P lending via online/social marketplaces be regulated. Peer lending has significantly grown and enabled borrowers with a sub-par credit history. P2P lending is highly prone to performance risks on account of a higher probability of a borrower-default, credit risks owing to poor loan-sanctioning decisions & lack of fund-monitoring post disbursal, cash drag risks because of a larger borrower-population than the available lenders, platform Risks driven by borrower insolvency or frauds or technology risks/cybersecurity breaches and market risks owing to interest rate fluctuations and unemployment risks leading to non-payments.
With more than 200 million active users in India — the largest anywhere in the world — WhatsApp is expected to drive large volumes on peer-to-peer (P2P) payments and also become a popular platform for merchant payments. India is slated to be the first country globally to get the payments facility from WhatsApp.
Other global giants, too, are zeroing in on this space. For instance, Google has already launched its payments app Google Tez (“Tez” in Hindi means fast), while Samsung has launched Samsung Pay and Amazon has introduced Amazon Pay.
Paytm, India’s largest online payments and mobile wallet company, has invested Rs. 5,000 crore ($786 million) in mobile payments to date.
This was 13% less than $14.6 billion in 2015. On the other hand, fintech investments in Asia increased to $5.4 billion in 2016, up 12.5% from $4.8 billion in 2015.
In the not too distant future, there may come a time, where we cease to interact with the banks as we know it. Banks which were monolithic organization who created the products, sold it directly and owned the customers are being slowly ceding ground to so called new breed fintech companies chipping away at the edges. While regulations and strict KYC/AML regulations still enable banks to continue to be in business, the power they once wielded is diminishing. As Niti Aayog Chairman, Amitabh Kant said “Debit cards, credit cards and ATMs might lose relevance in the next four years”.
According to the latest annual report of RBI, during Q1 of FY18, as against negative incremental rise in bank credit, the non-bank sources gained space in lending. The total flow of funds to the commercial sector from non-bank sources during the period increased to Rs 1,16,600 crore while the formal banking system trailed behind.
In terms of financial assets, NBFCs recorded a healthy growth — a compound annual growth rate (CAGR) of 19% in the past few years — comprising 13% of the total credit and are expected to reach nearly 18% by 2018-19.
Active support and initiatives by financial regulators such as the Monetary Authority of Singapore, Bank Negara Malaysia and Bank Indonesia has enabled the Asia-Pacific Fintech ecosystem to grow significantly in 2017.
The Fintech industry in the Asia-Pacific region is expected to grow at a CAGR of 72.5% from 2015 to 2020, reaching US$72 billion.
Future of Cashless Payments in Singapore
According to Ms Quah Mei Lee, Industry Principal, ICT, Asia-Pacific, the mobile payments market in Singapore was estimated to be worth US$1.4 billion in 2017. The market is still small but is growing fast. There are many supportive regional and local regulations and initiatives that will help Singapore move towards a cashless Society.
Fintech in Singapore’s SME Landscape
In the wake of the global Fintech boom, disruptive market innovations have forced a radical shift of business models in the Financial Services industry, notably within the P2P Lending segment. Frost & Sullivan believes that leading banks and financial institutions are driven to be lean and agile on multiple fronts, including but not limited to new digital services, elevated customer experiences and innovative technological solutions.
Online loan providers have recently begun targeting young adults here in their 20s and 30s in Korea in the name of “providing pocket money.” Other peer-to-peer lending platforms promote their services as an investment fund or shared wallet to relax young people’s vigilance toward the money lenders.
Blockchain spending in Asia Pacific excluding Japan will jump 91 percent in the five years until 2021, thanks to applications in finance and supply chain industries, said IDC in a report today.
China will see a five-year annual growth rate of 95 percent, compared with about 81 percent growth worldwide, said IDC in the report, the first blockchain report released by the company.
For example, PPDai, China’s first online P2P (peer-to-peer) lending platform listed in the US market, said in January it would invest 1 billion yuan (US$156 million) within three years to set up a new research institute.
News Comments Today’s main news: Lending Club closes 5 investment funds, rebrands LC Advisors. CommonBond closes $248M securitization, receives AA S&P rating. LendingTree Q3 results. LandlordInvest expects to double IFISA intake. Ant Financial puts off IPO. Renredai volume surpasses 37.8B RMB. New Zealand prepares for open banking. SMART Box to debut in Canada. Today’s main analysis: Don’t forget about loan recoveries. Today’s […]
Big Tech vs. Big Banks. AT: “So far, all this talk of Amazon and Google threatening banks has been speculation. They certainly have the financial clout and technological prowess to be the threat that everyone is anticipating. But we still haven’t seen it happen–yet.”
Yesterday, Lending Clubannounced the closure of several funds. The funds were part of what was previously known as LC Advisors, an investment management company dedicated to investing in notes originated by the platform.
Since each fund is a separate legal entity there were many different buyers that participated. While we don’t know the terms of the deals or who purchased these loans, Suri did share with us that there were over 40 bids for the assets and 5 of the 6 funds have been sold at fair value or a slight premium.
What happens next?
Lending Club is rebranding its asset management business. Now called LendingClub Asset Management or LCAM for short.
When we asked Suri about positioning the new offerings to investors he stated that their biggest flagship fund under LC Advisors had delivered slightly over 6% annualized since 2011.
