This past year, significant efforts have been made by the SEC, FINRA, state regulators and CSBS to streamline regulations and processes for all fintech companies. These ongoing changes have presented opportunities and challenges that impact the fintech community around the globe. Please join us for a 60-minute webinar, moderated by Manatt’s fintech leader Brian Korn, […]
This past year, significant efforts have been made by the SEC, FINRA, state regulators and CSBS to streamline regulations and processes for all fintech companies. These ongoing changes have presented opportunities and challenges that impact the fintech community around the globe. Please join us for a 60-minute webinar, moderated by Manatt’s fintech leader Brian Korn, to gain insight to the following key topics:
Updates on the bank partnership model
The latest on charter options, including the OCC fintech charter and ILCs
The state and federal enforcement agenda, including rapidly growing FTC activity
SEC/FINRA Joint Statement on Custody and Customer Protection Rules for cryptocurrency and digital investments: Paradigm shift or more of the same?
State fintech regulatory sandboxes: What are they exactly, and will more states continue to opt in?
Deal terms: How the regulatory environment is driving investor and lender behavior for originators
If you can’t make our live program on September 19, click here.
SoFi disappointed in earnings while loan performance suffers. AT: “A large part of the reason SoFi has focused on high income earners is because they believed that those borrower were more likely to pay back their loans on time. That seems that hasn’t been the case.”
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.”
GS M&A acceleration + MPL securitization comparisons. AT: “The chart comparing SoFi’s and Marlette Funding’s most recent securitizations is quite interesting – two from SoFi (student loan and consumer loan) and one from Marlette.”
Symphony, OpenFin join forces. AT: “This looks like a good partnership, and a bit surprising considering that both of these organizations are quite young.”
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.
Four-year universities like Purdue are using them as a way to show their commitment to students as much as reduce their financial burden. The school’s program, Back a Boiler (an abbreviation of the nickname for the student body known as Boilermakers), is offering 175 students almost $2 million in ISA funding. Graduates with high income never pay more than 2.5 times their original ISA amount, while those earning less than $20,000 a year see their payments go to $0.
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.
In total, Symphony has 230,000 users across 200 firms, whereas OpenFin can be found on more than 100,000 desktops across the Street.Symphony, a unicorn, announced a $63 million fundraise in May, bringing the total amount the company has raised to $234 million. OpenFin finished a $15 million round of venture funding backed by JPMorgan in February 2017. It has raised $22 million in total funding.
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.
Bengaluru-based Rupeek, which operates an online marketplace for gold loans, has raised $6.83 million (Rs 44 crore) in a fresh funding round led by Accel Partners.
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.