CommonBond, a leading financial technology company that helps students and graduates pay for higher education, today announces the close of a $248 million securitization of refinanced student loans. The offering’s most senior notes achieved AA ratings from Moody’s, S&P, and DBRS – Aa2, AA, and AA (high), respectively – the company’s highest ratings to date.
The transaction was CommonBond’s fifth and largest to date. Investors submitted $1 billion in orders, making the deal more than four times oversubscribed. Goldman Sachs served as structuring agent, co-lead manager, book-runner, and co-sponsor. Barclays and Citi also served as co-lead managers and book-runners on the transaction, while Guggenheim Securities served as co-manager.
The transaction was the first of CommonBond’s to be rated by S&P, who assigned AA ratings to the transaction, alongside similar ratings from Moody’s and DBRS. Moody’s and DBRS also recently upgraded CommonBond’s ratings on previous deals in recognition of the company’s strong credit performance.
To showcase the significance of the third-party debt collection industry in America, the New York Fed publishes in their Quarterly Report on Household Debt and Credit a ‘Third-Party Collections’ chart (below). As of 2017-Q1, between 12-13% of consumers with debt have debt being collected by third-party agencies (blue line). Of those, the average amount of debt in collections is ~$1,400 (red line).
The 2015-2016 roll rate matrix is experiencing a higher percentage of loans going from non-performing (60-89 DPD & 90-119 DPD) to current when compared to the 2013-2014 roll rate matrix. This 100 bps difference for 60-89 DPD and 200 bps for 90-119 DPD can be attributed to the improvement of servicers’ collection and outreach programs for delinquent loans.
Consumer loans have experienced a monthly recovery rate between 5% to 15% within different portfolios on our platform. Based on this table, a $100M pool of loans would have a $1M valuation difference between a 5% and 15% recovery rate input.
LendingTree, Inc. (NASDAQ: TREE), operator of LendingTree.com, the nation’s leading online loan marketplace, today announced results for the quarter ended September 30, 2017.
Third Quarter 2017 Business Highlights
Record revenue from mortgage products of $73.8 million represents an increase of 38% over third quarter 2016 driven by strong growth in both purchase and refinance revenues at 87% and 24%, respectively. According to Mortgage Bankers Association, originations industry-wide were down 16% in the comparable period.
Record revenue from non-mortgage products of $97.7 million in the third quarter represents an increase of 138% over the third quarter 2016 and increased to 57% of total revenue compared to 43% one year ago.
Home equity revenue growth accelerated, increasing $9.0 million, or 176% over third quarter 2016, and marked the eighth consecutive quarter of year-over-year growth exceeding 100%.
Personal loans revenue of $25.4 million grew 44% over third quarter 2016 and grew 24% sequentially.
Revenue from our credit card offerings grew to $39.4 million in 3Q compared to just $6.6 million in 3Q 2016. On a proforma basis, giving effect to the CompareCards and MagnifyMoney acquisitions as if they had occurred on January 1, 2016, credit cards revenue grew 43%.
More than 6.5 million consumers have now signed up for free credit scores and savings alerts through My LendingTree, and the volume of new enrollments accelerated. Revenue contribution from MyLendingTree grew 96% in the third quarter compared to the prior year period as new features and smarter savings alerts are driving increased engagement.
Third Quarter 2017 Financial Highlights
Record consolidated revenue of $171.5 million represents an increase of $76.9 million, or 81%, over revenue in the third quarter 2016.
GAAP net income from continuing operations of $10.1 million, or $0.74per diluted share.
Record Variable Marketing Margin of $59.1 million represents an increase of $22.8 million, or 63%, over third quarter 2016.
Record Adjusted EBITDA of $34.7 million increased $16.2 million, or 88%, over third quarter 2016.
Adjusted Net Income per share of $1.17 represents growth of 65% over third quarter 2016.
During the quarter, the company repurchased 42 thousand shares of its stock at a weighted-average price per share of $237 for aggregate consideration of $10.0 million. As of September 30, 2017, the company has $38.7 million in repurchase authorization remaining.
Business Outlook – 2017
LendingTree is revising Revenue, Variable Marketing Margin and Adjusted EBITDA guidance for full-year 2017, as follows:
Revenue is anticipated to be in the range of $603 – $608 million, representing growth of 57% – 58% over full-year 2016 and an increase from prior guidance of $580 – $590 million.
Variable Marketing Margin is anticipated to be $202 – $205 millioncompared to prior guidance of $190 – $195 million.
Adjusted EBITDA is anticipated to be in the range of $111 – $113 million, up 59% – 62% over full-year 2016 and an increase from prior guidance of $103 – $106 million.
A recent report from McKinsey on the global banking industry addressed the threat banks face from technology firms. Amazon stock jumped 13% on earnings and reporting that Amazon is increasing its lending footprint. Tune into Bloomberg Radio archive to hear more about this topic as PeerIQ’s CEO discusses the threats and opportunities of big technology with Bloomberg’s Lisa Abramowicz and Pimm Fox.
Summary of Amazon’s Lending Business
Amazon finances small businesses that sell products through the Amazon marketplace on an invitation-only basis. Interest rates range from 6 to 15%, tenor ranges from 4 to 6 months, and loan size is up to $750K.
Although there is no segment-level P&L reporting for the lending unit, loss-rates according to Amazon’s Peeyush Nahar have been “very, very small.” Amazon’s lending makes up a small part of their business (e.g., $3 Bn in loans to date vs. Amazon’s $136 Bn annual revenue). Amazon is also not directly financing the consumers indicating substantial opportunity to grow.
Owning the Customer
The most compelling advantage big tech has outside of data and customer acquisition are the creation of entirely new channels that banks cannot easily replicate.
A few examples:
In-Home: Large consumer tech firms occupy the most intimate space of consumer through services such as Amazon’s Echo, Google’s Home, or Apple’s Siri. These platforms represent a trojan horse for delivering new products and services in a highly personal and exclusive manner.
Personal assistants that are increasingly anticipatory and have access to the calendars, preferences, and daily lives of consumers.
Mobile and virtual wallets which shift the battleground from legacy “share of wallet” and “primary card” concepts to mobile platforms and virtual wallets
Virtual spaces created via social media including Facebook or services such as Lyft or Uber which enable unobstructed access to the consumer.
Technology giants like Google and Amazon, which gained their market muscle from non-finance-related ventures, are slowly stepping into the space. Their next target could be small business lending, and according to some experts, it’s fast approaching the market.
Amazon in particular is positioned to dominate. The company has already lent more than $1 billion to merchants selling on its platform, and, just as alternative lenders put the pressure on traditional FIs with their quick surge into the market, the Amazons of the world will do the same, Mills predicted.
Chatter Picks Up Steam
Karen Mills’ statements have found new backing in the latest banking report released by McKinsey & Co. this week. New reports in Bloomberg on Wednesday (Oct. 25) said the report identifies Amazon as the newest, biggest threat to the small business lending status quo.
The report points to sagging return on equities for the banks, which have not been able to surpass 10 percent since the 2007/2008 global financial crisis. The FIs that collaborate with those FinTechs could boost their return on equities to 14 percent and even higher if they develop their own solutions in-house.
When customers open an account at one of these automated investing firms, they’re put into funds from companies like Charles Schwab Corp. and Vanguard Group and charged a fee of anywhere from 25 to 50 basis points. In return, they get some extra benefits, like tax loss harvesting, which can result in a lower tax bill, and automatic re-balancing at no extra cost.
But there’s a catch, the funds that customers buy through these advisors are all available on free trading platforms such as Robinhood Financial, where there’s no added cost.
Consumer analytics company SelfScore has rebranded as Deserve, writes Julie Muhn at Finovate (Banking Technology‘s sister company).
The California-based company continues to be committed to providing underbanked Americans with access to credit, and to fuel that mission, Deserve has received $12 million in funding. The round was led by Accel, with participation from Aspect Ventures, Pelion Ventures, Mission Holdings, Alumni Venture Group, and GDP Venture, and brings Deserve’s total funding to $27 million.
Blockchain is particularly relevant to the lending market. Lending is a contract-intensive process with an extensive lifecycle; it carries significant risk and limited trust across its value chain – from origination to funding through to the fulfillment and servicing of the loan.
Moreover, the integration of blockchain with digital lending ensures transactions are tracked in an open and transparent way. Banks and lenders get direct visibility into exactly what happened during the lending process – who was involved, who had control over the authoritative copy of the digital assets and ultimately, who owns the value of those assets, as required by law.
Touching on the recent boom in real estate crowdfunding firms, John McNellis, co-founder of Palo Alto, Calif.-based development firm McNellis Partners, divided the crowdfunding sector into two groups: firms that simply connect investors with developers and firms that invest in projects themselves. The first concept should work in the long term, he noted. But when it comes to crowdfunding firms underwriting real estate deals, McNellis pointed out that it takes at least a decade in the business to become a reliable underwriter. “To expect these 20-year-olds who are good at tech to be good at underwriting” is unrealistic, he said. McNellis added that established developers normally already have financial partners that they prefer to work with. The developers most in need of crowdfunding dollars would be either those just starting out in the business or developers with a spotty track record.
The decline in underlying collateral quality — a theme across wider consumer ABS sectors — has been playing out in marketplace loan ABS, with recent deals from Prosper, Marlette Funding and Avant featuring a growing proportion of loans taken by borrowers with credit scores of less than 680.
A 2017 crowdfunding reportby the National Women’s Business Council, for example, found that 47% of successful campaigns on the popular crowdfunding platform Indiegogo were run by women.
Keep in mind that online business loan shopping sites may operate in a variety of ways:
Lead generation sites will simply gather your information then sell it to various lenders, which may then call or email you with information or offers.
Online lenders may offer a specific set of loan products aimed at specific types of borrowers (for example, those with significant credit card sales). Remember: just because you can’t qualify with one lender doesn’t mean you can’t quality with others.
Online brokers may try to help get you funding with various lenders with whom they have a relationship. They may charge a significant fee for this service, so be sure to ask.
Online marketplaces will present you with options and allow you to choose which ones seem right for your needs. Ideally, you’ll also see which loans are best matched to your qualifications. (Disclosure: Nav’s small business loan marketplace operates this way.)
Zeus CrowdFunding once again offers borrowers what other lenders won’t – low rates designed specifically for the real estate investor and their year-end needs. For a limited time, qualified applicants will pay only six percent interest for the first six months of the loan term.
The company loans up to 100 percent of a project’s cost to qualified applicants in as little as four days.
On Deck Capital, Inc. (NYSE:ONDK) is scheduled to be issuing its quarterly earnings data before the market opens on Wednesday, November 1st. Analysts expect the company to announce earnings of $0.03 per share for the quarter.
As banks rush to catch a wave of robo technologies, Wells Fargo Advisors is rolling out a factor-based approach designed for advisors and their clients.
The wirehouse has launched an expansion to its electronic model portfolio services platform, according to Patty Loepker, WFA’s head of research directed advisory programs. The new managed accounts program features allocations built around smart beta ETFs.
Litigation finance specialist Pravati Capital has launched its third fund vehicle to capitalize on opportunities in the burgeoning litigation finance sector.
The new fund, named Pravati Credit Fund III, will invest in mature stage, high-probability, high-value cases or case portfolios where there is established liability and precedent for settlement, according to a statement.
Initially, my co-founders and I had experience verifying identity documents meant for an offline world. The current way of verifying documentation for a standard current account requires hours and hours of face-to-face in-branch and still not getting approved; it’s no wonder there’s a 40% drop-off.
Of the 7 billion people in the world, Facebook has brought their social identity online, LinkedIn has brought their professional identity online and now we’re looking to bring their legal identity online.
How exactly are Onfido providing something that mainstream banks should take notice of?
Very simply, we help business verify the identity of the people they are onboarding digitally. That can be with a photo of their government issued ID that the user can send with a smartphone. We cover 600 IDs globally and use machine learning to verify whether the ID is genuine or not. There are three steps to our core technology. The first, we extract the details, see if the patterns are consistent and compare them to the millions of historically computed IDs. The second step is asking the user to take a photo or short video of their face, which we compare to the photo on their identity document for similarity. The third step is to check that their details – name, date of birth and address – are consistent with records on multiple databases. Altogether this verifies the person is who they claim to be and, end-to-end, takes two minutes.
We use a hybrid machine/human approach – the technology is able to automatically process the vast majority of documents, and the small number of outliers are passed to our expert human team for review. It means that human resource can be put to more effective use, and would heavily cut down on the 30,000 people employed by Citibank, for example, who just work on onboarding and compliance checks.
As a Millennial yourself, how much of a role do you think generations play on attitudes to banking?
Millennials are just so used to doing absolutely everything on their phone.
Fintechs have really monopolised the millennial market and they’re building the models to ensure they keep that market for the next 15-20 years. That’s where PSD2 becomes very relevant as a leveller of the playing field for the market – it’ll increase healthy competition.
Silicon Valley investors have more than doubled funding for UK technology companies this year, in a sign of strengthening links with the world’s biggest tech hub after the Brexit vote.
British start-ups received £884.8m from venture capital backers based in San Francisco and the Bay Area in the first nine months of this year, compared to £342m in the whole of 2016, according to London & Partners, the London mayor’s promotional agency.
According to the latest figures from London & Partners (L&P), the Mayor of London’s official promotional firm, investors from around the world have backed London-based fintech firms to the tune of £825m so far this year. This is a positive sign for the industry after UK fintech investment plummeted by more than a third in 2016 as investors put off decisions in the wake of the Brexit vote.
One of the biggest London fintech success stories, currency exchange platform Transferwise, is reported to be in discussions with investors to raise a further £77m, which would value the company at more than £1.2bn.
Strange as it may seem, using the analogy of Lego may be the best way to demonstrate why we believe the peer-to-peer (P2P) industry also isn’t – and can’t be – a one trick pony. While some see the industry as a fad that is set to become redundant, there are many reasons why this isn’t the case.
P2P platforms are exploring a range of new and old ways, and their aim is to create something which is more equitable, satisfactory and useful for everyone.
Uber has appointed a former senior adviser to the Bank of England as non-executive chair in the UK, as it endeavours to clean up its image and “make things right” after Transport for London last month revoked the ride hailing company’s licence to operate in the city.
Laurel Powers-Freeling, who will take up the newly created position, is currently senior independent director at online lender Atom Bank.
Flush with cash, Chinese financial-technology giant Ant Financial Services Group is putting on hold plans for an initial public offering while it steps up investments in everything from startups to artificial intelligence, according to a senior company executive.
Investors and analysts have been expecting Ant to go public sometime in 2018. The Hangzhou-based company last raised $4.5 billion from private investors in April 2016 in a deal that gave it a $60 billion valuation—and its business has since expanded significantly.
51 CreditCard (u51.com), an online platform for credit card bill management, is reported to be listed on Hong Kong Exchanges and Clearing Limited (HKEX) in 2018, aiming to raise at least 500 million dollars.
According to a report of China Daily, the credit database of PBOC has collected credit information of more than 840 million individuals as well as more than 19 million companies and organizations by the end of April. Among these agencies, only 255 licensed micro loan companies have been connected to the company credit information system and 156 to the individual credit information system.
From November 1st, customers will be able to pay their train tickets by using WeChat Pay through the official booking website 12306.com or in the train station (booking office/self-service ticket machine).
On October 18th, Trustdata released the long-awaited “Trustdata: China Consumer Finance Analysis Report (2017)”. The document presents a comprehensive review of consumer finance development in China, makes a deep analysis of payday loan, installment credit and consumer behaviors, and proposes a new concept called “Consumer Finance Development Index”.Statistics from the research notes that, by the end of last month, the credit scale of consumer finance in China has reached more than 110 billion yuan with 3.7 million registered users.
The phenomenon of “Chinese companies lining up for an IPO in the United States or Hong Kong” has re-surfaced recently, Tiger Brokers, an online brokerage helping Chinese investors trade US- or HK-listed stocks, told chinadaily.com.cn Thursday.
Beijing-based Jianpu Technology Inc, which is 100 percent controlled by RONG360 Inc filed its preliminary prospectus with the US Securities and Exchange Commission, without the estimated IPO price range, on Oct 20.
Prior to Jianpu, Chinese online small consumer credit provider Qudian Inc made its debut on the New York Stock Exchange on Oct 18. Qudian priced its IPO of 37,500,000 American depositary shares (ADSs) at $24.00 per ADS for a total offering size of about $900 million, according to Xinhua News Agency. Qudian closed at $26.39 Wednesday after diving 7.24 percent, still above its IPO price.
Recently, Renrendai issued its performance report for the third quarter of 2017.According to the report, the cumulative turnover of the platform surpass 37.88 billion RMB, with 524 thousand transactions in total.
More details, Renrendai remained steady growth in the third quarter. The volume on the platform reached 6.51 billion RMB this quarter, a 109% increase over the same period last year, and the amount of money that investors earn is up 55% from the same period last year. In addition, the per capita borrowing amount on the platform is 80.8 thousand RMB, which represents the capital requirements of small business owners and self-employed people in the class, and always below the national regulations of loan balance ceiling of $200000.
On 27th October, the shares of Qudian tumbled again, closing down $3.59 to $22.8, down 13.6% below the offering price of $24 a share.
The company has fall into constant questioning just after it landed in the SEC. Luo Min, the CEO of Qudian, responded several questions through an interview Qudian’s Luo Min Respond To All, but this move has raised more query. Many media and media outlets gathered to lambast Luo Min for “lying” in her response.
On 23th October, Luo Min avoided all the media interviews again. Since then, the shares of Qudian began to slump, which closed at $26.39 on 26th Oct, down nearly 20 percent from the opening price of $31.89 on Wednesday.
Jianpu Technology Inc, a wholly-owned subsidiary of Chinese fintech firm Rong360, has filed for a $200 million IPO in the US. Goldman Sachs, Morgan Stanley and JP Morgan are bookrunners for the deal, according to a stock exchange filing.
China is preparing to tighten regulation of online consumer lending as part of a campaign against financial risks, dealing a possible setback to Chinese fintech groups that hope to sell shares in the US.
Household debt in China remains low as a share of GDP, and authorities have encouraged growth of consumer credit as a way to rebalance the economy towards consumer spending, but now concerns are rising about irresponsible lending practices online.
Online consumer lending has replaced peer-to-peer lending as the trendy new area in Chinese fintech, as a regulatory crackdown on P2P reduced that sector’s profitability. Short-term consumer loans outstanding in China grew by Rmb1.49tn ($225bn) through the first nine months of this year, compared to an increase of Rmb830bn for all of 2016, according to PBoC data.
Chan also said the rapid growth of new fintech services, such as peer-to-peer lending marketplaces and online money market funds, was made possible by a lack of innovation by the country’s traditional banks in addressing the needs of not only the average consumer, but also many small and medium-sized enterprises.
High-flying start-up Ant Financial Services Group, which runs online payments service Alipay and money market fund Yu’ebao, has made AI a key driver for expanding its businesses and improving customer service.
China was the world’s second-biggest investor in AI enterprises last year, injecting US$2.6 billion into the sector, according to the state-run think tank, Wuzhen Institute. The United States topped the list with US$17.9 billion in investments.
What would your reaction be if you wanted to get a loan and your bank asks to go through your Facebook profile? In China, this is already happening on a large scale, but it’s not banks that are doing the rating—it’s the country’s burgeoning fintech companies. And it’s not Facebook they are looking at—its social platform WeChat and shopping website Taobao.
Social credit scoring analyses data from non-traditional sources: social media, online shopping, payment apps, cell phone accounts, and more. This type of scoring is meant to fill a gap for people who want a loan but don’t have any way of proving they can repay one. In order to gauge whether you are creditworthy or not, the score can take into account a number of variables: who your friends are, what you buy, whether pay your bills on time or even how much time you spend reading the user agreement. It’s like FICO but decidedly more creepy.
Alibaba was once a kind of shadow lender too. The company first started building its own credit scoring model to provide loans to Taobao vendors. For this, it relied solely on the platform’s ability to gather big data—transactions, user ratings, market positioning, and others.
Sesame Score (screenshot above) tracks five areas: identity information, such as information on users’ education and work, ability to keep financial obligations, credit history, behavioral preferences like shopping, money transfers, and connections with other people. In return, it offers deposit-free bike and power bank rentals as well as other benefits.
Yirendai (YRD) is a Chinese fintec company focused on facilitating unsecured loans. Leveraging the experience of its parent company, CreditEase, Yirendai has facilitated more than RMB 47 billion (US$7 billion) of loans since commencing operations in March 2012.
Financials and performance
Yirendai’s core business has seen rapid growth, facilitating over RMB 20 billion(US$3 billion) in loans in 2016, up 112% from 2015. The most recent forecastfrom the company expects loan volume to continue to grow through 2017, with RMB 35-37 billion (US$5.3-5.6 billion) this year. Earnings have been strong and growing as well, with net income for the six months ending June 30, 2017, rising from RMB 392 million to 620 million (US$58.9 million to 93.2 million) over the same prior-year period, translating to diluted earnings per ADS of RMB 6.71 to 10.26 (US$1.01 to 1.54) for the same periods.
China’s upcoming Social Credit System
Presently, eight companies have been licensed to develop algorithmic SCS scoring systems, including China Rapid Finance, a partner of social network TenCent (OTCPK:TCEHY) and Sesame Credit, which is run by Ant Financial, an Alibaba (BABA) affiliate.
Italian P2P firm BorsadelCredito.it has followed in the footsteps of its UK antecedent Funding Circle by launching a closed-end fund. The unlisted fund, which is called Colombo, hopes to raise €100m to invest across a 5 year timespan, and is managed by BorsadelCredito.it (through a vehicle named ART SGR SpA). The fund’s custodian bank is Caceis Bank.
By investing in Italian SME loans, originated exclusively by BorsadelCredito.it, the fund will target a yield of 5 per cent (5.5 per cent pre-tax).
Desai left the audience in no doubt that Funding Circle has “no plans” to launch a bank. Later that same day, Zopa CEO Jaidev Janardana delivered his keynote: “Why we’re launching a bank”.
José Rego, who runs Portuguese P2P firm Raize, sees the issue as black-and-white.
“By definition, if you become a bank, you stop being an alternative lender,” he said. “Becoming a bank is an extremely complex and very expensive strategic decision which typically takes into consideration other elements besides the equity value generated by the alternative lending. Only a select number of platforms are likely to have the opportunity to become banks (if they wish so). So, in reality, I don’t think it should be something we’re thinking about within the industry.”
In a new report ‘Asset & Wealth Management Revolution: Embracing Exponential Change’, PwC anticipates that global Assets under Management (AuM) will almost double in size by 2025, from US$84.9 trillion in 2016 to US$111.2 trillion by 2020, and then again to US$145.4 trillion by 2025.
By 2025, AuM will have almost doubled – rising by 6.2% a year, from US$84.9 trillion in 2016 to US$145.4 trillion in 2025, with the fastest growth seen in the developing markets of Latin America and Asia Pacific.
While active management will continue to grow and play an important role, reaching $87.6 trillion by 2025 (60% of global AuM), PwC predicts growth in passive management to reach $36.6 trillion by 2025 (25% of global AuM).
If current growth is sustained, the industry’s penetration rate (managed assets, as a proportion of total assets) will expand from 39.6% in 2016 to 42.1% by 2025.
PwC anticipates assets growing at 5.7% a year in North America from 2016 to 2020, slowing to 4.0% per annum from 2020 to 2025, lifting assets from US$46.9 trillion to US$71.2 trillion over the nine years. Similarly, Europe is projected to grow at 8.4% and 3.4% per annum respectively over the two periods, with assets rising from US$21.9 trillion to US$35.7 trillion.
McKinsey said that the industry needs to continue its digital makeover to protect the up to 40 percent of revenues at risk by 2025 and prepare for competition from so-called platform companies like Bezos’s Amazon.com Inc.
As he extends Amazon’s reach, the Seattle-based company has had discussions with banking regulators about financial innovation, according to lobbying disclosures reviewed by American Banker. And it already has a small-business lending arm that has doled out more than $3 billion to more than 20,000 of the merchants on its e-commerce platform.
The global banking industry, which had an 8.6 percent return on equity last year, could offset the loss of profits from price competition by partnering with platform companies and generating more revenue from their data. Banks that go further by creating their own platforms could elevate their ROE to 14 percent, according to the report. ROE is a measure of profitability.
Furthermore with smartphone prices of $30 to $50, Asian markets maintain a robust mobile market. 76% of Taiwan is connected to mobile, and 70% of Myanmar is connected.
Experts estimate Asia as the region to become the fastest growing Internet region by 2020. And while their internet industry is flourishing, only 27% of Southeast Asians have a bank account. In 2017, China has 731 million internet users. That is only 53.1% of the population. China represents internet development at a fast pace, but it still has 21% unbanked. Internet traffic growth in Myanmar is at 58%, yet Myanmar is one of the lowest banking rates in Asia with over 70% of adults (aged 15+ years) unbanked.
As an example OECD research points out that financial sector works constitute 19% of the top 1% earners but the share of finance in the overall employment is only 4%.
In developed world, there are huge reserves of money lying in banks at sub zero, zero or miniscule interest rates. On the other hand in the developing world where there is a dearth of credit, loans can only be had at rates as high as 20-30%.
According to Eurostat, SMEs represent around 99% of all enterprises. In OECDcountries alone SMEs are responsible for job creation to the tune of 60-70%.
Karma plans to use the blockchain in such a way that individuals as well as legal entities can make the most of profitable relationships with each other. This will entail creating a community of participants, who will be able to lend money, borrow money, insure against default, Score loans and carry out assessments and even collections. All of this will be fuelled by the Karma token that will be at the centre of this new ecosystem.
The sale of Karma tokens is legal in all jurisdictions including the United States and China. Qualified US investors can participate. The basic price of Karma Token is US$ 0.01. Early investors can get discounts of 50% till US$ 1 mln is collected, thereafter 30% discount is available till US$3 mln is collected and 15% till US$ 8 mln is collected. There is a hard cap of US$ 10 mln on the token sale.
Though fintech can take many forms, “I think the disruption is really in the payer experience,” says Sharon Butler, EVP, education at Flywire, a global payment solutions company. “Essentially we are leveraging banking infrastructure. I think really what fintech is, is sort of the blend of the old and the new.”
Preceding the growth in cross-border tuition fee payment services, which track the money and file it instantly with minimum costs involved, were more staff resources sifting through multiple transactions and matching them to the student, coupled with uncertainty from the student’s side about when or whether the money would actually have arrived.
Improvements in payment services is one of the biggest ways fintech has benefitted students, agrees Devie Mohan, founder of fintech research company, Burnmark.
Fertile ground in China
Financial technology as an industry has grown globally at an unprecedented scale. Last year, fintech reaped $17.4 billion of venture capital investment – a colossal increase on the $2.5 billion it received just four years ago.
And $7.7 billion of this investment went to China, seeing it overtake the US as the top investment market for fintech companies for the first time.
A platform targeting the Chinese market has recently struck a deal to partner with ChinaPay, the online payment subsidiary of China UnionPay, one of the world’s payment giants.
The mobile payment industry is one which has grown particularly quickly in China in comparison with other countries around the world, predominantly led by Alipay and WeChat Pay. These two platforms combined saw $2.9 trillion in transactions overall last year.
Modernising student loans
But it was Prodigy Finance that entered the loan market specifically to serve international students. Since its inception in 2007, the platform has lent over $310 million to international students all around the world to study overseas, and is expanding its services.
Financial services startup Ethercash has proudly announced its Pre-ICO Campaign, which will raise funds to develop its blockchain-backed financial platform. The Ethercash platform aims to revolutionise three core functions of finance to bring greater transparency and security in the way we lend, send and spend. The Etherecash platform will allow its users to leverage their cryptocurrency holdings to acquire fiat currency loans without the need for credit history, through the application of lawyer-backed smart contracts. The Etherecash Pre-ICO campaign will run from October 25th, 2017 until November 7th, 2017 and ICO campaign will begin November 15th, 2017 and finish on December 19th, 2017.
Andrew Sieprath is among the first people in the Europe to embrace “open banking” as a customer.
His chosen banking provider is Revolut, which isn’t even a bank.
Revolut is just one of three “open banking” services due to launch here in the next few months. They will lead New Zealand into something of a banking revolution which threatens to do to banks what Uber is doing to taxi firms, and ultimately put more pressure on them to cut staff or close branches.
There are many emerging open banking models, but as a starting point, think internet banking that’s slicker, more intuitive, and allows users to see and manage accounts from multiple banks in a single place.
While the technology behind robo-advice is making it cheaper to invest, it doesn’t mean it is actually providing advice let alone the right advice, says the Association of Real Return Investment Advisers general manager Rebecca Jacques.
She told a recent Calastone forum that she put a few global and domestic robo-advisers to the test by giving each the same simplistic target: to pay her young children’s private school fees.
Every robo asked for a country of origin; only one asked for a tax bracket – but what was “scary” was that not one asked if the funds would be used for private school tuition, she notes.
But the report found property transactions made up a very small part of that alternative financing industry, making up just $49 million, or 8%, of the $609 million dealt out in 2016.
Australia lags behind the Asia-Pacific average (excluding China) of 17% of alternative financing going towards real estate. The popularity of peer-to-peer property financing in South Korea is a big contributor to the high average.
The $49 million alternative lending spent on real estate in Australia is made up of $36 million in peer-to-peer lending and $13 million in crowdfunding. In the US, peer-to-peer is worth $1 billion and crowdfunding $800 million.
CrowdfundUP – The startup has so far allowed 2,000 people invest in 17 projects, with individual investments typically ranging from $5,000 to $2 million.
CoVESTA – The real estate on offer includes residential, commercial and even agricultural properties, with investors requiring to contribute at least 5% of the purchase price if they wish to be a tenant in the property. For passive ownership, just 1% ownership is required.
It has been observed that, when the P2P lending industry or any other industry is prudently regulated, it attracts more participation. In terms of P2P, the regulation will increase entry of investors as well as borrowers. This is a reason why RBI regulating the NBFC-P2Ps is a long-term positive for the Indian P2P lendingindustry.
RBI regulating the sector means dead-end for players that are looking only to generate money without adding any value.
However, the potential social benefits of P2P lending are contingent on a facilitative and proportionate regulatory ecosystem. A review of the P2P regulations issued by the RBI leaves much to be desired in that sense. Saliently, the P2P regulations delegate potentially arbitrary discretion to RBI in gatekeeping, impose high market-access barriers that would inhibit innovation in a technology-intensive sector, and lack clarity around critical issues like leverage ratio.
A. Excessive regulatory discretion: One of the principal governance issues of a modern state is injecting accountability into regulatory discretion.
B. Disproportionate minimum capital requirements: The RBI has prescribed a mandate that would require a minimum net-owned fund (NOF) of Rs2 crore.
C. Lack of clarity around critical issues like leverage ratio: Leverage ratio is defined as “total outside liabilities divided by owned funds, of the non-banking financial corporation in P2P (NBFC-P2P)”. This leverage ratio has been capped at 2.
The current marketplace for financial products in India is still highly inefficient, time-consuming & uncertain for customers – especially the SMEs and the MSMEs. When they require loans as working capital or for expenditures like purchase of raw materials, payment towards wages etc. to achieve scale and growth, approaching a bank directly or even visiting loan aggregator websites becomes challenging in terms of time & information. Also, due to varied risk appetite of traditional financial institutions, many SME and MSME entrepreneurs are often puzzled in terms of documentation requirements; different banks and lenders have their own set of risk parameters which they assess while sanctioning a lending facility. This results in high rejection rates within the loan ecosystem.
Why online lending is emerging as an enabler for India’s MSME industry
New-age fintech lending marketplaces endeavor to revolutionize the country’s financial lending patterns by changing the way it works. They are enabling easy access to loans by connecting these small businesses to financial institutions on a consolidated platform for quicker sanctions. Such neutral platforms, with customer-centric features offering a wide range of loan products and end-to-end loan fulfillment, enable MSMEs to concentrate on building their businesses rather than worrying about finances to fulfill the gap in their cash flows or fund their expansion and growth.
While the Reserve Bank of India’s (RBI) guidelines for lenders and borrowers on peer to peer (P2P) lending platforms are important cautionary moves, caps on lending should ideally be linked to lenders’ incomes, Neha Agarwal, co-founder of i2ifunding, told Shritama Bose. The company has disbursed more than Rs 3 crore so far in FY18 and has a full-year target of Rs 10 crore, she added.
We have had more than 30,000 registrations on our platform so far, of which around 25,000 people are registered as borrowers and around 5,000 as lenders. Since launch, around 500 loans have been disbursed and we have around 2,000 active lenders.
The average loan size is about Rs 1.5 lakh.
Almost 90% of the lenders have invested more than once. Around 40% of lenders are lending regularly on our platform.
Gregor has a company in Singapore where individuals can securely store their gold and silver.
Using peer to peer lending you can withdraw up to half of your holdings in loans at low-interest rates. For example, if you have $100k worth of gold you can deposit and take out a loan for 50k at around 3.5% interest per year.
The fast growing Fintech industry is another feather in the cap of rising Asia. According to EY FinTech Adoption Index 2017, there is a palpable global shift of fintech activities from the UK and the US to Asia.
Another report provided by KPMG and CB Insights says in 2016, investments in Fintech companies in Asia hit $8.6 billion across 181 deals.
In light of this, fintech innovation labs and fintech accelerator/incubator spaces are rapidly growing throughout Asia, especially in Hong Kong. The FinTech Innovation Lab Asia-Pacific is collaboration between Accenture and leading financial institutions including Bank of America, Merrill Lynch, Goldman Sachs, HSBC, J.P. Morgan, and Standard Chartered, etc.
A bout of high-profile mega-rounds in the Chinese market has also played a vital role in uplifting Fintech investment. One such activity was a whopping US$4.5 billion funding round by Ant Financial, an affiliate of Alibaba group. The other smaller but successful funding rounds in China during 2016 were: US$73 million to Quant Group, and US$30.4 million to China Rapid Finance.
According to a recent research conducted by Startupbootcamp FinTech Mumbai and PwC, it was found that more than 95% of financial service companies are seeking partnership with Fintech startups through collaboration rather than competing with them.
Another report regarding Indian Fintech ecosystem is more interesting. It says Indian Fintech market is expected to double from current US$1.2 billion to US$2.4 billion in 2020.
Tan, who formerly partnered with Sequoia Capital Asia, said his Singapore-based fund is looking for ambitious, strong Korean tech startups to invest in what could become the next unicorn.
He believes Asian-based VCs have a competitive advantage over established VCs from Europe or the US in the region as they can effectively tackle the needs of startups.
Fintech and software as a service, especially targeting small and midsized businesses, are the buzzword in Southeast Asia, according to Yoo Jung-ho, investment manager at Korea Investment Partners.
“In many of these countries, payment, banking abd finance, are still in a nascent stage with only 10 percent of the population utilizing credit and banking services,” said Yoo. “There is a great demand for firms that provides peer-to-peer lending and payment services. “So companies that target small and medium enterprises that make up the majority in Southeast Asia, will have a fighting chance.
According to recent reports, only 12 percent of households in Malawi have access to credit. With 65 percent of the population living under the poverty line, the rural population is especially vulnerable to the limitations of credit.
In today’s modern age, a physical bank is no longer needed to conduct financial services. Virtual and automated banking is expected to replace 30 percent of bank roles in the next ten years. These virtual banks even the playing field for Malawians by allowing consolidated rates, 24/7 access to services, and a location for information about other services. Some of these alternative, virtual services include:
Peer to Peer Loans:Rather than receiving a loan from a financial institution, peer to peer loans allow people to receive a loan directly from an individual financer. In order to apply for a loan, you must visit a peer to peer lending platform such as Prosper or Perform, and the online marketplace will match borrowers and lenders. Although the site still uses credit scores, individuals may have more sympathy towards you and your situation as opposed to a national bank.
Crowdfunding:Another way to finance an opportunity is through crowdfunding. Crowdfunding is a fairly recent innovation that utilizes crowdsourcing as a way to raise funds for a project or business.
The change in financial technologies in the coming years will have a great impact in Malawi, and create more access to services for the entire population.
Lendified, a Canada-based lender who provides small business loans online has entered into an agreement with ClearFlow Commercial Finance to increase its lending capacity. According to the lending platform, through the agreement, ClearFlow is providing it with a $60 million credit facility to fund loans delivered through its website.